Legacy Reserves LP (LRLP, Legacy or the Partnership) and its affiliated entities are referred to as Legacy
in these financial statements.
LRLP, a Delaware limited partnership, was formed by its general partner, Legacy Reserves GP, LLC
(LRGPLLC), on October 26, 2005 to own and operate oil and natural gas properties. LRGPLLC is a Delaware limited liability company formed on October 26, 2005, and it currently owns an approximately 0.03% general partner interest
in LRLP.
Significant information regarding rights of the unitholders includes the following:
In the event of a liquidation, after making required payments to Legacys preferred unitholders,
all property and cash in excess of that required to discharge all liabilities will be distributed to the unitholders and LRLPs general partner in proportion to their capital account balances, as adjusted to reflect any gain or loss upon the
sale or other disposition of Legacys assets in liquidation.
Legacy owns and operates oil and natural gas producing properties
located primarily in East Texas, the Permian Basin (West Texas and Southeast New Mexico), Rocky Mountain and Mid-Continent regions of the United States. Legacy has acquired oil and natural gas producing properties and drilled and undrilled
leasehold.
The accompanying financial statements have been prepared on the accrual basis of accounting whereby revenues are recognized
when earned, and expenses are recognized when incurred.
Accounts receivable are recorded at the invoiced amount and do not bear interest. Legacy routinely assesses the financial strength of its
customers. Bad debts are recorded based on an account-by-account review. Accounts are written off after all means of collection have been exhausted and potential recovery is considered remote. Legacy does not have any off-balance-sheet credit
exposure related to its customers (see Note 10).
Legacy accounts for oil and natural gas properties using the successful efforts method. Under this method of accounting, costs relating to the
acquisition and development of proved areas are capitalized when incurred. The costs of development wells are capitalized whether productive or non-productive. Leasehold acquisition costs are capitalized when incurred. If proved reserves are found
on an unproved property, leasehold cost is transferred to
proved properties. Exploration dry holes are charged to expense when it is determined that no commercial reserves exist. Other exploration costs, including personnel costs, geological and
geophysical expenses and delay rentals for oil and natural gas leases, are charged to expense when incurred. The costs of acquiring or constructing support equipment and facilities used in oil and gas producing activities are capitalized. Production
costs are charged to expense as incurred and are those costs incurred to operate and maintain our wells and related equipment and facilities.
Depreciation and depletion of producing oil and natural gas properties is recorded based on units of production. Acquisition costs of proved
properties are amortized on the basis of all proved reserves, developed and undeveloped, and capitalized development costs (wells and related equipment and facilities) are amortized on the basis of proved developed reserves. As more fully described
below, proved reserves are estimated annually by Legacys independent petroleum engineer, LaRoche Petroleum Consultants, Ltd. (LaRoche), and are subject to future revisions based on availability of additional information.
Legacys in-house reservoir engineers prepare an updated estimate of reserves each quarter. Depletion is calculated each quarter based upon the latest estimated reserves data available. As discussed in Note 11, asset retirement costs are
recognized when the asset is placed in service, and are amortized over proved developed reserves using the units of production method. Asset retirement costs are estimated by Legacys engineers using existing regulatory requirements and
anticipated future inflation rates.
Upon sale or retirement of complete fields of depreciable or depletable property, the book value
thereof, less proceeds from sale or salvage value, is charged to income. On sale or retirement of an individual well the proceeds are credited to accumulated depletion and depreciation.
Oil and natural gas properties are reviewed for impairment when facts and circumstances indicate that their carrying value may not be
recoverable. Legacy compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using managements expectations of future oil and natural gas prices. These future price scenarios
reflect Legacys estimation of future price volatility. If net capitalized costs exceed estimated undiscounted future net cash flows, the measurement of impairment is based on estimated fair value, using estimated discounted future net cash
flows. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices and (iv) a market-based weighted
average cost of capital rate. The underlying commodity prices embedded in Legacys estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as
well as other factors that Legacys management believes will impact realizable prices. For the year ended December 31, 2017, Legacy recognized $37.3 million of impairment expense in 47 separate producing fields, due primarily to the
further decline in oil and natural gas futures prices, increased expenses and well performance during the year ended December 31, 2017, which decreased the expected future cash flows below the carrying value of the assets. For the year ended
December 31, 2016, Legacy recognized $61.8 million of impairment expense, in 43 separate producing fields, due primarily to well performance and the further decline in commodity prices during the year ended December 31, 2016, which
decreased the expected future cash flows below the carrying value of the assets. For the year ended December 31, 2015, Legacy recognized $633.8 million of impairment expense, $598.1 million of which was in 218 separate producing fields, due to
the significant decline in commodity prices during the year ended December 31, 2015, which decreased the expected future cash flows below the carrying value of the assets. The remainder of the impairment related primarily to unproven
properties.
Unproven properties that are individually significant are assessed for impairment and if considered impaired are charged to
expense when such impairment is deemed to have occurred. Legacy did not recognize impairment expense on unproved properties during the years ended December 31, 2017 and 2016. During the year ended December 31, 2015, Legacy recognized $35.7
million of impairment of unproven properties.
Legacys estimates of proved reserves are based on the quantities of oil, NGLs and natural gas that engineering and geological analyses
demonstrate, with reasonable certainty, to be recoverable from established reservoirs in the future under current operating and economic parameters. LaRoche prepares a reserve and economic evaluation of all Legacys properties on a case-by-case
basis utilizing information provided to it by Legacy and information available from state agencies that collect information reported to it by the operators of Legacys properties. The estimates of Legacys proved reserves have been
prepared and presented in accordance with SEC rules and accounting standards.
Reserves and their relation to estimated future net cash
flows impact Legacys depletion and impairment calculations. As a result, adjustments to depletion and impairment are made concurrently with changes to reserve estimates. Legacy prepares its reserve estimates, and the projected cash flows
derived from these reserve estimates, in accordance with SEC guidelines. The independent engineering firm described above adheres to the same guidelines when preparing the reserve report. The accuracy of Legacys reserve estimates is a function
of many factors including the quality and quantity of available data, the interpretation of that data, the accuracy of various mandated economic assumptions, and the judgments of the individuals preparing the estimates.
Legacys proved reserve estimates are a function of many assumptions, all of which could deviate significantly from actual results. As
such, reserve estimates may materially vary from the ultimate quantities of oil, NGLs and natural gas eventually recovered.
Legacy is structured as a limited partnership, which is a pass-through entity for United States income tax purposes.
The State of Texas has a margin-based franchise tax law that is commonly referred to as the Texas margin tax and is assessed at a 0.75% rate.
Corporations, limited partnerships, limited liability companies, limited liability partnerships and joint ventures are examples of the types of entities that are subject to the tax. The tax is considered an income tax and is determined by applying a
tax rate to a base that considers both revenues and expenses.
Legacy recorded income tax (expense) benefit of $(1.4) million, $(1.2)
million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively, which consists primarily of the Texas margin tax and federal income tax on a corporate subsidiary which employs full and part-time personnel providing
services to the Partnership. The Partnerships total effective tax rate differs from statutory rates for federal and state purposes primarily due to being structured as a limited partnership, which is a pass-through entity for federal income
tax purposes.
Net income for financial statement purposes may differ significantly from taxable income reportable to unitholders as a
result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under the partnership agreement. In addition, individual unitholders have different investment bases
depending upon the timing and price of acquisition of their common units, and each unitholders tax accounting, which is partially dependent upon the unitholders tax position, differs from the accounting followed in the consolidated
financial statements. As a result, the aggregate difference in the basis of net assets for financial and tax reporting purposes cannot be readily determined as the Partnership does not have access to information about each unitholders tax
attributes in the Partnership. However, with respect to the Partnership, the Partnerships book basis in its net assets exceeds the Partnerships net tax basis by $1.7 billion at December 31, 2017.
Legacy uses derivative financial instruments to achieve more predictable cash flows by reducing its exposure to oil and natural gas price
fluctuations and interest rate changes. Legacy does not specifically designate derivative instruments as cash flow hedges, even though they reduce its exposure to changes in oil and natural gas prices and interest rates. Therefore, Legacy records
the change in the fair market values of oil and natural gas derivatives in current earnings. Changes in the fair values of interest rate derivatives are recorded in interest expense (see Notes 8 and 9).
Management of Legacy has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ materially from those
estimates. Estimates which are particularly significant to the consolidated financial statements include estimates of oil and natural gas reserves, valuation of derivatives, impairment of oil and natural gas properties, depreciation, depletion and
amortization, asset retirement obligations and accrued revenues.
Sales of crude oil, NGLs and natural gas are recognized when the delivery to the purchaser has occurred and title has been transferred. This
occurs when oil or natural gas has been delivered to a pipeline or a tank lifting has occurred. Crude oil is priced on the delivery date based upon prevailing prices published by purchasers with certain adjustments related to oil quality and
physical location. Virtually all of Legacys natural gas contracts pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality
of natural gas, and prevailing supply and demand conditions, so that the price of the natural gas fluctuates to remain competitive with other available natural gas supplies. These market indices are determined on a monthly basis. As a result,
Legacys revenues from the sale of oil and natural gas will suffer if market prices decline and benefit if they increase. Legacy believes that the pricing provisions of its oil and natural gas contracts are customary in the industry.
To the extent actual volumes and prices of oil and natural gas are unavailable for a given reporting period because of timing or information
not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded as Accounts receivableoil and natural gas in the accompanying consolidated balance sheets.
Natural gas imbalances occur when Legacy sells more or less than its entitled ownership percentage of total natural gas production. Any amount
received in excess of its share is treated as a liability. If Legacy receives less than its entitled share, the underproduction is recorded as a receivable. Legacy did not have any significant natural gas imbalance positions as of December 31,
2017, 2016 and 2015.
Undivided interests in oil and natural gas properties owned through joint ventures are consolidated on a proportionate basis. Investments in
entities where Legacy exercises significant influence, but not a controlling interest, are accounted for by the equity method. Under the equity method, Legacys investments are stated at cost plus the equity in undistributed earnings and losses
after acquisition.
Legacy has capitalized certain operating rights acquired in the acquisition of oil and natural gas properties. The operating rights, which have
no residual value, are amortized over their estimated economic life of
approximately 15 years beginning July 1, 2006. Amortization expense is included as an element of depletion, depreciation, amortization and accretion expense. Impairment is assessed on a
quarterly basis or when there is a material change in the remaining useful life. The expected amortization expenses for 2018, 2019, 2020 and 2021 are $358,000, $349,000, $322,000 and $223,000, respectively.
Legacy is subject to extensive federal, state and local environmental laws and regulations. These laws, which are frequently changing, regulate
the discharge of materials into the environment and may require Legacy to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or
capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a non-capital nature are
recorded when environmental assessment and/or remediation are probable, and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments is fixed and readily determinable.
Basic income (loss) per unit amounts are calculated after deducting distributions paid to Legacys Preferred Units using the weighted
average number of units outstanding during each period. Diluted income (loss) per unit also give effect to dilutive unvested restricted units (calculated based upon the treasury stock method) (see Note 12).
Legacys management initially treats each new acquisition of oil and natural gas properties as a separate operating segment. Legacy
aggregates these operating segments into a single segment for reporting purposes.
Concurrent with its formation on March 15, 2006, a Long-Term Incentive Plan (LTIP) for Legacy was created. Due to
Legacys history of cash settlements for option exercises and certain phantom unit awards, Legacy accounts for these awards under the liability method, which requires the Partnership to recognize the fair value of each unit option at the end of
each period. Expense or benefit is recognized as the fair value of the liability changes from period to period. Legacy accounts for executive phantom unit and restricted unit awards under the equity method. Legacys issued units, as reflected
in the accompanying consolidated balance sheet at December 31, 2017, do not include 241,373 units related to unvested restricted unit awards.
Below are the components of accrued oil and natural gas liabilities as of December 31, 2017 and 2016.
Restricted cash of $3.2 million and $3.6 million as of December 31, 2017 and 2016, respectively, is recorded in the Prepaid expenses
and other current assets line. The restricted cash amounts represent various deposits to secure the performance of contracts, surety bonds and other obligations incurred in the ordinary course of business.
Certain prior year balances have been reclassified to conform to the current year presentation of balances as stated in this annual report on
Form 10-K.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (ASU 2016-02). ASU 2016-02
establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with
classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective
transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We
are currently evaluating the impact of our pending adoption of ASU 2016-02 on our consolidated financial statements.
In May 2014, the
FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize
revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this
core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with
Customers (ASU 2015-14), which approved a one-year delay of the standards effective date. In accordance with ASU 2015-14, the standard is now effective for annual periods beginning after December 15, 2017, and interim
periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a
retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Legacy will adopt ASU 2014-09 utilizing the modified retrospective approach as
of January 1, 2018.
Legacy has completed its scoping and impact assessment of ASU 2014-09. Legacys assessment included
involvement from a consultant to assist with its implementation methodology and development of conclusions related to the impact that ASU 2014-09 is expected to have on the Partnerships financial statements.
In performing its impact assessment, Legacy evaluated a representative population of revenue contracts related to its three material revenue
streams: oil, natural gas and natural gas liquids. Through Legacys contract review process, the Partnership identified all material contract types and contractual features that represent its revenue. For those contracts evaluated during its
implementation, Legacy reviewed key contract provisions under ASU 2014-09 to assess the impact on the amount and timing of revenue recognition, as well as the presentation of revenues upon adoption of the new standard. As a part of this assessment,
Legacy compared its historical accounting policies and practices to that required by ASU 2014-09.
Based upon work completed to date, the
adoption of ASU 2014-09 will not have a material impact on net profit. However, Legacy does believe that certain reclassifications between revenue and expenses will be
required based upon its assessment of (i) where control of Legacys product passes to its customer for certain natural gas and NGL contracts and (ii) whether Legacy represents the
principal or the agent in certain arrangements. In addition, Legacys disclosures surrounding revenue recognition will be more robust upon adoption of ASU 2014-09. Legacy is continuing to perform other implementation activities, including the
development of new controls and policies and draft disclosures.
The estimated fair values of Legacys financial instruments approximate the carrying amounts except as discussed below:
On April 1, 2014, Legacy entered into a five-year $1.5 billion secured revolving credit facility with Wells Fargo Bank, National
Association, as administrative agent, (as amended through the Eighth Amendment, the Credit Agreement). Borrowings under the Credit Agreement mature on April 1, 2019. Legacys obligations under the Credit Agreement are secured
by mortgages on over 95% of the total value of its oil and natural gas properties as well as a pledge of all of its ownership interests in its operating subsidiaries. The amount available for borrowing at any one time is limited to the lesser of the
borrowing base and the facility amount and contains a $2 million sub-limit for letters of credit. The borrowing base at December 31, 2017 was set at $575 million. The
borrowing base is subject to semi-annual redeterminations on April 1 and October 1 of each year. Any borrowings in excess of the redetermined borrowing base must be repaid.
Additionally, either Legacy or the lenders may, once during each calendar year, elect to redetermine the borrowing base between scheduled redeterminations. Legacy also has the right, once during each calendar year, to request the redetermination of
the borrowing base upon the proposed acquisition of certain oil and natural gas properties where the purchase price is greater than 10% of the borrowing base then in effect. Any increase in the borrowing base requires the consent of all the lenders
and any decrease in or maintenance of the borrowing base must be approved by the lenders holding at least 66-2/3% of the outstanding aggregate principal amounts of the loans or participation interests in letters of credit issued under the Credit
Agreement. If the requisite lenders do not agree on an increase or decrease, then the borrowing base will be the highest borrowing base acceptable to the lenders holding 66-2/3% of the outstanding aggregate principal amounts of the loans or
participation interests in letters of credit issued under the Credit Agreement so long as it does not increase the borrowing base then in effect. Under the Credit Agreement, interest on debt outstanding is charged based on Legacys selection of
a one-, two-, three- or six-month LIBOR rate plus 1.5% to 2.5%, or the ABR which equals the highest of the prime rate, the Federal funds effective rate plus 0.50% or one-month LIBOR plus 1.00%, plus an applicable margin from 0.5% to 1.5% per
annum, determined by the percentage of the borrowing base then in effect that is drawn.
The Credit Agreement contains various covenants
that limit Legacys ability to: (i) incur indebtedness, (ii) enter into certain leases, (iii) grant certain liens, (iv) enter into certain swaps, (v) make certain loans, acquisitions, capital expenditures and
investments, (vi) make distributions other than from available cash, (vii) merge, consolidate or allow certain material changes in the character of its business, (viii) repurchase Senior Notes or repay second lien term loans,
(ix) engage in certain asset dispositions, including a sale of all or substantially all of its assets or (x) maintain a consolidated cash balance in excess of $20 million without prepaying the loans in an amount equal to such excess.
Effective October 25, 2016, Legacy entered into an amendment (the Eighth Amendment) to the Credit Agreement with the Administrative Agent and certain other financial institutions party thereto as lenders to, among other items:
(i) permit the issuance and use of the Second Lien Term Loans pursuant to the Second Lien Term Loan Credit Agreement (as defined below), (ii) increase the percentage of the total value of Legacys Oil and Gas Properties required to be
subject to a mortgage to 95% of the value or the most recently evaluated Reserve Report and grant a mortgage on certain identified undeveloped acreage in the Permian Basin, (iii) require Legacy to grant a perfected security interest in its cash
and securities accounts, subject to certain customary exceptions and (iv) allow Legacy to hedge on an unsecured basis with counterparties who (or whose credit support provider) has an issuer rating or whose long term senior unsecured debt
rating of BBB-/Baa3. The Credit Agreement, as amended by the Eighth Amendment, also contains covenants that, among other things, require Legacy to maintain specified ratios or conditions. As of December 31, 2017 these covenants were as follows:
(i) as of any day, first lien debt to EBITDA for the four fiscal quarters ending on the last day of the fiscal quarter immediately preceding the date of determination for which financial statements are available to not be greater than: 2.50 to
1.00, (ii) As of the last day of any fiscal quarter, beginning the fiscal quarter ended December 31, 2018, secured debt at any time to EBITDA for the four fiscal quarters ending on the last day of the fiscal quarter preceding such day of
not more than 4.5 to 1.0, (iii) as of the last day of the most recent quarter, total EBITDA over the last four quarters to total interest expense over the last four quarters to be greater than 2.0 to 1.0, (iv) as of the last day of any
fiscal quarter, consolidated current assets, as of the last day of the most recent quarter and including the unused amount of the total commitments, to consolidated current liabilities as of the last day of the most recent quarter of not less than
1.0 to 1.0, excluding current maturities under the Credit Agreement and non-cash assets and liabilities under FASB Accounting Standards Codification 815, which includes the current portion of oil, natural gas and interest rate derivatives and
(v) as of the last day of any fiscal quarter, the ratio of (a) the sum of (i) the net present value using NYMEX forward pricing, discounted at 10 percent per annum, of Legacys proved developed producing oil and gas properties
(PDP PV-10) as reflected in the most recent reserve report delivered either July 1 or December 31 of each year, as the case may be, beginning with the reserve report to be delivered on July 1, 2017 (giving pro forma effect
to material acquisitions or dispositions since the date of such reports), (ii) the net mark to market value of Legacys swap agreements and (iii) Legacys cash and cash equivalents, in each case as of such date to
(b) Secured Debt as of such day to be equal to or less than 1.00 to 1.00.
All capitalized terms not defined in the foregoing description have the meaning assigned to them
in the Credit Agreement, as amended by the Eighth Amendment.
As of December 31, 2017, Legacy had outstanding borrowings of $499
million under the Credit Agreement at a weighted average interest rate of 4.37% and therefore had approximately $75.2 million of borrowing availability remaining. For the year ended December 31, 2017, Legacy paid $20.1 million of interest
expense on the Credit Agreement.
At December 31, 2017, Legacy was in compliance with all covenants contained in the Credit
Agreement. Should commodity prices dramatically fall in 2018, Legacy could breach certain financial covenants under its revolving credit facility, which would constitute a default under its revolving credit facility. Such default, if not remedied,
would require a waiver from Legacys lenders in order for Legacy to avoid an event of default and subsequent acceleration of all amounts outstanding under Legacys revolving credit facility or foreclosure on Legacys oil and natural
gas properties. While no assurances can be made that, in the event of a covenant breach, such a waiver will be granted, Legacy believes the long-term global outlook for commodity prices and its efforts to date, which include the suspension of
distributions to Legacys unitholders and Preferred Unitholders, as well as asset sales, will be viewed positively by its lenders. A default under Legacys revolving credit facility could cause all of Legacys existing indebtedness,
including Legacys Second Lien Term Loans (as defined below), 2020 Senior Notes and 2021 Senior Notes, to be immediately due and payable.
On October 25, 2016, Legacy entered into a Term Loan Credit Agreement (as amended, the Second Lien Term Loan Credit Agreement)
among Legacy, as borrower, Cortland Capital Market Services LLC, as administrative agent and second lien collateral agent, and the lenders party thereto, providing for term loans up to an increased aggregate principal amount of $300.0 million as
part of the third amendment to the credit agreement (the Second Lien Term Loans). GSO Capital Partners L.P. (GSO) and certain funds and accounts managed, advised or sub-advised, by GSO are the initial lenders thereunder. The
Second Lien Term Loans are secured on a second lien priority basis by the same collateral that secures Legacys Credit Agreement and are unconditionally guaranteed on a joint and several basis by the same wholly owned subsidiaries of Legacy
that are guarantors under the Credit Agreement.
Legacy used the initial $60.0 million of gross loan proceeds from its Second Lien Term
Loan to repay outstanding indebtedness and pay associated transaction expenses. Legacy used subsequent draws to fund the Acceleration Payment as defined in Note 4. As of December 31, 2017, there was $205.0 million drawn under the Second Lien
Term Loan. The Second Lien Term Loans under the Second Lien Term Loan Credit Agreement will be issued with an upfront fee of 2% and bear interest at a rate of 12.00% per annum payable quarterly in cash or, prior to the 18 month anniversary of
the Second Lien Term Loan Credit Agreement, Legacy may elect to pay in kind up to 50% of the interest payable. The Second Lien Term Loans may be used for general corporate purposes and for the repayment of outstanding indebtedness, in any case as
may be approved by GSO. For the first 24 months following the effective date of the Term Loan Credit Agreement, GSO may not assign more than 49% of the Second Lien Term Loans without the Partnerships consent. The Second Lien Term Loan Credit
Agreement matures on August 31, 2021; provided, however, that, if on July 1, 2020, Legacy has greater than or equal to a face amount of $15.0 million of Senior Notes that were outstanding on the date the Second Lien Term Loan Credit
Agreement was entered into or any other senior notes with a maturity date that is earlier than August 31, 2021, the Second Lien Term Loan Credit Agreement will mature on August 1, 2020. The Second Lien Term Loan Credit Agreement contains
customary prepayment provisions and make-whole premiums.
The Second Lien Term Loan Credit Agreement was amended on January 5, 2018.
See Note 15 for further discussion.
The Second Lien Term Loan Credit Agreement also contains covenants that, among other things,
require us to maintain specified ratios or conditions as follows:
All capitalized terms used but not defined in the foregoing description have the meaning assigned
to them in the Second Lien Term Loan Credit Agreement.
At December 31, 2017, Legacy was in compliance with all covenants contained
in the Second Lien Term Loan Credit Agreement.
For the year ended December 31, 2017, Legacy incurred interest expense of $15.0
million under the Second Lien Term Loan Credit Agreement.
On December 4, 2012, Legacy and its 100% owned subsidiary Legacy Reserves Finance Corporation completed a private placement offering to
eligible purchasers of an aggregate principal amount of $300.0 million of Legacys 8% Senior Notes due 2020 (the 2020 Senior Notes), which were subsequently registered through a public exchange offer that closed on January 8,
2014. The 2020 Senior Notes were issued at 97.848% of par.
Legacy has the option to redeem the 2020 Senior Notes, in whole or in part, at
any time on or after December 1, 2016, at the specified redemption prices set forth below together with any accrued and unpaid interest, if any, to the date of redemption if redeemed during the twelve-month period beginning on December 1
of the years indicated below.
Legacy may be required to offer to repurchase the 2020 Senior Notes at a purchase price of 101% of the
principal amount, plus accrued and unpaid interest, if any, to the redemption date, in the event of a change of control as defined by the indenture. Legacy and Legacy Reserves Finance Corporations obligations under the 2020 Senior Notes are
guaranteed by its 100% owned subsidiaries Legacy Reserves Operating GP LLC, Legacy Reserves Operating LP, Legacy Reserves Services, Inc., Legacy Reserves Energy Services LLC, Dew Gathering
LLC and Pinnacle Gas Treating LLC, which constitute all of Legacys wholly-owned subsidiaries other than Legacy Reserves Finance Corporation. In the future, the guarantees may be released or
terminated under the following circumstances: (i) in connection with any sale or other disposition of all or substantially all of the properties of the guarantor; (ii) in connection with any sale or other disposition of sufficient capital
stock of the guarantor so that it no longer qualifies as Legacys Restricted Subsidiary (as defined in the indenture); (iii) if designated to be an unrestricted subsidiary; (iv) upon legal defeasance, covenant defeasance or
satisfaction and discharge of the indenture; (v) upon the liquidation or dissolution of the guarantor provided no default or event of default has occurred or is occurring; (vi) at such time the guarantor does not have outstanding
guarantees of its, or any other guarantors, other debt; or (vii) upon merging into, or transferring all of its properties to Legacy or another guarantor and ceasing to exist. Refer to Note 14Subsidiary Guarantors for further details
on Legacys guarantors.
The indenture governing the 2020 Senior Notes limits Legacys ability and the ability of certain of its
subsidiaries to (i) sell assets; (ii) pay distributions on, repurchase or redeem equity interests or purchase or redeem Legacys subordinated debt, provided that such subsidiaries may pay dividends to the holders of their equity
interests (including Legacy) and Legacy may pay distributions to the holders of its equity interests subject to the absence of certain defaults, the satisfaction of a fixed charge coverage ratio test and so long as the amount of such distributions
does not exceed the sum of available cash (as defined in the partnership agreement) at Legacy, net proceeds from the sales of certain securities and return of or reductions to capital from restricted investments; (iii) make certain investments;
(iv) incur or guarantee additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict distributions or other payments from certain of its subsidiaries to Legacy;
(vii) consolidate, merge or transfer all or substantially all of Legacys assets; (viii) engage in certain transactions with affiliates; (ix) create unrestricted subsidiaries; and (x) engage in certain business activities.
These covenants are subject to a number of important exceptions and qualifications. If at any time when the 2020 Senior Notes are rated investment grade by each of Moodys Investors Service, Inc. and Standard & Poors Ratings
Services and no Default (as defined in the indenture) has occurred and is continuing, many of such covenants will terminate and Legacy and its subsidiaries will cease to be subject to such covenants. Further, if the lenders under Legacys
Credit Agreement were to accelerate the indebtedness under Legacys Credit Agreement as a result of a default, such acceleration could cause a cross-default of all of the 2020 Senior Notes and permit the holders of such notes to accelerate the
maturities of such indebtedness.
The indenture also includes customary events of default. As of the December 31, 2017, the
Partnership was in compliance with all covenants of the 2020 Senior Notes.
During the year ended December 31, 2016, Legacy repurchased a face amount of $52.0 million of its 2020 Senior Notes on the
open market. Legacy treated these repurchases as an extinguishment of debt. Accordingly, Legacy recognized a gain for the difference between (1) the face amount of the 2020 Senior Notes repurchased net of the unamortized portion of both the
original issuers discount and issuance costs and (2) the repurchase price.
On June 1, 2016, Legacy exchanged 2,719,124
units representing limited partner interests in the Partnership for $15.0 million of face amount of its outstanding 2020 Senior Notes. Legacy treated this exchange as an extinguishment of debt. Accordingly, Legacy recognized a gain for the
difference between (1) the face amount of the 2020 Senior Notes repurchased net of the unamortized portion of both the original issuers discount and issuance costs and (2) the fair value of the units issued in the exchange based on
the closing price on June 1, 2016.
On May 28, 2013, Legacy and its 100% owned subsidiary Legacy Reserves Finance Corporation completed a private placement offering to
eligible purchasers of an aggregate principal amount of $250 million of Legacys
6.625% Senior Notes due 2021 (the 2021 Senior Notes), which were subsequently registered through a public exchange offer that closed on March 18, 2014. The 2021 Senior Notes were
issued at 98.405% of par.
On May 13, 2014, Legacy and its 100% owned subsidiary Legacy Reserves Finance Corporation completed a
private placement offering to eligible purchasers of an aggregate principal amount of an additional $300 million of the 6.625% 2021 Senior Notes. These 2021 Senior Notes were issued at 99% of par.
The terms of the 2021 Senior Notes, including details related to Legacys guarantors, are substantially identical to the terms of the
2020 Senior Notes with the exception of the maturity date, interest rate and redemption provisions noted below. Legacy will have the option to redeem the 2021 Senior Notes, in whole or in part, at any time on or after June 1, 2017, at the
specified redemption prices set forth below together with any accrued and unpaid interest, if any, to the date of redemption if redeemed during the twelve-month period beginning on June 1 of the years indicated below.
Legacy may be required to offer to repurchase the 2021 Senior Notes at a purchase price of 101% of the
principal amount, plus accrued and unpaid interest, if any, to the redemption date, in the event of a change of control as defined by the indenture. Legacy and Legacy Reserves Finance Corporations obligations under the 2021 Senior Notes are
guaranteed by the same parties and on the same terms as Legacys 2020 Senior Notes discussed above. Further, if the lenders under Legacys Credit Agreement were to accelerate the indebtedness under Legacys Credit Agreement as a
result of a default, such acceleration could cause a cross-default of all of the 2021 Senior Notes and permit the holders of such notes to accelerate the maturities of such indebtedness.
As of December 31, 2017, the Partnership was in compliance with all covenants of the 2021 Senior Notes.
On December 31, 2017, Legacy entered into an agreement to repurchase a face amount of $187.1 million of its 2021 Senior Notes from
certain holders in a single transaction. The transaction was funded on January 5, 2018 and will therefore be recognized in 2018. Legacy will treat this repurchase as an extinguishment of debt. Accordingly, Legacy will recognize a gain for the
difference between (1) the face amount of the 2021 Senior Notes repurchased net of the unamortized portion of both the original issuers discount and issuance costs and (2) the repurchase price. See Note 15 for further discussion.
During the year ended December 31, 2016, Legacy repurchased a face amount of $117.3 million of its 2021 Senior Notes on the
open market. Legacy treated these repurchases as an extinguishment of debt. Accordingly, Legacy recognized a gain for the difference between (1) the face amount of the 2021 Senior Notes repurchased net of the unamortized portion of both the
original issuers discount and issuance costs and (2) the repurchase price.
For the year ended December 31, 2017, Legacy
paid $47.3 million of cash interest expense for the 2020 Senior Notes and 2021 Senior Notes.
On
August 1, 2017, Legacy made a payment in the amount of $141 million (the Acceleration Payment) in connection with its First Amended and Restated Development Agreement (the Restated Agreement) with
Jupiter JV, LP (Jupiter). The Acceleration Payment caused the reversion to Legacy of additional working interests in all wells and associated personal property and infrastructure
(collectively, the Wells) and all undeveloped assets subject to the Restated Agreement. The transaction was accounted for as an asset acquisition in accordance with ASU 2017-01. Therefore, the acquired interests were recorded based upon
the cash consideration paid, with all value assigned to proved oil and natural gas properties.
On July 31, 2015, Legacy purchased (1) 100% of the issued and outstanding limited liability company membership interests in Dew
Gathering LLC, which owns directly and indirectly natural gas gathering and processing assets in Anderson, Freestone, Houston, Leon, Limestone and Robertson Counties, Texas (the WGR Acquisition) from WGR Operating LP (WGR)
for a net purchase price of $96.7 million, and (2) various oil and natural gas properties and associated production assets (the Anadarko E&P Acquisition, together with the WGR Acquisition, the Anadarko Acquisitions)
from Anadarko E&P Onshore LLC (Anadarko) for a net purchase price of $337.2 million. The purchase prices were financed with borrowings under Legacys revolving credit facility. The effective date of these purchases was
April 1, 2015. The operating results from the Anadarko Acquisitions have been included from their acquisition on July 31, 2015. During the year ended December 31, 2015, Legacy incurred acquisition costs, recorded in general and
administrative expense, of approximately $2.4 million related to the Anadarko Acquisitions and other acquisitions.
The allocation of the
purchase price to the fair value of the acquired assets and liabilities assumed was as follows (in thousands):
Blue Quail Energy Services, LLC (Blue Quail), a company specializing in water transfer services, is an affiliate of Moriah Energy
Services LLC, an entity which Cary D. Brown and Dale A. Brown, directors of Legacy, are principals. Legacy has contracted with Blue Quail to provide water transfer services and paid $9,758, $98,297 and $382,629 in 2017, 2016 and 2015, respectively
to Blue Quail for such services.
In mid-2015 Legacy performed a technical evaluation of a potential acquisition and, based on such
evaluation and Legacys business model, subsequently decided not to pursue such acquisition. In September 2015, Moriah Powder River LLC, an oil and natural gas exploration and production company which Cary D. Brown and Dale Brown indirectly
control, decided to pursue such opportunity and paid Legacy a one-time expense reimbursement of $500,000 to utilize Legacys prior technical work product.
From time to time Legacy is a party to various legal proceedings arising in the ordinary course of business. While the outcome of lawsuits
cannot be predicted with certainty, Legacy is not currently a party to any proceeding that it believes could have a potential material adverse effect on its financial condition, results of operations or cash flows.
Legacy is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to
environmental protection. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes environmental protection requirements that result in increased costs to the oil and natural gas industry in general,
the business and prospects of Legacy could be adversely affected.
Legacy has employment agreements and retention bonus agreements with
its officers and certain other employees. The employment agreements with its officers specify that if the officer is terminated by Legacy for other than cause or following a change in control, the officer shall receive severance pay ranging from 24
to 36 months salary plus bonus and COBRA benefits, respectively. The retention bonus agreements provide for fixed bonus amounts to be paid to employees contingent upon various criteria including their continuous employment or a change in
control.
Legacy maintains its
cash in bank deposit accounts, which, at times, may exceed federally insured amounts. Legacy has not experienced any losses in such accounts. Legacy believes it is not exposed to any significant credit risk on its cash.
Substantially all of Legacys accounts receivable result from oil and natural gas sales or joint interest billings to third parties in the
oil and natural gas industry. This concentration of customers and joint interest owners may impact Legacys overall credit risk in that these entities may be similarly affected by changes in economic and other conditions. Historically, Legacy
has not experienced significant credit losses on such receivables. No bad debt expense was recorded in 2017, 2016 or 2015. Legacy cannot ensure that such losses will not be realized in the future. A listing of oil and natural gas purchasers
exceeding 10% of Legacys sales is presented in Note 10.
Due to the volatility of oil and natural gas prices, Legacy periodically enters into price-risk management transactions (e.g., swaps, enhanced
swaps, costless collars or three-way collars) for a portion of its oil and natural gas production to achieve a more predictable cash flow, as well as to reduce exposure from price fluctuations. Legacy values these transactions at fair value on a
recurring basis (Note 8). As of December 31, 2017, Legacys commodity derivative transactions have a fair value favorable to the Partnership of $6.3 million, collectively. Legacy enters into commodity derivative transactions with entities
which Legacys management believes are creditworthy. In addition, Legacy reviews and assesses the creditworthiness of these institutions on a routine basis.
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair
value measurement. Legacys assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value
hierarchy levels.
Legacy estimates the fair values of its commodity swaps based on published forward commodity price curves for the underlying commodities as of
the date of the estimate for those commodities for which published forward pricing is readily available. For those commodity derivatives for which forward commodity price curves are not readily available, Legacy estimates, with the assistance of
third-party pricing experts, the forward curves as of the date of the estimate. Legacy validates the data provided by third parties by understanding the pricing models used, obtaining market values from other pricing sources, analyzing pricing data
in certain situations and confirming, where applicable, that those securities trade in active markets. Legacy estimates the option value of puts and calls combined into hedges, including costless collars, three-way collars and enhanced swaps using
an option pricing model which takes into account market volatility, market prices, contract parameters and discount rates based on published LIBOR rates and interest swap rates. Due to the lack of an active market for periods beyond one-month from
the balance sheet date for Legacys oil price differential swaps, Legacy has reviewed historical differential prices and known economic influences to estimate a reasonable forward curve of future pricing scenarios based upon these factors. In
order to estimate the fair value of its interest rate swaps, Legacy uses a yield curve based on money market rates and interest rate swaps, extrapolates a forecast of future interest rates, estimates each future cash flow, derives discount factors
to value the fixed and floating rate cash flows of each swap, and then discounts to present value all known (fixed) and forecasted (floating) swap cash flows. Curve building and discounting techniques used to establish the theoretical market value
of interest bearing securities are based on readily available money market rates and interest swap market data. The determination of the fair values above incorporates various factors including the impact of Legacys non-performance risk and
the credit standing of the counterparties involved in the Partnerships derivative contracts. The risk of nonperformance by the Partnerships counterparties is mitigated by the fact that enters into derivative transactions with entities
which Legacys management believes are creditworthy. In addition, Legacy routinely monitors the creditworthiness of its counterparties. As the factors described above are based on significant assumptions made by management, these assumptions
are the most sensitive to change.
The following table sets forth a reconciliation of changes in the fair value of financial assets
and liabilities classified as Level 3 in the fair value hierarchy:
During periods of market disruption, including periods of volatile oil and natural gas prices, rapid credit
contraction or illiquidity, it may be difficult to value certain of the Partnerships derivative instruments if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active
markets with observable data that become illiquid due to changes in the financial environment. In such cases, more derivative instruments may fall to Level 3 and thus require more subjectivity and management judgment. As such, valuations may include
inputs and assumptions that are less observable or require greater estimation as well as valuation methods which are more sophisticated or require greater estimation thereby resulting in valuations with less certainty. Further, rapidly changing
commodity and unprecedented credit and equity market conditions could materially impact the valuation of derivative instruments as reported within Legacys consolidated financial statements and the period-to-period changes in value could vary
significantly. Decreases in value may have a material adverse effect on Legacys results of operations or financial condition.
Nonfinancial assets and liabilities measured at fair value on a non-recurring basis include certain nonfinancial assets and liabilities as may
be acquired in a business combination, measurements of oil and natural gas property impairments, and the initial recognition of asset retirement obligations, for which fair value is used. These asset retirement obligation (ARO) estimates
are derived from historical costs as well as managements expectation of future cost environments. As there is no corroborating market activity to support the assumptions used, Legacy has designated these measurements as Level 3. A
reconciliation of the beginning and ending balances of Legacys ARO is presented in Note 11.
Nonrecurring fair value measurements of
proved oil and natural gas properties during the years ended December 31, 2017 and 2016 consist of:
Due to the volatility of oil and natural gas prices, Legacy periodically enters into price-risk management transactions (e.g., swaps, enhanced
swaps or collars) for a portion of its oil and natural gas production to achieve a more predictable cash flow, as well as to reduce exposure from price fluctuations. While the use of these arrangements limits Legacys ability to benefit from
increases in the prices of oil and natural gas, it also reduces Legacys potential exposure to adverse price movements. Legacys arrangements, to the extent it enters into any, apply to only a portion of its production, provide only
partial price protection against declines in oil and natural gas prices and limit Legacys potential gains from future increases in prices. None of these instruments are used for trading or speculative purposes.
These derivative instruments are intended to mitigate a portion of Legacys price-risk and may be considered hedges for economic
purposes, but Legacy has chosen not to designate them as cash flow hedges for accounting purposes. Therefore, all derivative instruments are recorded on the balance sheet at fair value with changes in fair value being recorded in current period
earnings.
By using derivative instruments to mitigate exposures to changes in commodity prices, Legacy exposes itself to credit risk and
market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes Legacy, which
creates credit risk. Legacy minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties.
The following table sets forth a reconciliation of the changes in fair value of Legacys commodity derivatives for the years ended
December 31, 2017, 2016, and 2015.
Certain of our commodity derivatives and interest rate derivatives are presented on a net basis on the
Consolidated Balance Sheets. The following table summarizes the gross fair values of our derivative instruments, presenting the impact of offsetting the derivative assets and liabilities on our Consolidated Balance Sheets as of the dates indicated
below (in thousands):
As of December 31, 2017, Legacy had the following NYMEX WTI crude oil swaps paying floating
prices and receiving fixed prices for a portion of its future oil production as indicated below:
As of December 31, 2017, Legacy had the following Midland-to-Cushing crude oil differential swaps paying
a floating differential and receiving a fixed differential for a portion of its future oil production as indicated below:
As of December 31, 2017, Legacy had the following NYMEX WTI crude oil costless collars that combine a
long put with a short call as indicated below:
As of December 31, 2017, Legacy had the following NYMEX WTI crude oil enhanced swap contracts that
combine a short put, a long put and a fixed-price swap as indicated below:
As of December 31, 2017, Legacy had the following NYMEX Henry Hub natural gas swaps paying floating
natural gas prices and receiving fixed prices for a portion of its future natural gas production as indicated below:
Due to the volatility of interest rates, Legacy periodically enters into interest rate risk management transactions in the form of interest
rate swaps for a portion of its outstanding debt balance. These transactions allow Legacy to reduce exposure to interest rate fluctuations. While the use of these arrangements limits Legacys ability to benefit from decreases in interest rates,
it also reduces Legacys potential exposure to increases in interest rates. Legacys arrangements, to the extent it enters into any, apply to only a portion of its outstanding debt balance, provide only partial protection against interest
rate increases and limit Legacys potential savings from future interest rate declines. It is never managements intention to hold or issue derivative instruments for speculative trading purposes. Conditions sometimes arise where actual
borrowings are less than notional amounts hedged which has and could result in overhedged amounts.
Legacy does not designate these
derivatives as cash flow hedges, even though they reduce its exposure to changes in interest rates. Therefore, the mark-to-market of these instruments is recorded in current earnings and
classified as a component of interest expense. The total impact on interest expense from the mark-to-market and settlements was as follows:
The table below summarizes the interest rate swap assets and liabilities as of December 31, 2017.
For the year ended December 31, 2017, Legacy sold oil, NGL and natural gas production representing 10% or more of total revenues to the
purchaser as detailed in the table below. For the years ended December 31, 2016 and 2015, Legacy did not sell oil, NGL or natural gas production representing 10% or more of total revenue to any one customer.
An asset retirement obligation (ARO) associated with the retirement of a tangible long-lived asset is recognized as a liability in
the period in which it is incurred and becomes determinable. When liabilities for dismantlement and abandonment costs, excluding salvage values, are initially recorded, the carrying amount of the related oil and natural gas properties is increased.
The fair value of the additions to the ARO asset and liability is estimated using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandon
costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) future inflation factors; and (iv) a credit-adjusted risk-free interest rate. These inputs require significant judgments and estimates by
the Partnerships management at the time of the valuation and are the most sensitive and subject to change. Accretion of the liability is recognized each period using the interest method of allocation, and the capitalized cost is depleted using
the units of production method. Should either the estimated life or the estimated abandonment costs of a property change materially upon Legacys periodic review, a new calculation is performed using the same methodology of taking the
abandonment cost and inflating it forward to its abandonment date and then discounting it back to the present using Legacys credit-adjusted-risk-free rate. The carrying value of the ARO is adjusted to the newly calculated value, with a
corresponding offsetting adjustment to the asset retirement cost. When obligations are relieved by sale of the property or plugging and abandoning the well, the related liability and asset costs are removed from Legacys balance sheet. Any
difference in the cost to plug and the related liability is recorded as a gain or loss on Legacys statement of operations in the disposal of assets line item.
The following table reflects the changes in the ARO during the years ended December 31,
2017, 2016 and 2015.
Each year the Partnership reviews and, to the extent necessary, revises its ARO estimates. During 2015, 2016
and 2017, no revisions of previous estimates were deemed necessary.
As of December 31, 2017, 2,300,000 of Legacys 8% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
(the Series A Preferred Units) were outstanding.
As of December 31, 2017, 7,200,000 of Legacys 8.00% Series B
Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the Series B Preferred Units) were outstanding.
Distributions on the Series A Preferred Units and Series B Preferred Units (collectively, the Preferred Units) are cumulative from
the date of original issue and will be payable monthly in arrears on the 15th day of each month of each year, when, as and if declared by the board of directors of the Partnerships general partner. Distributions on the Series A Preferred Units
will be payable from, and including, the date of the original issuance to, but not including April 15, 2024 at an initial rate of 8.00% per annum of the stated liquidation preference. Distributions on the Series B Preferred Units will be
payable from, and including, the date of the original issuance to, but not including June 15, 2024 at an initial rate of 8.00% per annum of the stated liquidation preference. Distributions accruing on and after April 15, 2024 for the
Series A Preferred Units and June 15, 2024 for the Series B Preferred Units will accrue at an annual rate equal to the sum of (a) three-month LIBOR as calculated on each applicable date of determination and (b) 5.24% for Series A
Preferred Units and 5.26% for Series B Preferred Units, based on the $25.00 liquidation preference per preferred unit.
At any time on or
after April 15, 2019 or June 15, 2019, Legacy may redeem the Series A Preferred Units or Series B Preferred Units, respectively, in whole or in part at a redemption price of $25.00 per Preferred Unit plus an amount equal to all accumulated
and unpaid distributions thereon through and including the date of redemption, whether or not declared. Legacy may also redeem the Preferred Units in the event of a change of control.
The Series A Preferred Units and the Series B Preferred Units trade on the NASDAQ Global Select Market under the symbols LGCYP and
LGCYO, respectively.
On January 21, 2016, Legacy announced that its general partner suspended monthly cash distribution
for both its Series A Preferred Units and its Series B Preferred Units. As of December 31, 2017, $3.92 of distributions per unit were in arrears, representing a total cumulative arrearage of approximately $37.2 million.
