Exhibit 10.1
May 4, 2011
JPMorgan Chase Bank, N.A.
2200 Ross Avenue, Third Floor
Dallas, Texas 75201
Attention: Kimberly A. Bourgeois

  Re:   Tenth Amendment to Credit Agreement dated as of January 18, 2008 among
Approach Resources Inc. (“Borrower”), JPMorgan Chase Bank, N.A. and the
institutions named therein (“Lenders”) and JPMorgan Chase Bank, N.A., as Agent
(“Agent”)

Ladies and Gentlemen:
     Reference is hereby made to that certain Credit Agreement dated as of
January 18, 2008 among Approach Resources Inc., a Delaware corporation
(“Borrower”), JPMorgan Chase Bank, N.A., as Agent (“Agent”), and the Lenders
that are signatory parties hereto (the “Lenders”), as amended by amendments
dated February 19, 2008, May 6, 2008, August 26, 2008, April 8, 2009, July 8,
2009, October 30, 2009, February 1, 2010, May 3, 2010, October 21, 2010 and as
of the date hereof (as amended, the “Loan Agreement”). All capitalized terms
herein shall have the meanings ascribed to them in the Loan Agreement.
     Pursuant to this Tenth Amendment (the “Amendment”), Agent, Lenders and
Borrower agree, effective as of the date hereof, to amend the Loan Agreement
according to the terms and provisions set forth below.
     1. Increase to Borrowing Base and Commitment. As of the date hereof, the
Borrowing Base and Commitment under the Loan Agreement are increased to
$200,000,000.
     2. Amendment to Section 1. Definitions.
     (a) Effective as of the date hereof, the definition of “Accounting
Principles” is deleted in its entirety and the following is substituted
therefor:
“Accounting Principles means generally accepted accounting principles (“GAAP”)
in effect from time to time, applied in a manner consistent with prior periods;
provided that, if Borrower notifies Agent that Borrower requests an amendment to
any provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if Agent notifies Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall

 

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have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.”
     (b) Effective as of the date hereof, the definition of “Applicable Rate” is
deleted in its entirety and the following is substituted therefor:
“Applicable Rate means, for any day, with respect to any Base Rate Loan or
Eurodollar Loan, or with respect to the Unused Commitment Fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption “Base Rate Margin”, “Eurodollar Margin” or “Unused Commitment
Fee Rate”, as the case may be, based upon the Borrowing Base Usage applicable on
such date:

              Borrowing Base       Base Rate   Unused Commitment Usage  
Eurodollar Margin   Margin   Fee Rate
≥ 90%
  275.0 b.p.   175.0 b.p.   50.0 b.p.
≥ 75% < 90%
  250.0 b.p.   150.0 b.p.   50.0 b.p.
≥ 50% < 75%
  225.0 b.p.   125.0 b.p.   50.0 b.p.
≥25% < 50%
  200.0 b.p.   100.0 b.p.   50.0 b.p.
<25%
  175.0 b.p.   75.0 b.p.   50.0 b.p.  

Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next change.”
     (c) Effective as of the date hereof, the definition of “Commitment” is
deleted in its entirety and the following is substituted therefor:
“Commitment means (A) for all Lenders, the lesser of (i) the Facility Amount, or
(ii) the Borrowing Base, as reduced or increased from time to time pursuant to
Sections 2 and 7 hereof, and (B) as to any Lender, its obligation to make
Advances hereunder in amounts not exceeding, in the aggregate, an amount equal
to such Lender’s Commitment Percentage times the total Commitment as of any
date. The Commitment of each Lender hereunder shall be adjusted from time to
time to reflect assignments made by such Lender pursuant to Section 29 hereof.
Each reduction in the Commitment shall result in a Pro Rata reduction in each
Lender’s Commitment.”
     (d) Effective as of the date hereof, the definition of “Guarantors” is
amended by deleting therefrom the reference to Approach Oil & Gas (Canada) Inc.
as a Guarantor.
     (e) Effective as of the date hereof, the definition of “Maturity Date” is
deleted in its entirety and the following is substituted therefor:

