EMPLOYMENT AGREEMENT BETWEEN TETON ENERGY CORPORATION AND LONNIE BROCK (Executive)
BETWEEN
TETON
ENERGY CORPORATION
AND
XXXXXX
XXXXX
(Executive)
THIS
EMPLOYMENT AGREEMENT
(this
“Agreement”), dated as of January 1, 2008, (the “Effective Date”) is entered
into by and between Teton Energy Corporation, a Delaware corporation (the
“Company”), and Xxxxxx Xxxxx, an individual with an address at 000 Xxxxxxxxx
Xxxxx, Xxxx, Xxxxxxxx 00000, (the “Executive”) (collectively, the “Parties,”
individually, a “Party”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company (the “Board”) has requested and the
Executive has agreed to serve the Company as Executive Vice President and Chief
Financial Officer pursuant to the terms and conditions herein; and
WHEREAS,
the Board has determined that it is in the best interest of the Company, its
affiliates, and its stockholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat,
or occurrence of a Change in Control (as defined in Article Seven herein);
and
WHEREAS,
the Board has determined that it is in the best interests of the Company and
its
stockholders to indemnify the Executive for claims for damages arising out
of or
relating to the performance of such services to the Company in accordance with
the terms and conditions set forth in this Agreement and pursuant to Delaware
law; and
WHEREAS,
as
an
inducement to serve and in consideration for such services, the Company has
agreed to indemnify the Executive for claims for damages
arising out of or relating to the performance of such services to the Company
in
accordance with the terms and conditions set forth in a separate agreement,
which indemnification agreement is attached as an exhibit hereto and is
incorporated herein by reference; and
WHEREAS,
in order to accomplish these objectives and establish the rights, duties and
obligations of the Parties, which shall be generally stated herein and which
may
be more fully stated in other agreements between the Parties, including
equity-based agreements, indemnity agreements, and other employment or incentive
related agreements as the Company or the Board may adopt from time to time,
the
Board has caused the Company to enter into this Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth herein, the Parties, intending to be legally bound, hereby
agree as follows:
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ARTICLE
ONE
DEFINITIONS
1. Definitions.
As used in this Agreement:
1.1 The
term
“Accrued Obligations,” when used in the case of the Executive’s death or
disability shall mean the sum of
(1) that portion Executive’s Base Salary that was not previously paid to
the Executive from the last payment date through the Date of Termination, and
(2) an amount equal to 12 months salary at the level of the Executive’s Base
Salary then in effect,
1.2 The
term
“Automatic Extension” shall have the meaning set forth in Section 2.2
herein.
1.3 The
term
“Base Salary”, shall have the meaning set forth in Section 3.1
herein.
1.4 The
term
“Board” shall have the meaning set forth in the recitals.
1.5 The
term
“Cause” shall have the meaning set forth in Section 4.3 herein.
1.6 The
term
“Common Stock” shall mean the Common Stock, par value $0.001, of the
Company.
1.7 The
term
“Compensation Committee” shall mean the Compensation Committee of the
Company.
1.8 The
term
“Corporate Documents” shall mean the Company’s Certificate of Incorporation, as
amended and/or its Bylaws, as amended.
1.9 The
term
“Effective Date” shall have the meaning set forth in the preamble.
1.10 The
term
“Good Reason” shall have the meaning set forth in Section 4.4
herein.
1.11 The
term
“Initial Term” shall have the meaning set forth in Section 2.2
herein.
1.12 The
term
“Severance Benefit” shall have the meaning set forth in Section 4.8(a)(i)
herein.
1.13 The
term
“Without Cause” shall have the meaning set forth in Section 4.3
herein.
1.14 The
term
“Without Good Reason” shall have the meaning set forth in Section 4.5
herein.
ARTICLE
TWO
POSITION
& DUTIES
2. Employment.
2.1 Title.
The
Executive shall serve as the Executive Vice President and Chief Financial
Officer of the Company and agrees to perform services for the Company and such
other affiliates of the Company, as described in Section 2 herein.
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2.2 Term.
The
Executive’s employment shall be for an initial term of two (2) years (“Initial
Term”), commencing on the Effective Date. The Executive’s employment shall be
automatically extended on the day after the second year anniversary of the
Effective Date (“Automatic Extension”), and on each second anniversary date
thereof, for additional two (2) year periods unless, with respect to any such
Automatic Extension, Executive’s employment is terminated by either party during
the 60-day period prior to such anniversary date as provided in Article
Four.
2.3 Duties
and Responsibilities.
The
Executive shall report to the Chief Executive Officer (the “CEO”) and in his
capacity as an officer of the Company shall perform such duties and services
as
may be appropriate for a senior executive and as are assigned to him by the
CEO.
During the term of this Agreement, the Executive shall, subject to the direction
of the CEO, oversee and direct such assigned operations of the Company and
shall
perform such duties as are customarily performed by an Executive Vice President
and Chief Financial Officer of an oil and gas exploration company such as the
Company or as are otherwise delegated to him from time to time by the CEO or
such other matters and projects as may from time to time be reasonably assigned
to him by the CEO.
2.4 Performance
of Duties.
During
the term of the Agreement, except as otherwise approved by the CEO or as
provided below, the Executive agrees to devote his full business time, effort,
skill and attention to the affairs of the Company and its subsidiaries, will
use
his best efforts to promote the interests of the Company, and will discharge
his
responsibilities in a diligent and faithful manner, consistent with sound
business practices. The foregoing shall not, however, preclude Executive from
devoting reasonable time, attention and energy in connection with the following
activities, provided that such activities do not materially interfere with
the
performance of his duties and services hereunder:
(a) serving
as a director or a member of a committee of any company or organization, if
serving in such capacity does not involve any conflict with the business of
the
Company or any subsidiary and such other company or organization is not in
competition, in any manner whatsoever, with the business of the Company or
any
of its subsidiaries;
(b) fulfilling
speaking engagements;
(c) engaging
in charitable and community activities;
(d) managing
his personal business and investments; and
(e) any
other
activity approved of by the Board. For purposes of this Agreement, any activity
specifically listed on Schedule A shall be considered as having been approved
by
the Board.
2.5 Representations
and Warranties of the Executive with Respect to Conflicts, Past Employers and
Corporate Opportunities.
The
Executive represents and warrants that:
(a) his
employment by the Company will not conflict with any obligations which he has
to
any other person, firm or entity;
(b) he
has
not brought to the Company (during the period before the signing of this
Agreement) and he will not bring to the Company any materials or documents
of a
former or present employer, nor will he knowingly bring any confidential
information or property of any other person, firm or entity; and
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(c) he
will
not, without disclosure to and approval of the Board, directly or indirectly,
assist or have an active interest in (whether as a principal, stockholder,
lender, employee, officer, director, partner, venturer, consultant or otherwise)
in any person, firm, partnership, association, corporation or business
organization, entity or enterprise that competes with or is engaged in a
business which is substantially similar to the business of the Company except
that ownership of not more than two percent (2%) of the outstanding securities
of any class of any publicly held entity shall not be deemed a violation of
this
Section 2.5; provided,
further,
that
any investment specifically listed on Schedule A shall not be deemed a violation
of this Section 2.5.
2.6 Activities
and Interests with Companies Doing Business with the Company.
In
addition to those activities and interests of Executive disclosed on
Schedule
A
attached
hereto, Executive shall promptly disclose to the Board, in accordance with
the
Company’s policies, full information concerning any interests, direct or
indirect, he holds (whether as a principal, stockholder, lender, executive,
director, officer, partner, venturer, consultant or otherwise) in any business
which, as reasonably known to Executive, purchases or provides services or
products to, the Company or any of its subsidiaries, provided that the Executive
need not disclose any such interest resulting from ownership of not more than
two (2%) of the outstanding securities of any class of any publicly held
entity.
2.7 Other
Business Opportunities.
Nothing
in this Agreement shall be deemed to preclude the Executive from participating
in other business opportunities if and to the extent that: (a) such business
opportunities are not directly competitive with, similar to the business of
the
Company, or would otherwise be deemed to constitute an opportunity appropriate
for the Company, (b) the Executive’s activities with respect to such
opportunities do not have a material adverse effect on the performance of the
Executive’s duties hereunder, and (c) the Executive’s activities with respect to
such opportunity have been fully disclosed in writing to the Board.
2.8 Reporting
Location.
For
purposes of this Agreement, the Executive’s reporting location shall be Denver,
Colorado, which shall include the metropolitan area within a 40 mile radius
from
the Company’s current office.
ARTICLE
THREE
COMPENSATION
3. Compensation.
3.1 Base
Salary.
Executive shall receive an initial annual base salary of Two Hundred Five
Thousand Dollars ($205,000.00), payable bi-monthly in arrears (the “Base
Salary”) and subject to all federal, state, and municipal withholding
requirements. The Base Salary shall be reviewed by the CEO and the Board,
annually for any increase.
3.2 Cash
Bonus.
The
Executive shall be eligible for a cash bonus equal to an amount of up to one
hundred percent (100%) of his Base Salary for each fiscal year he is employed
by
the Company (annualized for any fiscal year consisting of less than 12 full
months or with respect to which the Executive has been employed by the Company
for less than twelve (12) full months. Each Cash Bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year in respect of which the Cash Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Cash Bonus that may be approved by the Board
from time to time. The Executive understands that the cash bonus, if any, shall
be performance based, which objectives shall be set by the Compensation
Committee.
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3.3 Equity-Based
Compensation.
The
Executive shall be entitled to participate in all equity-based compensation
plans offered by the Company to the same extent as provided to other senior
executives of the Company and as determined by the Board of Directors. The
Executive understands that as of the date of this Agreement, the only
equity-based plan offered by the Company is the 2005 Long-term Incentive
Plan.
Notwithstanding
any other provision of this Agreement, effective January 1, 2008, the Executive
shall be entitled to 20,000 restricted shares of Teton common stock, which
shall
vest in equal increments over a period of three years and be subject to a
restricted stock agreement in a form substantially similar to the form of
agreement in Exhibit B. In addition, the Executive shall be entitled to a target
grant of 100,000 (base objective) or 200,000 (stretch objective) performance
share units (or such similar form of award as the Compensation Committee may
determine) under the Company’s Long-term Incentive Plan at the next regularly
scheduled grant (which normally occurs during the first quarter of the Company’s
fiscal year). The Executive understands that this target is in respect of the
first grant for which the Executive becomes eligible and that future grants,
if
any, will be subject to the discretion of the Compensation
Committee.
