Document:

exv10w7

Exhibit 10.7

SEPARATION AND RELEASE AGREEMENT

     This Separation and Release Agreement (the “Agreement”) is between Approach Resources
Inc. (“ARI”) and Glenn W. Reed (the “Individual”).

RECITALS

     WHEREAS, the Individual has been employed by ARI and Approach Operating, LLC (collectively,
the “Company”) as its Vice President — Operations under an Employment Agreement between ARI
and the Individual effective as of January 1, 2003 and amended by the First Amendment to Employment
Agreement effective as of December 31, 2008 (the “Employment Agreement”).

     WHEREAS, capitalized terms in this Agreement and not otherwise defined shall have those
meanings assigned to them in the Employment Agreement.

     WHEREAS, the Company has determined not to extend the Employment Agreement in accordance with
paragraph 6(e) of the Employment Agreement and the parties have agreed that the Individual will
retire from the Company effective November 20, 2009 (the “Separation Date”).

     WHEREAS, the parties desire to enter this Agreement to reflect their mutual undertakings,
promises, and agreements concerning the Individual’s termination of employment with the Company and
payments and benefits to the Individual upon or by reason of such termination.

     NOW THEREFORE, in exchange for the valuable consideration paid or given under this Agreement,
the receipt, adequacy, and sufficiency of which is hereby acknowledged, the parties knowingly and
voluntarily agree to the following terms:

TERMS

	1.	 	Notice of Termination; Effect of Termination. Pursuant to paragraph 9(a) of the
Employment Agreement, this Agreement constitutes the Company’s Notice of Termination to the
Individual that his employment with the Company is being terminated pursuant to the Company’s
decision not to extend the Employment Agreement in accordance with paragraph 6(e) of the
Employment Agreement. The Individual waives his right to receive 60 days’ notice of such
termination under paragraph 6(e) of the Employment. The termination of the Individual’s
employment with the Company shall be effective as of the Separation Date and result in a
Separation from Service as of the Separation Date. Effective as of the Separation Date, the
Individual shall also, and hereby does, resign from all corporate, board, and other offices
and positions he holds with the Company and its Affiliates (as defined below). As of the
Separation Date, the Individual shall be relieved of all further duties pursuant to his
employment with the Company. The Individual shall continue his regular duties for, and
full-time employment with, the Company until the Separation Date although the Company may in
its sole

 

 

	 	 	discretion place the Individual on a paid leave of absence at anytime before the Separation
Date.

	2.	 	Final Pay and Benefits. Regardless of whether the Individual accepts this Agreement,
he shall receive the following payments and benefits in accordance with the Company’s existing
policies, or at the Company’s sole discretion, pursuant to his employment with the Company and
his participation in the Company’s benefit plans:

	 	(a)	 	Final Pay. Payment of his regular Base Salary plus payment for his
accrued unused vacation, if any, through the Separation Date. This amount is a gross
amount, subject to applicable taxes and withholdings, and shall be delivered to the
Individual on or within six days after the Separation Date.
	 
	 	(b)	 	Vested Benefits. Payment or other entitlement, in accordance with the
terms of the applicable plan or as required by applicable law, of any benefits to which
he has a vested entitlement as of the Separation Date under the terms of the Company’s
employee benefit plans.
	 
	 	(c)	 	Right to Continue Certain Insurance Benefits. In accordance with the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the right to continue
after the Company’s first regularly scheduled payday following the Separation Date his
group health, dental, and vision insurance benefits, if any, for himself and his
dependents, at his own expense. The Individual should complete an insurance
continuation election form, which will be furnished to him under separate cover, and
timely return it if he wishes to continue his insurance coverage under COBRA.
	 
	 	(d)	 	Common Stock. As of the Separation Date, the Individual owns 22,845
fully vested shares (the “Shares”) of Company common stock. By signing this
Agreement, the Individual represents and warrants that he owns only the Shares and has
no common stock, stock options, or other equity-related interests or awards from the
Company or its Affiliates (as defined below) other than as described in the previous
sentence.
	 
	 	(e)	 	Reimbursement of Business Expenses. Reimbursement of any business
expenses properly incurred by the Individual in accordance with Company policy before
the Separation Date.

	3.	 	Post-Separation Obligations. The Employment Agreement and any other agreement
between the parties except as provided below in this paragraph (all of the agreements just
described shall be referred to as the “Prior Agreements”) shall be terminated as of
the Separation Date without any further action by the parties other than signing this
Agreement. As of the Separation Date and without any further action, the Company and the
other Released Parties (as defined below) shall have no further liabilities, obligations, or
duties to the Individual, and the Individual shall forfeit all rights and benefits, under the
Prior Agreements except as provided in this Agreement. Notwithstanding the

 

 

	 	 	previous two sentences, the Individual’s obligations under the Employment Agreement,
including without limitation under paragraphs 10 (Business Opportunities and Intellectual
Property; Personal Investments; Confidentiality; Covenant not to Compete); 11 (Non-Compete
Obligations During Employment Term); 12 (Confidentiality Obligations); 13 (Obligations After
Separation Date); and 19 (Waiver of Rights to Jury Trial and Class-Action Participation)
(together, the “Post-Separation Obligations”), and the parties’ mutual rights and
obligations under paragraphs 15 (Survival of Covenants; Enforcement of Covenants; and
Remedies); 20 (Attorneys’ Fees and Other Costs); 24 (Severability); and 25 (Governing Law;
Venue) of the Employment Agreement shall survive the termination of the Individual’s
employment and the termination of the Prior Agreements. Nothing in this Agreement shall be
construed to limit, supersede, or cancel any of the Post-Separation Obligations. The
Individual acknowledges and agrees that he intends to, and shall, comply with such
Post-Separation Obligations notwithstanding the termination of his employment with the
Company and the termination of the Prior Agreements. The parties agree that paragraph 18,
Dispute Resolution, of the Employment Agreement shall be null and void and of no further
force or effect as of the Effective Date.

	4.	 	Special Separation Consideration. In full satisfaction of paragraph 7(b) of the
Employment Agreement, contingent upon the Individual’s acceptance and non-revocation of this
Agreement, and in consideration of the Individual’s promises and undertakings in this
Agreement, the Company shall provide, or cause to be provided, to him, in addition to the
salary and benefits he will receive pursuant to paragraph 2, the following special separation
consideration (the “Special Separation Consideration”):

	 	(a)	 	Separation Payments. The Company shall pay the Individual the
following separation payments (the “Separation Payments”): (i) on or before
the 20th day following the Separation from Service, the Company shall pay the
Individual a lump sum in the amount of $104,200, which is equal to 50% of his
Base Salary in effect as of the Separation from Service; and (ii) on or before December
31, 2009, the Company shall pay the Individual a lump sum equal to $312,600,
which is equal to 150% of his Base Salary in effect as of the Separation from Service.
The Separation Payments are gross amounts and subject to applicable taxes and
withholdings.
	 