On June 4, 2014, Legacy issued 300,000 Incentive Distribution Units to WPX Energy Rocky Mountain, LLC (WPX) as part of the
Piceance Acquisition. The Incentive Distribution Units issued to WPX include
100,000 Incentive Distribution Units that immediately vested along with the ability to vest in up to an additional 200,000 Incentive Distribution Units (the Unvested IDUs) in
connection with any future asset sales or transactions completed with Legacy pursuant to the terms of the IDR Holders Agreement. Incentive Distribution Units that are not issued to WPX or other parties will remain in Legacys treasury for the
benefit of all limited partners until such time as Legacy may make future issuances of Incentive Distribution Units.
The Incentive
Distribution Units represent a right to incremental cash distributions from Legacy after certain target levels of distributions are paid to unitholders, which targets are set above the current levels of Legacys distributions to unitholders. As
of June 4, 2017, all of the Unvested IDUs had been forfeited pursuant to their terms of issuance.
In addition, the vested and
outstanding Incentive Distribution Units held by WPX may be converted by Legacy, subject to applicable conversion factors, into units on a one-for-one basis at any time when Legacy has made a distribution in respect of its units for each of the four
full fiscal quarters prior to the delivery of its conversion notice, and the amount of the distribution in respect of the units for the full quarter immediately preceding delivery of its conversion notice was equal to at least $0.90 per unit; and
the amount of all distributions during each quarter within the four-quarter period immediately preceding delivery of its conversion notice did not exceed the adjusted operating surplus, as defined in Legacys Partnership Agreement, for such
quarter. Further, WPX also has the ability to similarly convert any of its vested Incentive Distribution Units beginning three years after June 4, 2014. WPX may not transfer any of the Incentive Distribution Units it holds to any person that is
not a controlled affiliate of WPX.
The following table sets forth the computation of basic and diluted loss per unit:
As of December 31, 2017, 241,373 restricted units and 1,389,773 phantom units were excluded from the
calculation of diluted earnings per unit due to their anti-dilutive effect. Additionally, as the conditions for conversion on the Incentive Distribution Units have not been met, they have been excluded from the calculation. As of December 31,
2016, 484,447 restricted units and 1,212,692 phantom units were excluded from the calculation of diluted earnings per unit due to their anti-dilutive effect. As of December 31, 2015, 550,447 restricted units and 862,064 phantom units were
excluded from the calculation of diluted earnings per unit due to their anti-dilutive effect.
On December 31, 2017, Legacy entered
into a standstill and voting agreement that included the issuance of 3.8 million units. The units were issued on January 5, 2018. See Note 15 for further discussion.
On March 15, 2006, a Long-Term Incentive Plan (as amended, LTIP) for Legacy was created and Legacy adopted the LTIP for its
employees, consultants and directors, its affiliates and its general partner. The awards under the long-term incentive plan may include unit grants, restricted units, phantom units, unit options and unit appreciation rights (UARs). The
LTIP permits the grant of awards that may be made or settled in units up to an aggregate of 5,000,000 units. As of December 31, 2017 grants of awards net of forfeitures and, in the case of phantom units, historical exercises covering 3,365,716
units have been made, comprised of 266,014 unit option awards, 989,163 restricted unit awards, 1,389,773 phantom unit awards and 720,766 unit awards. The UAR awards granted under the LTIP may only be settled in cash, and therefore are not included
in the aggregate number of units granted under the LTIP. The LTIP is administered by the compensation committee of the board of directors (Compensation Committee) of Legacys general partner.
The cost of employee services in exchange for an award of equity instruments is measured based on a grant-date fair value of the award (with
limited exceptions), and that cost must generally be recognized over the vesting period of the award. However, if an entity that nominally has the choice of settling awards by issuing units predominately settles in cash, or if an entity usually
settles in cash whenever an employee asks for cash settlement, the entity is settling a substantive liability rather than repurchasing an equity instrument. Due to Legacys historical practice of settling options, UARs and certain phantom unit
awards in cash, Legacy accounts for unit options, UARS and certain phantom unit awards by utilizing the liability method. The liability method requires companies to measure the cost of the employee services in exchange for a cash award based on the
fair value of the underlying security at the end of each reporting period until settlement. Compensation cost is recognized based on the change in the liability between periods.
A UAR is a notional unit that entitles the holder, upon vesting, to receive cash valued at the difference between the closing price of units on
the exercise date and the exercise price, as determined on the date of grant. Because these awards are settled in cash, Legacy accounts for the UARs under the liability method.
During the year ended December 31, 2015, Legacy issued (i) 204,500 UARs to employees which vest ratably over a three-year period and
(ii) 96,520 UARs to employees which cliff-vest at the end of a three-year period. Legacy did not issue UARs to employees during the years ended December 31, 2016 and 2017. All of the UARs granted in 2015 expire seven years from the grant
date and are exercisable when they vest.
For the years ended December 31, 2017, 2016 and 2015, Legacy recorded compensation
(benefit) expense of $(37,240), $223,569 and $(10,713), respectively, due to the changes in the compensation liability related to the above awards based on its use of the Black-Scholes model to estimate the December 31, 2017, 2016 and 2015 fair
value of these UARs (see Note 8). As of December 31, 2017, there was a total of $32,662 of unrecognized compensation costs related to the unexercised and non-vested portion of the UARs. At December 31, 2017, this cost was expected to be
recognized over a weighted-average period of 0.69 years. Compensation expense is based upon the fair value as of the balance sheet date and is recognized as a percentage of the service period satisfied. Based on historical data, Legacy has assumed a
volatility factor of approximately 89% and employed the Black-Scholes model to estimate the December 31, 2017 fair value to be realized as compensation cost based on the percentage of the service period satisfied. Based on historical data,
Legacy has assumed an estimated forfeiture rate of 5.6%. The Partnership will adjust the estimated forfeiture rate based upon actual experience. Legacy has assumed an annual distribution rate of $0.00 per unit.
A summary of UAR activity for the year ended December 31, 2017, 2016 and 2015 is as follows:
The following table summarizes the status of the Partnerships non-vested UARs since January 1,
2017:
Legacy has used a weighted-average risk free interest rate of 2.0% in its Black-Scholes calculation of fair
value, which approximates the U.S. Treasury interest rates at December 31, 2017. Expected life represents the period of time that options and UARs are expected to be outstanding and is based on the Partnerships best estimate. The
following table represents the weighted average assumptions used for the Black-Scholes option-pricing model:
Legacy has also issued phantom units under the LTIP to executive officers. A phantom unit is a notional unit that entitles the holder, upon
vesting, to receive either one Partnership unit for each phantom unit or the cash equivalent of a Partnership unit, as stipulated by the form of the grant. Legacy accounts for the phantom units settled in Partnership units under the equity method.
Legacy accounts for the phantom units settled in cash under the liability method.
During March 2015, the Compensation Committee approved
the award of 341,251 subjective, or service-based, phantom units and 259,998 objective, or performance-based, phantom units to Legacys executive officers. During June 2016, the Compensation Committee approved with respect to Paul Horne, and
the board of directors of LRGPLLC approved the recommendation of the Compensation Committee with respect to the other executive officers the award of a maximum of 391,674 subjective, or service-based, phantom units that, upon vesting, settle in
Partnership units, a maximum of 1,286,930 subjective phantom units that, upon vesting, settle in cash and a maximum of 2,238,138 objective, or performance-based, phantom units to Legacys executive officers. During February 2017, the
Compensation Committee approved the award to Legacys executive officers of a maximum of 396,850 subjective, or service-based, phantom units that, upon vesting, settle in units, a maximum of 793,701 subjective phantom units that, upon vesting,
settle in cash and a maximum of 1,587,402 objective, or performance-based, phantom units that, upon vesting, settle in cash.
Compensation
expense related to the phantom units and associated DERs was $4.6 million, $3.7 million and $3.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.
During
the year ended December 31, 2015, Legacy issued an aggregate of 381,860 restricted units to both non-executive employees and an executive employee. The restricted units awarded to non-executive employees vest ratably over a three-year period
beginning at the date of grant. The restricted units granted to the executive employee vest ratably over a three-year period for a portion of the restricted units, with the remainder vesting in full at the end of a five-year period. During the year
ended December 31, 2016, Legacy issued an aggregate of 137,569 restricted units to non-executive employees. The restricted units vest ratably over a three-year period beginning at the date of grant. During the year ended December 31, 2017,
did not issue restricted units to any employees. Compensation expense related to restricted units was $1.5 million, $2.7 million and $2.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017,
there was a total of $0.9 million of unrecognized compensation costs related to the non-vested portion of these restricted units. At December 31, 2017, this cost was expected to be recognized over a weighted-average period of 1.6 years.
Pursuant to the provisions of ASC 718, Legacys issued units as reflected in the accompanying consolidated balance sheet at
December 31, 2017, do not include 241,373 units related to unvested restricted unit awards.
On June 15, 2015, Legacy granted and issued 11,025 units to each of its five non-employee directors as part of their annual compensation
for serving on the board of directors of Legacys general partner. The value of each unit was $9.13 at the time of issuance. On May 10, 2016, Legacy granted and issued 39,526 units to each of its six non-employee directors as part of their
annual compensation for serving on the board of directors of Legacys general partner. The value of each unit was $2.59 at the time of issuance. On May 16, 2017, Legacy granted and issued 47,847 units to each of its six non-employee
directors who receive compensation for their service on Legacys board of directors as part of their annual compensation for serving on the board of directors of Legacys general partner. The value of each unit was $2.04 at the time of
issuance. None of these units were subject to vesting. Legacy recognized the expense associated with the unit grants on the date of grant.
On October 17, 2014, Legacy filed a registration statement on Form S-3 with the Securities and Exchange Commission (SEC) to
register the issuance and sale of, among other securities, its debt securities, which may be co-issued by Legacy Reserves Finance Corporation. The registration statement also registered guarantees of debt securities by Legacy Reserves Operating GP,
LLC, Legacy Reserves Operating LP and Legacy Reserves Services, Inc. The Partnerships 2020 Senior Notes were issued in a private offering on December 4, 2012 and were subsequently registered through a public exchange offer that closed on
January 8, 2014. The Partnerships 2021 Senior Notes were issued in two separate private offerings on May 28, 2013 and May 8, 2014. $250 million aggregate principal amount of our 2021 Senior Notes were subsequently registered
through a public exchange offer that closed on March 18, 2014. The remaining $300 million of aggregate principal amount of our 2021 Senior Notes were subsequently registered through a public exchange offer that closed on February 10, 2015.
The 2020 Senior Notes and the 2021 Senior Notes are guaranteed by Legacys 100% owned subsidiaries Legacy Reserves Operating GP LLC, Legacy Reserves Operating LP, Legacy Reserves Services, Inc., Legacy Reserves Energy Services LLC, Dew
Gathering LLC and Pinnacle Gas Treating LLC, which constitute all of its wholly-owned subsidiaries other than Legacy Reserves Finance Corporation, and certain other future subsidiaries (the Guarantors, together with any future 100% owned
subsidiaries that guarantee the Partnerships 2020 Senior Notes and 2021 Senior Notes, the Subsidiaries). The Subsidiaries are 100% owned by the Partnership and the guarantees by the Subsidiaries are full and unconditional, except
for customary release provisions described in Note 3Long-Term Debt. The Partnership has no assets or operations independent of the Subsidiaries, and there are no significant restrictions upon the ability of the Subsidiaries to distribute funds
to the Partnership. The guarantees constitute joint and several obligations of the Guarantors.
On December 31, 2017, Legacy entered into a definitive agreement with certain funds managed by Fir Tree Partners (Fir Tree)
pursuant to which Legacy acquired $187.0 million of the 6.625% Notes for a price of approximately $132 million with a settlement date of January 5, 2018. Legacy funded the purchase price with borrowings under its Term Loan Credit Agreement,
leaving $60.4 million available for borrowing under the Term Loan Credit Agreement as of February 20, 2018. The portion of the purchase price attributable to accrued and unpaid interest was funded with borrowings under Legacys Revolving
Credit Agreement.
On December 31, 2017, Legacy entered into the Third Amendment to the Term Loan Credit Agreement (the Third Amendment) with
GSO. Among other items, the Third Amendment increased the total commitment of terms loans under the Term Loan Credit Agreement to $400.0 million, extended the availability of borrowings under the Term Loan Credit Facility to October 26, 2019
and relaxed the asset coverage ratio to 0.85 to 1.00 until the fiscal quarter ended December 31, 2018. The Third Amendment became effective on January 5, 2018.
On December 31, 2017, Legacy entered into a Standstill and Voting Agreement in which Legacy agreed to pay cash and issue units
representing limited partnership interests to certain entities controlled by Fir Tree, in exchange for Fir Tree, among other things, limiting their ability to acquire additional Legacy securities, agreeing to vote the issued units in accordance with
the recommendation of the Board of Directors of Legacys general partner and generally support Legacys actions. Total consideration to Fir Tree of $8.6 million included $2.5 million in cash and 3.8 million units which were valued for
accounting purposes at the December 29, 2017 closing price of $1.61 and is recognized as a general and administrative expense in the year ended December 31, 2017. Legacy settled the transaction with the cash payment and issuance of units
on January 5, 2018.
Property acquisition costs include costs incurred to purchase, lease, or otherwise acquire a property.
Development costs include costs incurred to gain access to and prepare development well locations for drilling, to drill and equip development wells, and to provide facilities to extract, treat, and gather natural gas. Please see page F-32 for total
capitalized costs and associated accumulated depletion.
The proved oil, NGL and natural gas reserves of Legacy have been estimated by an independent petroleum engineer, LaRoche, as of
December 31, 2017, 2016 and 2015. These reserve estimates have been prepared in compliance with the Securities and Exchange Commission rules and accounting standards based on the 12-month unweighted first-day-of-the-month average price for
December 31, 2017, 2016 and 2015.
An analysis of the change in estimated quantities of oil and natural gas reserves, all of which
are located within the United States, is shown below. The 2017, 2016 and 2015 amounts have been revised to properly reflect the appropriate category associated with the estimated oil and natural reserve quantity changes.
The primary drivers behind the changes to our proved reserves in each of 2015, 2016 and 2017 are described in
more detail below.
Summarized in the following table is
information for Legacy with respect to the standardized measure of discounted future net cash flows relating to proved reserves. Future cash inflows are computed by applying the
Had we been subject to entity-level U.S. federal income taxes, the estimated pro forma, undiscounted income
tax expense as of December 31, 2017 would have been $227.7 million, and our estimated pro forma standardized measure of discounted net cash flows would have been reduced by $137.6 million to $1,034.5 million.
The standardized measure is based on the following oil and natural gas prices realized over the life of the properties at the wellhead as of
the following dates:
The following table summarizes the principal sources of change in the standardized measure of
discounted future estimated net cash flows:
The data presented should not be viewed as representing the expected cash flow from or current value of,
existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent
revisions. Actual future prices and costs are likely to be substantially different from the current prices and costs utilized in the computation of reported amounts.
Legacy Reserves Inc., or New Legacy, was incorporated on March 22, 2018 as a Delaware corporation.
New Legacy was formed for the purpose of effecting the corporate reorganization of Legacy Reserves LP (Corporate Reorganization).
Concurrent with the Corporate Reorganization, New Legacy will serve as the new parent holding company of Legacy Reserves LP and its subsidiaries.
The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America
(GAAP). Separate Statements of Operations, Changes in Stockholders Equity and of Cash Flows have not been presented because New Legacy had no business transactions or activities as of March 31, 2018, except for the initial
capitalization of New Legacy which was funded by an affiliate. In this regard, general and administrative costs associated with the formation and daily management of New Legacy have been determined by New Legacy to be insignificant.
The
preparation of the balance sheet, in accordance with GAAP, requires management to make estimates and assumptions that affect the amounts reported in the balance sheet and accompanying notes. Actual results could differ from those estimates.
New Legacy is a corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability
method. New Legacy recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits
of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which New Legacy operates for the year in which those temporary differences are expected to be recovered or settled. New
Legacy recognizes the financial statement effects of a tax position when it is
more-likely-than-not,
based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are
then reduced by a valuation allowance if New Legacy believes it
more-likely-than-not
such net deferred tax assets will not be realized. As of March 31, 2018, there are no income tax related balances
reflected in our balance sheet.
New Legacy has authorized share capital of 1,000 common shares with $0.01 par value. On March 31, 2018, all 1,000 shares were issued and
acquired by an affiliate for consideration of $10. Each share has one voting right.
There have been no events subsequent to March 31, 2018 that would require additional adjustments to or disclosure in New Legacys
financial statements.
Report of Independent Registered Public Accounting Firm
Shareholder and Board of Directors
Legacy Reserves, Inc.
Midland, Texas
Opinion on the Financial Statement
We have audited the accompanying balance sheet of Legacy Reserves, Inc. (the Company) as of March 22, 2018 (date of inception)
and the related notes (collectively referred to as the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company at March 22, 2018, in conformity
with accounting principles generally accepted in the United States of America.
Basis for Opinion
The financial statement is the responsibility of the Companys management. Our responsibility is to express an opinion on the
Companys financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing
procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe
that our audit provides a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Companys auditor since 2018.
Houston, Texas
April 6, 2018
F - 71
LEGACY RESERVES INC.
BALANCE SHEET
AS OF MARCH 22, 2018
(In whole dollars)
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March 22, 2018
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ASSETS
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Cash
|
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$
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10
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Total current assets
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10
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Total assets
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$
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10
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LIABILITIES AND STOCKHOLDERS EQUITY
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Total liabilities
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Commitments and contingencies
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Stockholders equity:
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Common Stock, $0.01 par value; 1,000 shares authorized, issued and outstanding at
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$
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10
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Total stockholders equity
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10
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Total liabilities and stockholders equity
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$
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10
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See accompanying notes to balance sheet.
F - 72
(1) Organization and Background of Business
Legacy Reserves Inc., or New Legacy, was incorporated on March 22, 2018 as a Delaware corporation.
New Legacy was formed for the purpose of effecting the corporate reorganization of Legacy Reserves LP (Corporate Reorganization).
Concurrent with the Corporate Reorganization, New Legacy will serve as the new parent holding company of Legacy Reserves LP and its subsidiaries.
The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America
(GAAP). Separate Statements of Operations, Changes in Stockholders Equity and of Cash Flows have not been presented because New Legacy had no business transactions or activities as of March 22, 2018, except for the initial
capitalization of New Legacy which was funded by an affiliate. In this regard, general and administrative costs associated with the formation and daily management of New Legacy have been determined by New Legacy to be insignificant.
(2) Summary of Significant Accounting Policies
(a) Estimates
The
preparation of the balance sheet, in accordance with GAAP, requires management to make estimates and assumptions that affect the amounts reported in the balance sheet and accompanying notes. Actual results could differ from those estimates.
(b) Income Taxes
New Legacy is a corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability
method. New Legacy recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits
of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which New Legacy operates for the year in which those temporary differences are expected to be recovered or settled. New
Legacy recognizes the financial statement effects of a tax position when it is
more-likely-than-not,
based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are
then reduced by a valuation allowance if New Legacy believes it
more-likely-than-not
such net deferred tax assets will not be realized. As of March 22, 2018, there are no income tax related balances
reflected in our balance sheet.
(3) Stockholders Equity
New Legacy has authorized share capital of 1,000 common shares with $0.01 par value. On March 22, 2018, all 1,000 shares were issued and
acquired by an affiliate for consideration of $10. Each share has one voting right.
(4) Subsequent Events
There have been no events subsequent to March 22, 2018 that would require additional adjustments to or disclosure in New Legacys
financial statements.
F - 73
Annex A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 9, 2018
BY AND AMONG
LEGACY
RESERVES INC.,
LEGACY RESERVES MERGER SUB LLC,
LEGACY RESERVES LP
AND
LEGACY RESERVES GP, LLC
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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A-2
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Section 1.01
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Definitions
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A-2
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ARTICLE II THE MERGER
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A-7
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Section 2.01
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The Merger and Surviving Entity
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A-7
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Section 2.02
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Closing
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A-7
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Section 2.03
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Effective Time
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A-8
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Section 2.04
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Effects of the Merger
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A-8
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Section 2.05
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Organizational Documents of the Surviving Entity and Partnership GP
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A-8
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Section 2.06
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Organizational Documents of the Company
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A-8
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Section 2.07
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Directors and Officers of the Company
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A-8
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ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES
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A-9
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Section 3.01
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Merger Consideration
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A-9
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Section 3.02
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Exchange of Certificates
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A-10
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Section 3.03
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Treatment of Restricted Units; Termination of Partnership Equity Plan
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A-13
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Section 3.04
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Adjustments
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A-13
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Section 3.05
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No Dissenters Rights
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A-13
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND THE PARTNERSHIP
GP
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A-14
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Section 4.01
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Organization, Standing and Corporate Power
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A-14
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Section 4.02
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Capitalization
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A-14
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Section 4.03
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Authority; Noncontravention; Voting Requirements
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A-15
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Section 4.04
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Governmental Approvals
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A-16
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Section 4.05
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No Other Representations or Warranties
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A-16
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB
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A-16
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Section 5.01
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Organization, Standing and Corporate Power
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A-16
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Section 5.02
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Capitalization
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A-17
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Section 5.03
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Authority; Noncontravention; Voting Requirements
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A-18
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Section 5.04
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Governmental Approvals
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A-18
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Section 5.05
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No Other Representations or Warranties
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A-19
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ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS
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A-19
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Section 6.01
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Preparation of the Registration Statement and the Partnership Proxy Statement; Partnership Unitholder Meeting
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A-19
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Section 6.02
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Reasonable Best Efforts
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A-20
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Section 6.03
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Access to Information
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A-20
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Section 6.04
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Indemnification and Insurance
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A-21
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Section 6.05
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Fees and Expenses
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A-22
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Section 6.06
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Section 16 Matters
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A-22
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Section 6.07
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Listing
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A-22
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Section 6.08
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Dividends and Distributions
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A-22
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Section 6.09
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Performance by Partnership GP
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A-22
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Section 6.10
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Tax Treatment
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A-22
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Section 6.11
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Takeover Statutes
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A-22
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ARTICLE VII CONDITIONS PRECEDENT
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A-22
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Section 7.01
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Conditions to Each Partys Obligation to Effect the Merger
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A-22
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Section 7.02
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Conditions to Obligations of the Company and Merger Sub to Effect the Merger
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A-24
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A-i
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Page
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Section 7.03
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Conditions to Obligation of the Partnership to Effect the Merger
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A-24
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Section 7.04
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Frustration of Closing Conditions
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A-24
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ARTICLE VIII TERMINATION
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A-25
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Section 8.01
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Termination
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A-25
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Section 8.02
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Effect of Termination
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A-26
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ARTICLE IX MISCELLANEOUS
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A-26
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Section 9.01
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Survival
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A-26
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Section 9.02
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Interpretation
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A-26
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Section 9.03
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Amendment or Supplement
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A-26
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Section 9.04
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Extension of Time, Waiver, Etc.
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A-27
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Section 9.05
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Communications
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A-27
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Section 9.06
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Entire Understanding; No Third-Party Beneficiaries
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A-28
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Section 9.07
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Governing Law; Submission to Jurisdiction
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A-28
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Section 9.08
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Waiver of Jury Trial
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A-29
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Section 9.09
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Execution in Counterparts
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A-29
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Section 9.10
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Successors and Assigns
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A-29
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Section 9.11
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Severability
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A-29
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Section 9.12
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No-Recourse
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A-29
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Section 9.13
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Specific Performance
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A-30
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Section 9.14
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Effect of Amendment and Restatement
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A-30
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EXHIBIT A
|
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Form of Amended and Restated Certificate of Incorporation of the Company
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EXHIBIT B
|
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Form of Amended and Restated Bylaws of the Company
|
EXHIBIT C
|
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|
Post-Closing Board of Directors of the Company
|
EXHIBIT D
|
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Post-Closing Officers of the Company
|
A-ii
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of July 9, 2018 (this
Agreement
), is by and among
Legacy Reserves Inc., a Delaware corporation (the
Company
), Legacy Reserves Merger Sub LLC, a Delaware limited liability company and a Subsidiary of the Company (
Merger Sub
), Legacy Reserves LP, a Delaware
limited partnership (the
Partnership
), and Legacy Reserves GP, LLC, a Delaware limited liability company, the general partner of the Partnership (the
Partnership GP
) and, at the Closing, a Subsidiary of the
Company. The Company, Merger Sub, Partnership and Partnership GP are each referred to herein separately as a
Party
and collectively as the
Parties
.
WHEREAS, the Parties entered into an Agreement and Plan of Merger (the
Original Merger Agreement
) dated as of March 23,
2018 (the
Original Execution Date
), pursuant to which the Parties agreed to effect the Merger (as defined below) upon the terms and subject to the conditions of the Original Merger Agreement;
WHEREAS, the Parties now desire to amend and restate the Original Merger Agreement in its entirety in the form of this Agreement and to effect
the Merger upon the terms and subject to the conditions of this Agreement;
WHEREAS, the Conflicts Committee of the Board of Directors of
the Partnership GP has (i) determined that the GP Purchase (as defined below) is fair and reasonable to, and in the best interests of, the Partnership and the Partnership Unaffiliated Unitholders and (ii) approved, and recommended that the
Board of Directors of the Partnership GP (the
GP Board
) approve, the GP Purchase Agreement and the transactions contemplated thereby;
WHEREAS, the GP Board has determined, in the good faith exercise of its reasonable business judgment, that no conflict exists between the
interests of the Partnership GP or any of its Affiliates, on the one hand, and the interests of the Partnership and the Unaffiliated Unitholders, on the other hand, in connection with the Corporate Reorganization other than in connection with the GP
Purchase;
WHEREAS, the GP Board has (i) determined that the Corporate Reorganization, including the GP Purchase, is fair and
reasonable to, and in the best interests of, the Partnership and the Unitholders, (ii) approved this Agreement and the GP Purchase Agreement (as defined below), the execution, delivery and performance of this Agreement and the GP Purchase
Agreement and the transactions contemplated by this Agreement and the GP Purchase Agreement and (iii) resolved to submit this Agreement to a vote of the Unitholders and recommend approval of this Agreement by the Unitholders;
WHEREAS, the Board of Directors of the Company (the
Company Board
) has (i) determined that the Corporate
Reorganization , including the GP Purchase, is in the best interests of the Company and the Company Stockholders and declared it advisable to enter into this Agreement and the GP Purchase Agreement and (ii) approved the execution, delivery and
performance of this Agreement and the GP Purchase Agreement and the transactions contemplated by this Agreement and the GP Purchase Agreement, including the issuance of Company Shares pursuant to the Merger (the
Company Stock
Issuance
);
WHEREAS, the sole member of Merger Sub has (i) determined that the Corporate Reorganization is in the best
interests of Merger Sub and declared it advisable to enter into this Agreement and (ii) approved the execution, delivery and performance of this Agreement and the transactions contemplated hereby; and
A-1
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained in this Agreement, and intending to be legally bound, the Parties hereto agree to amend and restate the Original Merger Agreement as follows:
ARTICLE I
DEFINITIONS
Section 1.01
Definitions
. As used in this Agreement, the following terms have the meanings ascribed thereto below:
Affiliate
of any Person means any other Person, directly or indirectly, Controlling, Controlled by or under common Control
with such particular Person;
provided
,
however
, that, except where otherwise expressly provided, for the purposes of this Agreement, the Partnership, the Partnership GP and their Subsidiaries shall not be considered Affiliates of the
Company, Merger Sub or any of its other Subsidiaries.
Agreement
has the meaning specified in the introductory
paragraph of this Agreement.
Amended and Restated Bylaws
has the meaning specified in
Section 2.07
.
Amended and Restated Charter
has the meaning specified in
Section 2.03
.
Antitrust Laws
means the Sherman Act of 1890, as amended, the Clayton Antitrust Act of 1914, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, in each case including the rules and regulations promulgated thereunder, and all other applicable Laws issued by a Governmental Entity that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or lessening of competition.
Average Closing
Price
means, as of any date, the average of the closing sale prices of a Unit as reported on NASDAQ for the five (5) consecutive full trading days (in which such Units are traded on NASDAQ) ending at the close of trading on the full
trading day immediately preceding such date.
Book-Entry Units
has the meaning specified in
Section
3.01(g)
.
Business Day
means a day except a Saturday, a Sunday or other day on which
the Commission or banks in the City of Houston or New York are authorized or required by applicable Law to be closed.
Certificate
has the meaning specified in
Section
3.01(g)
.
Certificate of Merger
has the meaning specified in
Section
2.03
.
Classified Board Proposal
has the meaning specified in
Section
2.06
.
Closing
has the meaning specified in
Section
2.02
.
Closing Date
has the meaning specified in
Section
2.02
.
Code
means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
Commission
means the United States Securities and Exchange Commission.
Company
has the meaning specified in the introductory paragraph of this Agreement.
A-2
Company Common Stock
means the common stock of the Company, par value $0.01
per share.
Company Equity Awards
means the incentive equity awards of the Company pursuant to the Company Long-Term
Incentive Plan.
Company Long-Term Incentive Plan
means the Legacy Reserves Inc. 2018 Omnibus Incentive Plan.
Company Material Adverse Effect
has the meaning specified in
Section
5.01(a)
.
Company Shares
means shares of Company Common Stock.
Company Stockholders
means the holders of the outstanding Company Shares.
Contract
means any written contract, agreement, indenture, note, bond, mortgage, deed of trust, loan, instrument, lease,
license, commitment or other arrangement, understanding, undertaking, commitment or obligation.
Control
(including the
correlative meanings of the terms Controlling Controlled by and under common Control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
Corporate Reorganization
means, collectively, this Agreement and the transactions contemplated hereby, including the GP
Purchase.
DGCL
means the General Corporation Law of the State of Delaware, as amended from time to time.
DLLCA
means the Delaware Limited Liability Company Act, as amended from time to time.
DRULPA
means the Delaware Revised Uniform Limited Partnership Act, as amended from time to time.
Effective Time
has the meaning specified in
Section
2.03
.
Environmental Law
means any Law relating to (i) pollution, the protection, preservation or restoration of the
environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource) or workplace health or occupational safety, or (ii) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as in effect at the date of this Agreement.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Exchange Agent
has the meaning specified in
Section
3.02(a)
.
Exchange Fund
has the meaning specified in
Section
3.02(b)
.
Finance Corp.
means Legacy Reserves Finance Corporation, a Delaware corporation.
First Amended Execution Date
means July 9, 2018.
GAAP
means generally accepted accounting principles in the United States.
General Partner Interest
has the meaning set forth in the Partnership Agreement.
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Governmental Entity
means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
GP Board
has the meaning specified in the introductory paragraph of this Agreement.
GP Member Consent
means the consent of the Members authorizing, among other things, this Agreement and the transactions
contemplated hereby.
GP Purchase
means the purchase of the limited liability company interest in Partnership GP by the
Company from Lion GP Interests, LLC, a Delaware limited liability company, and the admission of the Company as the sole member of Partnership GP, pursuant to the terms of the GP Purchase Agreement.
GP Purchase Agreement
means that certain GP Purchase Agreement, dated as of March 23, 2018, by and among the
Company, Lion GP Interests, LLC, a Delaware limited liability company, Moriah Properties, Ltd. and Brothers Production Properties, Ltd., Brothers Production Company, Inc., Brothers Operating Company, Inc., J&W McGraw Properties, Ltd., DAB
Resources, Ltd. and H2K Holdings, Ltd.
Hazardous Substance
means any substance, material or waste that is listed,
defined, designated or classified as hazardous, toxic, radioactive, dangerous or a pollutant or contaminant or words of similar meaning under any applicable Environmental Law or are otherwise regulated by any Governmental
Entity with jurisdiction over the environment, natural resources, or workplace health or occupational safety, including without limitation petroleum or any derivative or byproduct thereof, radon, radioactive material, asbestos or asbestos containing
material, urea formaldehyde, foam insulation or polychlorinated biphenyls.
HSR Act
means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended from time to time, and the rules and regulations promulgated thereunder.
Hydrocarbons
means oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all products refined or separated therefrom.
Incentive Distribution Unit
has the meaning set
forth in the Partnership Agreement.
Indemnified Person
mean any person who is now, or has been or becomes at any time
prior to the Effective Time, an officer, director or employee of the Partnership or any of its Subsidiaries or the Partnership GP and also with respect to any such Person, in their capacity as a director, officer, employee, member, trustee or
fiduciary of another corporation, foundation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (whether or not such other entity or enterprise is affiliated with the Partnership) serving at the request of or on
behalf of the Partnership or the Partnership GP or any of their respective Subsidiaries and together with such Persons heirs, executors or administrators
Issuers
means, collectively, the Partnership and Finance Corp.
Law
means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law
(including common law), rule or regulation.
Liens
has the meaning specified in
Section
4.01(c)
.
Limited Partner
has the meaning set forth in the Partnership Agreement.
Material Adverse Effect
means, when used with respect to a Person, any change, effect, event or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to have a material
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adverse effect on the business, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole;
provided
,
however
, that Material Adverse
Effect shall not include (i) any effect resulting from entering into this Agreement or the announcement of the transactions contemplated by this Agreement; (ii) any effect resulting from changes in general market, economic,
financial, regulatory or political conditions or any outbreak of hostilities or war, terrorism, earthquakes, hurricanes, tornadoes, floods or other natural disasters, (iii) any effect that affects the Hydrocarbon exploration, production,
development, processing, gathering and/or transportation industry generally (including changes in commodity prices or general market prices in the Hydrocarbon exploration, production, development, processing, gathering and/or transportation industry
generally), and (iv) any effect resulting from a change in Laws or regulatory policies.
Maximum Amount
has the
meaning specified in
Section
6.04(b)
.
Member
has the meaning specified in the Partnership GP
LLC Agreement.
Merger
has the meaning specified in
Section
2.01
.
Merger Consideration
has the meaning specified in
Section
3.01(e)
.
Merger Sub
has the meaning specified in the introductory paragraph of this Agreement.
NASDAQ
means the NASDAQ Stock Market LLC.
National Securities Exchange
means an exchange registered with the Commission under Section 6(a) of the Exchange Act.
Organizational Documents
means any charter, certificate of incorporation, articles of association, bylaws, operating
agreement or similar formation or governing documents and instruments.
Original Execution Date
has the meaning
specified in the introductory paragraph of this Agreement.
Original Merger Agreement
has the meaning specified in the
introductory paragraph of this Agreement.
Outside Date
means December 31, 2018.
Partnership
has the meaning specified in the introductory paragraph of this Agreement.
Partnership Agreement
means the Fifth Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of
April 10, 2017, as amended or supplemented from time to time.
Partnership Board Recommendation
has the meaning
specified in
Section
6.01(b)
.
Partnership GP
has the meaning specified in the introductory
paragraph of this Agreement.
Partnership GP LLC Agreement
means the Amended and Restated Limited Liability Company
Agreement of the Partnership GP, dated as of March 15, 2006, as amended or supplemented from time to time.
Partnership
Interest
has the meaning set forth in the Partnership Agreement.
Partnership Long-Term Incentive Plan
means
the Legacy Reserves LP Long-Term Incentive Plan.
Partnership Material Adverse Effect
has the meaning specified in
Section
4.01(a)
.
Partnership Proxy Statement
has the meaning specified in
Section
4.04
.
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Partnership SEC Documents
means all reports, schedules, forms, certifications,
prospectuses and registration, proxy and other statements required to be filed or furnished by the Partnership with the Commission and publicly available prior to the date of this Agreement.
Partnership Security
has the meaning set forth in the Partnership Agreement.
Partnership Unaffiliated Unitholders
means holders of Units other than the Company, Partnership GP and their Affiliates.
Partnership Unitholder Approval
has the meaning specified in
Section
7.01(a)
.
Partnership Unitholder Meeting
has the meaning specified in
Section
6.01(b)
.
Party
and
Parties
have the meanings set forth in the introductory paragraph of this Agreement.
Person
means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.
Proceeding
shall mean any actual or threatened claim (including a claim of a violation of Law), action, audit, demand,
suit, proceeding, investigation or other proceeding at law or in equity or order or ruling, in each case whether civil, criminal, administrative, investigative or otherwise and whether or not such claim, action, audit, demand, suit, proceeding,
investigation or other proceeding or order or ruling results in a formal civil or criminal litigation or regulatory action.
Registration Statement
means the registration statement on Form
S-4
to be filed
with the Commission by the Company in connection with the issuance of Company Shares in connection with the Merger, as amended or supplemented from time to time.
Representatives
means with respect to a Person, its directors, officers, employees, agents and representatives, including
any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative.
Restraints
has the meaning specified in
Section
7.01(c)
.
Restricted Unit
has the meaning specified in
Section
3.03(a)
.
Rights
means, with respect to any Person, (a) options, warrants,
preemptive rights, subscriptions, calls or other rights, convertible securities, exchangeable securities, agreements or commitments of any character obligating such Person (or the general partner of such Person) to issue, transfer or sell any
partnership or other equity interest of such Person or any of its Subsidiaries or any securities convertible into or exchangeable for such partnership interests or equity interests, or (b) contractual obligations of such Person (or the general
partner of such Person) to repurchase, redeem or otherwise acquire any partnership interest or other equity interest in such Person or any of its Subsidiaries or any such securities or agreements listed in
clause
(a)
of
this definition.
Securities Act
means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Series A Merger Consideration
has the meaning specified in
Section
3.01(d)
.
Series A Preferred Units
has the meaning set forth in the Partnership
Agreement.
Series B Merger Consideration
has the meaning specified in
Section
3.01(e)
.
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Series B Preferred Units
has the meaning set forth in the Partnership
Agreement.
Subsidiary
means, with respect to any Person, any corporation, limited liability company, partnership,
association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or Controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof and (ii) if a limited liability company, partnership, association or other
business entity (other than a corporation), a majority of limited liability company, partnership or other similar ownership interests thereof with voting rights at the time owned or Controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a
corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or Control, directly or indirectly, the manager, managing member,
managing director (or a board comprised of any of the foregoing) or general partner of such limited liability company, partnership, association or other business entity.
Surviving Entity
has the meaning specified in
Section
2.01
.
Takeover Laws
has the meaning specified in
Section
5.03(a)
.
Tax
or
Taxes
means any and all federal, state, local or foreign or provincial taxes, charges, imposts,
levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and similar charges, including any and all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Entity
with respect thereto.
Tax Return
means any return, report or similar filing (including any attached schedules,
supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any information return, claim for refund or declaration of estimated Taxes (and including any amendments with respect thereto).
Trustee
has the meaning specified in
Section
7.01(f)
.
Unit
has the meaning set forth in the Partnership Agreement.
Unitholders
means the holders of Units.
Unit Merger Consideration
has the meaning specified in
Section
3.01(a)
.
ARTICLE II
THE MERGER
Section 2.01
The Merger and Surviving Entity
. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DRULPA and the DLLCA, at the Effective Time, Merger Sub shall merge with and into the
Partnership (the
Merger
), the separate limited liability company existence of Merger Sub will cease and the Partnership shall survive and continue to exist as a Delaware limited partnership (the Partnership as the surviving entity
in the Merger, sometimes being referred to herein as the
Surviving Entity
).
Section 2.02
Closing
. Subject to the provisions of
Article VII
, the closing of the Merger
(the
Closing
) shall take place at the offices of Kirkland & Ellis LLP, 609 Main Street, Suite 4700, Houston, Texas 77002 at
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10:00 A.M., Houston, Texas time, on the second (2nd) Business Day after the satisfaction or waiver of the conditions set forth in
Article VII
(other than conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other place, date and time as the Partnership and the Company shall agree. The date on which the Closing actually occurs is
referred to as the
Closing Date
.
Section 2.03
Effective Time
. Subject to the
provisions of this Agreement, at the Closing, Partnership GP and the Company, as applicable, will cause each of a certificate of merger, executed in accordance with the relevant provisions of the Partnership Agreement, the DRULPA and the DLLCA (the
Certificate of Merger
), and the certificate of incorporation of the Company as amended and restated in accordance with
Section 2.06
hereof (the
Amended and Restated Charter
), executed in accordance with
the relevant provisions of the DGCL, to be duly filed with the Secretary of State of the State of Delaware. The Merger will become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of
Delaware or at such later date or time as may be agreed by the Partnership and the Company in writing and specified in the Certificate of Merger (the effective time of the Merger being hereinafter referred to as the
Effective
Time
). The Amended and Restated Charter shall be filed with the Secretary of State of the State of Delaware prior to the filing of the Certificate of Merger and shall become effective at or prior to
the Effective Time.
Section 2.04
Effects of the Merger
. The Merger shall have the effects set
forth in this Agreement, the Partnership Agreement and the applicable provisions of the DRULPA and the DLLCA.
Section 2.05
Organizational Documents of the Surviving Entity
and Partnership GP
. At the
Effective Time, (a) the certificate of limited partnership of the Partnership as in effect immediately prior to the Effective Time shall remain unchanged and shall be the certificate of limited partnership of the Surviving Entity from and after
the Effective Time, until duly amended in accordance with applicable Law, and (b) the Partnership Agreement as in effect immediately prior to the Effective Time shall remain unchanged and shall be the agreement of limited partnership of the
Surviving Entity from and after the Effective Time, until duly amended in accordance with the terms thereof and applicable Law.
Section 2.06
Organizational Documents of the Company
. At the Partnership Unitholder Meeting, the Partnership will submit the inclusion of a provision implementing a classified board in the amended and restated certificate of
incorporation of the Company to the Unitholders for approval thereof (the
Classified Board Proposal
). If the Unitholders approve the Classified Board Proposal, the certificate of incorporation of the Company shall be amended and
restated as set forth in
Exhibit A
and will include the language in brackets that is identified as language to be used for a classified board and the bylaws of the Company shall be amended and restated as set forth in
Exhibit B
and
will include the language in brackets that is identified as language to be used for a classified board, in each case, prior to the Effective Time. If the Unitholders do not approve the Classified Board Proposal, the certificate of incorporation of
the Company shall be amended and restated as set forth in
Exhibit A
and will include the language in brackets that is identified as language to be used if there is no classified board and the bylaws of the Company shall be amended and
restated as set forth in
Exhibit B
and will include the language in brackets that is identified as language to be used if there is no classified board, in each case, prior to the Effective Time. The certificate of incorporation of the
Company, as so amended and restated, shall be the certificate of incorporation of the Company, and the bylaws of the Company, as so amended and restated by such Bylaws Amendment, shall be the bylaws of the Company, until thereafter amended or
changed as provided herein or by applicable Law, consistent with the obligations set forth in
Section
6.04(a)
.
Section 2.07
Directors and Officers of the Company
.
(a)
Directors
. From and after the Effective Time, the Persons identified on
Exhibit C
to this Agreement as the directors of the
Company shall be the directors of the Company. Such directors shall serve until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Amended and Restated
Charter and the bylaws of the Company as amended and restated in accordance with
Section 2.06
hereof (the
Amended and Restated Bylaws
).
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(b)
Officers
. From and after the Effective Time, the Persons identified on
Exhibit
D
to this Agreement as the officers of the Company shall be the officers of the Company, holding the positions set forth on
Exhibit D
. Such officers shall serve until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Amended and Restated Charter and the Amended and Restated Bylaws.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
Section 3.01
Merger Consideration
. Subject to the provisions of this Agreement, at the Effective
Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, the Partnership, the Partnership GP or any holder of Company securities or Partnership Securities:
(a)
Conversion of Units
. Subject to
Section
3.01(c)
,
Section
3.02(h)
and
Section
3.04
, each Unit issued and outstanding as of immediately prior to the Effective Time shall be converted into the right to receive 1.0 Company Share (the
Unit Merger Consideration
), which Company
Shares will be duly authorized and validly issued in accordance with applicable Laws, subject to adjustment in accordance with
Section
3.04
.
(b)
Equity of Merger Sub
. The limited liability company interests in Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into a number of Units of the Surviving Entity equal to the number of Units converted into the right to receive the Unit Merger Consideration pursuant to
Section
3.01(a)
, and the Company
shall be admitted as a limited partner of the Partnership and hold such Units. At the Effective Time, the books and records of the Partnership shall be revised to reflect the conversion of all Units held by Persons other than the Partnership GP, the
Company and any Subsidiaries of the Company, and the Partnership (as the Surviving Entity) shall continue without dissolution. For the avoidance of doubt, the Partnership GP shall continue to hold the General Partner Interest and shall continue as
the general partner of the Partnership.
(c)
Treatment of Partnership Owned Partnership Securities and Company Owned Partnership
Interests
. Notwithstanding anything to the contrary in this Agreement, at the Effective Time, all Partnership Securities that are owned immediately prior to the Effective Time by the Partnership or its Subsidiaries shall be automatically
canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled Partnership Securities. All Partnership Interests that are owned immediately prior to the Effective Time by the Partnership GP, the Company or
any Subsidiaries of the Company shall remain outstanding as Partnership Interests in the Surviving Entity, unaffected by the Merger.
(d)
Treatment of Series A Preferred Units
. Subject to
Section
3.02(h)
and
Section
3.04
hereof, each Series A Preferred Unit issued and outstanding as of immediately prior to the Effective Time
shall be converted into the right to receive 2.92033118 Company Shares (the
Series A Merger Consideration
), which Company Shares will be duly authorized and validly issued in accordance with applicable Laws, subject to adjustment
in accordance with
Section
3.04
. For the avoidance of doubt, the Series A Merger Consideration shall constitute any and all consideration to be paid in respect of Series A Preferred Units, and any rights to accumulated and
unpaid distributions on the Series A Preferred Units shall be discharged on the Closing Date.
(e)
Treatment of Series B Preferred
Units
. Subject to
Section
3.02(h)
and
Section
3.04
hereof, each Series B Preferred Unit issued and outstanding as of immediately prior to the Effective Time shall be converted into the right to
receive 2.90650421 Company Shares (the
Series B Merger Consideration
and together with the Unit Merger Consideration and the Series A Merger Consideration, the
Merger
Consideration
), which
Company Shares will be duly authorized and validly issued in accordance with applicable Laws, subject to adjustment in accordance with
Section
3.04
. For the avoidance of doubt, the Series B Merger Consideration shall
constitute any and all consideration to be paid in respect of Series B Preferred Units, and any rights to accumulated and unpaid distributions on the Series B Preferred Units shall be discharged on the Closing Date.
