Document:

Exhibit 10.12

		

			 

		

		
			SETTLEMENT AGREEMENT
		

		
			This SETTLEMENT AGREEMENT (this “Agreement”) is made and entered into as of December 22, 2015, among VAALCO Energy, Inc., a Delaware corporation (the “Company”), on the one hand, and Group 42, Inc., a Delaware corporation, Mr. Paul A. Bell, and Mr. Michael Keane (collectively, “Group 42”), and BLR Partners LP, a Texas limited partnership, BLRPart, LP, a Texas limited partnership, BLRGP Inc., a Texas corporation, Fondren Management, LP, a Texas limited partnership, FMLP Inc., a Texas corporation, The Radoff Family Foundation, a Texas non-profit corporation, and Bradley L. Radoff  (collectively, the “BLR Group” and, together with Group 42, the “Stockholder Group”), on the other hand. The Company and the Stockholder Group are each referred to herein as a “Party” and collectively, as the “Parties.”
		

		
			RECITALS
		

		
			WHEREAS, as of the date hereof, the Stockholder Group beneficially owns, in the aggregate, 6,474,692 shares of common stock of the Company, par value $0.10 per share (“Common Stock”); 
		

		
			WHEREAS, the Company and the Stockholder Group have determined to come to an agreement with respect to the composition of the Board of Directors of the Company (the “Board”) and certain other matters, as provided in this Agreement.
		

		
			NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows:
		

		
			1.Withdrawal of the Consent Solicitation.
		

		
			(a)Group 42 hereby withdraws its Notice of Proposed Action by Written Consent of Stockholders to the Company dated November 6, 2015 (the “Notice”) with immediate effect.
		

		
			(b)Each member of the Stockholder Group shall, and shall cause its Representatives to, immediately cease the consent solicitation (the “Consent Solicitation”) pursuant to the Stockholder Group’s definitive consent solicitation statement on Schedule 14A filed with the SEC on December 4, 2015 (the “Consent Solicitation Statement”).  The Stockholder Group shall not, and shall cause its Representatives not to, mail or otherwise deliver any Consent Solicitation Statement or any consent card in respect of the Consent Solicitation to any of the Company’s stockholders.  Each member of the Stockholder Group agrees that it shall not, and shall not permit its Representatives to, vote, deliver or otherwise use any consents that may have been received by the Stockholder Group or any of its Representatives to date with respect to the Consent Solicitation.  
		

		
			2.Board Composition and Related Matters. 
		

		
			(a)Effective upon the execution of this Agreement, Mr. James B. Jennings and Mr. O. Donaldson Chapoton shall resign from the Board, and the Board shall accept their resignations with immediate effect.
		

		 

 

		
			(b)Effective upon the execution of this Agreement, Mr. Michael Keane shall be appointed to the Board (the “Stockholder Group Designee”). Prior to his appointment to the Board, the Stockholder Group Designee (and any Stockholder Group Replacement Designee) shall execute an irrevocable resignation as director in the form attached hereto as Exhibit A. Following his appointment to the Board, the Board shall appoint the Stockholder Group Designee (and any Stockholder Group Replacement Designee) to each of the Nominating and Corporate Governance Committee and the Compensation Committee.
		

		
			(c)Effective upon the execution of this Agreement,   the roles of Chairman of the Board and Chief Executive Officer shall be separated and  Mr. Andrew L. Fawthrop shall be the Chairman of the Board and  the Stockholder Group Designee shall be Vice Chairman of the Board.
		

		
			(d)Prior to the nomination of directors for election at the 2016 annual meeting of stockholders (the “2016 Annual Meeting”), the Board shall nominate for election at the 2016 Annual Meeting an additional designee mutually agreed upon between the Stockholder Group and the Company (the “Mutual Designee”, and, collectively with the Stockholder Group Designee, the “Designees”). The Mutual Designee shall qualify as an “independent director” under applicable rules of the SEC, the rules of the New York Stock Exchange (“NYSE”) and under the Company’s corporate governance guidelines. Immediately following the execution of this Agreement, the Company and the Stockholder Group shall engage in good faith discussions with respect to the individual who shall be the Mutual Designee.  Each of the Stockholder Group and the Company shall be entitled to recommend individuals for consideration to be selected as the Mutual Designee.  The Company shall not unreasonably withhold consent with respect to any Mutual Designee recommended by the Stockholder Group; provided that the Company may withhold consent if it reasonably determines that the Mutual Designee is not independent from the Stockholder Group as a result of material business or personal relationship with the Stockholder Group or any of its Affiliates or Associates.
		

		
			(e)During the time period starting on the date hereof and ending on the Termination Date (the “Commitment Period”), the Board shall  nominate the Designees for election to the Board at each Stockholder Meeting or in respect of any solicitation of written consents of stockholders at which directors are to be elected;  cause the Company to file a definitive proxy statement or definitive consent statement in respect of each Stockholder Meeting or solicitation of written consents of stockholders at which directors are to be elected and recommend that the Company’s stockholders vote or consent directly or by proxy in favor of, and otherwise use reasonable best efforts to cause, the election of all Designees; and  cause the Company to file a definitive consent revocation statement in respect of any solicitation of written consents of stockholders to remove any of the Designees and recommend that the Company’s stockholders do not sign consents to remove any of the Designees and use reasonable best efforts to cause the revocation of any such consents.
		

