UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 1, 2011
APPROACH RESOURCES INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation)
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001-33801
(Commission File Number)
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51-0424817
(IRS Employer Identification No.)
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One Ridgmar Centre
6500 West Freeway, Suite 800
Fort Worth, Texas
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76116
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(Address of principal executive offices)
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(Zip Code)
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(817) 989-9000
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (
see
General
Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Amended and Restated Employment Agreement with J. Ross Craft
Effective January 1, 2011, Approach Resources Inc. (the Company) entered into an amended and
restated employment agreement with its President and Chief Executive Officer, J. Ross Craft (the
Craft Agreement). The Craft Agreement replaces the Companys prior employment agreement with Mr.
Craft, which was entered into as of January 1, 2003, and amended as of December 31, 2008.
The Craft Agreement extends the initial term of Mr. Crafts employment through January 1,
2013, and will be automatically renewed for additional one-year terms unless either party elects
not to renew the Craft Agreement or the Craft Agreement is otherwise terminated in accordance with
its terms.
The Craft Agreement provides for Mr. Craft to serve as President and Chief Executive Officer
of the Company with an annual base salary of $410,000, subject to annual review and adjustment by
the Companys Board of Directors (the Board); provided, however, that once established at an
increased amount, Mr. Crafts Base Salary will not be reduced below that increased amount during
the Term. Mr. Craft will be entitled to participate in the Companys performance incentive plan or
other bonus plan maintained by the Company, to be determined by the Compensation and Nominating
Committee of the Board (Committee) in its sole discretion.
In the event of Mr. Crafts death or if he becomes Permanently Disabled, the Craft Agreement
will terminate and the Company will pay Mr. Craft or his estate severance payments equal to (i)
100% of Mr. Crafts then-current Base Salary and (ii) 100% of the average of any Bonuses received
by Mr. Craft in the two years immediately before the Separation from Service.
If the Craft Agreement is terminated by the Company without Cause, by Mr. Craft for Good
Reason, or by the Companys proper notice of nonrenewal of the Craft Agreement, the Company will
pay Mr. Craft severance payments equal to (i) 200% of the greater of Mr. Crafts then-current Base
Salary and Mr. Crafts Base Salary at any time within two years immediately before the Separation
from Service and (ii) 100% of the Bonus that Mr. Craft would have received based on achievement of
applicable performance goals in the year of termination; provided, that in the event of the
Companys proper notice of non-renewal, Mr. Crafts Bonus payment will be prorated for any partial
year of service. The Company will also reimburse Mr. Craft for certain premiums paid under the
Consolidated Omnibus Reconciliation Act of 1985 (COBRA) for a period of up to 24 months (12
months if Mr. Craft terminates his employment for Good Reason), depending on Mr. Crafts
eligibility for continuation of coverage under COBRA.
In the event of a Change in Control, the Craft Agreement will terminate and the Company will
pay Mr. Craft severance payments equal to (i) 200% of the greater of Mr. Crafts then-current Base
Salary and Mr. Crafts Base Salary at any time within the two years immediately before the Change
in Control and (ii) 200% of the average of any Bonuses received by Mr. Craft in the two years
before the Change in Control. The Company will also reimburse Mr. Craft for certain premiums paid
under COBRA for a period of up to 24 months, depending on Mr. Crafts eligibility for continuation
of coverage under COBRA.
Under the Craft Agreement, Mr. Craft has agreed to certain confidentiality, non-competition
and non-solicitation covenants with respect to the Company.
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The description of the Craft Agreement contained herein is qualified in its entirety by
reference to the full text of the Craft Agreement, a copy of which is attached hereto as
Exhibit 10.1
and is incorporated herein by reference. Capitalized terms used but not
defined above have the meaning given them in the Craft Agreement.
Amended and Restated Employment Agreement with Steven P. Smart
Effective January 1, 2011, Company entered into an amended and restated employment agreement
with its Executive Vice President and Chief Financial Officer, Steven P. Smart (the Smart
Agreement). The Smart Agreement replaces the Companys prior employment agreement with Mr. Smart,
which was entered into as of January 1, 2003, and amended as of December 31, 2008.
The Smart Agreement extends the initial term of Mr. Smarts employment through January 1,
2013, and will be automatically renewed for additional one-year terms unless either party elects
not to renew the Smart Agreement or the Smart Agreement is otherwise terminated in accordance with
its terms.
The Smart Agreement provides for Mr. Smart to serve as Executive Vice President and Chief
Financial Officer of the Company with an annual base salary of $275,000, subject to annual review
and adjustment by the Board. Mr. Smart will be entitled to participate in the Companys
performance incentive plan or other bonus plan maintained by the Company, to be determined by the
Committee in its sole discretion.
In the event of Mr. Smarts death or if he becomes Permanently Disabled, the Smart Agreement
will terminate and the Company will pay Mr. Smart or his estate severance payments equal to (i)
100% of Mr. Smarts then-current Base Salary and (ii) 100% of the average of any Bonuses received
by Mr. Smart in the two years immediately before the Separation from Service.
If the Smart Agreement is terminated by the Company without Cause, by Mr. Smart for Good
Reason or by the Companys proper notice of nonrenewal of the Smart Agreement, the Company will pay
Mr. Smart severance payments equal to (i) 150% of the greater of Mr. Smarts then-current Base
Salary and Mr. Smarts Base Salary at any time within two years immediately before the Separation
from Service and (ii) the Bonus that Mr. Smart would have received based on achievement of
applicable performance goals in the year of termination, prorated for any partial year of service.
The Company will also reimburse Mr. Smart for certain premiums paid under COBRA for a period of up
to 18 months (12 months if Mr. Smart terminates his employment for Good Reason), depending on Mr.
Smarts eligibility for continuation of coverage under COBRA.
If Mr. Smart is employed by the Company at the time of a Change in Control and the Smart
Agreement is terminated by the Company without Cause or by Mr. Smart for Good Reason within one
year of such Change in Control, the Company will pay Mr. Smart severance payments equal to (i) 150%
of the greater of Mr. Smarts then-current Base Salary and Mr. Smarts Base Salary at any time
within the two years immediately before the Change in Control and (ii) 100% of the average of
Bonuses received by Mr. Smart in the two years before the Change in Control. The Company will also
reimburse Mr. Smart for certain premiums paid under COBRA for a period of up to 18 months,
depending on Mr. Smarts eligibility for continuation of coverage under COBRA.
Under the Smart Agreement, Mr. Smart has agreed to certain confidentiality, non-competition
and non-solicitation covenants with respect to the Company.
The description of the Smart Agreement contained herein is qualified in its entirety by
reference to the full text of the Smart Agreement, a copy of which is attached hereto as
Exhibit 10.2
and is
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incorporated herein by reference. Capitalized terms used but not defined above have the
meaning given them in the Smart Agreement.
Employment Agreement with J. Curtis Henderson
Effective January 1, 2011, the Company entered into an employment agreement with its Executive
Vice President and General Counsel, J. Curtis Henderson (the Henderson Agreement).
The initial term of the Henderson Agreement will expire on January 1, 2013, and will be
automatically renewed for additional one-year terms unless either party elects not to renew the
Henderson Agreement or the Henderson Agreement is otherwise terminated in accordance with its
terms.
The Henderson Agreement provides for Mr. Henderson to serve as Executive Vice President and
General Counsel of the Company with an annual base salary of $275,000, subject to annual review and
adjustment by the Board. Mr. Henderson will be entitled to participate in the Companys
performance incentive plan or other bonus plan maintained by the Company, to be determined by the
Committee in its sole discretion.
In the event of Mr. Hendersons death or if he becomes Permanently Disabled, the Henderson
Agreement will terminate and the Company will pay Mr. Henderson or his estate severance payments
equal to (i) 100% of Mr. Hendersons then-current Base Salary and (ii) 100% of the average of any
Bonuses received by Mr. Henderson in the two years immediately before the Separation from Service.
If the Henderson Agreement is terminated by the Company without Cause, by Mr. Henderson for
Good Reason or by the Companys proper notice of nonrenewal of the Henderson Agreement, the Company
will pay Mr. Henderson severance payments equal to (i) 150% of the greater of Mr. Hendersons
then-current Base Salary and Mr. Hendersons Base Salary at any time within two years immediately
before the Separation from Service and (ii) the Bonus that Mr. Henderson would have received based
on achievement of applicable performance goals in the year of termination, prorated for any partial
year of service. The Company will also reimburse Mr. Henderson for certain premiums paid under
COBRA for a period of up to 18 months (12 months if Mr. Henderson terminates the Henderson
Agreement for Good Reason), depending on Mr. Hendersons eligibility for continuation of coverage
under COBRA.
If Mr. Henderson is employed by the Company at the time of a Change in Control and the
Henderson Agreement is terminated by the Company without Cause or by Mr. Henderson for Good Reason
within one year of such Change in Control, the Company will pay Mr. Henderson severance payments
equal to (i) 150% of the greater of Mr. Hendersons then-current Base Salary and Mr. Hendersons
Base Salary at any time within two years immediately before the Change in Control and (ii) 100% of
the average of any Bonuses received by Mr. Henderson in the two years before the Change in Control.
The Company will also reimburse Mr. Henderson for certain premiums paid under COBRA for a period
of up to 18 months, depending on Mr. Hendersons eligibility for continuation of coverage under
COBRA.
Under the Henderson Agreement, Mr. Henderson has agreed to certain confidentiality,
non-competition and non-solicitation covenants with respect to the Company.
The description of the Henderson Agreement contained herein is qualified in its entirety by
reference to the full text of the Henderson Agreement, a copy of which is attached hereto as
Exhibit 10.3
and is incorporated herein by reference. Capitalized terms used but not
defined above have the meaning given them in the Henderson Agreement.
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Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits.
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Exhibit No.
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Description
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10.1
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Amended and Restated Employment Agreement dated as of January
1, 2011, by and between Approach Resources Inc. and J. Ross
Craft
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10.2
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Amended and Restated Employment Agreement dated as of January
1, 2011, by and between Approach Resources Inc. and Steven P.
Smart
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10.3
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Employment Agreement dated as of January 1, 2011, by and
between Approach Resources Inc. and J. Curtis Henderson
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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APPROACH RESOURCES INC.
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By:
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/s/ J. Curtis Henderson
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J. Curtis Henderson
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Executive Vice President and General Counsel
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Date:
January 6, 2011
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EXHIBIT INDEX
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Exhibit No.
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Description
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10.1
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Amended and Restated Employment Agreement dated as of January
1, 2011, by and between Approach Resources Inc. and J. Ross
Craft
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10.2
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Amended and Restated Employment Agreement dated as of January
1, 2011, by and between Approach Resources Inc. and Steven P.
Smart
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10.3
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Employment Agreement dated as of January 1, 2011, by and
between Approach Resources Inc. and J. Curtis Henderson
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Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the
Agreement
) is entered into as of
January 1, 2011 (the
Effective Date
), by and between APPROACH RESOURCES INC., a Delaware
corporation (the
Company
), and J. ROSS CRAFT, an individual residing in the State of
Texas (
Employee
).
RECITALS
WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement between
the parties effective as of January 1, 2003 and amended by the First Amendment to the Employment
Agreement between the parties effective as of December 31, 2008 (together, the
Original
Employment Agreement
).
WHEREAS, the parties desire to enter into this Agreement to amend, supersede, and fully
restate and replace the Original Employment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to the following terms:
TERMS
1.
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Employment and Position
. The Company shall continue to employ Employee as its
President and Chief Executive Officer, and Employee shall continue to serve in such
capacities, subject to the terms of this Agreement, and Employee shall report directly to the
Companys Board of Directors (the
Board
).
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2.
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Duties
. Employee shall perform in the capacities described in paragraph 1 and shall
have such duties, responsibilities, and authorities as may be reasonably assigned by the
Board, in its sole discretion, including without limitation duties, responsibilities, and
authorities for the Companys Affiliates (as defined below). Employee shall devote his full
time, best efforts, abilities, knowledge, and experience to the Companys business and affairs
as necessary to faithfully perform his duties, responsibilities, and authorities under this
Agreement.
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3.
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Place of Performance
. Although Employee shall be expected to work at all Company
locations from time to time and travel as necessary to perform his duties, responsibilities,
and authorities under this Agreement, Employees primary work location shall be at the
Companys corporate headquarters or within 25 miles from the Companys corporate headquarters.
The Company shall provide without cost to Employee such office space, secretarial, and
administrative services, equipment, furniture, and furnishings as are suitable and appropriate
to Employees titles and positions.
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4.
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Term of Agreement
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(a)
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Initial Term
. This Agreement shall continue in full force and effect
for the initial term described in this subparagraph 4(a) (the
Initial Term
),
commencing on the Effective Date and expiring on January 1, 2013 (the
Expiration
Date
), unless
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terminated before the Expiration Date in accordance with paragraph 6.
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(b)
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Renewal Term
. Notwithstanding subparagraph 4(a), the effectiveness of
this Agreement shall automatically be extended for an additional one-year term on the
Expiration Date and on each successive anniversary of the Expiration Date (each, a
Renewal Date
), unless and until (i) either party gives written notice of
non-renewal at least 120 days prior to the Expiration Date or any Renewal Date; or (ii)
the Agreement is terminated earlier in accordance with paragraph 6 (each, a
Renewal Term
).
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(c)
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Term
. The Initial Term and any Renewal Terms shall be referred to
below collectively as the
Term
of this Agreement.
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5.
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Compensation and Employment Benefits
. In consideration for the performance of
Employees duties, responsibilities, and authorities under this Agreement, the Company shall
provide Employee with the following compensation and employment benefits:
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(a)
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Base Salary
. From the Effective Date until changed as provided in this
subparagraph, the Company shall pay Employee an annual base salary of $410,000.00 (the
Base Salary
), prorated for any partial period of employment. The Base Salary
shall be payable semi-monthly in accordance with the Companys ordinary payroll
policies and procedures for employee compensation. During the Term, Employees Base
Salary shall be subject to an annual review and adjustment by the Board in its sole
discretion;
provided, however
, that once established at an increased specified
rate, at no time thereafter during the Term shall the Base Salary be reduced below the
increased amount set forth in this subparagraph.
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(i)
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Performance Plan
. In addition to the Base Salary,
Employee shall be eligible to participate in the Company Performance Incentive
Plan or another bonus plan or program maintained by the Company or an Affiliate
(
Performance Plan
) to be determined annually by the Compensation
Committee of the Board in its sole discretion. For purposes of this Agreement,
Bonus
means any annual bonus payable pursuant to the Performance Plan
to Employee.
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(ii)
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Payout Option
. The Bonus may be paid in cash, common
stock of the Company, or a combination thereof, as determined by the
Compensation Committee in its sole discretion;
provided, however
, that
the Compensation Committee may offer Employee the option to elect to receive
the value of any Bonus in cash, common stock, or a combination thereof, subject
to applicable law and such terms, conditions, and limitations as the
Compensation Committee may establish from time to time.
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(iii)
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Discretionary Participation Level
. The Compensation
Committee, in its sole
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Amended and Restated Employment Agreement
Page 2
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discretion, shall determine Employees participation in
the Performance Plan and amount or range of the Bonus available to Employee
based on achievement of performance goals during the fiscal year or other
performance period.
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(iv)
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Payment
. Any Bonus or other discretionary compensation
payments due under this Agreement shall be paid to Employee at the time
specified by the Compensation Committee at the time any such Bonus or other
discretionary compensation payment is awarded, but in no event later than 2
1
/
2
months after the end of the taxable year in which any substantial risk of
forfeiture with respect to such Bonus or other payment lapses. Unless
otherwise specifically provided for in this Agreement or a plan, policy or
program of the Company, Employee must be employed by the Company or an
Affiliate on the date the Bonus or other payment is made to be entitled to
receive the Bonus or other payment.
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(c)
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Employment Benefits
. The Company shall provide Employee with the
employment benefits that the Company ordinarily provides to its executive-level
employees. Such employment benefits shall be governed by the applicable plan
documents, insurance policies, and/or employment policies, and may be modified,
suspended, revoked, or terminated in accordance with the terms of the applicable
documents or policies without violating this Agreement. In addition to those benefits,
the Company shall provide or cause to provide the following benefits upon satisfaction
by Employee of any eligibility requirements, subject to the following limitations:
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(i)
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Sick-Leave Benefits and Supplemental Long-Term Disability
Insurance Premiums
. To the extent made available to other employees of the
Company, and unless this Agreement is terminated pursuant to paragraph 6 in
which case no sick-leave benefits shall be payable, Employee shall be paid sick
leave benefits at his then prevailing Base Salary rate during his absence due
to illness or other incapacity up to a maximum of 180 days in any one-year
period. The Company shall also continue paying $350.00 per month for the
Company-provided supplemental long-term disability insurance policy covering
Employee on the Effective Date.
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(ii)
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Vacations
. The Company shall provide Employee with a
minimum of five weeks of paid vacation per calendar year during the Term,
prorated for the first calendar year of the Term. Unless the Company has
adopted a plan or policy pursuant to which some or all of such vacation may be
rolled over to the next succeeding year in which case only a maximum of five
weeks of paid vacation may be carried over, such vacation may not be carried
over from calendar year to calendar year and accrued unused vacation shall be
forfeited if not used by the end of the calendar year in which it was granted.
The Company shall provide Employee with all paid holidays ordinarily given by
the Company to its employees. Employee shall be paid for any accrued
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Amended and Restated Employment Agreement
Page 3
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unused vacation should this Agreement terminate pursuant to paragraph 6.