	 	(b)	 	Continuation of Employee Welfare Benefits. If the Individual timely
elects continuation coverage under COBRA by completing and returning the insurance
continuation election form that will be provided under separate cover, the Company
shall provide him for a period of 24 months following the Separation from Service or,
if less, the period ending on the date he is no longer entitled to continuation
coverage under COBRA, with continuation of all benefits applicable to him and his
immediate family members under any employee welfare benefit plan maintained by the
Company immediately before the Separation from Service, including without limitation
health, dental, vision, and life insurance benefits then applicable to the Individual
and his immediate family under the Company’s employee welfare benefit plans;
provided, however, that if such continued coverage after the Separation from
Service is not permitted under the

 

 

	 	 	 	Company’s plans, then the Company shall provide the Individual with substantially
similar benefits through an insurance policy or reimburse the Individual for the
full cost of obtaining such insurance which reimbursement amount shall be paid
within five days of the Individual’s furnishing the Company with evidence of the
cost of such insurance, which evidence shall be furnished to the Company by the
Individual on a monthly basis. Notwithstanding any other provision of his
Agreement, the Individual shall immediately notify the Company’s Executive Vice
President and General Counsel in writing if he or his immediate family becomes
eligible to receive any benefits similar to the benefits covered by this
subparagraph through subsequent employment or otherwise and the Company’s obligation
to provide such benefits under this subparagraph shall terminate as of the date of
any such eligibility. For purposes of this subparagraph, “family members” shall not
include the Individual’s former spouse who has been receiving health and dental
insurance benefits under the Company’s employee welfare benefit plans before the
Separation Date (at the Individual’s sole expense) pursuant to the Individual’s
divorce decree or other binding arrangement with the Individual’s former spouse. If
the Individual desires to continue such benefits for his former spouse following the
Separation Date, he shall continue to be solely responsible for them at his own
expense.
	 
	 	(c)	 	Continuation of Pension or Employee Benefit Plan Benefits. The Company
shall provide the Individual with all benefits to which he is entitled to receive as of
the Separation from Service pursuant to any pension or employee benefit plan or other
arrangement or life insurance policy maintained by the Company immediately before the
Separation from Service.
	 
	 	(d)	 	Disability. The parties acknowledge that (i) the Company maintains a
disability income policy (the “Disability Policy”) for the benefit of Individual, (ii)
the maximum monthly benefit under the Disability Policy is $4,300 and (iii) the monthly
premium for the Disability Policy is $207.18. The Company agrees to make a lump sum
payment to Individual, on or before December 31, 2009, in the amount of $5,868.20, less
any monthly premium for the Disability Policy paid by the Company between the
Separation Date and December 31, 2009, in full satisfaction of all of the Company’s
obligations under paragraph 4(b) of this Agreement with respect to continuation of
disability benefits.

	5.	 	Return of Property and Information. Whether or not the Individual accepts this
Agreement, he shall return to the Company or the other Released Parties (as defined below) any
and all items of its or their property, including without limitation keys, all copies of
Confidential Information (as defined below), badge/access card, computers, software, cellular
telephones and smart phones, equipment, credit cards, forms, files, manuals, correspondence,
business records, personnel data, lists of employees, salary and benefits information,
supplier and vendor files, price lists, contracts, contract information, marketing plans,
brochures, catalogs, training materials, computer tapes and diskettes or other portable media,
computer-readable files and data stored on any hard drive or other installed device, and data
processing reports, and any and all other documents or property

 

 

	 	 	which he has had possession of or control over during his employment with the Company. The
Individual’s obligations under this paragraph supplement, rather than supplant, his
obligations under the common law and his Post-Separation Obligations. The Individual’s
obligations under this paragraph shall not apply to, and the Individual may retain copies
of, personnel, benefit, or payroll documents concerning him.

	6.	 	General Release by the Individual.

	 	(a)	 	Full and Final Release by Releasing Parties. In consideration of the
mutual promises and undertakings in this Agreement, the Individual, on behalf of
himself and his spouse, other family members, heirs, successors, and assigns
(collectively, the “Releasing Parties”), hereby voluntarily, completely, and
unconditionally to the maximum extent permitted by applicable law releases, acquits,
waives, and forever discharges any and all claims, demands, liabilities, and causes of
action of whatever kind or character, whether known, unknown, vicarious, derivative,
direct, or indirect (individually a “Claim” and collectively the
“Claims”), that he or they, individually, collectively, or otherwise, may have
or assert against the Released Parties (as defined below).
	 
	 	(b)	 	Claims Included. This release includes without limitation any Claim
arising out of or relating in any way to (i) the Individual’s employment or his
termination of employment with the Company or with the employment practices of any of
the Released Parties; (ii) any federal, state, or local statutory or common law or
constitutional provision that applies, or is asserted to apply, directly or indirectly,
to the formation, continuation, or termination of the Individual’s employment
relationship with the Company, including but not limited to the Age Discrimination in
Employment Act (“ADEA”); (iii) any contract or agreement between, concerning,
or relating to the Individual and any of the Released Parties, including without
limitation the Employment Agreement; and (iv) any other alleged act, breach, conduct,
negligence, gross negligence, or omission of any of the Released Parties.
	 
	 	(c)	 	Claims Excluded. This release does not (i) waive or release any Claim
for breach or enforcement of this Agreement; (ii) waive or release any right or Claim
under the ADEA that may arise after the date this Agreement is signed by the
Individual; or (iii) prevent the Individual from filing any unemployment compensation
claims or workers’ compensation Claims.
	 
	 	(d)	 	Definition of Released Parties and Affiliates. The “Released
Parties” include (i) ARI, Approach Operating, LLC, Approach Oil & Gas Inc.,
Approach Oil & Gas (Canada) Inc., Approach Services LLC, Approach Delaware, LLC and
Approach Resources I, LP; (ii) any parent, subsidiary, or Affiliate of the companies
just named in (i); (iii) any past or present officer, director, or employee of the
entities just referred to in (i)-(ii), in their individual and official capacities; and
(iv) any past or present predecessors, successors, parent companies, subsidiaries,
owners, shareholders, members, managers, benefit plans, operating units, Affiliates,

 

 

	 	 	 	divisions, agents, representatives, officers, directors, partners, members,
employees, fiduciaries, insurers, attorneys, successors, and assigns of the entities
just named in (i)-(iii). “Affiliate” shall mean any entity that Controls,
is Controlled by or is under common Control with an entity or person, and
“Control” means the ownership, directly or indirectly, of more than fifty
(50) percent of the voting rights in an entity.

	7.	 	General Release by the Company. In consideration of the mutual promises and
undertakings in this Agreement, the Company, on behalf of itself and its successors and
assigns, hereby voluntarily, completely, and unconditionally to the maximum extent permitted
by applicable law releases, acquits, waives, and forever discharges any and all claims,
demands, liabilities, and causes of action of whatever kind or character, whether known,
unknown, vicarious, derivative, direct, or indirect (individually a “Claim” and
collectively the “Claims”), that it may have or assert against the Individual and his
family members, heirs, successors and assigns. This release does not supersede or relieve the
Individual of his Post-Separation Obligations and does not waive or release (a) any Claim for
breach or enforcement of this Agreement; (b) any right or Claim that may arise after the date
this Agreement is signed by the Individual; or (c) any Claim for fraud, illegal acts or
omissions, intentional or willful misconduct, reckless misconduct or gross negligence of the
Individual that may be based on facts not known to the Company’s President and Chief Executive
Officer or Executive Vice President and General Counsel on the date this Agreement is signed
by the Individual.

