Document:

Exhibit 4.1

THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”),
dated as of August 4, 2006, is by and among TransMontaigne Inc., a
Delaware corporation (the “Company”),
the guarantors listed on the signature pages hereto (collectively, the “Guarantors”) and
Wells Fargo Bank, National Association, as trustee (the “Trustee”),
supplementing that certain Indenture, dated as of May 30, 2003 (the “Indenture”), pursuant
to which the Company issued its 9-1/8% Series B Senior Subordinated Notes due
2010 (the “Notes”).  Capitalized terms used but not otherwise
defined in this Supplemental Indenture shall have the meanings assigned to such
terms in the Indenture.

W I T N E S S E T H:

WHEREAS, the Company has entered into an Agreement and
Plan of Merger, dated as of June 22, 2006 (the “Merger
Agreement”), with Morgan Stanley Capital Group Inc. (“Parent”) and Buffalo Merger Sub Inc.
(“Merger Co”), pursuant to which,
among other things, Merger Co will merge (the “Merger”)
with and into the Company with the Company being the surviving corporation and
a wholly-owned subsidiary of Parent;

WHEREAS, it is a condition to the consummation of the
Merger that provision shall have been made to either redeem the Notes to or
amend the terms of the Notes to permit them to remain outstanding after the
Merger;

WHEREAS, in furtherance of the satisfaction of the
condition referred to in the preceding Recital, the Company has offered to
purchase for cash, on the terms and subject to the conditions set forth in its
Offer to Purchase and Consent Solicitation Statement, dated July 24, 2006, and
the related Consent and Letter of Transmittal of the same date, any and all of
the outstanding Notes (as the same may from time to time be amended and in
effect, the “Offer”);

WHEREAS, in connection with the Offer, the Company has
solicited consents (the “Solicitation”)
from the Holders of the Notes to amend the Indenture (the “Proposed Amendments”),
in each case to become operative and in effect on the Acceptance Date (as
defined below) and subject to the conditions set forth in Section 2 below;

WHEREAS, as of the date of this Supplemental
Indenture, the Holders of in excess of 66-2/3% of the aggregate principal
amount of the outstanding Notes have consented to the Proposed Amendments;

WHEREAS, the Company desires to execute and deliver,
and has requested the Trustee to join with the Company and the Guarantors in
the execution and delivery of, this Supplemental Indenture for the purpose of
amending the Indenture to effect the Proposed Amendments upon, and subject to
the terms and conditions, set forth herein;

WHEREAS, Section 9.02 of the Indenture provides
that the Company and the Trustee may amend or supplement the Indenture with the
consent of the Holders of (a) at least a majority in principal amount of the
outstanding Notes with respect to the Proposed Amendments other than the
Proposed Amendment to eliminate Section 4.15 (Offer to Repurchase Upon Change
of Control) of the Indenture; and (b) at least 66-2/3% in principal amount of
the outstanding Notes

 

 

in order to eliminate Section 4.15 (Offer to
Repurchase Upon Change of Control) of the Indenture;

WHEREAS, the Company has been authorized by a
resolution of its Board of Directors to execute and deliver this Supplemental
Indenture;

WHEREAS, this Supplemental Indenture has been duly
authorized by all necessary corporate action on the part of the Guarantors; and

WHEREAS, the Company has furnished, or caused to be
furnished, to the Trustee and the Trustee has received, (i) an Officers’
Certificate complying with Sections 9.06 and 13.04(a) of the Indenture, and
(ii) an Opinion of Counsel complying with Section 13.04(b) of the
Indenture, as well as evidence of consents of at least 66-2/3% in principal
amount of the outstanding Notes;

NOW, THEREFORE, considering the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company, the Guarantors and the Trustee mutually covenant and
agree for the equal and ratable benefit of the Holders of the Notes as follows:

1.             Proposed
Amendments. Subject to Section 2 of this Supplemental Indenture, the
following provisions of the Indenture are hereby amended as follows:

(a)           Amendments
to Article IV.  Each of
Section 4.03 (Reports), Section 4.04 (Compliance Certificate),
Section 4.05 (Taxes), Section 4.07 (Restricted Payments),
Section 4.08 (Dividend and Other Payment Restrictions Affecting
Subsidiaries), Section 4.09 (Limitation on Additional Indebtedness),
Section 4.10 (Asset Sales), Section 4.11 (Transactions with
Affiliates), Section 4.12 (Liens), Section 4.13 (Business
Activities), Section 4.14 (Corporate Existence), Section 4.15 (Offer
to Repurchase Upon Change of Control), Section 4.16 (Designation of Unrestricted
Subsidiaries), Section 4.17 (Limitation on Issuance or Sale of Equity
Interests of Restricted Subsidiaries), and Section 4.18 (Additional Note
Guarantees) of the Indenture is hereby deleted in its entirety and replaced
with the phrase “Intentionally Omitted.” Any references to such deleted
Sections in the Indenture are also hereby deleted in their entirety.

