Exhibit 10.4

 

TETON ENERGY CORPORATION

 

2005 Long Term Incentive Plan

 

RESTRICTED STOCK AWARD AGREEMENT

 

THIS AGREEMENT is made as of this 1st day of April 2006, 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 January 1, 2007; one-third of
the Shares (     ) vesting on January 1, 2008, and the balance or (     ) of the
Shares vesting on January 1, 2009, 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 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

 

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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, 410 17th Street,
Suite 1850, Denver, Colorado 80202.”

 

(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.

 

(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.

 

(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

 

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certificates to be delivered to Participant or Participant’s legal
representatives, beneficiaries or heirs.

 

6.              Distributions and Adjustments

 

(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.

 

(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.

 

(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.

 

7.              Taxes

 

(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.

 

(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.

 

(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

 

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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.

 

8.              Confidentiality, Non-Competition And Non-Solicitation

 

In consideration of Participant’s receipt of this award, Participant agrees as
follows:

 

(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.

 

(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.

 

(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).

 

(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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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.

 

(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.

 

(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.

 

(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.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.

 

 

 

TETON ENERGY CORPORATION

 

 

 

 

By:

 

 

 

 

 

 

Its:

Chairman

 

 

 

 

 

PARTICIPANT

 

 

 

 

 

 

 

Grantee:

No. of Shares:

Grant Date:

Vesting Date:

 

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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;

 

(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 20% 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.

 

(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

 

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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.

 

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Exhibit B

 

Prohibited Activities or Ownership Interests

 

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Exhibit C

 

Permitted Activities or Ownership Interests

 

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