Exhibit 10.11
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 Gysle R.
Shellum ( “Shellum”).
WHEREAS, the Company wishes to employ Shellum as
Chief Financial Officer and to perform the duties and services
incident to such position for the Company, and Shellum 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 shall be November 11, 2008 (the
“Effective Date”), and the initial term shall be for
the period beginning on the Effective Date and ending December 31,
2010.
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Automatic
Extensions. The Term of this Agreement shall be
extended for an additional 12 months beginning on December 31, 2009
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., shall be
the “Term.”
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The place of employment shall be
the Company’s offices in Denver, Colorado, unless Shellum and
the Company mutually agree to an alternative
location. Shellum acknowledges that there may be
substantial business travel associated with Shellum’s
position.
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Position and
Responsibilities
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Position. Shellum shall serve as Chief
Financial Officer of the Company and shall initially report to the
Chief Executive Officer of the Company (the “Chief Executive
Officer”) and be under the general direction and control of
the Chief Executive Officer.
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Responsibilities. Shellum shall have obligations,
duties, authority and power to do such acts as are customarily done
by a person holding the same or an equivalent position in
corporations of similar size to the Company. Shellum
shall perform such managerial duties and
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responsibilities for the Company as may be
reasonably be assigned to him and, at no additional
compensation, if requested, shall serve on the Board of
Directors of the Company (the "Board") and 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 may from time to time be requested.
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Dedication
of Professional Services. Shellum shall devote substantially
all of Shellum’s 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 Shellum’s position with
the Company. Shellum 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 (the “Compensation
Committee”); provided, however, that this restriction shall
not be construed as preventing Shellum from investing
Shellum’s 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 Shellum in the operation of the affairs
of the business in which such investment is made and in which
Shellum’s participation is solely that of a passive
investor.
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Adherence to
Standards. Shellum shall comply with the
written policies, standards, rules and regulations of the Company
from time to time established for all employees or executive
officers of the Company consistent with Shellum's position and
level of authority.
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Minimum
Stock Ownership. Shellum shall comply with the
Company’s minimum stock ownership requirements for officers
(other than the Chief Executive Officer); such requirements being
that by the fifth anniversary of the date of hire and until
Shellum’s Termination Date, Shellum shall maintain a minimum
stock ownership equal to two times Shellum’s Base Salary, as
defined in Section 4.a.
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Base
Salary. The
Company shall pay Shellum an annual base salary of $235,000 (the
“Base Salary”) commencing on the Effective Date and
ending on the Termination Date. The Base Salary shall be
payable in accordance with the ordinary payroll practices of the
Company. The Base Salary shall be reviewed annually by
the Compensation Committee and 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
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comparable
companies, the performance of Shellum and the Company, and other
relevant factors.
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Performance
Bonus. Shellum shall be eligible to earn an
annual performance bonus (the “Bonus”) during the Term
based on criteria established by the Compensation Committee in its
sole discretion each year, to be paid by March 15 of the following
year. For 2009, the target bonus will be 50% of Shellum’s
base salary, and the exceptional performance bonus will be 100% of
such base salary.
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Equity
Compensation Grant. As a long term incentive, on the
Effective Date under the Company’s Long-Term Equity
Compensation Plan, Shellum shall participate in any equity
compensation program provided to all executive officers, based on
criteria established by the Compensation Committee in its sole
discretion each year. Initially, Shellum will be granted
a restricted stock award equal to 100% of Base Salary, to vest pro
rata over 4 years; the valuation date for such award will be based
on the closing price of the Company’s stock on November 28,
2008.
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Other
Compensation. Shellum shall 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 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 Shellum with coverage under all
employee pension and welfare benefit programs, plans and practices
commensurate with Shellum’s positions in the Company and to
the extent permitted under the respective employee benefit
plan.
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Vacation. Shellum will be entitled to four (4)
weeks of paid vacation in each calendar year, to be taken at such
times as is reasonably determined by Shellum to be consistent with
Shellum’s responsibilities under this
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Agreement and
the Company’s vacation policy applicable to all
employees.
