FORM OF CHANGE OF CONTROL
SEVERANCE AGREEMENT
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.
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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(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, Zinke & Trumbo, 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 i
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