Document:

exv10w5

Exhibit 10.5

FORM
OF MEMORIAL PRODUCTION PARTNERS LP

LONG TERM INCENTIVE PLAN

     Section 1. Purpose of the Plan. The Memorial Production Partners LP Long Term Incentive Plan (the “Plan”) has been adopted
by Memorial Production Partners GP LLC, a Delaware limited liability company (the “General
Partner”), the general partner of Memorial Production Partners LP, a Delaware limited partnership
(the “Partnership”). The Plan is intended to promote the interests of the General Partner, the
Partnership and their Affiliates by providing to Employees, Consultants and Directors incentive
compensation awards based on Units to encourage superior performance. The Plan is also
contemplated to enhance the ability of the General Partner, the Partnership and their Affiliates to
attract and retain the services of individuals who are essential for the growth and profitability
of the Partnership and to encourage them to devote their best efforts to advancing the business of
the Partnership.

     Section 2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below:

     (a) “Affiliate” means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is under common control
with, the Person in question. As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.

     (b) “Appointed MRD Directors” means members of the Board of Directors of MRD that were
appointed or nominated by any member or Affiliate of the NGP Group.

     (c) “Award” means an Option, Unit Appreciation Right, Restricted Unit, Phantom Unit,
Substitute Award, Unit Award or Other Unit Based Award granted under the Plan, and shall include
any tandem DERs granted with respect to an Award.

     (d) “Award Agreement” means the written or electronic agreement by which an Award shall be
evidenced.

     (e) “Board” means the Board of Directors of the General Partner.

     (f) “Change of Control” means, and shall be deemed to have occurred upon one or more of the
following events:

          (i) the Appointed MRD Directors do not constitute a majority of the Board of Directors of MRD;

          (ii) MRD, the NGP Group or any Affiliate of the NGP Group does not have the right to appoint
or nominate a majority of the Board;

          (iii) the members of the General Partner approve and implement, in one or a series of
transactions, a plan of complete liquidation of the General Partner;

 

 

          (iv) the sale or other disposition by the General Partner of all or substantially all of its
assets in one or more transactions to any Person other than the General Partner or an Affiliate of
the General Partner or the NGP Group; or

          (v) a Person other than the General Partner or an Affiliate of the General Partner or the NGP
Group becomes the general partner of the Partnership.

Notwithstanding the foregoing, with respect to an Award that is subject to Section 409A of the
Internal Revenue Code of 1986, as amended, “Change of Control” shall mean a “change of control
event” as defined in the regulations and guidance issued under Section 409A.

     (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     (h) “Committee” means the Board, the Compensation Committee of the Board or such other
committee as may be appointed by the Board to administer the Plan.

     (i) “Consultant” means an individual who renders consulting or advisory services to the
General Partner or an Affiliate thereof, other than a member of the NGP Group.

     (j) “DER” means a distribution equivalent right, being a contingent right, granted in tandem
with a specific Award (other than a Restricted Unit or Unit Award), to receive with respect to each
Unit subject to the Award an amount in cash equal to the cash distributions made by the Partnership
with respect to a Unit during the period such Award is outstanding.

     (k) “Director” means a member of the Board or the board of an Affiliate of the General Partner
who is not an Employee or a Consultant (other than in that individual’s capacity as a Director).

     (l) “Employee” means an employee of the General Partner or an Affiliate of the General
Partner, other than a member of the NGP Group.

     (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (n) “Fair Market Value” means, on any relevant date, the closing sales price of a Unit on the
principal national securities exchange or other market in which trading in Units occurs on the last
market trading day prior to the applicable day (or, if there is no trading in the Units on such
date, on the next preceding day on which there was trading) as reported in The Wall Street Journal
(or other reporting service approved by the Committee). If Units are not traded on a national
securities exchange or other market at the time a determination of Fair Market Value is required to
be made hereunder, the determination of Fair Market Value shall be made by the Committee in good
faith using a “reasonable application of a reasonable valuation method” within the meaning of
Treasury Regulation Section 1.409A-l(b)(5)(iv)(B).

     (o) “MRD” means Memorial Resource Development LLC.

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     (p) “NGP Group” shall mean Natural Gas Partners VIII, L.P., Natural Gas Partners IX, L.P., NGP
IX Offshore Holdings, L.P., NGP Energy Capital Management, LLC, and their respective Affiliates
(other than MRD, the Partnership, the General Partner and their respective subsidiaries) and their
Affiliate’s respective directors, officers, shareholders, members, managers, representatives of
management committees and employees (and members of their respective families and trusts for the
primary benefit of such family members).

     (q) “Option” means an option to purchase Units granted under the Plan.

     (r) “Other Unit Based Awards” means Awards granted to an Employee, Director or Consultant
pursuant to Section 6(e) hereof.

     (s) “Participant” means an Employee, Consultant or Director granted an Award under the Plan.

     (t) “Partnership IPO” means an initial public offering of the Partnership’s equity securities
that is registered under the Securities Act of 1933, as amended.

     (u) “Person” means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization, association, governmental agency or political
subdivision thereof or other entity.

