Document:

exv10w18

 

Exhibit
10.18

(Multicurrency—Cross Border)

International Swap Dealers Association, Inc.

MASTER AGREEMENT

dated as of October 24, 2006

	 	 	 
	BNP PARIBAS
	 	TETON ENERGY CORPORATION

..........................................................................................and..........................................................................................

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that
are or will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and
the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties
confirming those Transactions.     

Accordingly, the parties agree as follows: —

1. Interpretation

(a) Definitions. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.

(c) Single Agreement. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this
“Agreement”), and the
parties would not otherwise enter into any Transactions.

2. Obligations

	(a)	 	General Conditions.

(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.

(ii) Payments under this Agreement will be made on the due date for
value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.

(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event
of Default with respect to the other party has occurred and is
continuing, (2) the condition precedent that no Early Termination Date
in respect of the relevant Transaction has occurred or been effectively
designated and (3) each other applicable condition precedent specified
in this Agreement.

Copyright
©  1992 by International Swap Dealers Association, Inc.

 

 

(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a
reasonable objection to such change.

(c) Netting. If on any date amounts would otherwise be payable:—

	 	(i)	 	in the same currency; and
	 
	 	(ii)	 	in respect of the same Transaction,

by each party to the other, then, on such date, each party’s obligation to
make payment of any such amount will be automatically satisfied and discharged
and, if the aggregate amount that would otherwise have been payable by one
party exceeds the aggregate amount that would otherwise have been payable by
the other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties
make and receive payments or deliveries.

(d) Deduction or Withholding for Tax.

(i) Gross-Up. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
(“X”) will:—

(1) promptly notify the other party (“Y”) of such requirement;

(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y
under this Section 2(d)) promptly upon the earlier of determining
that such deduction or withholding is required or receiving notice
that such amount has been assessed against Y;

(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and

(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
the payment to which Y is otherwise entitled under this Agreement,
such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable
Taxes, whether assessed against X or Y) will equal the Full amount
Y would have received had no such deduction or withholding been
required. However, X will not be required to pay any additional
amount to Y to the extent that it would not be required to be paid
but for:—

(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

(B) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure
would not have occurred but for (I) any action taken by a
taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a
Change in Tax Law.

					
	 	 	 	 	 
	 
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(ii) Liability. If: —

(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to make
any deduction or withholding in respect of which X would not be
required to pay an additional amount to Y under Section
2(d)(i)(4);

(2) X does not so deduct or withhold; and

(3) a liability resulting from such Tax is assessed directly
against X,

then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).

(e) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment
obligation will, to the extent permitted by law and subject to Section 6(c),
be required to pay interest (before as well as after judgment) on the overdue
amount to the other party on demand in the same currency as such overdue
amount, for the period from (and including) the original due date for payment
to (but excluding) the date of actual payment, at the Default Rate. Such
interest will be calculated on the basis of daily compounding and the actual
number of days elapsed. If, prior to the occurrence or effective designation
of an Early Termination Date in respect of the relevant Transaction, a party
defaults in the performance of any obligation required to be settled by
delivery, it will compensate the other party on demand if and to the extent
provided for in the relevant Confirmation or elsewhere in this Agreement.

3. Representations

Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into and, in the case of the representations in Section 3(f), at all times
until the termination of this Agreement) that:—

(a) Basic Representations.

(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;

(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;

(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;

(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and

(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors’ rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).

					
	 	 	 	 	 
	 
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(b) Absence of Certain Events. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a
result of its entering into or performing its obligations under this
Agreement or any Credit Support Document to which it is a party.

(c) Absence of Litigation. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency
or official or any arbitrator that is likely to affect the legality, validity
or enforceability against it of this Agreement or any Credit Support Document
to which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.

(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the
date of the information, true, accurate and complete in every material
respect.

(e) Payer Tax Representation. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.

(f) Payee Tax Representations. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(f) is accurate and true.

4. Agreements

Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:—

(a) Furnish
Specified Information. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:—

(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;

(ii) any other documents specified in the Schedule or any Confirmation;
and

(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to
be executed and to be delivered with any reasonably required
certification,

in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.

(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.

(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.

(d) Tax Agreement. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.

(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated,

					
	 	 	 	 	 
	 
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organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this
Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the other
party against any Stamp Tax levied or imposed upon the other party or in
respect of the other party’s execution or performance of this Agreement by any
such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.

5. Events of Default and Termination Events

(a) Events of Default. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an “Event of Default”) with respect to such party:—

(i) Failure to Pay or Deliver. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;

(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i)
or 2(e)
or to give notice of a Termination Event or any agreement or obligation
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of such
failure is given to the party;

(iii) Credit Support Default.

(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;

(2) the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be in
full force and effect for the purpose of this Agreement (in either
case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or

(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;

(iv) Misrepresentation. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;

(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);

(vi)
Cross Default. If “Cross Default” is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however

					
	 	 	 	 	 
	 
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described) in respect of
such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);

(vii) Bankruptcy. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party: —

(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other
similar law affecting creditors’ rights, or a petition is
presented for its winding-up or liquidation, and, in the case of
any such proceeding or petition instituted or presented against
it, such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief or
the making of an order for its winding-up or liquidation or (B) is
not dismissed, discharged, stayed or restrained in each case
within 30 days of the institution or presentation thereof; (5) has
a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation
or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the foregoing
acts; or

(viii) Merger Without Assumption. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer: —

(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or

(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its obligations
under this Agreement.

(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii)
below, and, if specified to be applicable, a Credit Event

					
	 	 	 	 	 
	 
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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) 

below: —

(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party): —

(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or

(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;

(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));

(iii) Tax Event Upon Merger. The party (the “Burdened Party”) on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either
case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);

(iv)
Credit Event Upon Merger. If “Credit Event Upon
Merger” is
specified in the Schedule as applying to the party, such party
(“X”),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or

(v)
Additional Termination Event. If any “Additional Termination Event”
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).

(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event of Default.

					
	 	 	 	 	 
	 
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6. Early Termination

(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the “Defaulting Party”) has occurred and is
then continuing, the other party (the “Non-defaulting Party”) may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, “Automatic Early Termination” is specified in the Schedule as
applying to a party, then an Early Termination Date in respect of all
outstanding Transactions will occur immediately upon the occurrence with
respect to such party of an Event of Default specified in Section
5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as
of the time immediately preceding the institution of the relevant proceeding
or the presentation of the relevant petition upon the occurrence with respect
to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to
the extent analogous thereto, (8).

(b) Right to Terminate Following Termination Event.

(i)
Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.

(ii) Transfer to avoid Termination Event. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will, as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.

If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
    

Any such transfer by a party under this Section 6(b)(ii) will be subject
to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party’s policies in
effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.

(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.

(iv) Right to Terminate If: —

(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or

(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,

either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then

					
	 	 	 	 	 
	 
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continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.

(c) Effect of Designation.

(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.

(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).

(d) Calculations.

(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.

(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.

(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties’ election in the
Schedule of a payment measure, either “Market Quotation” or “Loss”, and a
payment method, either the “First Method” or the “Second Method”. If the
parties fail to designate a payment measure or payment method in the Schedule,
it will be deemed that “Market Quotation” or the “Second Method”, as the case
may be, shall apply. The amount, if any, payable in respect of an Early
Termination Date and determined pursuant to this Section will be subject to
any Set-off.

(i) Events of Default. If the Early Termination Date results from an
Event of Default: —

(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party over (B) the Termination Currency Equivalent
of the Unpaid Amounts owing to the Defaulting Party.

(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party’s Loss in respect of
this Agreement.

(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the

					
	 	 	 	 	 
	 
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Non-defaulting Party) in respect of the Terminated
Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party
will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.

(4) Second Method and Loss. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party’s Loss
in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if
it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.

(ii) Termination Events. If the Early Termination Date results from a
Termination Event: —

(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3),
if Market Quotation applies, or Section 6(e)(i)(4), if Loss
applies, except that, in either case, references to the Defaulting
Party and to the Non-defaulting Party will be deemed to be
references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than
all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.

(2) Two Affected Parties. If there are two Affected Parties: —

(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount (“X”) and the
Settlement Amount of the party with the lower Settlement
Amount (“Y”) and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and

(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with
the lower Loss (“Y”).

If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount 

to Y.

(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because “Automatic Early Termination” applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).

(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.

					
	 	 	 	 	 
	 
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7. Transfer

Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of
the other party, except that: —

(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and

(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be
void.

8. Contractual Currency

(a) Payment in the Contractual Currency. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the “Contractual Currency”). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered
into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts payable in respect of this Agreement. If for any reason the
amount in the Contractual Currency so received falls short of the amount in
the Contractual Currency payable in respect of this Agreement, the party
required to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual
Currency payable in respect of this Agreement, the party receiving the payment
will refund promptly the amount of such excess.

(b) Judgments. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party
is entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency and will refund promptly to the other party any excess of
the Contractual Currency received by such party as a consequence of sums paid
in such other currency if such shortfall or such excess arises or results from
any variation between the rate of exchange at which the Contractual Currency
is converted into the currency of the judgment or order for the purposes of
such judgment or order and the rate of exchange at which such party is able,
acting in a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual Currency
with the amount of the currency of the judgment or order actually received by
such party. The term “rate of exchange” includes, without limitation, any
premiums and costs of exchange payable in connection with the purchase of or
conversion into the Contractual Currency.

(c) Separate Indemnities. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.

(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.

					
	 	 	 	 	 
	 
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9. Miscellaneous

(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.

(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced
by a facsimile transmission) and executed by each of the parties or confirmed
by an exchange of telexes or electronic messages on an electronic messaging
system.

(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.

(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.

(e) Counterparts and Confirmations.

(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.

(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging system, which
in each case will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.

(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.

(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.

10. Offices; Multibranch Parties

(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organisation of such party, the
obligations of such party are the same as if it had entered into the
Transaction through its head or home office. This representation will be
deemed to be repeated by such party on each date on which a Transaction is
entered into.

(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.

(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.

11. Expenses

A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees and Stamp Tax, incurred by such other party by reason of the enforcement
and protection of its rights under this Agreement or any Credit Support Document

					
	 	 	 	 	 
	 
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to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.

12. Notices

(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system detail, provided (see the
Schedule) and will be deemed effective as indicated:—

(i) if in writing and delivered in person or by courier, on the date it
is delivered;

(ii) if sent by telex, on the date the recipient’s answerback is
received;

(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender’s facsimile machine);

(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or

(v) if sent by electronic messaging system, on the date that electronic
message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.

(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.

13. Governing Law and Jurisdiction

(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.

(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement (“Proceedings”), each party irrevocably:—

(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York
City, if this Agreement is expressed to be governed by the laws of the
State of New York; and

(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the
Civil Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

(c) Service of Process. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any

					
	 	 	 	 	 
	 
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reason any party’s Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute
process agent acceptable to the other party. The parties irrevocably consent
to service of process given in the manner provided for notices in Section 12.
Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.

(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the
grounds of sovereignty or other similar grounds from (i) suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction, order for
specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of
any judgment to which it or its revenues or assets might otherwise be entitled
in any Proceedings in the courts of any jurisdiction and irrevocably agrees,
to the extent permitted by applicable law, that it will not claim any such
immunity in any Proceedings.

14. Definitions

As used in this Agreement: —

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b).

“Affected Transactions” means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, “control”
of any entity or person means ownership of a majority of the voting power of
the entity or person.

“Applicable Rate” means: —

(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;

(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and

(d) in all other cases, the Termination Rate.

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified
as such in this Agreement.

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.

					
	 	 	 	 	 
	 
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“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section
6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed
in respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to
such recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).

“law” includes any treaty, law, rule or regulation (as modified, in the case
of tax matters, by the practice of any relevant governmental revenue
authority) and “lawful” and
“unlawful” will be construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so
specified, as otherwise agreed by the parties in writing or determined
pursuant to provisions contained, or incorporated by reference, in this
Agreement, (b) in relation to any other payment, in the place where the
relevant account is located and, if different, in the principal financial
centre, if any, of the currency of such payment, (c) in relation to any notice
or other communication, including notice contemplated under Section 5(a)(i),
in the city specified in the address for notice provided by the recipient and,
in the case of a notice contemplated by Section 2(b), in the place where the
relevant new account is to be located and (d) in relation to Section
5(a)(v)(2), in the relevant locations for performance with respect to such
Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before
the relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party’s legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early
Termination Date, or, if that is not reasonably practicable, as of the
earliest date thereafter as is reasonably practicable. A party may (but need
not) determine its Loss by reference to quotations of relevant rates or prices
from one or more leading dealers in the relevant markets.

“Market Quotation” means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or
by such party (expressed as a positive number) in consideration of an
agreement between such party (taking into account any existing Credit Support
Document with respect to the obligations of such party) and the quoting
Reference Market-maker to enter into a transaction (the “Replacement
Transaction”) that would have the effect of preserving for such party the
economic equivalent of any payment or delivery (whether the underlying
obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in
respect of such Terminated Transaction or group of Terminated Transactions
that would, but for the occurrence of the relevant Early Termination Date,
have

					
	 	 	 	 	 
	 
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been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of each applicable condition precedent) after that Early Termination Date is
to be included. The Replacement Transaction would be subject to such
documentation as such party and the Reference Market-maker may, in good faith,
agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably
practicable as of the same day and time (without regard to different time
zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good Faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if
more than one quotation has the same highest value or lowest value, then one
of such quotations shall be disregarded. If fewer than three quotations are
provided, it will be deemed that the Market Quotation in respect of such
Terminated Transaction or group of Terminated Transactions cannot be
determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head
or home office.

“Potential Event of Default” means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market,
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or
imposed on, such payer.

“Settlement Amount” means, with respect to a party and any Early Termination
Date, the sum of: —

(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and

(b) such party’s Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not
(in the reasonable belief of the party making the determination) produce a
commercially reasonable result.

“Specified Entity” has the meanings specified in the Schedule.

					
	 	 	 	 	 
	 
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“Specified Indebtedness” means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter
entered into between one party to this Agreement (or any Credit Support
Provider of such party or any applicable Specified Entity of such party) and
the other party to this Agreement (or any Credit Support Provider of such
other party or any applicable Specified Entity of such other party) which is a
rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions),
(b) any combination of these transactions and (c) any other transaction
identified as a Specified Transaction in this Agreement or the relevant
confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment
or fee of any nature (including interest, penalties and additions thereto)
that is imposed by any government or other taxing authority in respect of any
payment under this Agreement other than a stamp, registration, documentation
or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

“Terminated Transactions” means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if “Automatic Early Termination” applies,
immediately before that Early Termination Date).

“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated
in the Termination Currency, such Termination Currency amount and, in respect
of any amount denominated in a currency other than the Termination Currency
(the “Other Currency”), the amount in the Termination Currency determined by
the party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or,
if the relevant Market Quotation or Loss (as the case may be), is determined
as of a later date, that later date, with the Termination Currency at the rate
equal to the spot exchange rate of the foreign exchange agent (selected as
provided below) for the purchase of such Other Currency with the Termination
Currency at or about 11:00 a.m. (in the city in which such foreign exchange
agent is located) on such date as would be customary for the determination of
such a rate for the purchase of such Other Currency for value on the relevant
Early Termination Date or that later date. The foreign exchange agent will, if
only one party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by the
parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon
Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early
Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become
payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or
prior to such Early Termination Date and which remain unpaid as at such Early
Termination Date and (b) in respect of each Terminated Transaction, for each
obligation under Section 2(a)(i) which was (or would have been but for Section
2(a)(iii)) required to be settled by delivery to such party on or prior to
such Early Termination Date and which has not been so settled as at such Early
Termination Date, an amount equal to the fair market

					
	 	 	 	 	 
	 
	 	17
	 	ISDA® 1992

 

 

value of that which was (or would have been) required to be delivered as of
the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding)
such Early Termination Date, at the Applicable Rate. Such amounts of interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed. The fair market value of any obligation referred to in clause
(b) above shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it shall be
the average of the Termination Currency Equivalents of the fair market values
reasonably determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below
with effect from the date specified on the first page of this document.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	BNP PARIBAS
	 	 	 	TETON ENERGY CORPORATION

	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	(Name of Party)
	 	 	 	(Name of Party)

	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Christopher Taylor

	 	 	 	By:
	 	/s/ Bill I. Pennington
	 

	 	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Christopher Taylor
	 	 	 	 	 	Name:
	 	Bill I. Pennington
	 

	 	Title:
	 	Vice President/Derivatives Credit
	 	 	 	 	 	Title:
	 	Executive Vice President/CFO
	 

	 	Date:
	 	10-30-06
	 	 	 	 	 	Date:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	/s/ Dora Sung

	 	 	 	
	 	 
	

	 	Dora Sung

	 	 	 	
	 	 
	

	 	Managing Director

	 	 	 	
	 	 
	

	 	BNP Paribas / CIT Group

	 	 	 	
	 	
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	/s/ K. F. Arleth

	 	 	 	
	 	 
	

	 	K. F. Arleth

	 	 	 	
	 	 
	

	 	Pres. & CEO	 	 	 	
	 	 
	

	 	Teton Energy	 	 	 	
	 	

Copyright
© 1992 by International Swap Dealers Association, Inc.