(b)           Amendments
to Article V.  Section 5.01 (Merger, Consolidation, or
Sale of Assets) of the Indenture is hereby amended to read in its entirety as
follows:

“5.01              Merger,
Consolidation, or Sale of Assets.

The Company shall not,
directly or indirectly, in a single transaction or a series of related transactions,
(a) consolidate or merge with or into another Person (other than a merger with
a Wholly-Owned Restricted Subsidiary solely for the purpose of changing the
Company’s jurisdiction of incorporation to another State of the United States),
or sell, lease, transfer, convey or otherwise dispose of or assign all or
substantially all of the assets of the Company or the Company and the
Restricted Subsidiaries (taken as a whole) or (b) adopt a Plan of Liquidation
unless, in either case:  either: (y) the
Company will be the surviving or continuing Person; or (z) the Person formed by
or surviving such consolidation or merger or to which such sale, lease,
conveyance or other disposition shall be made (or, in

 2
 

 

 

the case of a Plan of Liquidation, any Person to which
assets are transferred) (collectively, the “Successor”) is
a corporation organized and existing under the laws of any State of the United
States of America or the District of Columbia, and the Successor expressly
assumes, by supplemental indenture in form and substance satisfactory to the
Trustee, all of the obligations of the Company under the Notes, this Agreement
and the Registration Rights Agreement.

Except as provided in
Sections 11.05 and 11.06, no Guarantor may consolidate with or merge with or
into (whether or not such Guarantor is the surviving Person) another Person,
whether or not affiliated with such Guarantor.

Notwithstanding the
foregoing, any Restricted Subsidiary may merge into the Company or another
Restricted Subsidiary.”

(c)           Amendments
to Article VI. 
Section 6.01 (Events of Default) of the Indenture is hereby amended
to read in its entirety as follows:

“6.01       Events of Default.

Each of the following is
an “Event Of Default”:

(a)  failure by the Company to pay interest on any
of the Notes when it becomes due and payable and the continuance of any such
failure for 30 days (whether or not such payment is prohibited by the
subordination provisions of this Agreement);

(b)  failure by the Company to pay the principal on
any of the Notes when it becomes due and payable, whether at stated maturity,
upon redemption, upon purchase, upon acceleration or otherwise (whether or not
such payment is prohibited by the subordination provisions of this Agreement);

(c)  failure by the Company to comply with Section
5.01 and 4.15 hereof;

(d)  failure by the Company to comply with any
other agreement or covenant in this Agreement and continuance of this failure
for 45 days after notice of the failure has been given to the Company by the
Trustee or by the Holders of at least 25% of the aggregate principal amount of
the Notes then outstanding;

(e)  Intentionally Omitted;

(f)   Intentionally Omitted;

(g)  the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:

(i)   commences a voluntary case,

(ii)  consents to the entry of an order for relief
against it in an involuntary case,

(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its assets, or

 3
 

 

 

(iv) makes a general assignment for the benefit of
its creditors;

(h)  a court of competent jurisdiction enters an
order or decree that remains unstayed and in effect for 60 days under any
Bankruptcy Law that:

(i)   is for relief against the Company or any
Significant Subsidiary as debtor in an involuntary case,

(ii)  appoints a Custodian of the Company or any
Significant Subsidiary or a Custodian for all or substantially all of the
assets of the Company or any Significant Subsidiary, or

(iii)   orders the liquidation of the Company or any
Significant Subsidiary; or

(i)   any Note Guarantee of any Significant
Subsidiary ceases to be in full force and effect (other than in accordance with
the terms of such Note Guarantee and this Agreement) or is declared null and
void and unenforceable or found to be invalid or any Guarantor denies its
liability under its Note Guarantee (other than by reason of release of a
Guarantor from its Note Guarantee in accordance with the terms of this
Agreement and the Note Guarantee) and in either case such condition continues
for 45 days.”

