PYR ENERGY CORPORATION FORM OF CHANGE OF CONTROL SEVERANCE AGREEMENT
Exhibit 10.3
PYR ENERGY CORPORATION
This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and
between ___(the “Employee”) and PYR Energy Corporation (the “Company”), effective as of
the latest date set forth by the signatures of the parties hereto below.
R E C I T A L S
A. ___is currently employed by the Company.
B. The Company is considering the possibility of an acquisition by another company or other
change of control as a means of enhancing shareholder value. The Board of Directors of the Company
(the “Board”) recognizes that such an agreement can be a distraction to the Employee and can cause
the Employee to consider alternative employment opportunities. The Board has determined that it is
in the best interests of the Company and its shareholders to assure that the Company will have the
continued dedication and objectivity of the Employee, notwithstanding the Change of Control (as
defined below) of the Company.
C. The Board believes that it is in the best interests of the Company and its shareholders to
provide the Employee with an incentive to continue his employment and to motivate the Employee to
maximize the value of the Company upon a Change of Control for the benefit of its shareholders.
D. The Board believes that it is imperative to provide the Employee with certain severance
benefits upon Employee’s termination of employment following a Change of Control which provides the
Employee with enhanced financial security and provides incentive and encouragement to the Employee
to remain with the Company notwithstanding a Change of Control.
E. Certain capitalized terms used in the Agreement are defined in Section 5 below.
The parties hereto agree as follows:
1. Term of Agreement. This Agreement shall terminate upon the date that all
obligations of the parties hereto with respect to this Agreement have been satisfied.
2. At-Will Employment. The Company and the Employee acknowledge that the Employee’s
employment is, and shall continue to be at-will, as defined under applicable law. If the
Employee’s employment terminates for any reason other than an Involuntary Termination following a
Change of Control, the Employee shall not be entitled to any payments, benefits, damages, awards or
compensation except for those payments that may be available in accordance with the Company’s
established employee plans and practices or pursuant to other agreements with the Company.
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3. Severance Benefits.
(a) Involuntary Termination In Connection With a Change of Control. If the Employee’s
employment terminates as a result of Involuntary Termination (as defined below) at any time prior
to October 30, 2008 following a Change of Control, then the Employee shall be entitled to receive
the following severance benefits:
(1) Severance Payment. A cash payment in an amount equal to ___% of the
Employee’s Annual Compensation plus a pro rata payment of the current year bonus award, if a bonus
plan is in effect, based on the target bonus for the Employee (the “Severance Payment”);
(2) Continued Employee Benefits. One hundred percent (100%) Company-paid health,
dental and life insurance coverage at the same level of coverage as was provided to the Employee
immediately prior to the Termination Date (the “Company-Paid Coverage”). If such coverage included
the Employee’s dependents immediately prior to the Termination Date, such dependents shall also be
covered by the Company at the same rate of coverage as was being provided at the Termination Date,
and thus, shall be included in the definition of Company-Paid Coverage. Company-Paid Coverage
shall continue until the earlier of (i) nine months from the Termination Date or (ii) the date that
the Employee and his dependents become covered under another employer’s group health, dental or
life insurance plans that provide Employee and his dependents with comparable benefits and levels
of coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act of 1985
(“COBRA”), the date of the “Qualifying Event” for Employee and his dependents shall be the date
upon which the Company-paid coverage terminates.
(3) Timing of Severance Payments. Any severance payment to which Employee is entitled
under Section 3(a)(1) or 3(c) (as applicable) shall be paid by the Company to the Employee (or to
the Employee’s successor in interest, pursuant to Section 6(b)) in cash and, notwithstanding the
limitations of Section 5, in full, not later than five (5) calendar days following the Termination
Date, subject to Section 9(f). However, notwithstanding any provision of this Agreement to the
contrary, if the Employee is a Specified Employee on the Termination
Date and, as a result thereof,
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the rules
promulgated thereunder would so require, any such payment will be made on the first day following
the date six (6) months after the Termination Date.
(b) Voluntary Resignation; Termination for Cause. If the Employee’s employment
terminates by reason of the Employee’s voluntary resignation (and is not an Involuntary
Termination), or if the Employee is terminated for Cause as defined in Section 5(b) herein, then
the Employee shall not be entitled to receive (i) a Severance Payment, (ii) the Company-Paid
Coverage, (iii) the Accrued ORRI Earnings, or (iv) the ORRI assignment, except to the extent that
those benefits (if any) are payable under the Company’s then existing option, severance and
benefits plans and practices or pursuant to other agreements with the Company.
(c) Disability or Death. If the Company terminates the Employee’s employment as a
result of the Employee’s Disability, or such Employee’s employment is terminated due to the death
of the Employee, then the Employee, or the Employee’s estate or
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heirs in the event of death, shall be entitled to receive (i) a Severance Payment (in
accordance with this Section 3), (ii) the Company-Paid Coverage, (iii) the Accrued ORRI Earnings,
or (iv) the ORRI Assignment.
