UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
December 31, 2008
APPROACH RESOURCES INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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001-33801
(Commission file number)
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51-0424817
(I.R.S. employer identification number)
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One Ridgmar Centre
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6500 W. Freeway, Suite 800
Fort Worth, Texas
(Address of principal executive office)
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76116
(Zip code)
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(817) 989-9000
(Registrants telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2.):
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Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
(e) Amendments of Compensatory Plans; Compensatory Arrangements of Certain Officers
Effective December 31, 2008, Approach Resources Inc. (the Company) executed amendments
(collectively, the Amendments) to (i) its 2007 Stock Incentive Plan (Stock Incentive Plan),
(ii) Employment Agreements (Employment Agreements) with J. Ross Craft (President and Chief
Executive Officer), Steven P. Smart (Executive Vice President and Chief Financial Officer) and
Glenn W. Reed (Executive Vice President Engineering and Operations) , and (iii) Indemnity
Agreements (Indemnity Agreements) with each of its directors and executive officers. The
Amendments affect various participants in the plans and arrangements,
including each of the Companys named executive officers listed in the Companys proxy statement
for its 2008 Annual Meeting of Stockholders: J. Ross Craft (President and Chief Executive
Officer), Steven P. Smart (Executive Vice President and Chief Financial Officer) Glenn W. Reed
(Executive Vice President Engineering and Operations), J. Curtis Henderson (Executive Vice
President, Secretary and General Counsel) and Ralph P. Manoushagian (Executive Vice President
Land).
The Amendments reflect, among other things, changes necessary to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the Code), and the regulations promulgated thereunder
(collectively Section 409A). Section 409A was enacted in 2004 and governs nonqualified deferred
compensation arrangements. Section 409A imposes accelerated tax and additional tax on employees
and other service providers who are parties to a nonqualified deferred compensation arrangement if
the arrangement does not comply with Section 409A. Although Section 409A went into effect in 2005,
final regulations were not issued until 2007. Companies must amend affected nonqualified deferred
compensation arrangements by December 31, 2008 to ensure compliance with Section 409A.
Amendment to Stock Incentive Plan
The Amendment to the Stock Incentive Plan provides, among other things, for the following:
(i) Adjustments to outstanding awards and award agreements in the event of a recapitalization
or reorganization will be made in accordance with Sections 422, 424 and 409A of the Code;
(ii) Individuals who provide services to Affiliates (as defined in the Stock Incentive Plan)
that are not considered a single employer with the Company under Section 414(b) or (c) of the Code
will not be eligible to receive awards under the Stock Incentive Plan until the Affiliate adopts
the Stock Incentive Plan as a participating employer;
(iii) Nonqualified stock options and stock appreciation rights may only be granted to
individuals performing services for the Company or other entity in a chain of entities in which
each entity has a controlling interest in another entity in the chain; and
(iv) Any Affiliate not considered a single employer with the Company under Section 414(b) or
(c) may adopt the Stock Incentive Plan by written instrument delivered to the Compensation and
Nominating Committee before the grant of any award subject to Section 409A.
Amendments to Employment Agreements
The Amendments to the Employment Agreements provide, among other things, for the following:
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With respect to Mr. Craft:
(i) The amount and timing of expense reimbursements will conform to the requirements of
Section 409A;
(ii) The definition of Good Reason is amended to conform to Section 409A, including an
extension of the cure period for the Company from 10 to 30 days and the addition of notice and
exercise periods in which the Employee must take action;
(iii) Section 409A prohibits different forms of payment upon different types of separations.