	8.	 	Confidentiality, Cooperation, Nonprosecution, and Nondisparagement.

	 	(a)	 	Mutual Confidentiality. The fact and terms of this Agreement shall be
and remain confidential and shall not be disclosed by the parties. The obligations
under this subparagraph shall not apply to disclosures (i) to legal counsel, family
members, accountants, tax advisors, financial advisors, or others with a business need
to know of this Agreement, provided such persons have agreed to keep the terms of this
Agreement confidential; (ii) to a governmental agency if requested in connection with
an audit or investigation; (iii) if compelled by law or valid legal process; (iv) as
necessary in any legal proceeding for breach or enforcement of this Agreement; or (v)
as necessary to comply with applicable law or applicable rules of any securities
exchange on which the Company’s shares are listed, to respond to audits, or to defend
against or prosecute legal or administrative complaints or claims.
	 
	 	(b)	 	Cooperation. The Individual shall cooperate fully and completely with
the Company or any of the other Released Parties, at their request, in all pending and
future litigation, investigations, arbitrations, and/or other fact-finding or
adjudicative proceedings, public or private, involving the Company or any of the other
Released Parties. This obligation includes without limitation the Individual promptly
meeting with counsel for the Company or the other Released Parties at reasonable times
upon their request, and providing testimony in court, before an arbitrator or other
convening authority, or upon deposition that is truthful,

 

 

	 	 	 	accurate, and complete, according to information known to him. If the Individual
appears as a witness in any pending or future litigation, arbitration, or other
fact-finding or adjudicative proceeding at the request of Company or any of the
other Released Parties, the Company or the other Released Parties shall reimburse
him, upon submission of substantiating documentation, for necessary and reasonable
expenses incurred by him as a result of testifying.
	 
	 	(c)	 	Nonprosecution. Except as requested by any of the Released Parties, as
permitted by law that supersedes the terms of this Agreement, or as compelled by valid
legal process, the Individual shall not (i) assist, cooperate with, or supply
information of any kind to any individual or private-party litigant or their agents or
attorneys concerning (A) the employment, terms and conditions, or ending of the
Individual’s or any other employee’s employment with the Company or any of the other
Released Parties or the employment practices of any of the Released Parties; or (B) the
business or operations of any of the Released Parties; or (ii) initiate or assist any
other person in connection with any investigation, inquiry, or any other action of any
kind with respect to any of the Released Parties’ employment practices, business, or
operations.
	 
	 	(d)	 	Mutual Nondisparagement. The Individual and other Releasing Parties
and the Company’s Vice-President-level-and-above executive employees shall not,
directly or indirectly, make any derogatory or disparaging statements (whether oral,
written, electronic, anonymous, on the Internet, or otherwise) about each other,
including without limit any statements (A) about their respective businesses,
decisions, management, leadership, finances, employment practices, products, services,
stock value, or operations, (B) on any social-networking or other Internet website
including without limitation all online blogs, message boards, forums, and the like,
and/or (C) to any third party involved in the Company’s industry that suggest or imply
improper, wrongful, or unethical conduct or that are critical of the other’s business
or other operations or practices. The obligations under this subparagraph are in
addition to any otherwise applicable contractual, statutory, or common-law
obligations. If questioned about or commenting on the reason for or circumstances
surrounding the ending of the Individual’s employment with the Company by a third
party, the Individual and the other Releasing Parties and the Company shall respond
only that the Individual decided to retire from the Company or similar words to that
effect. The obligations in this subparagraph shall not prohibit any truthful
statements that are required by applicable law or valid legal process. Nor shall they
prohibit the Company’s Vice-President-level-and-above executive employees from making
any statements to persons within the Company (including the Company’s outside legal,
tax and financial advisors) with a business need to know of the information
communicated in such statements.

 

 

	9.	 	Waiver of Certain Rights.

	 	(a)	 	Right to Relief Not Provided in this Agreement. Except as provided in
this Agreement, the Individual shall and hereby does irrevocably waive any right to
monetary recovery from the Company or the other Released Parties, whether sought
directly by him or in the event any administrative agency or other public authority,
individual, or group of individuals should pursue any claim on his behalf; and he shall
not request from the Company or the other Released Parties, as compensation or damages
related to his employment or the termination of his employment with any of the Released
Parties, anything of value that is not provided for in this Agreement.
	 
	 	(b)	 	Right to Class- or Collective-Action Initiation or Participation. The
Individual shall and hereby does irrevocably waive the right to initiate or participate
in any class or collective action or other legal or administrative proceeding with
respect to any claim against the Company or the Released Parties, including without
limitation any claim arising from the formation, continuation, or termination of his
employment relationship with any of the Released Parties.

	10.	 	Agreement Not to Seek Reemployment. Neither the Company nor any of the other
Released Parties shall have any obligation to employ or to hire or rehire the Individual or to
consider him for hire with regard to future employment or potential employment. Accordingly,
the Individual agrees that (a) he shall not apply for or otherwise seek employment with the
Company or any of the other Released Parties at any time in the future, and (b) his
forbearance to seek future employment as just stated is purely contractual and is in no way
involuntary, discriminatory, or retaliatory.
	 
	11.	 	Consultation and Transition. The Individual shall, without additional consideration
other than Special Separation Consideration, upon the Company’s request, be available for up
to 45 days after the Separation Date for consultation at reasonable times and without
unreasonable interference with his personal or business activities, in person, online, or by
telephone, as necessary, on such matters relating to the Company or the other Released Parties
as may be within his knowledge and to assist the Company in transitioning his duties and
responsibilities. The Company shall indemnify the Individual against any and all claims
arising from the Individual’s services under this paragraph, and the indemnity shall
specifically cover, among other things, the Individual’s attorney’s fees; provided,
however, that the Company shall have no obligation to indemnify the Individual against
fraud, illegal acts or omissions, intentional or willful misconduct, reckless misconduct, or
gross negligence of the Individual.
	 
	12.	 	No Violations. The Individual represents and warrants that he has no knowledge that
any officer, director, employee, agent, or representative of the Company or its Affiliates has
committed or is suspected of committing any act which is or may be in violation of any federal
or state law or regulation or has acted in a manner which requires corrective action of any
kind. The Individual further represents and warrants that he has not informed the Company or
any of the other Released Parties of, and that he is unaware of,

 

 

	 	 	any alleged violations of the Company’s standards of business conduct or personnel policies,
or other misconduct by the Company or any of the other Released Parties, that have not been
resolved satisfactorily by the Company or the other Released Parties.
	 
	13.	 	Non-Use and Non-Disclosure of Confidential Information. Whether or not the
Individual accepts this Agreement, neither he nor any of the other Releasing Parties shall at
any time use or disclose to any third party any of the Company’s confidential information (the
“Confidential Information”), which includes without limitation all information used in
the Company’s business that gives it and/or its Affiliates an advantage over their competitors
and is not generally known to its or their competitors or readily ascertainable by the public
through independent investigation; business information, including methods of operation and
service, business ideas and plans, expansion plans, business proposals, sales data, leases,
and opportunities pertaining to the lease, acquisition, exploration, production, gathering,
transporting, marketing, treating, or other processing of hydrocarbons and related products
and the exploration potential of geographical areas on which hydrocarbon exploration prospects
are located; financial information, including margins, earnings, profits, losses, accounts
payable, and accounts receivable; information about future plans, including marketing
strategies, target markets, prospective purchasers, promotions, sales plans, projects and
proposals, and research and development; intellectual-property information, including all
ideas, inventions, discoveries, processes, designs, methods, substances, articles, computer
programs, and improvements (including, without limitation, enhancements to, or further
interpretation or processing of, information that was in the Company’s possession before the
Effective Date of this Agreement), whether or not patentable or copyrightable; personnel
information, including personnel policies, employment practices, personnel records, employee
lists, personnel contact information, performance information, compensation data, benefits,
and training programs; trade secret information, including information or matters constituting
trade secrets as defined under applicable law; and technical information, including databases,
formulae, designs, compilations of information, data, and know-how related to the Company’s
operations. Confidential Information shall also include all Company-related information
contained in any manual or electronic document or file created by the Individual during his
employment with the Company or created by the Company and provided or made available the
Individual in connection with his employment. Confidential Information shall not include any
Company-related information in the public domain, through no disclosure or wrongful act of the
Individual, to such an extent as to be readily available to competitors. If it appears the
Individual will be compelled by law or judicial process to disclose any Confidential
Information following the Separation Date, he shall notify the Company’s Executive Vice
President and General Counsel in writing immediately upon his receipt of a subpoena or other
legal process. The Individual’s obligations under this paragraph shall supplement, rather
than supplant, his obligations concerning Confidential Information the common law and his
Post-Separation Obligations.
	 