Upon
a
Change of Control, all equity-based compensation will be treated in the same
manner as if Executive’s employment was terminated by the Company Without
Cause.
3.4 Participation
In Benefit Plans.
(a) Retirement
Plans.
Executive shall be entitled to participate, without any waiting or eligibility
periods, in all qualified retirement plans provided to other executive officers
and other key employees.
(b) Taxes.
The
Company shall pay, on a grossed-up basis for federal, state, and local income
taxes, the amount of any excise tax payable by Executive as a result of any
payments triggered by this Agreement, or other compensation agreements between
Executive and the Company, or any of its subsidiaries and any income tax payable
by Executive as a result of any payments in Common Stock triggered by this
Agreement or other compensation agreements between Executive and the Company,
or
any of its subsidiaries, except as might otherwise be provided such benefit
plan.
(c) Employee
Benefit Plans and Insurance.
The
Executive shall have the right to participate in employee benefit plans and
insurance programs of the Company that the Company may sponsor from time to
time
and to receive customary Company benefits, if those benefits are so offered
to
other senior executives of the Company. Nothing herein shall obligate the
Executive to accept such benefits if and when they are offered.
(d) Vacation.
(i) The
Executive shall be entitled to four (4) weeks of vacation per calendar year,
which vacation level shall be reviewed by the Board from time to time. No more
than 1.5 times (1.5x) Executive’s authorized annual vacation allocation may be
accrued, at any given time. In the event that Executive has reached his maximum
authorized vacation allocation, accrual will not re-commence until Executive
uses some of his paid vacation credit and thereby brings the balance below
his
maximum. Accrued paid vacation credit forfeited because of an excess balance
can
not be retroactively reapplied.
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(ii) Pay
will
only be provided for any unused, accrued paid vacation credit at the time of
Executive’s separation from the business by the Company due to a reduction in
force, by Executive upon retirement, or upon the death of an employee, provided
that Executive has been a regular full-time employee for three calendar months
prior to such event. Termination of employment for Cause by the Company, or
Executive’s resignation, will result in the forfeiture of any unused paid
vacation credit.
(e) Paid
Holidays.
The
Executive shall be entitled to such paid holidays as are generally available
to
all employees. As of the date of this Agreement, the Company’s employees are
permitted to observe ten (10) paid holidays.
(f) Reimbursement
of Expenses.
Executive shall be entitled to reimbursement within a reasonable time for all
properly documented and approved expenses for travel. The Company shall
reimburse business expenses of Executive directly related to Company business,
including, but not limited to, airfare, lodging, meals, travel expenses, medical
expenses while traveling not covered by insurance, business entertainment,
expenses associated with entertaining business persons, local expenses to
governments or governmental officials, tariffs, applicable taxes outside of
the
United States, special expenses associated with travel to certain countries,
supplemental life insurance or supplemental insurance of any kind or special
insurance rates or charges for travel outside the United States (unless such
insurance is being provided by the Company), rental cars and insurance for
rental cars, and any other expenses of travel that are reasonable in nature
or
that have been otherwise pre-approved. Executive shall be governed by the travel
and entertainment policy in effect at the Company.
3.5 Relocation
Expenses.
In the
event that Executive is required to move from his primary
residence and consents to such move, then Executive shall be provided with
relocation assistance as provided below:
(a) Housing
and Temporary Lodging.
The
Company will pay the costs for the Executive and his family of house-hunting
trips and the cost of transporting Executive, his spouse, furniture, household
effects, and vehicles, to the area in which the Company will be headquartered.
In addition, the Company will pay the cost of Executive’s travel, temporary
living expenses, including housing, whether hotel or apartment, and meals,
during the period prior to Executive’s move to the city in which the Company
will be headquartered.
3.6 Severance
Benefit.
In the
event that Executive’s employment is terminated, other than for Cause, Executive
shall receive compensation pursuant to Section 4.8 herein.
3.7 Payroll
Procedures and Policies.
All
payments required to be made by the Company to the Executive pursuant to this
Article Three shall be paid on a regular basis in accordance with the Company’s
normal payroll procedures and policies.
ARTICLE
FOUR
TERMINATION
OF EMPLOYMENT
4.1 Death.
The
Executive’s employment shall terminate automatically upon the Executive’s death
during the Employment Term.
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4.2 Disability.
If the
Company determines in good faith that the Disability (as defined below) of
the
Executive has occurred during the Employment Term, the Company may give the
Executive notice of its intention to terminate the Executive’s employment. In
such event, the Executive’s employment hereunder shall terminate effective on
the 30th
day
after receipt of such notice by the Executive (the “Disability Effective Date”);
provided,
that,
within
the 30-day period after such receipt, the Executive shall not have returned
to
full-time performance of the Executive’s duties. For purposes of this Agreement,
“Disability” shall mean the absence of the Executive from the Executive’s duties
hereunder on a full-time basis for an aggregate of 180 days within any
given period of 270 consecutive days (in addition to any statutorily required
leave of absence and any leave of absence approved by the Company) as a result
of the incapacity of the Executive, despite any reasonable accommodation
required by law, due to bodily injury or disease or any other mental or physical
illness, which will, in the opinion of a physician selected by the Company
or
its insurers and acceptable to the Executive or the Executive’s legal
representative, be permanent and continuous during the remainder of the
Executive’s life.
4.3 Termination
by Company.
(a) Termination
for Cause.
The
Company may terminate the Executive’s employment hereunder for Cause (as defined
below). For purposes of this Agreement, “Cause” shall mean:
(i) the
willful and continued failure of the Executive to perform substantially the
Executive’s duties hereunder (other than any such failure resulting from bodily
injury or disease or any other incapacity due to mental or physical illness)
after a written demand for substantial performance is delivered to the Executive
by the CEO or the Board, which specifically identifies the manner in which
the
CEO or the Board believes the Executive has not substantially performed the
Executive’s duties; or
(ii) the
willful engaging by the Executive in illegal conduct or gross misconduct that
is
materially and demonstrably detrimental to the Company and/or its affiliated
companies, monetarily or otherwise.
For
purposes of this provision, no act, or failure to act, on the part of the
Executive shall be considered “willful” unless done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the Executive’s
action or omission was in the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by
the
Board, upon the instructions of the Chief Executive Officer or another senior
officer of Company, or based upon the advice of counsel for the Company shall
be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company and its affiliated
companies. The cessation of employment of the Executive shall not be deemed
to
be for Cause unless and until there shall have been delivered to the Executive
a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board then in office at a meeting
of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in detail.
(iii) the
Executive’s conviction of, or plea of nolo contendere to, any felony of theft,
fraud, embezzlement or violent crime.
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(b) Termination
Without Cause.
All
terminations by the Company that are not for Cause, or on the occasion of the
Executive’s death or disability, or that are not terminations during the 60-day
period prior to any anniversary date as provided in Section 2.2 or Section
4.5,
shall be considered Without Cause.
4.4 Termination
by Executive.
The
Executive may terminate the Executive’s employment hereunder (x) at any
time during the Employment Term for Good Reason (as defined below) or (y) during
the Window Period (as defined below) Without Good Reason. For purposes of this
Agreement, the “Window Period” shall mean the 30-day period immediately
following the first anniversary of the Effective Date, and “Good Reason” shall
mean any of the following (without the Executive’s express written consent):
(a) The
assignment to the Executive of any duties inconsistent in any respect with
the
Executive’s position (including status, offices, titles and reporting
requirements), duties, functions, responsibilities or authority as contemplated
by Section 2.3 of this Agreement, or any other action by the Company that
results in a diminution in such position, duties, functions, responsibilities
or
authority, excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(b) Any
failure by the Company to comply with any of the provisions of Section 2.3
of
this Agreement, other than an isolated, insubstantial and inadvertent action
not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(c) The
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 2.8 of this Agreement or the Company’s requiring the
Executive to travel on the Company’s or its affiliated companies’ business to a
substantially greater extent than during the three-year period immediately
preceding the Effective Date;
(d) Any
failure by the Company to provide Executive with the compensation provided
for
in Article III, which is not promptly remedied by the Company after notice
thereof given by Executive;
(e) Any
failure by the Company to comply with and satisfy Section 8.1 of this Agreement;
or
(f) Any
purported termination by the Company of the Executive’s employment hereunder
otherwise than as expressly permitted by this Agreement, and for purposes of
this Agreement, no such purported termination shall be effective.
For
purposes of this Section 4.4, any good faith determination of “Good Reason” made
by the Executive shall be conclusive.
4.5 Termination
without Prejudice.
The
Company or Executive may terminate this Agreement at any time during the 60-day
period prior to each Automatic Extension.
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4.6 Notice
of Termination.
Any
termination of the Executive’s employment hereunder by the Company or by the
Executive (other than a termination pursuant to Section 4.1) shall be
communicated by a Notice of Termination (as defined below) to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which (a) indicates the specific termination provision in this
Agreement relied upon, (b) in the case of a termination for Disability,
Cause or Good Reason, 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 (c) specifies the Date of
Termination (as defined in Section 4.7 below); provided, however, that
notwithstanding any provision in this Agreement to the contrary, a Notice of
Termination given in connection with a termination (i) for Cause shall be given
by the Company, or (ii) for Good Reason shall be given by the Executive, within
a reasonable period of time, not to exceed 120 days, following the
occurrence of or the discovery of the event giving rise to such right of
termination. The failure by the Company or the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of
Disability, Cause or Good Reason shall not waive any right of the Company or
the
Executive hereunder or preclude the Company or the Executive from asserting
such
fact or circumstance in enforcing the Company’s or the Executive’s rights
hereunder.
4.7 Date
of Termination.
