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July 20, 1998
PRIVILEGED AND CONFIDENTIAL
Sarah Jones Farmar
16374 Sandstone Drive
Morrison, CO 80465
Re: Termination Agreement
Dear Sarah:
GETCHELL Gold Corporation (the "Company") considers it essential to the best
interests of the stockholders of the Company to foster the continuous employment
of key management personnel. In this connection, the Board of Directors (the
"Board") of the Company recognizes that, as is the case with many publicly held
corporations and their subsidiaries and parents, the possibility of a Change in
Control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a Change in Control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereto, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "Change in Control" of the Company (as defined in
Section 2 hereof) under the circumstances described below. This agreement,
however, does not otherwise change your employment arrangements and except for
the conditions pertaining to a Change in Control, your continued employment
continues to be subject to the will of the President and Chief Executive Officer
of the Company.
1. TERMS OF AGREEMENT
This Agreement shall commence on the date hereof and shall continue in
effect through June 30, 2000; provided, however, if a Change in
Control of the Company shall have occurred during the term of this
Agreement, this
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Agreement shall continue in effect for a period of three (3) years
beyond the month in which such Change in Control occurred; provided
further, that in no event shall this Agreement extend beyond your
normal retirement age unless specifically endorsed to so provide.
2. CHANGE IN CONTROL
(i) No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as
set forth below. For purposes of this Agreement, a
"Change in Control" of the Company are deemed to have
occurred if:
(A) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended [the
"Exchange Act"], other than a trustee or
other fiduciary holding securities under an
employee benefit plan of the Company or a
corporation owned, directly or indirectly by
the stockholders of the Company, in
substantially the same proportions as their
ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Company representing twenty percent (20%)
or more of the combined voting power of the
Company's outstanding securities; or
(B) During any period of two (2) consecutive
years (not including any period prior to the
execution of this Agreement), individuals
who at the beginning of such period
constitute the Board and any new director
(other than a director designated by a person
who has entered into an agreement with the
Company to effect a transaction described in
clause (A) or (i) of this Subsection) whose
election by the Board or nomination for
election by the Company's stockholders was
approved by a vote of at least two-thirds
(2/3) of the directors then still in office
who either were directors at the beginning of
the
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period or whose election or nomination for
election was previously so approved, cease
for any reason to constitute a majority
thereof; or
(C) The shareholders of the Company approve a
merger or consolidation of the Company with
any other corporation, other than a merger or
consolidation which would result in the
voting securities of the Company
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) at least
eighty percent (80%) of the combined voting
power of the voting securities of the
Company or such surviving entity
outstanding immediately after such merger or
consolidation, or the shareholders of the
Company approve an agreement for the sale
or disposition by the Company of all or
substantially all the Company's assets; or
(D) There occurs any "Takeover Event," as such
term is defined in the Amended and Restated
Long-Term Incentive Plan of the Company, as
amended November 4, 1992, or a "Change in
Control," as such term is defined in the 1996
Long-Term Equity Incentive Plan of the
Company.
(ii) For purposes of this Agreement, a "potential Change in
Control" of the Company shall be deemed to have
occurred if:
(A) The Company enters into an agreement, the
consummation of which would result in the
occurrence of a Change in Control of the
Company.
(B) Any person (including the Company) publicly
announces an intention to take or to consider
taking actions which, if
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consummated, would constitute a Change in
Control of the Company.
(C) Any person, other than a trustee or other
fiduciary holding securities under an
employee benefit plan of the Company or a
corporation owned, directly or indirectly, by
the stockholders of the Company, in
substantially the same proportions as their
ownership of stock of the Company, who is
or becomes the beneficial owner, directly or
indirectly, of securities of the Company
representing nine and a half (9.5%) percent
or more of the combined voting power of the
Company's then outstanding securities,
increases his beneficial ownership of such
securities by five percent (5%) or more over
the percentage so owned by such person on
the date hereof; or
(D) The Board adopts a resolution to the effect
that, for purposes of this Agreement, a
potential Change in Control has occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential Change in Control, you will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the
occurrence of such potential Change in Control, (ii) the termination by you of
your employment by reason of Disability, as defined in Subsection 3(i), or (iii)
the occurrence of a Change in Control of the Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL
If any of the events described in Subsection 2(i)
hereof constituting a Change in Control of the
Company have occurred, you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon
the subsequent termination of your employment during
the term of this Agreement unless such termination is
(A) because of your death or Disability as defined in
Subsection 3(i), (B) by the Company for Cause, or by
you other than for Good Reason, in either of which
case you shall be entitled to the benefits provided
in Subsection 4(ii).