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(f)
Treatment of Incentive Distribution Units
. Notwithstanding anything to the contrary in
this Agreement and pursuant to Section 6.7 of the Partnership Agreement, at the Effective Time, all Incentive Distribution Units that are issued and outstanding as of immediately prior to the Effective Time shall be automatically canceled and
shall cease to exist and no consideration shall be delivered in exchange for such canceled Incentive Distribution Units.
(g)
Certificates
. As of the Effective Time, all Partnership Securities converted into the right to receive the applicable Merger Consideration pursuant to
Section
3.01(a),
Section
3.01(d)
or
Section
3.01(e)
shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such Partnership
Securities (a
Certificate
) or
non-certificated
Partnership Securities represented in book-entry form immediately prior to the Effective Time (
Book-Entry Units
) shall cease
to have any rights with respect thereto, except the right to receive the applicable Merger Consideration, any dividends or other distributions to which such holder is entitled pursuant to
Section
3.02(g)
and cash in lieu of
any fractional shares to which such holder is entitled pursuant to
Section
3.02(h)
, in each case to be issued or paid in consideration therefor upon surrender of such Certificate or Book-Entry Unit in accordance with
Section
3.02(c)
, without interest.
Section 3.02
Exchange of
Certificates
.
(a)
Exchange Agent
. Prior to the Closing Date, the Company shall appoint an exchange agent reasonably acceptable
to the Partnership (the
Exchange Agent
) for the purpose of exchanging Certificates and Book-Entry Units for the applicable Merger Consideration and paying any dividends or other distributions to which a holder of Partnership
Securities is entitled pursuant to
Section
3.02(g)
and any cash in lieu of any fractional shares to which such holder is entitled pursuant to
Section
3.02(h)
. As promptly as practicable after the
Effective Time, the Company will send, or will cause the Exchange Agent to send, to each holder of record of Partnership Securities as of the Effective Time whose Partnership Securities were converted into the right to receive the applicable Merger
Consideration, a letter of transmittal (which shall specify that, with respect to certificated Partnership Securities, the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates (or
affidavits of loss in lieu thereof pursuant to
Section
3.02(i)
) to the Exchange Agent) in such customary forms as the Partnership and the Company may reasonably agree, including, as applicable, instructions for use in
effecting the surrender of Certificates (or effective affidavits of loss in lieu thereof pursuant to
Section
3.02(i)
) and Book-Entry Units to the Exchange Agent in exchange for the applicable Merger Consideration, cash in
lieu of any fractional shares payable pursuant to
Section
3.02(h)
and any dividends or distributions pursuant to
Section
3.02(g)
.
(b)
Deposit
. On or prior to the Closing Date, the Company shall cause to be deposited with the Exchange Agent, in trust for the benefit
of the holders of Partnership Securities whose Partnership Securities are converting into the right to receive the applicable Merger Consideration at the Effective Time, Company Shares (which shares shall be uncertificated and registered in
book-entry form), payable upon due surrender of the Certificates (or affidavits of loss in lieu thereof pursuant to
Section
3.02(i)
with respect to certificated Partnership Securities) or Book-Entry Units pursuant to the
provisions of this
Article III
. Following the Effective Time, the Company agrees to make available to the Exchange Agent, from time to time as needed, cash or other consideration as applicable sufficient to pay any dividends and other
distributions pursuant to
Section
3.02(g)
and any Company Shares or cash in lieu of any fractional shares payable pursuant to
Section
3.02(h)
, in each case, that may be payable from time to time
following the Effective Time. All Company Shares and cash or other consideration payable in respect of any dividends or distributions pursuant to
Section
3.02(g)
deposited with the Exchange Agent or cash in lieu of any
fractional shares as such holders have the right to receive pursuant to
Section
3.02(h)
shall be referred to in this Agreement as the
Exchange Fund
. The Exchange Agent shall, pursuant to irrevocable
instructions delivered by the Company at or prior to the Effective Time, deliver the applicable Merger Consideration contemplated to be issued or paid pursuant to this
Article III
out of the Exchange Fund. The Exchange Fund shall not be used
for any purpose other than to pay such applicable Merger Consideration, cash in lieu of any fractional shares payable pursuant to
Section
3.02(h)
and any dividends and other distributions pursuant to
Section
3.02(g)
.
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(c)
Exchange
. Each holder of Partnership Securities that have been converted into the
right to receive the applicable Merger Consideration, upon delivery to the Exchange Agent of a properly completed letter of transmittal, duly executed and completed in accordance with the instructions thereto, and surrender of a Certificate (or
affidavit of loss in lieu thereof pursuant to
Section
3.02(
i)
with respect to certificated Partnership Securities) or Book-Entry Units and such other documents as may reasonably be required by the Exchange Agent
(including with respect to Book-Entry Units), will be entitled to receive in exchange therefor (i) the number of Company Shares representing, in the aggregate, the whole number of Company Shares that such holder has the right to receive in
accordance with the provisions of this
Article III
, (ii) a check in the amount of cash in lieu of any fractional shares payable pursuant to
Section
3.02(h)
and (iii) such dividends or other distributions as
such holder has the right to receive pursuant to
Section
3.02(g)
. Any and all Company Shares delivered in accordance with this
Section
3.02(c)
shall be uncertificated and shall be registered in
book-entry form. The Merger Consideration and such other amounts as reflected in the immediately preceding sentence shall be paid as promptly as practicable by mail after receipt by the Exchange Agent of the Certificate (or affidavit of loss in lieu
thereof pursuant to
Section
3.02(
i)
with respect to certificated Partnership Securities) or any applicable documentation with respect to the surrender of Book-Entry Units, and letter of transmittal in accordance with
the foregoing. No interest shall be paid or accrued on any Merger Consideration, cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of Certificates and Book-Entry Units. Until so surrendered, each such
Certificate and Book-Entry Unit shall, after the Effective Time, represent for all purposes only the right to receive such Merger Consideration and such other amounts as contemplated by
Section
3.02(g)
and
Section
3.02(h)
.
(d)
Other Payees
. If any cash payment is to be made to a Person other than the Person
in whose name the applicable surrendered Certificate or Book-Entry Unit is registered, it shall be a condition of such payment that the Person requesting such payment shall pay any transfer or other similar Taxes required by reason of the making of
such cash payment to a Person other than the registered holder of the surrendered Certificate or Book-Entry Unit or shall establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable. If any portion of the Merger
Consideration is to be registered in the name of a Person other than the Person in whose name the applicable surrendered Certificate or Book-Entry Unit is registered, it shall be a condition to the registration thereof that the surrendered
Certificate shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such delivery of the Merger Consideration shall pay to the Exchange Agent any transfer or other similar Taxes required as a result of
such registration in the name of a Person other than the registered holder of such Certificate, or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
(e)
No Further Transfers
. From and after the Effective Time, there shall be no further registration on the books of the Partnership of
transfers of Partnership Securities converted into the right to receive the applicable Merger Consideration. From and after the Effective Time, the holders of Certificates or Book-Entry Units representing Partnership Securities converted into the
right to receive the applicable Merger Consideration which were outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Partnership Securities, except as otherwise provided in this Agreement or by
applicable Law. If, after the Effective Time, Certificates or Book-Entry Units are presented to the Exchange Agent or the Company, they shall be canceled and exchanged for the consideration provided for, and in accordance with the procedures set
forth, in this
Article III
.
(f)
Termination of Exchange Fund
. Any portion of the Exchange Fund that remains unclaimed by
the holders of Partnership Securities converted into the right to receive the Merger Consideration nine (9) months after the Effective Time shall be returned to the Company, upon demand, and any such holder who has not exchanged his, her or its
Partnership Securities for the applicable Merger Consideration in accordance with this
Section
3.02
prior to that time shall thereafter look only to the Company for delivery of the applicable Merger Consideration, the
payment of cash in lieu of any fractional shares payable pursuant to
Section
3.02(h)
and the payment of any dividends and other distributions pursuant to
Section
3.02(g)
in respect of such
holders Partnership Securities. Notwithstanding the foregoing, the Company, Merger Sub and the Partnership shall not be
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liable to any holder of Partnership Securities for any Merger Consideration duly delivered to a public official pursuant to applicable abandoned property Laws. Any Merger Consideration remaining
unclaimed by holders of Partnership Securities immediately prior to such time as such amounts would otherwise escheat to, or become property of, any Governmental Entity shall, to the extent permitted by applicable Law, become the property of the
Company free and clear of any claims or interest of any Person previously entitled thereto.
(g)
Dividends and Distributions
. No
dividends or other distributions declared or made after the Effective Time with respect to Company Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificates or Book-Entry Units with respect to
Company Shares represented thereby, unless and until the holder of such Certificate or Book-Entry Unit shall surrender such Certificate or Book-Entry Unit. Subject to the effect of escheat, Tax or other applicable Law, following surrender of any
such Certificate, there shall be paid by the Company to the holder of Company Shares issued in exchange therefor, without interest, (i) promptly, the amount of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such Company Shares and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such Company Shares.
(h)
No Fractional Shares
. No fractions of a Company Share will be issued
upon the surrender of Partnership Securities outstanding immediately prior to the Effective Time in accordance with
Section
3.02(c)
, and such fractional interests will not entitle the owner thereof to vote or to have any
rights as a holder of any Company Shares. Notwithstanding any other provision of this Agreement, each holder of Partnership Securities converted into the right to receive the applicable Merger Consideration in the Merger who would otherwise have
been entitled to receive a fraction of a Company Share (after taking into account all Partnership Securities exchanged by such holder) will receive, in lieu thereof, a cash payment (without interest rounded up to the nearest whole cent) in an amount
equal to the product of (i) the Average Closing Price as of the Closing Date and (ii) the fraction of a Company Share that such holder would otherwise be entitled to receive pursuant to this
Article III
. As promptly as practicable
after the determination of the amount of cash, if any, to be paid to holders of fractional interests, the Company will cause the Exchange Agent to forward payments to such holders of fractional interests subject to and in accordance with the terms
of this Agreement. The Parties acknowledge that payment of such cash consideration in lieu of issuing fractional Company Shares was not separately
bargained-for
consideration but merely represents a mechanical
rounding off for purposes of avoiding the expense and inconvenience to the Company that would otherwise be caused by the issuance of fractional Company Shares.
(i)
Lost, Stolen or Destroyed Certificates
. If any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Company, the posting by such Person of a bond, in such reasonable amount as the Company may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration to be paid in respect of the applicable Partnership Securities
represented by such Certificate as contemplated by this
Article III
and pay cash in lieu of any fractional shares payable pursuant to
Section
3.02(
h)
and any dividends and other distributions pursuant to
Section
3.02(g)
.
(j)
Withholding Taxes
. The Company, Merger Sub, the Surviving Entity and the Exchange
Agent shall deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts, if any, as are required to be deducted and withheld with respect to the making of such payment under the Code, the Treasury Regulations
issued thereunder or under any provision of applicable state, local or foreign tax Law (and to the extent deduction and withholding is required, such deduction and withholding shall be taken in cash or Company Common Stock, as determined by the
Company). To the extent amounts are so withheld and paid over to the appropriate taxing authority, such withheld amounts shall be treated for the purposes of this Agreement as having been paid to the former holder of the Partnership Securities in
respect of whom such withholding was made. If withholding is taken in Company Shares, the Company and the Exchange Agent shall be treated as
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having sold such consideration for an amount of cash equal to the fair market value of such consideration at the time of such deemed sale and paid such cash proceeds to the appropriate taxing
authority.
Section 3.03
T
reatment of Restricted Units; Termination of Partnership Equity
Plan
.
(a) As soon as reasonably practicable following the date of this Agreement, and in any event prior to the Effective Time, the
GP Board (or, if appropriate, any committee administering the Partnership Long-Term Incentive Plan) will adopt resolutions, and the Partnership will take all other actions as may be necessary or required in accordance with applicable Law and the
Partnership Long-Term Incentive Plan (including, the award agreements in respect of awards granted thereunder) to give effect to this
Section
3.03
to provide that each Unit subject to forfeiture or restricted unit or
phantom unit that settles in Units granted under the Partnership Long-Term Incentive Plan (each, a
Restricted
Unit
) that is outstanding immediately prior to the Effective Time shall, as of the Effective Time,
automatically and without any action on the part of the holder thereof, (i) be treated as an issued and outstanding Unit as of immediately prior to the Effective Time and otherwise subject to the terms and conditions of this Agreement
(including
Section
3.01
and
Section
3.02
) and (ii) shall continue to be subject to the same terms and conditions applicable to such Restricted Unit as in effect immediately prior to the
Effective Time (which such changes as are necessary or appropriate to give effect to consummation of the transactions contemplated by this Agreement).
(b) Prior to the Effective Time, the GP Board shall take all actions necessary to terminate the Partnership Long-Term Incentive Plan, such
termination to be effective at the Effective Time, and from and after the Effective Time, the Partnership Long-Term Incentive Plan shall be terminated and no Restricted Units or other rights with respect to Units or other Partnership Interests shall
be granted or be outstanding thereunder, it being understood that the terminations contemplated by this Agreement shall in no respect limit the Companys obligations under this
Section
3.03
with respect to Restricted
Units granted prior to the Effective Time.
(c) Prior to the Effective Time, the Company Board or its compensation committee shall adopt
the Company Long-Term Incentive Plan as of the Effective Time, authorize the Company Equity Awards at the Effective Time and shall take all other actions as may be necessary to authorize the events contemplated in
Section
3.03(a)
. As soon as practicable following the Effective Time, the Company shall file a Form
S-8
registration statement with respect to the Company Shares available for grant
and delivery under the Company Long-Term Incentive Plan from and after the Effective Time and shall maintain the effectiveness of such registration statement (and maintain the current status of the prospectus contained therein) for so long as such
shares are available for grant and delivery under the Company Long-Term Incentive Plan.
Section 3.04
Adjustments
. Notwithstanding any provision of this
Article III
to the contrary, if between the date of this Agreement and the Effective Time the number of outstanding Partnership Securities or Company Shares shall have been changed
into a different number of units or shares or a different class or series by reason of the occurrence or record date of any unit or share dividend, subdivision, reclassification, recapitalization, split,
split-up,
unit or share distribution, combination, exchange of units or shares or similar transaction, the Merger Consideration and any other similar dependent item, as the case may be, shall be appropriately
adjusted to reflect fully the effect of such unit or share dividend, subdivision, reclassification, recapitalization, split,
split-up,
unit or share distribution, combination, exchange of units or shares or
similar transaction and to provide the holders of Partnership Securities the same economic effect as contemplated by this Agreement prior to such event.
Section 3.05
No Dissenters
Rights
. No dissenters or appraisal rights
shall be available with respect to the Merger or the other transactions contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND THE
PARTNERSHIP GP
The
Partnership and, with respect to itself where provided for in this
Article IV
, the Partnership GP each represent and warrant to the Company as follows:
Section 4.01
Organization, Standing and Corporate Power
.
(a) Each of the Partnership, the Partnership GP and their respective Subsidiaries is a legal entity duly organized, validly existing and in
good standing under the applicable Laws of the jurisdiction in which it is incorporated, formed or organized, as applicable, and has all requisite limited liability company, corporate, partnership or other applicable entity power and authority
necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted, except where the failure to have such power or authority has not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on the Partnership (
Partnership Material Adverse Effect
).
(b) Each of the
Partnership and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Partnership Material
Adverse Effect.
(c) All the outstanding limited liability company interests, partnership interests, shares of capital stock of, or other
equity interests in, each material Subsidiary of the Partnership that are owned directly or indirectly by the Partnership have been duly authorized and validly issued in accordance with the Organizational Documents of each such entity (in each case
as in effect on the date of this Agreement and on the Closing Date) and are fully paid (in the case of an interest in a limited partnership or limited liability company, to the extent required under the Organizational Documents of such entity) and
nonassessable (to the extent such Subsidiary is a corporate entity) and, except as disclosed in the Partnership SEC Documents, are owned free and clear of any mortgage, claim, encumbrance, pledge, lien (statutory or otherwise), security agreement,
conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance upon or with respect to any property of any kind (including any restriction on
the right to vote or transfer the same, except for such transfer restrictions as set forth in the Organizational Documents of such Subsidiary and for such transfer restrictions of general applicability as may be provided under the Securities Act,
and the blue sky Laws of the various states of the United States) (collectively,
Liens
).
Section 4.02
Capitalization
.
(a) The authorized equity interests of the Partnership consist of Units, Series A Preferred
Units, Series B Preferred Units, the Incentive Distribution Units and the General Partner Interest. As of March 20, 2018, the issued and outstanding limited partner interests and general partner interests of the Partnership consisted of
(i) 76,894,049 Units, (ii) 2,300,000 Series A Preferred Units, (iii) 7,200,000 Series B Preferred Units, (iv) 100,000 Incentive Distribution Units and (v) the General Partner Interest, and there were 236,120 Restricted Units
and 1,424,114 phantom units which settle in Units pursuant to the Partnership Long-Term Incentive Plan outstanding. The Partnership GP is the sole general partner of the Partnership and owns all of the General Partner Interest. All outstanding
equity interests of the Partnership are, and all Units issuable pursuant to the Restricted Units, when issued in accordance with the respective terms thereof, will be, duly authorized, validly issued, fully paid and nonassessable (except as such
nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the DRULPA) and free of preemptive rights (except as set forth in the Partnership Agreement).
(b) As of March 23, 2018, except as set forth above in this
Section
4.02
or as set forth in the
Partnerships equity plans or grant documents issued thereunder or the Partnership Agreement, (i) there are no equity securities
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of the Partnership issued or authorized and reserved for issuance, (ii) there are no outstanding options, profits interest units, phantom units, restricted units, unit appreciation rights,
warrants, preemptive rights, subscriptions, calls or other Rights, convertible securities, exchangeable securities, agreements or commitments of any character obligating the Partnership or any of its Subsidiaries to issue, transfer or sell any
partnership or other equity interest of the Partnership or such Subsidiary or any securities convertible into or exchangeable for such partnership interests or equity interests, or any commitment to authorize, issue or sell the same or any such
equity securities, except pursuant to this Agreement, and (iii) there are no contractual obligations of the Partnership or any of its Subsidiaries to repurchase, redeem or otherwise acquire any partnership interest or other equity interest in
the Partnership or any of its Subsidiaries or any such securities or agreements listed in
clause
(ii)
of this sentence.
(c) Neither the Partnership nor any of its Subsidiaries has any outstanding bonds, debentures, notes or other indebtedness, the holders of
which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the holders of Units on any matter.
(d) Except as disclosed in the Partnership SEC Documents, there are no voting trusts or other agreements or understandings to which the
Partnership or any of its Subsidiaries is a party with respect to the voting or registration of capital stock or other equity interest of the Partnership or any of its Subsidiaries.
Section 4.03
Authority; Noncontravention; Voting Requirements
.
(a) Each of the Partnership and the Partnership GP has all necessary entity power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, subject to obtaining the Partnership Unitholder Approval in the case of the Partnership. The execution, delivery and performance by each of the Partnership and the Partnership GP of this
Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized and approved by the GP Board and the Members and, except for obtaining the Partnership Unitholder Approval, no other entity action on the
part of the Partnership and the Partnership GP is necessary to authorize the execution, delivery and performance by the Partnership and the Partnership GP of this Agreement and the consummation of the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by the Partnership and the Partnership GP and, assuming due authorization, execution and delivery of this Agreement by the other Parties hereto, constitutes a legal, valid and binding obligation of
the Partnership and the Partnership GP, enforceable against them in accordance with its terms.
(b) Neither the execution and delivery of
this Agreement by the Partnership or the Partnership GP nor the consummation by the Partnership and the Partnership GP of the transactions contemplated by this Agreement, nor compliance by the Partnership and the Partnership GP with any of the terms
or provisions of this Agreement, will (i) assuming the Partnership Unitholder Approval is obtained, conflict with or violate any provision of the Partnership Agreement or any of the Organizational Documents of the Partnerships material
Subsidiaries, (ii) assuming the authorizations, consents and approvals referred to in
Section
4.04
and the Partnership Unitholder Approval are obtained and the filings referred to in
Section
4.04
are made, (x) violate any applicable Law, judgment, writ or injunction of any Governmental Entity applicable to the Partnership or any of its Subsidiaries or any of their respective properties or assets,
or (y) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or
cancellation under, or result in the creation of any Lien upon any of the respective properties or assets of, the Partnership or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contract, to which the Partnership or
any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected or (iii) result in the exercisability of any right to purchase or acquire any material asset of the Partnership or any
of its Subsidiaries, except, in the case of
clause
(ii)
, such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Partnership Material Adverse Effect.
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(c) All of the Members have consented to this Agreement and the transactions contemplated hereby
pursuant to the GP Member Consent.
(d) Except for the GP Member Consent, which was obtained prior to the execution of this Agreement, the
Partnership Unitholder Approval is the only vote or approval of the holders of any class or series of Partnership Interests that is necessary to approve and adopt this Agreement and the transactions contemplated by this Agreement.
(e) The GP Board, at a meeting duly called and held, has (i) determined that the Merger is fair and reasonable to, and in the best
interests of, the Partnership and the Unitholders, (ii) approved this Agreement, the execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement and (iii) resolved to submit this Agreement to a
vote of the Unitholders and recommend approval of this Agreement by the Unitholders.
Section 4.04
Governmental Approvals
. Except for (a) filings required under, and compliance with other applicable requirements of, the Exchange Act, the Securities Act, including the filing of a proxy statement/prospectus with the Commission in
connection with the Merger (the
Partnership Proxy Statement
) and applicable state securities and blue sky laws, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware,
(c) filings required under, and compliance with other applicable requirements of, applicable Antitrust Laws or (d) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules of NASDAQ or any
other National Securities Exchange, no consents or approvals of, or filings, declarations or registrations with, any Governmental Entity are necessary for the execution, delivery and performance of this Agreement by the Partnership and the
consummation by the Partnership of the transactions contemplated by this Agreement, other than such other consents, approvals, filings, declarations or registrations that are not required to be obtained or made prior to the consummation of such
transactions or, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to (i) prevent or materially impede, interfere with or hinder the consummation of the transactions contemplated by this
Agreement or (ii) result in a Partnership Material Adverse Effect.
Section 4.05
No Other
Representations or Warranties
. Except for the representations and warranties set forth in this
Article IV
, neither the Partnership nor any other Person makes or has made any express or implied representation or warranty with respect to
the Partnership or with respect to any other information provided to the Company or Merger Sub in connection with the Merger or the other transactions contemplated by this Agreement. Without limiting the generality of the foregoing, neither the
Partnership nor any other Person will have or be subject to any liability or other obligation to the Company, Merger Sub or any other Person resulting from the distribution to the Company or Merger Sub (including their respective Representatives),
or the Companys or Merger Subs (or such Representatives) use of, any such information, including any information, documents, projections, forecasts or other materials made available to the Company or Merger Sub in expectation of
the Merger, unless any such information is the subject of an express representation or warranty set forth in this
Article IV
.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB
The Company represents and warrants to the Partnership as follows:
Section 5.01
Organization, Standing and Corporate Power
.
(a) Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing under the applicable Laws
of the jurisdiction in which it is incorporated, formed or organized, as applicable, and has all requisite partnership, corporate, limited liability company or other applicable entity power
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and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted, except where the failure to have such power or authority has
not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company (
Company Material Adverse Effect
).
(b) Each of the Company and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good
standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) All the outstanding partnership interests, limited liability company interests, shares of capital stock of, or other equity interests in,
each material Subsidiary of the Company that are owned directly or indirectly by the Company have been duly authorized and validly issued in accordance with the Organizational Documents of such entity (in each case as in effect on the date of this
Agreement and on the Closing Date) and are fully paid (in the case of an interest in a limited partnership or limited liability company, to the extent required under the Organizational Documents of such entity) and nonassessable (to the extent such
Subsidiary is a corporate entity) and are owned free and clear of all Liens.
Section 5.02
Capitalization
.
(a) As of the date of this Agreement and immediately prior to the Effective Time, the Company has and will have
1,000 outstanding shares of Company Common Stock, which shares are and will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights.
(b) As of the date of this Agreement, except as set forth above in this
Section
5.02
and set forth in the
Companys equity plans or grant documents issued thereunder, (i) there are no partnership interests, limited liability company interests or other equity securities of the Company issued or authorized and reserved for issuance,
(ii) there are no outstanding options, profits interest units, phantom units, restricted units, unit appreciation rights, warrants, preemptive rights, subscriptions, calls or other Rights, convertible securities, exchangeable securities,
agreements or commitments of any character obligating the Company to issue, transfer or sell any equity interest of the Company or any securities convertible into or exchangeable for such equity interests, or any commitment to authorize, issue or
sell the same or any such equity securities, except pursuant to this Agreement, and (iii) there are no contractual obligations of the Company to repurchase, redeem or otherwise acquire any other equity interest in the Company or any such
securities or agreements listed in
clause
(ii)
of this sentence.
(c) Neither the Company nor any of its
Subsidiaries has outstanding bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with Company Stockholders
on any matter.
(d) There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a
party with respect to the voting or registration of capital stock or other equity interest of the Company.
(e) When issued pursuant to
the terms of this Agreement, all Company Shares constituting any part of the Merger Consideration will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights.
(f) All of the issued and outstanding limited liability company interests of Merger Sub are beneficially owned by the Company. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by this Agreement. Except for obligations and liabilities incurred in connection with its formation
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and the transactions contemplated by this Agreement, Merger Sub has not and will not have incurred, directly or indirectly, any obligations or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.03
Authority; Noncontravention; Voting Requirements
.
(a) Each of the Company and Merger Sub has all necessary entity power and
authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by the Company and Merger Sub of this Agreement, and the consummation of the transactions
contemplated by this Agreement, have been duly authorized and approved by Merger Sub and the Company, as its sole member, and by the Company Board, and no other entity action on the part of the Company and Merger Sub is necessary to authorize the
execution, delivery and performance by the Company and Merger Sub of this Agreement and the consummation of the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by the Company and Merger Sub and,
assuming due authorization, execution and delivery of this Agreement by the other Parties hereto constitutes a legal, valid and binding obligation of each of the Company and Merger Sub, enforceable against each of them in accordance with its terms.
The Company Board has taken all necessary action so that any takeover, anti-takeover, moratorium, fair price, control share or similar Law applicable to the Company or any of its Subsidiaries (including the restrictions on
business combinations with an interested stockholder (each as defined in Section 203 of the DGCL) under Section 203 of the DGCL) (
Takeover Laws
) do not, and will not, apply to this Agreement and
the consummation of the transactions contemplated this Agreement, including the Merger and the Company Stock Issuance.
(b) Neither the
execution and delivery of this Agreement by the Company and Merger Sub, nor the consummation by the Company and Merger Sub of the transactions contemplated by this Agreement, nor compliance by the Company and Merger Sub with any of the terms or
provisions of this Agreement, will (i) conflict with or violate any provision of the Organizational Documents of the Company or any of the Companys material Subsidiaries, (ii) assuming the authorizations, consents and approvals
referred to in
Section
5.04
are obtained and the filings referred to in
Section
5.04
are made, (A) violate any Law, judgment, writ or injunction of any Governmental Entity applicable to the
Company or any of its Subsidiaries or any of their respective properties or assets, or (B) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of termination or cancellation under, give rise to a right to receive a change of control payment (or similar payment) under, accelerate the performance required by, or result in
the creation of any Lien upon any of the respective properties or assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contract to which the Company or any of its Subsidiaries is a party, or by
which they or any of their respective properties or assets may be bound or affected or (iii) result in the exercisability of any right to purchase or acquire any material asset of the Company or any of its Subsidiaries, except, in the case of
clause
(ii)
, for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) The Company Board, at a meeting duly called and held, has (i) determined that it is in the best
interests of the Company and the Company Stockholders, and declared it advisable, to enter into this Agreement and (ii) approved the execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement,
including the Company Stock Issuance.
Section 5.04
Governmental Approvals
. Except for
(a) filings required under, and compliance with other applicable requirements of, the Exchange Act, the Securities Act, including the filing of the Registration Statement with the Commission and applicable state securities and blue
sky laws, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (c) filings required under, and compliance with other applicable requirements of, applicable Antitrust Laws or (d) any
consents, authorizations,
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approvals, filings or exemptions in connection with compliance with the rules of NASDAQ or any other National Securities Exchange, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Entity are necessary for the execution, delivery and performance of this Agreement by the Company and Merger Sub and the consummation by the Company and Merger Sub of the transactions contemplated by this
Agreement, other than such other consents, approvals, filings, declarations or registrations that are not required to be obtained or made prior to consummation of such transactions or, if not obtained, made or given, would not, individually or in
the aggregate, reasonably be expected to (i) prevent or materially impede, interfere with or hinder the consummation of the transactions contemplated by this Agreement or (ii) result in a Company Material Adverse Effect.
Section 5.05
No Other Representations or Warranties
. Except for the representations and warranties
set forth in this
Article V
, neither the Company nor any other Person makes or has made any express or implied representation or warranty with respect to the Company and Merger Sub or with respect to any other information provided to the
Partnership in connection with the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, neither the Company nor any other Person will have or be subject to any liability or other obligation to the
Partnership or the Partnership GP or any other Person resulting from the distribution to the Partnership (including their Representatives), or the Partnerships or the Partnership GPs (or such Representatives) use of, any such
information, including any information, documents, projections, forecasts or other materials made available to the Partnership and the Partnership GP in expectation of the Merger, unless any such information is the subject of an express
representation or warranty set forth in this
Article V
.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.01
Preparation of the Registration Statement and the Partnership Proxy Statement; Partnership
Unitholder Meeting
.
(a) As promptly as practicable following the date of this Agreement, the Partnership and the Company shall
jointly prepare and file with the Commission the Partnership Proxy Statement and the Partnership and the Company shall prepare and file with the Commission the Registration Statement, in which the Partnership Proxy Statement will be included as a
prospectus. Each of the Partnership and the Company shall use its reasonable best efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and keep the Registration Statement
effective for so long as necessary to consummate the transactions contemplated by this Agreement. Each of the Partnership and the Company shall use its reasonable best efforts to cause the Partnership Proxy Statement to be mailed to the Unitholders
as promptly as practicable after the Registration Statement is declared effective under the Securities Act. No filing of, or amendment or supplement to, including by incorporation by reference, the Registration Statement or the Partnership Proxy
Statement will be made by any Party without providing the other Party a reasonable opportunity to review and comment thereon. If at any time prior to the Effective Time any information relating to the Partnership or the Company, or any of their
respective Affiliates, directors or officers, is discovered by the Partnership or the Company that should be set forth in an amendment or supplement to either the Registration Statement or the Partnership Proxy Statement, so that any such document
would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Party that discovers such
information shall promptly notify the other Parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the Commission and, to the extent required by applicable Law, disseminated to the
Unitholders.
(b) The Partnership shall, as promptly as practicable following the date of this Agreement, establish a record date for, duly call, give
notice of, convene and hold a special meeting of the Unitholders (the
Partnership Unitholder Meeting
) for the purpose of obtaining the Partnership Unitholder Approval. The Partnership shall, through the
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GP Board, recommend to the Unitholders approval of this Agreement (the
Partnership Board
Recommendation
) unless the GP Board has concluded that recommending to
the Unitholders approval of this Agreement would be inconsistent with its duties to the holders of Units under applicable Law, and the Partnership shall, through the GP Board, use reasonable best efforts to obtain from the Unitholders the
Partnership Unitholder Approval. The Partnership Proxy Statement shall include the Partnership Board Recommendation. Without limiting the generality of the foregoing, the Partnerships obligations pursuant to the first sentence of this
Section
6.01(b)
shall not be affected by the withdrawal or modification of the Partnership Board Recommendation or the GP Boards approval of this Agreement or the transactions contemplated by this Agreement.
Notwithstanding anything in this Agreement to the contrary, the Partnership may postpone or adjourn the Partnership Unitholder Meeting (A) to solicit additional proxies for the purpose of obtaining the Partnership Unitholder Approval,
(B) for the absence of quorum, and (C) to the extent reasonably necessary to ensure that any supplement or amendment to the Partnership Proxy Statement that the GP Board has determined after consultation with outside legal counsel is
necessary under applicable Law is provided to the Unitholders within the minimum amount of time reasonably practicable prior to the Partnership Unitholder Meeting.
(c) Unless this Agreement is validly terminated in accordance with
Article VIII
, the Partnership shall submit this Agreement to the
Unitholders for approval at the Partnership Unitholder Meeting.
Section 6.02
Reasonable Best
Efforts
.
(a) Subject to the terms and conditions of this Agreement, the Company, on the one hand, and each of the Partnership and the
Partnership GP, on the other hand, shall cooperate with the other and use and shall cause each of their respective Subsidiaries to use its reasonable best efforts to (i) take, or cause to be taken, all actions, and do, or cause to be done, all
things, necessary, proper or advisable to cause the conditions to the Closing to be satisfied as promptly as practicable (and in any event no later than the Outside Date), including, for the avoidance of doubt, in the case of the Company until the
Effective Time or the termination of this Agreement, voting or causing to be voted all Units beneficially owned by the Company in favor of the Merger at the Partnership Unitholder Meeting, and to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, notifications, notices, petitions, statements,
registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable Antitrust Laws), (ii) obtain promptly (and in any event no later than the Outside Date) all approvals,
consents, clearances, expirations or terminations of waiting periods, registrations, permits, authorizations and other confirmations from any Governmental Entity or third party necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and (iii) defend any Proceedings challenging this Agreement or the consummation of the transactions contemplated by this Agreement.
(b) In furtherance and not in limitation of the foregoing, each Party hereto (including by their respective Subsidiaries) agrees to make an
appropriate filing (if required by applicable Law) of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated by this Agreement as promptly as practicable and in any event within fifteen
(15) Business Days after the date of this Agreement (unless a later date is mutually agreed to by the Parties hereto) and to supply as promptly as practicable any additional information and documentary material that may be requested by any
Governmental Entity pursuant to the HSR Act or any other applicable Antitrust Law and use its reasonable best efforts to take, or cause to be taken (including by their respective Subsidiaries), all other actions consistent with this
Section
6.02
necessary to cause the expiration or termination of any applicable waiting periods under the HSR Act as promptly as practicable (and in any event no later than the Outside Date).
Section 6.03
Access to Information
. Upon reasonable advance notice and subject to applicable Laws
relating to the exchange of information, each Party shall, and shall cause each of its Subsidiaries to afford to the other Party and its Representatives reasonable access during normal business hours (and, with respect to books and records, the
right to copy) to all of its and its Subsidiaries properties, commitments, books, Contracts, records
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and correspondence (in each case, whether in physical or electronic form), officers, employees, accountants, counsel, financial advisors and other Representatives.
Section 6.04
Indemnification and Insurance
.
(a) From and after the Effective Time, solely to the extent that the Partnership or the Partnership GP or any applicable Subsidiary thereof
would be permitted to indemnify an Indemnified Person immediately prior to the Effective Time, the Company and the Surviving Entity jointly and severally agree to (i) indemnify and hold harmless against any cost or expenses (including
attorneys fees), judgments, fines, losses, claims, damages or liabilities and amounts paid in settlement in connection with any actual or threatened Proceeding, and provide advancement of expenses with respect to each of the foregoing to, all
Indemnified Persons to the fullest extent permitted under applicable Law and (ii) honor the provisions regarding elimination of liability of officers and directors, indemnification of officers, directors and employees and advancement of
expenses contained in the Organizational Documents of the Partnership and the Partnership GP immediately prior to the Effective Time and ensure that the Organizational Documents of the Partnership and the Partnership GP or any of their respective
successors or assigns, if applicable, shall, for a period of six (6) years following the Effective Time, contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former
directors, officers, employees and agents of the Partnership and the Partnership GP than are presently set forth in such Organizational Documents. Any right of an Indemnified Person pursuant to this
Section
6.04(a)
shall
not be amended, repealed, terminated or otherwise modified at any time in a manner that would adversely affect the rights of such Indemnified Person as provided herein, and shall be enforceable by such Indemnified Person and their respective heirs
and representatives against the Company and the Partnership GP and their respective successors and assigns.
(b) The Company shall
maintain in effect for six (6) years from the Effective Time directors and officers liability insurance policies covering acts or omissions occurring at or prior to the Effective Time with respect to Indemnified Persons (provided
that the Company may substitute therefor policies with reputable carriers of at least the same coverage containing terms and conditions that are no less favorable to the Indemnified Persons);
provided
,
however
, that in no event shall
the Company be required to expend pursuant to this
Section
6.04(b)
more than an amount per year equal to 300% of current annual premiums paid by the Partnership for such insurance (the
Maximum Amount
). In
the event that, but for the proviso to the immediately preceding sentence, the Company would be required to expend more than the Maximum Amount, the Company shall obtain the maximum amount of such insurance as is available for the Maximum Amount. If
the Company in its sole discretion elects, then, in lieu of the obligations of the Company under this
Section
6.04(b)
, the Company may (but shall be under no obligation to), prior to the Effective Time, purchase a
tail policy with respect to acts or omissions occurring or alleged to have occurred prior to the Effective Time that were committed or alleged to have been committed by such Indemnified Persons in their capacity as such.
(c) The rights of any Indemnified Person under this
Section
6.04
shall be in addition to any other rights such
Indemnified Person may have under the Organizational Documents of the Partnership and the Partnership GP, any indemnification agreements, or the DLLCA and DRULPA. The provisions of this
Section
6.04
shall survive the
consummation of the transactions contemplated by this Agreement for a period of six (6) years and are expressly intended to benefit each of the Indemnified Persons and their respective heirs and representatives;
provided
,
however
,
that in the event that any claim or claims for indemnification or advancement set forth in this
Section
6.04
are asserted or made within such six (6)-year period, all rights to indemnification and advancement in respect of
any such claim or claims shall continue until disposition of all such claims. If the Company and/or the Partnership GP, or any of their respective successors or assigns (i) consolidates with or merges into any other Person, or
(ii) transfers or conveys all or substantially all of their businesses or assets to any other Person, then, in each such case, to the extent necessary, a proper provision shall be made so that the successors and assigns of the Company and/or
the Partnership GP shall assume the obligations of the Company and the Partnership GP set forth in this
Section
6.04
.
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Section 6.05
Fees and Expenses
. Except as otherwise
provided in
Section
3.02(d)
or
Section
8.02
, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Partnership.
Section 6.06
Section
16
Matters
. Prior to the Effective Time, the Company and the Partnership shall take all such steps as may be required (to the extent permitted under applicable Law) to cause any dispositions of Partnership
Securities (including derivative securities with respect to Partnership Securities) or acquisitions of Company Common Stock (including derivative securities with respect to Company Common Stock) resulting from the transactions contemplated by this
Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Partnership, or will become subject to such reporting requirements with respect to the Company, to be exempt
under Rule
16b-3
promulgated under the Exchange Act.
Section 6.07
Listing
. The Company shall cause the Company Common Stock to be issued pursuant to and
in accordance with this Agreement to be approved for listing (subject, if applicable, to notice of issuance) for trading on a National Securities Exchange prior to the Closing.
Section 6.08
Dividends and Distributions
. After the date of this Agreement until the Effective
Time, neither the Partnership nor the Company shall declare any dividend or distribution in respect of any Company Common Stock or Partnership Securities.
Section 6.09
Performance by Partnership GP
. The Partnership GP shall cause the Partnership and its
Subsidiaries to comply with the provisions of this Agreement.
Section 6.10
Tax Treatment
. For
United States federal income tax purposes (and for purposes of any applicable state, local or foreign income Tax Laws that follows the United States federal income tax treatment), the Parties agree to treat the Merger as an exchange described in
Section 351 of the Code. The Parties will prepare and file all Tax Returns consistent with the foregoing and will not take any inconsistent position on any Tax Return, or during the course of any Proceeding with respect to Taxes, except as
otherwise required by applicable Law following a final determination by a court of competent jurisdiction or other administrative settlement with or final administrative decision by the relevant Governmental Entity.
Section 6.11
Takeover Statutes
. If any Takeover Law shall become applicable to this Agreement, the
Merger, the Company Stock Issuance or the other transactions contemplated hereby or related thereto, each of (i) the Partnership, the Partnership GP and the Partnership GP Board and (ii) the Company and the Company Board shall grant such
approvals and shall use reasonable best efforts to take such actions so that the transactions contemplated hereby, including the Merger and the Company Stock Issuance, may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise use reasonable best efforts to eliminate or minimize the effects of such statute or regulation on the transactions contemplated hereby, including the Merger and the Company Stock Issuance.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01
Conditions to Each Party
s Obligation to Effect the Merger
. The respective obligations of each Party hereto to effect the Merger shall be subject to the satisfaction (or waiver, if permissible under
applicable Law) on or prior to the Closing Date of the following conditions:
(a)
Partnership Unitholder Approval
. The affirmative
vote or consent of a majority of the votes cast by Unitholders who are entitled to vote on the matter at the Partnership Unitholder Meeting or any adjournment or postponement thereof in favor of the approval of this Agreement (the
Partnership
Unitholder
Approval
) shall
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have been obtained in accordance with applicable Law and the Organizational Documents of the Partnership. For the avoidance of doubt, abstentions and broker
non-votes
shall be deemed to not be votes cast with respect to the Partnership Unitholder Approval.
(b)
Regulatory Approval
. Any waiting period applicable to the transactions contemplated by this Agreement under the HSR Act shall have
been terminated or shall have expired.
(c)
No Injunctions or Restraints
. No Law, injunction, judgment or ruling enacted,
promulgated, issued, entered, amended or enforced by any Governmental Entity (collectively,
Restraints
) shall be in effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated by this
Agreement or making the consummation of the transactions contemplated by this Agreement illegal.
(d)
Registration Statement
. The
Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or
threatened by the Commission.
(e)
Stock Exchange Listing
. The Company Common Stock deliverable to the Limited Partners as
contemplated by this Agreement shall have been approved for listing on a National Securities Exchange, subject to official notice of issuance.
(f)
Supplemental Indentures
. (i) The Second Supplemental Indenture, among the Issuers, the guarantors party thereto and Wilmington
Trust, National Association (as successor to Wells Fargo Bank, National Association), as trustee (the
Trustee
), to the Indenture, dated as of December 4, 2012, among the Issuers, the guarantors party thereto and the Trustee
relating to the issuance by the Issuers of the 8% Senior Notes due 2020 and (ii) the Second Supplemental Indenture, among the Issuers, the guarantors party thereto and the Trustee, to the Indenture, dated as of May 28, 2013, among the
Issuers, the guarantors party thereto and the Trustee relating to the issuance by the Issuers of the 6.625% Senior Notes due 2021, shall have been entered into and all conditions precedent necessary for their effectiveness, other than any conditions
related to the transactions contemplated by this Agreement, shall have been satisfied or waived.
(g)
RBL Amendment
. The Ninth
Amendment to the Third Amended and Restated Credit Agreement, among the Partnership, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, Compass Bank, as Syndication Agent, UBS Securities LLC and U.S. Bank National
Association, as
Co-Documentation
Agents and the Lenders party thereto, dated as of April 1, 2014, shall have been entered into and all conditions precedent necessary for the effectiveness of such
amendment, other than any conditions related to the transactions contemplated by this Agreement, shall have been satisfied or waived.
(h)
Term Loan Amendment
. The Fourth Amendment to the Credit Agreement, dated as of October 25, 2016, by and among the Partnership, the financial institutions from time to time party thereto as lenders, and Cortland Capital Market Services
LLC, as the Administrative Agent, shall have been entered into and all conditions precedent necessary for the effectiveness of such amendment, other than any conditions related to the transactions contemplated by this Agreement, shall have been
satisfied or waived.
(i)
GP Purchase Agreement
. All conditions precedent required to consummate the GP Purchase, other than any
conditions related to the transactions contemplated by this Agreement, shall have been satisfied or waived.
(j)
Company Long-Term
Incentive Plan; Company Equity Awards
. The Company Board or its compensation committee shall have adopted the Company Long-Term Incentive Plan as of the Effective Time and authorized the Company Equity Awards as of the Effective Time.
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Section 7.02
Conditions to Obligations of the Company and
Merger Sub to Effect the Merger
. The obligations of the Company and Merger Sub to effect the Merger are further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following
conditions:
(a)
Representations and Warranties
. (i) The representations and warranties of the Partnership and the Partnership
GP contained in
Section
4.03(a)
and
Section
4.03(d)
shall be true and correct in all respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of such date); (ii) the representations and warranties of the Partnership and the Partnership GP contained in
Section
4.02(a)
shall be true
and correct in all respects, other than immaterial misstatements or omissions, both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such
date); and (iii) all other representations and warranties of the Partnership and the Partnership GP set forth herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date), except, in the case of this
clause
(iii)
, where the failure of such representations and warranties to be so true and correct (without giving
effect to any limitation as to materiality or Partnership Material Adverse Effect set forth in any individual such representation or warranty) does not have, and would not reasonably be expected to have, individually or in
the aggregate, a Partnership Material Adverse Effect. The Company shall have received a certificate signed on behalf of the Partnership and the Partnership GP by an executive officer of the Partnership GP to such effect.
(b)
Performance of Obligations of the Partnership and Partnership GP
. The Partnership and the Partnership GP shall have performed in
all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date. The Company shall have received a certificate signed on behalf of the Partnership and the Partnership GP by an executive
officer of the Partnership GP to such effect.
Section 7.03
Conditions to Obligation of the
Partnership to Effect the Merger
. The obligation of the Partnership to effect the Merger is further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a)
Representations and Warranties
. (i) The representations and warranties of the Company contained in
Section
5.03(a)
shall be true and correct in all respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date); (ii) the representations and warranties of the Company contained in
Section
5.02(a)
shall be true and correct in all respects, other than immaterial misstatements or omissions, both when
made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date); and (iii) all other representations and warranties of the Company set forth
herein shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of this
clause
(iii)
, where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to materiality or Company Material Adverse Effect set
forth in any individual such representation or warranty) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Partnership shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such effect.
(b)
Performance of Obligations of the Company and Merger
Sub
. Each of the Company and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date. Partnership shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such effect.
Section 7.04
Frustration of Closing Conditions
.
(a) Neither the Partnership nor the Partnership GP may rely on the failure of any condition set
forth in
Section
7.01
,
Section
7.02
or
Section
7.03
, as the case may be, to be satisfied if such failure was due to the failure
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of either such Party to perform and comply in all material respects with the covenants and agreements to be performed or complied with by it prior to the Closing.