     (v) “Phantom Unit” means a notional Unit granted under the Plan which upon vesting entitles
the Participant to receive a Unit or an amount of cash equal to the Fair Market Value of a Unit, as
determined by the Committee in its discretion.

     (w) “Restricted Period” means the period established by the Committee with respect to an Award
during which the Award remains subject to forfeiture and is either not exercisable by or payable to
the Participant, as the case may be.

     (x) “Restricted Unit” means a Unit granted under the Plan that is subject to a Restricted
Period.

     (y) “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act or any
successor rule or regulation thereto as in effect from time to time.

     (z) “SEC” means the Securities and Exchange Commission, or any successor thereto.

     (aa) “Substitute Award” means an award granted pursuant to Section 6(g) of the Plan.

     (bb) “UDR” means a distribution made by the Partnership with respect to a Restricted Unit.

     (cc) “Unit” means a common unit of the Partnership.

     (dd) “Unit Appreciation Right” means a contingent right granted to a Participant pursuant to
Section 6(b) that entitles the holder to receive, in cash or Units, as determined by the Committee
in its sole discretion, an amount equal to the excess of the Fair Market Value of a

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Unit on the
exercise date of the Unit Appreciation Right (or another specified date) over the exercise price of
the Unit Appreciation Right.

     (ee) “Unit Award” means an award granted pursuant to Section 6(d) of the Plan.

     Section 3. Administration.

     (a) Authority of the Committee. The Plan shall be administered by the Committee. A
majority of the Committee shall constitute a quorum, and the acts of a majority of the members of
the Committee who are present at any meeting thereof at which a quorum is present, or acts
unanimously approved by the members of the Committee in writing, shall be the acts of the
Committee. Subject to the following and any applicable law, the Committee, in its sole discretion,
may delegate any or all of its powers and duties under the Plan, including the power to grant
Awards under the Plan, to the Chief Executive Officer of the General Partner, subject to such
limitations on such delegated powers and duties as the Committee may impose, if any. Upon any such
delegation all references in the Plan to the “Committee”, other than in Section 7, shall be deemed
to include the Chief Executive Officer. Any such delegation shall not limit the Chief Executive
Officer’s right to receive Awards under the Plan; provided, however, the Chief
Executive Officer may not grant Awards to himself, a Director or any executive officer of the
General Partner or an Affiliate, or take any action with respect to any Award previously granted to
himself, a person who is an executive officer or a Director. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii)
determine the number of Units to be covered by Awards; (iv) determine the terms and conditions of
any Award; (v) determine whether, to what extent, and under what circumstances Awards may be
settled, exercised, canceled, or forfeited; (vi) interpret and administer the Plan and any
instrument or agreement relating to an Award made under the Plan; (vii) establish, amend, suspend,
or waive such rules and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (viii) make any other determination and take any other
action that the Committee deems necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan
or an Award Agreement in such manner and to such extent as the Committee deems necessary or
appropriate. Unless otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including, without limitation, the General Partner, the Partnership, any
Affiliate, any Participant, and any beneficiary of any Participant.

     (b) Limitation of Liability. The Committee and each member thereof shall be entitled
to, in good faith, rely or act upon any report or other information furnished to him or her by any
officer or employee of the General Partner, the Partnership or their Affiliates, the General
Partner’s or the Partnership’s legal counsel, independent auditors, consultants or any other
agents assisting in the administration of the Plan. Members of the Committee and any officer or
employee of the General Partner, the Partnership or any of their Affiliates acting at the direction
or on behalf of the Committee shall not be personally liable for any action or determination taken
or made in good faith with respect to this Plan, and shall, to the fullest extent permitted by law,

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be indemnified and held harmless by the General Partner with respect to any such action or
determination.

     Section 4. Units.

     (a) Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c),
the maximum number of Units that may be delivered with respect to Awards under the Plan shall be
(i) until and up to a Partnership IPO, 10% of the aggregate number of issued and outstanding Units
as of the date of the adoption of the Plan and (ii) from and after a Partnership IPO, that greater
number of Units (which will subsume and include all Units described in Section 4(a)(i), as adjusted
to give effect to any split in the Units effected in connection with a Partnership IPO) as is equal
to 10% of the aggregate number of common units and subordinated units that will be issued and
outstanding immediately following the closing of a Partnership IPO; provided,
however, that Units withheld from an Award to either satisfy the Partnership’s or any
Affiliate of the Partnership’s tax withholding obligations with respect to the Award or pay the
exercise price of an Award shall not be considered to be Units delivered under the Plan for this
purpose. If any Award is forfeited, cancelled, exercised, or otherwise terminates or expires
without the actual delivery of Units pursuant to such Award (the grant of Restricted Units is not a
delivery of Units for this purpose), the Units subject to such Award shall again be available for
Awards under the Plan (including Units not delivered in connection with the exercise of an Option
or Unit Appreciation Right). There shall not be any limitation on the number of Awards that may be
granted and paid in cash.

