Exhibit 10.2

 

EXECUTION VERSION

 

EMPLOYMENT AGREEMENT
RYAN MIDGETT

 

This EMPLOYMENT AGREEMENT (this “Agreement”), effective as of January 17, 2018
(the “Effective Date”), is by and between Vanguard Natural Resources, Inc.
(“VNR”, together with its subsidiaries, the “Company”) and Ryan Midgett
(“Executive”).

 

WHEREAS, VNR desires to continue to employ Executive, and Executive desires to
continue to be employed by VNR; and

 

WHEREAS, the parties desire to set forth in writing the terms and conditions of
their understandings and agreements in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, VNR hereby agrees to continue to employ Executive and
Executive hereby accepts such continued employment upon the terms and conditions
set forth in this Agreement:

 

1.                  Employment Period.

 

(a)               Subject to Section 5, VNR hereby agrees to employ Executive,
and Executive hereby agrees to be employed by VNR, in accordance with the terms
and provisions of this Agreement, for the period commencing as of the Effective
Date and ending on December 31, 2020 (the “Employment Period”); provided,
however, that the Employment Period shall automatically be renewed and extended
for an additional period of twelve (12) months commencing on January 1, 2021 and
expiring on January 1, 2022, and on each successive January 1 thereafter, unless
at least ninety (90) days prior to the ensuing expiration date (but no more than
twelve (12) months prior to such expiration date), VNR or Executive shall have
given ninety (90) days written notice to the other that it or he, as applicable,
does not wish to extend this Agreement (a “Non-Renewal Notice”). The term
“Employment Period” as utilized in this Agreement, shall refer to the Employment
Period as so automatically extended.

 

(b)               During the term of Executive’s employment with VNR, Executive
shall serve as the Chief Financial Officer of VNR and in so doing, shall report
to the President and Chief Executive Officer of the Company (the “CEO”) or, as
required by applicable law or listing standards, to the Board of Directors of
the Company (the “Board”). Executive shall have supervision and control over,
and responsibility for, such management and operational functions of the Company
currently assigned to such positions, and shall have such other powers and
duties (including holding officer positions with VNR and one or more
subsidiaries of VNR) as may from time to time be prescribed by the CEO or the
Board, so long as such powers and duties are reasonable and customary for the
Chief Financial Officer of an enterprise comparable to the Company.

 

(c)               During the term of Executive’s employment with VNR, and
excluding any periods of vacation and sick leave to which Executive is entitled,
Executive agrees to devote substantially all of his business time to the
business and affairs of VNR and, to the extent necessary to discharge the
responsibilities assigned to Executive hereunder or by the CEO or Board
hereafter, to use Executive’s reasonable best efforts to perform faithfully,
effectively and efficiently such responsibilities. During the term of
Executive’s employment with VNR, it shall not be a violation of this Agreement
for Executive to (i) serve on corporate, civic or charitable boards or
committees, provided that service on any corporate board or committee shall be
subject to the prior approval of the Board, which shall not be unreasonably
withheld, (ii) deliver lectures or fulfill speaking engagements, and
(iii) manage personal investments, so long as such activities do not materially
interfere with the performance of Executive’s responsibilities as an employee of
the Company in accordance with this Agreement.

 

 

 

 

(d)               The parties expressly acknowledge that any performance of
Executive’s responsibilities hereunder shall necessitate, and the Company shall
provide, access to or the disclosure of Confidential Information (as defined in
Section 9(a) below) to Executive and that Executive’s responsibilities shall
include the development of the Company’s goodwill through Executive’s contacts
with the Company’s customers and suppliers.

 

2.                  Compensation.

 

(a)               Base Salary. VNR shall pay Executive an annual base salary
(“Base Salary”) at the rate of $300,000 for the period commencing on the
Effective Date. The Board may at its discretion elect to increase Executive’s
Base Salary at any time if they deem an increase is warranted. Subject to
Section 5(c)(ii) hereof, the Board may not decrease Executive’s annual Base
Salary without his prior written approval. Base Salary shall be payable in
accordance with the ordinary payroll practices of VNR, but in no event shall the
Base Salary be paid to Executive less frequently than monthly. The term “Base
Salary” as used in this Agreement shall refer to the Base Salary as it may be so
adjusted from time to time.

 

(b)               Annual Bonus. Executive shall be eligible to receive an annual
bonus (the “Annual Bonus”) in an amount to be determined by the Board or
compensation committee of the Board (“Committee”) based on performance goals
established by the Board or Committee, as applicable; provided, however, that
the parties agree that Executive shall be subject to, and receive, bonus
payments through the end of the 2017 calendar year in accordance with the
Company’s 2017 pre-emergence annual cash bonus program. With respect to calendar
year 2018, Executive’s target Annual Bonus opportunity will be equal to no less
than sixty percent (60%) of his Base Salary (“Target Bonus”).

 

(c)               MIP Grants. Executive shall be eligible to participate in the
Company’s management incentive plan (“MIP”) in accordance with the terms thereof
and as determined by the Board; provided that, for calendar year 2018, the
Company intends to award Executive an initial grant under the MIP with a grant
date value of $1,250,000 (determined using a share price of $19.50).

