Document:

exv10w11

 

Exhibit 10.11

BUSINESS OPPORTUNITIES AGREEMENT

     THIS BUSINESS OPPORTUNITIES AGREEMENT
(this “Agreement”), dated as of                 , 2007, is
entered into by and among Approach Resources Inc., a Delaware corporation (the “Company”), and the
parties to this Agreement listed on Exhibit A hereto (each a “Designated Party” and
collectively the “Designated Parties”).

RECITALS

     A. Each of the Designated Parties engages, directly or indirectly, in the E&P Business. The
businesses in which the Designated Parties engage are similar to those in which the Company
engages.

     B. In recognition that certain Designated Parties may engage, directly or indirectly, in the
same or similar activities or lines of business and have an interest in the same or similar areas
of business, and in recognition of the benefits to be derived by the Company through its continued
contractual, corporate and business relations with each Designated Party (including services of
employees, officers and directors of each Designated Party as directors and officers of the
Company), this Agreement is set forth to regulate and define the conduct of certain affairs of the
Company as they may involve each Designated Party, and as applicable, its employees, officers and
directors, and the powers, rights, duties, liabilities, interests and expectations of the Company
in connection therewith.

     C. The law relating to duties that certain Designated Parties may owe to the Company is not
clear. The application of such law to particular circumstances is often difficult to predict, and,
if a court were to hold that any Designated Party breached any such duty, such Designated Party
could be held liable for damages in a legal action brought on behalf of the Company.

     D. In order to induce the Designated Parties to serve as directors of the Company, the Company
is willing to enter into this Agreement, pursuant to Section 122 of the General Corporation Law of
the State of Delaware, in order to renounce, effective upon the date hereof, any interest or
expectancy it may have in the classes or categories of business opportunities specified herein that
are presented to or identified by any Designated Party, as more fully described herein. As a
result of this Agreement, each Designated Party, as applicable, may continue to conduct his or its
business and to pursue certain business opportunities without an obligation to offer such
opportunities to the Company or any of its Subsidiaries, and any Designated Party, as applicable,
may continue to discharge his responsibilities as a director or employee of such Designated Party
or any company in which such Designated Party has an interest.

     NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, rights, and
obligations set forth in this Agreement and the benefits to be derived herefrom, and other good and
valuable consideration, the receipt and the sufficiency of which each of the undersigned
acknowledges and confesses, the undersigned agree as follows:

     1. Renouncement of Business Opportunities. The Company hereby renounces any interest
or expectancy in any business opportunity, transaction or other matter in which any Designated
Party participates or desires or seeks to participate in and that involves any aspect

 

 

of the E&P Business (each, a “Business Opportunity”) other than a Business Opportunity that
(i) is first presented to a Designated Party solely in such person’s capacity as a director or
officer of the Company or its Subsidiaries and with respect to which, at the time of such
presentment, no other Designated Party has independently received notice of or otherwise
identified such Business Opportunity or (ii) is identified by a Designated Party solely through
the disclosure of information by or on behalf of the Company (each Business Opportunity other than
those referred to in clauses (i) or (ii) are referred to as a “Renounced Business Opportunity”).
No Designated Party shall have any obligation to communicate or offer any Renounced Business
Opportunity to the Company, and any Designated Party may pursue a Renounced Business Opportunity,
provided that such Renounced Business Opportunity is conducted by such Designated Party in
accordance with the standard set forth in Section 2. The Company shall not be prohibited from
pursuing any Business Opportunity with respect to which it has renounced any interest or
expectancy as a result of this Section 1. Nothing in this Section 1 shall be construed to allow
any director to usurp a Business Opportunity of the Company or its Subsidiaries solely for his or
her personal benefit.

     2. Standards for Separate Conduct of Renounced Business Opportunities. In the event
that a Designated Party acquires knowledge of a Renounced Business Opportunity, such Designated
Party may pursue such Renounced Business Opportunity if such Renounced Business Opportunity is
developed and pursued solely through the use of personnel and assets of the Designated Party
(including, as applicable, such Designated Party in his capacity as a director, officer, employee
or agent of the Designated Party).

     3. Liability. Provided a Renounced Business Opportunity is conducted by a Designated
Party in accordance with the standards set forth in Section 2 hereof, no Designated Party shall be
liable to the Company or a Stockholder for breach of any fiduciary or other duty by reason of such
Renounced Business Opportunity. In addition, no Designated Party shall be liable to the Company
or a Stockholder for breach of any fiduciary duty as a director or controlling Stockholder, as
applicable, by reason of the fact that such Designated Party conducts, pursues or acquires such
Renounced Business Opportunity for itself, directs such Renounced Business Opportunity to another
Person or does not communicate information regarding such Renounced Business Opportunity to the
Company.

     4. Disclosing Conflicts of Interest. Should any director of the Company have actual
knowledge that he or his Affiliates is pursuing a Renounced Business Opportunity also pursued by
the Company, he shall disclose to the Company’s board of directors that he may have a conflict of
interest, so that the board of directors may consider his withdrawal from discussions in board
deliberations, as appropriate.