For
purposes of this Agreement, the “Date of Termination” shall mean the effective
date of termination of the Executive’s employment hereunder, which date shall be
(a) if the Executive’s employment is terminated by the Executive’s death,
the date of the Executive’s death, (b) if the Executive’s employment is
terminated because of the Executive’s Disability, the Disability Effective Date,
(c) if the Executive’s employment is terminated by the Company (or
applicable affiliated company) for Cause or by the Executive for Good Reason,
the date on which the Notice of Termination is given, (d) if the
Executive’s employment is terminated pursuant to Section 2.2, the date on which
the Employment Term ends pursuant to Section 2.2 due to a party’s delivery of a
Notice of Termination thereunder, and (e) if the Executive’s employment is
terminated for any other reason, the date specified in the Notice of
Termination, which date shall in no event be earlier than the date such notice
is given; provided, however, that if within 30 days after any
Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination,
the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected).
4.8 Obligations
of the Company upon Termination.
(a) Good
Reason or During the Window Period; Other Than for Cause, Death or
Disability.
If,
during the Employment Term, the Company (or applicable affiliated company)
shall
terminate the Executive’s employment hereunder other than for Cause, Death or
Disability or the Executive shall terminate the Executive’s employment either
for Good Reason or Without Good Reason during the Window Period:
(i) the
Company shall pay to the Executive (either in a lump sum or on in equal monthly
installments over a 12-month period after the Date of Termination, at the
Company’s option) the sum
of
(1) that portion of Executive’s Base Salary that was not previously paid
to the Executive from the last payment date through the Date of Termination,
and
(2) an
amount equal to 12 months salary at the level of the Executive’s Base Salary
then in effect, (such 12 months amount is hereinafter referred to as the
“Severance Amount”);
(ii) all
stock
options, stock appreciation rights, and restricted stock shall immediately
vest;
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(iii) all
stock
options and stock appreciation rights shall be payable in Common Stock;
(iv) all
performance share units that would vest in the course of any fiscal year shall
vest on a pro rata basis; and
(v) the
Company shall pay, on a grossed-up basis (as determined in the same manner
as
under Section 3.4(b) herein) the amount of any excise and income taxes payable
by Executive as a result of any payments in Common Stock triggered by this
Agreement, or other agreements between Executive and the Company, or any of
its
subsidiaries.
To
the
extent not theretofore paid or provided, the Company shall timely pay or provide
to the Executive any other amounts or benefits required to be paid or provided
or which the Executive is eligible to receive under any plan, program, policy,
practice or arrangement or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits hereinafter referred
to as
the “Other Benefits”).
(b) Death.
If the
Executive’s employment is terminated by reason of the Executive’s death during
the Employment Term, this Agreement shall terminate without further compensation
obligations to the Executive’s legal representatives under this Agreement, other
than for (i) payment of Accrued Obligations (which shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
90 days of the Date of Termination) and the timely payment or settlement of
any other amount pursuant to the Other Benefits and (ii)
treatment of all other compensation under existing plans as provided by the
terms and rules of those plans.
(c) Disability.
If the
Executive’s employment is terminated by reason of the Executive’s Disability
during the Employment Term, this Agreement shall terminate without further
compensation obligations to the Executive, other than for payment of Accrued
Obligations (which shall be paid to the Executive in a lump sum in cash within
90 days of the Date of Termination) and the timely payment or settlement of
any other amount pursuant to the Other Benefits, and (ii) treatment of all
other compensation under existing plans as provided by the terms and rules
of
those plans.
(d) Cause;
Other than for Good Reason or During the Window Period.
If the
Executive’s employment is terminated for Cause during the Employment Term, this
Agreement shall terminate without further compensation obligations to the
Executive other than the obligation to pay the Executive the Base Salary
through
the Date of Termination plus the amount of any compensation previously deferred
by the Executive, in each case to the extent theretofore unpaid and to reimburse
expenses pursuant to Section 3.4(g) incurred prior to the Termination Date.
If
the Executive voluntarily terminates the Executive’s employment during the
Employment Term, excluding a termination either for (i) Good Reason or (ii)
Without Good Reason during the Window Period, this Agreement shall terminate
without further compensation obligations to the Executive, other than for
the
that portion of Executive’s Base Salary that was not previously paid to the
Executive from the last payment date through the effective date of the
Executive’s voluntary termination plus the amount of any compensation previously
deferred by the Executive, in each case to the extent theretofore unpaid,
to
reimburse expenses pursuant to Section 3.4(g) incurred prior to the Termination
Date and the timely payment or provision of the Other Benefits, as provided
in
any applicable plan; and the Executive shall have no further obligations
nor
liability to the Company. In such case, any amounts owed to the Executive
shall
be paid to the Executive in a lump sum in cash within 90 days of the Date
of Termination subject to applicable laws and regulations.
10
4.9 Continuation
of Payments During Disputes.
The
Parties agree that in the case of:
(a) termination
which the Company contends is for Cause, but Executive claims is not for Cause;
or
(b) termination
by Executive under Section 4.4 herein,
the
Company shall continue to pay all compensation due to the Executive hereunder
until the resolution of such dispute, but the Company shall be entitled to
repayment of all sums so paid, if ultimately it shall be determined by a court
of competent jurisdiction, in a final non-appealable decision, that the
termination was for Cause or such termination by Executive was not authorized
under Section 4.4 herein, and all sums so repaid shall bear interest from the
date from the date on which such court makes such determination at the prime
rate as published in The
Wall Street Journal
on the
date on which such court makes such determination. Any such reimbursement of
payments by the Executive shall not include any legal fees or other loss, costs,
or expenses incurred by the Company, notwithstanding any provision of the
Indemnification Agreement, which is attached as Exhibit
A
and is
considered a part of this Agreement.
ARTICLE
FIVE
INDEMNIFICATION
5. Indemnification.
The Executive shall be indemnified and held harmless pursuant to the terms
and
conditions set forth in the Indemnification Agreement substantially in the
form
attached as Exhibit
A
hereto.
ARTICLE
SIX
CONFIDENTIALITY
6. Confidentially;
Non-Competition; and Non-Solicitation.
6.1 Confidentiality.
In
consideration of employment by the Company and the Executive’s receipt of the
salary and other benefits associated with the Executive’s employment, and in
acknowledgment that (a) the Company is engaged in the oil and gas business,
(b)
maintains secret and confidential information, (c) during the course of the
Executive’s employment by the Company such secret or confidential information
may become known to the Executive, and (d) full protection of the Company’s
business makes it essential that no employee appropriate for his or her own
use,
or disclose such secret or confidential information, the Executive agrees that
during the time of the Executive’s employment and for a period of one (1) year
following the termination of the Executive’s employment with the Company, the
Executive agrees to hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any person, or use for his own personal
benefit or for the benefit of anyone else, any trade secrets, confidential
dealings, or other confidential or proprietary information of any kind, nature,
or description (whether or not acquired, learned, obtained, or developed by
Executive alone or in conjunction with others) belonging to or concerning the
Company or any of its subsidiaries, except (i) with the prior written consent
of
the Company duly authorized by its Board, (ii) in the course of the proper
performance of the Executive’s duties hereunder, (iii) for information (x) that
becomes generally available to the public other than as a result of unauthorized
disclosure by Executive or his affiliates or (y) that becomes available to
the
Executive on a non-confidential basis from a source other than the Company
or
its subsidiaries who is not bound by a duty of confidentiality, or other
contractual, legal, or fiduciary obligation, to the Company, or (iv) as required
by applicable law or legal process. Notwithstanding the foregoing, this Section
is not intended, nor shall be construed, to prohibit the Executive’s use of the
Executive’s general knowledge, skill and experience or the Executive’s inventive
powers.
11
6.2 Non-Competition.
During
the Executive’s employment with the Company and for so long as the Executive
receives any Severance Benefit or is receiving any Severance Amount as provided
in Section 4.8(a)(i) in respect of the termination of his employment, Executive
shall not be engaged as an officer or executive of, or in any way be associated
in a management or ownership capacity with any corporation, company, partnership
or other enterprise or venture which conducts a business which is in direct
competition with the business of the Company; provided,
however,
that
Executive may own not more than two percent (2%) of the outstanding securities,
or equivalent equity interests, of any class of any corporation, company,
partnership, or enterprise that is in direct competition with the business
of
the Company, which securities are listed on a national securities exchange
or
traded in the over-the-counter market. For purposes of this Agreement, if the
Executive is paid a lump sum Severance Amount then it shall be deemed that
the
Executive is continuing to receive a Severance Benefit or Severance Amount
for
the number of months of the Executive’s Base Salary represented by the lump sum
payment. It is expressly agreed that the remedy at law for breach of this
covenant is inadequate and that injunctive relief shall be available to prevent
the breach thereof.
6.3 Non-Solicitation.
The
Executive also agrees that he will not, directly or indirectly, during the
term
of his employment or within one (1) year after termination of his employment
for
any reason, in any manner, encourage, persuade, or induce any other employee
of
the Company to terminate his employment, or any person or entity engaged by
the
Company to represent it to terminate that relationship without the express
written approval of the Company. It is expressly agreed that the remedy at
law
for breach of this covenant is inadequate and that injunctive relief shall
be
available to prevent the breach thereof.
ARTICLE
SEVEN
CHANGE
OF CONTROL
7. Certain
Definitions.
7.1 Change
of Control Effective Date.
The
“Change of Control Effective Date” shall mean the first date during the Change
of Control Period (as defined in Section 7.2) on which a Change of Control
occurs. Notwithstanding anything in this Agreement to the contrary, if a Change
of Control occurs and if the Executive’s employment with the Company (or
applicable affiliated company) is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the “Change of Control
Effective Date” shall mean the date immediately prior to the date of such
termination of employment.
7.2 Change
of Control Period.
The
“Change of Control Period” shall mean the period commencing on the date of this
Agreement and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof herein referred to as the “Renewal Date”), the Change of Control Period
shall be automatically extended so as to terminate three years after such
Renewal Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of Control Period shall
not
be so extended.
12
7.3 Change
of Control.
