Document:

exv10w1

Exhibit 10.1

SEVENTH AMENDMENT

TO FOURTH AMENDED AND RESTATED REVOLVING LOAN AGREEMENT

          This Seventh Amendment to Fourth Amended and Restated Revolving Loan Agreement (this
“Amendment”) is entered into as of January 25, 2011 by and among VIASAT, INC., a Delaware
corporation (“Borrower”), each lender to the Credit Agreement (as defined below)
(collectively, the “Lenders” and individually, a “Lender”) that is a party hereto,
UNION BANK, N.A., as administrative agent (in such capacity, “Administrative Agent”), BANK
OF AMERICA, N.A., as Syndication Agent, JPMORGAN CHASE BANK, N.A., COMPASS BANK and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents, CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
and BANK OF THE WEST, as Co-Agents, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and UNION
BANK, N.A., as Joint Lead Arrangers and Joint Book Runners and UNION BANK, N.A., as collateral
agent (in such capacity, “Collateral Agent”).

RECITALS

          Borrower, Administrative Agent, Collateral Agent and the Lenders are parties to that certain
Fourth Amended and Restated Revolving Loan Agreement dated as of July 1, 2009, as amended by that
certain First Amendment to the Fourth Amended and Restated Revolving Loan Agreement dated as of
September 30, 2009, that certain Second Amendment to the Fourth Amended and Restated Revolving Loan
Agreement dated as of October 6, 2009, that certain Letter Agreement — Third Amendment dated as of
December 15, 2009, that certain Fourth Amendment to Fourth Amended and Restated Revolving Loan
Agreement dated as of March 15, 2010, that certain Letter Agreement — Fifth Amendment dated as of
March 31, 2010 and that certain Letter Agreement — Sixth Amendment dated as of October 12, 2010
(as further amended, modified or supplemented from time to time, the “Credit Agreement”).
The parties desire to amend the Credit Agreement in certain respects in accordance with the terms
of this Amendment. Unless otherwise defined herein, all capitalized terms in this Amendment shall
be as defined in the Credit Agreement.

          NOW, THEREFORE, the parties hereto agree as follows:

     1. The title page of the Credit Agreement is hereby amended by (a) deleting the reference
therein to “BANC OF AMERICA SECURITIES LLC” and replacing it with “MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED” and (b) adding the following reference immediately below the reference ending
with “Co-Documentation Agents”: “CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH and BANK OF THE WEST, as
Co-Agents”.

     2. Amendments to Definitions.

          2.1 The following defined term is hereby added to Section 1.1 of the Credit Agreement in the
appropriate alphabetical order:

 

 

          “Seventh Amendment Effective Date” means the date upon which the conditions to
effectiveness set forth in Section 15 of that certain Seventh Amendment to Fourth Amended and
Restated Revolving Loan Agreement dated as of January 25, 2011 are satisfied.

          2.2 The definition of “Applicable Alternate Base Rate Margin” is hereby amended and
restated in its entirety to read as follows:

          “Applicable Alternate Base Rate Margin” means, for each Pricing Period, the interest
rate margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing
Level for that pricing Period:

	 	 	 
	Applicable	 	 
	Pricing Level	 	Margin
	I

	 	150 bps
	II

	 	200 bps
	III

	 	250 bps

          2.3 The definition of “Applicable Commitment Fee Rate” is hereby amended and restated
in its entirety to read as follows:

          “Applicable Commitment Fee Rate” means, for each Pricing Period, the rate set forth
below (expressed in basis points per annum) opposite the Applicable Pricing Level for that Pricing
Period:

	 	 	 
	Applicable	 	 
	Pricing Level	 	Margin
	I

	 	40 bps
	II

	 	45 bps
	III

	 	50 bps

          2.4 The definition of “Applicable Eurodollar Rate Margin” is hereby amended and
restated in its entirety to read as follows:

          “Applicable Eurodollar Rate Margin” means, for each Pricing Period, the interest rate
margin set forth below (expressed in basis points per annum) opposite the Applicable Pricing Level
for that Pricing Period:

	 	 	 
	Applicable	 	 
	Pricing Level	 	Margin
	I

	 	250 bps
	II

	 	300 bps
	III

	 	350 bps

 

 

          2.5 The definition of “Applicable Pricing Level” is hereby amended and restated in its
entirety to read as follows:

          “Applicable Pricing Level” means, for each Pricing Period, the pricing level set forth
below opposite the Leverage Ratio as of the last day of the Fiscal Quarter most recently ended
prior to the commencement of that Pricing Period:

	 	 	 
	Pricing Level	 	Leverage Ratio
	I

	 	Less than 1.50 to 1.00
	II

	 	Greater than or equal to 1.50 to 1.00, but less than 2.50 to 1.00
	III

	 	Greater than or equal to 2.50 to 1.00

          provided that (i) in the event that Borrower does not deliver a Pricing Certificate
with respect to any Pricing Period prior to the commencement of such Pricing Period, then until
such Pricing Certificate is delivered, the Applicable Pricing Level for that Pricing Period shall
be Pricing Level III, but once Borrower has delivered a Pricing Certificate with respect to such
Pricing Period, then any resulting change in the Applicable Pricing Level shall be made
retroactively to the beginning of such Pricing Period, and (ii) if any Pricing Certificate is
subsequently determined to be in error, then any resulting change in the Applicable Pricing Level
shall be made retroactively to the beginning of the relevant Pricing Period.

          2.6 The definition of the term “Arrangers” is hereby amended by deleting the reference
therein to “Banc of America Securities LLC” and replacing it with “Merrill Lynch, Pierce, Fenner &
Smith Incorporated”.

          2.7 The definition of the term “Commitment” is hereby amended and restated in its entirety to
read as follows:

          “Commitment” means, subject to Sections 2.5 and 2.8, $325,000,000. The respective Pro Rata
Shares of the Lenders with respect to the Commitment are set forth in Schedule 1.1.

          2.8 The definition of the term “EBITDA” is hereby amended and restated in its entirety to read
as follows:

          “EBITDA” means the sum of (a) Net Income plus (b) to the extent deducted in determining Net
Income, (i) Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv)
amortization, (v) non-cash losses as a result of the disposition of customer premises equipment,
(vi) any extraordinary non-cash or nonrecurring non-cash charges or losses, and (vii) any non-cash
charges arising from compensation expense as a result of the adoption of Financial Accounting
Standards Board Statement 123 (Revised 2004), “Share-Based Payment”, which requires certain
stock-based compensation to be recorded as expense within the Borrower’s consolidated statement of
operations, (viii) non-recurring expenses for professional services, regulatory clearances and
filings, transfer fees, severance payments and other similar closing costs (to the extent such
expenses are not capitalized by the Borrower) incurred in connection with the WildBlue Acquisition,
provided that such non-recurring expenses shall not

 

 

exceed an aggregate amount of $27,500,000; and (ix) non-recurring expenses for professional
services, regulatory clearances and filings, transfer fees, severance payments and other similar
closing costs (to the extent such expenses are not capitalized by the Borrower) incurred in
connection with Permitted Acquisitions (other than the WildBlue Acquisition) and reasonably
approved by the Administrative Agent”; minus (c) to the extent included in Net Income, (i) non-cash
gains as a result of the disposition of customer premises equipment, (ii) any extraordinary
non-cash or nonrecurring non-cash gains, (iii) the amount of any subsequent cash payments in
respect of any non-cash charges described in the preceding clause (b)(vii), and (iv) Interest
income; all calculated for the Borrower and its Subsidiaries on a consolidated basis. For the
avoidance of doubt, for purposes of calculating EBITDA with respect to any period in which the
WildBlue Acquisition occurred, such Acquisition shall be deemed to have occurred on the first day
of such period. Accordingly, as to any such period Net Income, Interest Expense, expense for taxes
paid or accrued and each other component contained in the definition of “EBITDA” shall be deemed to
include the actual results of WildBlue on a pro forma consolidated basis with the Borrower as if
such Acquisition had occurred on the first day of such period.

          2.9 The definition of the term “Interest Coverage Ratio” is hereby amended and
restated in its entirety to read as follows:

          “Interest Coverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio
of (a) EBITDA for the fiscal period consisting of the four (4) Fiscal Quarters ended on such date
to (b) Cash Interest Expense of Borrower and its Subsidiaries for such fiscal period; provided
that, for the avoidance of doubt, Interest Expense as used herein will not include interest
incurred by WildBlue prior to consummation of the WildBlue Acquisition.

          2.10 The definition of the term “Investment” is hereby amended and restated in its entirety to
read as follows:

     “Investment” means, when used in connection with any Person, any investment by or of
that Person, whether by means of purchase or other acquisition of stock or other securities of any
other Person or by means of a loan, advance creating a debt, capital contribution, guaranty or
other debt or equity participation or interest in any other Person, including any
partnership and joint venture interests of such Person; provided that expenditures by the
Borrower or the Subsidiaries with respect to customer premises equipment shall not be deemed to be
an Investment. The amount of any Investment shall be the amount actually invested (minus
any return of capital with respect to such Investment which has actually been received in Cash or
has been converted into Cash), without adjustment for subsequent increases or decreases in the
value of such Investment.

          2.11 The definition of the term “Revolving Loan Maturity Date” is hereby amended by
deleting the reference therein to “July 1, 2012” and replacing it with “January 25, 2016”.

 

 

     3. Section 2.8 of the Credit Agreement is hereby amended as follows:

          (a) Paragraph (a) of Section 2.8 is amended and restated in its entirety to read as follows:

               “(a) If no Default or Event of Default shall have occurred and be continuing, Borrower may at
any time prior to the Revolving Loan Maturity Date request (provided that such requests shall be
made no more than three (3) times on or after the Seventh Amendment Effective Date) increases of
the Commitment by notice to the Administrative Agent in writing of the amount of such proposed
increase (such notice, a “Commitment Increase Notice”); provided, however, that any such request
pursuant to a Commitment Increase Notice shall be in the minimum amount of $10,000,000 and the
aggregate amount of the increase in the Commitment on and after the Seventh Amendment Effective
Date shall not exceed $50,000,000. Any such Commitment Increase Notice delivered with respect to
any proposed increase in the Commitment may offer one or more Revolving Lenders an opportunity to
subscribe for its Pro Rata Share (with respect to the existing Commitment (prior to such increase))
of the increased Commitment. The Administrative Agent shall, within five (5) Banking Days after
receipt of a Commitment Increase Notice, notify each Lender of such request. Each Lender desiring
to increase its Commitment shall notify the Administrative Agent in writing no later than five (5)
Banking Days after receipt of notice from the Administrative Agent. Any Lender that does not
notify the Administrative Agent within the time period specified above that it will increase its
Commitment will be deemed to have rejected such offer. Any agreement by a Lender to increase its
Commitment shall be irrevocable. The notices contemplated by the third and fourth sentences above
shall not be required with respect to any exercise by the Borrower of its option to increase the
Commitment under this Section 2.8 consummated on the Seventh Amendment Effective Date or within
thirty (30) days thereafter.”