     (b) Sources of Units Deliverable Under Awards. Any Units delivered pursuant to an
Award shall consist, in whole or in part, of Units acquired in the open market, from any Affiliate,
the Partnership or any other Person, or any combination of the foregoing, as determined by the
Committee in its discretion.

     (c) Anti-dilution Adjustments. With respect to any “equity restructuring” event that
could result in an additional compensation expense to the General Partner or the Partnership
pursuant to the provisions of FASB Accounting Standards Codification, Topic 718 if adjustments to
Awards with respect to such event were discretionary, the Committee shall equitably adjust the
number and type of Units covered by each outstanding Award and the terms and conditions, including
the exercise price and performance criteria (if any), of such Award to equitably reflect such
restructuring event and shall adjust the number and type of Units (or other securities or property)
with respect to which Awards may be granted after such event. With respect to any other similar
event that would not result in an accounting charge under FASB Accounting Standards Codification,
Topic 718 if the adjustment to Awards with respect to such event were subject to discretionary
action, the Committee shall have complete discretion to adjust Awards in such manner as it deems
appropriate with respect to such other event.

     Section 5. Eligibility. Any Employee, Consultant or Director shall be eligible to be designated a Participant and
receive an Award under the Plan. Notwithstanding the foregoing, Employees, Consultants and
Directors that provide services to Affiliates that are not considered a single employer with the
Partnership under Code Section 414(b) or Code Section 414(c) shall not be eligible to receive
Awards which are subject to Code Section 409A until the Affiliate adopts this Plan as a
participating employer in accordance with Section 10.

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     Section 6. Awards.

     (a) Options. The Committee may grant Options which are intended to meet the
requirements of Treasury Regulation Section 1.409A-l(b)(5)(i)(A) only to Employees, Consultants or
Directors performing services for the Partnership or a corporation or other type of entity in a
chain of corporations or other entities in which each corporation or other entity has a
“controlling interest” in another corporation or entity in the chain, starting with the Partnership
and ending with the corporation or other entity for which the Employee, Consultant or Director
performs services. For purposes of this Section 6(a), “controlling interest” means (i) in the case
of a corporation, ownership of stock possessing at least 50% of total combined voting power of all
classes of stock of such corporation entitled to vote or at least 50% of the total value of shares
of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at
least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a
sole proprietorship, ownership of the sole proprietorship; or (iv) in the case of a trust or
estate, ownership of an actuarial interest (as defined in Treasury Regulation Section
1.414(c)-2(b)(2)(ii)) of at least 50% of such trust or estate. The Committee may grant Options
that are otherwise exempt from or compliant with Code Section 409A to any eligible Employee,
Consultant or Director. The Committee shall have the authority to determine the number of Units to
be covered by each Option, the purchase price therefor and the Restricted Period and other
conditions and limitations applicable to the exercise of the Option, including the following terms
and conditions and such additional terms and conditions, as the Committee shall determine, that are
not inconsistent with the provisions of the Plan.

          (i) Exercise Price. The exercise price per Unit purchasable under an Option shall be
determined by the Committee at the time the Option is granted but, except with respect to
Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date of grant of
the Option.

          (ii) Time and Method of Exercise. The Committee shall determine the exercise terms
and the Restricted Period with respect to an Option grant, which may include, without limitation, a
provision for accelerated vesting upon the achievement of specified performance goals or other
events, and the method or methods by which payment of the exercise price with respect thereto may
be made or deemed to have been made, which may include, without limitation, cash, check acceptable
to the General Partner, a “cashless-broker” exercise through procedures approved by the General
Partner, or any combination of methods, having a Fair Market Value on the exercise date equal to
the relevant exercise price.

          (iii) Forfeitures. Except as otherwise provided in the terms of the Option grant,
upon termination of a Participant’s employment with the General Partner and its Affiliates or
membership on the Board, whichever is applicable, for any reason during the applicable Restricted
Period, all unvested Options shall be forfeited by the Participant. The Committee may, in its
discretion, waive in whole or in part such forfeiture with respect to a Participant’s Options;
provided that the waiver contemplated under this Section 6(a)(iii) shall be effective only to the
extent that such waiver will not cause the Participant’s Options that are designed to satisfy Code
Section 409A to fail to satisfy such section.

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     (b) Unit Appreciation Rights. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number
of Units to be covered by each grant, whether Units or cash shall be delivered upon exercise, the
exercise price therefor and the conditions and limitations applicable to the exercise of the Unit
Appreciation Rights, including the following terms and conditions and such additional terms and
conditions as the Committee shall determine, that are not inconsistent with the provisions of the
Plan.

          (i) Exercise Price. The exercise price per Unit Appreciation Right shall be
determined by the Committee at the time the Unit Appreciation Right is granted but, except with
respect to Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date
of grant of the Unit Appreciation Right.

          (ii) Time of Exercise. The Committee shall determine the Restricted Period and the
time or times at which a Unit Appreciation Right may be exercised in whole or in part, which may
include, without limitation, accelerated vesting upon the achievement of specified performance
goals or other events.

