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Exhibit 10.11
Execution Copy
EMPLOYMENT
AGREEMENT
This Employment
Agreement ("Agreement") is entered into effective as of
February 5, 2005 by and between Venoco, Inc., a Delaware
corporation ("Company"), and William Schneider
("Employee").
WHEREAS, the
Company desires to employ Employee as its President, and Employee
desires to accept such employment;
NOW, THEREFORE,
in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1.
Employment.
The Company hereby employs
Employee, and Employee hereby accepts employment by the Company, as
the President and on the terms and conditions set forth in this
Agreement.
2.
Term of
Employment. Subject to the provisions for earlier
termination provided in the Agreement, the term of this Agreement
(the "Term") shall commence on the effective date of this Agreement
as stated above and shall terminate on December 31,
2006; provided, however,
commencing on January 1, 2006 and on each
January 1 thereafter, the term of this Agreement shall
automatically be extended one additional year unless, not later
than September 30 of the preceding year, the Board of
Directors of the Company (the "Board") shall give written notice to
Employee that the Term of the Agreement shall cease to be so
extended; provided, further,
that if a Change in Control, as defined in
Section 8, shall have occurred during the original or extended
Term of this Agreement, the Term shall continue in effect for a
period of not less than 36 months beyond the date of such
Change in Control. In no event, however, shall the Term of this
Agreement extend beyond the end of the calendar month in which
Employee's 65th birthday occurs. Notwithstanding any provision of
this Agreement to the contrary, termination of this Agreement shall
not alter or impair any rights or benefits of Employee (or
Employee's estate or beneficiaries) that have arisen under this
Agreement on or prior to such termination, including, without
limitation, the provisions of Sections 9(c), 15 and 18.
3.
Employee's
Duties. During
the Term of this Agreement, Employee shall serve as the President
of the Company, based in Denver, Colorado, and with such customary
duties and responsibilities as may from time to time be assigned to
him by the Board, provided that such duties are at all times
consistent with the duties of such position.
Employee agrees
to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the duties and responsibilities assigned to
Employee hereunder, to use reasonable best efforts to perform
faithfully and efficiently such duties and
responsibilities.
4.
Base
Compensation. For
services rendered by Employee under this Agreement, the Company
shall pay to Employee a base salary ("Base Compensation") of
$285,000.00 per annum, payable in accordance with the Company's
customary payroll practice for its executive officers. The amount
of Base Compensation shall be reviewed periodically and may be
increased to reflect inflation or such other adjustments as the
Board may deem appropriate but Base Compensation, as increased, may
not be decreased thereafter.
5.
Signing and Annual
Bonuses. Upon
Employee's execution of this Agreement, the Company shall pay to
Employee a signing bonus of $25,000.00. Additionally, Employee
shall be eligible to
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participate in the Company's Incentive
Compensation Plan; under which cash bonuses are paid to employees
based upon the performance of both the Company and the employee.
The target bonus for the position of President shall be 65% of Base
Compensation. The annual bonus for 2005 will be paid no later than
May 31, 2006 and shall be based on Employee's performance as
measured against goals established by the Company's Compensation
Committee.
6.
Stock Options.
Promptly after Employee
commences employment, or promptly after the Company timely adopts a
Stock Incentive Plan if no such plan exists on the day Employee
commences employment, Employee shall be granted options to purchase
shares of Company stock that represent 4.5% of the then outstanding
shares of Company stock. Stock options will at a minimum include
provisions similar to those in Attachment I, Stock Option
Description. The strike price of the shares reflecting 3.5% of the
then outstanding shares of Company stock shall be $45 per share;
the strike price of the shares reflecting 0.5% of the then
outstanding shares of Company stock shall be $55 per share; and the
strike price of the shares reflecting 0.5% of the then outstanding
shares of Company stock shall be $65 per share. In all cases, the
strike price will be adjusted for any stock splits, stock
dividends, recapitalization, or similar events subsequent to
signing of this agreement. Pro rata for the various strike prices,
twenty percent (20%) of such options shall vest immediately upon
being granted, and the remainder shall vest in equal lots on the
first, second, third, and fourth anniversaries of the date that
Employee commences employment. In the event of a Change in Control
as defined in Section 8 hereof or discharge other than for
Misconduct (as defined herein) all options shall become immediately
vested. Vested options shall remain exercisable for a period of two
(2) years following termination of employment. Unvested
options shall expire upon termination of employment. Should the
Company not adopt a Stock Incentive Plan that affords Employee such
options, then the Company shall provide Employee with alternate
compensation that is at least as valuable to Employee as the
options contemplated herein.