		
			(f)During the Commitment Period, in the event that the Stockholder Group Designee ceases to be a director for any reason, the Stockholder Group shall be entitled to designate,  for consideration by the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”), a candidate for replacement for such Stockholder Group Designee (such replacement, a “Stockholder Group Replacement Designee”). The Nominating Committee, in good faith and consistent with its fiduciary duties, shall make a decision with respect to such candidate within five (5) Business Days after a completed D&O questionnaire has been received by the Nominating Committee (the form of questionnaire shall be delivered to 
		

		 

		

			 

		

 

		the Stockholder Group Replacement Designee immediately following its designation by the Stockholder Group); and, subject to the Nominating Committee’s approval, which approval shall not be unreasonably withheld, the Board shall appoint such candidate approved by the Nominating Committee within two  (2) Business Days. In the event the Nominating Committee declines to recommend a candidate designated by the Stockholder Group,  the Stockholder Group may propose one or more replacement designees, subject to the above criteria.    
		

		
			(g)The size of the Board shall be fixed at no more than  seven directors, prior to the 2016 Annual Meeting, and  eight directors, following the 2016 Annual Meeting and until the end of the Commitment Period. 
		

		
			(h)The Company agrees that the Board and all applicable committees of the Board shall take all necessary actions, effective immediately following the execution of this Agreement, to determine that each Designee, including any Stockholder Group Replacement Designee, is deemed to be a member of the “Incumbent Board” (as such term is defined in the applicable agreement or instrument)  for purposes of determining whether there has been a “Change in Control” under (i) any employment agreements between the Company and any of its named executive officers entered into following the execution of this Agreement and (ii) the Company’s 2014 Long Term Incentive Plan for any grants following the execution of this Agreement.
		

		
			(i)The obligations of the Company pursuant to paragraphs (b), (e) (solely with respect to the Stockholder Group Designee and any Stockholder Group Replacement Designee), and (f)  of this Section 2 shall terminate immediately in the event the Stockholder Group ceases to beneficially own 5% or more of the issued and outstanding shares of Common Stock. 
		

		
			3.Shareholder Rights Plan.  Immediately following the execution of this Agreement, the Board shall terminate that certain Rights Agreement entered into by and between the Company and Computershare Trust Company, N.A., dated as of September 26, 2015, by amending such agreement to accelerate its expiration date, and shall take all other actions consistent with and necessary to facilitate such termination.
		

		
			4.Voting.   
		

		
			(a)During the Commitment Period, each member of the Stockholder Group shall, and shall cause its Affiliates and Associates under its control to, appear in person or by proxy, or deliver a consent or consent revocation, as applicable, at each Stockholder Meeting and in respect of any solicitation of written consents of stockholders and to vote all shares of Common Stock beneficially owned by such person and over which such person has voting power at such Stockholder Meeting or solicitation by written consent  in accordance with the Board’s recommendations with respect to each election of directors and any removal of directors, in each case as set forth in the Board’s applicable definitive proxy statement, consent solicitation statement or consent revocation statement filed in respect thereof; and  in accordance with the Board’s recommendations with respect to any other proposal to be submitted to the stockholders of the Company, in each case as set forth in the Board’s applicable definitive proxy statement, consent solicitation statement or consent revocation statement filed in respect thereof;   provided,  however, that, solely in respect of clause (ii), to the extent that the recommendation of Institutional Shareholder Services (“ISS”) differs from the Board’s recommendation, the 
		

		 

		

			 

		

 

		Stockholder Group shall have the right to vote any or all shares held by it in accordance with the recommendation of ISS.
		

		
			(b)Each member of the Stockholder Group agrees that it shall not, and that it shall not permit any of its Affiliates and Associates to, directly or indirectly, take any action inconsistent with this Section  4.
		

		
			5.Standstill.  During the Commitment Period, without the prior written consent of the Board, each member of the Stockholder Group shall not, and shall cause its Affiliates and Associates under its control not to, directly or indirectly:
		

		
			(a) (i) acquire or acquire rights to acquire (except by way of stock dividends or other distributions or offerings made available to holders of voting securities of the Company generally on a pro rata basis), directly or indirectly, whether by purchase, tender or exchange offer, through the acquisition of control of another person, by joining a group, through swap or hedging transactions or otherwise, any voting securities of the Company or any voting rights decoupled from the underlying voting securities which would result in the ownership,  control or other beneficial ownership interest in more than (A) for Group 42 and its Affiliates and Associates under its control 6.5% of the then-outstanding shares of the Common Stock in the aggregate,  provided, however, that this shall exclude any grants of equity securities received by Michael Keane in his capacity as director of the Company or shares Mr. Keane is otherwise required by the Company to acquire or hold,  and (B) for the BLR Group and its Affiliates and Associates under its control, 8.5% of the then-outstanding shares of the Common Stock in the aggregate; provided, however, that the foregoing ownership limitations shall be determined independently with respect to Group 42 and its Affiliates and Associates under its control, on the one hand, and the BLR Group and its Affiliates and Associates under its control, on the other hand; provided further, that the calculation of such ownership limitations shall exclude any stock buyback transaction by the Company that treats stockholders pro rata; or (ii) knowingly sell all or substantially all, through swap or hedging transactions or otherwise, the voting securities of the Company or any voting rights decoupled from the underlying voting securities held by the Stockholder Group and its Representatives to any Third Party which would, to the actual knowledge of the Stockholder Group, result in such Third Party, together with its Affiliates and Associates, having beneficial ownership interest of 5.0% or more of the then-outstanding shares of Common Stock (except for Schedule 13G filers that are mutual funds, pension funds or index funds);
		