Therefore, the Amendment provides that all separation payments will be made at the same time and in
the same form for all types of separations. Payments made upon termination by the Company without
Cause (as defined in the Employment Agreement), upon election by the Company not to extend the
Employment Agreement or upon termination by the Employee for Good Reason (as defined by the
Employment Agreement) will be made within 60 days following a Separation of Service (as defined in
the Employment Agreement), rather than within 90 days for termination for Good Reason and 24 months
after termination without Cause or non-extension by the Company under the original Employment
Agreement. The 90-day period was changed to 60 days due to Section 409A;
(iv) The Amendment clarifies that a payment on Change in Control (as defined in the Employment
Agreement) is not intended to be paid in addition to other, salary-based separation payments
payable under the Employment Agreement in the event of a termination not for Cause or without Good
Reason, and Change in Control payments will be made within 60 days following the Change in Control,
rather than 24 months under the original Employment Agreement; and
(v) Payment of benefits under the Companys welfare benefits plans after employment will be
limited to the period of eligibility under the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA).
With respect to Messrs. Smart and Reed:
(i) The amount and timing of expense reimbursements will conform to the requirements of
Section 409A;
(ii) Section 409A prohibits different forms of payment upon different types of separations.
Therefore, the Amendment provides that all separation payments will be made at the same time and in
the same form for all types of separations. Payments made upon termination by the Company without
Cause, upon election by the Company not to extend the Employment Agreement or upon termination by
the Employee for Good Reason will be made within 60 days following a Separation of Service, rather
than within 90 days upon breach by the Company and 24 months after termination without Cause or
non-extension by the Company under the original Employment Agreement. The 90-day period was
changed to 60 days due to Section 409A;
(iii) Payment of benefits under the Companys welfare benefits plans after employment will be
limited to the period of eligibility under COBRA.
Amendment to Form of Indemnity Agreement
The Company is a party to Indemnity Agreements with each of its directors and executive officers.
The indemnity agreements provide that directors and executive officers will be indemnified to the
fullest
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extent allowed by law against expenses and settlement amounts paid or incurred by them as a
director or executive officer of the Company. The Amendment to the Form Indemnity Agreement for
each of the directors and executive officers conforms the amount and timing of expense
reimbursements under the Indemnity Agreements to the requirements of Section 409A.
The foregoing description is a summary of the Amendments and does not purport to be a complete
statement of the parties rights and obligations under the applicable agreements. The foregoing
description is qualified in its entirety by reference to the full text of the Amendments, which are
filed as Exhibits 10.1 through 10.5 to this Current Report on Form 8-K, respectively, and are
incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
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Exhibit No.
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Description
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10.1
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First Amendment dated as of December 31, 2008 to Approach
Resources Inc. 2007 Stock Incentive Plan dated as of June 28,
2007.
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10.2
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and J. Ross
Craft dated as of January 1, 2003.
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10.3
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and Steven
P.
Smart dated as of January 1, 2003.
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10.4
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and Glenn W.
Reed dated as of January 1, 2003.
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10.5
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First Amendment dated as of December 31, 2008 to Form of
Indemnity Agreement between the Company and each of its
directors and executive officers dated as of July 12, 2007.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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APPROACH RESOURCES INC.
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By:
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/s/ J. Curtis Henderson
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J. Curtis Henderson
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Executive Vice President and General
Counsel
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Date: December 31, 2008
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EXHIBIT INDEX
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Exhibit No.
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Description
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10.1
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First Amendment dated as of December 31, 2008 to Approach
Resources Inc. 2007 Stock Incentive Plan dated as of June 28,
2007.
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10.2
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and J. Ross
Craft dated as of January 1, 2003.
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10.3
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and Steven
P.
Smart dated as of January 1, 2003.
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10.4
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First Amendment dated as of December 31, 2008 to Employment
Agreement by and between Approach Resources Inc. and Glenn W.
Reed dated as of January 1, 2003.
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10.5
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First Amendment dated as of December 31, 2008 to Form of
Indemnity Agreement between the Company and each of its
directors and executive officers dated as of July 12, 2007.
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Exhibit 10.1
FIRST AMENDMENT TO THE
APPROACH RESOURCES INC.
2007 STOCK INCENTIVE PLAN
This First Amendment to the Approach Resources Inc. 2007 Stock Incentive Plan (the
Amendment) is made effective as of December 31, 2008, by Approach Resources Inc., a Delaware
corporation (Approach).
