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news-ex102_149.htm

Exhibit 10.2

EARLY RETIREMENT AGREEMENT AND GENERAL RELEASE

This Early Retirement Agreement and General Release (“Agreement”) is made by and between NewStar Financial, Inc., on behalf of itself and all of its predecessors, successors and affiliated entities (collectively, “NewStar” or the “Company”), and John J. Frishkopf, on behalf of himself, his  executors, heirs, administrators, agents, attorneys, administrators, beneficiaries and assigns (collectively, “Frishkopf”).  In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, NewStar and Frishkopf agree as follows:

	
1.
	
Early Retirement.  Frishkopf shall retire early from NewStar effective as of September 30, 2016 (the “Retirement Date”). Except as expressly modified by this Agreement, the Employment Agreement between NewStar and Frishkopf dated October 9, 2015 (“Employment Agreement”), a copy of which is attached as Exhibit A, shall continue to govern the terms and conditions of Frishkopf’s employment with NewStar until and after Frishkopf’s Retirement Date pursuant to its terms. 

	
2.
	
Separation Benefits.  Provided that Frishkopf remains an employee of NewStar  in Good Standing as defined below through the Retirement Date, and provided further that Frishkopf executes this Agreement prior to August 3, 2016 (and does not, and may no longer, revoke this Agreement), the parties agree that Frishkopf’s separation from the Company is mutually agreed and that Frishkopf shall be eligible for the following payments and benefits:

	
 
	
(a)
	
Payment of the Pro-Rated Bonus for 2016 in the amount of $487,500;

	
 
	
(b)
	
Payment of one year of base salary at his current salary of $350,000;

	
 
	
(c)
	
Payment of severance in the amount of $650,000;

	
 
	
(d)
	
One year of NewStar paid family health and dental care premiums and the associated health reimbursement account coverage covered under COBRA assuming timely acceptance of COBRA;

	
 
	
(e)
	
Continued vesting of all outstanding restricted stock and cash units until fully vested.

 

 

The cash payment from (a) to (c) totaling $1,487,500 will be paid in installments of (1) $743,750 paid 6 months and one day following his “separation of service” within the meaning of Section 409A as Frishkopf is a “specified employee” under Section 409A of the Internal Revenue Code of 1986, as amended, and therefor payments shall begin after the waiting period; and (2) $61,979 semi-monthly for 6 months following the 6 month and one day waiting period.  Payments will be made by direct deposit unless instructed otherwise. Good Standing for purposes on this Agreement means that Frishkopf carries out his responsibilities, complies with all Company policies and procedures, is available whenever reasonably requested by the CEO, CFO, or the Board of Directors, and   provides all assistance reasonably requested to transition his responsibilities prior to his Retirement Date. Frishkopf may work part-time and outside of the office during this time so long as his job duties are performed by himself or transitioned to a successor.

	
1.
	
General Release.  Except with respect to any rights, obligations or duties arising out of this Agreement, and in consideration of the payments and benefits set forth in this Agreement, Frishkopf hereby releases and discharges NewStar and anyone acting by, through or on behalf of NewStar, including but not limited NewStar’s directors, officers, employees, representatives and agents (collectively, the “Releasees”), to the fullest extent permitted by law, of and from any and all complaints, charges, lawsuits or claims for relief of any kind by Frishkopf that Frishkopf now has, ever had or ever may have against the Releasees, or any of them, whether known or unknown, arising out of any matter or thing that has happened before the signing of this Agreement, including but not limited to (i) claims for tort or contract; (ii) claims arising out of, based on, or connected with Frishkopf’s employment, including terms and conditions of employment, by NewStar and the cessation of that employment; and (iii) claims arising under any federal, state or local labor, employment or discrimination laws, including but not limited to the following (all as amended): Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Americans with Disabilities Act (“ADA”), the Equal Pay Act of 1963, the Genetic Information Non-Discrimination Act, the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act (G.L. c. 151B), the Massachusetts Civil Rights Act, the Massachusetts Equal Rights Act, the Massachusetts Wage Act, and any other local, state or federal law, policy, order, regulation or guideline affecting or relating to claims or rights of employees.  The release contained herein is a GENERAL RELEASE, including of statutory claims.  Nothing in this Agreement shall be construed to preclude Frishkopf from participating or cooperating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission, or any other local, state or federal administrative agency, including with respect to a challenge to this General Release.  However, in the event that a charge or complaint is filed against the Releasees, or any of them, with any administrative agency or in the event of an authorized investigation, charge or lawsuit filed against the Releasees by any administrative agency, Frishkopf expressly waives and shall not accept any award or damages therefrom. Notwithstanding the above, Frishkopf is not releasing his rights to vested benefits, rights to indemnification and defense under his Employment Agreement and/or any D&O policy of NewStar, nor is he releasing any rights he has under the equity agreements he has executed.       

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2.
	
Continuation of Prior Covenants.  Frishkopf acknowledges and agrees that, following the Retirement Date, he will remain bound by the terms of the Employment Agreement to the extent that such terms survive the cessation of Frishkopf’s employment under the Employment Agreement, including the covenants contained in Sections 8 (Confidentiality) and 9 (Restrictive Covenants) and all related enforcement provisions.   However, notwithstanding the language herein, Frishkopf’s non-solicit obligation in the Employment Agreement and his Lock-Up Agreements as defined below is herein reduced from two years to one year following his Retirement Date. 

During the Restricted Period and for a period of ninety (90) days thereafter, Frishkopf’s obligations under Lock-Up Agreements by and between NewStar and Frishkopf dated December 13, 2006 and March 18, 2009 respectively (together, the “Lock-Up Agreements,” copies of which are attached as Exhibits B and C) remain in effect, except as stated in paragraph 4 herein. Specifically, in accordance with the Lock-Up Agreement dated December 13, 2006, during the Restricted Period and for a period of ninety (90) days thereafter, Frishkopf shall hold and not transfer 31,286 shares, which represents twenty-five percent (25%) of Vested Incentive Securities subject to lock-up under the Lock-Up Agreement (the “Restricted Securities”). In accordance with the Lock-Up Agreement dated March 18, 2009, during the Restricted Period and for a period of 90 days thereafter, Frishkopf shall not transfer more than fifty percent (50%) of the proceeds from the exercise of any options granted on March 18, 2009 priced at $2.76 (the “Restricted Proceeds”), totaling 38,965 shares. The foregoing results in an aggregate of 70,251 NewStar shares being restricted from transfer under the Lock-Up Agreements. As used herein, the term “Restricted Period” shall have the meaning given to such term in the Lock-Up Agreements.

The Restricted Securities and Restricted Proceeds shall be held, in Frishkopf’s name, by Merrill Lynch in its capacity as the administrator of the Company’s equity award programs, until 90 days following the date the Restricted Period expires. If the Board of Directors of the Company, in its sole discretion, at any time during the Restricted Period and for a period of ninety (90) days thereafter, determines that Frishkopf has violated or breached the Restrictive Covenants (as defined in the Lock-Up Agreements and modified in Section 4 of this Agreement) at any time prior to the expiration of the Restricted Period, then all of such Restricted Securities and Restricted Proceeds, as of the date of breach shall be forfeited for no consideration.

	
1.
	
Business Consultation. For one (1) year following the Retirement Date, Frishkopf will be available to provide his consultation and guidance on specific business decisions at the reasonable request of the Chief Executive Officer or the succeeding Treasurer, for no additional consideration. Such consultations will be limited to a maximum amount of time of two (2) hours per week and will be provided access to NewStar information as needed without violating this Agreement.

	
2.
	
Employment and Reporting Status. As of Frishkopf’s Retirement Date, Frishkopf will no longer (a) be deemed a “Section 16 Officer” or a “Key Employee” under the Company’s Amended and Restated Insider Trading Policy or (b) be otherwise subject to the Company’s Amended and Restated Insider Trading Policy or share ownership guidelines. 

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Notwithstanding the foregoing, Frishkopf acknowledges that (a) the federal securities laws prohibit the purchase or sale of any securities of the Company on the basis of material, non-public information about such securities or the Company, and (b) Section 16 under the Securities Exchange Act may impose certain reporting or other requirements with respect to a transaction in the Company’s securities following the cessation of director or officer status, if the transaction is executed within a period of not less than six months of an opposite transaction subject to Section 16 of the Exchange Act and if the transaction is not otherwise exempted from Section 16(b) of the Exchange Act.     

	
3.
	
No Pending Claims; Non-admissions.  Frishkopf represents and warrants that he has not filed any complaints, charges, or claims for relief against the Releasees, or any one of them, with any local, state or federal court or administrative agency, any professional or regulatory board, or any other agency or entity.  Frishkopf further warrants that he has not previously assigned or transferred any of the claims that are the subject of the General Release contained in this Agreement.    

It is further understood and agreed that this Agreement does not constitute any admission by NewStar that any action taken with respect to Frishkopf was unlawful or wrongful, or that any action by it constituted a breach of contract or violated any federal, state or local law, policy, rule or regulation.  

	
4.
	
Return of Property.  Within two business days after the Retirement Date, Frishkopf shall:

	
 
	
(a)
	
return all property belonging to NewStar, including but not limited to computers, papers, files, documents, reference guides, equipment, keys, access key tag/card, identification cards, credit cards, software, computer access codes, data storage, supplies and institutional manuals. Frishkopf shall not retain any copies, summaries, reproductions or excerpts of any of the foregoing, whether in hardcopy or electronic format, and further;

	
 
	
(b)
	
to the extent Frishkopf has stored any NewStar property on any personal home computer(s) or other personal electronic storage device(s), Frishkopf shall first forward a copy of any such property by email to Jennifer Muldoon (jmuldoon@newstarfin.com) and then shall to the best of his knowledge delete all NewStar property from any personal home computer(s) and any other personal electronic storage device(s) within two business days. If NewStar property is located at a later date, Frishkopf will delete the material immediately.

	
5.
	
Non-disparagement.  Frishkopf agrees not to disparage or make negative statements about NewStar or any of NewStar’s officers, directors, employees, or programs.   Nothing in this Agreement shall bar Frishkopf or NewStar from providing truthful testimony in any legal proceeding, or in responding to any request from any governmental agency, or as required by law, or by court order or other legal process.  

	
6.
	
Breach.  Frishkopf acknowledges that any material breach of this Agreement and/or the Employment Agreement may cause irreparable damage to NewStar and that in the event of such breach, NewStar shall be entitled, in addition to monetary damages and to any 

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other remedies available to NewStar under this Agreement and/or the Employment Agreement and at law, to equitable relief, including injunctive relief.  In the event that Frishkopf institutes legal proceedings to enforce this Agreement or the Employment Agreement, Frishkopf agrees that the sole remedy available to Frishkopf shall be enforcement of the terms of this Agreement or the Employment Agreement and/or a claim for damages resulting from the breach of this Agreement or the Employment Agreement, but that under no circumstances shall Frishkopf be entitled to receive or collect any damages for claims that Frishkopf has released under this Agreement.  

	
7.
	
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of NewStar and Frishkopf and their respective successors and assigns. If Frishkopf dies before receiving the payments stated herein, the remaining payments will be paid to his estate. 

	
8.
	
Severability.  If any provision of this Agreement is held to be excessively broad, it shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.  Should any part, term or provision of this Agreement be determined by any tribunal, administrative agency or court of competent jurisdiction to be illegal, invalid or unenforceable, even after all attempts at reformation or construction have been exhausted as provided in the prior sentence, the validity of the remaining parts, terms or provisions shall not be affected thereby, and the illegal, invalid or unenforceable part, term or provision shall be deemed not to be part of this Agreement.

	
9.
	
Entire Agreement.  This Agreement, including its attached exhibits, constitutes the entire agreement between the parties about or relating to the cessation of Frishkopf’s employment with NewStar, or NewStar’s obligations to Frishkopf with respect to Frishkopf’s cessation of employment, and fully supersedes any and all prior and contemporaneous agreements or understanding between the parties concerning the subject matter of this Agreement, except that the Employment Agreement shall remain in effect as set forth  above, and the terms of the applicable grant documents and plan documents for any stock options or other equity rights shall remain in effect unless amended in this Agreement.  The terms of this Agreement are contractual in nature and not a mere recital, and they shall take effect as a sealed document.  This Agreement may be changed or amended only by agreement in writing signed by both parties.  

	
10.
	
Time to Consider Agreement; Revocation.  

	
 
	
(a)
	
Frishkopf acknowledges that he has been advised in writing to, and has been given the opportunity to, consult an attorney of his choice before signing this Agreement.

