Document:

f10q0314ex10v_carbon.htm

Exhibit 10.5

 

 

Carbon Natural Gas Company

 

 

Annual Incentive Plan

 

 

2014

 

  

  

  

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

Plan Objectives

The Annual Incentive Plan (the “Plan”) is designed to meet the following objectives:

	
  

	
·

	
Provide an annual incentive plan that is performance driven and focused on objectives that are critical to the success of Carbon Natural Gas Company and the creation of value for shareholders.

	
  

	
·

	
Offer competitive cash compensation opportunities to employees.

	
  

	
·

	
Reward outstanding achievement.

	
  

	
·

	
Recruit and retain key employees.

 

Plan Concept

The Plan provides Annual Incentive Awards which will be determined primarily on the basis of the Company’s results on financial and operating performance measures.

Sixty percent of the Incentive Award shall be based on financial and operating performance measures selected by the Board of Directors.

Forty percent of the Incentive Award will be based upon discretion of the Board of Directors.

The Plan period is from January 1, 2014 to December 31, 2014.

Performance Objective Measures and Weighting

The Board of Directors will establish the Performance Measures and Objectives, the Threshold, Target and Outstanding performance levels and the weighting for each Performance Measure.

	
Measure

	 	
Weighting

	 	 	
Target

	  	 	 	 	 	  
	
EBITDA per Debt Adjusted Share Growth

	 	 	20.00	%	 	
20% increase

	  	 	 	 	 	 	  
	
Increase in Net Total Proved Reserves

	 	 	10.00	%	 	
5% increase

	  	 	 	 	 	 	  
	
Net Annual Production Growth

	 	 	20.00	%	 	
10% increase

	  	 	 	 	 	 	  
	
Lease Operating Expenses ($/unit)

	 	 	20.00	%	 	
$1.10/mcfe (6:1)

	  	 	 	 	 	 	  
	
G&A per Unit of Production

	 	 	10.00	%	 	
$.80 per unit of production equivalent

	  	 	 	 	 	 	  
	
F&D Cost per Unit of Reserves

	 	 	20.00	%	 	
$1.70 per unit of reserve equivalent

	  	 	 	 	 	 	  
	
Total of Performance Measures

	 	 	100.00	%	 	
 

 

  

2

  

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

Plan Administration

 

The Plan will be administered by the Committee and the Chief Executive Officer (for all positions except his own).  The Chief Financial Officer will verify the performance calculation for the financial and operating measures in consultation with the President, who shall be responsible for the estimation of the Company’s oil and gas reserves.

The CEO will establish the Incentive Award Pool for the non-officer employees and will allocate Incentive Awards to the Pool Participants at his discretion.

The Board cannot increase payout amounts above the outstanding level under performance categories that depend on the achievement of specific Company targets. Payments related to performance categories that are tied to the achievement of specific targets are capped once the highest level is achieved.  The Board can, in its reasonable discretion, reduce or increase the payout amounts for these performance categories after taking into account special or unusual factors that may have contributed to the achievement of target performance measures such as acquisitions, commodity prices or other factors considered appropriate by the Board.

Award Achievement Levels

Award Achievement Levels for the Plan will be:

	●	
Threshold

	
Minimum level at which Incentive Award payouts occur

	 	  	  
	●	
Target

	
Level at which the participant receives the Incentive Target Award percentage.

	 	  	  
	●	
Outstanding

	
Level at which the participant receives 200% of the Incentive Target Award percentage.

 

Completion percentages between Threshold, Target and Outstanding will be determined by interpolation.

Targets can be adjusted for material changes made during the year to the business plan or scope thereof, including the capital expenditure budget.

 

  

3

  

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

Performance Levels

Performance levels will be set for each measure.  Performance results below the Threshold will equate to a zero completion percentage.

A minimum 30% completion threshold is required for the total Plan in order for Award payments to be made under the Plan.

Completion Calculation

Completion percentages for each individual measure will be equal to the calculated completion percentage of the measure times the weighting for that measure. The overall completion percentage for the Plan for financial and operating measures and department objectives will be the sum of the weighted completion percentages for each individual measure.

