EXHIBIT 10.1
MANAGEMENT CONSULTING
SERVICES AGREEMENT
AMONG:
PETROGEN CORP.
AND:
PETROGEN, INC.
AND:
▇▇▇▇▇▇▇ ▇▇▇▇▇
PETROGEN CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇
__________
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-- Petrogen Corp. and Petrogen, Inc. --
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MANAGEMENT CONSULTING SERVICES AGREEMENT
THIS MANAGEMENT CONSULTING SERVICES AGREEMENT is made and dated for
reference effective as at January 1, 2004 (the "EFFECTIVE DATE") as fully
executed effective on this _____ day of January, 2004.
AMONG:
PETROGEN CORP., a company incorporated under the laws of the State of
Nevada, U.S.A., and having an executive office and an address for notice
and delivery located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇.▇.▇., ▇▇▇▇▇
(the "COMPANY");
OF THE FIRST PART
AND:
PETROGEN, INC., a company incorporated under the laws of the State of
Colorado, U.S.A., and also having an executive office and an address for
notice and delivery located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇
("PETROGEN, INC.");
OF THE SECOND PART
(the Company and Petrogen, Inc. being hereinafter collectively also
referred to as the "COMPANIES" as the context so requires).
AND:
▇▇▇▇▇▇▇ ▇▇▇▇▇, having an address for notice and delivery located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇.▇.▇., ▇▇▇▇▇
(the "CONSULTANT");
OF THE THIRD PART
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-- Petrogen Corp. and Petrogen, Inc. --
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(the Company, Petrogen, Inc. and the Consultant being hereinafter
singularly also referred to as a "PARTY" and collectively referred to as
the "PARTIES" as the context so requires).
WHEREAS:
A. The Company is a reporting company incorporated under the laws of the
State of Nevada, U.S.A., and has its common shares listed for trading on the
NASDAQ Over-The-Counter Bulletin Board;
B. Petrogen, Inc. is a non-reporting company incorporated under the laws of
the State of Colorado, U.S.A., and, in accordance with the terms and conditions
of a certain "Share Exchange Agreement", dated for reference effective as at
October 11, 2002 (the "SHARE EXCHANGE AGREEMENT"), as entered into among the
Company, Petrogen, Inc. and all of the shareholders of Petrogen, Inc., the
Company therein purchased all of the issued and outstanding shares of Petrogen,
Inc. from the shareholders of Petrogen, Inc.;
C. In conjunction with the recent completion by the Company of the Share
Exchange Agreement the resulting Company is now involved in the principal
business of Petrogen, Inc.; which is oil and gas development and production
(collectively, the resulting "BUSINESS"); and, as a consequence thereof, the
Companies are hereby desirous of retaining the Consultant as the Companies'
respective President and Chief Operating Officer, and the Consultant is hereby
desirous of accepting such positions, in order to provide such related services
to the Companies (collectively, the "GENERAL SERVICES") as may be necessary and
determined during the continuance of this agreement (the "AGREEMENT");
E. Since the introduction of the Parties hereto the Parties hereby
acknowledge and agree that there have been various discussions, negotiations,
understandings and agreements between them relating to the terms and conditions
of the proposed General Services and, correspondingly, that it is their
intention by the terms and conditions of this Agreement to hereby replace, in
their entirety, all such prior discussions, negotiations, understandings and
agreements with respect to the proposed General Services; and
F. The Parties hereto have agreed to enter into this Agreement which
replaces, in their entirety, all such prior discussions, negotiations,
understandings and agreements, and, furthermore, which necessarily clarifies
their respective duties and obligations with respect to the within General
Services to be provided hereunder, all in accordance with the terms and
conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
mutual covenants and provisos herein contained, THE PARTIES HERETO AGREE AS
FOLLOWS:
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-- Petrogen Corp. and Petrogen, Inc. --
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ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following words
and phrases shall have the following meanings:
(a) "ADVANCES" has the meaning ascribed to it in section "3.4"
hereinbelow;
(b) "ADDITIONAL OPTION" has the meaning ascribed to it in section
"4.7" hereinbelow;
(c) "AGREEMENT" means this Management Consulting Services
Agreement as from time to time supplemented or amended by one
or more agreements entered into pursuant to the applicable
provisions hereof, together with any Schedules attached
hereto;
(d) "BENEFITS" has the meaning ascribed to it in section "4.8"
hereinbelow;
(e) "BOARD OF DIRECTORS" means the Board of Directors of each or
either of the Company and Petrogen, Inc. as duly constituted
from time to time;
(f) "BONUS" has the meaning ascribed to it in section "4.4"
hereinbelow;
(g) "BUSINESS" has the meaning ascribed to it in recital "D."
hereinabove.
(h) "BUSINESS DAY" means any day during which United States
Chartered Banks are open for business in the City of Houston,
State of Texas, U.S.A.;
(i) "CHANGE IN CONTROL" means, in relation to section "4.7"
hereinbelow, the occurrence of any of the following events:
(i) the acquisition, whether direct or indirect, of
voting shares of the Company in excess of 20% of the
issued and outstanding voting shares of the Company
by a person or group of persons acting in concert,
other than through an Consultant share purchase plan
or Consultant share ownership plan and other than by
persons who are, or who are controlled by, the
existing shareholders of the Company;
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(ii) any change or changes in the composition of the Board
of Directors of the Company from the Effective Date
such that less than a majority of the Board of
Directors continues to consist of Directors who are
continuing Directors (each a "CONTINUING DIRECTOR").