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(d)
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Reimbursement of Business Expenses
. Employee may incur ordinary,
necessary, and reasonable business expenses in connection with the performance of his
duties, responsibilities, and authorities under this Agreement and for the promotion of
the Companys business and activities during the Term, including but not limited to
expenses for necessary travel and entertainment and other items of expenses required in
the normal and routine course of Employees employment. The Company shall promptly
reimburse Employee from time to time for all such business expenses incurred pursuant
to and in conformity with this subparagraph and the policies and practices of the
Company relative to the reimbursement of business expenses. Notwithstanding the
foregoing, (i) the amount of expenses eligible for reimbursement during a calendar year
may not affect the expenses eligible for reimbursement in any other calendar year, (ii)
the reimbursement must 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 shall not be subject to liquidation or exchange for any other benefit.
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6.
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Termination of Agreement
. This Agreement may be terminated as follows;
provided,
however
, that any termination of this Agreement shall also constitute a termination of
Employees employment with the Company:
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(a)
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Death
. This Agreement shall terminate immediately upon Employees
death.
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(b)
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Permanent Disability
. This Agreement shall immediately terminate in
the event that Employee becomes Permanently Disabled. For purposes of this Agreement,
Employee shall be deemed to have become
Permanently Disabled
when (i) he
receives disability benefits under either Social Security or the Companys long-term
disability plan, if any, (ii) the Board, upon the written report of a qualified
physician designated by the Board or its insurers, shall have determined (after a
complete physical examination of Employee at any time after he has been absent from the
Company for a total period of 180 or more calendar days in any 12-month period) that
Employee has become physically and/or mentally incapable of performing his essential
job functions with or without reasonable accommodation as required by law, or (iii)
Employee is otherwise unable for a continuous period of 120 calendar days to perform
his essential job functions with or without reasonable accommodation as required by law
due to injury, illness, or other incapacity (physical or mental).
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(c)
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With Cause
. The Company shall be entitled to terminate this Agreement
immediately for any Cause.
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(i)
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Definition of Cause
. For purposes of this Agreement,
Cause
shall be defined as follows:
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Amended and Restated Employment Agreement
Page 4
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(A)
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the willful and continued failure by Employee
substantially to perform his duties, responsibilities, or authorities
hereunder (other than any such failure resulting from Employee becoming
Permanently Disabled);
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(B)
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the willful engaging by Employee in misconduct
that is materially injurious to the Company;
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(C)
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any misconduct by Employee in the course and
scope of Employees employment under this Agreement, including but not
limited to dishonesty, disloyalty, disorderly conduct, insubordination,
harassment of other employees or third parties, abuse of alcohol or
controlled substances, or other violations of the Companys personnel
policies, rules, or Code of Conduct;
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(D)
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any material violation by Employee of this
Agreement; or
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(E)
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any violation by Employee of any fiduciary duty
owed by Employee to the Company or its Affiliates.
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For purposes of this subparagraph, no act, or failure to act, on Employees
part shall be considered
willful
unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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(ii)
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Limited Notice and Opportunity to Cure
. If the Company
determines in its reasonable, good faith discretion that a cure is possible and
appropriate, the Company will give Employee written notice of the acts or
omissions constituting Cause and no termination of this Agreement shall be for
Cause unless and until Employee fails to cure such acts or omissions within 10
days following receipt of such written notice. If the Company determines in
its reasonable, good faith discretion that a cure is not possible and
appropriate, Employee shall have no notice or cure rights before this Agreement
is terminated for Cause.
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(d)
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Without Cause
. The Company shall be entitled to terminate this
Agreement for any reason other than death, Employee becoming Permanently Disabled, or
Cause, at any time by providing 90 days written notice to Employee that the Company is
terminating the Agreement without Cause.
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(e)
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With Good Reason
. Employee shall be permitted to terminate this
Agreement for any Good Reason.
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(i)
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Definition of Good Reason
. For purposes of this
Agreement,
Good Reason
shall exist in the event any of the following
actions are taken without Employees consent:
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Amended and Restated Employment Agreement
Page 5
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(A)
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a material diminution in Employees Base
Salary, duties, responsibilities, or authorities;
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(B)
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a requirement that Employee report to an
officer or employee other than the Board (or similar governing body);
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(C)
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a material relocation of Employees primary
work location more than 25 miles away from the Companys corporate
headquarters; or
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(D)
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any other action or inaction by the Company
that constitutes a material breach by the Company of its obligations
under this Agreement.
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(ii)
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Notice and Opportunity to Cure
. To exercise his right
to terminate for Good Reason, Employee must provide written notice to the
Company of his belief that Good Reason exists within 90 days of the initial
existence of the condition(s) giving rise to Good Reason, and that notice shall
describe the condition(s) believed to constitute Good Reason. The Company
shall have 30 days to remedy the Good Reason condition(s). If not remedied
within that 30-day period, Employee may terminate this Agreement;
provided,
however
, that such termination must occur no later than 180 days after the
date of the initial existence of the condition(s) giving rise to the Good
Reason; otherwise, Employee is deemed to have accepted the condition(s), or the
Companys correction of such condition(s), that may have given rise to the
existence of Good Reason.
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(f)
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Without Good Reason
. Employee shall be entitled to terminate this
Agreement without Good Reason at any time by providing 120 days written notice to
Company that Employee is terminating the Agreement without Good Reason.
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(g)
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Expiration of Term
. Either party may terminate this Agreement by
providing a proper notice of non-renewal in accordance with subparagraph 4(b).
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(h)
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Change in Control
. This Agreement shall terminate immediately upon a
Change in Control in accordance with subparagraph 8(b).
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Amended and Restated Employment Agreement
Page 6
7.
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Payments and Benefits Due Upon Termination
.
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(a)
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Accrued Obligations
. Upon any termination of this Agreement, the
Company shall have no further obligation to Employee under this Agreement or otherwise,
except as expressly provided in this Agreement and except for (i) payment to Employee
of all earned but unpaid Base Salary through the Date of Termination, prorated as
provided in subparagraph 5(a), (ii) payment to Employee, in accordance with the terms
of the applicable benefit plan of the Company or to the extent required by law, of any
benefits to which Employee has a vested entitlement as of the Date of Termination
(other than any entitlement to severance or separation pay, if any), (iii) payment to
Employee of any accrued unused vacation; and (iv) payment to Employee of any approved
but un-reimbursed business expenses incurred in accordance with applicable Company
policy and the terms of this Agreement. The payments and benefits described in
(i)-(iv) shall be referred to in this Agreement as the
Accrued Obligations
and shall be paid in accordance with the Companys plans and policies and applicable
law.
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(b)
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Termination by the Company Due to Death or Permanent Disability
. If
this Agreement is terminated due to death or Employee becoming Permanently Disabled,
then the Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits payable to Employee or the personal representative of Employees estate, as
applicable:
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
100% of his Base Salary in effect as of such Separation from Service; and
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(ii)
|
|
on or before the 60th day following Employees Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years immediately before the
Separation from Service.
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(c)
|
|
Termination by the Company for Cause or by Employee Without Good
Reason
. Upon termination of this Agreement by (i) the Company for Cause in
accordance with subparagraph 6(c) or (ii) Employee without Good Reason in accordance
with subparagraph 6(f), the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations
to Employee in accordance with subparagraph 7(a).
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(d)
|
|
Termination by the Company without Cause or by Employee for Good
Reason
. If this Agreement is terminated by (i) the Company without Cause in
accordance with subparagraph 6(d) or (ii) Employee for Good Reason in accordance with
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Amended and Restated Employment Agreement
Page 7
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subparagraph 6(e), then the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations
to Employee in accordance with subparagraph 7(a) in addition to the following severance
payments and benefits:
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
200% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the Separation from
Service; and
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(ii)
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|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination; and
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(iii)
|
|
commencing on the date of Employees Separation from Service
and continuing for a period of 24 months (or 12 months if Employee terminates
with Good Reason) or, if less, the period ending on the date Employee is no
longer entitled to continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (
COBRA
), or similar state law,
the Company shall reimburse Employee on a monthly basis for the premium costs
of continuing all insurance benefits then applicable to Employee and his
immediate family under any employee welfare benefit plan maintained by the
Company as of the Effective Date and through the Separation from Service,
including without limitation health, dental, supplemental long-term disability,
and life insurance benefits;
provided, however
, that if such continued
coverage after the Separation from Service is not permitted under such Company
plans or applicable law, then the Company shall either (A) provide Employee
with substantially similar benefits through an insurance policy or policies or
(B) if it is not commercially reasonable to provide such an insurance policy or
policies and permitted under applicable law, provide Employee within 60 days
following his Separation from Service with a lump sum in cash equal to the
premiums paid by the Company in the 24 months before the Separation from
Service to provide Employee with such insurance benefits.
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(e)
|
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Expiration of the Term
. If this Agreement is terminated by Employee
providing a proper notice of non-renewal in accordance with subparagraph 4(b), the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a). If this Agreement is terminated by the Company
providing a proper notice of non-renewal in accordance with subparagraph 4(b), then
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Amended and Restated Employment Agreement
Page 8
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the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits:
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(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
200% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the Separation from
Service; and
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(ii)
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|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
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(iii)
|
|
commencing on the date of Employees Separation from Service
and continuing for a period of 24 months or, if less, the period ending on the
date Employee is no longer entitled to continuation coverage under COBRA or
similar state law, the Company shall reimburse Employee on a monthly basis for
the premium costs of continuing all insurance benefits then applicable to
Employee and his immediate family under any employee welfare benefit plan
maintained by the Company as of the Effective Date and through the Separation
from Service, including without limitation health, dental, supplemental
long-term disability, and life insurance benefits;
provided, however
,
that if such continued coverage after the Separation from Service is not
permitted under such Company plans or applicable law, then the Company shall
either (A) provide Employee with substantially similar benefits through an
insurance policy or policies or (B) if it is not commercially reasonable to
provide such an insurance policy or policies and permitted under applicable
law, provide Employee within 60 days following his Separation from Service with
a lump sum in cash equal to the premiums paid by the Company in the 24 months
before the Separation from Service to provide Employee with such insurance
benefits.
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8.
|
|
Change in Control
. The parties acknowledge that Employee has entered into this
Agreement based on his confidence in the current stockholders of the Company and the support
of the Board. Accordingly, if the Company should undergo a Change in Control the parties
agree as follows:
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Amended and Restated Employment Agreement
Page 9
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(i)
|
|
Affiliate
: except as otherwise provided in this
Agreement, for purposes of this Agreement, Affiliate means, with respect to the
Company, any person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Company;
provided, however
, that a natural person shall not be
considered an Affiliate.
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(ii)
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|
Change in Control
: a Change in Control means (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Companys common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Companys common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, (b) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all, of the assets of the Company and the its subsidiaries to any
other person or entity (other than an Affiliate of the Company), (c) the
stockholders of the Company approve any plan or proposal for liquidation or
dissolution of the Company, (d) any person or entity (other than Yorktown
Energy Partners V, L.P., or any of its affiliated funds), including a
group
as contemplated by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding shares
of the Companys voting stock (based upon voting power) or (e) as a result of
or in connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board. Notwithstanding the foregoing, a Change of Control
shall not include a public offering of the Companys common stock or a
transaction with its sole purpose to change the state of the Companys
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Companys
securities immediately before such transaction.
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|
(iii)
|
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CIC Effective Date
: means the date upon which a
Change of Control occurs.
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|
(iv)
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|
Code
: means Internal Revenue Code of 1986, as amended
from time to time.
|
|
(b)
|
|
Change in Control Benefits and Payments
. If there is a Change in
Control and Employee is employed by the Company or an Affiliate on the CIC Effective
Date, then this Agreement shall terminate, regardless of whether Employee experiences a
Separation from Service, and the Company shall have no further obligation to Employee
under this Agreement or otherwise, except the Company shall provide
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Amended and Restated Employment Agreement
Page 10
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|
|
Employee with the
Accrued Obligations in accordance with subparagraph 7(a) plus the following Change in
Control payments and benefits in lieu of any severance payments or benefits that may
otherwise be due under subparagraph 7(d):
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(i)
|
|
on the earliest date between 20 and 60 days following the CIC
Effective Date when the Release described in subparagraph 10(a) has become
fully enforceable and irrevocable, a lump sum in cash equal to 200% of the
greater of (A) the then-current Base Salary, and (B) the Base Salary at any
time within two years immediately before the CIC Effective Date; and
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|
(ii)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to 200% of the average of any Bonuses received by
Employee from the Company in the two years before the CIC Effective Date; and
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(iii)
|
|
commencing on the date of Employees Separation from Service
and continuing for a period of 24 months or, if less, the period ending on the
date Employee is no longer entitled to continuation coverage under COBRA or
similar state law, the Company shall reimburse Employee on a monthly basis for
the premium costs of continuing all insurance benefits then applicable to
Employee and his immediate family under any employee welfare benefit plan
maintained by the Company as of the Effective Date and through the Separation
from Service, including without limitation health, dental, supplemental
long-term disability, and life insurance benefits;
provided, however
,
that if such continued coverage after the Separation from Service is not
permitted under such Company plans or applicable law, then the Company shall
either (A) provide Employee with substantially similar benefits through an
insurance policy or policies or (B) if it is not commercially reasonable to
provide such an insurance policy or policies and permitted under applicable
law, provide Employee within 60 days following his Separation from Service with
a lump sum in cash equal to the premiums paid by the Company in the 24 months
before the Separation from Service to provide Employee with such insurance
benefits.
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(c)
|
|
Effect of a Change in Control Following Date of Termination
.
Notwithstanding any contrary provision in this Agreement, if this Agreement is
terminated by the Company without Cause in accordance with subparagraph 6(d) or by
Employee for Good Reason in accordance with subparagraph 6(e), and a CIC Effective Date
occurs within 120 days following the Date of Termination, then, in addition to the
severance payments and benefits provided to Employee in accordance with subparagraph
7(d), the Company shall provide Employee (or to Employees estate in the event of his
death following the Date of Termination) with the following Change in Control payments:
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(i)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that
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Amended and Restated Employment Agreement
Page 11
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|
|
Employee would have been entitled to receive under subparagraph
8(b)(i) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(i); and
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(ii)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(ii) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(ii).
|
9.
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|
Parachute Payment Limitation
. Notwithstanding any contrary provision in this
Agreement, if Employee is a
disqualified individual
(as defined in Section 280G of
the Code), and the Change in Control payments and benefits described in paragraph 8, together
with any other payments which Employee has the right to receive from the Company, would
constitute a
parachute payment
(as defined in Section 280G of the Code), the
payments and benefits provided hereunder shall be either (a) reduced (but not below zero) so
that the aggregate present value of such payments and benefits received by Employee from the
Company shall be $1.00 less than three times Employees
base amount
(as defined in
Section 280G of the Code) and so that no portion of such payments received by Employee shall
be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full,
whichever produces the better net after-tax result for Employee (taking into account any
applicable excise tax under Section 4999 of the Code and any applicable income tax). The
determination as to whether any such reduction in the amount of the payments and benefits is
necessary shall be made by the Company in good faith and such determination shall be
conclusive and binding on Employee. If a reduced payment is made to Employee pursuant to
clause (a) above and through error or otherwise that payment, when aggregated with other
payments from the Company (or its affiliates) used in determining if a parachute payment
exists, exceeds $1.00 less than three times Employees base amount, Employee shall immediately
repay such excess to the Company upon notification that an overpayment has been made.
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10.
|
|
Conditions on Receipt of Severance and Change in Control Benefits
.
|
|
(a)
|
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Compliance with Post-Termination Obligations and Execution and
Non-Revocation of General Release Agreement
. Notwithstanding any other provision
in this Agreement, the Companys payment to Employee of the severance payments and
benefits described in subparagraphs 7(b)(i), 7(d)(i)-(ii), and 7(e)(i) or the Change in
Control payments and benefits described in subparagraphs 8(b)(i)-(ii) and 8(c)(i)-(ii)
is subject to the condition that he complies with all applicable covenants under
paragraphs 12, 13, 14, and 15 of this Agreement. The Company shall have the right to
cease payment of any such payments or benefits, as well as to seek restitution of any
such payments or benefits already paid, if such covenants have been breached by
Employee but all other provisions of this Agreement shall remain in full force and
effect. The Companys payment of such payments or benefits to Employee is also
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Amended and Restated Employment Agreement
Page 12
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|
subject to the condition that, within 55 days after the Date of Termination, he
execute, deliver to the Company, and not revoke as permitted by applicable law a
General Release Agreement in a form reasonably acceptable to the Company that fully and
finally releases and waives any and all claims, demands, actions, and suits whatsoever
which he has or may have against the Company and its Affiliates, whether under this
Agreement or otherwise, that arose before the General Release Agreement was executed
(the
Release
). For purposes of this Agreement, the Release shall not become
fully enforceable and irrevocable until Employee has timely executed the Release and
not revoked his acceptance of the Release within seven days after its execution.
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(b)
|
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Separation from Service Requirement
. Notwithstanding any other
provision of this Agreement, Employee shall be entitled to the severance benefits and
payments in subparagraphs 7(b), 7(d), or 7(e) only if Employees termination of
employment constitutes a Separation from Service. For purposes of this Agreement,
Separation from Service
means separation from service (within the meaning of
Code Section 409A and the regulations and other guidance promulgated thereunder
(
Section 409A
)) with the group of employers that includes the Company and
each of its Affiliates. For this purpose,
Affiliate
means any incorporated
or unincorporated trade or business or other entity or person, other than the Company,
that along with the Company is considered a single employer under Code Section 414(b)
or Code Section 414(c), but (i) in applying Code Section 1563(a)(1), (2), and (3) for
the purposes of determining a controlled group of corporations under Code Section
414(b), the phrase at least 50 percent shall be used instead of the phrase at least
80 percent in each place the phrase at least 80 percent appears in Code Section
1563(a)(1), (2), and (3), and (ii) in applying Treasury Regulation Section 1.414(c)-2
for the purposes of determining trades or businesses (whether or not incorporated) that
are under common control for the purposes of Code Section 414(c), the phrase at least
50 percent shall be used instead of the phrase at least 80 percent in each place the
phrase at least 80 percent appears in Treasury Regulation Section 1.414(c)-2.
