exv10w1



 





Exhibit 10.1




REGISTRATION RIGHTS AGREEMENT




     This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 14, 2007,
is by and among Approach Resources Inc., a Delaware corporation (the “Company”), and each
of the other parties identified on the signature pages hereto (the “Stockholders”).



     WHEREAS, the Company and certain of the Stockholders are parties to that certain Contribution
Agreement dated as of June 29, 2007 (the “Contribution Agreement”), pursuant to which such
Stockholders will receive shares of Common Stock (as hereinafter defined) in exchange for common
stock of Approach Oil & Gas Inc., a Delaware corporation (“AOG”), and certain oil and gas
properties of Neo Canyon Exploration, L.P., a Texas limited partnership (the
“Combination”);



     WHEREAS, in order to satisfy its obligations under the terms of that certain Voting and
Stockholders’ Agreement dated as of January 1, 2003, by and among the Company, certain of its
stockholders and other parties thereto (the “Voting Agreement”), the Company is entering
into this Agreement with certain of its existing Stockholders;



     WHEREAS, certain Stockholders have agreed to make or have made investments (the
“Investment”) in AOG in exchange for convertible promissory notes, pursuant to which, upon
the occurrence of certain events, such notes will be automatically converted into Common Stock,
which shall be entitled to the same registration rights as those shares of Common Stock provided to
Stockholders pursuant to the Contribution Agreement; and



     WHEREAS, in connection with, and in consideration of, the transactions contemplated by the
Contribution Agreement, the Voting Agreement and the Investment, the Stockholders have requested,
and the Company has agreed to provide, registration rights with respect to the Registrable
Securities (as hereinafter defined), as set forth in this Agreement.



     NOW, THEREFORE, for and in consideration of the mutual agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto, intending to be legally bound hereby, agree as follows:



     Section 1. Definitions. As used in this Agreement, the following terms shall have the
following meanings:



     “Common Stock” shall mean shares of the Company’s common stock, par value $0.01 per
share.



     “Contribution Agreement” shall have the meaning set forth in the recitals.



     “Demand Notice” shall have the meaning set forth in Section 3 hereof.



     “Demand Registration” shall have the meaning set forth in Section 3 hereof.



     “Demanding Qualified Holder Group” shall mean, with respect to any Demand
Registration, the Qualified Holder Group delivering the relevant Demand Notice.



 









 





     “Effectiveness Period” shall mean, with respect to any Shelf Registration Statement,
the period from the date the Shelf Registration Statement is declared effective by the SEC until
the earlier of:




	 	(i)	 	the sale of all of the Registrable Securities covered by such Shelf
Registration Statement pursuant to such Shelf Registration Statement or pursuant to
Rule 144 under the Securities Act or any similar provision then in effect; or
	 
	 	(ii)	 	the time at which all of the Registrable Securities covered by the Shelf
Registration Statement and not held by affiliates of the Company (as defined in Rule
144 under the Securities Act) are, in the opinion of counsel for the Company, eligible
for sale pursuant to Rule 144(k) (or any successor or analogous rule) under the
Securities Act.





     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.



     “Initial Public Offering” shall mean the first underwritten registered public offering
of equity securities of the Company pursuant to a registration statement that has been declared
effective under the Securities Act.



     “Losses” shall have the meaning set forth in Section 8 hereof.



     “Management Qualified Holder” shall mean each of J. Ross Craft, Steven P. Smart,
J. Curtis Henderson, Glenn W. Reed, Ralph P. Manoushagian, James S. Scott and Montana Oil and Gas,
Ltd. and any other Person who becomes a Management Qualified Holder pursuant to Section 12(c), but
only to the extent any such Person continues to hold Registrable Securities.



     “Person” shall mean an individual, partnership, corporation, limited partnership,
limited liability company, foreign limited liability company, trust, estate, corporation,
custodian, trustee-executor, administrator, nominee or entity in a representative capacity.



     “Piggyback Notice” shall have the meaning set forth in Section 4 hereof.



     “Piggyback Registration” shall have the meaning as set forth in Section 4
hereof.



     “Proceeding” shall mean an action, claim, suit, arbitration or proceeding (including,
without limitation, an investigation or partial proceeding, such as a deposition), whether
commenced or threatened.



     “Prospectus” shall mean the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A, 430B or
430C promulgated under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.



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     “Qualified Holder Group” means (i) all of the Management Qualified Holders,
collectively or (ii) each of the Yorktown Qualified Holders.



     “Qualified Public Offering” shall mean any firm commitment underwritten offering by
the Company of Common Stock to the public pursuant to an effective registration statement under the
Securities Act (i) for which the aggregate gross cash proceeds to be received by the Company from
such offering (without deducting underwriting discounts, expenses and commissions) are at least
fifty million dollars ($50,000,000), and (ii) pursuant to which the Common Stock is listed for
trading on the New York Stock Exchange or is admitted to trading and quoted for trading on the
Nasdaq Global Market system.



     “Registrable Securities” shall mean, subject to the next succeeding sentence, the
shares of Common Stock (i) held by any Stockholder on the date of this Agreement, and (ii) issuable
to the Stockholders pursuant to the Contribution Agreement or the Investment, including, in each of
cases (i) and (ii), any shares of Common Stock issued or distributed by way of dividend, stock
split or other distribution in respect of such shares. As to any particular Registrable Securities,
once issued, such securities shall cease to be Registrable Securities when (i) they are sold
pursuant to an effective Registration Statement under the Securities Act, (ii) they are sold
pursuant to Rule 144 (or any similar provision then in force under the Securities Act) and the
transferee thereof does not receive “restricted securities” as defined in Rule 144, (iii) they
shall have ceased to be outstanding, (iv) they have been sold in a private transaction in which the
transferor’s rights under this Agreement are not assigned to the transferee of the securities, or
(v) they become eligible for resale pursuant to Rule 144(k) (or any similar rule then in effect
under the Securities Act). No Registrable Securities may be registered under more than one (1)
Registration Statement at any one time.