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     “Maturity Date means July 31, 2014.”
     (f) Effective as of the date hereof, the following definitions are added to
Section 1:
               “Facility Amount shall mean $300,000,000.
               Sole Bookrunner shall mean JPMorgan Securities LLC.
               Sole Lead Arranger shall mean JPMorgan Securities LLC.”
     3. Mandatory Borrowing Base Reductions. Section 2(g) of the Loan Agreement
is hereby deleted in its entirety and the following is substituted therefor:
     “(g) Mandatory Borrowing Base Reductions. The Borrowing Base shall be
reduced from time to time as follows:
     (i) by an amount of any prepayment required by Section 12(r) upon the sale
of assets; and
     (ii) by twenty-five percent (25%) of the principal amount of each issuance
of senior unsecured indebtedness permitted under Section 13(d)(viii).
If, as a result of any such reduction in the Borrowing Base, the Total
Outstandings ever exceed the Borrowing Base then in effect, Borrower shall make
the mandatory prepayment of principal required pursuant to Section 9(b) hereof.”
     4. Amendment to Section 3, “Notes Evidencing Loans.” Effective the date
hereof, the first sentence of Section 3(a) and the first sentence of Section
3(b) are deleted in their entirety and the following are substituted therefor:
     “(a) Form of Notes. The Loans shall be evidenced by a Note or Notes in the
aggregate face amount of the Facility Amount and shall be in the form of Exhibit
“B” hereto with appropriate insertions.
     (b) Issuance of Additional Notes. At the Effective Date there shall be
outstanding Notes in the aggregate face amount of the Facility Amount and shall
be in the form of Exhibit “B” hereto with appropriate insertions.”
     5. Amendment to Section 13(b)(ii), “Financial Covenants”. Effective as of
the date hereof, Subsection 13(b)(ii) of the Loan Agreement is hereby amended to
provide as follows:
     “(ii) Consolidated Funded Debt to Consolidated EBITDAX Ratio. Commencing
with the fiscal quarter ending June 30, 2011, Borrower and Guarantors will not
permit, as of the last day of any fiscal

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quarter, the ratio of the sum of (A) the Consolidated Funded Debt to (B) the
Consolidated EBITDAX (in each case annualized for the fiscal quarter ending on
such date by multiplying such sum by 4), to be greater than 4.0 to 1.0.”
     6. Replacement of Exhibit “C,” “Certificate of Compliance”. Exhibit “C” to
the Loan Agreement is hereby deleted in its entirety and the Exhibit “C”
attached hereto is substituted therefor.
     7. Amendment to Section 13(d), “Limitation on Additional Indebtedness”.
Section 13(d) of the Loan Agreement is hereby amended by adding the following
Subsection (viii) thereto:
     “(viii) the issuance of one or more issues of senior unsecured
indebtedness, provided however, that the aggregate principal amount of all of
such issues of such senior unsecured indebtedness shall not exceed $200,000,000,
and provided further that each such issuance shall result in a reduction in the
Borrowing Base then in effect equal to twenty-five percent (25%) of the
principal amount of such issuance.”
     8. Amendment to Section 24, “Amendments”. Section 24 of the Loan Agreement
is hereby deleted in its entirety and the following is substituted therefor:
“24. Amendments. This Agreement may be amended only by an instrument in writing
executed by an authorized officer of the party against whom such amendment is
sought to be enforced. No modification or waiver of any provision of the Loan
Documents, including this Agreement, or the Notes nor consent to departure
therefrom, shall be effective unless in writing signed by Borrower and Required
Lenders; provided, however, that no amendment, waiver, or other action shall be
effected pursuant to this Section 24 without the consent of all Lenders which:
(a) would increase the Borrowing Base (but excluding any waiver of (i) the
Borrowing Base reduction according to Section 2(g)(ii) hereof or (ii) the
decrease in the amount of the Borrowing Base reduction otherwise provided by
Section 2(g)(ii), either of which will require the consent of Required Lenders),
(b) would reduce any fees hereunder, or the principal of, or the interest on,
any Lender’s Note or Notes, (c) would postpone any date fixed for any payment of
any fees hereunder, or any principal or interest of any Lender’s Note or Notes,
(d) would increase the aggregate Commitments or any Lender’s individual
Commitment hereunder or would materially alter Agent’s obligations to any Lender
hereunder (but excluding any waiver of (i) the Borrowing Base reduction
according to Section 2(g)(ii) hereof or (ii) the decrease in the amount of the
Borrowing Base reduction otherwise provided for by Section 2(g)(ii), either of
which will require the consent of Required Lenders), (e) would release Borrower
from its obligation to pay any Lender’s Note or Notes or release any Guarantor
from any of its obligations, (f) would release any Collateral (other than the
Collateral that is sold or transferred with the prior consent of Required
Lenders pursuant to Section 13(a)(ii)), (g) would change the definition of
Required Lenders (or without the

