Document:

Exhibit 10.6

 

Teton Energy Corporation 2005 Long-Term Incentive Plan

 

2006 Performance Share Unit Award Agreement

 

You have been selected to be
a Participant in the Teton Energy Corporation 2005 Long-Term Incentive Plan
(the “Plan”), as specified below:

 

Participant:

 

Date of Award:

 

Target Number of Performance Share Units Awarded:                                                  Base Units;        
Stretch Target Units

 

Performance Period:                              1 January 2006 to 31 December 2008

 

Performance Measure:                  Completion
of acquisitions that increase the Company’s asset base; Management’s efficiency
and effectiveness; Measurement of Teton’s stock performance relative to a stock
performance index of peers of the Company, which index is compiled by an
independent third party-based on the size and growth prospects, and the price
of the Company’s common stock (the “Performance Measures”). The Performance
Measures are consolidated into a composite measure based on the relative
weighting of each component as a percentage of 100%. Performance measures are
based on the attainment of one, two, and three-year objectives.

 

THIS AWARD AGREEMENT,
effective as of the Date of Award set forth above, represents the award of
Performance Share Units by Teton Energy Corporation, a Delaware corporation
(the “Company”), to the Participant named above, pursuant to the provisions of
the Plan, which is attached as Exhibit A, and pursuant to the plan
administration document (the “Plan Administration”), which is attached as Exhibit B.

 

The Plan and the Plan
Administration provide a complete description of the terms and conditions
governing Performance Share Units. If there is any inconsistency between the
terms of this Award Agreement and the terms of the Plan, the Plan’s terms shall
completely supersede and replace the conflicting terms of this Award Agreement.
All capitalized terms shall have the meanings ascribed to them in the Plan,
unless specifically set forth otherwise herein. In consideration of the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties hereto agree as
follows:

 

1. Affiliation with the Company. The Performance Share Units granted
hereunder are awarded on the condition that the Participant remains as a member
of the Board of Directors with the Company from the Date of Award through the
end of the Performance Period, as specified above. However, neither such
condition nor the award of the Performance Share Units shall impose upon the
Company any obligation to retain the Participant on its Board for any given
period or upon any specific terms. Further, Participant confirms that the
Performance Share Units are being offered to Participant only for Participant’s
services as a director of the Company.

 

2. Earning Performance Share Units. Subject to the terms of the Plan and this
Award Agreement, the Participant shall be entitled to receive payment of the
number and value of Performance Share Units earned by the Participant over the
Performance Period, where the number of Performance Share Units is determined
as a function of the extent to which the corresponding performance goals have
been achieved.

 

3. Performance Measures. The Performance Measures under this Award
Agreement shall be based on a combination of Completion of acquisitions that increase
the Company’s asset base; Management’s efficiency and effectiveness;
Measurement of Teton’s stock performance relative to a stock performance and
growth prospects. The Performance Measures are consolidated into a composite
measure based on the relative weighting of each component as a percentage of
100%. Performance measures are based on the attainment of one, two, and
three-year objectives.

 

 

Achievement of the following
targets in 2006, 2007 and 2008 will entitle the Participant to payment of the
Target Number of Performance Share Units awarded as set forth above, subject to
other provisions of the Plan and this Award Agreement:

 

Base
Performance Targets

 

	
   

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Composite
  Measurement

  	
   

  	
  100.00

  	
   

  	
  100.00

  	
   

  	
  100.00

  	
   

  

 

Achievement of the following
targets in 2005, 2006, and 2007 shall entitle the Participant to payment of
200% of the Target Number of Performance Share Units awarded:

 

Stretch
Performance Targets

 

	
   

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Composite
  Measurement

  	
   

  	
  122.50

  	
   

  	
  121.50

  	
   

  	
  118.00

  	
   

  

 

Achievement of the following
targets in 2005, 2006, and 2007 shall entitle the Participant to payment of 50%
of the Target Number of Performance Share Units awarded:

 

Below
Base Performance Targets

 

	
   

  	
   

  	
  2006

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Composite
  Measurement

  	
   

  	
  50.00

  	
   

  	
  50.00

  	
   

  	
  50.00

  	
   

  

 

Achievement of less than the
aforementioned targets shall result in no payment of Performance Share Units to
the Participant under this Award Agreement.