(b) Neither the Company nor Merger Sub may rely on the failure of any condition set forth in
Section
7.01
,
Section
7.02
or
Section
7.03
, as the case may be, to be satisfied if such failure was due to the failure of either such Party to perform and comply in all material respects with the covenants and
agreements to be performed or complied with by it prior to the Closing.
ARTICLE VIII
TERMINATION
Section 8.01
Termination
. This Agreement may be terminated and the transactions contemplated by this Agreement abandoned at any time prior to the Effective Time:
(a) by the mutual written consent of the Partnership and the Company duly authorized by the Company Board and the GP Board.
(b) by either of the Partnership or the Company:
(i) if the Closing shall not have been consummated on or before the Outside Date;
(ii) if any Restraint having the effect set forth in
Section 7.01(c)
shall be in effect and shall have become final and nonappealable;
provided
,
however
, that the right to terminate this Agreement under this
Section 8.01(b)(ii)
shall not be available to the Partnership or the Company if such Restraint was due to the failure of, in the case of the Partnership,
the Partnership or the Partnership GP and in the case of the Company, the Company or Merger Sub, to perform any of its obligations under this Agreement; or
(iii) if the Partnership Unitholder Meeting and any postponements or adjournments thereof shall have concluded and the Partnership Unitholder
Approval shall not have been obtained.
(c) by the Company, if the Partnership or the Partnership GP shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set forth in this Agreement (or if any of the representations or warranties of the Partnership or the Partnership GP set forth in this Agreement shall fail to be true), which
breach or failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in
Section
7.02(
a)
or
Section
7.02(b)
and
(B) is incapable of being cured, or is not cured, by the Partnership or the Partnership GP within thirty (30) days following receipt of written notice from the Company of such breach or failure;
provided
,
however
, that the
Company shall not have the right to terminate this Agreement pursuant to this
Section
8.01(c)
if the Company or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements
contained in this Agreement.
(d) by the Partnership,
(i) if the GP Board, prior to the Partnership Unitholder Meeting, shall have concluded that recommending to the Unitholders approval of this
Agreement would be inconsistent with its duties to the holders of Units under applicable Law; or
(ii) if the Company shall have breached
or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement (or if any of the representations or warranties of the Company set forth in this Agreement shall fail to be true), which breach or
failure (A) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in
Section
7.03(a)
or
Section
7.03(b)
and (B) is incapable of
being cured, or is not cured, by the Company within thirty (30) days following receipt of written notice from the Partnership of such breach or failure;
provided
,
however
, that the
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Partnership shall not have the right to terminate this Agreement pursuant to this
Section
8.01(d)(ii)
if the Partnership or the Partnership GP is then in material breach
of any of its representations, warranties, covenants or agreements contained in this Agreement.
Section 8.02
Effect of Termination
. In the event of the termination of this Agreement as provided
in
Section
8.01
, written notice thereof shall be given to the other Party or Parties, specifying the provision of this Agreement pursuant to which such termination is made, and this Agreement shall forthwith become null and
void (other than the provisions in the last sentence of
Section
6.03
, the provisions in
Section
6.05
,
Section
8.02
and
Article IX
, all of which shall survive
termination of this Agreement), and, except as otherwise provided in this
Section
8.02
, there shall be no liability on the part of any of the Company, Merger Sub or the Partnership and the Partnership GP or their respective
directors, officers and Affiliates;
provided, however
, that no such termination shall relieve any Party hereto from (a) any liability for any failure to consummate the Merger and the other transactions contemplated by this Agreement
when required pursuant to this Agreement or (b) any liability for fraud.
ARTICLE IX
MISCELLANEOUS
Section 9.01
Survival
. The representations, warranties and agreements in this Agreement (including, for the avoidance of doubt, any schedule, instrument or other document delivered pursuant to this Agreement) shall terminate at the
Effective Time or, except as otherwise provided in
Section
8.02
, upon the termination of this Agreement pursuant to
Section
8.01
, as the case may be, except that the agreements set forth in
Article I
,
Article II
,
Article III
and the last sentence of
Section
6.03
,
Section
6.05
and
Section
6.07
and any other agreement in this Agreement that
contemplates performance after the Effective Time shall survive the Effective Time.
Section 9.02
Interpretation
. The provision of a table of contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in
construing or interpreting this Agreement. All references in this Agreement to Exhibits, Appendices, Articles, Sections, subsections, clauses and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections,
clauses and other subdivisions of or to this Agreement unless expressly provided otherwise. The words this Agreement, herein, hereby, hereunder and hereof, and words of similar import,
refer to this Agreement as a whole and not to any particular Article, Section, subsection, clause or other subdivision unless expressly so limited. The words this Article, this Section, this subsection, this
clause, and words of similar import, refer only to the Article, Section, subsection and clause hereof in which such words occur. The word including (in its various forms) means including without limitation. All
references to $ or dollars shall be deemed references to the lawful currency of the United States of America. Each accounting term not defined herein will have the meaning given to it under GAAP as interpreted as of the date
of this Agreement. Unless expressly provided to the contrary, the word or is not exclusive. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles
(including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Appendices and Exhibits referred to herein are attached to and by this reference incorporated
herein for all purposes. Reference herein to any federal, state, local or foreign Law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The words day or
days shall mean calendar day, unless denoted as a Business Day. The words will and will not are expressions of command and not merely expressions of future intent or expectation. When used in this Agreement, the
word either shall be deemed to mean one or the other, not both. Unless otherwise noted, references herein to a party are references to the applicable Party to this Agreement. All references in this
Agreement to the date hereof or the date of this Agreement shall refer to the First Amended Execution Date.
Section 9.03
Amendment or Supplement
. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the Partnership Unitholder
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Approval, by written agreement of the Parties hereto, by action taken or authorized by the Company Board and the GP Board;
provided
,
however
, that following receipt of the
Partnership Unitholder Approval, there shall be no amendment or change to the provisions of this Agreement which by applicable Law or stock exchange rule would require further approval by the Unitholders, without such approval. Unless otherwise
expressly set forth in this Agreement, whenever a determination, decision, approval or consent of the Partnership or Partnership GP is required pursuant to this Agreement, such determination, decision, approval or consent must be authorized by the
GP Board.
Section 9.04
Extension of Time, Waiver, Etc.
At any time prior to the Effective
Time, any Party may, subject to applicable Law, (a) waive any inaccuracies in the representations and warranties of any other Party hereto, (b) extend the time for the performance of any of the obligations or acts of any other Party
hereto, (c) waive compliance by the other Party with any of the agreements contained herein or, except as otherwise provided herein, waive any of such Partys conditions or (d) make or grant any consent under this Agreement.
Notwithstanding the foregoing, no failure or delay by the Partnership, the Partnership GP, the Company or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a Party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party.
Section 9.05
Communications
. All notices and other communications hereunder shall be in
writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:
If to the Company or Merger Sub, to:
Legacy Reserves Inc.
303 W. Wall
Street, Suite 1800
Midland, Texas 79701
Attention: Bert Ferrara
Email: bferrara@legacylp.com
with a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
609 Main Street
Houston, Texas
77002
Attention: Matthew R. Pacey, P.C.
Michael P.
Fisherman
Email: matt.pacey@kirkland.com
michael.fisherman@kirkland.com
If to the Partnership or the Partnership GP, to:
Legacy Reserves LP
303 W. Wall
Street, Suite 1800
Midland, Texas 79701
Attention: Bert Ferrara
Email: bferrara@legacylp.com
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with a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
609 Main Street
Houston, Texas
77002
Attention: Matthew R. Pacey, P.C.
Michael P.
Fisherman
Email: matt.pacey@kirkland.com
michael.fisherman@kirkland.com
with a copy (which shall not constitute notice) to:
Richards Layton & Finger, P.A.
One Rodney Square
920 North King
Street
Wilmington, Delaware 19801
Attention: Srinivas M. Raju
Kenneth E.
Jackman
Email: raju@rlf.com
jackman@rlf.com
or to such other address as the Parties hereto may designate in writing. All notices and communications shall be deemed to have been duly given: at the
time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the overnight courier copy, if sent via facsimile; and upon
actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 9.06
Entire Understanding; No Third-Party Beneficiaries
. This Agreement and any certificates delivered by any Party pursuant to this Agreement (a) constitute the entire agreement and understanding, and supersede all other prior agreements and
understandings, both written and oral, among the Parties with respect to the subject matter of this Agreement and thereof and (b) shall not confer upon any Person other than the Parties hereto any rights (including third-party beneficiary
rights or otherwise) or remedies hereunder, except for, in the case of
clause
(b)
, the provisions of
Section
6.04
and
Section
9.12
and the right of the holders of
Partnership Securities to receive the applicable Merger Consideration after the Closing (a claim by the holders of Partnership Securities with respect to which may not be made unless and until the Closing shall have occurred). Notwithstanding
anything to the contrary in this Agreement,
Section
9.07
and
Section
9.12
shall be for the benefit of, and enforceable by, any financing sources or lender providing financing in connection with the
Merger.
Section 9.07
Governing Law; Submission to Jurisdiction
.
(a) This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this
Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed
in accordance with and governed by the laws of the State of Delaware without regard to principles of conflicts of laws.
(b) Each of the
Parties agrees (i) that this Agreement involves at least $100,000.00, and (ii) that this Agreement has been entered into by the Parties hereto in express reliance upon 6 Del. C. § 2708. Each of the Parties hereby irrevocably and
unconditionally agrees (i) to be subject to the jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the State of Delaware, and (ii)(1) to the extent such Party is not otherwise subject to service of process
in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such Partys agent for acceptance of legal process and notify the other Party or Parties hereto of the
A-28
name and address of such agent, and (2) that service of process may, to the fullest extent permitted by law, also be made on such Party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of valid service, and that service made pursuant to (ii)(1) or (2) above shall, to the fullest extent permitted by law, have the same legal force and effect as if
served upon such Party personally within the State of Delaware. Any action against any Party relating to the foregoing shall be brought in the Delaware Court of Chancery (or, solely if the Delaware Court of Chancery declines to accept jurisdiction
over any action, to the exclusive jurisdiction of the Superior Court of the State of Delaware (Complex Commercial Division) or, if the subject matter jurisdiction over the action is vested exclusively in the federal courts of the United States of
America, the United States District Court for the District of Delaware) and any appellate courts of any thereof. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
Section 9.08
Waiver
of Jury Trial
. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING
UNDER THIS AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 9.09
Execution in Counterparts
. This Agreement may be executed in any number of
counterparts and by different Parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same
agreement.
Section 9.10
Successors and Assigns
. The provisions of this Agreement will be
binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. No Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement (including any transfer by way of
merger or operation of law) without the consent of each other Party, except that Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any Subsidiary of the Company, but no such
assignment shall relieve the Company or Merger Sub of any of its obligations hereunder, and any such purported assignment in violation of this
Section
9.10
shall be void ab initio.
Section 9.11
Severability
. Whenever possible, each provision or portion of any provision of this
Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but, if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable
Law, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in
such jurisdiction in such manner as will effect as nearly as lawfully possible the purposes and intent of such invalid, illegal or unenforceable provision.
Section 9.12
No-Recourse
. Notwithstanding anything that may
be expressed or implied in this Agreement or any document, agreement, or instrument delivered contemporaneously herewith, and notwithstanding the fact that any Party may be a partnership or limited liability company, each Party hereto, by its
acceptance of the
A-29
benefits of this Agreement, covenants, agrees and acknowledges that no Persons other than the Parties to this Agreement (and their respective successors and assigns) shall have any obligation
hereunder and that it has no rights of recovery hereunder against, and no recourse hereunder or under any documents, agreements, or instruments delivered contemporaneously herewith or in respect of any oral representations made or alleged to be made
in connection herewith or therewith shall be had against, (a) any former, current or future director, officer, agent, Affiliate, manager, advisor, subadvisor, assignee, incorporator, controlling Person, fiduciary, representative or employee of
any Party (or any of their successors or permitted assignees), (b) any former, current, or future general or limited partner, manager, stockholder or member of any Party (or any of their successors or permitted assignees) or (c) any Affiliate
thereof or against any former, current or future director, officer, agent, employee, Affiliate, manager, advisor, subadvisor, assignee, incorporator, controlling Person, fiduciary, representative, general or limited partner, stockholder, manager or
member of any of the foregoing, or in each case, any financing sources of any of the foregoing, but in each case not including the Parties to this Agreement (and their respective successors and assigns), whether by or through attempted piercing of
the corporate veil, by or through a claim (whether in tort, contract or otherwise) by or on behalf of such Party against such persons and entities, by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any
statute, regulation or other applicable law, or otherwise; it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on, or otherwise be incurred by any such Persons, as such, for any obligations of
the applicable Party under this Agreement or the transactions contemplated hereby, under any documents or instruments delivered contemporaneously herewith, or in connection or contemplation hereof, in respect of any oral representations made or
alleged to be made in connection herewith or therewith, or for any claim (whether in tort, contract or otherwise) based on, in respect of, or by reason of, such obligations or their creation;
provided
,
however
, that nothing in this
Section
9.12
shall limit any liability of the Parties to this Agreement for breaches of the terms and conditions of this Agreement.
Section 9.13
Specific Performance
. The Parties agree that irreparable damage would occur and that
the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and it is accordingly agreed that the Parties shall
be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in each case, in accordance with this
Section
9.13
in the Delaware
Court of Chancery or any federal court sitting in the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction,
specific performance and other equitable relief as provided herein on the basis that (a) either Party has an adequate remedy at law or (b) an award of specific performance is not an appropriate remedy for any reason at law or equity. Each
Party further agrees that no Party shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this
Section
9.13
, and each Party
irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
Section 9.14
Effect of Amendment and Restatement
. This Agreement amends and restates the Original Merger Agreement in its entirety. This Agreement shall be effective as of the First Amended Execution Date, and all amendments to the
Original Merger Agreement effected by this Agreement, and all other covenants, agreements, terms and provisions of this Agreement, shall be deemed to have effect as of the First Amended Execution Date unless expressly stated otherwise. Each of the
representations and warranties made in this Agreement shall be deemed to be made on the First Amended Execution Date.
[
Signature page
follows
]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
|
|
|
COMPANY
:
|
|
LEGACY RESERVES INC.
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
|
MERGER SUB
:
|
|
LEGACY RESERVES MERGER SUB LLC
|
|
|
By:
|
|
Legacy Reserves Inc.,
|
|
|
its sole member
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
|
PARTNERSHIP
:
|
|
LEGACY RESERVES LP
|
|
|
By:
|
|
Legacy Reserves GP, LLC,
|
|
|
its general partner
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
|
PARTNERSHIP GP
:
|
|
LEGACY RESERVES GP, LLC
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
[Signature Page to the Amended and Restated Agreement and Plan of Merger]
A-31
EXHIBIT A
FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
THE COMPANY
[
See
attached.
]
[Exhibit A to the Amended and Restated Agreement and Plan of Merger]
A-32
Final
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LEGACY RESERVES INC.
ARTICLE I
Section 1.1.
Name
.
The name of the corporation is Legacy Reserves Inc. (the
Corporation
).
ARTICLE II
Section 2.1.
Address
.
The registered office of the Corporation in the State of Delaware is 1675 S. State Street, Suite B, Dover, Kent
County, Delaware 19001, and the name of the Corporations registered agent at such address is Capitol Services, Inc.
ARTICLE III
Section 3.1.
Purpose
.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or
hereafter be organized under the General Corporation Law of the State of Delaware (the
DGCL
).
ARTICLE IV
Section 4.1.
Capitalization
.
The total number of shares of all classes of stock that the Corporation is authorized to issue is
1,050,000,000 shares, consisting of (i) 105,000,000 shares of Preferred Stock, par value $0.01 per share (
Preferred Stock
) and (ii) 945,000,000 shares of common stock, par value $0.01 per share (the
Common
Stock
). The number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in
voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of any of the Common Stock or Preferred Stock
voting separately as a class shall be required therefor, unless a vote of any such holder is required pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred
Stock).
Section 4.2.
Preferred Stock
.
(A)
The Board of Directors of the Corporation (the
Board
) is hereby expressly authorized, by resolution or
resolutions, at any time and from time to time, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the
designation of such series, the voting powers (if any) of the shares of such series, and the powers, preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of
the shares of such series and to cause to be filed with the Secretary of State of the State of Delaware a certificate of designation with respect thereto. The powers, preferences and relative, participating, optional and other special rights of each
series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
A-33
(B)
Except as otherwise required by law, holders of a series of Preferred Stock, as such,
shall be entitled only to such voting rights, if any, as shall expressly be granted thereto by this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to such series of Preferred Stock).
Section 4.3.
Common Stock
.
(A)
Voting Rights
.
(1) Each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote.
(2) Notwithstanding the foregoing, to the fullest extent permitted by law,
holders of Common Stock, as such, shall have no voting power with respect to, and shall not be entitled to vote on, any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any
series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to
vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the DGCL. Except as otherwise provided in this Amended and Restated
Certificate of Incorporation or required by applicable law, the holders of Common Stock shall vote together as a single class (or, if the holders of one or more series of Preferred Stock are entitled to vote together with the holders of Common
Stock, as a single class with the holders of such other series of Preferred Stock) on all matters submitted to a vote of the stockholders generally.
(B)
Dividends
. Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred
Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the payment of dividends in cash, property of the Corporation or shares of the Corporations capital stock, such
dividends may be declared and paid ratably on the Common Stock out of the assets of the Corporation that are by law available therefor at such times and in such amounts as the Board in its discretion shall determine.
(C)
Liquidation, Dissolution or Winding Up
. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the rights, if any, of the holders of Preferred Stock or any class or series of stock having a
preference over or the right to participate with the Common Stock as to distributions upon dissolution or liquidation or winding up, the holders of all outstanding shares of Common Stock shall be entitled to receive the remaining assets of the
Corporation available for distribution ratably in proportion to the number of shares held by each such stockholder.
ARTICLE V
Section 5.1.
Amendment of Certificate of Incorporation
.
The Corporation reserves the right to amend this Amended and Restated Certificate
of Incorporation in any manner permitted by the DGCL. Notwithstanding the foregoing, the following provisions in this Amended and Restated Certificate of Incorporation may be amended, altered, repealed or rescinded, in whole or in part, or any
provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least sixty six and two thirds percent (66 2/3%) in voting power of all the then outstanding shares of stock of the Corporation entitled
to vote thereon, voting together as a single class: this
Article V
,
Article VI
,
Article VII
,
Article VIII
,
Article IX
and
Article X
.
Section 5.2.
Amendment of Bylaws
.
The Board is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the
bylaws of the Corporation (as in effect from time to time, the
Bylaws
) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or
A-34
this Amended and Restated Certificate of Incorporation. Stockholders shall also have the power to make, repeal, alter, amend and rescind, in whole or in part, the Bylaws without any requirement
to obtain separate Board approval;
provided
,
however
, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law, by this Amended and Restated Certificate of Incorporation
or by the Bylaws, the affirmative vote of the holders of at least sixty six and two thirds percent (66 2/3%) in voting power of all the then outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class,
shall be required in order for the stockholders of the Corporation to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws. No Bylaws hereafter made or adopted, nor any alteration or amendment thereto or repeal or
rescission thereof, shall invalidate any prior act of the Board that was valid at the time it was taken.
ARTICLE VI
Section 6.1.
Board of Directors
.
(A)
Except as provided in this Amended and Restated Certificate of Incorporation or the DGCL, the business and affairs of the
Corporation shall be managed by or under the direction of the Board. Except as otherwise provided for or fixed pursuant to the provisions of
Article IV
(including any certificate of designation with respect to any series of Preferred Stock)
and this
Article VI
relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time exclusively by resolution adopted by the Board. [The
directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more other such series, as the case may be) shall be divided into three classes designated
Class I, Class II and Class III. Each class shall consist, as nearly as possible, of
one-third
of the total number of such directors. Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was elected;
provided
,
that
each director initially appointed to Class I shall serve for an initial term expiring at the Corporations first annual
meeting of stockholders following the effectiveness of this provision; each director initially appointed to Class II shall serve for an initial term expiring at the Corporations second annual meeting of stockholders following the
effectiveness of this provision; and each director initially appointed to Class III shall serve for an initial term expiring at the Corporations third annual meeting of stockholders following the effectiveness of this provision. If the
number of such directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a
newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any
incumbent director. Any such director shall hold office until the annual meeting at which his or her term expires and until his or her successor shall be elected and qualified, or his or her death, resignation, retirement, disqualification or
removal from office. The Board is authorized to assign members of the Board already in office to their respective class.]
1
[At each annual meeting of stockholders, directors shall be elected for a
term of office to expire at the next succeeding annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified, subject, however, to such directors
earlier death, resignation, retirement, disqualification or removal.]
2
(B)
Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding, any newly created directorship on the Board that results from an increase in the number of directors and any vacancy occurring in the Board
(whether by death, resignation, retirement, disqualification, removal or other cause) may only be filled by a majority of the directors then in office, although less than a quorum or by a sole remaining director. Any director elected to fill a
vacancy or newly created directorship shall hold office until
1
|
Note: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
2
|
Note: To be inserted if Classified Board Proposal is not approved at the Partnership Unitholder Meeting.
|
A-35
the next [election of the class for which such director shall have been chosen]
3
[annual
meeting]
4
and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.
(C)
Any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock, voting separately as
a series or together with one or more other such series, as the case may be) may be removed [only for cause and]
5
[with or without cause]
6
only
by the affirmative vote of the holders of at least sixty six and two thirds percent (66 2/3%) in voting power of all the then outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class.
(D)
During any period when the holders of any series of Preferred Stock, voting separately as a series or together with one or more
series, have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall
automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional
director shall serve until such directors successor shall have been duly elected and qualified, or until such directors right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her
earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to
elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death,
resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly.
(E)
Elections of directors need not be by written ballot unless the Bylaws shall so provide.
ARTICLE VII
Section 7.1.
Limitation on Liability of Directors
.
(A)
To the fullest extent permitted by the DGCL as it now exists or may hereafter
be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty owed to the Corporation or its stockholders.
(B)
Neither the amendment nor repeal of this
Article VII
, nor the adoption of any provision of this Amended and Restated
Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director of the Corporation existing at the
time of such amendment, repeal, adoption or modification.
ARTICLE VIII
Section 8.1.
Consent of Stockholders in Lieu of Meeting
.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders;
provided
,
however
, that any action required or
3
|
Note: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
4
|
Note: To be inserted if Classified Board Proposal is not approved at the Partnership Unitholder Meeting.
|
5
|
Note: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
6
|
Note: To be inserted if Classified Board Proposal is not approved at the Partnership Unitholder Meeting.
|
A-36
permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior
notice and without a vote, to the extent expressly so provided herein (including in a certificate of designation relating to such series of Preferred Stock).
Section 8.2.
Special Meetings of the Stockholders
.
Except as otherwise required by law and subject to the rights of the holders of any
series of Preferred Stock, special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time only by or at the direction of the Board or the Chairman of the Board.
Section 8.3.
Annual Meetings of the Stockholders
.
An annual meeting of stockholders for the election of directors to succeed those
directors whose terms then expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, if any, on such date, and at such time as shall be fixed exclusively by resolution of the Board or
a duly authorized committee thereof.
ARTICLE IX
Section 9.1.
Competition and Corporate Opportunities
.
(A)
In recognition and anticipation that members of the Board who are not employees of the Corporation (the
Non-Employee
Directors
) and their respective Affiliates (as defined below) may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the
Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this
Article IX
are set forth to regulate
and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of the
Non-Employee
Directors or their respective
Affiliates and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.
(B)
No
Non-Employee
Director (including any
Non-Employee
Director who serves as an officer of the Corporation in both his or her director and officer capacities) or his or her Affiliates (the Persons (as defined below) identified above being referred
to, collectively, as
Identified Persons
and, individually, as an
Identified Person
) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the
same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent
permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such
activities. To the fullest extent permitted by law, the Corporation, pursuant to Section 122(17) of the DGCL hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity that
may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in
Section
9.1(C)
of this
Article IX
. Subject to
Section
9.1(C)
of
this
Article IX
, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity that may be a corporate opportunity for itself, herself or himself and the Corporation or any of its
Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by
law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person
pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.
A-37
(C)
The Corporation does not renounce its interest in any corporate opportunity offered to
any
Non-Employee
Director (including any
Non-Employee
Director who serves as an officer of this Corporation) if such opportunity is (i) expressly offered to such
person solely in his or her capacity as a director or officer of the Corporation or (ii) identified by a
Non-Employee
Director solely through the disclosure of information by or on behalf of the
Corporation, and the provisions of
Section
9.1(B)
of this
Article IX
shall not apply to any such corporate opportunity.
(D)
In addition to and notwithstanding the foregoing provisions of this
Article IX
, a corporate opportunity shall not be deemed
to be a potential corporate opportunity for the Corporation if it is a business opportunity that (i) the Corporation is neither financially or legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line
of the Corporations business or is of no practical advantage to the Corporation or (iii) is one in which the Corporation has no interest or reasonable expectancy.
(E)
For purposes of this
Article IX
, (i)
Affiliate
shall mean (a) in respect of a
Non-Employee
Director, any Person that, directly or indirectly, controls or is controlled by, or is under common control with, such
Non-Employee
Director (other than the
Corporation and any entity that is controlled by the Corporation) and (b) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation; (ii)
Person
shall mean any individual,
corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity; and (iii)
control
(including the correlative meanings of the terms controlled by and
under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
(F)
To the fullest extent permitted by law, any Person purchasing or otherwise
acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this
Article IX
.
ARTICLE X
Section 10.1.
DGCL
Section
203
.
The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.
Section 10.2.
Severability
.
If any provision or provisions of this Amended and Restated Certificate of Incorporation shall be
held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Amended
and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not
itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby and (ii) to the fullest extent permitted by applicable law, the provisions of this
Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent
permitted by law.
* * * *
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EXHIBIT B
FORM OF AMENDED AND RESTATED BYLAWS OF THE COMPANY
[
See attached.
]
[Exhibit B to the Amended and Restated Agreement and Plan of Merger]
A-39
Final
FORM OF
AMENDED AND
RESTATED
BYLAWS
OF
LEGACY RESERVES
INC.
ARTICLE I
Offices
Section 1.01
Registered Office
.
The registered office and registered agent of Legacy Reserves Inc. (the
Corporation
) in the State of Delaware shall be as set forth in the Amended and Restated Certificate of Incorporation (as defined below). The Corporation may also have offices in such other places in the United States or elsewhere
(and may change the Corporations registered agent) as the Board of Directors of the Corporation (the
Board
) may, from time to time, determine or as the business of the Corporation may require as determined by any officer of
the Corporation.
ARTICLE II
Meetings of Stockholders
Section 2.01
Annual Meetings
.
Annual meetings of stockholders may be held at such place, if any, either within or without
the State of Delaware, and at such time and date as the Board shall determine and state in the notice of meeting. The Board may, in its sole discretion, determine that meetings of stockholders shall not be held at any place, but may instead be held
solely by means of remote communication as described in
Section
2.12
in accordance with Section 211(a)(2) of the General Corporation Law of the State of Delaware (the
DGCL
). The Board may postpone,
reschedule or cancel any annual meeting of stockholders previously scheduled by the Board.
Section 2.02
Special
Meetings
.
Special meetings of the stockholders may only be called in the manner provided in the Corporations certificate of incorporation as then in effect (as the same may be amended and/or restated from time to time, the
Amended and Restated Certificate of Incorporation
) and may be held at such place, if any, either within or without the State of Delaware, and at such time and date as the Board or the Chairman of the Board shall determine and
state in the notice of meeting. The Board may postpone, reschedule or cancel any special meeting of stockholders previously scheduled by the Board or the Chairman of the Board. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 2.03
Notice of Stockholder Business and Nominations
.
(A)
Annual Meetings of Stockholders
.
(1) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at
an annual meeting of stockholders only (a) pursuant to the Corporations notice of meeting (or any supplement thereto) delivered pursuant to
Section
2.05
, (b) by or at the direction of the Board or any
authorized committee thereof, (c) by any stockholder of the Corporation who (i) was a stockholder of record at the time of giving of notice provided for in this
Section
2.03
and at the time of
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the annual meeting, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures set forth in this
Section
2.03
as to such business or
nomination, or (d) with respect to nominations, by any Eligible Stockholder (as defined in
paragraph (C)(2)
of this
Section
2.03
) whose Stockholder Nominee (as defined in
paragraph (C)(1)
of this
Section
2.03
) is included in the Corporations proxy materials for the relevant annual meeting.
Clauses (c)
and
(d)
of the foregoing sentence shall be the exclusive means for a stockholder to make
director nominations and
clause (c)
of the foregoing sentence shall be the exclusive means for a stockholder to submit other business (other than matters properly brought under Rule
14a-8
under the
Securities Exchange Act of 1934, as amended (the
Exchange Act
) and included in the Corporations notice of meetings) before an annual meeting of stockholders.
(2) Without qualification, for nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to
clause (c)
of
paragraph
(A)(1)
of this
Section
2.03
, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and, in the case of business
other than nominations of persons for election to the Board, such other business must constitute a proper matter for stockholder action. To be timely, such stockholders notice shall be delivered to the Secretary of the Corporation at the
principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the first anniversary of the preceding years annual meeting (which date shall, for purposes of the
Corporations first annual meeting of stockholders after its shares of Common Stock (as defined in the Amended and Restated Certificate of Incorporation) are first publicly traded, be deemed to have occurred on May 15, 2018);
provided
,
however
, that in the event that the date of the annual meeting is advanced by more than thirty (30) days, or delayed by more than seventy (70) days, from the anniversary date of the previous years meeting, or
if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred and twentieth (120th) day prior to such annual meeting and not later than
the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Public announcement of an
adjournment or postponement of an annual meeting shall not commence a new time period (or extend any time period) for the giving of a stockholders notice. Notwithstanding anything in this
Section
2.03(A)(2)
to the
contrary, if the number of directors to be elected to the Board at an annual meeting is increased, and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least
one hundred (100) calendar days prior to the first anniversary of the prior years annual meeting of stockholders, then a stockholders notice required by this
Section
2.03
shall be considered timely, but
only with respect to nominees for any new positions created by such increase, if it is received by the Secretary of the Corporation not later than the close of business on the tenth (10th) calendar day following the day on which such public
announcement is first made by the Corporation.
(3) To be in proper form, a stockholders notice delivered pursuant to this
Section
2.03
must: (a) set forth, as to the stockholder giving the notice, the beneficial owner, if any, on whose behalf the nomination or proposal is made, and their respective affiliates or associates or others
acting in concert therewith (i) the name and address of such stockholder, as they appear on the Corporations books, and of such beneficial owner, and of their respective affiliates or associates or others acting in concert therewith;
(ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder and such beneficial owner, and their respective affiliates or associates or others
acting in concert therewith (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of
shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series
of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the
Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation,
whether or not such instrument, contract or right
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shall be subject to settlement in the underlying class or series of capital stock of the Corporation, through the delivery of cash or other property, or otherwise, and without regard to whether
the stockholder of record, the beneficial owner, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other
direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation and any other direct or indirect opportunity to profit or share in any profit derived from any increase
or decrease in the value of any class or series of shares of the Corporation (any of the foregoing, a
Derivative Instrument
) directly or indirectly owned beneficially by such stockholder, the beneficial owner, or any of their
respective affiliates or associates or others acting in concert therewith, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder, such beneficial owner and their respective affiliates or
associates or others acting in concert therewith have any right to vote any class or series of shares of any security of the Corporation, and any contract, arrangement, understanding, relationship or otherwise, the purpose or effect of which is to
increase or decrease the voting power of such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (D) any short interest in any security of the Corporation (for purposes of
this
Section
2.03
a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to
profit or share in any profit derived from any decrease in the value of the subject security) involving such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (E) any rights
to dividends on the shares of the Corporation owned beneficially by such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying
shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder, such beneficial owner and their
respective affiliates or associates or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, (G) any performance-related fees (other than an asset-based fee) that
such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any,
as of the date of such notice, including, without limitation, any such interests held by members of the immediate family sharing the same household of such stockholder, such beneficial owner and their respective affiliates or associates or others
acting in concert therewith, (H) any significant equity interests or any Derivative Instruments or short interests in any principal competitor of the Corporation held by such stockholder, such beneficial owner and their respective affiliates or
associates or others acting in concert therewith and (I) any direct or indirect interest of such stockholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith in any contract with the
Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) (which information shall be supplemented by
such stockholder and beneficial owner, if any, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date); (iii) any other information relating to such stockholder and beneficial owner,
if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election
pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (iv) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (y) to
deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporations outstanding capital stock required to approve or adopt the business to be proposed or to elect the nominee and/or (z) otherwise to
solicit proxies from stockholders in support of such proposal or the nomination; (b) if the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, set forth
(i) a brief description of the business desired to be brought before the meeting (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation,
the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business and (ii) a description of all agreements, arrangements
and understandings between such stockholder and beneficial owner, if any, and any other person or persons
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(including their names) in connection with the proposal of such business by such stockholder; (c) set forth, as to each person, if any, whom the stockholder proposes to nominate for election
or reelection to the Board of Directors (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of
directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such persons written consent to being named in the Corporations proxy statement as a
nominee of the stockholder and to serving as a director if elected) and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any
other material relationships, between or among such stockholder and the beneficial owner, if any, on whose behalf the nomination is made and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each
proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Item 404 promulgated
under Regulation
S-K
if the stockholder making the nomination, such beneficial owner, or any affiliate or associate thereof or person acting in concert therewith, were the registrant for purposes
of such rule and the nominee were a director or executive officer of such registrant, and a description of any other agreements, arrangements and understandings between or among such stockholder, such beneficial owner, any of their respective
affiliates or associates or others acting in concert therewith, and any other person or persons (including their names) in connection with the nomination by such stockholder; and (d) with respect to each nominee for election or reelection to
the Board of Directors, include a completed and signed questionnaire, representation and agreement required by
Section
2.04
. The Corporation may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation, including information relevant to the independence, or lack thereof, of such nominee.
(B)
Special Meetings of Stockholders
. Only such business shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the Corporations notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the
Corporations notice of meeting (1) by or at the direction of the Board or any committee thereof or (2) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who
is entitled to vote at the meeting, who complies with the notice procedures set forth in this
Section
2.03
and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. In the
event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be)
for election to such position(s) as specified in the Corporations notice of meeting if the stockholders notice as required by
paragraph (A)(2)
of this
Section
2.03
with respect to any nomination
(including the completed and signed questionnaire, representation and agreement required by
Section
2.04
) shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close
of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the
day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special
meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as described above.
(C)
Proxy Access for Director Nominations
.
(1) Subject to the terms and conditions of these Bylaws and the Amended and Restated
Certificate of Incorporation, in connection with an annual meeting of stockholders at which directors are to be elected, the Corporation will include in its proxy statement and on its form of proxy and on any ballot distributed at such annual
meeting (in addition to the persons nominated for election by the Board or any committee thereof) the name of a nominee for election to the Board submitted pursuant to this
paragraph (C)
of
Section
2.03
(a
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Stockholder Nominee
), and will include in its proxy statement information relating to the Stockholder Nominee (the
Required Information
, as defined below),
if (i) the Stockholder Nominee satisfies the eligibility requirements in this
paragraph (C)
of
Section
2.03
, (ii) the Stockholder Nominee is identified in a notice (the
Stockholder
Notice
) that is timely and proper and delivered in accordance with this
paragraph (C)
of
Section
2.03
by a stockholder that qualifies as, or is acting on behalf of, an Eligible Stockholder (as defined
below), (iii) the Eligible Stockholder expressly elects at the time of the delivery of the Stockholder Notice to have the Stockholder Nominee included in the Corporations proxy materials pursuant to this
Section
2.03(C)
, and (iv) the additional requirements of these Bylaws are met.
(2) To qualify as an
Eligible Stockholder
, a stockholder or beneficial owner must (i) Own and have Owned, continuously for at least three years as of the date of the Stockholder Notice, a number of shares that represents at least three percent
(3%) of the outstanding shares of the Voting Stock (as defined below) as of the date of the Stockholder Notice (the
Required Shares
), and (ii) thereafter continue to own the Required Shares through such annual meeting of
stockholders. For purposes of this
paragraph (C)
of
Section
2.03
,
Voting Stock
shall mean the capital stock of the Corporation generally entitled to vote in the election of directors. For
purposes of satisfying the ownership requirements of this
paragraph (C)(2)
of
Section
2.03
, a group of no more than twenty (20) stockholders and/or beneficial owners may aggregate the shares of Voting Stock that
each stockholder and/or beneficial owner has Owned continuously for at least three years as of the date of the Stockholder Notice. No stockholder or beneficial owner, alone or together with any of its affiliates, may be a member of more than one
group of stockholders constituting an Eligible Stockholder under this
paragraph (C)
of
Section
2.03
per each annual meeting of stockholders. A group of funds that are (i) under common management and
investment control, (ii) under common management and funded primarily by the same employer or (iii) a group of investment companies, as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940,
as amended, shall be treated as one stockholder or beneficial owner. Whenever an Eligible Stockholder consists of a group of stockholders and/or beneficial owners, any and all requirements and obligations for an Eligible Stockholder set forth in
this
paragraph (C)
of
Section
2.03
must be satisfied by each such stockholder or beneficial owner, except that shares may be aggregated as specified in this
paragraph (C)(2)
of
Section
2.03
.
(3) For purposes of this
paragraph (C)
or
Section
2.03
:
(a) A stockholder or beneficial owner shall be deemed to
Own
only those outstanding shares of Voting Stock as to which
such person possesses both (A) the full voting and investment rights pertaining to the shares and (B) the full economic interest in (including the opportunity for profit and risk of loss on) such shares;
provided
that the number of
shares calculated in accordance with clauses (A) and (B) shall not include any shares (1) sold by such person or any of its affiliates in any transaction that has not been settled or closed, including any short sale, (2) borrowed by
such person or any of its affiliates for any purposes or purchased by such person or any of its affiliates pursuant to an agreement to resell, or (3) subject to any option, warrant, forward contract, swap, contract of sale, or other derivative
or similar agreement entered into by such person or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of outstanding shares of Voting Stock, in any such
case which instrument or agreement has, or is intended to have, or if exercised would have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, such persons or its affiliates full right
to vote or direct the voting of any such shares, and/or (y) hedging, offsetting, or altering to any degree any gain or loss arising from the full economic ownership of such shares by such person or its affiliates. The terms
Owned
,
Owning
and other variations of the word
Own
, when used with respect to a stockholder or beneficial owner, shall have correlative meanings.
(b) A stockholder or beneficial owner shall Own shares held in the name of a nominee or other intermediary so long as the person
retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. The persons Ownership of shares shall be deemed to continue during any period in which the
person has delegated any voting power by means of a proxy, power of attorney, or other instrument or arrangement that is revocable at any time by the person.
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(c) A stockholder or beneficial owners Ownership of shares shall be deemed to continue
during any period in which the person has loaned such shares provided that the person (A) both has the power to recall such loaned shares on five business days notice and recalls the loaned shares within five business days of being
notified that its Stockholder Nominee will be included in the Corporations proxy materials for the relevant annual meeting, and (B) holds the recalled shares through the annual meeting.
(4) For purposes of this
paragraph (C)
of
Section
2.03
, the
Required Information
that the Corporation will include in its proxy statement is:
(a) The information concerning each Stockholder Nominee and the Eligible
Stockholder that is required to be disclosed in the Corporations proxy statement by the applicable requirements of the Exchange Act and the rules and regulations thereunder, and
(b) If the Eligible Stockholder so elects, a written statement of the Eligible Stockholder (or, in the case of a group, a written statement
of the group), not to exceed five-hundred (500) words, in support of each Stockholder Nominee, which must be provided at the same time as the Stockholder Notice for inclusion in the Corporations proxy statement for the annual meeting (the
Statement
).
Notwithstanding anything to the contrary contained in this
paragraph (C)
of
Section
2.03
, the Corporation may omit from its proxy materials any information or Statement that it, in good faith, believes is untrue in any material respect (or omits a material fact necessary in order to make the
statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule, regulation or listing standard. Nothing in this
paragraph
(C)
of
Section
2.03
shall limit the Corporations ability to solicit against and include in its proxy materials its own statements relating to any Eligible Stockholder or Stockholder Nominee.
(5) Within the time period specified herein, the Stockholder Notice shall be delivered by a stockholder and shall set forth all information,
representations and agreements required under
paragraphs (A)(3)(a)
and
(A)(3)(c)
of this
Section
2.03
above (and for such purposes, references therein to stockholder and to the beneficial
owner, if any, on whose behalf the nomination is made shall be deemed to refer to Eligible Stockholder), and in addition such Stockholder Notice shall include:
(a) a copy of the Schedule 14N that has been or concurrently is filed with the SEC under the Exchange Act,
(b) a statement setting forth and certifying to the number of shares of Voting Stock the Eligible Stockholder Owns and has Owned (as defined
in
paragraph
(C)(3)
of this
Section
2.03
of these Bylaws) continuously for at least three years as of the date of the Stockholder Notice and agreeing to continue to Own such shares through the
annual meeting and stating whether it intends to maintain Ownership of the Required Shares for at least one year following the annual meeting, which statement shall also be included in the Schedule 14N filed with the SEC,
(c) the written agreement of the Eligible Stockholder addressed to the Corporation, setting forth the following additional agreements,
representations, and warranties:
i. it will provide (1) the information required under
paragraph (A)(3)
of this
Section
2.03
as of the record date, (2) notification in writing verifying the Eligible Stockholders continuous Ownership of the Required Shares as of the record date, and (3) immediate notice to the
Corporation if the Eligible Stockholder ceases to own any of the Required Shares prior to the annual meeting of stockholders,
ii. it
(1) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and does not presently have any such intent, (2) has not nominated and will not nominate for
election to the Board at the annual meeting any person other than the
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Stockholder Nominee(s) being nominated pursuant to this
paragraph (C)
of
Section
2.03
, (3) has not engaged and will not engage in, and has not been and will
not be a participant (as defined in Item 4 of Exchange Act Schedule 14A) in, a solicitation within the meaning of Exchange Act Rule
14a-1(l),
in support of the election of any individual as a
director at the annual meeting other than its Stockholder Nominee or a nominee of the Board, and (4) will not distribute to any stockholder any form of proxy for the annual meeting other than the form distributed by the Corporation, and
iii. it will (1) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholders
communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation, (2) indemnify and hold harmless the Corporation and each of its directors, officers and employees
individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees
arising out of any nomination submitted by the Eligible Stockholder pursuant to this
paragraph (C)
of
Section
2.03
, (3) comply with all laws, rules, regulations and listing standards applicable to any
solicitation in connection with the annual meeting, (4) file all materials described below in
clause (c)
of
paragraph (C)(7)
of this
Section
2.03
with the SEC, regardless of whether any such filing
is required under Exchange Act Regulation 14A, or whether any exemption from filing is available for such materials under Exchange Act Regulation 14A, and (5) promptly provide to the Corporation prior to the day of the annual meeting such
additional information as reasonably requested by the Corporation, and
iv. in the case of a nomination by a group, the designation by
all group members of one group member that is authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination.
(6) To be timely under this
paragraph (C)
of
Section
2.03
, the Stockholder Notice must be delivered by
a stockholder to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the one hundred twentieth (120th) day, nor earlier than the close of business on the one hundred fiftieth
(150th) day, prior to the first anniversary of the date (as stated in the Corporations proxy materials) the definitive proxy statement was first sent to stockholders in connection with the preceding years annual meeting of stockholders
(which date shall, for purposes of the Corporations first annual meeting of stockholders after its shares of Common Stock are first publicly traded, be deemed to have occurred on April 15, 2018);
provided
,
however
, that in
the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one
hundred fiftieth (150th) day prior to such annual meeting and not later than the close of business on the later of the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the Corporation. In no event shall an adjournment, recess or postponement of an annual meeting or the public announcement thereof commence a new time period (or extend any time period) for
the giving of the Stockholder Notice as described above.
(7) An Eligible Stockholder must:
(a) within five business days after the date of the Stockholder Notice, provide to the Corporation one or more written statements from the
record holder(s) of the Required Shares and from each intermediary through which the Required Shares are or have been held, in each case during the requisite three-year holding period, specifying the number of shares that the Eligible Stockholder
Owns, and has Owned continuously in compliance with this
paragraph (C)
of
Section
2.03
,
(b)
include in the Schedule 14N filed with the SEC (A) the number of shares of Voting Stock Owned by the Eligible Stockholder and (B) a statement certifying that it Owns and has Owned the Required Shares in compliance with this
paragraph
(C)
of
Section
2.03
,
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(c) file with the SEC any solicitation or other communication by or on behalf of the Eligible
Stockholder relating to the Corporations annual meeting of stockholders, one or more of the Corporations directors or director nominees or any Stockholder Nominee, regardless of whether any such filing is required under Exchange Act
Regulation 14A or whether any exemption from filing is available for such solicitation or other communication under Exchange Act Regulation 14A, and
(d) as to any group of funds whose shares are aggregated for purposes of constituting an Eligible Stockholder, within five business days
after the date of the Stockholder Notice, provide to the Corporation documentation reasonably satisfactory to the Corporation that demonstrates that the funds satisfy the requirements of the fifth sentence of
paragraph (C)(2)
of this
Section
2.03
.
The information provided pursuant to this
paragraph (C)(7)
of
Section
2.03
shall be deemed part of the Stockholder Notice for purposes of this
paragraph (C)
of
Section
2.03
(8) Within the time period and in the manner prescribed in
paragraph
(C)(6)
of this
Section
2.03
for delivery of the Stockholder Notice, a written representation and agreement of each Stockholder Nominee shall be delivered to the Secretary of the Corporation, which shall be deemed part of the Stockholder
Notice for purposes of this
paragraph (C)
of
Section
2.03
and signed by each Stockholder Nominee and representing and agreeing that such Stockholder Nominee:
(a) consents to being named in the Corporations proxy statement and form of proxy as a nominee and to serving as a director if elected,
(b) is not and will not become a party to any agreement, arrangement, or understanding with, and has not given any commitment or
assurance to, any person or entity as to how such Stockholder Nominee, if elected as a director, will act or vote on any issue or question that has not been disclosed to the Corporation, and
(c) is not and will not become a party to any agreement, arrangement, or understanding with any person or entity other than the Corporation
with respect to any direct or indirect compensation, reimbursement, or indemnification in connection with candidacy or service or action as a director that has not been disclosed to the Corporation.