In this regard Continuing Director means an
individual who is a member of the Board of Directors
as of the Effective Date, or who becomes a member of
the Board of Directors subsequent to the Effective
Date with the approval of a majority of the Directors
who were Continuing Directors as of the Effective
Date;
(iii) a merger of the voting shares of the Company where
the voting shares of the resulting merged company are
owned or controlled by shareholders of whom more than
20% are not the same as the shareholders of the
Company immediately prior to the merger; or
(iv) a sale by the Company of substantially all of the
assets of the Company to an entity that is not
controlled by either the shareholders of the Company
or by the Company;
(j) "COMPANIES" means the Company and Petrogen, Inc.;
(k) "COMPANY" means Petrogen Corp., a company incorporated under
the laws of the State of Nevada, U.S.A., or any successor
company, however formed, whether as a result of merger,
amalgamation or other action;
(l) "COMPANY'S NON-RENEWAL NOTICE" has the meaning ascribed to it
in section "3.2" hereinbelow;
(m) "CONSULTANT" means ▇▇▇▇▇▇▇ ▇▇▇▇▇;
(n) "CPR RULES" means the CPR NON-ADMINISTERED ARBITRATION RULES,
as amended, as set forth in Article "7" hereinbelow;
(o) "EFFECTIVE DATE" has the meaning ascribed to it on the front
page of this Agreement;
(p) "EFFECTIVE TERMINATION DATE" has the meaning ascribed to it in
each of sections "3.2", "3.3", "3.4" and "3.5" hereinbelow;
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(q) "EXCHANGE ACT" has the meaning ascribed to it in section "4.7"
hereinbelow;
(r) "EXECUTIVE" has the meaning ascribed to it in section "4.7"
hereinbelow;
(s) "EXPENSES" has the meaning ascribed to it in section "4.5"
hereinbelow;
(t) "FEE" has the meaning ascribed to it in section "4.1"
hereinbelow;
(u) "FOLLOW-ON OPTION" has the meaning ascribed to it in section
"4.7" hereinbelow;
(v) "FORM S-8 REGISTRATION STATEMENT" has the meaning ascribed to
it in section "4.7" hereinbelow;
(w) "GENERAL SERVICES" has the meaning ascribed to it in section
"2.1" hereinbelow;
(x) "INDEMNIFIED PARTY" has the meaning ascribed to it in section
"6.1" hereinbelow;
(y) "INITIAL OPTION" has the meaning ascribed to it in section
"4.7" hereinbelow;
(z) "INITIAL VESTING DATE" has the meaning ascribed to it in
section "4.7" hereinbelow;
(aa) "INSURANCE" has the meaning ascribed to it in section "6.2"
hereinbelow;
(ab) "OPTION" has the meaning ascribed to it in section "4.7"
hereinbelow;
(ac) "OPTION PLAN" has the meaning ascribed to it in section "4.7"
hereinbelow;
(ad) "OPTION SHARE" has the meaning ascribed to it in section "4.7"
hereinbelow;
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(ae) "PARTIES" or "PARTY" means, individually and collectively, the
Company, Petrogen, Inc. and/or the Consultant hereto, as the
context so requires, together with each of their respective
successors and permitted assigns as the context so requires;
(af) "PETROGEN, INC." means Petrogen, Inc., a company incorporated
under the laws of the State of Colorado, U.S.A., or any
successor company, however formed, whether as a result of
merger, amalgamation or other action;
(ag) "POOLING AGREEMENT" has the meaning ascribed to it in section
"4.7" hereinbelow;
(ah) "REGULATORY APPROVAL" means the acceptance for filing, if
required, of the transactions contemplated by this Agreement
by the Regulatory Authorities;
(ai) "REGULATORY AUTHORITIES" and "REGULATORY AUTHORITY" means,
either singularly or collectively as the context so requires,
such regulatory agencies who have jurisdiction over the
affairs of either of the Company, Petrogen, Inc. and/or the
Consultant and including, without limitation, and where
applicable, the British Columbia Securities Commission, the
United States Securities and Exchange Commission, NASDAQ and
all regulatory authorities from whom any such authorization,
approval or other action is required to be obtained or to be
made in connection with the transactions contemplated by this
Agreement;
(aj) "REPLENISHED OPTION" has the meaning ascribed to it in section
"4.7" hereinbelow;
(ak) "RULE" has the meaning ascribed to it in section "4.6"
hereinbelow;
(al) "SECURITIES ACT" has the meaning ascribed to it in section
"4.7" hereinbelow;
(am) "SETTLEMENT AMOUNT" has the meaning ascribed to it in section
"4.7" hereinbelow;
(an) "SEVERANCE PACKAGE" has the meaning ascribed to it in section
"3.2" hereinbelow;
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(ao) "SUBSIDIARY" means any company or companies of which more than
50% of the outstanding shares carrying votes at all times
(provided that the ownership of such shares confers the right
at all times to elect at least a majority of the directors of
such company or companies) are for the time being owned by or
held for that company and/or any other company in like
relation to that company and includes any company in like
relation to the subsidiary;
(ap) "VACATION" has the meaning ascribed to it in section "4.6"
hereinbelow; and
(aq) "VESTING OPTION" has the meaning ascribed to it in section
"4.7" hereinbelow.
1.2 INTERPRETATION. For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the words "HEREIN", "HEREOF" and "HEREUNDER" and other words
of similar import refer to this Agreement as a whole and not
to any particular Article, section or other subdivision of
this Agreement;
(b) any reference to an entity shall include and shall be deemed
to be a reference to any entity that is a permitted successor
to such entity; and
(c) words in the singular include the plural and words in the
masculine gender include the feminine and neuter genders, and
VICE VERSA.
ARTICLE 2
GENERAL SERVICES AND DUTIES OF THE CONSULTANT
2.1 GENERAL SERVICES. During the continuance of this Agreement the
Companies hereby agree to retain the Consultant as the respective President of
each of the Companies, and the Consultant hereby agrees to be subject to the
direction and supervision of the Chief Executive Officer of the Company, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, and the Board of Directors of the Company (the "BOARD OF
DIRECTORS"), consistent with such positions, and the Consultant also agrees to
accept such positions in order to provide such related services as the Chief
Executive Officer and Board of Directors shall, from time to time, reasonably
assign to the Consultant and as may be necessary for the ongoing maintenance and
development of the Companies' various Business interests during the continuance
of this Agreement (collectively, the "GENERAL SERVICES"); it being expressly
acknowledged and agreed by the Parties hereto that the Consultant shall commit
and provide to the Companies the General Services on a reasonably full-time
basis during the continuance of this Agreement for which the Company, as more
particularly set forth hereinbelow, hereby agrees to pay and provide to the
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-- Petrogen Corp. and Petrogen, Inc. --
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order and direction of the Consultant each of the proposed Fee (as hereinafter
determined), signing fee, Bonus (as hereinafter determined), Expense (as
hereinafter determined) payment reimbursements, Options (as hereinafter
determined), Vacation (as hereinafter determined) pay, Benefits (as hereinafter
determined) and Severance Package (as hereinafter determined) in accordance with
Articles "3" and "4" hereinbelow.
In this regard it is hereby acknowledged and agreed that the Consultant
shall be entitled to communicate with and shall rely upon the advice, direction
and instructions of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the current Chairman, Chief Executive
Officer and a Director of each of the Companies, or upon the advice or
instructions of such other Director or Officer of the Company as ▇▇. ▇▇▇▇▇▇▇▇
shall, from time to time, designate in times of ▇▇. ▇▇▇▇▇▇▇▇'▇ absence, in order
to initiate, coordinate and implement the General Services as contemplated
herein subject, at all times, to the final direction and supervision of the
Board of Directors of the Company.
2.2 ADDITIONAL DUTIES RESPECTING THE GENERAL SERVICES. Without in any
manner limiting the generality of the General Services to be provided as set
forth in section "2.1" hereinabove, it is hereby also acknowledged and agreed
that Consultant will, during the continuance of this Agreement, devote
reasonably all of the Consultant's consulting time to the General Services of
the Consultant as may be determined and required by the Board of Directors for
the performance of said General Services faithfully, diligently, to the best of
the Consultant's abilities and in the best interests of the Companies and,
furthermore, that the Consultant's consulting time will be prioritized at all
times for the Companies in that regard.
2.3 ADHERENCE TO RULES AND POLICIES OF THE COMPANIES. The Consultant hereby
acknowledges and agrees to abide by the reasonable rules, regulations,
instructions, personnel practices and policies of the Companies and any changes
therein which may be adopted from time to time by the same as such rules,
regulations, instructions, personnel practices and policies may be reasonably
applied to the Consultant as the President and Chief Operating Officer of each
of the Companies.
ARTICLE 3
EFFECTIVENESS, TERMINATION AND SEVERANCE
3.1 EFFECTIVENESS OF THE AGREEMENT. This Agreement commences on the
Effective Date as set forth hereinabove, however, is subject, at all times, to
the Companies' prior receipt, if required, of Regulatory Approval from each of
the Regulatory Authorities to the terms and conditions of and the transactions
contemplated by this Agreement.
