Exhibit 10.2

 

Execution Version

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is made by and between Resolute
Energy Corporation, a Delaware corporation (the “Company”), and Theodore Gazulis
(“Employee”) effective as of January 1, 2017 (the “Effective Date”).

 

WHEREAS, the Company desires to employ Employee as its Executive Vice President
and Chief Financial Officer to provide services to the Company and its direct
and indirect subsidiaries (the “Subsidiaries”); and

 

WHEREAS, Employee desires to be employed by the Company and to commit himself to
serve the Company on the terms herein provided.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

1. Employment. The Company shall employ Employee, and Employee accepts continued
employment with the Company, upon the terms and conditions set forth in this
Agreement.  Unless earlier terminated pursuant to Section 4 below, the initial
term of this Agreement shall begin on the Effective Date and end on December 31,
2017 (the “Initial Term”), provided, however, that the term shall be
automatically renewed for successive one-year periods (each such period an
“Extension Term”) unless the Company provides a written notice of non-renewal to
Employee more than 60 days before the end of the Initial Term or the
then-current Extension Term.  The Initial Term together with each Extension
Term, if any, shall be the “Term.”  If the Company gives timely notice of
non-renewal, then Employee’s employment shall end on the last day of the
then-current Term.  A termination of Employee’s employment at the end of the
Term by reason of notice of non-renewal given by the Company shall be considered
a termination without Cause for purposes of Sections 4, 5 and 6, as applicable.

 

2. Position and Duties; Exclusive Compensation and Services.

 

(a) Employee shall initially hold the title of Executive Vice President and
Chief Financial Officer; provided however that this title may be changed from
time to time during the Term by the Board of Directors (the “Board”) or any duly
authorized committee thereof to a different title which shall have at least
equivalent rank to Employee’s initial title.  The Company and Employee agree
that Employee shall have duties and responsibilities consistent with the
assigned position in a company the size and of the nature of the Company, and
such other duties and authority that are assigned to Employee from time to time
by the Board or such officer of the Company to whom Employee reports as shall be
designated by the CEO or the Board.  Employee shall report to the Chief
Executive Officer or such other officer of the Company (with a title of
President or above) as shall be designated from time to time by the CEO or the
Board.  

 

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(b) During the Term, Employee agrees to devote his full business time and
attention to the business and affairs of the Company.  Notwithstanding the
foregoing, so long as such activities do not conflict with the Company’s
interests, interfere with Employee’s duties and responsibilities or violate
Employee’s obligations hereunder, Employee will not be prohibited from
(i) managing his personal, financial, and legal affairs; (ii) engaging in
professional, charitable or community activities or organizations; or
(iii) serving on the boards of directors, or advisory boards of directors, of
not-for-profit charitable organizations, not-for-profit professional
organizations, or for-profit corporations, so long as Employee secures the
Board’s express written consent for Employee to serve on any such for-profit
board positions prior to undertaking such service.  

 

(c) During the Term, Employee agrees to comply with the policies of the Company,
including without limitation such policies with respect to legal compliance,
conflicts of interest, confidentiality, compensation recovery (clawback),
professional conduct and business ethics as are from time to time in effect,
including but not limited to the Company’s Code of Business Conduct and Ethics.

 

3. Compensation.

 

(a) Base Salary.  Initially, Employee’s base salary shall be $350,000 per
annum.  Employee’s base salary may be increased (but not decreased, including
after any increase, without Employee’s written consent or unless pursuant to a
decrease broadly applied to all senior vice president level or higher employees)
by the Board (or the Compensation Committee) in its sole discretion (as adjusted
from time to time, the “Base Salary”).  The Base Salary shall be payable to
Employee in regular installments in accordance with the Company’s general
payroll practices and subject to withholdings required by applicable law.

 

(b) Short Term Incentive Compensation. During the Term, as determined by the
Board (or the Compensation Committee) in its sole discretion, Employee shall be
eligible to receive an annual short term incentive compensation payment (an “STI
Payment”) for each calendar year pursuant to the Company’s short term incentive
plan then in effect (the “STI Plan”).  Pursuant to the terms of the STI Plan,
each annual STI Payment shall be payable based on the achievement of personal
and Company performance targets.  Initially, Employee’s target STI Payment shall
be equal to 100% (the “Target STI Percentage”) of Employee’s annual Base Salary
(the “Target STI Amount”).  The Target STI Percentage may be increased (but not
decreased below the initial Target STI Percentage stated above without
Employee’s written consent or unless pursuant to a decrease broadly applied to
all senior vice president level or higher employees) in its sole
discretion.  The STI Payment shall be subject to increase or decrease based on
achievement of performance targets and in accordance with the terms of the STI
Plan.  For each calendar year in the Term, the Board (or the Compensation
Committee) will determine and will establish in writing (i) the Target STI
Amount, (ii) the applicable performance targets, (iii) the percentage of annual
Base Salary payable to Employee if some lesser or greater percentage of the
annual performance target is achieved, and (iv) such other applicable terms and
conditions of the STI Plan necessary to satisfy the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”).

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(c) Long Term Incentive Compensation.  During the Term, as determined by the
Board (or the Compensation Committee) in its sole discretion, Employee shall be
eligible to receive annual grants of equity, equity-related or other long-term
awards (including long-term cash awards) (an “LTI Grant”) pursuant to the
Company’s 2009 Performance Incentive Plan or any other long-term incentive
plan(s) in effect from time to time, subject to the terms and conditions
thereof.  Initially, Employee’s target LTI Grant shall have a value (as
determined by the Board in its reasonable discretion) equal to 375% (“Target LTI
Percentage”) of Employee’s annual Base Salary (the “Target LTI Amount”).  The
Target LTI Amount may be increased (but not decreased below the initial Target
LTI Percentage stated above without Employee’s written consent or unless
pursuant to a decrease broadly applied to all senior vice president level or
higher employees) by the Board (or the Compensation Committee) in its sole
discretion.  Any LTI Grants previously awarded to Employee pursuant to the
Company’s 2009 Performance Incentive Plan that are outstanding on the Effective
Date hereof shall continue to be governed by the terms and conditions of such
plan and award agreements, subject to any vesting modifications made herein.  

 

(d) Employee Benefits.  During the Term, Employee will be entitled to receive
such welfare benefits and other fringe benefits (including, but not limited to
vacation, medical, dental, life insurance, 401(k) and other employee benefits
and perquisites) as the Company offers from time to time to similarly situated
executive level employees, subject to applicable eligibility requirements.  The
Company shall not, however, by reason of this Section 3(d), be obligated to
refrain from changing, amending, or discontinuing any such benefit plan or
program, on a prospective basis, so long as any such changes are similarly
applicable to similarly situated employees of the Company.

 

(e) Business Expenses. The Company shall reimburse Employee for all reasonable
expenses incurred by him in the course of performing his duties during the Term
to the extent consistent with the Company’s written policies in effect from time
to time with respect to travel, entertainment and other business expenses and
subject to the Company’s requirements with respect to reporting and
documentation of such expenses (“Business Expenses”).

 

(f) Leave of Absence Due to Disability.  Employee shall be entitled to a paid
leave of absence of up to 180 days in the event of Disability where there is a
reasonable expectation that the Employee will return to his duties with
Employer, provided that the Company may offset the payment of Employee’s Base
Salary then in effect by the amount of any short-term or long-term Company-paid
disability benefits Employee receives pursuant to Section 3(d) above.  For
purposes of this Agreement, “Disability” means Employee’s inability to perform
the duties of Employee’s position, with or without reasonable accommodation, due
to a physical or mental impairment that is expected to last for more than 30
days.  The existence of any such Disability shall be certified by a physician
acceptable to both the Company and Employee.  If the parties are not able to
agree on the choice of a physician, each party shall select a physician who, in
turn, shall select a third physician to render such certification.