          (b) Clause (i) of the last paragraph of Section 2.8 is amended and restated in its entirety to
read as follows:

               “(i) each of the existing Lenders shall assign to each of the New Lenders, if any, and each of
the New Lenders shall purchase from each of the existing Lenders, at the principal amount thereof
(together with accrued interest), such interests in the Loans outstanding on such date, or, if
there are no New Lenders at such time, each of the Lenders party to this Agreement on the date such
increased Commitment becomes effective shall increase or decrease the outstanding balance of their
Revolving Loans, in either case as shall be necessary in order that, after giving effect to all
such assignments, purchases, increases and decreases, such Loans will be held by the Lenders
ratably in accordance with their Commitments after giving effect to such increase in the total
Commitments hereunder,”

     4. Section 2.9(b)(i) of the Credit Agreement is hereby amended by adding the following
sentence to the end thereof: “Solely for the purposes of this Section 2.9 with respect to Swing
Line Advances, “Applicable Interest Rate” means, as of any date of determination, the Alternate
Base Rate plus the Applicable Alternate Base Rate Margin.”

     5. Section 6.14 of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:

 

 

          “6.14 Interest Coverage Ratio. Permit the Interest Coverage Ratio at the end of each
Fiscal Quarter to be less than 4.50 to 1.00.”

     6. Section 6.17 of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:

          “6.17 Capital Expenditures. Make any Capital Expenditure in any Fiscal Year, if to do
so would cause the aggregate Capital Expenditures made in such Fiscal Year to exceed $75,000,000
(exclusive of (i) Capital Expenditures made in connection with Permitted Acquisitions and (ii)
Capital Expenditures regarding ViaSat-1 Joint Venture which, when aggregated with Dispositions made
pursuant to Section 6.2(b) and Investments made pursuant to Section 6.16(n), do not exceed the
Maximum ViaSat-1 Joint Venture Investments) at any time during the term hereof; provided
that if at the end of the Fiscal Year Capital Expenditures made in such Fiscal Year are less than
$75,000,000, then the amount by which $75,000,000 exceeds the Capital Expenditures made in such
Fiscal Year may be carried forward and included in the aggregate amount of Capital Expenditures
permitted to be made in succeeding Fiscal Years; provided further that in no event shall
Capital Expenditures made in any Fiscal Year exceed $100,000,000; provided further that
expenditures by the Borrower or the Subsidiaries with respect to customer premises equipment shall
not be deemed to be Capital Expenditures.”

     7. Section 11.27 of the Credit Agreement is hereby amended by deleting the phrase “upon ten
(10) Banking Days’ prior notice” and replacing it with “upon three (3) Banking Days’ prior notice
(or such lesser period of notice as the Non-Consenting Lender and the Administrative Agent may
agree to)”.

     8. Exhibit B to the Credit Agreement is hereby replaced in its entirety with
Exhibit B attached hereto.

     9. Schedule 1.1 to the Credit Agreement is hereby replaced in its entirety with
Schedule 1.1 attached hereto.

     10. Schedule 4.4 to the Credit Agreement is hereby replaced in its entirety with
Schedule 4.4 attached hereto.

     11. No course of dealing on the part of Lenders, the Administrative Agent, the Collateral
Agent or their officers, nor any failure or delay in the exercise of any right by the
Administrative Agent, the Collateral Agent or any Lender, shall operate as a waiver thereof, and
any single or partial exercise of any such right shall not preclude any later exercise of any such
right. Administrative Agent’s, Collateral Agent’s or any Lenders’ failure at any time to require
strict performance by Borrower of any provision of any Loan Document shall not affect any right of
any Lender, Administrative Agent or Collateral Agent thereafter to demand strict compliance and
performance. Any suspension or waiver of a right must be in writing signed by an officer of
Administrative Agent, in accordance with the terms of the Credit Agreement.

     12. The Credit Agreement, as amended hereby, shall be and remain in full force and effect in
accordance with its respective terms and hereby is ratified and confirmed in all respects. Except
as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy

 

 

of Administrative Agent, Collateral Agent or any Lender under the Credit Agreement, as in
effect prior to the date hereof.

     13. The Borrower represents and warrants to the Lenders that (a) except for representations
and warranties which expressly speak as of a particular date or are no longer true and correct as a
result of a change which is permitted by the Credit Agreement, the representations and warranties
contained in the Credit Agreement or in any other document or documents relating thereto are true
and correct in all material respects on and as of the date hereof as though made on the date
hereof, and all such representations and warranties shall survive the execution and delivery of
this Amendment, (b) each Domestic Subsidiary listed on Schedule 4.4 to the Credit Agreement is, as
of the Seventh Amendment Effective Date, either (i) party to the Subsidiary Guaranty, the
Subsidiary Security Agreement and the Subsidiary Pledge Agreement or (ii) not a Significant
Domestic Subsidiary and (c) no Default or Event of Default has occurred and is continuing as of the
date hereof.

     14. As a condition to the effectiveness of Section 7 of this Amendment, Administrative Agent
shall have received, in form and substance reasonably satisfactory to Administrative Agent, this
Amendment, duly executed by Borrower, Administrative Agent, Collateral Agent and the Requisite
Lenders.

     15. As a condition to the effectiveness of this Amendment (other than Section 7 which shall
become effective in accordance with the requirements of Section 14 hereof), Administrative Agent
and the Lenders shall have received, in form and substance reasonably satisfactory to
Administrative Agent and the Lenders, the following:

     (a) this Amendment, duly executed by Borrower, Administrative Agent, Collateral Agent and the
Lenders;

     (b) an Affirmation of Subsidiary Guaranty and Security Agreement, duly executed by each
Guarantor;

     (c) resolutions of the Board of Directors of Borrower authorizing the execution, delivery and
performance of this Amendment, with an incumbency certificate; each in form and content reasonably
acceptable to Administrative Agent;

     (d) a certificate signed by a Responsible Official of Borrower certifying that the condition
specified in Section 8.1(e) of the Credit Agreement is true and correct as of the date hereof;

     (e) payment of all commitment fees owing by Borrower to each respective Lender, in such
amounts as agreed upon between Borrower and such Lender; and

     (f) all reasonable attorneys’ fees and costs incurred by the Administrative Agent’s and
Collateral Agent’s counsel through the date of this Amendment, which may be debited from any of
Borrower’s accounts (following Borrower’s authorization of such fees and costs).

     16. The governing law and venue provisions of Section 11.17 of the Credit Agreement are
incorporated herein by this reference mutatis mutandis. This Amendment may be

 

 

executed in two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one instrument. Delivery of an executed counterpart hereof by
facsimile transmission shall be effective as delivery of a manually executed counterpart. Except
as amended hereby, all of the provisions of the Credit Agreement and the other Loan Documents shall
remain unmodified and in full force and effect except that each reference to the “Agreement”, or
words of like import in any Loan Document, shall mean and be a reference to the Credit Agreement as
amended hereby. This Amendment shall be deemed a “Loan Document” as defined in the Credit
Agreement. Each party shall execute and deliver such further documents, and perform such further
acts, as may be reasonably necessary to achieve the intent of the parties as expressed in this
Amendment.

[Balance of Page Intentionally Left Blank]

 

 

     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above
written.

	 	 	 	 	 
	 	VIASAT, INC.

 	 
	 	By:  	                                              /s/ Keven K. Lippert
 	 
	 	 	Name:  	Keven K. Lippert 	 
	 	 	Title:  	Vice President, General Counsel & Secretary 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	UNION BANK, N.A.,

as Administrative Agent

 	 
	 	By:  	                                              /s/ Mark Adelman
 	 
	 	 	Mark Adelman 	 
	 	 	Vice President 	 
	 

	 	 	 	 	 
	 	UNION BANK, N.A.,

as Collateral Agent

 	 
	 	By:  	                                              /s/ Mark Adelman
 	 
	 	 	Mark Adelman 	 
	 	 	Vice President 	 
	 

	 	 	 	 	 
	 	UNION BANK, N.A.,

as a Lender and Swing Line Lender

 	 
	 	By:  	                                              /s/ Mark Adelman
 	 
	 	 	Mark Adelman 	 
	 	 	Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A.,

as a Lender

 	 
	 	By:  	                                              /s/ Christopher D. Pannacciulli
 	 
	 	 	Name:  	Christopher D. Pannacciulli 	 
	 	 	Title:  	Senior Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A.,

as a Lender

 	 
	 	By:  	                                              /s/ Anna C. Araya
 	 
	 	 	Name:  	Anna C. Araya 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	BANK OF THE WEST,

as a Lender

 	 
	 	By:  	                                              /s/ Alyssa Pearson
 	 
	 	 	Name:  	Alyssa Pearson 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	COMERICA BANK,

as a Lender

 	 
	 	By:  	                                              /s/ Don R. Carruth
 	 
	 	 	Name:  	Don R. Carruth 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	CALIFORNIA BANK & TRUST,

as a Lender

 	 
	 	By:  	                                              /s/ Steve DeLong
 	 
	 	 	Name:  	Steve DeLong 	 
	 	 	Title:  	Senior Vice President, Manager 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,

as a Lender

 	 
	 	By:  	                                              /s/ Donald S. Green
 	 
	 	 	Name:  	Donald S. Green 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	COMPASS BANK,

as a Lender

 	 
	 	By:  	                                              /s/ Erik Velastegvi
 	 
	 	 	Name:  	Erik Velastegvi 	 
	 	 	Title:  	Senior Vice President 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

