FORM OF CHANGE IN CONTROL AGREEMENT
Exhibit 10.1
FORM OF CHANGE IN CONTROL AGREEMENT
Infinity Energy Resources, Inc. entered into Change in Control Agreements in substantially the form
attached with the following executive officers:
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxx
For Messrs. Tuell, Ficker, and Xxxx, the multiples provided in Section 4(b) are 2.0, 1.5, and 1.0 respectively.
AGREEMENT by and between Infinity Energy Resources, Inc., a Delaware corporation (the
“Company”), with offices at 000 Xxxxxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 and ____________(the “Executive”), an individual residing in the State of Colorado, dated as of June 9, 2006.
WHEREAS, the Company recognizes that the current business environment makes it difficult to
attract and retain highly qualified executives unless a certain degree of security can be offered
to such individuals against organizational and personnel changes which frequently follow changes in
control of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to consider major career
changes in an effort to assure financial security for themselves and their families; and
WHEREAS, the Company desires to assure fair treatment of its executives in the event of a
Change in Control (as defined below) and to allow them to make critical career decisions without
undue time pressure and financial uncertainty, thereby increasing their willingness to remain with
the Company notwithstanding the outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its executives will be involved in evaluating or
negotiating any offers, proposals or other transactions which could result in Changes in Control of
the Company and believes that it is in the best interest of the Company and its stockholders for
such executives to be in a position, free from personal financial and employment considerations, to
be able to assess objectively and pursue aggressively the interests of the Company’s stockholders
in making these evaluations and carrying on such negotiations; and
WHEREAS, the Board of Directors (the “Board”) of the Company believes it is essential to
provide the Executive with compensation arrangements upon a Change in Control that provide the
Executive with individual financial security and that are competitive with those of other
corporations, and in order to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and intending to be legally
bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective as of the date first
set forth above. This Agreement may be terminated by the Company upon 12 months’ advance written
notice to the Executive; provided, however, that after a Change in Control of the Company during
the term of this Agreement, this Agreement shall remain in effect until all of the obligations of
the parties under the Agreement are satisfied and the Protection Period has expired. Prior to a
Change in Control this Agreement shall immediately terminate upon termination of the Executive’s
employment or upon the Executive’s ceasing to be an elected officer of the Company.
2. Certain Definitions. For purposes of this Agreement, the following words and phrases shall
have the following meanings:
(a) “Cause” shall mean (i) the continued failure by the Executive to perform his material
responsibilities and duties toward the Company (other than any such failure resulting from the
Executive’s incapacity due to physical or mental illness), (ii) the engaging by the Executive in
willful or reckless conduct that is demonstrably injurious to the Company monetarily or otherwise,
(iii) the conviction of the Executive of a felony, or (iv) the commission or omission of any act by
the Executive that is materially inimical to the best interests of the Company and that constitutes
on the part of the Executive common law fraud or malfeasance, misfeasance, or nonfeasance of duty;
provided, however, that Cause shall not include the Executive’s lack of professional
qualifications. For purposes of this Agreement, an act, or failure to act, on the Executive’s part
shall be considered “willful” or “reckless” only if done, or omitted, by him not in good faith and
without reasonable belief that his action or omission was in the best interest of the Company. The
Executive’s employment shall not be deemed to have been terminated for Cause unless the Company
shall have given or delivered to the Executive (A) reasonable notice setting forth the reasons for
the Company’s intention to terminate the Executive’s employment for Cause, (B) a reasonable
opportunity, at any time during the 30-day period after the Executive’s receipt of such notice, for
the Executive, together with his counsel, to be heard before the Board, and (C) a Notice of
Termination (as defined in Section 12 below) stating that, in the good faith opinion of not less
than a majority of the entire membership of the Board, the Executive was guilty of the conduct set
forth in clauses (i), (ii), (iii) or (iv) of the first sentence of this Section 2(a).