The Stockholder Nominee must promptly provide to the Corporation prior to the date of the annual meeting such other information as it may reasonably request.
The Corporation may request such additional information as necessary to permit the Board to determine if each Stockholder Nominee satisfies the requirements of this
paragraph (C)
of
Section
2.03
.
(9) In the event that any information or communications provided by the Eligible Stockholder or any Stockholder Nominees to the Corporation
or its stockholders is not, when provided, or thereafter ceases to be, true, correct and complete in all material respects (including omitting a material fact necessary to make the statements made, in light of the circumstances under which they were
made, not misleading), each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary and provide the information that is required to make such information or communication true, correct, complete and not
misleading; it being understood that providing any such notification shall not be deemed to cure any defect or limit the Corporations right to omit a Stockholder Nominee from its proxy materials as provided in this
paragraph (C)
of
Section
2.03
.
(10) Notwithstanding anything to the contrary contained in this
paragraph
(C)
of
Section
2.03
, the Corporation may omit from its proxy materials any Stockholder Nominee, and such nomination shall be disregarded and no vote on such Stockholder Nominee will
occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation, if:
(a) the Eligible Stockholder
or Stockholder Nominee breaches any of its respective agreements, representations, or warranties set forth in the Stockholder Notice (or otherwise submitted pursuant to
A-47
this
paragraph (C)
of
Section
2.03
) or any of the information in the Stockholder Notice (or otherwise submitted pursuant to this
paragraph (C)
of
Section
2.03
) was not, when provided, true, correct and complete, or the requirements of this
paragraph (C)
of
Section
2.03
have otherwise not been met,
(b) the Stockholder Nominee (A) is not independent under any applicable listing standards, any applicable rules of the SEC, and any
publicly disclosed standards used by the Board in determining and disclosing the independence of the Corporations directors, (B) does not qualify either (1) as independent under the audit committee independence requirements set forth
in the rules of any stock exchange applicable to the Corporation, or (2) as a
non-employee
director under Exchange Act Rule
16b-3
(or any successor
provision), (C) is or has been, within the past three years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914, as amended, (D) is a named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses), has been convicted in a criminal proceeding (excluding traffic violations and other minor offenses), is a named subject of a pending civil fraud investigation or has been convicted
of fraud in a civil proceeding, in each case, within the past ten (10) years, or (E) is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended,
(c) the Corporation has received a notice (whether or not subsequently withdrawn) that a stockholder intends to nominate any candidate for
election to the Board pursuant to the advance notice requirements for stockholder nominees for director in
paragraph (A)(3)
of this
Section
2.03
,
(d) the election of the Stockholder Nominee to the Board would cause the Corporation to violate the Amended and Restated Certificate of
Incorporation, these Bylaws, any applicable law, rule, regulation or listing standard, or
(e) the Eligible Stockholder or applicable
Stockholder Nominee fails to comply with its obligations pursuant to these Bylaws, including but not limited to its obligations under this
paragraph (C)
of
Section
2.03
.
(11) The maximum number of Stockholder Nominees submitted by all Eligible Stockholders that may be included in the Corporations proxy
materials pursuant to this
paragraph
(C)
of
Section
2.03
shall not exceed the greater of (i) two or (ii) twenty percent (20%) of the number of directors in office as of the last day on
which a Stockholder Notice may be delivered pursuant to this
paragraph (C)
of
Section
2.03
with respect to the annual meeting, or if such amount is not a whole number, the closest whole number (rounding down)
below twenty percent (20%) (such resulting number, the
Permitted Number
);
provided
that the Permitted Number shall be reduced by: (i) any Stockholder Nominee whose name was submitted for inclusion in the
Corporations proxy materials pursuant to this
paragraph (C)
of
Section
2.03
but who the Board of Directors decides to nominate as a Board nominee or whose name is withdrawn [,]
1
[and]
2
(ii) any nominees who were previously elected to the Board as Stockholder Nominees at any of the preceding two annual meetings and who
are nominated for election at such annual meeting by the Board as a Board nominee [, (iii) any director currently serving on the Board who was a Stockholder Nominee at any of the two preceding annual meetings and (iv) any director
currently serving on the Board who was a Stockholder Nominee at the third preceding annual meeting and who the Board decides to nominate as a Board nominee at the upcoming annual meeting]
3
. In the
event that one or more vacancies for any reason occurs after the date of the Stockholder Notice but before the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the Permitted Number shall be calculated
based on the number of directors in office as so reduced. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this
paragraph (C)
of
Section
2.03
exceeds the
Permitted Number, the Corporation shall determine which Stockholder Nominees shall be included in the
1
|
Note
: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
2
|
Note
: To be inserted if Classified Board Proposal is not approved at the Partnership Unitholder Meeting.
|
3
|
Note
: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
A-48
Corporations proxy materials in accordance with the following provisions: each Eligible Stockholder will select one Stockholder Nominee for inclusion in the Corporations proxy
materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Voting Stock each Eligible Stockholder disclosed as Owned in its respective Stockholder Notice submitted to the Corporation. If the
Permitted Number is not reached after each Eligible Stockholder has selected one Stockholder Nominee, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.
Following such determination, if any Stockholder Nominee who satisfies the eligibility requirements in this
paragraph (C)
of
Section
2.03
thereafter is nominated by the Board, thereafter is not included in the
Corporations proxy materials or thereafter is not submitted for director election for any reason (including the Eligible Stockholders or Stockholder Nominees failure to comply with this
paragraph (C)
of
Section
2.03
), no other nominee or nominees shall be included in the Corporations proxy materials or otherwise submitted for director election in substitution thereof.
(12) Any Stockholder Nominee who is included in the Corporations proxy materials for a particular annual meeting of stockholders but
either (i) withdraws from or becomes ineligible or unavailable for election at the annual meeting for any reason, including for the failure to comply with any provision of these Bylaws (provided that in no event shall any such withdrawal,
ineligibility or unavailability commence a new time period (or extend any time period) for the giving of a Stockholder Notice) or (ii) does not receive a number of votes cast in favor of his or her election at least equal to twenty-five percent
(25%) of the shares present in person or represented by proxy and entitled to vote in the election of directors, will be ineligible to be a Stockholder Nominee pursuant to this
paragraph (C)
of
Section
2.03
for
the next two annual meetings.
(13) The Board (and any other person or body authorized by the Board) shall have the power and authority
to interpret this
paragraph (C)
of
Section
2.03
and to make any and all determinations necessary or advisable to apply this
paragraph (C)
of
Section
2.03
to any persons,
facts or circumstances, including the power to determine (i) whether one or more stockholders or beneficial owners qualifies as an Eligible Stockholder, (ii) whether a Stockholder Notice complies with this
paragraph (C)
of
Section
2.03
and has otherwise met the requirements of this
paragraph (C)
of
Section
2.03
, (iii) whether a Stockholder Nominee satisfies the qualifications and requirements in this
paragraph (C)
of
Section
2.03
, and (iv) whether any and all requirements of this
paragraph (C)
of
Section
2.03
have been satisfied. Any such interpretation or
determination adopted in good faith by the Board (or any other person or body authorized by the Board) shall be binding on all persons, including the Corporation and its stockholders (including any beneficial owners). Notwithstanding the foregoing
provisions of this
paragraph (C)
of
Section
2.03
, unless otherwise required by law or otherwise determined by the chairman of the meeting or the Board, if the Eligible Stockholder (or a qualified representative
(as defined below) of the Eligible Stockholder) does not appear at the annual meeting of stockholders of the Corporation to present its Stockholder Nominee or Stockholder Nominees, such nomination or nominations shall be disregarded, notwithstanding
that proxies in respect of the election of the Stockholder Nominee or Stockholder Nominees may have been received by the Corporation. This
paragraph (C)
of
Section
2.03
shall be the exclusive method for
stockholders to include nominees for director election in the Corporations proxy materials.
(D)
General
.
(1) Only such persons who are nominated in accordance with the procedures set forth in this
Section
2.03
shall be
eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at an annual or special meeting of stockholders as shall have been brought before the meeting
in accordance with the procedures set forth in this
Section
2.03
. Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the chairman of the meeting shall, in addition to
making any other determination that may be appropriate for the conduct of the meeting, have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in these Bylaws, including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so
solicit, at the case
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may be, proxies in support of such stockholders nominee or proposal in compliance with such stockholders representation as required by
clause (A)(3)(a)(iv)
of this
Section
2.03
and, (b) if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall be disregarded. The date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess
and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at
the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman
of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Notwithstanding the foregoing
provisions of this
Section
2.03
, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to
present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this
Section
2.03
, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such
stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the
writing or electronic transmission, at the meeting of stockholders. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
(2) Whenever used in these Bylaws,
public announcement
shall mean disclosure (a) in a
press release released by the Corporation;
provided
such press release is released by the Corporation following its customary procedures, is reported by the Dow Jones News Service, Associated Press or comparable national news service, or is
generally available on internet news sites, or (b) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations
promulgated thereunder.
(3) Notwithstanding the foregoing provisions of this
Section
2.03
, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this
Section
2.03
;
provided
,
however
, that, to the
fullest extent permitted by law, any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other
business to be considered pursuant to these Bylaws (including
paragraph (A)(1)(c)
and
paragraph (B)
of this
Section
2.03
), and compliance with
paragraph (A)(1)(c)
and
paragraph (B)
of
this
Section
2.03
of these Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the last sentence of (A)(1), business other than nominations brought
properly under and in compliance with Rule
14a-8
of the Exchange Act, as may be amended from time to time). Nothing in these Bylaws shall be deemed to affect any rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances.
Section
2.04
Submission of Questionnaire, Representation and Agreement
.
To be eligible
to be a nominee for election or reelection as a director of the Corporation, a person must deliver by mail (in the case of nominee nominated by a stockholder pursuant to Section 2.03, in accordance with the time periods prescribed for
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delivery of notice under
Section
2.03
of these Bylaws, as applicable) to the Secretary of the Corporation at the principal executive offices of the Corporation a written
questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request)
and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (i) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any
commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a
Voting Commitment
) that has not been disclosed to the Corporation or
(2) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law, (ii) is not and will not become
a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with such persons candidacy or
service or action as a director that has not been disclosed to the Corporation, and (iii) in such persons individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if
elected as a director of the Corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, and any other Corporation policies
and guidelines applicable to directors.
Section 2.05
Notice of Meetings
. Whenever stockholders are required or
permitted to take any action at a meeting, a timely notice in writing or by electronic transmission, in the manner provided in Section 232 of the DGCL, of the meeting, which shall state the place, if any, date and time of the meeting, the means
of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from
the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purposes for which the meeting is called, shall be mailed to or transmitted electronically by the Secretary of the Corporation
to each stockholder of record entitled to vote thereat as of the record date for determining the stockholders entitled to notice of the meeting. Unless otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws,
the notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders
entitled to notice of the meeting.
Section 2.06
Quorum
. Unless otherwise required by law, the Amended and Restated
Certificate of Incorporation or the rules of any stock exchange upon which the Corporations securities are listed, the holders of record of a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation
entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders. Notwithstanding the foregoing, where a separate vote by a class or series or classes or
series is required, a majority in voting power of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on that
matter. Once a quorum is present to organize a meeting, it shall not be broken by the subsequent withdrawal of any stockholders. At any meeting of stockholders of the Corporation, if less than a quorum be present, the chairman of the meeting or
stockholders holding a majority in voting power of the shares of stock of the Corporation, present in person or by proxy and entitled to vote thereat, shall have the power to adjourn the meeting from time to time in accordance with
Section
2.11
.
Section 2.07
Voting
. Except as otherwise provided by or pursuant to the
provisions of the Amended and Restated Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder that has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy in any manner
provided by applicable law, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable power. A
A-51
stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new
proxy bearing a later date. Unless required by the Amended and Restated Certificate of Incorporation or applicable law, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by such stockholders proxy, if there be such proxy. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the voting power of the
outstanding shares of stock present in person or represented by proxy and entitled to vote and voting on the subject matter shall decide any question brought before such meeting, unless the question is one upon which, by express provision of
applicable law, of the rules or regulations of any stock exchange applicable to the Corporation, of any regulation applicable to the Corporation or its securities, of the Amended and Restated Certificate of Incorporation or of these Bylaws, a
different vote is required, in which case such express provision shall govern and control the decision of such question. Notwithstanding the foregoing sentence and subject to the Amended and Restated Certificate of Incorporation (including any
certificate of designation relating to any series of Preferred Stock (as defined in the Amended and Restated Certificate of Incorporation)), all elections of directors shall be determined by a plurality of the votes cast in respect of the shares
present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
Section 2.08
Chairman of Meetings
. The Chairman of the Board, if one is elected, or, in his or her absence or disability, the Chief Executive Officer of the Corporation, or in the absence of the Chairman of the Board and the Chief Executive Officer, a
person designated by the Board shall be the chairman of the meeting and, as such, preside at all meetings of the stockholders.
Section 2.09
Secretary of Meetings
. The Secretary of the Corporation shall act as secretary at all meetings of the
stockholders. In the absence or disability of the Secretary, the Chairman of the Board or the Chief Executive Officer shall appoint a person to act as Secretary at such meetings.
Section 2.10
Consent of Stockholders in Lieu of Meeting
. Any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote only to the extent permitted by and in the manner provided in the Amended and Restated Certificate of Incorporation and in
accordance with applicable law.
Section 2.11
Adjournment
.
Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. Any business may be
transacted at the adjourned meeting that might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such
adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned
meeting as of the record date so fixed for notice of such adjourned meeting.
Section 2.12
Remote
Communication
. If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of
remote communication:
(A) participate in a meeting of stockholders; and
(B) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by
means of remote communication;
provided
that:
(1) the Corporation shall implement reasonable measures to verify that each person
deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder;
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(2) the Corporation shall implement reasonable measures to provide such stockholders and
proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and
(3) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote
or other action shall be maintained by the Corporation.
Section 2.13
Inspectors of Election
. The Corporation may,
and shall if required by law, in advance of any meeting of stockholders, appoint one or more inspectors of election, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and to make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed or designated is able to act at a meeting of stockholders, the chairman of the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector or inspectors so appointed or designated shall (i) ascertain the number of shares of capital stock of the Corporation outstanding and the voting power of each such share, (ii) determine the shares
of capital stock of the Corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made
to any determination by the inspectors and (v) certify their determination of the number of shares of capital stock of the Corporation represented at the meeting and such inspectors count of all votes and ballots. Such certification and
report shall specify such other information as may be required by law. In determining the validity and counting of proxies and ballots cast at any meeting of stockholders of the Corporation, the inspectors may consider such information as is
permitted by applicable law. No person who is a candidate for an office at an election may serve as an inspector at such election.
ARTICLE III
Board of
Directors
Section 3.01
Powers
. Except as otherwise provided by the Amended and Restated Certificate of
Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of its Board. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not
by the DGCL or the Amended and Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders.
Section 3.02
Number and Term; Chairman
. Subject to the rights of the holders of any series of Preferred Stock to elect
directors under specific circumstances, if any, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the affirmative vote of a majority of the Board. Directors shall be elected by the stockholders
at their annual meeting, and the term of each director shall be as set forth in the Amended and Restated Certificate of Incorporation. Directors need not be stockholders. The Board shall elect from its ranks a Chairman of the Board, who shall have
the powers and perform such duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairman of the Board shall preside at all meetings of the Board at which he or she is present. If the Chairman of the Board is not
present at a meeting of the Board, the Chief Executive Officer (if the Chief Executive Officer is a director and is not also the Chairman of the Board) shall preside at such meeting, and, if the Chief Executive Officer is not present at such meeting
or is not a director, a majority of the directors present at such meeting shall elect one (1) of their members to preside over such meeting.
Section 3.03
Resignations
. Any director may resign at any time upon notice given in writing or by electronic transmission
to the Board, the Chairman of the Board, the Chief Executive Officer or the Secretary of
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the Corporation. The resignation shall take effect at the time or upon the happening of any event specified therein, and if no specification is so made, at the time of its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise expressly provided in the resignation.
Section 3.04
Removal
.
Directors of the Corporation may be removed in the manner provided in the Amended and Restated Certificate of Incorporation and applicable law.
Section 3.05
Vacancies and Newly Created Directorships
.
Subject to applicable law and the rights granted to the
holders of any one or more series of Preferred Stock then outstanding, vacancies occurring in any directorship (whether by death, resignation, retirement, disqualification, removal or other cause) and newly created directorships resulting from any
increase in the number of directors shall be filled in accordance with the Amended and Restated Certificate of Incorporation. Any director elected to fill a vacancy or newly created directorship shall hold office until the next [election of the
class for which such director shall have been chosen]
4
[annual meeting]
5
and until his or her successor shall be elected and qualified, or
until his or her earlier death, resignation, retirement, disqualification or removal.
Section 3.06
Meetings
.
Regular meetings of the Board may be held at such places and times as shall be determined from time to time by the Board. Special meetings of the Board may be called by the Chief Executive Officer of the Corporation
or the Chairman of the Board, and shall be called by the Chief Executive Officer or the Secretary of the Corporation if directed by the Board and shall be at such places and times as they or he or she shall fix. Notice need not be given of regular
meetings of the Board. At least twenty-four (24) hours before each special meeting of the Board, either written notice, notice by electronic transmission or oral notice (either in person or by telephone) of the time, date and place of the
meeting shall be given to each director;
provided
,
however
, that if written notice is given only by United States mail, such notice be deposited in the United States mail, postage prepaid at least five (5) days before such special
meeting of the Board. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
Section 3.07
Quorum, Voting and Adjournment
.
Unless otherwise provided by the Amended and Restated Certificate
of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business. Unless otherwise provided in the Amended and Restated Certificate of Incorporation, cumulative voting for the election of
directors shall be prohibited. Except as otherwise provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws, the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of
the Board. In the absence of a quorum, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of such adjourned meeting need not be given if the time and place of such adjourned meeting are announced
at the meeting so adjourned.
Section 3.08
Committees; Committee Rules
.
The Board may designate one or more
committees, including but not limited to an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee, each such committee to consist of one or more of the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee to replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board establishing such committee, shall have
and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it;
provided
that no such
committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the
DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing these Bylaws. Each committee of the Board may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise
4
|
Note
: To be inserted if Classified Board Proposal is approved at the Partnership Unitholder Meeting.
|
5
|
Note
: To be inserted if Classified Board Proposal is not approved at the Partnership Unitholder Meeting.
|
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be provided by a resolution of the Board designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be
necessary to constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present at a meeting of the
committee at which a quorum is present. Unless otherwise provided in such a resolution, in the event that a member and that members alternate, if alternates are designated by the Board, of such committee is or are absent or disqualified, the
member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or
disqualified member.
Section 3.09
Action Without a Meeting
.
Unless otherwise restricted by the Amended and
Restated Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or any committee thereof, as the case may be,
consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed in the minutes of proceedings of the Board. Such filing shall be in paper form if the minutes are maintained
in paper form or shall be in electronic form if the minutes are maintained in electronic form.
Section 3.10
Remote
Meeting
.
Unless otherwise restricted by the Amended and Restated Certificate of Incorporation, members of the Board, or any committee designated by the Board, may participate in a meeting by means of conference telephone or other
communications equipment in which all persons participating in the meeting can hear each other. Participation in a meeting by means of conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 3.11
Compensation
.
The Board shall have the authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the Corporation in any capacity.
Section 3.12
Reliance on Books and
Records
.
A member of the Board, or a member of any committee designated by the Board shall, in the performance of such persons duties, be fully protected in relying in good faith upon records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by any of the Corporations officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other
persons professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
ARTICLE IV
Officers
Section 4.01
Number
.
The officers of the Corporation shall include a Chief Executive Officer and a Secretary, each
of whom shall be elected by the Board and who shall hold office for such terms as shall be determined by the Board and until their successors are elected and qualify or until their earlier death, resignation, retirement, disqualification or removal.
In addition, the Board may elect a President, one or more Vice Presidents, including one or more Executive Vice Presidents, Senior Vice Presidents, a Treasurer and one or more Assistant Treasurers and one or more Assistant Secretaries, who shall
hold their office for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Any number of offices may be held by the same person.
Section 4.02
Other Officers and Agents
.
The Board may appoint such other officers and agents as it deems advisable,
who shall hold their office for such terms and shall exercise and perform such powers and duties as shall be determined from time to time by the Board. The Board may appoint one or more officers called a Vice Chairman, each of whom does not need to
be a member of the Board.
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Section 4.03
Chief Executive Officer
.
The Chief Executive Officer,
subject to the determination of the Board, shall have general executive charge, management, and control of the properties and operations of the Corporation in the ordinary course of its business, with all such powers with respect to such properties
and operations as may be reasonably incident to such responsibilities. If the Board has not elected a Chairman of the Board or in the absence or inability to act as the Chairman of the Board, the Chief Executive Officer shall exercise all of the
powers and discharge all of the duties of the Chairman of the Board, but only if the Chief Executive Officer is a director of the Corporation.
Section 4.04
President
.
The President, if any, shall have such powers and shall perform such duties as shall be assigned to
him or her by the Chief Executive Officer or the Board.
Section 4.05
Vice Presidents
.
Each Vice President, if any
are elected, of whom one or more may be designated an Executive Vice President or Senior Vice President, shall have such powers and shall perform such duties as shall be assigned to him or her by the Chief Executive Officer or the Board.
Section 4.06
Treasurer
.
(A) The Treasurer, if any, shall have custody of the corporate funds, securities, evidences of indebtedness and other valuables of the
Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board or its designees selected for such purposes. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers therefor. The Treasurer shall render to the Chief Executive Officer and the
Board, upon their request, a report of the financial condition of the Corporation. If required by the Board, the Treasurer shall give the Corporation a bond for the faithful discharge of his or her duties in such amount and with such surety as the
Board shall prescribe.
(B) In addition, the Treasurer shall have such further powers and perform such other duties incident to the office
of Treasurer as from time to time are assigned to him or her by the Chief Executive Officer or the Board.
Section 4.07
Secretary
.
The Secretary shall: (A) cause minutes of all meetings of the stockholders and directors to be recorded and kept properly; (B) cause all notices required by these Bylaws or otherwise to be given
properly; (C) see that the minute books, stock books, and other nonfinancial books, records and papers of the Corporation are kept properly; and (D) cause all reports, statements, returns, certificates and other documents to be
prepared and filed when and as required. The Secretary shall have such further powers and perform such other duties as prescribed from time to time by the Chief Executive Officer or the Board.
Section 4.08
Assistant Treasurers and Assistant Secretaries
.
Each Assistant Treasurer and each Assistant Secretary, if
any are elected, shall be vested with all the powers and shall perform all the duties of the Treasurer and Secretary, respectively, in the absence or disability of such officer, unless or until the Chief Executive Officer or the Board shall
otherwise determine. In addition, Assistant Treasurers and Assistant Secretaries shall have such powers and shall perform such duties as shall be assigned to them by the Chief Executive Officer or the Board.
Section 4.09
Corporate Funds and Checks
.
The funds of the Corporation shall be kept in such depositories as shall from
time to time be prescribed by the Board or its designees selected for such purposes. All checks or other orders for the payment of money shall be signed by the Chief Executive Officer, the President, a Vice President, the Treasurer or the Secretary
or such other person or agent as may from time to time be authorized and with such countersignature, if any, as may be required by the Board.
Section 4.10
Contracts and Other Documents
.
The Chief Executive Officer and the Secretary, or such other officer or
officers as may from time to time be authorized by the Board or any other committee given
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specific authority in the premises by the Board during the intervals between the meetings of the Board, shall have power to sign and execute on behalf of the Corporation deeds, conveyances and
contracts, and any and all other documents requiring execution by the Corporation.
Section 4.11
Ownership of Equity Interests
or Other Securities of Another Entity
.
Unless otherwise directed by the Board, the Chief Executive Officer, the President, a Vice President, the Treasurer or the Secretary, or such other officer or agent as shall be authorized by the
Board, shall have the power and authority, on behalf of the Corporation, to attend and to vote at any meeting of securityholders of any entity in which the Corporation holds securities or equity interests and may exercise, on behalf of the
Corporation, any and all of the rights and powers incident to the ownership of such securities or equity interests at any such meeting, including the authority to execute and deliver proxies and consents on behalf of the Corporation.
Section 4.12
Delegation of Duties
.
In the absence, disability or refusal of any officer to exercise and perform his or
her duties, the Board may delegate to another officer such powers or duties.
Section 4.13
Resignation and
Removal
.
Any officer of the Corporation may be removed from office for or without cause at any time by the Board. Any officer may resign at any time in the same manner prescribed for directors under
Section
3.03
of these Bylaws.
Section 4.14
Vacancies
.
The Board shall have the power to fill
vacancies occurring in any office.
ARTICLE V
Stock
Section 5.01
Certificated Shares
.
The shares of stock of the Corporation shall be represented by certificates;
provided
that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporations stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two authorized
officers of the Corporation, including, but not limited to, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President, a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number and class of shares of stock of the Corporation owned by such holder. Any or all of the signatures on the certificate may be a facsimile. The Board shall have the power to appoint one or more
transfer agents and/or registrars for the transfer or registration of certificates of stock of any class, and may require stock certificates to be countersigned or registered by one or more of such transfer agents and/or registrars.
Section 5.02
Uncertificated Shares
.
If the Board chooses to issue uncertificated shares, the Corporation, if required
by the DGCL, shall, within a reasonable time after the issue or transfer of uncertificated shares, send the stockholder a written statement of the information required by the DGCL. The Corporation may adopt a system of issuance, recordation and
transfer of its shares of stock by electronic or other means not involving the issuance of certificates;
provided
that the use of such system by the Corporation is permitted by applicable law.
Section 5.03
Transfer of Shares
.
Shares of stock of the Corporation represented by certificates shall be transferable
upon its books by the holders thereof, in person or by their duly authorized attorneys or legal representatives, upon surrender to the Corporation by delivery thereof to the person in charge of the stock and transfer books and ledgers. Certificates
representing such shares, if any, shall be cancelled and new certificates, if the shares are to be certificated, shall thereupon be issued. Shares of capital stock of the Corporation that are not represented by a certificate shall be transferred in
accordance with any procedures adopted by the Corporation or its agents and applicable law. A record shall be made of each transfer. Whenever any transfer of shares shall be
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made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated
shares requested to be transferred, both the transferor and transferee request the Corporation do so. Subject to the requirements of applicable law, the Corporation shall have power and authority to make such rules and regulations as it may deem
necessary or proper concerning the issue, transfer and registration of certificates representing shares of stock of the Corporation and uncertificated shares.
Section 5.04
Lost, Stolen, Destroyed or Mutilated Certificates
.
A new certificate of stock or uncertificated shares
may be issued in the place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, and the Corporation may, in its discretion, require the owner of such lost, stolen or destroyed certificate, or his or
her legal representative, to give the Corporation a bond, in such sum as the Corporation may direct, in order to indemnify the Corporation against any claims that may be made against it in connection therewith. A new certificate or uncertificated
shares of stock may be issued in the place of any certificate previously issued by the Corporation that has become mutilated upon the surrender by such owner of such mutilated certificate and, if required by the Corporation, the posting of a bond by
such owner in an amount sufficient to indemnify the Corporation against any claim that may be made against it in connection therewith.
Section 5.05
List of Stockholders Entitled to Vote
.
The Corporation shall prepare, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (
provided
,
however
, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date
of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting at least ten (10) days prior to the meeting (a) on a reasonably accessible electronic network;
provided
that the information required to gain access to such list is provided with the notice of meeting or (b) during ordinary business hours at the principal place of business of the Corporation. In the event that the Corporation determines to make
the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then a list of stockholders
entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote
communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the
notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this
Section
5.05
or to vote in
person or by proxy at any meeting of stockholders.
Section 5.06
Fixing Date for Determination of Stockholders of
Record
.
(A) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any
adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board
determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided
,
however
, that the Board may fix a new record date for
determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for
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stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned
meeting.
(B) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
(C) Unless otherwise
restricted by the Amended and Restated Certificate of Incorporation, in order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board may fix a record date, which
record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is
adopted by the Board. If no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board, (i) when no prior action of the Board is required by law, the record date
for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board is
required by law, the record date for such purpose shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.
Section 5.07
Registered Stockholders
. Prior to the surrender to the Corporation of the certificate or certificates for a
share or shares of stock or notification to the Corporation of the transfer of uncertificated shares with a request to record the transfer of such share or shares, the Corporation may treat the registered owner of such share or shares as the person
entitled to receive dividends, to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner of such share or shares. To the fullest extent permitted by law, the Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.
ARTICLE VI
Notice and
Waiver of Notice
Section 6.01
Notice
.
If mailed, notice to stockholders shall be deemed given when deposited in
the United States mail, postage prepaid, directed to the stockholder at such stockholders address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders,
any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.
Section 6.02
Waiver of Notice
.
A written waiver of any notice, signed by a stockholder or director, or waiver by electronic
transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need
be specified in such a waiver. Attendance at any meeting (in person or by remote communication) shall constitute waiver of notice except attendance for the express purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
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ARTICLE VII
Indemnification
Section 7.01
Right to Indemnification
.
Each person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a
proceeding
), by reason of the fact that he or she is or was a director or an officer of the Corporation
or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
indemnitee
), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, agent or trustee or in any
other capacity while serving as a director, officer, employee, agent or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss
(including attorneys fees, judgments, fines, Employee Retirement Income Security Act of 1974 excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith;
provided
,
however
, that, except as provided in
Section
7.03
with respect to proceedings to enforce rights to indemnification or advancement of expenses or with respect to any compulsory counterclaim brought by such indemnitee,
the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
Section 7.02
Right to Advancement of Expenses
.
In addition to the right to indemnification conferred in
Section
7.01
, an indemnitee shall also have the right to be paid by the Corporation the expenses (including attorneys fees) incurred in appearing at, participating in or defending any such proceeding in advance of its
final disposition or in connection with a proceeding brought to establish or enforce a right to indemnification or advancement of expenses under this
Article
VII
(which shall be governed by
Section
7.03
(hereinafter an
advancement of expenses
));
provided
,
however
, that, except as provided in
Section
7.03
with respect to proceedings to enforce rights to
indemnification or advancement of expenses or with respect to any compulsory counterclaim brought by such indemnitee, the Corporation shall be responsible for an advancement of expenses in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by the Board;
provided
,
further
,
however
, that, if the DGCL requires or in the case of an advance made in a proceeding brought to establish or enforce a
right to indemnification or advancement, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be made solely upon delivery to the Corporation of an undertaking (hereinafter an
undertaking
), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a
final adjudication
) that such indemnitee is not entitled to be indemnified or entitled to
advancement of expenses under
Section
7.01
and this
Section
7.02
or otherwise.
Section 7.03
Right of Indemnitee to Bring Suit
.
If a claim under
Section
7.01
or
Section
7.02
is not paid in full by the Corporation within (A) sixty (60) days after a written claim for indemnification has been received by the Corporation or (B) twenty (20) days after a claim for an
advancement of expenses has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or to obtain advancement of expenses, as applicable. To the fullest
extent permitted by law, if the indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to
be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) any suit brought by the Corporation to recover an
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advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct,
shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or
to such advancement of expenses, under this
Article
VII
or otherwise shall be on the Corporation.
Section 7.04
Indemnification Not Exclusive
.
(A)
General
. The provision of indemnification to or the advancement of expenses and costs to any indemnitee under this
Article
VII
, or the entitlement of any indemnitee to indemnification or advancement of expenses and costs under this
Article
VII
, shall not limit or restrict in any way the power of the Corporation
to indemnify or advance expenses and costs to such indemnitee in any other way permitted by law or be deemed exclusive of, or invalidate, any right to which any indemnitee seeking indemnification or advancement of expenses and costs may be entitled
under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such indemnitees capacity as an officer, director, employee or agent of the Corporation and as to action in any other capacity.
(B)
Responsibility for Payment
.
(1) Given that certain jointly indemnifiable claims (as defined below) may arise due to the service of the indemnitee as a director and/or
officer of the Corporation at the request of the indemnitee-related entities (as defined below), the Corporation shall be fully and primarily responsible for the payment to the indemnitee in respect of indemnification or advancement of expenses in
connection with any such jointly indemnifiable claims, pursuant to and in accordance with the terms of this
Article
VII
, irrespective of any right of recovery the indemnitee may have from the indemnitee-related entities.
Under no circumstance shall the Corporation be entitled to any right of subrogation or contribution by the indemnitee-related entities and no right of advancement or recovery the indemnitee may have from the indemnitee-related entities shall reduce
or otherwise alter the rights of the indemnitee or the obligations of the Corporation hereunder. In the event that any of the indemnitee-related entities shall make any payment to the indemnitee in respect of indemnification or advancement of
expenses with respect to any jointly indemnifiable claim, the indemnitee-related entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee against the Corporation, and the
indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the indemnitee-related entities
effectively to bring suit to enforce such rights. Each of the indemnitee-related entities shall be third-party beneficiaries with respect to this
Section
7.04(B)
, entitled to enforce this
Section
7.04(B)
.
(2) For purposes of this
Section
7.04(B)
, the following terms shall
have the following meanings:
(a) The term
indemnitee-related entities
means any corporation, limited liability
company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Corporation or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise for
which the indemnitee has agreed, on behalf of the Corporation or at the Corporations request, to
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serve as a director, officer, employee or agent and which service is covered by the indemnity described herein) from whom an indemnitee may be entitled to indemnification or advancement of
expenses with respect to which, in whole or in part, the Corporation may also have an indemnification or advancement obligation.
(b) The
term
jointly indemnifiable claims
shall be broadly construed and shall include, without limitation, any action, suit or proceeding for which the indemnitee shall be entitled to indemnification or advancement of expenses from both
the indemnitee-related entities and the Corporation pursuant to applicable law, any agreement, certificate of incorporation, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or
comparable organizational documents of the Corporation or the indemnitee-related entities, as applicable.
Section 7.05
Nature
of Rights
.
The rights conferred upon indemnitees in this
Article
VII
shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to
the benefit of the indemnitees heirs, executors and administrators. Any amendment, alteration or repeal of this
Article
VII
that adversely affects any right of an indemnitee or its successors shall be prospective only
and shall not limit, eliminate, or impair any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.
S
ection 7.06
Insurance
.
The Corporation may purchase and maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the DGCL.
Section 7.07
Indemnification of Employees and Agents of
the Corporation
.
The Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the
provisions of this
Article
VII
with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
ARTICLE VIII
Miscellaneous
Section 8.01
Electronic Transmission
.
For purposes of these Bylaws,
electronic transmission
means
any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient
through an automated process.
Section 8.02
Corporate Seal
.
The Board may provide a suitable seal, containing
the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant
Treasurer.
Section 8.03
Fiscal Year
.
The fiscal year of the Corporation shall begin on the first day of January
and end on the thirty-first day of December of each year.
Section 8.04
Section Headings
.
Section headings in
these Bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.
Section 8.05
Inconsistent Provisions
.
In the event that any provision of these Bylaws is or becomes inconsistent with
any provision of the Amended and Restated Certificate of Incorporation, the DGCL or any other applicable law, such provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force
and effect.
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ARTICLE IX
Amendments
Section 9.01
Amendments
.
The Board is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part,
these Bylaws without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or the Amended and Restated Certificate of Incorporation. Stockholders shall also have the power to make, repeal,
alter, amend and rescind, in whole or in part, these Bylaws without any requirement to obtain separate Board approval;
provided
,
however
, that, in addition to any vote of the holders of any class or series of capital stock of the
Corporation required by the Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock), these Bylaws or applicable law, the affirmative vote of the holders of at least sixty
six and two thirds (66 2/3%) in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the Corporation to alter, amend,
repeal or rescind, in whole or in part, any provision of these Bylaws (including, without limitation, this
Section
9.01
). No Bylaws hereafter made or adopted, nor any alteration or amendment thereto or repeal or rescission
thereof, shall invalidate any prior act of the Board that was valid at the time it was taken.
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EXHIBIT C
POST-CLOSING BOARD OF DIRECTORS OF THE COMPANY
Class
I
:
Class
II
:
Class
III
:
Note: If the Classified Board Proposal is not approved at the Partnership Unitholder Meeting, these same six individuals will serve on the Board of Directors
of the Company.
[Exhibit C to the Amended and Restated Agreement and Plan of Merger]
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EXHIBIT D
POST-CLOSING OFFICERS OF THE COMPANY
|
|
|
Paul T. Horne
Chief Executive Officer
|
|
|
|
James Daniel Westcott
President and Chief Financial Officer
|
|
|
|
Kyle M. Hammond
Executive Vice President and Chief Operating Officer
|
|
|
|
Kyle A. McGraw
Executive Vice President and Chief Development Officer
|
|
|
|
Dan G. LeRoy
Vice President, General Counsel and Secretary
|
|
|
|
Micah C. Foster
Chief Accounting Officer and Controller
|
|
|
|
John Eklund
Vice President Permian Basin Operations
|
|
|
|
Cory Elliot
Vice President Information Technology
|
|
|
|
David J. Hartman
Vice President Corporate Reserves and Planning
|
[Exhibit D to the Amended and Restated Agreement and Plan of Merger]
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Annex B
LEGACY RESERVES INC.
2018 OMNIBUS
INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of this Legacy Reserves Inc. 2018 Omnibus Incentive Plan is to enhance the profitability and value of the Company for the
benefit of its stockholders by enabling the Company to offer Eligible Individuals cash and
stock-based
incentives in order to attract, retain and reward such individuals and strengthen the mutuality of
interests between such individuals and the Companys stockholders. The Plan is effective as of the date set forth in Article XIV.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following meanings:
2.1
Affiliate
means each of the following: (a) any Subsidiary;
(b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company or one of its Affiliates; (d) any trade or business (including, without limitation, a partnership or limited liability company) which directly or indirectly controls 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated as an
Affiliate by resolution of the Committee; provided that, unless otherwise determined by the Committee, the Common Stock subject to any Award constitutes service recipient stock for purposes of Section 409A of the Code or
otherwise does not subject the Award to Section 409A of the Code.
2.2
Award
means any award under the Plan of any Stock Option, Restricted
Stock, Performance Award, Other Stock-Based Award or Other Cash-Based Award. All Awards shall be granted by, confirmed by, and subject to the terms of, a written agreement executed by the Company and the Participant.
2.3
Award Agreement
means the written or electronic agreement setting
forth the terms and conditions applicable to an Award.
2.4
Board
means the Board of Directors of the Company.
2.5
Cause
means,
unless otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participants Termination of Employment or Termination of Consultancy, the following: (a) in the case where there is no employment agreement,
consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define
cause (or words of like import)), termination due to a Participants insubordination, dishonesty, fraud,
incompetence, moral turpitude, willful misconduct, refusal to perform the Participants duties or responsibilities
for any reason other than illness or incapacity or materially unsatisfactory performance of the Participants duties for the Company or an Affiliate, as determined by the
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Committee in its good faith discretion; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the Award that defines cause (or words of like import), cause as defined under such agreement; provided, however, that with regard to any agreement
under which the definition of cause only applies on occurrence of a change in control, such definition of cause shall not apply until a change in control actually takes place and then only with regard to a termination
thereafter. With respect to a Participants Termination of Directorship, cause means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.
2.6
Change in Control
has the meaning set forth in 10.2.
2.7
Code
means the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any successor provision and any treasury regulation promulgated thereunder.
2.8
Committee
means any committee of the Board duly authorized by the
Board to administer the Plan. If no committee is duly authorized by the Board to administer the Plan, the term Committee shall be deemed to refer to the Board for all purposes under the Plan.
2.9
Common Stock
means the common stock, $0.001 par value per share, of
the Company.
2.10
Company
means Legacy Reserves Inc., a Delaware
corporation, and its successors by operation of law.
2.11
Consultant
means any natural person who is an advisor or consultant
to the Company or its Affiliates.
2.12
Disability
means, unless
otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participants Termination, a permanent and total disability as defined in Section 22(e)(3) of the Code. A Disability shall only be deemed to occur
at the time of the determination by the Committee of the Disability. Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under
Section 409A(a)(2)(C)(i) or (ii) of the Code.
2.13
Effective
Date
means the effective date of the Plan as defined in Article XIV.
2.14
Eligible Employees
means each employee of the Company or an
Affiliate.
2.15
Eligible Individual
means an Eligible Employee,
Non-Employee
Director or Consultant who is designated by the Committee in its discretion as eligible to receive Awards subject to the conditions set forth herein.
2.16
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the Exchange Act or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
2.17
Fair
Market Value
means, for purposes of the Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the sales price reported for the
Common Stock on the applicable date: (a) as reported on the principal national securities exchange in the United States on which it is then traded or (b) if the Common Stock is not traded, listed or otherwise reported or quoted, the
Committee shall determine in good faith the Fair Market Value in whatever manner it considers appropriate taking into account the requirements of Section 409A of the Code. For purposes of the grant of any Award, the applicable date shall be the
last trading day immediately prior to the date on which
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the Award is granted or, if not a day on which the applicable market is open, the trading day immediately prior to the date on which the Award is granted. For purposes of the exercise of any
Award, the applicable date shall be the date a notice of exercise is received by the Committee or, if not a day on which the applicable market is open, the next day that it is open.
2.18
Family Member
means the Participants child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
including adoptive relationships, any person sharing the
Participants household (other than a tenant or employee), a trust in which these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets,
and any other entity in which these persons (or the Participant) own more than fifty percent (50%) of the voting interests.
2.19
Incentive Stock Option
means any Stock Option awarded to an
Eligible Employee of the Company, its Subsidiaries and its Parents (if any) under the Plan intended to be and designated as an Incentive Stock Option within the meaning of Section 422 of the Code.
2.20
Lead Underwriter
has the meaning set forth in Section 13.20.
2.21
Lock-Up
Period
has the
meaning set forth in Section 13.20.
2.22
Non-Employee
Director
means
a director or a member of the Board of the Company or any Affiliate who is not an active employee of the Company or any Affiliate.
2.23
Non-Qualified
Stock Option
means any Stock Option awarded under the Plan that is not an Incentive Stock Option.
2.24
Other Cash-Based Award
means an Award granted pursuant to Section 10.3 of the Plan and payable in cash at such time or times and subject to such terms and conditions as determined by the Committee in its
sole discretion.
2.25
Other Stock-Based Award
means an Award under
Article IX of the Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock, including, without limitation, an Award valued by reference to an Affiliate.
2.26
Parent
means any parent corporation of the Company within the
meaning of Section 424(e) of the Code.
2.27
Participant
means
an Eligible Individual to whom an Award has been granted pursuant to the Plan.
2.28
Performance Award
means an Award granted to a Participant pursuant
to Article IX hereof contingent upon achieving certain performance goals.
2.29
Performance Period
means the designated period during which the performance goals must be satisfied with respect to the Award to which the performance goals relate.
2.30
Plan
means this Legacy Reserves Inc. 2018 Omnibus Incentive Plan,
as amended from time to time.
2.31
Predecessor Awards
means Awards
issued under the Plan pursuant to the cancellation of equity awards issued under the Amended and Restated Legacy Reserves LP Long-Term Incentive Plan, in each case, in
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connection with the closing of the transactions contemplated by that certain Agreement and Plan of Merger dated as of March 23, 2018 by and among the Company, Legacy Reserves Merger Sub LLC,
Legacy Reserves LP and Legacy Reserves GP, LLC.
2.32
Proceeding
has
the meaning set forth in Section 13.9.
2.33
Registration Date
means the date on which the Company sells its Common Stock in a bona fide, firm commitment underwriting pursuant to a registration statement under the Securities Act.
2.34
Reorganization
has the meaning set forth in
Section 4.2(b)(ii).
2.35
Restricted Stock
means an Award of
shares of Common Stock under the Plan that is subject to restrictions under Article VII.
2.36
Restriction Period
has the meaning set forth in Section 7.3(a)
with respect to Restricted Stock.
2.37
Rule
16b-3
means Rule
16b-3
under Section 16(b) of the Exchange Act as then in effect or any successor provision.
2.38
Section
409A of the Code
means
the nonqualified deferred compensation rules under Section 409A of the Code and any applicable treasury regulations and other official guidance thereunder.
2.39
Securities Act
means the Securities Act of 1933, as amended and all
rules and regulations promulgated thereunder. Reference to a specific section of the Securities Act or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any
comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.40
Stock Option
or
Option
means any option to purchase shares of Common Stock granted to Eligible Individuals granted pursuant to Article VI.
2.41
Subsidiary
means any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
2.42
Ten Percent
Stockholder
means a person owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.
2.43
Termination
means a Termination of Consultancy, Termination of
Directorship or Termination of Employment, as applicable.
2.44
Termination of
Consultancy
means: (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; or (b) when an entity which is retaining a Participant as a Consultant ceases to be an Affiliate unless the
Participant otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that a Consultant becomes an Eligible Employee or a
Non-Employee
Director upon the termination of such Consultants consultancy, unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur
until such time as such Consultant is no longer a Consultant, an Eligible Employee or a
Non-Employee
Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of Consultancy in
the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter, provided that any such change to the definition of the term Termination of Consultancy does not subject the
applicable Award to Section 409A of the Code.
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2.45
Termination of
Directorship
means that the
Non-Employee
Director has ceased to be a director of the Company; except that if a
Non-Employee
Director becomes an
Eligible Employee or a Consultant upon the termination of such
Non-Employee
Directors directorship, such
Non-Employee
Directors ceasing to be a director of
the Company shall not be treated as a Termination of Directorship unless and until the Participant has a Termination of Employment or Termination of Consultancy, as the case may be.