     5. Interpretation

(a) For purposes of this Agreement, “Designated Parties” shall include all
Subsidiaries and Affiliates of each Designated Party (other than the Company and its
Subsidiaries).

(b) As used in this Agreement, the following definitions shall apply:

(i) “Affiliate” means with respect to a specified person, a person that
directly, or indirectly through one or more intermediaries, controls, or is

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controlled by, or is under common control with, the person specified, and
any directors, officers, partners or 5% or more owners of such person.

(ii) “E&P Business” means the oil and gas exploration, exploitation,
development and production business and includes without limitation (a) the
ownership of oil and gas property interests (including working interests,
mineral fee interests and royalty and overriding royalty interests), (b) the
ownership and operation of real and personal property used or useful in
connection with exploration for Hydrocarbons, development of Hydrocarbon
reserves upon discovery thereof and production of Hydrocarbons from wells
located on oil and gas properties and (c) debt of or equity interests in
corporations, partnerships or other entities engaged in the exploration for
Hydrocarbons, the development of Hydrocarbon reserves and the production and
sale of Hydrocarbons.

(iii) “Hydrocarbons” means oil, gas or other liquid or gaseous hydrocarbons
or other minerals produced from oil and gas wells.

(iv) “Person” means an individual, corporation, partnership, limited
liability company, trust, joint venture, unincorporated organization or
other legal or business entity.

(v) “Subsidiary” or “Subsidiaries” shall mean, with respect to any Person,
any other Person the majority of the voting securities of which are owned,
directly or indirectly, by such first Person.

     6. Miscellaneous.

(a) The provisions of this Agreement shall terminate and be of no further force and
effect at such time as no Designated Party serves as a director (including Chairman
of the Board) or officer of the Company or its Subsidiaries.

(b) This Agreement does not prohibit or impact the Company’s ability to participate
in any Business Opportunity.

(c) This Agreement may be signed by facsimile signature and in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to conflicts of laws principles.

[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date set forth
above.

	 	 	 	 	 
	 	APPROACH RESOURCES INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	DESIGNATED PARTIES:

 	 
	 
	 	
 	 
	 	James H. Brandi 	 
	 	 	 
	 
	 	 	 
	 	

 	 
	 	James C. Crain 	 
	 	 	 
	 
	 	 	 
	 	
 	 
	 	Bryan H. Lawrence 	 
	 	 	 
	 
	 	 	 
	 	
 	 
	 	Sheldon B. Lubar 	 
	 	 	 
	 
	 	 	 
	 	
 	 
	 	Christopher J. Whyte       	 
	 	 	 
	 

[Signature Page to Business Opportunities Agreement]

 

 

	 	 	 	 	 
	 	YORKTOWN ENERGY PARTNERS V, L.P.

 	 
	 	By:  	Yorktown V Company, LLC, its general partner
 	 
	 
	 	By:  	
 	 
	 	 	Name:  	W. Howard Keenan, Jr. 	 
	 	 	Title:  	Managing Member 	 
	 
	 	 	 
	 	YORKTOWN ENERGY PARTNERS VI, L.P.

 	 
	 	By:  	Yorktown VI Company, LP, its general partner
 	 
	 
	 	By:  	                             Yorktown VI Associates LLC, its general partner
 	 
	 
	 	By:  	
 	 
	 	 	Name:  	W. Howard Keenan, Jr. 	 
	 	 	Title:  	Managing Member 	 
	 
	 	 	 
	 	YORKTOWN ENERGY PARTNERS VII, L.P.

 	 
	 	By:  	Yorktown VII Company, LP, its general partner
 	 
	 
	 	By:  	                       Yorktown VII Associates LLC, its general partner
 	 
	 
	 	By:  	
 	 
	 	 	Name:  	W. Howard Keenan, Jr. 	 
	 	 	Title:  	Managing Member 	 
	 

[Signature Page to Business Opportunities Agreement]

 

 

EXHIBIT A

Designated Parties

Board Members

James H. Brandi

James C. Crain

Bryan H. Lawrence

Sheldon B. Lubar

Christopher J. Whyte

Such other persons as the Board of Directors of the Company shall from time to time determine

All Affiliates of the foregoing

Stockholders

Yorktown Energy Partners V, L.P.

Yorktown Energy Partners VI, L.P.

Yorktown Energy Partners VII, L.P.

Any other investment fund sponsored or managed by Yorktown Partners LLC, including any fund still

to be formedexv10w16

 

Exhibit 10.16

July 20, 2007

The Frost National Bank

777 Main Street, Suite 500

Fort Worth, Texas 76102

Attention: Mr. John S. Warren

	 	 	 	 	 
	 
	 	Re:	 	Second Amendment to Amended and Restated Credit Agreement dated as of February
15, 2007 between Approach Resources I, LP, The Frost National Bank, as Administrative
Agent, and the Lenders parties thereto

Gentlemen:

     Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of
February 15, 2007 between Approach Resources I, LP (“Borrower”), The Frost National Bank, as
Administrative Agent (“Agent”), and the Lenders parties thereto, as amended by letter amendment
dated June 14, 2007 among Borrower, Agent and Lenders (as amended thereby and hereby, the “Loan
Agreement”). All capitalized terms herein shall have the meanings ascribed to them in the Loan
Agreement.