	
 
	
(b)
	
For the convenience of the parties, facsimile and pdf signatures shall be accepted as originals.

	
 
	
(c)
	
Frishkopf further acknowledges that he may revoke this Agreement within seven (7) days of signing it, provided that this Agreement will not become effective until such seven day period has expired.  To be effective, any such revocation 

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must be in writing and delivered to NewStar’s principal office, to the attention of Jennifer Muldoon, by close of business on the seventh day after signing and must expressly state Frishkopf’s intention to revoke the Agreement.  The eighth day following Frishkopf’s execution hereof shall be deemed the “Effective Date” of this Agreement.

	
11.
	
Representations.  Frishkopf acknowledges that the benefits afforded to him under the terms of this Agreement exceed any legal obligation of NewStar and provide valid consideration for the General Release contained in this Agreement, and the parties attest that no other representations were made regarding this Agreement other than those contained herein.

	
12.
	
Choice of Law.  This Agreement shall be governed by, and shall be construed in accordance with, the laws of the Commonwealth of Massachusetts, without regard to its conflict of laws principles.  The parties hereby expressly consent to the personal jurisdiction of the state and federal courts located in Massachusetts for any lawsuit permitted to be filed arising from or relating to this Agreement and expressly waive any and all objections to venue, including, without limitation, the inconvenience of such forum.

	
13.
	
409A;  The parties agree that to the best of their knowledge this Agreement is in compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and any Department of Treasury regulations and other interpretive guidance issued thereunder.

IN WITNESS WHEREOF, NewStar and Frishkopf have duly executed this Agreement as of the dates written below.

 

	
NEWSTAR FINANCIAL, INC.

	
 
	
 
	
 

	
By:
	
/s/ TIMOTHY J. CONWAY
	
 

	
Name: Timothy J. Conway

	
Title:  Chairman, Chief Executive Officer and President

	
 
	
 
	
 

	
JOHN J. FRISHKOPF 

	
/s/ JOHN J. FRISHKOPF
	
 

	
Date:  August 3, 2016

 

 

 

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Exhibit A

 

RESTATED EMPLOYMENT AGREEMENT
of
JOHN J. FRISHKOPF

EMPLOYMENT AGREEMENT (this “Agreement”), dated as of October 9, 2015 (the “Effective Date”), between NEWSTAR FINANCIAL, INC., a Delaware corporation (the “Company”), and John J. Frishkopf (“Executive”).   This Agreement fully supersedes the Employment Agreement that Executive executed on October 9, 2013.  

In consideration of the mutual agreements set forth below and for other good and valuable consideration given by each party to this Agreement to the other, the receipt and sufficiency of which are hereby acknowledged, the Company agrees to employ Executive and Executive agrees to serve the Company as an employee pursuant to the terms and subject to the conditions that follow.

	
1.
	
Employment.  

	
 
	
(a)
	
The Company hereby agrees to employ Executive, and Executive hereby agrees to accept employment with the Company, upon the terms and conditions contained in this Agreement, effective as of the Effective Date.  

	
 
	
(b)
	
Executive’s employment with the Company shall continue, subject to earlier termination of such employment pursuant to the terms hereof, until the third (3rd) anniversary of the Effective Date and thereafter shall automatically renew for one additional one (1) year period unless a notice of intent not to renew shall be delivered in accordance with Section 17 by either the Company or Executive, as the case may be, at least ninety (90) days prior to the third (3rd) anniversary date, provided that either party may make any renewal contingent upon the parties’ agreement to add to, delete, or modify the terms of this Agreement by providing a notice to the other party at least ninety (90) days prior to the third (3rd) anniversary date.  The parties shall have a 30-day window to agree to any additional, deleted or modified terms and, if no agreement can be reached, then the initial contingent notice of renewal shall be deemed a notice of non-renewal unless the parties agree otherwise.  The term of Executive’s employment under this Agreement shall be referred to as the “Term.”  

	
 
	
(c)
	
In the event that this Agreement expires, whether as a result of non-renewal or as a result of the end of the one-year renewal, Executive shall revert to being an at-will employee of the Company, subject to the terms of Sections 8, 9 and 10 of this Agreement and any related enforcement provisions, and provided that nothing in this Agreement shall prevent either party from terminating this Agreement pursuant to Section 6 at any time prior to the expiration of the Term.   

	
 
	
(d)
	
Executive represents to the Company that he has no present intention to terminate employment with the Company.

 

 

	
2.
	
Duties.  During the Term, Executive shall serve on a full-time basis as Managing Director, Head of Asset Management for the Company.  Executive’s duties and responsibilities as Managing Director, Head of Asset Management of the Company shall include those duties customarily associated with an officer with a similar title or as may be assigned to him from time to time by the Chief Executive Officer of the Company.  Executive shall be assigned to work primarily out of the Company’s Boston, MA office or any other Company office that is or will be located within 20 miles thereof (the “Primary Office Location”), it being understood and agreed that Executive shall be required to travel as necessary in the course of his employment.  Executive shall devote his full business-time attention and energies and use his best efforts in his employment with the Company; provided, however, that this Agreement shall not be interpreted as prohibiting Executive from managing his personal affairs or engaging in charitable or civic activities; so long as, in each case, such activities do not interfere in any material respect with the performance of Executive's duties and responsibilities hereunder and are in accordance with the policies and procedures of the Company.

	
3.
	
Compensation and Benefits.  In consideration of entering into this Agreement and as full compensation for Executive’s services hereunder, during the Term, Executive shall receive the following compensation and benefits:

	
 
	
(a)
	
Base Salary.  The Company shall pay to Executive a base salary (“Base Salary”) at a gross rate of $350,000 per annum, payable in substantially equal installments in accordance with the payroll policies from time to time in effect at the Company.  Executive’s Base Salary may be subject to increase (but shall not be subject to decrease) on an annual basis as the Board of Directors shall determine.  

	
 
	
(b)
	
Incentive Bonuses.  Executive shall be eligible to participate in such annual incentive bonus programs as the Board of Directors may adopt from time to time for members of senior management of the Company (“Incentive Bonus”).  The Company will establish a target for the Incentive Bonus for the Executive at the beginning of each year (“Target Incentive Bonus”), provided that for each year of the Term the Target Incentive Bonus will not be below the 2015 Target Incentive Bonus of $625,000, and provided that if the Company does not establish a Target Incentive Bonus within 30 days of the start of the year, the Target Incentive Bonus shall be set automatically at the same amount as the last Company-established Target Incentive Bonus.  The Target Incentive Bonus is not a guarantee. Actual Incentive Bonus payments, if any, will be determined by the Company in its sole discretion and based on Company, business and individual performance, and the actual Incentive Bonus paid, if any, may include a mix of current-year cash compensation, deferred cash compensation and/or equity compensation in the Company’s sole discretion.  

	
 
	
(c)
	
Vacation.  Executive shall be entitled to accrue up to five (5) weeks of paid vacation per calendar year.  Vacation time will accrue in accordance with the usual vacation policies in effect at the Company from time to time, provided that notwithstanding anything in any Company policy to the contrary, Executive shall not be permitted to carry over any accrued but unused vacation time from one calendar year to the next; any accrued but unused vacation time at the end of a calendar year shall be forfeited.  

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(d)
	
Parking.  The Company shall pay the costs of monthly automobile parking for Executive at Executive’s Primary Office Location.

	
 
	
(e)
	
Other Benefits.  Executive shall participate in and be eligible to receive, but without duplication, all other benefits (i.e., benefits other than those of the types covered in Sections 3(a) - (d)) offered to senior executives of the Company, including, without limitation, retirement income and health plans and other health and welfare plans,  under and in accordance with the provisions of any employee benefit plan adopted or to be adopted by the Company (collectively, the “Benefit Plans”) other than any severance benefits offered to senior executives in accordance with any such plan.  Except as set forth herein, Executive shall not be entitled to any other benefits.

	
4.
	
Equity Holdback.  During the Term, Executive shall be required to own Company stock in an aggregate then-current fair market value equal to Executive’s then-current Base Salary multiplied by two (the “Ownership Level”).  

	
 
	
(a)
	
Stock Eligible for Holdback.  To satisfy his obligations under this Section, the following forms of Company stock shall be considered:

	
 
	
(i)
	
All vested and unvested shares awarded under the Company’s Equity Incentive Award Plan (the “Plan”), including restricted stock and performance shares but not including any vested but unexercised stock options;

	
 
	
(ii)
	
All stock beneficially owned by Executive and Executive’s spouse; and

	
 
	
(iii)
	
All stock held by any of Executive’s estate planning vehicles.

	
 
	
(b)
	
Certification of Holdback.  For purposes of calculating compliance with the Ownership Level, Executive’s Base Salary and the fair market value of the Company’s stock shall be measured once per calendar year at such time as the Compensation Committee of the Board of Directors may direct, but in any event no later than December 1 of each calendar year, beginning in 2014.  Executive shall certify to the Company’s Head of Human Resources once per calendar year whether the Ownership Level required under this Section has been satisfied, and Executive shall provide such documentation as may reasonably be requested to allow the Head of Human Resources to confirm such certification. 

	
 
	
(c)
	
Insufficient Awards of Stock.  If Executive has not been granted or has not vested sufficient stock to meet the Ownership Level, then all shares resulting from the vesting of any restricted stock award under the Plan shall be subject to the holdback described in this Section until such time as the value of all of Executive’s shares eligible for the holdback exceeds the Ownership Level.  

	
 
	
(d)
	
Exceptions.  The Ownership Level requirements set forth in this Section are subject to such exceptions as the Compensation Committee of the Board of Directors may grant in its sole discretion if compliance with this Section would create a severe hardship for Executive or would prevent Executive from complying with a court order (e.g., as part of a divorce settlement).  

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5.
	
Reimbursement for Expenses.  During the Term, Executive shall be entitled to incur on behalf of the Company reasonable and necessary expenses in connection with his duties in accordance with Company’s policies and the Company shall pay for or reimburse Executive for all such expenses upon presentation of proper receipts therefore.  Executive shall comply with such reasonable limitations and reporting requirements with respect to such expenses as the Company may establish from time to time. 

	
6.
	
Termination.  Executive’s employment hereunder may be terminated at any time during the Term as follows (each, a “Termination Event”):

	
 
	
(a)
	
Automatically in the event of the death of Executive.

	
 
	
(b)
	
At the option of the Company, by the Board of Directors (acting through the Chairman or Secretary) or by written notice to Executive in the event of the Permanent Disability of Executive.  As used herein, the term “Permanent Disability” shall mean a physical or mental incapacity or disability which renders Executive unable, with or without a reasonable accommodation, to render the services required hereunder (A) for one hundred eighty (180) days in any twelve (12) month period or (B) for a period of ninety (90) consecutive days.

	
 
	
(c)
	
At the option of the Company for Cause.  For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment if any of the following occurs:  

	
 
	
(i)
	
Executive continuously fails to perform substantially Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial conformance is delivered to Executive by the Board of Directors, which specifically identifies the manner in which the Board of Directors believes that Executive has not substantially performed Executive’s duties, or 

	
 
	
(ii)
	
Executive engages in illegal conduct or gross misconduct which is injurious to the Company or its affiliates, whether from a monetary perspective or otherwise, or 

	
 
	
(iii)
	
Executive is convicted of, or pleads guilty or nolo contendere to, any felony or any other crime involving moral turpitude, or

	
 
	
(iv)
	
Executive materially breaches his obligations under Section 8 or Section 9 hereof, or

	
 
	
(v)
	
Executive materially violates his obligations under Section 4 hereof.

Executive cannot be terminated for “Cause” as defined in (i), (iv), or (v) unless the Company first has notified Executive in writing that his employment is being terminated for Cause which notice shall specify the Cause event and Executive is given an opportunity, at least 30 days after receipt of such written notice from the Company, to make a presentation to the Chief Executive Officer that Executive should not be terminated for Cause.  

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(d)
	
At the option of the Company at any time without Cause. 

	
 
	
(e)
	
At the option of Executive for Good Reason.  For purposes of this Agreement, Executive shall have “Good Reason” to terminate this Agreement if any of the following occurs without the written consent of Executive (each a “Good Reason Condition”):

	
 
	
(i)
	
a reduction in Executive’s annual Base Salary from such Executive’s annual Base Salary then in effect; 

	
 
	
(ii)
	
a forced relocation by the Company of Executive from the Primary Office Location to a location greater than twenty (20) miles from his Primary Office Location.  