		
			(b)(i) nominate or recommend for nomination a person for election at any Stockholder Meeting at which directors of the Board are to be elected or any solicitation of written consents of stockholders of the Company; (ii) initiate, encourage or participate in any solicitation of proxies or consents in respect of any election contest or removal contest with respect to the Company’s directors; (iii) submit any stockholder proposal for consideration at, or bring any other business before, any Stockholder Meeting; (iv) initiate, encourage or participate in any solicitation of proxies or consents in respect of any stockholder proposal for consideration at, or bring any other business before, any Stockholder Meeting; (v) initiate, encourage or participate in any solicitation of written consents of stockholders; or (vi) initiate, encourage or participate in any “withhold” or similar campaign with respect to any Stockholder Meeting or any solicitation of written consents of stockholders;  provided, however, that nothing in this Section  5 shall restrict the Stockholder Group from identifying and designating any of the Designees;  
		

		 

		

			 

		

 

		
			(c)form, join or in any way participate in any group with respect to any voting securities of the Company in connection with any election or removal contest with respect to the Company’s directors (other than with other members of the Stockholder Group or one or more of their Affiliates to the extent that any such person signs a joinder to this Agreement reasonably agreeable to the Company);
		

		
			(d)deposit any Company voting securities in any voting trust or subject any Company voting securities to any arrangement or agreement with respect to the voting thereof;
		

		
			(e)seek, alone or in concert with others, to amend any provision of the Company’s certificate of incorporation or bylaws; provided,  however, that nothing herein shall be deemed to restrict the ability of each Designee to propose any changes he deems appropriate in accordance with his fiduciary duties as a director of the Company; 
		

		
			(f)effect or seek to effect, offer or propose to effect, cause or participate in, or in any way assist or facilitate any other person to effect or seek, offer or propose to effect or participate in any tender offer or exchange offer, merger, acquisition, share exchange or other business combination with the Company or any of its subsidiaries; or any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its subsidiaries or any material portion of its or their businesses; 
		

		
			(g)enter into any discussions, negotiations, agreements or understandings with any Third Party with respect to the foregoing, or encourage or seek to persuade any Third Party to take any action with respect to any of the foregoing, or otherwise take or cause any action materially inconsistent with any of the foregoing; or
		

		
			(h)take any action challenging the validity or enforceability of this Section 5 or this Agreement, or publicly make or in any way advance publicly any request or proposal that the Company or Board amend, modify or waive any provision of this Agreement.
		

		
			Nothing in this Section 5 shall be deemed to limit the ability of the Designees to exercise their fiduciary duties under law solely in their capacity as directors of the Company and in a manner consistent with their obligations under this Agreement.
		

		
			6.Mutual Non-Disparagement.  During the Commitment Period,  each Party shall not, and shall not permit any of its Affiliates and Associates to, publicly disparage or criticize the other Party, its business or any current or former directors, officers or employees of the other Party, as applicable. 
		

		
			7.No Litigation.  During the Commitment Period:
		

		
			(a)Each Party hereby covenants and agrees that it shall not, and shall not permit any of its Affiliates and Associates under its control to, directly or indirectly, alone or in concert with others, pursue, or assist any other person to initiate or pursue, any lawsuit, claim or proceeding before any court (collectively, “Legal Proceeding”) against the other Party or any of its Representatives, except for any Legal Proceeding initiated solely to remedy a breach of or to enforce this Agreement; provided,  however, that the foregoing shall not prevent any Party or any of their Representatives from responding to a Legal Requirement in connection with any Legal Proceeding if such Legal Proceeding has not been initiated by, or on behalf of, or at the suggestion of, such Party or any of their Representatives; provided,  further, that in the event any 
		

		 

		

			 

		

 

		Party or any of its Representatives receives such Legal Requirement, such Party shall give prompt written notice of such Legal Requirement to the other Party.
		

		
			8.Press Release and SEC Filings.
		

		
			(a)No later than one (1) Business Day following the execution of this Agreement, the Company and the Stockholder Group shall announce the entry into this Agreement and the material terms hereof by means of a mutually agreed upon press release in the form attached hereto as Exhibit B or as otherwise agreed to by the Parties (the “Mutual Press Release”). Prior to the issuance of the Mutual Press Release, neither the Company nor the Stockholder Group shall issue any press release or public announcement regarding this Agreement or take any action that would require public disclosure thereof without the prior written consent of the other Party.  No Party or any of its Representatives shall make any public statement (including, without limitation, in any filing required under the Exchange Act) concerning the subject matter of this Agreement inconsistent with the Press Release,  except as required by law or the rules of any applicable stock exchange or with the prior written consent of the Stockholder Group and/or the Company, as applicable, and otherwise in accordance with this Agreement.  
		

		
			(b)No later than two (2) Business Days following the execution of this Agreement, the Stockholder Group shall file with the SEC a Schedule 13D in compliance with Section 13 of the Exchange Act, reporting its entry into this Agreement, disclosing applicable items to conform to its obligations hereunder and appending this Agreement as an exhibit thereto (the “Schedule 13D”).  The Schedule 13D shall be consistent with the Mutual Press Release and the terms of this Agreement.  The Stockholder Group shall provide the Company and its Representatives with a reasonable opportunity to review the Schedule 13D prior to it being filed with the SEC and consider in good faith any comments of the Company and its Representatives.
		