     Pursuant to this letter amendment (the “Amendment”), Agent, Lenders and Borrower agree,
effective as of July 20, 2007, to amend the Loan Agreement according to the terms and provisions
set forth below.

     1. Amendment to Section 2(c). Section 2(c) of the Loan Agreement is amended as
follows:

     A. The phrase “account of Borrower (the “Letters of Credit”)” in the fourth
line of Section 2(c) of the Loan Agreement is deleted, and the phrase “account of
Borrower or its Affiliate, Approach Oil & Gas Inc. (the “Letters of Credit,”
inclusive of Letters of Credit issued for the account of Approach Oil & Gas Inc.)”
is substituted therefor.

     B. The phrase “issued for the account of Borrower” beginning in the tenth line
of Section 2(c) of the Loan Agreement is deleted and the phrase “issued for the
account of Borrower or Approach Oil & Gas Inc., as applicable” is substituted
therefor.

     2. Amendment to Section 2(d). Section 2(d) of the Loan Agreement is amended by
deleting the phrase “Borrower shall execute and deliver” beginning in the fifth line of Section 2
(d) and substituting the phrase “Borrower or Approach Oil & Gas Inc. (if the Letter of Credit is
issued for the account of Approach Oil & Gas Inc.) shall execute and deliver.”

 

     3. Ratification by Guarantors. Each Guarantor hereby ratifies and reaffirms all of
its obligations under its Guaranty Agreement (the “Guaranty”) of Borrower’s obligations under the
Loan Agreement, as amended hereby. Each Guarantor also hereby agrees that nothing in this
Amendment shall adversely affect any right or remedy of Bank under the Guaranty and that the
execution and delivery of this Amendment shall in no way change or modify its obligations as
guarantor under the Guaranty. Although each Guarantor has been informed by Borrower of the matters
set forth in this Amendment and such Guarantor has acknowledged and agreed to the same, such
Guarantor understands that Bank has no duty to notify such Guarantor or to seek such Guarantor’s
acknowledgment or agreement, and nothing contained herein shall create such a duty as to any
transaction hereafter.

     4. Confirmation and Ratification. Except as affected by the provisions set forth
herein, the Loan Agreement shall remain in full force and effect and is hereby ratified and
confirmed by all parties. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or remedy of the Bank
under the Loan Agreement or the other Loan Documents.

     5. Reference to Loan Agreement. Each of the Loan Agreement and the Loan Documents,
and any and all other agreements, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are
hereby amended so that any reference in the Loan Agreement, the Loan Documents and such other
documents to the Loan Agreement shall mean a reference to the Loan Agreement as amended hereby.

     6. Final Agreement. THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL
PROMISSORY NOTES AND OTHER LOAN DOCUMENTS EXECUTED PURSUANT THERETO OR HERETO, REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

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

[SIGNATURE PAGES TO FOLLOW]

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	 	Very truly yours,

BORROWER:

APPROACH RESOURCES I, LP,

a Texas limited partnership

 	 
	 	By:  	Approach Operating LLC.,
 	 
	 	 	a Delaware limited liability
company,
 its general partner 	 
	 	 	 
	 	By:  	Approach Resources Inc.,
 	 
	 	 	a Delaware corporation,

its sole member 	 
	 	 	 
	 	By:  	                                                   /s/ J. Ross Craft
 	 
	 	 	J. Ross Craft, President 	 
	 	 	 	 
	 	GUARANTORS:

APPROACH OPERATING, LLC,

a Delaware limited liability company

 	 
	 	By:  	Approach Resources Inc.,

 a Delaware corporation,
 its sole member 	 
	 	 	 	 
	 	By:  	                                                  /s/ J. Ross Craft
 	 
	 	 	J. Ross Craft, President 	 
	 	 	 	 
	 	APPROACH DELAWARE, LLC,

a Delaware limited liability company

 	 
	 	By:  	Approach Resources Inc.,

a Delaware corporation,
 its sole member 	 
	 	 	 	 
	 	By:  	                                                  /s/ J. Ross Craft
 	 
	 	 	J. Ross Craft, President 	 
	 	 	 	 

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ACCEPTED AND AGREED TO

effective as of the date and year first above written:

AGENT:

THE FROST NATIONAL BANK

	 	 	 	 	 
	 	 	 
	By:  	/s/ John S. Warren
 	 	 
	 	John S. Warren, Senior Vice President 	 	 
	 	 	 	 

LENDERS:

THE FROST NATIONAL BANK

	 	 	 	 	 
	 	 	 
	By:  	/s/ John S. Warren
 	 	 
	 	John S. Warren, Senior Vice President 	 	 
	 	 	 	 

JPMORGAN CHASE BANK, NA

	 	 	 	 	 
	 	 	 
	By:  	/s/ Wm. Mark Cranmer
 	 	 
	 	Wm. Mark Cranmer, Senior Vice President 	 	 
	 	 	 	 
	 

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