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Automobile. During the Term, Shellum shall be
entitled to an annual automobile allowance as approved by the
Compensation Committee and updated from time to time at its
discretion.
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Relocation
Expense. Shellum shall be entitled
to relocation expense for his move to the Denver Colorado area,
subject to the terms and conditions of the Company’s
relocation policy. In addition Shellum will be granted a
$30,000 stipend to cover the anticipated commute schedule prior to
such relocation.
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Confidential
Information. Shellum hereby acknowledges that in
connection with Shellum’s employment by the Company, Shellum
will be exposed to and may obtain certain Confidential Information
(as defined below) (including, without limitation, procedures,
memoranda, notes, records and customer and supplier lists whether
such information has been or is made, developed or compiled by
Shellum or otherwise has been or is made available to him)
regarding the business and operations of the Company and its
subsidiaries or affiliates. Shellum further acknowledges
that such Confidential Information is unique, valuable, considered
trade secrets and deemed proprietary by the Company. For
purposes of the Agreement, “Confidential Information”
includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Company or
their direct or indirect subsidiaries relating to Business
Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Company or
their direct or indirect subsidiaries, whether oral or in written
form (including electronic). Shellum agrees that all
Confidential Information is and will remain the property of the
Company or their direct or indirect subsidiaries, as the case may
be. Shellum further agrees, except for disclosures
occurring in the good faith performance of Shellum’s duties
for the Company or their direct or indirect subsidiaries, during
the Term and for a period of three (3) years after the Termination
Date, to hold in the strictest confidence all Confidential
Information, and not to, directly or indirectly, duplicate, sell,
use, lease, commercialize, disclose or otherwise divulge to any
person or entity any portion of the Confidential Information or use
any Confidential Information, directly or indirectly, for
Shellum’s own benefit or profit or allow any person, entity
or third party, other than the Company or their direct or indirect
subsidiaries and authorized executives of the same, to use or
otherwise gain access to any Confidential
Information. Shellum will have no obligation under this
Agreement with respect to any information that becomes generally
available to the public other than as a result of a
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disclosure by
Shellum or Shellum’s agent or other representative or becomes
available to Shellum on a non-confidential basis from a source
other than the Company or their direct or indirect
subsidiaries. Further, Shellum will have no obligation
under this Agreement to keep confidential any of the Confidential
Information to the extent that a disclosure of it is required by
law or is consented to by the Company; provided, however, that if
and when such a disclosure is required by law, Shellum promptly
will provide the Company with notice of such requirement, so that
the Company may seek an appropriate protective order.
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Return of
Property. Shellum agrees to deliver promptly
to the Company, upon termination of Shellum’s employment
hereunder, or at any other time when the Company so requests, all
documents and property relating to the business of the Company or
their direct or indirect subsidiaries, including without
limitation: all geological and geophysical reports and related data
such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and
opinions relating to the foregoing, production records, electric
logs, core data, pressure data, lease files, well files and
records, land files, abstracts, title opinions, title or curative
matters, contract files, notes, records, drawings, manuals,
correspondence, financial and accounting information, customer
lists, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes,
agreements, contracts, manuals, electronic data, or any
documents, whether written or digital and whether
prepared or compiled by Shellum or furnished to Shellum during the
Term, relating to the business of the Company or their direct or
indirect subsidiaries and all copies thereof and therefrom;
provided, however, that Shellum will be permitted to retain copies
of any documents or materials of a personal nature or otherwise
related to Shellum’s rights under this Agreement. The
aforementioned materials include materials on Shellum’s
personal computers, which materials shall be destroyed in a manner
satisfactory to the Company.
