Document:

exv10w5

 

Exhibit 10.5

 

 

ADMINISTRATIVE SERVICES AGREEMENT

among

PIONEER SOUTHWEST ENERGY PARTNERS L.P.,

PIONEER NATURAL RESOURCES GP LLC,

PIONEER SOUTHWEST ENERGY PARTNERS USA LLC,

and

PIONEER NATURAL RESOURCES USA, INC.

dated effective as of

                    , 2007

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE I

	DEFINITIONS

	 
	 	 	 	 	 	 
	Section 1.1

	 	Definitions
	 	 	1	 
	Section 1.2

	 	Construction
	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE II

	RETENTION OF PIONEER USA; SCOPE OF SERVICES

	 
	 	 	 	 	 	 
	Section 2.1

	 	Retention of Pioneer USA
	 	 	5	 
	Section 2.2

	 	Scope of Services
	 	 	5	 
	Section 2.3

	 	Exclusion of Services
	 	 	5	 
	Section 2.4

	 	Performance of Services by Affiliates and Third Parties
	 	 	5	 
	Section 2.5

	 	Intellectual Property
	 	 	5	 
	Section 2.6

	 	Appointment of Independent Accounting Firm and Independent Petroleum Engineer
	 	 	5	 
	 
	 	 	 	 	 	 
	ARTICLE III

	BOOKS, RECORDS AND REPORTING

	 
	 	 	 	 	 	 
	Section 3.1

	 	Books and Records
	 	 	6	 
	Section 3.2

	 	Audits
	 	 	6	 
	Section 3.3

	 	Reports
	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE IV

	PAYMENT AMOUNT

	 
	 	 	 	 	 	 
	Section 4.1

	 	Administrative Fee.
	 	 	6	 
	Section 4.2

	 	Direct Costs
	 	 	7	 
	Section 4.3

	 	COPAS Fee
	 	 	7	 
	Section 4.4

	 	Payment Terms.
	 	 	7	 
	Section 4.5

	 	Disputed Charges
	 	 	8	 
	Section 4.6

	 	Set Off
	 	 	8	 
	Section 4.7

	 	Pioneer USA’s Employees
	 	 	8	 
	Section 4.8

	 	Approval of Expenses
	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE V

	FORCE MAJEURE

	 
	 	 	 	 	 	 
	Section 5.1

	 	Force Majeure
	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE VI

	ASSIGNMENTS AND SUBCONTRACTS

	 
	 	 	 	 	 	 
	Section 6.1

	 	Assignments
	 	 	9	 
	Section 6.2

	 	Other Requirements
	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	TERMINATION

	 
	 	 	 	 	 	 
	Section 7.1

	 	Termination
	 	 	10	 
	Section 7.2

	 	Effect of Termination
	 	 	10	 

 i 

 

 

	 	 	 	 	 	 	 
	ARTICLE VIII

	CONFIDENTIAL INFORMATION

	 
	 	 	 	 	 	 
	Section 8.1

	 	Nondisclosure
	 	 	11	 
	Section 8.2

	 	Permitted Disclosure
	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	LIMITATION OF LIABILITY; INDEMNIFICATION

	 
	 	 	 	 	 	 
	Section 9.1

	 	Limitation of Liability
	 	 	11	 
	Section 9.2

	 	Partnership’s Indemnity
	 	 	12	 
	Section 9.3

	 	Limitation of Damages
	 	 	12	 
	Section 9.4

	 	Affiliate; Third Parties
	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE X

	GENERAL PROVISIONS

	 
	 	 	 	 	 	 
	Section 10.1

	 	Choice of Law
	 	 	12	 
	Section 10.2

	 	Notice
	 	 	12	 
	Section 10.3

	 	Entire Agreement
	 	 	13	 
	Section 10.4

	 	Further Action
	 	 	13	 
	Section 10.5

	 	Binding Effect
	 	 	13	 
	Section 10.6

	 	Creditors
	 	 	13	 
	Section 10.7

	 	Effect of Waiver or Consent
	 	 	13	 
	Section 10.8

	 	Counterparts
	 	 	13	 
	Section 10.9

	 	Invalidity of Provisions
	 	 	13	 
	Section 10.10

	 	Amendment or Restatement
	 	 	14	 
	Section 10.11

	 	Withholding or Granting of Consent
	 	 	14	 
	Section 10.12

	 	Directly or Indirectly
	 	 	14	 
	Section 10.13

	 	Laws and Regulations
	 	 	14	 
	Section 10.14

	 	Negation of Rights of Limited Partners, Assignees and Third Parties
	 	 	14	 
	Section 10.15

	 	No Recourse Against Officers or Directors
	 	 	14	 
	Section 10.16

	 	Arbitration
	 	 	14	 

 ii 

 

 

ADMINISTRATIVE SERVICES AGREEMENT

     THIS ADMINISTRATIVE SERVICES AGREEMENT is entered into on, and effective as of                     , 2007
(the “Effective Date”), among Pioneer Natural Resources GP LLC, a Delaware limited liability
company (the “General Partner”), Pioneer Southwest Energy Partners L.P., a Delaware limited
partnership (the “Partnership”), Pioneer Southwest Energy Partners USA LLC, a Texas limited
liability company (the “Operating Company”), and Pioneer Natural Resources USA, Inc., a Delaware
corporation (“Pioneer USA,” and collectively with the General Partner, the Partnership and the
Operating Company, the “Parties” and each, a “Party”).

RECITALS

     A. The Partnership is the owner, directly or indirectly, of interests in the Business (as
hereinafter defined);

     B. The Partnership Group (as hereinafter defined) requires certain services to operate the
Business and to fulfill other general and administrative functions relating to the Business; and

     C. The Partnership Group desires that Pioneer USA provide such services, and Pioneer USA is
willing to undertake such engagement, subject to the terms and conditions of this Agreement;

     NOW, THEREFORE, the General Partner, the Partnership, the Operating Company. and Pioneer USA
agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 Definitions. The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

     “AAA” is defined in Section 10.16.

     “Administrative Fee” is defined in Section 4.1.

     “Advisors” is defined in Section 8.2.

     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with the
Person in question. As used herein, the term “control” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a Person, whether
through ownership of Voting Securities, by contract or otherwise.

     “Agreement” means this Administrative Services Agreement, as it may be amended, supplemented
or restated from time to time.

     “Bbl” means a standard barrel containing 42 United States gallons.

 

 

     “BOE” means a barrel of oil equivalent and is a standard convention used to express oil and
gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the relative
energy content method by using the ratio of 6.0 Mcf of gas to 1.0 Bbl of oil or natural gas liquid.

     “Business” means the business of the Partnership Group.

     “Cause” has the meaning given such term in the Partnership Agreement.

     “Change of Control” means, and shall be deemed to have occurred upon, one or more of the
following events: (i) any transaction resulting in the Partnership (or its successor or survivor
by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof)
ceasing to be an Affiliate of Pioneer; (ii) the limited partners of the Partnership approve, in one
transaction or a series of transactions, a plan of complete liquidation of the Partnership; (iii)
the sale or other disposition by either the General Partner or the Partnership of all or
substantially all of its assets in one or more transactions to any Person other than the General
Partner or an Affiliate of the General Partner; or (iv) a transaction resulting in a Person other
than Pioneer or an Affiliate of Pioneer being the general partner of the Partnership (or its
successor or survivor by way of merger, consolidation, or some other transaction, or a parent or
subsidiary thereof).

     “Common Unit” has the meaning given such term in the Partnership Agreement.

     “Confidential Information” means non-public information about the disclosing Party’s or any of
its Affiliates’ business or activities that is proprietary and confidential, which shall include,
without limitation, all business, financial, technical and other information, including software
(source and object code) and programming code, of a Party or its Affiliates marked or designated
“confidential” or “proprietary” or by its nature or the circumstances surrounding its disclosure it
should reasonably be regarded as confidential. Confidential Information includes not only written
or other tangible information, but also information transferred orally, visually, electronically or
by any other means. Confidential Information does not include information that (i) is in or enters
the public domain without breach of this Agreement, or (ii) the receiving Party lawfully receives
from a third party without restriction on disclosure and to the receiving Party’s knowledge without
breach of a nondisclosure obligation.

     “COPAS” means the Council of Petroleum Accountants Societies.