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11.
|
|
Other Provisions Relating to Termination
.
|
|
(a)
|
|
Notice of Termination
. Any termination of this Agreement by the
Company or by Employee (other than termination because of death) shall be communicated
by written Notice of Termination to the other party thereto. For purposes of this
Agreement, a
Notice of Termination
shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated;
provided, however
, that any
failure to provide such detail shall not delay the effectiveness of the termination.
|
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(b)
|
|
Date of Termination
. For purposes of this Agreement,
Date of
Termination
shall mean (i) if Employees employment is terminated by death, the
date of death; (ii) if
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Amended and Restated Employment Agreement
Page 13
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|
|
Employees employment is terminated because of Employee becoming Permanently
Disabled, then 60 days after Notice of Termination is given (provided that Employee
shall not have returned to the performance of his duties, responsibilities, and
authorities on a full-time basis during such 60-day period); (iii) if (A) Employees
employment is terminated by the Company with or without Cause or (B) Employees
employment is terminated by Employee with or without Good Reason, then in each case
the date specified in the Notice of Termination, which shall comply with the
applicable notice requirements in paragraph 6; and (iv) if this Agreement is not
renewed, the last date of the Initial Term or the Renewal Term as applicable.
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(c)
|
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Mitigation
. Employee shall not be required to mitigate the amount of
any payment or benefits provided for in paragraphs 7 or 8 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for therein be
reduced by any compensation earned by Employee as the result of employment by another
employer after the Date of Termination, or otherwise.
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(d)
|
|
Interest
. Until paid, all past due amounts required to be paid by the
Company under any provision of this Agreement shall bear interest at 8% per annum
compounded daily.
|
12.
|
|
Business Opportunities and Intellectual Property
.
|
|
(a)
|
|
Prompt Disclosure Required
. Employee shall promptly disclose to the
Board in writing all Business Opportunities and Intellectual Property.
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|
|
(b)
|
|
Definition of Business Opportunities
. For purposes of this Agreement,
Business Opportunities
shall mean all business ideas, prospects, proposals or
other opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are located,
that are developed by Employee before or during the Term or originated by any third
party and brought to the attention of Employee before or during the Term, together with
information relating thereto (including, without limitation, geological and seismic
data and interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions, or other written or charted
means).
|
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(c)
|
|
Definition of Intellectual Property
. 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, that do not fall within
the definition of Business
|
Amended and Restated Employment Agreement
Page 14
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Opportunities, that Employee discovers, conceives, invents, creates, or
develops, alone or with others, before or during the Term, if such discovery,
conception, invention, creation, or development (i) occurs in the course of
Employees employment with the Company or its Affiliates or (ii) occurs with the use
of any time, materials, or facilities of the Company or its Affiliates.
|
13.
|
|
Non-Compete Obligations During Term
. During the Term and except as provided below or
as otherwise permitted by the Company (acting upon the instruction of the Board):
|
|
(a)
|
|
Employee shall not, other than through the Company or its Affiliates, engage or
participate in any manner, whether directly or indirectly through any family member or
as an employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor, or in any other individual or
representative capacity, in any business or activity that is engaged in leasing,
acquiring, exploring, developing or producing hydrocarbons and related products; and
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(b)
|
|
all investments made by Employee (whether in his own name or in the name of any
family members or made by Employees controlled affiliates), which relate to the lease,
acquisition, exploration, development or production of hydrocarbons and related
products shall be made solely through the Company or its Affiliates; and Employee shall
not (directly or indirectly through any family members), and shall not permit any of
his controlled affiliates to: (i) invest or otherwise participate alongside the Company
or its Affiliates in any Business Opportunities or (ii) invest or otherwise participate
in any business or activity relating to a Business Opportunity, regardless of whether
the Company or any of its Affiliates ultimately participates in such business or
activity;
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provided, however
, that this paragraph shall not apply to (x) the existing personal
oil and gas investments owned by Employee, his family members, and his controlled affiliates
as of the Effective Date of the Original Employment Agreement (the
Existing Personal
Investments
); (y) future expenditures made by Employee and his family members and his
controlled affiliates that are required to maintain, but not increase, their respective
current ownership interests in the Existing Personal Investments, excluding however, any
expenditure to participate in the acquisition, exploration, or development of any acreage
that is not currently included in the Existing Personal Investments as of the Effective
Date; and (z) any opportunity that is first offered to, and subsequently declined by, the
Company (acting through the Board).
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14.
|
|
Confidentiality Obligations
.
|
|
(a)
|
|
Confidentiality and Non-Disclosure Acknowledgments and Obligations
.
Employee hereby acknowledges that all trade secrets and confidential or proprietary
information of the Company and its Affiliates (collectively referred to herein as
Confidential
Information
) constitute valuable, special and unique assets of the
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Amended and Restated Employment Agreement
Page 15
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|
business of the Company and its Affiliates, and that access to and knowledge of such
Confidential Information is essential to the performance of Employees duties,
responsibilities, and authorities under this Agreement. During the Term and the
one-year period following the Date of Termination, Employee shall hold the
Confidential Information in strict confidence and shall not publish, disseminate, or
otherwise disclose, directly or indirectly, to any person other than the Company and
its Affiliates and their respective officers, directors, and employees, any
Confidential Information or use any Confidential Information for Employees own
personal benefit or for the benefit of anyone other than the Company and its
Affiliates. The Company agrees to provide previously undisclosed Confidential
Information to Employee in exchange for Employees 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.
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(b)
|
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Confidential Information Inclusions and Exclusions
. For purposes of
this Agreement, Confidential Information includes, without limitation, any information
heretofore or hereafter acquired, developed, or used by the Company or its Affiliates
relating to Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial, or management aspects of the business, operations,
properties, or prospects of the Company or its Affiliates whether oral or in written
form in business records, but shall exclude any information that (i) 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 (ii) was rightfully in the possession of Employee, as shown by Employees records,
prior to the Effective Date (including Employees method of selecting, purchasing, and
reworking oil and gas properties, which the Company and Employee may utilize subsequent
to the Term (subject to the other limitations contained in this Agreement));
provided, however
, that Employee shall provide to the Company copies of all
information described in clause (ii); and
provided further, however
, that this
subparagraph shall not be applicable to the extent 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.
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15.
|
|
Obligations After Date of Termination
.
|
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(a)
|
|
Non-Compete Obligations
. The purposes of paragraph 14 and this
paragraph 15 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, Employee shall not engage or participate in any
manner, 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, in any
business or
activity that is in engaged in leasing, acquiring, exploring,
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Amended and Restated Employment Agreement
Page 16
|
|
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developing or producing hydrocarbons and related products within the boundaries of,
or within a four mile radius of the boundaries of, any mineral property interest of
the Company or its Affiliates (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 or its
Affiliates and any third party) or any other property on which the Company or its
Affiliates have 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 Date of Termination or as of the end of the six-month
period following such Date of Termination;
provided, however
, that this
subparagraph shall not preclude Employee from making personal investments in
securities of oil and gas companies that are registered on a national stock
exchange, if the aggregate amount owned by Employee and all family members and
affiliates does not exceed 1% of such companys outstanding securities.
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(b)
|
|
Definition of Post-Termination Non-Compete Term
. For purposes of this
Agreement, the
Post-Termination Non-Compete Term
is the one-year period
following the Date of Termination;
provided, however
, that the Post-Termination
Non-Compete Term shall be reduced to the six-month period following the Date of
Termination if this Agreement is terminated either (i) by Employee with Good Reason in
accordance with subparagraph 6(e) or (ii) on account of a Change in Control in
accordance with subparagraph 8(b).
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(c)
|
|
Non-Solicitation Obligations
. Employee shall not, during the Post
Termination Non-Compete Term, 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 its Affiliates to (i) terminate his or her employment by 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 to
enter into contractual relations with any Persons other than such person, or (v) enter
into a relationship with a competitor of the Company or its Affiliates.
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(d)
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Discretionary Monthly Non-Compete Payments
. The Company may, in its
sole discretion, elect to continue on the Companys regularly scheduled paydays
Employees Base Salary in effect immediately before the Date of Termination during
each month of the Post-Termination Non-Compete Term (the
Monthly Non-Compete
Payments
). The Company shall provide written notice to Employee no later than 10
days after the Date of Termination or on or before the Companys first regularly
scheduled payday following the Date of Termination, whichever is sooner, of its
election to make any Monthly Non-Compete Payments. If the Company does elect to make
the Monthly Non-Compete Payments, the Company shall not be
obligated to continue making any such Monthly Non-Compete Payments and shall be
entitled in its sole discretion to cease making the Monthly Non-Compete Payments at
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Amended and Restated Employment Agreement
Page 17
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any time and for any reason but only upon at least 30 days written notice to
Employee, and the Company shall have no further obligation to Employee under this
subparagraph. If the Company starts but ceases making the Monthly Non-Compete
Payments, then, notwithstanding any contrary provision in this Agreement, the
Post-Termination Non-Compete Term for purpose of subparagraph 15(a) shall expire on
the last day of the month in which the final Monthly Non-Compete Payment was made by
the Company.
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16.
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Common Law Duties
. Employee acknowledges and agrees that his restrictive covenants
in paragraphs 12, 13, 14, and 15 of this Agreement shall supplement, rather than supplant, his
common law duties of confidentiality and loyalty owed to the Company.
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17.
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Survival of Covenants; Enforcement of Covenants; and Remedies
.
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(a)
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Survival of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement shall survive the
termination of this Agreement and shall be construed as agreements independent of any
other provision of this Agreement, and the existence of any Dispute of Employee with or
against the Company or its Affiliates whether predicated on this Agreement or otherwise
shall not constitute a defense to the enforcement by the Company of those covenants.
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(b)
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Enforcement of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement are ancillary to the
otherwise enforceable agreements to provide Employee with Confidential Information and
are supported by independent, valuable consideration. Employee further acknowledges
and agrees that the limitations as to time, geographical area, and scope of activity to
be restrained by those covenants are reasonable and acceptable to Employee and do not
import any greater restraint than is reasonably necessary to protect the Companys
goodwill, Confidential Information, and other legitimate business interests. Employee
further agrees that if, at some later date, a court of competent jurisdiction
determines that any of the covenants in paragraphs 12, 13, 14, or 15 are unreasonable,
any such covenants shall be reformed by the court and enforced to the maximum extent
permitted under the law.
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(c)
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Remedies
. In the event of breach or threatened breach by Employee of
any of his covenants in paragraphs 12, 13, 14, or 15 of this Agreement, the Company
shall be entitled to equitable relief by temporary restraining order, temporary
injunction, or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all monetary damages
that the Company may incur as a result of such breach, violation, or threatened breach
or violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time shall not be deemed an
election of remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation,
or threatened breach or violation, or as to any other breach, violation, or threatened breach or violation.
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Amended and Restated Employment Agreement
Page 18
18.
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Successors and Assigns
. This Agreement may not be assigned by the Company to any
other person or entity other than an Affiliate of the Company without Employees written
consent;
provided, however
, that in the event of a Change in Control, the Company
shall cause the surviving entity in any such transaction to assume the Companys obligations
under paragraphs 7 and 8 to the extent such obligations have not yet been fully performed.
Employees duties, responsibilities, authorities, compensation, and benefits under this
Agreement are personal to Employee and may not be assigned to any person or entity without
written consent from the Board. In the event of Employees death, this Agreement shall be
enforceable by Employees estate, executors, or legal representatives. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns.
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19.
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Representations of Employee
. Employee hereby represents and warrants that he has not
previously assumed any obligations inconsistent with those in this Agreement. Employee
further represents and warrants that he has entered into this Agreement pursuant to his own
initiative and that the Company did not induce him to execute this Agreement in contravention
of any existing commitments. Employee further acknowledges that the Company has entered into
this Agreement in reliance upon the foregoing representations of Employee.
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20.
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Dispute Resolution
. The parties agree to the following dispute resolution terms:
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(a)
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Definition of Dispute
. Any controversy, claim, complaint, cause of
action, or similar proceeding, whether based on statute, contract, common law,
negligence, tort, misrepresentation, or any other legal theory, arising out of or
relating to this Agreement or Employees employment with the Company (a
Dispute
), shall be resolved solely in accordance with the terms of this
paragraph;
provided, however
, that the term Dispute shall not include
Employees claims for workers compensation or unemployment compensation benefits
(although any claim asserted under Ch. 451 of the Texas Labor Code shall be considered
a Dispute subject to dispute resolution under this paragraph).
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(b)
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Mediation
. If a Dispute cannot be settled by good faith negotiation
between the parties, the parties shall submit the Dispute to nonbinding mediation as
soon as reasonably possible after the Dispute arose. If complete agreement cannot be
reached within five calendar days of submission to mediation, either party may file a
civil action against the other party in any court of competent jurisdiction permitted
under paragraph 26.
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(c)
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Waiver of Right to Jury Trial
. NOTWITHSTANDING ANY OTHER PROVISION IN
THIS AGREEMENT, THE PARTIES SHALL, AND HEREBY DO,
IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE. IN
ADDITION, EMPLOYEE SHALL, AND HEREBY DOES,
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Amended and Restated Employment Agreement
Page 19
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IRREVOCABLY WAIVE THE RIGHT TO PARTICIPATE IN ANY CLASS OR COLLECTIVE ACTION
WITH RESPECT TO ANY DISPUTE.
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21.
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Attorneys Fees and Other Costs
. If either party breaches this Agreement, or if a
Dispute arises between the parties based on or involving this Agreement, the party that
enforces its rights under this Agreement against the breaching party, or that prevails in the
resolution of such Dispute, shall be entitled to recover from the other party its reasonable
attorneys fees, court costs, and expenses incurred in enforcing such rights or resolving such
Dispute. For purposes of this paragraph, the finder of fact shall be requested to answer
affirmatively as to whether a party prevailed in order to recoup attorneys fees and other
costs pursuant to this paragraph.
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22.
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Entire Agreement
. This Agreement constitutes the entire agreement between the
parties concerning its subject matters and supersedes all prior and contemporaneous agreements
and understandings, both written and oral, between the parties with respect to its subject
matters, including without limitation the Original Employment Agreement. Employee agrees that
the Company has not made any promise or representation to him concerning this Agreement not
expressed in this Agreement, and that, in signing this Agreement, he is not relying on any
prior oral or written statement or representation by the Company but is instead relying solely
on his own judgment and his legal and tax advisors, if any.
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23.
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Amendment of Agreement
. This Agreement may not be modified or amended in any respect
except by an instrument in writing signed by the party against whom such modification or
amendment is sought to be enforced. Notwithstanding the previous sentence, the Company may
modify or amend this Agreement in its sole discretion at any time without the further consent
of the Employee in any manner necessary to comply with applicable law and regulations or the
listing or other requirements of any stock exchange upon which the Company is listed. No
modification or amendment may be enforced against the Company unless such modification or
amendment is in writing and signed by the Board.
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24.
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Waiver
. The waiver by either party of a breach of any term of this Agreement shall
not operate or be construed as a waiver of a subsequent breach of the same provision by either
party or of the breach of any other term or provision of this Agreement.
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25.
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Severability
. If any provision of this Agreement is held to be illegal, invalid, or
unenforceable, (a) this Agreement shall be considered divisible, (b) such provision shall be
deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and (c) in
all other respects this Agreement shall remain in full force and effect;
provided,
however
, that, if any such provision may be made enforceable by limitation, then such
provision shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
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26.
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Governing Law; Venue
. This Agreement shall be governed by the laws of the State of
Texas, without regard to its conflict-of-laws principles. Employee and the Company hereby
irrevocably consent to the binding and exclusive venue for any Dispute between the parties
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Amended and Restated Employment Agreement
Page 20
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arising out of or related to this Agreement being in the state or federal court of competent
jurisdiction that regularly conducts proceedings in Tarrant County, Texas. Nothing in this
Agreement, however, precludes Employee or the Company from seeking to remove a civil action
from any state court to federal court.
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27.
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Notices
. All notices under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or three calendar days after the date
deposited in a receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the Company at its
headquarters or Employee at the address of such person as set forth in the Companys records.
Either party may designate a different address by providing written notice of such new address
to the other party.
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28.
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Counterparts
. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered one and the
same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or
electronically scanned version by e-mail shall have the same force and effect as delivery of
the originally executed document.
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29.
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Code Section 409A
.
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(a)
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Intent
. All or a portion of the payments and benefits provided under
this Agreement is intended to be exempt from Section 409A and any ambiguous provision
will be construed in a manner that is compliant with or exempt from the application of
Section 409A. In particular, such payments and benefits are intended to constitute
short-term deferrals described in Treasury Regulation Section 1.409A-1(b)(4) or a
payment or benefit described in Treasury Regulation Section 1.409A-1(b)(9)(v). The
provisions of this Agreement shall be interpreted in a manner consistent with this
intent.