 

 

			
	(Bilateral Form)
	 	(ISDA Agreements Subject to New York Law Only)

International Swaps and Derivatives Association, Inc.

CREDIT SUPPORT ANNEX

to the Schedule to the

ISDA MASTER AGREEMENT

dated as of October 24, 2006

between

	 	 	 	 	 
	BNP PARIBAS
	 	 	 	TETON ENERGY CORPORATION
	 

	 	and
	 	 

	(“Party A”)
	 	 	 	(“Party B”)

This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part
of its Schedule and is a Credit Support Document under this Agreement with respect to each party.

Accordingly, the parties agree as follows:

Paragraph 1. Interpretation

(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in
this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this
Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this
Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any
inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will
prevail.

(b) Secured Party and Pledgor. All references in this Annex to the “Secured Party” will be to
either party when acting in that capacity and all corresponding references to the “Pledgor” will be
to the other party when acting in that capacity; provided,
however, that if Other Posted Support is
held by a party to this Annex, all references herein to that party as the Secured Party with
respect to that Other Posted Support will be to that party as the beneficiary thereof and will not
subject that support or that party as the beneficiary thereof to provisions of law generally
relating to security interests and secured parties.

Paragraph 2. Security Interest

Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security
for its Obligations, and grants to the Secured Party a first priority continuing security interest
in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the
Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted
Collateral, the security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further
action by either party.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

1

 

Paragraph 3. Credit Support Obligations

(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or
promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or
exceeds the Pledgor’s Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party
Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
“Delivery Amount” applicable to the Pledgor for any Valuation Date will equal the amount by which:

(i) the Credit Support Amount exceeds

(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.

(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds Secured
Party’s Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit
Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close
as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise
specified in Paragraph 13, the “Return Amount” applicable to the Secured Party for any Valuation
Date will equal the amount by which:

(i) the
Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds

(ii) the Credit Support Amount.

“Credit Support Amount” means, unless otherwise specified in Paragraph 13, for any Valuation Date
(i) the Secured Party’s Exposure for that Valuation Date plus (ii) the aggregate of all
Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts
applicable to the Secured Party, if any, minus (iv) the
Pledgor’s Threshold; provided, however,
that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.

Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and substitutions

(a) Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of
the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent
that:

(i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is
continuing with respect to the other party; and;

(ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or
been designated as the result of an Event of Default or Specified Condition with respect to the
other party.

(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand
for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification
Time, then the relevant Transfer will be made not later than the close of business on the next
Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer
will be made not later than the close of business on the second Local Business Day thereafter.

(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will
be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party
(or the other party, if the Valuation Agent is a party) of its calculations not later than the
Notification Time on the Local Business Day following
the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of
calculation).

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

2

 

(d) Substitutions.

(i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the
items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day,
Transfer to the Secured Party substitute Eligible Credit Support (the “Substitute Credit Support”);
and

(ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted
Credit Support specified by the Pledgor in its notice not later than the Local Business Day
following the date on which the Secured Party receives the Substitute
Credit Support, unless otherwise specified in Paragraph 13 (the
“Substitution Date”); provided that
the Secured Party will only be obligated to Transfer Posted Credit
Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as
of that date of the Substitute Credit Support.

Paragraph 5. Dispute Resolution

If a party (a “Disputing Party”) disputes (I) the Valuation Agent’s calculation of a Delivery
Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted
Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent
(if the Valuation Agent is not the other party) not later than the close of business on the Local
Business Day following (X) the date that the demand is made under Paragraph 3 in case of (I) above
or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the
appropriate party will Transfer the undisputed amount to the other party not later than the close
of business on the Local Business Day following (X) the date that the demand is made under
Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the
parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to
resolve the dispute by the Resolution Time, then:

(i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise
specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of
the Recalculation Date by:

(A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the
parties have agreed are not in dispute;

(B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking
four actual quotations at mid-market from Reference Market-makers for purposes of calculating
Market Quotation, and taking the arithmetic average of those obtained; provided that if four
quotations are not available for a particular Transaction (or Swap Transaction), then fewer than
four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are
available for a particular Transaction (or Swap Transaction), then the Valuation Agent’s original
calculations will be used for that Transaction (or Swap Transaction);
and

(C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of
Posted Credit Support.

(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or
Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer
pursuant to Paragraph 13.

Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each
party (or the other party, if the Valuation Agent is a party) not later than the Notification Time
on the Local Business Day following the Resolution Time. The appropriate party will, upon demand
following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

3

 

Paragraph 6. Holding and Using Posted Collateral

(a) Care of Posted Collateral. Without limiting the Secured Party’s rights under Paragraph 6(c),
the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral
to the extent required by applicable law, and in any event the Secured Party will be deemed to have
exercised reasonable care if it exercises at least the same degree of care as it would exercise
with respect to its own property. Except as specified in the preceding sentence, the Secured Party
will have no duty with respect to Posted Collateral, including, without limitation, any duty to
collect any Distributions, or enforce or preserve any rights pertaining thereto.

(b) Eligibility to Hold Posted Collateral; Custodians.

(i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding
Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an
agent (a “Custodian”) to hold Posted Collateral for the Secured Party. Upon notice by the Secured
Party to the Pledgor of the appointment of a Custodian, the Pledgor’s
obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The
holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted
Collateral by the Secured Party for which the Custodian is acting.

(ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy
conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party
will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to
Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the
Secured Party if it satisfies those conditions.

(iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the
same extent that the Secured Party would be liable hereunder for its own acts or omissions.

(c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the
rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured
Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no
Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the Secured Party, then
the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have
the right to:

(i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or
otherwise use in its business any Posted Collateral it holds, free from any claim or right of any
nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and

(ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee
for either.

For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit
Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement,
the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the
Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii)
above.

(d) Distributions and Interest Amount.

(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following
Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery
Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent
(and the date of calculation will be deemed to be a Valuation Date for this purpose).

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

4

 

(ii) Interest Amount. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in
lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to
Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the
Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest
Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as
calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation
Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this
Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security
interest granted under Paragraph 2.

Paragraph 7. Events of Default

For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect
to a party if:

(i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible
Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and
that failure continues for two Local Business Days after notice of that failure is given to that
party;

(ii) that party fails to comply with any restriction or prohibition specified in this Annex with
respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local
Business Days after notice of that failure is given to that party; or

(iii) that party fails to comply with or perform any agreement or obligation other than those
specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that
failure is given to that party.

Paragraph 8. Certain Rights and Remedies

(a) Secured Party’s Rights and Remedies. If at any time (1) an Event of Default or Specified
Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination
Date has occurred or been designated as the result of an Event of Default or Specified Condition
with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights and remedies:

(i) all rights and remedies available to a secured party under applicable law with respect to
Posted Collateral held by the Secured Party;

(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support, if any;

(iii) the right to Set-off any amounts payable by the Pledgor with respect to any
Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by
the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and

(iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more
public or private sales or other dispositions with such notice, if any, as may be required under
applicable law, free from any claim or right of any nature whatsoever of
the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party
having the right to purchase any or all of the Posted Collateral to be sold) and
to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted
Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as
the Secured Party may elect.

Each party acknowledges and agrees that Posted Collateral in the form
of securities may decline speedily in value and is of a type customarily sold on a recognized
market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted
Collateral by the Secured Party, except any notice that is required under applicable law and cannot
be waived.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

5

 

(b) Pledgor’s Rights and Remedies. If at any time an Early Termination Date has occurred or been
designated as the result of an Event of Default or Specified Condition with respect to the Secured
Party, then (except in the case of an Early Termination Date relating to less than all transactions
(or Swap Transactions) where the Secured Party has paid in full all of its obligations that are
then due under Section 6(e) of this Agreement):

(i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law
with respect to Posted Collateral held by the Secured Party;

(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the
terms of Other Posted Support, if any;

(iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the
Interest Amount to the Pledgor; and

(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to
(iii) above, the Pledgor may:

(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted
Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any
obligation of the Secured Party to Transfer that Posted Collateral); and

(B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any
remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any
remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred
to the Pledgor.

(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds
and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs
8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any
Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).

(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect
to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the
Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if
any.

Paragraph 9. Representations

Each party represents to the other party (which representation will be deemed to be repeated as of
each date on which it, as the Pledgor, Transfers Eligible Collateral) that:

(i) it has the power to grant a security interest in and lien on any Eligible Collateral it
Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that
security interest and lien;

(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it
Transfers to the Secured Party hereunder, free and clear of any security interest, lien,
encumbrance or other restrictions other than the security interest and lien granted under Paragraph
2;

(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this
Annex, the Secured Party will have a valid and perfected first priority security interest therein
(assuming that any central clearing corporation or any third-party financial intermediary or other
entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral
gives the notices and takes the action required of it
under applicable law for perfection of that interest); and

(iv) the performance by it of its obligations under this Annex will not result in the creation of
any security interest, lien or other encumbrance on any Posted Collateral other than the security
interest and lien granted under Paragraph 2.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

6

 

Paragraph 10. Expenses

(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its
own costs and expenses in connection with performing its obligations under this Annex and neither
party will be liable for any costs and expenses incurred by the other party in connection herewith.

(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges
of any nature that are imposed with respect to Posted Credit support held by the Secured Party upon
becoming aware of the same, regardless of whether any portion of that Posted Credit Support is
subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that
result from the exercise of the Secured Party’s rights under Paragraph 6(c).

(c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by
or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or
application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant
to the Expenses Section of this Agreement, by the
Defaulting Party or, if there is no Defaulting Party, equally by the parties.

Paragraph 11. Miscellaneous

(a) Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted
Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under
applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the
items of property that were required to be Transferred, from (and including) the date that the
Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of
Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.

(b) Further Assurances. Promptly following a demand made by a party, the other party will execute,
deliver, file and record any financing statement, specific assignment or other document and take
any other action that may be necessary or desirable and reasonably requested by that party to
create, preserve, perfect or validate any security
interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights
under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or
document a release of a security interest on Posted Collateral or an Interest Amount.

(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend
against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by
the Pledgor or that could adversely affect the security interest and lien granted by it under
Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured
Party’s rights under Paragraph 6(c).

(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including, but not limited to, all calculations, valuations and determinations made by either
party, will be made in good faith and in a commercially reasonable manner.

(e) Demands
and Notices. All demands and notices made by a party under this Annex will be made as
specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13.

(f) Specifications of Certain Matters. Anything referred to in this Annex as being specified in
Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex
will be construed accordingly.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

7

 

Paragraph 12. Definitions

As used in this Annex:

“Cash” means the lawful currency of the United States of America.

“Credit Support Amount” has the meaning specified in Paragraph 3.

“Custodian” has the meaning specified in Paragraphs 6(b)(i) and 13.

“Delivery Amount” has the meaning specified in Paragraph 3(a).

“Disputing Party” has the meaning specified in Paragraph 5.

“Distributions” means with, respect to Posted Collateral other than Cash, all principal, interest
and other payments and distributions of cash or other property with respect thereto, regardless of
whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c).
Distributions will not include any item of property acquired by the Secured Party upon any
disposition or liquidation of Posted Collateral, or, with respect to any Posted Collateral in the
form of Cash, any distributions on that collateral, unless otherwise specified herein.

“Eligible
Collateral” means with, respect to a party, the items, if any, specified as such for that
party in Paragraph 13.

“Eligible Credit Support” means Eligible Collateral and Other Eligible Support.

“Exposure” means for any Valuation Date or other date for which Exposure is calculated and subject
to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that
is the Secured Party by the other party (expressed as a positive number) or by a party that is the
Secured Party to the other party (expressed as a negative
number) pursuant to Section 6(e)(ii)(2)(A) of this
Agreement as if ail Transactions (or Swap
Transactions) were being terminated as of the relevant Valuation
Time; provided that Market
Quotation will be determined by the. Valuation Agent using its estimates at mid-market of the
amounts that would be paid for Replacement Transactions (as that term is defined in the definition
of “Market Quotation”).

“Independent
Amount” means, with respect to party, the amount
specified as such far that party in
Paragraph 13; if no amount is specified, zero.

“Interest Amount” means, with respect to an interest Period, the aggregate sum of the amounts of
interest calculated for each day in that interest. Period on the
principal amount of Pasted
Collateral. iii in the form of Cash held by the Secured Party on:
that day; determined by the Secured
Party for each such day, as follows:

(x) the
amount of that Cash on that day; multiplied by

(y) the
Interest Rate in effect for, that day;
divided by

(z) 360.

“Interest Period” means the period from (and including) the last Local Business Day on which an
Interest Amount was Transferred (or, if no Interest Amount has yet
been. Transferred, the Local
Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the
Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to
be Transferred.

“Interest Rate” means the rate specified in Paragraph 13.

“Local
Business Day”, unless otherwise specified in
Paragraph 1.3, has the meaning specified in the
Definitions Section of this Agreement, except that references to a payment in clause (b) thereof
wall be deemed to include a Transfer under this Annex.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

8

 

“Minimum Transfer Amount” means, with respect to a party, the amount specified as such for that
party in Paragraph 13; if no amount is specified, zero.

“Notification Time” has the meaning specified in Paragraph 13.

“Obligations”
means, with respect to a party, all, present and future obligations of that party
under this Agreement and any additional obligations specified for that party in Paragraph 13.

“Other Eligible Support” means, with respect to a party, the items, if any, specified as such for
that party in Paragraph 13.

“Other Posted Support” means all Other Eligible Support Transferred to the Secured Party that
remains in effect for the benefit of that Secured Party.

“Pledgor” means either party, when that party (i) receives a demand for or is required to Transfer
Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under
Paragraph 3(a).

“Posted Collateral” means all Eligible Collateral, other property, Distributions, and all proceeds
thereof that have been Transferred to or received by the Secured Party under this Annex and not
Transferred to the Pledgor pursuant to Paragraph 3(h), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to
Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash.

“Posted Credit Support” means Posted Collateral and Other Posted Support.

“Recalculation Date” means the Valuation Date that gives rise to the dispute under Paragraph 5;
provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the
resolution of the dispute, then the “Recalculation Date” means the most recent Valuation Date under
Paragraph 3.

“Resolution Time” has the meaning specified in Paragraph 13.

“Return
Amount” has the meaning specified: in Paragraph 3(b).

“Secured Party” means either party, when that party (i) makes a demand for or is entitled to
receive Eligible Credit Support under Paragraph 3(a) or
(ii) hobs or is deemed to hold Posted
Credit Support.

“Specified
Condition” means, with respect to a party, any event specified as: such for that party in
Paragraph 13.

“Substitute Credit Support” has the meaning specified in Paragraph 4(d)(i).

“Substitution
Date” has the meaning specified in Paragraph 4(d)(ii):

“Threshold” means, with respect to a party, the amount specified as such for that party in
Paragraph 13; if no amount is specified, zero.

“Transfer” means, with respect to any Eligible Credit Support, Posted Credit Support or Interest
Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as
applicable:

(i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts
specified by the recipient;

(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment
or delivery in appropriate physical form: to the recipient or its account accompanied by any duly
executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents
necessary to constitute a legally valid transfer to the recipient;

(iii) in the case of securities that can be paid or delivered in book-entry, the giving of written
instructions to the relevant depository institution or other entity specified by the recipient,
together with a written copy thereof to the recipient, sufficient if complied with to result in a
legally effective transfer of the relevant interest to the recipient; and

(iv) in
the case of Other Eligible Support or Other Pasted Support, as specified in Paragraph 13.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

9

 

“Valuation Agent” has the meaning specified in Paragraph 13.

“Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 13.

“Valuation Percentage” means, for any item of Eligible Collateral, the percentage specified in
Paragraph 13.

“Valuation Time” has the meaning specified in Paragraph 13.

“Value” means for any Valuation Date or other date for which Value is calculated and subject to
Paragraph 5 in the case of a dispute, with respect to:

(i) Eligible Collateral or Posted Collateral that is:

(A) Cash, the amount thereof; and

(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage, if any;

(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero;
and

(iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

10

 

Execution

PARTY A: BNP PARIBAS — SECURED PARTY

PARTY B: TETON ENERGY CORPORATION — PLEDGOR

PARAGRAPH 13. ELECTION AND VARIABLES

	(a)	 	Security Interest for “Obligations.” The term “Obligations” as used in this Annex includes
the following additional obligations of the Pledgor: None.
	 
	(b)	 	Credit Support Obligations.
	 
	(i)	 	Delivery Amount, Return Amount and Credit Support Amount

(A) “Delivery Amount” has the meaning specified in Paragraph 3(a).

(B) “Return Amount” has the meaning specified in Paragraph 3(b).