		
			(c)No later than two (2) Business Days following the execution of this Agreement, the Company shall file with the SEC a Current Report on Form 8-K, reporting its entry into this Agreement and appending this Agreement and the Mutual Press Release as an exhibit thereto (the “Form 8-K”).  The Form 8-K shall be consistent with the Mutual Press Release and the terms of this Agreement.  The Company shall provide the Stockholder Group and its Representatives with a reasonable opportunity to review and comment on the Form 8-K prior to the filing with the SEC and consider in good faith any comments of the Stockholder Group and its Representatives. 
		

		
			9.Confidentiality.    
		

		
			(a)Each member of the Stockholder Group acknowledges that certain information concerning the business and affairs of the Company (“Confidential Information”) may be disclosed to the Stockholder Group and its Representatives by the Company and its Representatives.  Each member of the Stockholder Group agrees that the Confidential Information shall be kept confidential and that the Stockholder Group and its Representatives shall not disclose any of the Confidential Information in any manner whatsoever without the specific prior written consent of the Company unless pursuant to paragraph (b) below; provided,  however, that the term “Confidential Information” shall not include information that (i) was already in the possession of the Stockholder Group, (ii) was in or enters the public domain, or was or becomes generally available to the public, other than as a result of the disclosure by any member of the Stockholder Group or any of its Representatives in violation of the terms of this 
		

		 

		

			 

		

 

		Agreement; or (iii) was independently developed or acquired by any member of the Stockholder Group without violating any of the obligations of any member of the Stockholder Group or any of its Representatives under this Agreement or any other confidentiality agreement, or under any other contractual, legal, fiduciary or binding obligation of any member of the Stockholder Group or any of its Representatives and without use of any Confidential Information.  Each member of the Stockholder Group shall undertake reasonable precautions to safeguard and protect the confidentiality of the Confidential Information, to accept responsibility for any breach of this Section  9 by any of its Representatives, including taking all reasonable measures (including Legal Proceedings) to restrain its Representatives from prohibited or unauthorized disclosures or uses of the Confidential Information. For the avoidance of doubt, the term “Confidential Information” shall include any information relating to the discussions or negotiations between the Company and its Representatives, on the one hand, and the Stockholder Group and its Representatives, on the other hand. 
		

		
			(b)In the event that any member of the Stockholder Group or any of its Representatives is required to disclose any Confidential Information by law, regulation, the rules of any applicable stock exchange, including, but not limited to, by oral questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands or similar processes (a “Legal Requirement”), such member of the Stockholder Group and its Representatives shall, to the extent legally permitted (i) provide the Company reasonably prompt notice of such Legal Requirement so that the Company may seek an appropriate protective order and waive compliance with the provisions of this Agreement; and (ii) consult with the Company as to the advisability of taking legally available steps to resist or narrow any disclosure pursuant to such Legal Requirement.  If, in the absence of a protective order or the receipt of a waiver hereunder, such member of the Stockholder Group is advised by its outside legal counsel that it is legally required or advised to disclose such Confidential Information, such member of the Stockholder Group may disclose to the required person that portion (and only that portion) of the Confidential Information that such counsel has advised it is required or advised to be disclosed; provided,  however, that such member of the Stockholder Group shall give the Company written notice as far in advance of its disclosure as is reasonably practicable and shall reasonably cooperate using commercially reasonable efforts in assisting the Company in connection with the Company seeking to obtain an order or other reliable assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed.
		

		
			(c)For the avoidance of doubt, the obligations under this Section 9 shall be in addition to, and not in lieu of, the Stockholder Designee’s confidentiality obligations under Delaware law and the certificate of incorporation, bylaws and applicable corporate governance policies of the Company.
		

		
			10.Compliance with Securities Laws.  Each member of the Stockholder Group acknowledges that the U.S. securities laws generally prohibit any person who has received from an issuer material, non-public information concerning such issuer from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.
		

		
			
		

		 

		

			 

		

 

		
		

		
			11.Affiliates and Associates. Each member of the Stockholder Group shall cause its controlled Affiliates and Associates to comply with the terms of this Agreement and shall be responsible for any breach of this Agreement by any such controlled Affiliate or Associate.  A breach of this Agreement by a controlled Affiliate or Associate of any member of the Stockholder Group, if such controlled Affiliate or Associate is not a Party, shall be deemed to occur if such controlled Affiliate or Associate engages in conduct that would constitute a breach of this Agreement if such controlled Affiliate or Associate was a Party to the same extent as the Stockholder Group.
		

		
			12.Representations and Warranties.
		

		
			(a)Each of Mr. Bell, Mr. Keane and Mr. Radoff represents and warrants that he is sui juris and of full capacity. Each member of the Stockholder Group represents and warrants that it has full power and authority to execute, deliver and carry out the terms and provisions of this Agreement and to consummate the transactions contemplated hereby, and that this Agreement has been duly and validly executed and delivered by each member of the Stockholder Group, constitutes a valid and binding obligation and agreement of each member of the Stockholder Group and is enforceable against each member of the Stockholder Group in accordance with its terms.  Each member of the Stockholder Group represents and warrants that, as of the date of this Agreement, the Stockholder Group beneficially owns 6,474,692 shares of the Common Stock, has voting authority over such shares, and owns no Synthetic Equity Interests or any Short Interests in the Company.  Each member of the Stockholder Group represents and warrants that it has not formed, is no member of, any group with any other person (other than the members of the group formed pursuant to the Stockholder Group’s Schedule 13D filed with the SEC) and does not act in concert with any other person.   Each member of the Stockholder Group represents and warrants that it has not, directly or indirectly, compensated or agreed to, and shall not, compensate either of the Designees for his respective service as a director of the Company with any cash, securities (including any rights or options convertible into or exercisable for or exchangeable into securities or any profit sharing agreement or arrangement) or other form of compensation directly or indirectly related to the Company or its securities, except for, in the case of the Stockholder Group Designee  (and any Stockholder Group Replacement Designee), any performance-based compensation tied to the investments of Group 42, Fondren Management, LP or their Affiliates (other than the Company).
		