Notwithstanding the foregoing, in order for Good Reason to occur, Executive must reasonably determine in good faith that a Good Reason Condition has occurred, Executive must provide written notice to the Board of Directors of the occurrence of the Good Reason Condition within 45 days of the initial occurrence of such condition, Executive must cooperate in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the Good Reason Condition, notwithstanding such efforts, the Good Reason Condition must continue to exist, and Executive must provide the Company with written notice of termination which establishes a termination date within 30 days after the end of the Cure Period.  If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.

	
 
	
(f)
	
At the option of Executive, at any time, for any reason, on ninety (90) days prior written notice to the Company. 

	
 
	
(g)
	
At the option of Executive upon Retirement.  For purposes of this Agreement, “Retirement” shall mean when Executive is fifty-five (55) years of age or older, Executive has completed at least five (5) years of service with the Company, and Executive provides at least ninety (90) days advance written notice of his intent to retire.

	
7.
	
Payments.

	
 
	
(a)
	
Death.  If the Termination Event is due to Executive’s death, Executive’s legal representatives shall be entitled to receive, as soon as practicable following the date of termination:

	
 
	
(i)
	
any accrued but unpaid Base Salary through the date of termination and any accrued and unpaid vacation pay or other benefits which may be owing in accordance with the Company policies and applicable law (the “Accrued Obligations”), plus 

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(ii)
	
an amount equal to the Target Incentive Bonus in respect of the then-current year, pro-rated for the period from the beginning of the then current year and ending on the date of termination, payable in a lump sum as soon as practicable following the date of termination (the “Pro Rated Bonus”), plus

	
 
	
(iii)
	
acceleration of vesting and exercisability of all equity and deferred cash incentive awards (the “Incentive  Equity”) issued to Executive under the Plan. For purposes of this Agreement, “vesting” shall mean, in the case of any restricted stock issued under the Plan, ceasing to be subject to forfeiture, and payment dates of any deferred cash awards granted under the Plan are not accelerated as a result of the application of any such vesting acceleration provision of this Agreement, plus

	
 
	
(iv)
	
a period of the lesser of (A) two (2) years following the date of termination or (B) the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options.

	
 
	
(b)
	
Permanent Disability.  If the Termination Event is due to Executive’s Permanent Disability, Executive or his legal representatives shall be entitled to receive, as soon as practicable following the date of termination:

	
 
	
(i)
	
Any Accrued Obligations, plus 

	
 
	
(ii)
	
the Pro Rated Bonus, plus

	
 
	
(iii)
	
acceleration of vesting and exercisability of all Incentive Equity, plus

	
 
	
(iv)
	
a period of the lesser of (A) one (1) year following the date of termination or (B) the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options.

	
 
	
(c)
	
Termination Without Cause or for Good Reason.  If the Termination Event is termination by the Company at any time during the Term without Cause or by Executive at any time during the Term for Good Reason, Executive shall be entitled to:

	
 
	
(i)
	
any Accrued Obligations, plus

	
 
	
(ii)
	
an amount equal to the Incentive Bonus paid or earned but unpaid to Executive in respect of the previous year, pro-rated for the period from the beginning of the then current year and ending on the date of termination, payable in a lump sum as soon as practicable after the date of termination, plus

	
 
	
(iii)
	
the Base Salary (which shall be the Base Salary as of the date of termination) during the Severance Period (as defined in Section 7(g)), payable in accordance with the payroll practices then in effect at the Company, plus

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(iv)
	
an amount equal to two (2) times the Incentive Bonus paid or earned but unpaid to Executive in respect of the previous year, payable as soon as practicable following the date of termination, plus

	
 
	
(v)
	
the continuation of all health benefits during the Severance Period at the same cost to Executive as though Executive continued his employment with the Company, plus

	
 
	
(vi)
	
the continued vesting and exercisability of all Incentive Equity, plus

	
 
	
(vii)
	
a period equal to the full length of the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options

	
 
	
(d)
	
Termination for Cause or Voluntary Termination by Executive.  If the Termination Event is termination by the Company for Cause pursuant to Section 6(c) or termination by Executive pursuant to Section 6(f), except for any Accrued Obligations, Executive shall not be entitled to receive severance or any other compensation or benefits after the last date of employment with the Company. If the termination is a Voluntary Termination by Executive, all of the Incentive Equity that is unvested as of the date of termination shall be forfeited for no consideration and Executive shall have the lesser of (i) one (1) year following the date of termination or (ii) the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options.  If the termination is for Cause, all of the Incentive Equity that is unvested as of the date of termination shall be forfeited for no consideration and, in the Company’s sole discretion, Executive may be granted the lesser of (i) one (1) year following the date of termination or (ii) the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options.  

	
 
	
(e)
	
Termination Upon Retirement.  If the Termination Event is due to the Retirement of Executive, Executive shall be entitled to receive, as soon as practicable following the date of termination:

	
 
	
(i)
	
any Accrued Obligations, plus 

	
 
	
(ii)
	
an amount equal to the Incentive Bonus paid or earned but unpaid to Executive in respect of the previous year, pro-rated for the period from the beginning of the then current year and ending on the date of termination, payable in a lump sum as soon as practicable following the date of such termination, but only if Executive retires effective as of the expiration of the Term of this Agreement, plus

	
 
	
(iii)
	
continued vesting all Incentive Equity, plus

	
 
	
(iv)
	
a period equal to the full length of the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options;

- 13 -

 

	
 
	
(f)
	
Change of Control. 

	
 
	
(i)
	
Special Payment.  If, at any time during the two (2) year period following a Change of Control (as defined in Section 7(f)(ii)), Executive's employment is terminated without Cause or by Executive for Good Reason, then instead of the payment set forth in subsection 7(c) Executive will receive:

	
 
	
(1)
	
Any Accrued Obligations, plus

	
 
	
(2)
	
an amount equal to two (2) times the Base Salary (which shall be the Base Salary as of the date of termination), payable in a lump sum as soon as practicable following the date of termination, plus 

	
 
	
(3)
	
the Pro Rated Bonus, plus 

	
 
	
(4)
	
an amount equal to two (2) times the Target Incentive Bonus  in respect of the then-current year, payable in a lump sum as soon as practicable following the date of termination, plus 

	
 
	
(5)
	
the continuation of all health benefits during the Severance Period, plus 

	
 
	
(6)
	
acceleration of vesting and exercisability of all Incentive Equity, plus 

	
 
	
(7)
	
a period equal to the full length of the remaining term (as set forth in the applicable grant notice) to exercise any vested stock options; 

	
 
	
(ii)
	
Change of Control Defined.  For purposes of this Section, the term “Change of Control” shall mean the occurrence of one or more of the following events: 

	
 
	
(1)
	
the consummation of a merger or consolidation of the Company with or into any other corporation or other entity in which holders of the Company’s voting securities immediately prior to such merger or consolidation will not, directly or indirectly, continue to hold at least a majority of the outstanding voting securities of the Company;

	
 
	
(2)
	
a sale, lease, exchange or other transfer (in one transaction or a related series of transactions) of all or substantially all of the Company’s assets;

- 14 -

 

	
 
	
(3)
	
the acquisition by any person or any group of persons, acting together in any transaction or related series of transactions, of such quantity of the Company’s voting securities as causes such person, or group of persons, to own beneficially, directly or indirectly, as of the time immediately after such transaction or series of transactions, 50% or more of the combined voting power of the voting securities of the Company other than as a result of 

	
 
	
(A)
	
an acquisition of securities directly from the Company or 

	
 
	
(B)
	
an acquisition of securities by the Company which by reducing the voting securities outstanding increases the proportionate voting power represented by the voting securities owned by any such person or group of persons to 50% or more of the combined voting power of such voting securities; or

	
 
	
(4)
	
a change in the composition of the Board of Directors within a two (2) year period such that a majority of the members of the Board of Directors are not Continuing Directors.  As used herein, the term “Continuing Directors” shall mean as of any date of determination, any member of the Board of Directors of the Company who 

	
 
	
(A)
	
was a member of Board of Directors of the Company immediately after the Effective Date of this Agreement, or 

	
 
	
(B)
	
was nominated for election or elected to the Company’s Board of Directors with the approval of, or whose election to the Board of Directors was ratified by, at least a majority of the Continuing Directors who were members of the Company’s Board of Directors at the time of that nomination or election;

provided, however, (i) that each such event shall also constitute a “change in control event” within the meaning of Treas. Reg. § 1.409A-3(i)(5)(i) and (ii) that in no case shall the public offering and sale of the Company’s Common Stock by its stockholders pursuant to a registered secondary offering or the voluntary or involuntary bankruptcy of the Company constitute a Change of Control.

	
 
	
(g)
	
Severance Period Defined.  For purposes of this Agreement, “Severance Period” shall mean the period beginning on the date of termination of Executive’s employment and ending on the date which is two (2) years thereafter.

	
 
	
(h)
	
Condition to Payment.  All payments and benefits due to Executive under this Section 7 which are not otherwise required by law shall be contingent upon (i)  delivery by Executive (or Executive’s beneficiary or estate), within 60 days of the effective date of termination, of an irrevocable separation agreement in such form as determined by the Company in its sole discretion, including a general release of all claims to the maximum extent permitted by law against the Company, its affiliates 

- 15 -

 

	
 
		
and its and their current and former stockholders, directors, employees and agents (in substantially the form attached as Exhibit A) and (ii) compliance by Executive with his obligations under any stockholder, restricted stock or other agreement to which the Company and Executive are a party; and further provided that if the 60 day period in clause (i) spans two calendar years, then no payment shall begin prior to January 1 of such second calendar year.

	
 
	
(i)
	
No Other Severance.  Executive hereby acknowledges and agrees that, other than the severance payments described in this Section 7, upon termination, Executive shall not be entitled to any other severance under any Company benefit plan or severance policy generally available to the Company’s employees or otherwise.

	
8.
	
Confidentiality.  

	
 
	
(a)
	
Executive agrees that Confidential Information was and shall be made available in connection with Executive’s employment by or consultancy with the Company.  Executive acknowledges that the Confidential Information that he develops or invents in connection with his employment by the Company or has obtained or will obtain in connection therewith is the property of the Company.  Executive agrees that he will not use any Confidential Information for his own benefit or for the benefit or any other person or entity or disclose any Confidential Information to any other person, except that Confidential Information may be disclosed: (i) to the extent required by applicable law, rule or regulation (including complying with any oral or written questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to which Executive is subject); provided that Executive gives the Company prompt notice of such requests, to the extent practicable, so that the Company may seek an appropriate protective order or similar relief (and Executive shall cooperate with such efforts by the Company at the Company’s expense, and shall in any event make only the minimum disclosure required by such law, rule or regulation unless Executive reasonably believes that other disclosure is necessary or advisable in order to avoid adverse consequences to Executive), (ii) if the prior written consent of the Board of Directors shall have been obtained, or (iii) to such Persons to the extent necessary in the reasonable judgment of Executive to perform his duties as an employee of the Company and, in his reasonable judgment, such disclosure is not harmful to the Company.

	
 
	
(b)
	
“Confidential Information” shall mean any information relating to the business or affairs of the Company or, as provided below, any of its affiliates, including, but not limited to, customer identities, potential customers, employees, business and financial strategies, methods or practices, business plans, financial models, proposals, documents or materials owned, developed or possessed by the Company, profit margins or other proprietary information used by the Company or any of its affiliates; provided that Confidential Information shall not include (i) information that is or becomes generally known to the public other than as a result of a disclosure by Executive in violation of this Agreement, (ii) information that was known to Executive prior to becoming an employee of the Company or (iii) information which becomes known to Executive following a Termination Event, through no wrongful act of Executive, by disclosure from a third party unless Executive has reason to 

- 16 -

 

	
 
		
believe that such third party is under an obligation or duty of confidentiality or secrecy with respect to such information or is an employee, officer, director or stockholder of the Company; and provided, further, that (A) in such case where any affiliate has a separate confidentiality requirement or agreement to which the Company is subject, such confidentiality requirement or agreement shall supersede the requirements herein and (B) unless a confidentiality requirement or agreement referred to in the preceding clause (A) exists with respect to an affiliate, Confidential Information for purposes of this definition as it relates to affiliates shall be deemed to include only Confidential Information of affiliates, the employees or consultants of which, are participants or observers at meetings of the Board of Directors of the Company.

	
9.
	
Restrictive Covenants.