          (iii) Forfeitures. Except as otherwise provided in the terms of the Unit Appreciation
Right grant, upon termination of a Participant’s employment with or service to the General Partner,
the Partnership and their Affiliates or membership on the Board, whichever is applicable, for any
reason during the applicable Restricted Period, all outstanding Unit Appreciation Rights awarded to
the Participant shall be automatically forfeited on such termination. The Committee may, in its
discretion, waive in whole or in part such forfeiture with respect to a Participant’s Unit
Appreciation Rights.

     (c) Restricted Units and Phantom Units. The Committee shall have the authority to
determine the Employees, Consultants and Directors to whom Restricted Units or Phantom Units shall
be granted, the number of Restricted Units or Phantom Units to be granted to each such Participant,
the Restricted Period, the conditions under which the Restricted Units or Phantom Units may become
vested or forfeited and such other terms and conditions as the Committee may establish with respect
to such Awards.

          (i) UDRs. To the extent provided by the Committee, in its discretion, a grant of
Restricted Units may provide that distributions made by the Partnership with respect to the
Restricted Units shall be subject to the same forfeiture and other restrictions as the Restricted
Unit and, if restricted, such distributions shall be held, without interest, until the Restricted
Unit vests or is forfeited with the UDR being paid or forfeited at the same time, as the case may
be. Absent such a restriction on the UDRs in the Award Agreement, UDRs shall be paid to the holder
of the Restricted Unit without restriction at the same time as cash distributions are paid by the
Partnership to its unitholders. Notwithstanding the foregoing, UDRs shall only be paid in a manner
that is either exempt from or in compliance with Code Section 409A.

          (ii) Forfeitures. Except as otherwise provided in the terms of the Restricted Units
or Phantom Units Award Agreement, upon termination of a Participant’s employment with, or
consultant services to, the General Partner and its Affiliates or membership on the Board,
whichever is applicable, for any reason during the applicable Restricted Period, all

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outstanding,
unvested Restricted Units and Phantom Units awarded the Participant shall be automatically
forfeited on such termination. The Committee may, in its discretion, waive in whole or in part
such forfeiture with respect to a Participant’s Restricted Units and/or Phantom Units; provided
that the waiver contemplated under this Section 6(c)(ii) shall be effective only to the extent that
such waiver will not cause the Participant’s Restricted Units and/or Phantom Units that are
designed to satisfy Code Section 409A to fail to satisfy such section.

          (iii) Lapse of Restrictions.

               (A) Phantom Units. Upon the vesting of each Phantom Unit, subject to the provisions
of Section 8(b), the Participant shall be entitled to receive one Unit or cash equal to the Fair
Market Value of a Unit, as determined by the Committee in its discretion.

               (B) Restricted Units. Upon the vesting of each Restricted Unit, subject to satisfying
the tax withholding obligations of Section 8(b), the Participant shall be entitled to have the
restrictions removed from his or her Unit certificate so that the Participant then holds an
unrestricted Unit.

     (d) Unit Awards. A Unit Award of Units not subject to a Restricted Period may be
granted under the Plan to any Employee, Consultant or Director as a bonus or additional
compensation or in lieu of cash compensation the individual is otherwise entitled to receive, in
such amounts as the Committee determines to be appropriate.

     (e) Other Unit Based Awards. The Committee is authorized, subject to limitations
under applicable law, to grant to Participants such other Awards that may be denominated or payable
in, valued in whole or in part by reference to, or otherwise based on, or related to, Units, as
deemed by the Committee to be consistent with the purposes of this Plan, including, without
limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable
into Units, purchase rights for Units, Awards with value and payment contingent upon performance of
the Partnership or any other factors designated by the Committee, and Awards valued by reference to
the book value of Units or the value of securities of or the performance of specified Affiliates of
the General Partner or the Partnership. The Committee shall determine the terms and conditions of
such Awards. Units delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(e) shall be purchased for such consideration, paid for at such times, by such
methods, and in such forms, including, without limitation, cash, Units, other Awards, or other
property, as the Committee shall determine. Cash awards, as an element of or supplement to any
other Award under this Plan, may also be granted pursuant to this Section 6(e).

     (f) DERs. To the extent provided by the Committee, in its discretion, an Award (other
than a Restricted Unit or Unit Award) may include a tandem DER grant, which may provide that such
DERs shall be paid directly to the Participant, be credited to a bookkeeping account (with or
without interest in the discretion of the Committee) subject to the same vesting restrictions as
the tandem Award, or be subject to such other provisions or restrictions as determined by the
Committee in its discretion. Absent a contrary provision in the Award Agreement, DERs shall be
paid to the Participant without restriction at the same time as cash distributions are paid by the
Partnership to its unitholders. Notwithstanding the foregoing, DERs

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shall only be paid in a manner
that is either exempt from or in compliance with Code Section 409A.

     (g) Substitute Awards. Awards may be granted under the Plan in substitution for
similar awards held by individuals who become Employees, Consultants or Directors as a result of a
merger, consolidation or acquisition by the Partnership or an Affiliate of another entity or the
assets of another entity. Such Substitute Awards that are Options may have exercise prices less
than the Fair Market Value of a Unit on the date of the substitution if such substitution complies
with Code Section 409A and the Treasury Regulations thereunder.