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(b)
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Specified Employee Postponement
. Notwithstanding
subparagraph (a) of this paragraph or any other provision of this Agreement to the
contrary, if the Company or an Affiliate that is treated as a
service
recipient
(as defined in Section 409A) is publicly traded on an established
securities market (or otherwise) and Employee is a
specified employee
(as
defined below) and is entitled to receive a payment that is subject to Section 409A on
account of Employees Separation from Service, such payment may not be made earlier
than six months following the date of his Separation from Service if required by
Section 409A, in which case, the accumulated postponed amount shall be paid in a lump
sum payment on the Section 409A Payment Date. The
Section 409A Payment Date
is the earlier of (i) the date of Employees death or (ii) the date that is six months
and one day after Employees Separation from Service. If any payment to Employee is
delayed pursuant to the foregoing sentence, such amount instead will be paid, with
interest at the rate set out in Section 11(d), on the Section 409A Payment Date. For
purposes of Section 409A,
each payment amount or benefit due under this Agreement will be considered a
separate payment and Employees entitlement to a series of payments or benefits
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Amended and Restated Employment Agreement
Page 21
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under this Agreement is to be treated as an entitlement to a series of separate
payments. The determination of whether Employee is a specified employee shall be
made in accordance with Section 409A using the default provisions in the Section
409A unless another permitted method has been prescribed for such purpose by the
Company.
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30.
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Right to Consult a Tax Advisor
. Notwithstanding any contrary provision in this
Agreement, Employee shall be solely responsible for any risk that the tax treatment of all or
part of any payments provided by this Agreement may be affected by Section 409A, which may
impose significant adverse tax consequences on him, including accelerated taxation, a 20%
additional tax, and interest. Because of the potential tax consequences, Employee has the
right, and is encouraged by this paragraph, to consult with a tax advisor of his choice before
signing this Agreement.
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[
Signature Page Follows
]
Amended and Restated Employment Agreement
Page 22
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EMPLOYEE:
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/s/ J. Ross Craft
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Name: J. Ross Craft
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COMPANY:
APPROACH RESOURCES INC.,
A Delaware Corporation
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By:
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/s/ Steven P. Smart
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Name:
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Steven P. Smart
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Title:
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Executive Vice President and Chief Financial Officer
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Amended and Restated Employment Agreement
Page 23
Exhibit 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the
Agreement
) is entered into as of
January 1, 2011 (the
Effective Date
), by and between APPROACH RESOURCES INC., a Delaware
corporation (the
Company
), and STEVEN P. SMART, an individual residing in the State of
Texas (
Employee
).
RECITALS
WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement between
the parties effective as of January 1, 2003 and amended by the First Amendment to the Employment
Agreement between the parties effective as of December 31, 2008 (together, the
Original
Employment Agreement
).
WHEREAS, the parties desire to enter into this Agreement to amend, supersede, and fully
restate and replace the Original Employment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to the following terms:
TERMS
1.
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Employment and Position
. The Company shall continue to employ Employee as its
Executive Vice President and Chief Financial Officer, and Employee shall continue to serve in
such capacities, subject to the terms of this Agreement, and Employee shall report directly to
the Companys President and Chief Executive Officer (the
President
) and/or Board of
Directors (the
Board
).
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2.
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Duties
. Employee shall perform in the capacities described in paragraph 1 and shall
have such duties, responsibilities, and authorities as may be reasonably assigned by the
President and/or Board, in his or its sole discretion, including without limitation duties,
responsibilities, and authorities for the Companys Affiliates (as defined below). Employee
shall devote his full time, best efforts, abilities, knowledge, and experience to the
Companys business and affairs as necessary to faithfully perform his duties,
responsibilities, and authorities under this Agreement.
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3.
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Place of Performance
. Although Employee shall be expected to work at all Company
locations from time to time and travel as necessary to perform his duties, responsibilities,
and authorities under this Agreement, Employees primary work location shall be at the
Companys corporate headquarters or within 50 miles from the Companys corporate headquarters.
The Company shall provide without cost to Employee such office space, secretarial, and
administrative services, equipment, furniture, and furnishings as are suitable and appropriate
to Employees titles and positions.
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4.
|
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Term of Agreement
.
|
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(a)
|
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Initial Term
. This Agreement shall continue in full force and effect
for the initial
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term described in this subparagraph 4(a) (the
Initial Term
), commencing on
the Effective Date and expiring on January 1, 2013 (the
Expiration Date
),
unless terminated before the Expiration Date in accordance with paragraph 6.
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(b)
|
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Renewal Term
. Notwithstanding subparagraph 4(a), the effectiveness of
this Agreement shall automatically be extended for an additional one-year term on the
Expiration Date and on each successive anniversary of the Expiration Date (each, a
Renewal Date
), unless and until (i) either party gives written notice of
non-renewal at least 120 days prior to the Expiration Date or any Renewal Date; or (ii)
the Agreement is terminated earlier in accordance with paragraph 6 (each, a
Renewal Term
).
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(c)
|
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Term
. The Initial Term and any Renewal Terms shall be referred to
below collectively as the
Term
of this Agreement.
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5.
|
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Compensation and Employment Benefits
. In consideration for the performance of
Employees duties, responsibilities, and authorities under this Agreement, the Company shall
provide Employee with the following compensation and employment benefits:
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(a)
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Base Salary
. From the Effective Date until changed as provided in this
subparagraph, the Company shall pay Employee an annual base salary of $275,000.00 (the
Base Salary
), prorated for any partial period of employment. The Base Salary
shall be payable semi-monthly in accordance with the Companys ordinary payroll
policies and procedures for employee compensation. During the Term, Employees Base
Salary shall be subject to an annual review and adjustment by the Board in its sole
discretion.
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(b)
|
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Bonus
.
|
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(i)
|
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Performance Plan
. In addition to the Base Salary,
Employee shall be eligible to participate in the Company Performance Incentive
Plan or another bonus plan or program maintained by the Company or an Affiliate
(
Performance Plan
) to be determined annually by the Compensation
Committee of the Board in its sole discretion. For purposes of this Agreement,
Bonus
means any annual bonus payable pursuant to the Performance Plan
to Employee.
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(ii)
|
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Payout Option
. The Bonus may be paid in cash, common
stock of the Company, or a combination thereof, as determined by the
Compensation Committee in its sole discretion;
provided, however
, that
the Compensation Committee may offer Employee the option to elect to receive
the value of any Bonus in cash, common stock, or a combination thereof, subject
to applicable law and such terms, conditions, and limitations as the
Compensation Committee may establish from time to time.
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(iii)
|
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Discretionary Participation Level
. The Compensation
Committee, in its sole
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Amended and Restated Employment Agreement
Page 2
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discretion, shall determine Employees participation in
the Performance Plan and amount or range of the Bonus available to Employee
based on achievement of performance goals during the fiscal year or other
performance period.
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(iv)
|
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Payment
. Any Bonus or other discretionary compensation
payments due under this Agreement shall be paid to Employee at the time
specified by the Compensation Committee at the time any such Bonus or other
discretionary compensation payment is awarded, but in no event later than 2
1
/
2
months after the end of the taxable year in which any substantial risk of
forfeiture with respect to such Bonus or other payment lapses. Unless
otherwise specifically provided for in this Agreement or a plan, policy or
program of the Company, Employee must be employed by the Company or an
Affiliate on the date the Bonus or other payment is made to be entitled to
receive the Bonus or other payment.
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(c)
|
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Employment Benefits
. The Company shall provide Employee with the
employment benefits that the Company ordinarily provides to its executive-level
employees. Such employment benefits shall be governed by the applicable plan
documents, insurance policies, and/or employment policies, and may be modified,
suspended, revoked, or terminated in accordance with the terms of the applicable
documents or policies without violating this Agreement. In addition to those benefits,
the Company shall provide or cause to provide the following benefits upon satisfaction
by Employee of any eligibility requirements, subject to the following limitations:
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(i)
|
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Sick-Leave Benefits
. To the extent made available to
other employees of the Company, and unless this Agreement is terminated
pursuant to paragraph 6 in which case no sick-leave benefits shall be payable,
Employee shall be paid sick leave benefits at his then prevailing Base Salary
rate during his absence due to illness or other incapacity up to a maximum of
180 days in any one-year period.
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(ii)
|
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Vacations
. The Company shall provide Employee with a
minimum of four weeks of paid vacation per calendar year during the Term,
prorated for the first calendar year of the Term. Unless the Company has
adopted a plan or policy pursuant to which some or all of such vacation may be
rolled over to the next succeeding year in which case only a maximum of four
weeks of paid vacation may be carried over, such vacation may not be carried
over from calendar year to calendar year and accrued unused vacation shall be
forfeited if not used by the end of the calendar year in which it was granted.
The time and duration of any vacation shall be subject to advance notice to the
President. The Company shall provide Employee with all paid holidays
ordinarily given by the Company to its employees. Employee shall be paid
for any accrued unused vacation should this Agreement terminate pursuant to
paragraph 6.
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Amended and Restated Employment Agreement
Page 3
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(d)
|
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Reimbursement of Business Expenses
. Employee may incur ordinary,
necessary, and reasonable business expenses in connection with the performance of his
duties, responsibilities, and authorities under this Agreement and for the promotion of
the Companys business and activities during the Term, including but not limited to
expenses for necessary travel and entertainment and other items of expenses required in
the normal and routine course of Employees employment. The Company shall promptly
reimburse Employee from time to time for all such business expenses incurred pursuant
to and in conformity with this subparagraph and the policies and practices of the
Company relative to the reimbursement of business expenses. Notwithstanding the
foregoing, (i) the amount of expenses eligible for reimbursement during a calendar year
may not affect the expenses eligible for reimbursement in any other calendar year, (ii)
the reimbursement must 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 shall not be subject to liquidation or exchange for any other benefit.
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6.
|
|
Termination of Agreement
. This Agreement may be terminated as follows;
provided,
however
, that any termination of this Agreement shall also constitute a termination of
Employees employment with the Company:
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(a)
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Death
. This Agreement shall terminate immediately upon Employees
death.
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(b)
|
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Permanent Disability
. This Agreement shall immediately terminate in
the event that Employee becomes Permanently Disabled. For purposes of this Agreement,
Employee shall be deemed to have become
Permanently Disabled
when (i) he
receives disability benefits under either Social Security or the Companys long-term
disability plan, if any, (ii) the President and/or the Board, upon the written report
of a qualified physician designated by the President and/or the Board or its insurers,
shall have determined (after a complete physical examination of Employee at any time
after he has been absent from the Company for a total period of 180 or more calendar
days in any 12-month period) that Employee has become physically and/or mentally
incapable of performing his essential job functions with or without reasonable
accommodation as required by law, or (iii) Employee is otherwise unable for a
continuous period of 90 calendar days to perform his essential job functions with or
without reasonable accommodation as required by law due to injury, illness, or other
incapacity (physical or mental).
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(c)
|
|
With Cause
. The Company shall be entitled to terminate this Agreement
immediately for any Cause.
|
|
(i)
|
|
Definition of Cause
. For purposes of this Agreement,
Cause
shall be
defined as follows:
|
|
(A)
|
|
the willful and continued failure by Employee
substantially to
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Amended and Restated Employment Agreement
Page 4
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|
perform his duties, responsibilities, or authorities
hereunder (other than any such failure resulting from Employee becoming
Permanently Disabled);
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(B)
|
|
the willful engaging by Employee in misconduct
that is materially injurious to the Company;
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(C)
|
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any misconduct by Employee in the course and
scope of Employees employment under this Agreement, including but not
limited to dishonesty, disloyalty, disorderly conduct, insubordination,
harassment of other employees or third parties, abuse of alcohol or
controlled substances, or other violations of the Companys personnel
policies, rules, or Code of Conduct;
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(D)
|
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any material violation by Employee of this
Agreement; or
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(E)
|
|
any violation by Employee of any fiduciary duty
owed by Employee to the Company or its Affiliates.
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For purposes of this subparagraph, no act, or failure to act, on Employees
part shall be considered
willful
unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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(ii)
|
|
Limited Notice and Opportunity to Cure
. If the Company
determines in its reasonable, good faith discretion that a cure is possible and
appropriate, the Company will give Employee written notice of the acts or
omissions constituting Cause and no termination of this Agreement shall be for
Cause unless and until Employee fails to cure such acts or omissions within 10
days following receipt of such written notice. If the Company determines in
its reasonable, good faith discretion that a cure is not possible and
appropriate, Employee shall have no notice or cure rights before this Agreement
is terminated for Cause.
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(d)
|
|
Without Cause
. The Company shall be entitled to terminate this
Agreement for any reason other than death, Employee becoming Permanently Disabled, or
Cause, at any time by providing 90 days written notice to Employee that the Company is
terminating the Agreement without Cause.
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(e)
|
|
With Good Reason
. Employee shall be permitted to terminate this
Agreement for any Good Reason.
|
|
(i)
|
|
Definition of Good Reason
. For purposes of this
Agreement,
Good Reason
shall exist in the event any of the following
actions are taken without Employees consent:
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Amended and Restated Employment Agreement
Page 5
|
(A)
|
|
a material diminution in Employees Base
Salary, duties, responsibilities, or authorities;
|
|
|
(B)
|
|
a requirement that Employee report to an
officer or employee other than the President or the Board (or similar
governing body);
|
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|
(C)
|
|
a material relocation of Employees primary
work location more than 50 miles away from the Companys corporate
headquarters; or
|
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|
(D)
|
|
any other action or inaction by the Company
that constitutes a material breach by the Company of its obligations
under this Agreement.
|
|
(ii)
|
|
Notice and Opportunity to Cure
. To exercise his right
to terminate for Good Reason, Employee must provide written notice to the
Company of his belief that Good Reason exists within 90 days of the initial
existence of the condition(s) giving rise to Good Reason, and that notice shall
describe the condition(s) believed to constitute Good Reason. The Company
shall have 30 days to remedy the Good Reason condition(s). If not remedied
within that 30-day period, Employee may terminate this Agreement;
provided,
however
, that such termination must occur no later than 180 days after the
date of the initial existence of the condition(s) giving rise to the Good
Reason; otherwise, Employee is deemed to have accepted the condition(s), or the
Companys correction of such condition(s), that may have given rise to the
existence of Good Reason.
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(f)
|
|
Without Good Reason
. Employee shall be entitled to terminate this
Agreement without Good Reason at any time by providing 120 days written notice to
Company that Employee is terminating the Agreement without Good Reason.
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|
|
(g)
|
|
Expiration of Term
. Either party may terminate this Agreement by
providing a proper notice of non-renewal in accordance with subparagraph 4(b).
|
7.
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Payments and Benefits Due Upon Termination
.
|
|
(a)
|
|
Accrued Obligations
. Upon any termination of this Agreement, the
Company shall have no further obligation to Employee under this Agreement or otherwise,
except as
expressly provided in this Agreement and except for (i) payment to Employee of all
earned but unpaid Base Salary through the Date of Termination, prorated as provided
in subparagraph 5(a), (ii) payment to Employee, in accordance with the terms of the
applicable benefit plan of the Company or to the extent required by law, of any
benefits to which Employee has a vested entitlement as of the Date of
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Amended and Restated Employment Agreement
Page 6
|
|
|
Termination
(other than any entitlement to severance or separation pay, if any), (iii) payment
to Employee of any accrued unused vacation; and (iv) payment to Employee of any
approved but un-reimbursed business expenses incurred in accordance with applicable
Company policy and the terms of this Agreement. The payments and benefits described
in (i)-(iv) shall be referred to in this Agreement as the
Accrued
Obligations
and shall be paid in accordance with the Companys plans and
policies and applicable law.
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|
(b)
|
|
Termination by the Company Due to Death or Permanent Disability
. If
this Agreement is terminated due to death or Employee becoming Permanently Disabled,
then the Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits payable to Employee or the personal representative of Employees estate, as
applicable:
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
100% of his Base Salary in effect as of such Separation from Service; and
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|
(ii)
|
|
on or before the 60th day following Employees Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years immediately before the
Separation from Service.
|
|
(c)
|
|
Termination by the Company for Cause or by Employee Without Good
Reason
. Upon termination of this Agreement by (i) the Company for Cause in
accordance with subparagraph 6(c) or (ii) Employee without Good Reason in accordance
with subparagraph 6(f), the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations
to Employee in accordance with subparagraph 7(a).
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|
|
(d)
|
|
Termination by the Company without Cause or by Employee for Good
Reason
. If this Agreement is terminated by (i) the Company without Cause in
accordance with subparagraph 6(d) or (ii) Employee for Good Reason in accordance with
subparagraph 6(e), then the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations
to Employee in accordance with subparagraph 7(a) in addition to the
following severance payments and benefits:
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any
|
Amended and Restated Employment Agreement
Page 7
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|
|
time within two years immediately before the Separation from
Service; and
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|
|
(ii)
|
|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
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|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of Employees Separation from Service (12-month period if Employee
terminates for Good Reason) that Employee is eligible to elect and elects to
continue coverage for himself and his eligible dependents under the Companys
or an Affiliates group heath plan pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (
COBRA
), or similar state law,
the Company shall reimburse Employee on a monthly basis for the difference
between the amount Employee pays to effect and continue such coverage and the
employee contribution amount that active senior executive employees of the
Company pay for the same or similar coverage.