 

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4. Termination of Employment.   Unless otherwise agreed to in writing by the
Company and Employee, Employee’s employment hereunder may be terminated under
the following circumstances:

 

(a) Death.  Employee’s employment hereunder shall terminate upon his death.

 

(b) Disability.  Employee’s employment may be terminated by the Company or
Employee may terminate his employment with the Company, if Employee has incurred
a Disability; provided, however, that if Employee is on a leave of absence due
to Disability under Section 3.1(f), the Company may not terminate Employee and
Employee may not terminate his Employment due to Disability pursuant to this
Section 4(b) before the 180th consecutive day of paid leave due to Disability
has elapsed.  No termination of employment due to Disability shall have occurred
unless the Employer or Employee has given the other party at least 30 days
written notice pursuant to Section 5(f).

 

(c) Termination by the Company. The Company may terminate Employee’s employment
with or without Cause.  For purposes of this Agreement, the term “Cause” means
(i) Employee’s conviction of, or plea of guilty or nolo contendere to, any
felony or to any crime or offense causing substantial harm to the Company or its
affiliates or involving acts of theft, fraud, embezzlement, moral turpitude or
similar conduct; (ii) Employee’s repeated intoxication by alcohol or drugs
during the performance of Employee’s duties in a manner that materially and
adversely affects Employee’s performance of such duties; (iii) malfeasance in
the conduct of Employee’s duties, including, but not limited to, (A) willful and
intentional misuse or diversion of funds or assets of the Company or its
affiliates, (B) embezzlement, or (C) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted to the
Company or its affiliates; (iv) Employee’s material violation of any provision
of a material written agreement between Employee and the Company that causes
harm to the Company and remains uncured for a period of 60 days after notice
thereof; or (v) Employee’s material failure to perform the duties of Employee’s
employment or material failure to follow or comply with the reasonable and
lawful written directives of the Board that causes harm to the Company, in
either case after Employee shall have been informed, in writing, of such
material failure and given a period of not less than 60 days to remedy
same.  Prior to any termination for Cause, the Company shall be entitled to
suspend Employee with pay and terminate all access to the premises and databases
of the Company during any investigation of any of the circumstances described
above.

 

(d) Termination by Employee. Employee may, upon giving the Company no less than
30 days’ advance written notice, resign and terminate Employee’s employment
without Good Reason or for Good Reason (as defined in Section 6(e) below).  The
Company may in its sole discretion, elect to waive all or any part of the 30-day
notice period.

 

5. Compensation Upon Termination in Absence of Change in Control.

 

(a) Without Cause or For Good Reason.  In the event Employee’s employment is
terminated by the Company without Cause or by Employee for Good Reason (but in
the absence of a Change in Control which shall be governed under Section 6), the
Company shall pay to

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Employee (i) any unpaid portion of the Base Salary through the Termination Date
at the rate then in effect, (ii) any earned but yet unpaid STI Payment for the
calendar year prior to the Termination Date, (iii) any unreimbursed Business
Expenses through the Termination Date, and (iv) such employee benefits, if any,
as to which Employee may be entitled pursuant to the terms governing such
benefits.  The amounts, if any, set forth in (i), (ii), (iii), and (iv) shall be
collectively referred to herein as the “Accrued Payments”.  In addition, and
contingent upon Employee satisfying the Severance Conditions (as defined below),
the Company shall also provide the following payments and other benefits (the
“Severance Package”):

 

(i) Payment of an amount equal to twenty-four (24) months of Employee’s Base
Salary as of the Termination Date (or, if Employee’s termination is due to the
Good Reason event described in clause (i) of the first sentence in Section 6(e),
as of the date immediately preceding the date of the reduction constituting Good
Reason), payable in substantially equal monthly installments over a period of
twenty-four (24) months beginning on the first payroll date which occurs in the
first month following the Termination Date; plus

 

(ii) Payment of an amount equal to 2.0 times the Target STI Amount, calculated
based on Employee’s Base Salary in effect on the Termination Date (or, if
Employee’s termination is due to the Good Reason event described in clause (i)
of the first sentence in Section 6(e), as of the date immediately preceding the
date of the reduction constituting Good Reason), payable in substantially equal
monthly installments over a period of twenty-four (24) months beginning on the
first payroll date which occurs in the first month following the Termination
Date; plus

 

(iii) Payment of an amount equal to a pro-rata portion of the Target STI Amount
multiplied by a fraction, the numerator of which is the number of days during
which Employee was employed by the Company in the calendar year of Employee’s
termination, and the denominator of which is 365 (the “Pro-Rata Bonus”), payable
as soon as administratively feasible following preparation of the Company’s
audited financial statements for the applicable calendar year, but in no event
later than March 31 (or earlier than January 1) of the calendar year following
the calendar year to which such STI Payment relates;

 

(iv) Pay or reimburse on a monthly basis the premiums required to continue
Employee’s (and his spouse’s and dependent children’s) group health care
coverage for a period of twenty-four (24) months following Employee’s
Termination Date, provided that Employee or his spouse or dependent children, as
applicable, elect benefits under Consolidated Omnibus Budget Reconciliation Act
of 1985 (“COBRA”).  If necessary to avoid inclusion in taxable income by
Employee of the value of in-kind benefits, or if coverage cannot be provided
under COBRA or the Company’s health and welfare plans, such health care
continuation premiums shall be provided in the form of taxable payments to
Employee, which payments shall be made without regard to whether Employee elects
to continue and remain eligible for such benefits under COBRA, and in which
event Company shall pay to Employee, with each monthly reimbursement, an
additional amount of cash equal to A/(1-R)-A, where A is the amount of the

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reimbursement for the month, and R is the sum of the maximum federal individual
income tax rate then applicable to ordinary income and the maximum individual
Colorado income tax rate then applicable to ordinary income; plus

 

(v) All unvested time-based LTI Grants held by Employee shall immediately and
automatically vest in full and, in the case of options or other exercisable LTI
Grants, shall remain exercisable for the period of time set forth in the
applicable award agreement; provided that, in the event a time-based LTI Grant
is “non-qualified deferred compensation” subject to the requirements of Code
Section 409A and the Treasury Regulations promulgated thereunder (“Section
409A”), such LTI Grant will be paid at the same time and in the same form as it
would have been paid had Employee continued to be employed by the Company,
unless the applicable award agreement expressly provides for a different time
and form of payment; plus

 

(vi) All outstanding performance-based LTI Grants held by Employee shall remain
outstanding through the end of the respective performance period, and may be
deemed earned and vested at the end of the respective performance period to the
extent that the stock price target or other performance thresholds applicable to
such awards are met on such measurement date, as determined by the Board in its
reasonable discretion; provided that, in the event a performance-based LTI Grant
is “non-qualified deferred compensation” subject to the requirements of Section
409A, such LTI Grant will be paid at the same time and in the same form as it
would have been paid had Employee continued to be employed by the Company,
unless the applicable award agreement expressly provides for a different time
and form of payment.  

