Document:

Exhibit
10.3

 

GLOBAL ENERGY

 

November 26,
2004

 

Fred
W. Kelly

12
Bayview Drive SW

Calgary,
Alberta

Canada
T2V 3N6

 

Dear
Fred,

 

Surge
Global Energy, Inc. (the “Company”) is very pleased to confirm our offer
of employment. This offer is contingent upon satisfactory results of all
reference, education, and background checks (Release and Authorization
attached) and is based on the following terms and conditions:

 

	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Start Date:

  	
   

  	
  We have an anticipated
  your start date as November 26, 2004.

  
	
   

  	
   

  	
   

  
	
  Office:

  	
   

  	
  New office to be
  established in Calgary, Alberta, Canada. The Company will pay the expenses of
  a Calgary office pursuant to an expense account in an amount agreed by you
  and the Board of Directors or the Compensation Committee thereof.

  
	
   

  	
   

  	
   

  
	
  Salary:

  	
   

  	
  Your starting salary as an
  exempt employee will be USD$100,000 annually.

  
	
   

  	
   

  	
   

  
	
  Signing Bonus:

  	
   

  	
  You will be entitled to
  receive a signing bonus of USD$25,000, which will be payable on the 90th
  day after your start date.

  
	
   

  	
   

  	
   

  
	
  Bonus:

  	
   

  	
  You will be eligible to
  participate in the Company’s Bonus Plan which the Board of Directors intends
  to establish with your input.

  
	
   

  	
   

  	
   

  
	
  Stock Options:

  	
   

  	
  You will be granted stock
  options to purchase 700,000 shares of common stock. The options will have an
  exercise price equal to $0.65 per share, and will be exercisable for ten
  years after grant, subject to earlier termination as set forth in the Option
  Agreement. The options will vest in equal monthly installments over three
  years. These options will be non-qualified stock options.

  
	
   

  	
   

  	
   

  
	
  Board of Directors:

  	
   

  	
  The Board of Directors has
  appointed you as a director contingent on your acceptance of this offer. You
  will serve until the next annual meeting of stockholders, or until your
  successor is duly elected and qualified. In

  

 

 

	
   

  	
   

  	
  accordance with Delaware
  law and the rules of various stock exchanges and quotation systems, the
  Board of Directors or the Nominating Committee thereof will have discretion
  to determine the candidates to be nominated for election at the next annual
  meeting of stockholders.

  
	
   

  	
   

  	
   

  
	
  Performance Review:

  	
   

  	
  The Board of Directors of
  the Compensation Committee thereof will review your performance after 90
  days, and you will be eligible for increased salary, additional stock option
  grants and/or increased expense account allowance based on the results of
  that review.

  
	
   

  	
   

  	
   

  
	
  Health Benefits:

  	
   

  	
  You will be eligible to
  participate in any future benefits plans (such as medical, dental, vision,
  short-term disability, long-term disability and life insurance) available to
  the Company’s employees at the time such plans are established.

  
	
   

  	
   

  	
   

  
	
  Travel:

  	
   

  	
  You will be required to
  travel occasionally to the Company’s corporate offices in San Diego,
  California, and other destinations, including New York, Argentina and Texas
  on a periodic basis as requested by the Board. It is expected that visits to
  each of the Company’s oil & gas properties will occur at least
  semi-annually. You will be reimbursed for your reasonable travel expenses for
  required travel on behalf of the Company.

  
	
   

  	
   

  	
   

  
	
  Paid Time Off &
  Holidays:

  	
   

  	
  You will receive 20 days
  of accrued Paid Time Off (PTO) annually, in use for vacation or sick time.
  This provides for most of your paid time away from work. PTO hours are
  accrued per pay period. Any accrued hours in excess of 200 will be paid out
  in the first pay period of December.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Company will establish
  from time to time its paid holidays. You must be on active status the day
  before and the day after the holiday to receive holiday pay.

  
	
   

  	
   

  	
   

  
	
  Retirement:

  	
   

  	
  You will be eligible to
  participate in any 401k, profit sharing or other defined contribution plan
  the Company establishes for employees. (Note: Some IRS or Revenue Canada
  limitations may apply.)