Participants

The CEO shall determine which employees are to be participants in the Plan.  If a participant’s employment with the Company terminates for any reason prior to payment, bonus awards (if any) will be paid at the discretion of the Board of Directors.

The Target Award percentages for the CEO and other officers of the Company (Exhibit A) are established by the Board of Directors.  Changes to Target Award percentages for Company officers are subject to the approval of the Board. The CEO is authorized to establish and adjust at his discretion the Target Award percentages for non-officer Plan participants and the allocation of incentive awards to the pool participants. All awards to officers under the Plan are subject to approval of the Board.

Incentive  Awards will be calculated based upon the participant’s average base salary during the Plan year or earned salary during the Plan year if the participant was a new hire during the year, took a leave of absence, or was absent due to a worker’s compensation issue.

  

4

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
EBITDA per Debt Adjusted Share Growth

	  	  
	
Objective

	
20% increase in EBITDA per Debt Adjusted Share Growth.

	  	  
	
Definition

	
The percentage increase in EBITDA per Debt Adjusted Share Growth from January 1, 2014 to December 31, 2014.

 

	
Awards Level

	
·

	
Threshold

	
12.5% increase

 

	  	
·

	
Target

	
20% increase

 

	  	
·

	
Outstanding

	
30% increase

  

5

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
Increase in Net Total Proved Reserves

	  	  
	
Objective

	
5% increase in Net Total Proved Reserves. All reserve calculations are based on SEC reserve rules.

	  	  
	  	
For purposes of the Plan, proved reserves shall be measured by calculating the natural gas equivalent value as determined by the ratio of the individual product annual average SEC prices at December 31, 2014.

	  	  
	
Definition

	
The percentage increase in the company’s Net Total Proved Reserves from January 1, 2014 to December 31, 2014.

 

	
Awards Level

 

	
·

	
Threshold

	
1% Reserve Growth

	  	
·

	
Target

	
5% Reserve Growth

 

	  	
·

	
Outstanding

	
15% Reserve Growth

  

6

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
Growth in Net Annual Production

	  	  
	
Objective

	
10% increase in net annual production.

	  	  
	  	
For purposes of the Plan, net equivalent production shall be measured by calculating the natural gas equivalent value as determined by the ratio of the individual product annual average SEC prices at December 31, 2014.

	  	  
	
Definition

	
The percentage increase in net production from January 1, 2014 to December 31, 2014.

 

	
Awards Level

	
·

	
Threshold

 

	
7.5% Increase

	  	
·

	
Target

	
10% Increase

 

	  	
·

	
Outstanding

	
15% Increase

                                

  

7

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
Lease Operating Cost $/unit of Net Production

	  	  
	
Objective

	
Lease Operating Expenses of $1.10/mcfe (6:1)

	  	  
	
Definition

	
Actual cash costs of the Company’s lease operating expenses.

 

	
Awards Level

 

	
·

	
Threshold

	
$1.21 per Unit

	  	
·

	
Target

	
$1.10 per Unit

 

	  	
·

	
Outstanding

	
$  .90 per Unit

  

8

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
G&A Cost  $/unit of Net Production

	  	  
	
Objective

	
General and Administrative Expense of $.80 per unit of Net Production Equivalent.

	  	  
	  	
For purposes of the Plan, net equivalent production shall be measured by calculating the natural gas equivalent value as determined by the ratio of the individual product annual average SEC prices at December 31, 2014.

	  	  
	
Definition

	
Actual cash costs of the company’s general and administrative expenses.

 

	
Awards Level

 

	
·

	
Threshold

	
$ .88 per Unit

	  	
·

	
Target

	
$ .80 per Unit

 

	  	
·

	
Outstanding

	
$ .72 per Unit

  

9

  

 

Carbon Natural Gas Company

2014 Annual Incentive Plan

 

	
Performance Measure

	
Finding and Development Cost  $/unit of Net Equivalent Reserve Additions

	  	  
	
Objective

	
Finding and Development Costs at $1.70 per unit of net  equivalent reserve additions through drilling and completion activities.

	  	  
	  	
For purposes of the Plan, net equivalent reserve additions shall be measured by calculating the natural gas equivalent value as determined by the ratio of the individual product annual average SEC prices at December 31, 2014.