 

Achievement of results
between Performance Targets identified above shall entitle the Participant to
payment of the number of Performance Share Units interpolated according to a
performance achievement function defined by the foregoing achievement levels. Such
interpolation shall be made by the Committee in its sole discretion and shall
be binding.

 

In the event that the
Base Performance Targets for 2006 are achieved, 20% of the Target Performance
Share Units shall vest and be paid out to the Participant. In the event that
the Base Performance Targets for 2007 are achieved, 30% of the Target
Performance Share Units shall vest and be paid out to the Participant. In the
event that the Base Performance Targets for 2008 are achieved, the balance or
50% of the Target Performance Shares Units shall vest and be paid out to the
Participant. Stretch targets, if achieved, will be paid out according to the
same schedule.

 

4. Form and Timing of Payment of Performance Share Units. Payment of earned Performance Share Units
shall be made as soon as practicable but in no event after March 15
of the calendar year following the calendar year of the close of the applicable
Performance Period. Subject to the Plan, the Committee, as that term is defined
in the Plan, has authorized that the future payment of any earned Performance
Share Units shall be made 100% in Shares. The Company will withhold from any
such payout Shares having a value equivalent to the amount needed to satisfy
the minimum statutory tax withholding requirements of the Company or its
Subsidiary in the appropriate taxing jurisdiction.

 

5. Voting Rights and Dividends. During the Performance Period and until the
date of payment of Performance Share Units as provided for in Section 4,
the Participant will not have voting rights with respect to the Performance
Share Units. During the Performance Period and until and including the date of
payment of Performance Share Units as provided in Section 4, the
Participant shall receive all dividends, dividend equivalents and other
distributions paid with respect to the number of shares of Common Stock of the
Company equal to the number of Performance Share Units granted under this Award.
Any such payment of dividend, dividend equivalent or other distribution will be
held in escrow and granted to Participant upon the attainment of applicable
targets and vesting of the shares. Amounts to be credited to such escrow shall
be credited within 15 calendar days following the specified record date.

 

2

 

6. Termination of Board Membership Due to Death, Disability,
or Retirement. In the
event the Participant’s tenure as a member of the Company’s Board is terminated
by reason of death, Disability, or Retirement (as such terms are defined in the
Plan) during the Performance Period, the Participant or the Participant’s
beneficiary or estate, as the case may be, shall be entitled to receive a
prorated payment of the Performance Share Units. The prorated payment shall be
determined by the Committee, in its discretion, based on the number of full
months of the Participant’s participation on the Board during the Performance
Period, in relation to the total number of months in the Performance Period,
and shall further be adjusted based on the achievement of the pre-established
performance goals set forth in Section 3.

 

Payment of Performance
Share Units shall be made at the time specified by the Committee in its
discretion. Notwithstanding the foregoing, with respect to a Participant who
retires during the Performance Period, payments shall be made at the same time
as payments are made to Participants who did not terminate employment or Board
service during the applicable Performance Period as set forth in Section 4.

 

7. Termination of Board Membership for Other Reasons. In the event the Participant’s tenure as a
member of the Company’s Board is terminated for any reason other than those
reasons set forth in Section 6, whether with or without cause, all
Performance Share Units awarded to the Participant under this Award Agreement
shall be forfeited by the Participant to the Company; provided, however, that
in the event the Participant’s Board membership is terminated without cause,
the Committee, in its discretion, may waive such automatic forfeiture
provision and pay out on a pro rata basis in accordance with Section 6.