		
			(b)The Company hereby represents and warrants that it has the power and authority to execute, deliver and carry out the terms and provisions of this Agreement and to consummate the transactions contemplated hereby, and that this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding obligation and agreement of the Company and is enforceable against the Company in accordance with its terms. The Company further represents and warrants that prior to the execution of this Agreement, consistent with their fiduciary duties, the Board approved the Stockholder Group Designee.
		

		
			13.Termination.  Each Party shall have the right to terminate this Agreement by giving written notice to the other Party at any time following the date that is the thirtieth (30th) day prior to the nomination deadline for the 2017 annual general meeting of stockholders (the date of such termination, the “Termination Date”).  Notwithstanding the foregoing,
		

		

		

		 

		

			 

		

 

		
		

		
			(a)the obligations of the Stockholder Group pursuant to Section 4,  Section 5, Section 6 and Section 7 shall terminate in the event the Company materially breaches its obligations pursuant to Section 2, Section 3, Section 6 or Section 7 or the representations and warranties in Section 12(b) of this Agreement and such breach has not been cured within 30 days following written notice of such breach; provided,  however, that any termination in respect of a breach of Section 6 requires a determination of a court of competent jurisdiction that the Company has materially breached Section 6;  provided,  further,  that the obligations of the Stockholder Group pursuant to Section 7 shall terminate immediately in the event that the Company materially breaches its obligations under Section 7;  
		

		
			(b)the obligations of the Company pursuant to Section 2,  Section 3, Section ‎6 and Section 7 shall terminate in the event any member of the Stockholder Group materially breaches its obligations in Section 1, Section 4, Section 5,  Section 6, Section 7 or Section 9 or the representations and warranties in Section 12(a) and such breach has not been cured within 30 days following written notice of such breach; provided,  however, that any termination in respect of a breach of Section ‎6 requires a determination of a court of competent jurisdiction that the Stockholder Group has materially breached Section 6;  provided,  further,  that the obligations of the Company pursuant to Section 7 shall terminate immediately in the event that any member of the Stockholder Group materially breaches its obligations under Section 7; and 
		

		
			(c)Section 9,  this Section 13 and Sections 14 to 19 shall continue to be in effect for a period of two years following such termination.
		

		
			No termination shall relieve any Party from liability for any breach of this Agreement prior to such termination.
		

		
			14.Expenses.  Each Party shall be responsible for its own fees and expenses incurred in connection with the negotiation, execution and effectuation of this Agreement and the transactions contemplated hereby, including, but not limited to, matters related to the Consent Solicitation; provided,  however, that the Company shall reimburse the Stockholder Group for reasonable and documented expenses associated with the negotiation, execution and effectuation of this Agreement and the Consent Solicitation, including, but not limited to, legal fees, in an amount not to exceed $350,000.
		

		
			
		

		 

		

			 

		

 

		
		

		
			15.Notices.  All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered by hand, with written confirmation of receipt; upon sending if sent by facsimile to the facsimile numbers below, with electronic confirmation of sending; one day after being sent by a nationally recognized overnight carrier to the addresses set forth below; or when actually delivered if sent by any other method that results in delivery, with written confirmation of receipt:
		

			
					
						 

					
						 

					
						 

					
						 

					
						 

					
						 

					
					
						 

					
						 

					
						 

					
						H. Liekefett, Esq.

					
						212.237.0100

					
						 

					
						 

				
	
					
						If to the Company:

					
						VAALCO Energy, Inc.

					
						9800 Richmond Avenue, Suite 700

					
						Houston, Texas 7704

					
						Attention:  General Counsel

					
						Facsimile:  713.623.0982

					
						 

					
					
						with a copy (which shall not constitute notice) to:

					
						Vinson & Elkins L.L.P.

					
						666 Fifth Avenue, 26th Floor

					
						New York, NY  10103-0040

					
						Attention:  Stephen M. Gill, Kai H. Liekefett, Esq.

					
						Facsimile:  212.237.0100

					
						 

				
	
					
						If to the Stockholder Group:

					
						Group 42, Inc.

					
						312 Pearl Pkwy.

					
						CIA Building II, Suite 2403

					
						San Antonio, TX 78215

					
						Attention: Paul A. Bell

					
						Facsimile: 210.824.5848

					
						 

					
					
						with a copy (which shall not constitute notice) to:

					
						Olshan Frome Wolosky LLP

					
						Park Avenue Tower

					
						65 East 55th Street

					
						New York, NY 10022

					
						Attention:  Steve Wolosky, Esq., Aneliya S. Crawford, Esq.

					
						Facsimile:  212.451.2222

					
						 

				

		
			16.Governing Law; Jurisdiction; Jury Waiver.  This Agreement, and any disputes arising out of or related to this Agreement (whether for breach of contract, tortious conduct or otherwise), shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to its conflict of laws principles.  The Parties agree that exclusive jurisdiction and venue for any Legal Proceeding arising out of or related to this Agreement shall exclusively lie in the Court of Chancery of the State of Delaware or, if such Court does not have subject matter jurisdiction, to the Superior Court of the State of Delaware or, if jurisdiction is vested exclusively in the Federal courts of the United States, the Federal courts of the United States sitting in the State of Delaware, and any appellate court from any such state or Federal court.  Each Party waives any objection it may now or hereafter have to the laying of venue of any such Legal Proceeding, and irrevocably submits to personal jurisdiction in any such court in any such Legal Proceeding and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any court that any such Legal Proceeding brought in any such court has been brought in any inconvenient forum.  Each Party consents to accept service of process in any such Legal Proceeding by service of a copy thereof upon either its registered agent in the State of Delaware or the Secretary of State of the State of Delaware, with a copy delivered to it by certified or registered mail, postage prepaid, return receipt requested, addressed to it at the address set forth in Section 15.  Nothing contained herein shall be deemed to affect the right of any Party to serve process in any manner permitted by law.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.
		