     “Damages” is defined in Section 9.1.

     “Default Rate” means an interest rate (which shall in no event be higher than the rate
permitted by applicable Law) equal to the prime interest rate of the Partnership’s principal lender
or if there is no such lender, the prime rate of Bank of America.

     “Dispute” is defined in Section 10.16.

     “Effective Date” is defined in the introductory paragraph.

     “Environmental Law” means current local, county, state, federal, and/or foreign law (including
common law), statute, code, ordinance, rule, order, judgment, decree, regulation or

2

 

other legal obligation relating to the protection of health, safety or the environment or
natural resources, including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. section 9601 et seq.), as amended, the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.), as amended, the Federal Water
Pollution Control Act (33 U.S.C. section 1251 et seq.), as amended, the Clean Air Act (42 U.S.C.
section 7401 et seq.), as amended, the Toxic Substances Control Act (15 U.S.C. section 2601 et
seq.), as amended, the Occupational Safety and Health Act (29 U.S.C. section 651 et seq.), as
amended, the Safe Drinking Water Act (42 U.S.C. section 300(f) et seq.), as amended, analogous
state, tribal or local laws, and any similar, implementing or successor law, and any amendment,
rule, regulation, or directive issued thereunder, including any determination by, or interpretation
of any of the foregoing by, any Governmental Authority that has the force of law.

     “Force Majeure” means any cause beyond the reasonable control of a Party, including the
following causes: acts of God, strikes, lockouts, acts of the public enemy, wars or warlike action
(whether actual or impending), arrests and other restraints of government (civil or military),
blockades, embargoes, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires,
sabotage, tornadoes, named tropical storms and hurricanes, floods, civil disturbances, terrorism,
mechanical breakdown of machinery or equipment, explosions, confiscation or seizure by any
government or other public authority and any order of any court of competent jurisdiction,
regulatory agency or governmental body having jurisdiction.

     “G&A Services” means those general and administrative services necessary or useful for the
conduct of the business of the Partnership Group, including, but not limited to, accounting,
business development, finance, land, legal, engineering, investor relations, management, marketing,
information technology, insurance, government regulations, communications, regulatory,
environmental and human resources.

     “Governmental Approval” means any material consent, authorization, certificate, permit,
right-of-way grant or approval of any Governmental Authority that is necessary for the
construction, ownership and operation of the Business in accordance with applicable Laws.

     “Governmental Authority” means any court or tribunal in any jurisdiction or any federal,
state, tribal, municipal or local government or other governmental body, agency, authority,
department, commission, board, bureau, instrumentality, arbitrator or arbitral body or any
quasi-governmental or private body lawfully exercising any regulatory or taxing authority.

     “Laws” means any applicable statute, Environmental Law, common law, rule, regulation,
judgment, order, ordinance, writ, injunction or decree issued or promulgated by any Governmental
Authority.

     “Mcf” means one thousand cubic feet and is a measure of natural gas volume.

     “Parties” is defined in the introductory paragraph.

     “Partnership” is defined in the introductory paragraph.

     “Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership
of the Partnership, as may be amended or restated from time to time.

3

 

     “Partnership Group” means the General Partner, the Partnership, the Operating Company and all
of their respective Subsidiaries.

     “Person” means an individual or a corporation, limited liability company, partnership, joint
venture, trust, unincorporated organization, association, government agency or political
subdivision thereof or other entity.

     “Pioneer” means Pioneer Natural Resources Company, a Delaware corporation.

     “Pioneer Indemnified Party” means Pioneer, each Affiliate of Pioneer (excluding any member of
the Partnership Group) and each of Pioneer’s and each such Affiliate’s controlling persons,
directors, officers, employees, agents and permitted assigns.

     “Pioneer USA Party” is defined in Section 9.1.

     “Rules” is defined in Section 10.16.

     “Services” is defined in Section 2.2.

     “Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of
the voting power of shares entitled (without regard to the occurrence of any contingency) to vote
in the election of directors or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such
Person or a combination thereof, (b) a partnership (whether general or limited) in which such
Person or a Subsidiary of such Person is, at the date of determination, (i) the general partner or
(ii) a limited partner of such partnership, but, in the case of a limited partner, only if more
than 50% of the partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or indirectly, at the date of
determination, by such Person, by one or more Subsidiaries of such Person, or a combination
thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person,
one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the
date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or
direct the election of a majority of the directors or other governing body of such Person.

     “Voting Securities” means securities of any class of a Person entitling the holders thereof to
vote in the election of, or to appoint, members of the board of directors or other similar
governing body of the Person and, with respect to the Partnership, means Common Units.

     “VPP” means each of the volumetric production payment agreements pursuant to which Pioneer USA
has sold proved reserves and which require the delivery by Pioneer USA of specified quantities of
oil and gas.

     Other terms defined herein have the meanings so given them.

     Section 1.2 Construction. Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c)

4

 

references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made
a part hereof for all purposes; (d) the terms “include”, “includes”, “including” and words of like
import shall be deemed to be followed by the words “without limitation”; (e) the terms “hereof,”
“herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of
this Agreement; and (f) references to money refer to legal currency of the United States of
America. The table of contents and headings contained in this Agreement are for reference purposes
only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II

RETENTION OF PIONEER USA; SCOPE OF SERVICES

     Section 2.1 Retention of Pioneer USA. The Partnership hereby engages Pioneer USA to perform
the Services, as directed by the General Partner, and to provide all personnel and any facilities,
goods and equipment not otherwise provided by the Partnership Group necessary to perform the
Services. Pioneer USA hereby accepts such engagement and agrees to perform the Services requested
by the General Partner and to provide any personnel, facilities, goods and equipment not otherwise
provided by the Partnership Group, and to provide all employees as may be reasonable and necessary
to perform the Services.

     Section 2.2 Scope of Services. The “Services” shall consist of such services the General
Partner determines may be reasonable and necessary to operate the Business, including, without
limitation, any G&A Services and those services described on Schedule I hereto. Pioneer
USA hereby covenants and agrees that the Services will be performed in accordance with (i)
applicable material Governmental Approvals and Laws and (ii) industry standards.

     Section 2.3 Exclusion of Services. The General Partner may temporarily or permanently exclude
any particular service from the scope of the Services upon ninety (90) days’ prior notice to
Pioneer USA.

     Section 2.4 Performance of Services by Affiliates and Third Parties. The Parties hereby agree
that in discharging its obligations hereunder, Pioneer USA may engage any of its Affiliates or any
qualified third party to perform the Services (or any part of the Services) on its behalf and that
the performance of the Services (or any part of the Services) by any such Affiliate or third party
shall be treated as if Pioneer USA performed such Services itself. Notwithstanding the foregoing,
nothing contained herein shall relieve Pioneer USA of its obligations hereunder.

     Section 2.5 Intellectual Property. The General Partner, the Partnership and the Operating
Company hereby grant to Pioneer USA and its Affiliates an irrevocable, royalty-free, non-exclusive
and non-transferable right and license to use, during the term of this Agreement, any intellectual
property provided by the Partnership Group to Pioneer USA or its Affiliates, but only to the extent
such use is necessary for the performance of the Services. Pioneer USA agrees that it and its
Affiliates will utilize such intellectual property solely in connection with the performance of the
Services.

     Section 2.6 Appointment of Independent Accounting Firm and Independent Petroleum Engineer.
Notwithstanding anything to the contrary in this Agreement, the Parties hereby

5

 

acknowledge and agree that the General Partner shall have the exclusive authority to appoint
an independent registered public accounting firm to audit the financial statements of the
Partnership and an independent petroleum engineer to provide reports to the Partnership relating to
estimates of proved reserves for Securities and Exchange Commission and other reporting purposes.

ARTICLE III

BOOKS, RECORDS AND REPORTING

     Section 3.1 Books and Records. Pioneer USA shall maintain accurate books and records
regarding the performance of the Services and its calculation of the Administrative Fee and any
Direct Costs, and shall maintain such books and records for the period required by applicable
accounting practices or Law.

     Section 3.2 Audits. The Partnership shall have the right, upon reasonable notice, and at all
reasonable times during usual business hours, to audit, examine and make copies of the books and
records referred to in Section 3.1. Such right may be exercised through any agent or employee of
the Partnership Group designated in writing by it or by an independent public accountant, engineer,
attorney or other agent so designated. The Partnership shall bear all costs and expenses incurred
in any inspection, examination or audit. Pioneer USA shall review and respond in a timely manner
to any claims or inquiries made by the Partnership regarding matters revealed by any such
inspection, examination or audit.