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|
(e)
|
|
Expiration of the Term
. If this Agreement is terminated by Employee
providing a proper notice of non-renewal in accordance with subparagraph 4(b), the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a). If this Agreement is terminated by the Company
providing a proper notice of non-renewal in accordance with subparagraph 4(b), then the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits:
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the
greater of (A) the then-current Base Salary, and (B) the Base Salary at any
time within two years immediately before the Separation from Service; and
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|
|
(ii)
|
|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement
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Amended and Restated Employment Agreement
Page 8
|
|
|
of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
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|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of Employees Separation from Service that Employee is eligible to
elect and elects to continue coverage for himself and his eligible dependents
under the Companys or an Affiliates group heath plan pursuant to COBRA or
similar state law, the Company shall reimburse Employee on a monthly basis for
the difference between the amount Employee pays to effect and continue such
coverage and the employee contribution amount that active senior executive
employees of the Company pay for the same or similar coverage.
|
8.
|
|
Change in Control
. The parties acknowledge that Employee has entered into this
Agreement based on his confidence in the current stockholders of the Company and the support
of the Board. Accordingly, if the Company should undergo a Change in Control the parties
agree as follows:
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|
(i)
|
|
Affiliate
: except as otherwise provided in this
Agreement, for purposes of this Agreement, Affiliate means, with respect to the
Company, any person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Company;
provided, however
, that a natural person shall not be
considered an Affiliate.
|
|
|
(ii)
|
|
Change in Control
: a Change in Control means (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Companys common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Companys common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, (b) any sale, lease, exchange or other transfer
(in one transaction or a series of
related transactions) of all or substantially all, of the assets of the
Company and the its subsidiaries to any other person or entity (other than
an Affiliate of the Company), (c) the stockholders of the Company approve
any plan or proposal for liquidation or dissolution of the Company, (d) any
person or entity (other than Yorktown Energy Partners V, L.P., or any of its
affiliated funds), including a
group
as contemplated by Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or
gains ownership or control (including, without limitation, power to vote) of
more
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Amended and Restated Employment Agreement
Page 9
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|
|
than 50% of the outstanding shares of the Companys voting stock (based
upon voting power) or (e) as a result of or in connection with a contested
election of directors, the persons who were directors of the Company before
such election shall cease to constitute a majority of the Board.
Notwithstanding the foregoing, a Change of Control shall not include a
public offering of the Companys common stock or a transaction with its sole
purpose to change the state of the Companys incorporation or to create a
holding company that will be owned in substantially the same proportions by
the persons who held the Companys securities immediately before such
transaction.
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|
|
(iii)
|
|
CIC Effective Date
: means the date upon which a
Change of Control occurs.
|
|
|
(iv)
|
|
Code
: means Internal Revenue Code of 1986, as amended
from time to time.
|
|
(b)
|
|
Change in Control Benefits and Payments
. If Employee is employed by
the Company on the CIC Effective Date and this Agreement is terminated on or before the
first anniversary of the CIC Effective Date by the Company without Cause in accordance
with subparagraph 6(d) or by Employee for Good Reason in accordance with subparagraph
6(e), then the Company shall have no further obligation to Employee under this
Agreement or otherwise, except the Company shall provide Employee with the Accrued
Obligations in accordance with subparagraph 7(a) plus the following Change in Control
payments and benefits in lieu of any severance payments or benefits that may otherwise
be due under subparagraph 7(d):
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|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the CIC Effective Date;
and
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|
(ii)
|
|
on or before the 60th day following Employees Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years before the CIC Effective
Date; and
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|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of
Employees Separation from Service that Employee is eligible to elect and
elects to continue coverage for himself and his eligible dependents under
the Companys or an Affiliates (or a successor of either such entity) group
heath plan pursuant to COBRA or similar state law, the Company shall
reimburse Employee on a monthly basis for the difference between the amount
Employee pays to effect and continue such coverage and the employee
contribution amount that active senior executive employees of the Company
pay for the same or similar coverage.
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Amended and Restated Employment Agreement
Page 10
|
(c)
|
|
Effect of a Change in Control Following Date of Termination
.
Notwithstanding any contrary provision in this Agreement, if this Agreement is
terminated by the Company without Cause in accordance with subparagraph 6(d) or by
Employee for Good Reason in accordance with subparagraph 6(e), and a CIC Effective Date
occurs within 120 days following the Date of Termination, then, in addition to the
severance payments and benefits provided to Employee in accordance with subparagraph
7(d), the Company shall provide Employee (or to Employees estate in the event of his
death following the Date of Termination) with the following Change in Control payments:
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|
(i)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(i) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(i); and
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|
(ii)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(ii) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(ii).
|
9.
|
|
Parachute Payment Limitation
. Notwithstanding any contrary provision in this
Agreement, if Employee is a
disqualified individual
(as defined in Section 280G of
the Code), and the Change in Control payments and benefits described in paragraph 8, together
with any other payments which Employee has the right to receive from the Company, would
constitute a
parachute payment
(as defined in Section 280G of the Code), the
payments and benefits provided hereunder shall be either (a) reduced (but not below zero) so
that the aggregate present value of such payments and benefits received by Employee from the
Company shall be $1.00 less than three times Employees
base amount
(as defined in
Section 280G of the Code) and so that no portion of such payments received by Employee shall
be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full,
whichever produces the better net after-tax result for Employee (taking into account any
applicable excise tax under
Section 4999 of the Code and any applicable income tax). The determination as to whether
any such reduction in the amount of the payments and benefits is necessary shall be made by
the Company in good faith and such determination shall be conclusive and binding on
Employee. If a reduced payment is made to Employee pursuant to clause (a) above and through
error or otherwise that payment, when aggregated with other payments from the Company (or
its affiliates) used in determining if a parachute payment exists, exceeds $1.00 less than
three times Employees base amount, Employee shall immediately repay such excess to the
Company upon notification that an overpayment has been made.
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Amended and Restated Employment Agreement
Page 11
10.
|
|
Conditions on Receipt of Severance and Change-in-Control Benefits
.
|
|
(a)
|
|
Compliance with Post-Termination Obligations and Execution and
Non-Revocation of General Release Agreement
. Notwithstanding any other provision
in this Agreement, the Companys payment to Employee of the severance payments and
benefits described in subparagraphs 7(b)(i), 7(d)(i)-(ii), and 7(e)(i) or the Change in
Control payments and benefits described in subparagraphs 8(b)(i)-(ii) and 8(c)(i)-(ii)
is subject to the condition that he complies with all applicable covenants under
paragraphs 12, 13, 14, and 15 of this Agreement. The Company shall have the right to
cease payment of any such payments or benefits, as well as to seek restitution of any
such payments or benefits already paid, if such covenants have been breached by
Employee but all other provisions of this Agreement shall remain in full force and
effect. The Companys payment of such payments or benefits to Employee is also
subject to the condition that, within 55 days after the Date of Termination, he
execute, deliver to the Company, and not revoke as permitted by applicable law a
General Release Agreement in a form reasonably acceptable to the Company that fully and
finally releases and waives any and all claims, demands, actions, and suits whatsoever
which he has or may have against the Company and its Affiliates, whether under this
Agreement or otherwise, that arose before the General Release Agreement was executed
(the
Release
). For purposes of this Agreement, the Release shall not become
fully enforceable and irrevocable until Employee has timely executed the Release and
not revoked his acceptance of the Release within seven days after its execution.
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|
(b)
|
|
Separation from Service Requirement
. Notwithstanding any other
provision of this Agreement, Employee shall be entitled to the severance or Change in
Control benefits and payments in subparagraphs 7(b), 7(d), 7(e), or 8(b) only if
Employees termination of employment constitutes a Separation from Service. For
purposes of this Agreement,
Separation from Service
means separation from
service (within the meaning of Code Section 409A and the regulations and other guidance
promulgated thereunder (
Section 409A
)) with the group of employers that
includes the Company and each of its Affiliates. For this purpose,
Affiliate
means any incorporated or unincorporated trade or business or other entity or person,
other than the Company, that along with the Company is considered a single employer
under Code Section 414(b) or Code Section 414(c), but (i) in applying Code Section
1563(a)(1), (2), and
(3) for the purposes of determining a controlled group of corporations under Code
Section 414(b), the phrase at least 50 percent shall be used instead of the phrase
at least 80 percent in each place the phrase at least 80 percent appears in Code
Section 1563(a)(1), (2), and (3), and (ii) in applying Treasury Regulation Section
1.414(c)-2 for the purposes of determining trades or businesses (whether or not
incorporated) that are under common control for the purposes of Code Section 414(c),
the phrase at least 50 percent shall be used instead of the phrase at least 80
percent in each place the phrase at least 80 percent appears in Treasury
Regulation Section 1.414(c)-2.
|
Amended and Restated Employment Agreement
Page 12
11.
|
|
Other Provisions Relating to Termination
.
|
|
(a)
|
|
Notice of Termination
. Any termination of this Agreement by the
Company or by Employee (other than termination because of death) shall be communicated
by written Notice of Termination to the other party thereto. For purposes of this
Agreement, a
Notice of Termination
shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated;
provided, however
, that any
failure to provide such detail shall not delay the effectiveness of the termination.
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|
(b)
|
|
Date of Termination
. For purposes of this Agreement,
Date of
Termination
shall mean (i) if Employees employment is terminated by death, the
date of death; (ii) if Employees employment is terminated because of Employee becoming
Permanently Disabled, then 60 days after Notice of Termination is given (provided that
Employee shall not have returned to the performance of his duties, responsibilities,
and authorities on a full-time basis during such 60-day period); (iii) if (A)
Employees employment is terminated by the Company with or without Cause or (B)
Employees employment is terminated by Employee with or without Good Reason, then in
each case the date specified in the Notice of Termination, which shall comply with the
applicable notice requirements in paragraph 6; and (iv) if this Agreement is not
renewed, the last date of the Initial Term or the Renewal Term as applicable.
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|
(c)
|
|
Mitigation
. Employee shall not be required to mitigate the amount of
any payment or benefits provided for in paragraphs 7 or 8 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for therein be
reduced by any compensation earned by Employee as the result of employment by another
employer after the Date of Termination, or otherwise.
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|
(d)
|
|
Interest
. Until paid, all past due amounts required to be paid by the
Company under any provision of this Agreement shall bear interest at 8% per annum
compounded daily.
|
12.
|
|
Business Opportunities and Intellectual Property
.
|
|
(a)
|
|
Prompt Disclosure Required
. Employee shall promptly disclose to the
Board in writing all Business Opportunities and Intellectual Property.
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|
(b)
|
|
Definition of Business Opportunities
. For purposes of this Agreement,
Business Opportunities
shall mean all business ideas, prospects, proposals or
other opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are located,
that are developed by Employee before or during the Term or originated by any third
party
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Amended and Restated Employment Agreement
Page 13
|
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|
and brought to the attention of Employee before or during the Term, together with
information relating thereto (including, without limitation, geological and seismic
data and interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions, or other written or charted
means).
|
|
(c)
|
|
Definition of Intellectual Property
. 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, that do not fall within
the definition of Business Opportunities, that Employee discovers, conceives, invents,
creates, or develops, alone or with others, before or during the Term, if such
discovery, conception, invention, creation, or development (i) occurs in the course of
Employees employment with the Company or its Affiliates or (ii) occurs with the use of
any time, materials, or facilities of the Company or its Affiliates.
|
13.
|
|
Non-Compete Obligations During Term
. During the Term and except as provided below or
as otherwise permitted by the Company (acting upon the instruction of the Board):
|
|
(a)
|
|
Employee shall not, other than through the Company or its Affiliates, engage or
participate in any manner, whether directly or indirectly through any family member or
as an employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor, or in any other individual or
representative capacity, in any business or activity that is engaged in leasing,
acquiring, exploring, developing or producing hydrocarbons and related products; and
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|
(b)
|
|
all investments made by Employee (whether in his own name or in the name of any
family members or made by Employees controlled affiliates), which relate to the lease,
acquisition, exploration, development or production of hydrocarbons and related
products shall be made solely through the Company or its Affiliates; and
Employee shall not (directly or indirectly through any family members), and shall
not permit any of his controlled affiliates to: (i) invest or otherwise participate
alongside the Company or its Affiliates in any Business Opportunities or (ii) invest
or otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether the Company or any of its Affiliates ultimately
participates in such business or activity;
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|
provided, however
, that this paragraph shall not apply to (x) the existing personal
oil and gas investments owned by Employee, his family members, and his controlled affiliates
as of the Effective Date of the Original Employment Agreement (the
Existing Personal
Investments
); (y) future expenditures made by Employee and his family members and his
controlled affiliates that are required to maintain, but not increase, their respective
current
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Amended and Restated Employment Agreement
Page 14
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|
ownership interests in the Existing Personal Investments, excluding however, any
expenditure to participate in the acquisition, exploration, or development of any acreage
that is not currently included in the Existing Personal Investments as of the Effective
Date; and (z) any opportunity that is first offered to, and subsequently declined by, the
Company (acting through the Board).
|
14.
|
|
Confidentiality Obligations
.
|
|
(a)
|
|
Confidentiality and Non-Disclosure Acknowledgments and Obligations
.
Employee hereby acknowledges that all trade secrets and confidential or proprietary
information of the Company and its Affiliates (collectively referred to herein as
Confidential Information
) constitute valuable, special and unique assets of
the business of the Company and its Affiliates, and that access to and knowledge of
such Confidential Information is essential to the performance of Employees duties,
responsibilities, and authorities under this Agreement. During the Term and the
one-year period following the Date of Termination, Employee shall hold the Confidential
Information in strict confidence and shall not publish, disseminate, or otherwise
disclose, directly or indirectly, to any person other than the Company and its
Affiliates and their respective officers, directors, and employees, any Confidential
Information or use any Confidential Information for Employees own personal benefit or
for the benefit of anyone other than the Company and its Affiliates. The Company
agrees to provide previously undisclosed Confidential Information to Employee in
exchange for Employees 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.
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|
(b)
|
|
Confidential Information Inclusions and Exclusions
. For purposes of
this Agreement, Confidential Information includes, without limitation, any information
heretofore or hereafter acquired, developed, or used by the Company or its Affiliates
relating to Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial, or management aspects of the business, operations,
properties, or prospects of the Company or its Affiliates whether oral or in written
form in business records, but shall exclude any information that (i) 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 (ii) was rightfully in the possession of Employee, as shown by
Employees records, prior to the Effective Date (including Employees method of
selecting, purchasing, and reworking oil and gas properties, which the Company and
Employee may utilize subsequent to the Term (subject to the other limitations
contained in this Agreement));
provided, however
, that Employee shall
provide to the Company copies of all information described in clause (ii); and
provided further, however
, that this subparagraph shall not be applicable to
the extent 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.
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Amended and Restated Employment Agreement
Page 15
15.
|
|
Obligations After Date of Termination
.
|
|
(a)
|
|
Non-Compete Obligations
. The purposes of paragraph 14 and this
paragraph 15 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, Employee shall not engage or participate in any
manner, 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, in any
business or activity that is in engaged in leasing, acquiring, exploring, developing or
producing hydrocarbons and related products within the boundaries of, or within a four
mile radius of the boundaries of, any mineral property interest of the Company or its
Affiliates (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 or its Affiliates and any third
party) or any other property on which the Company or its Affiliates have 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 Date of
Termination or as of the end of the six-month period following such Date of
Termination;
provided, however
, that this subparagraph shall not preclude
Employee from making personal investments in securities of oil and gas companies that
are registered on a national stock exchange, if the aggregate amount owned by Employee
and all family members and affiliates does not exceed 1% of such companys outstanding
securities.
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(b)
|
|
Definition of Post-Termination Non-Compete Term
. For purposes of this
Agreement, the
Post-Termination Non-Compete Term
is the one-year period
following the Date of Termination;
provided, however
, that the
Post-Termination Non-Compete Term shall be reduced to the six-month period following
the Date of Termination if this Agreement is terminated on or before the first
anniversary of the CIC Effective Date either (i) by the Company without Cause in
accordance with subparagraph 6(d) or (ii) by Employee for Good Reason in accordance
with subparagraph 6(e).
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(c)
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Non-Solicitation Obligations
. Employee shall not, during the Post
Termination Non-Compete Term, 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 its Affiliates to (i) terminate his or her employment by 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 to
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Amended and Restated Employment Agreement
Page 16
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enter into contractual relations with any Persons other than such person, or (v) enter
into a relationship with a competitor of the Company or its Affiliates.
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(d)
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Discretionary Monthly Non-Compete Payments
. The Company may, in its
sole discretion, elect to continue on the Companys regularly scheduled paydays
Employees Base Salary in effect immediately before the Date of Termination during
each month of the Post-Termination Non-Compete Term (the
Monthly Non-Compete
Payments
). The Company shall provide written notice to Employee no later than 10
days after the Date of Termination or on or before the Companys first regularly
scheduled payday following the Date of Termination, whichever is sooner, of its
election to make any Monthly Non-Compete Payments. If the Company does elect to make
the Monthly Non-Compete Payments, the Company shall not be obligated to continue making
any such Monthly Non-Compete Payments and shall be entitled in its sole discretion to
cease making the Monthly Non-Compete Payments at any time and for any reason but only
upon at least 30 days written notice to Employee, and the Company shall have no
further obligation to Employee under this subparagraph. If the Company starts but
ceases making the Monthly Non-Compete Payments, then, notwithstanding any contrary
provision in this Agreement, the Post-Termination Non-Compete Term for purpose of
subparagraph 15(a) shall expire on the last day of the month in which the final Monthly
Non-Compete Payment was made by the Company.
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16.
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Common Law Duties
. Employee acknowledges and agrees that his restrictive covenants
in paragraphs 12, 13, 14, and 15 of this Agreement shall supplement, rather than supplant, his
common law duties of confidentiality and loyalty owed to the Company.
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17.
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Survival of Covenants; Enforcement of Covenants; and Remedies
.
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(a)
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Survival of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement shall survive the
termination of this Agreement and shall be construed as agreements independent of any
other provision
of this Agreement, and the existence of any Dispute of Employee with or against the
Company or its Affiliates whether predicated on this Agreement or otherwise shall
not constitute a defense to the enforcement by the Company of those covenants.