     “Registration Statement” shall mean any registration statement of the Company under
the Securities Act that permits the public offering of any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such registration statement,
provided, however, that such Registration Statement shall not be a “shelf” registration pursuant to
Rule 415 under the Securities Act, unless the Company is at such time eligible to use Form S-3 (or
any applicable successor form).



     “Rule 144” shall mean Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the SEC.



     “SEC” shall mean the Securities and Exchange Commission or any successor agency having
jurisdiction under the Securities Act.



     “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.



     “Shelf Registration Statement” shall mean a “shelf” Registration Statement pursuant to
Rule 415 of the Securities Act.



     “Suspension Notice” shall have the meaning set forth in Section 6(b).



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     “underwritten registration or underwritten offering” shall mean a registration in
which securities of the Company are sold to an underwriter for reoffering to the public.



     “Yorktown Qualified Holders” shall mean each of Yorktown Energy Partners V, L.P.,
Yorktown Energy Partners VI, L.P. and Yorktown Energy Partners VII, L.P.



     Section 2. Holders of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns Registrable Securities or holds an option, warrant
or other right to purchase, or a security convertible into, Registrable Securities, whether or not
such acquisition or conversion has actually been effected.



     Section 3. Demand Registration.



          (a) Requests for Registration. Commencing 180 days after the Initial Public Offering, each
Qualified Holder Group shall have the right by delivering a written notice to the Company (the
“Demand Notice”) to require the Company to register, pursuant to the terms of this
Agreement under and in accordance with the provisions of the Securities Act, the number of
Registrable Securities requested to be so registered pursuant to the terms of this Agreement (a
“Demand Registration”); provided, however, that except for a Demand Notice relating to the
Management Demand (defined below), a Demand Notice may only be made if the sale of the Registrable
Securities requested to be registered by such Qualified Holder Group is reasonably expected to
result in aggregate gross cash proceeds in excess of $20,000,000. Following receipt of a Demand
Notice for a Demand Registration, the Company shall use its commercially reasonable efforts to file
a Registration Statement as promptly as practicable after such Demand Notice, and shall use its
commercially reasonable efforts to cause such Registration Statement to be declared effective under
the Securities Act as promptly as practicable after the filing thereof.




     The Management Qualified Holders shall be entitled collectively to a maximum of one Demand
Registration (the “Management Demand”) and the Yorktown Qualified Holders shall be entitled
collectively to a maximum of three Demand Registrations. Notwithstanding any other provisions of
this Section 3, in no event shall more than one (1) Demand Registration occur during any
six-month period (measured from the effective date of the Registration Statement to the date of the
next Demand Notice) or within 120 days after the effective date of a Registration Statement filed
by the Company; provided that no Demand Registration may be prohibited for such 120-day period more
often than once in a twelve-month period.



     No Demand Registration shall be deemed to have occurred for purposes of this Section
3(a) if the Registration Statement relating thereto does not become effective or is not
maintained effective for the period required pursuant to this Section 3(a), in which case
the Demanding Qualified Holder Group shall be entitled to an additional Demand Registration in lieu
thereof.



     Within ten (10) days after receipt by the Company of a Demand Notice, the Company shall give
written notice (the “Notice”) of such Demand Notice to all holders of Registrable
Securities and shall, subject to the provisions of Section 3(b) hereof, include in such
registration all Registrable Securities with respect to which the Company received written requests
for inclusion therein within ten (10) days after such Notice is given by the Company to such
holders.



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     All requests made pursuant to this Section 3 will specify the amount of Registrable
Securities to be registered and the intended methods of disposition thereof.



     The Company shall use commercially reasonable efforts to maintain the effectiveness of the
Registration Statement with respect to any Demand Registration for a period of at least 180 days
after the effective date thereof or such shorter period in which all Registrable Securities
included in such Registration Statement have actually been sold; provided, however, that such
period shall be extended for a period of time equal to the period the holders of Registrable
Securities refrain from selling any securities included in such registration at the request of an
underwriter of the Company or the Company pursuant to this Agreement.



          (b) Priority on Demand Registration. If any of the Registrable Securities registered
pursuant to a Demand Registration are to be sold in a firm commitment underwritten offering, and
the managing underwriter or underwriters advise the holders of such securities in writing that, in
its view, the total amount of Registrable Securities proposed to be sold in such offering is such
as to adversely affect the success of such offering (including, without limitation, securities
proposed to be included by other holders of securities entitled to include securities in the
Registration Statement pursuant to incidental or piggyback registration rights), then the amount of
securities to be offered (i) for the account of the members of the Demanding Qualified Holder Group
and any other holders of Registrable Securities and (ii) for the account of all such other Persons
(other than members of the Demanding Qualified Holder Group) shall be reduced to the extent
necessary to reduce the total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters by first reducing, or eliminating if
necessary, all securities of the Company requested to be included by such other Persons and then,
if necessary, reducing the securities requested to be included by the members of the Demanding
Qualified Holder Group and any other holders of Registrable Securities requesting such registration
pro rata among such holders on the basis of the percentage of the Registrable Securities requested
to be included in such Registration Statement by such holders. In connection with any Demand
Registration to which the provisions of this Section 3(b) apply, no securities other than
Registrable Securities shall be covered by such Demand Registration except as provided in
Section 3(d)(ii) hereof, and such registration shall not reduce the number of available
registrations with respect to the Demanding Qualified Holder Group under this Section 3 in
the event that the Registration Statement excludes more than 25% of the aggregate number of
Registrable Securities that members of the Demanding Qualified Holder Group requested be included.