(d)           Amendments to Defined
Terms.  Each defined term
and the definition thereof set forth in Section 1.1 (Definitions) or Section
1.02 (Other Definitions) of the Indenture that is no longer used as a result of
the amendments to the Indenture set forth in this Supplemental Indenture is
hereby deleted and replaced with the phrase “Intentionally Omitted.”  With respect to each defined term the
definition of which is set forth in any of the Sections or clauses eliminated
by this Supplemental Indenture that is still used in the Indenture after giving
effect to all of the amendments to the Indenture set forth in this Supplemental
Indenture pursuant to Section 2, the Indenture is hereby amended to add such
defined term and its definition to Section 1.1 (Definitions) of the Indenture
in alphabetical order within such Section.

2.             Effect
and Operation of Supplemental Indenture. (a) This Supplemental
Indenture shall be effective and binding immediately upon its execution by the
Company, the Guarantors and the Trustee; provided that,
notwithstanding anything in the Indenture or this Supplemental Indenture to the
contrary,

(i)            the amendments to the Indenture set
forth in Section 1(a) through (d) of this Supplemental Indenture shall not
become operative unless and until the Notes tendered in connection with the
Offer and the Solicitation are accepted for purchase by the Company or its permitted
assigns (the date on which the tendered Notes are so accepted for purchase, the
“Acceptance Date”)
and the Indenture will remain in effect in its current form until such
amendments become operative; and

(ii)           if the Offer and the Solicitation are
terminated, withdrawn or otherwise not completed and the Notes tendered in
connection with the Offer and the Solicitation are not accepted for purchase,
this Supplemental Indenture will

 4
 

 

 

have no force or effect, the amendments to the
Indenture set forth in Section 1(a) through (d) of this Supplemental
Indenture will not become operative.

(b)           Except as modified or amended by this
Supplemental Indenture, all provisions of the Indenture shall remain in full
force and effect.  In the event of any
conflict between the terms and conditions contained in the Notes and those
contained in the Indenture, as modified and amended by this Supplemental
Indenture, the provisions of the Indenture, as modified and amended by this
Supplemental Indenture, shall control.

3.             Conforming
Amendments.  Effective upon the
Acceptance Date, the form of the Note set forth as Exhibits A-1 and A-2 to the
Indenture, as well as each of the outstanding Notes, are hereby amended to
incorporate any and all changes that correspond to the amendments to the
Indenture set forth in Section 1(a) through (d) of this Supplemental
Indenture, to the extent the same become operative on the Acceptance Date as
set forth in Section 2 of this Supplemental Indenture.

4.             Interpretation.  Upon the execution and delivery of this
Supplemental Indenture, the Indenture shall be modified and amended in
accordance with this Supplemental Indenture, and all the terms and conditions
of the Indenture and this Supplemental Indenture shall be read together as
though they constitute one instrument, except that, in the event of any
conflict, the provisions of this Supplemental Indenture shall control. The
Indenture, as modified and amended by this Supplemental Indenture, is hereby
ratified and confirmed in all respects and shall bind every Holder of the
Notes.

5.             Trustee.

(a)           Trustee’s
Acceptance.  Subject to
Section 2 above, the Trustee hereby accepts this Supplemental Indenture and
agrees to perform the same under the terms and conditions set forth in the
Indenture.

(b)           Trustee
Not Responsible for Recitals. 
The Trustee shall not be responsible in any manner whatsoever for, or in
respect of, the validity or sufficiency of this Supplemental Indenture, or for,
or in respect of, the recitals contained herein, all of which recitals are made
solely by the Company.

(c)           Certain
Duties and Responsibilities of the Trustee.  In entering into this Supplemental Indenture,
the Trustee shall be entitled to the benefit of every provision of the
Indenture relating to the conduct or affecting the liability of, or affording
protection to, the Trustee, whether or not elsewhere herein so provided.

6.             Severability.
In the event any provision of this Supplemental Indenture shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Supplemental Indenture shall not in any way be
affected or impaired thereby.

7.             Conflict
with Trust Indenture Act. If any provision of this Supplemental Indenture
limits, qualifies or conflicts with any provision of the Trust Indenture Act of
1939, as amended (the “TIA”),
that is required under the TIA to be a part of or govern any provision of this
Supplemental Indenture, such provision of the TIA shall control.  If any provision of this Supplemental
Indenture modifies or excludes any provision of the TIA that may be so modified
or excluded, such provision of the TIA shall be deemed to apply to the
Indenture as so modified or excluded by this Supplemental Indenture, as the
case may be.