3.2 TERMINATION WITHOUT CAUSE BY THE COMPANY AND SEVERANCE PACKAGE.
Notwithstanding any other provision of this Agreement, this Agreement may be
terminated by the Company at any time after the Effective Date and during the
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continuance of this Agreement upon its delivery to the Consultant of prior
written notice of its intention to do so (the "COMPANY'S NOTICE OF TERMINATION")
at least 60 calendar days prior to the effective date of any such termination
(the "EFFECTIVE TERMINATION DATE"). In any such event the Consultant's ongoing
obligation to provide the General Services will continue only until the
Effective Termination Date and the Company's shall continue to pay to the
Consultant all of the amounts otherwise payable to the Consultant under Article
"4" hereinbelow until the Effective Termination Date (and including for greater
certainty, however, without limiting any of the amounts payable under Article
"4" hereinbelow, a pro rata portion of any Fees (as hereinafter determined),
Bonuses (as hereinafter determined), Vacation (as hereinafter determined) pay
and Benefits (as hereinafter determined). In this regard, and in addition to all
of the amounts otherwise due and payable to the Consultant under Article "4"
hereinbelow, the Company shall also pay to the Consultant the following amounts
in the following manner, however, subject at all times to the Consultant's
ongoing compliance with the Consultant's obligations under Article "5"
hereinbelow:
(a) an additional severance payment equating to an aggregate of
three months of the monthly Fee then payable by the Company to
the Consultant on the Effective Termination Date; and payable
within 10 business days of the Effective Termination Date;
(b) any Expense payment reimbursements which would then be due and
owing by the Company to the Consultant to the date of the
Effective Termination Date; and, subject to the Consultant's
prior compliance with the provisions of section "4.5"
hereinbelow, payable within 10 business days of the Effective
Termination Date;
(c) any Vacation pay which would then be due and owing by the
Company to the Consultant to the date of the Effective
Termination Date; and payable within 10 business days of the
Effective Termination Date;
(d) subject to the provisions of section "4.7" hereinbelow,
confirmation that all of the Consultant's then issued and
outstanding and vested Options in and to the Company as at the
Effective Termination Date are exercisable for a period of one
year from the Effective Termination Date; and
(e) confirmation that all of the Consultant's then Benefits
coverage would be extended to the Consultant and paid for by
the Company for a period ending one year from the Effective
Termination Date;
with the aggregate of each such obligation of the Company to the Consultant
under each of paragraphs "(a)", "(b)", "(c)", "(d)" and "(e)" hereinabove being
herein collectively referred to as the "SEVERANCE PACKAGE".
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3.3 TERMINATION WITHOUT CAUSE BY THE CONSULTANT. Notwithstanding any other
provision of this Agreement, this Agreement may be terminated by the Consultant
at any time after the Effective Date and during the continuance of this
Agreement upon the Consultant's delivery to the Company of prior written notice
of its intention to do so at least 30 calendar days prior to the effective date
of any such termination (herein also the "EFFECTIVE TERMINATION DATE"). In any
such event the Company shall pay to the Consultant all of the amounts otherwise
due or payable to the Consultant by the Company pursuant to Article "4"
hereinbelow until the Effective Termination Date.
3.4 TERMINATION FOR CAUSE BY ANY PARTY AND ADVANCE. Notwithstanding any
other provision of this Agreement, this Agreement may be terminated by either
Party hereto at any time upon written notice to the other Party of such Party's
intention to do so at least 30 calendar days prior to the effective date of any
such termination (herein also the "EFFECTIVE TERMINATION DATE"), and damages
sought, if:
(a) the other Party fails to cure a material breach of any
provision of this Agreement within 30 calendar days from its
receipt of written notice from said Party (unless such
material breach cannot be reasonably cured within said 30
calendar days and the other Party is actively pursuing to cure
said material breach);
(b) the other Party is willfully non-compliant in the performance
of its respective duties under this Agreement within 30
calendar days from its receipt of written notice from said
Party (unless such willful non-compliance cannot be reasonably
corrected within said 30 calendar days and the other Party is
actively pursuing to cure said willful non-compliance);
(c) the other Party commits fraud or serious neglect or misconduct
in the discharge of its respective duties hereunder or under
the law; or
(d) the other Party becomes adjudged bankrupt or a petition for
reorganization or arrangement under any law relating to
bankruptcy, and where any such involuntary petition is not
dismissed within 30 calendar days.
In this regard, and in the event that either of the Companies terminates
this Agreement at any time for cause by providing 30 calendar days' prior
written notice to the Consultant with respect to either of paragraphs "(a)" or
"(b)" only hereinabove, the Company shall pay to the Consultant all of the
amounts otherwise due or payable to the Consultant by the Company pursuant to
Article "4" hereinbelow until the Effective Termination Date (collectively, the
"ADVANCE").
In this regard, and in the event that the Consultant terminates this
Agreement at any time for cause by providing 30 calendar days' prior written
notice to the Company with respect to either of paragraphs "(a)" or "(b)" only
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hereinabove, the Company shall also pay to the Consultant all of the amounts
otherwise due or payable to the Consultant by the Company pursuant to Article
"4" hereinbelow until the Effective Termination Date as an Advance. In addition,
and should it then be either agreed by the Company or determined by arbitration
in accordance with Article "7" hereinbelow that the Consultant had, in fact,
appropriately terminated this Agreement for cause, the Company shall then be
obligated to provide and pay to the Consultant all of the amounts which comprise
the Severance Package in the manner as set forth in section "3.2" hereinabove.
3.5 DISABILITY OR DEATH AND ADVANCE. Notwithstanding any other provision of
this Agreement, this Agreement may be terminated at any time by any Party within
30 calendar days after the death or disability of the Consultant, as a without
fault termination (the resulting effective date of any such termination being
herein also the "EFFECTIVE TERMINATION DATE"). For the purposes of this
Agreement the term "DISABILITY" shall mean the Consultant shall have been unable
to provide the General Services contemplated under this Agreement for a period
of 180 calendar days, whether or not consecutive, during any 360 calendar day
period, due to a physical or mental disability. A determination of disability
shall be made by a physician satisfactory to both the Consultant and the
Company; provided that if the Consultant and the Company do not agree on a
physician, the Consultant and the Company shall each select a physician and
these two together shall select a third physician whose determination as to
disability shall be binding on all Parties. In the event that the Consultant's
employment is terminated by death or because of disability pursuant to this
Agreement, the Company shall pay to the estate of the Consultant or to the
Consultant, as the case may be, all amounts to which the Consultant would
otherwise be entitled under Article "4" hereinbelow until the Effective
Termination Date.
3.6 EFFECT OF TERMINATION. Terms of this Agreement relating to accounting,
payments, confidentiality non-compete, accountability for damages or claims, and
all other matters reasonably extending beyond the terms of this Agreement and to
the benefit of the Parties hereto or for the protection of the Business of the
Companies shall survive the termination of this Agreement, and any matter of
interpretation thereto shall be given a wide latitude in this regard. In
addition, and without limiting the foregoing, each of sections "3.2", "3.3",
"3.4" and "3.5" hereinabove shall survive the termination of this Agreement.
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ARTICLE 4
GENERAL SERVICES COMPENSATION OF THE CONSULTANT
4.1 MONTHLY FEE. Subject at all times to sections "4.3", "4.4" and "4.5"
hereinbelow, it is hereby acknowledged and agreed that the Consultant shall
render the General Services as defined hereinabove during the continuance of
this Agreement and shall thus be compensated on a monthly basis by the Company
from the Effective Date of this Agreement to the termination of the same by way
of the payment by the Company to the Consultant, or to the further order or
direction of the Consultant as the Consultant may determine, in the Consultant's
sole and absolute discretion, and advise the Company of prior to such payment,
of the gross monthly fee of U.S. $15,000.00 (the "FEE"). In this regard it is
hereby acknowledged and agreed that the within Fee represents the gross Fee
which is presently due and owing by the Company to the Consultant under the
terms and conditions of this Agreement. All such Fees will be due and payable by
the Company to the Consultant, or to the further order or direction of the
Consultant as the Consultant may determine, in the Consultant's sole and
absolute discretion, and advise the Company of prior to any such Fee payment, on
the final business day of the month of the then monthly period of service during
the continuance of this Agreement; provided, however, that it is hereby
acknowledged and agreed: (i) that only U.S. $7,500.00 of the Fee will actually
be paid by the Company to the Consultant on a monthly basis from the Effective
Date hereof up to and including the month of January of 2004; and (ii) that only
U.S. $10,000.00 of the Fee will actually be paid by the Company to the
Consultant on a monthly basis thereafter; with the balance of each monthly Fee
being accrued, without interest, until such time as the Company is in a position
to be able to afford to pay the Consultant either the balance of all Fees
accrued or the entire monthly Fee from future financing(s) and/or positive
monthly cash flow.