(C) “Credit Support Amount” will mean the higher of: (i) the amount calculated as
provided in the definition of that term in Paragraph 3 and (ii) the sum of the
Pledgor’s Independent Amounts.

	(ii)	 	Eligible Collateral. The following items will qualify as “Eligible Collateral” for the
party specified:

	 	 	 	 	 	 	 
	 	 	 	 	Valuation
	 	 	Pledgor	 	Percentage
	Cash

	 	þ
	 	 	100	%

	(iii)	 	Other Eligible Support. The following items will qualify as “Other Eligible Support”:
Not Applicable
	 
	(iv)	 	Thresholds.

	 	(A)	 	“Independent Amount” for the Pledgor means, None.
	 
	 	(B)	 	“Threshold” for the Pledgor means zero.
	 
	 	(C)	 	“Minimum Transfer Amount” with respect to transfer of Eligible Credit
Support by the Secured Party and the Pledgor means USD 100,000 (One Hundred
Thousand US Dollar); provided however, the Minimum Transfer Amount with respect to
the Pledgor and Secured Party shall be zero if an Event of Default or Termination
Event has occurred or is continuing.
	 
	 	(D)	 	Rounding. The Delivery Amount and the Return Amount will be rounded up
and down to the nearest integral multiple of USD10,000 (Ten Thousand US Dollars)
respectively; provided however, the Delivery Amount and Return Amount shall be $1
if an Event of Default or Termination Event has occurred or is continuing.

	(c)	 	Valuation and Timing.

(i) “Valuation Agent” means the Secured Party.

11

 

Execution

(ii) “Valuation Date means each day designated as such by the Secured Party or the Pledgor
by notice to the other party. To enable the Secured Party to make the calculations required
in connection with a Valuation Date on that date, notice from the Pledgor designating a
Valuation Date shall be given no later than 3:00 p.m., local time for the Valuation Agent,
on the Local Business Day before that Valuation Date in the city of the Valuation Agent.

(iii) “Valuation Time” means:

o the close of business in the city of the Valuation Agent on the Valuation Date or
date of calculation, as applicable;

þ the close of business in the city of the Valuation Agent on the Local Business Day in
that city before the Valuation Date or date of calculation, as applicable; provided
that the calculations of Value and Exposure will be made as of approximately the same time
on the same date.

(iv) “Notification Time” means 12:00 p.m., New York time, on a Local Business Day.

(v) “Transfer Timing and Calculations. Paragraphs 4(b) and 4(c) are hereby amended and
restated in their entirety as set forth below.

(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified,
if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is
made by the Notification Time, then the relevant Transfer will be made not later than
the close of business on the Valuation Date; if a demand is made after the Notification
Time, then the relevant Transfer will be made not later than the close of business on
the next Local Business Day thereafter.

(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3
and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation
Agent will notify each party (or the other party, if the Valuation Agent is a party) of
its calculations not later than the Notification Time on the applicable Valuation Date
(or in the case of Paragraph 6(d), the Local Business Day).”

	(d)	 	Conditions Precedent and Secured Party’s Rights and Remedies. The following Termination
Event(s) will be “Specified Conditions” for the Pledgor:

	 	 	 	 	 
	Illegality
	 	 	þ	 
	Tax Event
	 	 	o	 
	Tax Event Upon Merger
	 	 	o	 
	Credit Event Upon Merger
	 	 	þ	 
	Additional Termination Event(s)
	 	 	þ	 

	(e)	 	Substitution.

(i) “Substitution Date” has the meaning specified in Paragraph 4(d)(ii), unless otherwise
specified here: One Local Business Day for the Secured Party after the day specified in
Paragraph
4(d)(ii).

(ii) Consent. If specified here as applicable, then the Pledgor must obtain the Secured
Party’s consent for any substitution pursuant to Paragraph 4(d): not applicable.

12

 

Execution

	(f)	 	Dispute Resolution.

(i) “Resolution Time” means 1:00 p.m., New York time, on the Local Business Day following
the date on which the notice is given that gives rise to a dispute under Paragraph 5, unless
otherwise specified here: “Resolution Time” means 11:00 a.m., New York City time, on the
Local Business Day for both parties following the date the Pledgor gives notice of a dispute
pursuant to Paragraph 5.

(ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit
Support will be calculated as follows: for Cash, the U.S. dollar value thereof.

(iii) Alternative. The provisions of Paragraph 5 will apply, unless an alternative
dispute resolution procedure is specified here: not applicable.

	(g)	 	Holding and Using Posted Collateral.

	 	(i) Eligibility to Hold Posted Collateral; Custodians. The Secured Party will be
entitled to hold Posted Collateral pursuant to Paragraph 6(b), provided that the
Secured Party is not a Defaulting Party.
	 
	 	(ii)
Use of Posted Collateral. The provisions of Paragraphs 6(c)(i)
will apply.

	 
	(h)	 	Distributions and Interest Amount.

	 
	 	(i)   Interest Rate. The “Interest Rate” for each New York Banking Day means the opening
rate for overnight Federal Funds in effect for such day as reported on Bloomberg, and for
each other day, such rate on the next preceding New York Banking
Day.
	 
	 	(ii)  Transfer of Interest Amount. The Transfer of the Interest Amount will be made on the
last Local Business Day of each calendar month and on any Local Business Day that Posted
Collateral in the form of Cash is Transferred to the Pledgor pursuant
to Paragraph 3(b).
	 
	 	(iii) Alternative to Interest Amount. The provisions of Paragraph 6(d)(ii) will apply.

	 
	 	(iv) “Interest Amount” means with respect to an Interest Period, the aggregate sum of the
amounts of interest calculated for each day in that Interest Period on the principal amount
of Posted Collateral in the form of Cash held by the Secured Party on that day (but for
these purposes, Posted Collateral will exclude any amount of interest calculated for any day
within the relevant Interest Period not due to be transferred pursuant to Paragraph 6(d)(ii)
and (h)(ii) hereof), determined by the Secured Party for each such
day as follows:
	 
	 	(x)  
the amount of Cash on that day; multiplied by

	 	(y)  the Interest Rate in effect for that day; divided by
	 	(z)  360
	 
	 	Additional Representation(s): Not Applicable

	(j)	 	Other Eligible Support and Other Posted Support: Not Applicable.
	 
	(k)	 	Demands and Notices.

All demands, specifications and notices made under this Annex with respect to commodity
transactions, will be made pursuant to the Notices Section of this Agreement, unless otherwise
specified here:

13

 

Execution

the Secured Party:

BNP Paribas

787 Seventh Avenue, 3rd floor

New York, New York 10019

Attention: Collateral Management Group

Facsimile No.: (212)471-8038

Telephone: (212)841-2878

(For all purposes with a copy to the address specified in each Confirmation to which the notice
relates.)

All demands, specifications and notices made under this Annex with respect to all other
transactions for the Secured Party, will be made pursuant to the Notices Section of this Agreement.

the Pledgor:

Teton Energy Corporation

Address: 410 17th St., Suite 1850, Denver, CO 80202

Attention: Bill I. Pennington, Executive VP and CFO

Facsimilie No: 303-565-4606 Tel. No. 303-565-4600

	(1)	 	Address for Transfers.

With respect to commodity transactions, for Party A: as specified by notice.

With respect to the Pledgor: as specified by notice.

	(m)	 	Other Provisions.

(i) Definition of Secured Party and Pledgor, the Secured Party and the Pledgor agree that,
notwithstanding anything to the contrary in the recital to this Annex, Paragraph 1(b),
Paragraph 2 and the definitions in Paragraph 12, (A) this Annex is a Credit Support Document
only with respect to Teton Energy Corporation (B) as used in this Annex, “Secured Party”
always means BNP Paribas and “Pledgor” always means Teton Energy Corporation, (C) only the
Pledgor will be required to make Transfers of Eligible Credit Support hereunder and (D) only
the Pledgor makes the pledge and grant in Paragraph 2, the acknowledgment in the final
sentence of Paragraph 8(a) and the representations in Paragraph 9.

(ii) Valuation Agent’s City. For all purposes of this Annex, references to the Valuation
Agent’s city will be understood as references to New York City.

(iii) Certain Distributions Received. If a Secured Party receives or is deemed to receive
Distributions on a day that is not a Local Business Day, or after its close of business on a
Local Business Day, it will Transfer the Distributions to the Pledgor on the second
following Local Business Day, subject to Paragraph 4(a), but only to the extent contemplated
in Paragraph 6(d)(i) in connection with Distributions received or deemed received on a Local
Business Day.

(iv) Taxes in Connection with Interest Amounts. Notwithstanding anything to the contrary in
this Agreement, the Secured Party does not make any Payer Tax Representation referred to in
Section 3(e) of this Agreement with respect to any Interest Amount it is required to
Transfer under this Annex, the Secured Party shall have no obligation to pay additional
amounts in respect of Indemnifiable Taxes imposed with respect to any such Interest Amount,
and payment to the Pledgor of any such Interest Amount reduced by Taxes shall not constitute
a Tax Event.

14

 

Execution

(v) Failure to Transfer. Paragraph 7(i) of this Annex is hereby modified to apply to
failures to Transfer Other Eligible Support, as well as the items listed therein.

IN WITNESS WHEREOF, the parties have executed this document on the respective dates specified below
with effect from the date specified on the first page of this document.

	 	 	 	 	 	 	 	 	 	 	 
	BNP PARIBAS	 	 	 	TETON ENERGY CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Christopher Taylor
 

	 	 	 	By:
	 	/s/ Karl F. Arleth
 

	 	 
	Name:

	 	Christopher Taylor
	 	 	 	Name:
	 	Karl F. Arleth	 	 
	Title:

	 	Vice President/Derivatives Credit
	 	 	 	Title:
	 	Chief Executive Officer & President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Dora Sung
	 	 	 	By:
	 	/s/ Bill I. Pennington	 	 
	Name:

	 	DORA SUNG
	 	 	 	Name:
	 	Bill I. Pennington	 	 
	Title:

	 	MANAGING DIRECTOR
BNP Paribas/ CIT Group
	 	 	 	Title:
	 	CFO & Executive Vice President	 	 

15

 

Execution

SCHEDULE

to the

Master Agreement

dated as of October 24, 2006

between

BNP PARIBAS, a bank organized under the laws of France (“Party A”)

and

TETON ENERGY CORPORATION, a corporation organized under the laws of Delaware

(“Party B”)

PART I

TERMINATION PROVISIONS

	(a)	 	“Specified Entity”:

	 	(i)	 	means, in relation to Party A, for the purpose of:

	 	 	 	 	 	 	 
	 	Section 5(a)(v), Default under Specified Transaction
	 	None	 
	 	Section 5(a)(vi), Cross Default
	 	None	 
	 	Section 5(a)(vii), Bankruptcy
	 	None	 
	 	Section 5(b)(iv), Credit Event Upon Merger
	 	None	 

	 	(ii)	 	means, in relation to Party B, for purposes of:

	 	 	 	 	 
	 	Section 5(a)(v), Default under Specified Transaction
	 	None	 
	 	Section 5(a)(vi), Cross Default
	 	Its Affiliates	 
	 	Section 5(a)(vii), Bankruptcy
	 	None	 
	 	Section 5(b)(iv), Credit Event Upon Merger
	 	Its Affiliates	 

	(b)	 	“Specified Transaction” will have the meaning specified below:
	 
		 	(a) any transaction (including an agreement with respect to any such transaction) now existing
or hereafter entered into between one party to this Agreement (or any Credit Support Provider
of such party or any applicable Specified Entity of such party) and the other party to this
Agreement (or any Credit Support Provider of such other party or any applicable Specified
Entity of such other party) which is not a Transaction under this Agreement but (i) which is a
rate swap transaction, swap option, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction, currency option,
credit protection transaction, credit swap, credit default swap, credit default option, total
return swap, credit spread transaction, repurchase transaction, reverse repurchase
transaction, buy/sell-back transaction, securities lending transaction, weather index
transaction or forward purchase or sale of a security, commodity or other financial instrument
or interest (including any option with respect to any of these transactions) or (ii) which is
a type of transaction that is similar to any transaction referred to in clause (i) above that
is currently, or in the future becomes, recurrently entered into in the financial markets
(including terms and conditions incorporated by reference in such agreement) and which is a
forward, swap, future, option or other derivative on one or more rates, currencies,
commodities, equity securities or other equity instruments, debt securities or other debt
instruments, or economic indices or measures of

 

Execution

	 	 	economic risk or value, or other benchmarks against which payments or deliveries are
to be made, (b) any combination of these transactions and (c) any other transaction
identified as a Specified Transaction in this Agreement or the relevant confirmation.
	 
	(c)	 	The “Cross Default” provisions of Section 5(a)(vi) will apply to Party A and will
apply to Party B.
	 
	 	 	If such provisions apply:-
	 
	 	 	“Specified Indebtedness” will have the meaning specified in Section 14 of this Agreement
but will exclude deposits received by a party in the ordinary course of its banking
business.
	 
	 	 	Section 5 (a) (vi) (2) shall be modified by appending the following at the end thereof:
	 
	 	 	“provided, however, that an Event of Default under Section 5(a)(vi)(2) shall not
occur if: (i) the relevant default in making payment was caused by an error or
omission of a technical, administrative or operational nature; (ii) funds were
available to such party to enable it to make the relevant payment when due; and (iii)
such relevant payment is made within three business days for value (with interest) on
the original due date of payment, following receipt of written notice from an
interested party of such failure to pay.”
	 
	 	 	“Threshold Amount” means with respect to Party A three per cent (3%) of Party A’s
shareholders equity (as stated in the most recently published annual accounts of Party A) (or
the equivalent thereof in any other currency or currencies) and with respect to Party B USD
500,000 (Five Hundred Thousand US Dollars) (or the equivalent thereof in any other currency
or currencies).
	 
	(d)	 	The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will apply to Party A and will
apply to Party B.
	 
	(e)	 	The “Automatic Early Termination” provision of Section 6(a) will not apply to either party.
	 
	(f)	 	Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement:-

	 	(i)	 	Loss will apply.
	 
	 	(ii)	 	The Second Method will apply.

	(g)	 	“Termination Currency” means United States Dollars.
	 
	(h)	 	“Additional Termination Event” will apply. The following shall constitute an
Additional Termination Event with Party B as the Affected Party. All Transactions
shall be Affected Transactions and Party A shall, at its option, designate an Early
Termination Date:
	 
		 	(i) Breach of Covenants and/or Events of Default in the Credit Agreement. If, at anytime,
Party B breaches any “Covenants” or there occurs an “Event of Default” (as defined in the
Credit Agreement) in the Credit Agreement.
	 
	 	 	As used herein and throughout this Agreement, “Credit Agreement” means that certain Credit
Agreement dated as of June 15, 2006, by and among Teton Energy Corporation, as Borrower; BNP
Paribas, as Administrative Agent; and each other Financial Institutions listed or named
therein including but not limited to BNP Paribas, as Bank or Lender and all documents
defined as or referred to as security, collateral or guaranty therein, such may from time to
time be amended, modified or supplemented.

 

 

Execution

PART 2

TAX REPRESENTATIONS

	(a)	 	Payer Representations, For the purpose of Section 3(e) of this Agreement, Party A will make
the following representation and Party B will make the following representation:-
	 
	 	 	It is not required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest under Section
2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this
Agreement. In making this representation, it may rely on:-

	 	(i)	 	the accuracy of any representations made by the other party pursuant to Section
3(f) of this Agreement;
	 
	 	(ii)	 	the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of
this Agreement and the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and
	 
	 	(iii)	 	the satisfaction of the agreement of the other party contained in Section 4(d)
of this Agreement,

provided that it shall not be a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii)
by reason of material prejudice to its legal or commercial position.

	(b)	 	Party A Payee Tax Representations. For the purpose of Section 3(f), Party A makes
the following representations:

(i) with respect to payments that are attributable to Party A’s U.S. trade or
business:

It is a bank organized under the laws of France, acting hereunder through its New
York branch, and any payment received by it in connection with any Transaction
entered into hereunder will be effectively connected with its conduct of a trade or
business in the United States.

(ii) with respect to payments that are not attributable to Party A’s U.S. trade or
business:

It is fully eligible for the benefits of the “Business Profits” or
“Industrial and Commercial Profits” provision, as the case may be, the
“Interest” provision or the “Other Income” provision (if any) of the
Specified Treaty with respect to any payment described in such provisions
and received or to be received by it in connection with this Agreement.

“Specified Treaty” means with respect to Party A: the tax treaty for the avoidance
of double taxation and the prevention of fiscal evasion with respect to taxes on
income, if any, between the Government of France and the Government of the country
from which payments can be made by Party B.

	(c)	 	Party B Payee Tax Representations. For the purpose of Section 3(f), Party B makes
the following representation:
	 
		 	(i) Teton Energy Corporation is an independent energy company engaged primarily in the
development, production, and marketing of natural gas and oil in
North America. Any payment received by it in connection with any Transaction entered into
hereunder will be effectively connected with its conduct of a trade or business in the
United States.