	14.	 	Offset. The Company shall be entitled to set off against, and the Individual
authorizes the Company to deduct from, the Separation Payments any amounts which may be due
and owing to the Company or the other Released Parties by the Individual or the other

 

 

	 	 	Releasing Parties as of the Separation Date. Before invoking a set off pursuant to this
paragraph, however, the Company shall notify the Individual in writing of its intent to set
off, specifying in the notice the amount, the explanation for the claimed set off, and the
date the set off amount accrued, attaching copies of supporting documents, if any, for the
claimed set off, as well as providing the Individual 10 days to review and refute the claim
for set off.
	 
	15.	 	Nonadmission of Liability or Wrongdoing. The Individual acknowledges that (a) this
Agreement shall not in any manner constitute an admission of liability or wrongdoing on the
part of Company or any of the other Released Parties; (b) the Company and the other Released
Parties expressly deny any such liability or wrongdoing; and (c) except to the extent
necessary to enforce or remedy a breach of this Agreement, neither this Agreement nor any part
of it may be construed, used, or admitted into evidence in any judicial, administrative, or
arbitral proceedings as an admission of any kind by Company or any of the other Released
Parties.
	 
	16.	 	Authority to Execute. The Individual represents and warrants that he has the
authority to execute this Agreement on behalf of all the Releasing Parties.
	 
	17.	 	Mutual Waiver of Right to a Jury Trial. EACH PARTY SHALL AND HEREBY DOES IRREVOCABLY
WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM AGAINST THE OTHER PARTY (OR THE
RELEASED PARTIES), INCLUDING WITHOUT LIMITATION ANY CLAIM FOR BREACH OR ENFORCEMENT OF THIS
AGREEMENT.
	 
	18.	 	Governing Law; Severability; Interpretation. This Agreement and the rights and
duties of the parties under it shall be governed by the laws of the State of Texas, without
regard to any conflicts of laws principles. If any provision of this Agreement is held to be
unenforceable, such provision shall be considered separate, distinct, and severable from the
other remaining provisions of this Agreement, and shall not affect the validity or
enforceability of such other remaining provisions; and in all other respects, this Agreement
shall remain in full force and effect. If any provision of this Agreement is held to be
unenforceable as written but may be made to be enforceable by limitation, then such provision
shall be enforceable to the maximum extent permitted by applicable law. The language of all
parts of this Agreement shall in all cases be construed as a whole, according to its fair
meaning, and not strictly for or against any of the parties.
	 
	19.	 	Assignment. The Individual’s obligations, rights, and benefits under this Agreement
are personal to the Individual and shall not be assigned to any person or entity without
written permission from the Company’s Executive Vice President and General Counsel. This
Agreement shall be binding upon and inure to the benefit of the parties and their respective
heirs, legal representatives, successors, and permitted assigns.
	 
	20.	 	Breach of Agreement or Post-Separation Obligations. Notwithstanding any other
provision in this Agreement, the Company’s obligation to provide the Special Separation
Consideration to the Individual is subject to the condition that he and the Releasing

 

 

	 	 	Parties comply with their obligations under this Agreement and that he complies with his
Post-Separation Obligations. The Company shall have the right to suspend or cease providing
any part of the Special Separation Consideration, as well as to receive repayment from the
Individual of any Special Separation Consideration already provided, if any court of
competent jurisdiction determines that any such obligations have been breached by the
Individual or the Releasing Parties but all other provisions of this Agreement shall remain
in full force and effect; provided, however, that the Company shall not have the
right to suspend or cease providing, or receive repayment of, any part of the Special
Separation Consideration solely because the Individual exercises any right he may have to
challenge the effectiveness of this Agreement under the Older Workers Benefit Protection
Act. The Company’s rights under this paragraph shall be in addition to but shall in no
event lead to a double or multiple recovery pursuant to any other available rights and
remedies should there be a breach of any obligations of the Individual or the Releasing
Parties under this Agreement or the Post-Separation Obligations.
	 
	21.	 	Expiration Date. The Company’s offer of this Agreement shall expire after a period
of 21 days after the Individual was first given this Agreement for consideration (the
“Expiration Date”). The Individual may accept the offer at any time before the
Expiration Date by signing this Agreement in the space provided below and returning it to the
attention of J. Curtis Henderson, Executive Vice President and General Counsel (at
chenderson@approachresources.com or One Ridgmar Centre, 6500 West Freeway, Suite 800, Fort
Worth, Texas 76116) so that the signed Agreement is received no later than the close of
business on the Expiration Date.
	 
	22.	 	Limited Revocation Right; Effect of Revocation. After signing this Agreement, the
Individual shall have a period of seven days to reconsider and revoke his acceptance of this
Agreement if he wishes (the “Revocation Period”). If the Individual chooses to revoke
his acceptance of this Agreement, he must do so by providing written notice to J. Curtis
Henderson before the eighth day after signing this Agreement, in which case this Agreement
shall not become effective or enforceable and the Individual shall not receive the Special
Separation Consideration.
	 
	23.	 	Effective Date. This Agreement shall become effective and enforceable upon the
expiration of seven days after the Individual signs it (the “Effective Date”),
provided that the Individual signs this Agreement before the Expiration Date and does not
revoke his acceptance of this Agreement during the Revocation Period.
	 
	24.	 	Right to Consult an Attorney; Knowing and Voluntary Agreement. The Individual
acknowledges that (a) he has a right, and has been encouraged by this paragraph, to consult an
attorney of his choice before signing this Agreement; (b) he has had a reasonable period in
which to consider whether to sign this Agreement; (c) he fully understands the meaning and
effect of signing this Agreement; and (d) his signing of this Agreement is knowing and
voluntary.
	 
	25.	 	Independent Consideration; Other Obligations. Whether expressly stated in this
Agreement or not, all obligations the Individual assumes and undertakings he makes by

 

 

	 	 	signing this Agreement are understood to be in consideration of the mutual promises and
undertakings in this Agreement, including without limitation the undertakings in
subparagraphs 4(b) and (c) of this Agreement and the Special Separation Consideration. In
addition, the Individual acknowledges and agrees that neither the Company nor any of the
other Released Parties has any legal obligation to provide the Special Separation
Consideration to him outside of this Agreement and the Employment Agreement. The Individual
further acknowledges and agrees that his obligations under this Agreement supplement, rather
than supplant, his Post-Separation Obligations and any applicable contractual, statutory, or
common-law obligations.
	 