 

3.                  Employee Benefits.

 

(a)               During the Employment Period, VNR shall provide Executive with
coverage under all employee pension and welfare benefit programs, plans and
practices, which VNR makes available to its senior executives (including,
without limitation, participation in health, dental, group life, disability,
retirement and all other plans and fringe benefits to the extent generally
provided to such senior executives), commensurate with his position in the
Company, to the extent permitted under the employee benefit plan or program, and
in accordance with the terms of the program and/or plan.

 

2

 

 

(b)               Executive shall be entitled to vacation time in accordance
with the Company’s published vacation policy which currently provides Executive
with twenty five (25) business days paid vacation in each calendar year. Such
vacation time shall accrue at a rate of two (2) vacation days for each calendar
month worked; provided, however, that during any given calendar year, Executive
shall be able to take vacation days that will accrue during that calendar year,
even if such days have not yet accrued. A maximum of ten (10) business days of
accrued but unused vacation may be carried over from one calendar year to the
next.

 

(c)               Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement and promoting
the business of the Company, including, without limitation, reasonable expenses
for travel, lodgings, entertainment and similar items related to such duties and
responsibilities. VNR will promptly reimburse Executive for all such expenses
upon presentation by Executive of appropriately itemized and approved
(consistent with VNR’s policy) accounts of such expenditures, in accordance with
the Company’s expense reimbursement policy; provided, however, that in no event
shall the expense reimbursement be made after the last day of the taxable year
following the year in which the expense was incurred by Executive, although in
the event that the reimbursement would constitute taxable income to Executive,
such reimbursements will be paid no later than March 15th of the calendar year
following the calendar year in which the expense was incurred. No reimbursement
or expenses eligible for reimbursement in any taxable year shall affect the
expenses eligible for reimbursement in any other taxable year, nor may the right
to receive a reimbursement of expenses be subject to liquidation or exchanged
for another benefit.

 

4.                  Termination in Connection with a Change of Control.

 

(a)               Definition of Change of Control. For purposes of this
Agreement, a “Change of Control” shall mean the occurrence of one or more of the
following events:

 

(i)                 Any “person” or “group” within the meaning of those terms as
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended, other than an affiliate of VNR, shall become the beneficial owner, by
way of merger consolidation, recapitalization, reorganization or otherwise, of
fifty percent (50%) or more of the combined voting power of the equity interests
in VNR;

 

(ii)              VNR’s shareholders approve, in one or a series of
transactions, a plan of complete liquidation of VNR; or

 

(iii)            The sale or other disposition by VNR of all or substantially
all of its assets in one or more transactions to any person other than an
affiliate of VNR.

 

Notwithstanding the foregoing, with respect to a payment that is subject to
section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), a
“Change of Control” shall mean a “change of control event” as defined in the
regulations and guidance issued under section 409A of the Code.

 

3

 

 

(b)               If, during the twelve (12) months immediately following the
occurrence of a Change of Control of VNR (the “Change of Control Period”),
Executive is terminated by the Company without Cause or resigns for Good Reason
(as defined below),  Executive will be entitled to receive (i) within ten
(10) business days after the Date of Termination (as defined below), his Accrued
Compensation and Reimbursements (as defined below) and (ii) on the 60th day
following the Date of Termination, a lump sum payment of an amount equaling two
(2) times the sum of his Base Salary and the Annual Bonus paid or payable with
respect to the calendar year preceding the year in which the Change of Control
occurs (the “Change of Control Payment”). Notwithstanding the foregoing, in the
event that Executive experiences a termination under this Section 4(b) in
calendar year 2018, the Change of Control Payment shall instead be equal to two
(2) times the sum of Executive’s Base Salary and Target Bonus. Solely for
purposes of the Change of Control Payment, Executive’s Base Salary shall be
valued as in effect at the time of the Change of Control. Treatment of any
awards under the MIP will be as provided under the terms and conditions of the
MIP and the applicable individual award agreement.

 

5.                  Termination of Employment.

 

(a)               Termination without Cause or Resignation by Executive for
Other than Good Reason. Unless otherwise specified in a separate provision of
this Section 5, either Executive or VNR, by action of the Board, may terminate
this Agreement, and Executive’s employment by VNR, for any reason after
providing thirty (30) days written notice to the non-terminating party. If
Executive terminates this Agreement pursuant to this provision for a reason
other than Good Reason, VNR will pay Executive within ten (10) business days
after the Date of Termination (as defined below) (i) all accrued but unpaid Base
Salary, (ii) a prorated amount of Executive’s Base Salary for accrued but unused
vacation days, and (iii) yet unpaid reimbursements for any reasonable and
necessary business expenses incurred by Executive prior to the Date of
Termination in connection with his duties hereunder (such amounts collectively,
the “Accrued Compensation and Reimbursements”). Upon termination by VNR of this
Agreement pursuant to this Section 5(a) without Cause (other than during a
Change of Control Period, which shall be governed by Section 4(b)), VNR shall
pay or provide to Executive the following: (A) within ten (10) business days
after the Date of Termination, the Accrued Compensation and Reimbursements and
(B) on the 60th day following the Date of Termination, a lump sum payment (the
“Severance Payment”) equal to the amount of Executive’s Base Salary (at the rate
in effect hereunder as of the Date of Termination) for twenty four (24) months.
Treatment of any awards under the MIP will be as provided under the terms and
conditions of the MIP and the applicable individual award agreement.
Notwithstanding any other provision of this Agreement, the non-renewal of
Executive’s employment pursuant to the terms of a Non-Renewal Notice under
Section 1(a) of this Agreement shall not constitute a termination of this
Agreement entitling Executive to the Severance Payment under this Section 5(a)
or any Change of Control Payment under Section 4(b).