	  	  
	
Definition

	
The quotient of capital expenditures divided by the change in proved reserves during 2014 after the addition of 2014 production.

 

	
Awards Level                                       

 

	
·

	
Threshold

	
$1.96 per Unit

	  	
·

	
Target

	
$1.70 per Unit

 

	  	
·

	
Outstanding

	
$1.40 per Unit

  

10

  

Exhibit A

	
Target Bonus Award Levels

	  	 	
%

	 
	  	  	 	 	 
	
Patrick R. McDonald

	
Chief Executive Officer

	 	 	100	 
	
Kevin D. Struzeski

	
Chief Financial Officer

	 	 	60	 
	
Mark D. Pierce

	
President

	 	 	60	 

 

 

11fs12014a1ex10i_figoventures.htm

	
 

	
Exhibit 10.1

 

LEASE ASSUMPTION AGREEMENT

 

THIS AGREEMENT is hereby made and entered into effective as of December 25, 2013 by and among CGM Resources Limited and Capital Gold Mining Resources SAS (Domiciled in Bogota, Columbia and a wholly owned subsidiary of CGM Resources Limited) (The Assignor), and FIGO Ventures, Inc (Formerly AAA Energy, Inc.), 3273 E Warm Springs Rd., Las Vegas, Nevada, 89120. (The Assignee)

 

WITNESSETH:

 

WHEREAS, The Assignor and The Assignee entered into a Lease Assumption Agreement dated December 25, 2013, wherein The Assignor assigned to The Assignee the concessions for the mining operations at San Rafael mine (See Attached Contract), located in Jurisdiction of Municipalities of San Carlos and San Rafael, Antiocha, subject to terms and provisions more particularly contained therein; and

 

WHEREAS, The Assignee has requested that The Assignor consent to the assignment of The Assignor’s interest in the Lease to Assignee, and The Assignor has agreed to consent to such assignment, provided that The Assignor is not released from liability upon the Lease and The Assignor and Assignee shall remain jointiy and severally liablethereupon.

 

NOW, THEREFORE, for and in consideration of the mine, the assumption of the Lease herein described by Assignee, the consent of The Assignor to the assignment of the Lease by The Assignor to Assignee in exchange for 50 Million shares of the Common Stock of FIGO Ventures, Inc. and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties covenant and agree as follows:

 

1.           Assignment and Assumption of Rights and Obligations by The Assignor

 

The Assignor hereby assigns all of The Assignor’s right, title and interest in and to the Lease to Assignee and warrants to Assignee that The Assignor is not currently in default under the Lease. The Assignee consents to the assignment of The Assignor’s interest in the Lease by The Assignor to Assignee, waives its right to declare a default in the Lease by virtue of such assignment, but only for purposes of such specific assignment, and acknowledges that The Assignor is not in default under the Lease.

 

2.           Obligation of Assignee

 

Assignee hereby assumes and agrees to perform and pay all the obligations and payments of The Assignee now and hereafter owing to The Assignor pursuant to the Lease. Assignee shall perform all the obligations of The Assignor required in the Lease. The Assignor shall not be released by virtue of such assumption or assignment of the Lease to Assignee, and The Assignee shall continue to be unconditionally and jointly and severally liable upon the obligations and payments assumed here-under, pursuant and subject to all the terms and provisions of the Lease. All of the covenants, agreements and provisions referring to The Assignor in the Lease shall also be applicable to Assignee.

 

  

  

  

 

3.           Liability

 

Both The Assignor and Assignee shall remain jointly, severally and unconditionally liable upon the Lease not withstanding any action; or omission to act, which may hereafter be taken or suffered on the part of The Assignor, and not withstanding any future modifications, extensions and renewals of the Lease.

 

4.           Entire Agreement

 

This instrument and the Prior Lease Agreement constitutes the entire agreement of the parties with respect to the subject matter herein contained and may not be amended or modified except by an agreement in writing executed by all of the parties hereto. This instrument is severable such that the invalidity or unenforceability of any provision herein contained shall not impair the validity or enforceability of the remaining provisions.

 

5.           Applicable Law

 

This instrument shall be governed by, and construed in accordance with, the laws of the State of Nevada.