W I T N E S S E T H
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WHEREAS, Approach established the Approach Resources Inc. 2007 Stock Incentive Plan (the
Plan) effective as of June 28, 2007; and
WHEREAS, Approach now desires to amend the Plan for compliance with Internal Revenue Code
Section 409A and the Treasury Regulations issued thereunder;
NOW, THEREFORE, pursuant to the authority reserved in Section 14.1, the Plan is amended as
follows:
1. Section 4.2 of the Plan is hereby amended by the addition of the following sentence:
Notwithstanding the provisions of this Section 4.2, outstanding Awards and Award
Agreements shall be adjusted in accordance with (A) Sections 422 and 424 of the Code
and the regulations thereunder with respect to Incentive Stock Options and (B)
Section 409A of the Code and the regulations thereunder with respect to Nonqualified
Stock Options, SARs and, to the extent applicable, other Awards.
2. Article V of the Plan is hereby amended by the addition of the following sentence:
Notwithstanding the foregoing, Employees, Outside Directors and other individuals or
entities that provide services to Affiliates that are not considered a single
employer with Approach under Code Section 414(b) or Code Section 414(c) shall not be
eligible to receive Awards which are subject to Code Section 409A until the
Affiliate adopts this Plan as a participating employer in accordance with Section
15.18.
3. The second sentence of Section 7.1 of the Plan is hereby amended and restated in its
entirety as follows:
Nonqualified Stock Options may be granted only to Employees, Outside Directors or
other individuals or entities performing services for Approach or a corporation or
other type of entity in a chain of corporations or other entities in which each
corporation or other entity has a controlling interest in another corporation or
entity in the chain, starting with Approach and ending with the corporation or other
entity for which the Employee, Outside Director or other individual or entity
performs services.
4. The first sentence of Section 8.1(b) of the Plan is hereby amended and restated in its
entirety as follows:
SARs may be granted only to Employees, Outside Directors or other individuals or
entities performing services for Approach or a corporation or other type of entity
in a chain of corporations or other entities in which each corporation or other
entity has a
controlling interest in another corporation or entity in the chain, starting with
Approach and ending with the corporation or other entity for which the Employee,
Outside Director or other individual or entity performs services.
5. The Plan is hereby amended by the addition of the following as Section 15.18:
15.18
Participating Affiliates
. With the consent of the Committee, any
Affiliate that is not considered a single employer with Approach under Code Section
414(b) or Code Section 414(c) may adopt the Plan for the benefit of its Employees by
written instrument delivered to the Committee before the grant to the Affiliates
Employees under the Plan of any Award subject to Code Section 409A.
6. Except as otherwise specifically set forth herein, all other terms and conditions of the
Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Approach has caused this Amendment to be executed on its behalf by its
duly authorized officer as of this the 31
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day of December, 2008.
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APPROACH RESOURCES INC.
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By:
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/s/ J. Ross Craft
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J. Ross Craft, President and Chief Executive Officer
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Exhibit 10.2
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
J. Ross Craft
This First Amendment to Employment Agreement (Amendment) is effective December 31, 2008, and
serves to modify only those certain terms of the Employment Agreement (Agreement) dated and
effective January 1, 2003, between Approach Resources Inc. (the Company) and J. Ross Craft (the
Employee), as stated herein.
1. Paragraph 5(d) of the Agreement is hereby amended by adding the following sentence to the
end thereof:
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.
2. Paragraph 6(e) of the Agreement is hereby amended by restatement in its entirety to read as
follows:
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e.
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Good Reason
. At his option, Employee may terminate his employment
hereunder (a termination for Good Reason) in accordance with this paragraph 6(e) in
the event any of the following actions are taken without Employees consent:
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(i)
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a material diminution in Employees authority, responsibilities
or duties;
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(ii)
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a material diminution in the authority, duties or
responsibilities of the supervisor to whom Employee is required to report,
including a requirement that Employee report to an officer or employee instead
of reporting directly to the Board (or similar governing body); or
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(iii)
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any other action or inaction by the Company that constitutes a
material breach by the Company of its obligations under this Agreement.