          (c) Postponement of Demand Registration. The Company shall be entitled to postpone (but
not more than once in any twelve-month period), for a reasonable period of time not in excess of
ninety (90) days, the filing of a Registration Statement if the Company delivers to the members of
the Demanding Qualified Holder Group a certificate signed by both the principal executive officer
and the principal financial officer of the Company certifying that, in the good faith judgment of
the Board of Directors of the Company, such registration and offering would reasonably be expected
to materially adversely affect or materially interfere with any bona fide material financing of the
Company or any material transaction under consideration by the Company or would require disclosure
of information that has not been disclosed to the public, the premature disclosure of which would
materially adversely affect the Company. Such certificate shall contain a statement of the reasons
for such postponement and an approximation



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of the anticipated delay. The Persons receiving such
certificate shall keep the information contained in such certificate confidential subject to the
same terms set forth in Section 6(q). If the Company shall so postpone the filing of a
Registration Statement, the Demanding Qualified Holder Group shall have the right to withdraw the
request for registration by giving written notice to the Company within twenty (20) days of the
anticipated termination date of the postponement period, as provided in the certificate delivered
thereto, and in the event of such withdrawal, such request shall not be counted for purposes of the
number of Demand Registrations to which the Qualified Holder Groups are entitled pursuant to the
terms of this Agreement.




          (d) Registration of Other Securities. Whenever the Company shall effect a Demand
Registration pursuant to this Section 3 in connection with an underwritten offering, no
securities other than Registrable Securities shall be included among the securities covered by such
Demand Registration unless (i) the managing underwriter of such offering shall have advised each
holder of Registrable Securities requesting such registration in writing that it believes that the
inclusion of such other securities would not adversely affect such offering or (ii) the inclusion
of such other securities is approved by the affirmative vote of the holders of at least a majority
of the Registrable Securities included in such Demand Registration by the members of the Demanding
Qualified Holder Group.




     Section 4. Piggyback Registration.



          (a) Right to Piggyback. If, at any time after a Qualified Public Offering, the Company
proposes to file a registration statement under the Securities Act with respect to an offering of
Common Stock (other than a registration statement (i) on Form S-4, Form S-8 or any successor forms
thereto or (ii) filed solely in connection with an exchange offer or any employee benefit or
dividend reinvestment plan), whether or not for its own account, then, each such time, the Company
shall give prompt written notice of such proposed filing at least fifteen (15) days before the
anticipated filing date (the “Piggyback Notice”) to all of the holders of Registrable
Securities. The Piggyback Notice shall offer such holders the opportunity to include in such
registration statement the number of Registrable Securities as each such holder may request (a
“Piggyback Registration”). Subject to Section 4(b) hereof, the Company shall
include in each such Piggyback Registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within ten (10) days after the
Piggyback Notice has been given to the applicable holder. The eligible holders of Registrable
Securities shall be permitted to withdraw all or part of the Registrable Securities from a
Piggyback Registration at any time prior to the effective date of such Piggyback Registration. The Company shall not be
required to maintain the effectiveness of the Registration Statement for a Piggyback Registration
beyond the earlier to occur of (i) 120 days after the effective date thereof and (ii) consummation
of the distribution by the holders of the Registrable Securities included in such Registration
Statement.




          (b) Priority on Piggyback Registrations. The Company shall use reasonable efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to permit holders of
Registrable Securities requested to be included in the registration for such offering to include
all such Registrable Securities on the same terms and conditions as any other shares of capital
stock, if any, of the Company included therein. Notwithstanding the foregoing,

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if the managing underwriter or underwriters of such underwritten offering have informed the Company in writing that
it is their good faith opinion that the total amount of securities that such holders, the Company
and any other Persons having rights to participate in such registration, intend to include in such
offering is such as to adversely affect the success of such offering, then the amount of securities
to be offered (i) for the account of holders of Registrable Securities and (ii) for the account of
all such other Persons (other than the Company and holders of Registrable Securities) shall be
reduced to the extent necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter or underwriters by first reducing,
or eliminating if necessary, all securities of the Company requested to be included by such other
Persons (other than the Company and holders of Registrable Securities) and then, if necessary,
reducing the securities requested to be included by the holders of Registrable Securities
requesting such registration pro rata among such holders on the basis of the percentage of the
Registrable Securities requested to be included in such Registration Statement by such holders.




     Section 5. Restrictions on Public Sale by Holders of Registrable Securities. Each holder
of Registrable Securities agrees, in connection with the Initial Public Offering and any
underwritten offering made pursuant to a Registration Statement filed pursuant to Section 3
or Section 4 hereof (whether or not such holder elected to include Registrable Securities
in such Registration Statement), if requested (pursuant to a written notice) by the managing
underwriter or underwriters in an underwritten offering, not to effect any public sale or
distribution of any of the Company’s securities (except as part of such underwritten offering),
including a sale pursuant to Rule 144, or to give any Demand Notice during the period commencing on
the date of the request (which shall be no earlier than fourteen (14) days prior to the expected
“pricing” of such offering) and continuing for not more than 180 days (with respect to the Initial
Public Offering) or 120 days (with respect to any underwritten public offering other than the
Initial Public Offering made prior to the second anniversary of the Initial Public Offering and
thereafter 60 days rather than 120) after the date of the Prospectus pursuant to which such public
offering shall be made or such lesser period as is required by the managing underwriter, provided,
however, that all officers and directors of the Company must be subject to similar restrictions.