 

 

Execution

PART 3

AGREEMENT TO DELIVER DOCUMENTS

For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the
following documents, as applicable:-

	(a)	 	Tax forms, documents or certificates to be delivered are:-

	 	 	 	 	 
	Party required to	 	 	 	 
	Deliver	 	 	 	Date by which to
	Document	 	Form/Document/Certificate	 	be delivered
	Party A

	 	An executed United States
Internal Revenue Service
Form W-8BEN (or any
successor thereto) with
respect to any payments
received or to be
received by Party A that
are not effectively
connected or otherwise
attributable to Party A’s
conduct of a trade or
business in the United
States.

An
executed United States
Internal Revenue Service
Form W-8ECI (or any
successor thereto) with
respect to any payments
received or to be
received by Party A that
are effectively connected
or otherwise attributable
to Party A’s conduct of a
trade or business in the
United States.
	 	Upon execution of
this Agreement.
	 
	 	 	 	 
	Party B

	 	An executed United States
Internal Revenue Service
W-9 (or any successor
thereto), if applicable,
with respect to any
payments received or to
be received by Party B.
	 	Upon execution of
this Agreement, and
thereafter promptly
upon reasonable
demand by Party A
	 
	 	 	 	 
	PARTY A and PARTY B

	 	Any form, document or
certificate reasonably
requested by the other
party in order for such
other party to be able to
make payments hereunder
without withholding for
or on account of Taxes or
with such withholding at
a reduced rate.
	 	As soon as
practicable
following written
demand.

	(b)	 	Other documents to be delivered are:

 

 

Execution

	 	 	 	 	 	 	 
	Party required	 	 	 	Date by	 	Covered by
	to deliver	 	 	 	which to be	 	Section 3(d)
	document	 	Form / Document / Certificate	 	delivered	 	Representation
	Party A
and
Party B

	 	Such proof as Party A
and Party B
may reasonably
request of the names,
true signatures and
authority of persons
signing this
Agreement on its
behalf and any other
document referred to
herein to which it is
a party
	 	on signing
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	Certified copies of
all corporate
authorisations and
any other documents
with respect to the
execution, delivery
and performance of
this Agreement (and
any Credit Support
Document, if
applicable); together
with a certificate of
authority and
specimen signatures
of the persons
executing this
Agreement (and any
Credit Support
Document, if
applicable);
	 	On signing
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	A copy of Party B’s
(and any of its
Credit Support
Provider’s, if
applicable) most
recently available
annual report
containing audited
financial statements
for Party B’s, most
recently ended fiscal
year certified by its
(and its Credit
Support Provider’s,
if applicable),
independent public
accountants as fairly
presenting Party B’s
(and its Credit
Support Provider’s,
if applicable),
financial condition
and results of
operations for
and as at the
close of such fiscal
year.
	 	Promptly after

a request by

Party A
	 	Yes
	 
	 	 	 	 	 	 
	 

	 	With respect to Party
A’s annual report,
please access the
website:	 	 	 	 
	 

	 	www.bnpparibas.co
m.	 	 	 	 
	 
	 	 	 	 	 	 
	Party B

	 	A copy of Party B’s
(and any of its
Credit Support
Provider’s, if
applicable) most
recently
available
unaudited
financial statements
for Party B’s (and
its Credit Support
Provider’s, if
applicable) most
recently ended fiscal
quarter certified by
Party B’s (and its
Credit Support
Provider’s, if
applicable), chief
financial officer as
fairly presenting
Party B’s (and its
Credit Support
Provider’s, if
applicable),
financial condition
and results of
operations for and as
at the close of such
quarter;
	 	Promptly

after a

request by

Party A
	 	No

 

 

Execution

	 	 	 	 	 	 	 
	Party required	 	 	 	Date by	 	Covered by
	to deliver	 	 	 	which to be	 	Section 3(d)
	document	 	Form / Document / Certificate	 	delivered	 	Representation
	Party B

	 	Each regular
financial and/or
business reporting
document that is
distributed or is
generally available
to Party B’s (and its
Credit Support
Provider’s, if
applicable),
partners,
shareholders,
creditors or
investors or is filed
with any regulatory
authorities and is
publicly available or
relates to Party B’s
(and its Credit
Support Provider’s,
if applicable),
financial condition;
	 	Promptly after a

request by Party A
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	Such other
information
respecting
Party B’s (and
its Credit
Support
Provider’s, if
applicable),
condition or
operations,
financial or
otherwise, as Party A
may reasonably
request from time to
time;
	 	promptly

after a

request by

Party A
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	Written notification
of appointment
of Party B
(and/or its Credit
Support
Provider’s, if
applicable)
Process
Agent and
evidence of the
acceptance
of such
appointment by the
Process Agent[s];
	 	upon
execution
and
delivery of
this
Agreement
	 	No
	 
	 	 	 	 	 	 
	Party B

	 	The Credit Support
Document duly
executed by
Party B or its
Credit
Support
Provider.
	 	upon
execution
and
delivery of
this
Agreement
	 	Yes

PART 4

MISCELLANEOUS

	(a)	 	Addresses for Notices. For the purpose of Section 12(a) of this Agreement:-
	 
	 	 	Address for notices or communications to Party A:
	 
	 	 	With respect to Commodity Related Transactions :-
	 
	 	 	BNP Paribas, New York branch
	 	 	Address:             787 Seventh Avenue, 3rd Floor, New York, New York 10019
	 	 	Attention:           Commodity Indexed Transactions Group (“CITG”)
	 	 	Copy to:             CITG Legal Documentation /CITG Operations Department
	 	 	Facsimile No.:    (212)841-2041/2884     Tel. No:      (212) 841-2000/3429
	 
	 	 	With respect to this Agreement for any other purpose:—.
	 
	 	 	BNP Paribas, New York branch
	 	 	Address:             787 Seventh Avenue, New York, New York 10019
	 	 	Attention:            Legal and Transaction Management Group — ISDA
	 	 	Facsimile No:     212-841-3561    Tel. No:    212-841-3025

 

 

Execution

	 	 	Mandatory copy to:
	 
	 	 	BNP Paribas Head Office
	 	 	Address:      20 boulevard des Italiens, 75009 Paris
	 	 	Attention:      Legal and Transaction Management Group — ISDA
	 	 	Facsimile No:    +(33) (0) 1 4014 0114/5577 3261,   Tel. No:   +(33) (0) 1 4014 0199
	 
	 	 	Address for notices or communications to Party B:-
	 
	 	 	Teton Energy Corporation
	 	 	Address:            410 17th St., Suite 1850, Denver, CO 80202
	 	 	Attention:          Bill I. Pennington, Executive VP and CFO
	 	 	Facsimilie No:    303-565-4606 Tel. No. 303-565-4600
	 
	(b)	 	“Process Agent”, For the purpose of Section 13(c) of this
Agreement:-
	 
	 	 	Party A appoints as its Process Agent:
	 
	 	 	Its New York branch at 787 Seventh Avenue, New York, New York 10019, attn: Legal and
Transaction Management Group.
	 
	 	 	Party B appoints as its Process Agent:
	 
	 	 	CT Corporation with offices on the date hereof at 111 Eighth Avenue, New York, New York
10011
	 
	(c)	 	Offices. The provisions of Section 10(a) will apply to this Agreement.
	 
	(d)	 	Multibranch Party. For the purpose of Section
10(c) of this Agreement:-
	 
	 	 	Party A is a
Multibranch Party and may act through the following Offices: Party A Head Office, New York,
Tokyo, London, Hong Kong, Singapore, Sydney (AFSL 238043), Dublin and Grand Cayman.
	 
	 	 	And the following additional Offices with respect to FX and FX Currency Option
Transactions: Bangkok, Taipei, Taipei Offshore Banking Unit, Seoul, Manama, Manila,
Mumbai, Frankfurt, Amsterdam, Athens, Luxembourg, Oslo, Brussels, Madrid, Milan, and St.
Helier.
	 
	 	 	Party B is not a Multibranch Party.
	 
	(e)	 	Calculation Agent. The Calculation Agent is Party A. The failure by Party A to perform its
obligations as Calculation Agent hereunder shall not be construed as an Event of Default or
Termination Event.
	 
	(f)	 	Credit Support Document.
	 
	 	 	The Guaranty and Pledge Agreement under the Credit Agreement, such may from time to time
be amended, modified or supplemented, shall be a Credit Support Document in relation to
Party B and is incorporated herein by reference.

 

 

Execution

If Party A ceases to remain a Lender or party to the Credit Agreement (as in Part 1(h)(i) of
this Schedule), or if the indebtedness is paid in full and the credit Agreement is terminated and
all liens and security interests securing Party B’s obligations and indebtedness thereunder have
been released or reassigned or if the obligations under this Agreement is no longer secured under
the Credit Agreement; the Credit Support Annex dated as of even date herewith shall be a Credit
Support Document in relation to Party B and is incorporated herein by reference.

	(g)	 	Credit Support Provider. With respect to party A, Not Applicable; and with respect to Party B,
the Guarantors as defined under the Credit Agreement.

	 
	(h)	 	Governing Law. This Agreement will be governed by and construed in accordance with the laws of
the State of New York, without giving effect to its choice of law doctrine (NEW YORK GENERAL
OBLIGATIONS LAW SEC. 5-1401).
	 
	(i)	 	Netting of Payments. Subparagraph (ii) of
Section 2(c) of this Agreement will apply only to
Transactions that are other than Commodity Derivative Transaction, Foreign Exchange
Transactions of Currency Option Transactions unless otherwise stated in any Confirmation.
	 
	(j)	 	“Affiliate” will have the meaning specified in Section 14 of this Agreement.

PART 5

OTHER PROVISIONS

	(a)	 	ISDA Definitions
	 
	 	 	The definitions and provisions contained in the 2000 ISDA Definitions (the “ISDA
Definitions”) and the 2005 ISDA Commodity definitions (the “Commodity Definition”), as
published by the International Swaps and Derivatives Association, Inc. and as such definitions
may be further amended or supplemented from time to time (collectively, the “Definitions”) are
incorporated into used in a Confirmation shall have the meaning set forth in the Definitions,
unless otherwise defined in a Confirmation. In the event of any conflict between the provisions
of this Agreement and the provisions of the Definitions, the provisions of the Agreement shall
apply, and in the event of any conflict between the provisions of this Agreement and a
Confirmation, the provisions of the Confirmation shall apply.
	 
	(b)	 	Set-off
	 
	 	 	Any amount (the “Early Termination Amount”) payable to one party (the “Payee”) by the
other party (the “Payer”) under Section 6(e), in circumstances where there is a Defaulting
Party or an Affected Party where a Termination Event under Section 5(b)(iv) has occurred, will,
at the option of the party (“X”) other than the Defaulting
Party or the Affected Party (and without prior notice to
the Defaulting Party of the Affected Party), be reduced by its set-off against any amount(s)
(the “Other Agreement Amount”) payable (whether at such time or in the future or upon the occurrence
of the contingency) by the Payee to the Payer irrespective of the currency, place of payment
or booking
office of the obligation under any other agreement(s) (the “Other Agreement”) between the Payee
and the Payer (and the Other Agreement Amount will be discharged pro tanto). X will give notice
to the other party of any set-off so effected.
	 
	 	 	For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the
relevant part of such amounts) may be converted at the applicable
prevailing exchange rate into the
currency in which the other is denominated.

 

 

Execution

If an obligation is unascertained, X may in good faith estimate that obligation and
set-off in respect of the estimate, subject to the relevant party accounting to the other when
the obligation is ascertained.

Nothing in this paragraph shall be effective to create a charge or other security interest.
This Section shall be without prejudice and in addition to any right of set-off combination of
account, lien or other right to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).

	(c)	 	Tax Event
	 
	 	 	Section 5(b)(ii) is amended by deleting the words“, or there is a substantial likelihood that it
will”, from line four thereof.
	 
	(d)	 	Scope of Agreement. Section 9 of this Agreement is hereby amended by the addition of
the following new Section 9(h):
	 
	 	 	“Notwithstanding anything contained in this Agreement to the contrary, if the parties enter or
have in the past entered into any Specified Transaction excluding repurchase transactions,
reverse repurchase transactions, buy/shell-back transactions, security lending transactions and
forward purchase or sales of securities transactions, such Specified Transaction shall be
subject to, governed by, and construed in accordance with the terms of this Agreement unless
any confirmation or documentation relating thereto shall specifically state to the contrary.
Each such Specified Transaction shall be a Transaction for the purposes of this Agreement and
in the event of any inconsistency between the terms of such Specified
Transaction and the terms of this Agreement, the  terms of such Specified Transaction shall prevail.”
	 
	(e)	 	Representations. Each party will be deemed to represent to the other party on the
date on which it enters into a Transaction that (absent a written agreement between the
parties that expressly imposes affirmative obligations to the contrary for that
Transaction):

(i) Non-Reliance. It is acting for its own account and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is appropriate
or proper for its based upon its own judgement and upon advice from such advisers as it
has deemed necessary. It is not relying on any communication (written or oral) of the
other party as investment advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to the terms and conditions of a
Transaction shall not be considered investment advice or a
recommendation to enter into that Transaction. It has not received from the other party any assurance or guarantee as to
the expected results of the Transaction.

(ii) Evaluations and Understanding. It is capable of evaluating and understanding (on its
own behalf or through independent professional advice), and understands and accepts, the
terms, conditions and risks of that Transaction. It is also capable of assuming, and
assumes, the financial and other risks of that Transaction.

(iii) Status of parties. The other party is not acting as a fiduciary or an adviser for it
in respect of that Transaction.

(iv) Acting as Principal. It is acting as principal and not as agent or in any other
capacity, fiduciary or otherwise.

	(f)	 	Representations. Each party will be deemed to represent to the other party on the
date on which it enters into a Transaction that:

(i) Eligible Contract Participant. It is an “Eligible Contract Participant” as defined in
Section 1a (12) of the commodity Exchange Act Pursuant to the Commodity Futures Modernization

 

 

Execution

Act of 2000 adopted by the Commodity Futures Trading Commission from the exchange trading and
certain other requirements of the Commodity Exchange Act.

	(g)	 	Events of Default. Section 5(a) of the Agreement is amended as follows:

	 	(i)	 	by deleting the word “third” appearing on line three in subsection (i) thereof and
substituting the word “first” therefor;

	 
	 	(ii)	 	
by deleting the word “thirtieth” appearing on line five of subsection (ii) thereof and
substituting the word “fifth” therefor;
	 
	 	(iii)	 	by inserting the following at the end of subsection (vii)(3) thereof:

     “or a notice is sent convening a meeting to propose a voluntary arrangement of its creditors”;

	 	(iv)	 	by deleting the number “30” appearing on lines ten and eighteen of subsection (vii)
thereof and substituting the number “15” therefor.

	(h)	 	Consent to Recording. Each party (i) consents to the recording of telephone conversations of
trading and marketing personnel of the parties in connection with this Agreement and any
Transactions hereunder and to the submission of such recordings in evidence in any Proceedings
and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such
personnel.
	 
	(i)	 	Notices. The parties hereby acknowledge and agree to the deletion of the words “facsimile
transmission or” in line three of Section 12(a) of this Agreement.
	 
	(j)	 	Prior Transactions. In the event that Party A and Party B have entered into swaps, options or
similar transactions prior to the execution of this Agreement (“Existing Transactions”), under
Confirmations or Commodity Hedge Agreements the parties hereby agree that these Existing
Transaction shall for all purposes be Transactions hereunder and shall be subject to all the
terms of this Agreement. However, the delivery of documents pursuant to Part 3 of this
Schedule shall not be required in connection with the Existing Transaction. To the extent the
terms herein conflict with the terms of the agreements governing the
Existing Transactions, the
terms of this Agreement shall apply.
	 