4.2 SIGNING FEE. In addition to and notwithstanding any other compensation
provided by the Company to the Consultant under this Agreement, upon the
Effective Date of this Agreement the Company shall also pay to the Consultant,
or to the further order or direction of the Consultant as the Consultant may
determine, in the Consultant's sole and absolute discretion, and advise the
Company of prior to such payment, of a one-time signing fee of U.S. $35,000.00.
4.3 INCREASE IN THE FEE. It is hereby acknowledged that the proposed
initial Fee payments under this Agreement were negotiated as between the Parties
hereto in the context of the stage of development of the Companies existing as
at the Effective Date hereof. Correspondingly, it is hereby acknowledged and
agreed that the Fee shall be reviewed and renegotiated at the request of either
Party on a reasonably consistent basis during the continuance of this Agreement
and, in the event that the Parties cannot agree, then the Fee shall be increased
on an annual basis by the greater of (i) 15% and (ii) the percentage which is
the average percentage of all increases to management salaries and fees within
the Companies during the previous 12-month period. Any dispute respecting either
the effectiveness or magnitude of the final Fee hereunder shall be determined by
arbitration in accordance with Article "7" hereinbelow.
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-13-
4.4 BONUS. It is hereby also acknowledged that the Board of Directors
shall, in good faith, consider the payment of reasonable industry standard
annual bonuses (each being a "BONUS") based upon the performance of the
Companies and upon the achievement by the Consultant and/or the Companies of
reasonable management objectives to be reasonably established by the Board of
Directors (after reviewing proposals with respect thereto defined by the
Consultant in the Consultant's capacity as the President of each of the
Companies, and delivered to the Board of Directors by the Consultant at least 30
calendar days before the beginning of the relevant year of the Company (or
within 90 calendar days following the commencement of the Company's first
calendar year commencing on the Effective Date). These management objectives
shall consist of both financial and subjective goals and shall be specified in
writing by the Board of Directors, and a copy shall be given to the Consultant
prior to the commencement of the applicable year. The payment of any such Bonus
shall be payable no later than within 120 calendar days of the ensuing year
after any calendar year commencing on the Effective Date. Any dispute respecting
either the effectiveness or the magnitude of any Bonus hereunder shall be
determined by arbitration in accordance with Article "7" hereinbelow.
4.5 REIMBURSEMENT OF EXPENSES. It is hereby acknowledged and agreed that
the Consultant shall also be reimbursed for all direct, reasonable expenses
mutually agreed upon in advance between the Company and the Consultant actually
and properly incurred by the Consultant for the benefit of the Companies
(collectively, the "EXPENSES"); and which Expenses shall include, but not be
limited to, all cellular phone, telephone, facsimile, travel, mileage, meal,
courier, postage, etc. expenses, or any other incidental Expenses to an amount
of not more that U.S. $500.00 per month, or any other Expenses that may be
greater than U.S. $500.00 per month that are mutually agreed upon in advance by
the Company and the Consultant; and which Expenses, it is hereby acknowledged
and agreed, shall be payable by the Company to the order, direction and account
of the Consultant as the Consultant may designate in writing, from time to time,
in the Consultant's sole and absolute discretion, as soon as conveniently
possible after the prior delivery by the Consultant to the Company of written
substantiation on account of each such reimbursable Expense. In this regard the
Company also intends to provide the Consultant with a laptop and desktop
computer for his use during the continuance of and for the purposes of rendering
the General Services under this Agreement.
4.6 PAID VACATION. It is hereby also acknowledged and agreed that, during
the continuance of this Agreement, the Consultant shall be entitled to four
weeks paid vacation (collectively, the "VACATION") during each and every year
during the continuance of this Agreement. In this regard it is further
understood hereby that the Consultant's entitlement to any such paid Vacation
during any year (including the initial year) during the continuance of this
Agreement will be subject, at all times, to the Consultant's entitlement to only
a pro rata portion of any such paid Vacation time during any year (including the
initial year) and to the effective date upon which this Agreement is terminated
prior to the end of any such year for any reason whatsoever.
4.7 INITIAL OPTION, VESTING OPTIONS, ADDITIONAL OPTIONS, REPLENISHED
OPTIONS AND FOLLOW-ON Options. Subject to the following, it is hereby further
acknowledged and agreed that, during the continuance of this Agreement, the
Consultant will be granted, subject to the rules and policies of the Regulatory
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-14-
Authorities and applicable securities legislation, the terms and conditions of
the Company's existing stock option plan (the "OPTION PLAN") and the final
determination of the Board of Directors, acting reasonably, the following
incentive stock options (each being an "OPTION") to acquire up to the following
number of common shares of the Company (each being an "OPTION SHARE" when
acquired) in the following manner and subject to the following restrictions:
(a) INITIAL OPTION: upon the Effective Date of this Agreement the
Consultant will be granted an incentive stock Option in and to
the Company for the collective purchase of no less than an
aggregate of up to 200,000 Option Shares of the Company; which
incentive Option will be exercisable for a period of ten years
from the Effective Date, at an exercise price of U.S. $0.20
per Option Share in respect of 100,000 of such Option Shares
and at an exercise price of U.S. $0.25 per Option Share in
respect of the balance of 100,000 of such Option Shares; all
in accordance with the terms and conditions of the Company's
existing Option Plan and the rules and policies of the
Regulatory Authorities (such Option being herein the "INITIAL
OPTION");
(b) VESTING OPTIONS: upon the Effective Date of this Agreement the
Consultant will also be granted incentive and vesting stock
Options in and to the Company for the collective purchase of
no less than an aggregate of up to a further 1,200,000 Option
Shares of the Company; at an exercise price of U.S. $0.25 per
Option Share; which incentive vesting Options (each such
Option being herein a "VESTING OPTION") will be exercisable
for the periods set forth hereinbelow and subject to the
following vesting provisions for exercise during the
continuance of this Agreement in the following manner only:
(i) INITIAL VESTING OPTION: as to an initial 600,000 of
the Option Shares under the Vesting Option, the
Consultant shall have the initial vested right, for a
period of ten years from the Effective Date, to
purchase an aggregate of up to 16,690 Option Shares
under the initial Vesting Option one month following
the Effective Date (the "INITIAL VESTING DATE"), and
the Consultant's remaining right to purchase an
aggregate of up to the remaining 583,310 Option
Shares under the initial Vesting Option shall only
vest in equal monthly proportions over a period of 35
months from the Initial Vesting Date; with the first
such proportion (that being 1/35th or for 16,666
Option Shares) of the Vesting Option vesting on the
day which is one month from the Initial Vesting Date
and with the remaining monthly proportions of the
Vesting Option vesting on the same day of the month
for each of the ensuing 34 months therefrom; and
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-15-
(ii) FINAL VESTING OPTION: subject to the following
restriction as to exercise, as to the remaining
600,000 of the Option Shares under the Vesting
Option, the Consultant shall have the further vested
right, for a period of five years from the Effective
Date, to purchase an aggregate of up to 16,690
additional Option Shares under the final Vesting
Option on the Initial Vesting Date; and the
Consultant's remaining right to purchase an aggregate
of up to the remaining 583,310 Option Shares under
the final Vesting Option shall only vest in equal
monthly proportions over a period of 35 months from
the Initial Vesting Date; provided, however, that the
Consultant's right to exercise and acquire any Option