For
purposes of this Agreement, a “Change of Control” shall mean:
(a) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either (A) the then outstanding Common Shares the Company
(the “Outstanding Shares”) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the
election of directors (the “Outstanding Voting Securities”); provided,
however,
that
for purposes of this Subsection 7.3(a) the following acquisitions shall not
constitute a Change of Control: (w) Company-sponsored recapitalization that
is approved by the Incumbent Board, as defined below; (x) a capital raise
initiated by the Company where the Incumbent Board remains for at least at
least
548 days after the closing date of the raise, or (y) an acquisition of another
company or asset(s) initiated by the Company and where the Company’s
shareholders immediately after the transaction own at least 51% of the equity
of
the combined concern; or
(b) individuals
who, as of the date of this Agreement, constitute the Company’s Board (the
“Incumbent Board”) cease for any reason to constitute a majority of such Board
of Directors; provided,
however,
that
any individual becoming a director of the Company shareholders subsequent to
the
date hereof whose election, or nomination for election by the Company’s
shareholders was approved by a vote of a majority of the directors of the
Company then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other
than the Company Board; or
(c) consummation
of a reorganization, merger, amalgamation or consolidation of the Company,
with
or without approval by the shareholders of the Company, in each case, unless,
following such reorganization, merger, amalgamation or consolidation,
(i) more than 50% of, respectively, the then outstanding shares of common
stock (or equivalent security) of the company resulting from such
reorganization, merger, amalgamation or consolidation and the combined voting
power of the then outstanding voting securities of such company entitled to
vote
generally in the election of directors is then beneficially owned, directly
or
indirectly, by all or substantially all of the individuals and entities who
were
the beneficial owners, respectively, of the Outstanding Shares and Outstanding
Voting Securities immediately prior to such reorganization, merger, amalgamation
or consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, amalgamation or consolidation,
of the Outstanding Shares and Outstanding Voting Securities, as the case may
be,
(ii) no Person (excluding a parent of the Company that may come into being
after the date of this Agreement through any transaction deliberately undertaken
by the Company after an affirmative vote of its Incumbent Directors and the
Company shareholders), any employee benefit plan (or related trust) of the
Company or such company resulting from such reorganization, merger, amalgamation
or consolidation, and any Person beneficially owning, immediately prior to
such
reorganization, merger, amalgamation or consolidation, directly or indirectly,
15% or more of the Outstanding Shares or Outstanding Voting Securities, as
the
case may be) beneficially owns, directly or indirectly, 15% or more of,
respectively, the then outstanding shares of common stock (or equivalent
security) of the company resulting from such reorganization, merger,
amalgamation or consolidation or the combined voting power of the then
outstanding voting securities of such company entitled to vote generally in
the
election of directors, and (ii) a majority of the members of the board of
directors of the company resulting from such reorganization, merger,
amalgamation or consolidation were members of the Incumbent Board at the time
of
the execution of the initial agreement providing for such reorganization,
merger, amalgamation or consolidation; or
13
(d) consummation
of a sale or other disposition of all or substantially all the assets of the
Company, with or without approval by the shareholders of the Company, other
than
to a corporation, with respect to which following such sale or other
disposition, (i) more than 50% of, respectively, the then outstanding
shares of common stock (or equivalent security) of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Shares and Outstanding Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Shares and Outstanding Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company or such corporation, and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 15% or more of the Outstanding Shares or Outstanding Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
15%
or more of, respectively, the then outstanding shares of common stock (or
equivalent security) of such corporation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (C) a majority of the members
of the board of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of the
Incumbent Board providing for such sale or other disposition of assets of the
Company; or
(e) approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company.
ARTICLE
EIGHT
MISCELLANEOUS
8. Miscellaneous.
8.1 Benefit.
This
Agreement shall inure to the benefit of and be binding upon each of the Parties,
and their respective successors. This Agreement shall not be assignable by
any
Party without the prior written consent of the other Party. The Company shall
require any successor, whether direct or indirect, to all or substantially
all
the business and/or assets of the Company to expressly assume and agree to
perform, by instrument in a form reasonably satisfactory to Executive, this
Agreement and any other agreements between Executive and the Company or any
of
its subsidiaries, in the same manner and to the same extent as the
Company.
14
8.2 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with the laws of
the
State of Colorado without resort to any principle of conflict of laws that
would
require application of the laws of any other jurisdiction; provided,
however,
that
Delaware law shall govern with respect to the Executive’s rights under a Change
of Control under Article Seven herein.
8.3 Counterparts.
This
Agreement may be executed in counterparts and via facsimile, each of which
shall
be deemed to constitute an original, but all of which together shall constitute
one and the same Agreement. Each such counterpart shall become effective when
one counterpart has been signed by each Party thereto.
8.4 Headings.
The
headings of the various articles and sections of this Agreement are for
convenience of reference only and shall not be deemed a part of this Agreement
or considered in construing the provisions thereof.
8.5 Severability.
Any
term or provision of this Agreement that shall be prohibited or declared invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or declaration, without
invalidating the remaining terms and provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction, and if any term
or provision of this Agreement is held by any court of competent jurisdiction
to
be void, voidable, invalid or unenforceable in any given circumstance or
situation, then all other terms and provisions hereof, being severable, shall
remain in full force and effect in such circumstance or situation, and such
term
or provision shall remain valid and in effect in any other circumstances or
situation.
8.6 Construction.
Use of
the masculine pronoun herein shall be deemed to refer to the feminine and neuter
genders and the use of singular references shall be deemed to include the plural
and vice versa, as appropriate. No inference in favor of or against any Party
shall be drawn from the fact that such Party or such Party’s counsel has drafted
any portion of this Agreement.
8.7 Equitable
Remedies.
The
Parties hereto agree that, in the event of a breach of this Agreement by either
Party, the other Party, if not then in breach of this Agreement, may be without
an adequate remedy at law owing to the unique nature of the contemplated
relationship. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including
the
remedies of specific performance and injunction, in the event of a breach of
this Agreement, by the Party in breach, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which
it
would otherwise be entitled.
8.8 Attorney’s
Fees.
If any
Party hereto shall bring an action at law or in equity to enforce its rights
under this Agreement, the prevailing Party in such action shall be entitled
to
recover from the Party against whom enforcement is sought its costs and expenses
incurred in connection with such action (including fees, disbursements and
expenses of attorneys and costs of investigation). In
the
event that Executive institutes any legal action to enforce Executive’s legal
rights hereunder, or to recover damages for breach of this Agreement, Executive,
if Executive prevails in whole or in part, shall be entitled to recover from
the
Company reasonable attorneys’ fees and disbursements incurred by Executive with
respect to the claims or matters on which Executive has prevailed.
15
8.9 No
Waiver.
No
failure, delay or omission of or by any Party in exercising any right, power
or
remedy upon any breach or default of any other Party, or otherwise, shall impair
any such rights, powers or remedies of the Party not in breach or default,
nor
shall it be construed to be a waiver of any such right, power or remedy, or
an
acquiescence in any similar breach or default; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of
any kind or character on the part of any Party of any provisions of this
Agreement must be in writing and be executed by the Parties and shall be
effective only to the extent specifically set forth in such
writing.
8.10 Remedies
Cumulative.
All
remedies provided in this Agreement, by law or otherwise, shall be cumulative
and not alternative.
8.11 Amendment.
This
Agreement may be amended only by a writing signed by all of the Parties
hereto.
8.12 Entire
Contract.
This
Agreement and the documents and instruments referred to herein constitute the
entire contract between the parties to this Agreement and supersede all other
understandings, written or oral, with respect to the subject matter of this
Agreement.
8.13 Survival.
This
Agreement shall constitute a binding obligation of the Company and any successor
thereto. Notwithstanding any other provision in this Agreement, the obligations
under Articles 5 and 6 shall survive termination of this Agreement.
8.14 Savings
Clause.
Notwithstanding any other provision of this Agreement, if the indemnification
provisions in Exhibit
A
hereto
or any portion thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Company shall nevertheless indemnify Executive
as to Expenses, judgments, fines, penalties and amounts paid in settlement
with
respect to any Proceeding to the full extent permitted by any applicable portion
of this Agreement that shall not have been invalidated and to the fullest extent
permitted by applicable law.
8.15 Modifications
and Waivers.
Notwithstanding any other provision of this Agreement, the indemnification
provisions in Exhibit
A
hereto
and the Change of Control provisions Article Seven herein, may be amended from
time to time to reflect changes in Delaware law or for other
reasons.
8.16 Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been given (i) when delivered by hand or
(ii) if mailed by certified or registered mail with postage prepaid, on the
third day after the date on which it is so mailed:
(a)
If
to
Executive:
Xxxxxx
Xxxxx
000
Xxxxxxxxx Xx.
Xxxx,
XX
00000
(b)
If
to
the Company:
Teton
Energy Corporation
000
00xx
Xxxxxx – Xxxxx 0000
Xxxxxx,
XX 00000
Attn:
CEO
16
or
to
such other address as may have been furnished to Executive by the Company or
to
the Company by Executive, as the case may be.
8.17 No
Limitation.
Notwithstanding any other provision of this Agreement, for avoidance of doubt,
the parties confirm that the foregoing does not apply to or limit Executive’s
rights under Delaware law or the Company’s Corporate Documents.
8.18 Non-Binding
Mediation.
Before
commencing any legal proceeding in any court of law, any controversy arising
out
of or relating to this Agreement, its enforcement or interpretation, or because
of an alleged breach, default, or misrepresentation in connection with any
of
its provisions, or any other controversy arising out of Executive’s employment,
including, but not limited to, any state or federal statutory claims, shall
first be submitted to non-binding mediation in Denver, Colorado, before a sole
mediator selected from Judicial Arbitration and Mediation Services, Inc.,
Denver, Colorado, or its successor (“JAMS”), or if JAMS is no longer able to
supply the mediator, such mediator shall be selected from the American
Arbitration Association, provided, however, that provisional injunctive relief
may, but need not, be sought by either party to this Agreement in a court of
law
while mediation proceedings are pending
IN
WITNESS WHEREOF,
the
parties have set their hands and seals hereunto on the date first above
written.
|
Teton
Energy Corporation
|
EXECUTIVE
|
|||||
|
By:
|
/s/
Xxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxx Xxxxx
|
|||
|
Name:
|
Xxxx
X. Xxxxxx
|
Name: Xxxxxx Xxxxx
|
||||
|
Title:
|
President
and Chief Executive Officer
|
|||||
17
Schedule
A
Outside
Activities
Xxxxxx
Xxxxx
|
Company or
Project Name
|
Nature of
Business
|
Date Hired
or
Commenced
Involvement
|
Position
|
Compensation
|
Annual Time
Commitment, (time
away from office)
|
||||||
Dated:
January
1, 2008
Initials: Executive:
_____
Company:
______
18
Exhibit
A
Indemnification
Agreement
INDEMNIFICATION
AGREEMENT
This
INDEMNIFICATION AGREEMENT (the “Agreement”) is dated and effective as of January
1, 2008, and is made by and between Teton Energy Corporation a Delaware
corporation (the “Company”), and Xxxxxx Xxxxx, an officer or director of the
Company (the “Indemnitee”).