 

(b)               Termination for Cause. VNR, by action of the Board may
terminate this Agreement at any time for Cause. Upon termination by VNR for
Cause, Executive shall only be entitled to Accrued Compensation and
Reimbursements, which amount shall be paid within ten (10) business days after
the Date of Termination. For purposes hereof, “Cause” means any of the
following:

 

4

 

 

(i)                 Executive’s commission of theft, embezzlement, any other act
of dishonesty relating to his employment with VNR or any willful violation of
any law, rules or regulation applicable to the Company, including, but not
limited to, those laws, rules or regulations established by the Securities and
Exchange Commission, or any self-regulatory organization having jurisdiction or
authority over Executive or the Company; or

 

(ii)              Executive’s conviction of, or Executive’s plea of guilty or
nolo contendere to, any felony or of any other crime involving fraud, dishonesty
or moral turpitude; or

 

(iii)            A determination by the Board that Executive has materially
breached this Agreement (other than during any period of Disability, as defined
below) where such breach is not remedied within ten business (10) days after
written demand by the Board for substantial performance is actually received by
Executive which specifically identifies the manner in which the Board believes
Executive has so breached; or

 

(iv)             Executive’s willful failure to perform his reasonable and
customary duties as the Chief Financial Officer of VNR, which such failure is
not remedied within ten business (10) days after written demand by the Board for
substantial performance is actually received by Executive which specifically
identifies the nature of such failure.

 

For purposes of the definition of Cause, no act or failure to act, on the part
of Executive, shall be considered “willful” unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive’s
action or omission was in, or not opposed to, the best interests of the Company.
Any act, or failure to act, based upon authority given by the Board or based
upon the advice of counsel for VNR shall be conclusively presumed to be done, or
omitted to be done, by Executive in good faith and in the best interests of the
Company. VNR, by action of the Board, may terminate Executive’s employment for
Cause only after: (i) providing written notice to Executive, which identifies
the Cause for Executive’s termination (which notice must be given within ninety
(90) days after the actual discovery of the act(s) or omission(s) constituting
such Cause) and (ii) Executive has been given an opportunity, together with his
counsel, to be heard by the Board at a time and location reasonably designated
by the Board.

 

(c)               Termination with Good Reason. Executive may terminate this
Agreement for Good Reason, and thereby resign his employment, after providing
thirty (30) days’ written notice to the Company of the act(s) or omission(s)
constituting Good Reason (which notice must be given within ninety (90) days
after the occurrence of such act(s) or omission(s) and describe the act(s) or
omission(s) in reasonable detail) if such act(s) or omission(s) is/are not cured
by the Company within thirty (30) days after Executive provides such written
notice. For purposes hereof, “Good Reason” means any of the following reasons
that occurs without Executive’s written consent:

 

(i)                 A material reduction in Executive’s authority, duties, or
responsibilities; or

 

5

 

 

(ii)              A material reduction in Executive’s Base Salary, other than a
reduction affecting senior management similarly and in no event more than 10%
from the Base Salary in effect on the date hereof; or

 

(iii)            Executive’s removal from his position as Chief Financial
Officer of VNR, other than for Cause or by death or Disability, during the
Employment Period, to a position that is not at least equivalent in authority
and duties to Chief Financial Officer; or

 

(iv)             Relocation of Executive’s principal place of business to a
location fifty (50) or more miles from its location as of the Effective Date; or

 

(v)               A material breach by VNR of this Agreement, which materially
and adversely affects Executive; or

 

(vi)             VNR’s failure to make any material payment to Executive
required to be made under the terms of this Agreement.

 

Upon termination of this Agreement pursuant to this Section 5(c) (other than
during a Change of Control Period, which shall be governed by Section 4(b)), VNR
shall pay or provide to Executive the following: (i) within ten (10) business
days after the Date of Termination, his Accrued Compensation and Reimbursements
and (ii) on the 60th day following the Date of Termination, the Severance
Payment. Treatment of any awards under the MIP will be as provided under the
terms and conditions of the MIP and the applicable individual award agreement.