	
 
	
(a)
	
During the Term and for a period of two (2) years following the cessation of Executive’s employment with the Company for any reason (whether initiated by the Company or by Executive, and whether during or following the expiration of the Term of this Agreement), Executive shall not, directly or indirectly 

	
 
	
(i)
	
cause, solicit, induce or encourage any employees, consultants or contractors of the Company to leave such employment or service, or hire, employ or otherwise engage any such individual, or 

	
 
	
(ii)
	
cause, induce or encourage any customer, supplier or licensor of the Company, or any other Person who has a material business relationship with the Company, to terminate or modify any such relationship.

	
 
	
(b)
	
During the Term and for a period of one (1) years following cessation of Executive’s employment with the Company for any reason (whether initiated by the Company or by Executive, and whether during or following the expiration of the Term of this Agreement) Executive shall not, directly or indirectly alone or as a partner, officer, director, shareholder, member, sole proprietor, employee or consultant of any other firm or entity, personally engage or participate in any Restricted Business, as such term is defined below, as a material portion of his responsibilities. 

	
 
	
(c)
	
The parties hereto agree that, if any court of competent jurisdiction in a final nonappealable judgment determines that a specified time period, a specified business limitation or any other relevant feature of this Section 9 is unreasonable, arbitrary or against public policy, then a lesser time period, business limitation or other relevant feature which is determined to be reasonable, not arbitrary and not against public policy may be enforced against the applicable party.

	
 
	
(d)
	
“Restricted Business” shall mean any of the following: 

	
 
	
(i)
	
the business of directly extending senior loans to middle-market companies as targeted by the Company at the effective date of Executive’s cessation of employment with the Company;

- 17 -

 

	
 
	
(ii)
	
providing real estate financing of the types offered by the Company at the effective date of the Executive’s cessation of employment with the Company;

	
 
	
(iii)
	
extending asset based loans or investing in asset based securities with financial products of the types then offered by the Company at the effective date of Executive’s cessation of employment with the Company; or

	
 
	
(iv)
	
any other material line of business engaged in by the Company, and in which Executive materially participated or obtained Confidential Information about, as of the effective date of Executive’s cessation of employment with the Company. 

	
 
	
(e)
	
The Board of Directors of the Company, or following a Change of Control the senior management team of the acquiring company, shall, in its sole discretion, have the authority and discretion to waive any provision of this Section 9 or to make a  determination that a business is not a Restricted Business for purposes hereof. 

	
10.
	
Injunctive Relief.  The parties acknowledge and agree that restrictions contained in Sections 8 and 9 of this Agreement are necessary for the protection of the business and goodwill of the Company and are considered by Executive to be reasonable for such purpose.  Executive agrees that any breach or threatened breach of Sections 8 or 9 will cause the Company substantial and irrevocable damage that is difficult to measure.  Therefore, in the event of any such breach or threatened breach, Executive agrees that the Company, in addition to such other remedies which may be available, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right to specific performance of the provisions of Sections 8 and 9 of this Agreement and Executive hereby waives the adequacy of a remedy at law as a defense to such relief. 

	
11.
	
Survival; Conflicting Terms.  The provisions of Section 7, Section 8 and Section 9, and all related enforcement provisions, shall survive any termination of this Agreement and remain applicable according to their terms (whether under Section 6 or as a result of the expiration of the Term).  Section 7(f) shall survive a Change of Control regardless of whether this Agreement is terminated in connection with a Change of Control or expires by its terms following a Change of Control.  In the event of a conflict between the terms of this Agreement and any Incentive Equity documentation, the terms of this Agreement regarding the Incentive Equity shall prevail.  

	
12.
	
Indemnification.  If Executive is a party to any action, suit or proceeding by reason of the fact that Executive is or was an officer or agent of the Company (a “Proceeding”), the Company will indemnify Executive to the fullest extent permitted by the laws of the state of the Company’s incorporation, in effect at that time, or the certificate of incorporation and bylaws of the Company, whichever affords the greater protection to Executive.  

	
13.
	
Advancement of Expenses.  The Company shall advance, to the extent not prohibited by law, expenses incurred by Executive in connection with any Proceeding not initiated by the Executive, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.  The Executive shall qualify for 

- 18 -

 

		
advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Executive undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined by the Company, in its sole discretion that Executive is not entitled to be indemnified by the Company.  No other form of undertaking shall be required other than the execution of this Agreement.  This Section 13 shall not apply to any claim made by Executive for which indemnity is excluded by applicable law.

	
14.
	
Withholding Taxes.  Executive acknowledges and agrees that the Company may directly or indirectly withhold from any payments under this Agreement all federal, state, city or other taxes that will be required pursuant to any law or governmental regulation.

	
15.
	
Section 409A.  To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date (“Section 409A Guidance”).  Notwithstanding any provision of the Agreement to the contrary, (i) if, at the time of Executive’s separation of service from the Company, Executive is a “specified employee” as defined in 409A Guidance and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such separation of service is necessary in order to prevent any accelerated or additional tax under 409A Guidance, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following Executive’s separation of service with the Company (or the earliest date as is permitted under Section 409A), with any payments that otherwise would have been paid during the six-month period accumulating and paid to Executive in a lump sum on the first business day following the expiration of such six-month period and the remaining payments, if any, due after the six-month period following Executive’s separation from service paid in accordance with the terms of the applicable provision of this Agreement and (ii) if any other payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A, the Company may (a) adopt such amendments to the Agreement, including amendments with retroactive effect, that the Company determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Agreement and/or (b) take such other actions as the Company determines necessary or appropriate to comply with the requirements of 409A Guidance.  The Company shall consult with Executive in good faith regarding the implementation of this Section 15; provided that none of the Company, any of its affiliates, or any of their employees or representatives shall have any liability to Executive with respect thereto.  Each payment under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A of the Code and all payments payable as soon as practicable following a date of termination will be paid prior to the 15th day of the third month following the date such payment becomes due hereunder.  To the extent any reimbursement or in-kind benefit due to Executive under this Agreement constitutes “deferred compensation” under Section 409A of the Code, any such reimbursement or in-kind benefit shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  

- 19 -

 

	
16.
	
Effect of Prior Agreements.  This Agreement constitutes the sole and entire agreement and understanding between Executive and the Company with respect to the matters covered hereby and thereby, and there are no other promises, agreements, representations, warranties or other statements between Executive and the Company in respect to such matters not expressly set forth in this Agreement.  This Agreement supersedes all prior and contemporaneous agreements, understandings or other arrangements, whether written or oral, concerning the subject matter hereof, except that the terms of the Plan and any grant documents relating to any pre-existing Incentive Equity shall remain in full force and effect following Executive’s execution of this Agreement.

	
17.
	
Notices.  Any notice required, permitted, or desired to be given pursuant to any of the provisions of this Agreement shall be deemed to have been sufficiently given or served for all purposes when telecopied, when delivered by hand or received by registered or certified mail, postage prepaid, or by nationally reorganized overnight courier service addressed to the party to receive such notice at the following address or any other address substituted therefore by notice pursuant to these provisions:

If to the Company, at:

 

NewStar Financial, Inc.

500 Boylston Street

Suite 1250

Boston, MA 02116

Attention: Jennifer H. Muldoon

Facsimile: (617) 830-0010

 

If to Executive, at:

 

John J. Frishkopf

146 West Newton Street 

Boston, MA 02118

 

	
18.
	
Assignability.  The obligations of Executive may not be delegated and Executive may not, without the Company’s written consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this Agreement or any interest herein.  Any such 

- 20 -

 

		
attempted delegation or disposition shall be null and void and without effect.  The Company and Executive agree that this Agreement and all of the Company’ rights and obligations hereunder may be assigned or transferred by the Company to and may be assumed by and become binding upon and may inure to the benefit of any affiliate of or successor to the Company.  The term “successor” shall mean, with respect to the Company, any other corporation or other business entity which, by merger, consolidation, purchase of the assets, or otherwise, acquires all or a material part of its assets.  Any assignment by either of the Company of its rights or obligations hereunder to any affiliate of or successor of the Company shall not be a termination of employment for purposes of this Agreement.

	
19.
	
Modification.  This Agreement may not be modified or amended except in writing signed by the parties.  No term or condition of this Agreement will be deemed to have been waived except in writing by the party charged with waiver.  A waiver will operate only as to the specific term or condition waived and will not constitute a waiver for the future or act on anything other than that which is specifically waived.

	
20.
	
Governing Law.  This Agreement has been executed and delivered in the Commonwealth of Massachusetts and its validity, interpretation, performance and enforcement will be governed by the laws of that state applicable to contacts made and to be performed entirely within that state.

	
21.
	
Severability.  All provisions of this Agreement are intended to be severable.  In the event any provision or restriction contained herein is held to be invalid or unenforceable in any respect, in whole or in part, such finding will in no way affect the validity or enforceability of any other provision of this Agreement.  The parties hereto further agree that any such invalid or unenforceable provision will be deemed modified so that it will be enforced to the greatest extent permissible under law, and to the extent that any court of competent jurisdiction determines any restriction herein to be unreasonable in any respect, such court may limit this Agreement to render it reasonable in the light of the circumstances in which it was entered into and specifically enforce this Agreement as limited.

	
22.
	
No Waiver.  No course of dealing or any delay on the part of the Company or Executive in exercising any rights hereunder shall operate as a waiver of any such rights.  No waiver of any default or breach of this Agreement shall be deemed a continuing waiver of any other breach or default.

	
23.
	
Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original by the party executing the same but all of which together will constitute one and the same instrument.  For the convenience of the parties, facsimile and pdf signatures shall be accepted as originals.

	
24.
	
Binding Arbitration.

	
 
	
(a)
	
Binding Arbitration.  Except as expressly set forth in this Section, in the event any dispute should arise between the Parties with respect to any of the terms and conditions of this Agreement and/or Executive’s employment with the Company, the parties agree that any and all controversies, claims or disputes between them, including but not limited to any claim arising under tort or contract law and any claim 

- 21 -

 

	
 
		
arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans with Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the Rehabilitation Act, the Age Discrimination in Employment Act, the Massachusetts Fair Employment Practices Act (G.L. c. 151B), the Massachusetts Wage Act or any other local, state or federal statute, regulation or policy in any way relating to rights of employees, shall be submitted to final and binding arbitration, to be held in Boston, Massachusetts in accordance with the Employment Arbitration Rules and Procedures, including the Optional Appeal Procedure, as established by JAMS or its successor (“JAMS”) and as in effect at the time the request for arbitration is made (the “Arbitration Rules”), and to be administered by JAMS.  Issues of arbitrability shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and not state law.  The arbitration shall be conducted before a single neutral arbitrator appointed in accordance with the Arbitration Rules.  The arbitrator may award any form of remedy or relief that would otherwise be available in court (including equitable relief such as injunctions, temporary restraining orders, etc.), consistent with applicable law.  Unless the parties agree otherwise, the neutral arbitrator and the members of any appeal panel shall be former or retired judges or justices of any Massachusetts state or federal court with experience in matters involving employment disputes.  The party initiating arbitration will be responsible for paying the filing fee for the arbitration required by the arbitration service provider; provided, however, Executive’s payment of any such filing fee shall not exceed the filing fee for a civil action in the Massachusetts state court system and the Company shall reimburse Executive for any such fee in excess of that amount.  The Company will pay the arbitrator's fee to the extent required by law.  Any award pursuant to said arbitration shall be accompanied by a detailed written opinion of the arbitrator setting forth the reason for the award.  Executive knows that options other than arbitration, such as state and federal administrative and judicial remedies, are available to resolve any discrimination claim, and despite such knowledge Executive agrees to arbitrate all claims pursuant to this Section.  Executive understands that by signing this Agreement, he is waiving, and will forever be precluded from asserting, his right to utilize statutory administrative procedures and to seek judicial remedies with respect to such claims.    

	
 
	
(b)
	
Exceptions.  The Parties agree not to institute any litigation or proceedings against each other in connection with this Agreement except as provided in this Section, provided, however, that the Company shall have the right to seek injunctive relief or other equitable remedies in a court of competent jurisdiction as provided in Section 10 or with regard to any other Restrictive Covenant (e.g., non-disclosure, non-competition, non-solicitation, etc.) between the Company and Executive.  Any such injunctive relief or other equitable remedies shall be sought exclusively in any federal or state court of competent jurisdiction in the Commonwealth of Massachusetts, and both parties consent to the exclusive jurisdiction of the state and federal courts of Massachusetts for such purposes.  Moreover, nothing in this Section shall be construed to preclude Executive from participating or cooperating in any investigation or proceeding conducted by the Massachusetts Commission Against Discrimination, the Equal Employment Opportunity Commission or any other administrative agency.  However, in the event that a charge or complaint is filed against the Company with any administrative agency or in the event of an authorized 

- 22 -

 

	
 
		
investigation, charge or lawsuit filed against the Company by any administrative agency, Executive expressly waives and shall not accept any award or damages from such a proceeding but instead will pursue any claim for such damages in an arbitration proceeding as set forth in this Section.   