 

To receive the Severance Package, (i) Employee must execute and return to the
Company on or prior to the 30th day following the Termination Date a waiver and
release of claims agreement in the Company’s customary form (which may be
amended by the Company to reflect changes in applicable laws and regulations),
provided that the form  shall not include a waiver and release of claims by the
Employee for indemnification, claims for coverage under officer and director
policies, and claims as a stockholder of the Company (the “Release”), and where
contemplated by applicable law, not timely revoke such Release, and (ii) must
comply in all material respects with the covenants in Sections 8 and 10 of this
Agreement (together, the “Severance Conditions”).  No payment of any part of a
Severance Package or Change in Control Severance Package, or pursuant to Section
5(d), shall be made unless the Employee (or Employee’s estate) has complied with
the Severance Conditions.  If Employee (or Employee’s estate) has complied with
the Severance Conditions, then any payment that would have become payable prior
to the execution of the Release and the end of the revocation period shall be
made at the expiration of the 30 day period.

 

(b) Resignation.  In the event Employee’s employment is terminated by Employee
other than for Good Reason (but in the absence of a Change in Control which
shall be governed under Section 6), the Company shall pay to Employee the
Accrued Payments.  Employee shall not be eligible to receive any Pro-Rata Bonus
for the year in which the Termination Date occurs.

 

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(c) For Cause.  In the event Employee’s employment is terminated by the Company
for Cause, the Company shall pay to Employee the Accrued Payments; provided
that, Employee shall not be eligible to receive any STI Payment for the calendar
year prior to the Termination Date if such “Cause” termination is directly and
substantially related to the STI Payment. Employee shall not be eligible to
receive any Pro-Rata Bonus for the year in which the Termination Date occurs.

 

(d) Death or Disability.  In the event Employee’s employment terminates by
reason of his death, or either party terminates Employee’s employment due to
Disability pursuant to Section 4(b), the Company shall pay to Employee the
Accrued Payments.  In addition, and contingent upon Employee (or Employee’s
estate) satisfying the Severance Conditions, the Company shall also provide the
Employee (or Employee’s estate) the following payments and other benefits:

 

(i) Payment of an amount equal to twenty-four (24) months of Employee’s Base
Salary as of the Termination Date, payable in a lump sum on the 30th day
following the Termination Date, unless termination is due to a Disability that
does not constitute a disability under Treasury Regulation Section
1.409A-3(i)(4), in which case payment shall be in substantially equal monthly
installments over a period of twenty-four (24) months beginning on the first
payroll date which occurs in the first month following the Termination Date;
plus

 

(ii) Payment of an amount equal to 2.0 times the Target STI Amount, calculated
based on Employee’s Base Salary in effect on the Termination Date, payable in a
lump sum on the 30th day following the Termination Date, unless termination is
due to a Disability that does not constitute a disability under Treasury
Regulation Section 1.409A-3(i)(4), in which case payment shall be in
substantially equal monthly installments over a period of twenty-four (24)
months beginning on the first payroll date which occurs in the first month
following the Termination Date; plus

 

(iii) Payment of a Pro-Rata Bonus for the calendar year of termination, payable
as soon as administratively feasible following preparation of the Company’s
audited financial statements for the applicable calendar year, but in no event
later than March 31 (or earlier than January 1) of the calendar year following
the calendar year to which such STI Payment relates; plus

 

(iv) Payment or reimbursement on a monthly basis of the premiums required to
continue Employee’s (and his spouse’s and dependent children’s) group health
care coverage for a period of twenty-four (24) months following Employee’s
Termination Date, provided that Employee or his spouse or dependent children, as
applicable, elect benefits under COBRA. If necessary to avoid inclusion in
taxable income by Employee of the value of in-kind benefits, or if coverage
cannot be provided under COBRA or the Company’s health and welfare plans, such
health care continuation premiums shall be provided in the form of taxable
payments to Employee, which payments shall be made without regard to whether
Employee elects to continue and remain eligible for such benefits under COBRA,
and in which event Company shall pay to Employee, with each monthly
reimbursement, an additional amount of cash equal to A/(1-R)-A, where A is the

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amount of the reimbursement for the month, and R is the sum of the maximum
federal individual income tax rate then applicable to ordinary income and the
maximum individual Colorado income tax rate then applicable to ordinary income;
plus

 

(v) All unvested time-based LTI Grants held by Employee shall immediately and
automatically vest in full and, in the case of options or other exercisable LTI
Grants, shall remain exercisable for the period of time set forth in the
applicable award agreement, and all outstanding performance-based LTI Grants
held by Employee shall remain outstanding through the end of the respective
performance period, and may be deemed earned and vested at the end of the
respective performance period to the extent that the stock price target or other
performance thresholds applicable to such awards are met on such measurement
date, as determined by the Board in its reasonable discretion.  Notwithstanding
anything to the contrary in this Section 5(d)(v), in the event that an LTI Grant
is “non-qualified deferred compensation” subject to the requirements of Section
409A, such LTI Grant will be paid at the same time and in the same form as it
would have been paid had Employee continued to be employed by the Company,
unless the applicable award agreement expressly provides for a different time
and form of payment for death or Disability, as applicable.

 

(e) Exclusive Compensation and Benefits.  The compensation and benefits
described in this Section 5 or in Section 6, as applicable, along with the
associated terms for payment, constitute all of the Company’s obligations to
Employee with respect to the termination of Employee’s employment.  Nothing in
this Agreement, however, is intended to limit any vested benefits that Employee
may have under the applicable provisions of any benefit plan of the Company in
which Employee is participating on the Termination Date, any rights Employee may
have to continue or convert coverage under certain employee benefit plans in
accordance with the terms of those plans and applicable law, or any rights
Employee may have under long-term incentive or equity compensation plan.

 

(f) Notice of Termination.  Any termination of Employee’s employment shall be
communicated to the other party by written notice that (i) indicates the
specific termination provisions of this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
the termination (provided that an explanation shall not be required in the event
of a resignation unless the Employee is resigning for Good Reason), and
(iii) specifies the Termination Date (a “Notice of Termination”).

 

(g) Termination Date. For purposes of this Agreement, “Termination Date” means
the date of receipt of the Notice of Termination or any later date specified
therein or required by this Agreement, as the case may be; provided, however
that if Employee’s employment is terminated by reason of his death, the
Termination Date shall be the date of death of Employee.

 

(h) Deemed Resignations.  Unless otherwise agreed to in writing by the Company
and Employee prior to termination of Employee’s employment hereunder, any
termination of Employee’s employment shall constitute an automatic immediate
resignation of Employee from all positions he then holds as an employee,
officer, director, manager or other service provider of the Company and each
Subsidiary.

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(i) Application of Section 409A.  This Agreement is intended to comply with
Section 409A and shall be construed accordingly.  It is the intention of the
parties that payments or benefits payable under this Agreement not be subject to
the additional tax or interest imposed pursuant to Section 409A.  To the extent
such potential payments or benefits are or could become subject to Section 409A,
the Parties shall cooperate to amend this Agreement with the goal of giving
Employee the economic benefits described herein in a manner that does not result
in such tax or interest being imposed.  Notwithstanding anything in this
Agreement to the contrary, the following provisions shall apply.

 

For purposes of this Agreement, whenever and to the extent that it would be
necessary to comply with the requirements of Section 409A, Employee’s employment
will be treated as terminating when and only when Employee experiences a
Separation from Service.  For purposes of this Agreement, the term “Separation
from Service” means when Employee dies, retires or otherwise has a termination
of employment from the Company that constitutes a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h).  