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(b)
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Enforcement of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement are ancillary to the
otherwise enforceable agreements to provide Employee with Confidential Information and
are supported by independent, valuable consideration. Employee further acknowledges
and agrees that the limitations as to time, geographical area, and scope of activity to
be restrained by those covenants are reasonable and acceptable to Employee and do not
import any greater restraint than is reasonably necessary to protect the Companys
goodwill, Confidential Information, and other legitimate business interests. Employee
further agrees that if, at some later date, a court of competent jurisdiction
determines that any of the covenants in paragraphs 12, 13, 14, or 15 are
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Amended and Restated Employment Agreement
Page 17
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unreasonable,
any such covenants shall be reformed by the court and enforced to the maximum extent
permitted under the law.
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(c)
|
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Remedies
. In the event of breach or threatened breach by Employee of
any of his covenants in paragraphs 12, 13, 14, or 15 of this Agreement, the Company
shall be entitled to equitable relief by temporary restraining order, temporary
injunction, or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all monetary damages
that the Company may incur as a result of such breach, violation, or threatened breach
or violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time shall not be deemed an
election of remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation, or threatened breach or violation, or as to any other breach,
violation, or threatened breach or violation.
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18.
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Successors and Assigns
. This Agreement may not be assigned by the Company to any
other person or entity other than an Affiliate of the Company without Employees written
consent;
provided, however
, that in the event of a Change in Control, the Company
shall cause the surviving entity in any such transaction to assume the Companys obligations
under paragraphs 7 and 8 to the extent such obligations have not yet been fully performed.
Employees duties, responsibilities, authorities, compensation, and benefits under this
Agreement are personal to Employee and may not be assigned to any person or entity without
written consent from the Board. In the event of Employees death, this Agreement shall be
enforceable by Employees estate, executors, or legal representatives. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns.
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19.
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Representations of Employee
. Employee hereby represents and warrants that he has not
previously assumed any obligations inconsistent with those in this Agreement. Employee
further represents and warrants that he has entered into this Agreement pursuant to his own
initiative and that the Company did not induce him to execute this Agreement in
contravention of any existing commitments. Employee further acknowledges that the Company
has entered into this Agreement in reliance upon the foregoing representations of Employee.
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20.
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Dispute Resolution
. The parties agree to the following dispute resolution terms:
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(a)
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Definition of Dispute
. Any controversy, claim, complaint, cause of
action, or similar proceeding, whether based on statute, contract, common law,
negligence, tort, misrepresentation, or any other legal theory, arising out of or
relating to this Agreement or Employees employment with the Company (a
Dispute
), shall be resolved solely in accordance with the terms of this
paragraph;
provided, however
, that the term Dispute shall not include
Employees claims for workers compensation
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Amended and Restated Employment Agreement
Page 18
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or unemployment compensation benefits
(although any claim asserted under Ch. 451 of the Texas Labor Code shall be considered
a Dispute subject to dispute resolution under this paragraph).
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(b)
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Mediation
. If a Dispute cannot be settled by good faith negotiation
between the parties, the parties shall submit the Dispute to nonbinding mediation as
soon as reasonably possible after the Dispute arose. If complete agreement cannot be
reached within five calendar days of submission to mediation, either party may file a
civil action against the other party in any court of competent jurisdiction permitted
under paragraph 26.
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(c)
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Waiver of Right to Jury Trial
. NOTWITHSTANDING ANY OTHER PROVISION IN
THIS AGREEMENT, THE PARTIES SHALL, AND HEREBY DO, IRREVOCABLY WAIVE THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY DISPUTE. IN ADDITION, EMPLOYEE SHALL, AND HEREBY DOES,
IRREVOCABLY WAIVE THE RIGHT TO PARTICIPATE IN ANY CLASS OR COLLECTIVE ACTION WITH
RESPECT TO ANY DISPUTE.
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21.
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Attorneys Fees and Other Costs
. If either party breaches this Agreement, or if a
Dispute arises between the parties based on or involving this Agreement, the party that
enforces its rights under this Agreement against the breaching party, or that prevails in the
resolution of such Dispute, shall be entitled to recover from the other party its reasonable
attorneys fees, court costs, and expenses incurred in enforcing such rights or resolving such
Dispute. For purposes of this paragraph, the finder of fact shall be requested to answer
affirmatively as to whether a party prevailed in order to recoup attorneys fees and other
costs pursuant to this paragraph.
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22.
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Entire Agreement
. This Agreement constitutes the entire agreement between the
parties concerning its subject matters and supersedes all prior and contemporaneous agreements
and
understandings, both written and oral, between the parties with respect to its subject
matters, including without limitation the Original Employment Agreement. Employee agrees
that the Company has not made any promise or representation to him concerning this Agreement
not expressed in this Agreement, and that, in signing this Agreement, he is not relying on
any prior oral or written statement or representation by the Company but is instead relying
solely on his own judgment and his legal and tax advisors, if any.
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23.
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Amendment of Agreement
. This Agreement may not be modified or amended in any respect
except by an instrument in writing signed by the party against whom such modification or
amendment is sought to be enforced. Notwithstanding the previous sentence, the Company may
modify or amend this Agreement in its sole discretion at any time without the further consent
of the Employee in any manner necessary to comply with applicable law and regulations or the
listing or other requirements of any stock exchange upon which the Company is listed. No
modification or amendment may be enforced against the Company unless such modification or
amendment is in writing and signed by the Board.
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Amended and Restated Employment Agreement
Page 19
24.
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Waiver
. The waiver by either party of a breach of any term of this Agreement shall
not operate or be construed as a waiver of a subsequent breach of the same provision by either
party or of the breach of any other term or provision of this Agreement.
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25.
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Severability
. If any provision of this Agreement is held to be illegal, invalid, or
unenforceable, (a) this Agreement shall be considered divisible, (b) such provision shall be
deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and (c) in
all other respects this Agreement shall remain in full force and effect;
provided,
however
, that, if any such provision may be made enforceable by limitation, then such
provision shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
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26.
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Governing Law; Venue
. This Agreement shall be governed by the laws of the State of
Texas, without regard to its conflict-of-laws principles. Employee and the Company hereby
irrevocably consent to the binding and exclusive venue for any Dispute between the parties
arising out of or related to this Agreement being in the state or federal court of competent
jurisdiction that regularly conducts proceedings in Tarrant County, Texas. Nothing in this
Agreement, however, precludes Employee or the Company from seeking to remove a civil action
from any state court to federal court.
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27.
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Notices
. All notices under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or three calendar days after the date
deposited in a receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the Company at its
headquarters or Employee at the address of such person as set forth in the Companys records.
Either party may designate a different address by providing written notice of such new address
to the other party.
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28.
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Counterparts
. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered one and the
same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or
electronically scanned version by e-mail shall have the same force and effect as delivery of
the originally executed document.
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(a)
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Intent
. All or a portion of the payments and benefits provided under
this Agreement is intended to be exempt from Section 409A and any ambiguous provision
will be construed in a manner that is compliant with or exempt from the application of
Section 409A. In particular, such payments and benefits are intended to constitute
short-term deferrals described in Treasury Regulation Section 1.409A-1(b)(4) or a
payment or benefit described in Treasury Regulation Section 1.409A-1(b)(9)(v). The
provisions of this Agreement shall be interpreted in a manner consistent with this
intent.
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Amended and Restated Employment Agreement
Page 20
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(b)
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Specified Employee Postponement
. Notwithstanding
subparagraph (a) of this paragraph or any other provision of this Agreement to the
contrary, if the Company or an Affiliate that is treated as a
service
recipient
(as defined in Section 409A) is publicly traded on an established
securities market (or otherwise) and Employee is a
specified employee
(as
defined below) and is entitled to receive a payment that is subject to Section 409A on
account of Employees Separation from Service, such payment may not be made earlier
than six months following the date of his Separation from Service if required by
Section 409A, in which case, the accumulated postponed amount shall be paid in a lump
sum payment on the Section 409A Payment Date. The
Section 409A Payment Date
is the earlier of (i) the date of Employees death or (ii) the date that is six months
and one day after Employees Separation from Service. If any payment to Employee is
delayed pursuant to the foregoing sentence, such amount instead will be paid, with
interest at the rate set out in Section 11(d), on the Section 409A Payment Date. For
purposes of Section 409A, each payment amount or benefit due under this Agreement will
be considered a separate payment and Employees entitlement to a series of payments or
benefits under this Agreement is to be treated as an entitlement to a series of
separate payments. The determination of whether Employee is a specified employee
shall be made in accordance with Section 409A using the default provisions in the
Section 409A unless another permitted method has been prescribed for such purpose by
the Company.
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30.
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Right to Consult a Tax Advisor
. Notwithstanding any contrary provision in this
Agreement, Employee shall be solely responsible for any risk that the tax treatment of all or
part of any payments provided by this Agreement may be affected by Section 409A, which may
impose significant adverse tax consequences on him, including accelerated taxation, a 20%
additional tax, and interest. Because of the potential tax consequences, Employee has the
right, and is encouraged by this paragraph, to consult with a tax advisor of his choice before
signing this Agreement.
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[
Signature Page Follows
]
Amended and Restated Employment Agreement
Page 21
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EMPLOYEE:
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/s/ Steven P. Smart
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Name:
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Steven P. Smart
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COMPANY:
APPROACH RESOURCES INC.,
A Delaware Corporation
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By:
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/s/ J. Ross Craft
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Name:
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J. Ross Craft
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Title:
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President and Chief Executive Officer
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Amended and Restated Employment Agreement
Page 22
Exhibit 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the
Agreement
) is entered into as of January 1, 2011 (the
Effective Date
), by and between APPROACH RESOURCES INC., a Delaware corporation (the
Company
), and J. CURTIS HENDERSON, an individual residing in the State of Texas
(
Employee
).
RECITALS
WHEREAS, Employee has been employed by the Company as its Executive Vice President and General
Counsel without a written employment agreement.
WHEREAS, the Company now desires to employ Employee, and Employee now desires to be employed
by the Company, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to the following terms:
TERMS
1.
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Employment and Position
. The Company shall continue to employ Employee as its
Executive Vice President and General Counsel, and Employee shall continue to serve in such
capacities, subject to the terms of this Agreement, and Employee shall report directly to the
Companys President and Chief Executive Officer (the
President
) and/or Board of
Directors (the
Board
).
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2.
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Duties
. Employee shall perform in the capacities described in paragraph 1 and shall
have such duties, responsibilities, and authorities as may be reasonably assigned by the
President and/or Board, in his or its sole discretion, including without limitation duties,
responsibilities, and authorities for the Companys Affiliates (as defined below). Employee
shall devote his full time, best efforts, abilities, knowledge, and experience to the
Companys business and affairs as necessary to faithfully perform his duties,
responsibilities, and authorities under this Agreement.
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3.
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Place of Performance
. Although Employee shall be expected to work at all Company
locations from time to time and travel as necessary to perform his duties, responsibilities,
and authorities under this Agreement, Employees primary work location shall be at the
Companys corporate headquarters or within 50 miles from the Companys corporate headquarters.
The Company shall provide without cost to Employee such office space, secretarial, and
administrative services, equipment, furniture, and furnishings as are suitable and appropriate
to Employees titles and positions.
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4.
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Term of Agreement
.
|
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(a)
|
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Initial Term
. This Agreement shall continue in full force and effect
for an
Initial
Term
commencing on the Effective Date and expiring on January 1, 2013 (the
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Expiration Date
), unless terminated before the Expiration Date in
accordance with paragraph 6.
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(b)
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Renewal Term
. Notwithstanding subparagraph 4(a), the effectiveness of
this Agreement shall automatically be extended for an additional one year term on the
Expiration Date and on each successive anniversary of the Expiration Date (each, a
Renewal Date
), unless and until (i) either party gives written notice of
non-renewal at least 120 days prior to the Expiration Date or any Renewal Date; or (ii)
the Agreement is terminated earlier in accordance with paragraph 6 (each, a
Renewal Term
).
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(c)
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Term
. The Initial Term and any Renewal Terms shall be referred to
below collectively as the
Term
of this Agreement.
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5.
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Compensation and Employment Benefits
. In consideration for the performance of
Employees duties, responsibilities, and authorities under this Agreement, the Company shall
provide Employee with the following compensation and employment benefits:
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(a)
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Base Salary
. From the Effective Date until changed as provided in this
subparagraph, the Company shall pay Employee an annual base salary of $275,000.00 (the
Base Salary
), prorated for any partial period of employment. The Base Salary
shall be payable semi-monthly in accordance with the Companys ordinary payroll
policies and procedures for employee compensation. During the Term, Employees Base
Salary shall be subject to an annual review and adjustment by the Board in its sole
discretion.
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(i)
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Performance Plan
. In addition to the Base Salary,
Employee shall be eligible to participate in the Company Performance Incentive
Plan or another bonus plan or program maintained by the Company or an Affiliate
(
Performance Plan
) to be determined annually by the Compensation
Committee of the Board in its sole discretion. For purposes of this Agreement,
Bonus
means any annual bonus payable pursuant to the Performance Plan
to Employee.
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(ii)
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Payout Option
. The Bonus may be paid in cash, common
stock of the Company, or a combination thereof, as determined by the
Compensation Committee in its sole discretion;
provided, however
, that
the Compensation Committee may offer Employee the option to elect to receive
the value of any Bonus in cash, common stock, or a combination thereof, subject
to applicable law and such terms, conditions, and limitations as the
Compensation Committee may establish from time to time.
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(iii)
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Discretionary Participation Level
. The Compensation
Committee, in its sole discretion, shall determine Employees participation in
the Performance Plan
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Employment Agreement
Page 2
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and amount or range of the Bonus available to Employee
based on achievement of performance goals during the fiscal year or other
performance period.
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(iv)
|
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Payment
. Any Bonus or other discretionary compensation
payments due under this Agreement shall be paid to Employee at the time
specified by the Compensation Committee at the time any such Bonus or other
discretionary compensation payment is awarded, but in no event later than 2
1
/
2
months after the end of the taxable year in which any substantial risk of
forfeiture with respect to such Bonus or other payment lapses. Unless
otherwise specifically provided for in this Agreement or a plan, policy or
program of the Company, Employee must be employed by the Company or an
Affiliate on the date the Bonus or other payment is made to be entitled to
receive the Bonus or other payment.
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(c)
|
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Employment Benefits
. The Company shall provide Employee with the
employment benefits that the Company ordinarily provides to its executive-level
employees. Such employment benefits shall be governed by the applicable plan
documents, insurance policies, and/or employment policies, and may be modified,
suspended, revoked, or terminated in accordance with the terms of the applicable
documents or policies without violating this Agreement. In addition to those benefits,
the Company shall provide or cause to provide the following benefits upon satisfaction
by Employee of any eligibility requirements, subject to the following limitations:
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(i)
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Sick-Leave Benefits
. To the extent made available to
other employees of the Company, and unless this Agreement is terminated
pursuant to paragraph 6 in which case no sick-leave benefits shall be payable,
Employee shall be paid sick leave benefits at his then prevailing Base Salary
rate during his absence due to illness or other incapacity up to a maximum of
180 days in any one-year period.
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(ii)
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Vacations
. The Company shall provide Employee with a
minimum of four weeks of paid vacation per calendar year during the Term,
prorated for the first calendar year of the Term. Unless the Company has
adopted a plan or policy pursuant to which some or all of such vacation may be
rolled over to the next succeeding year in which case only a maximum of four
weeks of paid vacation may be carried over, such vacation may not be carried
over from calendar year to calendar year and accrued unused vacation shall be
forfeited if not used by the end of the calendar year in which it was granted.
The time and duration of any vacation shall be subject to advance notice to the
President. The Company shall provide Employee with all paid holidays
ordinarily given by the Company to its employees. Employee shall be paid
for any accrued unused vacation should this Agreement terminate pursuant to
paragraph 6.
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Employment Agreement
Page 3
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(d)
|
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Reimbursement of Business Expenses
. Employee may incur ordinary,
necessary, and reasonable business expenses in connection with the performance of his
duties, responsibilities, and authorities under this Agreement and for the promotion of
the Companys business and activities during the Term, including but not limited to
expenses for necessary travel and entertainment and other items of expenses required in
the normal and routine course of Employees employment. The Company shall promptly
reimburse Employee from time to time for all such business expenses incurred pursuant
to and in conformity with this subparagraph and the policies and practices of the
Company relative to the reimbursement of business expenses. Notwithstanding the
foregoing, (i) the amount of expenses eligible for reimbursement during a calendar year
may not affect the expenses eligible for reimbursement in any other calendar year, (ii)
the reimbursement must 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 shall not be subject to liquidation or exchange for any other benefit.
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6.
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Termination of Agreement
. This Agreement may be terminated as follows;
provided,
however
, that any termination of this Agreement shall also constitute a termination of
Employees employment with the Company:
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(a)
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Death
. This Agreement shall terminate immediately upon Employees
death.
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(b)
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Permanent Disability
. This Agreement shall immediately terminate in
the event that Employee becomes Permanently Disabled. For purposes of this Agreement,
Employee shall be deemed to have become
Permanently Disabled
when (i) he
receives disability benefits under either Social Security or the Companys long-term
disability plan, if any, (ii) the President and/or the Board, upon the written report
of a qualified physician designated by the President and/or the Board or its insurers,
shall have determined (after a complete physical examination of Employee at any time
after he has been absent from the Company for a total period of 180 or more calendar
days in any 12-month period) that Employee has become physically and/or mentally
incapable of performing his essential job functions with or without reasonable
accommodation as required by law, or (iii) Employee is otherwise unable for a
continuous period of 90 calendar days to perform his essential job functions with or
without reasonable accommodation as required by law due to injury, illness, or other
incapacity (physical or mental).
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(c)
|
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With Cause
. The Company shall be entitled to terminate this Agreement
immediately for any Cause.