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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 his employment with the Company;
provided, however, that such termination must occur no later than 180 days after the
date the initial existence of the condition(s) giving rise to the Good Reason;
otherwise, Employee is deemed to have accepted the condition(s), or the Companys
correction of such condition(s), that may have given rise to the existence of Good
Reason.
3. The introductory language prior to subparagraph (a) of Paragraph 7 is hereby amended by
restatement in its entirety to read as follows:
Upon termination of Employees employment for one of the following reasons, Employee shall
be entitled to the following compensation:
4. Paragraph 7(b) of the Agreement is amended by restatement in its entirety to read as
follows:
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b.
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Termination by the Company or by Employee for Good Reason
. If (i)
Employees employment shall be terminated without Cause as provided in paragraph 6(d)
or if the Company elects not to extend this Agreement as provided in paragraph 6(f) or
(ii) Employee should terminate his employment for Good Reason, then the Company shall
pay or provide Employee, in lieu of any further Base Salary payments to Employee:
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(A)
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on or before the 20
th
day following Employees
Separation from Service, a lump sum in cash equal to 50% of his Base Salary in
effect as of such Separation from Service;
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(B)
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on or before the 60
th
day following Employees
Separation from Service, a lump sum in cash equal to 150% of Employees Base
Salary in effect as of such Separation from Service;
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(C)
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all benefits Employee may be entitled to receive pursuant to
any pension or employee benefit plan or other arrangement or life insurance
policy maintained by the Company; and
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(D)
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for a period of 24 months (one year if Employee terminates with
Good Reason) or, if less, the period ending on the date Employee is no longer
entitled to continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA), a continuation of all benefits then
applicable to Employee and his immediate family under any employee welfare
benefit plan then maintained by the Company, including without limitation
health, dental and life insurance benefits; provided that if such continued
coverage after the Separation from Service is not permitted under the Companys
plans, then the Company will provide Employee with substantially similar
benefits through an insurance policy or reimburse Employee for the full cost of
obtaining such insurance which reimbursement amount shall be paid within five
(5) days of Employees furnishing the Company with evidence of the cost of such
insurance, which evidence shall be furnished to the Company by Employee on a
monthly basis.
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Notwithstanding the foregoing, Employee shall be entitled to the payments and
benefits above only if Employees termination of employment constitutes a
Separation from Service. For purposes of this Agreement, Separation from
Service means separation from service (within the meaning of Code Section 409A and
the regulations and other guidance promulgated thereunder) 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
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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.
5. Paragraph 7(c) of the Agreement is hereby deleted in its entirety.
6. Paragraph 8(a) of the Agreement is hereby amended by restatement in its entirety to read as
follows:
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a.
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If there is a Change in Control as defined in this paragraph and Employee is
employed on the Change in Control date, then this Agreement will terminate, regardless
of whether Employee terminates or experiences a Separation from Service, and the
Company shall pay or provide to Employee, in lieu of the payments and benefits provided
for in Section 7(b):
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(A)
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on or before the 20
th
day following the date of the
Change in Control, a lump sum in cash equal to 50% of his Base Salary in effect
as of the date of the Change in Control;
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(B)
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on or before the 60
th
day following the date of the
Change in Control, a lump sum in cash equal to 150% of Employees Base Salary
in effect as of the date of the Change in Control;
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(C)
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in the event of Employees termination for any reason on or
after the date of the Change in Control, all benefits Employee may be entitled
to receive pursuant to any pension or employee benefit plan or other
arrangement or life insurance policy maintained by the Company; and
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(D)
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in the event of Employees termination for any reason on or
after the date of the Change in Control, for a period of 24 months following
such termination or, if less, the period ending on the date Employee is no
longer entitled to continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA), a continuation of all benefits then
applicable to Employee and his immediate family under any employee welfare
benefit plan then maintained by the Company, including without limitation
health, dental and life insurance benefits; provided that if such continued
coverage after the Date of Termination is not permitted under the Companys
plans, then the Company will provide Employee with substantially similar
benefits through an insurance policy or reimburse Employee for the full cost of
obtaining such insurance which reimbursement amount shall be paid within five
(5) days of Employees furnishing the Company with evidence of the cost of such
insurance, which evidence shall be furnished to the Company by Employee on a
monthly basis.