     (h) General.

          (i) Awards May Be Granted Separately or Together. Awards may, in the discretion of
the Committee, be granted either alone or in addition to, in tandem with, or in substitution for
any other Award granted under the Plan or any award granted under any other plan of the Partnership
or any Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted
under any other plan of the Partnership or any Affiliate may be granted either at the same time as
or at a different time from the grant of such other Awards or awards. Notwithstanding the
foregoing but subject to Section 7(c) of the Plan, without the approval of unitholders, the
Committee will not (i) exchange or substitute previously granted Options or Unit Appreciation
Rights in a transaction that constitutes a “repricing” as such term is used in Rule 5635(c) of the
NASDAQ Listing Rules, as amended from time to time, or (ii) cause the General Partner or the
Partnership to offer to purchase or exchange for cash Options or Unit Appreciation Rights if, at
the time of such offer, the Fair Market Value of a Unit is less than the exercise price of such
Options or Unit Appreciation Rights.

          (ii) Performance Conditions. The right of a Participant to exercise or receive,
and/or the vesting or settlement of, any Award and the timing thereof may be subject to such
performance conditions as may be specified by the Committee. The Committee shall establish any
such performance conditions and goals based on one or more business criteria for the General
Partner and/or the Partnership, on a consolidated basis, and/or for specified Affiliates or
business or geographical units of the Partnership, as determined by the Committee in its
discretion, which may include (but are not limited to) one or more of the following: (A) earnings
per Unit, (B) increase in revenues, (C) increase in cash flow, (D) increase in cash flow from
operations, (E) increase in cash follow return, (F) return on net assets, (G) return on assets, (H)
return on investment, (I) return on capital, (J) return on equity, (K) economic value added, (L)
operating margin, (M) contribution margin, (N) net income, (O) net income per Unit, (P) pretax
earnings, (Q) pretax earnings before interest, depreciation and amortization, (R) pretax operating
earnings after interest expense and before incentives, service fees, and extraordinary or special
items, (S) total unitholder return, (T) debt reduction, (U) market share, (V) change in the
Fair Market Value of the Units, (W) operating income, and (X) any of the above goals determined on
an absolute or relative basis or as compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock
Index or a group of comparable companies.

          (iii) Limits on Transfer of Awards.

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               (A) Except as provided in Section 6(h)(iii)(C) below, each Option and Unit Appreciation Right
shall be exercisable only by the Participant during the Participant’s lifetime, or by the Person to
whom the Participant’s rights shall pass by will or the laws of descent and distribution.

               (B) Except as provided in Section 6(h)(iii)(C) below, no Award and no right under any such
Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by
a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the General Partner, the Partnership or any
Affiliate.

               (C) To the extent specifically provided by the Committee with respect to an Option or Unit
Appreciation Right, an Option or Unit Appreciation Right may be transferred by a Participant
without consideration to immediate family members or related family trusts, limited partnerships or
similar entities or on such terms and conditions as the Committee may from time to time establish.

          (iv) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee.

          (v) Unit Certificates. All certificates for Units or other securities of the
Partnership delivered under the Plan pursuant to any Award or the exercise thereof shall be subject
to such stop transfer orders and other restrictions as the Committee may deem advisable under the
Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which
such Units or other securities are then listed, and any applicable federal or state laws, and the
Committee may cause a legend or legends to be inscribed on any such certificates to make
appropriate reference to such restrictions.

          (vi) Consideration for Grants. Awards may be granted for such consideration,
including services, as the Committee shall determine.

          (vii) Delivery of Units or other Securities and Payment by Participant of
Consideration. Notwithstanding anything in the Plan or any Award Agreement to the contrary,
delivery of Units pursuant to the exercise or vesting of an Award may be deferred for any period
during which, in the good faith determination of the Committee, the General Partner is not
reasonably able to obtain Units to deliver pursuant to such Award without violating applicable law
or the applicable rules or regulations of any governmental agency or authority or securities
exchange. No Units or other securities shall be delivered pursuant to any Award until payment in
full of any amount required to be paid pursuant to the Plan or the applicable Award
Agreement (including, without limitation, any exercise price or tax withholding) is received
by the General Partner.