Shares under this final Vesting Option will be
limited, at all times, to the exercise and
acquisition of any vested Option Shares under the
final Option Agreement within a period of 12 months
from the actual date of vesting in each such instance
(failing which that portion of the then vested and
final Vesting Option will automatically terminate);
(c) ADDITIONAL OPTIONS: it is hereby also acknowledged and agreed
that, during each year during the ongoing continuance of this
Agreement, the Consultant shall also be compensated by the
Company from the commencement of each such year of this
Agreement to the termination of the same by way of the
granting by the Company to the Consultant, again subject to
each of the rules and policies of the Regulatory Authorities
and applicable securities legislation, the terms and
conditions of the Company's existing Option Plan and the final
determination of the Board of Directors, acting reasonably, of
further incentive stock Options in and to the Company (each
being an "ADDITIONAL OPTION") for the collective purchase of
not less than a further aggregate of the following number of
Option Shares of the Company in the following manner:
(i) upon the first day of the second year of the
continuance of this Agreement the Consultant will be
granted an Additional Option in and to the Company
for the collective purchase of no less than an
aggregate of up to 600,000 Option Shares of the
Company for a period of ten years from the date of
such granting;
(ii) upon the first day of the third year of the
continuance of this Agreement the Consultant will be
granted a further Additional Option in and to the
Company for the collective purchase of no less than
an aggregate of up to a further 600,000 Option Shares
of the Company for a period of ten years from the
date of granting; and
(iii) upon the first day of the fourth year of the
continuance of this Agreement the Consultant will be
granted a further Additional Option in and to the
Company for the collective purchase of no less than
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-16-
an aggregate of up to a further 600,000 Option Shares
of the Company for a period of ten years from the
date of granting; and
at each such date of granting of an Additional Option as
contemplated hereinabove each such Additional Option will be
exercisable at an exercise price per Option Share underlying
any such Additional Option determined at up to 30% below the
then ten-day trading average of the Company's shares on any
recognized exchange in North America immediately prior to the
date of granting; and which Additional Option or Additional
Option(s), subject to the final form of Option agreement,
shall, unless otherwise determined by the Board of Directors,
acting reasonably, vest not less than on an equivalent basis
quarterly during the first year of the exercise period of any
such Additional Option and based upon the prior attainment by
the Companies of certain development milestones which shall be
agreed to by the Consultant and the Company in advance of the
granting of any such Additional Option. Any dispute respecting
either the granting or the terms of any Additional Options
hereunder shall be determined by arbitration in accordance
with Article "7" hereinbelow;
(d) REPLENISHED OPTIONS: it is hereby acknowledged and understood
that, during the continuance of this Agreement, and while the
Company is not in a position to be able to afford to pay the
Consultant all amounts otherwise due hereunder, the Consultant
may be required, with the prior written request of the
Company, to exercise certain of the Consultant's then vested
and exercisable Vested Options and/or Additional Options
granted hereunder and pay for the exercise price of the same
by way of the then settlement by the Consultant of certain
indebtedness which may then be due and owing by the Company
under this Agreement (each such deemed settlement dollar
amount per Option exercise being a "SETTLEMENT AMOUNT"
hereunder as adjusted hereinbelow). In this regard, and should
any Settlement Amounts for Option Shares be settled during the
initial three years of the continuance of this Agreement,
then, subject to the following proviso, and in addition to the
Initial Option, the Vesting Options and the Additional Options
already granted hereunder, the Consultant will then be
entitled to be granted, at the end of such three-year period
and from time to time and when applicable on a quarterly basis
thereafter, further incentive stock Options in and to the
Company (each such Option being herein a "REPLENISHED OPTION")
then equal to and exercisable for that number of additional
Option Shares of the Company which would then equate to the
then Settlement Amount divided by the exercise price per
Option Share underlying any such Replenished Option determined
as the then ten-day trading average of the Company's shares on
any recognized exchange in North America immediately prior to
the date of each such granting; and in each such case
exercisable for a period of ten years from the date of
granting; provided, however, that, with the prior
acknowledgement that the intent of all Replenished Options is
to only reimburse the Consultant for any Vested Options and
Additional Options lost for amounts otherwise settled than for
cash, the Consultant and the Company shall first be required
deduct from the Settlement Amount, in each such instance for
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-17-
the granting of any Replenished Option, any net proceeds to
the Consultant from the sale of any Option Shares under any
exercised Vested Options and/or Additional Options which are
in excess of the then aggregate Settlement Amount previously
exercised. It is hereby acknowledged and agreed that it shall
be the Consultant's responsibility to report to the Company in
writing as to any net Settlement Amounts not otherwise
satisfied after the third year of this Agreement, and any
dispute respecting either the effectiveness or magnitude of
any such Replenish Option to be granted hereunder shall be
determined by arbitration in accordance with Article "7"
hereinbelow; and
(e) FOLLOW-ON OPTIONS: it is hereby further acknowledged and
agreed that, during the continuance of this Agreement, and in
addition to the Initial Option, the Vesting Options, the
Additional Options and the Replenished Options hereunder, the
Consultant will also be granted, from time to time and when
applicable, further incentive stock Options in and to the
Company (each such Option being herein a "FOLLOW-ON OPTION")
equal to 15% of any incentive stock options which are
heretofore granted by the Company after the Effective Date
hereof to any individuals comprising the following executive
positions in and to the Company (collectively, the
"EXECUTIVE"): (that being to either of the Chairman (currently
▇▇. ▇▇▇▇▇▇▇▇), the Chief Executive Officer (currently ▇▇.
▇▇▇▇▇▇▇▇), the President (currently the Consultant), any
Executive Vice-President (currently Messrs. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇); and on the same terms and conditions PRO
TANTA. Any dispute respecting either the effectiveness or
magnitude of any such Follow-on Option to be granted hereunder
shall be determined by arbitration in accordance with Article
"7" hereinbelow.
In this regard, and subject also to the following, it is hereby
acknowledged and agreed that the exercise of any such Initial Option, Vesting
Option, Additional Option, Replenished Option or Follow-on Option (each being,
again, an "OPTION") shall be subject, at all times, to such vesting and resale
provisions as may then be contained in the Company's Option Plan and as may be
finally determined by the Board of Directors, acting reasonably. Notwithstanding
the foregoing, however, it is hereby also acknowledged and agreed that:
(a) in the event that this Agreement is terminated in accordance
with either of sections "3.2", "3.3", "3.4" or "3.5"
hereinabove, such portion of the within and remaining Vesting
Option(s), Additional Option(s) and Replenished Option(s)
which shall have then vested in the foregoing manner and on
the determined Effective Termination Date shall,
notwithstanding the remaining exercise period of the
Option(s), then be exercisable by the Consultant for a period
of one year following such Effective Termination Date; and
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-18-
(b) in the event of a Change in Control of the Company, the within
Option(s) shall vest immediately and in priority to any other
vesting provision contained in this Agreement and in any
agreement evidencing the within Option(s) subject, at all
times, to the terms and conditions of the Company's then
Option Plan.