(b) “Change in Control” shall mean the first to occur of the following events specified in
(i), (ii), (iii), (iv), (v) or (vi) (but no event other than the specified events): (i) any person
becomes the beneficial owner, directly or indirectly, of securities of the Company representing
thirty-five percent (35%) or more of the combined voting power of the Company’s then outstanding
voting securities (other than (x) the Company, (y) any subsidiary of the Company, (z) one or more
employee benefit plans maintained by the Company), or (xx) any noteholders or warrantholders under
the Securities Purchase Agreement dated as of January 13, 2005 among Infinity, Inc., the
predecessor of the Company, and HFTP Investment L.L.C., AG Domestic Convertibles, L.P. and AG
Offshore Convertibles Ltd., as further amended, supplemented and modified (the “Promethean Purchase
Agreement”)); (ii) any noteholders or warrantholders under the Promethean Purchase Agreement,
whether individually or as a group (as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) become the owner, directly or indirectly, of outstanding
voting securities (including voting securities acquired on conversion of notes or exercise of
warrants) of the Company representing thirty-five percent (35%) or more of the combined voting
power of the Company’s then outstanding voting securities; (iii) three or more Directors of the
Company, whose election or nomination for election is not approved by a majority of the applicable
Incumbent Board, are elected within any single twelve month period to serve on the Board; (iv)
members of the applicable Incumbent Board cease to constitute a majority of the Board; (v) the
consummation of a merger or consolidation of the Company with or into any other corporation or
entity or person, or any other corporate reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization own less than 50% of the
outstanding voting securities of the surviving entity (or its parent) following the
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consolidation, merger or reorganization or (vi) the consummation of a sale, lease or other
disposition of all or substantially all of the assets of the Company. For purposes of this Section
2(b), the terms “person” and “beneficial owner” shall have the meanings set forth in Section 13(d)
and Rule 13d-3, respectively, of the Exchange Act and in the regulations promulgated thereunder.
For purposes of this Section 2(b), “Incumbent Board” shall mean (i) members of the Board of
Directors of the Company as of the date hereof, to the extent that they continue to serve as
members of the Board, and (ii) any individual who becomes a member of the Board after the date
hereof, if such individual’s election or nomination for election as a Director was approved by a
vote of at least seventy-five percent (75%) of the then applicable Incumbent Board.
(c) “Change in Control Date” shall be any date during the term of this Agreement on which a
Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive’s employment or status as an elected officer with the Company is terminated within six
(6) months before the date on which a Change in Control occurs, and it is reasonably demonstrated
that such termination (i) was at the request of a third party who has taken steps reasonably
calculated or intended to effect a Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control
Date” shall mean the date immediately before the date of such termination.
(d) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(e) “Disability,” for purposes of this Agreement, shall mean total disability as defined in
any long-term disability plan sponsored by the Company in which the Executive participates, or, if
there is no such plan or it does not define such term, then it shall mean the physical or mental
incapacity of the Executive that prevents him from substantially performing the duties of the
office or position to which he was elected or appointed by the Board for a period of at least 180
days and the incapacity is expected to be permanent and continuous through the Executive’s 65th
birthday.
(f) “Good Reason” means:
(i) the assignment to the Executive within the Protection Period of any duties inconsistent in
any respect with the Executive’s position (including status, offices, titles and reporting
requirements, authority, duties or responsibilities), or any other action that results in a
diminution in such position, authority, duties, or responsibilities excluding for this purpose an
isolated, insubstantial, and inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice given by the Executive;
(ii) a reduction by the Company in the Executive’s base salary as in effect immediately before
the beginning of the Protection Period or as increased from time to time after the beginning of the
Protection Period;
(iii) a failure by the Company to maintain plans providing benefits at least as beneficial as
those provided by any benefit or compensation plan (including, without limitation, any incentive
compensation plan, bonus plan or program, retirement, pension or savings plan, life insurance plan,
health and dental plan or disability plan) in which the Executive
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is participating immediately before the beginning of the Protection Period, or any action
taken by the Company that would adversely affect the Executive’s participation in or reduce the
Executive’s opportunity to benefit under any of such plans or deprive the Executive of any material
fringe benefit enjoyed by him immediately before the beginning of the Protection Period; provided,
however, that a reduction in benefits under the Company’s tax-qualified retirement, pension, or
savings plans or its life insurance plan, health and dental plan, disability plans or other
insurance plans, which reduction applies generally to participants in the plans and has a de
minimis effect on the Executive shall not constitute “Good Reason” for termination by the
Executive;
(iv) the Company’s requiring the Executive, without the Executive’s written consent, to be
based at any office or location in excess of 50 miles from his office location immediately before
the beginning of the Protection Period, except for travel reasonably required in the performance of
the Executive’s responsibilities;
(v) any purported termination by the Company of the Executive’s employment for Cause otherwise
than as referred to in Section 12 of this Agreement;
(vi) any failure by the Company to obtain the assumption of the obligations contained in this
Agreement by any successor as contemplated in Section 11(c) of this Agreement; or
(vii) any material breach of this Agreement by the Company.