2.46
Termination of Employment
means: (a) a termination of
employment (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing a Participant ceases to be an Affiliate, unless
the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant or a
Non-Employee
Director upon the termination of such Eligible Employees employment, unless otherwise determined by the Committee, in its sole discretion, no Termination of Employment shall be deemed to
occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or a
Non-Employee
Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of
Employment in the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter, provided that any such change to the definition of the term Termination of Employment does not
subject the applicable Award to Section 409A of the Code.
2.47
Transfer
means: (a) when used as a noun, any direct or
indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition (including the issuance of equity in any entity), whether for value or no value and whether voluntary or involuntary (including by operation of law), and
(b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in any entity) whether for value or for no value and whether voluntarily
or involuntarily (including by operation of law). Transferred and Transferable shall have a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1
The Committee
.
The Plan shall be administered and interpreted by the Committee.
3.2
Grants of Awards
. The Committee shall have full authority to grant, pursuant to the terms of
the Plan, to Eligible Individuals: (i) Stock Options, (ii) Restricted Stock Awards, (iii) Performance Awards; (iv) Other Stock-Based Awards; and (v) Other Cash-Based Awards. In particular, the Committee shall have the
authority:
(a) to select the Eligible Individuals to whom Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards, or any combination thereof, are to be granted hereunder to one or
more Eligible Individuals;
(c) to determine the number of shares of Common Stock to be covered by each Award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any
Award granted hereunder (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and
the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);
(e) to determine the amount of cash to be covered by each Award granted hereunder;
(f) to determine whether, to what extent and under what circumstances grants of Options and other Awards under the Plan
are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of the Plan;
B-5
(g) to determine whether and under what circumstances a Stock Option may
be settled in cash, Common Stock and/or Restricted Stock under Section 6.4(d);
(h) to determine whether a
Stock Option is an Incentive Stock Option or
Non-Qualified
Stock Option;
(i) to modify, extend or renew an Award, subject to Article XI and Section 6.4(l), provided, however, that such
action does not subject the Award to Section 409A of the Code without the consent of the Participant; and
(j) solely to the extent permitted by applicable law, to determine whether, to what extent and under what circumstances
to provide loans (which may be on a recourse basis and shall bear interest at the rate the Committee shall provide) to Participants in order to exercise Options under the Plan.
3.3
Guidelines
. Subject to Article XI hereof, the Committee shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it
shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. The
Committee may adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign
jurisdictions. Notwithstanding the foregoing, no action of the Committee under this Section 3.3 shall impair the rights of any Participant without the Participants consent. To the extent applicable, the Plan is intended to comply with the
applicable requirements of Rule
16b-3,
and the Plan shall be limited, construed and interpreted in a manner so as to comply therewith.
3.4
Decisions Final
. Any decision, interpretation or other action made or taken in good faith by
or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and
conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.
3.5
Procedures
. If the Committee is appointed, the Board shall designate one of the members of the
Committee as chairman and the Committee shall hold meetings, subject to the
By-Laws
of the Company, at such times and places as it shall deem advisable, including, without limitation, by telephone conference
or by written consent to the extent permitted by applicable law. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to
writing and signed by all of the Committee members in accordance with the
By-Laws
of the Company, shall be fully effective as if it had been made by a vote at a meeting duly called and held. The Committee
shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
3.6
Designation of Consultants/Liability
.
(a) The Committee may designate employees of the Company and professional advisors to assist the Committee in the
administration of the Plan and (to the extent permitted by applicable law and applicable exchange rules) may grant authority to officers to grant Awards and/or execute agreements or other documents on behalf of the Committee. In the event of any
designation of authority hereunder, subject to applicable law, applicable stock exchange rules and any limitations imposed by the Committee in connection with such
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designation, such designee or designees shall have the power and authority to take such actions, exercise such powers and make such determinations that are otherwise specifically designated to
the Committee hereunder.
(b) The Committee may employ such legal counsel, consultants and agents as it may deem
desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee or the Board in the engagement
of any such counsel, consultant or agent shall be paid by the Company. The Committee, its members and any person designated pursuant to
sub-section
(a) above shall not be liable for any action or
determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Award granted under it.
3.7
Indemnification
. To
the maximum extent permitted by applicable law and the Certificate of Incorporation and
By-Laws
of the Company and to the extent not covered by insurance directly insuring such person, each officer or employee
of the Company or any Affiliate and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Committee)
or liability (including any sum paid in settlement of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to
act in connection with the administration of the Plan, except to the extent arising out of such officers, employees, members or former members own fraud or bad faith. Such indemnification shall be in addition to any right of
indemnification the employees, officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or
By-Laws
of the Company or any
Affiliate. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to such individual under the Plan.
ARTICLE IV
SHARE
LIMITATION
4.1
Shares
. The aggregate number of shares of Common Stock that may be issued
with respect to Awards under the Plan shall not exceed 10,500,000 shares (the
Share Reserve
); provided, that the Share Reserve shall increase proportionally by 10% of all shares of Common Stock issued by the Company after the
Effective Date and before the first anniversary of the Effective Date, including any issuances of Common Stock in settlement of Predecessor Awards but otherwise excluding for this purpose any issuance of Common Stock pursuant to the Plan. The Share
Reserve shall be automatically increased without the necessity of any further action which may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both. The maximum number of shares
of Common Stock with respect to which Incentive Stock Options may be granted under the Plan shall be equal to 10,500,000. If any Option or Other Stock-Based Awards granted under the Plan expires, terminates or is canceled for any reason without
having been exercised in full, the number of shares of Common Stock underlying any unexercised Award shall again be available for the purpose of Awards under the Plan. If any shares of Restricted Stock, Performance Awards or Other Stock-Based Awards
denominated in shares of Common Stock awarded under the Plan to a Participant are forfeited for any reason, the number of forfeited shares of Restricted Stock, Performance Awards or Other Stock-Based Awards denominated in shares of Common Stock
shall again be available for purposes of Awards under the Plan. Any Award under the Plan settled in cash shall not be counted against the foregoing maximum share limitations. Notwithstanding anything to the contrary contained herein, shares of
Common Stock subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares of Common Stock are shares of Common Stock tendered in payment of the exercise of an Option. Notwithstanding any
other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any
Non-Employee
Director during any single calendar year (excluding Awards made at the election of the Director in lieu of all or a portion of annual and committee cash retainers pursuant to Section 6.3)
shall not exceed $500,000.
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4.2
Changes
.
(a) The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the
Board, the Committee or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization, stock split, or other change in the Companys capital structure or its business, (ii) any merger or
consolidation of the Company or any Affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of the Company or any Affiliate,
(v) any sale or transfer of all or part of the assets or business of the Company or any Affiliate or (vi) any other corporate act or proceeding.
(b) Subject to the provisions of Section 10.1:
(i) If the Company at any time subdivides (by any split, recapitalization or otherwise) the outstanding Common Stock
into a greater number of shares of Common Stock, or combines (by reverse split, combination or otherwise) its outstanding Common Stock into a lesser number of shares of Common Stock, then the respective exercise prices for outstanding Awards that
provide for a Participant elected exercise and the number of shares of Common Stock covered by outstanding Awards shall be appropriately adjusted by the Committee to prevent dilution or enlargement of the rights granted to, or available for,
Participants under the Plan.
(ii) Excepting transactions covered by Section 4.2(b)(i), if the Company
effects any merger, consolidation, statutory exchange,
spin-off,
reorganization, sale or transfer of all or substantially all the Companys assets or business, or other corporate transaction or event in
such a manner that the Companys outstanding shares of Common Stock are converted into the right to receive (or the holders of Common Stock are entitled to receive in exchange therefor), either immediately or upon liquidation of the Company,
securities or other property of the Company or other entity (each, a
Reorganization
), then, subject to the provisions of Section 10.1, (A) the aggregate number or kind of securities that thereafter may be issued
under the Plan, (B) the number or kind of securities or other property (including cash) to be issued pursuant to Awards granted under the Plan (including as a result of the assumption of the Plan and the obligations hereunder by a successor
entity, as applicable), or (C) the purchase price thereof, shall be appropriately adjusted by the Committee to prevent dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(iii) If there shall occur any change in the capital structure of the Company other than those covered by
Section 4.2(b)(i) or 4.2(b)(ii), including by reason of any extraordinary dividend (whether cash or equity), any conversion, any adjustment, any issuance of any class of securities convertible or exercisable into, or exercisable for, any class
of equity securities of the Company, then the Committee shall adjust any Award and make such other adjustments to the Plan to prevent dilution or enlargement of the rights granted to, or available for, Participants under the Plan.
(iv) Any such adjustment determined by the Committee pursuant to this Section 4.2(b) shall be final, binding and
conclusive on the Company and all Participants and their respective heirs, executors, administrators, successors and permitted assigns. Any adjustment to, or assumption or substitution of, an Award under this Section 4.2(b) shall be intended to
comply with the requirements of Section 409A of the Code and Treasury Regulation
§1.424-1
(and any amendments thereto), to the extent applicable. Except as expressly provided in this Section 4.2
or in the applicable Award Agreement, a Participant shall have no additional rights under the Plan by reason of any transaction or event described in this Section 4.2.
(v) Fractional shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) or this
Section 4.2(b) shall be aggregated until, and eliminated at, the time of exercise or payment by rounding-down for fractions less than
one-half
and
rounding-up
for
fractions equal to or greater than
one-half.
No cash settlements shall be required with respect to fractional shares eliminated by rounding. Notice of any adjustment shall be given by the Committee to each
Participant whose Award has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.
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4.3
Minimum Purchase Price
. Notwithstanding any
provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.
ARTICLE V
ELIGIBILITY
5.1
General Eligibility
. All current and prospective Eligible Individuals are eligible to
be granted Awards. Eligibility for the grant of Awards and actual participation in the Plan shall be determined by the Committee in its sole discretion. The Committee shall have full discretion to treat different Participants under the Plan
differently in any circumstance.
5.2
Incentive Stock Options
. Notwithstanding the foregoing,
only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan. Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be
determined by the Committee in its sole discretion.
5.3
General Requirement
. The vesting and
exercise of Awards granted to a prospective Eligible Individual are conditioned upon such individual actually becoming an Eligible Employee, Consultant or
Non-Employee
Director, respectively.
ARTICLE VI
STOCK
OPTIONS
6.1
Options
. Stock Options may be granted alone or in addition to other Awards
granted under the Plan. Each Stock Option granted under the Plan shall be of one of two types: (a) an Incentive Stock Option or (b) a
Non-Qualified
Stock Option.
6.2
Grants
. The Committee shall have the authority to grant to any Eligible Employee one or more
Incentive Stock Options,
Non-Qualified
Stock Options, or both types of Stock Options. The Committee shall have the authority to grant any Consultant or
Non-Employee
Director one or more
Non-Qualified
Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not so qualify shall constitute a separate
Non-Qualified
Stock Option.
6.3
Incentive Stock Options
. Notwithstanding anything in the Plan to the contrary, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent
of the Participants affected, to disqualify any Incentive Stock Option under such Section 422.
6.4
Terms of Options
. Options granted under the Plan shall be subject to the following terms and
conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a)
Exercise Price
. The exercise price per share of Common Stock subject to a Stock Option shall be determined
by the Committee at the time of grant, provided that the per share exercise price of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the
Common Stock at the time of grant.
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(b)
Stock Option Term
. The term of each Stock Option shall be fixed
by the Committee, provided that no Stock Option shall be exercisable more than 10 years after the date the Option is granted; and provided further that the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed five
years.
(c)
Exercisability
. Unless otherwise provided by the Committee in accordance with the provisions of
this Section 6.4, Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its
discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that such Stock Option is exercisable only in installments or within certain time periods), the Committee may waive such limitations on
the exercisability at any time at or after the time of grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such Stock Option may be exercised), based on such
factors, if any, as the Committee shall determine, in its sole discretion.
(d)
Method of Exercise
. Subject
to whatever installment exercise and waiting period provisions apply under Section 6.4(c), to the extent vested, Stock Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to the
Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price as follows: (i) in cash or by check, bank draft or money order payable to the order of the
Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on a national securities exchange, and the Committee authorizes, through a procedure whereby the Participant delivers irrevocable instructions to a
broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, with the
consent of the Committee, having the Company withhold shares of Common Stock issuable upon exercise of the Stock Option, or by payment in full or in part in the form of Common Stock owned by the Participant, based on the Fair Market Value of the
Common Stock on the payment date as determined by the Committee). No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for.
(e)
Non-Transferability
of Options
. No Stock Option shall be
Transferable by the Participant other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Participants lifetime, only by the Participant. Notwithstanding the foregoing, the Committee
may determine, in its sole discretion, at the time of grant or thereafter that a
Non-Qualified
Stock Option that is otherwise not Transferable pursuant to this Section is Transferable to a Family Member in
whole or in part and in such circumstances, and under such conditions, as specified by the Committee. A
Non-Qualified
Stock Option that is Transferred to a Family Member pursuant to the preceding sentence
(i) may not be subsequently Transferred other than by will or by the laws of descent and distribution and (ii) remains subject to the terms of the Plan and the applicable Award Agreement. Any shares of Common Stock acquired upon the
exercise of a
Non-Qualified
Stock Option by a permissible transferee of a
Non-Qualified
Stock Option or a permissible transferee pursuant to a Transfer after the
exercise of the
Non-Qualified
Stock Option shall be subject to the terms of the Plan and the applicable Award Agreement.
(f)
Termination by Death or Disability
. Unless otherwise determined by the Committee at the time of grant, or if
no rights of the Participant are reduced, thereafter, if a Participants Termination is by reason of death or Disability, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participants
Termination may be exercised by the Participant (or in the case of the Participants death, by the legal representative of the Participants estate) at any time within a period of one (1) year from the date of such Termination, but in
no event beyond the expiration of the stated term of such Stock Options; provided, however, that, in the event of a Participants Termination by reason of Disability, if the Participant dies within such exercise period, all unexercised Stock
Options held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one (1) year from the date of such death, but in no event beyond the expiration of the stated
term of such Stock Options.
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(g)
Involuntary Termination Without Cause
. Unless otherwise
determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participants Termination is by involuntary termination by the Company without Cause, all Stock Options that are held by such
Participant that are vested and exercisable at the time of the Participants Termination may be exercised by the Participant at any time within a period of ninety (90) days from the date of such Termination, but in no event beyond the
expiration of the stated term of such Stock Options.
(h)
Voluntary Resignation
. Unless otherwise determined
by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participants Termination is voluntary (other than a voluntary termination described in Section 6.4(i)(y) hereof), all Stock Options
that are held by such Participant that are vested and exercisable at the time of the Participants Termination may be exercised by the Participant at any time within a period of thirty (30) days from the date of such Termination, but in no
event beyond the expiration of the stated term of such Stock Options.
(i)
Termination for Cause
. Unless
otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participants Termination (x) is for Cause or (y) is a voluntary Termination (as provided in
Section 6.4(h)) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such
Termination.
(j)
Unvested Stock Options
. Unless otherwise determined by the Committee at the time of grant,
or if no rights of the Participant are reduced, thereafter, Stock Options that are not vested as of the date of a Participants Termination for any reason shall terminate and expire as of the date of such Termination.
(k)
Incentive Stock Option Limitations
. To the extent that the aggregate Fair Market Value (determined as of the
time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under the Plan and/or any other stock option plan of the Company, any Subsidiary or
any Parent exceeds $100,000, such Options shall be treated as
Non-Qualified
Stock Options. In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or any Parent at all
times from the time an Incentive Stock Option is granted until three months prior to the date of exercise thereof (or such other period as required by applicable law), such Stock Option shall be treated as a
Non-Qualified
Stock Option. Should any provision of the Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the
Committee may amend the Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.
(l)
Form, Modification, Extension and Renewal of Stock Options
. Subject to the terms and conditions and within
the limitations of the Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may (i) modify, extend or renew outstanding Stock Options granted under the Plan (provided that
the rights of a Participant are not reduced without such Participants consent and provided further that such action does not subject the Stock Options to Section 409A of the Code without the consent of the Participant), and
(ii) accept the surrender of outstanding Stock Options (to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor (to the extent not theretofore exercised). Notwithstanding the foregoing,
an outstanding Option may not be modified to reduce the exercise price thereof nor may a new Option at a lower price be substituted for a surrendered Option (other than adjustments or substitutions in accordance with Section 4.2), unless such
action is approved by the stockholders of the Company.
(m)
Deferred Delivery of Common Stock
. The Committee
may in its discretion permit Participants to defer delivery of Common Stock acquired pursuant to a Participants exercise of an Option in accordance with the terms and conditions established by the Committee in the applicable Award Agreement,
which shall be intended to comply with the requirements of Section 409A of the Code.
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(n)
Early Exercise
. The Committee may provide that a Stock Option
include a provision whereby the Participant may elect at any time before the Participants Termination to exercise the Stock Option as to any part or all of the shares of Common Stock subject to the Stock Option prior to the full vesting of the
Stock Option and such shares shall be subject to the provisions of Article VII and be treated as Restricted Stock. Unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction
the Committee determines to be appropriate.
(o)
Other Terms and Conditions
. The Committee may include a
provision in an Award Agreement providing for the automatic exercise of a
Non-Qualified
Stock Option on a cashless basis on the last day of the term of such Option if the Participant has failed to exercise the
Non-Qualified
Stock Option as of such date, with respect to which the Fair Market Value of the shares of Common Stock underlying the
Non-Qualified
Stock Option exceeds
the exercise price of such
Non-Qualified
Stock Option on the date of expiration of such Option, subject to Section 13.4. Stock Options may contain such other provisions, which shall not be inconsistent
with any of the terms of the Plan, as the Committee shall deem appropriate.
ARTICLE VII
RESTRICTED STOCK
7.1
Awards of Restricted Stock
. Shares of Restricted Stock may be issued either alone or in addition to
other Awards granted under the Plan. The Committee shall determine the Eligible Individuals, to whom, and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price (if any) to be paid by the
Participant (subject to Section 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards.
The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets (including, the
performance goals) or such other factor as the Committee may determine in its sole discretion.
7.2
Awards and Certificates
. Eligible Individuals selected to receive Restricted Stock shall not have any
right with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement evidencing the Award to the Company, to the extent required by the Committee, and has otherwise complied with the applicable
terms and conditions of such Award. Further, such Award shall be subject to the following conditions:
(a)
Purchase Price
. The purchase price of Restricted Stock shall be fixed by the Committee. Subject to
Section 4.3, the purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.
(b)
Acceptance
. Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period
as the Committee may specify at grant) after the grant date, by executing a Restricted Stock agreement and by paying whatever price (if any) the Committee has designated thereunder.
(c)
Legend
. Each Participant receiving Restricted Stock shall be issued a stock certificate in respect of such
shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of shares of Restricted Stock. Such certificate shall be registered in the name of such Participant,
and shall, in addition to such legends required by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of
B-12
the Legacy Reserves Inc. (the Company) 2018 Omnibus Incentive Plan (the Plan) and an Agreement entered into between the registered owner and the Company dated
. Copies of such Plan and Agreement are on file at the principal office of the Company.
(d)
Custody
. If stock certificates are issued in respect of shares of Restricted Stock, the Committee may
require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a condition of any grant of Restricted Stock, the Participant shall have delivered a duly
signed stock power or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a
portion of the shares subject to the Restricted Stock in the event that such Award is forfeited in whole or part.
7.3
Restrictions and Conditions
. The shares of Restricted Stock awarded pursuant to the Plan shall be
subject to the following restrictions and conditions:
(a)
Restriction Period
. (i) The Participant
shall not be permitted to Transfer shares of Restricted Stock awarded under the Plan during the period or periods set by the Committee (the
Restriction Period
) commencing on the date of such Award, as set forth in the Restricted
Stock Award Agreement and such agreement shall set forth a vesting schedule and any event that would accelerate vesting of the shares of Restricted Stock. Within these limits, based on service, attainment of performance goals and/or such other
factors or criteria as the Committee may determine in its sole discretion, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of
any Restricted Stock Award and/or waive the deferral limitations for all or any part of any Restricted Stock Award.
(ii) If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of performance
goals, the Committee shall establish the objective performance goals and the applicable vesting percentage of the Restricted Stock applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal
year or at such later date as otherwise determined by the Committee and while the outcome of the performance goals are substantially uncertain. Such performance goals may incorporate provisions for disregarding (or adjusting for) changes in
accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.
(b)
Rights as a Stockholder
. Except as provided in Section 7.3(a) and this Section 7.3(b) or as
otherwise determined by the Committee in an Award Agreement, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company, including, without limitation, the right
to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares and the right to receive dividends or other distributions paid with respect to the Restricted Stock; provided,
that any such dividends or other distributions will be subject to the same vesting requirements as the underlying Restricted Stock and shall be paid at the time the Restricted Stock becomes vested. If any dividends or distributions are paid in
shares of Common Stock or other property, such shares (or property) shall be deposited with the Company and shall be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid.
The Committee may, in its sole discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period.
(c)
Termination
. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are
reduced, thereafter, subject to the applicable provisions of the Award Agreement and the Plan, upon a Participants Termination for any reason during the relevant Restriction Period, all Restricted Stock still subject to restriction will be
forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.
B-13
(d)
Lapse of Restrictions
. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock, the certificates for such shares shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant, except as otherwise
required by applicable law or other limitations imposed by the Committee.
ARTICLE VIII
PERFORMANCE AWARDS
8.1
Performance Awards
. The Committee may grant a Performance Award to a Participant payable upon the
attainment of specific performance goals. If the Performance Award is payable in shares of Restricted Stock, such shares shall be transferable to the Participant only upon attainment of the relevant performance goal in accordance with Article VII.
If the Performance Award is payable in cash, it may be paid upon the attainment of the relevant performance goals either in cash or in shares of Restricted Stock (based on the then current Fair Market Value of such shares), as determined by the
Committee, in its sole and absolute discretion. Each Performance Award shall be evidenced by an Award Agreement in such form that is not inconsistent with the Plan and that the Committee may from time to time approve.
8.2
Terms and Conditions
. Performance Awards awarded pursuant to this Article VIII shall be subject to
the following terms and conditions:
(a)
Earning of Performance Award
. At the expiration of the applicable
Performance Period, the Committee shall determine the extent to which the performance goals are achieved and the percentage of each Performance Award that has been earned.
(b)
Non-Transferability
. Subject to the applicable provisions of the
Award Agreement and the Plan, Performance Awards may not be Transferred during the Performance Period.
(c)
Dividends
. Unless otherwise determined by the Committee at the time of grant, amounts equal to dividends
declared during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Award will be accumulated and paid upon vesting.
(d)
Payment
. Following the Committees determination in accordance with Section 8.2(a), the Company
shall settle Performance Awards, in such form (including, without limitation, in shares of Common Stock or in cash) as determined by the Committee, in an amount equal to such Participants earned Performance Awards.
(e)
Termination
. Subject to the applicable provisions of the Award Agreement and the Plan, upon a
Participants Termination for any reason during the Performance Period for a given Performance Award, the Performance Award in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant.
(f)
Accelerated Vesting
. Based on service, performance and/or such other factors or criteria, if any, as
the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or any part of any Performance Award.
B-14
ARTICLE IX
OTHER STOCK-BASED AND CASH-BASED AWARDS
9.1
Other Stock-Based Awards
. The Committee is authorized to grant to Eligible Individuals Other
Stock-Based
Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock, including but not limited to, shares of Common Stock awarded purely as
a bonus and not subject to restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an Affiliate, stock equivalent units, restricted stock
units, and Awards valued by reference to book value of shares of Common Stock. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under the Plan.
Subject to the provisions of the Plan, the Committee shall have authority to determine the Eligible Individuals, to whom, and the time or
times at which, such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the
completion of a specified Performance Period.
The Committee may condition the grant or vesting of Other Stock-Based Awards upon the
attainment of specified performance goals as the Committee may determine, in its sole discretion.
9.2
Terms and Conditions
. Other Stock-Based Awards made pursuant to this Article IX shall be
subject to the following terms and conditions:
(a)
Non-Transferability
. Subject to the applicable provisions of the
Award Agreement and the Plan, shares of Common Stock subject to Awards made under this Article IX may not be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or
deferral period lapses.
(b)
Dividends
. Unless otherwise determined by the Committee at the time of Award,
subject to the provisions of the Award Agreement and the Plan, the recipient of an Award under this Article IX, dividends or dividend equivalents in respect of the number of shares of Common Stock covered by the Award shall be accumulated and paid
upon vesting.
(c)
Vesting
. Any Award under this Article IX and any Common Stock covered by any such Award
shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion.
(d)
Price
. Common Stock issued on a bonus basis under this Article IX may be issued for no cash consideration.
Common Stock purchased pursuant to a purchase right awarded under this Article IX shall be priced, as determined by the Committee in its sole discretion.
9.3
Other Cash-Based Awards
. The Committee may from time to time grant Other Cash-Based Awards to
Eligible Individuals in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as it shall determine in its sole discretion. Other
Cash-Based Awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of
such Awards at any time in its sole discretion. The grant of an Other Cash-Based Award shall not require a segregation of any of the Companys assets for satisfaction of the Companys payment obligation thereunder.
B-15
ARTICLE X
CHANGE IN CONTROL PROVISIONS
10.1
Benefits
. In the event of a Change in Control of the Company (as defined below), and except
as otherwise provided by the Committee in an Award Agreement, the Compensation Committee may treat a Participants Award in accordance with one or more of the following methods as determined by the Committee:
(a) Awards, whether or not then vested, shall be continued, assumed, or have new rights substituted therefor, as
determined by the Committee in a manner consistent with the requirements of Section 409A of the Code, and restrictions to which shares of Restricted Stock or any other Award granted prior to the Change in Control are subject shall not lapse
upon a Change in Control and the Restricted Stock or other Award shall, where appropriate in the sole discretion of the Committee, receive the same distribution as other Common Stock on such terms as determined by the Committee; provided that the
Committee may decide to award additional Restricted Stock or other Awards in lieu of any cash distribution. Notwithstanding anything to the contrary herein, for purposes of Incentive Stock Options, any assumed or substituted Stock Option shall
comply with the requirements of Treasury Regulation
Section 1.424-1
(and any amendment thereto).
(b) The Committee, in its sole discretion, may provide for the purchase of any Awards by the Company or an Affiliate
for an amount of cash equal to the excess (if any) of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Awards, over the aggregate exercise price of such Awards. For purposes hereof,
Change in
Control Price
shall mean the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company.
(c) The Committee may, in its sole discretion, terminate all outstanding and unexercised Stock Options or any Other
Stock-Based Award that provides for a Participant elected exercise, effective as of the date of the Change in Control, by delivering notice of termination to each Participant at least twenty (20) days prior to the date of consummation of the
Change in Control, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Change in Control, each such Participant shall have the right to exercise in full all of such
Participants Awards that are then outstanding (without regard to any limitations on exercisability otherwise contained in the Award Agreements), but any such exercise shall be contingent on the occurrence of the Change in Control, and,
provided that, if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.
(d) Notwithstanding any other provision herein to the contrary, the Committee may, in its sole discretion, provide for
accelerated vesting or lapse of restrictions, of an Award at any time.
10.2
Change
in
Control
. Unless otherwise determined by the Committee in the applicable Award Agreement or other written agreement with a Participant approved by the Committee, a Change in Control shall be deemed to occur if:
(a) any person, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the
Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of
Common Stock of the Company), becoming the beneficial owner (as defined in Rule
13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined
voting power of the Companys then outstanding securities, excluding for purposes herein, acquisitions pursuant to a Business Combination (as defined below) that does not constitute a Change in Control as defined in Section 10.2(b) herein;
(b) a merger, reorganization, or consolidation of the Company or in which equity securities of the Company are
issued (each, a
Business Combination
), other than a merger, reorganization or consolidation
B-16
which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or its Parent) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity (or, as applicable, the Parent of the Company or such surviving entity) outstanding
immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in
Section 10.2(a)) acquires more than 50% of the combined voting power of the Companys then outstanding securities shall not constitute a Change in Control of the Company; or
(c) a complete liquidation or dissolution of the Company or the consummation of a sale or disposition by the Company of
all or substantially all of the Companys assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, 50% or more of the combined voting
power of the outstanding voting securities of the Company at the time of the sale.
For purposes herein, a Change in Control shall not be deemed to occur
if such event is triggered by (x) any acquisition of securities pursuant to a conversion or exchange (any such conversion or exchange, a
Conversion
) of any rights set forth in that certain Term Loan Credit Agreement, dated as
of October 24, 2016, among Legacy Reserves LP, Cortland Capital Market Services LLC and the lenders party thereto, as amended from time to time (the
Credit Agreement
), by GSO Capital Partners LP or its Affiliates (or any
successor lender under the Credit Agreement) (collectively,
GSO
) or (y) following any such Conversion, acquisitions by GSO generally. Notwithstanding the foregoing, with respect to any Award that is characterized as
nonqualified deferred compensation within the meaning of Section 409A of the Code, an event shall not be considered to be a Change in Control under the Plan for purposes of payment of such Award unless such event is also a
change in ownership, a change in effective control or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A of the Code.
ARTICLE XI
TERMINATION
OR AMENDMENT OF PLAN
Notwithstanding any other provision of the Plan, the Board may at any time, and from time to time, amend, in
whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XIII or Section 409A of the Code), or suspend or
terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such Participant and, provided further, that without the approval of the holders of the Companys Common Stock entitled to vote in accordance with applicable law, no amendment may be made
that would (i) increase the aggregate number of shares of Common Stock that may be issued under the Plan (except by operation of Section 4.2); (ii) change the classification of individuals eligible to receive Awards under the Plan;
(iii) decrease the minimum Stock Option price of any Stock Option; (iv) extend the maximum option period under Section 6.4; (v) award any Stock Option in replacement of a canceled Stock Option with a higher exercise price than the
replacement award; or (vi) require stockholder approval in order for the Plan to continue to comply with the applicable provisions of Section 422 of the Code. Notwithstanding anything herein to the contrary, the Board may amend the Plan or
any Award Agreement at any time without a Participants consent to comply with applicable law including Section 409A of the Code. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but,
subject to Article IV or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holders consent.
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ARTICLE XII
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an unfunded plan for incentive and deferred compensation. With respect to any payment as to
which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any right that is greater than those of a general unsecured creditor of the
Company.
ARTICLE XIII
GENERAL PROVISIONS
13.1
Legend
. The Committee may require each person receiving shares of Common Stock pursuant to a
Stock Option or other Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by the Plan, the certificates
for such shares may include any legend that the Committee deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities exchange system
upon whose system the Common Stock is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to
such restrictions.
13.2
Other Plans
. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.
13.3
No Right to Employment/Directorship/Consultancy
. Neither the Plan nor the grant of any Option
or other Award hereunder shall give any Participant or other employee, Consultant or
Non-Employee
Director any right with respect to continuance of employment, consultancy or directorship by the Company or any
Affiliate, nor shall there be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant or
Non-Employee
Director is retained to terminate such
employment, consultancy or directorship at any time.
13.4
Withholding of Taxes
. The Company
shall have the right to deduct from any payment to be made pursuant to the Plan, or to otherwise require, prior to the issuance or delivery of shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any federal,
state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required
withholding to the Company. Any statutorily required withholding obligation or any other tax obligation with regard to any Participant may be satisfied, subject to the consent of the Committee, by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already owned. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.
13.5
No Assignment of Benefits
. No Award or other benefit payable under the Plan shall,
except as otherwise specifically provided by law or permitted by the Committee, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
B-18
13.6
Listing and Other Conditions
.
(a) Unless otherwise determined by the Committee, as long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the issuance of shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system. The Company shall have no obligation to
issue such shares unless and until such shares are so listed, and the right to exercise any Option or other Award with respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock
pursuant to an Option or other Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation
to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act or otherwise, with respect to shares of Common Stock or Awards, and the right to exercise any Option or
other Award shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 13.6, any Award affected by such suspension
which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension, but no such suspension shall
extend the term of any Award.
(d) A Participant shall be required to supply the Company with certificates,
representations and information that the Company requests and otherwise cooperate with the Company in obtaining any listing, registration, qualification, exemption, consent or approval the Company deems necessary or appropriate.
13.7
Stockholders Agreement and Other Requirements
. Notwithstanding anything herein to the
contrary, as a condition to the receipt of shares of Common Stock pursuant to an Award under the Plan, to the extent required by the Committee, the Participant shall execute and deliver a stockholders agreement or such other documentation that
shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise or purchase, and such other terms as the Board or Committee shall from time to time establish. Such stockholders agreement or other
documentation shall apply to the Common Stock acquired under the Plan and covered by such stockholders agreement or other documentation. The Company may require, as a condition of exercise, the Participant to become a party to any other
existing stockholder agreement (or other agreement).
13.8
Governing Law
. The Plan and actions
taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware
principles of conflict of laws).
13.9
Jurisdiction; Waiver of Jury Trial
. Any suit, action or proceeding with respect to the Plan
or any Award Agreement, or any judgment entered by any court of competent jurisdiction in respect of any thereof, shall be resolved only in the courts of the State of Delaware
or the United States District Court for the District of
Delaware
and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, the Company and each Participant shall irrevocably and unconditionally (a) submit in
any proceeding relating to the Plan or any Award Agreement, or for the recognition and enforcement of any judgment in respect thereof (a
Proceeding
), to the exclusive jurisdiction of the courts of the State of Delaware, the court
of the United States of America for the District of Delaware, and appellate courts having jurisdiction of appeals from any of the foregoing, and agree that all claims in respect of any such Proceeding shall be heard and determined in such
Delaware
State court or, to the extent permitted by law, in such federal court, (b) consent that any such Proceeding may and shall be brought in such courts and waives any
B-19
objection that the Company and each Participant may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an
inconvenient court and agree not to plead or claim the same, (c) waive all right to trial by jury in any Proceeding (whether based on contract, tort or otherwise) arising out of or relating to the Plan or any Award Agreement, (d) agree
that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, in the case of a Participant, at the
Participants address shown in the books and records of the Company or, in the case of the Company, at the Companys principal offices, attention General Counsel, and (e) agree that nothing in the Plan shall affect the right to effect
service of process in any other manner permitted by the laws of the State of Delaware.
13.10
Construction
. Wherever any words are used in the Plan in the masculine gender they shall be
construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases
where they would so apply.
13.11
Other Benefits
. No Award granted or paid out under the Plan
shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefit under any other benefit plan now or subsequently in effect under which the availability or amount of
benefits is related to the level of compensation.
13.12
Costs
. The Company shall bear all
expenses associated with administering the Plan, including expenses of issuing Common Stock pursuant to Awards hereunder.
13.13
No Right to Same Benefits
. The provisions of Awards need not be the same with respect to
each Participant, and such Awards to individual Participants need not be the same in subsequent years.
13.14
Death/Disability
. The Committee may in its discretion require the transferee of a
Participant to supply it with written notice of the Participants death or Disability and to supply it with a copy of the will (in the case of the Participants death) or such other evidence as the Committee deems necessary to establish
the validity of the transfer of an Award. The Committee may also require that the agreement of the transferee to be bound by all of the terms and conditions of the Plan.
13.15
Section 16(b) of the Exchange Act
. All elections and transactions under the Plan by persons
subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under
Rule 16b-3.
The Committee may establish and adopt
written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.
13.16
Section 409A of the Code
. The Plan is intended to comply with, or be exempt from, the
applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any Award is subject to Section 409A of the Code, it shall be paid in a manner that will
comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the
contrary, any provision in the Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such
provision shall be null and void. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any
action taken by the Committee or the Company and, in the event that any amount or benefit under the Plan becomes subject to penalties under Section 409A of the Code, responsibility for payment of such penalties shall rest solely with the
affected Participants and not with the Company. Notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) of nonqualified deferred compensation (within the meaning of Section 409A of the
B-20
Code) that are otherwise required to be made under the Plan to a specified employee (as defined under Section 409A of the Code) as a result of such employees separation
from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and
shall instead be paid (in a manner set forth in the Award Agreement) upon expiration of such delay period. For purposes of Code Section 409A, the Participants right to receive any installment payments pursuant to this Agreement shall be
treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within
the sole discretion of the Company.
13.17
Successor and Assigns
. The Plan shall be binding on
all successors and permitted assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate.
13.18
Severability of Provisions
. If any provision of the Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
13.19
Payments to Minors, Etc
. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipt thereof shall be deemed paid when paid to such persons guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully
discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.
13.20
Lock-Up
Agreement
. As a condition to the grant of an
Award, if requested by the Company and the lead underwriter of any public offering of the Common Stock (the
Lead Underwriter
),
a Participant shall irrevocably agree not to sell, contract to sell, grant any option to
purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any
other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time following the effective date of a registration statement of the
Company filed under the Securities Act that the Lead Underwriter shall specify (the
Lock
-Up
Period
). The Participant shall further agree to sign such documents as may be requested by
the Lead Underwriter to effect the foregoing and agree that the Company may impose stop-transfer instructions with respect to Common Stock acquired pursuant to an Award until the end of such
Lock-Up
Period.
13.21
Headings and Captions
. The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
13.22
Company Recoupment of Awards
. A Participants rights with respect to any Award
hereunder shall in all events be subject to (i) any right that the Company may have under any Company recoupment policy or other agreement or arrangement with a Participant, or (ii) any right or obligation that the Company may have
regarding the clawback of incentive-based compensation under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
B-21
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall become effective on the closing of the transaction contemplated by that certain Agreement and Plan of Merger dated as of
March 23, 2018 by and among the Company, Legacy Reserves Merger Sub LLC, Legacy Reserves LP and Legacy Reserves GP, LLC, subject to the approval of the Plan by the stockholders of the Company in accordance with the requirements of the laws of
the State of Delaware.
ARTICLE XV
TERM OF PLAN
No Award
shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date that the Plan is adopted or the date of stockholder approval, but Awards granted prior to such tenth anniversary may extend beyond that date.
B-22
Annex C
GP PURCHASE AGREEMENT
by
and among
LEGACY RESERVES INC.,
and
LION GP INTERESTS, LLC
and
Solely for Purposes of
Section
6.01
,
Section
8.12
,
Section
8.16
and
Section
8.17
,
LEGACY RESERVES GP, LLC
and
LEGACY RESERVES LP
and
Solely for Purposes of
Section
5.02
,
Section
6.01
,
Section
8.12
,
Section
8.16
and
Section
8.18
,
MORIAH PROPERTIES, LTD.,
and Solely for Purposes of
Section
5.02
,
Section
6.01
,
Section
8.12
and
Section
8.16
,
BROTHERS PRODUCTION PROPERTIES, LTD., BROTHERS
PRODUCTION COMPANY,
INC., BROTHERS OPERATING COMPANY, INC., J&W MCGRAW PROPERTIES, LTD.,
DAB RESOURCES, LTD. and H2K HOLDINGS, LTD.
Dated as of March 23, 2018
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
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C-1
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Section 1.01
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Definitions
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C-1
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ARTICLE II GP INTEREST SALE
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C-5
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Section 2.01
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GP Interest Sale
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C-5
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Section 2.02
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Deliveries Upon the Closing
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C-5
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Section 2.03
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Conditions of Sellers Obligations at the Closing
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C-6
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Section 2.04
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Conditions of Companys Obligations at the Closing
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C-6
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Section 2.05
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Tax Treatment
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C-7
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Section 2.06
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Further Assurances
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C-7
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ARTICLE III REPRESENTATIONS AND WARRANTIES RELATED TO THE COMPANY
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C-7
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Section 3.01
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Existence.
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C-7
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Section 3.02
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No Conflicts
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C-7
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Section 3.03
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Authority; Enforceability
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C-7
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Section 3.04
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Approvals
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C-8
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Section 3.05
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Certain Fees
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C-8
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Section 3.06
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Financing
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C-8
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Section 3.07
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Limitation
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C-8
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Section 3.08
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Certain Disclaimers
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C-8
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
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C-8
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Section 4.01
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Existence
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C-8
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Section 4.02
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Authorization, Enforceability
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C-9
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Section 4.03
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No Conflicts
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C-9
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Section 4.04
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Contributed Property
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C-9
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Section 4.05
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MIPA
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C-9
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Section 4.06
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Financing
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C-9
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Section 4.07
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Certain Fees
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C-9
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Section 4.08
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Limitation
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C-9
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Section 4.09
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Certain Disclaimers
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C-10
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ARTICLE V COVENANTS
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C-10
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Section 5.01
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Access
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C-10
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Section 5.02
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Voting Covenant
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C-10
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Section 5.03
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Public Announcements; Confidentiality
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C-11
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ARTICLE VI INDEMNIFICATION, COSTS AND EXPENSES
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C-11
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Section 6.01
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Indemnification
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C-11
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Section 6.02
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Indemnification Procedure.
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C-13
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Section 6.03
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Limitation on Liability
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C-15
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Section 6.04
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Survival
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C-15
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ARTICLE VII TERMINATION
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C-15
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Section 7.01
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Termination
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C-15
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Section 7.02
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Notice of Termination
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C-15
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Section 7.03
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Effect of Termination
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C-15
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ARTICLE VIII MISCELLANEOUS
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C-15
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Section 8.01
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Expenses
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C-15
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Section 8.02
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Interpretation
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C-16
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Section 8.03
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Amendments and Waivers.
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C-16
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C-i
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Page
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Section 8.04
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Conspicuous
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C-17
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Section 8.05
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Communications
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C-17
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Section 8.06
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Entire Understanding
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C-18
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Section 8.07
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Governing Law; Submission to Jurisdiction
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C-18
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Section 8.08
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Waiver of Jury Trial
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C-18
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Section 8.09
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Execution in Counterparts
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C-19
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Section 8.10
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Successors and Assigns
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C-19
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Section 8.11
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Severability
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C-19
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Section 8.12
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No Recourse
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C-19
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Section 8.13
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Creditors
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C-20
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Section 8.14
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Time is of the Essence
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C-20
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Section 8.15
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Specific Performance
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C-20
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Section 8.16
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Release
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C-20
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Section 8.17
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Guarantors Representations; Guaranty; Indemnification and Insurance
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C-22
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Section 8.18
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Moriah Properties Representation; Guaranty, Indemnification and Insurance.
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C-24
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EXHIBITS
EXHIBIT A
Form of Assignment
EXHIBIT B Form of LLC Agreement Amendment
EXHIBIT C Exhibit A to the LLC Agreement
C-ii
GP PURCHASE AGREEMENT
This GP PURCHASE AGREEMENT (this
Agreement
) is entered into as of March 23, 2018 (the
Effective
Date
) by and among Legacy Reserves Inc., a Delaware corporation (the
Company
), Lion GP Interests, LLC, a Delaware limited liability company (the
Seller
); and
solely for purposes of
Section
8.12
,
Section
8.16
and
Section
8.17
, Legacy Reserves LP, a Delaware limited partnership (the
MLP
), and Legacy Reserves
GP, LLC, a Delaware liability company (
GP LLC
); and solely for purposes of
Section
5.02
,
Section
8.12
,
Section
8.16
and
Section
8.18
, Moriah Properties, Ltd., a Texas limited partnership (
Moriah Properties
); and solely for purposes of
Section
5.02
,
Section
8.12
and
Section
8.16
, Brothers Production Properties, Ltd., Brothers Production Company, Inc., Brothers Operating Company, Inc., J&W McGraw Properties, Ltd., DAB Resources, Ltd. and H2K Holdings, Ltd. (collectively, the
Other Members
).
WHEREAS, it is contemplated that the MLP, GP LLC, the Company and Legacy Reserves Merger Sub LLC, a
Delaware limited liability company and wholly-owned subsidiary of the Company (
Merger Sub
), will enter into an Agreement and Plan of Merger (the
Merger Agreement
) by which Merger Sub will merge into the MLP,
with the MLP surviving as a subsidiary of the Company (the transactions contemplated by the Merger Agreement, the
Corporate Reorganization
);
WHEREAS, Moriah Properties is a current member of GP LLC and has entered into an agreement (the
MIPA
) with the other
current members of GP LLC by which the other current members will sell all of their respective Interests (as defined below) in GP LLC to Moriah Properties, and Moriah Properties has agreed to assign to the Seller its Interests in GP LLC and its
right to purchase the Interests in GP LLC under the MIPA (collectively, the
Consolidation
);
WHEREAS, the Consolidation
is to occur immediately prior to closing the Corporate Reorganization, and following the Consolidation but before the Corporate Reorganization the Seller will hold all of the Equity Securities of GP LLC;
WHEREAS, the Company desires to purchase, and the Seller desires to sell to the Company, all of the Interests, and in consideration therefor,
the Company shall pay to the Seller such amount as further set forth in
Section
2.01
on the terms and subject to the provisions of this Agreement (the
GP Interest Sale
); and
WHEREAS, each of this Agreement, the transactions contemplated hereunder and the LLC Agreement Amendment (as defined below) have been approved
by the Conflicts Committee (the
Conflicts Committee
) of the board of directors of GP LLC (the
Board
), by a unanimous vote and acting in good faith (which action constitutes Special Approval as such
term is defined in the MLP Agreement (as defined below)), and by the Board, after receipt of the recommendation of the Conflicts Committee;
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01
Definitions
. As used in this Agreement, the following terms have the meanings indicated:
Affiliate
of any Person means any other Person, directly or indirectly, Controlling, Controlled by or under common Control
with such particular Person;
provided
that, solely for purposes of this Agreement, no director or officer of the Partnership Entities, solely in such capacity, shall be deemed to be an Affiliate of any GP LLC Member.
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Agreement
has the meaning set forth in the introductory paragraph of
this Agreement.
Assignment
means an Assignment in the form attached hereto as
Exhibit A
, pursuant to which the
Seller shall assign and contribute the Interests to the Company at the Closing.
Board
has the meaning set forth in the
recitals of this Agreement.
Business Day
means a day except a Saturday, a Sunday or other day on which the Commission
or banks in the City of Houston or New York are authorized or required by applicable Law to be closed.
Claim Notice
has the meaning specified in
Section
6.02(a)
,
Closing
means the consummation of the GP
Interest Sale hereunder.
Closing Date
means the date on which the Closing occurs.
Code
means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
Commission
means the United States Securities and Exchange Commission.