	(k)	 	Default Under Specified Transaction. Section 5(a)(v) will be deleted in its entirety and
replaced with the following provision:

“(v) Default under Specified Transaction. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party (1) defaults (other than by failing to make a
delivery) under a Specified Transaction or any credit support arrangement relating to a
Specified Transaction and, after giving effect to any applicable
notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving effect to any
applicable notice requirement or grace period, in making any payment due on the last payment
or exchange date of, or any payment on early termination of, a Specified Transaction (or, if
there is no applicable notice requirement or grace period, such
default continues for at least
one Local Business Day); (3) defaults in making any delivery due under (including any delivery
due on the last delivery or exchange date of) a Specified Transaction or any credit support
arrangement relating to a Specified Transaction and, after giving effect to any applicable
notice requirement or grace period, such default results in a liquidation of, an acceleration
of obligations under, or an early termination of, all transactions
outstanding under the documentation applicable to that Specified Transaction; or (4)
disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a
Specified Transaction or any credit support arrangement relating to a Specified Transaction
that is, in either case, confirmed or evidenced by a document or other confirming evidence
executed and delivered by that party, Credit

 

 

Execution

Support Provider or Specified Entity (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);”

	(l)	 	Termination Events
	 
	 	 	Section 5(b) is amended by including the following:

	 	“(vi)	 	Force Majeure Event. After giving effect to any applicable provision, disruption
fallback or remedy specified in, or pursuant to, the relevant Confirmation or elsewhere is
this Agreement, by reason of force majeure or act of state occurring after a Transaction is
entered into, on any day:-

	 	(1)	 	the Office through which such party (which will be the
Affected Party) makes and
receives payments or deliveries with respect to such Transaction is prevented from
performing any absolute or contingent obligation to make a payment or delivery in respect
of such Transaction, from receiving a payment or delivery in respect of such Transaction
or from complying with any other material provision of this Agreement relating to such
Transaction (or would be so prevented if such payment, delivery or
compliance were required on that day), or it becomes impossible or impracticable for such
Office so to perform, receive or comply (or it would be impossible or impracticable for
such Office so to perform, receive or comply if such payment, delivery or compliance were
required on that day); or
	 
	 	(2)	 	such party or any Credit Support Provider of such party (which will be the Affected
Party) is prevented from performing any absolute or contingent obligation to make a
payment or delivery which such party or Credit Support Provider has under any Credit
Support Document relating to such Transaction, from receiving a payment or delivery under
such Credit Support Document or from complying with any other material provision of such
Credit Support Document (or would be so prevented if such payment, delivery or compliance
were required on that day), or it becomes impossible or impracticable for such party or
Credit Support Provider so to perform, receive or comply (or it would be impossible or
impracticable for such party or Credit Support Provider so to perform, receive or comply
if such payment, delivery or compliance were required on that day),

so long as the force majeure or act of state is beyond the control of such Office, such party
or such Credit Support Provider, as appropriate, and such Office, party or Credit Support Provider
could not, after using all reasonable efforts (which will not require such party or Credit Support
Provider to incur a loss, other than immaterial, incidental
expenses), overcome such prevention, impossibility or
impracticability;”

Further to this amendment, the following consequential amendments will also be made:

	 	(i)	 	Section 5(b) will be amended by adding “or a Force Majeure Event if the event is
specified in (vi) below” after “specified in (iii) below” in the fourth line;
	 
	 	(ii)	 	by replacing the “.” at the end of
Section 5(b)(v) with “; or”;
	 
	 	(iii)	 	Section 5(c) will be amended by adding the following sentence at the end, “If an event
or circumstance which would otherwise constitute or give rise to an Event of Default also
constitutes a Force majeure Event, it will be treated as a Force Majeure Event and will not
constitute an Event of Default.”;
	 
	 	(iv)	 	Section 6(b)(ii) will be amended by adding the words “,a Force Majeure Event under
Section 5(b)(vi)” immediately after the words
“If an Illegality under Section 5(b)(i)(1)”
in the first sentence;

 

 

Execution

	 	(v)	 	Section 6(b)(iii) will be amended by adding the words
“, a Force
Majeure Event under Section 5(b)(vi)” immediately after
the words “If and Illegality
under Section 5(b)(i)(I)” at the start of the sentence;
	 
	 	(vi)	 	Section 6(b)(iv)(2) will be amended by adding the words “,a Force
Majeure Event under Section 5(b)(vi)” immediately after
the words “If and
Illegality under Section 5(b)(i)(2)” at the start of the sentence;
	 
	 	(vii)	 	Section 6(b)(iv) will be amended by adding the words
“or a  Force
Majeure Event,” immediately after the words “either party in the case of an
Illegality,”;
	 
	 	(viii)	 	The definition of “Affected Transactions” in Section 14 will be amended by
adding the words “a Force Majeure Event,” immediately after the words “consisting
of an Illegality,”;
	 
	 	(ix)	 	Section 14 will be amended by the inclusion of a new
definition as
follows:
	 
	 	 	 	““Force Majeure Event” has the meaning specified in Section 5(b)(vi)”; and
	 
	 	(x)	 	The definition of “Termination Event” is amended to include the words “a Force Majeure
Event” after the word “Illegality” : in the first line.

	(m)	 	Additional Representation(s).

	(i)	 	Pari-Passu. Party B represents, warrants and covenants, (said
representation shall be covered by section 3(d) of the Agreement), to Party A that
its obligations under this Agreement shall rank at all times pari-passu with any
other senior secured Specified Indebtedness.

PART 6

FX AND CURRENCY OPTION TRANSACTIONS

	(a)	 	Confirmations
	 
	 	 	Where a Transaction is confirmed by means of an electronic messaging system that
the parties have elected to use to confirm such Transaction or if the Transaction is a
FX Transaction or a Currency Option Transaction confirmed by a means other than by an
electronic messaging system (i) such confirmation will constitute a ‘Confirmation’ as
referred to in this Agreement even where not so specified in the confirmation, (ii)
such Confirmation will supplement, form part of, and be subject to this Agreement
(unless such Confirmation shall expressly state otherwise) and all
provisions in the
Agreement will govern the Confirmation except as modified therein and (iii) the
definitions and provisions contained in the 1998 ISDA FX and Currency Option
Definitions (as published by the International Swaps and Derivatives Association, Inc.,
the Emerging Markets Traders Association and The Foreign Exchange Committee) as amended
and supplemented by the 1998 ISDA Euro Definitions (published by the International
Swaps and Derivatives Association, Inc.) (together the “FX Definitions”) will be
incorporated into the Confirmation if the Transaction is an FX Transaction or Currency
Option Transaction.
	 
	 	 	For the purpose of this Agreement, the terms “Currency Option Transaction” and “FX
Transaction” shall have the meanings ascribed to them in the FX Definitions.

 

 

Execution

	(b)	 	Payment Instructions. All payments to be made hereunder in respect of FX Transactions
and Currency Option Transactions shall be made in accordance with standing payment
instructions provided in writing from time to time by the parties (or as otherwise
specified in a Confirmation).
	 
	(c)	 	Payment of Premiums for Currency Option Transactions.

	 	(i)	 	Unless otherwise agreed in writing by the parties, the premium for
any Currency Option Transaction shall be paid on its Premium Payment Date.
	 
	 	(ii)	 	If the Premium is not paid on its Premium Payment Date,
the Seller may elect:

	 	(A)	 	to accept a late payment of such Premium;
	 
	 	(B)	 	to give written notice of such non-payment and,
if such payment shall not be received within two (2) Local Business Days
of such notice, treat the related Currency Option Transaction as void;
or
	 
	 	(C)	 	to give written notice of such non-payment and,
if such payment shall not be received within two (2) Local Business Days
of such notice, treat such non-payment as an Event of Default under
Section 5 (a) (i) of the Agreement.

	 	(iii)	 	If the Seller elects to act under either (A) or (B) above, the Buyer
shall pay all out-of-pocket costs and actual damages incurred in connection with
such unpaid or late Premium or void Currency Option Transaction, including,
without limitation, interest on such Premium from and including the Premium
Payment Date to but excluding the late payment date in the same currency as such
Premium at the prevailing market rate and any other losses, costs or expenses
incurred by the Seller in connection with such terminated Currency Option
Transaction, for the loss of its bargain, its cost of funding, or the loss
incurred as a result of terminating, liquidating, obtaining or re-establishing a
delta hedge or related trading position with respect to such Currency Option
Transaction.

	(d)	 	Netting Discharge and Termination of Currency Options.

From a date to be mutually agreed by the parties, any Call Option or any Put
Option written by a party will automatically be terminated and discharged, in
whole or in part, as applicable, and unless otherwise agreed, against a Call
Option or a Put Option, respectively written by the other party, such discharge
and termination to occur automatically upon the payment in full of the last
Premium payable in respect of such Currency Option Transaction in accordance
with standard payment instructions; provided that such discharge and
termination may only occur in respect of Currency Option Transactions:

	 	(i)	 	each being with respect to the same Put Currency and
the same Call Currency;
	 
	 	(ii)	 	each having the same Expiration date and Expiration
Time;
	 
	 	(iii)	 	each being of the same style i.e. either both being
American Style Options or both being European Style Options;
	 
	 	(iv)	 	each having the same Strike Price;
	 
	 	(v)	 	each having been transacted by the same offices of
Party A and Party B; and
	 
	 	(vi)	 	neither of which shall have been exercised by
delivery of a Notice of Exercise;

and upon the occurrence of such discharge and termination, neither Party shall
have any obligation to the other Party in respect of the relevant Currency
Option Transaction or, as the case may be, parts

 

 

Execution

thereof
so discharged and terminated. Such discharge and termination shall be effective
notwithstanding that either party may fail to record such discharge and termination in its books.
In the case of a partial discharge and termination (i.e. where the relevant Currency Option
Transactions are for different amounts of the Currency Pair), the remaining portion of the Currency
Option Transaction  which is partially discharged and terminated
shall continue to be a Currency Option Transaction for the purpose of the Agreement, including this provision.

	 	 	 	 	 	 	 
	SIGNED FOR AND ON BEHALF OF

	 	 	 	SIGNED FOR AND ON BEHALF OF
	 	 
	BNP PARIBAS

	 	 	 	TETON ENERGY CORPORATION	 	 
	(“Party A”)

	 	 	 	(“Party B”)	 	 
	 
	 	 	 	 	 	 
	By: /s/ Christopher Taylor

	 	 	 	By: /s/ Karl F. Arleth	 	 
	 
	 	 	 	 	 	 
	Name: Christopher Taylor

	 	 	 	Name: Karl F. Arleth	 	 
	 
	 	 	 	 	 	 
	Title: Vice President/Derivatives Credit

	 	 	 	Title: Chief Executive Officer & President	 	 
	 
	 	 	 	 	 	 
	By: /s/ Dora Sung

	 	 	 	By: /s/ Bill I. Pennington	 	 
	 
	 	 	 	 	 	 
	Name: DORA SUNG

	 	 	 	Name: Bill I. Pennington	 	 
	 
	 	 	 	 	 	 
	Title:
MANAGING DIRECTOR BNP Paribas / CIT Group

	 	 	 	Title: CFO & Executive Vice President
	 	

 

 

	 	 	 
	Seal
of Pascal Dufour, Jean-Pierre

	 	 
	Benoist & Claudine Savary
	 	 
	Notaries
	 	 
	15
Boulevard Poissonnière
	 	 
	75002 Paris
	 	 

7 JULY 2004

BNP PARIBAS

Total Delegation of Authority

by philippe BLAVIER

to

Dominique AUBERNON

Didier BALME

Jean-Michel BARDIN

Amine BELHADJ

(et al.)

	 	 	 
	 

	 	Visé
NE VARIETUR sous le n°
Marie-Paule WAGNER

Expert-Traducteur Juré

16 JUIL.
2004

 

 

 2

00037422

Stamp tax paid on statement

Authorisation No. 28/83 of 21 November 1983

No. 005429

	 	 	 	 	 
	 

	 	 	00037435	 
	245645 01

	 	Stamp tax paid on statement

	CLS/45/GS

	 	Authorisation No. 28/83 of 21 November 1983

	 

	 	No. 000893

Seal of Pascal Dufour, Jean-Pierre Benoist & Claudine Savary, Notaries

15 Boulevard Poissonniere, 75002 Paris

Registration taxes on statement: €75

     On 7 July 2004,

     Before Pascal DUFOUR, Esq., notary, member of the firm of Pascal Dufour, Jean-Pierre Benoist &
Claudine Savary, notaries, 15 Boulevard Poissonniére, Paris 2

     This notarial (total) delegation of powers was signed by:

     Philippe BLAVIER, domiciled at 3 Rue d’Antin, Paris (2nd arrondissement),

     Acting as Head of the Corporate and Investment Banking Core Business of BNP PARIBAS SA (“the
Company”), a public limited company with a capital of 1,757,231,208 euros and its registered
office at 16 Boulevard des Italiens, Paris (9th arrondissement), identified by SIREN

 No. 662 042 449 RCS Paris.

     Hereto authorized by virtue of the powers delegated to him in a general power-of–attorney
signed on 30 October 2003 before Claudine SAVARY, Esq., notary in Paris, by Baudouin PROT,
domiciled at 3 Rue d’Antin, Paris 2, the Company’s Chief Executive Officer (and Board Member),
whereby authority was delegated to the “General Agents” (including the aforesaid Signatory), each
of whom was authorized to act alone and to redelegate his powers to all such agents (“Deputy
Agents”) as he saw fit.

     Baudouin PROT having been elected the Company’s Chief Executive Officer (and Board Member) by
a resolution adopted at a meeting of the Board of Directors on 11 June 2003, a certified true
excerpt from the minutes of which has been filed in the records of the aforesaid notarial firm as
evidenced by a record of such filing signed before Claudine SAVARY, Esq., notary in Paris, on 27
June 2003.

     At said meeting on 11 June 2003, the Company’s Board of Directors specified the methods of
dissociation of the offices of Chairman and Chief Executive Officer the principle of which it had
defined on motion of Chairman and Chief Executive Officer Michel PEBEREAU at its meeting on 14 May
2003 preceding a mixed regular and special meeting of the Company’s shareholders, Mr. PEBEREAU
thus assuming

 

 

 3

office of Chairman of the Board of Directors and Baudouin PROT that of Chief Executive Officer
(and Board Member).

     Assuming the general management of BNP Paribas by virtue of said resolution, the Commercial
Code’s provisions relative to business corporations, and the Company’s certificate of
incorporation, and having the broadest powers to act for the Company in all circumstances.

     Who, in his aforesaid capacity, hereby delegates to the following persons (the “Deputy
Agents”):

          Business Lines, Coverage, Territories, Functions and Regions:

 

 

 4

	 	 	 	 	 	 	 
	Dominique

	 	AUBERNON
	 	Matthieu
	 	LACAZE
	Didier

	 	BALME
	 	François
	 	LAPLACE
	Jean-michel

	 	BARDIN
	 	Hélène
	 	LECLERC
	Amine

	 	BELHADJ
	 	Philippe
	 	LOUSKY
	Jean-François

	 	BIARD
	 	Chantal
	 	MAZZACURATI
	Jean-Pierre

	 	BERNARD
	 	Loïc
	 	MEINNEL
	Thierry

	 	BERNARD
	 	Philippe
	 	MEUNIER
	Jean-Marc

	 	BONNEFOUS
	 	Yann
	 	MUZIKA
	Patrick

	 	BRISSIAUD
	 	Eric
	 	NICOLAS
	David

	 	BRUNNER
	 	Jean
	 	NUNEZ
	Michel

	 	CHEVALIER
	 	Tomoko
	 	NUNOI
	Pascal

	 	CONFAVREUX
	 	Florian
	 	OLLIVIER
	Pierre Joseph

	 	COSTA
	 	Olivier
	 	OSTY
	Françoise

	 	DANIEL
	 	David
	 	OVENDEN
	Mignonne

	 	DAO
	 	Oliver
	 	PAUL
	Philippe

	 	DE GENTILE
	 	Lincoln
	 	PAYTON
	Jacques

	 	DESBIEG
	 	Gilles
	 	PECRIAUX
	Thierry

	 	DESJARDINS
	 	Chantal
	 	PIANI
	Jacques

	 	DESPONTS
	 	Jean-Jacques
	 	POIRRIER
	Jean-François

	 	DIMEGLIO
	 	Alain
	 	POIRSON
	Jacques

	 	D’ESTAIS
	 	Denis
	 	QUILLET
	Gautier

	 	DIRCKX
	 	Eric
	 	RAYNAUD
	François

	 	DRAVENY
	 	Dominique
	 	REMY
	Jean-Louis

	 	DUGUIT
	 	Christophe
	 	ROUSSEAU
	Michel

	 	EYDOUX
	 	Denis
	 	ROUSSEAU
	Alexandrine

	 	FERRI
	 	Everett
	 	SCHENK
	Magali

	 	FOUCAUD
	 	Larry
	 	SOBIN
	Rémi

	 	FRANK
	 	Arnaud
	 	TELLIER
	François

	 	FREYEISEN
	 	Jean-Charles
	 	TATIBOUET
	Bernard

	 	GAVGANI
	 	Jacques-Olivier
	 	THOMANN
	Gilles

	 	GELLE
	 	Thierry
	 	VARENE
	Yann

	 	GERARDIN
	 	Philippe
	 	VUARCHEX
	Nathalie

	 	HARTMANN
	 	Marie-Françoise
	 	WALBAUM
	Robert

	 	HAWLEY
	 	Cyril
	 	WOLKONSKY
	Frédéric

	 	JANBON
	 	Paul
	 	YANG
	Michel

	 	KONCZATY
	 	Yusuke
	 	YASUDA
	Alain

	 	KASPEREIT	 	 	 	 

 

 5

Territories:

	 	 	 	 	 	 	 
	Christian

	 	ABEILLON
	 	Michal
	 	KOZARZEWSKI
	Dominique

	 	ALCOUFFE
	 	Antonio
	 	LADEIRA
	Frédéric

	 	AMOUDRU
	 	Patrick
	 	LANG
	Robert

	 	AMZALLAG
	 	Jae Young
	 	LEE
	Pascal

	 	BORIS
	 	Didier
	 	MAHOUT
	Philippe

	 	BOUYAUD
	 	Eric
	 	MARTIN
	Jean-Claude

	 	CHAVAL
	 	Ramiro
	 	MATO
	Jean-Paul

	 	CHING
	 	Andrzej
	 	MAUBERG
	Laurent

	 	COURANDON
	 	Bernard
	 	MENCIER
	François

	 	CRISTOFARI
	 	Benoît
	 	MONSAINGEON
	Michel

	 	DE VIBRAYE
	 	Thierry
	 	RAMENASON
	Bernard

	 	DIGEON
	 	Hervé
	 	REYNAUD
	Thierry

	 	DINGREVILLE
	 	Philippe
	 	REYNIEIX
	Philippe

	 	DITISHEIM
	 	Robert
	 	RICCI
	Michel

	 	DUBOIS
	 	Ullrich-Günther
	 	SCHUBERT
	Graziano

	 	FERRARI
	 	Giuseppe
	 	SPADAFORA
	Jean-François

	 	FICHAUX
	 	Jean-Michel
	 	VANDEKERKOVE
	Paul-François

	 	GAUVIN
	 	François
	 	VAN DEN BOSCH
	Christian

	 	GIRAUDON
	 	Philippe
	 	VION
	Jean-François

	 	GLOUX
	 	Siew Ying
	 	YAP
	Laszlo

	 	HAAS
	 	Chye Kin
	 	WEE
	Philippe

	 	JOANNIER
	 	Hai Tao
	 	XIE

general authority to bind the Company in connection with and for purposes of all the
transactions customarily engaged in by credit institutions and investment service providers in
France and abroad, as provided below, including the following general transactions:

	•	 	To represent the Company vis-à-vis third parties, all authorities and all public
agencies, without restriction; to sign the correspondence; to sign all prospectuses, all
reports of operations or any other document intended for French or foreign regulatory or
supervisory authorities.
	 