7.
Additional
Benefits. In
addition to the other compensation and benefits provided for in
this Agreement, Employee shall be entitled to receive all fringe
benefits and perquisites offered by the Company to its executive
officers. Such benefits shall include, without limitation,
reimbursement of relocation expenses, including temporary housing
for Employee and his family for up to 60 days, incurred by
Employee in moving himself and his family to Denver, Colorado; 4
weeks paid vacation per year; participation in the Company's 401
(k) Plan; participation in other incentive and benefit plans
offered generally to key employees; participation in various
employee benefit plans or programs provided to the employees of the
Company in general, subject to the regular eligibility requirements
with respect to each of such benefit plans or programs; and such
other benefits or prerequisites as may be approved by the Board
during the Term of this Agreement. Nothing in this paragraph shall
be deemed to prohibit the Company from making any changes in any
ERISA plans, programs or benefits described in this Section 7,
provided the change similarly affects all executives of the Company
similarly situated.
8.
Change in
Control.
For purposes of
this Agreement, a "Change in Control" shall mean the occurrence of
one of the following events:
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(i) any
"person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than (a) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company
(b) any affiliate, or any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or
(c) Timothy M. Marquez, 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 30% or more of
the combined voting power of the Company's then outstanding
securities;
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(ii) during
any period of two consecutive years (not including any period prior
to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the
Company, 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 (i), (iii) or
(iv) of this Section) whose election by the Board of Directors
of the Company or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved (hereinafter referred to as
"Continuing Directors"), cease for any reason to constitute at
least a majority thereof;
(iii) the
stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (a) 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) more than 65% of
the combined voting power of the voting securities of the Company
(or such surviving entity) outstanding immediately after such
merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than 30% of the combined voting power of the Company's then
outstanding securities; or
(iv) the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets. For
purposes of this clause (iv), the term "the sale or
disposition by the Company of all or substantially all of the
Company's assets" shall mean a sale or other disposition
transaction or series of related transactions involving assets of
the Company or of any direct or indirect subsidiary of the Company
(including the stock of any direct or indirect subsidiary of the
Company) in which the value of the assets or stock being sold or
otherwise disposed of (as measured by the purchase price being paid
therefor or by such other method as the Board of Directors of the
Company determines is appropriate in a case where there is no
readily ascertainable purchase price) constitutes more than
two-thirds of the "fair market value of the Company" (as
hereinafter defined). For purposes of the preceding sentence, the
"fair market value of the Company" shall be the aggregate market
value of the Company's outstanding common stock (on a fully diluted
basis) plus the aggregate market value of the Company's other
outstanding equity securities. The aggregate market value of the
Company's equity securities shall be determined by multiplying the
number of shares of the Company's common stock (on a fully diluted
basis) outstanding on the date of the execution and delivery of a
definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average
closing price of such security for the ten trading days immediately
preceding the Transaction Date, or if not publicly traded, by such
other method as the Board of Directors of the Company shall
determine is appropriate.
9.
Termination.
This Agreement may be
terminated prior to the end of its Term as set forth
below.
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(a)
Resignation.
Employee may resign,
including by reason of retirement, his position at any time. In the
event of such resignation, except in the case of resignation on or
following a Change in Control either (i) for Good Reason (as
defined below) or (ii) by Employee, with or without Good
Reason, during the 30-day period following the six-month
anniversary of the date of the Change in Control (the "Window
Period"), Employee shall not be entitled to further compensation
pursuant to this Agreement. A resignation by Employee during the
Window Period shall be treated for all purposes the same as a
resignation by Employee for Good Reason.
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(b)
Death.
If Employee's employment is
terminated due to his death, the Company shall pay Employee's
beneficiaries or legal representatives (i) within
15 days, any Base Compensation and vacation pay which had
accrued hereunder at the date of Employee's death; and
(ii) within 30 days, the same benefits that Employee
would receive in the event of Discharge following a Change in
Control as described in Section 9(c)(i), below.