     Section 3.3 Reports. Pioneer USA shall prepare and deliver to the Partnership any reports
provided for in this Agreement and such other reports as the Partnership may reasonably request
from time to time regarding the performance of the Services.

ARTICLE IV

PAYMENT AMOUNT

     Section 4.1 Administrative Fee.

	 	(a)	 	The Partnership shall on a quarterly basis reimburse Pioneer
USA and its Affiliates for their costs in providing the Services (the
“Administrative Fee”), pursuant to any methodology determined in accordance
with this Section 4.1. Initially and until changed as provided in this Section
4.1, the Administrative Fee will be based on a methodology of determining the
Partnership Group’s share, on a per BOE basis, of certain of the general and
administrative costs incurred by Pioneer USA and its Affiliates (excluding the
Partnership Group). Under this initial methodology, the per BOE cost for
Services during any period will be determined by dividing (i) the aggregate
United States general and administrative costs of Pioneer USA and its
Affiliates (excluding the Partnership Group) during such period, excluding such
costs directly attributable to Pioneer USA’s and its Affiliates’ Alaska
operations, by (ii) the sum of (x) the United States production during such
period of Pioneer USA and its Affiliates (which for the avoidance of doubt
includes the production of the Partnership

6

 

	 	 	 	Group), excluding any production attributable to Pioneer USA’s and its
Affiliates’ Alaska operations, plus (y) the volumes delivered under all VPPs
during such period. The Administrative Fee will then be determined by
multiplying the per BOE costs by the total production of the Partnership
during such period. For 2007, it is estimated that the Administrative Fee
for the Partnership Group will be $1.08 per BOE of the Partnership Group’s
production. The Administrative Fee may be based on amounts estimated by
Pioneer USA if actual amounts are not available as determined by Pioneer
USA. The Administrative Fee for the quarter containing the Effective Date
shall equal the Administrative Fee that would have been payable for the full
quarter multiplied by a fraction the numerator of which is equal to the
number of days from the Effective Date until the end of such quarter and the
denominator of which is equal to the number of days in such quarter.
	 
	 	(b)	 	From time to time, Pioneer USA may propose changes to the
methodology of calculating the Administrative Fee. Any change in the
methodology of calculation will take effect when the General Partner, on behalf
of the Partnership Group, consents to such change. The consent of the General
Partner will not be unreasonably withheld, delayed or conditioned, so long as
the methodology proposed reasonably compensates Pioneer USA and its Affiliates
for their costs in providing the Services.
	 
	 	(c)	 	On an annual basis, commencing with fiscal year 2008, Pioneer
USA will review the Administrative Fee charged during the previous twelve month
period. The review of the previous twelve month period shall involve a
comparison of the final general and administrative expense and production
amounts to the amounts used to calculate the Administrative Fee for the
previous twelve month period in order to determine if the Partnership was
overcharged or undercharged. Any overcharged or undercharged amounts will be
reflected as a decrease or increase, respectively, to the Administrative Fee
for the then current fiscal quarter.

     Section 4.2 Direct Costs. The Partnership shall reimburse Pioneer USA and its Affiliates for
all third-party expenses that Pioneer USA and its Affiliates incur on behalf of the Partnership
Group, if any (the “Direct Costs”).

     Section 4.3 COPAS Fee. Pioneer USA shall be entitled to retain any COPAS overhead charges
associated with drilling and operating wells billed in accordance with operating agreements to the
extent that it is the operator of such wells. The Partnership will pay all expenses that are
directly chargeable to wells under operating agreements.

     Section 4.4 Payment Terms.

	 	(a)	 	Pioneer USA shall invoice the Partnership within twenty-five
(25) days after the close of each quarter for the actual or estimated amount of
the Administrative Fee, plus or minus any adjustments necessary to correct

7

 

	 	 	 	estimated billings to actual billings. Subject to Section 4.5, all invoices
shall be due and payable, in immediately available funds within fifteen (15)
days after receipt of each invoice. Upon the request of the Partnership,
Pioneer USA shall furnish a reasonable detail of the calculation of the
Administrative Fee during any quarter. Pioneer USA has the right to charge
the Partnership interest on all past due invoices at the Default Rate.
	 
	 	(b)	 	The Partnership shall reimburse Pioneer USA or its Affiliates
within five (5) days after receipt of an invoice and related support, for
Direct Costs incurred by Pioneer USA and its Affiliates. Pioneer USA has the
right to charge the Partnership interest on all past due invoices at the
Default Rate.

     Section 4.5 Disputed Charges. THE PARTNERSHIP MAY, WITHIN 120 DAYS AFTER RECEIPT OF A CHARGE
FROM PIONEER USA, TAKE WRITTEN EXCEPTION TO SUCH CHARGE, ON THE GROUND THAT THE CHARGE WAS NOT A
CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY PIONEER USA OR
ITS AFFILIATES IN CONNECTION WITH THE SERVICES. THE PARTNERSHIP SHALL NEVERTHELESS PAY PIONEER USA
IN FULL WHEN DUE THE FULL ADMINISTRATIVE FEE AND ANY DIRECT COSTS CHARGED TO PIONEER USA. SUCH
PAYMENT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF THE PARTNERSHIP TO RECOUP ANY CONTESTED
PORTION OF ANY AMOUNT SO PAID. HOWEVER, IF THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN,
OR ANY PART THEREOF, IS ULTIMATELY DETERMINED NOT TO BE A CORRECT CALCULATION OF THE ADMINISTRATIVE
FEE AND/OR A REASONABLE COST INCURRED BY PIONEER USA OR ITS AFFILIATES IN CONNECTION WITH ITS
PROVIDING THE SERVICES HEREUNDER, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE
REFUNDED BY PIONEER USA TO THE PARTNERSHIP TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE
DURING THE PERIOD FROM THE DATE OF PAYMENT BY THE PARTNERSHIP TO THE DATE OF REFUND BY PIONEER USA.

     Section 4.6 Set Off. In the event that Pioneer USA owes the Partnership a sum certain in an
uncontested amount under any other agreement, then any such amounts may be aggregated and the
Partnership and Pioneer USA may discharge their obligations by netting those amounts against any
amounts owed by the Partnership to Pioneer USA under this Agreement. If the Partnership or Pioneer
USA owes the other party a greater aggregate amount, that Party may pay to the other Party the
difference between the amounts owed.

     Section 4.7 Pioneer USA’s Employees. The Partnership shall not be obligated to pay to Pioneer
USA’s or its Affiliates’ employees directly any compensation, salaries, wages, bonuses, benefits,
social security taxes, workers’ compensation insurance, retirement and insurance benefits, training
and other such expenses; provided, however, that the Partnership or the General Partner or its
Affiliates may, at its option, compensate such employees under one or more equity-based incentive
compensation plans for the provision of Services hereunder and the Partnership will reimburse the
General Partner or such Affiliate for the cost incurred for such compensation.

8

 

     Section 4.8 Approval of Expenses. Pioneer USA acknowledges that the Audit Committee of the
Board of Directors of the General Partner, or if there is no Audit Committee, the entire Board of
Directors of the General Partner, may at any time review the Administrative Fee, any Direct Costs
and the levels of Services and, as a result, may direct the Partnership to decrease the level of
Services or to dispute a prior invoice pursuant to Section 4.5. In addition to the information
Pioneer USA is obligated to provide pursuant to Section 4.4(a), Pioneer USA shall provide such
other information as reasonably necessary to determine the veracity or appropriateness of any
Administrative Fee or Direct Costs hereunder.

ARTICLE V

FORCE MAJEURE

     Section 5.1 Force Majeure. A Party’s obligation under this Agreement shall be excused when
and to the extent its performance of that obligation is prevented due to Force Majeure; provided,
however, that a Party shall not be excused by Force Majeure from any obligation to pay money. The
Party that is prevented from performing its obligation by reason of Force Majeure shall promptly
notify the other Parties of that fact and shall exercise due diligence to end its inability to
perform as promptly as practicable. Notwithstanding the foregoing, a Party is not required to
settle any strike, lockout or other labor dispute in which it may be involved; provided, however,
that, in the event of a strike, lockout or other labor dispute affecting Pioneer USA, Pioneer USA
shall use reasonable efforts to continue to perform all obligations hereunder by utilizing its
management personnel and that of its Affiliates.