(d) Overriding Royalty Interest. Pursuant to the Participation Agreement dated
December 1, 2003, by and among Palace Exploration Company, Xxxxx & Xxxxxx, Inc., The Oxford Oil
Company, and the Company concerning the Cumberland, Mallard and Pintail Prospects (the
“Participation Agreement”), the Company reserved an overriding royalty interest (“ORRI”) of three
percent (3%) of the Leases (as defined in the Participation Agreement) as an employee overriding
royalty (the “Employee Overriding Royalty”). Immediately prior to the closing of the acquisition
of the Company contemplated by Recital B. (above) (the “Closing”), and as further identified in
Exhibit A attached hereto, the Company shall (i) pay to Employee the percentage of the
earnings from the Employee Overriding Royalty that have been accrued by the Company as of the
Closing (the “Accrued ORRI Earnings”), in the amount identified in Exhibit A, and (ii)
assign to Employee the split and percentage amounts of the Employee Overriding Royalty identified
in Exhibit A (the “ORRI Assignment”) and pursuant to the Assignment of Overriding Royalty
attached hereto as Exhibit B. Except as described otherwise in this Agreement, in the
event the Closing does not occur during the term of this Agreement, the Accrued ORRI Earnings shall
not be paid to Employee and the Employee shall not receive the ORRI Assignment, but instead the
Accrued ORRI Earnings and ORRI Assignment shall be re-allocated in the sole discretion of the
Company’s board of directors.
4. Attorney Fees, Costs and Expenses. The Company shall reimburse Employee for the
reasonable attorney fees, costs and expenses incurred by the Employee in connection with any action
brought by Employee to enforce his rights hereunder, provided such action is not decided in favor
of the Company.
5. Definition of Terms. The following terms referred to in this Agreement shall have
the following meanings:
(a) Annual Compensation. “Annual Compensation” means an amount equal to twelve times
the Employee’s salary with the Company for the last full month preceding the Change of Control.
(b) Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the
Employee in connection with his responsibilities as an employee and intended to result in
substantial personal enrichment of the Employee, (ii) the conviction of a felony, (iii) a willful
act by the Employee that constitutes gross misconduct and that is injurious to the Company, or (iv)
for a period of not less than thirty (30) days following delivery to the Employee of a written
demand for performance from the Company that describes the basis for the Company’s belief that the
Employee has not substantially performed his duties, continued violations by the Employee of the
Employee’s obligations to the Company that are demonstrably willful and deliberate on the
Employee’s part. Any dismissal for Cause in accordance with subsection (iv) of this Section 5(b)
must be approved by the Company’s Board of Directors prior to the dismissal date.
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(c) Change Of Control. “Change of Control” means (i) the acquisition, directly or
indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) of the beneficial ownership of more than fifty percent of the
outstanding securities of the Company, (ii) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is to change the
state in which the Company is incorporated, (iii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, (iv) a complete liquidation or dissolution of the
Company, or (v) any reverse merger in which the Company is the surviving entity but in which
securities possessing more than fifty percent of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from the persons holding
those securities immediately prior to such merger.
(d) Disability. “Disability” shall mean that the Employee has been unable to perform
his Company duties as the result of his incapacity due to physical or mental illness, and such
inability, at least twenty-six (26) weeks after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable to the Employee or
the Employee’s legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at least thirty (30)
days’ written notice by the Company of its intention to terminate the Employee’s employment. In
the event that the Employee resumes the performance of substantially all of his duties hereunder
before the termination of his employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
(e) Involuntary Termination. “Involuntary Termination” shall mean (i) without the
Employee’s express written consent, the significant reduction of the Employee’s duties, authority
or responsibilities, relative to the Employee’s duties, authority or responsibilities as in effect
immediately prior to such reduction, or the assignment to Employee of such reduced duties,
authority or responsibilities or change in Employee’s title relative to Employee’s current
employment position; (ii) a material reduction by the Company in the base salary or target bonus,
if any, of the Employee as in effect immediately prior to such reduction; (iii) a material
reduction by the Company in the kind or level of employee benefits, including bonuses, to which the
Employee was entitled immediately prior to such reduction with the result that the Employee’s
overall benefits package is significantly reduced; (iv) the relocation of the Employee to a
facility or a location more than one hundred (100) miles from the Employee’s then present location,
without the Employee’s express written consent; (v) any purported termination of the Employee by
the Company that is not effected for Cause, or any purported termination for which the grounds
relied upon are not valid; (vi) the failure of the Company to obtain the assumption of this
Agreement by any successors contemplated in Section 6(a) below; or (vii) any act or set of facts or
circumstances that would, under Colorado case law or statute constitute a constructive termination
of the Employee. Notwithstanding this paragraph (e), a termination described subparagraph (i),
(ii), (iii), (vi), or (vii) shall be considered an involuntary termination only if the Employee has
provided notice to the Company of the existence of the condition described within a period of 90
days of the initial existence of the condition and the Company is provided a period of 30 days
during which it may remedy the condition and not pay the Severance Payment provided for in Section
3(a) of this Agreement.