	•	 	To employ, appoint and dismiss all employees and agents.
	 
	•	 	To appoint all special agents (authorized to act alone) by (notarial or non-notarial)
written special and specific power-of-attorney, for purposes of agreement to and execution
of a deed, contract or other document concerning a specific transaction or one or more
types of specific transactions included in the general transactions described herein; to
revoke the appointments of such special agents.

 

6

	•	 	To establish and manage the general organization of any Branch or Representative Office,
wherever established.
	 
	•	 	To buy, sell, exchange, partition all real estate, real rights, shares of building
companies in any form, all businesses, business segments, leaseholds, corporate and other
intangible rights; to have all articles and conditions drawn up, to specify all reserve
prices therein; to make all bids or overbids; to establish or acquire, under the same
conditions, all praedial servitudes and easements, to alter them, to waive the same; to
manage and administer all real estate belonging to the Company; to
apply for all administrative authorizations; to have all condominium declarations, master deeds and lists of
condominium units drawn up; to represent the Company at all meetings of owners, tenants,
partners or shareholders, to take part in all votes, to make all decisions; to grant,
accept, amend and cancel all leases as landlord or tenant; to grant all mortgages, real
estate pledges or equivalent security interests in France and abroad, to decide on all
amendments thereof, to request release thereof, to consent to
discharge thereof and cancellation of the registration thereof, all with or without evidence of payment; to request the formalities
appurtenant thereto of all competent organizations, mortgage offices, land offices,
offices of clerks of commercial courts, trade and companies registers or others.
	 
	•	 	To make all purchases and sales of personalty, equipment and supplies necessary for the
Company’s operations, for that purpose to enter into all contracts and place all orders,
to request the formalities appurtenant thereto of all competent organizations.
	 
	•	 	To procure or cancel all insurance policies relative to the operations and transactions
covered by this power-of-attorney.
	 
	•	 	To make, grant or contract all loans of borrowings, credit
lines or advances. 
	 
	•	 	To accept and receive — form all French or foreign private or public natural persons
or legal entities, including the Caisse Centrale du Tresor Public, the Caisse des
Dépôts et Consignations, all public or sate-approved agencies or institutions,
autonomous public corporations, public service concessionaires, semi-public companies, all
private or municipal payers, paymasters, receivers and collectors, all without limitation
 — all principal amounts and interest due to the Company and to receipt therefor.
	 
	•	 	To open all accounts for the Company in all French or foreign banks, credit
institutions, financial services or other companies, including the Banque de France and
other central banks, to decide on and accept all terms relative to the opening of such
accounts and transaction of business therein, to accept all credit lines; to open and
accept all letters of credit; to make up and settle all current or other accounts.
	 
	•	 	To make all deposits and withdrawals of funds, securities,
valuables; to accept all cash
and other security deposits.

 

7

	•	 	To draw, indorse, accept, pay all negotiable instruments, to remit them for discount or
collection; to indorse and pay all checks and remit them for collection; to sign all
checks, transfer orders and payment or settlement orders on all French or foreign banks,
including the Banque de France or other central banks, French or foreign credit or other
institutions, to make all withdrawals of funds; to make all protests and serve all notices
and banker’s tickets.
	 
	•	 	To post all bonds, security deposits and guaranties.
	 
	•	 	To grant all credit lines, all advances, all discount authorizations, for that purpose
to enter into all contracts and agreements, receive, pay, make up, settle all current and
other accounts.
	 
	•	 	To fix discount and interest rates, fees, custodian charges.
	 
	•	 	To extend the maturities of contracts, bills of exchange, promissory notes, instruments
of all kinds and all commitments more generally.
	 
	•	 	To acquire and assign all receivables in any way.
	 
	•	 	To make all exchanges with our without balancing payments.
	 
	•	 	To decide on the nature of all guaranties and security interests to be granted to the
Company, to accept such security and any subordination and any subrogation; to request the
formalities appurtenant thereto of all competent organizations, mortgage offices, land
offices, offices of clerks of commercial courts, or others.
	 
	•	 	To accept, take and hold all guaranties and security interests in any form, by way of
garnishments, caveats, notices, stop-payment and stop-transfer orders, personalty and real
estate pledges, registered mortgages, security deposits, bonds, liens, chattel mortgages,
hypothecations, attachments, distraints or other equivalent security; to consent to all
amendments of such guaranties and security interests, all
subordinations, extensions of
times, remissions of debt, waivers, releases and cancellations, all with or without
evidence of payment; to consent to, accept and sign all agreements and contracts entailing parity of
rank, novation, assignment of receivables or liabilities, subrogation and subrogation
receipt; to request the formalities appurtenant thereto of all competent organizations,
mortgage offices, land offices, offices of clerks of commercial courts, or others.
	 
	•	 	To let all safes or safe-deposit boxes to customers.
	 
	•	 	To acquire an dispose of all interests in all companies, whether existing or to be
organized, to participate in the founding of all companies, associations and
organizations.

 

8

	•	 	To make all applications of funds, to purchase or otherwise acquire all securities for
the Company, to have them registered in the Company’s name.
	 
	•	 	To buy and sell for cash or on time all government or other bonds, shares and other
securities belonging to the Company, including securities issued by public or private
legal entities transferable by book entry or delivery which confer identical rights per
class and directly or indirectly afford entitlement to a percentage of the issuer legal
entity’s capital stock or to a general claim on its assets; to request and make transfers
or conversions to registered or bearer from all securities, to accept and receive the
amounts due on matured securities and all premiums and prizes, to receipt therefore.
	 
	•	 	To rent a safe-deposit box in all French or foreign banks or credit institutions in the
Company’s name, to have free access thereto, to make all deposits therein and withdrawals
therefrom.
	 
	•	 	To subscribe to all issues of shares, to pay the amount of the subscribed capital and
all premiums in excess of par value in one or more instalments, to sign all subscription
forms, to make all exchanges of securities.
	 
	•	 	To buy and sell gold, silver and all precious materials in general.
	 
	•	 	To engage in all spot or forward foreign and currency exchange transactions.
	 
	•	 	To engage in all foreign currency transactions and all interest rate transactions,
including swaps and hedges.
	 
	•	 	To certify all documents, checks and customers’ signatures.
	 
	•	 	To receipt for all payments in whatever legal form.
	 
	•	 	To withdraw all assets deposited to secure all advances, to receive all arrears and
dividends, whether or not matured, to transfer them if need be.
	 
	•	 	To accept all advances on deposits of Treasury bills, shares, bonds, for that purpose
to make all commitments to all French or foreign public or private banks, credit and other
institutions, all French or foreign individuals, the Banque de France and other central
banks.
	 
	•	 	To engage in all transactions concerning the opening of postal checking accounts and
transactions therein.
	 
	•	 	To agree on, discuss, close, make up and settle all accounts with all customers,
debtors, depositaries, to determine the balance due, to pay or receive the same.

 

9

	•	 	To withdraw insured and other letters, boxes and packages from the post office and all
express and parcel delivery services or carriers, to withdraw all deposits, cash all money
orders, give all releases.
	 
	•	 	To sign all receipts, acknowledgments, advices, notices, waybills, routing orders,
transaction confirmations, accounts, statements of accounts and other documents.
	 
	•	 	To sign all receipts and releases for cash, all receipts and releases for certificates
of title to gold, silver, precious materials in general, and all receipts for articles,
letters, parcels, packages.
	 
	•	 	To take all legal proceedings in the Company’s name in all countries; to defend the
Company in France and abroad in all competent trial and appellate courts and all
arbitration proceedings; to have all summonses and subpoenas before all competent trial
and appellate courts and arbitrations boards in France and abroad served; to file and
withdraw all criminal charges in France and abroad, whether or not coupled with civil
claims.
	 
	•	 	In event of dispute, to take all necessary proceedings in person or through an agent;
for that purpose to summon, appear and testify in and before all courts or arbitrations
boards, to appoint all arbitrators, to sign all submission bonds, to be reconciled,
otherwise to sue and defend in and before all competent trail and appellate courts and
arbitration boards, to obtain all trial and appellate judgments and arbitration awards, to
have them executed in all legal ways and by all legal means, or to waive the same; to have
all attachments of real or personal property made, to request all entries and
registrations; to file claims in all bankruptcy and reorganizations proceedings,
distributions and apportionments, to receive the amount of all claims; to give or accept
receipts and release for all sums received or paid.
	 
	•	 	To assign all claims, receivables, rents or royalties, whether or not matured, for such
considerations and on such terms as they see fit.
	 
	•	 	To represent the Company in all meetings and deliberations of shareholders, bondholders
and partners and in the discharge of the duties of all offices to which it may be elected,
to cast all votes.
	 
	•	 	To make all bargains and settlements, to accept all compromises, to consent to all
acquiescences and waivers, all subrogations and subordinations, and all releases of
recorded encumbrances, liens, attachments, caveats, stop-payment and stop-transfer orders
and other rights, before or after payment; to request the formalities appurtenant thereto
of all competent organizations.

 

 

10

	•	 	To represent the Company in all bankruptcy, reorganization,
arrangement or equivalent
proceedings; to file or report the Company’s claim with or to all authorized parties, to
adduce all proofs, to file all demands and claims with such parties.
	 
	•	 	To represent the Company vis-à-vis all tax or other authorities, to make and sign all
returns, to pay all duties, penalties, taxes, charges, to file all requests for exemption
from or reduction or refund of such duties, taxes and penalties.
	 
	•	 	To comply on the Company’s behalf with all filing and notice formalities required by
statutory or regulatory provisions; to request all entries and amendatory entries
concerning the Company on the Trade and Companies Register or with other similar
organizations.
	 
	•	 	To comply with all formalities (or have them complied with) relative to the filing and
registration of all trademarks and trade names and applications for all patents.

For those purposes, to sign all instruments, documents, records, reports and minutes, to designate
address for notices and service of process, and generally to do the needful for purposes of the
foregoing operations and transactions. Each of the Deputy Agents shall himself assume, in that
capacity, in lieu of the Signatory who shall accordingly be
exonerated therefrom, any criminal
liability of the Company for any offenses committed in the exercise of the powers hereby delegated.

	 	 	The powers delegated above to the Deputy Agents concerns ALL the general powers delegated to the
Signatory by Baudouin PROT aforesaid in the aforesaid notarial general power-of-attorney dated 30
October 2003.
	 
	 	 	The Signatory specifies that this (total) delegation of powers supersedes, effective this date,
the delegation of powers to various employees of BNP Paribas by the Signatory in a document
signed before Claudine SAVARY, Esq., notary in Paris, on 11 July 2003.

	 	1.	 	The deputy Agents to whom authority is delegated by this power-of-attorney and the
documents amending and/or supplementing it may sign only jointly in pairs in one of the following
ways:

	 	•	 	either inter sese,
	 
	 	•	 	or, for the transactions described in the power-of-attorney signed on this date by
Philippe BLAVIER aforesaid before Claudine SAVARY, Esq., delegating (partial) powers to
various employees in charge of Representative Offices of the Company abroad, with a Deputy
Agent named in that power-of-attorney,

 

11

	 	•	 	or with a General Agent,
	 
	 	•	 	or with a Subdeputy Agent,
	 
	 	•	 	or with one of the deputy agents named in the power-of-attorney delegating powers (“Functions”)
to various employees signed by Baudouin PROT, aforesaid, on 30 October 2003 before Claudine
SAVARY, Esq., notary in Paris (or other documents supplementing and/or amending said power-of-attorney).

          As specified in 2. below, the Deputy Agents may, by a redelegation of powers, redelegate to any
agents (any “Subdeputy Agents”) some or all of the general powers delegated to them hereby (and
by documents supplementing and/or amending this one).

     The
Deputy Agents may also appoint any special agents (authorized to act alone) by a special and
specific (notarial or non-notarial) written power-of-attorney for the purpose of agreement to
and execution of a deed, contract or other document concerning a specific transaction or one or
more types of specific transactions included in the general transactions described in this
power-of-attorney (and the documents supplementing and/or amending it), in accordance with the
terms of this power-of-attorney (and the documents supplementing and/or amending it).

2. The
Deputy Agents, acting in pairs, may redelegate some or all of the general powers
delegated to them hereby (and by the documents supplementing and/or amending this one) to
all such agents (the “Subdeputy Agents”) as they see fit by a redelegation of powers.

Such redelegations of powers shall be made as follows:

     2.1. The Subdeputy Agents to whom authority is redelegated by the redelegations of
powers and documents supplementing and/or amending them may sign only jointly in pairs
inter sese or with a General Agents or a deputy Agent. Notwithstanding that rule and
for practical reasons, redelegations of powers (and documents supplementing and/or
amending them) concerning the Company’s Branches and Representative Offices abroad may
provide that Subdeputy Agents (or some of them) may sign either in pairs (as
aforesaid) or alone, as the Deputy Agents see fit.

     The Subdeputy Agents may not redelegate the general powers delegated to them by the
redelegation of powers (and by the documents supplementing or amending it).

 

12

     The Subdeputy Agents may however appoint any special agents (authorized to act alone) by a special
and specific (notarial or non-notarial) written power-of-attorney for purposes of agreement to and
execution of a deed, contract or other document concerning a specific transaction or a type of
specific transaction included in the general transactions described in the redelegation of powers
(and the documents supplementing and/or amending it), in accordance with the terms of such
redelegation of powers (and of the documents supplementing and/or amending it).

     2.2. Each redelegation of powers (and each document supplementing and/or amending it) shall be
made by notarial document signed before one of the members of the aforesaid notarial firm, who
shall inform the Company thereof in writing. Notwithstanding that rule and for practical reasons,
the redelegations of powers (and documents supplementing and/or amending them) concerning the
Company’s Branches and Representative Offices abroad may also be either signed before a foreign
notary or acknowledged before a member of the Bar. Such document, which shall be in compliance with
the provisions and clauses relative to redelegations of powers contained in the general
power-of-attorney and in the delegation of powers concerned except for minor adaptations
necessitated by the governing foreign law, shall be filed in the records of the aforesaid notarial
firm, to which full authority for that purpose is delegated, which shall inform the Company thereof
in writing; a translation of such document, if it is in a foreign language, shall simultaneously be
filed in said notarial firm’s records.

     2.3.
In the same way as specified in 2.2. above, the Deputy Agents may as they see fit amend
the list of the Subdeputy Agents and/or the general powers delegated to them (or to some of them)
by the redelegation of powers (and the documents supplementing and/or amending it).

     The Signatory specifies in his aforesaid capacity that in the aforesaid general
power-of-attorney signed by Baudouin PROT, aforesaid, on 30 October 2003 before Claudine SAVARY,
Esq., Mr. PROT specified in his aforesaid capacity that from the date of execution of said general
power-of-attorney, the delegations of powers (and all the documents supplementing and/or amending
them) and the redelegations of powers (and all the documents supplementing and/or amending them)
shall contain the provisions set forth in said general power-of-attorney, and that from the date
thereof, each of said documents shall supersede the delegation of powers and redelegation of
powers referred to in I.b. of said general power-of-attorney.