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prior consent of Required Lenders if such consent is not required), or (h) would
amend this sentence. No such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other circumstances without such notice or demand. No amendment of any
provision of this Agreement relating to Agent shall be effective without the
written consent of Agent.”
     9. Fees. Borrower shall pay to Agent and to Sole Lead Arranger and Sole
Bookrunner the fees set out in the fee agreement dated the date hereof (the “Fee
Agreement”).
     10. Assignments of Commitment. Prior to giving effect to this Amendment,
JPMorgan Chase Bank, N.A., BNP Paribas, KeyBank National Association and The
Frost National Bank (the “Existing Lenders”) each has a Commitment Percentage as
set out below under the heading “Existing Lender Commitments.” The Existing
Lenders desire to assign to Royal Bank of Canada (the “New Lender”), a
percentage of each Existing Lender’s Commitment Percentage of its obligations as
a Lender under the Loan Agreement, such that after giving effect to such
assignments and as of the date hereof, the respective Commitment Percentages of
the Existing Lenders and the New Lender will be as set forth below under the
heading “Revised Lender Commitments” and on Schedule I attached hereto and made
a part hereof and of the Loan Agreement, as amended hereby. Agent and Borrower
hereby consent to the assignments by Existing Lenders of such portion of each of
their rights and obligations as a Lender under the Loan Agreement to the New
Lender. Effective as of the date hereof such acquisition of a portion of the
Existing Lenders’ Commitments by the New Lender shall be deemed to have been
consummated pursuant to the terms of the Assignment and Acceptance Agreement
attached as Exhibit D to the Loan Agreement (which is incorporated herein by
reference as if fully set forth herein) as if the Existing Lenders and the New
Lender had executed Assignment and Acceptance Agreements with respect to such
assignments.

                                      Existing Lender Commitments     Revised
Lender Commitments   Lenders   Percentage     Amount     Percentage     Amount  
JPMorgan Chase Bank, N.A.
    30 %   $ 45,000,000       22.50 %   $ 45,000,000  
BNP Paribas
    23.33 %   $ 35,000,000       20.00 %   $ 40,000,000  
KeyBank National Association
    23.33 %   $ 35,000,000       20.00 %   $ 40,000,000  
Royal Bank of Canada
    N/A       N/A       20.00 %   $ 40,000,000  
The Frost National Bank
    23.33 %   $ 35,000,000       17.50 %   $ 35,000,000  
TOTAL
                    100.00 %   $ 200,000,000  

     11. Schedule I. Effective as of the date hereof, Schedule I to the Loan
Agreement is deleted in its entirety and Schedule I attached hereto is
substituted therefor.
     12. Notes. Notwithstanding Sections 3(a) and 3(b) of the Loan Agreement
referencing that the Loans shall be evidenced by Notes payable to each Lender in
the aggregate face amount of the Facility Amount, the delivery of such a Note to
the Lenders shall be at each

