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EMPLOYMENT AGREEMENT

Employment Agreement

EMPLOYMENT AGREEMENT | Document Parties: APPROACH RESOURCES INC You are currently viewing:
This Employment Agreement involves

APPROACH RESOURCES INC

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Title: EMPLOYMENT AGREEMENT
Governing Law: Texas     Date: 1/28/2011
Industry: Oil and Gas Operations     Sector: Energy

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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.

 

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 Company’s President and Chief Executive Officer (the “ President ”) and/or Board of Directors (the “ Board ”).

 

2.

 

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 Company’s Affiliates (as defined below). Employee shall devote his full time, best efforts, abilities, knowledge, and experience to the Company’s business and affairs as necessary to faithfully perform his duties, responsibilities, and authorities under this Agreement.

 

3.

 

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, Employee’s primary work location shall be at the Company’s corporate headquarters or within 50 miles from the Company’s 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 Employee’s titles and positions.

Employment Agreement — Page 1

 


 

4.

 

Term of Agreement .

 

(a)

 

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.

 

 

(b)

 

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 ”).

 

(c)

 

Term . The Initial Term and any Renewal Terms shall be referred to below collectively as the “ Term ” of this Agreement.

 

5.

 

Compensation and Employment Benefits . In consideration for the performance of Employee’s duties, responsibilities, and authorities under this Agreement, the Company shall provide Employee with the following compensation and employment benefits:

 

(a)

 

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 Company’s ordinary payroll policies and procedures for employee compensation. During the Term, Employee’s Base Salary shall be subject to an annual review and adjustment by the Board in its sole discretion.

 

 

(b)

 

Bonus .

 

(i)

 

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.

 

 

(ii)

 

Payout Option . The Bonus may be paid in cash, common stock of the Company, or a combination thereof, as determined by the Compensation Committee in its sole discretion; provided, however , that the Compensation Committee may offer Employee the option to elect to receive the value of any Bonus in cash, common stock, or a combination thereof, subject to applicable law and such terms, conditions, and limitations as the Compensation Committee may establish from time to time.

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(iii)

 

Discretionary Participation Level . The Compensation Committee, in its sole discretion, shall determine Employee’s 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.

 

(iv)

 

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.

 

 

(c)

 

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:

 

(i)

 

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.

 

 

(ii)

 

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

Employment Agreement Page 3

 


 

 

 

 

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.

 

(d)

 

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 Company’s 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 Employee’s 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.

 

6.

 

Termination of Agreement . This Agreement may be terminated as follows; provided, however , that any termination of this Agreement shall also constitute a termination of Employee’s employment with the Company:

 

(a)

 

Death . This Agreement shall terminate immediately upon Employee’s death.

 

 

(b)

 

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 Company’s 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).

 

(c)

 

With Cause . The Company shall be entitled to terminate this Agreement immediately for any Cause.

 

 

(i)

 

Definition of Cause . For purposes of this Agreement, “ Cause ” shall be defined as follows:

Employment Agreement Page 4

 


 

 

(A)

 

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);

 

 

(B)

 

the willful engaging by Employee in misconduct that is materially injurious to the Company;

 

(C)

 

any misconduct by Employee in the course and scope of Employee’s 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 Company’s personnel policies, rules, or Code of Conduct;

 

 

(D)

 

any material violation by Employee of this Agreement; or

 

(E)

 

any violation by Employee of any fiduciary duty owed by Employee to the Company or its Affiliates.

 

 

 

 

For purposes of this subparagraph, no act, or failure to act, on Employee’s 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.

 

(ii)

 

Limited Notice and Opportunity to Cure . If the Company determines in its reasonable, good faith discretion that a cure is possible and appropriate, the Company will give Employee written notice of the acts or omissions constituting Cause and no termination of this Agreement shall be for Cause unless and until Employee fails to cure such acts or omissions within 10 days following receipt of such written notice. If the Company determines in its reasonable, good faith discretion that a cure is not possible and appropriate, Employee shall have no notice or cure rights before this Agreement is terminated for Cause.

 

 

(d)

 

Without Cause . The Company shall be entitled to terminate this Agreement for any reason other than death, Employee becoming Permanently Disabled, or Cause, at any time by providing 90 days written notice to Employee that the Company is terminating the Agreement without Cause.

 

(e)

 

With Good Reason . Employee shall be permitted to terminate this Agreement for any Good Reason.

Employment Agreement Page 5

 


 

 

(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 Employee’s consent:

 

 

(A)

 

a material diminution in Employee’s Base Salary, duties, responsibilities, or authorities;

 

(B)

 

a requirement that Employee report to an officer or employee other than the President or the Board (or similar governing body);

 

 

(C)

 

a material relocation of Employee’s primary work location more than 50 miles away from the Company’s corporate headquarters; or

 

(D)

 

any other action or inaction by the Company that constitutes a material breach by the Company of its obligations under this Agreement.