(g) “Parent” means any entity that directly or indirectly through one or more other entities
owns or controls more than 50 percent of the voting stock or common stock of the Company.
(h) “Protection Period” means the period beginning on the Change in Control Date and ending on
the last day of the 30th full calendar month following the Change in Control Date.
(i) “Subsidiary” means a company 50 percent or more of the voting securities of which are
owned, directly or indirectly, by the Company.
3. Vesting Upon Change in Control. Upon a Change in Control, any and all Common Shares (as
defined in Section 4(c)), options, or other forms of securities issued by the Company and
beneficially owned by the Executive (whether granted before or after the date of this Agreement)
that are unvested, restricted, or subject to any similar restriction that would otherwise require
continued employment by the Executive beyond the Change in Control Date in order to be vested in
the hands of the Executive shall vest automatically.
4. Benefits Upon Termination Within a Protection Period. If, during a Protection Period, the
Executive’s employment is terminated by the Company other than for Cause or Disability or other
than as a result of the Executive’s death or if the Executive terminates his employment for Good
Reason, the Company shall, subject to Sections 8 and 9, pay to the Executive in a lump sum in cash,
within 10 days after the date of termination, the aggregate of the following amounts:
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(a) an amount equal to the Executive’s full base salary and vacation pay (for vacation not
taken) accrued but unpaid through the date of termination at the rate in effect at the time of the
termination;
(b) a severance amount equal to ____ times the Executive’s “Annual Compensation.” For purposes
of Section 4 and 5 of this Agreement, “Annual Compensation” shall be an amount equal to the sum of
(i) the Executive’s annual base salary from the Company and its Subsidiaries (including scheduled
base salary increases or increases that are budgeted and approved either by the Compensation
Committee of the Board of Directors or by the Board of Directors of the Company in advance of the
Change in Control Date), annualized for any partial year, in effect immediately prior to the Change
in Control Date; and (ii) the average of the annual bonus amounts received by the Executive in each
of the two calendar years prior to the Change in Control Date for which bonuses have been paid
(which annual bonus may be in the aggregate if the Executive has received more than one bonus
payment for a calendar year); and
(c) upon surrender by the Executive (which surrender shall be at the sole option of Executive)
of his outstanding options to purchase common shares of the Company (“Common Shares”) granted to
the Executive by the Company (the “Outstanding Options”), an amount in respect of each Outstanding
Option (whether vested or not) equal to the difference between the exercise price of such
Outstanding Option and the higher of (x) the fair market value of the Common Shares at the time of
such termination (but not less than the closing price for the Common Shares on NASDAQ, or such
other national stock exchange on which such shares may be listed, on the last trading day such
shares traded prior to the date of termination), and (y) the higher of the highest price paid for
Common Shares and, in the cases of securities convertible into Common Shares or carrying a right to
acquire Common Shares, the highest effective price (based on the prices paid for such securities
and the price at which such securities are convertible into Common Shares or at which Common Shares
may be acquired), by any person or group whose acquisition of voting securities has resulted in a
Change in Control of the Company, in each case in the 12 months preceding a Change in Control;
provided that Executive may elect, in lieu of exercising the foregoing right, to retain the
Outstanding Options and exercise all rights relating thereto in accordance with the terms of the
Outstanding Options and any related option plans and agreements.