(c)
Discharge.
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(i) The
Company may terminate this Agreement and Employee's employment for
any reason deemed sufficient by the Company upon notice as provided
in Section 12. However, in the event that Employee's
employment is terminated during the Term by the Company on or
following a Change in Control and for any reason other than his
Misconduct (as defined in Section 9(c)(ii) below) then:
(A) the Company shall pay in a lump sum, in cash, to Employee,
within 15 days of the Date of Termination, an amount equal to
three times the sum of (1) Employee's Base Compensation,
(2) an amount equal to the highest incentive award paid or
payable, as the case may be, to Employee under the Company's
Incentive Compensation Plan during the current year and the three
years prior to termination, (3) an amount equal to the amount
of contributions that the Company made on behalf of Employee under
the Company's 401(k) Plan during the prior year disregarding any
limitations on benefits or covered compensation imposed by I.R.C.
Sections 401(a)(17), 401(k), 401(m) or 415; (B) for the
36-month period after such Date of Termination, the Company shall
provide or arrange to provide Employee (and Employee's dependents)
with life, disability, accident and group health insurance benefits
substantially similar to those which Employee (and Employee's
dependents) were receiving immediately prior to the Notice of
Termination, with the Employee charged a monthly premium(s) for
such coverage(s) that does not exceed the premium(s) charged to an
active employee for comparable coverage(s); benefits otherwise
receivable by Employee pursuant to this clause (B) shall be
reduced to the extent comparable benefits are actually received by
Employee (and Employee's dependents) during the 36-month period
following Employee's termination, and any such benefits actually
received by Employee shall be reported to the Company (to the
extent coverage and/or benefits received under a self-insured
health plan of the Company (any successor or affiliate) are taxable
to Employee, the Company shall make Employee "whole" on a net after
tax basis); (C) within 30 days of the Date of Termination
or, if later, the first date on which such payment would not
subject Employee to suit under Section 16(b) of the Securities
Exchange Act of 1934, if applicable, the Company shall offer to pay
to Employee for cancellation of all outstanding stock-based awards
then held by Employee on the Date of Termination (collectively,
"Awards"), a lump sum amount in cash equal to the sum of the value
(with respect to an option or stock appreciation right, the
"spread"; and with respect to restricted stock or phantom stock,
the value of an unrestricted share) of all such Awards, calculated,
where applicable, as if all corporate performance goals had been
achieved (thus warranting full value of the Award) and in the case
where the Company's stock is not publicly traded, using a fair
market value on the Date of Termination as determined by an
independent third party agreeable to the Company and Employee. The
fair market value shall be determined based on the trading values
of a comparable group of public companies as determined by the
independent third party and the aggregate value discount applied
for various factors including illiquidity, being private and
minority ownership shall not exceed 15%.
(ii) Notwithstanding
the foregoing provisions of this Section 9, in the event
Employee is terminated because of Misconduct, the Company shall
have no compensation obligations pursuant to this Agreement after
the Date of Termination. As used herein, "Misconduct" means
(a) the willful and continued failure by Employee to
substantially perform his duties with the Company (other than any
such failure resulting from Employee's incapacity due to
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physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination
by Employee for Good Reason), after a written demand for
substantial performance is delivered to Employee by the Board,
which demand specifically identifies the manner in which the Board
believes that Employee has not substantially performed his duties,
or (b) the willful engaging by Employee in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes hereof, no act, or failure to act, on
Employee's part shall be deemed "willful" unless done, or omitted
to be done, by Employee not in good faith and without reasonable
belief that Employee's action or omission was in the best interest
of the Company. Notwithstanding the foregoing, Employee shall not
be deemed to have been terminated for Misconduct unless and until
there shall have been delivered to Employee a copy of a resolution
duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable
notice to Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board), finding that in
the good faith opinion of the Board Employee was guilty of conduct
set forth above and specifying the particulars thereof in
detail.
(iii) If
the Company terminates this Agreement and Employee's employment
before the expiration of the Term, other than following a Change in
Control and other than for Misconduct, the Company shall pay in a
lump sum, in
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