RECITALS
A. The
Company is aware that competent and experienced persons are increasingly
reluctant to serve as directors or officers of corporations unless they are
protected by comprehensive liability insurance and/or indemnification, due
to
increased exposure to litigation costs and risks resulting from their service
to
such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors and
officers;
B. The
Board
of Directors of the Company (the “Board”) has concluded that, to retain and
attract talented and experienced individuals to serve as officers and directors
of the Company and to encourage such individuals to make the business decisions
necessary or appropriate for the success of the Company and its Subsidiaries
(as
defined in Section 1 below), it is necessary for the Company contractually
to
indemnify its directors and certain of its officers, and certain of the
directors and officers of its Subsidiaries, and to assume for itself maximum
permissible liability for Expenses, losses, liabilities and damages in
connection with claims against such officers and directors relating to their
service in such capacities, and has further concluded that the failure to
provide such contractual indemnification could result in significant harm to
the
Company and its Subsidiaries and the Company’s stockholders;
C. The
statutes and judicial decisions regarding the duties of directors and officers
are often difficult to apply, ambiguous, or conflicting, and therefore fail
to
provide such directors and officers with adequate, reliable knowledge of legal
risks to which they are exposed or information regarding the proper course
of
action to take;
D. Plaintiffs
often seek damages in such large amounts and the costs of litigation may be
so
great (whether or not the case is meritorious), that the defense and/or
settlement of such litigation may be beyond the personal resources of directors
and officers;
E. Section
145 of the General Corporation Law of Delaware, under which the Company is
organized (the “GCL”), empowers the Company to indemnify by agreement its
officers, directors, employees and agents, and persons who serve, at the request
of the Company, as directors, officers, employees or agents of other
corporations or enterprises, and expressly provides that the indemnification
provided by the GCL is not exclusive; further the provisions of the Amended
Certificate of Incorporation of the Company (the “Certificate of Incorporation”)
specifically state that the rights to indemnification and payment of expenses
described therein are not exclusive, and thereby contemplate that contracts
with
respect to indemnification and payment of Expenses by the Company and similar
obligations of the Company may be entered into by and between the Company and
persons entitled to such rights described in the Certificate of Incorporation;
and
F. The
Company desires and has requested the Indemnitee to serve or continue to serve
as a director or officer of the Company. As an inducement to serve and in
consideration for such service, the Company has agreed to indemnify the
Indemnitee for claims for damages arising out of or related to the performance
of such services to the Company in accordance with the terms and conditions
set
forth in this Agreement.
NOW,
THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as
follows:
1. Definitions.
1.1.
Agent.
For the purposes of this Agreement, “Agent” of the Company means any person who
is or at any time was a director or officer of the Company or a subsidiary
of
the Company; or is or at any time was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary
of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or was a director or officer of another enterprise or affiliate of
the
Company at the request of, for the convenience of, or to represent the interests
of such predecessor corporation. The term “enterprise” includes any employee
benefit plan of the Company, its subsidiaries, affiliates and predecessor
corporations.
1.2.
Change
in
Control. “Change in Control” means a change in control of the Company occurring
after January 1, 2008, of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any
similar item on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the “Act”), whether or not the Company is then subject to
such reporting requirement; provided,
however,
that,
without limitation, such a Change in Control shall be deemed to have occurred
if
after January 1, 2008, (i) any “person” (as such term is used in Sections 13(d)
and 14(d) of the Act) other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned directly
or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 15% or more of the
combined voting power of the Company’s then-outstanding securities without the
prior approval of at least two-thirds of the members of the board of directors
of the Company in office immediately prior to such person attaining such
percentage interest; (ii) there occurs a proxy contest, or the Company is a
party to a merger, consolidation, sale of assets, plan of liquidation or other
reorganization not approved by at least two-thirds of the members of the board
of directors of the Company then in office, as a consequence of which members
of
the board of directors in office immediately prior to such transaction or event
constitute less than a majority of the board of directors thereafter; or (iii)
during any period of two consecutive years, other than as a result of an event
described in clause (ii) of this subsection (c), individuals who at the
beginning of such period constituted the board of directors of the Company
(including for this purpose any new director whose election or nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority
of the board of directors.
2
1.3.
Company.
As used herein the term “Company” includes all successors and assigns to the
Company, including, without limitation, any corporation or other entity that
is
a successor to the Company by virtue of a Change in Control.
1.4.
Controlled.
“Controlled” means subject to the power to exercise a controlling influence over
the management or policies of a corporation, partnership, joint venture, trust
or other entity.
1.5.
Expenses.
For purposes of this Agreement, “Expenses” includes all direct and indirect
costs of any type or nature whatsoever (including, without limitation,
attorneys’ fees and related disbursements and retainers, costs of travel, other
out-of-pocket costs such as fees and disbursements of expert witnesses, private
investigators and professional advisors, court costs, transcript costs, fees
of
experts, duplicating, printing, and binding costs, telephone and fax
transmission charges, postage, delivery services, secretarial services and
other
disbursements and expenses and reasonable compensation for time spent by the
Indemnitee for which he is not otherwise compensated by the Company or any
third
party) actually and reasonably incurred by the Indemnitee in connection with
the
investigation, defense or appeal of a proceeding or establishing or enforcing
a
right to indemnification or advancement of expenses under this Agreement,
Section 145 of the GCL or otherwise.
1.6.
Proceeding.
For the purposes of this Agreement, a “Proceeding” means any threatened,
pending, or completed action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, inquiry or other
proceeding, whether civil, criminal, administrative, investigative or any other
type whatsoever, whether formal or informal, including a proceeding initiated
by
Indemnitee pursuant to Section 9 of this Agreement to enforce Indemnitee’s
rights hereunder.
1.7.
Subsidiary.
For purposes of this Agreement, “Subsidiary” means any corporation, partnership,
limited liability company, trust, joint venture, or other entity of which more
than fifty percent (50%) of the outstanding voting securities is owned directly
or indirectly by the Company, by the Company and one or more of its subsidiaries
or by one or more of the Company’s subsidiaries.
2. Agreement
to Serve.
The
Indemnitee agrees to serve and/or continue to serve as an agent of the Company,
at the will of the Company (or under separate agreement, if such agreement
exists), in the capacity the Indemnitee currently serves as an agent of the
Company, faithfully and to the best of his ability, so long as he is duly
appointed or elected and qualified in accordance with the applicable provisions
of the charter documents of the Company or any Subsidiary of the Company;
provided, however, that the Indemnitee may at any time and for any reason resign
from such position (subject to any contractual obligation that the Indemnitee
may have assumed apart from this Agreement), and the Company or any Subsidiary
shall have no obligation under this Agreement to continue the Indemnitee in
any
such position. For the avoidance of doubt, the Company and Indemnitee each
acknowledge and agree that the resignation or other termination of Indemnitee
as
an agent of the Company under this paragraph 2 shall not impair any right that
Indemnitee may otherwise have to be indemnified under the terms of this
Agreement.
3
3. Directors’
and Officers’ Insurance.
The
Company shall, to the extent that the Board determines it to be economically
reasonable, maintain a policy of directors’ and officers’ liability insurance
(“D&O Insurance”), on such terms and conditions as may be approved by the
Board.
4. Mandatory
Indemnification.
Subject
to Section 9 below, the Company shall indemnify and hold the Indemnitee harmless
to the fullest extent permitted by the GCL. Without limiting the generality
of
the foregoing, the Company shall indemnify and hold harmless the Indemnitee
as
follows:
4.1.
Third
Party Actions. If the Indemnitee is a person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in
the right of the Company) by reason of the fact that he is or at any time was
an
agent of the Company, or by reason of anything done or not done by him in any
such capacity, against any and all claims, expenses and liabilities of any
type
whatsoever (including, but not limited to, attorneys’ fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of such proceeding if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of
the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; and/or
4.2.
Derivative
Actions. If the Indemnitee is a person who was or is a party or is threatened
to
be made a party to any proceeding by or in the right of the Company to procure
a
judgment in its favor by reason of the fact that he is or at any time was an
agent of the Company, or by reason of anything done or not done by him in any
such capacity, against any and all claims, expenses and liabilities, including
without limitation attorneys’ fees, amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement, or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed
to
be in, or not opposed to, the best interests of the Company; except that no
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged, in
a
judgment not subject to appeal, to be liable to the Company by a court of
competent jurisdiction due to willful misconduct of a culpable nature in the
performance of his duty to the Company, unless and only to the extent that
the
Court of Chancery in Delaware or the court in which such proceeding was brought
shall determine upon application that, despite the adjudication of liability
but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such amounts which the Court of Chancery
or
such other court shall deem proper; and/or
4
4.3.
Exception
for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company
shall not be obligated to indemnify the Indemnitee for expenses or liabilities
of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) to the extent such
have been paid directly to the Indemnitee by D&O Insurance.
5. Partial
Indemnification and Contribution.
5.1.
Partial
Indemnification. If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any
expenses or liabilities of any type whatsoever (including, but not limited
to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) incurred by him in the investigation, defense, settlement, or appeal
of a proceeding but is not entitled, however, to indemnification for all of
the
total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which
the
Indemnitee is not entitled to indemnification.