[Signatures Continued Next Page]

 

 

	 	 	 	 	 
	 	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,

as a Lender

 	 
	 	By:  	                                              /s/ Doreen Barr
 	 
	 	 	Name:  	Doreen Barr 	 
	 	 	Title:  	Director 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                              /s/ Kevin Buddhdew
 	 
	 	 	Name:  	Kevin Buddhdew 	 
	 	 	Title:  	Associate 	 
	 

[Signature Page to Seventh Amendment to

Fourth Amended and Restated Revolving Loan Agreement]

 

 

EXHIBIT B

(Compliance Certificate)

 

 

COMPLIANCE CERTIFICATE

			
	To:      	 	UNION BANK, N.A.,

AS ADMINISTRATIVE AGENT

     This Compliance Certificate (this “Certificate”) is delivered with reference to that
certain Fourth Amended and Restated Revolving Loan Agreement, dated as of July 1, 2009, among
ViaSat, Inc., a Delaware corporation (“Borrower”), the Lenders therein named, Union Bank,
N.A. (formerly known as Union Bank of California, N.A.), as Administrative Agent; Bank of America,
N.A., as Syndication Agent; JPMorgan Chase Bank, N.A., Compass Bank and Wells Fargo Bank, National
Association, as Co-Documentation Agents; Credit Suisse AG, Cayman Islands Branch and Bank of the
West, as Co-Agents; Merrill Lynch, Pierce, Fenner & Smith Incorporated and Union Bank, N.A., as
Joint Lead Arrangers and Joint Book Runners; and Union Bank, N.A., as Collateral Agent (as amended,
extended, renewed, supplemented or otherwise modified from time to time, the “Loan
Agreement”). Terms defined in the Loan Agreement and not otherwise defined in this Certificate
shall have the meanings defined for them in the Loan Agreement. Section references herein relate to
the Loan Agreement unless stated otherwise. In the event of any conflict or inconsistency between
the terms of this Certificate and the terms of the Loan Agreement, the Loan Agreement shall
control.

     This Certificate is delivered in accordance with Section 7.3 of the Loan Agreement by a Senior
Officer of Borrower. This Certificate is delivered with respect to the Fiscal Quarter ended
___________________, ____ (the “Test Fiscal Quarter”). Computations indicating compliance
with respect to the covenants contained in Sections 6.13, 6.14, 6.15 and
6.16(k) of the Loan Agreement are set forth below:

[Balance of Page Intentionally Left Blank]

 

 

	I.	 	Section 6.13 — Leverage Ratio. Leverage Ratio for the period ending on the last
day of the Test Fiscal Quarter (the “Determination Date”) was ____: 1.00

	 	 	Maximum Permitted:      3.50:1.00

	 	 	Leverage Ratio is computed as follows:.

	 	 	 	 	 

	(a)

	 	all Indebtedness of Borrower and its Subsidiaries on the
Determination Date minus the aggregate amount of all Cash and Cash
Equivalents of the Borrower and its Subsidiaries in excess of
$30,000,000 in which the Collateral Agent has a perfected security interest
	 	$ 

divided by

	 	 	 	 	 

	(b)

	 	EBITDA for the fiscal period consisting of the four (4) Fiscal
Quarters ended on the Determination Date (as calculated below)
	 	$ 

	 
	 	 	 	 
	 

	 	equals Leverage Ratio [(a)÷(b)]
	 	________: 1.00

	II.	 	Section 6.14 — Interest Coverage Ratio. As of the last day of the Test Fiscal Quarter the
Interest Coverage Ratio was ____: 1.00.

	 	 	Minimum:      4.50:1.00

	 	 	Interest Coverage Ratio is computed as follows:

	 	 	 	 	 

	(a)

	 	EBITDA for the fiscal period consisting of the four
(4) Fiscal Quarters ended on the Determination Date
(as calculated below)
	 	$ 

divided by

	 	 	 	 	 

	(b)

	 	Cash Interest Expense of Borrower and its Subsidiaries
for such fiscal period
	 	$ 

	 
	 	 	 	 
	 

	 	equals the Interest Coverage Ratio [(a) ÷ (b)]
	 	________: 1.00

 

 

	III.	 	Section 6.15 — Senior Secured Leverage Ratio. Senior Secured Leverage Ratio for the period ending on the last day of
the Test Fiscal Quarter (the “Determination Date”) was ____: 1.00

	 	 	Maximum Permitted: 2.50:1.00 from the date of incurrence of any Permitted
Additional Senior Indebtedness through the day before Borrower’s Fiscal Year ending 2011;
and (b) 2.00 to 1.00 thereafter

	 	 	Senior Secured Leverage Ratio is computed as follows:

	 	 	 	 	 

	(a)

	 	all Indebtedness of Borrower and its Subsidiaries on the
Determination Date
	 	$ 

	 
	 	 	 	 
	minus

	 	 	 	 
	 
	 	 	 	 
	(b)

	 	unsecured portion of Permitted Senior Unsecured Indebtedness	 	$ 

divided by

	 	 	 	 	 

	(c)

	 	EBITDA for the fiscal period consisting of the four (4) Fiscal
Quarters ended on the Determination Date (as calculated below)
	 	$ 

	 
	 	 	 	 
	 

	 	equals Senior Secured Leverage Ratio [(a)- (b)÷(c)]
	 	________: 1.00

	IV.	 	Section 6.16(k) — Investments in ViaSat Satellite Ventures and in
Wholly-Owned Foreign Subsidiaries (for Investments in Joint Ventures);
Investments in Joint Ventures. As of the last day of the Test Fiscal Quarter
the aggregate of all such Investments was equal to
$_________ (the “6.16(k)
Joint Venture Investment Limitation”).

	 	 	Maximum:	 	1.50 X Borrower’s consolidated trailing twelve month

        EBITDA as of Borrower’s most recent fiscal quarter

	 	 	Investment limitation is computed as follows:

	 	 	 
	Investments in ViaSat Satellite Ventures
for the purpose of investment by ViaSat
Satellite Ventures in Joint Ventures

	 	$ 

	 
	 	 
	Investments in Wholly-Owned Foreign
Subsidiaries for the purpose of
investment by such Wholly-Owned Foreign
Subsidiaries in Joint Ventures
	 	$ 

	 
	 	 
	Investment Amount:
	 	$ 

	 
	 	 
	Recipient:
	 	 

 

 

	 	 	 

	Investment Amount:
	 	$ 

	 
	 	 
	Recipient:
	 	 

	 
	 	 
	Investment Amount:
	 	$ 

	 
	 	 
	Recipient:
	 	 

	 
	 	 
	Total Investment Amount:

	 	$ 

	 
	 	 
	equals the 6.16(k) Joint Venture Investment Limitation
	 	$ 

	 	 	EBITDA is calculated as follows:

	 	 	 	 	 

	(a)

	 	Net Income
	 	$ 

	 
	 	 	 	 
	Plus (without duplication)	 	 
	 
	 	 	 	 
	(b)

	 	(i) Interest Expense
	 	$ 

	 
	 	 	 	 
	 

	 	(ii) expense for taxes paid or accrued
	 	$ 

	 
	 	 	 	 
	 

	 	(iii) depreciation
	 	$ 

	 
	 	 	 	 
	 

	 	(iv) amortization
	 	$ 

	 
	 	 	 	 
	 

	 	(v) non-cash losses as a result of the disposition of
customer premises equipment
	 	$ 

	 
	 	 	 	 
	 

	 	(vi) extraordinary non-cash or nonrecurring non-cash charges or losses	 	$ 

	 
	 	 	 	 
	 

	 	(vii) non-cash charges arising from compensation expense	 	$ 

	 
	 	 	 	 
	 
	 	(viii) non-recurring, non-capitalized expenses for professional services/regulatory clearances/filings/transfer fees/severance payments incurred in connection with the WildBlue Acquisition	 	$ 

	 
	 	 	 	 
	 

	 	(ix) non-recurring, non-capitalized expenses for professional services/regulatory clearances/filings/transfer fees/severance payments incurred in connection with other Permitted Acquisitions	 	$ 

	 
	 	 	 	 
	Minus (without duplication)	 	 

 

 

	 	 	 	 	 

	(c)

	 	(i) non-cash gains as a result of the disposition of
customer premises equipment
	 	$ 

	 
	 	 	 	 
	 

	 	(ii) extraordinary non-cash or
nonrecurring non-cash gains realized
	 	$ 

	 
	 	 	 	 
	 

	 	(iii) the amount of any subsequent cash payments in
respect of any non-cash charges described in clause
(b)(vii), above
	 	$ 

	 
	 	 	 	 
	 

	 	(iv) Interest income
	 	$ 

	 
	 	 	 	 
	Equals EBITDA [(a)+(b)-(c)]	 	$ 

	V.	 	A review of the activities of Borrower during the fiscal period covered by this
Certificate has been made under the supervision of the undersigned with a view to
determining whether during such fiscal period Borrower performed and observed all of
its Obligations. To the best knowledge of the undersigned, during the fiscal period
covered by this Certificate, all covenants and conditions have been so performed and
observed and no Default or Event of Default has occurred and is continuing, with the
exceptions set forth below in response to which Borrower has taken or proposes to take
the following actions (if none, so state).

 

 

 

 

	VI.	 	The undersigned a Senior Officer of Borrower or his or her designated
representative certifies in such capacity that the calculations made and the
information contained herein are derived from the books and records of Borrower, as
applicable, and that to the best of his or her knowledge each and every matter
contained herein correctly reflects those books and records.

