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 24, 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
(Address of principal executive offices)
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76116
(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):
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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)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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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.
Employment Agreement with Qingming Yang
Effective January 24, 2011, the Company entered into an employment agreement with its
Executive Vice President Business Development and Geosciences, Qingming Yang (the Yang
Agreement).
The initial term of the Yang Agreement will expire on January 24, 2013, and will be
automatically renewed for additional one-year terms unless either party elects not to renew the
Yang Agreement or the Yang Agreement is otherwise terminated in accordance with its terms.
The Yang Agreement provides for Mr. Yang to serve as Executive Vice President Business
Development and Geosciences of the Company with an annual base salary of $275,000, subject to
annual review and adjustment by the Board. Mr. Yang 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 (the Committee) in its sole discretion.
In the event of Mr. Yangs death or if he becomes Permanently Disabled, the Yang Agreement
will terminate and the Company will pay Mr. Yang or his estate severance payments equal to (i) 100%
of Mr. Yangs then-current Base Salary and (ii) 100% of the average of any Bonuses received by Mr.
Yang in the two years immediately before the Separation from Service.
If the Yang Agreement is terminated by the Company without Cause, by Mr. Yang for Good Reason
or by the Companys proper notice of nonrenewal of the Yang Agreement, the Company will pay Mr.
Yang severance payments equal to (i) 150% of the greater of Mr. Yangs then-current Base Salary and
Mr. Yangs Base Salary at any time within two years immediately before the Separation from Service
and (ii) the Bonus that Mr. Yang 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. Yang for certain premiums paid under COBRA for a period of up to 18 months (12 months
if Mr. Yang terminates his employment for Good Reason), depending on Mr. Yangs eligibility for
continuation of coverage under COBRA.
If Mr. Yang is employed by the Company at the time of a Change in Control and the Yang
Agreement is terminated by the Company without Cause or by Mr. Yang for Good Reason within one year
of such Change in Control, the Company will pay Mr. Yang severance payments equal to (i) 150% of
the greater of Mr. Yangs then-current Base Salary and Mr. Yangs 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. Yang in the two years before the Change in Control. The Company will also
reimburse Mr. Yang for certain premiums paid under COBRA for a period of up to 18 months, depending
on Mr. Yangs eligibility for continuation of coverage under COBRA.
Under the Yang Agreement, Mr. Yang has agreed to certain confidentiality, non-competition and
non-solicitation covenants with respect to the Company.
The description of the Yang Agreement contained herein is qualified in its entirety by
reference to the full text of the Yang 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 Yang Agreement.
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Employment Agreement with Ralph P. Manoushagian
Effective January 24, 2011, the Company entered into an employment agreement with its
Executive Vice President Land, Ralph P. Manoushagian (the Manoushagian Agreement).
The initial term of the Manoushagian Agreement will expire on January 24, 2013, and will be
automatically renewed for additional one-year terms unless either party elects not to renew the
Manoushagian Agreement or the Manoushagian Agreement is otherwise terminated in accordance with its
terms.
The Manoushagian Agreement provides for Mr. Manoushagian to serve as Executive Vice President
Land of the Company with an annual base salary of $200,000, subject to annual review and
adjustment by the Board. Mr. Manoushagian 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. Manoushagians death or if he becomes Permanently Disabled, the
Manoushagian Agreement will terminate and the Company will pay Mr. Manoushagian or his estate
severance payments equal to (i) 100% of Mr. Manoushagians then-current Base Salary and (ii) 100%
of the average of any Bonuses received by Mr. Manoushagian in the two years immediately before the
Separation from Service.
If the Manoushagian Agreement is terminated by the Company without Cause, by Mr. Manoushagian
for Good Reason or by the Companys proper notice of nonrenewal of the Manoushagian Agreement, the
Company will pay Mr. Manoushagian severance payments equal to (i) 150% of the greater of Mr.
Manoushagians then-current Base Salary and Mr. Manoushagians Base Salary at any time within two
years immediately before the Separation from Service and (ii) the Bonus that Mr. Manoushagian 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. Manoushagian for
certain premiums paid under COBRA for a period of up to 18 months (12 months if Mr. Manoushagian
terminates his employment for Good Reason), depending on Mr. Manoushagians eligibility for
continuation of coverage under COBRA.
If Mr. Manoushagian is employed by the Company at the time of a Change in Control and the
Manoushagian Agreement is terminated by the Company without Cause or by Mr. Manoushagian for Good
Reason within one year of such Change in Control, the Company will pay Mr. Manoushagian severance
payments equal to (i) 150% of the greater of Mr. Manoushagians then-current Base Salary and Mr.
Manoushagians 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. Manoushagian in the two years
before the Change in Control. The Company will also reimburse Mr. Manoushagian for certain
premiums paid under COBRA for a period of up to 18 months, depending on Mr. Manoushagians
eligibility for continuation of coverage under COBRA.
Under the Manoushagian Agreement, Mr. Manoushagian has agreed to certain confidentiality,
non-competition and non-solicitation covenants with respect to the Company.