 

IN WITNESS WHEREOF, this instrument has been executed by all parties with the intent of being legally bound.

 

ASSIGNOR:

	  	  
		  	  
	
CGM Resources Limited

	  	
Date: December 25, 2013

	  	  
	            	  	  
	
Capital Gold Mining Resources SAS

	
Date: December 25, 2013

	
 

ASSIGNEE:

  

	  
	  	  
	
FIGO Ventures, Inc (Formerly AAA Energy, Inc.)

	
Date: December 25, 2013

 

  

  

  

 

“Approving a work program and scheduled Works”

 

DIRECTOR OF TITLE MINING Secretary of the Department of Antaquia, in exercise of his powers conferred by Decree No. 2575 of October 14, 2008, and Resolutions Nos. 18-0993 of 23 November 2004, 18-1847 of 22 December 2006, 18-0916 of June 21, 2007, 18-0993 of June 21, 2008 and 18-2365 of 18 December 2008, 18-2433 of 14 December 2010 and,

 

WHEREAS:

 

Capital Gold Mining Resources SAS, Domiciled in Bogota, D.C. Corporate #021 17983, owns the mining concession contract No. 7092, registered in the National Mining Feb 07, 2007, with the code HHCE -08, which aims at the economic exploitation of gold, silver and Concentrates, located in Jurisdiction of Municipalities of San Carlos and San Rafael of this Department.

 

The present holder of the Works and Works Program (PTO) on 03 January 2001, which was annexed to the contract as part of the obligations. Being evaluated and graded-same by technical Study    No. 000015 of 27 January 2011, the Authors of the study address it as technically acceptable and in turn defined the minerals to exploit and the respective annual volume of extraction. Also estimated the in the policy are mining environmental stages in accordance with the provisions of Article 280 of Act 685 of 2001.

 

ALINDERACION COORDINATES IN PLANS GAUSS

 

	
PUNTA

	  	
NORTH POINT COORDINATES(X)

	  	
EAST COORDINATES (Y)

	
PA

	  	
1,183,725.00

	  	
895,800.00

	
1

	  	
1,895,800.00

	  	
183,725.00

	
2

	  	
1,896,800.00

	  	
182,700.00

	
3

	  	
1,898,600.00

	  	
183,225.00

	
4

	  	
1,897,600.00

	  	
184,225.00

	  	  	  	  	  

Area:233.50 hectares.

 

●  MINERAL CONCESSION OR DELA MINERALS: GOLD, SILVER AND CONCENTRATES

●  LENGTH OF HOLDING PERIOD: 26 years

●  MNNG ENVIROMENTAL POLICY:  28,824393 Pesos

●  IGAC IRON: 148- I-D.

 

Established above, and taking into account the amount of the Mining Environmental Policy for the exploitaion phase will be the amount of TWENTY EIGHT MILLION EIGHT HUNDRED AND TWENTY FOUR THOUSAND THREE HUNDRED AND NINTY THREE PESOS.

 

ARTICLE THREE: To warn the operator to couple power to initiate formal Period of exploitation and issue the respective act to authorize, should provide the environmental authorization in accordance with the prescription by the Code of Mines, Act 99 of 1993, Decree 1220 of 2005 and Decree 500, 2006.

 

ARTICLE FOUR: Refer copy of this act to the Environmental Authority Administrative correspondent once-same is enforceable

 

ARTICLE FIVE: Once you sign this ruling, send copy to Weber County, Bogota DC, for the correspondng registration in the National Mining Register as provided by Article 22, paragraph d) of Article 332 Of Act 685 of 2001.

 

  

  

  

Against this Order an appeal for rehearing, which may be brought within five (5) days following its notification?

 

NOTIFY AND ENFORCED

 

MONICA MARIA VELEZ GOMES

 

Titration Director of Mining

Mauricio Gomez Florez Proyecio

22/02/2011

 

PERSONAL NOTIFICATION

 

Today March 15, 2011, present in the Mining Titling Directorate of the Ministry of Mines, Capital Gold Mining

Resources SAS, Domiciled in Bogota, D.C. personally notified of this resolution

The Notified: Document # 8256628

 

GOMEZ MARLENY ALZATE

Administrative Assistant (E) - Secretary of Mines

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