Exhibit 10.5

PENN VIRGINIA CORPORATION

2011 ANNUAL INCENTIVE CASH BONUS AND LONG-TERM EQUITY

COMPENSATION GUIDELINES

 

1. Purpose of the Guidelines.

The purpose of the Guidelines is to provide annual and long-term incentive
frameworks that are performance driven and focused on corporate and individual
quantitative and qualitative objectives that are critical to the Company’s
success.

 

2. Definitions.

The following terms used herein shall have the following meanings:

(a) “Board” means the Board of Directors of the Company.

(b) “Budget” means the Company’s annual budget for the applicable Plan Year, as
approved by the Board.

(c) “Cash Bonus Award” means an incentive cash bonus award granted to a
Participant pursuant to the Guidelines that is paid in a lump sum cash payment.

(d) “Cash Bonus Percentages” shall mean those cash bonus award percentages
described on Exhibit A under the heading “Cash Bonus Percentages – Executive
Officers – Percent of Base Salary.”

(e) “Cash Bonus Pool” means that amount of cash actually available for Cash
Bonus Awards in any given Plan Year, as determined in accordance with Section 3
of the Guidelines.

(f) “Cash Bonus Pool Target” means, with respect to any given Plan Year, the
total amount of cash that would be payable as Cash Bonus Awards with respect to
such Plan Year to all Participants if each Participant received his or her
Target Cash Bonus.

(g) “Cash Costs per Mcfe” means, with respect to any given Plan Year, (x) the
sum of the Company’s cash lease operating, gathering, processing and
transportation expenses, production and ad valorem taxes and general and
administrative expenses during such Plan Year as set forth in the Financial
Statements divided by (y) the Company’s total Production during such Plan Year
measured in Mcfe.

(h) “CEO” means the Company’s Chief Executive Officer.

(i) “Committee” means the Compensation and Benefits Committee of the Board.

(j) “Company” means Penn Virginia Corporation and its subsidiaries.

(k) “Company Performance Measures” means, with respect to Plan Year 2011, NAV
per share, EBITDAX, Production, Reserves and Cash Costs per Mcfe. The Committee
shall, by resolution, determine the Company Performance Measures for each Plan
Year after 2011.

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(l) “Drilling F&D Costs per Mcfe” means (x) the sum of the Company’s drilling
and completion capital costs related to all wells completed or identified as dry
holes during such Plan Year, including any capital costs incurred in any
previous Plan Year related to the drilling of, or otherwise in connection with,
such wells divided by (y) the Company’s proved reserves developed as a result of
such wells measured in Mcfe by the Company’s independent third party engineering
firm.

(m) “EBITDAX” shall have the meaning assigned to such term in the Company’s
Credit Agreement dated November 18, 2009, as amended, restated or replaced.

(n) “Employee Stock Incentive Plan” means the Company’s Seventh Amended and
Restated 1999 Employee Stock Incentive Plan, as amended, restated or replaced.

(o) “Executive Officer” means the Company’s CEO, Chief Financial Officer, Chief
Operating Officer and Chief Administrative Officer and any other officers which
the Committee may, by resolution, identify as an Executive Officer.

(p) “Financial Statements” means the Company’s audited financial statements as
of and for the year ended December 31st of the applicable Plan Year.

(q) “Guidelines” means these 2011 Annual Incentive Cash Bonus and Long-Term
Equity Compensation Guidelines.

(r) “Individual Performance Measures” means those objective and subjective
corporate and individual measures that (i) the CEO considers in recommending to
the Committee, and that the Committee uses to determine, the Cash Bonus Award
and Long-Term Equity Compensation Award of each Executive Officer other than the
CEO, (ii) the Committee considers in determining the Cash Bonus Award and
Long-Term Equity Compensation Award of the CEO and (iii) the CEO considers in
approving Cash Bonus Awards and Long-Term Equity Compensation Awards of
Participants other than the Executive Officers.

(s) “Long-Term Equity Compensation Award” means an incentive equity award
determined to be granted to a Participant pursuant to the Guidelines that is
denominated in a dollar amount and that is paid out in the form of an award
under the Employee Stock Incentive Plan.

(t) “Mcfe” means million cubic feet equivalent.

(u) “NAV per share” means, with respect to any given Plan Year, (x) that amount
equal to (A) the value of the Company’s Oil and Gas Assets on December 31st of
such Plan Year as set forth in the Financial Statements plus (B) the Company’s
cash on December 31st of such Plan Year as set forth in the Financial Statements
minus (C) the Company’s total long-term debt outstanding on December 31st of
such Plan Year as set forth in the Financial Statements divided by (y) the
weighted average total number of fully diluted shares of the Company’s common
stock issued and outstanding during such Plan Year.

 

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(v) “Oil and Gas Assets” means those assets comprising the Company’s property
and equipment as set forth in the Financial Statements.

(w) “Participant” means any employee of the Company who was employed by the
Company on December 31st of the Plan Year with respect to whom a Cash Bonus
Award or Long-Term Equity Compensation Award is paid.