		 

		

			 

		

 

		
			17.Specific Performance.  Each member of the Stockholder Group, on the one hand, and the Company, on the other hand, acknowledges and agrees that irreparable injury to the other Party would occur in the event any provision of this Agreement were not performed in accordance with such provision’s specific terms or were otherwise breached or threatened to be breached and that such injury would not be adequately compensable by the remedies available at law (including the payment of money damages).  It is accordingly agreed that each member of the Stockholder Group, on the one hand, and the Company, on the other hand (the “Moving Party”), shall each be entitled to specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof, and the other Party hereto shall not take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the grounds that any other remedy or relief is available at law or in equity.  This Section 17 shall not be the exclusive remedy for any violation of this Agreement.
		

		
			18.Certain Definitions and Interpretations.  As used in this Agreement:  (a) the terms “Affiliate” and “Associate”  (and any plurals thereof) have the meanings ascribed to such terms under Rule 12b-2 promulgated by the SEC under the Exchange Act and shall include all persons or entities that at any time prior to the Termination Date become Affiliates or Associates of any person or entity referred to in this Agreement;  (b) the term “Annual Meeting” means each annual meeting of stockholders of the Company and any adjournment, postponement, reschedulings or continuations thereof;  (c) the term “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;(d)  the terms “beneficial ownership,” “group,” “person,” “proxy,” and “solicitation” (and any plurals thereof) have the meanings ascribed to such terms under the Exchange Act; (e) the term “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in the State of Delaware are authorized or obligated to be closed by applicable law; (f) the term “Representatives” means a person’s Affiliates and Associates under its control and its and their respective directors, officers, employees, partners, members, managers, consultants, legal or other advisors, agents and other representatives;  (g) the term “SEC” means the U.S. Securities and Exchange Commission; (h) the term “Short Interests” means any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Company’s equity securities by, manage the risk of share price changes for, or increase or decrease the voting power of, such person with respect to the shares of any class or series of the Company’s equity securities, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the Company’s equity securities;(i) the term “Stockholder Meeting” means each annual or special meeting of stockholders of the Company, or any other meeting of stockholders held in lieu thereof, and any adjournment, postponement, reschedulings or continuations thereof; (j) the term “Synthetic Equity Interests” means any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such person, the purpose or effect of which is to give such person economic risk similar to ownership of equity securities of any class or series of the Company, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the Company’s equity securities, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Company’s equity securities, without regard to whether (i) the derivative, swap or other transactions convey any voting rights in such equity securities to such person; (ii) the derivative, swap or other transactions are required to be, or are capable of being, 
		

		 

		

			 

		

 

		settled through delivery of such equity securities; or (iii) such person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions; and (k) the term “Third Party” refers to any person that is not a Party, a member of the Board, a director or officer of the Company, or legal counsel to any Party.  In this Agreement, unless a clear contrary intention appears, (i) the word “including” (in its various forms) means “including, without limitation;” (ii) the words “hereunder,” “hereof,” “hereto” and words of similar import are references in this Agreement as a whole and not to any particular provision of this Agreement; (iii) the word “or” is not exclusive; and (iv) references to “Sections” in this Agreement are references to Sections of this Agreement unless otherwise indicated.  
		

		
			19.Miscellaneous.
		

		
			(a)This Agreement contains the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof and thereof.
		

		
			(b)This Agreement is solely for the benefit of the Parties and is not enforceable by any other persons.  
		

		
			(c)This Agreement shall not be assignable by operation of law or otherwise by a Party without the consent of the other Party.  Subject to the foregoing sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the permitted successors and assigns of each Party.
		

		
			(d)Neither the failure nor any delay by a Party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder.
		

		
			(e)If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  It is hereby stipulated and declared to be the intention of the Parties that the Parties would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable.  In addition, the Parties agree to use their reasonable best efforts to agree upon and substitute a valid and enforceable term, provision, covenant or restriction for any of such that is held invalid, void or enforceable by a court of competent jurisdiction.
		

		
			(f)Any amendment or modification of the terms and conditions set forth herein or any waiver of such terms and conditions must be agreed to in a writing signed by each Party.
		

		
			(g)This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, shall have the same effect as physical delivery of the paper document bearing the original signature.
		

		
			 
		

		

		

		 

		

			 

		

 

		IN WITNESS WHEREOF, each of the Parties has executed this Agreement, or caused the same to be executed by its duly authorized representative, as of the date first above written.
		