          (viii) Change of Control. No Award that constitutes a “deferral of compensation”
within the meaning of Treasury Regulation Section 1.409A-1(b), whether by design, due to a
subsequent modification in the terms and conditions of such Award or as a result of a change in
applicable law following the date of grant of such Award, and that is not exempt from Section 409A
of the Code pursuant to an applicable exemption (any such Award, a “409A

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Award”) shall become
exercisable, or be settled or otherwise paid or distributed, pursuant to the Plan or the applicable
Award Agreement, as a result of a Change of Control, unless the event constituting such Change of
Control also constitutes a “change in the ownership or effective control” or “in the ownership of a
substantial portion of the assets” of the General Partner or the Partnership within the meaning of
Treasury Regulation Section 1.409A-3(i)(5); except that, to the extent permitted under Section 409A
and the Treasury Regulations promulgated thereunder, the time of exercise, payment or settlement of
a 409A Award shall be accelerated, or payment shall be made under the Plan in respect of such
Award, upon the occurrence of a Change of Control, as determined by the Committee in its
discretion, to the extent necessary to pay income, withholding, employment or other taxes imposed
on such 409A Award. To the extent any 409A Award does not become exercisable or is not settled or
otherwise payable upon a Change of Control as a result of the limitations described in the
preceding sentence, it shall become exercisable or be settled or otherwise payable upon the
occurrence of an event that qualifies as a permissible time of distribution in respect of such 409A
Award under Section 409A and the Treasury Regulations promulgated thereunder, the Plan and the
terms of the governing Award Agreement.

          (ix) Additional Agreements. Each Employee, Consultant or Director to whom an Award is
granted under this Plan may be required to agree in writing, as a condition to the grant of such
Award or otherwise, to subject an Award that is exercised or settled following such Person’s
termination of services with the General Partner, the Partnership or their Affiliates to a general
release of claims and/or a noncompetition agreement in favor of the General Partner, the
Partnership, and their Affiliates, with the terms and conditions of such agreement(s) to be
determined in good faith by the Committee.

     Section 7. Amendment and Termination. Except to the extent prohibited by applicable law:

     (a) Amendments to the Plan. Except as required by the rules of the principal
securities exchange on which the Units are traded and subject to Section 7(b) below, the Board may
amend, alter, suspend, discontinue, or terminate the Plan in any manner, including increasing the
number of Units available for Awards under the Plan, without the consent of any partner,
Participant, other holder or beneficiary of an Award, or any other Person.

     (b) Amendments to Awards. Subject to Section 7(a), the Committee may waive any
conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided no
change, other than pursuant to Section 7(c), in any Award shall materially reduce the benefit to a
Participant without the consent of such Participant. Notwithstanding the foregoing, the
Board may amend the Plan or an Award to cause such Award to be exempt from Code Section 409A
or to comply with the requirements of Code Section 409A or any other applicable law.

     (c) Actions Upon the Occurrence of Certain Events. Upon the occurrence of a Change of
Control, any change in applicable law or regulation affecting the Plan or Awards thereunder, or any
change in accounting principles affecting the financial statements of the Partnership, the
Committee, in its sole discretion, without the consent of any Participant or holder of the Award,
and on such terms and conditions as it deems appropriate, may take any one

11

 

or more of the following
actions in order to prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or an outstanding Award:

          (i) provide for either (A) the termination of any Award in exchange for an amount of cash, if
any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the
occurrence of such transaction or event the Committee determines in good faith that no amount would
have been attained upon the exercise of such Award or realization of the Participant’s rights, then
such Award may be terminated by the General Partner without payment); provided, that, in the event
the occurrence giving rise to the Committee’s exercise of its powers under this Section 7(c) is a
transaction pursuant to which the Partnership or the General Partner is survived by a successor
entity with a readily tradable security, the Committee shall not have the authority to terminate
and cash out any such Award pursuant to this Section 7(c)(i)(A) but will instead but required to
provide for the assumption of such Awards by the successor or survivor entity in accordance with
Section 7(c)(ii) below, or (B) the replacement of such Award with other rights or property selected
by the Committee in its sole discretion;

          (ii) provide that such Award be assumed by the successor or survivor entity, or a parent or
subsidiary thereof, or be exchanged for similar options, rights or awards covering the equity of
the successor or survivor, or a parent or subsidiary thereof, with appropriate adjustments as to
the number and kind of equity interests and prices;

          (iii) make adjustments in the number and type of Units (or other securities or property)
subject to outstanding Awards, and in the number and kind of outstanding Awards or in the terms and
conditions of (including the exercise price), and the vesting and performance criteria included in,
outstanding Awards, or both;

          (iv) provide that such Award shall be exercisable or payable, notwithstanding anything to the
contrary in the Plan or the applicable Award Agreement; and

          (v) provide that the Award cannot be exercised or become payable after such event, i.e., shall
terminate upon such event.

Notwithstanding the foregoing, (i) any such action contemplated under this Section 7 shall be
effective only to the extent that such action will not cause any Award that is designed to satisfy
Code Section 409A to fail to satisfy such section, and (ii) with respect to an above event that is
an “equity restructuring” event that would be subject to a compensation expense pursuant to FASB
Accounting Standards Codification, Topic 718, the provisions in Section 4(c) shall control to the
extent they are in conflict with the discretionary provisions of this Section 7.

     Section 8. General Provisions.

     (a) No Rights to Award. No Person shall have any claim to be granted any Award under
the Plan, and there is no obligation for uniformity of treatment of Participants. The terms and
conditions of Awards need not be the same with respect to each recipient.