In this regard, and in accordance with the terms and conditions of each
final form of Option agreement, the Parties hereby also acknowledge and agree
that:
(a) REGISTRATION OF OPTION SHARES UNDER THE INITIAL OPTION AND
VESTING OPTIONS: the Company shall file with the United States
Securities and Exchange Commission (the "SEC") a registration
statement on Form S-8 (the "FORM S-8 REGISTRATION STATEMENT")
within 90 calendar days after the Effective Date hereof
covering the issuance of all Option Shares of the Company
underlying the then issued Initial Option and Vesting Options,
and such Form S-8 Registration Statement shall comply with all
requirements of the SECURITIES ACT OF 1933, as amended (the
"SECURITIES ACT"). In this regard the Company shall use its
best efforts to ensure that the Form S-8 Registration
Statement remains effective as long as such Initial Option and
Vesting Options are outstanding, and the Consultant fully
understands and acknowledges that these Option Shares will be
issued in reliance upon the exemption afforded under the Form
S-8 Registration Statement which is available only if the
Consultant acquires such Option Shares for investment and not
with a view to distribution. The Consultant is familiar with
the phrase "acquired for investment and not with a view to
distribution" as it relates to the Securities Act and the
special meaning given to such term in various releases of the
SEC;
(b) REGISTRATION OF OPTION SHARES UNDER THE ADDITIONAL OPTIONS AND
FOLLOW-ON OPTIONS: subject, in part, to the pooling provisions
of paragraph "(e)" hereinbelow, the Company shall also file
with the SEC a Form S-8 Registration Statement within 90
calendar days after the granting by the Company to the
Consultant of any Additional Option, Replenished Option or
Follow-on Option hereunder covering the issuance of all Option
Shares of the Company underlying the then issued Additional
Option, Replenished Option or Follow-on Option, and such Form
S-8 Registration Statement shall comply with all requirements
of the Securities Act. In this regard the Company shall again
use its best efforts to ensure that the Form S-8 Registration
Statement remains effective as long as such Additional Option,
Replenished Option or Follow-on Option is outstanding, and the
Consultant fully understands and again acknowledges that these
Option Shares will be issued in reliance upon the exemption
afforded under the Form S-8 Registration Statement which is
available only if the Consultant acquires such Option Shares
for investment and not with a view to distribution;
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-19-
(c) SECTION 16 COMPLIANCE: the Company shall ensure that all
grants of Options are made to ensure compliance with all
applicable provisions of the exemption afforded under Rule
16b-3 promulgated under the SECURITIES AND EXCHANGE ACT OF
1934, as amended (the "EXCHANGE ACT"). Without limiting the
foregoing, the Company shall have an independent committee of
the Board of Directors of the Company approve each grant of
incentive stock options to the Executive and, if required, by
the applicable Regulatory Authorities and the shareholders of
the Company. The Company shall file, on behalf of the
Executive, all reports required to filed with the SEC pursuant
to the requirements of Section 16(a) under the Exchange Act
and applicable rules and regulations;
(d) DISPOSITION OF ANY OPTION SHARES: the Consultant further
acknowledges and understands that, without in anyway limiting
the acknowledgements and understandings as set forth
hereinabove, the Consultant agrees that the Consultant shall
in no event make any disposition of all or any portion of the
Option Shares which the Consultant may acquire hereunder
unless and until:
(i) there is then in effect a "REGISTRATION STATEMENT"
under the Securities Act covering such proposed
disposition and such disposition is made in
accordance with said Registration Statement; or
(ii) (A) the Consultant shall have notified the Company of
the proposed disposition and shall have furnished the
Company with a detailed statement of the
circumstances surrounding the proposed disposition,
(B) the Consultant shall have furnished the Company
with an opinion of the Consultant's own counsel to
the effect that such disposition will not require
registration of any such Option Shares under the
Securities Act and (C) such opinion of the
Consultant's counsel shall have been concurred in by
counsel for the Company and the Company shall have
advised the Consultant of such concurrence;
(e) POOLING OF ANY OPTION SHARES UNDER ADDITIONAL OPTIONS AND
REPLENISHED OPTIONS: the Consultant further acknowledges and
understands that, notwithstanding the prior filing by the
Company of any Form S-8 Registration Statement and Resale
Registration Statement in connection with any Option Shares
acquired by the Consultant under any vested Additional Option
and Replenished Option hereunder, within 90 calendar days of
the granting of the first Additional Option hereunder the
Parties hereby agree to negotiate, in good faith and to formal
agreement, a proposed pooling or lock-up agreement (the
"POOLING AGREEMENT") covering the resale of any Option Shares
acquired by the Consultant under any Additional Option and
Replenished Option hereunder, with the prior understanding
that the purpose of the proposed Pooling Agreement will be to
provide for the orderly trading of the Company's common stock
during the continuance of this Agreement. In this regard, and
should the Parties be unable to form a final Pooling Agreement
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-20-
as set forth hereinabove, the final form of Pooling Agreement
shall be determined by arbitration in accordance with Article
"7" hereinbelow; and
(f) PAYMENT FOR ANY OPTION SHARES: it is hereby further
acknowledged and agreed that, during the continuance of this
Agreement, the Consultant shall be entitled to exercise any
vested Option granted hereunder and pay for the same by way of
the prior agreement of the Consultant, in the Consultant's
sole and absolute discretion, and with the prior knowledge of
the Company, to settle any indebtedness which may be due and
owing by the Company under this Agreement in payment for the
exercise price of any Option Shares acquired thereunder. In
this regard, and subject to further discussion as between the
Company and the Consultant, together with the prior approval
of the Board of Directors of the Company and the establishment
by the Company of a new Option Plan predicated upon the same,
it is envisioned that, when the Company is in a position to
afford the same, the Company may adopt certain additional
"cashless exercise" provisions respecting the granting and
exercise of incentive stock options during the continuance of
this Agreement.
4.8 BENEFITS. It is hereby acknowledged and agreed that, when instituted,
and during the continuance of this Agreement, the Consultant shall be entitled
to participate fully in each of the Companies' respective medical services plans
and management and employee benefits program(s) (collectively, the "BENEFITS").
ARTICLE 5
ADDITIONAL OBLIGATIONS OF THE CONSULTANT
5.1 REPORTING. At such time or times as may be required by the Board of
Directors of the Company, acting reasonably, the Consultant will provide the
Board of Directors with such information concerning the results of the
Consultant's General Services and activities hereunder for the previous month as
the Board of Directors may reasonably require.
5.2 NON-CIRCUMVENTION. The Consultant hereby acknowledges and agrees, for a
period of at least six months following the termination of this Agreement for
any reason whatsoever, not to initiate any contact or communication directly
with either of the Companies or any of their respective subsidiaries, as the
case may be, together with each of their respective directors, officers,
representatives, agents or employees, without the prior written consent of the
Board of Directors and, notwithstanding the generality of the foregoing, further
acknowledges and agrees, even with the prior written consent of the Board of
Directors to such contact or communication, to limit such contact or
communication to discussions outside the scope of any confidential information
(as hereinafter determined) and now with any view to causing any such person to
leave his or her position with either of the Companies.
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-21-
5.3 CONFIDENTIALITY. The Consultant will not, except as authorized or
required by the Consultant's duties hereunder, reveal or divulge to any person
or companies any information concerning the organization, business, finances,
transactions or other affairs of the Companies or of any of the Companies'
respective subsidiaries which may come to the Consultant's knowledge during the
continuance of this Agreement, and the Consultant will keep in complete secrecy
all confidential information entrusted to the Consultant and will not use or
attempt to use any such information in any manner which may injure or cause loss
either directly or indirectly to the Companies' respective Business interests.
This restriction will continue to apply for a period of two years after the
termination of this Agreement but will cease to apply to information or
knowledge which may come into the public domain.
5.4 COMPLIANCE WITH APPLICABLE LAWS. The Consultant will not knowingly
violate any Canadian, U.S. and foreign laws, whether federal, provincial or
state, applicable to the Consultant's duties hereunder and, in addition, any
information which the Consultant may provide to any person or company hereunder
will, to the best of the Consultant's knowledge, information and belief, be
accurate and complete in all material respects and not misleading, and will not
omit to state any fact or information which would be material to such person or
company. In this regard the Company hereby agrees to provide the Consultant with
access to the Company's legal counsel in order to determine, in advance, if the
proposed performance by the Consultant of any General Services hereunder is in
accordance with the Consultant's duties to the Companies under this Agreement.