 

(d)               Termination by Disability. VNR, by action of the Board, may
terminate this Agreement at any time if Executive shall be deemed in the
reasonable judgment of the Board to have sustained a “Disability.” Executive
shall be deemed to have sustained a Disability if and only if he shall have been
unable to substantially perform his duties as an employee of VNR as a result of
sickness or injury, and shall have remained unable to perform any such duties
for a period of more than 180 consecutive days in any twelve (12) month period.
Upon termination of this Agreement for Disability, Executive shall only be
entitled to (i) Accrued Compensation and Reimbursements, which amount shall be
paid within ten (10) business days after the Date of Termination and (ii) any
other amounts or benefits to which Executive may be entitled under a separate
plan, policy or program maintained by the Company.

 

(e)               Termination by Death. This Agreement will terminate
automatically upon Executive’s death. Upon termination of this Agreement because
of Executive’s death, VNR shall pay or provide Executive’s estate with the
following: (i) Accrued Compensation and Reimbursements, which amount shall be
paid within ten (10) business days after the Date of Termination and (ii) any
other amounts or benefits to which Executive may be entitled under a separate
plan, policy or program maintained by the Company.

 

(f)                Date of Termination. As used in this Agreement, “Date of
Termination” means (i) if Executive’s employment is terminated by his death, the
date of his death; (ii) if Executive’s employment is terminated as a result of a
Disability or by VNR for Cause or without Cause, then the date specified in a
notice delivered to Executive by VNR of such termination, (iii) if Executive’s
employment is terminated by Executive for Good Reason, then the date specified
in the notice of such termination delivered to VNR by Executive, (iv) if
Executive’s employment terminates due to the giving of a Non-Renewal Notice, the
last day of the Employment Period, and (v) if Executive’s employment is
terminated for any other reason, the date specified therefore in the notice of
such termination.

 

6

 

 

6.                  Employment.

 

Upon termination of this Agreement, Executive’s employment shall also terminate
and cease, and Executive shall be deemed to have voluntarily resigned from all
positions and the Board, if Executive is a member of the Board. Executive shall
confirm the foregoing resignation(s) by submitting to the Company written
confirmation of Executive’s resignation(s), and the Company’s obligations to pay
the Severance Payment or the Change of Control Payment shall be subject to the
Company’s receipt of such written confirmation.

 

7.                  Mitigation.

 

Upon termination of this Agreement for any reason, amounts to be paid per the
express terms of this Agreement shall not be reduced whether or not Executive
obtains other employment.

 

8.                  Release.

 

Notwithstanding any other provision in this Agreement to the contrary, as a
condition precedent to receiving any change of control or severance payments or
benefits set forth in Section 4 or 5 of this Agreement (other than the Accrued
Compensation and Reimbursements) in connection with any applicable termination
scenario, Executive agrees to execute (and not revoke) a customary severance and
release agreement, including a waiver of all claims, reasonably acceptable to
the Company (the “Release”), within the forty-five (45) day period immediately
following the Date of Termination. All revocation rights and timing restrictions
shall be set forth in such Release. If Executive fails to execute and deliver
the Release, or revokes the Release, Executive agrees that he shall not be
entitled to receive any severance payments or benefits set forth in Section 4
or 5 of this Agreement (other than the Accrued Compensation and Reimbursements)
in connection with any applicable termination scenario. For purposes of this
Agreement, the Release shall be considered to have been executed by Executive if
it is signed by his legal representative in the case of legal incompetence or on
behalf of Executive’s estate in the case of his death.

 

9.                  Nondisclosure.

 

(a)               It is understood that Executive during his tenure with the
Company has received and will continue to receive access to some or all of the
Company’s various trade secrets and confidential or proprietary information,
including information he has not received before, consisting of, but not limited
to, information relating to (i) business operations and methods, (ii) existing
and proposed investments and investment strategies, (iii) financial performance,
(iv) compensation arrangements and amounts (whether relating to the Company or
to any of its employees), (v) contractual relationships, (vi) business partners
and relationships, and (vii) marketing strategies (all of the forgoing,
“Confidential Information”). Confidential Information shall not include:
(A) information that Executive may furnish to third parties regarding his
obligations under this Section 9 and under Section 10 or (B) information that
(1) is general knowledge of Executive or information that becomes generally
available to the public by means other than Executive’s breach of this Section 9
(for example, not as a result of Executive’s unauthorized release of marketing
materials), (2) is in Executive’s possession, or becomes available to Executive,
on a non-confidential basis, from a source other than the Company or
(3) Executive is required by law, regulation, court order or discovery demand to
disclose; provided, however, that in the case of clause (3), Executive gives the
Company, to the extent permitted by law, reasonable notice prior to the
disclosure of the Confidential Information and the reasons and circumstances
surrounding such disclosure to provide the Company an opportunity to seek a
protective order or other appropriate request for confidential treatment of the
applicable Confidential Information.

 

7

 

 

(b)               Executive agrees that all Confidential Information, whether
prepared by Executive or otherwise coming into his possession, shall remain the
exclusive property of the Company during Executive’s employment with the
Company. Executive further agrees that Executive shall not, except for the
benefit of the Company pursuant to the exercise of his duties in accordance with
this Agreement or with the prior written consent of the Company, use or disclose
to any third party any of the Confidential Information described herein,
directly or indirectly, either during Executive’s employment with the Company or
at any time following the termination of Executive’s employment with the
Company.