     Section 6. Registration Procedures. If and whenever the Company is required to use its
commercially reasonable efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 3 and Section 4 hereof, the Company shall
effect such registration to permit the sale of such Registrable Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the Company shall cooperate in the
sale of the securities and shall, as expeditiously as possible:



          (a) Prepare and file with the SEC a Registration Statement or Registration Statements on such
form which shall be available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution thereof, and use its commercially
reasonable efforts to cause such Registration Statement to become effective and to remain effective
as provided herein; provided, however, that before filing a Registration Statement or Prospectus or
any amendments or supplements thereto (including documents that would be incorporated or deemed to
be incorporated therein by reference), the Company shall furnish or otherwise make available to the
holders of the Registrable Securities covered by such Registration Statement, their counsel and the
managing underwriters, if any, copies of all such



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documents proposed to be filed. The Company shall
not file any such Registration Statement or Prospectus or any amendments or supplements thereto
(including such documents that, upon filing, would be incorporated or deemed to be incorporated by
reference therein) with respect to a Demand Registration to which the holders of a majority of the
Registrable Securities covered by such Registration Statement, their counsel, or the managing
underwriters, if any, shall reasonably object, in writing, on a timely basis, unless, in the
opinion of the Company, such filing is necessary to comply with applicable law.




          (b) If such Registration Statement is a Shelf Registration Statement:





     (i) Subject to any notice by the Company in accordance with this Section 6(b)
of the existence of any fact or event of the kind described in Section 6(d)(vi), use
its commercially reasonable efforts to keep the Shelf Registration Statement
continuously effective during the Effectiveness Period; upon the occurrence of any
event that would cause the Shelf Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of the Registrable Securities covered thereby during
the Effectiveness Period, the Company shall file promptly an appropriate amendment
to the Shelf Registration Statement, a supplement to the Prospectus or a report
filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15 (d) of the Exchange
Act, in the case of clause (A) of this Section 6(b)(i), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B) of this
Section 6(b)(i), use its commercially reasonable efforts to cause such amendment to
be declared effective and the Shelf Registration Statement and the related
Prospectus to become usable for their intended purposes as soon as practicable
thereafter.




     (ii) Notwithstanding Section 6(b)(i) hereof, the Company may suspend the
effectiveness of the Shelf Registration Statement (each such period, a “Suspension
Period”):




     (A) if a majority of the Company’s board of directors, in good faith,
determines that (1) the offer or sale of any shares of Common Stock would
materially impede, delay or interfere with any proposed financing, offer or
sale of securities, acquisition, merger, tender offer, business
combination, corporate reorganization, consolidation or other
significant transaction involving the Company, (2) after the advice of
counsel, the sale of the shares of Common Stock covered by the Shelf
Registration Statement would require disclosure of non-public material
information not otherwise required to be disclosed under applicable law, and
(3) either (x) the Company has a bona fide business purpose for preserving
the confidentiality of the proposed transaction, (y) disclosure would have a
material adverse effect on the Company or the Company’s ability to
consummate the proposed transaction, or (z) the proposed transaction renders
the Company unable to comply with requirements of the SEC; or



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     (B) if a majority of the Company’s board of directors, in good faith,
determines that the Company is required by law, rule or regulation to
supplement the Shelf Registration Statement or file a post-effective
amendment to the Shelf Registration Statement in order to incorporate
information into the Shelf Registration Statement for the purpose of (1)
including in the Shelf Registration Statement any Prospectus required under
Section 10(a)(3) of the Securities Act, (2) reflecting in the Prospectus
included in the Shelf Registration Statement any facts or events arising
after the effective date of the Shelf Registration Statement (or the most
recent post-effective amendment) that, individually or in the aggregate,
represents a fundamental change in the information set forth in the
Prospectus, or (3) including in the Prospectus included in the Shelf
Registration Statement any material information with respect to the plan of
distribution not disclosed in the Shelf Registration Statement or any
material change to such information.


Upon the occurrence of any event described in clauses (A) and (B) of this Section 6(b)(ii), the
Company shall give notice to each Demanding Qualified Holder with respect to such Shelf
Registration Statement that the availability of the Shelf Registration is suspended and, upon
actual receipt of any such notice, each such Demanding Qualified Holder agrees not to sell any
Registrable Securities pursuant to the Shelf Registration Statement until such Demanding Qualified
Holder’s receipt of copies of the supplemented or amended Prospectus provided for this Section
6(b). The Suspension Period shall not exceed 60 days in any 90-day period (except as a result of a
review of any post-effective amendment by the SEC prior to declaring any post-effective amendment
to the Shelf Registration Statement effective provided the Company has used its commercially
reasonable efforts to cause such post-effective amendment to be declared effective); provided, that
Suspension Periods shall not exceed an aggregate of 120 days in any 12-month period. The Company
shall not be required to specify in the written notice to the Qualified Holders the nature of the
event giving rise to the Suspension Period.




          (c) Prepare and file with the SEC such amendments and post-effective amendments to each
Registration Statement as may be necessary to keep such Registration Statement continuously
effective during the period provided herein with respect to the disposition of all securities
covered by such Registration Statement; and cause the related Prospectus to be supplemented by any
Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) under the Securities Act.




          (d) Notify each selling holder of Registrable Securities, its counsel and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in
writing, (which notice pursuant to clauses (ii) through (v) below shall be accompanied by an
instruction to suspend the use of the Prospectus until the Company shall have remedied the basis
for such suspension if the effectiveness of a Shelf Registration Statement has been suspended
pursuant to Section 6 (b)), (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the SEC



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or any other Federal
or state governmental authority for amendments or supplements to a Registration Statement or
related Prospectus or for additional information, (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) if at any time the representations and warranties of the Company contained
in any agreement (including any underwriting agreement) contemplated by Section 6(p) below
cease to be true and correct, (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for
such purpose and (vi) of the happening of any event that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein,
not misleading, and that, in the case of the Prospectus, it will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading.




          (e) Use its commercially reasonable efforts to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement, or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction.




          (f) If requested by the managing underwriters, if any, or the holders of a majority of the
then-outstanding Registrable Securities being sold in connection with an underwritten offering,
promptly include in a Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such holders may reasonably request in order to permit the
intended method of distribution of such securities and make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the Company has received
such request; provided, however, that the Company shall not be required to take any actions under
this Section 6(f) that are not, in the opinion of counsel for the Company, in compliance
with applicable law.