(x) “Performance Level Percentages” means, with regard to Plan Year 2011, the
performance level percentages set forth on Exhibit B under the heading
“Performance Level Percentages.” The Committee shall, by resolution, determine
Performance Level Percentages for each Plan Year after 2011.

(y) “Plan Year” means the Company’s fiscal year.

(z) “Production” means the Company’s net production for the applicable Plan Year
as set forth in the Financial Statements.

(aa) “Reserves” means the Company’s proved reserves on December 31st of the
applicable Plan Year as set forth in the official report prepared by the
Company’s independent petroleum engineers for such Plan Year.

(bb) “Target Cash Bonus” means, with respect to any Participant, the product of
(x) such Participant’s base salary on December 31st of the Plan Year with
respect to which a Cash Bonus Award is being considered times (y) such
Participant’s Target Cash Bonus Percentage times (z) a fraction, the numerator
of which is the number of days that the Participant was employed by the Company
during such Plan Year and the denominator of which is 365.

(cc) “Target Cash Bonus Percentage” means, with respect to Executive Officers,
those percentages described on Exhibit A under the heading “Cash Bonus
Percentages – Executive Officers – Percent of Base Salary – Target” and, with
respect to Participants other than Executive Officers, the target percentages
for such Participants determined as described on Exhibit A.

(dd) “Target Equity Incentive Percentage” means, with respect to Executive
Officers, those percentages described on Exhibit A under the heading “Equity
Incentive Percentages – Executive Officers – Target Percent of Base Salary” and,
with respect to Participants other than Executive Officers, the target
percentages for such Participants determined as described on Exhibit A.

(ee) “Weighting Factor” means the weighting percentage assigned to each Company
Performance Measure as described on Exhibit B under the heading “Quantitative
Performance Measures and Weighting Factors – Weighting Factors.”

 

3. Calculation of Cash Bonus Pool.

The amount of the Cash Bonus Pool available to pay Cash Bonus Awards with
respect to each Plan Year shall be that amount equal to the product of (x) the
Cash Bonus Pool Target times (y) the sum of the products of (A) the Performance
Level Percentage attained for each Company

 

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Performance Measure times (B) the Weighting Factor for such Company Performance
Measure. The Committee shall have the discretion to increase or decrease the
Cash Bonus Pool by 15%. The Committee shall have the discretion to delete, add
or change any Performance Measure or the Weighting Factor of any Performance
Measure at any time or from time to time for any Plan Year.

 

4. Determination of Cash Bonus Awards and Long-Term Equity Compensation Awards.

 

  (a)

Individual Performance Measures. Prior to March 1st of each Plan Year:

(i) The CEO shall recommend to the Committee Individual Performance Measures for
each Executive Officer other than the CEO;

(ii) The Committee shall approve Individual Performance Measures for each
Executive Officer, including the CEO, and the CEO shall advise each other
Executive Officer of his or her Individual Performance Measures; and

(iii) Each Executive Officer other than the CEO shall recommend to the CEO
Individual Performance Measures for each Participant who reports directly to
such Executive Officer, the CEO shall approve Individual Performance Measures
for such Participants and each Executive Officer shall advise such Participant
of his or her Individual Performance Measures.

Individual Performance Measures for Participants other than the Executive
Officers and the Participants reporting directly to the Executive Officers shall
be determined by the CEO or the other Executive Officers if and as they deem
necessary. Individual Performance Measures may be weighted to indicate relative
importance. The Committee may delete, add or change any Individual Performance
Measure or the relative importance of any Individual Performance Measure
applicable to any Executive Officer at any time or from time to time for any
Plan Year, and the CEO may take the same such actions with respect to the
Individual Performance Measures of any other Participant.

 

  (b)

Cash Bonus Awards. Prior to March 1st of each Plan Year:

(i) The CEO shall recommend to the Committee a Cash Bonus Award for each
Executive Officer with respect to the immediately preceding Plan Year, which
recommendation shall be based on (A) the size of the Cash Bonus Pool available,
(B) such Executive Officer’s Threshold, Target and Stretch Cash Bonus
Percentages as described on Exhibit A, (C) whether such Executive Officer met,
exceeded or did not meet his or her Individual Performance Measures set for such
immediately preceding Plan Year, (D) peer comparison data and (E) such other
appropriate criteria as the CEO shall determine;

(ii) The Committee shall set the Cash Bonus Award for each Executive Officer,
including the CEO, using the same criteria described in subsection (b)(i); and

(iii) After receiving recommendations from the other Executive Officers, as
appropriate, the CEO shall approve all Cash Bonus Awards to be paid to
Participants other than the Executive Officers and shall advise the Committee of
the total amount of such Cash Bonus Awards.

 

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All Cash Bonus Awards, if any, shall be paid by not later than March 15th of
each Plan Year with respect to the immediately preceding Plan Year and, subject
to the Committee’s discretion to increase the Cash Bonus Pool by 15%, shall not,
in the aggregate, exceed the Cash Bonus Pool.