Common Stock
means the common stock of the Company, par value $0.01, per share.
Company
has the meaning set forth in the introductory paragraph of this Agreement.
Company Indemnitee
has the meaning specified in
Section
6.01(a)
.
Conflicts Committee
has the meaning set forth in the recitals of this Agreement.
Contract
means any written contract, agreement, indenture, note, bond, mortgage, deed of trust, loan, instrument,
lease, license, commitment or other arrangement, understanding, undertaking, commitment or obligation.
Consolidation
has the meaning set forth in the recitals of this Agreement.
Control
(including the correlative meanings of the terms
Controlling, Controlled by and under common Control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
Corporate
Reorganization
has the meaning set forth in the recitals of this Agreement.
Damages
means judgments, awards,
liabilities, damages, fines, diminution in value,
and losses and all actual costs, fees, outlays, expenses, expenditures and disbursements of every nature, whether attributable to personal injury
or death, property damage, contract claims (including contractual indemnity claims), torts, or otherwise (including costs of investigation and/or monitoring) and fees and expenses of attorneys, accountants, consultants, expert witnesses and other
witnesses and the costs of enforcement of the indemnity.
Effective Date
has the meaning set forth in the introductory
paragraph of this Agreement.
Equity Securities
means, with respect to any Person, (i) equity interests in such
Person, including, in the case of the Company, the Common Stock, (ii) obligations, evidences of indebtedness or other securities or
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interests convertible or exchangeable into equity interests in such Person, including, in the case of the Company, the Common Stock and (iii) warrants, options or other rights to purchase or
otherwise acquire equity interests in such Person, including, in the case of the Company, the Common Stock.
GAAP
means
generally accepted principles of the United States.
General Partner Interest
has the meaning set forth in the MLP
Agreement.
Governmental Entity
means the United States of America or any other nation, any state or other political
subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.
GP Interest Sale
has the meaning set forth in the recitals.
GP LLC
has the meaning set forth in the recitals of this Agreement.
GP LLC Member
means any former, current or future member of GP LLC.
HSR Act
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time, and the rules and
regulations promulgated thereunder.
Indemnified Party
has the meaning specified in
Section
6.02(a)
.
Indemnifying Party
has the meaning specified in
Section
6.02(a)
.
Interests
has the meaning given to such term in the LLC Agreement.
Law
means any federal, state, local or foreign order, writ, injunction, judgment, settlement, award, decree, statute, law
(including common law), rule or regulation.
Lien
means any mortgage, claim, encumbrance, pledge, lien (statutory or
otherwise), security agreement, conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance upon or with respect to any property of any
kind.
LLC Agreement
means that certain Amended and Restated Limited Liability Company Agreement of GP LLC, dated as of
March 15, 2006, as heretofore amended and as amended from time to time.
LLC Agreement Amendment
means an
amendment to the LLC Agreement substantially in the form attached as
Exhibit B
.
Merger Agreement
has the
meaning set forth in the recitals of this Agreement.
Merger Sub
has the meaning set forth in the recitals of this
Agreement.
MIPA Assignment Agreement
means the assignment agreement pursuant to which Moriah Properties assigns to the
Seller its interests in the GP LLC and its right to purchase the Interests in GP LLC under the MIPA in connection with the Consolidation.
MIPA
has the meaning set forth in the recitals of this Agreement.
MLP
has the meaning set forth in the recitals of this Agreement.
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MLP Agreement
means the Fifth Amended and Restated Agreement of Limited
Partnership of the MLP, dated as of April 10, 2017, as amended or supplemented from time to time.
Moriah
Properties
has the meaning set forth in the recitals of this Agreement.
Other Members
has the meaning set
forth in the recitals of this Agreement.
Partnership Entities
means the MLP, GP LLC and any Subsidiary of the MLP.
Partnership Released Party
has the meaning specified in
Section
8.16(b)
.
Party
means individually each of the Company and the Seller and collectively the
Parties
; provided that
(w), solely for purposes of
Section
5.02
, such terms shall include Moriah Properties and the Other Members, (x) solely for purposes of
Section
6.01
,
Section
8.12
and
Section
8.16
, such terms shall include Moriah Properties, the Other Members, the MLP and GP LLC, (y) solely for purposes of
Section
8.17
, such terms shall include the MLP and GP LLC and
(z) solely for purposes of
Section
8.18
, such terms shall include Moriah Properties.
Permits
means any approvals, authorizations, consents, licenses, permits, variances, waivers, grants, franchises,
concessions, exemptions, orders, registrations or certificates of a Governmental Entity.
Permitted Liens
means
(a) generally applicable restrictions on transfer that may be imposed by state or federal securities laws and (b) any Liens created by or approved by the Company.
Person
means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.
Proceedings
means all proceedings, actions, claims, suits, investigations and inquiries by or before any arbitrator or
Governmental Entity.
Purchase Price
has the meaning set forth in
Section
2.01
.
Released Party
has the meaning set forth in
Section
6.01(c)
.
Seller
has the meaning set forth in the introductory paragraph of this Agreement.
Seller Group
means Seller, Moriah Properties and the Other Members.
Seller Indemnitee
has the meaning specified in
Section
6.01(b)
.
Subsidiary
means, with respect to any Person, any corporation, limited liability company, partnership, association or
business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the
time owned or Controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof and (ii) if a limited liability company, partnership, association or other business entity (other
than a corporation), a majority of limited liability company, partnership or other similar ownership interests thereof with voting rights at the time owned or Controlled, directly or indirectly, by any Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such
Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains
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or losses or shall be or Control, directly or indirectly, the manager, managing member, managing director (or a board comprised of any of the foregoing) or general partner of such limited
liability company, partnership, association or other business entity.
Tax
means all federal, state, county, local,
foreign and other taxes, charges, fees, imposts, levies or other assessments of any kind whatsoever, including corporate franchise, income, sales, use ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise,
premium, property, customers, net worth, capital gains, transfer, stamp, documentary, social security, environmental, alternative minimum, occupation, recapture and other taxes, and including all interest, penalties and additions imposed with
respect to such amounts, and all amounts payable pursuant to any arrangement or agreement with respect to Tax.
Tax
Return
means any return, declaration, report, claim for refund, election, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
Third Party Claim
has the meaning specified in
Section
6.02(b)
.
ARTICLE II
GP INTEREST SALE
Section 2.01
GP Interest Sale
. The Closing shall occur concurrently with the consummation of the Corporate Reorganization. On and subject to the terms and conditions hereof, at the Closing, Seller shall sell to the Company, and the
Company shall purchase from the Seller, all the Interests in GP LLC, free and clear of all Liens (other than Permitted Liens), pursuant to an Assignment, and in exchange therefor, the Company shall pay to the Seller $3,000,000.00 in cash (the
Purchase Price
).
Section 2.02
Deliveries Upon the Closing
.
(a)
Deliveries of the Seller
. At the Closing, Seller shall deliver, or cause to be delivered to the Company:
(i) an Assignment, duly executed by or on behalf of Seller;
(ii) a certificate of Sellers
non-foreign
status complying with the provisions of
Section 1446(f) of the Code and Treasury Regulations
Section 1.1445-2(b)
in a form reasonably acceptable to the Company;
(iii) a cross-receipt duly executed by Seller certifying that Seller has received in full from the Company the aggregate Purchase Price;
(iv) a certificate from Seller duly executed by an authorized officer of Seller, dated as of Closing, certifying on behalf of Seller that the
conditions set forth in
Section
2.04(e)
and
Section
2.04(f)
have been satisfied.
(b)
Deliveries of the Company
. At the Closing, the Company shall deliver, or cause to be delivered to Seller:
(i) payment of the
Purchase Price by Federal (same day) funds by wire transfer to an account at a bank designated by Seller at least three (3) Business Days prior to the Closing;
(ii) an Assignment, duly executed by or on behalf of the Company; and
(iii) a certificate from the Company duly executed by an authorized officer of the Company, dated as of Closing, certifying on behalf of the
Company that the conditions set forth in
Section
2.03(e)
and
Section
2.03(f)
have been satisfied.
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Section 2.03
Conditions of Seller
s
Obligations at the Closing
. The obligation of Seller to sell its Interest at the Closing is subject to the satisfaction (or waiver by Seller) on or prior to Closing Date of the following conditions:
(a) No Law, injunction, judgment or ruling has been enacted, promulgated, issued, entered, amended or enforced by any Governmental Entity or
shall be in effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated by this Agreement or the Merger Agreement or making the consummation of the transactions contemplated by this Agreement or the Merger
Agreement illegal, and there shall not be pending any suit, action or proceeding by any Governmental Entity or other Person seeking to restrain, preclude, enjoin or prohibit the transactions contemplated by this Agreement or the Merger Agreement;
(b) all of the representations and warranties of the Company contained in this Agreement shall be true and correct as of the Effective
Date and as of the Closing Date as though made on and as of the Closing Date as if such representations and warranties were made on and as of that date, in the case of the representations and warranties of the Company set forth in
Section
3.01
and
Section
3.02(a)
, in all respects, and in the case of all other representations and warranties of the Company, in all material respects;
(c) the transactions contemplated by the Merger Agreement shall close simultaneously with the closing of the transactions contemplated by this
Agreement in accordance with the terms of the Merger Agreement;
(d) any consents required under the HSR Act with respect to the GP
Interest Sale and the Corporate Reorganization shall have been obtained or the waiting periods thereunder shall have expired or otherwise been terminated;
(e) the Company shall have performed in all material respects all of the covenants required to be performed by the Company hereunder on or
prior to the Closing Date; and
(f) the Company shall have delivered to the Seller the items and duly executed counterparts of the
documents to be delivered by the Company pursuant to
Section
2.02(b)
.
Section 2.04
Conditions of Company
s Obligations at the Closing
. The obligation
of the Company to consummate the transactions contemplated by this Agreement is subject to the satisfaction (or waiver by the Company) on or prior to Closing Date of the following conditions:
(a) No Law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Entity shall be in
effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated by this Agreement or the Merger Agreement or making the consummation of the transactions contemplated by this Agreement or the Merger Agreement
illegal;
(b) all of the representations and warranties of the Seller contained in this Agreement shall be true and correct as of the
Effective Date and as of the Closing Date as though made on and as of the Closing Date as if such representations and warranties were made on and as of that date in the case of the representations and warranties of the Seller set forth in
Section
4.01
and
Section
4.03(a)
, in all respects, and, in the case of all other representations and warranties of the Seller, in all material respects;
(c) the transactions contemplated by the Merger Agreement shall close simultaneously with the closing of the transactions contemplated by this
Agreement in accordance with the terms of the Merger Agreement;
(d) all consents required under the HSR Act with respect to the GP
Interest Sale and the Corporate Reorganization shall have been obtained or the waiting periods thereunder shall have expired or otherwise been terminated;
(e) the Seller shall have performed in all material respects all of the covenants required to be performed by the Seller hereunder on or prior
to the Closing Date; and
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(f) the Seller shall have delivered to the Company the items and duly executed counterparts of
the documents to be delivered by the Seller pursuant to
Section
2.02(a)
.
Section 2.05
Tax Treatment
. For U.S. federal income and applicable state and local income tax
purposes, the Parties shall treat the GP Interest Sale as a sale to the Company of the assets of GP LLC and, unless otherwise required by a determination within the meaning of Section 1313 of the Code, the Parties shall not take any
U.S. federal, state or local income tax reporting position inconsistent with such treatment.
Section 2.06
Further Assurances
. From time to time after the Effective Date, without further
consideration, the Company and the Seller shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
RELATED TO THE COMPANY
As
of the Effective Date and as of the Closing Date, the Company represents and warrants to the Seller:
Section 3.01
Existence
.
(a) The Company has been duly organized and is validly existing as a corporation in good standing under the Laws of the jurisdiction of its
organization, has the full corporate authority to own or lease its properties and assets, and is duly registered or qualified as a foreign corporation, as the case may be, for the transaction of business under the Laws of each jurisdiction in which
the character of the business conducted by it or the nature or location of the properties owned or leased by it makes such registration or qualification necessary except where the failure to have such power or authority or qualification would not
prevent the consummation of the transactions contemplated by this Agreement.
(b) The Company is not in default in the performance,
observance or fulfillment of any provision of its certificate of incorporation or bylaws.
Section 3.02
No Conflicts
. Assuming the accuracy of the representations of Moriah Properties in
Section
8.18(a)
, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not (a) assuming the authorizations, consents
and approvals referred to in Section 5.04 of the Merger Agreement are obtained and the filings referred to in Section 5.04 of the Merger Agreement are made, conflict with or result in a breach or violation of any of the terms or provisions
of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any Contract to which the Company is a party or by which the Company is bound or to which any of the property or assets of
the Company is subject, (b) conflict with or result in any violation of the provisions of the organizational documents of the Company or (c) assuming the authorizations, consents and approvals referred to in Section 5.04 of the Merger
Agreement are obtained and the filings referred to in Section 5.04 of the Merger Agreement are made, violate or will not violate any statute, Law, Permit or regulation of any court or Governmental Entity or body having jurisdiction over the
Company or the property or assets of the Company, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by this Agreement.
Section 3.03
Authority; Enforceability
. The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by the Company of this Agreement and the consummation by it of the transactions contemplated hereby have
been duly and validly authorized by all necessary legal action on the part of the Company. This Agreement has been duly and validly authorized and has been validly executed and
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delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by Seller, Moriah Properties and the Other Members, constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors rights and by
general principles of equity.
Section 3.04
Approvals
. Except for authorizations, consents and
approvals referred to in Section 5.04 of the Merger Agreement and the filings referred to in Section 5.04 of the Merger Agreement, no authorization, consent, approval, waiver, license, qualification or written exemption from, nor any
filing, declaration, qualification or registration with, any Governmental Entity or any other Person is required in connection with the execution, delivery or performance by the Company of this Agreement.
Section 3.05
Certain Fees
. No fees or commissions are or will be payable by the Company, and,
except to the extent engaged by Seller or its Affiliates, Seller shall not be subject to any liability or other obligation with respect to brokers, finders or investment bankers in connection with or relating to the consummation of the transactions
contemplated by this Agreement.
Section 3.06
Financing
. The Company or its Affiliates has, and
at the Closing will have, available funds sufficient to pay the Purchase Price, and to pay all fees and expenses to be paid by the Company in connection with the transactions contemplated hereby.
Section 3.07
Limitation
.
THE COMPANY ACKNOWLEDGES TH
AT
EXCEPT AS AND TO THE
EXTENT EXPRESSLY SET FORTH IN
ARTICLE IV
OF THIS AGREEMENT OR IN THE CERTIFICATES OF SELLER TO BE DELIVERED PURSUANT TO
SECTION
2.02(A)(II)
AND
SECTION
2.02(A)(IV)
,
THERE ARE NO REPRESENTATIONS AND WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, BY SELLER, ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES AS TO THE INTERESTS OR THE
PARTNERSHIP ENTITIES OR THEIR ASSETS, AND THE COMPANY HAS NOT RELIED UPON ANY ORAL OR WRITTEN INFORMATION PROVIDED BY OR ON BEHALF OF THE SELLER OR ITS AFFILIATES
.
Section 3.08
Certain Disclaimers
.
EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN
ARTICLE III
OF THIS AGREEMENT OR IN THE CERTIFICATE OF THE COMPANY TO BE DELIVERED PURSUANT TO
SECTION 2.02(B)(III)
,
(A)
THE COMPANY, ITS AFFILIATES AND THEIR RESPECTIVE
REPRESENTATIVES
MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED,
AND
(B)
THE COMPANY, ON BEHALF OF ITSELF AND ITS AFFILIATES, EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO THE SELLER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO THE SELLER BY
THE COMPANY, ITS CURRENT AND FORMER AFFILIATES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR OTHER REPRESENTATIVES)
.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the Effective Date and as of the Closing Date, Seller represents and warrants to the Company as follows:
Section 4.01
Existence
. Seller (i) is duly organized and validly existing and in good standing
under the Laws of its state of formation and (ii) has all necessary power and authority to own properties and to conduct its business as currently conducted except where the failure to have such power or authority as would not prevent the
consummation of the transactions contemplated by this Agreement.
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Section 4.02
Authorization, Enforceability
. Seller has
all necessary limited liability company power and authority to execute and deliver this Agreement, the MIPA and the MIPA Assignment Agreement and to consummate the transactions contemplated by this Agreement and the Consolidation. The execution,
delivery and performance by Seller of this Agreement, the MIPA and the MIPA Assignment Agreement and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary legal action on
the part of Seller. Each of this Agreement, the MIPA and the MIPA Assignment Agreement has been duly executed and delivered by Seller and, assuming due authorization, execution and delivery of this Agreement by the Company, GP LLC, Moriah
Properties, the MLP and the Other Members with regards to this Agreement, and assuming the due authorization, execution and delivery of the MIPA by each party thereto other than Seller with regards to the MIPA, constitutes the legal, valid and
binding obligation of Seller, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors rights generally and by general
principles of equity and except as the rights to indemnification may be limited by applicable Law (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 4.03
No
Conflicts
. Assuming the accuracy of the representations of GP LLC and the
MLP in
Section
8.17(a)
, the execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby will not (a) assuming the authorizations, consents and
approvals referred to in Section 4.03 and 4.04 of the Merger Agreement are obtained and the filings referred to in Section 4.04 of the Merger Agreement are made, conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute such a default), under the LLC Agreement or any Contract to which Seller is a party or by which Seller is bound or to which any of the
property or assets of Seller is subject, (b) conflict with or result in any violation of the provisions of the organizational documents of Seller or (c) assuming the authorizations, consents and approvals referred to in Section 4.03
and 4.04 of the Merger Agreement are obtained and the filings referred to in Section 4.04 of the Merger Agreement are made, violate or will not violate any statute, Law, Permit or regulation of any court or Governmental Entity or body having
jurisdiction over Seller or the property or assets of Seller, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by this
Agreement.
Section 4.04
Contributed Property
. Immediately prior to Closing, after the
consummation of the transactions contemplated by the MIPA, (a) Seller will own the Interests free and clear of any Liens (other than Permitted Liens) and (b) Seller will be the sole member of GP LLC. As of the Closing Date, after giving
effect to the GP Interest Sale, the Company will own the Interests free and clear of any Liens (other than Permitted Liens) and will be the sole member of GP LLC.
Section 4.05
MIPA
. The Seller has provided to the Company a true and correct copy of the MIPA.
Section 4.06
Financing
. The Seller or its Affiliates has, and at the closing of the Consolidation
the Seller will have, available funds sufficient to fund the Consolidation pursuant to the MIPA.
Section 4.07
Certain Fees
. No fees or commissions are or will be payable by Seller to brokers,
finders or investment bankers with respect to the purchase of any of the Interests or the consummation of the transactions contemplated by this Agreement, in each case, for which the Company may be liable.
Section 4.08
Limitation
.
THE SELLER ACKNOWLEDGES THAT
EXCEPT AS AND TO THE EXTENT
EXPRESSLY SET FORTH IN
ARTICLE III
OF THIS AGREEMENT OR IN THE CERTIFICATE OF THE COMPANY TO BE DELIVERED
PURSUANT TO
SECTION 2.02(B)(III)
, THERE ARE NO REPRESENTATIONS AND WARRANTIES,
EXPRESS, STATUTORY OR IMPLIED, BY THE COMPANY, ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES AS TO THE PARTNERSHIP ENTITIES OR THEIR ASSETS (OTHER THAN THOSE REPRESENTATIONS AND
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WARRANTIES PURSUANT TO
SECTION
8.18(A)
), AND THE SELLER HAS NOT RELIED UPON
ANY ORAL OR WRITTEN INFORMATION PROVIDED BY OR ON
BEHALF OF THE COMPANY OR ITS AFFILIATES
.
Section 4.09
Certain Disclaimers
.
EXCEPT AS
AND TO THE EXTENT EXPRESSLY SET FORTH IN
ARTICLE IV
OF THIS AGREEMENT OR IN THE CERTIFICATES OF SELLER TO BE DELIVERED PURSUANT TO
SECTION
2.02(A)(II)
AND
SECTION
2.02(A)(IV)
,
(A)
SELLER, ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES
MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED,
AND
(B)
SELLER, ON BEHALF OF ITSELF AND ITS AFFILIATES, EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO THE COMPANY OR ANY OF ITS
AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO THE COMPANY BY SELLER, ITS CURRENT AND FORMER AFFILIATES, OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ADVISORS OR OTHER REPRESENTATIVES)
.
ARTICLE V
COVENANTS
Section 5.01
Access
. The Company and its Affiliates (including the Partnership Entities) shall make or cause to be made available to the Seller all books, records and documents of the Partnership Entities (and the assistance of
employees responsible for such books, records and documents), for a purpose reasonably related to Sellers business, upon reasonable written demand stating the purpose of such demand and notice during regular business hours, at Sellers
own expense, as may be reasonably necessary for (a) investigating, settling, preparing for the defense or prosecution of, defending or prosecuting any Proceeding (including relating to any Tax) relating to this Agreement or the transactions
contemplated hereby or matters related to Taxes, (b) preparing reports to Governmental Entities, (c) the filing of all Tax Returns, the making of any election relating to Taxes and the preparation for any audit by any Tax authority, and
(d) such other purposes for which access to such documents is determined by Seller to be reasonably necessary, including preparing and delivering any statement provided for under this Agreement or otherwise or the determination of any matter
relating to the rights and obligations of Seller or any of its Affiliates under this Agreement, the LLC Agreement or the Merger Agreement;
provided
,
however
, that access to such books, records, documents and employees shall not
unreasonably interfere with the normal operations of the Company or its Affiliates. The Company shall, and shall cause each Partnership Entity to, maintain and preserve all such Tax Returns, books, records and other documents for the greater of
(A) one year after the Closing Date and (B) any applicable statutory or regulatory retention period, as the same may be extended and, in each case, shall offer to transfer such records to the Seller at the end of any such period.
Notwithstanding any other provision of this Agreement, the Company may keep confidential from the Seller, for such period of time as the Seller deems reasonable, (i) any information that the Company reasonably believes to be in the nature of
trade secrets or (ii) other information the disclosure of which the Company in good faith believes (A) is not in the best interests of the Company or the Partnership Entities, (B) could damage the Company or its business or
(C) that the Company or any of the Partnership Entities is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Company the primary purpose of which is to circumvent the
obligations set forth in this
Section
5.01
).
Section 5.02
Voting
Covenant
. Seller and each of the Other Members shall (and shall cause their Affiliates to) (a) vote (including, without limitation, if applicable, through the execution of one or more written consents if the Seller and each of the Other
Members or their Affiliates, as equityholders of the MLP, are requested to vote through the execution of an action by written consent in lieu of any such annual or special meeting of the equityholders of the MLP) at each meeting of the equityholders
of the MLP of which Seller and the Other Members have due notice (including without limitation at any adjournments or postponements thereof) as may be
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required so that all of the Equity Securities in the MLP held, directly or indirectly, by them and/or by any of their Affiliates, are voted in the same manner (for,
against, withheld, abstain or otherwise) as recommended by the Board with respect to the Corporate Reorganization as contemplated in the Merger Agreement (including without limitation with respect to director
elections); and (b) be present, in person or by proxy, at all meetings of the equityholders of the MLP of which Seller and the Other Members have due notice so that all of the Equity Securities held by them in the MLP, directly or indirectly,
by them and/or by any of their Affiliates, from time to time may be counted for the purposes of determining the presence of a quorum with respect to the Corporate Reorganization and voted in accordance with
Section
5.02(a)
at such meetings (including without limitation at any adjournments or postponements thereof).
Section 5.03
Public Announcements; Confidentiality
. Seller shall be given a reasonable opportunity
to review and comment on the portion of the initial press release concerning the execution of this Agreement, and the Company shall consider any such comments in good faith. Thereafter, no Party shall make any press release or other public
announcement which specifically mentions the other Party without the prior written consent of the other Party (which consent may be via email and shall not be unreasonably withheld, conditioned or delayed);
provided
,
however
, that the
foregoing shall not restrict disclosures (i) to the extent required (upon advice of counsel) by applicable securities or other Laws or the applicable rules of any stock exchange having jurisdiction over the Parties or their respective
Affiliates, (ii) of the terms of this Agreement by any Seller to its Affiliates or (iii) to the extent such Party has been given a reasonable opportunity to review such disclosure prior to its release and no objection is raised. Seller
shall be given a reasonable opportunity to review and comment on any portion of any Form 8-K, proxy statement or other public statements and any amendments or supplements thereof that specifically references Seller, its Affiliates or the GP Interest
Sale (other than references to the GP Interest Sale that have been previously approved by Seller) and the Company shall consider any such comments in good faith.
ARTICLE VI
INDEMNIFICATION, COSTS AND EXPENSES
Section 6.01
Indemnification
.
(a) From and after the Closing, Seller shall indemnify, defend and hold harmless the Company and its officers, managers, advisors,
subadvisors, directors, employees, Affiliates, members, partners, equityholders, and agents, and the successors to and permitted assigns of the foregoing (and their respective officers, managers, directors, employees, Affiliates, members, partners,
equityholders, agents and successors and permitted assigns) (collectively, the
Company Indemnitees
) from and against any and all Damages incurred or suffered by any of the Company Indemnitees:
(i) as a result of or arising out of a breach of any representation or warranty made by Seller in
Article IV
or Moriah
Properties in
Section
8.18(a)
; or
(ii) as a result of or arising out of the breach of any
covenant or agreement made or to be performed by Seller or Moriah Properties pursuant to this Agreement.
EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR
IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF THE COMPANY INDEMNITEES
.
(b)
From and after the Closing, the Company shall indemnify, defend and hold harmless Seller and the Other Members and their respective officers, managers, advisors, subadvisors, directors, employees, Affiliates, members, partners, equityholders, and
agents, and the successors to and permitted assigns of the foregoing (and their respective officers, managers, directors, employees, Affiliates, members, partners, equityholders, agents and
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successors and permitted assigns) (collectively, the
Seller Indemnitees
) from and against any and all Damages incurred or suffered by any of the Seller Indemnitees:
(i) as a result of or arising out of a breach of any representation or warranty made by the Company in
Article IV
or the
MLP or GP LLC in
Section
8.17(a)
;
(ii) as a result of or arising out of the breach of any
covenant or agreement made or to be performed by the Company, GP LLC or the MLP pursuant to this Agreement; or
(iii)
relating to the release in
Section
8.16(a)
.
EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER
SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF THE SELLER INDEMNITEES.
(c) EXCEPT FOR THE REMEDIES CONTAINED IN
SECTION
8.15
,
SECTION
8.17
AND CAUSES OF ACTION BASED UPON INTENTIONAL FRAUD OR AN INTENTIONAL MISREPRESENTATION HEREUNDER, FOLLOWING THE CLOSING, THIS
SECTION
6.01
CONTAINS THE PARTIES EXCLUSIVE REMEDIES AGAINST EACH OTHER WITH RESPECT TO BREACHES OF THE REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE PARTIES IN THIS AGREEMENT, AND THE AFFIRMATIONS OF SUCH REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS CONTAINED IN THE CERTIFICATE DELIVERED BY EACH PARTY AT CLOSING PURSUANT TO
SECTION
2.02(A)(IV)
AND
SECTION
2.02(B)(III)
, AS APPLICABLE. EXCEPT FOR THE REMEDIES CONTAINED
IN THIS
SECTION
6.01
,
SECTION
8.15
,
SECTION
8.17
AND CAUSES OF ACTION BASED ON INTENTIONAL FRAUD OR INTENTIONAL MISREPRESENTATION,
EFFECTIVE AS OF THE CLOSING
,
THE COMPANY,
ON BEHALF OF ITSELF AND THE PARTNERSHIP ENTITIES,
RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES EACH OF SELLER, MORIAH PROPERTIES AND THE OTHER MEMBERS AND THEIR RESPECTIVE AFFILIATES,
EACH OF THE PRESENT AND
FORMER PARTNERS, MEMBERS, EQUITYHOLDERS, OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AGENTS, ADVISORS AND REPRESENTATIVES OF ANY OF THE FOREGOING, AND EACH OF THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE
RELEASED PARTIES
),
FROM ANY AND ALL PROCEEDINGS, SUITS, LEGAL OR ADMINISTRATIVE ACTIONS, CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, OBLIGATIONS, INTEREST, OR CAUSES OF ACTION
WHATSOEVER, WHETHER KNOWN OR UNKNOWN, BOTH IN LAW OR IN EQUITY,
WHETHER IN CONTRACT, TORT OR OTHERWISE,
WHICH SUCH PERSONS MIGHT NOW OR SUBSEQUENTLY MAY HAVE,
BASED ON, RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE LLC
AGREEMENT AMENDMENT, THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN
, OR THE NEGOTIATION, APPROVAL OR CONSUMMATION OF ANY OF THE FOREGOING, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR
CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON
; PROVIDED, HOWEVER, THAT THE COMPANY, GP LLC AND MLP AND THE PARTNERSHIP ENTITIES DO NOT RELEASE
(X)
ANY ADVISOR OF A PARTNERSHIP ENTITY FOR
ANY CLAIMS OF SUCH PARTNERSHIP ENTITY AGAINST SUCH ADVISOR SOLELY IN ITS CAPACITY AS AN ADVISOR TO SUCH PARTNERSHIP ENTITY OR
(Y)
ANY OF THE PARTIES TO THIS AGREEMENT FOR BREACHES OF THE EXPRESS TERMS OF THIS AGREEMENT BY
SUCH PARTY
. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING THE FOREGOING, THE COMPANY, GP LLC AND MLP AND
THE PARTNERSHIP ENTITIES DO NOT RELEASE ANY RELEASED PARTY FOR ANY CLAIMS AGAINST SUCH RELEASED PARTY IN SUCH RELEASED
PARTY
S CAPACITY AS A DIRECTOR OR OFFICER OF THE COMPANY OR ANY OF THE PARTNERSHIP ENTITIES; PROVIDED THAT THE FOREGOING SHALL NOT LIMIT ANY
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EXCULPATION FROM LIABILITY, RIGHTS TO INDEMNITY OR OTHER LIMITATIONS ON LIABILITIES OR DUTIES ANY RELEASED PARTY MAY HAVE (WHETHER IN SUCH RELEASED PARTY
S CAPACITY AS A
DIRECTOR OR OFFICER OF THE COMPANY OR PARTNERSHIP ENTITIES OR OTHERWISE).
(d) The indemnity of each Party provided in this
Section
6.01
shall be for the benefit of and extend to each Person included in the Seller Group, the Other Members, the Company and the Partnership Entities, as applicable;
provided
,
however
, that any claim
for indemnity under this
Section
6.01
by any such Person must be brought and administered by a Party to this Agreement. No Indemnified Party (including any Person within the Seller Group, the Other Members and the Company
and the Partnership Entities) other than Seller, the Other Members and the Company shall have any rights against either the Seller, the Other Members or the Company under the terms of this
Section
6.01
except as may be
exercised on its behalf by the Company, the Other Members or the Seller, as applicable, pursuant to this
Section
6.01(d)
. Each of the Seller, the Other Members and the Company, as applicable, may elect to exercise or not
exercise indemnification rights under this
Article VI
on behalf of the other Indemnified Parties affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Party for any action or inaction under this
Article VI
.
Section 6.02
Indemnification Procedure
.
(a) A claim for indemnification not based upon a Third Party Claim (as defined below) may be asserted by written notice from the Party that may
be entitled to indemnification pursuant to this
Article VI
(the
Indemnified Party
) to the Party that may be obligated to provide indemnification pursuant to this
Article VI
(the
Indemnifying
Party
);
provided
,
however
, that failure to so notify the Indemnifying Party shall not release, waive or otherwise affect the Indemnifying Partys obligations with respect thereto, except to the extent that the
Indemnifying Party can demonstrate actual loss and material prejudice as a result of such failure. Any notice of claim under this
Section
6.02
shall be in writing and state in reasonable detail the basis of the claim for
indemnification (the
Claim Notice
). In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Person shall have 30 days from its receipt of the Claim Notice to (i) cure the Damages
complained of, (ii) admit its obligation to provide indemnification with respect to such Damages or (iii) dispute the claim for such indemnification. If the Indemnifying Party does not notify the Indemnified Party within such 30-day period
that it has cured the Damages or that it disputes the claim for such indemnification, the Indemnifying Party shall be conclusively deemed obligated to provide such indemnification hereunder.
(b) If any legal proceedings shall be instituted or any claim or demand shall be asserted by any third party in respect of which
indemnification may be sought under
Section
6.01
(a
Third Party Claim
), the Indemnified Party shall, promptly after the Indemnified Party has actual knowledge of the Third Party Claim, give its Claim
Notice of the assertion of the Third Party Claim to the Indemnifying Party;
provided
,
however
, that failure of the Indemnified Party to so notify the Indemnifying Party shall not release, waive or otherwise affect the Indemnifying
Partys obligations with respect thereto, except to the extent such failure materially prejudices the Indemnifying Persons ability to defend against such Third Party Claim.
(c) Subject to the provisions of this
Section
6.02
, in the case of a claim for indemnification based upon a Third
Party Claim, the Indemnifying Party shall have the right, at its sole expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against, negotiate, settle or otherwise deal
with any Third Party Claim which relates to any losses indemnified against by it hereunder;
provided
, that, in order to defend against, negotiate, settle or otherwise deal with any such Third Party Claim, the Indemnifying Party must first
acknowledge in writing to the Indemnified Party its unqualified obligation to indemnify the Indemnified Party as provided hereunder and provide to the Indemnified Party reasonable evidence that the Indemnifying Party has reasonably sufficient
financial resources to enable it to fulfill its obligations under this
Article VI
. Notwithstanding the preceding sentence, the Indemnifying Party shall not have the right to defend against, negotiate, settle, or otherwise deal with any Third
Party Claim (i) if the Third Party Claim is not solely for monetary damages (except where any
non-monetary
relief being sought is
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merely incidental to a primary claim for monetary damages), (ii) if the Third Party Claim involves criminal allegations, or (iii) if the Indemnifying Party fails to prosecute or defend,
actively and diligently, the Third Party Claim. If the Indemnifying Party elects to defend against, negotiate, settle or otherwise deal with any Third Party Claim, it shall within fifteen (15) days of the Indemnified Partys written notice
of the assertion of such Third Party Claim (or sooner if the nature of the Third Party Claim so requires) notify the Indemnified Party of its intent to do so;
provided
,
that, the Indemnifying Party must conduct its defense of the Third
Party Claim actively and diligently thereafter in order to preserve its rights in this regard. If the Indemnifying Party elects not to defend against, negotiate, settle, or otherwise deal with any Third Party Claim, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to indemnify the Indemnified Party for losses relating to such Third Party Claim under this Agreement, the Indemnified Party may defend against the Third Party Claim (at the sole
cost and expense of the Indemnifying Party, if the Indemnified Party is entitled to indemnification hereunder), with counsel of the Indemnified Partys choosing, subject to the right of the Indemnifying Party to admit its obligation and assume
the defense of the Third Party Claim at any time prior to settlement or final determination thereof. If the Indemnifying Party has not yet admitted its obligation to provide indemnification with respect to a Third Party Claim, the Indemnified Party
shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for 10 days following receipt of such notice to (i) admit in writing its obligation to provide indemnification
with respect to the Third Party Claim and (ii) if its obligation is so admitted, reject, in its reasonable judgment, the proposed settlement. If the Indemnified Party settles any Third Party Claim over the objection of the Indemnifying Party
after the Indemnifying Party has timely admitted its obligation in writing and assumed the defense of a Third Party Claim, the Indemnified Party shall be deemed to have waived any right to indemnity therefor. If the Indemnified Party controls the
defense of any Third Party Claim, then the Indemnifying Party shall reimburse the Indemnified Party for the expenses of defending such Third Party Claim upon submission of periodic bills, which reimbursement shall be made within thirty
(30) days of the applicable submission.
(d) If the Indemnifying Party shall assume the defense of any Third Party Claim, the
Indemnified Party may participate, at his, her or its own expense (except that fees and disbursements of counsel to Seller shall be borne by the Company), in the defense of such Third Party Claim;
provided
,
further
, that such
Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (A) so requested by the Indemnifying Party to participate or (B) in the reasonable opinion of counsel
to the Indemnified Party a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable;
provided
,
further
, that the Indemnifying Party shall not
be required to pay for more than one such counsel (plus any appropriate local counsel) for all Indemnified Parties in connection with any single Third Party Claim. Each Party hereto shall provide reasonable access to each other Party to such
documents and information as may reasonably be requested in connection with the defense, negotiation or settlement of any Third Party Claim. Notwithstanding anything in this
Section
6.02
to the contrary, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim or consent to the entry of any judgment with respect thereto without the written consent of the Indemnified Party if such settlement or judgment (1) would create any liability
of the Indemnified Party for which the Indemnified Party is not entitled to indemnification hereunder, (2) would provide for any injunctive relief or other
non-monetary
obligation affecting the
Indemnified Party, or (3) does not result in a final and unconditional release of the Indemnified Party from all liability in respect of the Third Party Claim (including, in the case of a settlement, an unconditional written release of the
Indemnified Party).
(e) After any final decision, judgment or award shall have been rendered by a Governmental Entity of competent
jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually binding agreement, in each case with respect
to a Third Party Claim, the Indemnified Party shall forward to the Indemnifying Party notice of any sums due and owing by the Indemnifying Party pursuant to this Agreement with respect to such matter and the Indemnifying Party shall pay all of such
remaining sums so due and owing to the Indemnified Party by wire transfer of immediately available funds within five (5) Business Days after the date of such notice.
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Section 6.03
Limitation on Liability
.
(a) NOTWITHSTANDING ANYTHING TO THE CONTRARY, SELLER AND MORIAH PROPERTIES SHALL HAVE NO LIABILITY IN THE AGGREGATE TO ANY INDEMNIFIED PARTY
FOR ANY DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN IN EXCESS OF THE PURCHASE PRICE.
(b)
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
ARTICLE VI
OR ANY OTHER PROVISION OF THIS AGREEMENT, IN NO EVENT SHALL SELLER, MORIAH PROPERTIES OR THE COMPANY HAVE ANY LIABILITY OR INDEMNIFICATION OBLIGATION TO ANY OTHER PERSON FOR
PUNITIVE, SPECIAL, INDIRECT, LOSS OF PROFIT, PENALTY OR OTHER INDIRECT OR UNFORESEEN DAMAGES, WHETHER IN LAW OR EQUITY, ARISING FROM THE PERFORMANCE OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY; PROVIDED THAT THIS
SECTION
6.03
SHALL NOT LIMIT THE RIGHT OF AN INDEMNIFIED PARTY TO RECOVER ANY SUCH DAMAGES TO THE EXTENT A COMPONENT OF ANY THIRD PARTY CLAIM.
Section 6.04
Survival
. All representations and warranties set forth in
Article III
and
Article IV
shall survive the execution and delivery of this Agreement and the consummation of the Closing for a period equal to the statute of limitations applicable to breach of contract under Delaware law. All covenants contemplated herein
to be performed at or prior to the Closing shall survive the Closing until fully performed or expressly
waived.
ARTICLE VII
TERMINATION
Section 7.01
Terminatio
n
. This Agreement may be terminated at any time prior to the Closing Date by either the Seller or the Company, in each case, if the Merger Agreement shall have been validly terminated in accordance with
its terms.
Section 7.02
Notice of Termination
. The Seller may exercise its right to terminate
this Agreement pursuant to
Section
7.01
by giving written notice thereof from time to time to the Company. The Company may exercise its right to terminate this Agreement pursuant to
Section
7.01
by
giving written notice thereof from time to time to the Seller.
Section 7.03
Effect of
Termination
. If a termination of this Agreement pursuant to the provisions of this
Article VII
occurs, this Agreement shall become void and have no effect, and there shall be no further liability on the part of Seller or the Company to
any Person in respect hereof, except under the provisions of
Section
6.03
, this
Section
7.03
and
Article VIII
(including
Section
8.01(a)
and
Section
8.17(c)
);
provided
,
however
,
that no such termination shall relieve any Party of any liability resulting from any Willful Breach of this Agreement by such Party prior to the time of such
termination. For purposes of this
Section
7.03
,
Willful Breach
shall mean a material breach that is a consequence of an act or a failure to take such act by the breaching Party with the knowledge that the
taking of such act (or the failure to take such act) would cause a material breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01
Expenses
.
(a) All costs and expenses, including fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party
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incurring such costs and expenses, except (i) the Company shall reimburse Seller for all reasonable and documented fees and disbursements of counsel with respect to the Corporate
Reorganization, this Agreement, the Merger Agreement, the MIPA, the Consolidation, the LLC Agreement Amendment, and (ii) the Company shall reimburse Seller for $100,000 in advisory fees.
(b) All transfer, documentary, sales, use, stamp, registration and other similar Taxes, and all conveyance fees and recording charges, in each
case incurred by reason of the GP Interest Sale shall be borne by the Company when due, and the Party responsible by applicable Law for filing any Tax Returns with respect to such Taxes shall timely file all such necessary Tax Returns and other
documentation with respect to all such Taxes, and, if required by applicable Law, the other Party or Parties shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.
Section 8.02
Interpretation
. The provision of a table of contents, the division of this Agreement
into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to Exhibits,
Appendices, Articles, Sections, subsections, clauses and other subdivisions refer to the corresponding Exhibits, Appendices, Articles, Sections, subsections, clauses and other subdivisions of or to this Agreement unless expressly provided otherwise.
The words this Agreement, herein, hereby, hereunder and hereof, and words of similar import, refer to this Agreement as a whole and not to any particular Article, Section, subsection,
clause or other subdivision unless expressly so limited. The words this Article, this Section, this subsection, this clause, and words of similar import, refer only to the Article, Section, subsection
and clause hereof in which such words occur. The word including (in its various forms) means including without limitation. All references to $ or dollars shall be deemed references to the lawful
currency of the United States of America. Each accounting term not defined herein will have the meaning given to it under GAAP as interpreted as of the date of this Agreement. Unless expressly provided to the contrary, the word or is not
exclusive. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and
vice versa, unless the context otherwise requires. Appendices and Exhibits referred to herein are attached to and by this reference incorporated herein for all purposes. Reference herein to any federal, state, local or foreign Law shall be deemed to
also refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The words day or days shall mean calendar day, unless denoted as a Business Day. The words will and will
not are expressions of command and not merely expressions of future intent or expectation. When used in this Agreement, the word either shall be deemed to mean one or the other, not both. Unless otherwise
noted, references herein to a party are references to the applicable party to this
Agreement.
Section 8.03
Amendments and Waivers
.
(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing, expressly identified as
an amendment or waiver and is signed by each of the Parties. For the purposes of clarity, no signature or consent of any third-party beneficiary to any provision of
Article VI
shall be required in order to amend or waive any provision
of
Article VI
. The Company agrees not to amend or waive any provision of the Merger Agreement in a manner that would materially and adversely affect the rights of the Seller or its Affiliates under this Agreement or amend or waive
Section 6.04 (Indemnification and Insurance), Section 8.02 (Effect of Termination) or Section 9.12 (No Recourse) without the prior written consent of Seller.
(b) No failure or delay by any Party in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided will be cumulative and not exclusive of any rights or remedies
hereunder, or at law or in equity; accordingly, no exercise of any right or remedy shall be construed as an election of remedies by any Party.
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Section 8.04
Conspicuous
. THE PARTIES AGREE THAT, TO
THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE PROVISIONS IN THIS AGREEMENT IN ALL UPPERCASE TYPE OR BOLD-TYPE FONT ARE CONSPICUOUS FOR THE PURPOSE OF ANY APPLICABLE LAW.
Section 8.05
Communications
. All notices and other communications hereunder shall be in writing and
shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:
(a) If to Seller:
Lion GP
Interests, LLC
c/o Moriah Properties, Ltd.
303 W. Wall Street, Suite 2400
Midland, Texas 79701
Attention:
Terry Creech
Tyler Harris
Email: terry@moriahgroup.net
tharris@moriahgroup.net
with a copy to (which shall not constitute notice):
Baker Botts L.L.P.
910 Louisiana
Street
Houston, Texas 77002
Attention: Joshua Davidson
Travis J. Wofford
Email: joshua.davidson@bakerbotts.com
travis.wofford@bakerbotts.com
(b) If to the Company, MLP or GP LLC:
Legacy Reserves Inc.
303 W. Wall
Street, Suite 1800
Midland, Texas 79701
Attention: Bert Ferrara
Email:
bferrara@legacylp.com
with a copy to (which shall not constitute notice):
Kirkland & Ellis LLP
609 Main Street
Houston, Texas
77002
Attention: Matthew R. Pacey, P.C.
Michael P. Fisherman
Email: matt.pacey@kirkland.com
michael.fisherman@kirkland.com
and
Kyle Vann, Chairman of the Conflicts Committee
c/o Legacy Reserves Inc.
303 W.
Wall Street, Suite 1800
Midland, Texas 79701
Email: vannk@swbell.net
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and
Richards, Layton & Finger, P.A.
One Rodney Square
920 N. King
St.
Wilmington, Delaware 19801
Attention: Srinivas M. Raju
Kenneth E. Jackman
Email:
raju@rlf.com
jackman@rlf.com
or to such other address as the Parties hereto may designate in writing. All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the overnight courier copy, if sent via
facsimile; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
Section 8.06
Entire
Understanding
. This Agreement, the LLC Agreement Amendment, the
Assignment and any certificates delivered by any Party pursuant to this Agreement are intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the
Parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter.
Section 8.07
Governing Law; Submission to Jurisdiction
. This Agreement, and all claims or causes of
action (whether in contract, tort, equity or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out
of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflicts of laws. Each of the
Parties agrees (a) that this Agreement involves at least $100,000.00, and (b) that this Agreement has been entered into by the Parties hereto in express reliance upon 6 Del. C. § 2708. Each of the Parties hereby irrevocably and
unconditionally agrees (a) to be subject to the jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the State of Delaware, and (b) that service of process may, to the fullest extent permitted by law, be
made on such Party by prepaid certified mail in accordance with
Section
8.05
with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service, and that service made
pursuant to this clause (b) shall, to the fullest extent permitted by law, have the same legal force and effect as if served upon such Party personally within the State of Delaware. Any action against any Party relating to the foregoing shall
be brought exclusively in the Delaware Court of Chancery (or, solely if the Delaware Court of Chancery declines to accept jurisdiction over any action, in the Superior Court of the State of Delaware (Complex Commercial Division) or, if the subject
matter jurisdiction over the action is vested exclusively in the federal courts of the United States of America, in the United States District Court for the District of Delaware), and any appellate courts of any thereof. The Parties hereby
irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of
such dispute. Each of the Parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
Section 8.08
Waiver of Jury Trial
. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO
CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
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HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
Section 8.09
Execution in Counterparts
. This Agreement may be executed in any
number of counterparts and by different Parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one
and the same agreement.
