Dominic
J. Bazile II
(Executive)
THIS EMPLOYMENT AGREEMENT (this “Agreement”),
dated as of February 1, 2007, (the “Effective
Date”) is entered into by and between Teton Energy
Corporation, a Delaware corporation (the “Company”),
and Dominic J. Bazile II, an individual with an address at 7638
Prairie Lake Trail, Parker, Colorado 80134, (the
“Executive”) (collectively, the “Parties,”
individually, a “Party”).
WHEREAS,
Employee has substantial experience in the Company’s business
and is currently the Company’s Executive Vice President and
Chief Operating Officer; and
WHEREAS,
the parties desire to clarify certain portions of this Agreement
and to modify certain of the benefits and obligations provided
hereunder; 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 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:
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 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, and (3) all equity-based awards that
vest pursuant to the terms of each plan under which they were
awarded.
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 “Cash Bonus” shall mean the annual cash
incentive awarded to Executive each year and approved by the
Compensation Committee as identified more fully in Section 3.2
herein.
1.6
The term “Cause” shall have the meaning set forth in
Section 4.3 herein.
1.7
The term “Common Stock” shall mean the Common Stock,
par value $0.001, of the Company.
1.8
The term “Compensation Committee” shall mean the
Compensation Committee of the Board of Directors of the
Company.
1.9
The term “Corporate Documents” shall mean the
Company’s Certificate of Incorporation, as amended and/or its
Bylaws, as amended.
1.10
The term “Effective Date” shall have the meaning set
forth in the preamble.
1.11
The term “Good Reason” shall have the meaning set forth
in Section 4.4 herein.
1.12
The term “Initial Term” shall have the meaning set
forth in Section 2.2 herein.
1.13
The term “Severance Benefit” shall have the meaning set
forth in Section 4.7(a)(i) herein.
1.14
The term “Target Cash Bonus” shall mean the targeted
bonus for the Executive in a specific or current fiscal year as
identified more fully in Section 3.2 herein.
1.15
The term “Without Cause” shall have the meaning set
forth in Section 4.3 herein.
1.16
The term “Without Good Reason” shall have the meaning
set forth in Section 4.5 herein.
2.1
Title . The Executive shall serve as the Executive Vice
President and Chief Operating 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.
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; provided, however ,
that the outstanding term at any time shall never be greater than
two (2) years.
2.3
Duties and Responsibilities . The Executive shall report to
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 Executive shall, subject to the direction of the CEO
of the Company, 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 Operating 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. The parties further agree that
initially the Executive’s responsibilities will be primarily
dedicated to the acquisition of an operated property; upon the
commencement of formal oil and gas operations by the Company on the
operated property, the Company’s organization will be
restructured in order to provide the Executive with such
operational oversight as may be customary for a COO in an oil and
gas exploration and production company the size of the
Company.
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
(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:
provided, however , 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.
2.9
Other . The Company commits that upon the Executive’s
completion of one year of service and assuming the Company has
successfully completed an acquisition of an operated property and
begun formal operations of such property, the Board shall consider
the Executive for appointment to the Company’s Board of
Directors and shall consider the Executive for a promotion to the
Company’s president. The Executive understands and agrees
that any outcome of such consideration will be 100% at
the discretion
of the Board and that the failure of the Board to elect the
Executive to the Company’s Board of Directors or to promote
the Executive to the Company’s president shall not be
considered.
3.1
Base Salary . Executive shall receive an initial annual base
salary of Two Hundred Twenty-Five Thousand Dollars ($225,000.00),
payable according to the Company’s normal payroll policies
and procedures, as in effect from time to time (the “Base
Salary”) and subject to all federal, state, and municipal
withholding requirements. The Base Salary shall be reviewed by the
CEO, with input from 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 (pro
rata 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 75 th day 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.
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.
(a) The Executive
understands that as of the date of this Agreement, the only
stock-based plan offered by the Company is the 2005 Long-Term
Incentive Plan.
(b) Upon a Change
of Control, all equity-based compensation will be deemed to have
vested as of the Change of Control Effective Date (as defined
Section 7.1 herein).
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 by such benefit plan.
(c) Life
Insurance . The Company will purchase life insurance on the
life of Executive in an amount not less than $2,000,000, the
benefits of which will be payable
one-half to the
Executive’s beneficiary and one-half to the Company. The
Executive’s “beneficiary” is the person or
persons (who may be designated concurrently, successively or
contingently) designated by the Executive in his last effective
writing filed with the Company prior to his death, or if the
Executive shall have failed to make an effective designation, the
Executive’s beneficiary is his spouse, if the Executive is
married and his spouse is living at the time of each payment, and
otherwise his surviving children. The Executive shall assist the
Company in procuring such insurance by submitting to such
examinations and by signing such applications and other instruments
as may be reasonable and as may be required by the insurance
carriers to which application is made for any such insurance. The
Executive represents that, to the best of his knowledge, he is
currently insurable at standard premium rates for life insurance
policies.
(d) 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.
(i) The Executive
shall be entitled to five (5) weeks of vacation per calendar
year, which vacation level shall be reviewed by the CEO 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 cannot be retroactively
reapplied.
(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.
(f) 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.
(g)
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 the event that the Company shall move its
corporate headquarters from the Denver, Colorado metropolitan area.
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 4.7
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 as
then in effect.
TERMINATION OF
EMPLOYMENT
4.1
Death . The Executive’s employment shall terminate
automatically upon the Executive’s death during the
Employment Term.
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 30
th 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
Board or the Chief Executive Officer of the Company, which
specifically identifies the manner in which the Board or the Chief
Executive Officer of the Company 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.
(b) Termination
Without Cause.
All terminations
by the Company that are not for Cause, shall be considered Without
Cause.
4.4
Termination by Executive . The Executive may terminate the
Executive’s employment her
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