     (b) Tax Withholding. Unless other arrangements have been made that are acceptable to
the General Partner or an Affiliate, the Partnership or Affiliate is authorized to withhold from

12

 

any Award, from any payment due or transfer made under any Award or from any compensation or other
amount owing to a Participant the amount (in cash, Units, Units that would otherwise be issued
pursuant to such Award or other property) of any applicable taxes payable in respect of the grant
of an Award, its exercise, the lapse of restrictions thereon, or any payment or transfer under an
Award or under the Plan and to take such other action as may be necessary in the opinion of the
General Partner or Affiliate to satisfy its withholding obligations for the payment of such taxes.

     (c) No Right to Employment or Services. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the General Partner or any
Affiliate or to remain on the Board, as applicable. Furthermore, the General Partner or an
Affiliate may at any time dismiss a Participant from employment free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan, any Award Agreement or other
agreement.

     (d) Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the laws of the State
of Texas without regard to its conflicts of laws principles.

     (e) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award,
or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

     (f) Other Laws. The Committee may refuse to issue or transfer any Units or other
consideration under an Award if, in its sole discretion, it determines that the issuance or
transfer of such Units or such other consideration might violate any applicable law or regulation,
the rules of the principal securities exchange on which the Units are then traded, or entitle the
Partnership or an Affiliate to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the General Partner by a Participant, other holder or beneficiary in connection
with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or
beneficiary.

     (g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
General Partner or any Affiliate and a Participant or any other Person. To the extent that any
Person acquires a right to receive payments from the General Partner or any Affiliate pursuant to
an Award, such right shall be no greater than the right of any general unsecured creditor of the
General Partner or such Affiliate.

     (h) No Fractional Units. No fractional Units shall be issued or delivered pursuant to
the Plan or any Award, and the Committee shall determine whether cash, other securities, or

13

 

other
property shall be paid or transferred in lieu of any fractional Units or whether such fractional
Units or any rights thereto shall be canceled, terminated, or otherwise eliminated.

     (i) Headings. Headings are given to the Sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

     (j) Facility Payment. Any amounts payable hereunder to any person under legal
disability or who, in the judgment of the Committee, is unable to manage properly his financial
affairs, may be paid to the legal representative of such person, or may be applied for the benefit
of such person in any manner that the Committee may select, and the General Partner shall be
relieved of any further liability for payment of such amounts.

     (k) Participation by Affiliates. In making Awards to Employees employed by an entity
other than the General Partner, the Committee shall be acting on behalf of the Affiliate, and to
the extent the Partnership has an obligation to reimburse the Affiliate for compensation paid for
services rendered for the benefit of the Partnership, such payments or reimbursement payments may
be made by the Partnership directly to the Affiliate.

     (l) Gender and Number. Words in the masculine gender shall include the feminine
gender, the plural shall include the singular and the singular shall include the plural.

     (m) Code Section 409A. Notwithstanding any other provision of the Plan to the
contrary, any Award subject to Code Section 409A is intended to satisfy the application of Code
Section 409A to the Award.

     (n) No Guarantee of Tax Consequences. None of the Board, the Committee, the
Partnership nor the General Partner makes any commitment or guarantee that any federal, state or
local tax treatment will (or will not) apply or be available to any Participant.

     (o) Specified Employee under Code Section 409A. Subject to any other restrictions or
limitations contained herein, in the event that a “specified employee” (as defined under Code
Section 409A and the Treasury Regulations thereunder) becomes entitled to a payment under an Award
which is a 409A Award on account of a “separation from service” (as defined under Code Section 409A
and the Treasury Regulations thereunder), such payment shall not occur until the date that is six
months plus one day from the date of such separation from service. Any amount that is otherwise
payable within the six month period described herein will be aggregated and paid in a lump sum
without interest.

     Section 9. Term of the Plan. The Plan shall be effective on the date of its approval by the Board and shall continue
until the earliest of (i) the date terminated by the Board, (ii) all Units available under the Plan
have been paid to Participants, or (iii) the 10th anniversary of the date the Plan, as amended and
restated, is approved by the Board. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, however, any Award granted prior to such termination, and the authority
of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under such Award, shall extend beyond such termination date.

14

 

     Section 10. Adoption by Affiliates. With the consent of the Committee, any Affiliate that is not considered a single employer
with the Partnership under Code Section 414(b) or Code Section 414(c) may adopt the Plan for the
benefit of its Employees, Consultants or Directors by written instrument delivered to the Committee
before the grant to such Affiliate’s Employees, Consultants or Directors under the Plan of any 409A
Award.

15exv4w21

Exhibit 4.21

Execution Version

BLUESTEM BRANDS, INC.

AMENDMENT NO. 1

TO

SERIES A PREFERRED STOCK PURCHASE WARRANT

     This Amendment No. 1 to Series A Preferred Stock Purchase Warrant, dated as of June 28, 2011
(this “Amendment”), will amend that certain warrant, originally issued on March 24, 2006 (the
“Warrant”), by Bluestem Brands, Inc., a Delaware corporation (the “Company”), to Prudential Capital
Partners II, L.P. (the “Holder”), to purchase 35,773,013 shares of the Company’s Series A
Convertible Preferred Stock, par value $0.00001 per share, at the per share exercise price of
$0.01.

