Exhibit 10.3

 

Legacy Reserves LP
Long-Term Incentive Plan

 

Grant of Phantom Units (Units) Under Subjective Component of Long-Term Equity
Incentive Compensation

 

Grantee:

 

Grant Date:

 

1.                                      Grant of Phantom Units.  Legacy Reserves
LP (the “Partnership”) hereby grants to you             Phantom Units under the
Amended and Restated Legacy Reserves LP Long-Term Incentive Plan (the “Plan”) on
the terms and conditions set forth under this Grant of Phantom Units (Units)
Under Subjective Component of Long-Term Equity Incentive Compensation Agreement
(this “Agreement”) and in the Plan, which is attached hereto as Appendix A and
is incorporated herein by reference as a part of this Agreement.  A Phantom Unit
is a notional Unit of the Partnership that is subject to the forfeiture and
non-transferability provisions set forth below in this Agreement.  Each Phantom
Unit granted to you also includes a tandem Distribution Equivalent Right
(“DER”), which provides that when the Partnership makes a cash distribution with
respect to a Unit, an amount of cash with respect to each of your Phantom Units
equal to the amount of the quarterly distribution paid on such Unit will be
accrued and on the vesting date, such accrued amounts will be payable to you
with respect to the number of your Phantom Units actually vested.  No accrued
distribution amounts will be payable with respect to unvested or forfeited
Phantom Units. The terms of this Agreement are set forth below.  In the event of
any conflict between the terms of this Agreement and the Plan, the Plan shall
control. Capitalized terms used in this Agreement but not defined herein shall
have the meanings ascribed to such terms in the Plan, unless the context
requires otherwise.

 

2.                                      Regular Vesting.  Except as otherwise
provided in Section 3 below, the Phantom Units granted pursuant to this
Agreement shall vest on               .

 

Your “employment with the Partnership” (as defined in Section 3), or any of its
Affiliates, as the case may be (the “Employer”), must be continuous from the
Grant Date through the applicable vesting date in order for the Phantom Units to
become vested under the provisions of this Agreement.

 

3.                                      Events Occurring Prior to Regular
Vesting.

 

(a)                                 Death or Disability.  If your “employment
with the Employer” (as defined below in this Section 3) terminates as a result
of your death or you become disabled (within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended and in effect from time to time (the
“Code”)), the Phantom Units automatically will become fully vested.

 

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(b)                                 Termination by the Employer other than for
Cause.  If your “employment with the Employer” (as defined below in this
Section 3) is terminated by the Employer for any reason other than “Cause” (as
defined below in this Section 3), as determined by the Employer, the Phantom
Units then held by you automatically will become fully vested.

 

(c)                                  Other Terminations.  If your “employment
with the Employer” (as defined below in this Section 3) should terminate for any
reason other than as provided in Sections 3(a) and (b) above, all unvested
Phantom Units then held by you automatically shall be forfeited and cancelled
without payment upon such termination.  Upon forfeiture of a Phantom Unit, the
tandem DER, along with any associated accrued distribution of cash with respect
to the tandem DER, shall automatically be cancelled without payment.

 

(d)                                 Change of Control.  All outstanding Phantom
Units held by you automatically shall become fully vested upon a Change of
Control.

 

For purposes of this Section 3, “employment with the Employer” or “employment
with the Partnership” shall include being an employee of or a director (or
equivalent) or consultant to the Partnership or an Affiliate.

 

For purposes of this Section 3, “Cause” means any of the following:

 

(i) the Grantee’s conviction of, or plea of nolo contendere to, any felony or to
any crime or offense causing substantial harm to any of the Partnership or its
direct or indirect subsidiaries (whether or not for personal gain) or involving
acts of theft, fraud, embezzlement, moral turpitude or similar conduct;

 

(ii) the Grantee’s repeated intoxication by alcohol or drugs during the
performance of his duties;

 

(iii) malfeasance in the conduct of Grantee’s duties, including, but not limited
to, (A) willful and intentional misuse or diversion of any of the Partnerships’
or its subsidiaries’ funds, (B) embezzlement or (C) fraudulent or willful and
material misrepresentations or concealments on any written reports submitted to
any of the Partnership or its subsidiaries;

 

(iv) the Grantee’s material failure to perform the duties of the Grantee’s
employment consistent with his position, or material failure to follow or comply
with the reasonable and lawful written directives of the Board;

 

(v) a material breach of the Grantee’s employment agreement; or

 

(vi) a material breach by the Grantee of written policies of the Partnership
concerning employee discrimination or harassment.

 

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(e)                                  Notice and Cure Opportunity in Certain
Circumstances. The Grantee may be afforded a reasonable opportunity to cure any
act or omission that would otherwise constitute “Cause” under Section 3 hereof
according to the following terms: The Board will cause the Partnership to give
the Grantee written notice stating with reasonable specificity the nature of the
circumstances determined by the Board in good faith to constitute “Cause.” If,
in the good faith judgment of the Board, the alleged breach is reasonably
susceptible to cure, the Grantee will have fifteen (15) days from his receipt of
such notice to effect the cure of such circumstances or such breach to the good
faith satisfaction of the Board. The Board will state whether the Grantee will
have such an opportunity to cure in the initial notice of “Cause” referred to
above. If, in the good faith judgment of the Board the alleged breach is not
reasonably susceptible to cure, or such circumstances or breach have not been
satisfactorily cured within such fifteen (15) day cure period, such breach will
thereupon constitute “Cause” hereunder.

