Exhibit
10.1
MANAGEMENT STOCK POOL AGREEMENT
THIS AGREEMENT
is dated for reference this 7th day
of June, 2005
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AMONG:
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TERAX ENERGY, INC.
, a body corporate formed pursuant
to the laws of the State of Nevada and having an office for
business located at 9600 Great Hills Trail, Suite 150W, Austin
Texas 78759
(the
“Company”)
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AND:
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THE SHAREHOLDERS OF TERAX
ENERGY, INC. listed in
Schedule “A” hereto
(the
“Shareholders”)
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WHEREAS:
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A.
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The Company is
primarily engaged in the business of locating, acquiring and
developing oil and natural gas properties;
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B.
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The
Company’s common stock is registered under Section 15(d) of
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and the Company’s common
stock is quoted on the NASD "Bulletin Board” under the symbol
“TXEI”;
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C.
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The
shareholders of the Company own the shares of the Company’s
common stock as listed in Schedule “A” attached
hereto and are duly appointed officers and/or directors of
the Company;
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D.
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In order to
ensure that the management of the Company has the proper
incentives to enhance the Company’s performance, management
of the Company have agreed to the escrow, lock-up,
performance criteria and return to treasury provisions
provided for herein.
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NOW THEREFORE THIS AGREEMENT
WITNESSETH THAT in
consideration of the premises and the mutual covenants, agreements,
representations and warranties contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
DEPOSIT OF SHARES INTO ESCROW
Each Shareholder covenants and
agrees to and in favor of the Company that he or she shall cause
the certificates representing the Shares to be deposited with
Phillip A. Wylie, Esq. (the “Escrow Agent”) on and
subject to the terms of the Management Stock Pool Escrow Agreement
in the form attached hereto as Schedule “B”.
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ARTICLE 2
ESCROW TERMS
No Options,
etc.
2.01 Each Shareholder covenants
and agrees to and in favor of the Company that, for so long as the
Shares issued to them hereunder are held in escrow pursuant to the
terms hereof, they will not option, pledge, hypothecate or
otherwise agree to transfer such Shares in any manner
whatsoever.
Return to Treasury –
Termination or Resignation
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2.02 The Shares
will be returned to the treasury of the Company as
follows:
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(a)
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in the event
that a particular Shareholder who is an employee of the Company
ceases to be an employee of the Company either by resignation or
through termination by the Company for Cause (as that term is
defined in the particular Shareholders’ employment agreement)
on or before December 31, 2007 (the “Outside Date”),
all of the Shares held in escrow on account of that particular
Shareholder and not released to that particular Shareholder
pursuant to section 2.03 hereof are to be returned to the treasury
of the Company without consideration; and
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(b)
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in the event
that a particular Shareholder who is a director of the Company
resigns as a director of the Company on or before the Outside Date,
all of the Shares held in escrow on account of that particular
Shareholder and not released to that particular Shareholder
pursuant to section 2.03 hereof are to be returned to the treasury
of the Company without consideration.
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Release from Escrow-
Performance Milestones
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2.03 Any Shares
not returned to treasury of the Company pursuant to section
2.02 hereof will be released from escrow as
follows:
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(a)
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in the event
that the Company, as at December 31, 2005, has achieved both of the
following performance milestones) 1/3 of the Shares deposited into
escrow on account of that particular Shareholder are to be released
to that Shareholder
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(i)
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the Company,
based solely upon its audited financial statements for the year
ended December 31, 2005, as filed with the Securities and Exchange
Commission (the “2005 Statements”) has total proved
oil, gas, and condensate reserves (“Total Proved
Reserves”), as estimated by a competent third-party
engineering firm, of not less than 3,515 million cubic feet of gas
equivalent recoverable (“MMCFE”). For the purposes of
this calculation and those to follow in this agreement, oil and
condensate shall be converted to equivalent gas on the basis of the
generally accepted accounting practice of one (1) barrel of oil or
condensate per six (6) thousand cubic feet of gas
(“MCF”), and
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3
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(ii)
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the Company, as
determined by the Company’s auditor in conjunction with the
preparation of the 2005 Statements, has achieved, or should have
achieved, an average MCF per day production rate for the thirty
days immediately prior to December 31, 2005 of not less than 1,090
MCF per day. To the extent the Company did not achieve this
threshold but was capable of doing so, as estimated by a competent
third-party engineering firm, were it not for infrastructure
considerations beyond the control of the Company, or for then
prevailing market considerations, this threshold shall be deemed to
have been met (the “Market Consideration
Test”);
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(b)
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in the event
that the Company, as at December 31, 2006, has achieved both of the
following performance milestones 1/3 of the Shares deposited into
escrow on account of that particular Shareholder are to be released
to that Shareholder
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(i)
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the Company,
based solely upon its audited financial statements for the year
ended December 31, 2006, as filed with the Securities and Exchange
Commission (the “2006 Statements”) has Total Proved
Reserves, as estimated by a competent third-party engineering firm,
of not less than 36,700 MMCFE, and
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(ii)
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the Company, as
determined by the Company’s auditor in conjunction with the
preparation of the 2006 Statements, has achieved, or should have
achieved, an average MCF per day production rate for the thirty
days immediately prior to December 31, 2006 of not less than 14,857
MCF per day, subject to the Market Consideration Test;
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(c)
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in the event
that the Company, as at December 31, 2007, has achieved both of the
following performance milestones 1/3 of the Shares deposited into
escrow on account of that particular Shareholder are to be released
to that Shareholder
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(i)
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the Company,
based solely upon its audited financial statements for the year
ended December 31, 2007, as filed with the Securities and Exchange
Commission (the “2007 Statements”) has Total Proved
Reserves, as estimated by a competent third-party engineering firm,
of not less than 65,875 MMCFE, and
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(ii)
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the Company, as
determined by the Company’s auditor in conjunction with the
preparation of the 2007 Statements, has achieved, or should have
achieved, an average MCF per day production rate for the thirty
days immediately prior to December 31, 2007
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