	26.	 	Entire Agreement. This Agreement contains and represents the entire agreement of the
parties with respect to its subject matters, and supersedes all prior agreements and
understandings, written and oral, between the parties with respect to its subject matters.
Notwithstanding the preceding sentence, nothing in this Agreement shall be interpreted or
construed as superseding or relieving the Individual of his Post-Separation Obligations. The
Individual agrees that the Company has not made any promise or representation to him
concerning this Agreement that is not expressed in this Agreement or the Employment Agreement,
and that in signing this Agreement, he is not relying on any prior oral or written statement
or representation by the Company or any of the other Released Parties but is instead relying
solely on his own judgment.
	 
	27.	 	Modification; Waiver. No provision of this Agreement shall be amended, modified, or
waived unless such amendment, modification, or waiver is agreed to in writing and signed by
the Individual and a duly authorized representative of the Company.
	 
	28.	 	Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered one and the
same agreement. The delivery of this Agreement in the form of a clearly legible facsimile or
electronically scanned version by e-mail shall have the same force and effect as delivery of
the originally executed document.
	 
	29.	 	Internal Revenue Code Section 409A; Right to Consult a Tax Advisor. The parties
intend for the Special Separation Consideration to be exempt from or comply with the
provisions of Code Section 409A and not be subject to the tax imposed by Code Section 409A.
The provisions of this Agreement shall be interpreted in a manner consistent with this intent.
Notwithstanding any other provision in this Agreement, the Individual shall be solely
responsible for any risk that the tax treatment of all or part of the Special Separation
Consideration may be affected by Code Section 409A, which may impose significant adverse tax
consequences on him, including accelerated taxation, a 20% additional tax, and interest.
Because of the potential tax consequences, the Individual has the right, and is encouraged by
this paragraph, to consult with a tax advisor of his choice before signing this Agreement.

 

 

     AGREED:

	 	 	 	 	 	 	 
	APPROACH RESOURCES INC.	 	GLENN W. REED
	 
	 
	By:

	 	/s/ J. Ross Craft
	 	By:
	 	/s/ Glenn W. Reed
	 

	 	 
	 	 	 	 
	 

	 	Print Name: J. Ross Craft
	 	 	 	Glenn W. Reed
	 

	 	Print Title: President and Chief Executive Officer
	 	 	 	Date Signed: November 10, 2009
	 

	 	Date Signed: November 10, 2009exv10w5

EXHIBIT 10.5

HORIZON BANCORP

DIRECTORS DEFERRED COMPENSATION PLAN

Amended and Restated

Effective

April 1, 1998

75

 

HORIZON BANCORP

DIRECTORS DEFERRED COMPENSATION PLAN

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 	DEFINITIONS	 	1
	 
	 	1.1       Adjustment	 	1
	 
	 	1.2       Affiliate	 	1
	 
	 	1.3       Board	 	1
	 
	 	1.4       Code	 	1
	 
	 	1.5       Committee	 	1
	 
	 	1.6       Company	 	1
	 
	 	1.7       Director	 	1
	 
	 	1.8       Disabled or Disability	 	1
	 
	 	1.9       Fees	 	1
	 
	 	1.10      Individual Account	 	1
	 
	 	1.11      Participant	 	1
	 
	 	1.12      Participation Agreement	 	2
	 
	 	1.13      Plan	 	2
	 
	 	 	 	 
	II.
	 	INTRODUCTION	 	2
	 
	 	2.1       Purpose	 	2
	 
	 	2.2       Effective Date	 	2
	 
	 	2.3       Affiliates	 	2
	 
	 	 	 	 
	III.
	 	PARTICIPATION	 	3
	 
	 	3.1       Right to Defer	 	3
	 
	 	3.2       Participation Agreement	 	3
	 
	 	3.3       Establishment of Individual Accounts	 	3
	 
	 	 	 	 
	IV.
	 	INVESTMENT OF CONTRIBUTIONS	 	4
	 
	 	4.1       Investments	 	4
	 
	 	4.2       Unsecured Contractual Rights	 	4
	 
	 	 	 	 
	V.
	 	DISTRIBUTIONS	 	5
	 
	 	5.1       Time of Payment of Benefits	 	5
	 
	 	5.2       Method of Payment of Benefits	 	5
	 
	 	5.3       Benefit Payment Elections	 	5
	 
	 	5.4       New Mandatory Benefit Payment Elections	 	6
	 
	 	5.5       Death of a Participant and Beneficiary Designations	 	6

76

 

	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	VI.
	 	PLAN ADMINISTRATION	 	7
	 
	 	6.1       Administration of Plan	 	7
	 
	 	6.2       Powers and Responsibilities of the Committee	 	7
	 
	 	6.3       Liabilities	 	8
	 
	 	6.4       Claims Procedure	 	8
	 
	 	6.5       Income and Employment Tax Withholding	 	9
	 
	 	 	 	 
	VII.
	 	AMENDMENT AND TERMINATION	 	9
	 
	 	 	 	 
	VIII.
	 	PARTICIPATION BY AFFILIATES	 	10
	 
	 	8.1       Affiliate Participation	 	10
	 
	 	8.2       Horizon Bancorp Action Binding on Other Employers	 	10
	 
	 	 	 	 
	IX.
	 	GENERAL PROVISIONS	 	10
	 
	 	9.1       Governing Law	 	10
	 
	 	9.2       Headings and Gender	 	10
	 
	 	9.3       Participant's Rights; Acquittance	 	10
	 
	 	9.4       Spendthrift Clause	 	10
	 
	 	9.5       Counterparts	 	11
	 
	 	9.6       No Enlargement of Employment Rights	 	11
	 
	 	9.7       Limitations on Liability	 	11
	 
	 	9.8       Incapacity of Participant or Beneficiary	 	11
	 
	 	9.9       Corporate Successors	 	11
	 
	 	9.10       Evidence	 	11
	 
	 	9.11      Action by a Company	 	11
	 
	 	9.12      Severability	 	11
	 
	 	SIGNATURES	 	12

77

 

ARTICLE I

DEFINITIONS

     Whenever the initial letter of a word or phrase is capitalized herein, the following words and
phrases shall have the meanings stated below unless a different meaning is plainly required by the
context:

     1.1 “Adjustment” means the net increases and decreases in the market value of the Individual
Account of each Participant. Such increases and decreases shall include such items as realized or
unrealized investment gains and losses, if any, and investment income, if any, and may, in the
discretion of Horizon Bancorp, include expenses properly attributable to administering the Plan.

     1.2 “Affiliate” means Horizon Bancorp and any other corporation or trade or business whose
employees are treated as being employed by Horizon Bancorp under Code Sections 414(b), 414(c),
414(m) or 414(o).

     1.3 “Board” means the Board of Directors of Horizon Bancorp.

     1.4 “Code” means the Internal Revenue Code of 1986, as amended.

     1.5 “Committee” means the Administrative Committee appointed by the Board to administer the
Plan as directed by the Board.

     1.6 “Company” means Horizon Bancorp, Horizon Bank and each other Affiliate that adopts the
Plan.

     1.7 “Director” means any duly elected and serving member or former member of the Board of
Directors of a Company who is not also an employee of the Company at any time during the Plan Year
immediately preceding his participation in the Plan.

     1.8 “Disabled” or “Disability” means any disability that would qualify as a disability under
Section 22(c)(3) of the Code.