 

8. Change in Control. In the event of a Change in Control as defined in the Plan, during
the Performance Period, the Target Number of Performance Share Units shall
become payable in full and such payment shall be made within twenty-five
(25) calendar days following the date of the Change in Control. The Committee,
in its discretion, may make such payment of the Target Number of
Performance Share Units in the form of cash or in shares (or in a
combination thereof). The number of Shares to be issued, if any, shall be equal
to the number of earned Performance Share Units designated by the Committee to
be paid in Shares. The amount of cash to be paid if any shall be equal to the
Fair Market Value, as defined in the Plan, of a share of the Common Stock of
the Company as of the date of the Change in Control multiplied by the number of
Performance Share Units designated by the Committee to be paid in cash.

 

9. Nontransferability. Performance Share Units may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except
as otherwise determined by the Committee and provided in this Award Agreement,
a Participant’s rights under the Plan shall be exercisable during the
Participant’s lifetime only by the Participant or the Participant’s legal
representative.

 

10. Adjustments in Authorized Shares. The Committee shall have the sole
discretion to adjust the number of Performance Share Units awarded pursuant to
this Award Agreement, in accordance with the Plan.

 

11. Tax Withholding. The Company shall have the power and the right to deduct or withhold,
or require the Participant or beneficiary to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Award Agreement. The Company’s power and right to
withhold includes the right to withhold Shares with a value equivalent to the
amount needed to satisfy the minimum statutory tax withholding requirements of
the Company, its Subsidiary, or affiliate in the appropriate taxing
jurisdiction.

 

12. Share Withholding. With respect to withholding required upon
any other taxable event arising as a result of Awards granted hereunder, the
Participant may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold Performance Share Units having a Fair Market Value on the date the tax
is to be determined equal to the minimum statutory total tax which could be
withheld on the transaction. All such elections shall be irrevocable, made 

 

3

 

in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.

 

13. Covenant Not to Compete. Without the consent of the Company, the
Participant shall not, directly or indirectly, at any time during the
Participant’s service on the Company’s Board or the Board of any of its
Subsidiaries, and for a period of eighteen (18) months following the
termination of Participant’s relationship with the Company and its Subsidiaries
for any reason, be associated or in any way connected as an owner, investor,
partner, director, officer, employee, agent, or consultant with any business
entity directly engaged in the production and/or sale of products competitive
with any material product, offering or business of the Company or any of its
Subsidiaries; provided, however, that the Participant shall not be deemed to
have breached this undertaking if his sole relation with such entity consists
of his holding, directly or indirectly, an equity interest in such entity not
greater than two percent (2%) of such entity’s outstanding equity interest, and
the class of equity in which the Participant holds an interest is listed
and traded on a broadly recognized national or regional securities exchange;
provided, further, that in the event that Participant’s service on the Company’s
Board or the board of any of its Subsidiaries terminates for reasons related to
a change in control, this restriction shall not apply. A Participant’s
investment in another business entity shall not be deemed to be directly
competitive with the Company’s operations or otherwise prohibited if: (a) it
was known to the independent directors at the time the Participant joined the
Company’s Board; (b) reviewed and approved by disinterested independent
directors; or (c) of a passive, minority investment nature and the disinterested independent directors have determined
that the activities undertaken by such other business entity are not directly
in competition with the Company as there are no corporate opportunities that
are being taken from the Company by virtue of the Participant’s investment.

 

The Participant
acknowledges that: (a) the services to be performed by him for the Company
as a member of the Company’s Board are of a special, unique, unusual,
extraordinary, and intellectual character; (b) the business of the Company
and its subsidiaries is worldwide in scope and its business opportunities are
located throughout the world; (c) the Company and its Subsidiaries and
affiliates compete with other businesses that are or could be located in any part of
the world; and (d) the provisions of this Section 13 are reasonable
and necessary to protect the Company’s business.

 

If any covenant in this Section 13
is held to be unreasonable, arbitrary, or against public policy, such covenant
will be considered to be divisible with respect to scope, time, and geographic
area, and such lesser scope, time, or geographic area, or all of them, as a
court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, binding, and
enforceable against the Participant.

 

The period of time
applicable to any covenant in this Section 13 will be extended by the
duration of any violation by the Participant of such covenant.