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Non-Compete
Obligations During Employment Term. Shellum agrees that
during the Term:
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Shellum will
not, other than through the Company, engage or participate in any
manner, whether directly or indirectly through any family member or
as an employee, employer, consultant, agent, principal, partner,
more than one percent shareholder, officer, director, licensor,
lender, lessor or in any other individual or representative
capacity, in any business or activity which is engaged in leasing,
acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products; provided that the foregoing
shall not
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be deemed to
restrain the participation by Shellum’s spouse in any
capacity set forth above in any business or activity engaged in any
such activity and provided further that the Company may, in good
faith, take such reasonable action with respect to Shellum’s
performance of Shellum’s duties, responsibilities and
authorities as set forth in this Agreement as it deems necessary
and appropriate to protect its legitimate business interests with
respect to any actual or apparent conflict of interest reasonably
arising from or out of the participation by Shellum’s spouse
in any such competitive business or activity; and
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all investments
made by Shellum (whether in Shellum’s own name or in the name
of any family members or other nominees or made by Shellum’s
controlled affiliates), which relate to the leasing, acquisition,
exploration, production, gathering or marketing of hydrocarbons and
related products will be made solely through the Company; and
Shellum will not (directly or indirectly through any family members
or other persons), and will not permit any of Shellum’s
controlled affiliates to: (1) invest or otherwise participate
alongside the Company or its direct or indirect subsidiaries in any
Business Opportunities, or (2) invest or otherwise participate in
any business or activity relating to a Business Opportunity,
regardless of whether any of the Company or its direct or indirect
subsidiaries ultimately participates in such business or activity,
in either case, except through the
Company. Notwithstanding the foregoing, nothing in this
Section 6 shall be deemed to prohibit Shellum or any family member
from owning, or otherwise having an interest in, less than one
percent (1%) of any publicly-owned entity or three percent (3%) or
less of any private equity fund or similar investment fund that
invests in any business or activity engaged in any of the
activities set forth above, provided that Shellum has no active
role with respect to any investment by such fund in any
entity.
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Non-Compete
Obligations After Termination Date . Shellum agrees that Shellum will
not engage or participate in any manner, whether directly or
indirectly through any family member or other person or as an
employee, employer, consultant, agent principal, partner, more than
one percent shareholder, officer, director, licensor, lender,
lessor or in any other individual or representative
capacity:
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during the
one-year period following the Termination Date, in any business or
activity which is engaged in leasing, acquiring, exploring,
producing, gathering or marketing hydrocarbons and related products
within (1) any county or parish in which the Company owns any oil
and gas interests or conducts operations on the Termination Date or
in which the Company has owned any oil and gas interests or
conducted operations at any time during the six months immediately
preceding the Termination Date or (2) any county or
parish adjacent to any county or parish described in clause (1);
and
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during the
two-year period following the Termination Date, in any business or
activity which is in direct competition with the business of the
Company or its direct or indirect subsidiaries in the leasing,
acquiring, exploring, producing, gathering or marketing of
hydrocarbons and related products within the boundaries of, or
within a two-mile radius of the boundaries of, any mineral property
interest of any of the Company or its direct or indirect
subsidiaries (including, without limitation, a mineral lease,
overriding royalty interest, production payment, net profits
interest, mineral fee interest or option or right to acquire any of
the foregoing, or an area of mutual interest as designated pursuant
to contractual agreements between the Company and any third party)
or any other property on which any of the Company or its direct or
indirect subsidiaries has an option, right, license or authority to
conduct or direct exploratory activities, such as three-dimensional
seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping),
as of the Termination Date or as of the end of the six-month period
following such Termination Date; provided that, this subsection
(ii) will not preclude Shellum from making investments in
securities of oil and gas companies which are registered on a
national stock exchange, if the aggregate amount owned by Shellum
and all family members and affiliates does not exceed 5% of such
company’s outstanding securities.
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Notwithstanding
the foregoing, nothing in this Section 6.c. shall be deemed to
restrain the participation by Shellum’s spouse in any
capacity set forth above in any business or activity described
above.
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Non-Solicitation. During the Term and for a period of
twenty-four (24) months after the Termination Date, Shellum will
not, whether for
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Shellum’s
own account or for the account of any other person (other than the
Company or its direct or indirect subsidiaries), intentionally
solicit, endeavor to entice away from the Company or its direct or
indirect subsidiaries, or otherwise interfere with the relationship
of the Company or its direct or indirect subsidiaries with, (i) any
person who is employed by the Company or its direct or indirect
subsidiaries (including any independent sales representatives or
organizations), or (ii) any client or customer of the Company or
its direct or indirect subsidiaries.