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Lender’s discretion. Any Lender may request that Loans made by it be evidenced
by a Note. In such event, the Borrower shall prepare, execute and deliver to
such Lender a Note payable to the order of such Lender in the form of Exhibit
“B” to the Loan Agreement. Thereafter, the Loans evidenced by such Note and
interest thereon shall at all times (including after assignment pursuant to
Section 29 of the Loan Agreement) be represented by one or more Notes in such
form payable to the order of the payee named therein. Irrespective of the
Facility Amount, no Lender shall ever be obligated to advance on the Commitment
any amount in excess of its Commitment then in effect.
     13. Release of Guaranty. By executing this Amendment, Agent, on behalf of
Lenders, Borrower and Approach Oil & Gas (Canada) Inc. (“Approach Canada”)
hereby agree to terminate the Restated Guaranty (the “Guaranty”) of Approach
Canada. Agent, on behalf of Lenders, does hereby release Approach Canada from
any and all obligations, covenants, representations and warranties contained in
the Guaranty.
     14. Conditions Precedent. The effectiveness of this Amendment is subject to
the satisfaction of the following conditions precedent, unless specifically
waived in writing by Lenders:
     (a) The Amendment. Borrower, each Guarantor and each Lender shall have duly
and validly executed and delivered this Amendment to Agent.
     (b) Replacement Notes. If requested by any Lender, and upon the delivery to
Borrower of the terminated existing Notes, Borrower shall have duly and validly
executed the Notes payable to each of the Lender signatories hereto in
termination and replacement of the existing Notes.
     (c) Payment of Fees. Borrower shall have paid to Agent and to JPMorgan
Securities LLC the Fees described in the Fee Agreement.
     (d) Representations and Warranties. The representations and warranties
contained in the Loan Agreement and in the other Loan Documents shall be true
and correct in all material respects as of the date hereof, as if made on the
date hereof.
     (e) No Default. No Default or Event of Default shall have occurred and be
continuing.
     (f) Corporate/Partnership Proceedings. All corporate and/or partnership
proceedings, taken in connection with the transactions contemplated by this
Amendment and all documents, instruments and other legal matters incident
thereto shall be satisfactory to Agent, and its legal counsel.
     15. Ratification by Guarantors. Each Guarantor (with the exception of
Approach Canada) hereby ratifies and reaffirms all of its obligations under its
Guaranty Agreement (the “Guaranty”) of Borrower’s obligations under the Loan
Agreement, as amended hereby. Each

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Guarantor also hereby agrees that nothing in this Amendment shall adversely
affect any right or remedy of Lenders under the Guaranty and that the execution
and delivery of this Amendment shall in no way change or modify its obligations
as guarantor under the Guaranty. Although each Guarantor has been informed by
Borrower of the matters set forth in this Amendment and such Guarantor has
acknowledged and agreed to the same, such Guarantor understands that Agent has
no duty to notify such Guarantor or to seek such Guarantor’s acknowledgment or
agreement, and nothing contained herein shall create such a duty as to any
transaction hereafter.
     16. Representations and Warranties. By executing this Amendment, Borrower
hereby represents, warrants and certifies to Lenders that, as of the date
hereof, (a) there exists no Event of Default or events which, with notice or
lapse of time, would constitute an Event of Default; (b) Borrower has performed
and complied with all agreements and conditions contained in the Loan Agreement
or the other Loan Documents which are required to be performed or complied with
by Borrower; and (c) the representations and warranties contained in the Loan
Agreement and the other Loan Documents are true in all material respects, with
the same force and effect as though made on and as of the date hereof.
     17. Confirmation and Ratification. Except as affected by the provisions set
forth herein, the Loan Agreement shall remain in full force and effect and is
hereby ratified and confirmed by all parties. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lenders under the Loan
Agreement or the other Loan Documents.
     18. Reference to Loan Agreement. Each of the Loan Agreement and the Loan
Documents, and any and all other agreements, documents or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Loan Agreement, as amended hereby, are hereby amended so that any
reference in the Loan Agreement, the Loan Documents and such other documents to
the Loan Agreement shall mean a reference to the Loan Agreement as amended
hereby.
     19. Multiple Counterparts. This Amendment may be executed in a number of
identical separate counterparts, each of which for all purposes is to be deemed
an original, but all of which shall constitute, collectively, one agreement. No
party to this Amendment shall be bound hereby until a counterpart of this
Amendment has been executed by all parties hereto. Delivery of an executed
counterpart of a signature page of this Amendment by telecopy shall be effective
as delivery of a manually executed counterpart of this Amendment.
     20. Final Agreement. THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND
ALL PROMISSORY NOTES AND OTHER LOAN DOCUMENTS EXECUTED PURSUANT THERETO OR
HERETO, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG ANY OF
THE PARTIES.