 

(c)               Upon termination of this Agreement, Executive agrees that all
Confidential Information and other files, documents, materials, records,
notebooks, customer lists, business proposals, contracts, agreements and other
repositories containing information concerning the Company or the business of
the Company (including all copies thereof) in Executive’s possession, custody or
control, whether prepared by Executive or others, shall remain with or be
returned to the Company as soon as practicable after the Date of Termination.

 

(d)               Nothing in this Agreement will preclude, prohibit or restrict
Executive from (i) communicating with, any federal, state or local
administrative or regulatory agency or authority, including but not limited to
the Securities and Exchange Commission (the “SEC”); (ii) participating or
cooperating in any investigation conducted by any governmental agency or
authority; or (iii) filing a charge of discrimination with the United States
Equal Employment Opportunity Commission or any other federal state or local
administrative agency or regulatory authority. Nothing in this Agreement, or any
other agreement between the parties, prohibits or is intended in any manner to
prohibit, Executive from (A) reporting a possible violation of federal or other
applicable law or regulation to any governmental agency or entity, including but
not limited to the Department of Justice, the SEC, the U.S. Congress, and any
governmental agency Inspector General, or (B) making other disclosures that are
protected under whistleblower provisions of federal law or regulation. This
Agreement does not limit Executive’s right to receive an award (including,
without limitation, a monetary reward) for information provided to the SEC.
Executive does not need the prior authorization of anyone at the Company to make
any such reports or disclosures, and Executive is not required to notify the
Company that Executive has made such reports or disclosures. Nothing in this
Agreement or any other agreement or policy of the Company is intended to
interfere with or restrain the immunity provided under 18 U.S.C. §1833(b).
Executive cannot be held criminally or civilly liable under any federal or state
trade secret law for the disclosure of a trade secret that is made (i) (A) in
confidence to federal, state or local government officials, directly or
indirectly, or to an attorney, and (B) for the purpose of reporting or
investigating a suspected violation of law; (ii) in a complaint or other
document filed in a lawsuit or other proceeding, if filed under seal; or
(iii) in connection with a lawsuit alleging retaliation for reporting a
suspected violation of law, if filed under seal and does not disclose the trade
secret, except pursuant to a court order. The foregoing provisions regarding
protected disclosures are intended to comply with all applicable laws. If any
laws are adopted, amended or repealed after the execution of this Agreement,
this Section 9(d) shall be deemed to be amended to reflect the same.

 

8

 

 

10.              Non-Competition and Non-solicitation.

 

(a)               As part of the consideration for the compensation and benefits
to be paid to Executive hereunder, to protect Confidential Information of the
Company and its customers and clients that have been and will be entrusted to
Executive, the business goodwill of the Company and its subsidiaries that will
be developed in and through Executive and the business opportunities that will
be disclosed or entrusted to Executive by the Company and its subsidiaries, and
as an additional incentive for the Company to enter into this Agreement, from
the date hereof through the first anniversary of the Date of Termination (the
“Restricted Period”), Executive will not (other than for the benefit of the
Company pursuant to this Agreement), directly or indirectly:

 

(i)                 engage in, or carry on or assist, individually or as a
principal, owner, officer, director, employee, shareholder, consultant,
contractor, partner, member, joint venturer, agent, equity owner or in any other
capacity whatsoever, any (A) Competing Business or (B) Business Enterprise (as
defined below) that is otherwise directly competitive with the Company within
the states in which the Company conducts business; “Competing Business” means,
during the Employment Period, any business directly competitive with the
business in which the Company is engaged from time to time in connection with
the exploration and production of oil and gas in recognized basins and,
following the Employment Period, where VNR was actively conducting such business
as of the Date of Termination and during the one-year period preceding the Date
of Termination.

 

(ii)              perform for any corporation, partnership, limited liability
company, sole proprietorship, joint venture or other business association or
entity (a “Business Enterprise”) engaged in any Competing Business any duty
Executive has performed for the Company that involved Executive’s access to, or
knowledge or application of, Confidential Information;

 

(iii)            induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company to cease doing business with the Company
or in any way interfere with the relationship between any such customer,
supplier, licensee or business relation and the Company;

 

(iv)             induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company with whom Executive had direct business
contact in dealings during the Employment Period in the course of his employment
with the Company to cease doing business with the Company or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company; or

 

9

 

 

(v)               solicit with the purpose of hiring or hire any person who is
or, within 180 days after such person ceased to be an employee of the Company,
was an employee of the Company.

 

(b)               Notwithstanding the duration of the restrictions set forth in
Section 10(a) above and subject to Section 10(e) below, the restrictions set
forth under Sections 10(a)(i) and (ii) shall expire after 180 days following the
Date of Termination, if Executive terminates this Agreement under Sections 5(c)
or 4(b) hereof or the Company terminates Executive’s employment without Cause
under Sections 5(a) or 4(b).