	
 
	
(c)
	
Fees and Expenses.  Executive or his beneficiaries shall pay all attorney’s fees and expenses incurred by Executive or his beneficiaries in resolving any claim or dispute arising out of or relating to this Agreement.  If it is finally determined that Executive or his beneficiaries prevailed with respect to such claim or dispute, the Company shall reimburse all attorney’s fees and expenses incurred by Executive.

	
 
	
(d)
	
Confidentiality.  The parties will keep confidential, and will not disclose to any person, except as may be required by law, the existence of any controversy under this Section 24, the referral of any such controversy to arbitration or the status or resolution thereof.  In addition, the confidentiality restrictions set forth in Section 8 shall continue in full force and effect.

	
25.
	
Acknowledgment.  Executive acknowledges that before entering into this Agreement, Executive has had the opportunity to consult with any attorney or other advisor of Executive’s choice, and that this provision constitutes advice from the Company to do so if Executive chooses.  Executive further acknowledges that Executive has entered into this Agreement of Executive’s own free will, and that no promises or representations have been made to Executive by any person to induce Executive to enter into this Agreement other than the express terms set forth herein.  Executive further acknowledges that Executive has read this Agreement and understands all of its terms, including the waiver of rights set forth in Section 24. 

 

- 23 -

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day written above.

- 24 -

 

Exhibit B

 

 

LOCK UP AGREEMENT (the “Agreement”), dated as of December 13, 2006, among NewStar Financial, Inc., a Delaware corporation (together with its subsidiaries, the “Company”) and the management stockholders signatory hereto (the “Management Stockholders” and each a “Management Stockholder”).

WHEREAS, each of the Management Stockholders has been issued shares of the Company’s restricted stock (“Restricted Stock”) pursuant to a restricted stock agreement (a “Restricted Stock Agreement”) and granted options to purchase shares of the Company’s common stock (“Options” and, together with the Restricted Stock, “Incentive Securities”);

 

WHEREAS, each of the Management Stockholders is bound by the terms of a covenant not to compete and a covenant not to solicit as set forth in the applicable Restricted Stock Agreement (the “Restrictive Covenants”);   

 

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows:

1.Definitions.  

(a)“Transfer” means to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer, whether directly or indirectly, or agree or commit to do any of the foregoing.

(b)“Vested Incentive Securities” means Incentive Securities that, in the case of Restricted Stock, are no longer subject to forfeiture pursuant to a Restricted Stock Agreement and, in the case of Options, are vested.

2.Prohibited Transfers.  

(a) For a period of one (1) year following the expiration of the underwriter’s lock-up in connection with the Company’s initial public offering, such Management Stockholder shall not Transfer more than ten percent (10%) of the Vested Incentive Securities then held by such Management Stockholder and, after such one (1) year period and during the Restricted Period (as defined below),  shall not Transfer more than seventy-five percent (75%) of the Vested Incentive Securities then held by such Management Stockholder.  For purposes of this agreement, the ten percent (10%) or seventy-five percent (75%), as applicable, of Vested Incentive Securities that may be Transferred shall be referred to as the “Transferable Vested Incentive Securities”.  The number of shares constituting Transferable Vested Incentive Securities shall be calculated after giving effect to any transfer by a Management Stockholder to the Company of any Incentive Securities for the purpose of satisfying withholding taxes, as permitted by and in accordance with, the Restricted Stock Agreement.

- 25 -

 

(b)In connection with the termination of such Management Stockholder’s employment with the Company, such Management Stockholder hereby agrees that, if the Board of Directors of the Company, in its sole discretion, at any time during the one year period following the date of termination of employment (the “Restricted Period”) and for a period of ninety (90) days thereafter, determines that the Management Stockholder has violated or breached the Restrictive Covenants at any time prior to the expiration of the Restricted Period, then all of such Management Stockholder’s Vested Incentive Securities that, as of the date of breach of such Restrictive Covenants, are not Transferable Vested Incentive Securities, shall be forfeited for no consideration.

3.Administration.  The Incentive Securities constituting the ninety percent (90%) or twenty-five percent (25%), as applicable, of Incentive Securities that cannot be transferred by a Management Stockholder pursuant to this Agreement shall be held, for such Management Stockholder’s account, by Merrill Lynch in its capacity as the administrator of the Company’s equity award programs, until the termination of this Agreement. 

4.Miscellaneous.

(a)Termination of Agreement.  This Agreement and the Management Stockholder’s obligations hereunder shall terminate and have no further force and effect upon a Change of Control (as defined in the applicable Restricted Stock Agreement).

(b)Successor and Assigns. This Agreement is intended to bind and inure to the benefit of each of the Management Stockholders and their respective successors, assigns, heirs, executors, administrators and representatives.

(c)Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. 

(d)Severability.  Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(e)Amendments.  This Agreement may not be modified, amended or supplement except in writing signed by each of the parties hereto.

(f)Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of Delaware.

- 26 -

 

Exhibit C

 

 

LOCK UP AGREEMENT (the “Agreement”), dated as of March 18, 2009 among NewStar Financial, Inc., a Delaware corporation (together with its subsidiaries, the “Company”) and the management stockholders signatory hereto (the “Management Stockholders” and each a “Management Stockholder”).

WHEREAS, on the date hereof each of the Management Stockholders has been granted options to purchase shares of the Company’s common stock (“Options”), and as a condition to such grant, the Compensation Committee of the Company has imposed certain restrictions on the transfer of the proceeds of the Options upon exercise;

 

WHEREAS, each of the Management Stockholders is bound by the terms of a covenant not to compete and a covenant not to solicit as set forth in the Management Stockholder’s applicable Employment Agreement (the “Restrictive Covenants”);   

 

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows:

1.Definitions.  

(a)“Proceeds” means proceeds received from an exercise of all or a portion of Options at the time of such exercise, net of all taxes.

(b)“Restricted Period” means the period from the date hereof until the date one year after the date of termination of employment of the Management Stockholder. 

(c)“Transfer” means to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer, whether directly or indirectly, or agree or commit to do any of the foregoing.

2.Prohibited Transfers.  

(a) During the Restricted Period, each Management Stockholder shall not Transfer more than fifty percent (50%) of the Proceeds from Options exercised by such Management Stockholder during such period (the “Restricted Proceeds”).  Notwithstanding the foregoing, nothing in this agreement shall limit a Management Stockholder’s ability to Transfer the Transferable Proceeds.  For purposes of this agreement, the remaining 50% of Proceeds from Options exercised by such Management Stockholder during such period that may be Transferred shall be referred to as the “Transferable Proceeds”.  

(b)In connection with the termination of such Management Stockholder’s employment with the Company, such Management Stockholder hereby agrees that, if the Board of Directors of the Company, in its sole discretion, at any time during the Restricted Period and for a period of 

- 27 -

 

ninety (90) days thereafter, determines that the Management Stockholder has violated or breached the Restrictive Covenants at any time prior to the expiration of the Restricted Period, then all of such Management Stockholder’s Restricted Proceeds shall be forfeited for no consideration.

3.Administration.  The Restricted Proceeds that cannot be Transferred by a Management Stockholder pursuant to this Agreement shall be held, for such Management Stockholder’s account, by Merrill Lynch in its capacity as the administrator of the Company’s equity award programs, until the termination of this Agreement. 

4.Miscellaneous.

(a)Termination of Agreement.  This Agreement and the Management Stockholder’s obligations hereunder shall terminate and have no further force and effect with respect to each Management Stockholder upon the earlier of (i) ninety (90) days after such Management Stockholder’s Restricted Period ends, or (ii) upon a Change of Control (as defined in the applicable Management Stockholder’s Employment Agreement).

(b)Successor and Assigns. This Agreement is intended to bind and inure to the benefit of each of the Management Stockholders and their respective successors, assigns, heirs, executors, administrators and representatives.

(c)Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. 

(d)Severability.  Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(e)Amendments.  This Agreement may not be modified, amended or supplement except in writing signed by each of the parties hereto.

(f)Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of Delaware.

 

 

4817-4095-9285, v.  1

- 28 -Exhibit 10.1

 

Execution Version

 

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

 

among

 

ARCHROCK, INC.

 

ARCHROCK SERVICES, L.P.

 

ARCHROCK SERVICES LEASING LLC

 

ARCHROCK GP LP LLC

 

ARCHROCK GP LLC

 

ARCHROCK MLP LP LLC

 

ARCHROCK GENERAL PARTNER, L.P.

 

ARCHROCK PARTNERS OPERATING LLC

 

ARCHROCK PARTNERS LEASING LLC

 

and

 

ARCHROCK PARTNERS, L.P.

 

dated as of

 

October 31, 2016

 

 

TABLE OF CONTENTS

 

	
ARTICLE I   CONTRIBUTIONS, CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS
    	
1
    
	
 
    	
 
    
	
1.1
    	
Transactions
    	
1
    
	
1.2
    	
Transaction Taxes
    	
2
    
	
1.3
    	
Proration of 2016 Ad   Valorem Taxes
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II   CLOSING
    	
3
    
	
 
    	
 
    
	
2.1
    	
Closing
    	
3
    
	
2.2
    	
Deliveries at the   Closing
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE III   REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
    	
4
    
	
 
    	
 
    
	
3.1
    	
Organization and   Existence
    	
4
    
	
3.2
    	
Authority and Approval
    	
4
    
	
3.3
    	
No Conflict
    	
4
    
	
3.4
    	
Consents
    	
5
    
	
3.5
    	
Laws and Regulations;   Litigation
    	
5
    
	
3.6
    	
No Adverse Changes
    	
6
    
	
3.7
    	
Employee Benefits
    	
6
    
	
3.8
    	
Management Projections;   Financial and Operational Information
    	
6
    
	
3.9
    	
Environmental Matters
    	
6
    
	
3.10
    	
Contracts
    	
7
    
	
3.11
    	
Equipment
    	
7
    
	
3.12
    	
Sufficiency of Assets
    	
8
    
	
3.13
    	
Licenses; Permits
    	
8
    
	
3.14
    	
Insurance
    	
8
    
	
3.15
    	
Brokerage Arrangements
    	
8
    
	
3.16
    	
Investment
    	
8
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   REPRESENTATIONS AND WARRANTIES OF THE RECIPIENTS
    	
9
    
	
 
    	
 
    
	
4.1
    	
Organization and   Existence
    	
9
    
	
4.2
    	
Authority and Approval
    	
9
    
	
4.3
    	
Delivery of Opinion
    	
9
    
	
4.4
    	
Brokerage Arrangements
    	
9
    
	
4.5
    	
Newly Issued Common   Units
    	
10
    

 

ii

 

	
ARTICLE V   CONDITIONS TO CLOSING
    	
10
    
	
 
    	
 
    
	
5.1
    	
Conditions to Each   Party’s Obligation to Effect the Transactions
    	
10
    
	
5.2
    	
Conditions to the   Obligation of the Recipients
    	
10
    
	
5.3
    	
Conditions to the   Obligation of the Contributors
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   COVENANTS, ETC.
    	