ARTICLE VI

ASSIGNMENTS AND SUBCONTRACTS

     Section 6.1 Assignments.

	 	(a)	 	Without the prior consent of Pioneer USA, none of the
Partnership or the other members or the Partnership Group may sell, assign,
transfer or convey any of its rights, or delegate any of its obligations, under
this Agreement to any Person.
	 
	 	(b)	 	Without the prior consent of the Partnership, Pioneer USA may
not sell, assign, transfer or convey any of its rights, or delegate any of its
obligations, under this Agreement to any Person, other than the delegation of
performance of Services to an Affiliate of Pioneer USA or a qualified third
party as permitted by Section 2.4 and the sale, assignment, transfer or
conveyance of its rights hereunder to any such Affiliate.
	 
	 	(c)	 	Notwithstanding the foregoing, a merger shall not be deemed to
be an assignment and a transfer of the rights and an assumption of the
obligations under this Agreement in connection with the transfer of all or
substantially all of the assets of a Party shall not be deemed an assignment of
such rights or obligations of such Party to this Agreement.

9

 

     Section 6.2 Other Requirements. Subject to the other provisions hereof:

	 	(a)	 	All materials and workmanship used or provided in performing
the Services shall be in accordance with applicable specifications and
standards.
	 
	 	(b)	 	Pioneer USA shall exercise reasonable diligence to obtain the
most favorable terms or warranties available from vendors, suppliers and other
third parties, and where appropriate, Pioneer USA shall assign such warranties
to the Partnership.
	 
	 	(c)	 	In rendering the Services, Pioneer USA shall not discriminate
against any employee or applicant for employment because of race, color,
religion, sex, national origin, age or disability, and shall, to the extent
applicable, comply with the equal employment opportunity clauses promulgated
under Executive Order 11246, The Vietnam Era Veterans Readjustment Assistance
Act and the Rehabilitation Act of 1973, each of which is incorporated herein by
reference.
	 
	 	(d)	 	Pioneer USA agrees to exercise reasonable diligence to ensure
that, during the term of this Agreement, it shall not employ unauthorized
aliens as defined in the Immigration Reform and Control Act of 1986, or any
successor law.

ARTICLE VII

TERMINATION

     Section 7.1 Termination.

          (a) Notwithstanding any other provision of this Agreement, if the General Partner is removed
as general partner of the Partnership under circumstances where Cause does not exist and Common
Units held by the General Partner and its Affiliates are not voted in favor of such removal, this
Agreement may immediately thereupon be terminated by Pioneer USA. This Agreement may also be
terminated immediately by any Party upon a Change of Control. Any termination under this Section
7.1(a) shall become effective immediately upon delivery of the notice first described in this
Section 7.1(a).

          (b) In addition to Section 7.1(a), either Party may terminate this Agreement at any time by
giving notice of such termination to the other Party. Any termination under this Section 7.1(b)
shall become effective ninety (90) days after delivery of such notice, or such later time (not to
exceed the first anniversary of the delivery of such notice) as may be specified by the terminating
Party.

          (c) Articles VIII, IX and X of this Agreement shall survive any termination of this Agreement.

     Section 7.2 Effect of Termination. If this Agreement is terminated in accordance with Section
7.1(a) or 7.1(b), all rights and obligations under this Agreement shall cease except for

10

 

(a) obligations that expressly survive termination of this Agreement, (b) liabilities and
obligations that have accrued prior to such termination, including the obligation to pay any
amounts that have become due and payable prior to such termination, and (c) the obligation to pay
any portion of the Administrative Fee or any Direct Costs that have accrued prior to such
termination, even if such amounts have not become due and payable at that time.

ARTICLE VIII

CONFIDENTIAL INFORMATION

     Section 8.1 Nondisclosure. Each of Pioneer USA and the Partnership Group agrees that (i) it
will not disclose to any third party or use any Confidential Information disclosed to it by the
other except as expressly permitted in this Agreement, and (ii) it will take all reasonable
measures to maintain the confidentiality of all Confidential Information of the other Party in its
possession or control, which will in no event be less than the measures it uses to maintain the
confidentiality of its own information of similar type and importance.

     Section 8.2 Permitted Disclosure. Notwithstanding the foregoing, each Party may disclose
Confidential Information (i) to the extent required by a court of competent jurisdiction or other
governmental authority or otherwise as required by law, including without limitation disclosure
obligations imposed under the federal securities laws, provided that such Party has given the other
Party prior notice of such requirement when legally permissible to permit the other Party to take
such legal action to prevent the disclosure as it deems reasonable, appropriate or necessary, or
(ii) to its consultants, legal counsel, Affiliates, accountants, banks and other financing sources
and their advisors (collectively, the “Advisors”); provided that each Advisor that receives
Confidential Information pursuant to this Section 8.2 agrees to be bound by the provisions of
Section 8.1.

ARTICLE IX

LIMITATION OF LIABILITY; INDEMNIFICATION

     Section 9.1 Limitation of Liability. Neither Pioneer USA nor any of its controlling persons,
directors, officers, employees, agents and permitted assigns (each, a “Pioneer USA Party”) shall
have any liability to the Partnership Group for any losses, damages, claims, demands, causes of
action, judgments, settlements, fines, penalties, injury, liability, cost or expense, including
court costs and reasonable attorney’s fees and expert fees and expenses (“Damages”), arising out of
or relating in any way to this Agreement, whether such Damages arise on account of the furnishing
of Services hereunder, the failure to furnish Services hereunder, or otherwise, and whether or not
such Damages were caused by the negligence of the Pioneer USA Party, including the Pioneer USA
Party’s sole negligence and whether sounding in contract, tort, statute or otherwise; provided,
however, that the foregoing limitation shall not apply to Damages caused by a Pioneer USA Party if
there has been a final decision determining that such Pioneer USA Party acted in bad faith or
engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge
that the conduct was unlawful. No Affiliate of Pioneer USA shall have any liability to the
Partnership Group on account of any Damages suffered by the Partnership Group arising out of or
relating in any way to this Agreement, whether or not such Damages were caused by their bad faith,
negligence and/or gross

11

 

negligence, including their sole negligence and/or sole gross negligence, or their fraud,
willful misconduct or, in the case of a criminal matter, their knowledge that the conduct was
unlawful.

     Section 9.2 Partnership’s Indemnity. The Partnership agrees to indemnify, defend and hold
harmless each Pioneer Indemnified Party from and against any and all Damages arising out of or
relating in any way to this Agreement, whether such Damages arise on account of the furnishing of
Services hereunder, the failure to furnish Services hereunder, or otherwise, and whether or not
such Damages were caused by the negligence of any Pioneer Indemnified Party, including the Pioneer
Indemnified Party’s sole negligence; provided, however, that the foregoing limitation shall not
apply to Damages caused by a Pioneer Indemnified Party if there has been a final decision
determining that such Pioneer Indemnified Party acted in bad faith or engaged in fraud, willful
misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was
unlawful.

     Section 9.3 Limitation of Damages. If the Partnership Group suffers Damages arising out of or
relating in any way to this Agreement, which Damages were caused, as determined by a final
decision, by Pioneer USA’s (or any Affiliate of Pioneer USA pursuant to Section 9.4) bad faith,
fraudulent activities, willful misconduct or, in the case of a criminal matter, knowledge that the
conduct was unlawful, Pioneer USA’s sole liability to the Partnership Group shall be to properly
perform the Services in question at no additional cost to the Partnership Group and to pay the
Partnership Group for any and all direct damages suffered by the Partnership Group.
Notwithstanding anything to the contrary contained herein or at Law and in equity, in no event
shall Pioneer USA be liable for punitive, special, indirect, incidental or consequential damages
(including, without limitation, damages for loss of business profits, business interruption or any
other loss) arising from or relating in any way to any claim made under this Agreement or regarding
the provision of or the failure to provide Services, even if Pioneer USA had been advised or was
aware of the possibility of such damages.