		
			 
		

		
			GROUP 42, INC,
		

		
			By:/s/ Paul A. Bell
		

		
			Name:Paul A. Bell
		

		
			Title:President and Chief Executive Officer
		

		
			PAUL A. BELL
		

		
			/s/ Paul A. Bell
		

		
			Paul A. Bell
		

		

		

		 

		

			Signature Page to Settlement Agreement

		

 

		MICHAEL KEANE
		

		
			/s/ Michael Keane
		

		
			Michael Keane
		

		
			 
		

		

		

		 

		

			Signature Page to Settlement Agreement

		

 

		BLR PARTNERS LP
		

		
			By: BLPPart, LP, General Partner
		

		
			By: BLRGP Inc., General Partner
		

		
			By:/s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff
		

		
			Title:Sole Director
		

		
			BLRPART, LP
		

		
			By: BLRGP Inc., General Partner
		

		
			By:/s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff 
		

		
			Title:Sole Director
		

		
			BLRGP INC.
		

		
			By:/s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff 
		

		
			Title:Sole Director
		

		
			FONDREN MANAGEMENT, LP
		

		
			By: FMLP INC., General Partner
		

		
			By:/s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff
		

		
			Title:Sole Director
		

		
			FMLP INC.
		

		
			By:/s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff
		

		
			Title:Sole Director
		

		

		

		 

		

			Signature Page to Settlement Agreement

		

 

		THE RADOFF FAMILY FOUNDATION
		

		
			By: /s/ Bradley L. Radoff
		

		
			Name:Bradley L. Radoff
		

		
			Title:Director
		

		
			BRADLEY L. RADOFF
		

		
			/s/ Bradley L. Radoff
		

		
			Bradley L. Radoff
		

		

		

		 

		

			Signature Page to Settlement Agreement

		

 

		
		

		
			VAALCO ENERGY, INC. 
		

		
			By: /s/ Steven P. Guidry
		

		
			Name:Steven P. Guidry
		

		
			Title:Chief Executive Officer
		

		

		

		 

		

			Signature Page to Settlement Agreement

		

 

		Exhibit A
		

		
			Resignation Letter
		

		 

		

			 

		

 

		
		

		
			December 22, 2015
		

		
			Board of Directors
VAALCO Energy, Inc.
9800 Richmond Avenue, Suite 700
Houston, Texas 7704
		

		
			Re: Resignation
		

		
			Ladies and Gentlemen:
		

		
			This irrevocable resignation is delivered pursuant to that certain Settlement Agreement (the “Agreement”) dated as of December 22, 2015 among VAALCO Energy, Inc. (the “Company”) and Group 42, Inc., Paul A. Bell, Michael Keane, BLR Partners LP, BLRPart, LP, BLRGP Inc., Fondren Management, LP, FMLP Inc., The Radoff Family Foundation and Bradley L. Radoff  (collectively, the “Stockholder Group”).  Capitalized terms used herein but not defined shall have the meaning set forth in the Agreement.
		

		
			Effective immediately upon (i) such time as the Stockholder Group’s ownership in the Company falls below 5% of the outstanding Common Stock or (ii) the Termination Date, I hereby irrevocably resign from my position as a director of the Board and from any and all committees of the Board on which I serve.  I acknowledge that upon such resignation I shall have no rights to nominate, recommend, appoint or participate in a Board vote in respect of any replacement director. 
		

		
			 
		

		
			Very truly yours, 
		

		
			 
		

		
			/s/ Michael Keane
		

		
			Name:  Michael Keane
		

		

		

		 

		

			 

		

 

		
		

		
			Exhibit B
		

		
			Mutual Press ReleaseEX-4.1

 Exhibit 4.1 

ATLAS RESOURCE PARTNERS HOLDINGS, LLC 

ATLAS RESOURCE FINANCE CORPORATION 

and 
 the Subsidiary Guarantors
named herein 
  
  

9.25% SENIOR NOTES DUE 2021 
  

 
  

 
 FOURTH
SUPPLEMENTAL INDENTURE 
 DATED AS OF DECEMBER 17, 2015 
  

 
 WELLS FARGO
BANK, NATIONAL ASSOCIATION, 
 Trustee 
  

 

 This FOURTH SUPPLEMENTAL INDENTURE, dated as of December 17, 2015, is among Atlas Resource
Partners Holdings, LLC, a Delaware limited liability company (the “Company”), Atlas Resource Finance Corporation, a Delaware corporation (“Finance Co” and, together with the Company, the “Issuers”),
Atlas Resource Partners, L.P., a Delaware limited partnership (“ARP”), and each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary
Guarantors” and, together with ARP, the “Guarantors”) and Wells Fargo Bank, National Association, a national banking association, as Trustee. 

RECITALS 
 WHEREAS, the Issuers,
ARP, the initial Subsidiary Guarantors and the Trustee are party to that certain Indenture, dated as of July 30, 2013 (the “Base Indenture”), as supplemented by a first supplemental indenture dated as of July 31, 2013 (the
“First Supplemental Indenture”), a second supplemental indenture dated as of October 14, 2014 (the “Second Supplemental Indenture”) and a third supplemental indenture dated as of July 23, 2015 (the
“Third Supplemental Indenture” and, together with the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture and the Base Indenture, the “Indenture”), pursuant to which the
Issuers have issued an aggregate of $325,000,000 in principal amount of 9.25% Senior Notes due 2021 (the “Notes”); 

WHEREAS, the Issuers desire and have requested ARP, the Subsidiary Guarantors and the Trustee to join with the Issuers in the execution and
delivery of this Fourth Supplemental Indenture for the purpose of increasing the fixed dollar amount in the basket for secured Credit Facilities from $500 million to $1,050 million; 

WHEREAS, Section 9.02 of the Indenture provides that a supplemental indenture may be entered into by the Issuers, the Guarantors and the
Trustee to change certain provisions of the Indenture or modify certain rights of the holders of the Notes with the consent of Holders of at least a majority in principal amount of the Notes then outstanding; 