5.2. Contribution.
If the Indemnitee is not entitled to the indemnification provided in Section
4
for any reason other than the statutory limitations set forth in the GCL, then
in respect of any threatened, pending or completed proceeding in which the
Company is jointly liable with the Indemnitee (or would be if joined in such
proceeding), the Company shall contribute to the amount of Expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by the Indemnitee in such proportion
as
is appropriate to reflect (i) the relative benefits received by the Company
on
the one hand and the Indemnitee on the other hand from the transaction from
which such proceeding arose and (ii) the relative fault of the Company on the
one hand and of the Indemnitee on the other hand in connection with the events
which resulted in such Expenses, judgments, fines or settlement amounts, as
well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnitee on the other hand shall be
determined by reference to, among other things, the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such Expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation, which does not take account of the foregoing
equitable considerations.
6. Mandatory
Advancement of Expenses.
6.1.
Advancement.
Subject to Section 9 below, the Company shall advance all expenses incurred
by
the Indemnitee in connection with the investigation, participation, defense,
settlement or appeal of any proceeding to which the Indemnitee is a party or
is
threatened to be made a party by reason of the fact that the Indemnitee is
or at
any time was an agent of the Company or by reason of anything done or not done
by him in any such capacity. The Indemnitee hereby undertakes promptly to repay
such amounts advanced only if, and to the extent that, it shall ultimately
be
determined that the Indemnitee is not entitled to be indemnified by the Company
under the provisions of this Agreement, the Certificate of Incorporation, or
Bylaws of the Company, the GCL or otherwise. The advances to be made hereunder
shall be paid by the Company to the Indemnitee within thirty (30) days following
delivery of a written request therefor by the Indemnitee to the
Company.
5
6.2.
Exception.
Notwithstanding the foregoing provisions of this Section 6, the Company shall
not be obligated to advance any expenses to the Indemnitee arising from a
lawsuit filed directly by the Company against the Indemnitee if an absolute
majority of the members of the Board reasonably determines in good faith, within
thirty (30) days of the Indemnitee’s request to be advanced expenses, that the
facts known to them at the time such determination is made demonstrate clearly
and convincingly that the Indemnitee acted in bad faith. If such a determination
is made, the Indemnitee may have such decision reviewed by another forum, in
the
manner set forth in Sections 8.3, 8.4 and 8.5 hereof, with all references
therein to “indemnification” being deemed to refer to “advancement of expenses,”
and the burden of proof shall be on the Company to demonstrate clearly and
convincingly that, based on the facts known at the time, the Indemnitee acted
in
bad faith. The Company may not avail itself of this Section 6.2 as to a given
lawsuit if, at any time after the occurrence of the activities or omissions
that
are the primary focus of the lawsuit, the Company has undergone a change in
control. For this purpose, a change in control shall mean a given person or
group of affiliated persons or groups increasing their beneficial ownership
interest in the Company by at least fifteen (15) percentage points without
advance Board approval.
7. Notice
and Other Indemnification Procedures.
7.1.
Promptly
after receipt by the Indemnitee of notice of the commencement of or the threat
of commencement of any proceeding, the Indemnitee shall, if the Indemnitee
believes that indemnification with respect thereto may be sought from the
Company under this Agreement, notify the Company of the commencement or threat
of commencement thereof.
7.2.
If,
at
the time of the receipt of a notice of the commencement of a proceeding pursuant
to Section 7.1 hereof, the Company has D&O Insurance in effect, the Company
shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of
such proceeding in accordance with the terms of such D&O Insurance
policies.
6
7.3.
In
the
event the Company shall be obligated to advance the expenses for any proceeding
against the Indemnitee, the Company, if appropriate, shall be entitled to assume
the defense of such proceeding, with counsel approved by the Indemnitee (which
approval shall not be unreasonably withheld), upon the delivery to the
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by the Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to the Indemnitee under
this Agreement for any fees of counsel subsequently incurred by the Indemnitee
with respect to the same proceeding, provided that: (a) the Indemnitee shall
have the right to employ his own counsel in any such proceeding at the
Indemnitee’s expense; (b) the Indemnitee shall have the right to employ his own
counsel in connection with any such proceeding, at the expense of the Company,
if such counsel serves in a review, observer, advice, and counseling capacity
and does not otherwise materially control or participate in the defense of
such
proceeding; or (c) if (i) the employment of counsel by the Indemnitee has been
previously authorized by the Company, (ii) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
the
Indemnitee in the conduct of any such defense or (iii) the Company shall not,
in
fact, have employed counsel to assume the defense of such proceeding, then
the
fees and expenses of the Indemnitee’s counsel shall be at the expense of the
Company.
8. Determination
of Right to Indemnification.
8.1.
To
the
extent the Indemnitee has been successful on the merits or otherwise in defense
of any proceeding referred to in Section 4.1 or 4.2 of this Agreement or in
the
defense of any claim, issue or matter described therein, the Company shall
indemnify the Indemnitee against expenses actually and reasonably incurred
by
him in connection with the investigation, defense or appeal of such proceeding,
or such claim, issue or matter, as the case may be, including without limitation
Indemnitee’s attorneys’ fees.
8.2.
In
the
event that Section 8.1 is inapplicable, or does not apply to the entire
proceeding, the Company shall nonetheless indemnify the Indemnitee unless the
Company shall prove by clear and convincing evidence to a forum listed in
Section 8.3 below that the Indemnitee has not met the applicable standard of
conduct required to entitle the Indemnitee to such indemnification.
8.3.
The
Indemnitee shall be entitled to select the forum in which the validity of the
Company’s claim under Section 8.2 hereof that the Indemnitee is not entitled to
indemnification will be heard from among the following:
(a) a
quorum
of the Board consisting of directors who are not parties to the proceeding
for
which indemnification is being sought;
(b) the
stockholders of the Company, provided however that the Indemnitee can select
a
forum consisting of the stockholders of the Company only with the approval
of
the Company;
(c) legal
counsel mutually agreed upon by the Indemnitee and the Board, which counsel
shall make such determination in a written opinion;
(d) a
panel
of three arbitrators, one of whom is selected by the Company, another of whom
is
selected by the Indemnitee and the last of whom is selected by the first two
arbitrators so selected; or
7
(e) the
Court
of Chancery of Delaware or other court having jurisdiction of subject matter
and
the parties.
8.4.
As
soon
as practicable, and in no event later than thirty (30) days after the forum
has
been selected pursuant to Section 8.3 above, the Company shall, at its own
expense, submit to the selected forum its claim that the Indemnitee is not
entitled to indemnification, and the Company shall act in the utmost good faith
to assure the Indemnitee a complete opportunity to defend against such
claim.
8.5.
If
the
forum selected in accordance with Section 8.3 hereof is not a court, then after
the final decision of such forum is rendered, the Company or the Indemnitee
shall have the right to apply to the Court of Chancery of Delaware, the court
in
which the proceeding giving rise to the Indemnitee’s claim for indemnification
is or was pending or any other court having jurisdiction of subject matter
and
the parties, for the purpose of appealing the decision of such forum, provided
that such right is executed within sixty (60) days after the final decision
of
such forum is rendered. If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.
8.6.
Notwithstanding
any other provision in this Agreement to the contrary, the Company shall
indemnify the Indemnitee against all Expenses incurred by the Indemnitee in
connection with any hearing or proceeding under this Section 8 involving the
Indemnitee and against all Expenses incurred by the Indemnitee in connection
with any other proceeding between the Company and the Indemnitee involving
the
interpretation or enforcement of the rights of the Indemnitee under this
Agreement unless a court of competent jurisdiction finds that each of the
material claims and/or defenses of the Indemnitee in any such proceeding was
frivolous or not made in good faith.
9. Exceptions.
Any
other provision herein to the contrary notwithstanding, the Company shall not
be
obligated pursuant to the terms of this Agreement:
9.1.
Claims
Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee
with
respect to proceedings or claims initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to proceedings
specifically authorized by the Board or brought to establish or enforce a right
to indemnification and/or advancement of Expenses arising under this Agreement,
the charter documents of the Company or any Subsidiary or any statute or law
or
otherwise, but such indemnification or advancement of Expenses may be provided
by the Company in specific cases if the Board finds it to be appropriate;
or
9.2.
Unauthorized
Settlements. To indemnify the Indemnitee hereunder for any amounts paid in
settlement of a proceeding unless the Company consents in advance in writing
to
such settlement, which consent shall not be unreasonably withheld;
or
8
9.3.
Securities
Law Actions. To indemnify the Indemnitee on account of any suit in which
judgment is rendered against the Indemnitee for an accounting of profits made
from the purchase or sale by the Indemnitee of securities of the Company
pursuant to the provisions of Section l6(b) of the Securities Exchange Act
of
1934 and amendments thereto or similar provisions of any federal, state or
local
statutory law; or
9.4.
Unlawful
Indemnification. To indemnify the Indemnitee if a final decision by a court
having jurisdiction in the matter, in a judgment not subject to appeal, shall
determine that such indemnification is not lawful. In this respect, the Company
and the Indemnitee have been advised that the Securities and Exchange Commission
takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication.
10. Non-Exclusivity.
THE
PROVISIONS FOR INDEMNIFICATION AND ADVANCEMENT OF EXPENSES SET FORTH IN THIS
AGREEMENT SHALL NOT BE DEEMED EXCLUSIVE OF ANY OTHER RIGHTS WHICH THE INDEMNITEE
MAY HAVE UNDER ANY PROVISION OF LAW, THE COMPANY’S CERTIFICATE OF INCORPORATION
OR BYLAWS, THE VOTE OF THE COMPANY’S STOCKHOLDERS OR DISINTERESTED DIRECTORS,
OTHER AGREEMENTS OR OTHERWISE, BOTH AS TO ACTION IN THE INDEMNITEE’S OFFICIAL
CAPACITY AND TO ACTION IN ANOTHER CAPACITY WHILE OCCUPYING HIS POSITION AS
AN
AGENT OF THE COMPANY, AND THE INDEMNITEE’S RIGHTS HEREUNDER SHALL CONTINUE AFTER
THE INDEMNITEE HAS CEASED ACTING AS AN AGENT OF THE COMPANY AND SHALL INURE
TO
THE BENEFIT OF THE HEIRS, EXECUTORS AND ADMINISTRATORS OF THE
INDEMNITEE.
11. Burden
of Proof.
In
making a determination with respect to entitlement to indemnification hereunder,
the person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement, and the Company
shall have the burden of proof to overcome that presumption in connection with
the making by any person, persons or entity of any determination contrary to
that presumption.