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     Please signify your acceptance to the foregoing terms and provisions by
executing a copy of this Amendment at the space provided below.
SIGNATURES TO FOLLOW

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            Very truly yours,

BORROWER:

APPROACH RESOURCES INC.,
a Delaware corporation
      By:   /s/ J. Ross Craft         J. Ross Craft, President and Chief
Executive Officer                GUARANTORS:

APPROACH OIL & GAS INC.,
a Delaware corporation
      By:   /s/ J. Ross Craft         J. Ross Craft, President and Chief
Executive Officer                APPROACH RESOURCES I, LP,
a Texas limited partnership
      By:   Approach Operating, LLC,
a Delaware limited liability company,
its general partner             By:   Approach Resources Inc.,
a Delaware corporation,
its sole member             By:   /s/ J. Ross Craft         J. Ross Craft,
President and Chief Executive Officer                RELEASED GUARANTOR:

APPROACH OIL & GAS (CANADA) INC.,
an Alberta, Canada corporation
      By:   /s/ J. Ross Craft         J. Ross Craft, President and Chief
Executive Officer           

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            ACCEPTED AND AGREED TO
effective as of the date and year
first above written:

AGENT:

JPMORGAN CHASE BANK, N.A.
      By:   /s/ Michael A. Kamauf         Michael A. Kamauf, Authorized Officer 
              LENDERS:

JPMORGAN CHASE BANK, N.A.
      By:   /s/ Michael A. Kamauf         Michael A. Kamauf, Authorized Officer 
         

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            BNP PARIBAS, Lender and Syndication Agent
      By:   /s/ John A. Clark         Name:   John A. Clark        Title:  
Managing Director              By:   /s/ Betsy Jocher         Name:   Betsy
Jocher        Title:   Director   

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            KEYBANK NATIONAL ASSOCIATION,
Lender and Documentation Agent
      By:   /s/ David Morris         Name:   David Morris        Title:   Vice
President   

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            THE FROST NATIONAL BANK
      By:   /s/ John S. Warren         John S. Warren, Senior Vice President   
       

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            ROYAL BANK OF CANADA
      By:   /s/ Don J. McKinnerney         Name:   Don J. McKinnerney       
Title:   Authorized Signatory   

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EXHIBIT “C”
CERTIFICATE OF COMPLIANCE
     The undersigned APPROACH RESOURCES INC., a Delaware corporation
(“Borrower”), hereby certifies that J. Ross Craft is authorized to execute this
Certificate of Compliance (in the capacity stated in his signature below). With
reference to that certain Credit Agreement, dated as of January 18, 2008 (as
same may be amended, modified, increased, supplemented and/or restated from time
to time, the “Agreement”) entered into between the Borrower and JPMORGAN CHASE
BANK, N.A. as “Agent” and Lender, for itself and the Lenders signatory thereto
(the “Lenders”), the undersigned further certifies, represents and warrants on
behalf of Borrower that all of the following statements are true and correct
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified):
     (a) Borrower has fulfilled in all material respects its obligations under
the Notes and Loan Documents, including the Agreement, and all representations
and warranties made herein and therein continue (except to the extent they
relate solely to an earlier date) to be true and correct in all material
respects.
     (b) No Default or Event of Default has occurred under the Loan Documents,
including the Agreement.
     (c) To the extent requested from time to time by the Agent, the certifying
party shall specifically affirm compliance of Borrower in all material respects
with any of its representations and warranties (except to the extent they relate
solely to an earlier date) or obligations under said instruments.
     (d) Financial Computations for the period ending _______________ :
     (i) Current Ratio:
     (ii) Consolidated Funded Debt to Consolidated EBITDAX Ratio:
          EXECUTED, DELIVERED AND CERTIFIED TO this __ day of ____, 200___.

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APPROACH RESOURCES INC.,
a Delaware corporation
      By:           J. Ross Craft, President and Chief        Executive Officer 
 

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SCHEDULE I

                      Commitment Amount   Percentage Commitment
JPMorgan Chase Bank, NA
  $ 45,000,000.00       22.50 %
BNP Paribas
  $ 40,000,000.00       20.00 %
Key Bank National Association
  $ 40,000,000.00       20.00 %
Royal Bank of Canada
  $ 40,000,000.00       20.00 %
The Frost National Bank
  $ 35,000,000.00       17.50 %
TOTAL
  $ 200,000,000.00       100.00 %

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