5. Executive’s Right to Leave Employment. At any time during the six month period following a
Change in Control Date, the Executive shall have the right to terminate the Executive’s employment
with the Company at the Executive’s sole discretion (the “Executive Termination Right”). In the
event the Executive exercises the Executive Termination Right, the Company shall, subject to
Sections 8 and 9, pay the Executive in a lump sum in cash within 10 days after the date of
termination the aggregate of the following amounts:
(a) The amounts set forth in Sections 4(a) and 4(c); and
(b) 0.75 multiplied by the amount set forth in Section 4(b).
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive, or other plans,
practices, policies, or programs provided by the Company or any of its Subsidiaries and for
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which the Executive may qualify, nor shall anything in this Agreement limit or otherwise
affect such rights as the Executive may have under any stock option or other agreements with the
Company or any of its Subsidiaries. Amounts that are vested benefits or that the Executive is
otherwise entitled to receive under any plan, practice, policy, or program of the Company or any of
its Subsidiaries at or subsequent to the date of termination shall be payable in accordance with
such plan, practice, policy, or program; provided, however, that the Executive shall not be
entitled to severance pay, or benefits similar to severance pay, under any plan, practice, policy,
or program generally applicable to employees of the Company or any of its Subsidiaries.
7. Full Settlement; No Obligation to Seek Other Employment; Legal Expenses. The Company’s
obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations under this Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right, or action that the Company may have against the Executive or
others. The Executive shall not be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under any of the provisions of this
Agreement. The Company agrees to pay, within five days following timely written demand by the
Executive, all legal fees and expenses the Executive may reasonably incur as a result of any
dispute or contest (regardless of outcome) by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. A written demand is
timely if it is made with respect to expenses incurred during the calendar year in which the
written demand is made, or incurred in the prior calendar year if the written demand is made on or
before the last day of February. In any such action brought by the Executive for damages or to
enforce any provisions of this Agreement, he shall be entitled to seek both legal and equitable
relief and remedies, including, without limitation, specific performance of the Company’s
obligations under this Agreement, in his sole discretion.
8. Cut Back in Benefits. Notwithstanding any other provision of this Agreement, the cash lump
sum payment and other benefits otherwise to be provided pursuant to Sections 3, 4, and 5 of this
Agreement (the “Severance Benefit”) shall be reduced as described below if independent accountants
for the Company (the “Accountants”) determine (A) that Executive would, by reason of section 4999
of the Code, be required to pay an excise tax on any part of the Severance Benefit or any part of
any other payment or benefit to which Executive is entitled under any plan, practice, policy, or
program, and (B) the amount of the Severance Benefit that Executive would retain on an after-tax
basis, present value basis would be increased as a result of such reduction by an amount of at
least $5,000. If the Severance Benefit is required to be reduced, it shall be reduced only to the
extent required, in the opinion of the Accountants, to prevent the imposition upon the Executive of
the tax imposed under section 4999 of the Code. The Company shall determine which elements of the
Severance Benefit shall be reduced to conform to the provisions of this Section. Any determination
made by the Accountants or the Company pursuant to this Section shall be conclusive and binding on
the Executive. The Executive shall promptly provide to the Company such information regarding the
Executive’s tax situation as the Company shall reasonably request in order to allow the Accountants
to perform calculations required by this Section 8.
9. Code Section 409A Savings Provision. Notwithstanding anything in this Agreement to the
contrary, the following provisions related to payments treated as deferred compensation under Code
Section 409A shall apply:
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(a) If, on the date of Executive’s “separation from service,” Executive is a “specified
employee,” within the meaning of Sections 409A(a)(2)(A)(i) and 409A(a)(2)(B)(i) of the Code, and as
a result of such separation from service Executive would receive any payment that, absent the
application of these provisions, would be subject to the constructive receipt, interest, and
additional tax provisions of Code Section 409A(a), then any such payment shall be made on the date
that is the earliest of: (i) six (6) months after Executive’s separation from service, (ii)
Executive’s date of death, or (iii) such other earliest date for which such payment will not be
subject to such constructive receipt, interest, and additional tax.