     1.9 “Fees” means all fees paid to a Participant for a Plan Year for services rendered to a
Company as a Director with respect to such Plan Year including retainer fees for attendance at
regularly scheduled Board of Directors meetings, special meetings called from time to time, and
fees for attendance at any and all meetings of committees of a Company’s Board of Directors.

     1.10 “Individual Account” means the individual bookkeeping account maintained for each
Participant in accordance with Section 2.2.

     1.11 “Participant” means a non-employee Director of a Company who becomes a Participant
pursuant to Article II of the Plan.

78

 

     1.12 “Participation Agreement” means the written agreement between the Participant and a
Company pursuant to which the Participant elects to defer receipt of Fees, designate a beneficiary,
and elect a form and the time of distribution of his benefits under the Plan.

     1.13 “Plan” means this Horizon Bancorp Directors Deferred Compensation Plan, as amended and
restated, generally effective April 1, 1998.

     1.14 “Plan Year” means the twelve (12) month period beginning January 1, and ending December
31.

ARTICLE II

INTRODUCTION

     2.1 PURPOSE. The Horizon Bancorp Directors Deferred Compensation Plan (“Plan”) as set forth
herein is a complete amendment and restatement of the Plan which was originally effective January
1, 1984. The purpose of this Plan is to permit Directors of Horizon Bancorp, Horizon Bank and any
other Company under the Plan to defer the receipt and resulting taxation of the Fees received from
a Company for services as a Director of a Company. All benefits payable under this Plan shall be
paid solely out of the general assets of the Companies.

     2.2 EFFECTIVE DATE. The Horizon Bancorp Directors Deferred Compensation Plan was originally
established by Horizon Bancorp, effective January 1, 1984. The effective date of the Plan, as
amended and restated is April 1, 1998. The provisions of the Plan only apply to a Director who was
not receiving a distribution of his benefit under the Plan or a predecessor plan before the
effective date. The rights and benefits, if any, of a Director who was receiving a distribution of
his benefit under the Plan before the effective date will be determined in accordance with the
terms of the Plan in effect as of the date he began receiving a distribution of his benefit.

     2.3 AFFILIATES. Any Affiliate may adopt the Plan for the benefit of its Directors with Horizon
Bancorp’s consent in accordance with Section 8.1.

79

 

ARTICLE III

PARTICIPATION

     3.1 RIGHT TO DEFER. A Director may become a Participant by electing, on a Participation
Agreement, to defer the receipt of all or a portion of the Fees he or she would otherwise receive
with respect to a Plan Year as a Director of a Company.

     3.2 PARTICIPATION AGREEMENT.

	 	(a)  	REQUIREMENT FOR PARTICIPATION AGREEMENT. As a condition to a Company’s and
the Committee’s obligation to credit deferred Fees for the benefit of a Participant
pursuant to Section 3.1, the Participant must execute a Participation Agreement (on
such forms as shall be prescribed by the Committee) in which it is agreed that the
Participant’s Company will withhold payment of all or a portion of the Participant’s
Fees and shall credit such amount withheld to the Participant’s Individual Account at
the time set forth in the Plan.
	 
	 	(b)  	TIMING OF EXECUTION AND DELIVERY OF PARTICIPATION AGREEMENT. Except as
provided in Section 5.4, a Participation Agreement must be executed by the Participant
and the Committee prior to the first day of the year in which the Participant is
entitled to receive the Fees with respect to which the Participant Fees specified in
the Participation Agreement relate.
	 
	 	(c)  	MODIFICATION OF PARTICIPANT DEFERRAL ELECTION. At any time, a Participant
and the Committee may execute and deliver an amended Participation Agreement which
increases, decreases, commences or terminates the deferral of the Participant’s Fees.
Provided, however, except as provided in Section 5.4, such amended Participation
Agreement must be executed by the Participant and the Committee prior to the first day
of the Plan Year in which the Participant is entitled to receive the Fees with respect
to which the Participant Fees specified in the Participation Agreement relate.
	 
	 	(d)  	DIRECTORS ELECTED MID-YEAR. A non-employee elected to fill a vacancy on a
Company’s Board of Directors who was not a Director on the preceding December 31st
may, by completing a Participation Agreement before his term begins, elect to defer
Fees for the balance of the Plan Year following such election and for succeeding Plan
Years.

     3.3 ESTABLISHMENT OF INDIVIDUAL ACCOUNTS.

 3

80

 

	 	(a)  	INDIVIDUAL ACCOUNT. All amounts to be allocated to each Participant pursuant
to Section 3.1, shall be credited to the Participant’s Individual Account as of the
last day of the Plan Year for which such Fees are payable and all amounts paid to the
Participant or his designated beneficiary pursuant to Article V shall be debited from
his Individual Account as of the time actually paid. Additionally, all amounts
credited to each Participant under the Plan prior to April 1, 1998, shall be credited,
as of April 1, 1998, to such Participants’ Individual Accounts under this restated
Plan.
	 
	 	(b)  	ALLOCATION OF ADJUSTMENTS. Following the allocations made pursuant to the
foregoing, the Committee shall determine the Adjustments for each Plan Year, and on
such other dates as the Committee deems necessary or advisable, by adding together all
income received, and realized and unrealized gains and losses, and deducting therefrom
all taxes, charges or expenses (unless paid separately by a Company in a Company’s
discretion, outside the confines of this Plan) and any realized and unrealized losses
since the most recent allocation of Adjustments to Participants’ Individual Accounts.
The Adjustments shall be allocated as of the allocation date specified herein to the
Individual Accounts of Participants who maintain a credit balance in their Individual
Accounts as of such date as provided in Section 4.1.

ARTICLE IV

INVESTMENT OF CONTRIBUTIONS

     4.1 INVESTMENTS. For periods ending prior to April 1, 1998, the Adjustment to each
Participant’s Individual Account equals the rate of interest equal to the average of the rates paid
on the last business day of each month during the Plan Year for one (1) year notes issued by the
U.S. Treasury. Effective for periods beginning on and after April 1, 1998, the Adjustment to each
Participant’s Individual Account shall be determined as if the amounts credited to such Individual
Account were invested in hypothetical investments designated by the Committee to be used to measure
increases or decreases in the Individual Account over time. No provision of the Plan shall impose
or be deemed to impose any obligation upon a Company, other than an unsecured contractual
obligation to make a cash payment to Participants and their beneficiaries in accordance with the
terms of the Plan. Benefits payable under the Plan shall be paid directly by a Company from its
general assets. A Company shall not be required to segregate any funds or other assets for the
payment of benefits under the Plan.

     4.2 UNSECURED CONTRACTUAL RIGHTS. The Plan at all times shall be unfunded and shall constitute
a mere promise by a Company to make benefit payments in the future. Notwithstanding any other
provision of this Plan, neither a Participant nor his designated beneficiary shall have any
preferred claim on, or any beneficial ownership interest in, any assets of a Company prior to the
time benefits are paid as provided in Article V, including any Fees deferred by the Participant.
All rights created under this Plan shall be mere unsecured contractual rights of the Participant
against a Company.

 4

81

 

ARTICLE V

DISTRIBUTIONS

     5.1 TIME OF PAYMENT OF BENEFITS. All amounts credited to a Participant’s Individual Account,
including any Adjustments credited in accordance with Section 3.3, shall be or commence to be
distributed to or for the benefit of a Participant (or his designated beneficiary) on the date
effectively elected by the Participant in his Participation Agreement. A Participant may amend his
Participation Agreement as to the time of payment only pursuant to Section 5.4 or if the amended
Participation Agreement provides for the deferral of the distribution to a date later than the date
previously elected.