     Section 9.4 Affiliate; Third Parties. If Pioneer USA uses the personnel of its Affiliates to
provide Services, Pioneer USA shall be responsible for the acts and omissions of such personnel to
the extent provided in this Agreement; provided, however, that Pioneer USA will not be responsible
unless such conduct has been determined by a final decision that such personnel acted in bad faith
or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge
that the conduct was unlawful.

ARTICLE X

GENERAL PROVISIONS

     Section 10.1 Choice of Law. This Agreement shall be subject to and governed by the laws of
the State of Texas, excluding any conflicts-of-law rule or principle that might refer the
construction or interpretation of this Agreement to the laws of another state.

     Section 10.2 Notice. All notices, requests or consents provided for or permitted to be given
pursuant to this Agreement must be in writing and must be given by depositing same in the United
States mail, addressed to the Person to be notified, postpaid, and registered or certified with
return receipt requested or by delivering such notice in person or by telecopier or telegram to
such Party. Notice given by personal delivery or mail shall be effective upon actual

12

 

receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if
received during the recipient’s normal business hours, or at the beginning of the recipient’s next
business day after receipt if not received during the recipient’s normal business hours. All
notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address
set forth below or at such other address as such Party may stipulate to the other Parties in the
manner provided in this Section 10.2.

5205 N. O’Connor Blvd., Suite 200

Irving, Texas 75039

Phone: (972) 444-9001

Fax: (972) 969-3587

Attention: General Counsel

     Section 10.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties
relating to the matters contained herein, superseding all prior contracts or agreements, whether
oral or written, relating to the matters contained herein.

     Section 10.4 Further Action. In connection with this Agreement and all transactions
contemplated by this Agreement, each Party agrees to execute and deliver such additional documents
and instruments and to perform such additional acts as may be necessary or appropriate to
effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and
all such transactions.

     Section 10.5 Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their heirs, executors, administrators, successors, legal representatives
and permitted assigns.

     Section 10.6 Creditors. None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership.

     Section 10.7 Effect of Waiver or Consent. No waiver or consent, express or implied, by any
Party to or of any breach or default by any Person in the performance by such Person of its
obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such Person of the same or any other obligations of such
Person hereunder. Failure on the part of a Party to complain of any act of any Person or to declare
any Person in default, irrespective of how long such failure continues, shall not constitute a
waiver by such Party of its rights hereunder until the applicable statute of limitations period has
run.

     Section 10.8 Counterparts. This Agreement may be executed in counterparts, all of which
together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all
such Parties are not signatories to the original or the same counterpart. Each Party shall become
bound by this Agreement immediately upon affixing its signature hereto.

     Section 10.9 Invalidity of Provisions. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provision to other Persons

13

 

or circumstances shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.

     Section 10.10 Amendment or Restatement. This Agreement may be amended or restated only by a
written instrument executed by each of the Parties; provided, however, that after the completion of
the Partnership’s initial public offering of common units representing limited partner interests,
the Partnership may not, without the prior approval of the conflicts committee of the board of
directors of the General Partner or, if there is no such committee, the independent members of such
board of directors, agree to any amendment or modification of this Agreement that the General
Partner determines will adversely affect the holders of such Common Units. The Parties hereto
agree that, for purposes of this Section 10.10, any material change in the nature, quantity or
duration of the Services to be provided under this Agreement shall constitute a modification of
this Agreement.

     Section 10.11 Withholding or Granting of Consent. Each Party may, with respect to any consent
or approval that it is entitled to grant pursuant to this Agreement, grant or withhold such consent
or approval in its sole and uncontrolled discretion, with or without cause, and subject to such
conditions as it shall deem appropriate.

     Section 10.12 Directly or Indirectly. Where any provision of this Agreement refers to action
to be taken by any Party, or which such Party is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Party, including actions
taken by or on behalf of any Affiliate of such Party.

     Section 10.13 Laws and Regulations. Notwithstanding any provision of this Agreement to the
contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement
if the effect thereof would be to cause such Party to be in violation of any applicable law,
statute, rule or regulation.

     Section 10.14 Negation of Rights of Limited Partners, Assignees and Third Parties. Except as
set forth in Article IX, the provisions of this Agreement are enforceable solely by the Parties,
and no limited partner, member, or assignee of the Partnership or other Person shall have the
right, separate and apart from the Partnership, to enforce any provision of this Agreement or to
compel any Party to comply with the terms of this Agreement.

     Section 10.15 No Recourse Against Officers or Directors. For the avoidance of doubt, the
provisions of this Agreement shall not give rise to any right of recourse against any officer or
director of any member of the Partnership Group or any Pioneer Indemnified Party.

     Section 10.16 Arbitration. Any claim, counterclaim, demand, cause of action, dispute, or any
other controversy arising out of or relating in any way to this Agreement or to the subject matter
of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by
binding arbitration. A Dispute must be resolved through arbitration regardless of whether the
Dispute involves claims that this Agreement is unlawful, unenforceable, void or voidable or
involves claims sounding in tort, contract, statute or common law. This Section 10.16 shall be
binding on and shall inure to the benefit of the Parties and their Affiliates, the Partnership
Group and the Pioneer Indemnified Parties. The validity, construction and

14

 

interpretation of this agreement to arbitrate, and all other procedural aspects of the
arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration
under this Agreement shall be administered by the American Arbitration Association (“AAA”) and
conducted in accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in existence
at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the
governing law as specified in Section 10.1 of this Agreement. The arbitral tribunal shall not be
empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble,
multiple or special damages, and the Parties and their Affiliates, the Partnership Group and the
Pioneer Indemnified Parties waive any right they may have to recover such damages from one another.
The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable
compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas.
The arbitration shall be conducted in the English language.

     The Dispute shall be decided by a panel of three neutral arbitrators. The claimant or
claimants shall nominate an arbitrator at the time of service of a request for arbitration. The
respondent or respondents shall nominate an arbitrator at the time of service of the response to
the request for arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator,
then that arbitrator shall be appointed in accordance with the Rules. The two appointed arbitrators
shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If
the two party-appointed arbitrators are unable to agree upon an arbitrator within 15 days of the
respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the
Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a
Dispute that are not completely common, then all arbitrators shall be appointed in accordance with
the Rules and not by nomination or appointment by the Parties. Any arbitration award may be
enforced by the courts sitting in Dallas, Texas or any other court of competent subject matter
jurisdiction (including any jurisdiction in which a Party holds or keeps assets). Any action to
challenge, vacate or set aside the award in whole or in part must be brought in the courts sitting
in Dallas, Texas. The Parties and their Affiliates, the Partnership Group and the Pioneer
Indemnified Parties agree to waive any objections they may have to personal jurisdiction, venue or
forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas,
Texas or any other jurisdiction where a party against which enforcement of the award is sought
holds or keeps assets.

15

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the
Effective Date.

	 	 	 	 	 
	 	PIONEER NATURAL RESOURCES GP LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PIONEER SOUTHWEST ENERGY PARTNERS L.P.

	 	By:  	Pioneer Natural Resources GP LLC, its

General Partner

	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PIONEER SOUTHWEST ENERGY PARTNERS USA LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PIONEER NATURAL RESOURCES USA, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[Signature Page to Administrative Services Agreement]

 

 

Schedule I

Services Provided by Pioneer USA

to the Partnership Group

	1.	 	Accounting
	 
	2.	 	Audit
	 
	3.	 	Business Development
	 
	4.	 	Financial Services
	 
	5.	 	Real Property
	 
	6.	 	Legal
	 
	7.	 	Operations/Reservoir Engineering/Geology/Geophysics
	 
	8.	 	Investor Relations
	 
	9.	 	Management and Corporate Development
	 
	10.	 	Risk Management
	 
	11.	 	Commercial and Marketing
	 
	12.	 	Information Technology
	 
	13.	 	Insurance Services
	 
	14.	 	Government Regulations Compliance
	 
	15.	 	Securities and Exchange Commission Reporting
	 
	16.	 	Sarbanes-Oxley Compliance
	 
	17.	 	Treasury
	 
	18.	 	Tax
	 
	19.	 	Communications
	 
	20.	 	Human Resources
	 
	21.	 	Administrative Services

Schedule I — 1exv10w1

 