With regard to any provision in this Agreement that provides for reimbursement
of expenses or in-kind benefits, except for any expense, reimbursement or
in-kind benefit provided pursuant to this Agreement that does not constitute a
“deferral of compensation,” within the meaning of Treasury Regulation Section
1.409A-1(b), (i) the amount of expenses eligible for reimbursement, or in-kind
benefits provided, during any calendar year shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other
calendar year, (ii) such payments shall be made on or before the last day of the
calendar year following the calendar year in which the expense was incurred, and
(iii) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit.

Each payment made under this Agreement shall be treated as a separate and
distinct payment and the right to a series of installment payments under this
Agreement shall be treated as a right to a series of separate and distinct
payments.

If a payment that could be made under this Agreement would be subject to
additional taxes and interest under Section 409A, the Company shall accelerate
payment of amounts otherwise payable under the Agreement to the time at which
such amounts are includible in the income of Employee, provided that such
acceleration shall only be permitted to the extent permitted under Treasury
Regulation Section 1.409A-3(j)(4)(vii) and the amount of such acceleration does
not exceed the amount permitted under Treasury Regulation Section
1.409A-3(j)(4)(vii).

No payment to be made under this Agreement shall be made at a time earlier than
that provided for in this Agreement unless such payment is (i) an acceleration
of payment permitted to be made under Treasury Regulation Section 1.409A-3(j)(4)
or (ii) a payment that would otherwise not be subject to additional taxes and
interest under Section 409A. Each payment of benefits pursuant to Section 5 or 6
shall be a separate and distinct payment to the maximum extent permitted by
Section 409A.

The portion of any payment under this Agreement that would constitute a
“short-term deferral” within the meaning of Treasury Regulation Section
1.409A-1(b)(4), would meet the

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requirements for separation pay due to involuntary separation from service under
Treasury Regulation Section 1.409A-1(b)(9)(iii), or would otherwise be exempt
from Section 409A shall be treated as a separately identified and determinable
amount for purposes of Section 409A, and shall be exempt from Section 409A to
the maximum extent possible.

In the event that the Company becomes subject to the sanctions imposed pursuant
to Section 2716 of the Public Health Service Act by reason of this Agreement,
the parties shall cooperate to amend this Agreement with the goal of giving
Employee the economic benefits described herein in a manner that does not result
in such sanctions being imposed.

Notwithstanding any other provision in this Agreement, if (i) Employee is a
“specified employee” on the date of the Employee’s “separation from service”
within the meaning of Code Sections 409A(a)(2)(A)(i) and 409A(a)(2)(B)(i), and
(ii) as a result of such separation from service the Employee would receive any
payment that, absent the application of this paragraph, would be subject to the
interest and additional tax imposed pursuant to Code Section 409A(a) as a result
of the application of Code Section 409A(a)(2)(B)(i), then such payment shall be
made on the date that is the earliest of: (A) the first day following the day
that is 6 months after the Employee ‘s separation from service, (B) the
Employee’s date of death, or (C) such other date on which such payment will not
be subject to such interest and additional tax.

 

Notwithstanding any other provision in this Agreement, if the terms of payment
of any payment of all or a portion of a Severance Package or a Change in Control
Severance Package would cause any amount to be subject to the additional tax or
interest imposed pursuant to Section 409A by reason of Treasury Regulations
Sections 1.409A-3(a) or (c), such payment shall be made, if at all, in a lump
sum on the 30th day following the Termination Date or, if the preceding
paragraph is applicable to Employee, upon the earliest date permitted under such
preceding paragraph.  

 

6. Change in Control.

 

(a) Vesting of LTI Grants.  

 

(i) If, in connection with a Change in Control (as defined in Section 6(d)
below), the vesting of outstanding LTI Grants is accelerated under the terms of
the Company’s 2009 Performance Incentive Plan or any other long-term incentive
plan(s) (or any applicable award agreement thereunder) then in effect, then the
vesting of any outstanding LTI Grants held by Employee shall also be
accelerated.  

 

(ii) If the vesting of outstanding LTI Grants is not accelerated or only
partially accelerated in connection with the Change in Control under the terms
of the Company’s 2009 Performance Incentive Plan or any other long-term
incentive plan(s) (or any applicable award agreement thereunder) then in effect,
then the following terms shall apply following the Change in Control with
respect to the remaining unvested LTI Grants held by Employee:

 

(A) Any performance-based LTI Grants held by Employee shall immediately vest to
the extent that the stock price target or other performance thresholds
applicable to such awards are met in the Change in Control transaction, as
determined by

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the Board in its reasonable discretion. Any performance-based equity awards held
by Employee that are not vested under the preceding sentence shall be
automatically converted to time-based equity awards in equal one-third
proportions and the vesting of those awards shall be amended such that those
awards shall vest over Employee’s next three regularly scheduled vesting dates;
provided that no such conversion shall apply unless the conversion can be
structured in a manner intended to comply with Section 409A.

 

(B) All LTI Grants held by Employee that remain unvested following application
of the foregoing provisions of this Section 6(a) shall vest on the established
vesting date of such LTI Grants; provided however, that in the event of a
termination of Employee’s employment by the Company (or its successor) for any
reason other than for Cause, or a termination of Employee’s employment by
Employee for Good Reason, within two years following a Change in Control, such
unvested LTI Grants shall immediately and automatically vest in full and, in the
case of options or other exercisable LTI Grants, shall remain exercisable for
two years following such termination of employment or, if earlier, until the
original expiration date set forth in the applicable award agreement.  

 

(iii) In addition, if Employee’s employment was terminated (A) by the Company
for any reason other than for Cause or (B) by Employee for Good Reason within
the six months prior to the occurrence of a Change in Control, then Employee
shall be treated for purposes of this Section 6(a) as if he continued to be
employed through the date of the Change in Control and the termination of his
Employment occurred immediately following the Change in Control.

 

Notwithstanding anything to the contrary in this Agreement, in the event that an
LTI Grant is “non-qualified deferred compensation” subject to the requirements
of Section 409A, any LTI Grant that is subject to Section 6(a)(ii) or Section
6(a)(iii) will be paid at the same time and in the same form as it would have
been paid had Employee continued to be employed by the Company, unless the
applicable award agreement expressly provides for a different time and form of
payment.

 

(b) Severance Benefits.  In addition, if a Change in Control Severance Payment
Event (as defined below) occurs, then the Company shall pay to Employee the
Accrued Payments, and contingent upon Employee satisfying the Severance
Conditions, the Company shall also provide Employee the following payments and
other benefits (the “Change in Control Severance Package”):  

 

(i) Payment of an amount equal to 2.5 times the sum of (i) Employee’s annual
rate of Base Salary as of the Termination Date (or, if Employee’s termination is
due to the Good Reason event described in clause (i) of the first sentence in
Section 6(e), as of the date immediately preceding the date of the reduction
constituting Good Reason) or as of the date of the Change in Control, whichever
is greater, plus (ii) Employee’s Target STI Amount, calculated based on
Employee’s Base Salary as of the Termination Date (or, if Employee’s termination
is due to the Good Reason event described in clause (i) of the first sentence in
Section 6(e), as of the date immediately preceding the date of

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the reduction constituting Good Reason) or, if greater, as of the date of the
Change in Control, payable to Employee on the 30th day following the Termination
Date (or, if later, the date of the Change in Control) in a lump sum payment;
plus

 

(ii) Payment of a Pro-Rata Bonus for the calendar year of termination, payable
in a lump sum on the 30th day following the Termination Date (or, if later, the
date of the Change in Control); plus

 

(iii) The Company shall pay or reimburse on a monthly basis the premiums
required to continue Employee’s (and his spouse’s and dependent children’s)
group health care coverage for a period of twenty-four (24) months following
Employee’s Termination Date, provided that Employee or his spouse or dependent
children, as applicable, elect benefits under COBRA. If necessary to avoid
inclusion in taxable income by Employee of the value of in-kind benefits, or if
coverage cannot be provided under COBRA or the Company’s health and welfare
plans, such health care continuation premiums shall be provided in the form of
taxable payments to Employee, which payments shall be made without regard to
whether Employee elects to continue and remain eligible for such benefits under
COBRA, and in which event Company shall pay to Employee, with each monthly
reimbursement, an additional amount of cash equal to A/(1-R)-A, where A is the
amount of the reimbursement for the month, and R is the sum of the maximum
federal individual income tax rate then applicable to ordinary income and the
maximum individual Colorado income tax rate then applicable to ordinary income
(iv) Provided, however, that the sum of (i) and (ii) above shall be reduced, but
not below zero, by the sum of any benefits actually provided to Employee
pursuant to Section 5(a)(i), (ii), or (iii) and any payments otherwise required
pursuant to Section 5(a)(i), (ii), and (iii) shall not be made.  

