Exhibit 10.10
Employment
Agreement
This Employment Agreement (the
“Agreement”) is made and entered into this 31st day of
December, 2008, by and between Petroleum Development Corporation, a
Nevada Corporation (the “Company”), and Eric R. Stearns
(the “Employee”).
WHEREAS, the Company currently employs the
Employee in the capacity of Executive Vice President and, prior to
March 9, 2008, had employed the Employee in the capacity of
Executive Vice President of Exploration and Development;
WHEREAS, the Company desires to employ the
Employee to perform the duties and services incident to such
position for the Company, and the Employee wishes to be so employed
by the Company, all upon the terms and conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the premises
and mutual covenants and obligations set forth herein and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged and accepted, the parties hereto,
intending to be legally bound, agree as follows:
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Initial
Term . The
effective date of this Agreement will be January 1, 2008 (the
“Effective Date”), and the initial term will be for the
period beginning on the Effective Date and ending December 31,
2009.
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Automatic
Extensions. The Term of this Agreement will be
extended for an additional twelve (12) months beginning on December
31, 2008 and on each successive December 31 unless either party
provides the other with at least thirty (30) days prior written
notice, or unless the contract has been terminated by the parties
in accordance with the provisions of Section 7 of this
Agreement. The period of time from the Effective Date
until the Termination Date, as defined in Section 7.b., will be the
“Term.”
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Change of
Control . In
the event of a Change of Control, the Term of this Agreement will
automatically be extended to the date that is twenty-four (24)
months after the date of the Change of Control without any action
on the part of the Company or the Employee. Thereafter,
the date of the Change of Control will be treated as the Effective
Date for purposes of further automatic 12-month extensions of the
Agreement under this section. “Change of
Control” of the Company will occur on the earliest of the
following events:
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Change in
Ownership : A change in
ownership of the Company occurs on the date that any one person, or
more than one person acting as a group, acquires ownership of stock
of the Company that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or
total voting power of the stock of the Company, excluding the
acquisition of
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additional stock by a person or more than
one person acting as a group who is considered to own more than 50%
of the total fair market value or total voting power of the stock
of the Company.
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Change in
Effective Control : A
change in effective control of the Company occurs on the date that
either:
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Any one person,
or more than one person acting as a group, acquires (or has
acquired during the l2-month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of
the Company possessing 30% or more of the total voting power of the
stock of the Company; or
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A majority of
the members of the Board of Directors of the Company (the
“Board”) is replaced during any l2-month period by
directors whose appointment or election is not endorsed by a
majority of the members of the board of directors prior to the date
of the appointment or election; provided, that this paragraph (B)
will apply only to the Company if no other corporation is a
majority shareholder.
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Change in
Ownership of Substantial Assets : A change the ownership of a substantial
portion of the Company's assets occurs on the date that any one
person, or more than one person acting as a group, acquires (or has
acquired during the l2-month period ending on the date of the most
recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more
than 40% of the total gross fair market value of the assets of the
Company immediately prior to such acquisition or acquisitions. For
this purpose, “gross fair market value” means the value
of the assets of the Company, or the value of the assets being
disposed of, determined without regard to any liabilities
associated with such assets.
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It is the
intent that this definition be construed consistent with the
definition of “Change of Control” as defined under
Internal Revenue Code Section 409A and the applicable Treasury
Regulations, as amended from time to time.
The place of
employment will be the Company’s headquarters building in
Bridgeport, West Virginia unless the Employee and the Company agree
to an alternative location.
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Position and
Responsibilities
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Position . The Employee served as the
Executive Vice President of Exploration and Development until March
9, 2008. For periods on or after March 9, 2008, the
Employee will serve as Executive Vice President. In such
capacities, the Employee will report to the Chief Executive Officer
of the Company and be under the general direction and control of
the Chief Executive Officer.
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Responsibilities. The Employee will have obligations,
duties, authority and power to do such acts as are customarily done
by a person holding the same or equivalent positions in
corporations of similar size to the Company. The
Employee shall perform such managerial duties and responsibilities
for the Company as may reasonably be assigned to him by the Chief
Executive Officer and, at no additional compensation, shall serve
in other such positions with any subsidiary corporation of the
Company, or any partnership, limited liability company or other
entity in which the Company has an interest (herein collectively
called “Affiliates”), as the Chief Executive Officer
may from time to time determine.