Exhibit 10.1

INDEMNITY AGREEMENT

      This Agreement made and entered into as of this ___ day
of           , 2007, by and
between Approach Resources Inc., a Delaware corporation (the “Company”), and 
           (“Indemnitee”),
who is currently serving the Company in the capacity of a director and/or officer
thereof;

WITNESSETH:

     WHEREAS, the Company and Indemnitee recognize that the interpretation of ambiguous statutes,
regulations and court opinions and of the Restated Certificate of Incorporation and Restated Bylaws
of the Company, and the vagaries of public policy, are too uncertain to provide the directors and
officers of the Company with adequate or reliable advance knowledge or guidance with respect to the
legal risks and potential liabilities to which they become personally exposed as a result of
performing their duties in good faith for the Company; and

     WHEREAS, the Company and the Indemnitee are aware that highly experienced and capable persons
are often reluctant to serve as directors or officers of a corporation unless they are protected to
the fullest extent permitted by law by comprehensive insurance and indemnification, especially
since the legal risks and potential liabilities, and the very threat thereof, associated with
lawsuits filed against the officers and directors of a corporation, and the resultant substantial
time, expense, harassment, ridicule, abuse and anxiety spent and endured in defending against such
lawsuits, whether or not meritorious, bear no reasonable or logical relationship to the amount of
compensation received by the directors or officers from the corporation; and

     WHEREAS, Section 145 of the General Corporation Law of the State of Delaware and the Restated
Certificate of Incorporation of the Company, which set forth certain provisions relating to the
mandatory and permissive indemnification of, and advancement of expenses to, officers and directors
(among others) of a Delaware corporation by such corporation, are specifically not exclusive of
other rights to which those indemnified thereunder may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise; and

     WHEREAS, after due consideration and investigation of the terms and provisions of this
Agreement and the various other options available to the Company and the Indemnitee in lieu
thereof, the Board of Directors of the Company has determined that the following Agreement is not
only reasonable and prudent but necessary to promote and ensure the best interests of the Company
and its stockholders; and

     WHEREAS, the Company desires to have Indemnitee serve or continue to serve as an officer
and/or director of the Company, free from undue concern for unpredictable, inappropriate or
unreasonable legal risks and personal liabilities by reason of his acting in good faith in the
performance of his duty to the Company; and Indemnitee desires to serve, or to continue to serve
(provided that he is furnished the indemnity provided for hereinafter), in either or both of such
capacities;

 

     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee, intending to be legally bound, do hereby agree as
follows:

     1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as director and/or officer of the Company and
as Indemnitee and the Company may agree, as a director, officer, trustee, general partner, managing
member, fiduciary, employee or agent of another Enterprise, for so long as he is duly elected or
appointed and qualified in accordance with the provisions of the General Corporation Law of the
State of Delaware and the Restated Certificate of Incorporation and Restated Bylaws of the Company
or until such time as he tenders his resignation. The Company acknowledges that the Indemnitee is
relying on this Agreement in so serving.

     2. Definitions. As used in this Agreement:

     (a) “Change in Control” means a change in control of the Company of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the “Act”), whether or not the Company is then subject to
such reporting requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any “person” (as such term is used in
Sections 13(d) and 14(d) of the Act) other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company representing 15%
or more of the combined voting power of the Company’s then outstanding securities without
the prior approval of at least two-thirds of the members of the Board of Directors of the
Company in office immediately prior to such person attaining such percentage interest; (ii)
there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of
assets, plan of liquidation or other reorganization not approved by at least two-thirds of
the members of the Board of Directors of the Company then in office, as a consequence of
which members of the Board of Directors in office immediately prior to such transaction or
event constitute less than a majority of the Board of Directors thereafter; or (iii) during
any period of two consecutive years, other than as a result of an event described in clause
(ii) of this subsection (a), individuals who at the beginning of such period constituted the
Board of Directors of the Company (including for this purpose any new director whose
election or nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority of the
Board of Directors.

     (b) “Disinterested Director” means a director of the Company who is not and was not a
party to the Proceeding in respect of which indemnification is sought by Indemnitee.

2

 

     (c) “Enterprise” shall mean any other corporation, limited liability company,
partnership, joint venture, trust, employee benefit plan, organization or other enterprise
of which Indemnitee is or was serving at the request of the Company as a director, officer,
trustee, general partner, managing member, fiduciary, employee or agent.

     (d) The term “Expenses” includes, without limitation, all reasonable attorneys’ fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements or expenses of the types customarily incurred in connection
with prosecuting, defending, preparing to prosecute or defend, investigating, or being or
preparing to be a witness in, or otherwise involved in, a Proceeding. Should any payments
by the Company under this Agreement be determined to be subject to any federal, state or
local income or excise tax, Expenses will also include such amounts as are necessary to
place Indemnitee in the same after-tax position, after giving effect to all applicable
taxes, Indemnitee would have been in had such tax not have been determined to apply to those
payments. Expenses also shall include (i) Expenses incurred in connection with any appeal
resulting from any Proceeding, including, without limitation, the premium, security for, and
other costs relating to any cost bond, supersedeas bond, or other appeal bond or its
equivalent and (ii) Expenses incurred by Indemnitee in connection with the interpretation,
enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or
otherwise.

     (e) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the past five
years has been, retained to represent: (i) the Company or Indemnitee in any matter material
to either such party (other than with respect to matters concerning the Indemnitee under
this Agreement, or of other indemnitees under similar indemnification agreements), or (ii)
any other party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person
who, under the applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an action to
determine Indemnitee’s rights under this Agreement. The Company agrees to pay the
reasonable fees and expenses of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all Expenses, claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.

     (f) “Proceeding” shall mean any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative, arbitrative or investigative, any
appeal in such an action, suit, or proceeding, and any inquiry or investigation that could
lead to such an action, suit or proceeding irrespective of the initiator thereof. The final
disposition of a Proceeding shall be as determined by a settlement or the judgment of a court or other investigative or administrative body. The Board of Directors shall
not make a determination as to the final disposition of a Proceeding.

     (g) References to “fines” shall include any (i) excise taxes assessed with respect to
any employee benefit plan and (ii) penalties; references to “serving at the

3

 

request of the Company” shall include any service as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent which imposes duties on, or involves services
by, such director, officer, trustee, general partner, managing member, fiduciary, employee
or agent with respect to an Enterprise; and a person who acts in good faith and in a manner
he reasonably believed to be in the interest of the Enterprise shall be deemed to have acted
in a manner “not opposed to the best interests of the Company” as referred to in this
Agreement.

     3. Indemnity in Third Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if
Indemnitee is a party to or is threatened to be made a party to or is otherwise involved in any
Proceeding (other than a Proceeding by or in the right of the Company to procure a judgment in its
favor) by reason of the fact that Indemnitee is or was a director and/or officer of the Company, or
was serving at the request of the Company as a director, officer, trustee, general partner,
managing member, fiduciary, employee or agent of an Enterprise, against all Expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by Indemnitee (or on his
behalf) in connection with such Proceeding or any claim, issue or matter therein, provided it is
determined pursuant to Section 8 of this Agreement or by the court having jurisdiction in the
matter, that Indemnitee acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any Proceeding or of
any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good faith and in a
manner that he reasonably believed to be in or not opposed to the best interests of the Company,
or, with respect to any criminal Proceeding, had reasonable cause to believe that his conduct was
unlawful. Indemnitee shall have the right to employ Indemnitee’s own legal counsel in any
Proceeding for which indemnification is available under this Section 3.

     4. Indemnity in Proceedings By or In the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if
Indemnitee is a party to or is threatened to be made a party to or otherwise involved in any
Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the
fact that Indemnitee is or was a director and/or officer of the Company, or is or was serving at
the request of the Company as a director, officer, trustee, general partner, managing member,
fiduciary, employee or agent of an Enterprise, against all Expenses actually and reasonably
incurred by Indemnitee (or on his behalf) in connection with such Proceeding provided it is
determined pursuant to Section 8 of this Agreement or by the court having jurisdiction in the
matter, that Indemnitee acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the Company, except that no indemnification shall be made
under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have
been adjudged to be liable to the Company unless and only to the extent that the Delaware Court of
Chancery or the court in which such Proceeding was brought or is pending, shall determine upon
application that, despite the adjudication of liability but in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as the Delaware
Court of Chancery or such other court shall deem proper. Indemnitee shall have the right to employ
Indemnitee’s own legal counsel in any Proceeding for which indemnification is available under this
Section 4.