 5
 

 

 

8.               Benefits
of this Supplemental Indenture. Nothing in this Supplemental Indenture or
the Notes, express or implied, shall give to any Person, other than the parties
hereto and thereto and their successors hereunder and thereunder and the
Holders of the Notes, any benefit or any legal or equitable right, remedy or
claim under the Indenture, this Supplemental Indenture or the Notes.

9.             Successors.  All agreements of the Company and  the Trustee in this Supplemental Indenture
shall bind their respective successors.

10.           NEW YORK LAW TO GOVERN. THIS
SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

11.           Effect
of Headings.  The Section headings
herein are for convenience only and shall not affect the construction hereof.

12.           Counterparts.  The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.

[Signatures on following
pages]

 6
 

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Third Supplemental Indenture to be duly executed, all as of the date first
written above.

	
  

  	
  TRANSMONTAIGNE INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Erik Carlson

  
	
   

  	
  Name: Erik Carlson

  
	
   

  	
  Title: Senior Vice President

  
	
   

  	
   

  
	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  TransMontaigne Services Inc.

  
	
   

  	
  TransMontaigne Product Services Inc.

  
	
   

  	
  TransMontaigne Transport Inc.

  
	
   

  	
  Coastal Fuels Marketing, Inc.

  
	
   

  	
  Coastal Tug and Barge, Inc.

  
	
   

  	
  Radcliff/Economy Marine Services, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Erik Carlson

  
	
   

  	
  Name: Erik Carlson

  
	
   

  	
  Title: Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK,

  
	
   

  	
   

  	
   NATIONAL
  ASSOCIATION, as Trustee

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy P. Mowdy

  
	
   

  	
  Name:  Timothy
  P. Mowdy

  
	
   

  	
  Title:  Vice
  President

  

 

 7Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

BETWEEN

TETON
ENERGY CORPORATION

AND

KARL F. ARLETH

(Executive)

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated
as of September 1, 2006 (the “Effective Date”) is entered into by and between
Teton Energy Corporation, a Delaware corporation (the “Company”), and Karl F.
Arleth, an individual with a physical address at 467 Lariat Loop Drive,
Silverthorne, CO 80498 and mailing address of P.O. Box 23507, Silverthorne, CO
80498, (the “Executive”) (collectively, the “Parties,” individually, a “Party”).

W I T N E S S E T H:

WHEREAS, the Parties have
previously entered into that certain Employment Agreement, dated as of May 1, 2003 (the “Original
Agreement”) pursuant to which the Company engaged the Executive as President
and Chief Executive Officer of the Company; and

WHEREAS, the Board of Directors of the
Company (the “Board”) has requested and
the Executive has agreed to continue services to the Company as President and
Chief Executive Officer upon the expiration of the Original Agreement;
and

WHEREAS,
the Board has determined that it is in the best interest of the Company, its
affiliates, and its stockholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat,
or occurrence of a Change in Control (as defined Article Seven herein); and

WHEREAS,
the Board has determined that it is in the best interests of the Company and
its stockholders to indemnify the Executive for claims for damages arising out
of or relating to the performance of such services to the Company in accordance
with the terms and conditions set forth in this Agreement and pursuant to
Delaware law; and

WHEREAS,
as an inducement to serve and in consideration for such services, the Company
has agreed to indemnify the Executive for claims for damages arising out of or
relating to the performance of such services to the Company in accordance with
the terms and conditions set forth in a separate agreement, which
indemnification agreement is attached as an exhibit hereto and is incorporated
herein by reference; and

WHEREAS,
in order to accomplish these objectives and establish the rights, duties and obligations of the Parties, which shall
be generally stated herein and which may be more fully stated in other
agreements between the Parties, including equity-based agreements, indemnity
agreements, and other employment or incentive related agreements as the Company
or the Board may adopt from time to time, the Board has caused the
Company to enter into this Agreement;

 

 

NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements set forth herein, the Parties,
intending to be legally bound, hereby agree as follows:

ARTICLE ONE

DEFINITIONS

1.                                       Definitions.  As used in this Agreement:

1.1                                 The term “Accrued Obligations,” when used in
the case of the Executive’s death or disability shall mean the sum of (1) the that portion Executive’s Base Salary that
was not previously paid to the Executive from the last payment date through the
Date of Termination, and (2) an amount equal 24 months salary at the level of
the Executive’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 Executive shall serve as
the President and Chief Executive Officer of the Company and agrees to perform
services for the Company and such other affiliates of the Company, as described
in Section 3 herein.