DELEGATION OF AUTHORITY

     Full authority is delegated by the Signatory to the aforesaid notarial firm to inform the
Company of the execution hereof pursuant to the aforesaid notarial general power-of-attorney signed
by Baudouin PROT, aforesaid, on 30 October 2003.

 

13

     DOCUMENT on twelve (12) pages, containing;

 — no approved insertions

 — no lines drawn through blank spaces

 — no full lines deleted

 — no figures deleted

 — no words deleted

     After reading hereof by the aforesaid notary, this document was signed by said notary and
by the Signatory before said notary in BNP PARIBAS’s offices at 3 Rue d’Antin, Paris 2, on
the aforesaid date.

	 	 	 
	SIGNATURE of	 	 
	Philippe BLAVIER
	 	(signature)
	General Agent of BNP PARIBAS	 	 
	 	 	 
	SIGNATURE of	 	 
	Mr. DUFOUR
	 	(signature)
	Notary in Paris	 	 

 

14

     CERTIFIED
TRUE COPY of a document in the records of the notarial firm at 15
Boulevard Poissonnière,
Paris second arrondissement,

     On thirteen pages, without insertion or deletion.

     Certified true to the original, sealed and delivered by Pascal DUFOUR, Esq., undersigned notary in
Paris,

     A
member of the notarial firm now named Pascal Dufour, Jean-Pierre
Benoist & Claudine Savary, notaries, 15 Boulevard Poissonniere, Paris, 2nd arrondissement.

     This document bound by the ASSEMBLACT RC process preventing any substitution or addition is signed
on the last page pursuant to §9.15 of Decree 71-941 of 26 November 1971.

(signature)exv10w20

 

Exhibit 10.20

EMPLOYMENT AGREEMENT

BETWEEN

TETON ENERGY CORPORATION

And

 WILLIAM P. BRAND, JR.

(Employee)

          THIS
EMPLOYMENT AGREEMENT (this “Agreement”), dated as of February 1, 2006, (the “Effective Date”)
is entered into by and between Teton Energy Corporation, a Delaware corporation (the “Company”),
and William P. Brand, Jr., an individual with an address at 8724 E. Phillips Place, Centennial,
Colorado 80112, (the “Employee”) (collectively, the “Parties,” individually, a “Party”).

W I T N E S S E T H:

          WHEREAS, the Board of Directors of the Company (the “Board”) has requested and the Employee has
agreed to serve the Controller and Chief Accounting Officer pursuant to the
terms and conditions herein; 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 Employee, 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 Employee 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 Employee 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:

ARTICLE ONE

DEFINITIONS

     1.

Definitions. As used in this Agreement:

     1.1      The term “Accrued Obligations,” when used in the case of the Employee’s death or
disability shall mean the sum of (1)  that portion Employee’s Base Salary that was not
previously paid to the Employee from the last payment date through the Date of Termination, and
(2) an amount equal six(6) months salary at the level of the Employee’s Base Salary then in effect,

     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 “Cause” shall have the meaning set forth in Section 4.3 herein.

     1.6       The term “Common Stock” shall mean the Common Stock, par value $0.001, of the
Company.

     1.7       The term “Compensation Committee” shall mean the Compensation Committee of the
Company.

     1.8       The term “Corporate Documents” shall mean the Company’s Certificate of Incorporation,
as amended and/or its Bylaws, as amended.

     1.9       The term “Effective Date” shall have the meaning set forth in the preamble.

     1.10       The term “Good Reason” shall have the meaning set forth in Section 4.4 herein.

     1.11       The term “Initial Term” shall have the meaning set forth in Section 2.2 herein.

     1.12       The term “Severance Benefit” shall have the meaning set forth in Section 4.8(a)(i)
herein.

     1.13       The term “Without Cause” shall have the meaning set forth in Section 4.3 herein.

     1.14       The term “Without Good Reason” shall have the meaning set forth in Section 4.5
herein.

 

 

ARTICLE TWO

POSITION & DUTIES

     2. Employment.

          2.1 Title. The
Employee shall serve as the Controller and Chief
Accounting 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. in
addition, you shall serve as an Assistant Secretary of the Company,
subject to election by the Company’s Board of Directors.

          2.2  Term.
The Employee’s employment shall be for an initial term of one (1) years (“Initial
Term”), commencing on the Effective Date. The Employee’s employment shall be automatically
extended on the day after the first  year anniversary of the Effective Date (“Automatic
Extension”), and on each second anniversary date thereof, for
additional one (1) year period
unless, with respect to any such Automatic Extension, Employee’s employment is terminated by
either party during the 60-day period prior to such anniversary date as provided in Article Four.

          2.3
 Duties and Responsibilities. The Employee shall report to the CFO and in his capacity as
an officer of the Company shall perform such duties and services as may be appropriate and as are
assigned to him by the CFO. During the term of this Agreement Employee shall, subject to the
direction of the CFO of the Company, oversee and direct the
operations of the Company’s accounting function; oversee and
assure compliance with the rules and regulations promulgated by the
United States Securities and Exchange Commission (including
compliance with Sarbanes-Oxley), and shall perform such duties as are
customarily performed by a controller of a company such as the Company or as are otherwise
delegated to him from time to time by the CFO or such other matters and projects as may from time
to time be reasonably assigned to him by the CFO. The Employee
understands that nothing herein shall be intended to limit any
reporting obligations that the Employee may have under law to either
the Company’s auditors or Board of Directors.

          2.4  Performance of Duties. During the term of the Agreement, except as otherwise approved by
the CFO or as provided below, the Employee 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 Employee from devoting reasonable time, attention and energy in connection to serving as a director or a member of 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; provided that such activities do not materially interfere with the
performance of his duties and services hereunder:

          2.5 Representations and Warranties of the Employees with Respect to Conflicts, Past Employers
and Corporate Opportunities. The Employees 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, or
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
egaged in a business which is substantially similar to the business of the Company except 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 Employee disclosed on
Schedule A attached hereto, Employee
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, Employee, director, officer, partner, venturer, consultant or otherwise) in any business
which, as reasonably known to Employee, purchases or provides services or products to, the Company
or any of its subsidiaries, provided that the Employee 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
Employee 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
Employee’s activities with respect to such opportunities do not have a material adverse effect on
the performance of the Employee’s duties hereunder, and (c) the Employee’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 Employee’s reporting location
shall be Denver, Colorado, which shall include the metropolitan area within a 40 mile radius from
the Company’s current office.

 

 

ARTICLE THREE

COMPENSATION

     3. Compensation.

          3.1
 Base Salary. Employee shall receive an initial annual base
salary of One  Hundred
Ten Thousand Dollars ($110,000.00), payable bi-monthly in arrears (the “Base Salary”) and
subject to all federal, state, and municipal withholding requirements. The Base Salary shall be
reviewed by the CFO,  and CEO annually for any increase.

          3.2
 Cash Bonus. The Employee shall be eligible for a cash bonus
equal to an amount of up to fifty percent (50%) of his Base Salary in
2007 and up to one hundred percent (100%) of his Base Salary for each fiscal year thereafter (annualized for any
fiscal year consisting of less than 12 full months or with respect to which the Employee has been
employed by the Company for less than twelve (12) full months. Each Cash Bonus shall be paid no
later than the end of the third month of the fiscal year next following the fiscal year in respect
of which the Cash Bonus is awarded, unless the Employee 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 Employee shall be entitled to participate in all
equity-based compensation plans offered by the Company and as determined by the Board of Directors.
The Employee understands that as of the date of this Agreement, the only equity-based plan offered
by the Company is the 2005 Long-term Incentive Plan. Pursuant to the
terms of this Agreement, the Employee shall be entiled to a grant of
25,000 performance share units, for base objectives and 50,000 performance share units for stretch objectives, which grant will be governed by the parameters and
objectives according to the 2007 objectives established by the
Company’s Board of Directors. The Employee will be provided with
a separate grant notice that describes the vesting and various
operational aspects of the 2005 Long-term Incentive Plan.

          Notwithstanding
any other provision of this Agreement, effective December  1,
2006, the
Employee shall be entitled to a grant of 9,000 restricted shares of Teton common stock, which
shall vest over a period of three years and be subject to a restricted stock agreement in a form
substantially similar to the form of agreement in Exhibit B.

     Upon a Change of Control, all equity-based compensation will be treated in the same manner as
if Employee’s employment was terminated by the Company Without Cause.

          3.4
Participation In Benefit Plans.

     (a)
Retirement Plans. Employee shall be entitled to participate, without any waiting or
eligibility periods, in all qualified retirement plans provided to other Employee 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 Employee as a result of any payments triggered by
this Agreement, or other compensation agreements between Employee and the Company, or any of its
subsidiaries and any income tax payable by Employee as a result of any payments in Common Stock
triggered by this Agreement or other compensation agreements between Employee and the Company, or
any of its subsidiaries, except as might otherwise be provided such benefit plan.

 

 

     (c)  Life Insurance. The Employee shall be entitled to life insurance on terms consistent with
that provided to other senior Employees of the Company as may be authorized by the Board from time
to time.

     (d)  Employee Benefit Plans and Insurance. The Employee 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. Nothing herein
shall obligate the Employee to accept such benefits if and when they are offered.

     (e) Vacation.

     (i) The Employee shall be
 entitled to four (4) weeks of vacation per calendar year
commencing with the 2007 fiscal year, which
vacation level shall be reviewed by the CFO from time to time. No more than 1.5 times (1.5x)
Employee’s authorized annual vacation allocation may be accrued, at any given time. In the event
that Employee has reached his maximum authorized vacation allocation, accrual will not re-commence
until Employee 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 can not be
retroactively reapplied.

     (ii) Pay will only be provided for any unused, accrued paid vacation credit at the time of
Employee’s separation from the business by the Company due to a reduction in force, by Employee
upon retirement, or upon the death of an employee, provided that Employee has been a regular
full-time employee for three calendar months prior to such event. Termination of employment for
Cause by the Company, or Employee’s resignation, will result in the forfeiture of any unused paid
vacation credit.

     (f)  Paid Holidays. The Employee 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.

          3.5
 Business-related Expenses.
Employee 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 Employee 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. Employee shall be governed by the travel and
entertainment policy in effect at the Company.

          3.6  Severance Benefit. In the event that Employee’s employment is terminated, other than
for Cause, Employee shall receive compensation pursuant to Section 4.8 herein.

 

 

          3.7 Payroll Procedures and Policies. All payments required to be made by the Company to the
Employee pursuant to this Article Three shall be paid on a regular basis in accordance with the
Company’s normal payroll procedures and policies.

ARTICLE FOUR

TERMINATION OF EMPLOYMENT

          4.1
Death. The Employee’s employment shall terminate automatically upon the Employee’s death
during the Employment Term.

          4.2
Disability. If the Company determines in good faith that the Disability (as defined below)
of the Employee has occurred during the Employment Term, the Company may give the Employee notice
of its intention to terminate the Employee’s employment. In such event, the Employee’s employment
hereunder shall terminate effective on the 30th day after receipt of such notice by the Employee
(the “Disability Effective Date”); provided, that, within the 30-day period after such receipt, the
Employee shall not have returned to full-time performance of the Employee’s duties. For purposes
of this Agreement, “Disability” shall mean the absence of the Employee from the Employee’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 Employee, 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 Employee or the Employee’s legal representative, be permanent and continuous
during the remainder of the Employee’s life.

          4.3
Termination by Company.

          (a) Termination for Cause.

          The Company may terminate the Employee’s employment hereunder for Cause (as defined below). For
purposes of this Agreement, “Cause” shall mean:

     (i) the willful and continued failure of the Employee to perform substantially the
Employee’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 Employee by the Board or the Chief Executive Officer or the Chief Financial Officer of the
Company, which specifically identifies the manner in which the Board
or the Chief Executive Officer or the Chief Financial Officer
of the Company believes the Employee has not substantially performed the Employee’s duties; or

     (ii) the willful engaging by the Employee 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
Employee shall be considered “willful” unless done, or omitted to be done, by the Employee in bad
faith or without reasonable belief that the Employee’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 Employee 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 Employee in good faith and in the
best interests of the Company and its affiliated companies. The cessation of employment of the
Employee shall not be deemed to be for Cause unless and until there shall have been delivered to
the Employee 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 Employee and the Employee
is given an opportunity, together with counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in detail.

     (iii) the Employee’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, or on the occasion of
the Employee death or disability, or that are not terminated during the 60-day
period prior to any anniversary date as provided in Section 2.2
or Section 4.4,
shall be considered Without Cause.

          4.4  Termination by Employee. The Employee may terminate the Employee’s
employment hereunder (x) at any time during the Employment Term for Good Reason
(as defined below) or (y) during the Window Period (as defined below) Without
Good Reason. For purposes of this Agreement, the “Window Period” shall mean the
30-day period immediately following the first anniversary of the Effective Date,
and “Good Reason” shall mean any of the following (without the Employee’s
express written consent):

     (a) The assignment to the Employee of any duties inconsistent in any
respect with the Employee’s position (including status, offices, titles and
reporting requirements), duties, functions, responsibilities or authority as
contemplated by Section 2.3 of this Agreement, or any other action by the
Company that results in a diminution in such position, duties, functions,
responsibilities or authority, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Employee;

     (b) Any failure by the Company to comply with any of the provisions of
Section 2.3 of this Agreement, other than an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Employee;

     (c) The Company’s requiring the Employee to be based at any office or
location other than as provided in Section 2.8 of this Agreement or the
Company’s
requiring the Employee to travel on the Company’s or its affiliated companies’
business to a substantially greater extent than during the three-year period
immediately preceding the Effective Date;

     (d) Any failure by the Company to comply with and satisfy Section 8.1 of
this Agreement; or

 

 

     (e) Any purported termination by the Company of the Employee’s employment
hereunder otherwise than as expressly permitted by this Agreement, and for
purposes of this Agreement, no such purported termination shall be effective.

For purposes of this Section 4.4, any good faith determination of “Good Reason”
made by the Employee shall be conclusive.

          4.5 Termination without Prejudice. The Company or Employee may terminate
this Agreement at any time during the 60-day period prior to the Automatic
Extension.

          4.6  Notice of Termination. Any termination of the Employee’s employment
hereunder by the Company or by the Employee (other than a termination pursuant
to Section 4.1) shall be communicated by a Notice of Termination (as defined
below) to the other party hereto. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which (a) indicates the specific termination
provision in this Agreement relied upon, (b) in the case of a termination for
Disability, Cause or Good Reason, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee’s
employment under the provision so indicated, and (c) specifies the Date of
Termination (as defined in Section 4.7 below); provided,
however, that
notwithstanding any provision in this Agreement to the contrary, a Notice of
Termination given in connection with a termination for Good Reason shall be
given by the Employee within a reasonable period of time, not to exceed
120 days, following the occurrence of the event giving rise to such right of
termination. The failure by the Company or the Employee to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Disability, Cause or Good Reason shall not waive any right of the Company or the
Employee hereunder or preclude the Company or the Employee from asserting such
fact or circumstance in enforcing the Company’s or the Employee’s rights
hereunder.

          4.7  Date of Termination. For purposes of this Agreement, the “Date of
Termination” shall mean the effective date of termination of the Employee’s
employment hereunder, which date shall be (a) if the Employee’s employment is
terminated by the Employee’s death, the date of the Employee’s death, (b) if
the Employee’s employment is terminated because of the Employee’s Disability,
the Disability Effective Date, (c) if the Employee’s employment is terminated
by the Company (or applicable affiliated company) for Cause or by the Employee
for Good Reason, the date on which the Notice of Termination is given, (d) if
the Employee’s employment is terminated pursuant to Section 2.2, the date on
which the Employment Term ends pursuant to Section 2.2 due to a party’s delivery
of a Notice of Termination thereunder, and (e) if the Employee’s employment is
terminated for any other reason, the date specified in the Notice of
Termination, which date shall in no event be earlier than the date such notice
is given; provided, however, that if within 30 days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties or by a final judgment, order or
decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).

          4.8  Obligations of the Company upon Termination.

     (a)  Good Reason or During the Window Period; Other Than for Cause, Death or
Disability. If, during the Employment Term, the Company (or applicable
affiliated company) shall terminate the Employee’s employment hereunder other
than for Cause or Disability or the Employee shall terminate the Employee’s
employment either for Good Reason or Without Good Reason during the Window
Period:

     (i) the Company shall pay to the Employee (either in a lump sum or on in
equal monthly installments over a six-month period after

 

 

the Date of Termination,
at the Company’s option) the sum of (1) the that portion Employee’s Base Salary
that was not previously paid to the Employee from the last payment date through
the Date of Termination, and (2) an amount equal six months salary at the level
of the Employee’s Base Salary then in effect, (such six months amount is
hereinafter referred to as the “Severance Amount”);

     (ii) all stock options, stock appreciation rights, and restricted stock
shall immediately vest;

     (iii) all stock options and stock appreciation rights shall be payable in
Common Stock;

     (iv) all performance share units that would vest in the course of any
fiscal year shall vest on a pro rata basis; and

     (v) the Company shall pay, on a grossed-up basis (as determined in the same
manner as under Section 3.4(b) herein) the amount of any excise and income taxes
payable by Employee as a result of any payments in Common Stock triggered by
this Agreement, or other agreements between Employee and the Company, or any of
its subsidiaries.