4

 

     5. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by
reason of the fact that Indemnitee is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as a director, officer, trustee, general partner, managing
member, fiduciary, employee or agent of an Enterprise, a witness in any Proceeding to which
Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably
incurred by Indemnitee (or on his behalf) in connection therewith.

     6. Indemnification for Expenses of Successful Party. Notwithstanding any other provision of this Agreement to the contrary, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to
in Sections 3 and/or 4 of this Agreement, or in defense of any claim, issue or matter therein,
including dismissal with or without prejudice, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred by Indemnitee (or on his behalf) in connection therewith. If
Indemnitee is not wholly successful in any Proceeding referred to in Sections 3 and/or 4 of this
Agreement, but is successful on the merits or otherwise (including dismissal with or without
prejudice) as to one or more, but less than all claims, issues or matters therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all Expenses actually and
reasonably incurred by Indemnitee (or on his behalf) in connection with each successfully resolved
claim, issue or matter. For purposes of this Section 6, and without limitation, the termination of
any claim, issue or matter in any Proceeding referred to in Sections 3 and/or 4 of this Agreement
by dismissal, with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.

     7. Advances of Expenses. To the fullest extent permitted by applicable law, the Expenses incurred by Indemnitee
pursuant to Sections 3 and/or 4 of this Agreement in connection with any Proceeding or any claim,
issue or matter therein shall be paid by the Company currently and in advance of the final
disposition of such Proceeding or any claim, issue or matter therein no later than 10 days after
receipt by the Company of a request for an Expense advancement with appropriate documentation. The
undersigned Indemnitee hereby undertakes to repay the advanced Expenses to the Company to the
extent that it is ultimately determined pursuant to Section 8, or, in the event the Indemnitee
elects to pursue other remedies pursuant to Section 10, that the undersigned Indemnitee is not
entitled to be indemnified therefor by the Company. This agreement of Indemnitee to repay is
unsecured and interest free.

     8. Procedure for Determination of Entitlement to Indemnification.

     (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the
Company a written request.

     (b) Upon written request by Indemnitee for indemnification pursuant to Section 8(a)
hereof, a determination, if required by applicable law, with respect to Indemnitee’s
entitlement thereto shall be made in the specific case: (i) if a Change in Control shall
have occurred, the Disinterested Directors shall direct Independent Counsel to make such
determination in a written opinion to the Board of Directors of the Company, a copy of which
shall be delivered to Indemnitee; or (ii) if a Change in Control

5

 

shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the
Board of Directors of the Company, or (B) by a committee of the Disinterested Directors
designated by a majority vote of Disinterested Directors, even though less than a quorum, or
(C) if there are no Disinterested Directors or, if the Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board of Directors of the Company, a copy of
which shall be delivered to Indemnitee; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within 10 days after such
determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred
by Indemnitee in cooperating with the person, persons or entity making the determination
discussed in this Section 8(b) with respect to Indemnitee’s entitlement to indemnification,
shall be borne by the Company (irrespective of the determination as to Indemnitee’s
entitlement to indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.

     (c) In the event the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be
selected as provided in this Section 8(c). If a Change in Control shall not have occurred,
the Independent Counsel shall be selected by the Board of Directors of the Company, and the
Company shall give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change in Control shall have occurred, the
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board of Directors of the Company, in which event the
preceding sentence shall apply), and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after such written notice
of selection shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection; provided, however, that such objection may be
asserted only on the ground that the Independent Counsel so selected does not meet the
requirements of “Independent Counsel” as defined in this Agreement, and the objection shall
set forth with particularity the factual basis of such assertion. Absent a proper and
timely objection, the person so selected shall act as Independent Counsel. If such written
objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until
such objection is withdrawn or a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written request for indemnification
pursuant to Section 8(b) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Delaware Court of Chancery or
other court of competent jurisdiction for resolution of any objection which shall have been
made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for
the appointment as Independent Counsel of a person selected by the Court or by such other
person as the Court shall designate, and the person with respect to whom all objections are
so resolved or the person so appointed shall act as Independent Counsel under Section 8(a)
hereof.

     (d) Indemnitee will be deemed a party to a Proceeding for all purposes hereof if
Indemnitee is named as a defendant or respondent in a complaint or petition for relief

6

 

in that Proceeding, regardless of whether Indemnitee is ever served with process or makes an
appearance in that Proceeding.

     9. Presumptions and Effect of Certain Provisions.

     (a) In making a determination with respect to entitlement to indemnification
hereunder, the person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a
request for indemnification in accordance with Section 8(a) of this Agreement, and the
Company shall have the burden of proof in overcoming such presumption by clear and
convincing evidence. Neither the failure of the Company (including its Board of Directors
or independent legal counsel) to have made a determination prior to the commencement of such
action pursuant to this Agreement that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual determination
by the Company (including its Board of Directors or independent legal counsel) that
Indemnitee has not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that Indemnitee has not met the applicable standard of conduct.

     (b) If the person, persons or entity empowered or selected under Section 8 of this
Agreement to determine whether Indemnitee is entitled to indemnification shall not have made
a determination within 30 days after receipt by the Company therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to make
Indemnitee’s statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable law;
provided, however, that such 30-day period may be extended for a reasonable time, not to
exceed an additional 15 days, if the person, persons or entity making the determination with
respect to entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating thereto.

     (c) For purposes of any determination of whether Indemnitee acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of the Company,
and, with respect to any criminal Proceeding, Indemnitee had no reasonable cause to believe
his conduct was unlawful (collectively, “Good Faith”), Indemnitee shall be deemed to have
acted in Good Faith if Indemnitee’s action is based on the records or books of account of
the Company and any other Enterprise of which Indemnitee is or was serving at the request of
the Company as a director, officer, trustee, general partner, managing member, fiduciary,
employee or agent or information, opinions, reports or statements, including financial
statements and other financial information, concerning the Company and any other Enterprise
of which Indemnitee is or was serving at the request of the Company as a director, officer,
trustee, general partner, managing member, fiduciary, employee or agent or any other person
which were prepared or supplied to Indemnitee by: (i) one or more officers or employees of
the Company and any Enterprise of which Indemnitee is or was serving at the request of the
Company as a director, officer, trustee, general partner, managing member, fiduciary,

7

 

employee or agent; (ii) appraisers, engineers, investment bankers, legal counsel or other
persons as to matters Indemnitee reasonably believed were within the professional or expert
competence of those persons; and (iii) any committee of the Board of Directors or equivalent
managing body of the Company and any other Enterprise of which Indemnitee is or was serving
at the request of the Company as a director, officer, trustee, general partner, managing
member, fiduciary, employee or agent of which Indemnitee is or was, at the relevant time,
not a member. The provisions of this Section 9(c) shall not be deemed to be exclusive or to
limit in any way the other circumstances in which the Indemnitee may be deemed to have met
the applicable standard of conduct set forth in this Agreement.

     (d) The knowledge and/or actions, or failure to act, of any director, officer, agent or
employee of the Company and any other Enterprise of which Indemnitee is or was serving at
the request of the Company as a director, officer, trustee, general partner, managing
member, fiduciary, employee or agent shall not be imputed to Indemnitee for purposes of
determining the right to indemnification under this Agreement.

     10. Remedies of Indemnitee.

     (a) In the event that (i) a determination is made pursuant to Section 8(b) of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii)
advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (iii) no
determination of entitlement to indemnification shall have been made pursuant to Section
8(b) of this Agreement within the time period provided in Section 9(b) after receipt by the
Company of the request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 5, Section 6, the last sentence of Section 8(b), or the last sentence of
Section 2(d) of this Agreement within 10 days after receipt by the Company of a written
request therefor, or (v) payment of indemnification pursuant to Section 3 or Section 4 of
this Agreement is not made within 10 days after a determination has been made that
Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication
by the Delaware Court of Chancery of his entitlement to such indemnification or advancement
of Expenses and appeals therefrom, concluding in a final and unappealable judgment by the Delaware Supreme Court. The Board of Directors shall
not make a determination as to the final disposition of such adjudication. The Company
shall not oppose Indemnitee’s right to seek any such adjudication.