 

(c)               Notwithstanding the foregoing restrictions of this Section 10,
nothing in this Section 10 shall prohibit (i) any investment by Executive,
directly or indirectly, in securities which are issued by a Business Enterprise
involved in or conducting a Competing Business, provided that Executive,
directly or indirectly, does not own more than five percent (5%) of the
outstanding equity or voting securities of such Business Enterprise or
(ii) Executive, directly or indirectly, from owning any interest in any Business
Enterprise which conducts a Competing Business if such interest in such Business
Enterprise is owned as of the date of this Agreement and Executive does not have
the right, in the case of (i) or (ii), through the ownership of a voting
interest or otherwise, to direct the activities of or associated with the
business of such Business Enterprise.

 

(d)               Executive acknowledges that each of the covenants of
Section 10(a) are in addition to, and shall not be construed as a limitation
upon, any other covenant provided in Section 10(a). Executive agrees that the
geographic boundaries, scope of prohibited activities, and time duration of each
of the covenants set forth in Section 10(a) are reasonable in nature and are no
broader than are necessary to maintain the confidentiality and the goodwill of
the Company’s proprietary and Confidential Information, plans and services and
to protect the other legitimate business interests of the Company, including
without limitation the goodwill developed by Executive with Company’s customers,
suppliers, licensees and business relations.

 

(e)               If, during any portion of the Restricted Period, Executive is
not in compliance with the terms of Section 10(a), the Company shall be entitled
to, among other remedies, compliance by Executive with the terms of
Section 10(a) for an additional period of time (i.e., in addition to the
Restricted Period) that shall equal the period(s) over which such noncompliance
occurred.

 

(f)                The parties hereto intend that the covenants contained in
Section 10(a) be construed as a series of separate covenants, one for each
defined province in each geographic area in which Executive on behalf of the
Company conducts business. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the applicable covenant contained
in Section 10(a). Furthermore, each of the covenants in Section 9(a) shall be
deemed a separate and independent covenant, each being enforceable irrespective
of the enforceability (with or without reformation) of the other covenants
contained in Section 10(a).

 

11.              Notices.

 

All notices and other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by
overnight delivery service to the parties at the following addresses or at such
other addresses as shall be specified by the parties by like notice, in order of
preference of the recipient:

 

10

 

 

To VNR or the Company: To Executive:
To the Secretary of VNR At the most recent address on file

 

Notice so given shall, in the case of mail, be deemed to be given and received
on the fifth calendar day after posting, and in the case overnight delivery
service, on the date of actual delivery.

 

12.              Severability and Reformation.

 

If any one or more of the terms, provisions, covenants or restrictions of this
Agreement shall be determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect, and the
invalid, void or unenforceable provisions shall be deemed severable. Moreover,
if any one or more of the provisions contained in this Agreement shall for any
reason be held to be excessively broad as to duration, geographical scope,
activity or subject, it shall be reformed by limiting and reducing it to the
minimum extent necessary, so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.

 

13.              Assignment.

 

This Agreement shall be binding upon and inure to the benefit of the heirs and
legal representatives of Executive and the permitted assigns and successors of
VNR, but neither this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by Executive without the
express written consent of VNR (except in the case of death by will or by
operation of the laws of intestate succession) or by VNR, except that VNR may
assign this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock assets or businesses of VNR,
if such successor expressly agrees to assume the obligations of VNR hereunder.

 

14.              Amendment.

 

This Agreement may be amended only by writing signed by both Executive and by a
duly authorized representative of VNR (other than Executive).

 

15.              Assistance in Litigation.

 

Executive shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or that may be brought in
the future against or on behalf of the Company that relate to events or
occurrences that transpired while Executive was employed by the Company.
Executive’s cooperation in connection with such claims or actions shall include,
but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Company at mutually
convenient times. Executive also shall cooperate fully with the Company in
connection with any investigation or review by any Federal, state, or local
regulatory authority as any such investigation or review relates, to events or
occurrences that transpired while Executive was employed by the Company. The
Company will pay Executive an agreed upon reasonable hourly rate for Executive’s
cooperation pursuant to this Section 15.

 

11

 

 

16.              Beneficiaries; References.

 

Executive shall be entitled to select (and change, to the extent permitted under
any applicable law) a beneficiary or beneficiaries to receive any compensation
or benefit payable hereunder following Executive’s death, and may change such
election, in either case by giving the Company written notice thereof. In the
event of Executive’s death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where appropriate, to
refer to his beneficiary, estate or other legal representative. Any reference to
the masculine gender in this Agreement shall include, where appropriate, the
feminine.

 

17.              Use of Name, Likeness and Biography.

 

The Company shall have the right (but not the obligation) to use, publish and
broadcast, and to authorize others to do so, the name, approved likeness and
approved biographical material of Executive to advertise, publicize and promote
the business of the Company and its affiliates, but not for the purposes of
direct endorsement without Executive’s consent. This right shall terminate upon
the termination of this Agreement. An “approved likeness” and “approved
biographical material” shall be, respectively, any photograph or other depiction
of Executive, or any biographical information or life story concerning the
professional career of Executive.

 

18.              Governing Law.

 

THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND GOVERNED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO RULES RELATING TO CONFLICTS
OF LAW.

 

19.              Entire Agreement.

 

This Agreement contains the entire understanding between the parties hereto with
respect to the subject matter hereof and supersedes in all respects any prior or
other agreement or understanding, written or oral, between the Company or any
affiliate of the Company and Executive with respect to such subject matter.