12. Duration
of Agreement.
This
Agreement shall continue until and terminate upon the later of: (a) 10 years
after the date that the Indemnitee shall have ceased to serve as a director
and/or officer of the Company or director, officer, employee or agent of any
other corporation, partnership, joint venture, trust, employee benefit plan
or
other enterprise which the Indemnitee served at the request of the Company;
or
(b) one year after the final, nonappealable termination of any Proceeding then
pending in respect of which the Indemnitee is granted rights of indemnification
or advancement of Expenses hereunder and of any proceeding commenced by the
Indemnitee pursuant to Section 10 of this Agreement relating
thereto.
9
13. General
Provisions.
13.1. Interpretation
of Agreement. It is understood that the parties hereto intend this Agreement
to
be interpreted and enforced so as to provide indemnification and advancement
of
expenses to the Indemnitee to the fullest extent now or hereafter permitted
by
law, except as expressly limited herein.
13.2. Severability.
If any provision or provisions of this Agreement shall be held to be invalid,
illegal, or unenforceable for any reason whatsoever, then:
(a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, all portions of any paragraphs of
this
Agreement containing any such provision held to be invalid, illegal, or
unenforceable that are not themselves invalid, illegal, or unenforceable) shall
not in any way be affected or impaired thereby; and
(b) to
the
fullest extent possible, the provisions of this Agreement (including, without
limitation, all portions of any paragraphs of this Agreement containing any
such
provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to give effect
to
the intent manifested by the provision held invalid, illegal or unenforceable
and to give effect to Section 13.1 hereof.
13.3. Modification
and Waiver. No supplement, modification or amendment of this Agreement shall
be
binding unless executed in writing by both of the parties hereto. No waiver
of
any of the provisions of this Agreement shall be deemed or shall constitute
a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.
13.4. Subrogation.
In the event of full payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
the
Indemnitee, who shall execute all documents required and shall do all acts
that
may be necessary or desirable to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
13.5. Counterparts.
This Agreement may be executed in one or more counterparts and via facsimile,
each of which shall constitute an original, but all of which when taken together
shall constitute a single agreement.
13.6. Successors
and Assigns. The terms of this Agreement shall bind, and shall inure to the
benefit of, the successors and assigns of the parties hereto.
13.7. Notice.
All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed duly given: (a) if delivered by hand
and
signed for by the party addressee; or (b) if mailed by certified or registered
mail, with postage prepaid, on the third business day after the mailing date.
Addresses for notices to either party are as shown on the signature page of
this
Agreement or as subsequently modified by written notice.
10
13.8. Gender.
The masculine, feminine or neuter pronouns used herein shall be interpreted
without regard to gender, and the use of the singular or plural shall be deemed
to include the other whenever the context so requires.
13.9. Governing
Law. This Agreement shall be governed exclusively by and construed according
to
the laws of the State of Delaware, as applied to contracts between Delaware
residents entered into and to be performed entirely within
Delaware.
If
the
GCL or any other applicable law is amended after the date hereof to permit
the
Company to indemnify Indemnitee for Expenses or liabilities, or to indemnify
Indemnitee with respect to any action or Proceeding, not contemplated by this
Agreement, then this Agreement (without any further action be either party
hereto) shall automatically be deemed to be amended to require that the Company
indemnify Indemnitee to the fullest extent permitted by the GCL.
13.10. Consent
to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent
to the jurisdiction of the courts of the State of Delaware for all purposes
in
connection with any action or proceeding, which arises out of or relates to
this
Agreement.
13.11. Attorneys’
Fees. In the event Indemnitee is required to bring any action to enforce rights
under this Agreement (including, without limitation, the payment or
reimbursement of expenses of any proceeding described in Section 4), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing
and
pursuing such action, unless a court of competent jurisdiction finds each of
the
material claims of the Indemnitee in any such action was frivolous and not
made
in good faith.
[Balance
of the Page Intentionally Left Blank]
11
IN
WITNESS WHEREOF, the parties hereto have entered into this Agreement effective
as of the date first written above.
|
TETON
ENERGY CORPORATION
|
INDEMNITEE
|
|||
|
By:
|
/s/
Xxxx X. Xxxxxx
|
By:
|
/s/
Xxxxxx Xxxxx
|
|
|
Name:
|
Xxxx
X. Xxxxxx
|
Name:
|
Xxxxxx
Xxxxx
|
|
|
Title:
|
President
and Chief Executive Officer
|
Title:
|
Chief
Financial Officer and
Executive
Vice-President
|
|
|
Date:
December 11, 2007
|
Date:
December 11, 2007
|
||
|
Address:
|
Teton
Energy Corporation
000
00xx
Xxxxxx – Xxxxx 0000
Xxxxxx,
XX 00000
|
Address:
|
000
Xxxxxxxxx Xxxxx
Xxxx,
XX 00000
|
12
Exhibit
B
Form
of Restricted Stock Agreement
TETON
ENERGY CORPORATION
2005
Long
Term Incentive Plan
FORM
OF RESTRICTED STOCK AWARD AGREEMENT
THIS
AGREEMENT is made as of this [___] day of [_______] 200[_], by and between
Teton
Energy Corporation, a Delaware corporation (the “Company”), and [__________]
(“Participant”).
The
Company, pursuant to its 2005
Long
Term Incentive Plan
(the
“Plan”), hereby grants the following stock award to Participant, which award
shall have the terms and conditions set forth in this Agreement:
|
1.
|
Award
|
The
Company, effective as of the date of this Agreement, hereby grants to
Participant a restricted stock award of [________] shares (the “Shares”) of
common stock, par value $0.001 per share, of the Company (the “Common Stock”),
subject to the terms and conditions set forth herein.
|
2.
|
Vesting
|
Subject
to the terms and conditions of this Agreement, the Shares shall vest in
Participant as follows: the Shares shall vest ratably over a three-year
period, with one-third of the Shares ([______]) vesting on [________],
200[_];one-third of the Shares ([______]) vesting on [________], 200[_], and
the
balance or [_______] of the Shares vesting on [________], 200[_], if, and only
if, Participant remains continuously employed by the Company from the date
hereof until each respective vesting date, and subject to the forfeiture
provisions below. Vesting of the Shares shall be accelerated to an earlier
date only under the following conditions:
|
(a)
|
in
the event of a Change in Control of Company (as defined in the attached
Exhibit A), and provided that Participant remains continuously in
the
service of or employed by the Company until the effective date of
such
Change in Control, all unvested Shares granted under this Agreement
shall
become immediately vested on the effective date of the Change in
Control;
|
|
(b)
|
in
the event that Participant’s employment by or service provision for the
Company is terminated because Participant becomes in the service
of a new
owner of any business of the Company pursuant to a Change in Control
event, and provided that Participant remains continuously employed
by or
in the service of the Company until the date of closing of the Change
in
Control event, all unvested Shares granted under this Agreement shall
become immediately vested as of the last date of Participant’s service to
or employment by the Company; or
|
|
(c)
|
in
the event that Participant’s service to the Company is involuntarily
terminated by the Company without cause within one year following
a Change
in Control Event, and provided that Participant remains continuously
in
the service of the Company until the date of such involuntary termination,
all unvested Shares granted under this Agreement shall become immediately
vested as of the last date of Participant’s employment with or service for
the Company.
|
|
(d)
|
in
the event that the Participant’s employment with or service to the Company
terminates because of death or Disability or at the request of the
Chief
Executive Officer of the Company (other than for Cause) or of a U.S.
government agency, all the Shares issuable under this award will
vest on
such termination. Except to the extent provided in the preceding
sentence
or unless specifically provided in this Agreement or in a side letter
thereto, this award will not vest upon the Participant’s retirement. On
the Vesting Date (or promptly thereafter), the Company will deliver
to the
Participant a certificate representing the Shares which have vested
on
such date. For purposes of this Agreement, the term “Disability” shall be
defined as
any condition which shall render the Participant incapable of fulfilling
his or her obligations hereunder because of injury or physical or
mental
illness, and such incapacity shall exist or reasonably may be expected,
upon the competent medical opinion of a doctor chosen by the Company,
for
a period exceeding 60 consecutive days or 120 nonconsecutive days
within a
six-month period.
|
|
3.
|
Restriction
on Transfer
|
Until
the
Shares vest pursuant to Section 2 hereof, none of the Shares may be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of or
encumbered, and no attempt to transfer the Shares, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the transferee with
any interest or right in or with respect to the Shares.
|
4.
|
Forfeiture
|
If
Participant ceases to be an employee of or otherwise providing services to
the
Company or any majority-owned affiliate of the Company for any reason prior
to
the vesting of the Shares pursuant to Section 2 hereof, Participant’s rights to
the unvested portion of the Shares shall be immediately and irrevocably
forfeited.
|
5.
|
Issuance
and Custody of
Certificate
|
|
(a)
|
The
Company shall cause to be issued one or more stock certificates,
registered in the name of Participant, evidencing the Shares. Each
such certificate (except for certificates in respect of shares to
be sold
for taxes) shall bear the following
legend:
|
“The
shares of common stock represented by this certificate are subject to
forfeiture, and the transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and conditions
(including restrictions against transfer) contained in the 2005
Long
Term Incentive Plan
(the
“Plan”) and a Restricted Stock Award Agreement (the “Agreement”) entered into
between Teton Energy Corporation and the registered owner of such shares.
Copies of the Plan and the Agreement are on file in the office of the Secretary
of Teton Energy Corporation, 000 00xx
Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000.”
|
(b)
|
Participant
shall execute stock powers relating to the Shares and deliver the
same to
the Company. Company shall use such stock powers only for the
purpose of canceling any unvested Shares that are
forfeited.
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(c)
|
Each
certificate issued pursuant to Section 5(a) hereof, together with
the
stock powers relating to the Shares, shall be deposited by the Company
with the Secretary of the Company or a custodian designated by the
Secretary. The Secretary or such custodian shall issue a receipt to
Participant evidencing the certificate or certificates held which
are
registered in the name of
Participant.