 

4.                                      Payment Upon Vesting of Phantom Units
and Payment of Amounts Due Under DERs.

 

(a)                                 Subject to the tax withholding requirements
of Section 5 below, not later than seventy-four (74) days following the date on
which a Phantom Unit vests hereunder, the Partnership shall issue and deliver to
you, in book-entry form, a Unit in respect of each Phantom Unit then vested. 
Subject to any tax withholding requirements of Section 5 below, not later than
seventy-four (74) days following any date on which a Phantom Unit vests
hereunder, the Partnership shall mail or otherwise deliver to you, in a single
lump sum in cash in respect of each DER granted in tandem with a Phantom Unit,
an amount of cash equal to all accrued cash distributions on such Unit.  Upon
vesting of a Phantom Unit, the related DER shall automatically terminate and be
forfeited; provided, however, that all accrued cash distributions through such
date shall remain payable in accordance with the immediately preceding sentence.

 

(b)                                 Notwithstanding the preceding provisions of
Section 4(a), to the extent that (i) the limitations (set forth in Code
Section 409A and regulations or other regulatory guidance issued thereunder) on
payments to specified employees, as defined in Code Section 409A and regulations
or other regulatory guidance issued thereunder, apply to you and (ii) at any
time prescribed under Code Section 409A and regulations or other regulatory
guidance issued thereunder, you are a key employee, as defined in Code
Section 416(i) without regard to paragraph 5 thereof, except to the extent
permitted under Code Section 409A and regulations or other regulatory guidance
issued thereunder, no distribution or payment that is subject to Code
Section 409A shall be made under this Agreement on account of your separation
from service, as defined in Code Section 409A and the regulations or other
regulatory guidance issued thereunder, with the Employer (at any time when you
are deemed under Code Section 409A and regulations or other regulatory guidance
issued thereunder to be a specified employee, as defined in

 

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Code Section 409A and regulations or other regulatory guidance issued
thereunder, and any equity interest of the Employer is publicly traded on an
established securities market or otherwise) before the date that is the first
day of the month that occurs six (6) months after the date of your separation
from service (or, if earlier, your date of death or any other date permitted
under Code Section 409A and regulations or other regulatory guidance issued
thereunder).

 

5.                                      Withholding of Tax.  Any amount payable
pursuant to Section 4 shall be subject to collection by the Partnership or an
Affiliate, as applicable, of all applicable federal, state and local income and
employment taxes required to be withheld in respect of such amount.

 

6.                                      No Rights as a Unitholder.  You shall
not be, or have any of the rights or privileges of, a unitholder of the
Partnership with respect to any Phantom Unit.

 

7.                                      Limitations Upon Transfer.  All rights
under this Agreement shall belong to you alone and may not be transferred,
assigned, pledged, or hypothecated by you in any way (whether by operation of
law or otherwise), other than by will or the laws of descent and distribution
and shall not be subject to execution, attachment, or similar process.  Upon any
attempt by you to transfer, assign, pledge, hypothecate, or otherwise dispose of
such rights contrary to the provisions in this Agreement or the Plan, or upon
the levy of any attachment or similar process upon such rights, such rights
shall immediately become null and void.

 

8.                                      Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of any successor or successors of the
Partnership and upon any person lawfully claiming under you.

 

9.                                      Rights of Grantee.  Any benefits payable
under Section 4 of this Agreement shall be provided from the general assets of
the Partnership or an Affiliate, as applicable.  The Grantee’s rights hereunder
shall not rise above those of a general creditor of the Partnership or an
Affiliate, as applicable.

 

10.                               Entire Agreement and Amendment.  This
Agreement constitutes the entire agreement of the parties with regard to the
subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
the Phantom Units and DERs, and any associated accrued distributions of cash
with respect to the DERs, granted hereby.  Without limiting the scope of the
preceding sentence, all prior understandings and agreements, if any, among the
parties hereto relating to the subject matter hereof are hereby null and void
and of no further force and effect.  Any modification of this Agreement shall be
effective only if it is in writing and signed by both you and an authorized
officer of the Company.

 

11.                               Notices.  Any notices given in connection with
this Agreement shall, if issued to Grantee, be delivered to Grantee’s current
address on file with the Partnership, or if issued to the Partnership, be
delivered to the Partnership’s principal offices.

 

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12.                               Execution of Receipts and Releases.  Any
payment of cash or property to Grantee, or to Grantee’s legal representatives,
heirs, legatees or distributees, in accordance with the provisions hereof,
shall, to the extent thereof, be in full satisfaction of all claims of such
persons hereunder.  The Partnership may require Grantee or Grantee’s legal
representatives, heirs, legatees or distributees, as a condition precedent to
such payment or issuance, to execute a release and receipt therefor in such form
as it shall determine.

 

13.                               Governing Law.  This grant shall be governed
by, and construed in accordance with, the laws of the State of Texas, without
regard to conflicts of laws principles thereof.

 

Legacy Reserves LP

Grantee

 

 

By:

Legacy Reserves GP, LLC, its General Partner

 

 

 

 

By:

 

 

By:

 

 

 

Name:

Name:

 

 

Title:

Title:

 

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APPENDIX A

 

AMENDED AND RESTATED
LEGACY RESERVES LP
LONG-TERM INCENTIVE PLAN

 

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