 

For so long as while the
covenants under this Section 13 are in effect, the Participant will give
notice to the Company of the identity of the Participant’s new employer or any
new company whose board Participant may join or otherwise affiliate with,
within two business days after accepting any such affiliation. The Company may notify
such company that the Participant is bound by this Award Agreement and, at the
Company’s election, furnish such company with a copy of this Award Agreement or
relevant portions thereof.

 

14. Disclosure of Confidential Information. Without the consent of the Company, the
Participant shall not disclose to any other person Confidential Information, as
defined below, concerning the Company or any of its Subsidiaries or affiliates,
or the Company’s or any of its Subsidiaries’ trade secrets of which the
Participant has gained knowledge during his participation as a director of the
Company. Any trade secrets of the Company or any of its subsidiaries or related
or affiliated companies or joint ventures will be entitled to all of the
protections and benefits under the Uniform Trade Secrets Act (Article 74
of the Colorado Statutes), Section 18-4-408 of the Colorado Statutes, and
any other applicable law. If any information that the Company deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Award Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of this Award
Agreement. The Participant hereby waives any 

 

4

 

requirement that the Company
submits proof of the economic value of any trade secret or posts a bond or
other security. None of the foregoing obligations and restrictions apply to any
part of the Confidential Information that the Participant demonstrates was
or became generally available to the public other than as a result of a
disclosure by the Participant.

 

For purposes of this
Award Agreement, Confidential Information shall include any and all information
concerning the business and affairs of the Company or any of its Subsidiaries
or affiliates which is not generally available to others, would be considered
to be information proprietary to the Company or any of its Subsidiaries, or
that is a trade secret within the meaning of the Uniform Trade Secrets Act
(Article 74 of the Colorado Statutes), Section 18-4-408 of the
Colorado Statutes, and any other applicable law.

 

15. Nonsolicitation. Without the written consent of the Company, the Participant shall
not, at any time during his tenure as a director and for a period of eighteen
(18) months following the termination of Participant’s relationship with the
Company and its Subsidiaries or affiliates for any reason (a) employ or
retain or arrange to have any other person, firm, or other entity employ or
retain or otherwise participate in the employment or retention of any person
who is an employee or consultant of the Company or its Subsidiaries; or (b) solicit
or arrange to have any other person, firm, or other entity solicit or otherwise
participate in the solicitation of business from any entity that was a customer
of the Company or any of its Subsidiaries or affiliates during the time of the
Participant’s affiliation with the Company, whether or not the Participant had
personal contact with such person; provided, further, that in the event that
Participant’s affiliation with the Company or any of its Subsidiaries
terminates for reasons related to a change in control, this restriction shall
not apply.

 

16. Injunctive Relief and Additional Remedy; Essential and
Independent Covenants.

 

The Participant
acknowledges that the injury that would be suffered by the Company as a result
of a breach of the provisions of this Award Agreement (including any provision
of Sections 13, 14, and 15) would be irreparable and that an award of monetary
damages to the Company for such a breach would be an inadequate remedy. Consequently,
the Company will have the right, in addition to any other rights it may have,
to obtain injunctive relief to restrain any breach or threatened breach or
otherwise to specifically enforce any provision of this Award Agreement, and
the Company will not be obligated to post bond or other security in seeking
such relief. Without limiting the Company’s rights under this Section 16
or any other remedies of the Company, if the Participant breaches any of the
provisions of Sections 13, 14, or 15, the Company will have the right to cease
making any payments otherwise due to the Participant under this Award
Agreement.

 

The covenants by the
Participant in Sections 13, 14, and 15 are essential elements of this Award
Agreement, and without the Participant’s agreement to comply with such
covenants, the Company would not have entered into this Award Agreement with
the Participant. The Company and the Participant have been afforded the
opportunity to consult their respective counsel and have been advised or had
the opportunity to obtain advice, in all respects concerning the reasonableness
and propriety of such covenants (including, without limitation, the time period
of restriction and the geographical area of restriction set forth in Section 13),
with specific regard to the nature of the business conducted by the Company and
its Subsidiaries and related or affiliated companies or joint ventures. The
Participant’s covenants in Sections 13, 14, and 15 are independent covenants
and the existence of any claim by the Participant against the Company under
this Award Agreement or otherwise, will not excuse the Participant’s breach of
any covenant in Sections 13, 14, or 15.

