Silk Energy Ltd SLKEF

Employment Agreement

[victor2009]

Another interesting piece of information, when reviewing compensation practices of this company is the following excerpt from the Management Information Circular dated April 23, 2010.  Completion of this agreement was not disclosed by News Release, to my knowledge it first became publicly available when the Circular was published on Sedar. If there was no other public disclosure when the agreement was executed, I suppose the company could have since negotiated cancelation, without disclosure. However, assuming this agreement is still in effect, it presents some real concerns to shareholders or prospective investors.

The possible dollar amount of potential liability is difficult to calculate, although it does appear that it would be a significant amount. To my knowledge there is no provision for the potential liability in the interim financial statements, nor reference to a potential liability. It seems bizarre to me that the company discloses a commitment for a monthly management fee of $30,000 (while paying $37,500), but does not report the commitment or contingent liability of an employment agreement that could be many times the amount involved. It will be interesting to see whether the agreement exists at the time of the audited statements, and whether the Auditors deem it worthy of disclosure. If they don't, I think the Securities Commission should be advised of a possible loop hole in disclosure requirements. The impact of this "parachute" being triggered could be significant to an investor - disclosure should not be limited to a paragraph in the Management Information Circular - particularly a paragraph as difficult to interpret as this one.

F. Employment Agreements

As of the date of this Information Circular, the Corporation has entered into a consulting agreement with Adrea

Capital Corp., a private British Columbia company owned and / or controlled by Mr. Miller. In the event that the

consulting agreement is terminated due to the death, retirement of disability of Mr. Miller, the agreement provides

for the lump sum payment of an amount equal to two (2) times the annual salary and two (2) times the average

annual bonus paid to Adrea Capital Corp. In the event that the agreement is terminated for any other reason or not

for just cause or in the event Mr. Miller resigns for "Good Reason", as such term is defined therein, Mr. Miller will

be entitled to a payment that, in the aggregate, equals the annual salary at time of termination and an amount equal

to the greater of: (i) six (6) times the annual salary; and (ii) an amount equal to the result obtained when the annual

salary is multiplied by a fraction, the numerator of which is the number of days between the date of termination and

Mr. Miller's retirement date and the denominator of which is 365. In addition, the Corporation is required to

purchase from Mr. Miller, at the fair market value, all shares, rights, options or warrants to acquire shares of the

Corporation owned by Mr. Miller and shall pay him three (3) times the difference between the exercise price and the

fair market value of all rights, options or warrants to acquire shares subject to issuance pursuant to any options or

warrants held by Mr. Miller.