(i) DISABILITY. If, as a result of your incapacity due to
physical or mental illness, you shall have been
absent from
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the full-time performance of your duties with the
Company for six (6) consecutive months, and within
thirty (30) days after written notice of termination
is given you shall not have returned to the full-time
performance of your duties, your employment may be
terminated for "Disability".
(ii) CAUSE. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the
willful and continued failure by you to substantially
perform your duties with the Company (other than any
such failure resulting from your incapacity due to
physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of
Termination by you for Good Reason as defined in
Subsections 3(iv) and 3 (iii), respectively) after a
written demand for substantial performance is
delivered to you by the Company, which demand
specifically identifies the manner in which the
Company believes that you have not substantially
performed your duties, or (B) the willful engaging by
you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise.
For purposes of this Subsection, no act, or
failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you
not in good faith and without reasonable belief that
your action or omission was in the best interest of
the Company.
(iii) GOOD REASON. You shall be entitled to terminate your
employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a
Change in Control of the Company of any of the
following circumstances unless, in the case of
paragraphs (A), (E), (F), (G) or (H), such
circumstances are fully corrected prior to the Date
of Termination specified in the Notice of
Termination, as defined in Subsections 3(v) and
3(iv), respectively, given in respect thereof:
(A) The assignment to you of any duties
inconsistent with your status as a senior
manager of the Company or a substantial
adverse alteration in the nature or status
of your responsibilities from those in
effect immediately prior to the Change in
Control
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of the Company;
(B) A reduction by the Company in your annual
base salary as in effect on the date hereof
or as the same may be increased from time to
time except for across-the-board salary
reductions similarly affecting all senior
executives of the Company and all senior
executives of any person or entity which
accedes to the business of the Company;
(C) The relocation of your principal office to
outside the Englewood, Colorado
Metropolitan Area, or the Company's
requiring you to be based anywhere other
than in Englewood, Colorado except for
required travel on the Company's business to
an extent substantially consistent with your
present business travel obligations;
(D) The failure by the Company, without your
consent, to pay to you any portion of your
current compensation except pursuant to an
across-the-board compensation deferral
similarly affecting all senior executives of
the Company and all senior executives of any
person or entity which accedes to the
business of the Company, or to pay to you
any portion of an installment of deferred
compensation under any deferred
compensation program of the Company,
within seven (7) days of the date such
compensation is due;
(E) The failure by the Company to continue in
effect any compensation plan in which you
participate immediately prior to the Change
in Control of the Company which is material
to your total compensation, including but
not limited to the Getchell Gold Corporation
Long-Term Incentive Plan, as the plan is
amended from time to time ("the Long-Term
Incentive Plan"), or any substitute plan
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adopted prior to the Change in Control,
unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan)
has been made with respect to such plan, or
the failure by the Company to continue your
participation therein (or in such substitute
or alternative plan) on a basis not
materially less favorable, both in terms of
the amount of benefits provided and the
level of your participation relative to
other participants, as existed at the time
of the Change in Control of the Company;
(F) The failure by the Company to continue to
provide you with benefits substantially
similar to those enjoyed by you under any of
the Company's pension, life insurance,
medical, health and accident, or disability
plans in which you were participating at the
time of the Change in Control of the
Company, the taking of any action by the
Company which would directly or indirectly
materially reduce any of such benefits or
deprive you of any material fringe benefit
enjoyed by you at the time of the Change in
Control of the Company, or the failure by
the Company to provide you with the number
of paid vacation days to which you are
entitled on the basis of years of service
with the Company in accordance with the
Company's normal vacation policy in effect
at the time of the Change in Control of the
Company;
(G) The failure of the Company to obtain a
satisfactory agreement from any successor to
assume and agree to perform this Agreement,
as contemplated in Section 5 hereof;
(H) Any purported termination of your employment
which is not effected pursuant to a Notice
of Termination satisfying the requirements
of Subsection (iv) below (and,
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if applicable, the requirements of
Subsection (ii) above); for purposes of this
Agreement, no such purported termination
shall be effective; or
(iv) Any material breach by the Company of any provision
of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness unless such
illness constitutes "Disability". Your continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.