To the extent not theretofore paid or provided, the Company shall timely pay or
provide to the Employee any other amounts or benefits required to be paid or
provided or which the Employee is eligible to receive under any plan, program,
policy, practice or arrangement or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits hereinafter referred to as
the “Other Benefits”).

            (b) Death. If the Employee’s employment is terminated by reason of the
Employees’s death during the Employment Term, this Agreement shall terminate
without further compensation obligations to the Employee’s legal
representatives under this Agreement, other than for (i) payment of Accrued
Obligations (which shall be paid to the Employee’s estate or beneficiary, as
applicable, in a lump sum in cash within 90 days of the Date of Termination) and
the timely payment or settlement of any other amount pursuant the Other Benefits
and (ii) treatment of all other compensation under existing plans as provided by
the terms and rules of those plans.

            (c) Disability. If the Employee’s employment is terminated by reason of
the Employees’s Disability during the Employment Term, this Agreement shall
terminate without further compensation obligations to the Employee, other than
for (i) payment of Accrued Obligations (which shall be paid to the Employee in
a lump sum in cash within 90 days of the Date of Termination) and the timely
payment or settlement of any other amount pursuant to the Other Benefits and (ii) treatment of all other
compensation under existing plans as provided by the terms and rules of those
plans.

            (d)  Cause; Other than for Good Reason or During the Window Period. If the
Employees’s employment is terminated for Cause during the Employment Term, this
Agreement shall terminate without further compensation obligations to the
Employee other than the obligation to pay to the Employee Base Salary through
the Date of Termination plus the amount of any compensation previously deferred
by the Employee, in each case to the extent theretofore unpaid. If the
Employee voluntarily terminates the

 

 

Employee’s employment during the
Employment Term, excluding a termination either for (i) Good Reason or (ii)
Without Good Reason during the Window Period, this Agreement shall terminate
without further compensation obligations to the Employee, other than for the
that portion Employee’s Base Salary that was not previously paid to the
Employee from the last payment date through the effective date of the
Employee’s voluntary termination and the timely payment or provision of the
Other Benefits, as provided in any applicable plan, and the Employee shall have
no further obligations nor liability to Company. In such case, any amounts owed
to the Employee shall be paid to the Employee in a lump sum in cash within
90 days of the Date of Termination subject to applicable laws and regulations.

          4.9  Continuation of Payments During Disputes. The Parties agree that in the
case of:

   (a) termination which the Company contends is for Cause, but Employee
claims is not for Cause; or

   (b) termination by Employee under Section 4.4 herein,

the Company shall continue to pay all compensation due to Employee hereunder
until the resolution of such dispute, but the Company shall be entitled to
repayment of all sums so paid, if it ultimately shall be determined by a court
of competent jurisdiction, in a final non-appealable decision, that the
termination was for Cause or such termination by Employee was not authorized
under Section 4.4 herein, and all sums so repaid shall bear interest at the
prime rate as published in The Wall Street Journal on the date on which such
court makes such determination. Any such reimbursement of payments by Employee
shall not include any legal fees or other loss, costs, or expenses incurred by
the Company, notwithstanding any provision of the Indemnification Agreement,
which is attached as Exhibit A and is considered a part of this Agreement.

ARTICLE FIVE

INDEMNIFICATION

     5.  Indemnification. The Employee shall be indemnified and held harmless
pursuant to the terms and conditions set forth in the Indemnification Agreement
substantially in the form attached as Exhibit A hereto.

ARTICLE SIX

CONFIDENTIALITY

     6.  Confidentially; Non-Competition; and Non-Solicitation.

          6.1  Confidentiality. In consideration of employment by the Company and
Employee’s receipt of the salary and other benefits associated with Employee’s
employment, and in acknowledgment that (a) the Company is engaged in the oil and
gas business, (b) maintains secret and confidential information, (c) during the
course of Employee’s employment by the Company such secret or
confidential information may become known to Employee, and (d) full
protection of the Company’s business makes it essential that no
employee appropriate for his or her own use,. or disclose such secret
or

 

 

 confidential information, Employee
agrees that during the time of Employee’s employment and for a period of one
(1) year following the termination of Employee’s employment with the Company,
Employee agrees to hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any person, or use for his own personal
benefit or for the benefit of anyone else, any trade secrets, confidential
dealings, or other confidential or proprietary information of any kind, nature,
or description (whether or not acquired, learned, obtained, or developed by
Employee alone or in conjunction with others) belonging to or concerning the
Company or any of its subsidiaries, except (i) with the prior written consent of
the Company duly authorized by its Board, (ii) in the course of the proper
performance of Employee’s duties hereunder. (iii) for information (x) that
becomes generally available to the public other than as a result of unauthorized
disclosure by Employee or his affiliates or (y) that becomes available to
Employee on a nonconfidential basis from a source other than the Company or its
subsidiaries who is not bound by a duty of confidentiality, or other
contractual, legal, or fiduciary obligation, to the Company, or (iv) as required
by applicable law or legal process.

          6.2  Non-Competition. During Employee’s employment with the Company and for
so long as Employee receives any Severance Benefit or is receiving any
Severance Amount provided under this agreement in respect of the termination of
his employment, Employee shall not be engaged as an officer or Employee of, or
in any way be associated in a management or ownership capacity with any
corporation, company, partnership or other enterprise or venture which conducts
a business which is in direct competition with the business of the Company;
provided, however, that Employee may own not more than two percent (2%) of the
outstanding securities, or equivalent equity interests, of any class of any
corporation, company, partnership, or either enterprise that is in direct
competition with the business of the Company, which securities are listed on a
national securities exchange or traded in the over-the-counter market. For
purposes of this Agreement, a lump sum payment equivalent made to Employee
shall be judged in relation to his most recent annual base salary to determine
whether Employee is continuing to receive a Severance Benefit or Severance
Amount and shall be measured from the date such payment is received. It is
expressly agreed that the remedy at law for breach of this covenant is
inadequate and that injunctive relief shall be available to prevent the breach
thereof.

          6.3  Non-Solicitation. Employee also agrees that he will not, directly or
indirectly, during the term of his employment or within one (1) year after
termination of his employment for any reason, in any manner, encourage,
persuade, or induce any other employee of the Company to terminate his
employment, or any person or entity engaged by the Company to represent it to
terminate that relationship without the express written approval of the Company.
It is expressly agreed that the remedy at law for breach of this covenant is
inadequate and that injunctive relief shall be available to prevent the breach
thereof.

ARTICLE SEVEN

CHANGE OF CONTROL

     7. Certain
Definitions.

          7.1  Change of Control Effective Date. The “Change of Control Effective
Date” shall mean the first date during the Change of Control Period (as defined
in Section 7.2) on which a Change of Control occurs. Notwithstanding anything in
this Agreement to the contrary, if a Change of Control occurs and if the
Employee’s employment with the Company (or applicable affiliated company) is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Employee that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose
in connection with

 

 

or anticipation of a Change of Control, then for all purposes of this
Agreement the “Change of Control Effective Date” shall mean the date immediately
prior to the date of such termination of employment.

          7.2  Change of Control Period. The “Change of Control Period” shall mean the
period commencing on the date of this Agreement and ending on the third
anniversary of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof herein referred to as the “Renewal
Date”), the Change of Control Period shall be automatically extended so as to
terminate three years after such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give notice to the Employee that the Change
of Control Period shall not be so extended.

          7.3  Change of Control. For purposes of this Agreement, a “Change of
Control” shall mean:

     (a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 15% or more of either (A) the then outstanding Common Shares the Company (the
“Outstanding Shares”) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Voting Securities”);
provided, however, that for
purposes of this Subsection 7.3(a) the following acquisitions shall not
constitute a Change of Control: (w) Company-sponsored recapitalization that is
approved by the Incumbent Board, as defined below; (x) a capital raise initiated
by the Company where the Incumbent Board remains for at least at least 548 days
after the closing date of the raise, or (y) an acquisition of another company or
asset(s) initiated by the Company and where the Company’s shareholders
immediately after the transaction own at least 51% of the equity of the combined
concern; or

     (b) individuals who, as of the date of this Agreement, constitute the
Company’s Board (the “Incumbent Board”) cease for any reason to constitute a
majority of such Board of Directors; provided, however, that any individual
becoming a director of the Company shareholders subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders was
approved by a vote of a majority of the directors of the Company then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Company Board; or

     (c) consummation of a reorganization, merger, amalgamation or consolidation
of the Company, with or without approval by the shareholders of the Company, in
each case, unless, following such reorganization, merger, amalgamation or
consolidation, (i) more than 50% of, respectively, the then outstanding shares
of common stock (or equivalent security) of the company resulting from such
reorganization, merger, amalgamation or consolidation and the combined voting
power of the then outstanding voting securities of such company entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Shares and Outstanding
Voting Securities immediately prior to such reorganization, merger, amalgamation
or consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, amalgamation or consolidation,
of the

 

 

Outstanding Shares and Outstanding Voting Securities, as the case may be,
(ii) no Person (excluding a parent of the Company that may come into being after
the date of this Agreement through any transaction deliberately undertaken by
the Company after an affirmative vote of its Incumbent Directors and the Company
shareholders), any employee benefit plan (or related trust) of the Company or
such company resulting from such reorganization, merger, amalgamation or
consolidation, and any Person beneficially owning, immediately prior to such
reorganization, merger, amalgamation or consolidation, directly or indirectly,
15% or more of the Outstanding Shares or Outstanding Voting Securities, as the
case may be) beneficially owns, directly or indirectly. 15% or more of,
respectively, the then outstanding shares of common stock (or equivalent
security) of the company resulting from such reorganization, merger,
amalgamation or consolidation or the combined voting power of the then
outstanding voting securities of such company entitled to vote generally in the
election of directors, and (ii) a majority of the members of the board of
directors of the company resulting from such reorganization, merger,
amalgamation or consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such reorganization,
merger, amalgamation or consolidation; or

     (d) consummation of a sale or other disposition of all or substantially all
the assets of the Company, with or without approval by the shareholders of the
Company, other than to a corporation, with respect to which following such sale
or other disposition, (i) more than 50% of, respectively, the then outstanding
shares of common stock (or equivalent security) of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Shares and Outstanding Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Shares and Outstanding Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation, and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or indirectly, 15%
or more of the Outstanding Shares or Outstanding Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 15% or more of, respectively,
the then outstanding shares of common stock (or equivalent security) of such
corporation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors, and (C) a majority of the members of the board of directors of such
corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or action of the
Incumbent Board providing for such sale or other disposition of assets of the
Company; or

     (e) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.

 

 

ARTICLE EIGHT

MISCELLANEOUS

     8.  Miscellaneous.

          8.1  Benefit. This Agreement shall inure to the benefit of and be binding
upon each of the Parties, and their respective successors. This Agreement shall
not be assignable by any Party without the prior written consent of the other
Party. The Company shall require any successor, whether direct or indirect, to
all or substantially all the business and/or assets of the Company to expressly
assume and agree to perform, by instrument in a form reasonably satisfactory to
Employee, this Agreement and any other agreements between Employee and the
Company or any of its subsidiaries, in the same manner and to the same extent as
the Company.

          8.2  Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Colorado without resort to any
principle of conflict of laws that would require application of the laws of any
other jurisdiction; provided, however, that Delaware law shall govern with
respect to the Employee’s rights under a Change of Control under Article Seven
herein.

          8.3  Counterparts. This Agreement may be executed in counterparts and via
facsimile, each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same Agreement. Each such
counterpart shall become effective when one counterpart has been signed by each
Party thereto.

          8.4 Headings. The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement or considered in construing the provisions thereof.

          8.5  Severability. Any term or provision of this Agreement that shall be
prohibited or declared invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
declaration, without invalidating the remaining terms and provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction, and if any term or provision of this Agreement is held by any
court of competent jurisdiction to be void, voidable, invalid or unenforceable
in any given circumstance or situation, then all other terms and provisions
hereof, being severable, shall remain in full force and effect in such
circumstance or situation, and such term or provision shall remain valid and in
effect in any other circumstances or situation.

          8.6  Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party’s counsel has drafted any portion of this Agreement.

          8.7  Equitable Remedies. The Parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party, if not then in breach
of this Agreement, may be without an adequate remedy at law owing to the unique nature of the contemplated
relationship. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement, by the Party in breach, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to

 

 

constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.

          8.8  Attorney’s Fees. If any Party hereto shall bring an action at law or in
equity to enforce its rights under this Agreement, the prevailing Party in such
action shall be entitled to recover from the Party against whom enforcement is
sought its costs and expenses incurred in connection with such action (including
fees, disbursements and expenses of attorneys and costs of investigation). In
the event that Employee institutes any legal action to enforce Employee’s
legal rights hereunder, or to recover damages for breach of this Agreement,
Employee, if Employee prevails in whole or in part, shall be entitled to
recover from the Company reasonable attorneys’ fees and disbursements incurred
by Employee with respect to the claims or matters on which Employee has
prevailed.

          8.9  No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or default of any other
Party, or otherwise, shall impair any such rights, powers or remedies of the
Party not in breach or default, nor shall it be construed to be a waiver of any
such right, power or remedy, or an acquiescence in any similar breach or
default; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any Party of
any provisions of this Agreement must be in writing and be executed by the
Parties and shall be effective only to the extent specifically set forth in such
writing.

          8.10  Remedies Cumulative. All remedies provided in this Agreement, by law or
otherwise, shall be cumulative and not alternative.

          8.11  Amendment. This Agreement may be amended only by a writing signed by
all of the Parties hereto.

          8.12  Entire Contract. This Agreement and the documents and instruments
referred to herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings, written or oral, with respect
to the subject matter of this Agreement.

          8.13  Survival. This Agreement shall constitute a binding obligation of the
Company and any successor thereto. Notwithstanding any other provision in this
Agreement, the obligations under Articles 5 and 6 shall survive termination of
this Agreement.

          8.14  Savings Clause. Notwithstanding any other provision of this Agreement,
if the indemnification provisions in Exhibit A  hereto or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Company shall nevertheless indemnify Employee as to Expenses, judgments,
fines, penalties and amounts paid in settlement with respect to any Proceeding
to the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated and to the fullest extent permitted by
applicable law.

          8.15  Modifications and Waivers. Notwithstanding any other provision of this
Agreement, the indemnification provisions in Exhibit A hereto and the Change of
Control provisions Article Seven herein, may be amended from time to time to
reflect changes in Delaware law or for other reasons.

          8.16  Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given (i) when
delivered by hand or (ii) if mailed by certified or registered mail with postage
prepaid, on the third day after the date on which it is so mailed:

 

 

          (a)        If to Employee:

      William P. Brand, Jr.

      8724 E. Phillips Place

      Centinnial, Colorado 80112

          (b)       If to the Company:

      Teton Energy Corporation

      410 17th Street — Suite 1850

      Denver, CO 80202

      Attn: CEO

or to such other address as may have been furnished to Employee by the Company
or to the Company by Employee, as the case may be.

          8.17
No Limitation. Notwithstanding any other provision of this Agreement,
for avoidance of doubt, the parties confirm that the foregoing does not apply to
or limit Employee’s rights under Delaware law or the Company’s Corporate
Documents.

          IN WITNESS WHEREOF, the parties have set their hands and seals hereunto on the
date first above written.

	 	 	 
	Teton Energy Corporation

	 	EMPLOYEE
	 
	 	 
	By:
/s/ Bill I. Pennington

	 	By: /s/ William P. Brand, Jr.
	 

	 	 

	Name: Bill I. Pennington

Title: Employee Vice President & CFO

	 	Name: William P. Brand, Jr.

 

 

Schedule A

Outside Activities

William P. Brand, Jr.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Date Hired	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	or	 	 	 	 	 	 	 	 	 	 	Annual Time	 
	Company or	 	Nature of	 	 	Commenced	 	 	 	 	 	 	 	 	 	 	Commitment, (time	 
	Project Name	 	Business	 	 	Involvement	 	 	Position	 	 	Compensation	 	 	away from office)	 
	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Dated:
December 1, 2006

	 	 	 	 	 	 	 	 	 
	Initials: Employee:

	 	 	 	Company:
	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

 

 

Exhibit A

Indemnification Agreement

 

 

Exhibit B

Form of Restricted Stock Agreement

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