 

Nothing in this Section 6 shall relieve the Company or any successor-in-interest
thereof of its obligation to continue, following any Change in Control, to
provide Employee with the compensation due pursuant to Section 3 of this
Agreement or to otherwise comply with its obligations hereunder in the event
Employee’s service continues pursuant to this Agreement following the occurrence
of such Change in Control.

 

A “Change in Control Severance Payment Event” shall mean (i) termination of
Employee’s employment by the Company (or its successor) for any reason other
than for Cause, or a termination of Employee’s employment by Employee for Good
Reason, within two years following a Change in Control or (ii) a Change in
Control that occurs within six months after a termination of Employee’s
employment by the Company for any reason other than for Cause or a termination
of Employee’s employment by Employee for Good Reason; provided, however, that in
no event shall a termination due to Disability pursuant to Section 4(b) be
Change in Control Severance Event.

 

(c) (i)  If any of the payments or benefits received or to be received by
Employee in connection with a Change in Control, whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with the Company,
or with any person whose actions result in a Change in Control of the Company or
any person affiliated with the Company or such

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Persons (all such payments and benefits, being hereinafter referred to as the
“Total Payments”) would be subject to the excise tax (the “Excise Tax”) imposed
under Code Section 4999, Employee shall receive the Total Payments and be
responsible for the Excise Tax; provided, however that Employee shall not
receive the Total Payments and the Total Payments shall be reduced to the Safe
Harbor amount if (1) the net amount of such Total Payments, as so reduced (and
after subtracting the net amount of applicable federal, state and local taxes on
such reduced Total Payments) is greater than or equal to (2) the net amount of
such Total Payment without such reduction (but after subtracting the net amount
of applicable federal, state and local taxes on such Total Payments and the
amount of Excise Tax to which Employee would be subject in respect of such
unreduced Total Payments).  The “Safe Harbor Amount” is the amount to which the
Total Payments would hypothetically have to be reduced so that no portion of the
Total Payments would be subject to the Excise Tax.

 

(ii) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (1) all of the
Total Payments shall be treated as “parachute payments” (within the meaning of
Code Section 280G(b)(2)) unless, in the opinion of an independent accounting
firm selected by the Company (the “Auditor”), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
Code Section 280G(b)(4)(A), (2) all “excess parachute payments” within the
meaning of Code Section 280G(b)(1) shall be treated as subject to the Excise Tax
unless, in the opinion of the Auditor, such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually rendered
(within the meaning of Code Section 280G(b)(4)(B)) in excess of the base amount
(within the meaning of Code Section 280G(b)(3)) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (3) the value
of any noncash benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of Code Sections 280G(d)(3) and
(4).  If the Auditor is prohibited by applicable law or regulation from
performing the duties assigned to it hereunder, then a different auditor,
acceptable to both the Company and Employee, shall be selected.  The fees and
expenses of the Auditor shall be paid by the Company.

 

(iii) In the event it is determined that the Safe Harbor amount is payable to
Employee, the Total Payments shall be reduced in the following order (A) first,
by reducing on a pro-rata basis any Total Payments payable to Employee in cash
under this Agreement that otherwise would be subject to the Excise Tax, (B)
next, by reducing on a pro rata basis any Total Payments related to LTI Grants
which payments are not valued for 280G purposes pursuant to Treasury Regulation
Section 1.280G-1 Q&A 24(c)), (C) next, by reducing on a pro rata basis any Total
Payments related to LTI Grants which payments are valued for 280G purposes
pursuant to Treasury Regulation Section 1.280G-1 Q&A 24(c)), (D) next, by
reducing any continued health and welfare payments or benefits set forth above,
and (E) finally, by reducing any Total Payments other than those described in
(A) through (D) in this Section 6(c)(iii) on a pro rata basis to the extent
necessary so that no portion of the Total Payments is subject to the Excise
Tax.  In applying any reduction to the Total Payments pursuant to this Section
6(c)(iii), the reduction shall be made in a manner intended to comply with
Section 409A.

 

(iv) At the time of the initial determination by the Auditor hereunder, it is
possible that the Total Payments will have been made to Employee which should
not have been made (an

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“Overpayment”) or that an amount which will not have been made to Employee could
have been made (an “Underpayment”), in each case, consistent with the
calculations required to be made hereunder. In the event that the Auditor, based
upon the assertion of a deficiency by the Internal Revenue Service against
Employee that the Auditor believes has a high probability of success, determines
an Overpayment has been made, any such Overpayment paid or distributed to or for
the benefit of Employee shall be repaid by Employee to the payor (or such person
designated by the payor) together with interest at the applicable Federal rate
provided in Code Section 7872(f)(2); provided, however, that no amount shall be
payable by Employee to the payor (or such person designated by the payor) if and
to the extent such deemed payment would not either reduce the amount on which
Employee is subject to tax under Code Section 61 and Code Section 4999 or
generate a refund of such taxes. In the event that the Auditor, based upon
controlling precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid to or
for the benefit of Employee together with interest at the applicable Federal
rate provided in Code Section 7872(f)(2); provided further that any such
Underpayment shall constitute a payment (within the meaning of Treasury
Regulation Section 1.409A-2(b)(2)) separate and apart from the Total Payments;
and provided, further that any such Underpayment shall be deemed a disputed
payment (within the meaning of Treasury Regulation Section 1.409A-3(g)) and
shall be made no later than the end of Employee’s first taxable year in which
the Auditor determines pursuant to this Section 6(c)(iv) that such Underpayment
is due.  

 

(v) This Section 6(c) shall be interpreted, to the maximum extent possible, so
as to avoid the imposition of excise taxes on Employee under Code Section 4999
or the disallowance of a deduction to the Company pursuant to Code Section
280G(a) with respect to any amount payable, or to be provided, under this
Agreement.

 

(d) For the purposes of this Agreement, “Change in Control” shall mean any of
the following which also constitutes a change in control event under Treasury
Regulation Section 1.409A-3(i)(5):

 

(i) an acquisition in one or series of related transactions of the beneficial
ownership of 40% of the Company’s outstanding voting stock by any person or
group, unless the stock is acquired (a) by the Company or its Subsidiaries, (b)
directly from the Company, (c) by an entity in a Business Combination (as
defined below) that otherwise does not constitute a Change in Control, or (d) by
an employee benefit plan (or related trust) sponsored by the Company or its
Subsidiaries;

 

(ii) the liquidation, dissolution or winding-up of the Company;

 

(iii) a reorganization, merger or consolidation of the Company or a sale or
other disposition of all or substantially all of the company’s assets (a
“Business Combination”), immediately following which individuals who constitute
the incumbent board cease to constitute at least a majority of the governing
body of the surviving entity; or

 

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(iv) a majority of the members of the Board of the Company is replaced during
any 12-month period by directors whose appointment or election is not endorsed
or recommended by a majority of the members of the Board prior to the date of
the appointment or election.