The description of the Manoushagian Agreement contained herein is qualified in its entirety by
reference to the full text of the Manoushagian Agreement, a copy of which is attached hereto as
Exhibit 10.2
and is incorporated herein by reference. Capitalized terms used but not
defined above have the meaning given them in the Manoushagian 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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Employment Agreement dated as of January 24, 2011, by and
between Approach Resources Inc. and Qingming Yang
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10.2
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Employment Agreement dated as of January 24, 2011, by and
between Approach Resources Inc. and Ralph P. Manoushagian
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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 28, 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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Employment Agreement dated as of January 24, 2011, by and
between Approach Resources Inc. and Qingming Yang
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10.2
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Employment Agreement dated as of January 24, 2011, by and
between Approach Resources Inc. and Ralph P. Manoushagian
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6
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the
Agreement
) is entered into as of January 24, 2011
(the
Effective Date
), by and between APPROACH RESOURCES INC., a Delaware corporation (the
Company
), and QINGMING YANG, an individual residing in the State of Texas
(
Employee
).
RECITALS
WHEREAS, Employee has been employed by the Company as its Executive Vice President Business
Development and Geosciences 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 Business Development and Geosciences, 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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Employment Agreement
Page 1
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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 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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Employment Agreement
Page 2
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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 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
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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
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Employment Agreement
Page 3
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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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(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)
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Definition of Cause
. For purposes of this Agreement,
Cause
shall be defined as follows:
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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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Employment Agreement
Page 5
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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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(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 President or 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 50 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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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,
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Employment Agreement
Page 6
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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)
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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)
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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)
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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)
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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)
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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
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Employment Agreement
Page 7
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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)
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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)
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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 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)
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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)
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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
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Employment Agreement
Page 8
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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)
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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.
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8.
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|
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)
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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
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Employment Agreement
Page 9
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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.
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|
(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)
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|
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)
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|
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)
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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
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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)
|
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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)
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|
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).
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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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Employment Agreement
Page 11
10.
|
|
Conditions on Receipt of Severance and Change-in-Control Benefits
.
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(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)
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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
.
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|
(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)
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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.
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12.
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|
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
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Employment Agreement
Page 13
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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 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.
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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):
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(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)
|
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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 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
Employment Agreement
Page 14
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).
14.
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Confidentiality Obligations
.
|
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(a)
|
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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)
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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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Employment Agreement
Page 15
15.
|
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Obligations After Date of Termination
.
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(a)
|
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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)
|
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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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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.
|
|
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.
|
|
Survival of Covenants; Enforcement of Covenants; and Remedies
.
|
|
(a)
|
|
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)
|
|
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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Employment Agreement
Page 17
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|
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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)
|
|
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.
|
|
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.
|
|
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.
|
|
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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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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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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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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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.
|
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
]
Employment Agreement
Page 21
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EMPLOYEE:
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/s/ Qingming Yang
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Name:
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Qingming Yang
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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 22
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the
Agreement
) is entered into as of January 24, 2011
(the
Effective Date
), by and between APPROACH RESOURCES INC., a Delaware corporation (the
Company
), and RALPH P. MANOUSHAGIAN, an individual residing in the State of Texas
(
Employee
).
RECITALS
WHEREAS, Employee has been employed by the Company as its Executive Vice President Land
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 Land, 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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Employment Agreement
Page 1
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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 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 $200,000.00 (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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Employment Agreement
Page 2
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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 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
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Employment Agreement
Page 3
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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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(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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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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Employment Agreement
Page 5
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(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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(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 President or 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 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)
|
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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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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
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Employment Agreement
Page 6
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|
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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)
|
|
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)
|
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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
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)
|
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on the earliest date between 20 and 60 days following
Employees Separation
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Employment Agreement
Page 7
|
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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)
|
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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)
|
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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
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Employment Agreement
Page 8
|
|
|
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 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
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Employment Agreement
Page 9
|
|
|
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.
|
|
(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
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Employment Agreement
Page 10
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|
|
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.
|
|
(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
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Employment Agreement
Page 11
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|
less than three times Employees base amount, Employee shall immediately
repay such excess to the Company upon notification that an overpayment has been made.
|
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
|
Employment Agreement
Page 12
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|
|
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.
|
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
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Employment Agreement
Page 13
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|
|
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).
|
|
(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
|
Employment Agreement
Page 14
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|
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 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
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Employment Agreement
Page 15
|
|
|
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.
|
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)
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Employment Agreement
Page 16
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|
|
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.
|
|
(d)
|
|
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.
|
16.
|
|
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.
|
17.
|
|
Survival of Covenants; Enforcement of Covenants; and Remedies
.
|
|
(a)
|
|
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.
|
|
(b)
|
|
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
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Employment Agreement
Page 17
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|
|
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.
|
|
(c)
|
|
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.
|
18.
|
|
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.
|
19.
|
|
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.
|
20.
|
|
Dispute Resolution
. The parties agree to the following dispute resolution terms:
|
|
(a)
|
|
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
|
Employment Agreement
Page 18
|
|
|
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).
|
|
(b)
|
|
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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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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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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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
]
Employment Agreement
Page 21
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EMPLOYEE:
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/s/ Ralph P. Manoushagian
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Name: Ralph P. Manoushagian
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COMPANY:
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APPROACH RESOURCES INC.,
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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 22