 

If this Award Agreement
or the Participant’s services as a member of the Board of the Company and its
Subsidiaries or affiliates expires or is terminated, this Award Agreement will
continue in full force and effect as is necessary or appropriate to enforce the
covenants and agreements of the Participant in Sections 13, 14, 15, and 16.

 

17. Beneficiary Designation. The Participant may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under this Award Agreement is to be paid in
case of his or her death before he or she receives any or all of such benefit.
Each such designation shall revoke all prior designations by the Participant,
shall be in a form prescribed by the 

 

5

 

Company, and will be
effective only when filed by the Participant in writing with the Secretary of
the Company during the Participant’s lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant’s death shall be paid
to the Participant’s estate.

 

Beneficiary
Designation (name, address, and relationship):

 

	
  Name:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
  Relationship:

  	
   

  	
   

  

 

18. Administration. This Award Agreement and the rights of the Participant hereunder are
subject to all the terms and conditions of the Plan, as the same may be
amended from time to time, as well as to such rules and regulations as the
Committee may adopt for administration of the Plan. It is expressly
understood that the Committee is authorized to administer, construe, and make
all determinations necessary or appropriate to the administration of the Plan
and this Award Agreement, all of which shall be binding upon the Participant. Any
inconsistency between the Award Agreement and the Plan shall be resolved in
favor of the Plan. Any inconsistency between the Award Agreement and the
administrative rules shall be resolved in favor of the administrative rules.
Any inconsistency between the administrative rules and the Plan shall be
resolved in favor of the Plan.

 

19. Continuation of Service. This Award Agreement is not an employment
agreement nor shall it be construed as an agreement to assure continued service
as a director of the Company, it shall not confer upon the Participant any
right to continuation as a director of the Company, nor shall this Award
Agreement interfere in any way with the Company’s right or the right of the
Company’s shareholders, as applicable, to terminate his or her tenure as a
director at any time.

 

20. No Vested Right In Future Awards. Participant acknowledges and agrees (by
executing this Award Agreement) that the granting of Awards under this Award
Agreement are made on a fully discretionary basis by the Committee and that
this Award Agreement does not lead to a vested right to further Awards in the
future. Further, the Awards set forth in this Award Agreement constitute a
non-recurrent benefit and the terms of Award Agreement are only applicable to
the Awards distributed pursuant to this Award Agreement.

 

21. Severability. In the event that any provision of this Award Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of this Award Agreement, and this Award Agreement
shall be construed and enforced as if the illegal or invalid provision had not
been included.

 

22. Miscellaneous. With the approval of the Board, the Committee may terminate,
amend, or modify the Plan; provided, however, that no such termination,
amendment, or modification of the Plan may in any way materially impairs
the Participant’s rights under this Award Agreement, without the Participant’s
written approval.

 

This Award Agreement shall
be subject to all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may be
required.

 

All obligations of the
Company under the Plan and this Award Agreement, with respect to the Performance
Share Units granted hereunder, shall be binding (i) on the Company and on
any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company; and (ii) on
the Participant and his or her heirs and legal representatives.

 

6

 

Each of the terms of this
Award Agreement is deemed severable in whole or in part, and if any term or
provision, or the application thereof, in any circumstance should be illegal,
invalid or unenforceable, the remaining terms and provisions will not be
affected thereby and will remain in full force and effect.