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Assignment
of Developments. Shellum assigns and agrees to assign
without further compensation to the Company and its successors,
assigns or designees, all of Shellum’s right, title and
interest in and to all Business Opportunities and Intellectual
Property (as those terms are defined below), and further
acknowledges and agrees that all Business Opportunities and
Intellectual Property constitute the exclusive property of the
Company.
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For purposes of this Agreement,
“Business Opportunities” means all business ideas,
prospects, proposals or other opportunities pertaining to the
lease, acquisition, exploration, production, gathering or marketing
of hydrocarbons and related products and the exploration potential
of geographical areas on which hydrocarbon exploration prospects
are located, which are developed by Shellum during the Term, or
originated by any third party and brought to the attention of
Shellum during the Term, together with information relating thereto
(including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other
written or charted means).
For purposes of this Agreement,
“Intellectual Property” shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances,
articles, computer programs and improvements (including, without
limitation, enhancements to, or further interpretation or
processing of, information that was in the possession of Shellum
prior to the date of this Agreement), whether or not patentable or
copyrightable, which do not fall within the definition of Business
Opportunities, which Shellum discovers, conceives, invents, creates
or develops, alone or with others, during the Term, if such
discovery, conception, invention, creation or development (i)
occurs in the course of Shellum’s employment with the
Company, or (ii) occurs with the use of any of the time, materials
or facilities of the Company or its direct or indirect
subsidiaries, or (iii) in the good faith judgment of the Board,
relates or pertains in any material way to the purposes, activities
or affairs of the Company or its direct or indirect
subsidiaries.
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Injunctive
Relief. Shellum acknowledges that a breach
of any of the covenants contained in this Section 6 may result in
material, irreparable injury to the Company for which there is no
adequate remedy at law, that
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it will not be
possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat of breach, the Company will
be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining Shellum from
engaging in activities prohibited by this Section 6 or such other
relief as may be required to specifically enforce any of the
covenants in this Section 6. To the extent that the
Company seeks a temporary restraining order (but not a preliminary
or permanent injunction), Shellum agrees that a temporary
restraining order may be obtained ex parte.
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Adjustment
of Covenants. The parties consider the covenants
and restrictions contained in this Section 6 to be
reasonable. However, if and when any such covenant or
restriction is found to be void or unenforceable and would have
been valid had some part of it been deleted or had its scope of
application been modified, such covenant or restriction will be
deemed to have been applied with such modification as would be
necessary and consistent with the intent of the parties to have
made it valid, enforceable and effective.
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Detrimental
Activities . If Shellum engages in any activity
that violates any covenant or restriction contained in this Section
6, in addition to any other remedy the Company may have at law or
in equity, (A) Shellum will be entitled to no further payments or
benefits from the Company under this Agreement or otherwise, except
for any payments or benefits required to be made or provided under
applicable law, (B) all unexercised stock options, restricted stock
and other forms of equity compensation held by or credited to
Shellum will terminate effective as of the date on which Shellum
engages in that activity, unless terminated sooner by operation of
another term or condition of this Agreement or other applicable
plans and agreements, and (C) any exercise, payment or delivery
pursuant to any equity compensation award that occurred within one
year prior to the date on which Shellum engages in that activity
may be rescinded within one year after the first date that a
majority of the members of the Board first became aware that
Shellum engaged in that activity. In the event of any
such rescission, Shellum will pay to the Company the amount of any
gain realized or payment received as a result of the rescinded
exercise, payment or delivery, in such manner and on such terms and
conditions as may be required.
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Right of
Set-Off . Shellum consents to a deduction
from any amounts the Company owes Shellum from time to time
(including amounts owed as wages or other compensation, fringe
benefits, or vacation pay, as well as any other amounts owed to
Shellum by the
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Company), to
the extent of the amounts Shellum owes the Company under Section 6
above. Whether or not the Company elects to make any
set-off in whole or in part, if the Company does not recover by
means of set-off the full amount Shellum owes, calculated as set
forth above, Shellum agrees to pay immediately the unpaid balance
to the Company. In the discretion of the Board,
reasonable interest may be assessed on the amounts owed, calculated
from the
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