Exhibit 10.1

IN THE COURT OF COMMON PLEAS

OF DELAWARE COUNTY, PENNSYLVANIA

 

KEVIN EPOCH and SANJAY ISRANI,    )   

Case No. 10-13223

Individually and On Behalf of All Others    )    Similarly Situated,    )   

CLASS ACTION

   )   

Plaintiffs,

   )       )   

v.

   )       )    PENN VIRGINIA GP HOLDINGS, L.P.,    )    PVG GP, LLC, WILLIAM H.
SHEA, JR.,    )    A. JAMES DEARLOVE, ROBERT HALL,    )    JOHN VAN RODEN,
JONATHAN    )    WELLER, PENN VIRGINIA RESOURCE    )    PARTNERS, L.P., PENN
VIRGINIA    )    RESOURCES GP, LLC and PVR    )    RADNOR, LLC,    )       )   

Defendants.

      ANITA SCHEIFELE, Individually and on    )   

Civil Action — LAW

Behalf of all others similarly situated    )   

Case No. 10-013368

   )   

Plaintiff,

   )       )   

v.

   )       )    WILLIAM SHEA, A. JAMES DEARLOVE,    )    ROBERT HALL, JOHN VAN
RODEN,    )    JONATHAN WELLER, PENN VIRGINIA    )    GP HOLDINGS, L.P., PVG GP,
LLC,    )    PENN VIRGINIA RESOURCE    )    PARTNERS, L.P., PENN VIRGINIA    )
   RESOURCE GP, LLC, and    )    PVR RADNOR, LLC    )       )   

Defendants.

   )   

MEMORANDUM OF UNDERSTANDING

WHEREAS, there are putative class action lawsuits currently pending in the Court
of Common Pleas of Delaware County, Pennsylvania (the “Court”), styled Epoch v.
Penn Virginia GP Holdings, L.P., et al., No. 10-13223, and Scheifele v. Shea,
No. 10-13368 (the “Actions”),

 

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brought on behalf of the public unitholders of Penn Virginia GP Holdings, L.P.
(“PVG” or the “Company”) and named as defendants PVG, its general partner PVG
GP, LLC (“PVG GP”), Penn Virginia Resource Partners (“PVG”), L.P., Penn Virginia
Resources GP, LLC, PVR Radnor LLC and PVG GP’s Board of Directors (the “Board”
or the “Individual Defendants”) consisting of William H. Shea, Jr., A. James
Dearlove, Robert Hall, John C. van Roden, Jr., and Jonathan B. Weller
(collectively the “Defendants”);

WHEREAS, the Actions challenge the merger of PVG and PVR pursuant to which PVR
will acquire PVG in exchange for 0.98 partnership units of PVR for each PVG
limited partnership unit, which merger was first announced on September 21, 2010
(the “Merger”);

WHEREAS, although Defendants deny the allegations asserted in the complaints in
the Actions, counsel for the Defendants and plaintiffs’ counsel in the Actions
(“Plaintiffs’ Counsel”) have engaged in arms’-length negotiations concerning a
possible settlement of the Actions;

WHEREAS, Defendants agreed to provide certain discovery and made certain
documents available to counsel for Plaintiffs in order for them to evaluate the
allegations and claims made in the Actions;

WHEREAS, counsel for all parties to the Actions have reached an agreement in
principle, set forth in this Memorandum, providing for the settlement of the
Actions between and among Plaintiffs, on behalf of themselves and the putative
Class (as defined below), and Defendants, on the terms and subject to the
conditions set forth below subject to the approval of the Court (the
“Settlement”);

WHEREAS, Defendants have consented to the conditional certification of the
Actions as a class action pursuant to Pennsylvania Rules of Civil Procedure
1710-1711 for settlement purposes only, as defined in ¶5(b) hereinafter;

WHEREAS, Plaintiffs’ Counsel has determined that a settlement of the Actions on
the terms reflected in this Memorandum is fair, reasonable, adequate, and in the
best interests of Plaintiffs and the putative Class;

 

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WHEREAS, Defendants, solely to avoid the costs, disruption and distraction of
further litigation, and without admitting the validity of any allegations made
in the Actions, or any liability with respect thereto, have concluded that it is
desirable that the claims against them be settled and dismissed on the terms
reflected in this Memorandum; and

WHEREAS, Defendants maintain that they have not committed any breach of
fiduciary duty, any breach of any applicable agreement, any disclosure violation
or any other breach or violation whatsoever, including, but not limited to, in
connection with the authorization and/or consummation of the Merger and each
agreement related thereto, or in connection with any disclosures regarding the
Merger or related agreement, including but not limited to the Joint Proxy
Statement and Prospectus dated December 23, 2010 (the “Joint Proxy Statement”);

NOW, THEREFORE, as a result of the foregoing and the negotiations among counsel
for the parties, the parties to the Action have agreed as follows:

1. In consideration for the Settlement and dismissal with prejudice of the
Actions and the releases provided herein, PVG and PVR will supplement their
Joint Proxy Statement with the disclosures recommended by Plaintiffs and as set
forth on Exhibit A hereto (the “Supplemental Disclosures”).

2. Defendants will provide Plaintiffs’ Counsel with confirmatory discovery as
set forth in Paragraph 7 and as may be reasonably requested to confirm the
fairness and adequacy of the Settlement and the disclosures relating to the
Merger (the “Settlement-Related Proceedings”).

3. The parties to the Action will attempt in good faith and use their best
efforts to agree upon, execute and present to the Court within forty-five
(45) days a formal stipulation of settlement (“Stipulation”) and such other
documents as may be necessary and appropriate to obtain the final approval by
the Court of the Settlement and the dismissal with prejudice of the Actions in
the manner contemplated herein and by the Stipulation.