	VII.	 	No event or circumstance has occurred that constitutes a Material Adverse Effect
since the date the most recent Compliance Certificate was executed and delivered,
with the exceptions set forth below (if none, so state):

 

 

 

 

 

 

	VIII.	 	No Significant Domestic Subsidiary has been acquired or created since the date the
most recent Compliance Certificate was executed and delivered, with the exceptions
set forth below (if none, so state):

 

 

	IX.	 	No Maximum ViaSat-1 Joint Venture Investments have been made since the date the
most recent Compliance Certificate was executed and delivered, with the exceptions
set forth below (by date and amount) (if none, so state):

Section 6.2 (Disposition of Property by Borrower and any Subsidiary):

 

 

 

Section 6.16(n) (Investments consisting of contributions of cash equivalents or other assets by
Borrower or its Subsidiaries to the ViaSat Satellite Ventures or the ViaSat-1 Joint Venture):

 

 

 

Section 6.17 (Capital Expenditures):

 

 

 

[Balance of Page Intentionally Left Blank]

 

 

     Maximum ViaSat-1 Joint Venture Investments is calculated as follows:

	 	 	 
	ViaSat-1 Joint Venture Investments (current period)

	 	$ 

	 
	 	 
	ViaSat-1 Joint Venture Investments (inception of Investments to date)

	 	$ 

	 
	 	 
	$500,000,000
	 	$ 

	 
	 	 
	Dated: 

	 	 

Name: 

Title: 

[Signature Page to Compliance Certificate]

 

 

SCHEDULE 1.1

(Lender Commitments)

 

 

SCHEDULE 1.1

Lender Commitments

	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	 	Pro Rata Share of	 
	Institution	 	Amount	 	 	Commitment	 
	Bank of America, N.A.
	 	$	45,000,000	 	 	 	13.846153846	%
	Union Bank, N.A.
	 	$	45,000,000	 	 	 	13.846153846	%
	JPMorgan Chase Bank, N.A.
	 	$	45,000,000	 	 	 	13.846153846	%
	Wells Fargo Bank, National
Association
	 	$	45,000,000	 	 	 	13.846153846	%
	Compass Bank
	 	$	40,000,000	 	 	 	12.307692308	%
	Credit Suisse AG, Cayman
Islands Branch
	 	$	35,000,000	 	 	 	10.769230769	%
	Bank of the West
	 	$	30,000,000	 	 	 	9.230769231	%
	Comerica Bank
	 	$	20,000,000	 	 	 	6.153846154	%
	California Bank & Trust
	 	$	20,000,000	 	 	 	6.153846154	%
	TOTAL
	 	$	325,000,000	 	 	 	100	%

 

 

SCHEDULE 4.4

(Subsidiaries)

 

 

SCHEDULE 4.4

A. Subsidiaries of ViaSat

	1.	 	ViaSat Worldwide Limited, a Delaware corporation.

Number of Shares issued: 1,000 shares common stock

Sole Shareholder: ViaSat, Inc.

	2.	 	ViaSat China Services, Inc., a Delaware corporation

Number of Shares issued: 1,000 shares common stock

Sole Shareholder: ViaSat, Inc.

	3.	 	ViaSat Europe S.r.L. an Italian limited liability company

Number of Shares issued: 10,000 shares

ViaSat, Inc.: quota of Euro 9,900

ViaSat Worldwide Ltd.: quota of Euro100

	4.	 	ViaSat Australia PTY Limited, an Australian corporation

Number of Shares issued: 1,000 Ordinary Shares

Sole Member/Shareholder: ViaSat, Inc.

	5.	 	ViaSat India Pvt. Ltd., an Indian private limited company

Number of Shares issued: 70 to ViaSat, Inc.

11,039 to ViaSat Worldwide Limited

	6.	 	ViaSat Canada Company, a Nova Scotia Unlimited Liability Company

Number of Shares issued: 100,000 shares

Sole Shareholder: ViaSat, Inc.

	7.	 	JAST. S.A., a Swiss corporation

Number of shares issued: 100,000 shares

Sole Shareholder: ViaSat, Inc.

	8.	 	Softswitch, LLC., a Delaware limited liability company

100% Member Interests owned by ViaSat, Inc.

	9.	 	ViaSat Satellite Ventures, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat, Inc.

	10.	 	ViaSat Satellite Ventures Holdings Luxembourg S.a.r.l., a societe a responsabilite limitee

Number of Shares issued: 50,000 shares

Sole Shareholder: ViaSat, Inc.

	11	 	ViaSat Credit Corp, a Delaware corporation

Number of Shares issued: 1,000 shares

 

 

	 	 	Sole Shareholder: ViaSat Satellite Ventures, LLC

	12.	 	VSV I Holdings, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat Satellite Ventures, LLC

	13.	 	VSV II Holdings, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat Satellite Ventures, LLC

	14.	 	IOM Licensing Holding Company Limited, an Isle of Man company

Number of Shares issued: 1 share

Sole Shareholder: ViaSat, Inc.

	15.	 	ViaSat (IOM) Limited, an Isle of Man company

Number of Shares issued: 1 share

Sole Shareholder: ViaSat, Inc.

	16.	 	ViaSat Satellite Ventures Holdings France SAS, a French Societe par Actions simplifiee

Number of Shares issued: 37,000 shares

Sole Shareholder: ViaSat Satellite Holdings Luxembourg S.a.r.l.

	17.	 	ViaSat Credit, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat Credit Corp.

	18.	 	ViaSat Satellite Ventures U.S. I, LLC, a Delaware limited liability company

100% Member Interests owned by VSV I Holdings, LLC.

	19.	 	ViaSat Satellite Ventures, U.S. II, LLC, a Delaware limited liability company

100% Member Interests owned by VSV II Holdings, LLC

	20.	 	ViaSat-1 Holdings, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat Satellite Ventures U.S. I, LLC

	21.	 	ViaSat Peru S.R.L., a Peruvian limited liability company

Number of Shares/Equity Quota issued: 100

ViaSat, Inc.: 1 equity quota

ViaSat Worldwide Ltd.: 99 equity quota

	22.	 	ViaSat Stimulus, LLC, a Delaware limited liability company

100% Member Interests owned by ViaSat, Inc

	23.	 	ViaSat, Inc. Limitada, a Chilean limited liability partnership

99.01% interests owned by ViaSat, Inc.

..99% interests owned by ViaSat Worldwide Ltd.

	24.	 	TrellisWare Technologies, Inc., a Delaware corporation

 

 

	 	 	Number of Shares issued: 14,737,176 shares

54% owned by ViaSat, Inc.

	25.	 	WildBlue Communications, LLC a Delaware limited liability company

(formerly Satellite
Broadband ARRA Application, LLC, a Delaware limited liability company)

100% Member Interests owned by WildBlue Communications, Inc.

	26.	 	WildBlue Holding, Inc., a Delaware corporation

Number of Shares issued: 1,000 shares

Sole Shareholder: ViaSat, Inc.

	27.	 	WildBlue Communications, Inc., a Delaware corporation

Number of Shares issued: 1,000 shares

Sole Shareholder: WildBlue Holding, Inc.

	28.	 	WB Holdings 1 LLC., a Colorado LLC

100 Member Interests Certificated

Sole Member/Shareholder: WildBlue Communications, Inc.

	29.	 	WildBlue Communications Canada Corp., a Nova Scotia unlimited liability company

Number of Shares issued: 100 shares

Sole Shareholder: WildBlue Communications, Inc.

	30.	 	ViaSat Satellite Holdings Limited, a UK private limited company

(formerly Stonewood
Sapphire Limited, a UK private limited company.)

Number of Shares issued: 69,140 shares

Sole Shareholder: ViaSat, Inc.

	31.	 	Stonewood Group Limited, a UK private limited company

Number of Shares issued: 59,690

Sole Shareholder: ViaSat Satellite Holdings Limited, a UK private limited company

	32.	 	Echoblue Rural Broadband, LLC., a Delaware limited liability company

50% Member Interests owned by WildBlue Communications, Inc.

50% Member Interests owned by EchoStar Broadband II LLC., a Colorado LLCexv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into as of January 24, 2011
(the “Effective Date”), by and between APPROACH RESOURCES INC., a Delaware corporation (the
“Company”), and QINGMING YANG, an individual residing in the State of Texas
(“Employee”).

RECITALS

     WHEREAS, Employee has been employed by the Company as its Executive Vice President — Business
Development and Geosciences without a written employment agreement.

     WHEREAS, the Company now desires to employ Employee, and Employee now desires to be employed
by the Company, subject to the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to the following terms:

TERMS

	1.	 	Employment and Position. The Company shall continue to employ Employee as its
Executive Vice President — Business Development and Geosciences, and Employee shall continue
to serve in such capacities, subject to the terms of this Agreement, and Employee shall report
directly to the Company’s President and Chief Executive Officer (the “President”)
and/or Board of Directors (the “Board”).

	2.	 	Duties. Employee shall perform in the capacities described in paragraph 1 and shall
have such duties, responsibilities, and authorities as may be reasonably assigned by the
President and/or Board, in his or its sole discretion, including without limitation duties,
responsibilities, and authorities for the Company’s Affiliates (as defined below). Employee
shall devote his full time, best efforts, abilities, knowledge, and experience to the
Company’s business and affairs as necessary to faithfully perform his duties,
responsibilities, and authorities under this Agreement.

	3.	 	Place of Performance. Although Employee shall be expected to work at all Company
locations from time to time and travel as necessary to perform his duties, responsibilities,
and authorities under this Agreement, Employee’s primary work location shall be at the
Company’s corporate headquarters or within 50 miles from the Company’s corporate headquarters.
The Company shall provide without cost to Employee such office space, secretarial, and
administrative services, equipment, furniture, and furnishings as are suitable and appropriate
to Employee’s titles and positions.

Employment Agreement — Page 1

 

 

	4.	 	Term of Agreement.

	 	(a)	 	Initial Term. This Agreement shall continue in full force and effect
for the initial term described in this subparagraph 4(a) (the “Initial Term”),
commencing on the Effective Date and expiring on January 1, 2013 (the “Expiration
Date”), unless terminated before the Expiration Date in accordance with paragraph
6.

	 	(b)	 	Renewal Term. Notwithstanding subparagraph 4(a), the effectiveness of
this Agreement shall automatically be extended for an additional one-year term on the
Expiration Date and on each successive anniversary of the Expiration Date (each, a
“Renewal Date”), unless and until (i) either party gives written notice of
non-renewal at least 120 days prior to the Expiration Date or any Renewal Date; or (ii)
the Agreement is terminated earlier in accordance with paragraph 6 (each, a
“Renewal Term”).

