AMENDED AND RESTATED
TETON ENERGY CORPORATION
J. Bazile II
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”).
W I T N E S S E T H:
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.
POSITION & DUTIES
2. Employment .
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. Compensation .
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.
(e) Vacation .
(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