 

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4. Pending the negotiation and execution of the Stipulation, all proceedings in
the Actions, except for Settlement-Related Proceedings, shall be stayed. Other
than seeking approval of the Settlement, the certification of the Settlement
Class, or as permitted herein or as may be expressly required by the Court,
Plaintiffs and Plaintiffs’ Counsel agree that they will not take any action or
make any filings in the Actions, including, but not limited to, filing any
motion or pleading of any kind seeking to enjoin, either temporarily or
permanently, the Merger of PVG and PVR or the unitholder meetings to vote upon
and approve the Merger. Plaintiffs shall have an extension of time to respond to
Defendants Preliminary Objections or Motions to Dismiss pending the Settlement
Related proceedings. The Stipulation shall provide that all proceedings in the
Actions, except for Settlement Related Proceedings, shall be stayed until the
Settlement Related Proceedings are concluded.

5. The Stipulation shall provide for, among other things, the following:

(a) The consolidation of the Actions pursuant to Pennsylvania Rule of Civil
Procedure 213 and the consolidated Actions shall proceed under the caption of
the earlier filed Action, Epoch at No. 10-13223;

(b) the conditional certification of the Actions as a class action pursuant to
Pennsylvania Rules of Civil Procedure 1710-1711 on behalf of a Class consisting
of all common unitholders of PVG from September 21, 2010 through and including
the date of the closing of the Merger, including any and all of their respective
successors in interest, predecessors, representatives, trustees, executors,
administrators, heirs, assigns or transferees, immediate and remote, and any
person or entity acting for or on behalf of, or claiming under, any of them, and
each of them (the “Class”). Excluded from the Class are Defendants, members of
the immediate family of any Defendant, any entity in which a Defendant has or
had a controlling interest,

 

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officers of PVG and the legal representatives, heirs, successors or assigns of
any such excluded person, and any individual or entity excluded from the Class
pursuant to Pennsylvania Rule of Civil Procedure 1711. Plaintiffs will not
oppose Defendants’ request that the Court approve a non-opt-out Class for
settlement purposes; provided, however, that the parties hereto agree that, if
such request is denied, the Settlement will be terminable by Defendants if
potential Class members owning a specified number of PVG units, to be determined
and agreed upon by the parties, exclude themselves from the settlement Class;

(c) for the complete discharge, dismissal with prejudice on the merits, release
and settlement, to the fullest extent permitted by law, of the Actions and all
known and unknown claims of every nature and description whatsoever, whether or
not concealed or hidden, against Defendants and their respective predecessors,
successors-in-interest, parents, subsidiaries, partners, affiliates,
representatives, agents, trustees, executors, heirs, spouses, marital
communities, assigns or transferees and any person or entity acting for or on
behalf of any of them and each of them, and each of their predecessors,
successors-in-interest, parents, subsidiaries, affiliates, officers, directors,
representatives, agents, trustees, executors, heirs, spouses, marital
communities, assigns or transferees and any person or entity acting for or on
behalf of any of them and each of them (including, without limitation, any
investment bankers, accountants, insurers, reinsurers or attorneys and any past,
present or future officers, directors and employees of any of them)
(collectively, the “Released Parties”) that have been or could have been
asserted by Plaintiffs or any member of the Class in their capacity as
unitholders, including class, individual or other claims, in state or federal
court, based upon, arising from, or related in any manner to the allegations,
facts, events, transactions, acts, occurrences, statements, representations,
misrepresentations, omissions or any other matter, thing or cause whatsoever, or

 

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any series thereof, embraced, involved, referred to, set forth, arising out of,
or otherwise related to, (i) any claims or allegations, made in any pleading
filed in any of the Actions, (ii) any claim that the Defendants acted in bad
faith in connection with the Merger; (iii) the Merger, including, but not
limited to, the fiduciary or contractual obligations of any of the Defendants or
Released Parties in connection with the Merger, the negotiations preceding the
Merger and the agreements entered into in connection with the Merger (the
“Agreements”) or the disclosure obligations of any of the Defendants or Released
Parties in connection with the Merger; (iv) the Agreements; (v) the Joint Proxy
Statement (including any amendments and revisions thereto) and the Supplemental
Disclosures; (vi) all public statements regarding the Merger, the Agreements
and/or the Joint Proxy Statement; and/or (vii) any actions omissions, or events
that in any way related to approval, consideration, consummation, or disclosure
obligations relating to the Merger or the Agreements (collectively, the “Settled
Claims”); provided, however, that the Settled Claims shall not include the right
of the plaintiffs or any members of the Class to enforce in the Court the terms
of the Stipulation;

(d) that Defendants and the Released Persons release plaintiffs, members of the
Class and their counsel, from all claims arising out of the instituting,
prosecution, settlement or resolution of the Actions, provided however, that the
Defendants and Released Persons shall retain the right to enforce in the Court
the terms of the Stipulation or this Memorandum;

(e) that Defendants have denied, and continue to deny, that any of them have
committed or have threatened to commit any violations of law or breaches of duty
to the plaintiffs, the Class or anyone else;

(f) that Defendants are entering into the Settlement solely because it will
eliminate the uncertainty, distraction, burden and expense of further
litigation;

 

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(g) that in the event the Settlement does not become final for any reason,
Defendants reserve the right to prosecute pending motions in the Actions and to
oppose certification of any class in future proceedings; and

(h) that subject to the Order of the Court, pending final determination of
whether the Settlement should be approved, plaintiffs and all members of the
Class, and any of them, are barred and enjoined from commencing, prosecuting,
instigating or in any way participating in the commencement or prosecution of
any action asserting any Settled Claims, either directly, representatively,
derivatively or in any other capacity, against any Released Person.