 

(e) For purposes of this Agreement, the term “Good Reason” shall mean, without
the express written consent of Employee, the occurrence of one of the following
arising on or after the Effective Date, as determined in a manner consistent
with Treasury Regulation Section 1.409A-1(n)(2)(ii): (i) notwithstanding
anything to the contrary in Section 3, a material reduction (meaning 10% or
more) in any one of Employee’s Base Salary, Target STI Percentage or Target LTI
Percentage, (ii) a material diminution in Employee’s authority, duties, title or
responsibilities, (iii) a permanent relocation in the geographic location at
which Employee must perform services to a location more than 50 miles from the
location at which Employee normally provided services immediately before the
relocation; or (iv) any other action or inaction that constitutes a material
breach by the Company of this Agreement or any material written agreement
between the Company and Employee.  Neither a transfer of employment among the
Company and any of its Subsidiaries nor the Company or a Subsidiary entering
into or discontinuing a co-employer relationship with a personnel services
organization constitutes Good Reason.  In the case of Employee’s allegation of
Good Reason, (i) Employee shall provide notice to the Company of the event
alleged to constitute Good Reason within 90 days after the initial occurrence of
such event, and (ii) the Company shall have the opportunity to remedy the
alleged Good Reason event within 30 days from receipt of notice of such
allegation (the “Cure Period”).  If not remedied within the Cure Period,
Employee may submit a Notice of Termination pursuant to Section 5(e), provided
that the Notice of Termination must be given no later than 90 days after the
expiration of the Cure Period; otherwise, Employee is deemed to have accepted
such event, or the Company’s remedy of such event, that may have given rise to
the existence of Good Reason; provided, however, such acceptance shall be
limited to the occurrence of such event and shall not waive Employee’s right to
claim Good Reason with respect to future similar or other events.

 

7. Business Opportunities and Intellectual Property.

 

(a) Employee represents that he has disclosed to the Company all Business
Opportunities and Intellectual Property (as defined below) that exist on the
date hereof.  Employee agrees to promptly disclose to the Company all Business
Opportunities and Intellectual Property that become such during the Term.

 

(b) Except with respect to the properties identified on the Disclosure Schedule
(“Disclosed Assets”) attached to the Confidentiality and Non-Compete Agreement
previously executed by Employee, Employee hereby assigns and agrees to assign to
the Company, its successors, assigns, or designees, all of Employee’s right,
title, and interest in and to all Business Opportunities and Intellectual
Property that exist on the date hereof or become such during the Term, and
further acknowledges and agrees that all Business Opportunities and Intellectual
Property that exist on the date hereof or become such during the Term constitute
the exclusive property of the Company.

 

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(c) For purposes hereof, “Business Opportunities” shall mean all business ideas,
prospects, proposals and 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, that are:

 

(i) developed by Employee: (A) during the period that Employee is employed by
the Company or any of its Subsidiaries, or (B) before the date hereof, if such
opportunities were developed in connection with (I) assets that have been sold
or contributed to the Company by Employee, or (II) Employee’s activities in the
oil and gas industry, and are directly or indirectly related to the Company’s
properties or assets acquired during the period that Employee is employed by the
Company or any of its Subsidiaries; and

 

(ii) originated by any third parties and brought to the attention of Employee,
whether before or during the Term, except to the extent that (A) such
opportunities are not applicable, directly or indirectly, to any of the
Company’s properties or assets acquired during the period that Employee is
employed by the Company or any of its Subsidiaries, and (B) third parties
possess valid and enforceable rights to such opportunities;

 

together with information relating thereto, including, without limitation, the
Business Records (as defined below).

 

(d) 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 Employee prior to the date of this Agreement), whether
or not patentable or copyrightable, which do not fall within the definition of
Business Opportunities, and which are discovered, conceived, invented, created,
or developed by Employee, alone or with others if such discovery, conception,
invention, creation, or development (i) occurs in the course of Employee’s
employment with the Company, or (ii) occurs with the substantial use of the
Company’s time, materials, assets or facilities (including assets sold or
contributed to the Company by Employee), or (iii) in the opinion of at least a
majority of the Board, relates or pertains in any way to the Company’s
properties or assets acquired during the period that Employee is employed by the
Company or any of its Subsidiaries, except to the extent that any third party
possesses a valid and enforceable right to such Intellectual Property.

 

8. Confidentiality Obligations.

 

(a) Employee hereby acknowledges that all trade secrets and confidential or
proprietary information of the Company (collectively referred to herein as
“Confidential Information”) constitute valuable, special and unique assets of
the Company’s business, and that access to and knowledge of such Confidential
Information is essential to the performance of Employee’s duties.  Employee
agrees that during the Term and during the twenty-four (24) month period
following the Termination Date, Employee will hold the Confidential Information
in strict

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confidence and will not publish, disseminate or otherwise disclose, directly or
indirectly, to any person other than the Company and its officers, directors and
employees, any Confidential Information or use any Confidential Information for
Employee’s own personal benefit or for the benefit of anyone other than the
Company.  The Company agrees to provide Confidential Information to Employee in
exchange for Employee’s agreement to keep such Confidential Information, and any
Confidential Information to which Employee has already become privy, in strict
confidence as provided in this Agreement.

 

(b) For purposes of this Section 8, it is agreed that Confidential Information
includes, without limitation, any information heretofore or hereafter acquired,
developed or used by the Company relating to Business Opportunities of the
Company or Intellectual Property or other geological, geophysical, economic,
financial or management aspects of the business, operations, properties or
prospects of the Company whether oral or in written form, whether or not
included in the Company’s Business Records, but shall exclude any information
which (A) is or has become part of common knowledge or understanding in the oil
and gas industry or otherwise in the public domain (other than from disclosure
by Employee in violation of this Agreement or any other confidentiality
agreement with the Company); (B) was rightfully in the possession of Employee,
as shown by Employee’s records, prior to the date of this Agreement and which is
not directly applicable to the business of the Company or any of its properties
or assets; (C) is lawfully acquired by Employee after the Term from any third
party not bound by an obligation of confidence to the disclosing party; or (D)
is independently developed by or for Employee after the Term without using the
Confidential Information of the Company; provided, however, that Employee shall
provide to the Company copies of all information described in clause (B) to the
extent reasonably requested by the Company.  Notwithstanding the foregoing, this
Section 8 shall not be applicable to the extent (1) Employee is required to
testify in a judicial or regulatory proceeding pursuant to the order of a judge
or administrative law judge after Employee requests that such Confidential
Information be preserved, or (2) Employee receives a valid and effective
subpoena, interrogatory or other legally enforceable request for information in
connection with a judicial process; provided, however, that if and when such a
disclosure is required pursuant to clause (1) or (2) above, Employee shall
promptly provide the Company with notice of such requirement, so that the
Company may (x) seek a protective order or other remedy (including, without
limitation, participation in any proceeding), or (y) waive compliance with the
terms of this Agreement in the Company’s sole discretion (but such waiver will
be limited to the Confidential Information required to be disclosed).  Employee
shall be entitled to furnish only such Confidential Information as Employee is
advised by legal counsel that he is legally required to disclose and will use
commercially reasonable efforts to obtain confidential treatment of any and all
Confidential Information disclosed.