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

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

	 	(a)	 	Base Salary. From the Effective Date until changed as provided in this
subparagraph, the Company shall pay Employee an annual base salary of $275,000.00 (the
“Base Salary”), prorated for any partial period of employment. The Base Salary
shall be payable semi-monthly in accordance with the Company’s ordinary payroll
policies and procedures for employee compensation. During the Term, Employee’s Base
Salary shall be subject to an annual review and adjustment by the Board in its sole
discretion.

	 	(b)	 	Bonus.

	 	(i)	 	Performance Plan. In addition to the Base Salary,
Employee shall be eligible to participate in the Company Performance Incentive
Plan or another bonus plan or program maintained by the Company or an Affiliate
(“Performance Plan”) to be determined annually by the Compensation
Committee of the Board in its sole discretion. For purposes of this Agreement,
“Bonus” means any annual bonus payable pursuant to the Performance Plan
to Employee.

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

Employment Agreement — Page 2

 

 

	 	 	 	
	 
	 	(iii)	 	Discretionary Participation Level. The Compensation
Committee, in its sole discretion, shall determine Employee’s participation in
the Performance Plan and amount or range of the Bonus available to Employee
based on achievement of performance goals during the fiscal year or other
performance period.

	 	(iv)	 	Payment. Any Bonus or other discretionary compensation
payments due under this Agreement shall be paid to Employee at the time
specified by the Compensation Committee at the time any such Bonus or other
discretionary compensation payment is awarded, but in no event later than 21/2
months after the end of the taxable year in which any substantial risk of
forfeiture with respect to such Bonus or other payment lapses. Unless
otherwise specifically provided for in this Agreement or a plan, policy or
program of the Company, Employee must be employed by the Company or an
Affiliate on the date the Bonus or other payment is made to be entitled to
receive the Bonus or other payment.

	 	(c)	 	Employment Benefits. The Company shall provide Employee with the
employment benefits that the Company ordinarily provides to its executive-level
employees. Such employment benefits shall be governed by the applicable plan
documents, insurance policies, and/or employment policies, and may be modified,
suspended, revoked, or terminated in accordance with the terms of the applicable
documents or policies without violating this Agreement. In addition to those benefits,
the Company shall provide or cause to provide the following benefits upon satisfaction
by Employee of any eligibility requirements, subject to the following limitations:

	 	(i)	 	Sick-Leave Benefits. To the extent made available to
other employees of the Company, and unless this Agreement is terminated
pursuant to paragraph 6 in which case no sick-leave benefits shall be payable,
Employee shall be paid sick leave benefits at his then prevailing Base Salary
rate during his absence due to illness or other incapacity up to a maximum of
180 days in any one-year period.

	 	(ii)	 	Vacations. The Company shall provide Employee with a
minimum of four weeks of paid vacation per calendar year during the Term,
prorated for the first calendar year of the Term. Unless the Company has
adopted a plan or policy pursuant to which some or all of such vacation may be
rolled over to the next succeeding year in which case only a maximum of four
weeks of paid vacation may be carried over, such vacation may not be carried
over from calendar year to calendar year and accrued unused vacation shall be
forfeited if not used by the end of the calendar year in which it was granted.
The time and duration of any vacation shall be subject to advance notice to
the President. The Company shall provide Employee with all paid holidays

Employment Agreement — Page 3

 

 

	 	 	 	ordinarily given by the Company to its employees. Employee shall be paid
for any accrued unused vacation should this Agreement terminate pursuant to
paragraph 6.

	 	(d)	 	Reimbursement of Business Expenses. Employee may incur ordinary,
necessary, and reasonable business expenses in connection with the performance of his
duties, responsibilities, and authorities under this Agreement and for the promotion of
the Company’s business and activities during the Term, including but not limited to
expenses for necessary travel and entertainment and other items of expenses required in
the normal and routine course of Employee’s employment. The Company shall promptly
reimburse Employee from time to time for all such business expenses incurred pursuant
to and in conformity with this subparagraph and the policies and practices of the
Company relative to the reimbursement of business expenses. Notwithstanding the
foregoing, (i) the amount of expenses eligible for reimbursement during a calendar year
may not affect the expenses eligible for reimbursement in any other calendar year, (ii)
the reimbursement must be made on or before the last day of the calendar year following
the calendar year in which the expense was incurred, and (iii) the right to
reimbursement shall not be subject to liquidation or exchange for any other benefit.

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

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

	 	(b)	 	Permanent Disability. This Agreement shall immediately terminate in
the event that Employee becomes Permanently Disabled. For purposes of this Agreement,
Employee shall be deemed to have become “Permanently Disabled” when (i) he
receives disability benefits under either Social Security or the Company’s long-term
disability plan, if any, (ii) the President and/or the Board, upon the written report
of a qualified physician designated by the President and/or the Board or its insurers,
shall have determined (after a complete physical examination of Employee at any time
after he has been absent from the Company for a total period of 180 or more calendar
days in any 12-month period) that Employee has become physically and/or mentally
incapable of performing his essential job functions with or without reasonable
accommodation as required by law, or (iii) Employee is otherwise unable for a
continuous period of 90 calendar days to perform his essential job functions with or
without reasonable accommodation as required by law due to injury, illness, or other
incapacity (physical or mental).

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

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

Employment Agreement — Page 4

 

 

	 	(A)	 	the willful and continued failure by Employee
substantially to perform his duties, responsibilities, or authorities
hereunder (other than any such failure resulting from Employee becoming
Permanently Disabled);

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

	 	(C)	 	any misconduct by Employee in the course and
scope of Employee’s employment under this Agreement, including but not
limited to dishonesty, disloyalty, disorderly conduct, insubordination,
harassment of other employees or third parties, abuse of alcohol or
controlled substances, or other violations of the Company’s personnel
policies, rules, or Code of Conduct;

	 	(D)	 	any material violation by Employee of this
Agreement; or

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

	 	 	 	For purposes of this subparagraph, no act, or failure to act, on Employee’s
part shall be considered “willful” unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.

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

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

Employment Agreement — Page 5

 

 

	 	(i)	 	Definition of Good Reason. For purposes of this Agreement,
“Good Reason” shall exist in the event any of the following actions are
taken without Employee’s consent:

	 	(A)	 	a material diminution in Employee’s Base
Salary, duties, responsibilities, or authorities;
	 
	 	(B)	 	a requirement that Employee report to an
officer or employee other than the President or the Board (or similar
governing body);
	 
	 	(C)	 	a material relocation of Employee’s primary
work location more than 50 miles away from the Company’s corporate
headquarters; or
	 
	 	(D)	 	any other action or inaction by the Company
that constitutes a material breach by the Company of its obligations
under this Agreement.

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

	 	(f)	 	Without Good Reason. Employee shall be entitled to terminate this
Agreement without Good Reason at any time by providing 120 days written notice to
Company that Employee is terminating the Agreement without Good Reason.
	 
	 	(g)	 	Expiration of Term. Either party may terminate this Agreement by
providing a proper notice of non-renewal in accordance with subparagraph 4(b).

	7.	 	Payments and Benefits Due Upon Termination.

	 	(a)	 	Accrued Obligations. Upon any termination of this Agreement, the
Company shall have no further obligation to Employee under this Agreement or otherwise,
except as expressly provided in this Agreement and except for (i) payment to Employee
of all earned but unpaid Base Salary through the Date of Termination, prorated as
provided in subparagraph 5(a), (ii) payment to Employee, in accordance with the terms
of the applicable benefit plan of the Company or to the extent required by law,

Employment Agreement — Page 6

 

 

	 	 	 	of any benefits to which Employee has a vested entitlement as of the Date of Termination
(other than any entitlement to severance or separation pay, if any), (iii) payment
to Employee of any accrued unused vacation; and (iv) payment to Employee of any
approved but un-reimbursed business expenses incurred in accordance with applicable
Company policy and the terms of this Agreement. The payments and benefits described
in (i)-(iv) shall be referred to in this Agreement as the “Accrued
Obligations” and shall be paid in accordance with the Company’s plans and
policies and applicable law.

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

	 	(i)	 	on the earliest date between 20 and 60 days following
Employee’s Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
100% of his Base Salary in effect as of such Separation from Service; and
	 
	 	(ii)	 	on or before the 60th day following Employee’s Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years immediately before the
Separation from Service.

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

	 	(i)	 	on the earliest date between 20 and 60 days following
Employee’s Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the

Employment Agreement — Page 7

 

 

	 	 	 	greater of (A) the then-current Base Salary, and (B) the Base Salary at any
time within two years immediately before the Separation from Service; and

	 	(ii)	 	on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 21/2 months after the end of
the taxable year in which any substantial risk of forfeiture with respect to
such bonuses lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement not
terminated for the year containing the Date of Termination multiplied by a
fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of which
is the number of days in the applicable performance period; and
	 
	 	(iii)	 	during the portion, if any, of the 18-month period commencing
on the date of Employee’s Separation from Service (12-month period if Employee
terminates for Good Reason) that Employee is eligible to elect and elects to
continue coverage for himself and his eligible dependents under the Company’s
or an Affiliate’s group heath plan pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), or similar state law,
the Company shall reimburse Employee on a monthly basis for the difference
between the amount Employee pays to effect and continue such coverage and the
employee contribution amount that active senior executive employees of the
Company pay for the same or similar coverage.

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

	 	(i)	 	on the earliest date between 20 and 60 days following
Employee’s Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the Separation from
Service; and
	 
	 	(ii)	 	on the date that annual bonuses are paid to other executive
employees of the Company, but in no event later than 21/2 months after the end of
the taxable year in which any substantial risk of forfeiture with respect to such bonuses

Employment Agreement — Page 8

 

 

	 	 	 	lapses, the Bonus that Employee would have received based on
achievement of performance goals under subparagraph 5(b) had this Agreement
not terminated for the year containing the Date of Termination multiplied by
a fraction, the numerator of which is the number of days during the period
beginning the first day of the performance period containing the Date of
Termination and ending on the Date of Termination, and the denominator of
which is the number of days in the applicable performance period; and

	 	(iii)	 	during the portion, if any, of the 18-month period commencing
on the date of Employee’s Separation from Service that Employee is eligible to
elect and elects to continue coverage for himself and his eligible dependents
under the Company’s or an Affiliate’s group heath plan pursuant to COBRA or
similar state law, the Company shall reimburse Employee on a monthly basis for
the difference between the amount Employee pays to effect and continue such
coverage and the employee contribution amount that active senior executive
employees of the Company pay for the same or similar coverage.