11
    
	
 
    	
 
    
	
6.1
    	
Regulatory Filings;   Consents
    	
11
    
	
6.2
    	
Independent   Investigation
    	
12
    
	
6.3
    	
General
    	
12
    
	
6.4
    	
Revisions to Schedules   A and B
    	
12
    
	
6.5
    	
Inadvertent Transfers   of, or Failure to Transfer, Assets
    	
12
    
	
6.6
    	
Nasdaq Listing
    	
13
    
	
6.7
    	
Recipient’s Obligations
    	
13
    
	
6.8
    	
Contributor’s   Obligations
    	
13
    
	
6.9
    	
Conduct and   Preservation of the Business
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   INDEMNIFICATION
    	
13
    
	
 
    	
 
    
	
7.1
    	
Indemnification of the   Contributors and Other Parties
    	
13
    
	
7.2
    	
Indemnification of the   Recipients and other Parties
    	
14
    
	
7.3
    	
Demands
    	
14
    
	
7.4
    	
Right to Contest and   Defend
    	
14
    
	
7.5
    	
Cooperation
    	
15
    
	
7.6
    	
Right to Participate
    	
15
    
	
7.7
    	
Payment of Damages
    	
15
    
	
7.8
    	
Limitations on   Indemnification
    	
16
    
	
7.9
    	
Survival
    	
16
    
	
7.10
    	
Sole Remedy
    	
16
    
	
7.11
    	
Express Negligence Rule
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   TERMINATION
    	
17
    
	
 
    	
 
    
	
8.1
    	
Events of Termination
    	
17
    
	
8.2
    	
Effect of Termination
    	
18
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   MISCELLANEOUS
    	
18
    
	
 
    	
 
    
	
9.1
    	
Transfer Restrictions
    	
18
    
	
9.2
    	
Registration Rights of   MLP LP LLC and its Affiliates
    	
18
    
	
9.3
    	
Expenses
    	
21
    

 

iii

 

	
9.4
    	
Right of Offset
    	
21
    
	
9.5
    	
Notices
    	
21
    
	
9.6
    	
Governing Law
    	
22
    
	
9.7
    	
Public Statements
    	
22
    
	
9.8
    	
Form of Payment
    	
22
    
	
9.9
    	
Entire Agreement;   Amendments and Waivers
    	
23
    
	
9.10
    	
Binding Effect and   Assignment
    	
23
    
	
9.11
    	
Severability
    	
23
    
	
9.12
    	
Interpretation
    	
23
    
	
9.13
    	
Headings and Schedules
    	
23
    
	
9.14
    	
Counterparts
    	
23
    

 

EXHIBITS AND SCHEDULES

 

	
Exhibit A
    	
 
    	
Archrock Leasing Bill   of Sale
    
	
Exhibit B
    	
 
    	
OpCo Bill of Sale
    
	
Exhibit C
    	
 
    	
APLP Bill of Sale
    
	
Exhibit D
    	
 
    	
APLP Operating Bill of   Sale
    
	
Exhibit E
    	
 
    	
First Amendment to   Fourth Amended and Restated Omnibus Agreement
    
	
Schedule A
    	
 
    	
Compression Equipment
    
	
Schedule B
    	
 
    	
Compression Agreements
    
	
Schedule 3.10
    	
 
    	
Contracts (Breach, Enforceability   and Refund)
    
	
Schedule 3.11
    	
 
    	
Compression Equipment   (Permitted Liens)
    
	
Schedule 3.14
    	
 
    	
Insurance
    

 

iv

 

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

 

This Contribution, Conveyance and Assumption Agreement (this “Agreement”) is made and entered into effective as of October 31, 2016 by and among Archrock, Inc., a Delaware corporation (“AROC”), Archrock Services, L.P., a Delaware limited partnership (“OpCo”), Archrock Services Leasing LLC, a Delaware limited liability company (“Archrock Leasing”), Archrock GP LP LLC, a Delaware limited liability company (“LP LLC”), Archrock GP LLC, a Delaware limited liability company (“GP LLC”), Archrock MLP LP LLC, a Delaware limited liability company (“MLP LP LLC”), Archrock General Partner, L.P., a Delaware limited partnership (“GP”), Archrock Partners Operating LLC, a Delaware limited liability company (“APLP Operating”), Archrock Partners Leasing LLC, a Delaware limited liability company (“APLP Leasing”), and Archrock Partners, L.P., a Delaware limited partnership (“APLP”).

 

RECITALS:

 

WHEREAS, at the Closing (as defined below), each of the events and transactions set forth in Section 1.1 below shall occur; and

 

WHEREAS, the Contributors (as defined below) desire to contribute the Assets (as defined below) to APLP in exchange for an aggregate consideration of $85.0 million, consisting of (i) a number of common units representing limited partner interests in APLP (the “New Common Units”) to be issued to MLP LP LLC and (ii) a number of general partner units in APLP (the “New GP Units”) to be issued to GP to maintain its level of general partner interest in APLP, in each case at a per APLP common unit price equal to the quotient of (i) the volume weighted daily average price of the APLP common units for each of the thirty (30) trading days ending one trading day prior to the Closing Date, as reported on the NASDAQ Global Select Market (or any applicable successor exchange) and (2) thirty (30).

 

NOW, THEREFORE, in consideration of the mutual undertakings and agreements contained in this Agreement, the parties hereto agree as follows:

 

ARTICLE I
 CONTRIBUTIONS, CONVEYANCES, ACKNOWLEDGMENTS AND DISTRIBUTIONS

 

1.1                               Transactions.  Pursuant to the terms hereof, each of the following transactions (collectively, the “Transactions”) is occurring as of the Closing Date:

 

(a)                                 Archrock Leasing sells to OpCo the compression equipment set forth on Schedule A (the “Compression Equipment”) and in exchange the balance under the existing revolving note, dated October 1, 2007, from Archrock Leasing in favor of OpCo is reduced by an amount equal to the net book value of the Compression Equipment as of the Closing Date, all pursuant to and in accordance with that certain Bill of Sale between Archrock Leasing and OpCo in the form set forth as Exhibit A (the “Archrock Leasing Bill of Sale”);

 

(b)                                 OpCo contributes to APLP (i) the master agreements and compression services agreements set forth on Schedule B (the “CSAs”), and (ii) the Compression Equipment (the items described in clauses (i) and (ii) together being referred to herein as the “Assets”) (of

 

 

which Assets (a) an undivided 1.985107331150% interest shall be deemed contributed to LP LLC, by LP LLC to GP and by GP to APLP, (b) an undivided .000019851272% interest shall be deemed contributed to GP LLC, by GP LLC to GP and by GP to APLP and (c) an undivided 98.014872817578% interest shall be deemed contributed to MLP LP LLC and by MLP LP LLC to APLP) in exchange for the following: (A) APLP’s issuance of the New Common Units to MLP LP LLC, and (B) APLP’s issuance of the New GP Units to GP in consideration of GP maintaining its current level of general partner interest in APLP), all pursuant to and in accordance with that certain Bill of Sale between OpCo and APLP in the form set forth as Exhibit B (the “OpCo Bill of Sale”);

 

(c)                                  APLP sells the Assets to APLP Operating in exchange for an increase in the balance under the existing revolving note dated July 26, 2010 from APLP Operating in favor of APLP in an amount equal to the net book value of the Compression Equipment as of the Closing Date pursuant to and in accordance with that certain Bill of Sale between APLP and APLP Operating dated as of the Closing Date in the form set forth as Exhibit C (the “APLP Bill of Sale”);

 

(d)                                 APLP Operating sells the Compression Equipment to APLP Leasing, and in exchange the balance under the existing revolving note, dated July 30, 2008, from APLP Leasing in favor of APLP Operating is increased by an amount equal to the net book value of the Compression Equipment as of the Closing Date, all pursuant to and in accordance with that certain Bill of Sale between APLP Operating and APLP Leasing dated as of the Closing Date in the form set forth as Exhibit D (the “APLP Operating Bill of Sale”); and

 

(e)                                  MLP LP LLC and GP hereby agree that they will not be entitled to, and will not receive, a cash distribution relating to the quarter ended September 30, 2016 in respect of the New Common Units, the New GP Units or the Incentive Distribution Rights (as defined in the APLP limited partnership agreement) related to such New Common Units.

 

1.2                               Transaction Taxes.  All sales, use, transfer, filing, recordation, registration and similar taxes and fees arising from or associated with the transactions contemplated hereunder other than taxes based on income (“Transaction Taxes”), shall be borne 50% on a joint and several basis by Archrock Leasing and OpCo (each a “Contributor” and, together, the “Contributors”) and 50% by APLP.  To the extent under applicable law the transferee is responsible for filing tax returns in respect of Transaction Taxes, APLP shall prepare and file all such returns.  The parties shall provide such certificates and other information and otherwise cooperate to the extent reasonably required to minimize Transaction Taxes.  The party that is not responsible under applicable law for paying the Transaction Taxes shall pay its share of the Transaction Taxes to the responsible party prior to the due date of such taxes.

 

1.3                               Proration of 2016 Ad Valorem Taxes.  Ad valorem taxes relating to the Equipment for the 2016 year shall be prorated on a daily basis between APLP Leasing on the one hand and Archrock Leasing on the other hand, with Archrock Leasing responsible for the prorated portion of such taxes for the period (for purposes of this Section 1.3, “period” means the period beginning on the assessment date for ad valorem taxes through the day before the next assessment date for such taxes) up to and including the Closing Date and APLP Leasing responsible for the prorated portion of such taxes after the Closing Date.  The party that receives

 

2

 

the ad valorem tax billing (the “Billed Party”) shall provide a copy of such billing to the other party together with a calculation of the prorated ad valorem taxes owed by each party. The party that did not receive the ad valorem tax billing shall pay its prorated portion of the ad valorem taxes to the Billed Party prior to the due date of such taxes and the Billed Party shall be responsible for the timely payment of the ad valorem taxes to the taxing authorities.

 

ARTICLE II
 CLOSING

 

2.1                               Closing.  The closing (the “Closing”) of the Transactions will be held at the offices of Latham & Watkins LLP, 811 Main Street, Suite 3700, Houston, Texas at 9:00 a.m. (Houston, Texas time) on the later of (a) the first business day after the conditions set forth in Article V have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date) and (b) such other date and time as to which the parties agree in writing, in each case subject to the rights of the parties under Article V and Article VIII. The date on which the Closing occurs is herein referred to as the “Closing Date.” The Closing shall be deemed effective as of 12:01 a.m. (Houston, Texas time) on the Closing Date.

 

2.2                               Deliveries at the Closing.  At the Closing:

 

(a)                                 Each party will execute and deliver the bills of sale described in Section 1.1 to which it is a party;

 

(b)                                 APLP will issue the New Common Units to MLP LP LLC and the New GP Units to GP;

 

(c)                                  The Contributors will deliver to APLP a certificate (i) stating that each of the Contributors is not a foreign corporation, foreign partnership, foreign trust or foreign estate, (ii) providing their U.S. Employer Identification Numbers and (iii) providing their addresses, all pursuant to Section 1445 of the Internal Revenue Code of 1986, as amended;

 

(d)                                 The Contributors will deliver to the Recipients a certificate dated the Closing Date and signed by an authorized officer of each of the Contributors confirming the matters set forth in Section 5.2(a) and (b);

 

(e)                                  The Recipients will deliver to the Contributors a certificate dated the Closing Date and signed by an authorized officer of each of the Recipients confirming the matters set forth in Section 5.3(a) and (b);

 

(f)                                   Each party will execute and deliver all other documents, certificates and other instruments required to be delivered or caused to be delivered by it pursuant to this Agreement; and

 

(g)                                  Each party to the Fourth Amended and Restated Omnibus Agreement, dated as of November 3, 2015, by and among AROC, OpCo, GP LLC, GP, APLP and APLP Operating (the “Omnibus Agreement”) will execute the First Amendment thereto in the form set forth as Exhibit E.

 

3

 

ARTICLE III
 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS

 

Each of the Contributors hereby represents and warrants, jointly and severally, to APLP, APLP Operating and APLP Leasing (collectively, the “Recipients”) that, except as disclosed in the forms, documents and reports filed or furnished by AROC with the U.S. Securities and Exchange Commission (the “SEC”) between January 1, 2016 and the Closing Date, as of the date hereof and as of the Closing Date (except for such representations and warranties expressly made as of a specified date):

 

3.1                               Organization and Existence.  Each of the Contributors and MLP LP LLC has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation, with full limited liability company or limited partnership power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted.  Each of the Contributors and MLP LP LLC is duly qualified to transact business and is in good standing as a limited liability company or limited partnership in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a material adverse effect on the business, financial or operating condition or results of operations of the Business (defined herein) or the Assets, taken as a whole (a “Material Adverse Effect”).

