ex_10-5.htm


    Exhibit
10.5

     

     

     

    
      SECTION
409A COMPLIANCE AMENDMENT

       

      TO

       

      EMPLOYMENT
AGREEMENT

       

      WHEREAS, Legacy Reserves
Services, Inc. (the “Employer”), William M. Morris (the “Employee”) and Legacy
Reserves GP, LLC (the “Company”) entered into that certain Employment Agreement
(the “Agreement”); and

       

      WHEREAS, the parties desire to
amend the Agreement to comply with Code Section 409A and regulations issued
thereunder;

       

      NOW, THEREFORE, the Agreement
is hereby amended by this Section 409A Compliance Amendment thereto, effective
as of the original effective date of the Agreement, as follows:

       

      1.          Section
6.1 of the Agreement shall be amended and restated to provide as
follows:

       

      “6.1           Death.  If
the Employee’s employment under this Agreement is terminated by reason of his
death, the Employer will pay to the person or persons designated by the Employee
for that purpose in a notice filed with the Employer, or, if no such person will
have been so designated, to his estate, within thirty (30) days following the
Termination Date, the amount of (a) the Employee’s accrued but unpaid Base
Salary through the Termination Date paid in a lump sum, (b) any accrued but
unpaid Bonus paid in a lump sum, (c) a pro rata portion of any Bonus for the
fiscal year in which the Termination Date occurs, paid in a lump sum, determined
by multiplying the Employee’s target Bonus for such period by a fraction, the
numerator of which is the number of days from the first day of the fiscal year
of the Company in which such termination occurs through and including the
Termination Date and the denominator of which is 365 (“Pro Rata Bonus”), and
(d) any other amounts that may be reimbursable by the Employer to the
Employee as expressly provided under this Agreement paid in a lump sum, and the
Employer thereafter will have no further obligation to the Employee under this
Agreement, other than for payment of any amounts accrued and vested under any
employee benefit plans or programs of the Related Parties and any payments or
benefits required to be made or provided under applicable
law.  Without limiting the generality of the foregoing, any rights the
Employee’s beneficiary(ies) may have to the proceeds of any life insurance
arrangement set forth in Section 4.3 will be
in lieu of any special entitlement to severance pay or benefits upon the
Employee’s death.”

       

      2.          Section
6.2 of the Agreement shall be amended and restated to provide as
follows:

       

                “6.2             Disability.  In
the event of the Employee’s termination by reason of Disability pursuant to
Section 5.5,
the Employee will continue to receive his Base Salary and participate in
applicable employee benefit plans or programs of the Related Parties (on an
equivalent basis to Section 6.4(a)(iv)
below) through the Termination Date, subject to offset dollar-for-dollar by the
amount of any disability income payments provided to the Employee under any
disability policy or program funded by any of the Related Parties, and will
receive within thirty (30) days following the Termination Date (a) the
Employee’s accrued but unpaid Base Salary through the Termination Date paid in a
lump sum, (b) any accrued but unpaid Bonus paid in a lump sum, (c) the
Employee’s Pro-Rata Bonus paid in a lump sum, and (d) any other amounts that may
be reimbursable by the Employer to the Employee as expressly provided under this
Agreement paid in a lump sum, and the Employer thereafter will have no further
obligation to the Employee under this Agreement, other than for payment of any
amounts accrued and vested under any employee benefit plans or programs of the
Related Parties and any payments or benefits required to be made or provided
under applicable law.”

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.          Section
6.3 of the Agreement shall be amended and restated to provide as
follows:

       

      “6.3             By the Employer for Cause or
the Employee Without Good Reason.  If the Employee’s employment
is terminated by the Employer for Cause, or if the Employee terminates his
employment other than for Good Reason, the Employee will receive within thirty
(30) days following the Termination Date (a) the Employee’s accrued but
unpaid Base Salary through the Termination Date paid in a lump sum, (b) any
accrued but unpaid Bonus paid in a lump sum, and (c) any other amounts that
may be reimbursable by the Employer to the Employee as expressly provided under
this Agreement paid in a lump sum, and the Employer thereafter will have no
further obligation to the Employee under this Agreement, other than for payment
of any amounts accrued and vested under any employee benefit plans or programs
of the Related Parties and any payments or benefits required to be made or
provided under applicable law.”