 

(c) Employee agrees to promptly deliver to the Company, upon termination of
Employee’s employment with the Company, or at any other later time when the
Company so requests, all documents and electronic data in existence on the
Termination Date relating to the business of the Company, 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,

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manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
other documents relating to the business of the Company (collectively, the
“Business Records”), and all copies thereof and therefrom that are in the
possession or under the control of Employee.

 

(d) Employee confirms that all of the Business Records (and all copies thereof
and therefrom) that are required to be delivered to the Company pursuant to this
Section 8 constitute the exclusive property of the Company.

 

(e) The obligation of confidentiality set forth in this Section 8 shall continue
notwithstanding Employee’s delivery of any Business Records to the Company.  The
provisions of this Section 8 shall continue in effect notwithstanding
termination of Employee’s employment for any reason.

 

(f) Notwithstanding the foregoing provisions of this Section 8 or any other
provision of this Agreement, Employee shall be entitled to retain any written
materials which, as shown by Employee’s records, were in Employee’s possession
on or prior to the date Employee was employed by the Company or any of its
predecessors, subject to the Company’s right to receive a copy of such materials
or, in lieu thereof, proof that such materials were in existence on the date
hereof.

 

9. Non-Compete Obligations During Employment Term.

 

(a) Except as set forth in subsection (b) of this Section 9 and in the
Disclosure Schedule or except as otherwise approved by the Board, Employee
agrees that during the Term:

 

(i) Employee 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 five
percent equity-holder, 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; and

 

(ii) all investments made by Employee (whether in Employee’s own name or in the
name of any Family Members or made by any Controlled Affiliates, as defined
below), which relate to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products shall be made solely
through the Company; and Employee will not (directly or indirectly through any
Family Members), and will not permit any Controlled Affiliate to: (A) invest or
otherwise participate alongside the Company in any Business Opportunities, or
(B) invest or otherwise participate in any business or activity relating to a
Business Opportunity, regardless of whether the Company ultimately participates
in such business or activity.

 

For purposes hereof, “Controlled Affiliates” are entities in which Employee and
Employee’s Family Members collectively own, directly or indirectly, a majority
of the

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equity or voting interests.  The restrictions of this Section 9(a) do not apply
to purely passive investments in companies in the energy industry provided such
investments do not exceed five percent of the outstanding equity securities of
the applicable company.

 

(b) Employee represents that neither Employee nor his Controlled Affiliates or
his “Family Members” (defined as Employee’s spouse and minor children living in
Employee’s household) own any investments or interests which relate to the
lease, acquisition, exploration, production, gathering or marketing of
hydrocarbons and related products, other than Employee’s interest in the
Disclosed Assets.  This paragraph shall not apply to, and Employee shall be
entitled to hold and acquire purely passive investments in companies in the
energy industry provided such investments do not exceed five percent of the
outstanding equity securities of the applicable company.

 

10. Obligations After Termination Date.

 

(a) The purposes of the provisions of Section 8 and this Section 10 are to
protect the Company from unfair loss of goodwill and business advantage and to
shield Employee from pressure to use or disclose Confidential Information or to
trade on the goodwill belonging to the Company.  Accordingly, during the
Post-Termination Non-Compete Term (as defined below), except as otherwise
approved by the Board, Employee will not engage or participate in (whether
directly or indirectly through any Family Member or as an employee, employer,
consultant, agent, principal, partner, shareholder, officer, director, licensor,
lender, lessor or in any other individual or representative capacity), any
business or activity (including leasing, acquiring, exploring, producing,
gathering or marketing hydrocarbons and related products) in such a manner that
Employee’s knowledge of Confidential Information is used to compete with the
Company, within a ten (10) mile radius of the boundaries of, any material
mineral property interest of the Company (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) as of the Termination Date
or any other material property on which the Company has, or is in the process of
negotiating, 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; provided that, this
Section 10 shall not preclude Employee from making purely passive investments in
companies in the energy industry provided such investments do not exceed five
percent of the outstanding equity securities of the applicable company.

 

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(b) For purposes hereof, the duration of the “Post-Termination Non-Compete Term”
shall be determined as follows (but may be shortened by the Board in its sole
discretion pursuant to subsection (d) below):

 

(i) in the event that (A) Employee’s employment by the Company was terminated
for Cause, (B) Employee voluntarily terminated his position (but not for Good
Reason), or (C) Employee breached in any material respect any of the provisions
of Sections 8 or 10 hereof, the Post-Termination Non-Compete Period shall be the
eighteen (18) month period following the Termination Date; or

 

(ii) in the event (A) Employee’s services as an employee are terminated by the
Company other than for Cause or (B) Employee voluntarily terminated his
employment for Good Reason, in either case outside the period that is six months
prior to or two years following a Change in Control, the Post-Termination
Non-Compete Period shall be the twelve (12) month period following the
Termination Date during which time the Company provides the Severance Package to
Employee pursuant to Section 5(a) above; or

 

(iii) in the event that, within six months prior to or two years following a
Change in Control (A) Employee’s services as an employee are terminated by the
Company other than for Cause or (B) Employee voluntarily terminated his
employment for Good Reason, the Post-Termination Non-Compete Period shall be the
six (6) month period following the Termination Date, provided that the Employee
receives (or is receiving) payments under a Change in Control Severance Package.

 

(c) Employee acknowledges that any severance payments made to Employee under
this Agreement, as well as the Company’s agreement to provide Confidential
Information to Employee, will constitute adequate consideration for Employee’s
agreements set forth in Section 10(a) above.

 

(d) The Board shall consider in good faith any request made by Employee to limit
the duration, geographical area, or scope of activity of Employee’s non-compete
obligations under this Section 10; provided however, that the Board shall
determine in its sole discretion whether to approve any such request and any
conditions upon which such approval would be based.

 

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(e) Employee will not, during the twenty-four (24) month period following the
Termination Date, solicit, entice, persuade or induce, directly or indirectly,
any employee (or person who within the preceding 90 days was an employee) of the
Company or any other person who is under contract with or rendering services to
the Company, to (i) terminate his or her employment by, or contractual
relationship with, such person, (ii) refrain from extending or renewing the same
(upon the same or new terms), (iii) refrain from rendering services to or for
such person, (iv) become employed by or enter into contractual relations with
any persons other than such person, or (v) enter into a relationship with a
competitor of the Company; provided, however, that the solicitation restrictions
set forth in this Section 10(e) shall not prohibit any form of general
advertising or solicitation that is not directed at a specific person or entity
and shall not prohibit Employee from offering employment and/or hiring any
employee of the Company who contacted Employee unsolicited.

 

11. General Provisions.

 

(a) Amendments and Waiver.  The terms and provisions of this Agreement may not
be modified or amended, nor may any of the provisions hereof be waived,
temporarily or permanently, unless such modification or amendment is agreed to
in writing and signed by Employee and by a duly authorized officer of the
Company, and such waiver is set out in writing and signed by the party to be
bound by waiver.  The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms, and a waiver on one
occasion shall not be deemed to be a waiver of the same or any other type of
breach on a future occasion.

 

(b) Withholding and Deductions.  With respect to any payment to be made to
Employee, the Company shall deduct, where applicable, any amounts authorized by
Employee, and shall withhold and report all amounts required to be withheld and
reported by applicable law.

 

(c) Mitigation.  Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by Employee as the result of employment by another
employer after the Termination Date, or otherwise.