          (g) Furnish to each selling holder of Registrable Securities, its counsel and each managing
underwriter, if any, without charge, at least one (1) conformed copy of the
Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each
post-effective amendment thereto, including financial statements (but excluding schedules, all
documents incorporated or deemed to be incorporated therein by reference, and all exhibits, unless
requested in writing by such holder, counsel or underwriter).




          (h) Deliver to each selling holder of Registrable Securities, its counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including
each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably
request in connection with the distribution of the Registrable Securities; and the Company, subject
to the last paragraph of this Section 6, hereby consents to the use of such Prospectus and
each amendment or supplement thereto by each of the selling holders of



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Registrable Securities and
the underwriters, if any, in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any such amendment or supplement thereto.




          (i) Prior to any public offering of Registrable Securities, use its commercially reasonable
efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such Registrable Securities
for offer and sale under the securities or “Blue Sky” laws of such jurisdictions within the United
States as any seller or underwriter reasonably requests in writing and to keep each such
registration or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and to take any other action that may be
necessary or advisable to enable such holders of Registrable Securities to consummate the
disposition of such Registrable Securities in such jurisdiction; provided, however, that the
Company will not be required to (i) qualify generally to do business in any jurisdiction where it
is not then so qualified or (ii) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject.




          (j) Cooperate with the selling holders of Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and delivery of certificates (not
bearing any legends) representing Registrable Securities to be sold after receiving written
representations from each holder of such Registrable Securities that the Registrable Securities
represented by the certificates so delivered by such holder will be transferred in accordance with
the Registration Statement, and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or holders may request at least two
(2) business days prior to any sale of Registrable Securities in a firm commitment public offering,
but in any other such sale, within ten (10) business days prior to having to issue the securities.




          (k) Use its commercially reasonable efforts to cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other governmental agencies or
authorities within the United States, except as may be required solely as a consequence of the
nature of such selling holder’s business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the granting of such
approvals, as may be necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities.




          (l) Upon the occurrence of any event contemplated by Section 6(d)(vi) above, prepare a
supplement or post-effective amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file
any other required document so that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.



11









 







          (m) Prior to the effective date of the Registration Statement relating to the Registrable
Securities, provide a CUSIP number for the Registrable Securities.




          (n) Provide and cause to be maintained a transfer agent and registrar for all Registrable
Securities covered by such Registration Statement from and after a date not later than the
effective date of such Registration Statement.




          (o) Use its commercially reasonable efforts to cause all shares of Registrable Securities
covered by such Registration Statement to be authorized to be quoted on the Nasdaq Global Market or
listed on another national securities exchange if shares of the particular class of Registrable
Securities are at that time quoted on the Nasdaq Global Market or listed on such exchange, as the
case may be.




          (p) Enter into such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such other actions reasonably
requested by the holders of a majority of the Registrable Securities being sold in connection
therewith (including those reasonably requested by the managing underwriters, if any) to expedite
or facilitate the disposition of such Registrable Securities, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and warranties to the holders of such
Registrable Securities and the underwriters, if any, with respect to the business of the Company
and its subsidiaries, and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if
true, confirm the same if and when requested, (ii) use its commercially reasonable efforts to
furnish to the selling holders of such Registrable Securities opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and counsels to the selling holders of the
Registrable Securities), addressed to each selling holder of Registrable Securities and each of the
underwriters, if any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by such counsel and
underwriters, (iii) use its commercially reasonable efforts to obtain “cold comfort” letters and
updates thereof from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary of the Company or
of any business acquired by the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement) who have certified the financial
statements included in such Registration Statement, addressed to each selling holder of Registrable
Securities (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting
profession) and each of the underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in “cold comfort” letters in connection with underwritten
offerings, (iv) if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures substantially to the effect set forth in Section
8 hereof with respect to all parties to be indemnified pursuant to said Section and (v) deliver
such documents and certificates as may be reasonably requested by the holders of a majority of the
Registrable Securities being sold, their counsel and the managing underwriters, if any, to evidence
the continued validity of the representations and warranties made
pursuant to Section



12









 






6(p)(i) above and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The above shall be done at
each closing under such underwriting or similar agreement, or as and to the extent required
thereunder.




          (q) Make available for inspection by a representative of the selling holders of Registrable
Securities, any underwriter participating in any such disposition of Registrable Securities, if
any, and any attorneys or accountants retained by such selling holders or underwriter, at the
offices where normally kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries, and cause the
officers, directors and employees of the Company and its subsidiaries to supply all information in
each case reasonably requested by any such representative, underwriter, attorney or accountant in
connection with such Registration Statement; provided, however, that any information that is not
generally publicly available at the time of delivery of such information shall be kept confidential
by such Persons unless (i) disclosure of such information is required by court or administrative
order, (ii) disclosure of such information, in the opinion of counsel to such Person, is required
by law or (iii) such information becomes generally available to the public other than as a result
of a disclosure or failure to safeguard by such Person. In the case of a proposed disclosure
pursuant to (i) or (ii) above, such Person shall be required to give the Company written notice of
the proposed disclosure prior to such disclosure and, if requested by the Company, assist the
Company in seeking to prevent or limit the proposed disclosure. Without limiting the foregoing, no
such information shall be used by such Person as the basis for any market transactions in
securities of the Company or its subsidiaries in violation of law.




          (r) Comply with all applicable rules and regulations of the SEC and make available to its
security holders earning statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder, or any similar rule promulgated under the Securities Act, no later
than forty-five (45) days after the end of any twelve-month period (or ninety (90) days after the
end of any twelve-month period if such period is a fiscal year) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after the effective date of
a Registration Statement, which statements shall cover one of said twelve-month periods.