     5.2 METHOD OF PAYMENT OF BENEFITS. The balance of a Participant’s Individual Account shall be
distributed in cash in a single lump sum payment or in substantially equal annual installments over
a period of not less than three (3) nor more than twelve (12) years, or in a combination of those
two methods, as elected by a Participant in accordance with the provisions of Section 5.3.

     5.3 BENEFIT PAYMENT ELECTIONS.

	 	(a)  	In order to be effective, a Participant’s election of the time and the
method in which his benefits shall be distributed (including benefits which become
payable as a result of the Participant’s death as set forth in Section 5.5) must be
made by delivering a Participation Agreement or an amended Participation Agreement to
the Committee not later than sixty (60) days prior to the beginning of the Plan Year
in which the Participant has elected to begin receiving his benefits. If the
Participant does not elect a time or method of distribution under Section 5.2, or such
election is not timely or properly made under this Section 5.3, a Company shall pay
the entire benefit at the time and in the method effectively elected in the most
recent Participation Agreement, or if no such effective Participation Agreement
exists, in the form of a single lump sum within thirty (30) to sixty (60) days after
the first to occur of the following:

	 	(i)  	Disability; or
	 
	 	(ii)  	Attainment of age sixty-five (65);

	 	(b)  	In the event a Participant properly elects and is eligible to receive his
Individual Account in the form of installments, the Participant must specify in his
written election the number of years over which the installments are to be
distributed.
	 
	 	(c)  	In the event a Participant properly elects and is eligible to receive his
Individual Account in a combination of a lump sum and installments, the Participant
must specify in his written election the percentage of the account which will be
distributed in a single lump sum and the percentage of the account which will be
distributed in installments, including the number of years over which such
installments shall be distributed.

 5

82

 

     5.4 NEW MANDATORY BENEFIT PAYMENT ELECTIONS. Notwithstanding any provision in this Plan to the
contrary, a Participation Agreement providing an effective election as to the deferral amount and
the time and method of payment of benefits under the Plan shall be entered into by all existing
Participants and by all directors beginning participation effective April 1, 1998, prior to April
1, 1998, including all Participants who are no longer actively deferring Fees under the Plan, and
such election shall supersede all prior benefit payment elections; provided, however, that if a
Participant’s benefit under the Plan is in pay status before April 1, 1998, pursuant to a prior
election, then that Participant may not effectively make a new election and must continue to
receive his benefit payments at the time and in the manner previously elected. If a Participant
does not make an effective election as required by this Section 5.4 or pursuant to Section 5.3(a),
then his benefit shall be paid at the time and in the manner provided in Section 5.3(a).

     5.5 DEATH OF A PARTICIPANT AND BENEFICIARY DESIGNATION.

	 	(a)  	FORM AND TIME OF PAYMENT. In the event of a Participant’s death prior to the
time his benefits under the Plan commence to be distributed, the balance in his
Individual Account shall be paid to his designated beneficiary in the form elected by
the Participant in his most recently filed Participation Agreement. Such distribution
shall be made or commence to be made within 60 days of the date of the Participant’s
death. If the Participant has not made an election as to the form in which his benefit
under the Plan is to be distributed, or if his election was not timely filed with the
Committee or is not in proper form, such benefit shall be paid to the Participant’s
designated beneficiary, in a single lump sum, within sixty (60) days of the date of
the Participant’s death. If the Participant dies after distribution of his benefits
under the Plan has commenced, his remaining benefit, if any, shall be distributed in
the same form(s) and at the same time(s) as such benefit was being distributed prior
to his death, or in a single lump sum, if effectively elected by the Participant in
his most recently filed Participation Agreement. Notwithstanding any provision to the
contrary, however, the Committee, in its sole discretion, may approve an accelerated
method and time of distribution to said beneficiary or beneficiaries.
	 
	 	(b)  	DESIGNATION OF BENEFICIARIES. The Participant may designate a primary and
contingent beneficiary or beneficiaries on forms provided by the Committee, which for
this purpose may include the Participation Agreement. Such designation may be changed
at any time for any reason by the Participant. If the Participant fails to designate a
beneficiary, or if such designation shall for any reason be illegal or ineffective, or
if the designated beneficiary(ies) shall not survive the Participant, his benefits
under the Plan shall be paid to his estate.

 6

83

 

ARTICLE VI

PLAN ADMINISTRATION

     6.1 ADMINISTRATION BY THE COMMITTEE. The Committee shall be responsible for administering the
Plan. Except as Horizon Bancorp shall otherwise expressly determine, the Committee shall be charged
with the full power and the responsibility for administering the Plan in all its details.

     6.2 POWERS AND RESPONSIBILITIES OF THE COMMITTEE.

	 	(a)  	The Committee shall have all powers necessary to administer the Plan,
including the power to construe and interpret the Plan documents; to decide all
questions relating to an individual’s eligibility to participate in the Plan; to
determine the amount, manner and timing of any distribution of benefits or withdrawal
under the Plan; to resolve any claim for benefits in accordance with Section 6.4, and
to appoint or employ advisors, including legal counsel, to render advice with respect
to any of the Committee’s responsibilities under the Plan. Any construction,
interpretation, or application of the Plan by the Committee shall be final, conclusive
and binding. All actions by the Committee shall be taken pursuant to uniform standards
applied to all persons similarly situated.
	 
	 	(b)  	RECORDS AND REPORTS. The Committee shall be responsible for maintaining
sufficient records to determine each Participant’s eligibility to participate in the
Plan, and the Fees of each Participant for purposes of determining the amount of
contributions that may be made by or on behalf of the Participant under the Plan. (c)
RULES AND DECISIONS. The Committee may adopt such rules as it deems necessary,
desirable, or appropriate in the administration of the Plan. All rules and decisions
of the Committee shall be applied uniformly and consistently to all Participants in
similar circumstances. When making a determination or calculation, the Committee shall
be entitled to rely upon information furnished by a Participant or beneficiary, a
Company or the legal counsel of a Company.
	 
	 	(d)  	APPLICATION AND FORMS FOR BENEFITS. The Committee may require a Participant
or beneficiary to complete and file with it an application for a benefit, and to
furnish all pertinent information requested by it. The Committee may rely upon all
such information so furnished to it, including the Participant’s or beneficiary’s
current mailing address.

 7

84

 

     6.3 LIABILITIES. The Committee shall be indemnified and held harmless by the Companies with
respect to any actual or alleged breach of responsibilities performed or to be performed hereunder.

     6.4 CLAIMS PROCEDURE.

	 	(a)  	FILING A CLAIM. Any Participant or beneficiary under the Plan may file a
written claim for a Plan benefit with the Committee or with a person named by the
Committee to receive claims under the Plan.
	 
	 	(b)  	NOTICE OF DENIAL OF CLAIM. In the event of a denial or limitation of any
benefit or payment due to or requested by any Participant or beneficiary under the
Plan (“claimant”), the claimant shall be given a written notification containing
specific reasons for the denial or limitation of his benefit. The written notification
shall contain specific reference to the pertinent Plan provisions on which the denial
or limitation of his benefit is based. In addition, it shall contain a description of
any other material or information necessary for the claimant to perfect a claim, and
an explanation of why such material or information is necessary. The notification
shall further provide appropriate information as to the steps to be taken if the
claimant wishes to submit his claim for review. This written notification shall be
given to a claimant within 90 days after receipt of his claim by the Committee unless
special circumstances require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice of the extension shall
be furnished to the claimant prior to the termination of said 90-day period, and such
notice shall indicate the special circumstances which make the postponement
appropriate.
	 