       

      4.          Section
6.4(a)(i) of the Agreement shall be amended and restated to provide as
follows:

       

      “(i)             an
amount equal to (a) the Employee’s accrued but unpaid Base Salary through the
Termination Date paid in a lump sum within thirty (30) days following the
Termination Date, (b) any accrued but unpaid Bonus paid in a lump sum within
thirty (30) days following the Termination Date, and (c) any other amounts that
may be reimbursable by the Employer to the Employee as expressly provided under
this Agreement paid in a lump sum within thirty (30) days following the
Termination Date;”

       

      5.          Section
6.4(a)(iii) of the Agreement shall be amended and restated to provide as
follows:

       

      “(iii)             a
cash amount equal to the Employee’s Pro-Rata Bonus for the fiscal year in which
the Termination Date occurs, paid in a lump sum within thirty (30) days
following the Termination Date; and”

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.          Section
6.7(a) of the Agreement shall be amended and restated to provide as
follows:

       

      “(a)             subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the “Code”), (such excise tax referred to in this Agreement as the
“Excise Tax”), then the Employee shall be entitled to receive an additional
payment or payments (collectively, a “Gross-Up Payment”).  The
Gross-Up Payment will be in an amount such that, after payment by the Employee
of all taxes, including any income tax or Excise Tax imposed on the Gross-Up
Payment, the Employee retains an amount equal to the Payment before any Excise
Tax is imposed.  Any Gross-Up Payment shall be due and payable to the
Employee within thirty (30) days after remittance by the Employee of the Excise
Tax to the Internal Revenue Service and the submission to the Company of
appropriate documentation of such remittance as may be required by the
Company.  To the extent Employee incurs any interest or penalties with
respect to such Excise Tax (other than interest and penalties due to Employee’s
failure to timely make any applicable election, file a tax return or pay taxes
shown on his return) (the “Expenses”), then the Company shall reimburse Employee
for such Expenses within thirty (30) days after Employee incurs such
Expenses.  This reimbursement obligation shall remain in effect during
the applicable statute of limitations applicable to any such Expenses, and the
amount of Expenses eligible for reimbursement during any taxable year of
Employee will not affect the amount of Expenses eligible for reimbursement in
any other taxable year of Employee.  This right to reimbursement is
not subject to liquidation or exchange for another benefit.  To the
extent the reimbursement by the Company of any Expenses is taxable to Employee,
such taxable amount shall be subject to a Gross-Up Payment by the Company as
provided herein.”

       

      7.          Section
7.8(b) of the Agreement shall be amended and restated to provide as
follows:

       

      “(b)             Right of
Set-Off.  The Employee consents to a deduction from any amounts
the Employer owes the Employee from time to time, to the extent permitted by
Section 409A of the Code and the regulations thereunder or otherwise, (including
amounts owed as wages or other compensation, fringe benefits, or vacation pay,
as well as any other amounts owed to the Employee by the Employer), to the
extent of the amounts the Employee owes the Employer under Section 7.8(a)
above.  Whether or not the Employer elects to make any set-off in
whole or in part, if the Employer does not recover by means of set-off the full
amount the Employee owes, calculated as set forth above, the Employee agrees to
pay immediately the unpaid balance to the Employer.  In the discretion
of the Board, reasonable interest may be assessed on the amounts owed,
calculated from the later of (i) the date the Employee engages in the prohibited
activity and (ii) the applicable date of exercise, payment or
delivery.”

       

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.          A
new Section 6.8 shall be added to the Agreement to provide as
follows:

       

      “6.8             Section 409A Limits on
Payments to Specified Employees.  Notwithstanding any other
provision of the Agreement to the contrary, if Employee is a “specified
employee,” as defined in Section 409A of the Code, except to the extent
permitted under Section 409A of the Code, no benefit or payment that is subject
to Section 409A of the Code (after taking into account all applicable exceptions
to Section 409A of the Code, including but not limited to the exceptions for
short-term deferrals and for “separation pay only upon an involuntary separation
from service”) shall be made under this Agreement on account of Employee’s
“separation from service,” as defined in Section 409A of the Code, until the
later of the date prescribed for payment in this Agreement and the 1st day of
the 7th calendar month that begins after the date of Employee’s separation from
service (or, if earlier, the date of death of Employee).  Any such
benefit or payment payable pursuant to this Agreement within the period
described in the immediately preceding sentence will accrue and will be payable
in a lump sum cash payment, with interest at the prime rate as published in the
Wall Street Journal, on the payment date set forth in the immediately preceding
sentence.”

       

      9.          Except
as modified herein, the Agreement is specifically ratified and
affirmed.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      IN WITNESS WHEREOF, the
Employer, the Company and the Employee have executed this Section 409A
Compliance Amendment to the Agreement as of this 31st day of December,
2008, to be effective as herein provided.

       

      
        
          	 	LEGACY RESERVES SERVICES,
      INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Steven
      H. Pruett	 
	 	 	Steven
      H. Pruett	 
	 	 	President
      and Chief Financial Officer	 
	 	 	 	 


        

      

      
        
          	 	LEGACY RESERVES GP,
      LLC	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Steven
      H. Pruett	 
	 	 	Steven
      H. Pruett	 
	 	 	President
      and Chief Financial Officer	 
	 	 	 	 


        

      

      
        	 	EMPLOYEE	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ William
      M. Morris	 
	 	 	William
      M. Morris