 

To the extent not
preempted by federal law, this Award Agreement is deemed to have been made and
entered into in the State of Colorado and in all respects the rights and
obligations of the parties will be governed by, and construed and enforced in
accordance with, the laws of the State of Colorado without regard to the
principles of conflict of laws. Any and all lawsuits, legal actions or
proceedings against either party arising out of this Award Agreement will be
brought in Denver County, Colorado or federal court of competent jurisdiction
sitting nearest to Denver, Colorado, and each party hereby submits to and
accepts the exclusive jurisdiction of such court for the purpose of such suit,
legal action or proceeding. Each party irrevocably waives any objection it may now
have or hereinafter have to this choice of venue of any suit, legal action or
proceeding in any such court and further waives any claim that any suit, legal
action or proceeding brought in any such court has been brought in an
inappropriate forum.

 

IN WITNESS WHEREOF, the
parties have caused this Award Agreement to be executed effective as of       ,
2006.

 

	
   

  	
  Teton Energy Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participant

  

 

7Exhibit 10.7

 

 

March 31, 2006

 

Mr. Patrick A. Quinn

Quinn & Associates,
P.C.

700 17th Street

Denver, CO 80202

 

Dear Pat:

 

This will
acknowledge that we have received your resignation as Teton Energy Corporation’s
(“Teton,” “we,” or the “Company”) contract Chief Financial Officer effective
today, March 31, 2006. In connection with your decision to resign we have
agreed (the “Agreement”) to the following:

 

1.               This
letter shall serve as your formal letter of resignation.

 

2.               You agree to tender
50,000 shares of the award
previously granted
to you in 2005 as an agreed upon reduction in services fees charged Teton by
Q&A. You will be entitled at any time after April 5, 2006, to an
opinion from Company’s counsel as to the resaleability of the remaining 50,000
shares under applicable securities regulations (substantially in the form attached
hereto as Exhibit A). The Company will bear the cost of that opinion. As
you will no longer be an officer of the Company, you will be responsible for
your own compliance with all securities laws, including any filings that may be
required depending on the dates of your sales. You are currently advised by the Company that as an affiliate, you
are covered by the blackout period for the first quarter earnings that went
into effect March 24, 2006, and will end three days after the filing of
the Company’s quarterly report for the first quarter 2006.

 

3.               Quinn &
Associates, P.C. (“Q&A”) will continue to provide accounting services to
Teton through a reasonable transition period coinciding with the Company’s
hiring of a new Chief Financial Officer. While this will necessarily be
somewhat of an indeterminate period, we will make every reasonable effort to
assure that this transition occurs as soon as practicable. Teton agrees to pay
Q&A invoices, at current standard rates for any services performed to date
and in the future, consistent with past practice. You have agreed that you will
also make yourself available to speak to any candidate for the CFO position
that wishes to interview you prior to making a decision as to whether to accept
any offer from the Company.

 

4.               You
will refrain from making statements, written or oral, which denigrate,
disparage or defame the goodwill or reputation of the Company (including any
subsidiaries that exist today or may exist in the future), including its
officers, shareholders, partners, agents, and former and current employees and
directors. 

 

 

Similarly, the
Company (including any subsidiaries that exist today or may exist in the
future), will refrain from making statements, written or oral, which denigrate,
disparage or defame you or Q & As’ goodwill or reputation. There is
excepted from this provision all statements: (a) necessary to enforce this
Agreement, (b) made to one’s immediate family, (c) that are made
truthfully as a result of any question required to be answered by law,
subpoena, written regulatory requirements promulgated and as enforced by the
Colorado Board of Accounting, the American Institute of Certified Public
Accountants, or the Colorado Society of Certified Public Accountants, or (d) that
are made truthfully by one party to this Agreement in response to any statement
by the other party to this Agreement that is violative of this paragraph.