 

3.2                               Authority and Approval.  Each of the Contributors and MLP LP LLC has the limited liability company or limited partnership power and authority to execute and deliver this Agreement, to consummate the Transactions and to perform all the terms and conditions hereof to be performed by it.  The execution and delivery by the Contributors and MLP LP LLC of this Agreement, the performance by each of them of all the terms and conditions hereof to be performed by it and the consummation of the Transactions have been duly authorized and approved by all requisite limited liability company or limited partnership action of each of them.  This Agreement constitutes the valid and binding obligation of each of the Contributors and MLP LP LLC, enforceable against each of them in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

 

3.3                               No Conflict.  This Agreement and the execution and delivery hereof by the Contributors and MLP LP LLC do not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not:

 

(a)                                 conflict with any of the provisions of the charter documents or equivalent governing instruments of the Contributors and MLP LP LLC or the provisions of the CSAs;

 

(b)                                 conflict with any provision of any law or administrative regulation or any judicial, administrative or arbitration order, award, judgment, writ, injunction or decree applicable to any Contributor or MLP LP LLC;

 

4

 

(c)                                  conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both) or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, any material indenture, mortgage, lien or material agreement, contract, commitment or instrument to which any Contributor or MLP LP LLC is a party or by which it is bound or to which any of its property is subject;

 

(d)                                 result in the creation of, or afford any person the right to obtain, any material lien, charge or encumbrance on the capital stock or other equity interests, property or assets of any Contributor or MLP LP LLC under any such material indenture, mortgage, lien, agreement, contract, commitment or instrument; or

 

(e)                                  result in the revocation, cancellation, suspension or material modification, singly or in the aggregate, of any Governmental Approval (as defined below) possessed by any Contributor or MLP LP LLC that is necessary or desirable for the ownership, lease or operation of its properties and other assets in the conduct of its business as now conducted, including any Governmental Approvals under any applicable Environmental Law (as defined below);

 

except, in the case of clauses (b), (c), (d) and (e), as would not have, individually or in the aggregate, a Material Adverse Effect and except for such as will have been cured at or prior to the Closing.

 

3.4                               Consents.  Other than filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations thereunder (the “HSR Act”) and except for notice to, or consent of, Governmental Authorities (as defined below) related to the transfer of environmental permits, no consent, approval, license, permit, order, or authorization of, or registration, declaration, or filing with, (each a “Governmental Approval”) any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality (collectively, “Governmental Authorities”) or other person or entity is required to be obtained or made by or with respect to the Contributors or MLP LP LLC in connection with:

 

(a)                                 the execution, delivery, and performance of this Agreement or the consummation of the Transactions;

 

(b)                                 the enforcement against the Contributors or MLP LP LLC of their respective obligations hereunder; or

 

(c)                                  following the Closing, the conduct by APLP of the business  represented by the Assets as it was conducted immediately prior to the Closing Date (the “Business”).

 

3.5                               Laws and Regulations; Litigation.  There are no pending claims, fines, actions, suits, demands, investigations or proceedings or any arbitration or binding dispute resolution proceeding (collectively, “Litigation”) with respect to which any of the Contributors or MLP LP LLC has been contacted in writing by or on behalf of the plaintiff or claimant, against or affecting the Business or the Assets or their ownership of the Business or the Assets (other than Litigation under any Environmental Law, which is the subject of Section 3.9) that (i) would individually, or in the aggregate, have a Material Adverse Effect or (ii) seek any material injunctive relief.  Except as would not, individually or in the aggregate, have a Material Adverse

 

5

 

Effect, (x) the Contributors and MLP LP LLC are not in violation of or in default under any law or regulation or under any order (other than Environmental Laws, which are the subject of Section 3.9) of any Governmental Authority applicable to it and (y) there is no Litigation (other than Litigation under any Environmental Law, which is the subject of Section 3.9) pending or, to any Contributor’s knowledge, threatened against or affecting such Contributor or MLP LP LLC, or any of their respective properties or assets, at law or in equity, by or before any Governmental Authority having jurisdiction over such party.  Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Litigation is pending or, to any Contributor’s knowledge, threatened to which any Contributor or MLP LP LLC is or may become a party that questions or involves the validity or enforceability of any of their respective obligations under this Agreement or seeks to prevent or delay, or damages in connection with, the consummation of the Transactions.

 

3.6                               No Adverse Changes.  Except for changes in the ordinary course of business due to matters that generally affect the economy or the industry in which the Business is engaged (including but not limited to fluctuations in the prices of natural gas or crude oil or any derivative of natural gas or crude oil), since December 31, 2015 there have been no changes in the Assets or the liabilities, financial or operational condition or results of operations of the Business that have had a Material Adverse Effect.  Since January 1, 2016 the Contributors have caused the Business to be conducted in the ordinary course and in substantially the same manner as previously conducted.

 

3.7                               Employee Benefits.  The Business does not have and never has had any employees.  None of the Contributors is a party to or is bound by any collective bargaining agreement with respect to any employees who perform services in connection with the Business. The Business does not and has never sponsored, maintained, contributed to or been a party to any employee benefit plan as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended, or any other employee benefit or compensation arrangement, agreement or program.

 

3.8                               Management Projections; Financial and Operational Information.  The projections (including projections of maintenance capital and allocated sales, general and administrative expense required for the Assets) provided to APLP (including those provided to Simmons & Company International (“Simmons”), the financial advisor to the conflicts committee (the “Conflicts Committee”) of the Board of Directors of GP LLC) by the Contributors as part of APLP’s due diligence review of the Business in connection with this Agreement have a reasonable basis and are consistent with management’s current expectations. The historical and current information regarding horsepower, revenues and costs of sales relating to the Assets and the Business provided to Simmons as part of its review of the Assets for the Conflicts Committee (the “Financial and Operational Information”) is correct and complete for the periods covered, in all material respects, and is derived from the Contributors’ books and records. The Contributors have not intentionally withheld disclosure from the Conflicts Committee and/or its advisors of any fact that, to their knowledge, would have a Material Adverse Effect.

 

3.9                               Environmental Matters.  With respect to the Business, except as do not (individually or in the aggregate) have a Material Adverse Effect, the Contributors (i) are in compliance with any and all applicable federal, state and local laws and regulations relating to

 

6

 

the prevention of pollution or protection of the environment or imposing liability or standards of conduct concerning any Hazardous Materials (as defined below) (“Environmental Laws”), (ii) have received all permits required of them under applicable Environmental Laws to conduct the Business as presently conducted, (iii) are in compliance with all terms and conditions of any such permits and (iv) do not have any liability in connection with the release into the environment of any Hazardous Material. The term “Hazardous Material” means (A) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (B) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any applicable Environmental Law.

 

3.10                        Contracts.

 

(a)                                 True and complete copies of the CSAs have been made available to APLP.  Except as set forth in Schedule 3.10, the Contributors are not and, to the Contributors’ knowledge, no other party is in default under or in breach or violation of (and no event has occurred which, with notice or the lapse of time or both, would constitute a default under or a breach or violation or lapse of) any term, condition or provision of any CSA except for defaults, breaches, violations or events that, individually or in the aggregate, do not have a Material Adverse Effect.

 

(b)                                 Except as set forth in Schedule 3.10, each of the CSAs constitutes a valid, binding and enforceable obligation of any Contributor that is a party thereto and, to the Contributors’ knowledge, enforceable obligations of any other party thereto, in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered on a proceeding in equity or at law) and an implied covenant of good faith and fair dealing) and is in full force and effect, and no defenses, off-sets or counterclaims have been asserted or, to the Contributors’ knowledge, threatened by any party thereto, nor has any Contributor waived any material rights thereunder.

 

(c)                                  Except as set forth in Schedule 3.10, to the Contributors’ knowledge, (i) none of the Contributors has received any compensation for services provided under any CSA that is subject to any refund or creates any repayment obligation either by or to any Contributor, and there is no basis for a claim that a refund is due and (ii)  APLP Operating will be entitled to receive the full contract price, in accordance with the terms of each CSA, for all services provided thereunder on and after the Closing Date.

 

3.11                        Equipment.

 

(a)                                 The applicable Contributor and MLP LP LLC has good and marketable, legal and indefeasible title to the Equipment, free and clear of all preferential purchase rights, options or other rights to purchase and in each case free and clear of all security interests, liens, mortgages, pledges, charges, claims, restrictions, easements, encumbrances and rights of others (“Liens”) for sums not yet due except (i) those set forth in Schedule 3.11, (ii) mechanics’,

 

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carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, (iii) Liens for taxes that are not due and payable or that may thereafter be paid without penalty, (iv) Liens securing debt of AROC that will be released prior to or as of the Closing (a complete list of which is set forth on Schedule 3.11) and (v) other imperfections of title or encumbrances that, individually or in the aggregate, could not reasonably be expected to materially interfere with the ordinary conduct of the Business (the Liens described in clauses (i), (ii), (iii), (iv) and (v) above are hereinafter referred to collectively as “Permitted Liens”).

 

(b)                                 The Equipment is, in the aggregate, in good operating condition and repair (normal wear and tear excepted) and has been maintained in accordance with applicable laws and regulations, as well as generally accepted industry practice, and is adequate for the purposes for which it is currently being used or held for use.

 

3.12                        Sufficiency of Assets.  The Assets constitute all of the assets necessary to conduct the Business in a manner materially consistent with the Financial and Operational Information.

 

3.13                        Licenses; Permits.  The Contributors hold all licenses, permits and authorizations (other than environmental permits, which are the subject of Section 3.9) that are necessary for the conduct of the Business and the ownership and current operation of the Assets, each in compliance with applicable law and regulation of Governmental Authorities, except for those the failure of which to have, individually or in the aggregate, does not have a Material Adverse Effect.  The Contributors have complied in all material respects with all terms and conditions thereof.

 

3.14                        Insurance.  The Contributors or their affiliates maintain policies of fire and casualty, liability, and other forms of property and liability insurance related to the Assets and the Business in such amounts, with such deductibles, and against such risks and losses as are, in the Contributors’ judgment, reasonable for the Business and the Assets, and such policies are listed on Schedule 3.14.  All such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy that has not been replaced on substantially similar terms prior to the date of such cancellation.  To the Contributors’ knowledge, the activities and operations of the Business have been conducted in a manner so as to conform in all material respects to all applicable provisions of those insurance policies.

 

3.15                        Brokerage Arrangements.  None of the Contributors has entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate APLP to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the Transactions.

 

3.16                        Investment.  MLP LP LLC is not acquiring the New Common Units with a view to or for sale in connection with any distribution thereof or any other security related thereto within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).  MLP LP LLC is familiar with investments of the nature of the New Common Units, understands that this investment involves substantial risks, has adequately investigated APLP and the New Common Units, and has substantial knowledge and experience in financial and business matters such that it is capable of evaluating, and has evaluated, the merits and risks inherent in purchasing the New

 

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Common Units, and is able to bear the economic risks of such investment.  MLP LP LLC has had the opportunity to visit with APLP and meet with the officers of its general partner and other representatives to discuss the business, assets, liabilities, financial condition, and operations of APLP, has received all materials, documents and other information that MLP LP LLC deems necessary or advisable to evaluate APLP and the New Common Units, and has made its own independent examination, investigation, analysis and evaluation of APLP and the New Common Units, including its own estimate of the value of the New Common Units.  MLP LP LLC has undertaken such due diligence (including a review of the properties, liabilities, books, records and contracts of APLP) as MLP LP LLC deems adequate.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES OF THE RECIPIENTS

 

Each of the Recipients hereby represents and warrants, jointly and severally, to the Contributors that as of the date hereof and as of the Closing Date (except for such representations and warranties expressly made as of a specified date):

 

4.1                               Organization and Existence.  Each of the Recipients is a partnership or limited liability company validly existing and in good standing under the laws of the State of Delaware, with full partnership or limited liability company power and authority to own, lease and operate the properties and assets it now owns, leases and operates and to carry on its business as and where such properties and assets are now owned or held and such business is now conducted.  Each of the Recipients is duly qualified to transact business as a limited partnership or limited liability company and is in good standing in each other jurisdiction in which such qualification is required for the conduct of its business, except where the failure to so qualify or to be in good standing does not have a material adverse effect on the business, financial condition or results of operations of the Recipients, taken as a whole (a “Recipient Material Adverse Effect”).

 

4.2                               Authority and Approval.  Each of the Recipients has the partnership or limited liability company power and authority to execute and deliver this Agreement, to consummate the Transactions and to perform all the terms and conditions hereof to be performed by it.  The execution and delivery by the Recipients of this Agreement, the performance by each of them of all the terms and conditions hereof to be performed by it and the consummation of the Transactions have been duly authorized and approved by all requisite partnership or limited liability company action of each of the Recipients.  This Agreement constitutes the valid and binding obligation of each of the Recipients, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors’ rights generally and by general principles of equity (whether applied in a proceeding at law or in equity).

 

4.3                               Delivery of Opinion.  Simmons has delivered an opinion to the Conflicts Committee that, as of the date of such opinion, the aggregate consideration to be paid by the Recipients as consideration for the Assets pursuant to this Agreement is fair to the common unitholders of APLP (other than OpCo and its subsidiaries) from a financial point of view.