2.2                                 Term.  The Executive’s employment
shall be for an initial term of three (3) years (“Initial Term”), commencing on
the Effective Date. The Executive’s employment shall be automatically extended
on the day after the second year anniversary of the Effective Date (“Automatic
Extension”), and on each anniversary date thereof, for additional two (2) year
periods unless, with respect to any such Automatic Extension, Executive’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 Executive shall report to the Board 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 Board.  During the term of this Agreement Executive
shall, subject to the direction of the Board of the Company, oversee and direct
the operations of the Company, and shall perform such duties as are customarily
performed by the President and Chief Executive Officer of a company such as the
Company or as are otherwise delegated to him from time to time by the Board.

2.4                                 Performance of Duties. During the term of the Agreement, except as
otherwise approved by the Board or as provided below, the Executive agrees to
devote his full business time, effort, skill and attention to the affairs of
the Company and its subsidiaries, will use his best efforts to promote the
interests of the Company, and will discharge his responsibilities in a diligent
and faithful manner, consistent with sound business practices.  The foregoing shall not, however, preclude
Executive from devoting reasonable time, attention and energy in connection
with the following activities, provided that such activities do not materially interfere
with the performance of his duties and services hereunder:

(a)                                  serving as a director or a member of a
committee of any company or organization, if serving in such capacity does not
involve any conflict with the business of the Company or any subsidiary and
such other company or organization is not in competition, in any manner
whatsoever, with the business of the Company or any of its subsidiaries;

(b)                                 fulfilling speaking engagements;

(c)                                  engaging in charitable and community
activities;

(d)                                 managing his personal business and
investments; and

(e)                                  any other activity approved of by the
Board.  For purposes of this Agreement,
any activity specifically listed on Schedule A shall be considered as having
been approved by the Board.

2.5                                 Representations and Warranties of the
Executive with Respect to Conflicts, Past Employers and Corporate Opportunities.  The
Executive represents and warrants that:

 

 

(a)                                  his employment by the Company will not
conflict with any obligations which he has to any other person, firm or entity;

(b)                                 he has not brought to the Company (during the
period before the signing of this Agreement) and he will not bring to the
Company any materials or documents of a former or present employer, 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 engaged in a business which is
substantially similar to the business of the Company; provided,
however, that ownership of not more than two percent (2%) of the
outstanding securities of any class of any publicly held corporation shall not
be deemed a violation of this Section 2.5; provided, further, that any
investment specifically listed on Schedule A shall not be deemed a violation of
this Section 2.5.

2.6                                 Activities and Interests with Companies Doing
Business with the Company.  In addition to those activities and interests
of Executive disclosed on Schedule A attached hereto, Executive shall
promptly disclose to the Board, in accordance with the Company’s policies, full
information concerning any interests, direct or indirect, he holds (whether as
a principal, stockholder, lender, executive, director, officer, partner,
venturer, consultant or otherwise) in any business which, as reasonably known
to Executive, purchases or provides services or products to, the Company or any
of its subsidiaries, provided that the Executive need not disclose any such
interest resulting from ownership of not more than two (2%) of the outstanding
securities of any class of any publicly held corporation.

2.7                                 Other Business Opportunities. 
Nothing in this Agreement shall be deemed to preclude the Executive from
participating in other business opportunities if and to the extent that: (a)
such business opportunities are not directly competitive with, similar to the
business of the Company, or would otherwise be deemed to constitute an
opportunity appropriate for the Company; (b) the Executive’s activities with
respect to such opportunities do not have a material adverse effect on the
performance of the Executive’s duties hereunder, and (c) the Executive’s
activities with respect to such opportunity have been fully disclosed in
writing to the Board.

2.8                                 Reporting Location.  For
purposes of this Agreement, the Executive’s reporting location shall be Denver,
Colorado, which shall include the metropolitan area within a 40 mile radius
from the Company’s current office.

ARTICLE THREE

COMPENSATION

3.                                       Compensation.

3.1                                 Base Salary.  Executive shall receive an
initial annual base salary of Two Hundred Fifty Thousand Dollars ($250,000.00),
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 Board annually for adequacy.

 

 

3.2                                 Cash Bonus.  The Executive shall be
eligible for a cash bonus equal to an amount as determined by the Compensation
Committee of the Board or by the independent directors (as that term is defined
by the stock exchange or market on which the Company’s shares may be the
traded).