WHEREAS, pursuant to a solicitation by the Issuers, consents to an amendment to Article 4, Section 4.09(b)(1) of the Indenture by Holders
of at least a majority in principal amount of the Notes then outstanding have been received; 
 WHEREAS, the Issuers have furnished, or
caused to be furnished, to the Trustee, and the Trustee has received, an Officers’ Certificate and an Opinion of Counsel stating, among other things, that this Supplemental Indenture is authorized or permitted by the Indenture; 

WHEREAS, all acts and things prescribed by the Indenture, by law and by the limited partnership agreement, limited liability company
agreement, Certificate of Incorporation and the Bylaws (or comparable constituent documents) of the Issuers, of the Guarantors and of the Trustee necessary to make this Fourth Supplemental Indenture a valid instrument legally binding on the Issuers,
the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; and 
 WHEREAS, this Fourth Supplement
Indenture has not resulted in a material modification of the Notes for Foreign Account Tax Compliance Act purposes. 

 NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above
premises, the Issuers, the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows: 

ARTICLE 1 
 Section 1.01.
This Fourth Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. 

Section 1.02. This Fourth Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the
Issuers, the Guarantors and the Trustee. The amendments set forth in Article 2 below shall not become operative until the Issuers deliver to the Trustee a signed Officers Certificate stating that all conditions to make the amendments operative have
been met. 
 Section 1.03. Each of the Issuers represents and warrants to the Trustee that the conditions precedent to the amendments
of the Indenture, including such conditions pursuant to Section 9.02 of the Base Indenture, have been satisfied in all respects. 

ARTICLE 2 
 Section 2.01.
Section 4.09(b)(1)(a) of the Indenture shall be amended by replacing “$500.0 million” with “$1,050 million”. 

Section 2.02. The following proviso is to be added to clause (a) of Section 4.09(b)(1): “provided, however,
that no more than $100 million of Indebtedness may be Incurred pursuant to this clause (a) to effect an exchange of the Notes or the 7.75% Notes by the Issuers for secured Indebtedness of the Issuers.” 

Section 2.03. The following definition will be added to Section 1.01: ““7.75% Notes” means the Issuers’
7.75% senior notes due 2021.” 
 ARTICLE 3 

Section 3.01. Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis
mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture. 

Section 3.02. No duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of
this Fourth Supplemental Indenture. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Fourth Supplemental Indenture or for or in respect of the recitals contained herein, all of
which recitals are made solely by the Issuers. 
 Section 3.03. THIS FOURTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 

Section 3.04. The parties may sign any number of copies of this Fourth Supplemental Indenture. Each signed copy shall be an original, but
all of such executed copies together shall represent the same agreement. 

 Section 3.05. This Fourth Supplemental Indenture will not result in a material modification
of the Notes for purposes of the Foreign Account Tax Compliance Act (“FATCA”). The Issuers shall give the Trustee prompt written notice of any material modification of the Notes deemed to occur for FATCA purposes. The Trustee shall
assume that no material modification for FATCA purposes has occurred regarding the Notes, unless the Trustee receives written notice from the Issuers that a material modification has occurred or will occur with respect to the Notes. 

[NEXT PAGE IS SIGNATURE PAGE] 

 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly
executed, all as of the date first written above. 
  

							
	ATLAS RESOURCE PARTNERS HOLDINGS, LLC
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer
	
	ATLAS RESOURCE FINANCE CORPORATION
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer
	
	Parent Guarantor:
	
	ATLAS RESOURCE PARTNERS, L.P.
	
	By: Atlas Energy Group, LLC, its General Partner
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer

 [Signature Page to ARP Fourth Supplemental Indenture – 9.25% Notes] 

 
							
	Subsidiary Guarantors:
	
	ATLAS ENERGY COLORADO, LLC
	ATLAS ENERGY INDIANA, LLC
	ATLAS ENERGY OHIO, LLC
	ATLAS ENERGY TENNESSEE, LLC
	ATLAS NOBLE, LLC
	ATLAS RESOURCES, LLC
	REI-NY, LLC
	RESOURCE ENERGY, LLC
	RESOURCE WELL SERVICES, LLC
	VIKING RESOURCES, LLC
	ARP BARNETT, LLC
	ARP OKLAHOMA, LLC
	ATLAS BARNETT, LLC
	ARP MOUNTAINEER PRODUCTION, LLC
	ARP PRODUCTION COMPANY, LLC
	ARP RANGELY PRODUCTION, LLC
	ARP EAGLE FORD, LLC
		
	By:	 	Atlas Resource Partners Holdings, LLC, its Sole Member
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer
	
	ARP BARNETT PIPELINE, LLC
		
	By:	 	ARP Barnett, LLC, its Sole Member
	By:	 	Atlas Resource Partners Holdings, LLC, its Sole Member
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer
	
	ATLS PRODUCTION COMPANY, LLC
		
	By:	 	ARP Production Company, LLC, its Sole Member
	By:	 	Atlas Resource Partners Holdings, LLC, its Sole Member
			
	By:	 		 	 /s/ Jeffrey M. Slotterback

		 		 	Name:	 	Jeffrey M. Slotterback
		 		 	Title:	 	Chief Financial Officer

 [Signature Page to ARP Fourth Supplemental Indenture – 9.25% Notes] 

 
			
	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
		
	By:	 	 /s/ Martin Reed

	Name:	 	Martin Reed
	Title:	 	Vice President

 [Signature Page to ARP Fourth Supplemental Indenture – 9.25% Notes]

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