6. The Settlement is expressly conditioned upon: (a) PVG and PVR obtaining the
requisite approval of their respective common unitholders as contemplated in the
Merger Agreement; (b) the consummation of the Merger; (c) the drafting and
execution of the Settlement Documents, which the parties agree to undertake in
good faith; (d) the conclusion by Plaintiffs and their Counsel after completion
of appropriate confirmatory discovery in the Actions reasonably satisfactory to
Plaintiffs’ Counsel (as described in Paragraph 7 below) that the proposed
Settlement is fair and reasonable; (e) the final certification of the Settlement
Class; (f) entry of a judgment by the Court approving all material terms of the
Settlement as set forth in the Stipulation; (g) entry of an order of dismissal
with prejudice of the Actions that has become final and no longer subject to
further appeal or review by lapse of time or otherwise and without awarding
costs to any party except pursuant to Paragraph 15; and (h) none of the material
terms of the Settlement as set forth in the Stipulation being modified pursuant
to any appeal or review. This MOU shall be voidable, at the discretion of
Defendants, if the vote of either PVG or PVR’s unitholders is enjoined on the
basis of any disclosure-based claims or any other claims, in any

 

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lawsuit. This MOU shall be null and void and of no force and effect if (i) any
of these conditions are not met, (ii) the Merger is not completed for any
reason, or (iii) Plaintiffs’ Counsel in the Actions determine, following
completion of confirmatory discovery, that the Settlement is not fair and
reasonable. If such determination is made, Plaintiffs’ Counsel may use any of
the confirmatory discovery to pursue any appropriate legal proceedings. In such
event, this MOU shall not be deemed to prejudice in any way the positions of the
parties with respect to the Actions, or to constitute an admission of fact by
any party, and shall not entitle any party to recover any costs or expenses
incurred in connection with the implementation of this MOU.

7. The parties shall have 45 days following the execution of this MOU to
complete confirmatory discovery. It is understood that, absent good cause, such
confirmatory discovery shall be as follows: (i) the depositions of a member of
the conflicts committee of PVG GP and a representative of Credit Suisse
knowledgeable about the work performed for the conflicts committee by Credit
Suisse and (ii) the production of certain agreed-upon documents in addition to
those already provided by Defendants. Plaintiffs acknowledge that Defendants
have already provided Plaintiffs with relevant non-privileged documents which
are to be considered part of the confirmatory discovery. Plaintiffs agree in
good faith in determining what, if any, additional documents are necessary to
conduct confirmatory discovery, and Defendants agree to consider any such
request in good faith. Also, the parties shall seek the entry of a
confidentiality order by the Court in the Actions, which, among other terms,
provides that the information previously provided to plaintiffs’ counsel and
pursuant to the confirmatory discovery shall only be used in connection with the
settlement approval process, that such discovery shall not be disseminated
except to any third-party consultant who counsel reasonably believes needs to
review such information and who first agrees to be bound by the confidentiality
order, and requires that such

 

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discovery be returned or destroyed within 30 days of the date the Settlement, if
approved, becomes final and non-appealable.

8. The releases contemplated by the Settlement extend to claims that Defendants
and Plaintiffs for themselves and on behalf of the Class do not know or suspect
to exist at the time of the release, which if known, might have affected the
decision to enter into the release or to object or not object to the Settlement
(the “Unknown Claims”). Plaintiffs, Defendants and each member of the Settlement
Class shall be deemed to waive, and shall waive and relinquish to the fullest
extent permitted by law any and all provisions, rights and benefits conferred by
any law of the United States or any state or territory of the United States, or
principle of common law, which governs or limits a person’s release of Unknown
Claims; further (i) the plaintiffs, for themselves and on behalf of the
Settlement Class and defendants shall be deemed to waive, and shall waive and
relinquish, to the fullest extent permitted by law, the provisions, rights and
benefits of Section 1542 of the California Civil Code which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OR EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR (ii) Plaintiffs, for themselves and on behalf of the Settlement Class
and Defendants also shall be deemed to waive any and all provisions, rights and
benefits conferred by any law of any state or territory of the United States, or
principle of common law, which is similar, comparable or equivalent to
California Civil Code § 1542; and (iii) Plaintiffs, for themselves and on behalf
of the Settlement Class acknowledge that members of the Settlement Class may
discover facts in addition to or different from those that they now know or
believe to be

 

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true with respect to the subject matter of this release, but that it is their
intention, as Plaintiffs and on behalf of the Settlement Class to fully, finally
and forever settle and release any and all claims released hereby known or
unknown, suspected or unsuspected, which now exist, or heretofore existed, or
may hereafter exist, and without regard to the subsequent discovery or existence
of such additional or different facts. Plaintiffs and Defendants acknowledge,
and the members of the Settlement Class shall be deemed by operation of the
entry of a final order and judgment approving the Settlement to have
acknowledged, that the foregoing waiver was separately bargained for and is a
key element of the Settlement of which this release is a part.

9. If any action is filed in state or federal court asserting claims that are
related to the subject matter of the Actions prior to final court approval of
the proposed Settlement, plaintiffs shall cooperate with the defendants in
obtaining the dismissal or withdrawal of such related litigation, including
where appropriate joining in any motion to dismiss such litigation.

10. This Memorandum will be executed by counsel for the parties to the Actions,
each of whom represents and warrants that they have the authority from their
client(s) to enter into this Memorandum and bind their clients thereto, that
plaintiffs are the only holders and owners of their claims and causes of action
asserted in the Actions, and that none of plaintiffs’ claims or causes of action
referred to in any complaint in the Actions or this Memorandum have been
assigned, encumbered or in any manner transferred in whole or in part.

11. This Memorandum, the Stipulation and the Settlement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to Pennsylvania’s principles governing choice of law. The parties
agree that any dispute arising out of or relating in any way to this Memorandum,
the Stipulation or the Settlement shall not be

 

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litigated or otherwise pursued in any forum or venue other than this Court, and
the parties expressly waive any right to demand a jury trial as to any such
dispute.

12. This Memorandum may be modified or amended only by a writing, signed by all
of the signatories hereto, that refers specifically to this Memorandum.