     (b) In the event that a determination shall have been made pursuant to Section 8(b) of
this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding
commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial
on the merits and Indemnitee shall not be prejudiced by reason of that adverse
determination.

     (c) If a determination shall have been made pursuant to Section 8(b) of this Agreement
that Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding commenced pursuant to this Section 10, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact necessary
to make Indemnitee’s statement not materially misleading, in connection

8

 

with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

     (d) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial
adjudication of his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the definition of Expenses
in Section 2(d) of this Agreement) actually and reasonably incurred by him in such judicial
adjudication regardless of whether Indemnitee ultimately is determined to be entitled to
such indemnification.

     (e) The Company shall be precluded from asserting in any judicial proceeding commenced
pursuant to this Section 10 that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court that the Company is
bound by all the provisions of this Agreement.

     11. Indemnification and Advancement of Expenses Under this Agreement Not Exclusive; Survival
of Rights. The rights of indemnification and to receive advancement of Expenses as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled
under the Certificate of Incorporation or Bylaws of the Company, any other agreement, any vote of
stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or
otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall
limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or
omitted by such Indemnitee prior to such amendment, alteration or repeal. To the extent that a
change in the General Corporation Law of the State of Delaware, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than would be afforded
currently under the Certificate of Incorporation of the Company and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be exclusive of any
other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

     12. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification or to
receive advancement by the Company for a portion of the Expenses, judgments, fines, penalties or
amounts paid in settlement actually and reasonably incurred by Indemnitee (or on his behalf) in
connection with such Proceeding, or any claim, issue or matter therein, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof
to which Indemnitee is entitled.

     13. Rights Continued. The rights of indemnification and to receive advancement of Expenses as provided by this
Agreement shall continue as to Indemnitee even though Indemnitee may have ceased to be a director
or officer of the Company and shall inure to the benefit of Indemnitee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

9

 

     14. No Construction as an Employment Agreement or Any Other Commitment. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be
retained in the employ or as an officer of the Company or any of its subsidiaries, if Indemnitee
currently serves as an officer of the Company, or to be renominated or reelected as a director of
the Company, if Indemnitee currently serves as a director of the Company.

     15. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing liability
insurance for directors, officers, trustees, general partners, managing members, fiduciaries,
employees or agents of the Company or any other Enterprise which such person serves at the request
of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or
their terms, to the maximum extent of the coverage available for any director, officer, trustee,
general partner, managing member, fiduciary, employee or agent under such policy or policies.

     16. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable under this Agreement if, and to the extent that, Indemnitee has otherwise actually
received such payment under any contract, agreement or insurance policy, the Certificate of
Incorporation or Bylaws of the Company, or otherwise.

     17. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all the rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including without limitation the
execution of such documents as may be necessary to enable the Company effectively to bring suit to
enforce such rights.

     18. Exceptions. Notwithstanding any other provision in this Agreement, the Company shall not be obligated
pursuant to the terms of this Agreement, to (i) indemnify or advance Expenses to Indemnitee with
respect to any claim, issue or matter therein, brought or made by Indemnitee by way of cross-claim,
counter claim or the like, or (ii) indemnify Indemnitee with respect to any Proceeding in which
final judgment is rendered against Indemnitee for an accounting of profits made from the purchase
and sale or the sale and purchase by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Act.

     19. Notices. Any notice or other communication required or permitted to be given or made to the Company or
Indemnitee pursuant to this Agreement shall be given if made in writing and deposited in the United
States mail, with postage thereon prepaid, addressed to the person to whom such notice or
communication is directed at the address of such person on the records of the Company, and such
notice or communication shall be deemed given or made at the time when the same shall be so
deposited in the United States mail. Any such notice or communication to the Company shall be
addressed to the Secretary of the Company.

     20. Contractual Rights. The right to be indemnified or to receive advancement of Expenses under this Agreement (i) is
a contract right based upon good and valuable

10

 

consideration, pursuant to which Indemnitee may sue, (ii) is and is intended to be retroactive and shall be available as to events occurring prior to
the date of this Agreement and (iii) shall continue after any rescission or restrictive
modification of this Agreement as to events occurring prior thereto.

     21. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; to the fullest extent possible,
the provisions of this Agreement shall be construed so as to give effect to the intent manifested
by the provisions held invalid, illegal or unenforceable; and those provision or provisions held to
be invalid, illegal or unenforceable for any reason whatsoever shall be deemed reformed to the
extent necessary to conform to applicable law and to give the maximum effect to the intent of the
parties hereto.

     22. Successors; Binding Agreement. The Company shall require and cause any successor (whether direct or indirect) by purchase,
merger, consolidation or otherwise) to all or substantially all of the business or assets of the
Company, by written agreement in form and substance reasonably satisfactory to Indemnitee, to
expressly assume and agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that executes and delivers the agreement provided for in this
Section 22 or that otherwise becomes bound by the terms and provisions of this Agreement by
operation of law. This Agreement shall be binding upon the Company and its successors and assigns
(including, without limitation, any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business or assets of the Company) and will inure
to the benefit of Indemnitee (and Indemnitee’s spouse, if Indemnitee resides in Texas or another
community property state), heirs, executors and administrators.

     23. Counterparts, Modification, Headings, Gender.

     (a) This Agreement may be executed in counterparts, each of which shall constitute one
and the same instrument, and either party hereto may execute this Agreement by signing any
such counterpart.

     (b) No provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by Indemnitee and an
appropriate officer of the Company. No waiver by any party at any time of any breach by any
other party of, or compliance with, any condition or provision of this Agreement to be
performed by any other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or at any prior or subsequent time.

     (c) Section headings are not to be considered part of this Agreement, are solely for
convenience of reference, and shall not affect the meaning or interpretation of this
Agreement or any provision set forth herein.

11

 

     (d) Pronouns in masculine, feminine and neuter genders shall be construed to include
any other gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.

     24. Exclusive Jurisdiction; Governing Law. The Company and Indemnitee agree that all disputes in any way relating to or arising under
this Agreement, including, without limitation, any action for advancement of Expenses or
indemnification, shall be litigated, if at all, exclusively in the Delaware Court of Chancery, and
if necessary, the corresponding appellate courts. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in such state without giving effect to the principles of conflicts of
laws. The Company and Indemnitee (i) expressly submit themselves to the personal jurisdiction of
the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in
connection with this Agreement, (ii) irrevocably appoint, to the extent such party is
not a resident of the State of Delaware, The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801 as its agent in the State of Delaware as such party’s agent for
acceptance of legal process in connection with any such action or proceeding against such party
with the same legal force and validity as if served upon such party personally within the State of
Delaware, (iii) waive any objection to the laying of venue of any such action or proceeding in the
Delaware Court of Chancery, and (iv) waive, and agree not to plead or to make, any claim that any
such action or proceeding brought in the Delaware Court of Chancery has been brought in an improper
or otherwise inconvenient forum.

     25. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the
date that Indemnitee shall have ceased to serve as a director and/or officer of the Company or
director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any
other Enterprise which Indemnitee served at the request of the Company; or (b) one year after the
final, nonappealable termination of any Proceeding then pending in respect of which Indemnitee is
granted rights of indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 10 of this Agreement relating thereto.

     26. Contribution. If it is established, under Section 8 or otherwise, that Indemnitee has the right to be
indemnified under this Agreement in respect of any claim, but that right is unenforceable by reason
of applicable law or public policy, then, to the fullest extent applicable law permits, the
Company, in lieu of indemnifying or causing the indemnification of Indemnitee under this Agreement,
will contribute to the amount Indemnitee has incurred, whether for judgments, fines, penalties,
excise taxes, amounts paid or to be paid in settlement or for Expenses reasonably incurred, in
connection with that Proceeding, in such proportion as is deemed fair and reasonable in light of
all the circumstances of that Proceeding in order to reflect:

     (a) the relative benefits Indemnitee and the Company have received as a result of the
event(s) or transactions(s) giving rise to that Proceeding; or

     (b) the relative fault of Indemnitee and of the Company and its other functionaries in
connection with those event(s) or transaction(s).

12

 

     IN WITNESS WHEREOF, the Company and Indemnitee have executed this Agreement as of the date and
year first above written.

	 	 	 	 	 
	 	APPROACH RESOURCES INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	INDEMNITEE:

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