 

 

(ii)

 

Notice and Opportunity to Cure . To exercise his right to terminate for Good Reason, Employee must provide written notice to the Company of his belief that Good Reason exists within 90 days of the initial existence of the condition(s) giving rise to Good Reason, and that notice shall describe the condition(s) believed to constitute Good Reason. The Company shall have 30 days to remedy the Good Reason condition(s). If not remedied within that 30-day period, Employee may terminate this Agreement; provided, however , that such termination must occur no later than 180 days after the date of the initial existence of the condition(s) giving rise to the Good Reason; otherwise, Employee is deemed to have accepted the condition(s), or the Company’s correction of such condition(s), that may have given rise to the existence of Good Reason.

 

(f)

 

Without Good Reason . Employee shall be entitled to terminate this Agreement without Good Reason at any time by providing 120 days written notice to Company that Employee is terminating the Agreement without Good Reason.

 

 

(g)

 

Expiration of Term . Either party may terminate this Agreement by providing a proper notice of non-renewal in accordance with subparagraph 4(b).

7.

 

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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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 Company’s plans and policies and applicable law.

 

(b)

 

Termination by the Company Due to Death or Permanent Disability . If this Agreement is terminated due to death or Employee becoming Permanently Disabled, then the Company shall have no further obligations to Employee under this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a) in addition to the following severance payments and benefits payable to Employee or the personal representative of Employee’s estate, as applicable:

 

 

(i)

 

on the earliest date between 20 and 60 days following Employee’s Separation from Service when the Release described in subparagraph 10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to 100% of his Base Salary in effect as of such Separation from Service; and

 

(ii)

 

on or before the 60th day following Employee’s Separation from Service, a lump sum in cash equal to 100% of the average of any Bonuses received by Employee from the Company in the two years immediately before the Separation from Service.

 

 

(c)

 

Termination by the Company for Cause or by Employee Without Good Reason . Upon termination of this Agreement by (i) the Company for Cause in accordance with subparagraph 6(c) or (ii) Employee without Good Reason in accordance with subparagraph 6(f), the Company shall have no further obligations to Employee under this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a).

 

(d)

 

Termination by the Company without Cause or by Employee for Good Reason . If this Agreement is terminated by (i) the Company without Cause in accordance with subparagraph 6(d) or (ii) Employee for Good Reason in accordance with subparagraph 6(e), then the Company shall have no further obligations to Employee under this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a) in addition to the following severance payments and benefits:

 

 

(i)

 

on the earliest date between 20 and 60 days following Employee’s Separation

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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

 

(ii)

 

on the date that annual bonuses are paid to other executive employees of the Company, but in no event later than 2 1 / 2 months after the end of the taxable year in which any substantial risk of forfeiture with respect to such bonuses lapses, the Bonus that Employee would have received based on achievement of performance goals under subparagraph 5(b) had this Agreement not terminated for the year containing the Date of Termination multiplied by a fraction, the numerator of which is the number of days during the period beginning the first day of the performance period containing the Date of Termination and ending on the Date of Termination, and the denominator of which is the number of days in the applicable performance period; and

 

 

(iii)

 

during the portion, if any, of the 18-month period commencing on the date of Employee’s 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 Company’s or an Affiliate’s group heath plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), or similar state law, the Company shall reimburse Employee on a monthly basis for the difference between the amount Employee pays to effect and continue such coverage and the employee contribution amount that active senior executive employees of the Company pay for the same or similar coverage.

 

(e)

 

Expiration of the Term . If this Agreement is terminated by Employee providing a proper notice of non-renewal in accordance with subparagraph 4(b), the Company shall have no further obligations to Employee under this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a). If this Agreement is terminated by the Company providing a proper notice of non-renewal in accordance with subparagraph 4(b), then the Company shall have no further obligations to Employee under this Agreement or otherwise, except the Company shall provide the Accrued Obligations to Employee in accordance with subparagraph 7(a) in addition to the following severance payments and benefits:

 

 

(i)

 

on the earliest date between 20 and 60 days following Employee’s Separation from Service when the Release described in subparagraph 10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to 150% of the greater of (A) the then-current Base Salary, and (B) the Base Salary at any time within two years immediately before the Separation from Service; and

 

(ii)

 

on the date that annual bonuses are paid to other executive employees of the

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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 Employee’s Separation from Service that Employee is eligible to elect and elects to continue coverage for himself and his eligible dependents under the Company’s or an Affiliate’s 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:

 

(a)

 

Definitions .

 

 

(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 Company’s common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company’s 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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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 Com


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