  
	
   

  	
   

  	
   

  
	
  Arbitration:

  	
   

  	
  As a contingency of this
  offer, you will be required to sign the attached Mutual Agreement to
  Arbitrate.

  

 

Due to the enactment of the Immigration Reform and
Control Act of 1986, this offer is contingent on your ability to produce
acceptable documentation verifying your eligibility to work in the United
States.

 

Additionally, as a condition of this offer and of
your employment with the Company, you will be required to preserve the Company’s
proprietary and confidential information and you must comply with the Company’s
policies and procedures. Accordingly, you will be required to execute an
appropriate Non-Disclosure and Assignment of Inventions Agreement effective as
of your first date of employment.

 

 

If accepted, your employment will be at-will with no
specified period or term of employment. This means that either you or the
Company may terminate employment at anytime, with or without reason. The
Company may also transfer, promote, demote or otherwise alter your position
and/or status at any time and for any reason. An employment agreement for a
specified period of time, which contradicts this at-will agreement, may only be
entered into in writing, signed with express authorization by the Board of
Directors or the Compensation Committee thereof.

 

We sincerely hope that you decide to join Surge Global
Energy, Inc. Please acknowledge your acceptance of our offer by signing
below and returning a copy of this letter to us not later than close of
business Friday, November 26, 2004. If we do not receive your response by
close of business on such date, this offer will be void.

 

If there are any questions, please do not hesitate
to call me.

 

Sincerely,

 

 

David Perez

Chief Operating Officer

 

I understand and agree to the terms and conditions set
forth in this letter. I further understand that any misrepresentations that I
have made on my employment application or resume can result in termination. I
acknowledge that no statement contradicting this letter, oral or written, has
been made to me, that I am not relying on any statement or term not contained
in this letter, and that no agreements exist which are contrary to the terms
and conditions set forth in this letter.

 

 

	
  Accepted by:

  	
  /s/ Fred W. Kelly

  	
   

  	
  Date:

  	
  November 26, 2004Exhibit 10.4

 

SUBLEASE

 

1.             PARTIES.

 

This Sublease, dated November 22,
2004 is made between Granite Financial Group, Inc., (“Sublessor”), and
Surge Global Energy, Inc. (“Sublessee”).

 

2.             MASTER LEASE.

 

Sublessor is the Lessee
under a written lease dated May 20, 2003 (the “Master Lease”), wherein
Prentiss Properties Acquisition Partners, L.P. (“Lessor”) leased to Sublessor
the real property located in the City of San Diego, County of San Diego, State
of California, described as: 12220 El Camino Real, Suite 400, San Diego,
California, 92130 (“Master Premises”).

 

3.             PREMISES.

 

Sublessor hereby subleases to Sublessee on the terms
and conditions set forth in this Sublease the following portion of the Master
Premises: 12220 El Camino Real, Suite 400, San Diego, California, 92130
(the “Premises”).

 

4.             WARRANTY BY SUBLESSOR.

 

Sublessor warrants and represents to Sublessee that
Sublessor is not now, and as of the commencement of the Term hereof will not
be, in default or breach of any of the provisions of the Master Lease, and that
Sublessor has no knowledge of any claim by Lessor that Sublessor is in default
or breach of any of the provisions of the Master Lease.

 

5.             TERM.

 