13. The provisions contained in this Memorandum shall not be deemed a
presumption, concession or admission by any Defendant of any fault, liability or
wrongdoing as to any facts or claims that have been or might be alleged or
asserted in the Actions, or any other action or proceeding that has been, will
be, or could be brought, and shall not be interpreted, construed, deemed,
invoked, offered, or received in evidence or otherwise used by any person in the
Actions, or in any other action or proceeding, whether civil, criminal or
administrative, for any purpose other than as provided expressly herein.

14. This Memorandum shall be binding upon and inure to the benefit of the
parties and their respective agents, executors, heirs, successors and assigns.

15. Following the negotiation of all other terms of the Settlement set forth
herein, the parties began arms-length negotiations concerning the amount of
attorneys’ fees, costs, and expenses to be paid to Plaintiffs’ Counsel, subject
to the approval of the Court. Plaintiffs agree to seek an award of attorneys
fees, costs, and expenses in an amount not to exceed $400,000. PVG, on behalf of
itself and for the benefit of the other Defendants in the Actions, agrees to pay
such fees, costs and expenses as may be awarded by this Court up to the
foregoing amount, subject to the terms and conditions of this Memorandum, the
terms and conditions of the Stipulation contemplated hereby and final approval
of the Settlement by the Court. Any failure by the Court to approve the amount
of such fees shall not affect the validity of the Settlement. PVG or its
successor or insurer shall pay the fees and expenses award to plaintiffs’
counsel in the

 

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Action within ten (10) business days of the date on which the Court’s order
approving the settlement and dismissing the Actions with prejudice becomes
final. In the event that such order is reversed or modified on appeal,
Plaintiffs’ Counsel shall refund to Defendants the advanced amount and all
interest accrued or accumulated thereon. Except as provided herein, the Released
Persons shall bear no other expenses, costs, damages, or fees alleged or
incurred by the named plaintiff, by any member of the Class, or by any of their
attorneys, experts, advisors, agents or representatives.

16. The Parties will present the Settlement to the Court for hearing and
approval as soon as practicable following appropriate notice to the Class.
Defendants shall be responsible for providing notice of the Settlement to the
members of the Class. Defendants shall pay all costs and expenses incurred in
providing notice of the Settlement to the members of the Class, with the
understanding that notice shall be effected by mail unless otherwise provided by
law.

17. The “Effective Date” of the settlement of the Actions shall be the date on
which the Order of the Court approving the settlement of the Actions becomes
final and no longer subject to further appeal or review, whether by exhaustion
of any possible appeal, writ of certiorari, lapse of time or otherwise.

18. This Memorandum may be executed in any number of actual or telecopied
counterparts and by each of the different parties on several counterparts, each
of which when so executed and delivered will be an original. The executed
signature page(s) from each actual or telecopied counterpart may be joined
together and attached and will constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the parties have executed this Memorandum effective as of
the date set forth below.

Dated: February 1, 2011

 

OF COUNSEL:    RYAN & MANISKAS, LLP ROBBINS GELLER RUDMAN & DOWD      LLP     
Darren J. Robbins    By  

        /s/ Richard A. Maniskas

Randall J. Baron          Katharine M. Ryan (PA Bar I.D. 42184) A. Rick Atwood,
Jr.          Richard A. Maniskas (PA Bar I.D. 85942) David T. Wissbroecker     
    995 Old Eagle School Road, Suite 311 David A. Knotts          Wayne, PA
19087 Eun Jin Lee          (484) 588-5516 655 West Broadway, Suite 1900      San
Diego, CA 92101          Attorneys for Plaintiff (619) 231-1058          Kevin
Epoch, Individually and on          Behalf of All Others Similarly Situated THE
BRISCOE LAW FIRM, PLLC      Willie C. Briscoe      8117 Preston Road, Suite 300
     Dallas, TX 75225      (214) 706-9314      POWERS TAYLOR LLP      Patrick W.
Powers      Campbell Centre II      8150 North Central Expressway, Suite 1575   
  Dallas, TX 75206      WOLF HALDENSTEIN ADLER      FREEMAN & HERZ, LLP     
Gregory M. Nespole      270 Madison Avenue      New York, NY 10016      (212)
545-4600     

 

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OF COUNSEL:    PRIBANIC & PRIBANIC LEVI & KORSINSKY LLP      Joseph Levi      30
Broad Street, 15th Floor    By  

        /s/ Vincent A. Coppola

New York, NY 10004          Vincent A. Coppola (PA Bar I.D. 50181) (212)
363-7500          513 Court Place          Pittsburgh, PA 15219          (412)
281-8844          Attorneys for Plaintiff          Anita Scheifele OF COUNSEL:
   DiORIO & SERENI, LLP PRICKETT, JONES & ELLIOTT, P.A.      James L. Holzman
(DE Bar I.D. 663)      1310 King Street, Box 1328    By  

        /s/ Mark A. Sereni

Wilmington, DE 19899          Mark A. Sereni (PA Bar I.D. 50090) (302) 888-6500
         Front & Plum Streets          Media, PA 19063          (610) 565-5700
         Attorneys for Defendants          Penn Virginia GP Holdings, L.P.,     
    PVG GP, LLC,          A. James Dearlove, Robert J. Hall,          John C.
Van Roden, Jr.,          Jonathan B. Weller OF COUNSEL:    ECKELL, SPARKS, LEVY,
AUERBACH,    MONTE, SLOANE, MATTHEWS & RICHARDS, LAYTON & FINGER, P.A.   
AUSLANDER, P.C. Srinivas M. Raju (DE Bar I.D. 3313)      One Rodney Square     
920 N. King Street    By  

        /s/ Patrick T. Henigan

Wilmington, DE 19801          Patrick T. Henigan (PA Bar I.D. 49448) (302)
651-7700          344 W. Front Street          Media, PA 19063          (610)
565-3700          Attorneys for Penn Virginia Resource          Partners, L.P.,
Penn Virginia Resources          GP, LLC, PVR Radnor, LLC

 

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OF COUNSEL:    SWARTZ CAMPBELL LLC PROCTOR HEYMAN LLP      Vernon R. Proctor (DE
Bar I.D. 1019)      1116 North West Street    By  

        /s/ Andrew J. Reilly

Wilmington, DE 19801          Andrew J. Reilly (PA Bar I.D. 55076) (302)
472-7301          115 North Jackson Street          Media, PA 19063     
    (610) 566-9222          Attorneys for William H. Shea, Jr.

