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:

  b.   Termination by the Company. If 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(e), 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 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

 

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      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 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 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:

  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

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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.

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

          APPROACH RESOURCES INC.   EMPLOYEE
 
       
By:
  /s/ J. Curtis Henderson   /s/ Glenn W. Reed
 
       
 
  J. Curtis Henderson   Glenn W. Reed
 
  Executive Vice President and General Counsel    

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