The Parties agree that for the Fiscal Year ended
December 2006, the Executive shall be entitled to the following:

(a)                                  A retention bonus equal to 100% of
Executive’s annual salary;

(b)                                 A performance bonus equal to up to 100%
of Executive’s annual salary based on the attainment of certain criteria, as
articulated by the compensation committee, which criteria are set forth on
Schedule B; and

(c)                                  An additional discretionary bonus based
on the Executive’s ability to establish the Company as an operating producer
during 2006.

3.3                                 Equity-Based
Compensation.  The
Executive shall be entitled to participate in all equity-based compensation
plans offered by the Company and as determined by the Board of Directors.

(a)                                  The Executive understands that as of the
date of this Agreement, the only stock-based plan offered by the Company is the
2005 Long-Term Incentive Plan.

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

3.4                                 Participation In Benefit Plans.

(a)                                  Retirement Plans. 
Executive shall be entitled to participate, without any waiting or
eligibility periods, in all qualified retirement plans provided to other
executive officers and other key employees.

(b)                                 Taxes.  The Company shall pay, on a
grossed-up basis for federal, state, and local income taxes, the amount of any
excise tax payable by Executive as a result of any payments triggered by this
Agreement, or other compensation agreements between Executive and the Company,
or any of its subsidiaries and any income tax payable by Executive as a result
of any payments in Common Stock triggered by this Agreement or other
compensation agreements between Executive and the Company, or any of its
subsidiaries, except as might otherwise be provided such benefit plan.

(c)                                  Life Insurance.  The
Company will purchase life insurance on the life of Executive in an amount not
less than $3,000,000, the benefits of which will be payable one-half to the
Executive’s beneficiary and one-half to the Company.  The Executive’s “beneficiary” is the person
or persons (who may be designated concurrently, successively or contingently)
designated by the Executive in his last effective writing filed with the
Company prior to his death, or if the Executive shall have failed to make an
effective designation, the Executive’s beneficiary is his spouse, if the
Executive is married and his spouse is living at the time of each payment, and
otherwise his surviving children.  The
Executive shall assist the Company in procuring such insurance by submitting to
such examinations and by signing such applications and other instruments as may
be reasonable and as may be required by the insurance carriers to which
application is made 

 

 

for any such insurance.  The
Executive represents that, to the best of his knowledge, he is currently
insurable at standard premium rates for life insurance policies.

(d)                                  Employee Benefit Plans and Insurance.  The
Executive shall have the right to participate in employee benefit plans and
insurance programs of the Company that the Company may sponsor from time to
time and to receive customary Company benefits, if those benefits are so
offered.  Nothing herein shall obligate
Executive to accept such benefits if and when they are offered.

(e)                                  Vacation.

(i)                                     The Executive shall be entitled to take such
vacations, with pay, as are customary among other chief executive officers of
organizations of similar size and nature, which vacation level shall be
reviewed by the Compensation Committee from time to time.  No more than 1.5 times (1.5x) Executive’s
authorized annual vacation allocation may be accrued, at any given time.  In the event that Executive has reached his
maximum authorized vacation allocation, accrual will not re-commence until
Executive uses some of his paid vacation credit and thereby brings the balance
below his maximum.  Accrued paid vacation
credit forfeited because of an excess balance can not be retroactively
reapplied.

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

(f)                                    Paid Holidays.  The
Executive shall be entitled to such paid holidays as are generally available to
all employees.  As of the date of this
Agreement, the Company’s employees are permitted to observe ten (10) paid
holidays.

3.5                                 Relocation and Business-related
Expenses.  In the event that Executive is required to
move from his primary residence and consents to such move, then
Executive shall be provided with relocation assistance as provided below:

(a)                                  Housing and Temporary Lodging.  The
Company will pay the costs, for the Executive and his family, of house-hunting
trips and the cost of transporting the Executive, his spouse, furniture,
household effects, and vehicles, to the area in which the Company will be
headquartered.  In addition, the Company
will pay the cost of the Executive’s travel, temporary living expenses,
including housing, whether hotel or apartment, and meals, during the period
prior to the Executive’s move to the city in which the Company will be
headquartered.

(b)                                 Maintenance of Primary Residence.  The Company acknowledges that, as of the date of
this Agreement, Executive’s primary residence is in Silverthorne,
Colorado.  In order to induce Executive
to remain in the Company’s employ, the Company agrees to pay the expenses
associated with the lease on Executive’s Denver apartment, which expenses shall
be coterminous with Executive’s Base Salary.