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7. Paragraph 9(d) of the Agreement is hereby amended to add the following to the end thereof:
Such interest shall be paid in a lump sum at the same time as the related past due
amounts.
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8. Paragraph 9 of the Agreement is hereby amended to add the following paragraph to the end
thereof:
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e.
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IRC Section 409A
. All or a portion of the severance pay and benefits
provided under this Agreement is intended to be exempt from Code Section 409A and any
ambiguous provision will be construed in a manner that is compliant with or exempt from
the application of Code Section 409A. In particular, such severance pay and benefits
are intended to constitute a payment or benefit described in paragraphs (b)(9)(iv) and
(v) of Treasury Regulation Section 1.409A-1 and/or severance pay due to involuntary
separation from service under Treasury Regulation Section 1.409A-1(b)(9)(iii).
Notwithstanding any provision in this Agreement to the contrary, if any payment or
benefit provided for herein would be subject to additional taxes and interest under
Code Section 409A if Employees receipt of such payment or benefit is not delayed until
the Section 409A Payment Date, then such payment or benefit will not be provided to
Employee (or Employees estate, if applicable) until the Section 409A Payment Date.
The Section 409A Payment Date is the earlier of (a) the date of Employees death or
(b) the date that is six months and one day after Employees Separation from Service.
If any payment to Employee is delayed pursuant to the foregoing sentence, such amount
instead will be paid, with interest at the rate set out in Section 9(d), on the Section
409A Payment Date. For purposes of Code Section 409A, each payment amount or benefit
due under this Agreement will be considered a separate payment and Employees
entitlement to a series of payments or benefits under this Agreement is to be treated
as an entitlement to a series of separate payments. Any amount that Employee is
entitled to be reimbursed under this Agreement will be reimbursed to Employee as
promptly as practicable and in any event not later than the last day of the calendar
year after the calendar year in which the expenses to be reimbursed are incurred, and
the amount of the expenses eligible for reimbursement during any calendar year will not
affect the amount of expenses eligible for reimbursement in any other calendar year.
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9. The third sentence of paragraph 16 of the Agreement is hereby amended by restatement in its
entirety to read as follows:
In the event of Employees death, this Agreement shall be enforceable by Employees estate,
executors, or legal representatives.
10. Except and only as expressly provided herein, all provisions of the Agreement shall remain
unchanged and continue in full force and effect, and are hereby ratified by the parties hereto.
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IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf by its
duly authorized officer, and the Employee has executed this Amendment, effective as of the date
first set forth above.
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APPROACH RESOURCES INC.
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EMPLOYEE
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By:
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/s/ J. Curtis Henderson
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/s/ J. Ross Craft
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J. Curtis Henderson
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J. Ross Craft
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Executive Vice President and General Counsel
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5
Exhibit 10.3
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
Steven P. Smart
This First Amendment to Employment Agreement (Amendment) is effective December 31, 2008, and
serves to modify only those certain terms of the Employment Agreement (Agreement) dated and
effective January 1, 2003, between Approach Resources Inc. (the Company) and Steven P. Smart (the
Employee), as stated herein.
1. Paragraph 5(d) of the Agreement is hereby amended by adding the following sentence to the
end thereof:
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.
2. Paragraph 7(b) of the Agreement is amended by restatement in its entirety to read as
follows:
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b.