Section 8.10
Successors and Assigns
. The provisions of this Agreement
will be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. No Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement (including any transfer by
way of merger or operation of law) without the consent of each other Party, and any such purported assignment in violation of this
Section
8.10
shall be void
ab initio
. Notwithstanding the foregoing, any valid
transfer of Interests or Sellers rights prior to the Closing shall be made expressly subject to the terms of this Agreement, and Seller shall assign its rights and obligations under this Agreement to any such transferee with respect to such
transferred Interests and Seller shall cause a transferee to execute a joinder to this Agreement pursuant to which it shall agree to be bound by this Agreement as Seller. Except as expressly provided in this Agreement, this Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the Parties to this Agreement and their respective successors and permitted assigns.
Section 8.11
Severability
. Whenever possible, each provision or portion of any provision of this
Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but, if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable
Law, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in
such jurisdiction in such manner as will effect as nearly as lawfully possible the purposes and intent of such invalid, illegal or unenforceable provision.
Section 8.12
No Recourse
. NOTWITHSTANDING ANYTHING THAT MAY BE EXPRESSED OR IMPLIED IN THIS
AGREEMENT OR ANY DOCUMENT, AGREEMENT, OR INSTRUMENT DELIVERED CONTEMPORANEOUSLY HEREWITH, AND NOTWITHSTANDING THE FACT THAT ANY PARTY MAY BE A PARTNERSHIP OR LIMITED LIABILITY COMPANY, EACH PARTY HERETO, BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT, COVENANTS, AGREES AND ACKNOWLEDGES THAT NO PERSONS OTHER THAN THE PARTIES TO THIS AGREEMENT (AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS) SHALL HAVE ANY OBLIGATION HEREUNDER AND THAT IT HAS NO RIGHTS OF RECOVERY HEREUNDER AGAINST, AND NO
RECOURSE HEREUNDER OR UNDER ANY DOCUMENTS, AGREEMENTS, OR INSTRUMENTS DELIVERED CONTEMPORANEOUSLY HEREWITH OR IN RESPECT OF ANY ORAL REPRESENTATIONS MADE OR ALLEGED TO BE MADE IN CONNECTION HEREWITH OR THEREWITH SHALL BE HAD AGAINST, (A) ANY
FORMER, CURRENT OR FUTURE DIRECTOR, OFFICER, AGENT, AFFILIATE, MANAGER, ADVISOR, SUBADVISOR, ASSIGNEE, INCORPORATOR, CONTROLLING PERSON, FIDUCIARY, REPRESENTATIVE OR EMPLOYEE OF ANY PARTY (OR ANY OF THEIR SUCCESSORS OR PERMITTED ASSIGNEES), (B) ANY
FORMER, CURRENT, OR FUTURE GENERAL OR LIMITED PARTNER, MANAGER, STOCKHOLDER OR MEMBER OF ANY PARTY (OR ANY OF THEIR SUCCESSORS OR PERMITTED ASSIGNEES) OR (C) ANY AFFILIATE THEREOF OR AGAINST ANY FORMER, CURRENT OR FUTURE DIRECTOR, OFFICER,
AGENT, EMPLOYEE, AFFILIATE, MANAGER, ADVISOR, SUBADVISOR, ASSIGNEE, INCORPORATOR, CONTROLLING PERSON, FIDUCIARY, REPRESENTATIVE, GENERAL OR LIMITED PARTNER, STOCKHOLDER, MANAGER OR
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MEMBER OF ANY OF THE FOREGOING, OR IN EACH CASE, ANY FINANCING SOURCES OF ANY OF THE FOREGOING, BUT IN EACH CASE NOT INCLUDING THE PARTIES TO THIS AGREEMENT (AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS), WHETHER BY OR THROUGH ATTEMPTED PIERCING OF THE CORPORATE VEIL, BY OR THROUGH A CLAIM (WHETHER IN TORT, CONTRACT OR OTHERWISE) BY OR ON BEHALF OF SUCH PARTY AGAINST SUCH PERSONS AND ENTITIES, BY THE ENFORCEMENT OF ANY ASSESSMENT OR BY ANY
LEGAL OR EQUITABLE PROCEEDING, OR BY VIRTUE OF ANY STATUTE, REGULATION OR OTHER APPLICABLE LAW, OR OTHERWISE; IT BEING EXPRESSLY AGREED AND ACKNOWLEDGED THAT NO PERSONAL LIABILITY WHATSOEVER SHALL ATTACH TO, BE IMPOSED ON, OR OTHERWISE BE INCURRED
BY ANY SUCH PERSONS, AS SUCH, FOR ANY OBLIGATIONS OF THE APPLICABLE PARTY UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, UNDER ANY DOCUMENTS OR INSTRUMENTS DELIVERED CONTEMPORANEOUSLY HEREWITH, OR IN CONNECTION OR CONTEMPLATION
HEREOF, IN RESPECT OF ANY ORAL REPRESENTATIONS MADE OR ALLEGED TO BE MADE IN CONNECTION HEREWITH OR THEREWITH, OR FOR ANY CLAIM (WHETHER IN TORT, CONTRACT OR OTHERWISE) BASED ON, IN RESPECT OF, OR BY REASON OF, SUCH OBLIGATIONS OR THEIR CREATION;
PROVIDED
,
HOWEVER
, THAT NOTHING IN THIS
SECTION
8.12
SHALL LIMIT ANY LIABILITY OF THE PARTIES TO THIS AGREEMENT FOR BREACHES OF THE TERMS AND CONDITIONS OF THIS AGREEMENT OR THE MERGER AGREEMENT.
Section 8.13
Creditors
. None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditors of the Company or by any creditors of Affiliates of the Company.
Section 8.14
Time is of the Essence
. This Agreement contains a number of dates and times by which
performance or the exercise of rights is due, and the Parties intend that each and every such date and time be the firm and final date and time, as agreed. For this reason, each Party hereby waives and relinquishes any right it might otherwise have
to challenge its failure to meet any performance or rights election date applicable to it on the basis that its late action constitutes substantial performance, to require the other Party to show prejudice, or on any equitable grounds. Without
limiting the foregoing, time is of the essence in the performance of all obligations under this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a date that is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or
action taken) shall be the next day that is a Business Day.
Section 8.15
Specific Performance
.
The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached and it is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in each case, in
accordance with this
Section
8.15
in the Delaware Court of Chancery or any federal court sitting in the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. Each of
the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief as provided herein on the basis that (a) either Party has an adequate remedy at law or (b) an award of specific
performance is not an appropriate remedy for any reason at law or equity. Each Party further agrees that no Party shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this
Section
8.15
, and each Party irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
Section 8.16
Release
.
(a)
EXCEPT FOR THE EXPRESS OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT, THE LLC AGREEMENT AMENDMENT, THE MIPA, THE MIPA ASSIGNMENT
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AGREEMENT OR THE MERGER AGREEMENT, EFFECTIVE AS OF THE CLOSING, EACH OF THE COMPANY, GP LLC AND THE MLP, ON BEHALF OF ITSELF AND THE OTHER
PARTNERSHIP ENTITIES, ABSOLUTELY AND
UNCONDITIONALLY RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES EACH OF THE RELEASED PARTIES
FROM ANY AND ALL COSTS, EXPENSES, DAMAGES, DEBTS, OR ANY OTHER OBLIGATIONS, LIABILITIES AND CLAIMS WHATSOEVER, WHETHER KNOWN OR UNKNOWN, BOTH IN LAW
AND IN EQUITY, WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH SUCH PERSONS MIGHT NOW OR SUBSEQUENTLY MAY HAVE, IN EACH CASE (A) TO THE EXTENT ARISING OUT OF OR RESULTING FROM THE OWNERSHIP AND/OR OPERATION OF THE PARTNERSHIP ENTITIES, OR THE
ASSETS, BUSINESS, OPERATIONS, CONDUCT, SERVICES PRODUCTS AND/OR EMPLOYEES (INCLUDING FORMER EMPLOYEES) OF ANY OF THE PARTNERSHIP ENTITIES (AND ANY PREDECESSORS), RELATED TO ANY PERIOD OF TIME AT OR BEFORE THE CLOSING, OR (B) BASED ON, RELATING
TO OR ARISING OUT OF THIS AGREEMENT, THE LLC AGREEMENT AMENDMENT, THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, OR THE NEGOTIATION, APPROVAL OR CONSUMMATION OF ANY OF THE FOREGOING, IN EACH CASE OF CLAUSE (A) AND (B)
EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON; PROVIDED, HOWEVER, THAT THE COMPANY, GP LLC AND MLP AND THE PARTNERSHIP ENTITIES DO NOT RELEASE
(X) ANY ADVISOR OF A PARTNERSHIP ENTITY FOR ANY CLAIMS OF SUCH PARTNERSHIP ENTITY AGAINST SUCH ADVISOR SOLELY IN ITS CAPACITY AS AN ADVISOR TO SUCH PARTNERSHIP ENTITY OR (Y) ANY OF THE PARTIES TO THIS AGREEMENT FOR BREACHES OF THE EXPRESS
TERMS OF THIS AGREEMENT BY SUCH PARTY. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING THE FOREGOING, THE COMPANY, GP LLC AND MLP AND THE PARTNERSHIP ENTITIES DO NOT RELEASE ANY RELEASED PARTY FOR ANY CLAIMS AGAINST SUCH RELEASED PARTY IN SUCH
RELEASED PARTYS CAPACITY AS A DIRECTOR OR OFFICER OF THE COMPANY OR THE PARTNERSHIP ENTITIES OR UNDER THE EXPRESS TERMS OF ANY WRITTEN EMPLOYMENT, CONSULTING OR DIRECTOR AGREEMENT WITH THE COMPANY, GP LLC, MLP OR ANY PARTNERSHIP ENTITY;
PROVIDED THAT THIS SENTENCE SHALL NOT LIMIT ANY EXCULPATION FROM LIABILITY, RIGHTS TO INDEMNITY OR OTHER LIMITATIONS ON LIABILITIES OR DUTIES ANY RELEASED PARTY MAY HAVE (WHETHER IN SUCH RELEASED PARTYS CAPACITY AS A DIRECTOR OR OFFICER OF THE
COMPANY OR PARTNERSHIP ENTITIES OR OTHERWISE).
(b)
EXCEPT FOR THE EXPRESS OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT THE LLC
AGREEMENT AMENDMENT, OR THE MERGER AGREEMENT, EFFECTIVE AS OF THE CLOSING, EACH OF THE SELLER, MORIAH PROPERTIES AND THE OTHER MEMBERS ABSOLUTELY AND UNCONDITIONALLY RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES EACH OF THE COMPANY AND THE
PARTNERSHIP ENTITIES AND THEIR RESPECTIVE AFFILIATES, EACH OF THE PRESENT AND FORMER PARTNERS, MEMBERS, EQUITYHOLDERS, OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AGENTS, ADVISORS AND REPRESENTATIVES OF ANY OF THE FOREGOING, AND EACH OF THEIR
RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE
PARTNERSHIP RELEASED PARTIES
), FROM ANY AND ALL COSTS, EXPENSES, DAMAGES, DEBTS, OR ANY OTHER OBLIGATIONS, LIABILITIES AND CLAIMS WHATSOEVER,
WHETHER KNOWN OR UNKNOWN, BOTH IN LAW AND IN EQUITY, WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH SUCH PERSONS MIGHT NOW OR SUBSEQUENTLY MAY HAVE, IN EACH CASE (A) TO THE EXTENT ARISING OUT OF OR RESULTING FROM THE OWNERSHIP AND/OR OPERATION
OF THE PARTNERSHIP ENTITIES, OR THE ASSETS, BUSINESS, OPERATIONS, CONDUCT, SERVICES, PRODUCTS AND/OR EMPLOYEES (INCLUDING FORMER EMPLOYEES) OF ANY OF THE PARTNERSHIP ENTITIES (AND ANY PREDECESSORS), RELATED TO ANY PERIOD OF TIME AT OR BEFORE THE
CLOSING, OR (B) BASED ON, RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE
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MERGER AGREEMENT, THE LLC AGREEMENT AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, OR THE NEGOTIATION, APPROVAL OR
CONSUMMATION OF ANY OF THE FOREGOING, IN EACH CASE OF
CLAUSE (A) AND (B), EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON; PROVIDED, HOWEVER, THAT THE SELLER, MORIAH PROPERTIES AND THE OTHER
MEMBERS DO NOT RELEASE (X) ANY ADVISOR FOR ANY CLAIMS OF SUCH PERSON AGAINST SUCH ADVISOR SOLELY IN ITS CAPACITY AS AN ADVISOR TO SELLER, MORIAH PROPERTIES OR ANY OTHER MEMBER OR (Y) ANY OF THE PARTIES TO THIS AGREEMENT FOR BREACHES OF THE
EXPRESS TERMS OF THIS AGREEMENT OR THE MERGER AGREEMENT BY SUCH PARTY. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING THE FOREGOING, SELLER, MORIAH PROPERTIES AND THE OTHER MEMBERS DO NOT RELEASE ANY PARTNERSHIP RELEASED PARTY FOR ANY CLAIMS AGAINST
SUCH PARTNERSHIP RELEASED PARTY IN SUCH PARTNERSHIP RELEASED PARTYS CAPACITY AS A DIRECTOR OR OFFICER OF THE COMPANY OR THE PARTNERSHIP ENTITIES; PROVIDED THAT THIS SENTENCE SHALL NOT LIMIT ANY EXCULPATION FROM LIABILITY, RIGHTS TO INDEMNITY
OR OTHER LIMITATIONS ON LIABILITIES OR DUTIES ANY PARTNERSHIP RELEASED PARTY MAY HAVE (WHETHER IN SUCH RELEASED PARTYS CAPACITY AS A DIRECTOR OR OFFICER OF THE COMPANY OR PARTNERSHIP ENTITIES OR OTHERWISE).
Section 8.17
Guarantors
Representations; Guaranty
;
Indemnification
and Insurance
.
(a) Each of the MLP and GP LLC is a legal entity duly organized, validly existing and in good standing under the
applicable Laws of the jurisdiction in which it is formed or organized, as applicable, and has all requisite limited liability company or partnership power and authority necessary to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance by each of the MLP and GP LLC of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly authorized and approved by the Board and
no other entity action on the part of the MLP and GP LLC is necessary to authorize the execution, delivery and performance by the MLP and GP LLC of this Agreement and the consummation of the transactions contemplated by this Agreement. The Conflicts
Committee has granted Special Approval (as defined in the MLP Agreement) with respect to this Agreement, the LLC Agreement Amendment and the transactions contemplated thereby. GP LLC is the sole general partner of the MLP and owns the General
Partner Interest. GP LLC engages in no other business other than those related to owning the General Partner Interest. There are no Equity Securities in GP LLC other than the Interests and GP LLC hereby agrees, prior to the Closing, not to issue any
new Equity Securities in GP LLC or admit any new members without the prior written consent of Seller. A true and correct copy of Exhibit A to the LLC Agreement as of the Effective Date is attached as
Exhibit C
to this Agreement. This
Agreement has been duly and validly authorized and has been validly executed and delivered by the MLP and GP LLC and, assuming due authorization, execution and delivery of this Agreement by the other Parties hereto, constitutes the legal, valid and
binding obligations of the MLP and GP LLC enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting
creditors rights and by general principles of equity. Assuming the accuracy of the representations of Moriah Properties in
Section
8.18(a)
, the execution, delivery and performance by the MLP and GP LLC of this
Agreement and the consummation by the MLP and GP LLC of the transactions contemplated hereby will not (i) assuming the authorizations, consents and approvals referred to in Section 5.04 of the Merger Agreement are obtained and the filings
referred to in Section 5.04 of the Merger Agreement are made, conflict with or result in a breach of violation of, any of the terms of provisions of, or constitute a default (of an event which, with notice or lapse of time or both, would
constitute such a default) under, any Contract to which the MLP or GP LLC is a party or by which the MLP or GP LLC is bound or to which any of the property or assets of the MLP or GP LLC is subject, (ii) conflict with or result in any violation
of the provisions of the organizational documents of the MLP or GP LLC or (iii) assuming the authorizations, consents and approvals referred to in Section 5.04 of the Merger Agreement are obtained and the filings referred to in
Section 5.04 of the Merger
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Agreement are made, violate or will not violate any statute, Law, Permit or regulation of any court or Governmental Entity or body having jurisdiction over the MLP or GP LLC or the property or
assets of the MLP or GP LLC, except in the case of clauses (i) and (iii), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by this Agreement.
(b) The MLP and GP LLC each hereby unconditionally and irrevocably guarantees to Seller the performance in full by the Company of the
obligations of the Company hereunder, including the obligations of the Company under
Section
8.16
and
Article VI
. Each of the MLP and GP LLC hereby waives all defenses as a surety including notice, and agrees that
its obligations under this
Section
8.17
shall not be impaired, diminished or discharged by any extension of time granted by the Company, by any course of dealing between the parties, or by any events or circumstances which
might operate to discharge a guarantor. Each of the MLP and GP LLC waives the right to require Seller to first proceed against the Company with respect to any dispute, controversy, or claim arising out of or related to this Agreement, and agrees
that any such dispute, controversy, or claim may be brought directly against the MLP, GP LLC, the Company, or against any one or more of them.
(c) THE MLP AND GP LLC EACH HEREBY UNCONDITIONALLY AND IRREVOCABLY JOINTLY AND SEVERALLY AGREE TO (AND TO CAUSE THEIR APPLICABLE SUBSIDIARIES
TO) INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE RELEASED PARTIES FROM AND AGAINST ANY PROCEEDING, COST OR EXPENSES (INCLUDING ATTORNEYS FEES), JUDGMENTS, FINES, LOSSES, CLAIMS, DEMANDS, DAMAGES, OBLIGATIONS, INTEREST, CAUSES OF ACTION OR
LIABILITIES WHATSOEVER AND AMOUNTS PAID IN SETTLEMENT IN CONNECTION WITH ANY ACTUAL OR THREATENED PROCEEDING, WHETHER KNOWN OR UNKNOWN, BOTH IN LAW OR IN EQUITY, WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH ANY PERSON MIGHT NOW OR SUBSEQUENTLY MAY
HAVE, RELATING TO OR ARISING OUT OF THIS AGREEMENT (EXCEPT ANY INDEMNIFICATION LIABILITY OF SELLER, MORIAH PROPERTIES OR THE OTHER MEMBERS UNDER
SECTION
6.01(A)
, OF THIS AGREEMENT OR FOR BREACHES OF THE EXPRESS TERMS OF
THIS AGREEMENT BY SELLER, MORIAH PROPERTIES OR THE OTHER MEMBERS), THE LLC AGREEMENT AMENDMENT, THE MERGER AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR
CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY SUCH PERSON TO BE INDEMNIFIED
, AND PROVIDE ADVANCEMENT OF EXPENSES (INCLUDING ATTORNEYS FEES) WITH RESPECT TO EACH OF THE FOREGOING, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE
LAW. FOR THE AVOIDANCE OF DOUBT AND NOTWITHSTANDING THE FOREGOING, THE COMPANY, GP LLC AND MLP AND THE PARTNERSHIP ENTITIES DO NOT INDEMNIFY ANY RELEASED PARTY FOR ANY CLAIMS AGAINST SUCH RELEASED PARTY IN SUCH RELEASED PARTYS CAPACITY AS A
DIRECTOR OR OFFICER OF THE COMPANY OR THE PARTNERSHIP ENTITIES OR UNDER THE EXPRESS TERMS OF ANY WRITTEN EMPLOYMENT, CONSULTING OR DIRECTOR AGREEMENT WITH THE COMPANY, GP LLC, MLP OR ANY PARTNERSHIP ENTITY
; PROVIDED THAT THIS SENTENCE SHALL NOT
LIMIT ANY EXCULPATION FROM LIABILITY, RIGHTS TO INDEMNITY OR OTHER LIMITATIONS ON LIABILITIES OR DUTIES ANY RELEASED PARTY MAY HAVE (WHETHER IN SUCH RELEASED PARTY
S CAPACITY AS A DIRECTOR OR OFFICER OF THE COMPANY OR PARTNERSHIP
ENTITIES OR OTHERWISE)
.
(d) From and after the Effective Date, the Company and its Affiliates shall honor any provision of the
organizational documents of any of the Partnership Entities setting forth exculpation from liability, rights to indemnification, or other limitations on liabilities or duties for any of the Partnership Entities or any of their respective officers,
managers, advisors, subadvisors, directors, employees, Affiliates, members, partners, equityholders, and agents, and the successors to and permitted assigns of the foregoing (and their respective officers, managers, directors, employees, Affiliates,
members, partners, equityholders, agents and successors and permitted assigns).
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(e) The rights of any Released Party under this
Section
8.17
shall be
in addition to any other rights such Released Party may have under the organizational documents of any GP LLC Members, their respective Affiliates, the Company or any Partnership Entities, indemnification or employment agreements with any such
person (including as provided under this Agreement or the Merger Agreement) or under applicable Law (including the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act and the Delaware General Corporation
Law). The provisions of this
Section
8.17
shall survive the consummation of the transactions contemplated by this Agreement for a period of six years and are expressly intended to benefit, and be enforceable by, each of the
Released Parties and their respective heirs and representatives;
provided
,
however,
that in the event that any claim or claims for indemnification or advancement set forth in this
Section
8.17
are asserted or
made within such
six-year
period, all rights to indemnification and advancement in respect of any such claim or claims will continue until disposition of all such claims. If the Company or any Partnership
Entity or any of their respective successors or assigns (i) consolidates with or merges into any other Person or (ii) in one or more series of transactions, directly or indirectly, transfers all or substantially all of its businesses or
assets to any Person (whether by consolidation, merger or otherwise), then, in each such case, proper provision shall be made so that such continuing or surviving entity or transferee of such assets or its respective successors and assigns, as the
case may be, shall assume the obligations set forth in this
Section
8.17
.
Section 8.18
Moriah Properties
Representation; Guaranty, Indemnification and
Insurance
.
(a) Moriah Properties is a legal entity duly organized, validly existing and in good standing under the applicable Laws of
the jurisdiction in which it is formed or organized, as applicable, and has all requisite partnership power and authority necessary to enter into this Agreement, provide its consent as a GP LLC Member to the Corporate Reorganization and to
consummate the transactions contemplated by this Agreement, the MIPA and the MIPA Assignment Agreement. The execution, delivery and performance by Moriah Properties of this Agreement, the MIPA and the MIPA Assignment Agreement, and the consummation
of the transactions contemplated hereby and thereby, have been duly authorized and approved by Moriah Properties and its general partner and no other entity action on the part of Moriah Properties or its general partner is necessary to authorize the
execution, delivery and performance by Moriah Properties of this Agreement, the MIPA and the MIPA Assignment Agreement and the consummation of the transactions contemplated hereby and thereby. Each of this Agreement, Moriah Properties consent
as a GP LLC Member to the Corporate Reorganization, the MIPA and the MIPA Assignment Agreement has been duly and validly authorized and has been validly executed and delivered by Moriah Properties and, assuming due authorization, execution and
delivery of this Agreement by the other Parties hereto (other than Seller) with respect to this Agreement, constitutes the legal, valid and binding obligations of Moriah Properties enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors rights and by general principles of equity. Assuming the accuracy of the representations of the
Company, GP LLC and the MLP herein, the execution, delivery and performance by Moriah Properties of this Agreement and the consummation by Moriah Properties of the transactions contemplated hereby will not (a) assuming the authorizations,
consents and approvals referred to in Section 4.03 and 4.04 of the Merger Agreement are obtained and the filings referred to in Section 4.04 of the Merger Agreement are made, conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any contract to which Moriah Properties is a party or by which Moriah Properties is bound or to which
any of the property or assets of Moriah Properties is subject, (b) conflict with or result in any violation of the provisions of the organizational documents of Moriah Properties or (c) assuming the authorizations, consents and approvals
referred to in Section 4.03 and 4.04 of the Merger Agreement are obtained and the filings referred to in Section 4.04 of the Merger Agreement are made, violate or will not violate any statute, law, permit or regulation of any court or
Governmental Entity or body having jurisdiction over Moriah Properties or the property or assets of Moriah Properties, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the
consummation of the transactions contemplated by this Agreement.
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(b) Moriah Properties hereby unconditionally and irrevocably guarantees to the Company the
performance in full by Seller of the obligations of Seller hereunder, including the obligations of Seller under
Article VI
. Moriah Properties hereby waives all defenses as a surety including notice, and agrees that its obligations under this
Section
8.18
shall not be impaired, diminished or discharged by any extension of time granted by Seller, by any course of dealing between the parties, or by any events or circumstances which might operate to discharge a
guarantor. Moriah Properties waives the right to require the Company to first proceed against the Seller with respect to any dispute, controversy, or claim arising out of or related to this Agreement, and agrees that any such dispute, controversy,
or claim may be brought directly against Moriah Properties, the Seller, or against any one or both of them.
(c) MORIAH PROPERTIES HEREBY
UNCONDITIONALLY AND IRREVOCABLY AGREES TO (AND TO CAUSE ITS SUBSIDIARIES TO) INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF THE PARTNERSHIP RELEASED PARTIES FROM AND AGAINST ANY PROCEEDING, COST OR EXPENSES (INCLUDING ATTORNEYS FEES), JUDGMENTS,
FINES, LOSSES, CLAIMS, DEMANDS, DAMAGES, OBLIGATIONS, INTEREST, CAUSES OF ACTION OR LIABILITIES WHATSOEVER AND AMOUNTS PAID IN SETTLEMENT IN CONNECTION WITH ANY ACTUAL OR THREATENED PROCEEDING, WHETHER KNOWN OR UNKNOWN, BOTH IN LAW OR IN EQUITY,
WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH ANY PERSON MIGHT NOW OR SUBSEQUENTLY MAY HAVE, AS A RESULT OF OR ARISING OUT OF A BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY MORIAH PROPERTIES IN SECTION 8.18(A) OR AS A RESULT OF OR ARISING
OUT OF THE BREACH OF ANY COVENANT OR AGREEMENT MADE OR TO BE PERFORMED BY MORIAH PROPERTIES PURSUANT TO THIS AGREEMENT,
EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL
FAULT OF ANY SUCH PERSON TO BE INDEMNIFIED
, AND PROVIDE ADVANCEMENT OF EXPENSES (INCLUDING ATTORNEYS FEES) WITH RESPECT TO EACH OF THE FOREGOING, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, SUBJECT IN EACH CASE TO THE LIMITATIONS
IN SECTION 6.03.
(d) The rights of any Indemnified Party under this
Section
8.18
shall be in addition to
any other rights such Indemnified Party may have under the organizational documents of any GP LLC Members, their respective Affiliates, the Company or any Partnership Entities, indemnification or employment agreements with any such person (including
as provided under this Agreement or the Merger Agreement) or under applicable Law (including the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act and the Delaware General Corporation Law). The provisions
of this
Section
8.18
shall survive the consummation of the transactions contemplated by this Agreement for a period of six years and are expressly intended to benefit, and be enforceable by, each of the Indemnified Parties
and their respective heirs and representatives;
provided
,
however,
that in the event that any claim or claims for indemnification or advancement set forth in this
Section
8.18
are asserted or made within such
six-year
period, all rights to indemnification and advancement in respect of any such claim or claims will continue until disposition of all such claims. If Moriah Properties or any of its successors or assigns
(i) consolidates with or merges into any other Person or (ii) in one or more series of transactions, directly or indirectly, transfers all or substantially all of its businesses or assets to any Person (whether by consolidation, merger or
otherwise), then, in each such case, proper provision shall be made so that such continuing or surviving entity or transferee of such assets or its respective successors and assigns, as the case may be, shall assume the obligations set forth in this
Section
8.18
.
[
Signature Pages Follow
]
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IN WITNESS WHEREOF, the Parties hereto execute this Agreement, effective as of the Effective
Date.
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THE COMPANY:
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LEGACY RESERVES INC.
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By:
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/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
|
THE COMPANY GUARANTORS:
|
|
LEGACY RESERVES LP
|
|
By: Legacy Reserves GP, LLC, its general partner
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
|
LEGACY RESERVES GP, LLC
|
|
|
By:
|
|
/s/ James Daniel Westcott
|
Name:
|
|
James Daniel Westcott
|
Title:
|
|
President and Chief Financial Officer
|
S
IGNATURE
P
AGE
TO
GP P
URCHASE
A
GREEMENT
C-26
|
|
|
SELLER:
|
|
LION GP INTERESTS, LLC
|
|
|
By:
|
|
/s/ Cary D. Brown
|
Name:
|
|
Cary D. Brown
|
Title:
|
|
Chief Executive Officer
|
|
THE SELLER GUARANTOR:
|
|
MORIAH PROPERTIES, LTD.
|
|
By: Moriah Resources, Inc., its general partner,
|
|
|
By:
|
|
/s/ Cary D. Brown
|
Name:
|
|
Cary D. Brown
|
Title:
|
|
Chief Executive Officer
|
S
IGNATURE
P
AGE
TO
GP P
URCHASE
A
GREEMENT
C-27
|
|
|
THE OTHER MEMBERS:
|
|
BROTHERS PRODUCTION PROPERTIES, LTD.
|
|
|
By:
|
|
Brothers Production Company, Inc.,
|
|
|
its general partner
|
|
|
By:
|
|
/s/ Kyle A. McGraw
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
BROTHERS PRODUCTION COMPANY, INC.
|
|
|
By:
|
|
/s/ Kyle A. McGraw
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
BROTHERS OPERATING COMPANY, INC.
|
|
|
By:
|
|
/s/ Kyle A. McGraw
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
J&W MCGRAW PROPERTIES, LTD.
|
|
|
By:
|
|
Wanda J. McGraw Management, LLC, its general partner
|
|
|
By:
|
|
/s/ Kyle A. McGraw
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
S
IGNATURE
P
AGE
TO
GP P
URCHASE
A
GREEMENT
C-28
|
|
|
DAB RESOURCES, LTD.
|
|
|
By:
|
|
DAB 1999 Corp., its general partner
|
|
|
By:
|
|
/s/ Dale A. Brown
|
Name:
|
|
Dale A. Brown
|
Title:
|
|
President
|
|
H2K HOLDINGS, LTD.
|
|
|
By:
|
|
H2K Management, LLC,
|
|
|
its general partner
|
|
|
By:
|
|
/s/ Paul T. Horne
|
Name:
|
|
Paul T. Horne
|
Title:
|
|
President
|
S
IGNATURE
P
AGE
TO
GP P
URCHASE
A
GREEMENT
C-29
EXHIBIT A
FORM OF ASSIGNMENT AGREEMENT
[
See attached.
]
E
XHIBIT
A
TO
GP P
URCHASE
A
GREEMENT
C-30
Exhibit A
FORM OF ASSIGNMENT AGREEMENT
This Assignment Agreement (this
Assignment
) is made and entered into effective as of 12:01 a.m., Houston, Texas
time, on [ ], 2018, by and between Legacy Reserves Inc., a Delaware corporation (
Assignee
), and Lion GP Interests, LLC, a
Delaware limited liability company (
Assignor
). Capitalized terms used but not defined herein shall have the meaning assigned to such term in the GP Purchase Agreement (as defined below).
W I T N E S S E T H:
WHEREAS, Assignor is a member of and owns all of the limited liability company interests (the
Assigned Interests
) in
Legacy Reserves GP, LLC (
GP LLC
);
WHEREAS, pursuant to the GP Purchase Agreement, dated as of March 23, 2018 (the
GP Purchase Agreement
), by and among Assignee, Assignor, Legacy Reserves LP, Legacy Reserves GP, LLC, Moriah Properties, Ltd. and Brothers Production Properties, Ltd., Brothers Production Company, Inc., Brothers Operating
Company, Inc., J&W McGraw Properties, Ltd., DAB Resources, Ltd. and H2K Holdings, Ltd., Assignor agreed to transfer, and Assignee has agreed to acquire, all of the Assigned Interests, such that Assignee will become the sole member of GP LLC upon
the terms and conditions contained in the GP Purchase Agreement; and
WHEREAS, Assignor desires to effect the sale, assignment, transfer,
conveyance and delivery of all of the Assigned Interests to Assignee as set forth above;
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereto do hereby agree as follows:
1.
Assignment
. Notwithstanding any provision to the contrary in the Amended and Restated Limited Liability Company Agreement of GP LLC,
dated March 15, 2006 (as amended, the
GP
LLC Agreement
), Assignor irrevocably and forever SELLS, ASSIGNS, TRANSFERS, CONVEYS AND DELIVERS to Assignee, its successors and assigns, to have and to hold forever, and
Assignee PURCHASES, ASSUMES AND ACCEPTS, Assignors entire right, title and interest in and to any and all Assigned Interests and any and all income, distributions, value, rights, benefits and privileges associated therewith or deriving
therefrom, free and clear of all Liens, other than (a) generally applicable restrictions on transfer that may be imposed by state or federal securities laws and (b) any Liens created by or approved by the Company.
2.
Substitution as Member
. Notwithstanding any provision to the contrary in the GP LLC Agreement, from and after the Closing, Assignee
shall be substituted for Assignor as a member of GP LLC with respect to the Assigned Interests and Assignor shall be withdrawn from GP LLC as a member and cease to have or exercise any right or power as a member of GP LLC or in any regard with
respect to the Assigned Interests. The parties hereto agree that the assignment of the Assigned Interests, the admission of Assignee as a substitute member, and the cessation of Assignor as a member of GP LLC shall not dissolve GP LLC and the
business of GP LLC shall continue.
E
XHIBIT
A
TO
GP P
URCHASE
A
GREEMENT
C-31
3.
General Provisions
.
(a)
Applicable Law; Submission to Jurisdiction; Waiver of Jury Trial
. The provisions of
Section
8.07
and
Section
8.08
to the GP Purchase Agreement (Governing Law; Submission to Jurisdiction; Waiver of Jury Trial) are hereby incorporated into this Assignment by reference,
mutatis
mutandis
.
(b)
Counterparts
. This Assignment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
(c)
Successors and Assigns
. Subject to
Section
8.10
of the GP Purchase Agreement, this
Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
(d)
Conflict
.
(i) This Assignment is made pursuant to, and is subject to the terms of, the GP Purchase Agreement. Notwithstanding anything to
the contrary contained in this Assignment, nothing contained herein is intended to or shall be deemed to limit, restrict, modify, alter, amend or otherwise change in any manner the rights and obligations of the parties to the GP Purchase Agreement
under the GP Purchase Agreement, and in the event of any conflict between the terms and provisions hereof and the terms and the provisions of the GP Purchase Agreement, the terms and provisions of the GP Purchase Agreement shall control.
(ii) In the event of any conflict between the terms and provisions hereof and the terms and provisions of the GP LLC Agreement,
the terms and provisions of this Assignment shall control.
(e)
Amendment or Supplement
. This Assignment may be
amended, modified or supplemented only by written agreement of the parties hereto.
[
Signature Pages Follow
]
E
XHIBIT
A
TO
GP P
URCHASE
A
GREEMENT
C-32
IN WITNESS WHEREOF, this Assignment has been duly executed by each of the parties hereto as of
the date and year first above written.
|
|
|
ASSIGNEE
:
|
|
LEGACY RESERVES INC.
|
S
IGNATURE
P
AGE
TO
A
SSIGNMENT
A
GREEMENT
C-33
|
|
|
ASSIGNOR
:
|
|
LION GP INTERESTS, LLC
|
S
IGNATURE
P
AGE
TO
A
SSIGNMENT
A
GREEMENT
C-34
EXHIBIT B
LLC AGREEMENT AMENDMENT
[
See attached.
]
E
XHIBIT
B
TO
GP P
URCHASE
A
GREEMENT
C-35
Final
THIRD AMENDMENT
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LEGACY RESERVES GP,
LLC
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF LEGACY RESERVES GP, LLC (this
Amendment
) (i) is entered into effective as of March 23, 2018 (the
Effective Date
) by and among Brothers Production Properties, Ltd. (
Brothers Properties
), Brothers Production Company,
Inc. (
Brothers Production
), Brothers Operating Company, Inc., (
Brothers Operating
), J&W McGraw Properties, Ltd. (
J&W McGraw
), Moriah Properties, Ltd. (
Moriah
), DAB
Resources, Ltd. (
DAB Resources
), and H2K Holdings, Ltd. (
H2K Holdings
; and together with Brothers Properties, Brothers Production, Brothers Operating, J&W McGraw, Moriah and DAB Resources, the
Members
and each, a
Member
) and (ii) has been approved by the unanimous consent of the Conflicts Committee (the
Conflicts Committee
) of the Board of Directors (the
Board
) of Legacy Reserves GP, LLC, a Delaware limited liability company (the
Company
), pursuant to Sections 7.10(d) and 13.5 of the GP LLC Agreement (as defined below).
Reference is made to the Amended and Restated Limited Liability Company Agreement of Legacy Reserves GP, LLC, dated March 15, 2006, as
amended by the First Amendment, effective as of December 31, 2009, and as further amended by the Second Amendment, effective as of March 16, 2012 (as so amended, the
GP LLC Agreement
). Unless otherwise defined herein,
all capitalized terms used herein shall have the meaning given to them in the GP LLC Agreement.
PREAMBLE
WHEREAS
, it is contemplated that Legacy Reserves LP, a Delaware limited partnership (the
Partnership
), the Company
and Legacy Reserves Inc., a Delaware corporation (
New Legacy
), will enter into an Agreement and Plan of Merger (the
Merger Agreement
) by which the Partnership will merge with and into Legacy Reserves Merger Sub
LLC, a Delaware limited liability company and wholly-owned subsidiary of New Legacy, with the Partnership surviving as a subsidiary of New Legacy (the transactions contemplated by the Merger Agreement, the
Corporate
Reorganization
);
WHEREAS
, the Members have previously consented to the Corporate Reorganization;
WHEREAS
, Section 13.5 of the GP LLC Agreement provides that the GP LLC Agreement may only be amended by a written instrument
executed by the Members (except in the case of amendments to the provisions contained in Article VII that are subject to the restrictions on amendment contained in such Article);
WHEREAS
, Section 7.10(d) of the GP LLC Agreement requires Special Approval (as defined in the GP LLC Agreement) as a condition to
amending Section 7.10(c) of the GP LLC Agreement; and
C-36
WHEREAS
, the Conflicts Committee, pursuant to the authority granted to the Conflicts
Committee by the Board in accordance with the GP LLC Agreement, has approved this Amendment, such approval constituting Special Approval of this Amendment.
NOW, THEREFORE
, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties hereto amend the GP LLC Agreement as follows:
AMENDMENTS
1.
|
Section
7.10(c)(ii)
. Section 7.10(c)(ii) shall be amended by deleting subclause
(6) in its entirety and replacing it with (6) dissolve (to the fullest extent permitted by law) or liquidate.
|
2.
|
Effect on GP LLC Agreement
. Except as amended hereby, the GP LLC Agreement shall be and remain in full
force and effect and this Amendment shall become a part of the GP LLC Agreement.
|
3.
|
Counterparts
. This Amendment may be executed in counterparts, all of which together shall constitute one
agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.
|
4.
|
Governing Law
. This Amendment shall be governed by and shall be construed in accordance with the laws of
the State of Delaware, excluding any
conflict-of-laws
rules or principle that might refer the governance or the construction of this Agreement to the law of another
jurisdiction.
|
C-37
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the Effective
Date.
|
|
|
MEMBERS
|
|
BROTHERS PRODUCTION PROPERTIES, LTD.
|
|
|
By:
|
|
Brothers Production Company, Inc., its general partner
|
|
|
By:
|
|
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
BROTHERS PRODUCTION COMPANY, INC.
|
|
|
By:
|
|
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
BROTHERS OPERATING COMPANY, INC.
|
|
|
By:
|
|
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
President
|
|
J&W MCGRAW PROPERTIES, LTD.
|
|
|
By:
|
|
Wanda J. McGraw Management, LLC, its general partner
|
|
|
By:
|
|
|
Name:
|
|
Kyle A. McGraw
|
Title:
|
|
Vice President
|
S
IGNATURE
P
AGE
TO
LLC A
GREEMENT
A
MENDMENT
C-38
|
|
|
MORIAH PROPERTIES, LTD.
|
|
|
By:
|
|
Moriah Resources, Inc., its general partner
|
|
|
By:
|
|
|
Name:
|
|
Cary D. Brown
|
Title:
|
|
Vice President
|
S
IGNATURE
P
AGE
TO
LLC A
GREEMENT
A
MENDMENT
C-39
|
|
|
DAB RESOURCES, LTD.
|
|
|
By:
|
|
DAB 1999 Corp., its general partner
|
|
|
By:
|
|
|
Name:
|
|
Dale A. Brown
|
Title:
|
|
President
|
S
IGNATURE
P
AGE
TO
LLC A
GREEMENT
A
MENDMENT
C-40
|
|
|
H2K HOLDINGS, LTD.
|
|
|
By:
|
|
H2K Management, LLC, its general partner
|
|
|
By:
|
|
|
Name:
|
|
Paul T. Horne
|
Title:
|
|
President
|
S
IGNATURE
P
AGE
TO
LLC A
GREEMENT
A
MENDMENT
C-41
EXHIBIT C
EXHIBIT A TO THE LLC AGREEMENT AS OF THE EFFECTIVE DATE
|
|
|
|
|
MEMBER
|
|
PERCENTAGE INTEREST
|
|
Moriah Properties, Ltd.
|
|
|
57.87
|
%
|
DAB Resources, Ltd.
|
|
|
5.20
|
%
|
Brothers Production Properties, Ltd.
|
|
|
29.26
|
%
|
Brothers Production Company, Inc.
|
|
|
1.56
|
%
|
Brothers Operating Company, Inc.
|
|
|
0.26
|
%
|
J&W McGraw Properties, Ltd.
|
|
|
5.33
|
%
|
H2K Holdings, Ltd.
|
|
|
0.52
|
%
|
E
XHIBIT
C
TO
GP P
URCHASE
A
GREEMENT
C-42
|
|
|
|
|
|
|
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting
methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by
11:59 p.m., Eastern Daylight Time, on September 18, 2018 .
|
|
|
|
|
Vote by Internet
Go to
www.investorvote.com/LGCY
Or scan the QR code with your
smartphone
Follow the
steps outlined on the secure website
|
|
|
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone
telephone
Follow the
instructions provided by the recorded message
|
|
|
|
Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the designated areas.
|
|
☒
|
|
|
|
|
|
|
|
q
|
|
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
|
|
q
|
|
|
|
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|
Proposals
|
|
THE GP BOARD UNANIMOUSLY RECOMMENDS THAT THE UNITHOLDERS OF THE PARTNERSHIP VOTE
FOR
THE APPROVAL OF THE MERGER AGREEMENT,
FOR
THE APPROVAL OF THE CLASSIFICATION OF THE BOARD OF DIRECTORS OF NEW LEGACY,
FOR
THE APPROVAL OF THE NEW EQUITY INCENTIVE PLAN,
FOR
THE COMPENSATION PAYMENTS TO NAMED EXECUTIVE OFFICERS OF THE PARTNERSHIP IN CONNECTION WITH THE CORPORATE REORGANIZATION AND
FOR
THE ADJOURNMENT OF THE SPECIAL
MEETING.
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|
|
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|
+
|
|
|
|
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|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
1.
|
|
To approve the Amended and Restated Agreement and Plan of Merger, dated July 9, 2018, by and among Legacy Reserves LP (the
Partnership), Legacy Reserves Inc. (New Legacy), Legacy Reserves Merger Sub LLC (Merger Sub), and Legacy Reserves GP, LLC, pursuant to which Merger Sub will be merged with and into the Partnership, with the
Partnership continuing as the surviving entity and a wholly owned subsidiary of New Legacy.
|
|
☐
|
|
☐
|
|
☐
|
2.
|
|
To approve the classification of the Board of Directors of New Legacy in accordance with the Amended and Restated Certificate of Incorporation of New Legacy, to be in effect following the consummation of the Corporate
Reorganization (the Corporate Reorganization) as described in the Registration Statement on Form S-4 (File No. 333-224182) and only if Proposal 1 above is approved.
|
|
☐
|
|
☐
|
|
☐
|
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|
|
3.
|
|
To approve the Legacy Reserves Inc. 2018 Omnibus Incentive Plan, to be in effect following the consummation of the Corporate Reorganization and only if Proposal 1 above is approved.
|
|
☐
|
|
☐
|
|
☐
|
|
|
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|
4.
|
|
To approve, on an advisory, non-binding basis, the compensation payments that may be paid or become payable to the Partnerships named executive officers in connection with the Corporate Reorganization.
|
|
☐
|
|
☐
|
|
☐
|
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|
|
|
5.
|
|
To approve any proposal that may be presented to adjourn the special meeting to a later date or dates to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to
approve Proposal 1 above.
|
|
☐
|
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☐
|
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☐
|
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B
|
|
Authorized
Signatures
This
section
must
be
completed
for
your
vote
to
be
counted.
Date
and
Sign
Below
|
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title.
If no box is checked with respect to Proposal 1, Proposal 2, Proposal 3, Proposal 4 or Proposal 5, your signature below authorizes the proxies to vote FOR the Board of
Directors recommendations for these proposals as indicated on the reverse side of this proxy card.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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|
Signature 2 Please keep signature within the box.
|
IF VOTING BY MAIL, YOU
MUST
COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
|
|
|
|
|
|
|
q
|
|
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
|
|
q
|
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Proxy Legacy Reserves LP
|
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+
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303 W. Wall St., Suite 1800
Midland, Texas 79701