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(i)
|
|
Definition of Cause
. For purposes of this Agreement,
Cause
shall be defined as follows:
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(A)
|
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the willful and continued failure by Employee
substantially to
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Employment Agreement
Page 4
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perform his duties, responsibilities, or authorities
hereunder (other than any such failure resulting from Employee becoming
Permanently Disabled);
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(B)
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the willful engaging by Employee in misconduct
that is materially injurious to the Company;
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(C)
|
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any misconduct by Employee in the course and
scope of Employees employment under this Agreement, including but not
limited to dishonesty, disloyalty, disorderly conduct, insubordination,
harassment of other employees or third parties, abuse of alcohol or
controlled substances, or other violations of the Companys personnel
policies, rules, or Code of Conduct;
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(D)
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any material violation by Employee of this
Agreement; or
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(E)
|
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any violation by Employee of any fiduciary duty
owed by Employee to the Company or its Affiliates.
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For purposes of this subparagraph, no act, or failure to act, on Employees
part shall be considered
willful
unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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(ii)
|
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Limited Notice and Opportunity to Cure
. If the Company
determines in its reasonable, good faith discretion that a cure is possible and
appropriate, the Company will give Employee written notice of the acts or
omissions constituting Cause and no termination of this Agreement shall be for
Cause unless and until Employee fails to cure such acts or omissions within 10
days following receipt of such written notice. If the Company determines in
its reasonable, good faith discretion that a cure is not possible and
appropriate, Employee shall have no notice or cure rights before this Agreement
is terminated for Cause.
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(d)
|
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Without Cause
. The Company shall be entitled to terminate this
Agreement for any reason other than death, Employee becoming Permanently Disabled, or
Cause, at any time by providing 90 days written notice to Employee that the Company is
terminating the Agreement without Cause.
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(e)
|
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With Good Reason
. Employee shall be permitted to terminate this
Agreement for any Good Reason.
|
|
(i)
|
|
Definition of Good Reason
. For purposes of this
Agreement,
Good Reason
shall exist in the event any of the following
actions are taken without Employees consent:
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Employment Agreement
Page 5
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(A)
|
|
a material diminution in Employees Base
Salary, duties, responsibilities, or authorities;
|
|
(B)
|
|
a requirement that Employee report to an
officer or employee other than the President or the Board (or similar
governing body);
|
|
(C)
|
|
a material relocation of Employees primary
work location more than 50 miles away from the Companys corporate
headquarters; or
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(D)
|
|
any other action or inaction by the Company
that constitutes a material breach by the Company of its obligations
under this Agreement.
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(ii)
|
|
Notice and Opportunity to Cure
. To exercise his right
to terminate for Good Reason, Employee must provide written notice to the
Company of his belief that Good Reason exists within 90 days of the initial
existence of the condition(s) giving rise to Good Reason, and that notice shall
describe the condition(s) believed to constitute Good Reason. The Company
shall have 30 days to remedy the Good Reason condition(s). If not remedied
within that 30-day period, Employee may terminate this Agreement;
provided,
however
, that such termination must occur no later than 180 days after the
date of the initial existence of the condition(s) giving rise to the Good
Reason; otherwise, Employee is deemed to have accepted the condition(s), or the
Companys correction of such condition(s), that may have given rise to the
existence of Good Reason.
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(f)
|
|
Without Good Reason
. Employee shall be entitled to terminate this
Agreement without Good Reason at any time by providing 120 days written notice to
Company that Employee is terminating the Agreement without Good Reason.
|
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(g)
|
|
Expiration of Term
. Either party may terminate this Agreement by
providing a proper notice of non-renewal in accordance with subparagraph 4(b).
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7.
|
|
Payments and Benefits Due Upon Termination
.
|
|
(a)
|
|
Accrued Obligations
. Upon any termination of this Agreement, the
Company shall have no further obligation to Employee under this Agreement or otherwise, except as
expressly provided in this Agreement and except for (i) payment to Employee of all
earned but unpaid Base Salary through the Date of Termination, prorated as provided
in subparagraph 5(a), (ii) payment to Employee, in accordance with the terms of the
applicable benefit plan of the Company or to the extent required by law, of any
benefits to which Employee has a vested entitlement as of the Date of
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Employment Agreement
Page 6
|
|
|
Termination
(other than any entitlement to severance or separation pay, if any), (iii) payment
to Employee of any accrued unused vacation; and (iv) payment to Employee of any
approved but un-reimbursed business expenses incurred in accordance with applicable
Company policy and the terms of this Agreement. The payments and benefits described
in (i)-(iv) shall be referred to in this Agreement as the
Accrued
Obligations
and shall be paid in accordance with the Companys plans and
policies and applicable law.
|
|
(b)
|
|
Termination by the Company Due to Death or Permanent Disability
. If
this Agreement is terminated due to death or Employee becoming Permanently Disabled,
then the Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits payable to Employee or the personal representative of Employees estate, as
applicable:
|
|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
100% of his Base Salary in effect as of such Separation from Service; and
|
|
(ii)
|
|
on or before the 60th day following Employees Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years immediately before the
Separation from Service.
|
|
(c)
|
|
Termination by the Company for Cause or by Employee Without Good
Reason
. Upon termination of this Agreement by (i) the Company for Cause in
accordance with subparagraph 6(c) or (ii) Employee without Good Reason in accordance
with subparagraph 6(f), the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations
to Employee in accordance with subparagraph 7(a).
|
|
(d)
|
|
Termination by the Company without Cause or by Employee for Good
Reason
. If this Agreement is terminated by (i) the Company without Cause in
accordance with subparagraph 6(d) or (ii) Employee for Good Reason in accordance with
subparagraph 6(e), then the Company shall have no further obligations to Employee under
this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a) in addition to the
following severance payments and benefits:
|
|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any
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Employment Agreement
Page 7
|
|
|
time within two years immediately before the Separation from
Service; and
|
|
(ii)
|
|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of Employees Separation from Service (12-month period if Employee
terminates for Good Reason) that Employee is eligible to elect and elects to
continue coverage for himself and his eligible dependents under the Companys
or an Affiliates group heath plan pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (
COBRA
), or similar state law,
the Company shall reimburse Employee on a monthly basis for the difference
between the amount Employee pays to effect and continue such coverage and the
employee contribution amount that active senior executive employees of the
Company pay for the same or similar coverage.
|
|
(e)
|
|
Expiration of the Term
. If this Agreement is terminated by Employee
providing a proper notice of non-renewal in accordance with subparagraph 4(b), the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a). If this Agreement is terminated by the Company
providing a proper notice of non-renewal in accordance with subparagraph 4(b), then the
Company shall have no further obligations to Employee under this Agreement or
otherwise, except the Company shall provide the Accrued Obligations to Employee in
accordance with subparagraph 7(a) in addition to the following severance payments and
benefits:
|
|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base Salary at any
time within two years immediately before the Separation from Service; and
|
|
(ii)
|
|
on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 2
1
/
2
months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement
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Employment Agreement
Page 8
|
|
|
of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of Employees Separation from Service that Employee is eligible to
elect and elects to continue coverage for himself and his eligible dependents
under the Companys or an Affiliates group heath plan pursuant to COBRA or
similar state law, the Company shall reimburse Employee on a monthly basis for
the difference between the amount Employee pays to effect and continue such
coverage and the employee contribution amount that active senior executive
employees of the Company pay for the same or similar coverage.
|
8.
|
|
Change in Control
. The parties acknowledge that Employee has entered into this
Agreement based on his confidence in the current stockholders of the Company and the support
of the Board. Accordingly, if the Company should undergo a Change in Control the parties
agree as follows:
|
|
(i)
|
|
Affiliate
: except as otherwise provided in this
Agreement, for purposes of this Agreement, Affiliate means, with respect to the
Company, any person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Company;
provided, however
, that a natural person shall not be
considered an Affiliate.
|
|
(ii)
|
|
Change in Control
: a Change in Control means (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Companys common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Companys common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, (b) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all, of the assets of the Company and the its subsidiaries to any other person or entity (other than an
Affiliate of the Company), (c) the stockholders of the Company approve any
plan or proposal for liquidation or dissolution of the Company, (d) any
person or entity (other than Yorktown Energy Partners V, L.P., or any of its
affiliated funds), including a
group
as contemplated by Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or
gains ownership or control (including, without limitation, power to vote) of
more
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Employment Agreement
Page 9
|
|
|
than 50% of the outstanding shares of the Companys voting stock (based
upon voting power) or (e) as a result of or in connection with a contested
election of directors, the persons who were directors of the Company before
such election shall cease to constitute a majority of the Board.
Notwithstanding the foregoing, a Change of Control shall not include a
public offering of the Companys common stock or a transaction with its sole
purpose to change the state of the Companys incorporation or to create a
holding company that will be owned in substantially the same proportions by
the persons who held the Companys securities immediately before such
transaction.
|
|
(iii)
|
|
CIC Effective Date
: means the date upon which a
Change of Control occurs.
|
|
(iv)
|
|
Code
: means Internal Revenue Code of 1986, as amended
from time to time.
|
|
(b)
|
|
Change in Control Benefits and Payments
. If Employee is employed by
the Company on the CIC Effective Date and this Agreement is terminated on or before the
first anniversary of the CIC Effective Date by the Company without Cause in accordance
with subparagraph 6(d) or by Employee for Good Reason in accordance with subparagraph
6(e), then the Company shall have no further obligation to Employee under this
Agreement or otherwise, except the Company shall provide Employee with the Accrued
Obligations in accordance with subparagraph 7(a) plus the following Change in Control
payments and benefits in lieu of any severance payments or benefits that may otherwise
be due under subparagraph 7(d):
|
|
(i)
|
|
on the earliest date between 20 and 60 days following
Employees Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the CIC Effective Date;
and
|
|
(ii)
|
|
on or before the 60th day following Employees Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years before the CIC Effective
Date; and
|
|
(iii)
|
|
during the portion, if any, of the 18-month period commencing
on the date of Employees Separation from Service that Employee is eligible to
elect and elects to continue coverage for himself and his eligible dependents
under the Companys or an Affiliates (or a successor of either such entity) group
heath plan pursuant to COBRA or similar state law, the Company shall
reimburse Employee on a monthly basis for the difference between the amount
Employee pays to effect and continue such coverage and the employee
contribution amount that active senior executive employees of the Company
pay for the same or similar coverage.
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Employment Agreement
Page 10
|
(c)
|
|
Effect of a Change in Control Following Date of Termination
.
Notwithstanding any contrary provision in this Agreement, if this Agreement is
terminated by the Company without Cause in accordance with subparagraph 6(d) or by
Employee for Good Reason in accordance with subparagraph 6(e), and a CIC Effective Date
occurs within 120 days following the Date of Termination, then, in addition to the
severance payments and benefits provided to Employee in accordance with subparagraph
7(d), the Company shall provide Employee (or to Employees estate in the event of his
death following the Date of Termination) with the following Change in Control payments:
|
|
(i)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(i) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(i); and
|
|
(ii)
|
|
on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(ii) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(ii).
|
9.
|
|
Parachute Payment Limitation
. Notwithstanding any contrary provision in this
Agreement, if Employee is a
disqualified individual
(as defined in Section 280G of
the Code), and the Change in Control payments and benefits described in paragraph 8, together
with any other payments which Employee has the right to receive from the Company, would
constitute a
parachute payment
(as defined in Section 280G of the Code), the
payments and benefits provided hereunder shall be either (a) reduced (but not below zero) so
that the aggregate present value of such payments and benefits received by Employee from the
Company shall be $1.00 less than three times Employees
base amount
(as defined in
Section 280G of the Code) and so that no portion of such payments received by Employee shall
be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full,
whichever produces the better net after-tax result for Employee (taking into account any
applicable excise tax under Section 4999 of the Code and any applicable income tax). The
determination as to whether any such reduction in the amount of the payments and benefits is
necessary shall be made by the Company in good faith and such determination shall be conclusive and binding on
Employee. If a reduced payment is made to Employee pursuant to clause (a) above and through
error or otherwise that payment, when aggregated with other payments from the Company (or
its affiliates) used in determining if a parachute payment exists, exceeds $1.00 less than
three times Employees base amount, Employee shall immediately repay such excess to the
Company upon notification that an overpayment has been made.
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Employment Agreement
Page 11
10.
|
|
Conditions on Receipt of Severance and Change-in-Control Benefits
.
|
|
(a)
|
|
Compliance with Post-Termination Obligations and Execution and
Non-Revocation of General Release Agreement
. Notwithstanding any other provision
in this Agreement, the Companys payment to Employee of the severance payments and
benefits described in subparagraphs 7(b)(i), 7(d)(i)-(ii), and 7(e)(i) or the Change in
Control payments and benefits described in subparagraphs 8(b)(i)-(ii) and 8(c)(i)-(ii)
is subject to the condition that he complies with all applicable covenants under
paragraphs 12, 13, 14, and 15 of this Agreement. The Company shall have the right to
cease payment of any such payments or benefits, as well as to seek restitution of any
such payments or benefits already paid, if such covenants have been breached by
Employee but all other provisions of this Agreement shall remain in full force and
effect. The Companys payment of such payments or benefits to Employee is also
subject to the condition that, within 55 days after the Date of Termination, he
execute, deliver to the Company, and not revoke as permitted by applicable law a
General Release Agreement in a form reasonably acceptable to the Company that fully and
finally releases and waives any and all claims, demands, actions, and suits whatsoever
which he has or may have against the Company and its Affiliates, whether under this
Agreement or otherwise, that arose before the General Release Agreement was executed
(the
Release
). For purposes of this Agreement, the Release shall not become
fully enforceable and irrevocable until Employee has timely executed the Release and
not revoked his acceptance of the Release within seven days after its execution.
|
|
(b)
|
|
Separation from Service Requirement
. Notwithstanding any other
provision of this Agreement, Employee shall be entitled to the severance or Change in
Control benefits and payments in subparagraphs 7(b), 7(d), 7(e), or 8(b) only if
Employees termination of employment constitutes a Separation from Service. For
purposes of this Agreement,
Separation from Service
means separation from
service (within the meaning of Code Section 409A and the regulations and other guidance
promulgated thereunder (
Section 409A
)) with the group of employers that
includes the Company and each of its Affiliates. For this purpose,
Affiliate
means any incorporated or unincorporated trade or business or other entity or person,
other than the Company, that along with the Company is considered a single employer
under Code Section 414(b) or Code Section 414(c), but (i) in applying Code Section
1563(a)(1), (2), and (3) for the purposes of determining a controlled group of
corporations under Code Section 414(b), the phrase at least 50 percent shall be used
instead of the phrase at least 80 percent in each place the phrase at least 80 percent appears in Code
Section 1563(a)(1), (2), and (3), and (ii) in applying Treasury Regulation Section
1.414(c)-2 for the purposes of determining trades or businesses (whether or not
incorporated) that are under common control for the purposes of Code Section 414(c),
the phrase at least 50 percent shall be used instead of the phrase at least 80
percent in each place the phrase at least 80 percent appears in Treasury
Regulation Section 1.414(c)-2.
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Employment Agreement
Page 12
11.
|
|
Other Provisions Relating to Termination
.
|
|
(a)
|
|
Notice of Termination
. Any termination of this Agreement by the
Company or by Employee (other than termination because of death) shall be communicated
by written Notice of Termination to the other party thereto. For purposes of this
Agreement, a
Notice of Termination
shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated;
provided, however
, that any
failure to provide such detail shall not delay the effectiveness of the termination.
|
|
(b)
|
|
Date of Termination
. For purposes of this Agreement,
Date of
Termination
shall mean (i) if Employees employment is terminated by death, the
date of death; (ii) if Employees employment is terminated because of Employee becoming
Permanently Disabled, then 60 days after Notice of Termination is given (provided that
Employee shall not have returned to the performance of his duties, responsibilities,
and authorities on a full-time basis during such 60-day period); (iii) if (A)
Employees employment is terminated by the Company with or without Cause or (B)
Employees employment is terminated by Employee with or without Good Reason, then in
each case the date specified in the Notice of Termination, which shall comply with the
applicable notice requirements in paragraph 6; and (iv) if this Agreement is not
renewed, the last date of the Initial Term or the Renewal Term as applicable.
|
|
(c)
|
|
Mitigation
. Employee shall not be required to mitigate the amount of
any payment or benefits provided for in paragraphs 7 or 8 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for therein be
reduced by any compensation earned by Employee as the result of employment by another
employer after the Date of Termination, or otherwise.
|
|
(d)
|
|
Interest
. Until paid, all past due amounts required to be paid by the
Company under any provision of this Agreement shall bear interest at 8% per annum
compounded daily.
|
12.
|
|
Business Opportunities and Intellectual Property
.
|
|
(a)
|
|
Prompt Disclosure Required
. Employee shall promptly disclose to the
Board in writing all Business Opportunities and Intellectual Property.
|
|
(b)
|
|
Definition of Business Opportunities
. For purposes of this Agreement,
Business Opportunities
shall mean all business ideas, prospects, proposals or
other opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are located,
that are developed by Employee before or during the Term or originated by any third
party
|
Employment Agreement
Page 13
|
|
|
and brought to the attention of Employee before or during the Term, together
with information relating thereto (including, without limitation, geological and
seismic data and interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions, or other written or
charted means).
|
|
(c)
|
|
Definition of Intellectual Property
. 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, that do not fall within
the definition of Business Opportunities, that Employee discovers, conceives, invents,
creates, or develops, alone or with others, before or during the Term, if such
discovery, conception, invention, creation, or development (i) occurs in the course of
Employees employment with the Company or its Affiliates or (ii) occurs with the use of
any time, materials, or facilities of the Company or its Affiliates.
|
13.
|
|
Non-Compete Obligations During Term
. During the Term and except as provided below or
as otherwise permitted by the Company (acting upon the instruction of the Board):
|
|
(a)
|
|
Employee shall not, other than through the Company or its Affiliates, engage or
participate in any manner, whether directly or indirectly through any family member or
as an employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor, or in any other individual or
representative capacity, in any business or activity that is engaged in leasing,
acquiring, exploring, developing or producing hydrocarbons and related products; and
|
|
|
(b)
|
|
all investments made by Employee (whether in his own name or in the name of any
family members or made by Employees controlled affiliates), which relate to the lease,
acquisition, exploration, development or production of hydrocarbons and related
products shall be made solely through the Company or its Affiliates; and Employee shall
not (directly or indirectly through any family members), and shall not permit any of
his controlled affiliates to: (i) invest or otherwise participate alongside the Company
or its Affiliates in any Business Opportunities or (ii) invest or otherwise participate
in any business or activity relating to a Business Opportunity, regardless of whether
the Company or any of its Affiliates ultimately participates in such business or
activity;
|
|
|
provided, however
, that this paragraph shall not apply to (x) the existing personal
oil and gas investments owned by Employee, his family members, and his controlled affiliates
as of the first day of Employees employment with the Company before the Term (the
Existing Personal Investments
); (y) future expenditures made by Employee and his
family members and his controlled affiliates that are required to maintain, but not
increase, their respective
|
Employment Agreement
Page 14
|
|
current ownership interests in the Existing Personal Investments,
excluding however, any expenditure to participate in the acquisition, exploration, or
development of any acreage that is not currently included in the Existing Personal
Investments as of the Effective Date; and
(z) any opportunity that is first offered to, and subsequently declined by, the Company
(acting through the Board).
|
14.
|
|
Confidentiality Obligations
.
|
|
(a)
|
|
Confidentiality and Non-Disclosure Acknowledgments and Obligations
.