 

  (c)

Long-Term Equity Compensation Awards. Prior to March 1st of each Plan Year:

(i) The CEO shall recommend to the Committee a Long-Term Equity Compensation
Award for each Executive Officer with respect to the immediately preceding Plan
Year, which recommendation shall be based on (A) such Executive Officer’s Target
Equity Incentive Percentage, (B) whether such Executive Officer met, exceeded or
did not meet his or her Individual Performance Measures set for such immediately
preceding Plan Year, (C) the relative importance to the success of the Company’s
execution of its strategic objectives of retaining and incentivizing the
Executive Officer beyond the current Plan Year, (D) peer comparison data and
(E) such other appropriate criteria as the CEO shall determine;

(ii) The Committee shall set the Long-Term Equity Compensation Award for each
Executive Officer, including the CEO, using the same criteria described in
subsection (c)(i); and

(iii) After receiving recommendations from the other Executive Officers, as
appropriate, the CEO shall approve the Long-Term Equity Compensation Award to be
considered by the Committee to be paid to each Participant other than Executive
Officers and shall advise the Committee of the amounts of such awards. All
Long-Term Equity Compensation Awards shall be paid out in the form of an award
approved by the Committee under the Employee Stock Incentive Plan.

 

5. Interpretation; Amendments.

The Committee shall have the power to interpret the Guidelines and to make and
amend rules for putting it into effect and administering it. To the extent
applicable, grants under the Guidelines shall be structured either to be exempt
from or to comply with the requirements of section 409A of the Code. The
provisions of the Guidelines shall be interpreted and applied insofar as
possible to carry out such intent. The Guidelines may be amended at any time or
from time to time by the Board or the Committee.

 

6. Governing Law.

The validity, construction and effect of the Guidelines and any rules or
regulations relating to the Guidelines shall be determined in accordance with
the laws of the Commonwealth of Pennsylvania without regard to its conflict of
laws principles.

 

7. Effective Date and Term of Guidelines.

The Guidelines became effective on February 23, 2011 and shall remain in effect
until terminated by the Board. The Guidelines were last amended December 20,
2012.

 

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EXHIBIT A

CASH BONUS PERCENTAGES

Executive Officers

 

     Percent of Base Salary

Officer

   Threshold    Target    Stretch

CEO

   0 – 50    100    200

COO

   0 – 50    100    200

CAO/GC

   0 – 40    80    160

CFO

   0 – 40    80    160

Sr. VP – Regional Manager

   0 – 40    80    160

VP – Regional Manager

   0 – 25    50    100

Other Employees

Prior to March 1st of each Plan Year, the CEO shall approve and advise the
Committee of the Target Cash Bonus Percentages for each Participant other than
the Executive Officers. Such percentages shall be subject to increase or
decrease in the event of a promotion or demotion.

EQUITY INCENTIVE PERCENTAGES

Executive Officers

 

Officer

   Target Percent of Base Salary

CEO

   300 – 400

COO

   250 – 350

CAO/GC

   200 – 300

CFO

   200 – 300

Sr. VP – Regional Manager

   150 – 300

VP – Regional Manager

   150 – 300

Other Employees

Prior to March 1st of each Plan Year, the CEO shall approve and advise the
Committee of the Target Equity Incentive Percentages for each Participant other
than the Executive Officers. Such percentages shall be subject to increase or
decrease in the event of a promotion or demotion.

 

A-1

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EXHIBIT B

2012 QUANTITATIVE PERFORMANCE MEASURES AND WEIGHTING FACTORS

 

Performance

Measure

   Weighting
Factor  

Level of Attainment*

   Performance Level
Percentages

Production

   30%   Over 110% of Budget    200%      108% to 110% of Budget    175%     
105% to 107% of Budget    150%      102% to 104% of Budget    125%      99% to
101% of Budget    100%      96% to 98% of Budget    90%      93% to 95% of
Budget    75%      90% to 92% of Budget    50%      Under 90% of Budget   
Committee discretion

Drilling

   25%   Under 86% of Budget    200%

F&D Costs

     86% to 90% of Budget    175%

per Mcfe

     91% to 94% of Budget    150%      95% to 97% of Budget    125%      98% to
102% of Budget    100%      103% to 106% of Budget    90%      107% to 110% of
Budget    80%      111% to 114% of Budget    70%      115% to 119% of Budget   
50%      Over 119% of Budget    Committee discretion

EBITDAX

   15%   Over 119% of Budget    200%

NAV per share

   15%   115% to 119% of Budget    175%      110% to 114% of Budget    150%     
105% to 109% of Budget    125%      96% to 104% of Budget    100%      92% to
95% of Budget    90%      88% to 91% of Budget    75%      84% to 87% of Budget
   60%      80% to 83% of Budget    50%      Under 80% of Budget    Committee
discretion

Cash Costs

   15%   Under 86% of Budget    200%

per Mcfe

     86% to 90% of Budget    175%      91% to 94% of Budget    150%      95% to
97% of Budget    125%      98% to 102% of Budget    100%      103% to 106% of
Budget    90%      107% to 110% of Budget    80%      111% to 114% of Budget   
70%      115% to 119% of Budget    50%      Over 119% of Budget    Committee
discretion

 

* Levels of attainment falling between percentages will be rounded up (0.5 and
over) or down (under 0.5), as appropriate

 

B-1