 

5.               Teton,
on the one hand, and Patrick Quinn and Q&A on the other, each on his or its
own behalf and on behalf of his or its affiliates, heirs, representatives and
assigns, hereby fully and forever releases and discharges the other as well as
the other’s past and present affiliates, officers, directors, employees,
shareholders, independent contractors, attorneys and agents, of and from any
and all actions, causes of action, claims, demands, costs and expenses,
including attorneys’ fees, of every kind and nature whatsoever, in law or in
equity, whether now known or unknown, that the releasing parties may now
have, or claim at any future time to have, against any released party based in
whole or in part upon any act or omission occurring on or before the
effective date of this agreement, without regard to present actual knowledge of
such acts or omissions; provided, however, (i) that any release from Teton shall not cover
an act or omission where Mr. Quinn or Q&A willfully exceeded his or
its scope of authority; was undertaken in reckless or willful
disregard of any federal, state, or local law, any provision of the Company’s
bylaws, charter, or plan adopted by the Company’s shareholders or board
of directors; or any act or omission, including any tortious conduct not
reasonably related to your or Q&A’s duties;
and (ii) any release from Patrick Quinn or Q&A shall not cover or
release any claims described in paragraph 6.

 

6.               Teton
confirms that for purposes of any indemnification provision in the Company’s
bylaws, charter, or with respect to its D&O insurance policy that you shall
be entitled to indemnification consistent with the provisions, requirements,
and limitations of the foregoing as well as with this Agreement during the
period you served as an officer in relation to such services as an officer.

 

7.               Indemnification.
The Company shall defend, indemnify and hold you and Q&A harmless from any
lawsuits, claims, losses, demands, costs, expenses, damages, investigations,
proceedings, judgment or liability suffered or incurred (including attorney
fees and costs of litigation and/or arbitration) arising out of, resulting from
or related in any way to your services for the Company; provided, however, that
such indemnification shall not cover an act or omission where you or Q&A willfully
exceeded your or its
scope of authority; was undertaken in reckless or willful disregard of any
federal, state, or local law, or
any provision of the Company’s bylaws, charter, or plan adopted
by the Company’s shareholders or board of directors; or any act or omission,
including any tortious conduct,
not reasonably related to your or Q&A’s duties, or any act or omission
for which indemnification is
void as against public policy
under federal or state law.

 

 

8.               Severability.
If any provision, or portion of thereof, of this Agreement shall for any reason
be held to be invalid or unenforceable or to be contrary to public policy or
any law, then the remainder of the Agreement shall not be affected thereby.

 

9.               In
addition, Teton represents and warrants that this Agreement has been authorized
by all necessary action of its Board of Directors. Any notice required under
this Agreement shall be sent to the address set forth in this letter or such
other address that is subsequently provided to the other party in writing and
notice shall be deemed given on the soonest of when actually received, the day
sent via email or facsimile or two days after mailing. The parties acknowledge
that irreparable injury would occur in the event any provision of this
Agreement is not performed or is breached and therefore, in addition to any
other remedy available, the parties are entitled to an injunction to prevent
breaches or to specifically enforce the provisions of this Agreement.

 

10.         Except
as required by law or regulation, or as necessary to enforce this Agreement,
none of the parties hereto will disclose the terms of this Agreement, provided
that you may disclose such terms to your financial and legal advisors,
Shareholders in Q&A and your immediate family  and the Company may disclose such terms
to selected employees, advisors and affiliates on a “need to know” basis, each
of whom shall be instructed by you or the Company, as the case may be, to
maintain the terms of this Agreement in strict confidence in accordance with
the terms hereof. This provision shall not apply once the Company discloses the
terms thereof in any public filings required by the SEC or to the extent
disclosed in any proxy statement.

 

11.         Other
than information or material required to manage the Company’s accounting
function as provided in Paragraph 2 of this Agreement, you agree immediately to
return to the Company all Company information and (as defined below) and
property. Subsequent to completion of your transitional accounting
responsibilities you agree to return any additional Company information or
property to Teton upon cessation of your providing such transitional accounting
services, and not to maintain copies of the same.

 

12.         Furthermore,
your execution of this Agreement affirms your obligation to keep all Company
information confidential and not to disclose it to any third party in the
future, except for disclosures described in paragraph 4(a), (c) and (d). As
used in this Agreement, the term “Company information” means: (i) confidential
information, including information received from third parties under
confidential conditions, and (ii) other technical, marketing, business, or
financial information, or information relating to personnel or former personnel
of the Company, the use or disclosure of which might reasonably be construed to
be contrary to the interest of the Company; provided,
however, that the term “Company information” shall not include any
information that is or became or becomes generally known or available to the
public other than as a direct result of a breach of this paragraph by you,
including Q&A or any employee of Q&A.