Employee hereby acknowledges that all trade secrets and confidential or proprietary
information of the Company and its Affiliates (collectively referred to herein as
Confidential Information
) constitute valuable, special and unique assets of
the business of the Company and its Affiliates, and that access to and knowledge of
such Confidential Information is essential to the performance of Employees duties,
responsibilities, and authorities under this Agreement. During the Term and the
one-year period following the Date of Termination, Employee shall hold the Confidential
Information in strict confidence and shall not publish, disseminate, or otherwise
disclose, directly or indirectly, to any person other than the Company and its
Affiliates and their respective officers, directors, and employees, any Confidential
Information or use any Confidential Information for Employees own personal benefit or
for the benefit of anyone other than the Company and its Affiliates. The Company
agrees to provide previously undisclosed Confidential Information to Employee in
exchange for Employees 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)
|
|
Confidential Information Inclusions and Exclusions
. For purposes of
this Agreement, Confidential Information includes, without limitation, any information
heretofore or hereafter acquired, developed, or used by the Company or its Affiliates
relating to Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial, or management aspects of the business, operations,
properties, or prospects of the Company or its Affiliates whether oral or in written
form in business records, but shall exclude any information that (i) 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 (ii) was rightfully in the possession of Employee, as shown by Employees records,
prior to the Effective Date (including Employees method of selecting, purchasing, and
reworking oil and gas properties, which the Company and Employee may utilize subsequent
to the Term (subject to the other limitations contained in this Agreement));
provided, however
, that Employee shall provide to the Company copies of all
information described in clause (ii); and
provided further, however
, that this
subparagraph shall not be applicable to the extent 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.
|
Employment Agreement
Page 15
15.
|
|
Obligations After Date of Termination
.
|
|
(a)
|
|
Non-Compete Obligations
. The purposes of paragraph 14 and this
paragraph 15 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, Employee shall not engage or participate in any
manner, 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, in any
business or activity that is in engaged in leasing, acquiring, exploring, developing or
producing hydrocarbons and related products within the boundaries of, or within a four
mile radius of the boundaries of, any mineral property interest of the Company or its
Affiliates (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 or its Affiliates and any third
party) or any other property on which the Company or its Affiliates have 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 Date of
Termination or as of the end of the six-month period following such Date of
Termination;
provided, however
, that this subparagraph shall not preclude
Employee from making personal investments in securities of oil and gas companies that
are registered on a national stock exchange, if the aggregate amount owned by Employee
and all family members and affiliates does not exceed 1% of such companys outstanding
securities.
|
|
|
(b)
|
|
Definition of Post-Termination Non-Compete Term
. For purposes of this
Agreement, the
Post-Termination Non-Compete Term
is the one-year period
following the Date of Termination;
provided, however
, that the Post-Termination
Non-Compete Term shall be reduced to the six-month period following the Date of
Termination if this Agreement is terminated on or before the first anniversary of the
CIC Effective Date either (i) by the Company without Cause in accordance with
subparagraph 6(d) or (ii) by Employee for Good Reason in accordance with subparagraph
6(e).
|
|
|
(c)
|
|
Non-Solicitation Obligations
. Employee shall not, during the Post
Termination Non-Compete Term, 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 its Affiliates to (i) terminate his or her employment by 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 to
|
Employment Agreement
Page 16
|
|
|
enter into contractual relations with any Persons other than such person, or (v) enter
into a relationship with a competitor of the Company or its Affiliates.
|
|
|
(d)
|
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Discretionary Monthly Non-Compete Payments
. The Company may, in its
sole discretion, elect to continue on the Companys regularly scheduled paydays
Employees Base Salary in effect immediately before the Date of Termination during
each month of the Post-Termination Non-Compete Term (the
Monthly Non-Compete
Payments
). The Company shall provide written notice to Employee no later than 10
days after the Date of Termination or on or before the Companys first regularly
scheduled payday following the Date of Termination, whichever is sooner, of its
election to make any Monthly Non-Compete Payments. If the Company does elect to make
the Monthly Non-Compete Payments, the Company shall not be obligated to continue making
any such Monthly Non-Compete Payments and shall be entitled in its sole discretion to
cease making the Monthly Non-Compete Payments at any time and for any reason but only
upon at least 30 days written notice to Employee, and the Company shall have no
further obligation to Employee under this subparagraph. If the Company starts but
ceases making the Monthly Non-Compete Payments, then, notwithstanding any contrary
provision in this Agreement, the Post-Termination Non-Compete Term for purpose of
subparagraph 15(a) shall expire on the last day of the month in which the final Monthly
Non-Compete Payment was made by the Company.
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16.
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Common Law Duties and Permitted Exceptions
. Employee acknowledges and agrees that
his restrictive covenants in paragraphs 12, 13, 14, and 15 of this Agreement shall supplement,
rather than supplant, his common law duties of confidentiality and loyalty owed to the
Company.
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17.
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Survival of Covenants; Enforcement of Covenants; Remedies; and Exception
.
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(a)
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Survival of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement shall survive the
termination of this Agreement and shall be construed as agreements independent of any
other provision of this Agreement, and the existence of any Dispute of Employee with or
against the Company or its Affiliates whether predicated on this Agreement or otherwise
shall not constitute a defense to the enforcement by the Company of those covenants.
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(b)
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Enforcement of Covenants
. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement are ancillary to the
otherwise enforceable agreements to provide Employee with Confidential Information and
are supported by independent, valuable consideration. Employee further acknowledges
and agrees that the limitations as to time, geographical area, and scope of activity to
be restrained by those covenants are reasonable and acceptable to Employee and do not
import any greater restraint than is reasonably necessary to protect the Companys
goodwill, Confidential Information, and other legitimate business interests. Employee
further agrees that if, at some later date, a court of competent
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Employment Agreement
Page 17
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jurisdiction
determines that any of the covenants in paragraphs 12, 13, 14, or 15 are unreasonable,
any such covenants shall be reformed by the court and enforced to the maximum
extent permitted under the law.
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(c)
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Remedies
. In the event of breach or threatened breach by Employee of
any of his covenants in paragraphs 12, 13, 14, or 15 of this Agreement, the Company
shall be entitled to equitable relief by temporary restraining order, temporary
injunction, or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all monetary damages
that the Company may incur as a result of such breach, violation, or threatened breach
or violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time shall not be deemed an
election of remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation, or threatened breach or violation, or as to any other breach,
violation, or threatened breach or violation.
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(d)
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Exception to Covenants
. The parties acknowledge that (i) Employee is
an attorney licensed to practice law in the Sate of Texas and employed, among other
things, to provide legal advice to Company and its Affiliates and (ii) by virtue of his
position and responsibilities, Employee is obligated by the Texas Rules of Disciplinary
Conduct and the common law to protect and preserve privileged and unprivileged
Confidential Information and not to use that information to the disadvantage of Company
or its Affiliates or for his own or a third partys benefit. The parties therefore
agree that Employee shall be permitted without violating this Agreement to disclose
privileged and unprivileged Confidential Information acquired during the course of and
by reason of his legal representation of the Company or its Affiliates as required to
do so by the Texas Disciplinary Rules of Professional Conduct. The parties further
agree that no covenant in this Agreement shall be interpreted or enforced in any manner
that violates Texas law, including without limitation any Texas Disciplinary Rule of
Professional Conduct, concerning restrictions on the rights of an attorney to practice
law. In particular, the non-competition and non-solicitation restrictions above shall
not be construed or enforced to restrict Employees right to practice law following the
termination of his employment with Company in violation of any Texas Disciplinary Rule
of Professional Conduct but shall be construed and enforced to apply to Employees
non-legal activities, capacities, and positions.
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18.
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Successors and Assigns
. This Agreement may not be assigned by the Company to any
other person or entity other than an Affiliate of the Company without Employees written
consent;
provided, however
, that in the event of a Change in Control, the Company
shall cause the surviving entity in any such transaction to assume the Companys obligations
under paragraphs 7 and 8 to the extent such obligations have not yet been fully performed.
Employees duties, responsibilities, authorities, compensation, and benefits under this
Agreement are personal to Employee and may not be assigned to any person or entity
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Employment Agreement
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without
written consent from the Board. In the event of Employees death, this Agreement shall be
enforceable by Employees estate, executors, or legal representatives. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns.
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19.
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Representations of Employee
. Employee hereby represents and warrants that he has not
previously assumed any obligations inconsistent with those in this Agreement. Employee
further represents and warrants that he has entered into this Agreement pursuant to his own
initiative and that the Company did not induce him to execute this Agreement in contravention
of any existing commitments. Employee further acknowledges that the Company has entered into
this Agreement in reliance upon the foregoing representations of Employee.
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20.
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Dispute Resolution
. The parties agree to the following dispute resolution terms:
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(a)
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Definition of Dispute
. Any controversy, claim, complaint, cause of
action, or similar proceeding, whether based on statute, contract, common law,
negligence, tort, misrepresentation, or any other legal theory, arising out of or
relating to this Agreement or Employees employment with the Company (a
Dispute
), shall be resolved solely in accordance with the terms of this
paragraph;
provided, however
, that the term Dispute shall not include
Employees claims for workers compensation or unemployment compensation benefits
(although any claim asserted under Ch. 451 of the Texas Labor Code shall be considered
a Dispute subject to dispute resolution under this paragraph).
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(b)
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Mediation
. If a Dispute cannot be settled by good faith negotiation
between the parties, the parties shall submit the Dispute to nonbinding mediation as
soon as reasonably possible after the Dispute arose. If complete agreement cannot be
reached within five calendar days of submission to mediation, either party may file a
civil action against the other party in any court of competent jurisdiction permitted
under paragraph 26.
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(c)
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Waiver of Right to Jury Trial
. NOTWITHSTANDING ANY OTHER PROVISION IN
THIS AGREEMENT, THE PARTIES SHALL, AND HEREBY DO, IRREVOCABLY WAIVE THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY DISPUTE. IN ADDITION, EMPLOYEE SHALL, AND HEREBY DOES,
IRREVOCABLY WAIVE THE RIGHT TO PARTICIPATE IN ANY CLASS OR COLLECTIVE ACTION WITH
RESPECT TO ANY DISPUTE.
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21.
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Attorneys Fees and Other Costs
. If either party breaches this Agreement, or if a
Dispute arises between the parties based on or involving this Agreement, the party that
enforces its rights under this Agreement against the breaching party, or that prevails in the
resolution of such Dispute, shall be entitled to recover from the other party its reasonable
attorneys fees, court costs, and expenses incurred in enforcing such rights or resolving such
Dispute. For purposes of this paragraph, the finder of fact shall be requested to answer
affirmatively as to
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Employment Agreement
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whether a party prevailed in order to recoup attorneys fees and other
costs pursuant to this
paragraph.
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22.
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Entire Agreement
. This Agreement constitutes the entire agreement between the
parties concerning its subject matters and supersedes all prior and contemporaneous agreements
and understandings, both written and oral, between the parties with respect to its subject
matters, including without limitation the Original Employment Agreement. Employee agrees that
the Company has not made any promise or representation to him concerning this Agreement not
expressed in this Agreement, and that, in signing this Agreement, he is not relying on any
prior oral or written statement or representation by the Company but is instead relying solely
on his own judgment and his legal and tax advisors, if any.
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23.
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Amendment of Agreement
. This Agreement may not be modified or amended in any respect
except by an instrument in writing signed by the party against whom such modification or
amendment is sought to be enforced. Notwithstanding the previous sentence, the Company may
modify or amend this Agreement in its sole discretion at any time without the further consent
of the Employee in any manner necessary to comply with applicable law and regulations or the
listing or other requirements of any stock exchange upon which the Company is listed. No
modification or amendment may be enforced against the Company unless such modification or
amendment is in writing and signed by the Board.
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24.
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Waiver
. The waiver by either party of a breach of any term of this Agreement shall
not operate or be construed as a waiver of a subsequent breach of the same provision by either
party or of the breach of any other term or provision of this Agreement.
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25.
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Severability
. If any provision of this Agreement is held to be illegal, invalid, or
unenforceable, (a) this Agreement shall be considered divisible, (b) such provision shall be
deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and (c) in
all other respects this Agreement shall remain in full force and effect;
provided,
however
, that, if any such provision may be made enforceable by limitation, then such
provision shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
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26.
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Governing Law; Venue
. This Agreement shall be governed by the laws of the State of
Texas, without regard to its conflict-of-laws principles. Employee and the Company hereby
irrevocably consent to the binding and exclusive venue for any Dispute between the parties
arising out of or related to this Agreement being in the state or federal court of competent
jurisdiction that regularly conducts proceedings in Tarrant County, Texas. Nothing in this
Agreement, however, precludes Employee or the Company from seeking to remove a civil action
from any state court to federal court.
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27.
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Notices
. All notices under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or three calendar days after the date
deposited in a receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the Company at its
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Employment Agreement
Page 20
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headquarters or Employee at the address of such person as set forth in the Companys
records. Either party may designate a different address by providing written notice of such
new address to the other party.
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28.
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Counterparts
. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered one and the
same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or
electronically scanned version by e-mail shall have the same force and effect as delivery of
the originally executed document.
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29.
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Code Section 409A
.
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(a)
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Intent
. All or a portion of the payments and benefits provided under
this Agreement is intended to be exempt from Section 409A and any ambiguous provision
will be construed in a manner that is compliant with or exempt from the application of
Section 409A. In particular, such payments and benefits are intended to constitute
short-term deferrals described in Treasury Regulation Section 1.409A-1(b)(4) or a
payment or benefit described in Treasury Regulation Section 1.409A-1(b)(9)(v). The
provisions of this Agreement shall be interpreted in a manner consistent with this
intent.
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(b)
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Specified Employee Postponement
. Notwithstanding subparagraph (a) of
this paragraph or any other provision of this Agreement to the contrary, if the Company
or an Affiliate that is treated as a
service recipient
(as defined in Section
409A) is publicly traded on an established securities market (or otherwise) and
Employee is a
specified employee
(as defined below) and is entitled to
receive a payment that is subject to Section 409A on account of Employees Separation
from Service, such payment may not be made earlier than six months following the date
of his Separation from Service if required by Section 409A, in which case, the
accumulated postponed amount shall be paid in a lump sum payment on the Section 409A
Payment Date. The
Section 409A Payment Date
is the earlier of (i) the date
of Employees death or (ii) the date that is six months and one day after Employees
Separation from Service. If any payment to Employee is delayed pursuant to the
foregoing sentence, such amount instead will be paid, with interest at the rate set out
in Section 11(d), on the Section 409A Payment Date. For purposes of Section 409A, each
payment amount or benefit due under this Agreement will be considered a separate
payment and Employees entitlement to a series of payments or benefits under this
Agreement is to be treated as an entitlement to a series of separate payments. The
determination of whether Employee is a specified employee shall be made in accordance
with Section 409A using the default provisions in the Section 409A unless another
permitted method has been prescribed for such purpose by the Company.
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30.
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Right to Consult a Tax Advisor
. Notwithstanding any contrary provision in this
Agreement, Employee shall be solely responsible for any risk that the tax treatment of all or
part of any payments provided by this Agreement may be affected by Section 409A, which may
impose
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Employment Agreement
Page 21
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significant adverse tax consequences on him, including accelerated taxation, a 20%
additional tax, and interest. Because of the potential tax consequences, Employee has the
right, and is encouraged by this paragraph, to consult with a tax advisor of his choice
before signing this Agreement.
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[
Signature Page Follows
]
Employment Agreement
Page 22
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EMPLOYEE:
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/s/ J. Curtis Henderson
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Name:
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J. Curtis Henderson
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COMPANY:
APPROACH RESOURCES INC.,
A Delaware Corporation
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By:
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/s/ J. Ross Craft
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Name:
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J. Ross Craft
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Title:
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President and Chief Executive Officer
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Employment Agreement
Page 23