(v) NOTICE OF TERMINATION. Any purported termination
of your employment by the Company or by you shall be
communicated by written Notice of Termination to the other
party hereto in accordance with Section 6 hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under
the provision so indicated.
(vi) DATE OF TERMINATION, ETC. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that you shall not have returned to the
full-time performance of your duties during such thirty
(30) day period), and (B) if your employment is terminated
pursuant to Subsection (ii) or (iii) above or for any other
reason (other than Disability), the date specified in the
Notice of Termination (which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than
thirty (30) days, and in the case of a termination pursuant
to Subsection (iii) above shall not be less than fifteen
(15) nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given); provided that
if within fifteen (15) days after any Notice of Termination
is given, or if later, prior to the Date of Termination
(as determined without regard to this provision), the party
receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the
Date of Termination
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shall be the date on which the dispute is finally
determined, either by mutual written agreement of the
parties by a binding arbitration award, or by a final
judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no
appeal has been perfected); provided further that the Date
of Termination shall be extended by a notice of dispute
only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Company will continue to pay you your
full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY
Following a Change in Control as defined by Subsection
2(i), upon termination of your employment or during a
period of disability, you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time
duties with the Company as a result of incapacity due to
physical or mental illness that does not constitute
Disability, you shall continue to receive your base salary
at the rate in effect at the commencement of any such
period, together with all compensation payable to you under
the Long-Term Incentive Plan or other plan during such
period, until this Agreement is terminated pursuant to
Section 3(i) hereof. Thereafter, or in the event your
employment shall be terminated, or by reason of your death,
your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then
in effect in accordance with the terms of such programs;
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(ii) If your employment shall be terminated by the Company for
Cause or by you other than for Good Reason, or for
Disability or death, the Company shall pay you your full
base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any
compensation plan of the Company at the time such
payments are due, and the Company shall have no further
obligations to you under this Agreement;
(iii) If your employment by the Company shall be terminated (a)
by the Company other than for Cause or Disability or (b) by
you for Good Reason, then you shall be entitled to the
benefits provided below:
(A) The Company shall pay you your full base
salary through the Date of Termination at the
rate in effect at the time Notice of
Termination is given, plus all other amounts
to which you are entitled under any
compensation plan of the Company, at the
time such payments are due, except as
otherwise provided below.
(B) In lieu of any further salary payments to you
for periods subsequent to the Date of
Termination, the Company shall pay as
severance pay to you, a lump sum severance
payment (together with the payments
provided in Paragraph E below and any
payment you may receive pursuant to
Paragraph D below, the "Severance
Payments") equal to 1.5 times the sum of (i)
your annual base salary and (ii) bonuses,
averaged over the three (3) years (or such
portion of the three (3) years during which
you actually were employed by the
Company) prior to the occurrence of the
circumstances giving rise to the Notice of
Termination.
(C) Health plan, dental plan, life insurance plan and
long-term disability plan coverage in
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effect on the Date of Termination will continue
for a period of twenty four (24) months from the
Date of Termination.
(D) Except for Incentive Stock Options ("ISO's")
which are hereby specifically excluded, in
lieu of shares of common stock of the
Company ("Company Shares") issuable upon
exercise of outstanding options ("Options"),
granted to you under the Company's
Long-Term Incentive Plan as amended from
time to time, or any other plan then in effect
(which Options shall be canceled upon the
making of the payment referred to below),
unless you notify the Company by giving
notice in accordance with Section 6 hereof
within fifteen (15) days after receipt of
Notice of Termination that you do not wish
such payment, the Company shall pay to you
not later than the fifth day following the Date
of Termination, an amount in cash equal to
the product of (i) the difference (to the extent
that such difference is a positive number)
obtained by subtracting the per share exercise
price of each Option held by you whether or
not then fully exercisable from the higher of
(A) the closing price of Company Shares as
reported on the American Stock Exchange on
the Date of Termination, or (B) the highest
per share price for Company Shares actually
paid in connection with any Change in
Control of the Company, or (C) the highest
per share price payable under the terms of
the Company's Long-Term Incentive Plans
as amended from time to time and (ii) the
number of Company Shares covered by each
such Option.
(E) The Company shall also pay to you all legal fees
and expenses incurred by you as a result of such
termination (including all such fees and expenses,
if any, incurred in contesting or disputing any
such termination or in
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seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with
any tax audit or proceeding to the extent
attributable to the application of Section 4999 of
the Internal Revenue Code of 1986, as amended (the
"Code") to any payment or benefit provided
hereunder).