 

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EXHIBIT A

In connection with the proposed settlement of the litigation, the Partnership
and Holdings agreed to supplement the following disclosures in the joint proxy
statement/prospectus (new text is underlined, and deleted text is stricken
through, other than the revised tables set forth in paragraphs 13 through 17
below):

1. The disclosure in the first full paragraph on page 12 of the joint proxy
statement/prospectus under the heading “Summary—Interests of Certain Persons in
the Merger” is revised as follows:

Senior management of the Partnership GP and Holdings GP prepared certain
projections with respect to the Partnership’s and Holdings’ future financial and
operating performance on a stand-alone basis. These projections were provided to
TudorPickering and Credit Suisse for use in connection with the preparation of
their opinions to the Partnership Conflicts Committee and the Holdings Conflicts
Committee, respectively, and related financial advisory services. Please read
“Special Factors—Certain Financial Projections Prepared by Management.”

2. The disclosure in the last paragraph on page 27 of the joint proxy
statement/prospectus under the heading “Risk Factors—Risks Related to the Merger
and Related Matters” is revised as follows:

Senior management of the Partnership GP and Holdings GP prepared certain
projections with respect to the Partnership’s and Holdings’ future financial and
operating performance on a stand-alone basis. These projections were provided to
TudorPickering and Credit Suisse for use in connection with the preparation of
their opinions to the Partnership Conflicts Committee and the Holdings Conflicts
Committee, respectively, and related financial advisory services. Please read
“Special Factors—Certain Financial Projections Prepared by Management.”

3. The disclosure in the last paragraph beginning on page 30 of the joint proxy
statement/prospectus under the heading “Risk Factors—Tax Risks Related to the
Merger” is revised as follows:

The U.S. federal income tax consequences of the merger depend on determinations
of fact and interpretations of complex provisions of U.S. federal income tax
law. The U.S. federal income tax rules are constantly under review by persons
involved in the legislative process, the IRS and the U.S. Treasury Department,
frequently resulting in revised interpretations of established concepts,
statutory changes, revisions to Treasury Regulations and other modifications and
interpretations. Any modification to the U.S. federal income tax laws or
interpretations thereof may or may not be applied retroactively and could change
the U.S. federal income tax treatment of the merger to Partnership unitholders
and Holdings unitholders. For example, in 2010 the U.S. House of Representatives
passed legislation relating to the taxation of “carried interests” that would
have treated transactions, such as the merger, occurring on or after an
effective date of January 1, 2011, as a taxable exchange to a unitholder of a
partnership such as Holdings. The U.S. Senate considered legislation during 2010
that would have had a similar effect.

 

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However, neither the legislation passed by the U.S. House of Representatives nor
the legislation considered by the Senate regarding “carried interests” was
enacted into law during 2010. The Partnership and Holdings are unable to predict
whether this proposed legislation or any other proposals will ultimately be
enacted, and if so, whether any such proposed legislation would be applied
retroactively.

4. The disclosure in the third full paragraph on page 36 of the joint proxy
statement/prospectus under the heading “Special Factors—Background of the
Merger” is revised as follows:

On August 2, 2010, the Holdings Conflicts Committee with representatives of
Prickett Jones and Akin Gump in attendance, met to review elements of the
proposed transaction and to interview Credit Suisse for the role of financial
advisor to the Holdings Conflicts Committee. Following the interview, the
Holding Conflicts Committee and legal counsel discussed the presentations,
experience and capabilities of the two financial advisors under consideration,
and the Holdings Conflicts Committee decided to engage Credit Suisse as its
financial advisor. Representatives of Credit Suisse were then invited to return
to the meeting, and the Holdings Conflicts Committee, with the assistance of its
legal counsel and financial advisor, then reviewed and discussed the terms of
the Partnership Conflicts Committee’s proposal on behalf of the Partnership and
discussed potential next steps with respect to the proposed transaction, as well
as tax matters and certain pending tax legislation. The representatives of
Credit Suisse then excused themselves from the meeting. Following the departure
of Credit Suisse, the members of the Holdings Conflicts Committee discussed
whether the Holdings Conflicts Committee should consider and analyze alternative
transactions, including other forms of restructuring the Partnership’s equity
capital (including eliminating only a portion of the IDRs, resetting the IDR
thresholds and/or periodically waiving portions of the IDR payments), a possible
sale or merger with a third party or other strategic alternatives. Among other
things, they discussed (i) the fact that the Holdings Board authorized the
Holdings Conflicts Committee to consider only the proposed transaction, (ii) the
possibility of the Holdings Conflict Committee seeking broader authority from
the Holdings Board, (iii) the fact that Penn Virginia Corporation had engaged in
an unsuccessful sales process in 2009 to sell its majority interest in Holdings,
and (iv) the importance of concluding the process of analyzing the proposed
and/or any alternative transaction as soon as reasonably practical to avoid any
adverse consequences that might result from passage of certain proposed tax
legislation as well as distractions and uncertainties often associated with
prolonged merger negotiations. After further discussion and deliberations, the
Holdings Conflicts Committee determined that, unless circumstances changed, it
would be in the best interest of Holdings and its unaffiliated unitholders for
the Holdings Conflicts Committee to consider only the proposed transaction,
subject to the need of the members of the Holdings Conflicts Committee to abide
by their fiduciary duties in the event of a third party bid for Holdings.