	8.	 	Change in Control. The parties acknowledge that Employee has entered into this
Agreement based on his confidence in the current stockholders of the Company and the support
of the Board. Accordingly, if the Company should undergo a Change in Control the parties
agree as follows:

	 	(a)	 	Definitions.

	 	(i)	 	Affiliate: except as otherwise provided in this
Agreement, for purposes of this Agreement, Affiliate means, with respect to the
Company, any person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Company; provided, however, that a natural person shall not be
considered an Affiliate.
	 
	 	(ii)	 	Change in Control: a Change in Control means (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Company’s common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company’s common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, (b) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all, of the assets of the Company and the its subsidiaries to any
other person or entity (other than an Affiliate of the Company), (c) the
stockholders of the Company approve any plan or proposal for liquidation or
dissolution of the Company, (d) any person or entity (other than Yorktown
Energy Partners V, L.P., or any of its affiliated
funds), including a “group” as contemplated by Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, acquires or gains

Employment Agreement — Page 9

 

 

	 	 	 	ownership or control (including, without limitation, power to vote) of more than 50%
of the outstanding shares of the Company’s voting stock (based upon voting
power) or (e) as a result of or in connection with a contested election of
directors, the persons who were directors of the Company before such
election shall cease to constitute a majority of the Board. Notwithstanding
the foregoing, a Change of Control shall not include a public offering of
the Company’s common stock or a transaction with its sole purpose to change
the state of the Company’s incorporation or to create a holding company that
will be owned in substantially the same proportions by the persons who held
the Company’s securities immediately before such transaction.

	 	(iii)	 	CIC Effective Date: means the date upon which a
Change of Control occurs.
	 
	 	(iv)	 	Code: means Internal Revenue Code of 1986, as amended
from time to time.

	 	(b)	 	Change in Control Benefits and Payments. If Employee is employed by
the Company on the CIC Effective Date and this Agreement is terminated on or before the
first anniversary of the CIC Effective Date by the Company without Cause in accordance
with subparagraph 6(d) or by Employee for Good Reason in accordance with subparagraph
6(e), then the Company shall have no further obligation to Employee under this
Agreement or otherwise, except the Company shall provide Employee with the Accrued
Obligations in accordance with subparagraph 7(a) plus the following Change in Control
payments and benefits in lieu of any severance payments or benefits that may otherwise
be due under subparagraph 7(d):

	 	(i)	 	on the earliest date between 20 and 60 days following
Employee’s Separation from Service when the Release described in subparagraph
10(a) has become fully enforceable and irrevocable, a lump sum in cash equal to
150% of the greater of (A) the then-current Base Salary, and (B) the Base
Salary at any time within two years immediately before the CIC Effective Date;
and
	 
	 	(ii)	 	on or before the 60th day following Employee’s Separation from
Service, a lump sum in cash equal to 100% of the average of any Bonuses
received by Employee from the Company in the two years before the CIC Effective
Date; and
	 
	 	(iii)	 	during the portion, if any, of the 18-month period commencing
on the date of Employee’s Separation from Service that Employee is eligible to
elect and elects to continue coverage for himself and his eligible dependents
under the Company’s or an Affiliate’s (or a successor of either such entity)
group heath plan pursuant to COBRA or similar state law, the Company shall
reimburse Employee on a monthly basis for the difference between the amount
Employee pays to effect and continue such coverage and the employee
contribution amount that active senior executive employees of the
Company pay for the same or similar coverage.

Employment Agreement — Page 10

 

 

	 	(c)	 	Effect of a Change in Control Following Date of Termination.
Notwithstanding any contrary provision in this Agreement, if this Agreement is
terminated by the Company without Cause in accordance with subparagraph 6(d) or by
Employee for Good Reason in accordance with subparagraph 6(e), and a CIC Effective Date
occurs within 120 days following the Date of Termination, then, in addition to the
severance payments and benefits provided to Employee in accordance with subparagraph
7(d), the Company shall provide Employee (or to Employee’s estate in the event of his
death following the Date of Termination) with the following Change in Control payments:

	 	(i)	 	on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(i) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(i); and
	 
	 	(ii)	 	on or before the 60th day following the CIC Effective Date, a
lump sum in cash equal to the excess, if any, of (A) the Change of Control
payment that Employee would have been entitled to receive under subparagraph
8(b)(ii) if he was employed by the Company or an Affiliate on the CIC Effective
Date, over (B) the severance payment payable to Employee in accordance with
subparagraph 7(d)(ii).

	9.	 	Parachute Payment Limitation. Notwithstanding any contrary provision in this
Agreement, if Employee is a “disqualified individual” (as defined in Section 280G of
the Code), and the Change in Control payments and benefits described in paragraph 8, together
with any other payments which Employee has the right to receive from the Company, would
constitute a “parachute payment” (as defined in Section 280G of the Code), the
payments and benefits provided hereunder shall be either (a) reduced (but not below zero) so
that the aggregate present value of such payments and benefits received by Employee from the
Company shall be $1.00 less than three times Employee’s “base amount” (as defined in
Section 280G of the Code) and so that no portion of such payments received by Employee shall
be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full,
whichever produces the better net after-tax result for Employee (taking into account any
applicable excise tax under Section 4999 of the Code and any applicable income tax). The
determination as to whether any such reduction in the amount of the payments and benefits is
necessary shall be made by the Company in good faith and such determination shall be
conclusive and binding on Employee. If a reduced payment is made to Employee pursuant to
clause (a) above and through error or otherwise that payment, when aggregated with other
payments from the Company (or its affiliates) used in determining if a parachute payment exists, exceeds $1.00
less than three times Employee’s base amount, Employee shall immediately repay such excess
to the Company upon notification that an overpayment has been made.

Employment Agreement — Page 11

 

 

	10.	 	Conditions on Receipt of Severance and Change-in-Control Benefits.

	 	(a)	 	Compliance with Post-Termination Obligations and Execution and
Non-Revocation of General Release Agreement. Notwithstanding any other provision
in this Agreement, the Company’s payment to Employee of the severance payments and
benefits described in subparagraphs 7(b)(i), 7(d)(i)-(ii), and 7(e)(i) or the Change in
Control payments and benefits described in subparagraphs 8(b)(i)-(ii) and 8(c)(i)-(ii)
is subject to the condition that he complies with all applicable covenants under
paragraphs 12, 13, 14, and 15 of this Agreement. The Company shall have the right to
cease payment of any such payments or benefits, as well as to seek restitution of any
such payments or benefits already paid, if such covenants have been breached by
Employee but all other provisions of this Agreement shall remain in full force and
effect. The Company’s payment of such payments or benefits to Employee is also
subject to the condition that, within 55 days after the Date of Termination, he
execute, deliver to the Company, and not revoke as permitted by applicable law a
General Release Agreement in a form reasonably acceptable to the Company that fully and
finally releases and waives any and all claims, demands, actions, and suits whatsoever
which he has or may have against the Company and its Affiliates, whether under this
Agreement or otherwise, that arose before the General Release Agreement was executed
(the “Release”). For purposes of this Agreement, the Release shall not become
fully enforceable and irrevocable until Employee has timely executed the Release and
not revoked his acceptance of the Release within seven days after its execution.
	 
	 	(b)	 	Separation from Service Requirement. Notwithstanding any other
provision of this Agreement, Employee shall be entitled to the severance or Change in
Control benefits and payments in subparagraphs 7(b), 7(d), 7(e), or 8(b) only if
Employee’s termination of employment constitutes a Separation from Service. For
purposes of this Agreement, “Separation from Service” means separation from
service (within the meaning of Code Section 409A and the regulations and other guidance
promulgated thereunder (“Section 409A”)) with the group of employers that
includes the Company and each of its Affiliates. For this purpose, “Affiliate”
means any incorporated or unincorporated trade or business or other entity or person,
other than the Company, that along with the Company is considered a single employer
under Code Section 414(b) or Code Section 414(c), but (i) in applying Code Section
1563(a)(1), (2), and (3) for the purposes of determining a controlled group of
corporations under Code Section 414(b), the phrase “at least 50 percent” shall be used
instead of the phrase “at least 80 percent” in each place the phrase “at least 80
percent” appears in Code Section 1563(a)(1), (2), and (3), and (ii) in applying
Treasury Regulation Section 1.414(c)-2 for the purposes of determining trades or
businesses (whether or not
incorporated) that are under common control for the purposes of Code Section 414(c),
the phrase “at least 50 percent” shall be used instead of the phrase “at least 80
percent” in each place the phrase “at least 80 percent” appears in Treasury
Regulation Section 1.414(c)-2.

Employment Agreement — Page 12

 

 

	11.	 	Other Provisions Relating to Termination.

	 	(a)	 	Notice of Termination. Any termination of this Agreement by the
Company or by Employee (other than termination because of death) shall be communicated
by written Notice of Termination to the other party thereto. For purposes of this
Agreement, a “Notice of Termination” shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated; provided, however, that any
failure to provide such detail shall not delay the effectiveness of the termination.
	 
	 	(b)	 	Date of Termination. For purposes of this Agreement, “Date of
Termination” shall mean (i) if Employee’s employment is terminated by death, the
date of death; (ii) if Employee’s employment is terminated because of Employee becoming
Permanently Disabled, then 60 days after Notice of Termination is given (provided that
Employee shall not have returned to the performance of his duties, responsibilities,
and authorities on a full-time basis during such 60-day period); (iii) if (A)
Employee’s employment is terminated by the Company with or without Cause or (B)
Employee’s employment is terminated by Employee with or without Good Reason, then in
each case the date specified in the Notice of Termination, which shall comply with the
applicable notice requirements in paragraph 6; and (iv) if this Agreement is not
renewed, the last date of the Initial Term or the Renewal Term as applicable.
	 
	 	(c)	 	Mitigation. Employee shall not be required to mitigate the amount of
any payment or benefits provided for in paragraphs 7 or 8 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for therein be
reduced by any compensation earned by Employee as the result of employment by another
employer after the Date of Termination, or otherwise.
	 