 

20.              Withholding.

 

The Company shall be entitled to withhold from payment to Executive of any
amount of withholding required by law.

 

21.              Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which will
be deemed an original.

  

12

 

 

22.              Remedies.

 

The parties recognize and affirm that in the event of a breach of Sections 9
or 10 of this Agreement, money damages would be inadequate and VNR would not
have an adequate remedy at law. Accordingly, the parties agree that in the event
of a breach or a threatened breach of Sections 9 or 10, VNR may, in addition and
supplementary to other rights and remedies existing in its favor, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security). In addition,
Executive agrees that in the event a court of competent jurisdiction or an
arbitrator finds that Executive violated Section 9 or 10, the time periods set
forth in those Sections shall be tolled until such breach or violation has been
cured. Executive further agrees that VNR shall have the right to offset the
amount of any damages resulting from a breach by Executive of Section 9 or 10
against any payments due Executive under this Agreement. The parties agree that
if one of the parties is found to have breached this Agreement by a court of
competent jurisdiction or arbitrator, the breaching party will be required to
pay the non-breaching party’s attorneys’ fees reasonably incurred in prosecuting
the non-breaching party’s claim of breach.

 

23.              Non-Waiver.

 

The failure by either party to insist upon the performance of any one or more
terms, covenants or conditions of this Agreement shall not be construed as a
waiver or relinquishment of any right granted hereunder or of any future
performance of any such term, covenant or condition, and the obligation of
either party with respect hereto shall continue in full force and effect, unless
such waiver shall be in writing signed by VNR (other than Executive) and
Executive.

 

24.              Announcement.

 

The Company shall have the right to make public announcements concerning the
execution of this Agreement and the terms contained herein, at the Company’s
discretion.

 

25.              Construction.

 

The headings and captions of this Agreement are provided for convenience only
and are intended to have no effect in construing or interpreting this Agreement.
The language in all parts of this Agreement shall be in all cases construed in
accordance to its fair meaning and not strictly for or against the Company or
Executive.

 

26.              Right to Insure.

 

The Company shall have the right to secure, in its own name or otherwise, and at
its own expense, life, health, accident or other insurance covering Executive,
and Executive shall have no right, title or interest in and to such insurance.
Executive shall assist the Company in procuring such insurance by submitting to
examinations and by signing such applications and other instruments as may be
required by the insurance carriers to which application is made for any such
insurance.

 

13

 

 

27.              No Inconsistent Obligations.

 

Executive represents and warrants that to his knowledge he has no obligations,
legal, in contract, or otherwise, inconsistent with the terms of this Agreement
or with his undertaking employment with the Company to perform the duties
described herein. Executive will not disclose to the Company, or use, or induce
the Company to use, any confidential, proprietary, or trade secret information
of others. Executive represents and warrants that to his knowledge he has
returned all property and confidential information belonging to all prior
employers, if he is obligated to do so.

 

28.              Binding Agreement.

 

This Agreement shall inure to the benefit of and be binding upon Executive, his
heirs and personal representatives, and the Company, its successors and assigns.

 

29.              Voluntary Agreement.

 

Each party to this Agreement has read and fully understands the terms and
provisions hereof, has had an opportunity to review this Agreement with legal
counsel, has executed this Agreement based upon such party’s own judgment and
advice of counsel (if any), and knowingly, voluntarily, and without duress,
agrees to all of the terms set forth in this Agreement. The parties have
participated jointly in the negotiation and drafting of this Agreement. If an
ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties and no presumption or burden of
proof will arise favoring or disfavoring any party because of authorship of any
provision of this Agreement. Except as expressly set forth in this Agreement,
neither the parties nor their affiliates, advisors and/or their attorneys have
made any representation or warranty, express or implied, at law or in equity
with respect of the subject matter contained herein. Without limiting the
generality of the previous sentence, the Companies, their affiliates, advisors,
and/or attorneys have made no representation or warranty to Executive concerning
the state or Federal tax consequences to Executive regarding the transactions
contemplated by this Agreement.

 

30.              Section 409A of the Code.

 

This Agreement is intended to comply with Section 409A of the Code, and the
Treasury regulations and other interpretive guidance issued thereunder
(collectively, “Section 409A”), or to be treated as exempt therefrom, and shall
be construed and administered in accordance with such intent. Any payments under
this Agreement that may be excluded from Section 409A either as separation pay
due to an involuntary separation from service, as a short-term deferral, or as
any other compensation that is otherwise exempt from Section 409A shall be
excluded from Section 409A to the maximum extent possible. Any payments to be
made under this Agreement upon a termination of Executive’s employment that are
subject to Section 409A shall only be made if such termination of employment
constitutes a “separation from service” under Section 409A. Notwithstanding any
provision in this Agreement to the contrary, if any payment or benefit provided
for herein would be subject to additional taxes and interest under Section 409A
if Executive’s receipt of such payment or benefit is not delayed until the
earlier of (i) the date of Executive’s death or (ii) the date that is six months
after the Date of Termination of Executive’s employment hereunder (such date,
the “Section 409A Payment Date”), then such payment or benefit shall not be
provided to Executive (or Executive’s estate, if applicable) until the
Section 409A Payment Date. Each payment under this Agreement is intended to be a
“separate payment” and not one of a series of payments for purposes of
Section 409A. Notwithstanding the foregoing, the Company does not guarantee any
particular tax effect, and Executive shall be solely responsible and liable for
the satisfaction of all taxes, penalties and interest that may be imposed on or
for the account of Executive in connection with the Agreement (including any
taxes, penalties and interest under Section 409A), and neither the Company, nor
any of its affiliates, shall have any obligation to indemnify or otherwise hold
Executive (or any beneficiary) harmless from any or all of such taxes, penalties
or interest.