5.5 OPINIONS, REPORTS AND ADVICE OF THE CONSULTANT. The Consultant
acknowledges and agrees that all written and oral opinions, reports, advice and
materials provided by the Consultant to the Companies in connection with the
Consultant's engagement hereunder are intended solely for the Companies' benefit
and for the Companies' uses only, and that any such written and oral opinions,
reports, advice and information are the exclusive property of the Companies. In
this regard the Consultant covenants and agrees that the Companies may utilize
any such opinion, report, advice and materials for any other purpose whatsoever
and, furthermore, may reproduce, disseminate, quote from and refer to, in whole
or in part, at any time and in any manner, any such opinion, report, advice and
materials in the Companies' sole and absolute discretion. The Consultant further
covenants and agrees that no public references to the Consultant or disclosure
of the Consultant's role in respect of the Companies may be made by the
Consultant without the prior written consent of the Board of Directors of the
Company in each specific instance and, furthermore, that any such written
opinions, reports, advice or materials shall, unless otherwise required by the
Board of Directors, be provided by the Consultant to the Companies in a form and
with such substance as would be acceptable for filing with and approval by any
Regulatory Authority having jurisdiction over the affairs of the Company from
time to time.
5.6 CONSULTANT'S BUSINESS CONDUCT. In the event that either of the
Companies has a reasonable concern that any of the General Services that are
being provided by the Consultant are being conducted in a way contrary to law,
or are reasonably likely to bring disrepute to the Business interests or to the
-- Management Consulting Services Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ --
___________________________________________________________
-- Petrogen Corp. and Petrogen, Inc. --
_________________________________
-22-
Companies' or the Consultant's reputation, the Companies may require that the
Consultant make such alterations in the Consultant's business conduct or
structure, whether of management or Board representation or Consultant or
sub-licensee representation, as the Board of Directors may reasonably require,
in its sole and absolute discretion, failing which the Company, in its sole and
absolute discretion, may terminate this Agreement upon 30 calendar days' prior
written notice to the Consultant. In this regard the Company hereby again agrees
to provide the Consultant with access to the Company's legal counsel in order to
determine, in advance, if the proposed performance by the Consultant of any
General Services hereunder is in accordance with the Consultant's duties to the
Company under this Agreement. In the event of any debate or dispute as to the
reasonableness of the Board of Directors of the Company's request or
requirements, the judgment of the Board of Directors shall be deemed correct
until such time as the matter has been determined by arbitration in accordance
with Article "7" hereinbelow.
ARTICLE 6
INDEMNIFICATION AND INSURANCE
6.1 INDEMNIFICATION. The Companies hereby agree to indemnify and save
harmless the Consultant from and against any and all losses, claims, actions,
suits, proceedings, damages, liabilities or expenses of whatever nature or kind
and to the extent allowed by law and including, without limitation, any
investigation expenses incurred by the Consultant, to which the Consultant may
become subject by reason only of the performance by the Consultant of the
General Services under this Agreement; provided, however, that this indemnity
shall only apply if the General Services are performed faithfully, diligently,
to the best of the Consultant's abilities and in the best interests of the
Companies. This indemnity will not apply in respect of the Consultant in the
event and to the extent that a Court of competent jurisdiction in a final
judgment shall determine that the Consultant was grossly negligent or guilty of
willful misconduct.
In case any action is brought against the Consultant in respect of which
indemnity may be sought against either of the Parties hereto, the Consultant
will give the Company prompt written notice of any such action of which the
Consultant has knowledge and the Company will undertake the investigation and
defense thereof on behalf of the Consultant, including the prompt employment of
counsel and the payment of all expenses. Failure by the Consultant to so notify
shall not relieve the Companies of the Companies' obligation of indemnification
hereunder unless (and only to the extent that) such failure results in a
forfeiture by the Companies of substantive rights or defenses. No admission of
liability and no settlement of any action shall be made without the consent of
each of the Parties hereto, such consent not to be unreasonable withheld.
Notwithstanding that the Company will undertake the investigation and defense of
any action, the Consultant will have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel will be at the expense of the Consultant unless such counsel has
been authorized by the Company, the Company has not assumed the defense of the
action within a reasonable period of time after receiving notice of the action,
the named parties to any such action include that the Consultant shall have been
advised by counsel that there may be a conflict of interest between any Party
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hereto or there are one or more legal defenses available to the Consultant which
are different from or in addition to those available to the Companies.
If for any reason other than the gross negligence or bad faith of the
Consultant being the primary cause of the loss claim, damage, liability, cost or
expense, the foregoing indemnification is unavailable to the Consultant or
insufficient to hold the Consultant harmless, the Companies shall contribute to
the amount paid or payable by the Consultant as a result of any and all such
losses, claim, damages or liabilities in such proportion as is appropriate to
reflect not only the relative benefits received by the Companies on the one hand
and the Consultant on the other, but also the relative fault of the Companies
and the Consultant and other equitable considerations which may be relevant.
Notwithstanding the foregoing, the Companies shall in any event contribute to
the amount paid or payable by the Consultant as a result of the loss, claim,
damage, liability, cost or expense (other than a loss, claim, damage, liability,
cost or expenses, the primary cause of which is the gross negligence or bad
faith of the Consultant), any excess of such amount over the amount of the fees
actually received by the Consultant hereunder.
6.2 INSURANCE. During the continuance of this Agreement it is hereby
acknowledged and agreed that the Company will use its best efforts to seek and
obtain directors' and officers' liability insurance (collectively, the
"INSURANCE") for its Board of Directors and Senior Officers which in no case
shall be less than the insurance which a reasonable and prudent businessman
carrying on a similar line of business would acquire from time to time. In
connection with the foregoing it is hereby further acknowledged and agreed that
any such Insurance shall be placed with a reputable and financially secure
insurance carrier and shall include the Company as an additional insured and
shall provide primary coverage with respect to the activities contemplated by
this Agreement. Furthermore, it is also intended that any such Insurance
policy(ies) shall include severability of interest and cross-liability
provisions and shall provide that the policy(ies) shall not be canceled or
materially altered except upon at least 30 calendar days' prior written notice
to each of the relevant parties thereto.
ARTICLE 7
ARBITRATION
7.1 MATTERS FOR ARBITRATION. Except for matters of indemnity or in the case
of urgency to prevent material harm to a substantive right or asset, the Parties
agree that all questions or matters in dispute with respect to this Agreement
shall be submitted to arbitration pursuant to the terms hereof. This provision
shall not prejudice a Party from seeking a Court order or assistance to garnish
or secure sums or to seek summary remedy for such matters as counsel may
consider amenable to summary proceedings.
7.2 NOTICE. It shall be a condition precedent to the right of any Party to
submit any matter to arbitration pursuant to the provisions hereof that any
Party intending to refer any matter to arbitration shall have given not less
than five business days' prior written notice of its intention to do so to the
other Parties together with particulars of the matter in dispute. On the
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expiration of such five business days the Party who gave such notice may proceed
to refer the dispute to arbitration as provided for in section "7.3"
hereinbelow.
7.3 APPOINTMENTS. The Party desiring arbitration shall appoint one
arbitrator, and shall notify the other Parties of such appointment, and the
other Parties shall, within five business days after receiving such notice,
appoint an arbitrator, and the two arbitrators so named, before proceeding to
act, shall, within five business days of the appointment of the last appointed
arbitrator, unanimously agree on the appointment of a third arbitrator, to act
with them and be chairperson of the arbitration herein provided for. If the
other Parties shall fail to appoint an arbitrator within five business days
after receiving notice of the appointment of the first arbitrator, and if the
two arbitrators appointed by the Parties shall be unable to agree on the
appointment of the chairperson, the chairperson shall be appointed in accordance
with the CPR Rules. Except as specifically otherwise provided in this section,
the arbitration herein provided for shall be conducted in accordance with such
CPR Rules. The chairperson, or in the case where only one arbitrator is
appointed, the single arbitrator, shall fix a time and place for the purpose of
hearing the evidence and representations of the Parties, and the chairperson
shall preside over the arbitration and determine all questions of procedure not
provided for by the CPR Rules or this section. After hearing any evidence and
representations that the Parties may submit, the single arbitrator, or the
arbitrators, as the case may be, shall make an award and reduce the same to
writing, and deliver one copy thereof to each of the Parties. The expense of the
arbitration shall be paid as specified in the award.