          (s) Cause its officers to use their commercially reasonable efforts to support the marketing
of the Registrable Securities covered by the Registration Statement (including,
without limitation, participation in “road shows”) taking into account the Company’s business
needs.




     The Company may require each seller of Registrable Securities as to which any registration is
being effected to furnish to the Company in writing such information required in connection with
such registration regarding such seller and the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company may exclude from such
registration the Registrable Securities of any seller who



13









 




unreasonably fails to furnish such
information within a reasonable time after receiving such request.




     Each holder of Registrable Securities agrees if such holder has Registrable Securities covered
by such Registration Statement that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 6(d)(ii), Section 6(d)(iii),
Section 6(d)(v) or Section 6(d)(vi) hereof, such holder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration Statement or Prospectus
until such holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(l) hereof, or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference in such Prospectus;
provided, however that the Company shall extend the time periods under Section 3 with
respect to the length of time that the effectiveness of a Registration Statement must be maintained
by the amount of time the holder is required to discontinue disposition of such securities.



     Section 7. Registration Expenses. All reasonable fees and expenses incident to the
performance of or compliance with this Agreement by the Company (including, without limitation, (i)
all registration and filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the National Association of Securities Dealers, Inc. and (B) of
compliance with securities or Blue Sky laws, including, without limitation, any fees and
disbursements of counsel for the underwriters in connection with Blue Sky qualifications of the
Registrable Securities pursuant to Section 6(i)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities in a form eligible
for deposit with The Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of
the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and
delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v)
expenses of the Company incurred in connection with any road show, (vi) fees and disbursements of
all independent certified public accountants referred to in Section 6(p)(iii) hereof
(including, without limitation, the expenses of any “cold comfort” letters required by this
Agreement) and any other persons, including special experts retained by the Company and (vii) fees
and disbursements of one counsel for the members of the Qualified Holder Group whose Registrable
Securities are included in a Registration Statement, which counsel shall be selected by the holders
of a majority of the Registrable Securities held by the Qualified Holder Group included in such
Registration Statement) shall be borne by the Company whether or not any Registration Statement is
filed or becomes effective. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be registered on any
securities exchange on which similar securities issued by the Company are then listed and rating
agency fees and the fees and expenses of any Person, including special experts, retained by the
Company.



     The Company shall not be required to pay (i) fees and disbursements of any counsel retained by
any holder of Registrable Securities or by any underwriter (except as set forth in clauses 7(i)(B)
and 7(vii)), (ii) any underwriter’s fees (including discounts, commissions or fees



14









 







of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the
distribution of the Registrable Securities or (iii) any other expenses of the holders of
Registrable Securities not specifically required to be paid by the Company pursuant to the first
paragraph of this Section 7.



     Section 8. Indemnification.



          (a) Indemnification by the Company. The Company shall, without limitation as to time,
indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable
Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the
officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and
employees of each of them, each Person who controls each such holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, managers, stockholders, accountants, attorneys, agents and employees of each such
controlling person, each underwriter, if any, and each Person who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter, from and
against any and all losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys’ fees and any legal or other fees or expenses
incurred by such party in connection with any investigation or Proceeding), expenses, judgments,
fines, penalties, charges and amounts paid in settlement (collectively, “Losses”), as
incurred, arising out of or based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any Prospectus, Prospectus supplement, offering circular, or other
document (including any related Registration Statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification, or compliance, and will reimburse
each such holder, each of its officers, directors, partners, members, managers, stockholders,
accountants, attorneys, agents and employees and each person controlling such holder, each such
underwriter, and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability, or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability, or expense arises out of or is
based on any untrue statement or omission by such holder or underwriter, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made
in such Registration Statement, Prospectus, Prospectus supplement, offering circular, or other
document in reliance upon and in conformity with written information furnished to the Company by
such holder. It is agreed that the
indemnity agreement contained in this Section 8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably withheld).




          (b) Indemnification by Holder of Registrable Securities. In connection with any
Registration Statement in which a holder of Registrable Securities is participating, such holder of
Registrable Securities shall furnish to the Company in writing such information as the Company
reasonably requests for use in connection with any Registration Statement or



15









 




Prospectus and agrees
to indemnify, to the fullest extent permitted by law, severally and not jointly, the Company, its
directors, officers, accountants, attorneys, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, partners, members, managers, stockholders, accountants,
attorneys, agents or employees of such controlling persons, and each underwriter, if any, and each
person who controls such underwriter (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), from and against all Losses arising out of or based on any untrue
statement of a material fact contained in any such Registration Statement, Prospectus, Prospectus
supplement, offering circular, or other document, or any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading, and will
reimburse the Company and such directors, officers, partners, members, managers, stockholders,
accountants, attorneys, employees, agents, persons, underwriters, or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that
such untrue statement or omission is made in such Registration Statement, Prospectus, Prospectus
supplement, offering circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such holder specifically for use in connection with the
preparation of such Registration Statement, Prospectus, Prospectus supplement, offering circular or
other document; provided, however, that the obligations of such holder hereunder shall not apply to
amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such holder (which consent
shall not be unreasonably withheld); and provided, further, that the liability of each selling
holder of Registrable Securities hereunder shall be limited to the net proceeds received by such
selling holder from the sale of Registrable Securities covered by such Registration Statement. In
addition, insofar as the foregoing indemnity relates to any such untrue statement or omission made
in the preliminary Prospectus but eliminated or remedied in the amended Prospectus on file with the
SEC at the time the Registration Statement becomes effective or in the final Prospectus filed
pursuant to applicable rules of the SEC or in any supplement or addendum thereto and such new
Prospectus is delivered to the underwriter, the indemnity agreement herein shall not inure to the
benefit of such underwriter, any controlling person of such underwriter and their respective
Representatives, if a copy of the final Prospectus filed pursuant to such rules, together with all
supplements and addenda thereto was not furnished to the Person asserting the loss, liability,
claim or damage at or prior to the time such furnishing is required by the Securities Act.