(b) It is the intention of the parties that all amounts payable under this Agreement not be
subject to the constructive receipt, interest, and additional tax resulting from the application of
Code Section 409A. To the extent such amounts could become subject to such constructive receipt,
interest, and additional tax, the parties shall cooperate to amend this Agreement with the goal of
giving Executive the same or equivalent value of the benefits described in this Agreement in a
manner that does not result in such constructive receipt, interest, and additional tax. In the
event the Company does not so cooperate, the Company shall indemnify Executive for any interest and
additional tax arising from the application of Code Section 409A, grossed-up for any other income
tax incurred by Executive related to the indemnification (i.e., indemnification of such additional
income tax), assuming the highest marginal income tax rates apply to any taxable indemnification.
10. Confidential Information. The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or data relating to the
Company or any of its Subsidiaries, and their respective businesses, obtained by the Executive
during the Executive’s employment by the Company or any of its Subsidiaries and that has not become
public knowledge (other than by acts of the Executive or his representatives in violation of this
Agreement). After the date of termination of the Executive’s employment with the Company, the
Executive shall not, without the prior written consent of the Company, communicate or divulge any
such information, knowledge, or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives or successor(s) in interest. The Executive may designate a successor (or
successors) in interest to receive any and all amounts due the Executive in accordance with this
Agreement should the Executive be deceased at any time of payment. Such designation of
successor(s) in interest shall be made in writing and signed by the Executive, and delivered to the
Company pursuant to Section 14(b). This Section 11(a) shall not supersede any designation of
beneficiary or successor in interest made by the Executive, or separately covered, under any other
plan, practice, policy, or program of the Company.
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(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business or assets of the Company
and any Parent of the Company or any successor and without regard to the form of transaction
utilized to acquire the business or assets of the Company, to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would be required to
perform it if no such succession or parentage had taken place. As used in this Agreement,
“Company” shall mean the Company as defined above and any successor to its business or assets as
aforesaid (and any Parent of the Company or any successor) that is required by this clause to
assume and agree to perform this Agreement or which otherwise assumes and agrees to perform this
Agreement.
12. Notice of Termination. Any termination of the Executive’s employment by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the
other party given in accordance with Section 14(b) of this Agreement. For purposes of this
Agreement, a “Notice of Termination” means a written notice that (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated, and (iii) if the date of termination is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more than 15 days after the
giving of such notice). The failure by the Executive to set forth in the Notice of Termination any
fact or circumstance that contributes to a showing of Good Reason shall not waive any right of the
Executive under this Agreement or preclude the Executive from asserting such fact or circumstance
in enforcing his rights.
13. Requirements and Benefits if Executive Is Employee of Subsidiary of Company. If the
Executive is an employee of any Subsidiary of the Company, he shall be entitled to all of the
rights and benefits of this Agreement as though he were an employee of the Company and the term
“Company” shall be deemed to include the Subsidiary by whom the Executive is employed. The Company
guarantees the performance of its Subsidiary under this Agreement.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State
of Delaware, without reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the parties or their
respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, to the addresses for each party as first written above or to such other
address as either party shall have furnished to the other in writing in accordance with this
Section. Notices and communications to the Company shall be addressed to the
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attention of the Company’s Corporate Secretary. Notice and communications shall be effective
when actually received by the addressee.
(c) Whenever reference is made in this Agreement to any specific plan or program of the
Company, to the extent that the Executive is not a participant in the plan or program or has no
benefit accrued under it, whether vested or contingent, as of the Change in Control Date, then such
reference shall be null and void, and the Executive shall acquire no additional benefit as a result
of such reference.
(d) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(e) The Company may withhold from any amounts payable under this Agreement such Federal,
state, or local taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(f) The Executive’s failure to insist upon strict compliance with any provision of this
Agreement shall not be deemed to be a waiver of such provision or any other provision.
IN WITNESS WHEREOF, the Executive has set his hand to this Agreement and, pursuant to the
authorization from the Board, the Company has caused this Agreement to be executed as of the day
and year first above written.
| INFINITY ENERGY RESOURCES, INC. | ||||||
| By: | ||||||
| Title: | ||||||
| EXECUTIVE | ||||||
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