7.4 AWARD. The Parties agree that the award of a majority of the
arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be
final and binding upon each of them.
ARTICLE 8
GENERAL PROVISIONS
8.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement to
date between the Parties hereto and supersedes every previous agreement,
expectation, negotiation, representation or understanding, whether oral or
written, express or implied, statutory or otherwise, between the Parties with
respect to the subject matter of this Agreement.
8.2 NO ASSIGNMENT. This Agreement may not be assigned by any Party hereto
except with the prior written consent of the other Parties.
8.3 NOTICE. Each notice, demand or other communication required or
permitted to be given under this Agreement shall be in writing and shall be sent
by prepaid registered mail deposited in a recognized post office and addressed
to the Party entitled to receive the same, or delivered to such Party, at the
address for such Party specified on the front page of this Agreement. The date
of receipt of such notice, demand or other communication shall be the date of
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delivery thereof if delivered, or, if given by registered mail as aforesaid,
shall be deemed conclusively to be the third business day after the same shall
have been so mailed, except in the case of interruption of postal services for
any reason whatsoever, in which case the date of receipt shall be the date on
which the notice, demand or other communication is actually received by the
addressee. Any Party may at any time and from time to time notify the other
Parties in writing of a change of address and the new address to which notice
shall be given to it thereafter until further change.
8.4 TIME OF THE ESSENCE. Time will be of the essence of this Agreement.
8.5 ENUREMENT. This Agreement will enure to the benefit of and will be
binding upon the Parties hereto and their respective heirs, executors,
administrators and assigns.
8.6 CURRENCY. Unless otherwise stipulated, all payments required to be made
pursuant to the provisions of this Agreement and all money amount references
contained herein are in lawful currency of the United States.
8.7 FURTHER ASSURANCES. The Parties will from time to time after the
execution of this Agreement make, do, execute or cause or permit to be made,
done or executed, all such further and other acts, deeds, things, devices and
assurances in law whatsoever as may be required to carry out the true intention
and to give full force and effect to this Agreement.
8.8 REPRESENTATION AND COSTS. It is hereby acknowledged by each of the
Parties hereto that ▇▇▇▇▇▇ ▇▇▇▇▇▇, Barristers and Solicitors, and the law office
of ▇▇▇▇ & ▇▇▇▇, PC, act solely for the Companies, and, correspondingly, that the
Consultant has been required by each of ▇▇▇▇▇▇ ▇▇▇▇▇▇, the law office of ▇▇▇▇ &
▇▇▇▇, PC and the Companies to obtain independent legal advice with respect to
its review and execution of this Agreement. In addition, it is hereby further
acknowledged and agreed by the Parties hereto that ▇▇▇▇▇▇ ▇▇▇▇▇▇, Barristers and
Solicitors, and certain or all of its principal owners or associates, from time
to time, may have both an economic or shareholding interest in and to Companies
and/or a fiduciary duty to the same arising from either a directorship,
officership or similar relationship arising out of the request of the Companies
for certain of such persons to act in a similar capacity while acting for the
Companies as counsel. Correspondingly, and even where, as a result of this
Agreement, the consent of each Party hereto to the role and capacity of ▇▇▇▇▇▇
▇▇▇▇▇▇, Barristers and Solicitors, and its principal owners and associates, as
the case may be, is deemed to have been received, where any conflict or
perceived conflict may arise, or be seen to arise, as a result of any such
capacity or representation, each Party hereto acknowledges and agrees to, once
more, obtain independent legal advice in respect of any such conflict or
perceived conflict and, consequent thereon, ▇▇▇▇▇▇ ▇▇▇▇▇▇, Barristers and
Solicitors, together with any such principal owners or associates, as the case
may be, shall be at liberty at any time to resign any such position if it or any
Party hereto is in any way affected or uncomfortable with any such capacity or
representation. Each Party to this Agreement will also bear and pay its own
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costs, legal and otherwise, in connection with its respective preparation,
review and execution of this Agreement and, in particular, that the costs
involved in the preparation of this Agreement, and all documentation necessarily
incidental thereto, by ▇▇▇▇▇▇ ▇▇▇▇▇▇, Barristers and Solicitors, and the law
office of ▇▇▇▇ & ▇▇▇▇, PC shall be at the cost of the Companies.
8.9 APPLICABLE LAW. The situs of this Agreement is Houston, Texas, U.S.A.,
and for all purposes this Agreement will be governed exclusively by and
construed and enforced in accordance with the laws and Courts prevailing in the
State of Texas, U.S.A.
8.10 SEVERABILITY AND CONSTRUCTION. Each Article, section, paragraph, term
and provision of this Agreement, and any portion thereof, shall be considered
severable, and if, for any reason, any portion of this Agreement is determined
to be invalid, contrary to or in conflict with any applicable present or future
law, rule or regulation in a final unappealable ruling issued by any court,
agency or tribunal with valid jurisdiction in a proceeding to which any Party
hereto is a party, that ruling shall not impair the operation of, or have any
other effect upon, such other portions of this Agreement as may remain otherwise
intelligible (all of which shall remain binding on the Parties and continue to
be given full force and effect as of the date upon which the ruling becomes
final).
8.11 CAPTIONS. The captions, section numbers and Article numbers appearing
in this Agreement are inserted for convenience of reference only and shall in no
way define, limit, construe or describe the scope or intent of this Agreement
nor in any way affect this Agreement.
8.12 COUNTERPARTS. This Agreement may be signed by the Parties hereto in as
many counterparts as may be necessary, and via facsimile if necessary, each of
which so signed being deemed to be an original and such counterparts together
constituting one and the same instrument and, notwithstanding the date of
execution, being deemed to bear the Effective Date as set forth on the front
page of this Agreement.
8.13 NO PARTNERSHIP OR AGENCY. The Parties have not created a partnership
and nothing contained in this Agreement shall in any manner whatsoever
constitute any Party the partner, agent or legal representative of the other
Parties, nor create any fiduciary relationship between them for any purpose
whatsoever.
8.14 CONSENTS AND WAIVERS. No consent or waiver expressed or implied by
either Party in respect of any breach or default by the other in the performance
by such other of its obligations hereunder shall:
(a) be valid unless it is in writing and stated to be a consent or
waiver pursuant to this section;
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(b) be relied upon as a consent to or waiver of any other breach
or default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver
pursuant to this section in any other or subsequent instance.
IN WITNESS WHEREOF the Parties hereto have hereunto set their
respective hands and seals as at the Effective Date as hereinabove determined.
The CORPORATE SEAL of )
PETROGEN CORP., )
the Company herein, was hereunto affixed )
in the presence of: ) (C/S)
)
___________________________________________ )
Authorized Signatory )
The CORPORATE SEAL of )
PETROGEN, INC., )
Petrogen, Inc. herein, was hereunto affixed )
in the presence of: ) (C/S)
)
___________________________________________ )
Authorized Signatory )
SIGNED, SEALED and DELIVERED by )
▇▇▇▇▇▇▇ ▇▇▇▇▇, )
the Consultant herein, in the presence of: )
)
___________________________________________ )
Witness Signature )
______________________________
) ▇▇▇▇▇▇▇ ▇▇▇▇▇
___________________________________________ )
Witness Address )
)
___________________________________________ )
Witness Name and Occupation )
__________
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