	 	(c)  	RIGHT OF REVIEW. In the event of a denial or limitation of his benefit, the
claimant or his duly authorized representative shall be permitted to review pertinent
documents and to submit to the Committee issues and comments in writing. In addition,
the claimant or his duly authorized representative may make a written request for a
full and fair review of his claim and its denial by the Committee; provided, however,
that such written request must be received by the Committee (or its delegate to
receive such requests) within 60 days after receipt by the claimant of written
notification of the denial or limitation of the claim. The 60-day requirement may be
waived by the Committee in appropriate cases.
	 
	 	(d)  	DECISION ON REVIEW. A decision shall be rendered by the Committee within 60
days after the receipt of the request for review, provided that where special
circumstances require an extension of time for processing the decision, it may be
postponed on written notice to the claimant (prior to the expiration of the initial
60-day period) for an additional 60 days after the receipt of such request for review.
Any decision by the Committee shall be furnished to the claimant in writing and shall
set forth the specific reasons for the decision and the specific Plan provisions on
which the decision is based.
	 
	 	(e)  	COURT ACTION. No Participant or beneficiary shall have the right to seek
judicial review of a denial of benefits, or to bring any action in any court to
enforce a claim for benefits prior to filing a claim for benefits or exhausting his
rights to review under this Section 6.4.

 8

85

 

     6.5 INCOME AND EMPLOYMENT TAX WITHHOLDING. The Companies shall be responsible for withholding,
and the Participant shall agree to such withholdings in his Participation Agreement, from the
Participant“s Fees or from the distribution of his benefit under the Plan of all applicable
federal, state, city and local taxes.

ARTICLE VII

AMENDMENT AND TERMINATION

     The Board may amend, suspend or terminate, in whole or in part, the Plan without the consent
of the Committee, the Participant, beneficiary or other person, except that no amendment,
suspension or termination shall retroactively impair or otherwise adversely affect (without
consent) the rights of a Participant, beneficiary or other person entitled to benefits under the
Plan which have accrued prior to the date of such action, as determined by the Committee in its
sole discretion. It is noted, however, that the Participant’s benefits under the Plan constitute
mere unsecured claims on the general assets of a Company. In addition, the Plan will terminate with
respect to an individual Company by resolution of the Company’s Board of Directors, provided that
30 days advance written notice is given to the Committee and Horizon Bancorp.

 9

86

 

ARTICLE VIII

PARTICIPATION BY AFFILIATES

     SECTION 8.1. AFFILIATE PARTICIPATION. Any Affiliate may adopt the Plan and become a
participating Company under the Plan by filing with the Committee:

	 	(a)  	a certified copy of a resolution of its Board of Directors to that effect;
and
	 
	 	(b)  	a written document signed by an authorized officer of Horizon Bancorp
which indicates the consent of Horizon Bancorp to that action.

     Notwithstanding any provision herein to the contrary, Horizon Bank shall automatically be a
participating Company as of the effective date of the restatement of this Plan, April 1, 1998.

     SECTION 8.2. HORIZON BANCORP ACTION BINDING ON OTHER EMPLOYERS. As long as Horizon Bancorp is
a Company under the Plan, it is empowered to act for any other Company in all matters relating to
the Plan or the Committee.

ARTICLE IX

GENERAL PROVISIONS

     9.1 GOVERNING LAW. The Plan shall be construed, regulated and administered according to the
laws of the State of Indiana, except in those areas preempted by the laws of the United States of
America in which case such laws will control.

     9.2 HEADINGS AND GENDER. The headings and subheadings in the Plan have been inserted for
convenience of reference only and shall not affect the construction of the provisions hereof. In
any necessary construction the masculine shall include the feminine and the singular the plural,
and vice versa.

     9.3 PARTICIPANT’S RIGHTS; ACQUITTANCE. No Participant shall acquire any right to be retained
in an Employer’s employ by virtue of the Plan, nor, upon his dismissal, or upon his voluntary
termination of employment, shall he have any right or interest in or to any Plan assets other than
as specifically provided herein.

     9.4 SPENDTHRIFT CLAUSE. No benefit or interest available hereunder will be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or
garnishment by creditors of the Participant or the Participant’s designated beneficiary, either
voluntarily or involuntarily.

 10

87

 

     9.5 COUNTERPARTS. This Plan may be executed in any number of counterparts, each of which shall
constitute but one and the same instrument and may be sufficiently evidenced by any one
counterpart.

     9.6 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be construed as a
contract of employment between a Company and any person, nor shall the Plan be deemed to give any
person the right to be retained in the employ or as a Director of a Company or limit the right of a
Company to employ or discharge any person with or without cause.

     9.7 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding provisions of the Plan,
none of the Companies, the Committee and each individual acting as an employee or agent of any of
them shall be liable to any Participant, Director or beneficiary for any claim, loss, liability or
expense incurred in connection with the Plan, except when the same shall have been judicially
determined to be due to the gross negligence or willful misconduct of such person.

     9.8 INCAPACITY OF PARTICIPANT OR BENEFICIARY. If any person entitled to receive a distribution
under the Plan is physically or mentally incapable of personally receiving and giving a valid
receipt for any payment due (unless prior claim therefor shall have been made by a duly qualified
guardian or other legal representative), then, unless and until claim therefor shall have been made
by a duly appointed guardian or other legal representative of such person, the Committee may
provide for such payment or any part thereof to be made to any other person or institution then
contributing toward or providing for the care and maintenance of such person. Any such payment
shall be a payment for the account of such person and a complete discharge of any liability of the
Companies and the Plan.

     9.9 CORPORATE SUCCESSORS. The Plan shall not be automatically terminated by a transfer or sale
of assets of Horizon Bancorp or by the merger or consolidation of Horizon Bancorp into or with any
other corporation or other entity (“Transaction”), but the Plan shall be continued after the
Transaction only if and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan.

     9.10 EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit,
document or other information which the person relying thereon considers pertinent and reliable,
and signed, made or presented by the proper party or parties.

     9.11 ACTION BY A COMPANY. Any action required of or permitted by a Company under the Plan
shall be by resolution of its Board of Directors or, for Horizon Bancorp, by resolution of the
Board or the Committee or by a person or persons authorized by resolution of the Board or the
Committee.

     9.12 SEVERABILITY. In the event any provisions of the Plan shall be held to be illegal or
invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the

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Plan, and the Plan shall be construed and endorsed as if such illegal or invalid provisions had
never been contained in the Plan.

SIGNATURES

     IN WITNESS WHEREOF, Horizon Bancorp, by its officers thereunder duly authorized, have caused
this Horizon Bancorp Directors Deferred Compensation Plan to be executed this ___day of
                    , 1997, effective April 1, 1998.

	 	 	 	 	 	 	 
	 	 	HORIZON BANCORP
	 	 	 	 	 	 	 
	

	 	By:	 	 	 	 
	

	 	 	 	 
	 	 
	

	 	Title:	 	 	 	 
	

	 	 	 	 	 	ATTEST:
	

	 	 	 	 	 	 

	 	 	 	 	 
	By:
	 	 	 	 
	

	 	 
	 	 
	Title:
	 	 	 	 
	

	 	 	 	 

SS-144873-2

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