 

(d) Survival.  The termination of Employee’s employment shall not impair the
rights or obligations of any party that have accrued prior to such termination
or which by their nature or terms survive termination of the Term, including
without limitation the Company’s obligations under Sections 5 and 6 and
Employee’s obligations under Sections 8 and 10.

 

(e) Validity.  The invalidity or unenforceability of any provision or provisions
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.  In
the event that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the geographic
or business scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall not
affect or render invalid

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or unenforceable any other provision of this Agreement, and, to the fullest
extent permitted by law, this Agreement shall be construed as if the geographic
or business scope or the duration of such provision had been more narrowly
drafted so as not to be invalid or unenforceable.

 

(f) Entire Agreement.  This Agreement, together with any grant notices
evidencing awards made pursuant to Section 3(b) or (c) above, constitutes the
entire agreement of the parties with regard to the subject matter hereof, and
contains all the covenants, promises, representations, warranties and agreements
between the parties with respect to employment of Employee by the
Company.  Without limiting the scope of the preceding sentence, all
understandings and agreements preceding the date of execution of this Agreement
and relating to the subject matter hereof (including specifically the prior
employment agreement and the Confidentiality and Non-Compete Agreement executed
by Employee) are hereby superseded and of no further force and effect.  This
Agreement, however, shall have no effect on the Indemnification Agreement
between Employee and the Company, which shall remain in effect.

 

(g) Successors and Assigns; Binding Agreement.  This Agreement shall bind and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, permitted assigns, heirs and personal representatives and
estates, as the case may be.  Neither this Agreement nor any right or obligation
hereunder of any party may be assigned or delegated without the prior written
consent of the other party hereto; provided, however, that the Company may
assign this Agreement to any of its Subsidiaries and Employee may direct payment
of any benefits that will accrue upon death.  Employee shall not have any right
to pledge, hypothecate, anticipate, or in any way create a lien upon any
payments or other benefits provided under this Agreement; and no benefits
payable under this Agreement shall be assignable in anticipation of payment
either by voluntary or involuntary acts, or by operation of law, except by will
or pursuant to the laws of descent and distribution.  This Agreement shall not
confer any rights or remedies upon any person or legal entity other than the
parties hereto and their respective successors and permitted assigns.

 

(h) Notices.  All notices or other communications required or permitted to be
given under this Agreement shall be in writing and be duly given as follows: (a)
if addressed to Employee, when delivered to the Employee personally or to the
address furnished to the Company by Employee, or (b) if addressed to the
Company, when delivered to the Company at its principal place of business at
such address, to the attention of the President.  Either party may change its
address by giving the other party notice of such change in accordance with the
provisions of this section.

 

(i) Termination of Agreement.  The obligations of Employee under Section 10
shall be terminated if the Company ceases to conduct business as a result of the
insolvency or failure of the Company.

 

(j) Construction.  The language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party.  The section headings in
this Agreement are for convenience of reference only, and they form no part of
this Agreement and shall not affect its construction.

 

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(k) Remedies.  Employee acknowledges that the Company’s remedy at law for any
breach of the provisions of this Agreement is and will be insufficient and
inadequate and that the Company shall be entitled to equitable relief, including
by way of temporary and permanent injunction, in addition to any remedies the
Company may have at law.  The parties agree that no claim for breach of this
Agreement may be made by either party following the date that is one year
following the date of discovery by the affected party of the alleged breach.

 

(l) Governing Law; Construction.  The parties agree that this Agreement is
governed by and shall be construed and enforced in accordance with Colorado law,
excluding its choice-of-law principles, except where federal law may preempt the
application of state law and also agree that this Agreement is to be construed
as a whole, according to its fair meaning, and not strictly for or against any
of the parties.

 

(m) Disputes; Venue; Jury-Trial Waiver; Mandatory Arbitration.  In the event of
any dispute, controversy or claim between the Company and Employee arising out
of or relating to the interpretation, application or enforcement of the
provisions of Sections 8, 9 or 10, the Company and Employee agree and consent to
the exclusive personal jurisdiction of the state and local courts of Colorado
State Judicial Branch and/or the United States District Court for the District
of Colorado for resolution of the dispute, controversy or claim, and that those
courts, and only those courts, will have jurisdiction to determine any dispute,
controversy or claim related to, arising under or in connection with Section 8,
9 or 10 of this Agreement.  The Company and Employee (i) agree that those courts
are convenient forums for the parties to any such dispute, controversy or claim
and for any potential witnesses, (ii) waive any objection to such venue, (iii)
agree that process issued out of any such court or in accordance with the rules
of practice of that court may be served by mail or other forms of substituted
service to the Company at the address of its principal executive offices and to
Employee at him last known address as reflected in the Company’s records, (iv)
that any judgment in any such action or proceeding may be enforced in other
jurisdictions, and (v) irrevocably waive the right to trial by jury and agree
not to ask for a jury in any such proceeding.

 

In the event of any dispute relating to this Agreement, other than a dispute
relating solely to Section 8, 9 or 10, the parties will use their best efforts
to settle the dispute, claim, question, or disagreement. To this effect, they
will consult and negotiate with each other in good faith and, recognizing their
mutual interests, attempt to reach a just and equitable solution satisfactory to
both parties.  If such a dispute cannot be settled through negotiation, the
parties agree first to try in good faith to settle the dispute by mediation
administered by the American Arbitration Association under its Commercial
Mediation Rules before resorting to arbitration, litigation, or some other
dispute resolution procedure.  If the parties do not reach such solution through
negotiation or mediation within a period of sixty (60) days, then, upon notice
by either party to the other, all disputes, claims, questions, or differences
will be finally settled by arbitration administered by the American Arbitration
Association in accordance with the provisions of its Commercial Arbitration
Rules.  The arbitrator will be selected by agreement of the parties or, if they
do not agree on an arbitrator within thirty (30) days after either party has
notified the other of him or its desire to have the question settled by
arbitration, then the arbitrator will be selected pursuant to the procedures of
the American Arbitration Association (the “AAA”) in Denver, Colorado.  The
determination reached in such arbitration will be final and binding on all
parties. Enforcement of the determination by such arbitrator may be sought in
any court of competent

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jurisdiction.  Unless otherwise agreed by the parties, any such arbitration will
take place in Denver, Colorado, and will be conducted in accordance with the
Commercial Arbitration Rules of the AAA.  The prevailing party in the
arbitration proceeding may be entitled to an award of reasonable attorneys’ fees
incurred in connection with the arbitration in such amount, if any, as
determined by the panel in its discretion. The costs of the arbitration shall be
borne equally by the parties unless otherwise determined by the panel in its
award.

 

(m) Limitations Reasonable.  The parties to this Agreement agree that the
limitations contained in Section 10 with respect to time, geographical area, and
scope of activity are reasonable.  However, if any court shall determine that
the time, geographical area, or scope of activity of any restriction contained
in Section 10 is unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be terminated but shall
be deemed amended to the extent required to render it valid and enforceable.

 

(n) Clawback.  Employee hereby acknowledges and agrees that any payment
hereunder will be subject to recovery by the Company pursuant to applicable law
and any applicable Company compensation recovery policy as may be from time to
time in effect.

 

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the Effective Date.

 

 

 

RESOLUTE ENERGY CORPORATION

 

 

 

 

 

By:

 

/s/ Richard F. Betz

 

 

 

 

Richard F. Betz, Chief Executive Officer

 

 

 

 

EMPLOYEE

 

 

 

 

 

By:

 

/s/ Theodore Gazulis

 

 

 

 

Theodore Gazulis

 

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