5. The disclosure in the second full paragraph on page 40 of the joint proxy
statement/prospectus under the heading “Special Factors—Background of the
Merger” is revised as follows:

 

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On September 2, 2010, the Holdings Conflicts Committee, with representatives of
Credit Suisse, Prickett Jones and Akin Gump in attendance, met telephonically to
discuss the status of negotiations. After discussions, the committee authorized
the chairman of the Holdings Conflicts Committee to have another meeting with
the chairman of the Partnership Conflicts Committee and authorized the chairman
of the Holdings Conflicts Committee to negotiate further and reach a compromise
(if possible), which could not be below a 0.98 exchange ratio. Prior to
authorizing its negotiating approach, the Holdings Conflicts Committee
considered alternative negotiating strategies (including potential counteroffers
from the Partnership Conflicts Committee) and discussed with representatives of
Credit Suisse an implied exchange ratio analysis and various other metrics with
respect to a 0.98 exchange ratio and that a 0.98 exchange ratio constituted the
midpoint between the pending Partnership Conflicts Committee proposal of 0.96
exchange ratio and the Holdings Conflicts Committee most recent counteroffer for
a 1.0 exchange ratio.

6. The disclosure in the last paragraph beginning on page 54 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

In connection with the proposed merger, management of the Partnership GP and
Holdings GP prepared projections for the Partnership and Holdings on a
stand-alone basis. Management initially prepared these projections, which we
refer to as the “initial projections,” based on existing operations and
specifically identified growth capital expenditures. Management subsequently
revised its projections to, among other things, reflect incremental EBITDA from
identified growth capital expenditures in 2013 and 2014, maintenance capital and
reserve replacement expenditure projections and to include certain adjustments
for phantom equity units. The initial projections, as revised, which we refer to
as the “revised projections,” were approved by management for use by
TudorPickering and Credit Suisse in connection with the preparation of their
opinions to the Partnership Conflicts Committee and the Holdings Conflicts
Committee, respectively. The revised projections were discussed by Credit Suisse
with the Holdings Conflicts Committee and by TudorPickering with the Partnership
Conflicts Committee. There have been no material changes in the Partnership’s or
Holding’s operations or performance or in any of the projections or assumptions
upon which they are based since the delivery of the opinions of Credit Suisse on
September 20, 2010, and TudorPickering on September 21, 2010, and no such
material changes are currently anticipated to occur before the special meetings
of Holdings or the Partnership. The summary of the revised projections set forth
below is included in this joint proxy statement/prospectus only because the
revised projections were approved by management for use by the respective
conflicts committees’ financial advisors and reviewed with the Partnership
Conflicts Committee and the Holdings Conflicts Committee in connection with the
merger.

 

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MEMORANDUM OF UNDERSTANDING

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7. The disclosure in the last paragraph beginning on page 55 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

The internal financial forecasts of the Partnership and Holdings upon which the
projections are based are, in general, prepared solely for internal use to
assist in various management decisions, including with respect to capital
budgeting. Such internal financial forecasts are inherently subjective in
nature, susceptible to interpretation and accordingly such forecasts may not be
achieved. The internal financial forecasts also reflect numerous assumptions
made by management, including material assumptions that may not be realized and
are subject to significant uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of the preparing
party. Accordingly, there can be no assurance that the assumptions made in
preparing the internal financial forecasts upon which the projections are based
will prove accurate. There will be differences between actual and forecasted
results, and the differences may be material. The risk that these uncertainties
and contingencies could cause the assumptions to fail to be reflective of actual
results is further increased due to the length of time in the future over which
these assumptions apply. The assumptions in early periods have a compounding
effect on the projections shown for the later periods. Thus, any failure of an
assumption to be reflective of actual results in an early period would have a
greater effect on the projected results failing to be reflective of actual
events in later periods. You should consider the risks identified in the
Partnership’s and Holdings’ most recent Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, which are incorporated by reference into this
joint proxy statement/prospectus, and the matters discussed elsewhere in this
joint proxy statement/prospectus under “Forward-Looking Statements.”

8. The disclosure in the first full paragraph on page 56 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

In developing the projections, management of the Partnership GP and Holdings GP
made numerous material assumptions with respect to the Partnership and Holdings,
including:

 

  •  

organic growth and acquisition opportunities and the amounts and timing of
related costs and potential economic returns;

 

  •  

the availability and cost of capital;

 

  •  

the cash flow from existing assets and business activities, including
assumptions related to royalty coal tonnage in the Partnership’s coal and
natural resources management segment and throughput volumes in the Partnership’s
midstream segment;

 

  •  

the commodity prices of natural gas, crude oil and composite NGLs, and the
impact they have on the Partnership’s commodity related activities in its
midstream segment; and

 

  •  

other general business, market and financial assumptions.

 

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MEMORANDUM OF UNDERSTANDING

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9. The disclosure in the third full paragraph on page 56 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

Among other financial information, management of the Partnership GP and Holdings
GP prepared management projections of distributable cash flow of the
Partnership, distributions to Holdings, and distributed cash flow of Holdings.
The revised projections for the Partnership and Holdings were prepared based on
the assumption that the Partnership would invest approximately $325 million on
identified growth capital expenditures from 2010 through 2014. In addition, the
revised projections were based on assumed annual maintenance capital
expenditures by the Partnership in 2011 through 2014 in the range of $14 to $15
million and also assumed $24 million in annual reserve replacement capital by
the Partnership in 2011 through 2014. The reduction in distributable cash flow
due to the assumption of such annual reserve replacement capital has been offset
by a reduction in management’s targeted cash distribution coverage ratio from
approximately 1.20x to 1.05x.