     WHEREAS, the Company and the Holder desire to amend the Warrant to clarify the effect that the
Company’s initial public offering will have on the Holder’s rights under the Warrant.

     NOW, THEREFORE, the parties hereby agree as follows:

     1. Defined Terms. Capitalized terms used but not defined herein will have the
meanings given to them in the Warrant.

     2. Redemption or Conversion of Series A Preferred Stock.

     a) If the Company’s Registration Statement on Form S-1, No. 333-173668, filed with the
Securities and Exchange Commission, shall become effective and the Company shall consummate
the initial public offering of its Common Stock thereunder, (such event, an “Event”), then
from and after such Event, the Holder shall have the right to purchase and receive, in lieu
of the shares of Series A Preferred Stock immediately theretofore purchasable and receivable
pursuant to the Warrant, shares of common stock of the Company (“Common Stock”) in an
aggregate amount (as the same may be adjusted as hereinafter provided, the “Shares”) equal
to the number of shares of Common Stock that such Holder would have received if the Holder
had exercised the Warrant immediately prior to the Event and the Series A Preferred Stock
that such Holder would have received upon such exercise had been simultaneously converted
into shares of Common Stock. The Exercise Price shall be adjusted simultaneously with the
Event to equal the quotient obtained by dividing (x) the aggregate Exercise Price of the
maximum number of shares of Series A Preferred Stock for which the Warrant was exercisable
immediately prior to such Event, by (y) the number of shares of Common Stock for which the
Warrant is exercisable immediately after such Event.

     b) From and after such Event, references in the Warrant to Series A Preferred Stock
shall be deemed amended to be references to Common Stock, and any other appropriate
provision shall be made, to the extent necessary or appropriate, to accord the Holder the
same rights and privileges relative to the purchase of Common Stock as the Warrant accorded
the Holder relative to the purchase of Series A Preferred Stock prior to the Event;
provided, however, that from and after such Event, the term “Shares” shall
have the meaning given to it in Section 2(a) of this Amendment.

 

 

     c) From and after such Event, the last sentence of Section 4(d)(i) shall be amended and
restated to read as follows:

	 	 	 	“If the Company shall, at any time or from time to time prior to the
Expiration Date, issue any shares of Common Stock as a stock dividend or
upon any stock split or other subdivision or combination of shares of Common
Stock, the number of Shares issuable pursuant to this Warrant shall be
increased or decreased (as applicable) by such amount required so that the
total number of Shares issuable under this Warrant, as a percentage of the
aggregate number of Fully Diluted Shares of the Company as of the date of
(and after giving effect to) such dividend, shall equal the same percentage
of Fully Diluted Shares of the Company as of immediately prior to such
dividend; provided that, for the avoidance of doubt, there shall be
no such adjustment as a result of the issuance by the Company of shares of
Common Stock in accordance with Article FOURTH, Section 1.6 of the Company’s
Fourth Amended and Restated Certificate of Incorporation in satisfaction of
dividends that have accrued on the Company’s Series B Preferred Stock or
Series A Preferred Stock pursuant to Article FOURTH, Section 1.2 or 1.3,
respectively, of the Company’s Fourth Amended and Restated Certificate of
Incorporation (the “Preferred Dividend Conversion Shares”).”

     d) From and after such Event, the meaning given to the term “Excluded Shares”
in Section 4(d)(iii) of the Warrant shall no longer apply, and for purposes of Section 4(d)
of the Warrant the term “Excluded Shares” shall mean all shares of Common Stock
issued (or pursuant to Section 4(d)(ii) of the Warrant deemed to have been issued) by the
Company at any time (A) upon conversion of any shares of preferred stock of the Company
(including the Preferred Dividend Conversion Shares), (B) to officers, directors, employees
or consultants of the Company pursuant to any compensatory equity award (including, without
limitation, restricted stock or stock options), (C) upon exercise or conversion of any
Convertible Securities outstanding as of the date of such Event, or (D) in events described
in Section 4(b) or 4(c) of the Warrant.

     3. All Other Terms Unchanged. Except as expressly provided in this Amendment, all of
the provisions, terms and conditions of the Warrant remain in full force and effect.

     4. Conflicting Provisions. Should any of the provisions of this Amendment conflict
with any of the provisions of the Warrant, then the provisions of this Amendment shall apply.

     5. Counterparts. This Amendment may be executed in one or more counterparts, any one
of which need not contain the signatures of more than one party, but all such counterparts taken
together will constitute one and the same instrument.

[Signature page follows.]

2

 

     IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to Series A
Preferred Stock Purchase Warrant to be signed by its duly authorized officer, effective as of the
date first written above.

	 	 	 	 	 	 	 

	 	 	BLUESTEM BRANDS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Mark P. Wagener
 

Mark P. Wagener
	 	 
	 

	 	Title:
	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	PRUDENTIAL CAPITAL PARTNERS II, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Julia Buthman
 

Julia Buthman
	 	 
	 

	 	Title:
	 	Vice President	 	 

3

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