 

14

 

 

31.              Section 280G 

 

Notwithstanding any other provisions in this Agreement, in the event that any
payment or benefit received or to be received by Executive (including, without
limitation, any payment or benefit received in connection with a Change of
Control of the Company or the termination of Executive’s employment, whether
pursuant to the terms of this Agreement or any other plan, program, arrangement
or agreement) (all such payments and benefits, together, the “Total Payments”)
would be subject (in whole or part), to any excise tax imposed under
Section 4999 of the Code, or any successor provision thereto (the “Excise Tax”),
then, after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, program, arrangement or
agreement, the Company will reduce the Total Payments to the extent necessary so
that no portion of the Total Payments is subject to the Excise Tax (but in no
event to less than zero); provided, however, that the Total Payments will be
reduced only if (a) the net amount of such Total Payments, as so reduced (and
after subtracting the net amount of federal, state, municipal and local income
and employment taxes on such reduced Total Payments and after taking into
account the phase out of itemized deductions and personal exemptions
attributable to such reduced Total Payments), is greater than or equal to
(b) the net amount of such Total Payments without such reduction (but after
subtracting the net amount of federal, state, municipal and local income and
employment taxes on such Total Payments and the amount of Excise Tax to which
Executive would be subject in respect of such unreduced Total Payments and after
taking into account the phase out of itemized deductions and personal exemptions
attributable to such unreduced Total Payments).

 

In the case of a reduction in the Total Payments, the Total Payments will be
reduced in the following order: (1) payments that are payable in cash that are
valued at full value under Treasury Regulation Section 1.280G-l, Q&A24(a) will
be reduced (if necessary, to zero ), with amounts that are payable last reduced
first; (2) payments and benefits due in respect of any equity valued at full
value under Treasury Regulation Section 1.280G-1, Q&A24(a), with the highest
values reduced first (as such values are determined under Treasury
Regulation Section 1.280G-1, Q&A 24), will next be reduced; (3) payments that
are payable in cash that are valued at less than full value under Treasury
Regulation Section l .280G-1, Q&A 24, with amounts that are payable last reduced
first, will next be reduced; ( 4) payments and benefits due in respect of any
equity valued at less than full value under Treasury
Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as
such values are determined under Treasury Regulation Section 1.280G-l, Q&A 24),
will next be reduced; and (5) all other non-cash benefits not otherwise
described in clause (2) or (4) will be next reduced pro-rata. Any reductions
made pursuant to each of clauses (1) through (4) above will be made in the
following manner: first, a pro-rata reduction of cash payment and payments and
benefits due in respect of any equity not subject to Section 409A of the Code,
and second, a pro-rata reduction of cash payments and payments and benefits due
in respect of any equity subject to Section 409A of the Code as deferred
compensation.

 

15

 

 

For purposes of determining whether and the extent to which the Total Payments
will be subject to the Excise Tax: (A) no portion of the Total Payments the
receipt or enjoyment of which Executive shall have waived at such time and in
such manner as not to constitute a “payment” within the meaning of
Section 280G(b) of the Code will be taken into account; (B) no portion of the
Total Payments will be taken into account that, in the opinion of the Company,
does not constitute a “parachute payment” within the meaning of
Section 280G(b)(2) of the Code (including, without limitation, by reason of
Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no
portion of such Total Payments will be taken into account that, in the opinion
of the Company, constitutes reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of
the “base amount” (as set forth in Section 280G(b)(3) of the Code) that is
allocable to such reasonable compensation; and (C) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Payments will
be determined by the Company in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.

 

 

32.              Indemnification 

 

VNR will defend and indemnify Executive as provided in VNR’s Bylaws and
Certificate of Incorporation, and to the maximum extent permitted pursuant to
applicable law. The obligations under this section shall survive termination of
Executive’s employment or this Agreement. During the Employment Period and
thereafter (with respect to events occurring during the Employment Period), VNR
will maintain and provide Executive with coverage under its directors’ and
officers’ liability policy to the same extent that it provides such coverage to
its other officers and directors.

 

16

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
on the dates below

 

  EXECUTIVE             Ryan Midgett   Date: 1/17/18               VANGUARD
NATURAL RESOURCES, INC.               By: Scott Sloan   Its: President Chief
Executive Officer   Date: 1/17/18

  

[Signature Page to Employment Agreement (Midgett)]