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Dedication
of Professional Services. The Employee shall devote
substantially all of his business time, best efforts and attention
to promote and advance the business of the Company and its
Affiliates to perform diligently and faithfully all the duties,
responsibilities and obligations of his positions with the
Company. Employee shall not be employed in any other
business activity, other than with the Company and its Affiliates,
during the Term, whether or not such activity is pursued for gain,
profit or other pecuniary advantage without approval by the
Compensation Committee of the Board (“Compensation
Committee”); provided, however, that this restriction will
not be construed as preventing Employee from investing his or her
personal assets in a business which does not compete with the
Company or its Affiliates, where the form or manner of such
investment will not require services of any significance on the
part of Employee in the operation of the affairs of the business in
which such investment is made and in which his participation is
solely that of a passive investor.
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Adherence to
Standards. Employee shall comply with the
written policies, standards, rules and regulations of the Company
from time to time established for all executive officers of the
Company consistent with Employee's position and level of
authority.
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Minimum
Stock Ownership. Employee shall comply with the
Company’s minimum stock ownership requirements for executive
officers of the Company, such requirement being that by March 9,
2009 (the fifth anniversary of the date such minimum stock
ownership requirements were
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adopted by the
Board) and until his Termination Date, Employee shall have a
minimum stock ownership equal to two (2) times the Employee’s
Base Salary, as defined in Section 4.a (or such level as adjusted
from time to time).
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Base
Salary. The
Company shall pay the Employee an annual base salary of $305,000
(the “Base Salary”) commencing on the Effective Date
and ending on the Termination Date. The Base Salary will
be payable in accordance with the ordinary payroll practices of the
Company. The Compensation Committee shall review the
Base Salary annually, and the Base Salary may be changed by the
Compensation Committee in its sole discretion, taking into account
the base salaries, aggregate annual cash compensation, and other
compensation of individuals holding similar positions at other
comparable companies and the performance of the Employee and the
Company.
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Performance
Bonus. In
addition to his Base Salary, the Employee will be eligible to earn
an annual performance bonus (the “Bonus”) during the
Term based on the achievement of corporate performance objectives
as determined by the Compensation Committee in its sole
discretion. The “Target Bonus” will be a
specified percentage of the Base Salary, as set forth in the
Petroleum Development Corporation Short-Term Incentive Compensation
Plan for a given year which may be earned if the Employee meets all
of the criteria established by the Compensation
Committee. However, the Bonus may be less than or more
than the Target Bonus based on the level of performance of the
Employee and the criteria established by and at the sole discretion
of, the Compensation Committee. For 2008, the Target
Bonus will be equal to 62.5% of the Employee’s Base Salary
and the maximum percentage will be 125% of the Employee’s
Base Salary. The Bonus will be paid in cash no later
than March 15 of the following year. To the extent
practicable, the Bonus will meet the requirements for qualified
performance-based compensation under Internal Revenue Code Section
162(m).
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Retirement
Compensation . Pursuant to prior employment
agreements, the Employee, as of the Effective Date, has earned a
right to ten (10) annual payments of $30,000 (total
$300,000). For each additional complete year of
employment with the Company, the Employee will earn and be entitled
to receive an additional annual retirement payment equal to $7,500
(the “Retirement Payment”). In the event the
Employee terminates employment with the Company prior to the last
day of a year pursuant to Sections 7.d., 7.f. or 7.h., the Employee
will also earn an additional Retirement Payment equal to
$7,500. The Retirement Payment will be payable to the
Employee, or in the event of the Employee’s death, to his
estate, beneficiaries, or designees, on each of the first ten
anniversary
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dates following
the date the Employee leaves the service of the
Company. The Retirement Payment will be in addition to
any deferred compensation, pension, or other payments the Employee
has earned under this and any other previous and subsequent
agreements with the Company and any other payments he may be due
under the Company’s employee benefit plans. The
Retirement Payment is payable to the Employee, even if the
Employee's termination is for Just Cause pursuant to Section
7.c.
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Equity
Compensation Grant. In addition to cash compensation,
the Employee will be eligible to earn equity compensation during
the Term. The amounts and form of all equity
compensation awards shall be determined at the sole discretion of
the Board or its designee and only in accordance with shareholder
approved stock compensation plans. As of the Effective
Date, under the Company’s Long-Term Equity Compensation Plan,
the Employee will receive an award equal in value to $442,250, 50%
of which will be awarded as restricted stock and 50% of which will
be awarded as long-term incentive performance (“LTIP”)
shares. For this purpose, the value of the restricted
stock and the LTIP shares will be determined by the Company’s
compensation consultants and will be based on the average closing
price of the stock of the Company for the month of December,
2007. The restricted stock will vest at the rate of 25%
for each complete year worked by the Employee under this Agreement,
beginning on March 7, 2008 and vesting at the rate of 25% on each
anniversary thereof. The performance shares will vest in
accordance with the timing and performance targets set forth in the
documentation for such LTIP shares. Future awards will
vest on the schedule specified by the Board or its designee at the
time of the award.