 

 

If you are in
agreement with the foregoing, please acknowledge on behalf of yourself as an
individual and as a representative of Q&A where provided below, whereupon
it will become a binding obligation of each of Teton, yourself, and Q&A.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  /s/ Karl F.
  Arleth

  	
   

  
	
   

  	
   

  
	
   

  	
  Karl F.
  Arleth

  
	
   

  	
  President & CEO

  

 

The provisions
of this Agreement have been thoroughly reviewed and are hereby agreed to.

 

	
   

  	
  QUINN &
  ASSOCIATES, P.C. 

  
	
   

  	
   

  
	
  By:

  	
  /s/ Patrick
  A. Quinn

  	
   

  	
  By:

  	
  /s/ Patrick
  A. Quinn

  	
   

  
	
   

  	
  Patrick A.
  Quinn

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  
	
  cc:

  	
  Board of
  Directors, Teton Energy Corporation

  David E. Danovitch, Esq.

  
						

 

 

Exhibit A

 

Form of 144 Opinion

 

[Date]

 

VIA
FACSIMILE (312-601-4350)

 

Linda Taylor

Computershare Investor Services

2 North LaSalle Street, 2nd
Floor

Chicago, IL 60602

 

Re:                               Teton
Energy Corporation

 

Dear Ms. Taylor:

 

We have been
requested to furnish an opinion concerning the transferability without
registration under the Securities Act of 1933, as amended (the “1933 Act”), of
X,XXX shares of Common Stock (the “Shares”) of Teton Energy Corporation (the “Company”),
which are represented by stock certificate number      
in the name of           (the “Stockholder”).
It is our understanding that the shares were acquired on          .

 

In connection
with the sale of the Shares, we have examined and relied upon (i) a letter
from the Stockholder (the “Seller’s Representation Letter”), (ii) a copy
of the notice filed with the Securities and Exchange Commission on Form 144
(the “Form 144”), (iii) correspondence and representations from          
(the “Broker”) to us (the “Broker’s Representation Letter”), (iv) a copy
of the certificates in question, and (v) any other information we may have
deemed necessary.

 

The
Stockholder has represented the Stockholder acquired the Shares in       ,
from the issuer and has held such Shares for more than one (1) year within
the meaning of Rule 144 promulgated under the 1933 Act (“Rule 144”). The
Form 144 indicates that no shares of the Company’s Shares have been sold
by the Stockholder within the three (3) preceding months, which when
aggregated with the sale of Shares hereunder, does not exceed one percent of
the class outstanding as shown by the most recent report or statement
published by the Company. Consequently, the sale of the Shares complies with
the volume requirements of Rule 144. The Broker’s Representation Letter
states that the Broker has complied with the provisions of Rule 144(f) and
that the Broker is not aware of any circumstances indicating potential failure
to comply with Rule 144 with respect to the sale of the Shares.

 

We believe the
Company to be current in its reporting requirements under the Securities
Exchange Act of 1934 and that the condition set forth in paragraph (c)(1) of
Rule 144 has been satisfied.

 

 

Assuming the
accuracy of the foregoing, it is our opinion that the sale of the Shares may be
made without registration under the 1933 Act by reason of the exemption
therefrom pursuant to Rule 144. Please note that in the event that a
certificate for a greater number of shares is presented to you, the balance of
the certificate to be issued remains restricted securities, should be issued
only in the name on the original certificate, remains subject to appropriate
stop transfer restrictions, and should contain appropriate investment and
lockup legends.

 

This opinion
is solely for the benefit of Computershare Investor Services and may not
be relied upon in any manner or for any purpose by any other person or entity.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GERSTEN
  SAVAGE LLP

  
	
   

  	
   

  
	
   

  	
  By:

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