10. The disclosure in the fourth full paragraph on page 56 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

The initial projections were initially provided to the Partnership Conflicts
Committee in July 2010 and to the Holdings Conflicts Committee in August 2010.
The revised projections were provided to both conflicts committees’ financial
advisors in September 2010. The revised projections were based on management
assumptions as of the dates of their preparation and have not been updated since
that time. Distributable cash flow of the Partnership, distributions to
Holdings, and distributed cash flow of Holdings as set forth in the table below
may not be indicative of distributable cash flow, distributions or distributed
cash flow generated in the future.

11. The disclosure in the table on page 56 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

Revised Projections (1)

 

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MEMORANDUM OF UNDERSTANDING

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     2011E      2012E      2013E      2014E       
($ in millions, except per unit amounts)  

Partnership Distributable Cash Flow

   $ 146       $ 155       $ 161       $ 160   

Partnership Distributable Cash Flow per Partnership Common Unit

   $ 2.08       $ 2.17       $ 2.23       $ 2.22   

Distributions to Holdings on GP/IDR Interests

   $ 34       $ 38       $ 40       $ 40                                       

Distributions to Holdings on Partnership Common Units

   $ 40       $ 41       $ 42       $ 42                                       

Total Distributions Received by Holdings

   $ 73       $ 79       $ 82       $ 82                                       

Holdings Distributed Cash Flow

   $ 71       $ 77       $ 80       $ 80                                       

Distributed Cash Flow per Holdings Common Unit

   $ 1.81       $ 1.97       $ 2.04       $ 2.04                              
        

 

(1) Projections of distributable cash flow of the Partnership, distributions to
Holdings, and distributed cash flow of Holdings are after assumed reserve
replacement capital, as well as assumed annual maintenance capital expenditures,
for each of the projection periods presented, but they do not include the
projected unidentified acquisitions.

12. The disclosure in the first full paragraph on page 57 of the joint proxy
statement/prospectus under the heading “Special Factors—Certain Financial
Projections Prepared by Management” is revised as follows:

In order to show the potential impact on the revised projections of the
projected unidentified acquisitions, we have included below additional
projections prepared by management after approval of the merger agreement by the
parties that adjusts the revised projections set forth above respecting
distributable cash flow of the Partnership to reflect the inclusion of the
projected unidentified acquisitions. The preparation of the additional
projections set forth below requires various other assumptions in addition to
assuming an average of $100 million annually in unidentified acquisitions
through 2014 at purchase prices reflecting an 8.5x EBITDA multiple, financed
with approximately equal amounts of debt and equity. The summary of the
distributable cash flow of the Partnership below may not be indicative of its
distributable cash flow in the future.

13. The disclosure in the last full paragraph on page 70 of the joint proxy
statement/prospectus under the heading “Special Factors—Opinion of Credit Suisse
Securities (USA) LLC—Financial Advisor to the Holdings Conflicts
Committee—Selected Companies Analysis—the Partnership” is revised as follows:

With respect to selected companies analysis for the Partnership, the selected
coal company master limited partnerships with publicly traded equity securities
and associated financial data reviewed were:

 

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MEMORANDUM OF UNDERSTANDING

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     LP Distributed Yield (%)        Current     2010E     2011E  

Alliance Resource Partners, L.P.

     5.4 %      5.5 %      6.1 %                          

Natural Resource Partners L.P.

     8.0 %      8.0 %      8.3 %                          

Oxford Resource Partners, LP

     9.2 %      9.2 %      NA                            

14. The disclosure in the second full paragraph on page 71 of the joint proxy
statement/prospectus under the heading “Special Factors—Opinion of Credit Suisse
Securities (USA) LLC—Financial Advisor to the Holdings Conflicts
Committee—Selected Companies Analysis—the Partnership” is revised as follows:

With respect to selected companies analysis for the Partnership, the selected
midstream company master limited partnerships with publicly traded equity
securities and associated financial data reviewed were:

 

     LP Distributed Yield (%)        Current     2010E     2011E  

Regency Energy Partners LP

     7.4 %      7.4 %      7.7 %                          

MarkWest Energy Partners, L.P.

     7.5 %      7.5 %      7.8 %                          

Targa Resources Partners LP

     7.7 %      7.8 %      8.3 %                          

Copano Energy, L.L.C.

     9.0 %      9.0 %      9.0 %                          

DCP Midstream Partners, LP

     7.4 %      7.4 %      7.8 %                          

Western Gas Partners, LP

     5.5 %      5.5 %      6.2 %                          

Atlas Pipeline Partners, L.P.

     NM (1)      NM        NM                            

Crosstex Energy, L.P.

     NM        NM        NM                            

Quicksilver Gas Services LP

     6.9 %      6.8 %      7.5 %                          

 

(1)

NM means “not meaningful”

15. The disclosure in the second full paragraph on page 72 of the joint proxy
statement/prospectus under the heading “Special Factors—Opinion of Credit Suisse
Securities (USA) LLC—Financial Advisor to the Holdings Conflicts
Committee—Selected Companies Analysis—Holdings” is revised as follows:

With respect to selected companies analysis for Holdings, the selected limited
partnerships with publicly traded equity securities and associated financial
data reviewed were:

 

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MEMORANDUM OF UNDERSTANDING

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     Implied GP only Enterprise
Value as a multiple of GP
only Distributed Cash Flow(1)      Current yield
spread to MLP
(bps)        Current     2010E      2011E      Total      GP
Only  

Energy Transfer Equity, L.P.

     17.4x        17.4x         16.5x         155         246                  
                            

Alliance Holdings GP, L.P.

     22.9        22.7         18.7         72         109                       
                       

NuStar GP Holdings, LLC

     20.4        20.0         18.9         136         227                    
                          

Crosstex Energy, Inc.

     NM (2)      NM         NM         NM         NM                           
                   

Atlas Pipeline Holdings, L.P.

     NM        NM         NM         NM         NM                             
                 

Holdings at closing price on 9/17/10

     15.5        15.5         11.9         56         127                       
                       

Holdings at proposed exchange ratio

     19.0        19.0         14.5         117         240                    
                          

 

(1)

Implied value of GP interest (enterprise value less market value of LP units)
divided by GP only cash flow net of assumed G&A.