	 	(d)	 	Interest. Until paid, all past due amounts required to be paid by the
Company under any provision of this Agreement shall bear interest at 8% per annum
compounded daily.

	12.	 	Business Opportunities and Intellectual Property.

	 	(a)	 	Prompt Disclosure Required. Employee shall promptly disclose to the
Board in writing all Business Opportunities and Intellectual Property.
	 
	 	(b)	 	Definition of Business Opportunities. For purposes of this Agreement,
“Business Opportunities” shall mean all business ideas, prospects, proposals or
other opportunities pertaining to the lease, acquisition, exploration, production,
gathering or marketing of hydrocarbons and related products and the exploration
potential of geographical areas on which hydrocarbon exploration prospects are located,
that are

Employment Agreement — Page 13

 

 

	 	 	 	developed by Employee before or during the Term or originated by any third
party and brought to the attention of Employee before or during the Term, together with
information relating thereto (including, without limitation, geological and seismic
data and interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions, or other written or charted
means).

	 	(c)	 	Definition of Intellectual Property. For purposes of this Agreement,
“Intellectual Property” shall mean all ideas, inventions, discoveries,
processes, designs, methods, substances, articles, computer programs, and improvements
(including, without limitation, enhancements to, or further interpretation or
processing of, information that was in the possession of Employee prior to the date of
this Agreement), whether or not patentable or copyrightable, that do not fall within
the definition of Business Opportunities, that Employee discovers, conceives, invents,
creates, or develops, alone or with others, before or during the Term, if such
discovery, conception, invention, creation, or development (i) occurs in the course of
Employee’s employment with the Company or its Affiliates or (ii) occurs with the use of
any time, materials, or facilities of the Company or its Affiliates.

	13.	 	Non-Compete Obligations During Term. During the Term and except as provided below or
as otherwise permitted by the Company (acting upon the instruction of the Board):

	 	(a)	 	Employee shall not, other than through the Company or its Affiliates, engage or
participate in any manner, whether directly or indirectly through any family member or
as an employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor, or in any other individual or
representative capacity, in any business or activity that is engaged in leasing,
acquiring, exploring, developing or producing hydrocarbons and related products; and
	 
	 	(b)	 	all investments made by Employee (whether in his own name or in the name of any
family members or made by Employee’s controlled affiliates), which relate to the lease,
acquisition, exploration, development or production of hydrocarbons and related
products shall be made solely through the Company or its Affiliates; and Employee shall
not (directly or indirectly through any family members), and shall not permit any of
his controlled affiliates to: (i) invest or otherwise participate alongside the Company
or its Affiliates in any Business Opportunities or (ii) invest or otherwise participate
in any business or activity relating to a Business Opportunity, regardless of whether
the Company or any of its Affiliates ultimately participates in such
business or activity;

provided, however, that this paragraph shall not apply to (x) the existing personal
oil and gas investments owned by Employee, his family members, and his controlled affiliates
as of the first day of Employee’s employment with the Company before the Term (the
“Existing Personal Investments”); (y) future expenditures made by Employee and his
family members

Employment Agreement — Page 14

 

 

and his controlled affiliates that are required to maintain, but not
increase, their respective current ownership interests in the Existing Personal Investments,
excluding however, any expenditure to participate in the acquisition, exploration, or
development of any acreage that is not currently included in the Existing Personal
Investments as of the Effective Date; and (z) any opportunity that is first offered to, and
subsequently declined by, the Company (acting through the Board).

	14.	 	Confidentiality Obligations.

	 	(a)	 	Confidentiality and Non-Disclosure Acknowledgments and Obligations.
Employee hereby acknowledges that all trade secrets and confidential or proprietary
information of the Company and its Affiliates (collectively referred to herein as
“Confidential Information”) constitute valuable, special and unique assets of
the business of the Company and its Affiliates, and that access to and knowledge of
such Confidential Information is essential to the performance of Employee’s duties,
responsibilities, and authorities under this Agreement. During the Term and the
one-year period following the Date of Termination, Employee shall hold the Confidential
Information in strict confidence and shall not publish, disseminate, or otherwise
disclose, directly or indirectly, to any person other than the Company and its
Affiliates and their respective officers, directors, and employees, any Confidential
Information or use any Confidential Information for Employee’s own personal benefit or
for the benefit of anyone other than the Company and its Affiliates. The Company
agrees to provide previously undisclosed Confidential Information to Employee in
exchange for Employee’s agreement to keep such Confidential Information, and any
Confidential Information to which Employee has already become privy, in strict
confidence as provided in this Agreement.
	 
	 	(b)	 	Confidential Information Inclusions and Exclusions. For purposes of
this Agreement, Confidential Information includes, without limitation, any information
heretofore or hereafter acquired, developed, or used by the Company or its Affiliates
relating to Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial, or management aspects of the business, operations,
properties, or prospects of the Company or its Affiliates whether oral or in written
form in business records, but shall exclude any information that (i) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in the
public domain (other than from disclosure by Employee in violation of this Agreement),
or (ii) was rightfully in the possession of Employee, as shown by Employee’s records,
prior to the Effective Date (including Employee’s method of
selecting, purchasing, and reworking oil and gas properties, which the Company and
Employee may utilize subsequent to the Term (subject to the other limitations
contained in this Agreement)); provided, however, that Employee shall
provide to the Company copies of all information described in clause (ii); and
provided further, however, that this subparagraph shall not be applicable to
the extent Employee is required to testify in a judicial or regulatory proceeding
pursuant to the order of a judge or administrative law judge after Employee requests
that such Confidential Information be preserved.

Employment Agreement — Page 15

 

 

	15.	 	Obligations After Date of Termination.

	 	(a)	 	Non-Compete Obligations. The purposes of paragraph 14 and this
paragraph 15 are to protect the Company from unfair loss of goodwill and business
advantage and to shield Employee from pressure to use or disclose Confidential
Information or to trade on the goodwill belonging to the Company. Accordingly, during
the Post-Termination Non-Compete Term, Employee shall not engage or participate in any
manner, whether directly or indirectly through any family member or as an employee,
employer, consultant, agent, principal, partner, shareholder, officer, director,
licensor, lender, lessor, or in any other individual or representative capacity, in any
business or activity that is in engaged in leasing, acquiring, exploring, developing or
producing hydrocarbons and related products within the boundaries of, or within a four
mile radius of the boundaries of, any mineral property interest of the Company or its
Affiliates (including, without limitation, a mineral lease, overriding royalty
interest, production payment, net profits interest, mineral fee interest, or option or
right to acquire any of the foregoing, or an area of mutual interest as designated
pursuant to contractual agreements between the Company or its Affiliates and any third
party) or any other property on which the Company or its Affiliates have an option,
right, license, or authority to conduct or direct exploratory activities, such as three
dimensional seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping), as of the Date of
Termination or as of the end of the six-month period following such Date of
Termination; provided, however, that this subparagraph shall not preclude
Employee from making personal investments in securities of oil and gas companies that
are registered on a national stock exchange, if the aggregate amount owned by Employee
and all family members and affiliates does not exceed 1% of such company’s outstanding
securities.

	 	(b)	 	Definition of Post-Termination Non-Compete Term. For purposes of this
Agreement, the “Post-Termination Non-Compete Term” is the one-year period
following the Date of Termination; provided, however, that the Post-Termination
Non-Compete Term shall be reduced to the six-month period following the Date of
Termination if this Agreement is terminated on or before the first anniversary of the
CIC Effective Date either (i) by the Company without Cause in accordance with
subparagraph 6(d) or (ii) by Employee for Good Reason in accordance with subparagraph
6(e).

	 	(c)	 	Non-Solicitation Obligations. Employee shall not, during the Post
Termination Non-Compete Term, solicit, entice, persuade, or induce, directly or
indirectly, any employee (or person who within the preceding 90 days was an employee)
of the Company or its Affiliates to (i) terminate his or her employment by such person,
(ii) refrain from extending or renewing the same (upon the same or new terms), (iii)
refrain from rendering services to or for such person, (iv) become employed by or to

Employment Agreement — Page 16

 

 

	 	 	 	enter into contractual relations with any Persons other than such person, or (v) enter
into a relationship with a competitor of the Company or its Affiliates.

	 	(d)	 	Discretionary Monthly Non-Compete Payments. The Company may, in its
sole discretion, elect to continue on the Company’s regularly scheduled paydays
Employee’s Base Salary in effect immediately before the Date of Termination during
each month of the Post-Termination Non-Compete Term (the “Monthly Non-Compete
Payments”). The Company shall provide written notice to Employee no later than 10
days after the Date of Termination or on or before the Company’s first regularly
scheduled payday following the Date of Termination, whichever is sooner, of its
election to make any Monthly Non-Compete Payments. If the Company does elect to make
the Monthly Non-Compete Payments, the Company shall not be obligated to continue making
any such Monthly Non-Compete Payments and shall be entitled in its sole discretion to
cease making the Monthly Non-Compete Payments at any time and for any reason but only
upon at least 30 days’ written notice to Employee, and the Company shall have no
further obligation to Employee under this subparagraph. If the Company starts but
ceases making the Monthly Non-Compete Payments, then, notwithstanding any contrary
provision in this Agreement, the Post-Termination Non-Compete Term for purpose of
subparagraph 15(a) shall expire on the last day of the month in which the final Monthly
Non-Compete Payment was made by the Company.

	16.	 	Common Law Duties. Employee acknowledges and agrees that his restrictive covenants
in paragraphs 12, 13, 14, and 15 of this Agreement shall supplement, rather than supplant, his
common law duties of confidentiality and loyalty owed to the Company.

	17.	 	Survival of Covenants; Enforcement of Covenants; and Remedies.

	 	(a)	 	Survival of Covenants. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement shall survive the
termination of this Agreement and shall be construed as agreements independent of any
other provision of this Agreement, and the existence of any Dispute of Employee with or
against the Company or its Affiliates whether predicated on this Agreement or otherwise
shall not constitute a defense to the enforcement by the Company of those covenants.