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Termination by the Company
. If Employees employment shall be
terminated without Cause as provided in paragraph 6(d) or if the Company elects not to
extend this Agreement as provided in paragraph 6(e), then the Company shall pay or
provide Employee, in lieu of any further Base Salary payments to Employee:
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(A)
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on or before the 20
th
day following Employees
Separation from Service, a lump sum in cash equal to 25% of his Base Salary in
effect as of such Separation from Service;
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(B)
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on or before the 60
th
day following Employees
Separation from Service, a lump sum in cash equal to 25% of Employees Base
Salary in effect as of such Separation from Service;
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(C)
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all benefits Employee may be entitled to receive pursuant to
any pension or employee benefit plan or other arrangement or life insurance
policy maintained by the Company; and
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(D)
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for a period of 6 months following such termination or, if
less, the period ending on the date Employee is no longer entitled to
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA), a continuation of all benefits then applicable to Employee
and his immediate family under any employee welfare benefit plan then
maintained by the Company, including without limitation health, dental and life
insurance benefits; provided that if such continued coverage after the Date of
Termination is not permitted under the Companys plans, then the Company will
provide Employee with substantially similar benefits through an insurance
policy or reimburse Employee for the full cost of obtaining such insurance
which reimbursement amount shall be paid within five (5) days of Employees
furnishing the Company
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with evidence of the cost of such insurance, which evidence shall be
furnished to the Company by Employee on a monthly basis.
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Notwithstanding the foregoing, Employee shall be entitled to the payments above only
if Employees termination of employment constitutes a Separation from Service.
For purposes of this Agreement, Separation from Service means separation from
service (within the meaning of Code Section 409A and the regulations and other
guidance promulgated thereunder) 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.
3. Paragraph 7(c) of the Agreement is hereby deleted in its entirety.
4. Paragraph 9(d) of the Agreement is hereby amended to add the following to the end thereof:
Such interest shall be paid in a lump sum at the same time as the related past due
amounts.
5. Paragraph 9 of the Agreement is hereby amended to add the following paragraph to the end
thereof:
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e.
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IRC Section 409A
. All or a portion of the severance pay and benefits
provided under this Agreement is intended to be exempt from Code Section 409A and any
ambiguous provision will be construed in a manner that is compliant with or exempt from
the application of Code Section 409A. In particular, such severance pay and benefits
are intended to constitute a payment or benefit described in paragraphs (b)(9)(iv) and
(v) of Treasury Regulation Section 1.409A-1 and/or severance pay due to involuntary
separation from service under Treasury Regulation Section 1.409A-1(b)(9)(iii).
Notwithstanding any provision in this Agreement to the contrary, if any payment or
benefit provided for herein would be subject to additional taxes and interest under
Code Section 409A if Employees receipt of such payment or benefit is not delayed until
the Section 409A Payment Date, then such payment or benefit will not be provided to
Employee (or Employees estate, if applicable) until the Section 409A Payment Date.
The Section 409A Payment Date is the earlier of (a) the date of Employees death or
(b) the date that is six months and one day after Employees Separation from Service.
If any payment to Employee is delayed pursuant to the foregoing sentence, such amount
instead will be paid, with interest at the rate set out in Section 9(d), on the Section
409A Payment Date. For purposes of Code Section 409A, each payment amount or benefit
due under this Agreement will be considered a separate payment and Employees
entitlement to a series of payments or benefits under this Agreement is to be treated
as an entitlement
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to a series of separate payments. Any amount that Employee is entitled to be
reimbursed under this Agreement will be reimbursed to Employee as promptly as
practicable and in any event not later than the last day of the calendar year after
the calendar year in which the expenses to be reimbursed are incurred, and the
amount of the expenses eligible for reimbursement during any calendar year will not
affect the amount of expenses eligible for reimbursement in any other calendar year.
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6. The third sentence of paragraph 16 of the Agreement is hereby amended by restatement in its
entirety to read as follows:
In the event of Employees death, this Agreement shall be enforceable by Employees estate,
executors, or legal representatives.
7. Except and only as expressly provided herein, all provisions of the Agreement shall remain
unchanged and continue in full force and effect, and are hereby ratified by the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf by its
duly authorized officer, and the Employee has executed this Amendment, effective as of the date
first set forth above.