(F) In the event that you become entitled to the
payments (the "Severance Payments")
provided under paragraphs (B),(D), and (E)
above, or to any other payments or benefits
received or to be received by you in
connection with a Change in Control or your
termination of employment (whether
pursuant to the terms of this Agreement or
any other plan, arrangement or agreement
with the Company) any person whose actions
result in a Change in Control or any person
affiliated with the Company or such person
(collectively with the Severance Payments,
the "Total Payments) if any of the Total
Payments will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of
the Code, the Company shall pay to you at
the time specified in paragraph (G), below,
an additional amount (the "Gross-Up
Payment") such that the net amount retained
by you, after deduction of any Excise Tax on
the Total Payments and any federal income
tax and Excise Tax upon the payment
provided for by this paragraph, shall be
equal to the Total Payments. For purposes
of determining whether any of the Total
Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) the
Total Payments shall be treated as "parachute
payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the
meaning of Section 280G(b)(1) shall be
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treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the
Company's independent auditors and acceptable to
you such other payments or benefits (in whole or
in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in
part) represent reasonable compensation for
services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax; (ii) the amount of the
Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B)
the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying
clause (i), above); and (iii) the value of any
non-cash benefits or any deferred payment or
benefit shall be determined by the Company's
independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of
the Gross-Up Payment, you shall be deemed to pay
federal income taxes at the highest marginal rate
of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made. In the
event that the Excise Tax is subsequently
determined to be less than the amount taken into
account hereunder at the time of termination of
your employment, you shall repay to the Company at
the time that the amount of such reduction in
Excise Tax is finally determined the portion of
the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal
income tax imposed on the Gross-Up Payment being
repaid by you if such repayment results in a
reduction in
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Excise Tax and/or a federal income tax deduction)
plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is
determined to exceed the amount taken into account
hereunder at the time of the termination of your
employment (including by reason of any payment,
the existence or amount of which cannot be
determined at the time of the Gross-Up Payment),
the Company shall make an additional gross-up
payment in respect of such excess (plus any
interest payable with respect to such excess) at
the time that the amount of such excess is finally
determined.
(G) The payments provided for in paragraphs
(B), (D), and (F) above, shall be made not
later than the fifth (5th) day following the
Date of Termination; provided, however,
that if the amounts of such payments cannot
be finally determined on or before such day,
the Company shall pay to you on such day an
estimate, as determined in good faith by the
Company, of the minimum amount of such
payments and shall pay the remainder of such
payments (together with interest at the rate
provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be
determined, but in no event later than the
thirtieth (30th) day after the Date of
Termination. In the event that the amount of
the estimated payments exceeds the amount
subsequently determined to have been due,
such excess shall constitute a loan by the
Company to you payable on the fifth (5th)
day after demand by the Company (together
with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(vi) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
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employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by you to the
Company, or otherwise.
(vii) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits
payable to you under the 401(k) Thrift Plan, and any other
plan or agreement relating to retirement benefits.
5. RELATIONSHIP WITH LONG-TERM INCENTIVE PLAN
In the event of an inconsistency between the terms of this
Agreement and the terms of the Company's Long-Term Incentive
Plans, the terms of this Agreement shall control.
6. SUCCESSORS: BINDING AGREEMENT
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to
expressly assume and agree to perform this
Agreement in the same manner and to the same
extent that the Company would be required to
perform it if no such succession had taken place.
Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company
in the same amount and on the same terms as you
would be entitled to hereunder if you terminate your
employment for Good Reason following a Change in
Control, except that for purposes of implementing
the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of
Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or
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otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be
payable to you hereunder if you had continued to
live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your
estate.
7. NOTICES
For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notice to the Company shall
be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon
receipt.
8. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware. All
references to Sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such Sections.
Any payments provided for hereunder shall be paid net of any
applicable withholding
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required under federal, state or local law. The obligations of the
Company under Section 4 shall survive the expiration of the term of
this Agreement.
9. VALIDITY
The invalidity or unenforceable ability or any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force
and effect.
10. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which together will
constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely yours,
GETCHELL GOLD CORPORATION
/s/ G. W. Thompson
G. W. (Bill) Thompson
President and Chief Executive Officer
GWT:mim
ACCEPTED AND AGREED to on this 20 day of July, 1998.
/s/ Sarah Jones Farmar
Sarah Jones Farmar