	 	(b)	 	Enforcement of Covenants. Employee acknowledges and agrees that his
covenants in paragraphs 12, 13, 14, and 15 of this Agreement are ancillary to the
otherwise enforceable agreements to provide Employee with Confidential Information and
are supported by independent, valuable consideration. Employee further acknowledges
and agrees that the limitations as to time, geographical area, and scope of activity to
be restrained by those covenants are reasonable and acceptable to Employee and do not
import any greater restraint than is reasonably necessary to protect the Company’s
goodwill, Confidential Information, and other legitimate business interests. Employee
further agrees that if, at some later date, a court of competent jurisdiction
determines that any of the covenants in paragraphs 12, 13, 14, or 15 are 

Employment Agreement — Page 17

 

 

	 	 	 	unreasonable,
any such covenants shall be reformed by the court and enforced to the maximum extent
permitted under the law.

	 	(c)	 	Remedies. In the event of breach or threatened breach by Employee of
any of his covenants in paragraphs 12, 13, 14, or 15 of this Agreement, the Company
shall be entitled to equitable relief by temporary restraining order, temporary
injunction, or permanent injunction or otherwise, in addition to other legal and
equitable relief to which it may be entitled, including any and all monetary damages
that the Company may incur as a result of such breach, violation, or threatened breach
or violation. The Company may pursue any remedy available to it concurrently or
consecutively in any order as to any breach, violation, or threatened breach or
violation, and the pursuit of one of such remedies at any time shall not be deemed an
election of remedies or waiver of the right to pursue any other of such remedies as to
such breach, violation, or threatened breach or violation, or as to any other breach,
violation, or threatened breach or violation.

	18.	 	Successors and Assigns. This Agreement may not be assigned by the Company to any
other person or entity other than an Affiliate of the Company without Employee’s written
consent; provided, however, that in the event of a Change in Control, the Company
shall cause the surviving entity in any such transaction to assume the Company’s obligations
under paragraphs 7 and 8 to the extent such obligations have not yet been fully performed.
Employee’s duties, responsibilities, authorities, compensation, and benefits under this
Agreement are personal to Employee and may not be assigned to any person or entity without
written consent from the Board. In the event of Employee’s death, this Agreement shall be
enforceable by Employee’s estate, executors, or legal representatives. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns.

	19.	 	Representations of Employee. Employee hereby represents and warrants that he has not
previously assumed any obligations inconsistent with those in this Agreement. Employee
further represents and warrants that he has entered into this Agreement pursuant to his own
initiative and that the Company did not induce him to execute this Agreement in contravention
of any existing commitments. Employee further acknowledges that the Company has entered into
this Agreement in reliance upon the foregoing representations of Employee.

	20.	 	Dispute Resolution. The parties agree to the following dispute resolution terms:

	 	(a)	 	Definition of Dispute. Any controversy, claim, complaint, cause of
action, or similar proceeding, whether based on statute, contract, common law,
negligence, tort, misrepresentation, or any other legal theory, arising out of or
relating to this Agreement or Employee’s employment with the Company (a
“Dispute”), shall be resolved solely in accordance with the terms of this
paragraph; provided, however, that the term Dispute shall not include
Employee’s claims for workers’ compensation 

Employment Agreement — Page 18

 

 

	 	 	 	or unemployment compensation benefits
(although any claim asserted under Ch. 451 of the Texas Labor Code shall be considered
a Dispute subject to dispute resolution under this paragraph).

	 	(b)	 	Mediation. If a Dispute cannot be settled by good faith negotiation
between the parties, the parties shall submit the Dispute to nonbinding mediation as
soon as reasonably possible after the Dispute arose. If complete agreement cannot be
reached within five calendar days of submission to mediation, either party may file a
civil action against the other party in any court of competent jurisdiction permitted
under paragraph 26.

	 	(c)	 	Waiver of Right to Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION IN
THIS AGREEMENT, THE PARTIES SHALL, AND HEREBY DO, IRREVOCABLY WAIVE THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY DISPUTE. IN ADDITION, EMPLOYEE SHALL, AND HEREBY DOES,
IRREVOCABLY WAIVE THE RIGHT TO PARTICIPATE IN ANY CLASS OR COLLECTIVE ACTION WITH
RESPECT TO ANY DISPUTE.

	21.	 	Attorneys’ Fees and Other Costs. If either party breaches this Agreement, or if a
Dispute arises between the parties based on or involving this Agreement, the party that
enforces its rights under this Agreement against the breaching party, or that prevails in the
resolution of such Dispute, shall be entitled to recover from the other party its reasonable
attorneys’ fees, court costs, and expenses incurred in enforcing such rights or resolving such
Dispute. For purposes of this paragraph, the finder of fact shall be requested to answer
affirmatively as to whether a party prevailed in order to recoup attorneys’ fees and other
costs pursuant to this paragraph.

	22.	 	Entire Agreement. This Agreement constitutes the entire agreement between the
parties concerning its subject matters and supersedes all prior and contemporaneous agreements
and understandings, both written and oral, between the parties with respect to its subject
matters, including without limitation the Original Employment Agreement. Employee agrees that
the Company has not made any promise or representation to him concerning this Agreement not
expressed in this Agreement, and that, in signing this Agreement, he is not relying on any
prior oral or written statement or representation by the Company but is instead relying solely
on his own judgment and his legal and tax advisors, if any.

	23.	 	Amendment of Agreement. This Agreement may not be modified or amended in any respect
except by an instrument in writing signed by the party against whom such modification or
amendment is sought to be enforced. Notwithstanding the previous sentence, the Company may
modify or amend this Agreement in its sole discretion at any time without the further consent
of the Employee in any manner necessary to comply with applicable law and regulations or the
listing or other requirements of any stock exchange upon which the Company is listed. No
modification or amendment may be enforced against the Company unless such modification or
amendment is in writing and signed by the Board.

Employment Agreement — Page 19

 

 

	24.	 	Waiver. The waiver by either party of a breach of any term of this Agreement shall
not operate or be construed as a waiver of a subsequent breach of the same provision by either
party or of the breach of any other term or provision of this Agreement.
	 
	25.	 	Severability. If any provision of this Agreement is held to be illegal, invalid, or
unenforceable, (a) this Agreement shall be considered divisible, (b) such provision shall be
deemed inoperative to the extent it is deemed illegal, invalid, or unenforceable, and (c) in
all other respects this Agreement shall remain in full force and effect; provided,
however, that, if any such provision may be made enforceable by limitation, then such
provision shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
	 
	26.	 	Governing Law; Venue. This Agreement shall be governed by the laws of the State of
Texas, without regard to its conflict-of-laws principles. Employee and the Company hereby
irrevocably consent to the binding and exclusive venue for any Dispute between the parties
arising out of or related to this Agreement being in the state or federal court of competent
jurisdiction that regularly conducts proceedings in Tarrant County, Texas. Nothing in this
Agreement, however, precludes Employee or the Company from seeking to remove a civil action
from any state court to federal court.
	 
	27.	 	Notices. All notices under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or three calendar days after the date
deposited in a receptacle maintained by the United States Postal Service for such purpose,
postage prepaid, by certified mail, return receipt requested, addressed to the Company at its
headquarters or Employee at the address of such person as set forth in the Company’s records.
Either party may designate a different address by providing written notice of such new address
to the other party.
	 
	28.	 	Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered one and the
same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or
electronically scanned version by e-mail shall have the same force and effect as delivery of
the originally executed document.
	 
	29.	 	Code Section 409A.

	 	(a)	 	Intent. All or a portion of the payments and benefits provided under
this Agreement is intended to be exempt from Section 409A and any ambiguous provision
will be construed in a manner that is compliant with or exempt from the application of
Section 409A. In particular, such payments and benefits are intended to constitute
short-term deferrals described in Treasury Regulation Section 1.409A-1(b)(4) or a
payment or benefit described in Treasury Regulation Section 1.409A-1(b)(9)(v). The
provisions of this Agreement shall be interpreted in a manner consistent with this
intent.

Employment Agreement — Page 20

 

 

	 	(b)	 	Specified Employee Postponement. Notwithstanding
subparagraph (a) of this paragraph or any other provision of this Agreement to the
contrary, if the Company or an Affiliate that is treated as a “service
recipient” (as defined in Section 409A) is publicly traded on an established
securities market (or otherwise) and Employee is a “specified employee” (as
defined below) and is entitled to receive a payment that is subject to Section 409A on
account of Employee’s Separation from Service, such payment may not be made earlier
than six months following the date of his Separation from Service if required by
Section 409A, in which case, the accumulated postponed amount shall be paid in a lump
sum payment on the Section 409A Payment Date. The “Section 409A Payment Date”
is the earlier of (i) the date of Employee’s death or (ii) the date that is six months
and one day after Employee’s Separation from Service. If any payment to Employee is
delayed pursuant to the foregoing sentence, such amount instead will be paid, with
interest at the rate set out in Section 11(d), on the Section 409A Payment Date. For
purposes of Section 409A, each payment amount or benefit due under this Agreement will
be considered a separate payment and Employee’s entitlement to a series of payments or
benefits under this Agreement is to be treated as an entitlement to a series of
separate payments. The determination of whether Employee is a “specified employee”
shall be made in accordance with Section 409A using the default provisions in the
Section 409A unless another permitted method has been prescribed for such purpose by
the Company.

	30.	 	Right to Consult a Tax Advisor. Notwithstanding any contrary provision in this
Agreement, Employee shall be solely responsible for any risk that the tax treatment of all or
part of any payments provided by this Agreement may be affected by Section 409A, which may
impose significant adverse tax consequences on him, including accelerated taxation, a 20%
additional tax, and interest. Because of the potential tax consequences, Employee has the
right, and is encouraged by this paragraph, to consult with a tax advisor of his choice before
signing this Agreement.

[Signature Page Follows]

Employment Agreement — Page 21

 

 

	 	 	 	 	 
	 	EMPLOYEE:

 	 
	 	/s/ Qingming Yang
 	 
	 	Name:  	Qingming Yang 	 

	 	 	 	 	 
	 	COMPANY:

APPROACH RESOURCES INC.,

A Delaware Corporation

 	 
	 	By:  	/s/ J. Ross Craft
 	 
	 	 	Name:  	J. Ross Craft 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

Employment Agreement — Page 22

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