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APPROACH RESOURCES INC.
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EMPLOYEE
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By:
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/s/ J. Curtis Henderson
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/s/ Steven P. Smart
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J. Curtis Henderson
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Steven P. Smart
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Executive Vice President and General Counsel
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Exhibit 10.4
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
Glenn W. Reed
This First Amendment to Employment Agreement (Amendment) is effective December 31, 2008, and
serves to modify only those certain terms of the Employment Agreement (Agreement) dated and
effective January 1, 2003, between Approach Resources Inc. (the Company) and Glenn W. Reed (the
Employee), as stated herein.
1. Paragraph 5(d) of the Agreement is hereby amended by adding the following sentence to the
end thereof:
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.
2. Paragraph 7(b) of the Agreement is amended by restatement in its entirety to read as
follows:
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b.
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Termination by the Company
. If Employees employment shall be
terminated without Cause as provided in paragraph 6(d) or if the Company elects not to
extend this Agreement as provided in paragraph 6(e), then the Company shall pay or
provide Employee, in lieu of any further Base Salary payments to Employee:
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(A)
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on or before the 20
th
day following Employees
Separation from Service, a lump sum in cash equal to 50% of his Base Salary in
effect as of such Separation from Service;
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(B)
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on or before the 60
th
day following Employees
Separation from Service, a lump sum in cash equal to 150% of Employees Base
Salary in effect as of such Separation from Service;
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(C)
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all benefits Employee may be entitled to receive pursuant to
any pension or employee benefit plan or other arrangement or life insurance
policy maintained by the Company; and
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(D)
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for a period of 24 months or, if less, the period ending on the date Employee is no longer
entitled to continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA), a continuation of all benefits then
applicable to Employee and his immediate family under any employee welfare
benefit plan then maintained by the Company, including without limitation
health, dental and life insurance benefits; provided that if such continued
coverage after the Separation from Service is not permitted under the Companys
plans, then the Company will provide Employee with substantially similar
benefits through an insurance policy or reimburse Employee for the full cost of
obtaining such insurance which reimbursement amount shall be paid within five
(5) days of
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Employees furnishing the Company with evidence of the cost of such
insurance, which evidence shall be furnished to the Company by Employee on a
monthly basis.
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Notwithstanding the foregoing, Employee shall be entitled to the payments above only
if Employees termination of employment constitutes a Separation from Service.
For purposes of this Agreement, Separation from Service means separation from
service (within the meaning of Code Section 409A and the regulations and other
guidance promulgated thereunder) 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.
3. Paragraph 7(c) of the Agreement is hereby deleted in its entirety.
4. Paragraph 9(d) of the Agreement is hereby amended to add the following to the end thereof:
Such interest shall be paid in a lump sum at the same time as the related past due
amounts.
5. Paragraph 9 of the Agreement is hereby amended to add the following paragraph to the end
thereof:
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e.
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IRC Section 409A
. All or a portion of the severance pay and benefits
provided under this Agreement is intended to be exempt from Code Section 409A and any
ambiguous provision will be construed in a manner that is compliant with or exempt from
the application of Code Section 409A. In particular, such severance pay and benefits
are intended to constitute a payment or benefit described in paragraphs (b)(9)(iv) and
(v) of Treasury Regulation Section 1.409A-1 and/or severance pay due to involuntary
separation from service under Treasury Regulation Section 1.409A-1(b)(9)(iii).
Notwithstanding any provision in this Agreement to the contrary, if any payment or
benefit provided for herein would be subject to additional taxes and interest under
Code Section 409A if Employees receipt of such payment or benefit is not delayed until
the Section 409A Payment Date, then such payment or benefit will not be provided to
Employee (or Employees estate, if applicable) until the Section 409A Payment Date.
The Section 409A Payment Date is the earlier of (a) the date of Employees death or
(b) the date that is six months and one day after Employees Separation from Service.