          (c) Conduct of Indemnification Proceedings. If any Person shall be entitled to indemnity
hereunder (an “indemnified party”), such indemnified party shall give prompt notice to the
party from which such indemnity is sought (the “indemnifying party”) of any claim or of the
commencement of any Proceeding with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so
notify the indemnifying party shall not relieve the indemnifying party from any obligation or
liability except to the extent that the indemnifying party has been prejudiced by such delay or
failure. The indemnifying party shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such indemnified party of such
claim or Proceeding, to, unless in the indemnified party’s reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect of such claim,
assume, at the indemnifying party’s expense, the defense of any such claim or Proceeding, with



16









 






counsel reasonably satisfactory to such indemnified party; provided, however, that an indemnified
party shall have the right to employ separate counsel in any such claim or Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless: (i) the indemnifying party agrees to pay such fees and
expenses or (ii) the indemnifying party fails promptly to assume the defense of such claim or
Proceeding or fails to employ counsel reasonably satisfactory to such indemnified party; in which
case the indemnified party shall have the right to employ counsel and to assume the defense of such
claim or proceeding; provided, however, that the indemnifying party shall not, in connection with
any one such claim or Proceeding or separate but substantially similar or related claims or
Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one firm of attorneys (together with appropriate
local counsel) at any time for all of the indemnified parties, or for fees and expenses that are
not reasonable. Whether or not such defense is assumed by the indemnifying party, such indemnified
party will not be subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). The indemnifying party shall not consent to entry of
any judgment or enter into any settlement that does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from all liability in respect of such
claim or litigation for which such indemnified party would be entitled to indemnification
hereunder.




          (d) Contribution. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any Losses (other than in accordance with its
terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such indemnifying party, on the one hand, and
indemnified party, on the other hand, shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent any such action,
statement or omission.




     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 8(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 8(d), an indemnifying party
that is a selling holder of Registrable Securities shall not be required to contribute any amount
in excess of the amount by which the net proceeds from the sale of the Registrable Securities sold
by such indemnifying party exceeds the amount of any damages that such indemnifying party has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.



17









 





          (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.




     Section 9. Rule 144. After the Initial Public Offering, the Company shall file the reports
required to be filed by it under the Securities Act and the Exchange Act, and will take such
further action as any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption provided by Rule 144.
Upon the request of any holder of Registrable Securities, the Company shall deliver to such holder
a written statement as to whether it has complied with such requirements.



     Section 10. Underwritten Registrations. If any Demand Registration is an underwritten
offering, the Company shall have the right to select the investment banker or investment bankers
and managers to administer the offering, subject to approval by the holders of a majority of the
Registrable Securities covered by such Demand Registration, not to be unreasonably withheld. The
Company shall have the right to select the investment banker or investment bankers and managers to
administer any Piggyback Registration.



     No Person may participate in any underwritten registration hereunder unless such Person (i)
agrees to sell the Registrable Securities it desires to have covered by the Demand Registration on
the basis provided in any underwriting arrangements in customary form and (ii) completes and
executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting
agreements and other documents required under the terms of such underwriting arrangements, provided
that such Person shall not be required to make any representations or warranties other than those
related to title and ownership of shares and as to the accuracy and completeness of statements made
in a Registration Statement, Prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to the Company or the managing underwriter by such
Person.



     Section 11. Miscellaneous.



          (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained the written consent of
holders of at least a majority of the then-outstanding Registrable Securities; provided, however,
that in no event shall the obligations of any holder of Registrable
Securities be materially increased or the rights of any holder of Registrable Securities be
adversely affected (without similarly adversely affecting the rights of all holders of Registrable
Securities), except upon the written consent of such holder. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly affect the rights of
other holders of Registrable Securities may be given by holders of at least a majority of the
Registrable Securities being sold by such holders pursuant to such Registration Statement.



18









 







          (b) Notices. All notices required to be given hereunder shall be in writing and shall be
deemed to be duly given if personally delivered, telecopied and confirmed, or mailed by certified
mail, return receipt requested, or overnight delivery service with proof of receipt maintained, at
the following address (or any other address that any such party may designate by written notice to
the other parties):




     if to the Company:


6300 Ridglea Place, Suite 1107

Fort Worth, Texas 76116

Fax: (817) 989-9001

Attn: J. Curtis Henderson, General Counsel




     and a copy to:


Thompson & Knight LLP

1700 Pacific Avenue, Suite 3300

Dallas, Texas 75201

Fax: (214) 969-1751

Attn: Jeffrey A. Zlotky, Esq.




     If to any holder of Registrable Securities, at such Person’s address as set forth on the
records of the Company. Any such notice shall, if delivered personally, be deemed received upon
delivery; shall, if delivered by telecopy, be deemed received on the first business day following
confirmation; shall, if delivered by overnight delivery service, be deemed received the first
business day after being sent; and shall, if delivered by mail, be deemed received upon the earlier
of actual receipt thereof or five (5) business days after the date of deposit in the United States
mail.



          (c) Successors and Assigns; Status. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including subsequent holders of
Registrable Securities; provided, however, that such successor or assign shall not be entitled to
such rights unless the successor or assign shall have executed and delivered to the Company an
Addendum Agreement substantially in the form of Exhibit A hereto promptly following the
acquisition of such Registrable Securities, in which event such successor or assign shall be deemed
a Management Qualified Holder or a member of another Qualified Holder Group, as applicable, for
purposes of this Agreement. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any Person other than the parties hereto and
their respective permitted successors and assigns any legal or equitable right, remedy or claim
under, in or in respect of this Agreement or any provision herein contained.




          (d) Counterparts. This Agreement may be executed by facsimile signature and in two (2) or
more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.



19









 







          (e) Headings. The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.