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Succession-Related Grant . On the date that Employee assumes
the position of Executive Vice President of the Company (March 9,
2008), the Employee will receive a one-time award of restricted
stock equal in value to $450,000. For this purpose, the
value of the restricted stock will be determined by the
Company’s compensation consultants and will be based on the
average closing price of the stock of the Company for the month of
December, 2007. The restricted stock will vest at the
rate of 20% for each complete year worked by the Employee under
this Agreement, beginning from the Effective Date.
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Other
Compensation. The Employee will continue to be
eligible to participate in all other cash or stock compensation
plans or programs maintained by the Company, as in effect from time
to time, in which other senior executives of the Company are
allowed to participate.
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Recoupment
of Certain Compensation. If the Company has to restate all or
a portion of its financial statements due to the material
noncompliance of the Company with any financial reporting
requirement under the securities laws, the Employee shall, for the
affected years, reimburse the
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Company for any
excess bonus paid to the Employee pursuant to Section
4.b. The reimbursements shall be equal to the difference
between the bonus paid to him for the affected years and the bonus
that would have been paid to the Employee had the financial results
been properly reported. Such reimbursement shall be paid
to the Company within ninety days after the Company notifies the
Employee of the amount owed to the Company.
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Participation in Company Benefit
Plans. During
the Term, the Company shall provide the Employee with coverage
under all employee pension and welfare benefit programs, plans and
practices commensurate with his positions in the Company and to the
extent permitted under the respective employee benefit
plan.
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Vacation. The Employee will be entitled to
twenty (20) days of paid vacation in each calendar year, to be
taken at such times as is reasonably determined by the Employee to
be consistent with the Employee’s responsibilities under this
Agreement.
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Expense
Reimbursement. The Employee is authorized to incur
reasonable expenses in carrying out his duties and responsibilities
under this Agreement, including, without limitation, expenses
related to travel, meals, entertaining, and similar items related
to such duties and responsibilities. The Company shall
reimburse the Employee for all such expenses on presentation by
Employee from time to time of appropriately itemized and approved
(consistent with the Company’s policy) accounts of such
expenditures. The Company shall reimburse the Employee
for reasonable dues and expenses of membership in such club or
clubs as the Board reasonably deems necessary for the Employee to
entertain on behalf of the Company and for costs associated with
continuing education and professional dues if approved in advance
by the Chief Executive Officer. All expense
reimbursements for a calendar year will be paid in the normal
course, but no later than March 15 of the following calendar
year.
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Life and
Disability Insurance. The Company will reimburse the
Employee for the cost of life insurance on the Employee in the face
amount of one million dollars ($1,000,000) with a person or persons
named by the Employee as either the owner or the beneficiary as the
Employee directs, and for the cost of a disability policy
consistent with what is provided to other executive officers of the
Company. All reimbursements for a calendar year will be
paid in the normal course, but no later than March 15 of the
following calendar year.
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Health
Insurance. The Company shall include the
Employee under any hospital, surgical, or group health plan or
policy adopted generally for the
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benefit of its
employees. The payment of the premiums for the Employee
and his dependents will be determined in accordance with the rules
and regulations adopted by the Company for its
employees. In addition to including the Employee and his
dependents in such plan, the Company shall pay all reasonable
hospital, surgical, medical, dental, and prescription expenses of
the Employee and his dependents not covered by such a
plan. If the Company has no group health plan, the
Company agrees to pay all reasonable premiums on any health
insurance policy obtained by the Employee to provide such
coverage.
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Automobile. During the Term, the Employee will
be entitled to use of a Company automobile or payment of a car
allowance in accordance with a plan approved by the Board or its
designee.
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Confidential
Material and Employee Obligations.
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Confidential
Material. The
Employee shall not, directly or indirectly, either during the Term
or thereafter, disclose to anyone (except in the regular course of
the Company's business or as required by law), or use in any
manner, any information acquired by the Employee during his
employment by the Company with respect to any clients or customers
of the Company or any confidential, proprietary or secret aspect of
the Company's operations or affairs unless such information has
become public knowledge other than by reason of actions, direct or
indirect, of the Employee. Information subject to the provisions of
this paragraph will include, without limitation:
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Brokers,
broker/dealer firms, law firms used to prepare Company and
partnership registration statements, due diligence investigations,
or other parties involved with the registration, review, or
offering of the Company’s securities and drilling
programs;
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Names,
addresses, and other information regarding investors in the
Company’s drilling programs;
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Names,
addresses and other information regarding investors who participate
with the Company in the drilling, completion or operation of oil
and gas wells as joint venture partners, working interest owners,
or in any other form of ownership;
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Lists of or
information about personnel seeking employment with or who are
currently employed by the Company;
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Maps, logs,
drilling reports and any other inform
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