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:

  e.   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 Employee’s
consent:

  (i)   a material diminution in Employee’s authority, responsibilities or
duties;     (ii)   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     (iii)  
any other action or inaction by the Company that constitutes a material breach
by the Company of its obligations under this Agreement.

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 Company’s 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:

 

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Upon termination of Employee’s 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:

  b.   Termination by the Company or by Employee for Good Reason. If (i)
Employee’s 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:

  (A)   on or before the 20th day following Employee’s Separation from Service,
a lump sum in cash equal to 50% of his Base Salary in effect as of such
Separation from Service;     (B)   on or before the 60th day following
Employee’s Separation from Service, a lump sum in cash equal to 150% of
Employee’s Base Salary in effect as of such Separation from Service;     (C)  
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     (D)   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 Company’s
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 Employee’s 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.

Notwithstanding the foregoing, Employee shall be entitled to the payments and
benefits above 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) 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:

  a.   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):

  (A)   on or before the 20th 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;     (B)   on or before the 60th day following the date of the
Change in Control, a lump sum in cash equal to 150% of Employee’s Base Salary in
effect as of the date of the Change in Control;     (C)   in the event of
Employee’s 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     (D)   in the event of Employee’s 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
Company’s 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 Employee’s 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.

     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:

  e.   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 Employee’s 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 Employee’s estate, if applicable) until the
Section 409A Payment Date. The “Section 409A Payment Date” is the earlier of
(a) the date of Employee’s death or (b) 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 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 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. 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.

     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 Employee’s death, this Agreement shall be enforceable by
Employee’s 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.

          APPROACH RESOURCES INC.   EMPLOYEE
 
       
By:
  /s/ J. Curtis Henderson   /s/ J. Ross Craft
 
       
 
  J. Curtis Henderson   J. Ross Craft
 
  Executive Vice President and General Counsel    

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