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(f) Specified Employee. “Specified Employee” shall mean a key employee (as defined in
Section 416(i) of the Code, without regard to paragraph 5 thereof) of the Company if any stock of
the Company (or any entity with which the Company would be considered a single employer under
section 414(b) or 414(c) of the Code) is publicly traded on an established securities market or
otherwise or such other definition as may be set forth in Section 409A of the Code.
(g) Termination Date. “Termination Date” shall mean (i) if this Agreement is
terminated by the Company for Disability, thirty (30) days after notice of termination is given to
the Employee (provided that the Employee shall not have returned to the performance of the
Employee’s duties on a full-time basis during such thirty (30)-day period), (ii) if the Employee’s
employment is terminated by the Company for any other reason, the date on which a notice of
termination is given, or (iii) if the Agreement is terminated by the Employee, the date on which
the Employee delivers the notice of termination to the Company.
6. Successors.
(a) Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company’s business and/or assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term “Company” shall include any successor to the
Company’s business and/or assets which executes and delivers the assumption agreement described in
this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee’s Successors. The terms of this Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
7. Notice.
(a) General. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the
case of the Employee, mailed notices shall be addressed to him or her at the home address which he
or she most recently communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall be directed to the
attention of its Secretary.
(b) Notice Of Termination. Any termination by the Company for Cause or by the
Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated
by a notice of termination to the other party hereto given in accordance with Section 7(a) of this
Agreement. Such notice shall indicate the specific termination provision in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances
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claimed to provide a basis for termination under the provision so indicated, and shall specify
the Termination Date (which shall be not more than thirty (30) days after the giving of such
notice). The failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of the Employee
hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights
hereunder.
8. Release and Waiver. In exchange for the Severance Payments and Accrued ORRI
Earnings payment described above, the Employee hereby releases and forever discharges the Company,
its affiliates and any subsidiary companies (collectively, the “Companies”) and their former or
current directors, officers, employees, members, agents, successors, predecessors, subsidiaries,
affiliates, assigns and attorneys (the “Released Parties”) from any and all charges, claims,
damages, injuries and actions, in law or equity, which Employee or his heirs, successors,
executors, or other representatives ever had, now have, or may have by reason of any act, omission,
matter, cause or thing through the date Employee signs this Agreement (“Released Claims”);
provided, however, that Released Claims do not include any charges, claims, damages, injuries or
actions, in law or equity, which Employee or his heirs, successors, executors, or other
representatives may have arising out of this Agreement. The Released Claims include, but are not
limited to, any claims for wages, back or front pay, damages, bonus, stock, stock options, costs,
expenses, attorneys’ fees, employee benefits, employee ORRI pool programs, breach of contract or
duty, fraud, misrepresentation, defamation, tort, and any claims under any federal, state, local or
other governmental statute or ordinance, including, without limitation, Title VII of the Civil
Rights Acts of 1964 and 1991; the Age Discrimination in Employment Act; the Americans with
Disabilities Act; the National Labor Relations Act; 42 U.S.C. § 1981; the Fair Labor Standards Act;
the Xxxxxxxx-Xxxxx Act; the Employee Retirement Income Security Act of 1974 (other than any accrued
benefit(s) to which Employee has a non-forfeitable right under any pension benefit plan); the
Colorado Anti-Discrimination Act; the Colorado Law on Equal Pay; the Colorado Wage Claim Act; and
the Colorado Constitution; and any amendments to any of the foregoing. The Employee understands
that this is a general release of all claims, whether known or unknown, that Employee may have
against the Released Parties based on any act, omission, matter, case or thing through the date of
Employee’s signing this Agreement.
9. Miscellaneous Provisions.
(a) No Duty To Mitigate. The Employee shall not be required to mitigate the amount of
any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings
that the Employee may receive from any other source (except as outlined by Section 3(a)(2)(ii)).
(b) Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and
by an authorized officer of the Company (other than the Employee). No waiver by either party of
any breach of, or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the same condition or
provision at another time.
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(c) Whole Agreement. This Agreement and any outstanding stock option agreements
represent the entire understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior arrangements and understandings regarding same. Other than the agreements
described in the preceding sentence, no agreements, representations or understandings (whether oral
or written and whether express or implied) which are not expressly set forth in this Agreement have
been made or entered into by either party with respect to the subject matter hereof.
(d) Choice Of Law. The validity, interpretation, construction and performance of this
Agreement shall be construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado without regard to principles of conflicts of
laws.
(e) Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(f) Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by its duly authorized officer, as of the day and year set forth below.
| COMPANY | PYR ENERGY CORPORATION |
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| By: | ||||
| Title: | ||||
| Date: | ||||
| EMPLOYEE | ||||
| Date: | ||||
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