          (f) Governing Law. This agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (without giving effect to the choice of law principles thereof).




          (g) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.




          (h) Entire Agreement. This Agreement is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with respect to Registrable
Securities. This Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.




          (i) Securities Held by the Company or its Subsidiaries. Whenever the consent or approval
of holders of a specified percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company or its subsidiaries shall not be counted in determining whether such
consent or approval was given by the holders of such required percentage.




          (j) Termination. This Agreement shall terminate when no Registrable Securities remain
outstanding; provided that Section 7 and Section 8 shall survive any termination
hereof.




          (k) Specific Performance. The parties hereto recognize and agree that money damages may be
insufficient to compensate the holders of any Registrable Securities for breaches by the Company of
the terms hereof and, consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.




          (j) Condition to the Obligation of the Parties. The effectiveness of this Agreement
and the respective obligations of each party to effect the transactions contemplated by this
Agreement shall be subject to fulfillment of the condition that the Combination shall have been
consummated in accordance with the terms of the Contribution Agreement.




[The Remainder of this Page is Left Intentionally Blank.]




20









 





     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be
duly executed as of the date first above written.



	 	 	 	 	 
	 	COMPANY:	 
	 
	 	
APPROACH RESOURCES INC.	 
	 
	 	By:  	/s/ J. Ross Craft
 	 
	 	 	J. Ross Craft 	 
	 	 	President and Chief Executive Officer 	 
	 
	 	STOCKHOLDERS:	 
	 
	 	/s/ J. Ross Craft
 	 
	 	J. Ross Craft	 
	 	 	 
	 	                                                     /s/ J. Curtis Henderson
 	 
	 	J. Curtis Henderson 	 
	 	 	 
	 	                                                     /s/ Ralph P. Manoushagian
 	 
	 	Ralph P. Manoushagian 	 
	 	 	 
	 	                                                     /s/ Glenn W. Reed
 	 
	 	Glenn W. Reed 	 
	 	 	 
	 	                                                     /s/ James S. Scott
 	 
	 	James S. Scott 	 
	 	 	 
	 	                                                     /s/ Steven P. Smart
 	 
	 	Steven P. Smart 	 
	 	 	 
	 	MONTANA OIL AND GAS, LTD.	 
	 
	 	By:  	/s/ J. Curtis Henderson, Attorney-in-Fact
 	 
	 	 	J. Curtis Henderson, Attorney-in-Fact 	 
	 	 	 	 
	 



Signature Page to Registration Rights Agreement





 









 





	 	 	 	 	 	 	 
	 	 	YORKTOWN ENERGY PARTNERS V, L.P.
	 
	 	 	 	 	 	 
	 	 	By: Yorktown V Company LLC, its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ W. Howard Keenan, Jr.
 

Name: W. Howard Keenan, Jr.
	 	 
	 

	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	YORKTOWN ENERGY PARTNERS VI, L.P.
	 
	 	 	 	 	 	 
	 	 	By: Yorktown VI Company LP, its general partner
	 
	 	 	 	 	 	 
	 	 	By: Yorktown VI Associates LLC, its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ W. Howard Keenan, Jr.
 

Name: W. Howard Keenan, Jr.
	 	 
	 

	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	YORKTOWN ENERGY PARTNERS VII, L.P.
	 
	 	 	 	 	 	 
	 	 	By: Yorktown VII Company LP, its general partner
	 
	 	 	 	 	 	 
	 	 	By: Yorktown VII Associates LLC, its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ W. Howard Keenan, Jr.
 

	 	 
	 

	 	 	 	Name: W. Howard Keenan, Jr.	 	 
	 

	 	 	 	Title: Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	NEO CANYON EXPLORATION, L.P.
	 
	 	 	 	 	 	 
	 	 	By: J. Cleo Thompson Petroleum 
	 	 	Management, L.L.C., its general partner
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James Cleo Thompson, Jr.	 	 
	 

	 	 	 	 

James Cleo Thompson, Jr., Member-
	 	 
	 

	 	 	 	Manager	 	 





Signature Page to Registration Rights Agreement




 









 








	 	 	 	 	 
	 	LUBAR EQUITY FUND, LLC

 	 
	 	By:  	/s/ David Lubar
 	 
	 	 	Name:  	David Lubar 	 
	 	 	Title:  	President 	 
	 



Signature Page to Registration Rights Agreement





 









 








EXHIBIT A




ADDENDUM AGREEMENT





     This Addendum Agreement is made this                    
day of                                         ,
20                    , by and between
                                                             (the “New Stockholder”) and Approach Resources Inc., a
Delaware corporation (the “Company”), pursuant to a Registration Rights Agreement dated as
of                                         , 2007 (the “Agreement”), between and among the Company and certain of
its stockholders (the “Stockholders”). Capitalized terms used but not otherwise defined
herein shall have the meanings given to such terms in the Agreement.



WITNESSETH:




     WHEREAS, the New Stockholder has acquired Registrable Securities (as defined in the Agreement)
directly or indirectly from a Stockholder; and



     WHEREAS, the Agreement requires that all persons desiring registration rights must enter into
an Addendum Agreement binding the New Stockholder to the Agreement to the same extent as if it were
an original party thereto;



     NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Stockholder
acknowledges that it has received and read the Agreement and that the New Stockholder shall be
bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement
to the same extent as if it were an original party to the Agreement and shall be deemed to be a
Stockholder thereunder.



	 	 	 
	 
	 

	 	 
	 

	 	New Stockholder






	 	 	 
	Address:
	 	 
	 
	 	 
	 


	 	 
	 
	 	 
	 


	 	 






Exhibit A-1









 





     AGREED TO on behalf of the Company pursuant to Section 12(c) of the Agreement.



	 	 	 	 	 	 	 
	 	 	APPROACH RESOURCES INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 





Exhibit A-2