 

 

(c)                                  Reimbursement. 
Executive shall be entitled to reimbursement within a reasonable time
for all properly documented and approved expenses for travel.  The Company shall reimburse business expenses
of Executive directly related to Company business, including, but not limited
to, airfare, lodging, meals, travel expenses, medical expenses while traveling
not covered by insurance, business entertainment, expenses associated with
entertaining business persons, local expenses to governments or governmental
officials, tariffs, applicable taxes outside of the United States, special
expenses associated with travel to certain countries, supplemental life
insurance or supplemental insurance of any kind or special insurance rates or
charges for travel outside the United States (unless such insurance is being
provided by the Company), rental cars and insurance for rental cars, and any
other expenses of travel that are reasonable in nature or that have been
otherwise pre-approved.  Executive shall
be governed by the travel and entertainment policy in effect at the Company.

3.6                                 Severance Benefit.  In
the event that Executive’s employment is terminated, other than for Cause,
Executive 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 Executive 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 Executive’s employment shall terminate automatically upon the
Executive’s death during the Employment Term.

4.2                                 Disability. If the Company determines in good faith that the Disability (as
defined below) of the Executive has occurred during the Employment Term, the
Company may give the Executive notice of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment hereunder
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”); provided,
that, within the 30-day period after
such receipt, the Executive shall not have returned to full-time performance of
the Executive’s duties. For purposes of this Agreement, “Disability” shall mean
the absence of the Executive from the Executive’s duties hereunder on a
full-time basis for an aggregate of 180 days within any given period of
270 consecutive days (in addition to any statutorily required leave of absence
and any leave of absence approved by the Company) as a result of incapacity of
the Executive, despite any reasonable accommodation required by law, due to
bodily injury or disease or any other mental or physical illness, which will,
in the opinion of a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal representative, be
permanent and continuous during the remainder of the Executive’s life.

4.3                                 Termination by Company.

(a)                                  Termination for Cause.

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

(i)                                     the willful and continued failure of the Executive
to perform substantially the Executive’s duties hereunder (other than any such
failure resulting from 

 

 

bodily injury or disease or
any other incapacity due to mental or physical illness) after a written demand
for substantial performance is delivered to the Executive by the Board or the
Chairman of the Company, which specifically identifies the manner in which the
Board or the Chairman of the Company believes the Executive has not
substantially performed the Executive’s duties; or

(ii)                                  the willful engaging by the Executive in
illegal conduct or gross misconduct that is materially and demonstrably
detrimental to the Company and/or its affiliated companies, monetarily or
otherwise.

For
purposes of this provision, no act, or failure to act, on the part of the
Executive shall be considered “willful” unless done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the Executive’s
action or omission was in the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board, upon the instructions of the Chairman or another Board
Member of Company, or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company and its affiliated
companies. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the Executive
a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board then in office at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in detail.

(iii)                               the Executive’s conviction of, or plea of
nolo contendere to, any felony of theft, fraud, embezzlement or violent crime.

(b)                                 Termination without Cause.

All
terminations by the Company that are not for Cause, or on the occasion of the
Executive 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 4.5,
shall be considered Without Cause.

4.4                                 Termination by Executive. The Executive may terminate the Executive’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 Executive’s express written consent):

(a)                                  The assignment to the Executive of any duties
inconsistent in any respect with the Executive’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 Executive;

 

 

(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
Executive;

(c)                                  The Company’s requiring the Executive 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 Executive 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 Executive’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 Executive shall be conclusive.

4.5                                 Termination without Prejudice.  The
Company or the Executive 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 Executive’s
employment hereunder by the Company or by the Executive (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 Executive’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 Executive 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 Executive 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 Executive hereunder or preclude the Company or the Executive
from asserting such fact or circumstance in enforcing the Company’s or the
Executive’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 Executive’s
employment hereunder, which date shall be (a) if the Executive’s
employment is terminated by the Executive’s death, the date of the Executive’s
death, (b) if the Executive’s employment is terminated because of the
Executive’s Disability, the Disability Effective Date, (c) if the
Executive’s employment is terminated by the Company (or applicable affiliated
company) for Cause or by the Executive for Good Reason, the date on which the
Notice of Termination is given, (d) if the Executive’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 Executive’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 Executive’s employment hereunder other than for
Cause or Disability or the Executive shall terminate the Executive’s employment
either for Good Reason or Without Good Reason during the Window Period:

(i)                                     the Company shall pay to the Executive
(either in a lump sum or on in equal monthly installments over a 12-month
period after the Date of Termination, at the Company’s option) the sum of (1) that portion of Executive’s Base Salary that
was not previously paid to the Executive from the last payment date through the
Date of Termination, and (2) an
amount equal 24 months salary at the level of the Executive’s Base Salary then
in effect, (such 24 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 Executive as a result of any payments in
Common Stock triggered by this Agreement, or other agreements between Executive
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 Executive any other amounts or benefits required
to be paid or provided or which the Executive 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 Executive’s employment is terminated by reason of the
Executive’s death during the Employment Term, this Agreement shall terminate
without further compensation obligations to the Executive’s legal
representatives under this Agreement, other than for (i) payment of
Accrued Obligations (which shall be paid to the Executive’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 Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Term, this Agreement shall
terminate without further compensation obligations to the Executive, other than
for (i) payment of Accrued Obligations (which shall be paid to the
Executive 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
Executive’s employment is terminated for Cause during the Employment Term, this
Agreement shall terminate without further compensation obligations to the
Executive other than the obligation to pay to the Executive Base Salary through
the Date of Termination plus the amount of any compensation previously deferred
by the Executive, in each case to the extent theretofore unpaid. If the
Executive voluntarily terminates the Executive’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 Executive, other than for the
that portion Executive’s Base Salary that was not previously paid to the
Executive from the last payment date through the effective date of the
Executive’s voluntary termination and the timely payment or provision of the
Other Benefits, as provided in any applicable plan, and the Executive shall
have no further obligations nor liability to the Company. In such case, any
amounts owed to the Executive shall be paid to the Executive 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 Executive claims is not for Cause; or

(b)                                 termination by Executive under Section 4.4
herein,

the Company shall continue
to pay all compensation due to Executive 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 Executive 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 Executive 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 Executive 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 Executive’s receipt of the
salary and other benefits associated with Executive’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
Executive’s employment by the Company such secret or confidential information
may become known to Executive, 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, Executive agrees that
during the time of Executive’s
employment and for a period of two (2) years following the termination of
Executive’s employment with the Company, Executive 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 Executive 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 Executive’s duties
hereunder, (iii) for information (x) that becomes generally available to the
public other than as a result of unauthorized disclosure by Executive or his
affiliates or (y) that becomes available to Executive 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 Executive’s employment with the Company and for so long as
Executive receives any Severance Benefit or is receiving any Severance Amount
provided under this agreement in respect of the termination of his employment,
Executive shall not be engaged as an officer or executive 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 Executive 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 Executive shall be judged in relation to his most
recent annual base salary to determine whether Executive 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. 
Executive 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
Executive’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 Executive 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 Executive 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 Executive, this Agreement and any other
agreements between Executive 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 Executive’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 Executive institutes any legal
action to enforce Executive’s legal rights hereunder, or to recover damages for
breach of this Agreement, Executive, if Executive prevails in whole or in part,
shall be entitled to recover from the Company reasonable attorneys’ fees and
disbursements incurred by Executive with respect to the claims or matters on
which Executive 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 Executive 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 Executive:

Karl F. Arleth

P.O. Box 23507

Silverthorne, CO 80498

970-468-7448

(b)                                 if to the Company:

Teton Energy Corporation

410 17th Street – Suite 1850

Denver, CO 
80202

Attn:
Chairman, Compensation Committee

or to such other address as
may have been furnished to Executive by the Company or to the Company by
Executive, 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
Executive’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

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James J.
  Woodcock

  	
   

  	
   

  	
  By:

  	
  /s/ Karl F. Arleth

  	
   

  
	
  Name:

  	
  James J.
  Woodcock

  	
   

  	
  Name:

  	
  Karl F. Arleth

  
	
  Title:

  	
  Director &
  Chairman, Compensation

  Committee

  	
   

  	
   

  
							

 

 

 

Schedule A

Outside Activities

Karl F. Arleth

	
  Company or

  Project Name

  	
   

  	
  Nature of

  Business

  	
   

  	
  Date Hired or

  Commenced

  Involvement

  	
   

  	
  Position

  	
   

  	
  Compensation

  	
   

  	
  Annual Time

  Commitment, (time away

  from office)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Dated:  September 1, 2006

Initials:         Executive: 
                      Company: 
       

 

 

Exhibit
A

Indemnification Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]