The Sublease Term shall be on a monthly basis. The
Term of this Sublease shall commence when Possession of the Premises has been
given to Sublessee by Sublessor with substantial completion of the Tenant
Improvements (if any), and when
Lessor consents to this Sublease (the “Commencement Date”), which is estimated
to occur on approximately November 22, 2004, such date to be adjusted
based on the actual date of commencement. If for any reason Sublessor does not
deliver Possession to Sublessee on the Commencement Date, the validity of this
Sublease shall not be impaired. Notwithstanding the foregoing, if Sublessor has
not delivered Possession to Sublessee within ninety (90) days after the
Commencement Date, then at any time thereafter and before delivery of
Possession of the Premises to Sublessee, Sublessee may give written notice to
Sublessor of Sublessee’s intention to cancel this Sublease. Said notice shall
set forth an effective date for such cancellation which shall be at least ten (10) days
after delivery of said notice to Sublessor. If Sublessor delivers Possession to
Sublessee on or before such effective date, this Sublease shall remain in full
force and effect. If Sublessor fails to deliver Possession to Sublessee on or
before such effective date, this Sublease shall be cancelable by Sublessee, in
which case all consideration previously paid by Sublessee to Sublessor on
account of this Sublease shall be returned to Sublessee, this Sublease shall
thereafter be of no further force or effect, and Sublessor shall have no
further liability to Sublessee on account of such delay or cancellation.

 

 

6.             RENT.

 

Sublessee shall pay to Sublessor as Rent, without
deduction, setoff, notice or demand, at 12220 El Camino Real, Suite 400
San Diego, California, 92130, or at such other place as Sublessor shall
designate from time to time by written notice to Sublessee, the sum of $1,800.00
per month, on the first day of each month of the Term. Sublessee shall pay $0.00
as a Security Deposit to be treated in the same manner as is outlined in the
Master Lease. If the Term begins on a day other than the first day of a month,
the Rent for the partial months shall be prorated on a per diem basis based on
the actual number of days in the month in which the Sublease commences.
Additional provisions:

 

7.             OTHER PROVISIONS OF SUBLEASE.

 

All applicable terms and conditions of the Master
Lease are incorporated into and made a part of this Sublease as if Sublessor
were the lessor thereunder, Sublessee the lessee thereunder, and the Premises
the Master Premises, except for the following: not applicable.  Sublessee assumes and agrees to perform the
lessee’s obligations under the Master Lease during the Term to the extent that
such obligations are applicable to the Premises, except that the obligation to
pay rent to Lessor under the Master Lease shall be considered performed by
Sublessee to the extent and in the amount rent is paid to Sublessor in
accordance with Section 6 of this Sublease.  Sublessee shall not commit or suffer any act
or omission that will violate any of the provisions of the Master Lease.
Sublessor shall exercise due diligence in attempting to cause Lessor to perform
its obligations under the Master Lease for the benefit of Sublessee. If the
Master Lease terminates, this Sublease shall terminate and the parties shall be
relieved of any further liability or obligation under this Sublease.
Notwithstanding the foregoing, if the Master Lease gives Sublessor any right to
terminate the Master Lease in the event of the partial or total damage,
destruction, or condemnation of the Master Premises or the building or project
of which the Master Premises are a part, the exercise of such right by
Sublessor shall not constitute a default or breach hereunder.

 

 

8.             ATTORNEYS’ FEES.

 

If Sublessor or Sublessee shall commence legal
action against the other arising out of or in connection with this Sublease,
the prevailing party shall be entitled to recover its costs of suit and
reasonable attorneys’ fees.

 

9.             AGENCY DISCLOSURE.

 

Sublessor and Sublessee each warrant that they have
dealt with no real estate broker in connection with this transaction.

 

10.          NOTICES.

 

All notices and demands which may or are to be
required or permitted to be given by either party on the other hereunder shall
be in writing. All notices and demands by the Sublessor to Sublessee shall be
mailed to the Sublessee at the Premises, or to such other place as Sublessee
may from time to time designate in a notice to the Sublessor. All notices and
demands by the Sublessee to Sublessor shall be mailed to the Sublessor at the
address set forth above, and to such other person or place as the Sublessor may
from time to time designate in a notice to the Sublessee.

 

	
  SUBLESSOR:

  	
  SUBLESSEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Daniel
  J. Schreiber

  	
   

  	
  By:

  	
  /s/ David Perez

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
        Daniel
  J. Schreiber

  	
   

  	
  Name:

  	
        David
  Perez

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
        President

  	
   

  	
  Title:

  	
        COO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
        11/22/04

  	
   

  	
  Date:

  	
        11/22/04

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