If any payment to Employee is delayed pursuant to the foregoing sentence, such amount
instead will be paid, with interest at the rate set out in Section 9(d), on the Section
409A Payment Date. For purposes of Code Section 409A, each payment amount or benefit
due under this Agreement will be considered a separate payment and Employees
entitlement
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to a series of payments or benefits under this Agreement is to be treated as an
entitlement to a series of separate payments. Any amount that Employee is entitled
to be reimbursed under this Agreement will be reimbursed to Employee as promptly as
practicable and in any event not later than the last day of the calendar year after
the calendar year in which the expenses to be reimbursed are incurred, and the
amount of the expenses eligible for reimbursement during any calendar year will not
affect the amount of expenses eligible for reimbursement in any other calendar year.
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6. The third sentence of paragraph 16 of the Agreement is hereby amended by restatement in its
entirety to read as follows:
In the event of Employees death, this Agreement shall be enforceable by Employees estate,
executors, or legal representatives.
7. Except and only as expressly provided herein, all provisions of the Agreement shall remain
unchanged and continue in full force and effect, and are hereby ratified by the parties hereto.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on its behalf by its
duly authorized officer, and the Employee has executed this Amendment, effective as of the date
first set forth above.
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APPROACH RESOURCES INC.
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EMPLOYEE
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By:
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/s/ J. Curtis Henderson
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/s/ Glenn W. Reed
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J. Curtis Henderson
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Glenn W. Reed
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Executive Vice President and General Counsel
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3
Exhibit 10.5
FIRST AMENDMENT TO INDEMNITY AGREEMENT
This Amendment to
Indemnity Agreement is entered into and effective as of December 31, 2008,
by and between Approach Resources Inc., a Delaware corporation (the Company), and
(the Indemnitee).
W I T N E S S E T H
:
WHEREAS, the Company and the Indemnitee entered into an Indemnity Agreement effective as of
July 12, 2007 (the Indemnity Agreement); and
WHEREAS, the Company and the Indemnitee now desire to amend the Indemnity Agreement for
compliance with Section 409A of the Internal Revenue Code and the Treasury Regulations and other
guidance thereunder;
NOW, THEREFORE, in consideration of the premises, the parties do hereby agree as follows:
1. The Indemnity Agreement is hereby amended to add a new Section 27 to the end thereof to
read as follows:
27.
Internal Revenue Code Section 409A.
Expenses payable pursuant to this Indemnity
Agreement are intended to satisfy the indemnification arrangement exception to Section 409A
of the Internal Revenue Code of 1986, as amended (the Code). Notwithstanding any
provision of this Agreement to the contrary, if any reimbursement of an Expense constitutes
deferred compensation subject to Code Section 409A (other than a tax gross-up payment),
such Expense shall be paid by the end of the calendar year next following the calendar year
in which the Expense is incurred, and the amount of such Expenses eligible for reimbursement
during any calendar year will not affect the amount of Expenses eligible for reimbursement
in any other calendar year. With respect to an Expense that is a tax gross-up payment as
defined in the Treasury Regulations under Code Section 409A, such tax gross-up payment will
be paid to the Indemnitee by the end of the calendar year following the calendar year in
which the Indemnitee remits the related taxes to the taxing authority. Any provision of
this Agreement to the contrary notwithstanding, if any payment provided for herein would be
subject to additional taxes and interest under Code Section 409A and if Indemnitees receipt
of such payment is not delayed until the Section 409A Payment Date, then such payment will
not be provided to Indemnitee (or Indemnitees estate, if applicable) until the Section 409A
Payment Date. The Section 409A Payment Date is the earlier of (a) the date of
Indemnitees death or (b) the date that is six months and one day after Indemnitees
separation from service as defined in Code Section 409A.
2. Except as otherwise specifically set forth herein, all other terms and conditions of the
Indemnity Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the date
first indicated above.
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APPROACH RESOURCES INC.
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By:
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Name:
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Title:
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INDEMNITEE
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Name:
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