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(d)
|
After
any Shares vest pursuant to Section 2 hereof, the Company shall promptly
cause to be issued a certificate or certificates evidencing such
vested
Shares, free of the legend provided in section 5(a) hereof, and shall
cause such certificate or certificates to be delivered to Participant
or
Participant’s legal representatives, beneficiaries or
heirs.
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2
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6.
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Distributions
and Adjustments
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(a)
|
If
all or any portion of the Shares vest in Participant subsequent to
any
change in the number or character of Shares of Common Stock (through stock
dividend, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares of Common Stock or other securities
of
the Company, issuance of warrants or other rights to purchase Shares
of
Common Stock or other securities of the Company or other similar
corporate
transaction or event affecting the Shares such that an adjustment
is
determined by the Compensation Committee of the Board of Directors
(the
“Committee”) to be appropriate in order to prevent dilution or enlargement
of the interest represented by the Shares), Participant shall then
receive
upon such vesting the number and type of securities or other consideration
which he would have received if the Shares had vested prior to the
event
changing the number or character of outstanding Shares of Common
Stock.
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(b)
|
Any
additional Shares of Common Stock, any other securities of the Company
and
any other property (except for cash dividends) distributed with respect
to
the Shares prior to the date the Shares vest shall be subject to
the same
restrictions, terms and conditions as the Shares. Any cash dividends
payable with respect to the Shares shall be distributed to Participant
at
the same time cash dividends are distributed to shareholders of the
Company generally.
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(c)
|
Any
additional Shares of Common Stock, any securities and any other property
(except for cash dividends) distributed with respect to the Shares
prior
to the date such Shares vest shall be promptly deposited with the
Secretary or the custodian designated by the Secretary to be held
in
custody in accordance with Section 5(c)
hereof.
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7.
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Taxes
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(a)
|
In
order to provide the Company with the opportunity to claim the benefit
of
any income tax deduction which may be available to it in connection
with
this restricted stock award, and in order to comply with all applicable
federal or state tax laws or regulations, the Company may take such
action
as it deems appropriate to assure that, if necessary, all applicable
federal or state income and social security taxes are withheld or
collected from Participant, including through means of grossing up
the
grant to so provide for the collection of such
taxes.
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(b)
|
Participant
may elect to satisfy his federal and state income tax withholding
obligations in connection with this restricted stock award by (i)
having
the Company withhold a portion of the shares of Common Stock otherwise
to
be delivered upon vesting of this restricted stock award having a
fair
market value equal to the amount of federal and state income taxes
required to be withheld in connection with this restricted stock
award, in
accordance with the rules of the Committee, or (ii) delivering to
the
Company shares of Common Stock other than the shares to be delivered
upon
vesting of this restricted stock award having a fair market value
equal to
such taxes, in accordance with the rules of the
Committee.
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3
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(c)
|
Notwithstanding
clause 7(b) above, if Participant elects, in accordance with
Section 83(b) of the Internal Revenue Code of 1986, as amended, to
recognize ordinary income in the year of acquisition of the Shares,
the
Company may require at the time of such election an additional payment
for
withholding tax purposes based on the fair market value of such Shares
as
of the date of the acquisition of such Shares by
Participant.
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8.
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Confidentiality,
Non-Competition And Non-Solicitation
|
In
consideration of Participant’s receipt of this award, Participant agrees as
follows:
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(a)
|
Participant
will hold in a fiduciary capacity for the benefit of the Company
all
information, knowledge or data relating to the Company or any Subsidiaries
and their respective businesses which the Company or any Subsidiaries
consider to be proprietary, trade secret or confidential that Participant
obtains or have previously obtained during its service and that is
not
public knowledge (other than as a result of Participant’s violation of
this provision) (“Confidential Information”). Participant will not
directly or indirectly use any Confidential Information for any purpose
not associated with the activities of the Company or any Subsidiaries,
or
communicate, divulge or disseminate Confidential Information to any
person
or entity not authorized by the Company or any Subsidiaries to receive
it
at any time during or after Participant’s service, except with the prior
written consent of the Company or as otherwise required by law or
legal
process.
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(b)
|
For
a period of two years after the termination of Participant’s service, for
any reason, voluntary or involuntary, Participant will not, without
the
written consent of the Company, directly or indirectly, engage or
hold an
interest in any company listed in Exhibit B, or any subsidiary or
affiliate of such company (the “Competing Businesses”), or directly or
indirectly have any interest in, own, manage, operate, control, be
connected with as a stockholder (other than as a holder of less than
five
percent (5%) of any class of publicly traded securities of any such
Competing Business). Participant and the Company explicitly acknowledge
that the companies, entities, or interests identified in Exhibit
C were
owned by Participant prior to his employment with the Company and
are
specifically approved.
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(c)
|
For
a period of one year after the termination of Participant’s service, for
any reason, Participant will not, without the written consent of
the
Company, directly or indirectly solicit, entice, persuade or induce
any
person to leave the employment of the Company or any Subsidiaries
(other
than persons employed in a clerical, non-professional or non-management
position).
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(d)
|
Participant
understands and agrees that the restrictions set forth above, including,
without limitation, the duration, and the business scope of such
restrictions, are reasonable and necessary to protect the legal interests
of the Company. Participant further agrees that the Company will
be
entitled to seek injunctive relief in the event of any actual or
threatened breach of such restrictions. In addition, Participant
also
agrees that in the event it is found by a court of law to have violated
the confidentiality provisions of this Agreement, that an adequate
remedy
will including, among other things, the immediate forfeit of all
shares
(whether or not vested) and disgorgement of any profit associated
with
this grant. If any provision of this Agreement is determined to be
unenforceable by any court, then such provision will be modified
or
omitted only to the extent necessary to make the remaining provisions
of
this Agreement enforceable.
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4
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9.
|
Miscellaneous
|
|
(a)
|
This
Agreement is issued pursuant to the Plan and is subject to its
terms. Participant hereby acknowledges receipt of a copy of the
Plan. The Plan is also available for inspection during business
hours at the principal office of the
Company.
|
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(b)
|
This
Agreement shall not confer on Participant any right with respect
to
continuance of service of or employment by the Company or any of
its
subsidiaries.
|
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(c)
|
This
award is governed by and subject to the terms and conditions of the
Plan,
which contain important provisions of this award and form a part
of this
Agreement. Copies of the Plan are being provided to or have been
provided
to Participant, along with a summary of the Plan. If there is any
conflict
between any provision of this Agreement and the Plan, this Agreement
will
control, unless the provision is not permitted by the Plan, in which
case
the provision of the Plan will apply. Participant’s rights and obligations
under this Agreement are also governed by and are subject to applicable
U.S. laws and foreign laws.
|
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(d)
|
This
Agreement may be executed via facsimile and in counterparts, each
of which
shall be considered an original, but all of which together shall
constitute one and the same
Agreement.
|
|
(e)
|
This
Agreement shall be governed by and construed under the internal laws
of
the State of Colorado, without regard for conflicts of laws principles
thereof.
|
5
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on
the day and year first above written.
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|
TETON
ENERGY CORPORATION
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By:
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||
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Its:
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Chairman
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PARTICIPANT
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||
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Grantee:
|
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No.
of Shares:
|
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Grant
Date:
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Vesting
Date:
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||||
6
Exhibit
A
Change
In Control.
|
(i)
|
For
purposes of this Agreement and this Exhibit A, a Change in Control” of the
Company shall mean:
|
|
(a)
|
a
change in control of the Company of a nature that would be required
to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended
(the
“Exchange Act”), whether or not the Company is then subject to such
reporting requirement;
|
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(b)
|
the
public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d)
of
the Exchange Act) by the Company or any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) that such person has
become
the “beneficial owner” (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 15% or more of the combined voting power of the Company’s
then outstanding securities, determined in accordance with Rule 13d-3,
excluding, however, any securities acquired directly from the Company
(other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired
directly from the Company); however, that for purposes of this clause
the
term “person” shall not include the Company, any subsidiary of the Company
or any employee benefit plan of the Company or of any subsidiary
of the
Company or any entity holding shares of Common Stock organized, appointed
or established for, or pursuant to the terms of, any such
plan;
|
|
(c)
|
the
Continuing Directors cease to constitute a majority of the Company’s Board
of Directors;
|
|
(d)
|
consummation
of a reorganization, merger or consolidation of, or a sale or other
disposition of all or substantially all of the assets of, the Company
(a
“Business Combination”), in each case, unless, following such Business
Combination, (A) all or substantially all of the persons who were
the
beneficial owners of the Company’s outstanding voting securities
immediately prior to such Business Combination beneficially own voting
securities of the corporation resulting from such Business Combination
having more than 50% of the combined voting power of the outstanding
voting securities of such resulting Corporation and (B) at least
a
majority of the members of the Board of Directors of the corporation
resulting from such Business Combination were Continuing Directors
at the
time of the action of the Board of Directors of the Company approving
such
Business Combination;
|
|
(e)
|
approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company; or
|
|
(f)
|
the
majority of the Continuing Directors determine in their sole and
absolute
discretion that there has been a change in control of the
Company.
|
7
|
(ii)
|
“Continuing
Director” shall mean any person who is a member of the Board of Directors
of the Company, while such person is a member of the Board of Directors,
who is not an Acquiring Person (as defined below) or an Affiliate
or
Associate (as defined below) of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and
who (x)
was a member of the Board of Directors on the date of this Agreement
as
first written above or (y) subsequently becomes a member of the Board
of Directors, if such person’s initial nomination for election or
initial election to the Board of Directors is recommended or approved
by a
majority of the Continuing Directors. For purposes of this
subparagraph (ii), “Acquiring Person” shall mean any “person” (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act) who
or
which, together with all Affiliates and Associates of such person,
is the
“beneficial owner” (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company’s
then outstanding securities, but shall not include the Company, any
subsidiary of the Company or any employee benefit plan of the Company
or
of any subsidiary of the Company or any entity holding shares of
Common
Stock organized, appointed or established for, or pursuant to the
terms
of, any such plan; and “Affiliate” and “Associate” shall have the
respective meanings ascribed to such terms in Rule 12b-2 promulgated
under
the Exchange Act.
|
8
Exhibit
B
Prohibited
Activities or Ownership Interests
None.
9
Exhibit
C
Permitted
Activities or Ownership Interests
None.
10