(2)

NM means “not meaningful”

16. The disclosure in the third full paragraph on page 72 of the joint proxy
statement/prospectus under the heading “Special Factors—Opinion of Credit Suisse
Securities (USA) LLC—Financial Advisor to the Holdings Conflicts
Committee—Selected Companies Analysis—Holdings” is revised as follows:

The selected companies analysis for Holdings did not include Enterprise GP
Holdings, L.P., Inergy Holdings, L.P. or Buckeye GP Holdings L.P. because those
partnerships were participants in recently announced transactions considered in
the selected transactions identified below. The selected companies analysis for
Holdings indicated the following high, low, mean and median multiples for the
selected limited partnerships with publicly traded equity securities and for
Holdings, as well as the following current yield to master limited partnership
(total and general partner only):

 

Multiple Description

   High      Low      Mean      Median      Implied
Multiples
for
Holdings
Based
on
Closing
Price on
9/17/10      Implied
Multiples
for
Holdings
Based on
Proposed
Exchange
Ratio  

Implied GP only Enterprise Value as a multiple of GP only Distributed Cash Flow

                 

Current

     22.9x         17.4x         20.2x         20.4x         15.5x         19.0x
  

2010E

     22.7x         17.4x         20.0x         20.0x         15.5x         19.0x
  

2011E

     18.9x         16.5x         18.0x         18.7x         11.9x         14.5x
  

Current yield spread to Master Limited Partnership (bps)

                 

Total

     155         72         121         136         56         117            
                                            

GP only

     246         109         194         227         127         240            
                                            

 

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MEMORANDUM OF UNDERSTANDING

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17. The disclosure in the first full paragraph on page 74 of the joint proxy
statement/prospectus under the heading “Special Factors—Opinion of Credit Suisse
Securities (USA) LLC—Financial Advisor to the Holdings Conflicts
Committee—Selected Transactions Analysis” is replaced as follows:

The selected transactions analysis indicated the following:

 

     GP IDR Tiers and
Cash Flows     Implied GP
only
multiple(1)      Current
yield spread
to MLP
(bps)  

Selected Transactions:

   Current
IDR tier     Highest
IDR
tier     Current
cash
flow to
GP     Current      FY+1      Total      GP
only  

Enterprise Products Partners, L.P./ Enterprise GP Holdings L.P.

     25 %      25 %      15 %      27.0x         23.0x         210         264
                                                              

Inergy, L.P./ Inergy Holdings, L.P.

     49 %      49 %      28 %      26.8         22.0         243         271   
                                                           

Crestwood Midstream Partners II, LLC/ Quicksilver Gas Services GP LLC

     15 %      50 %      6 %      96.8         77.9         332         685   
                                                           

Buckeye Partners, L.P./ Buckeye GP Holdings L.P.

     30 %      30 %      21 %      23.8         23.3         234         235   
                                                           

Energy Transfer Equity, L.P./ Regency Energy Partners LP

     25 %      50 %      4 %      47.6         44.6         623         623   
                                                           

Magellan Midstream Partners, L.P./ Magellan Midstream Holdings, L.P.

     50 %      50 %      33 %      12.8         12.1         197         197   
                                                           

MarkWest Energy Partners, L.P./ MarkWest Hydrocarbon, Inc.

     50 %      50 %      26 %      19.5         14.4         115         NM (2) 
                                                           

Enterprise GP Holdings L.P./ TEPPCO Partners, L.P.

     25 %      25 %      16 %      18.1         17.6         42         52      
                                                        

ArcLight Capital Partners, LLC/Kelso & Company/Lehman Brothers Holdings Inc./
Buckeye GP Holdings L.P. (61.9% interest)

     30 %      30 %      19 %      24.6         19.4         232         233   
                                                           

 

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MEMORANDUM OF UNDERSTANDING

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Energy Transfer Equity, L.P./ Energy Transfer Partners, L.P. (50% interest)

     50 %      50 %      34 %      23.7         17.6         192         192   
                                                           

Plains All American Pipeline, L.P./ Pacific Energy Partners, L.P.

     15 %      50 %      3 %      NM         NM         323         623        
                                                      

EPCO, Inc./ TEPPCO Partners, L.P.

     50 %      50 %      29 %      16.3         15.7         17         17      
                                                        

EPCO, Inc./ Enterprise Products Partners L.P.

     25 %      50 %      10 %      13.1         10.6         NM         NM      
                                                        

Valero L.P./ Kaneb Services LLC

     30 %      30 %      10 %      32.8         29.2         217         422   
                                                           

Lehman Brothers/ Pacific Energy Partners, L.P.

     2 %      50 %      2 %      32.5         31.4         63         406      
                                                        

ONEOK, Inc./ Northern Border Partners, L.P. (82.5% interest)

     25 %      50 %      7 %      16.8         16.8         164         187   
                                                           

Carlyle/Riverstone Global Energy and Power Fund II, L.P./ Buckeye Partners, L.P.

     30 %      30 %      16 %      16.2         16.8         4         5        
                                                      

Mean

     31 %      42 %      16 %      28.0x         24.5x         200         294
                                                              

Median

     30 %      50 %      16 %      23.8         18.5         203         235   
                                                           

High

     50 %      50 %      34 %      96.8         77.9         623         685   
                                                           

Low

     2 %      25 %      2 %      12.8         10.6         4         5          
                                                    

Implied Multiples for Holdings Based on Proposed Exchange Ratio

     50 %      50 %      21 %      19.0x         14.5x         117         240
                                                              

 

(1)

Equal to transaction value less market value of LP units owned by the GP divided
by the GP only distribution.

(2)

NM means “not meaningful”

 

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MEMORANDUM OF UNDERSTANDING