 

4.4                               Brokerage Arrangements.  No Recipient has entered, directly or indirectly, into any agreement with any person, firm or corporation that would obligate the Contributors or any

 

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of their affiliates (other than the Recipients) to pay any commission, brokerage or “finder’s fee” or other fee in connection with this Agreement or the Transactions.

 

4.5                               Newly Issued Common Units.  The New Common Units being issued at Closing will be, when issued in consideration for the contribution by the Contributors of the Assets, validly issued, fully paid and nonassessable (except as such nonassessability may be affected by the Delaware Revised Uniform Limited Partnership Act) and free of any preemptive or similar rights (other than those set forth in APLP’s limited partnership agreement).

 

ARTICLE V
 CONDITIONS TO CLOSING

 

5.1                               Conditions to Each Party’s Obligation to Effect the Transactions.  The respective obligation of each party to proceed with the Closing is subject to the satisfaction or waiver by each of the parties to this Agreement (subject to applicable laws) on or prior to the Closing Date of all of the following conditions:

 

(a)                                 all necessary filings with and consents of any Governmental Authority required for the consummation of the Transactions shall have been made and obtained, all waiting periods with respect to filings made with Governmental Authorities in contemplation of the consummation of the Transactions shall have expired or been terminated;

 

(b)                                 all necessary consents, waivers, conditions precedent or similar transfer restrictions held by or to be granted by any third party, other than any Governmental Authority, required for the consummation of the Transactions shall have been made and obtained, except where the failure to so obtain does not have a Material Adverse Effect or Recipient Material Adverse Effect or materially impair the ability of the parties to consummate the Transactions;

 

(c)                                  no party shall be subject to any decree, order or injunction of a court of competent jurisdiction that prohibits the consummation of the Transactions and no statute, rule, regulation, order, decree or injunction enacted, entered, or issued by any Governmental Authority, or other legal restraint or prohibition preventing the consummation of the Transactions, shall be in effect; and

 

(d)                                 the New Common Units shall have been approved for listing upon notice of issuance on NASDAQ Global Select Market.

 

5.2                               Conditions to the Obligation of the Recipients.  The obligation of the Recipients to proceed with the Closing is subject to the satisfaction or waiver by the Recipients on or prior to the Closing Date of the following conditions: (a) the Contributors shall have materially performed their covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date and (b) the representations and warranties of the Contributors made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (b) where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Material Adverse Effect; provided, that the Compression Equipment being utilized to service the customers that are

 

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parties to the CSAs at the time of Closing shall not, taken together, consist of less than an aggregate of 90% of the aggregate horsepower reflected in Schedule A as of the effective date of this Agreement.  The Contributors shall have delivered to the Recipients a certificate dated the Closing Date and signed by an authorized officer of each of the Contributors confirming the foregoing matters set forth in clauses (a) and (b) of this Section 5.2.

 

5.3                               Conditions to the Obligation of the Contributors.  The obligation of the Contributors to proceed with the Closing is subject to the satisfaction or waiver by the Contributors on or prior to the Closing Date of the following conditions: (a) the Recipients shall have materially performed their covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date and (b) the representations and warranties of the Recipients made in this Agreement shall be true and correct (without regard to qualifications as to materiality or Recipient Material Adverse Effect contained therein) as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except in the case of clause (b) where the failure of the representations and warranties to be true and correct, individually or in the aggregate, has not had a Recipient Material Adverse Effect.  The Recipients shall have delivered to the Contributors a certificate dated the Closing Date and signed by an authorized officer of each of the Recipients confirming the foregoing matters set forth in clauses (a) and (b) of this Section 5.3.

 

ARTICLE VI
 COVENANTS, ETC.

 

6.1                               Regulatory Filings; Consents.

 

(a)                                 As promptly as practicable but in any event no later than five business days after the date of this Agreement, the Contributors and the Recipients shall file with the Federal Trade Commission and the Department of Justice any notifications and other documents required to be filed by such party under the HSR Act with respect to the Transactions. The parties shall consult with each other to respond promptly to any requests for additional information made by either of such agencies and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. APLP will pay all filing fees under the HSR Act, but each party will bear its own costs except OpCo will bear the costs of Archrock Leasing for the preparation of any such filing.

 

(b)                                 The Contributors and the Recipients shall in good faith cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use commercially reasonable efforts to obtain the transfer or issuance to the Recipients of all necessary consents, approvals and authorizations of all Governmental Authorities at the earliest possible date and (iv) use commercially reasonable efforts to obtain all consents, approvals and authorizations of all other parties, in the case of each of clauses (i) through (iv) above as are necessary or advisable to consummate the transactions contemplated by this Agreement at the earliest possible date or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which any of the Contributors or the Recipients is a party or by which any of them is bound.

 

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(c)                                  Notwithstanding anything in this Agreement, the Recipients agree that the Contributors’ obligations under this Agreement shall in no way require any Contributor to accept any condition or requirement of any regulatory approval that is or could reasonably be determined to be adverse to any Contributor or AROC.

 

6.2                               Independent Investigation.  The Recipients acknowledge that in making the decision to enter into this Agreement and to consummate the Transactions, they have relied solely on their own independent investigation of the Business and the Assets and upon the express written representations, warranties and covenants in this Agreement.  Without diminishing the scope of the express written representations, warranties and covenants of the parties in this Agreement and without affecting or impairing its right to rely thereon, THE RECIPIENTS ACKNOWLEDGE THAT THE CONTRIBUTORS HAVE NOT MADE, AND THE CONTRIBUTORS HEREBY EXPRESSLY DISCLAIM AND NEGATE, ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE ASSETS OR THE BUSINESS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS).

 

6.3                               General.  Subject to Section 6.1(c), each party hereto will use good-faith commercially reasonable efforts to take all action and to do all things necessary, proper or advisable in order to consummate the Transactions.

 

6.4                               Revisions to Schedules A and B.   Prior to the Closing, the Contributors shall use commercially reasonable efforts to revise Schedules A and B, as applicable, to reflect the compression equipment, compression services agreements and master agreements that are anticipated to be used to provide compression services as of the Closing Date to the customers listed in Schedules A and B as of the date of this Agreement (except for such equipment owned by any Recipient as of such date), with such changes to the Schedules identified as of the Closing Date to reflect only those changes in the compression services agreements with, and equipment then being used to provide compression services to, the customers that occur in the ordinary course of business and in compliance with Section 6.9.

 

6.5                               Inadvertent Transfers of, or Failure to Transfer, Assets.  Within 10 business days following the Closing, the Contributors shall provide the Recipients a definitive list (the “Closing Asset List”) of the compression equipment, compression services agreements and master agreements that were used as of the Closing Date to provide compression services to the customers listed in Schedules A and B, as modified in accordance with Section 6.4, with such changes from Schedules A and B provided pursuant to Section 6.4 to reflect only those changes in compression equipment, compression services agreements and master agreements governing the provisions of compression services to the customers that occur in the ordinary course of business and in compliance with Section 6.9; provided that such definitive list must include compression equipment being utilized to service the customers that are parties to the CSAs at the time of Closing consisting of at least an aggregate of 90% of the aggregate horsepower reflected in Schedule A as of the effective date of this Agreement.  In the event that the Closing Asset List indicates that any assets were inadvertently transferred by the Contributors as part of the Assets, the applicable Recipient shall execute, deliver and record (where appropriate) any and all instruments or other documents of transfer, conveyance and assignment, or amend or correct any

 

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such existing instruments or documents, and take such other action as OpCo may reasonably request, as may be necessary or advisable to effect or evidence the transfer of those assets to OpCo or such affiliate as OpCo directs.  In the event that the Closing Asset List indicates that any Contributor failed to transfer (A) any assets that are used to provide compression services under the CSAs or (B) any CSAs as of the Closing Date, the applicable parties shall execute, deliver and record (where appropriate) any and all instruments or other documents of transfer, conveyance and assignment, or amend or correct any such existing instruments or documents, and take such other action as APLP may reasonably request, as may be necessary or advisable to effect or evidence the transfer of those assets or CSAs in accordance with this Agreement.

 

6.6                               Nasdaq Listing.  Prior to the Closing, APLP will use its best efforts to list, subject to notice of issuance, any New Common Units on NASDAQ Global Select Market.

 

6.7                               Recipient’s Obligations. From and after the Closing, APLP hereby agrees to guarantee the full and prompt payment when due of the indemnification obligations of the Recipients pursuant to Section 7.1 (subject to all applicable limitations under this Agreement).  The guarantee provided by APLP under this Section 6.7  shall be a guarantee of payment and not of performance or collection.

 

6.8                               Contributor’s Obligations. From and after the Closing, AROC hereby agrees to guarantee the full and prompt payment when due of the indemnification obligations of the Contributors pursuant to Section 7.2 (subject to all applicable limitations under this Agreement).  The guarantee provided by AROC under this Section 6.8  shall be a guarantee of payment and not of performance or collection.

 

6.9                               Conduct and Preservation of the Business. Except as expressly provided in this Agreement or as consented to in writing by the Recipients (which consent shall not be unreasonably withheld, delayed or conditioned), between the date of this Agreement and the earlier of the Closing Date and the termination of this Agreement in accordance with Section 8.1, the Contributors will maintain relationships with customers and will conduct the Business and operate the Assets according to their ordinary course of business consistent with past practice and in material compliance with all applicable laws. From the date of this Agreement until the Closing, the Contributors shall promptly notify the Recipients in writing of any fact, circumstance, event or action the existence, occurrence or taking of which has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or has resulted in, or could reasonably be expected to result in the condition set forth in Section 5.2(b) not being satisfied at the Closing.

 

ARTICLE VII
 INDEMNIFICATION

 

7.1                               Indemnification of the Contributors and Other Parties.  Solely for the purpose of indemnification in this Section 7.1, the representations and warranties of the Recipients in this Agreement shall be deemed to have been made without regard to any materiality or Recipient Material Adverse Effect qualifiers.  From and after the Closing Date, and notwithstanding any provision in the Omnibus Agreement to the contrary, the Recipients shall indemnify and hold the Contributors and their affiliates (other than GP LLC, GP and the Recipients and their respective

 

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subsidiaries), equity holders, directors, officers, employees, agents, representatives and insurers (together with the Contributors, the “Contributor Parties”) harmless from and against any and all damages (including exemplary damages and penalties), losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including reasonable counsel fees and reasonable expenses of investigation, defending and prosecuting litigation (collectively, the “Damages”), suffered by the Contributor Parties as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of any Recipient in this Agreement, (b) any breach of any agreement or covenant under this Agreement on the part of any Recipient or (c)  the ownership, operation or conduct of the Businesses or the Assets on or after the Closing Date, other than those for which the Recipients may be indemnified by the Contributors hereunder.

 

7.2                               Indemnification of the Recipients and other Parties.  Solely for the purpose of indemnification in this Section 7.2, the representations and warranties of the Contributors in this Agreement shall be deemed to have been made without regard to any materiality or Material Adverse Effect qualifiers. From and after the Closing Date, and notwithstanding any provision in the Omnibus Agreement to the contrary, the Contributors shall indemnify and hold GP LLC, GP and the Recipients and their respective subsidiaries, equity holders (other than LP LLC, MLP LP LLC and any of the Contributor Parties), directors, officers, employees, agents, representatives and insurers (together with the Recipients, the “Recipient Parties”) harmless from and against any and all Damages suffered by the Recipient Parties as a result of, caused by, arising out of, or in any way relating to (a) any breach of a representation or warranty of any Contributor in this Agreement, (b) any breach of any agreement or covenant under this Agreement on the part of any Contributor or (c) the ownership, operation or conduct of the Business or the Assets prior to the Closing Date.

 

7.3                               Demands.  Each indemnified party agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being collectively referred to herein as the “Indemnity Claim”), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party, together with a statement of such information respecting any of the foregoing as it shall have.  Such notice shall include a formal demand for indemnification under this Agreement.  The indemnifying party shall not be obligated to indemnify the indemnified party with respect to any Indemnity Claim if the indemnified party knowingly failed to notify the indemnifying party thereof in accordance with the provisions of this Agreement to the extent that knowing failure to notify actually results in material prejudice or damage to the indemnifying party.

 

7.4                               Right to Contest and Defend.  The indemnifying party shall be entitled at its cost and expense to contest and defend by all appropriate legal proceedings any Indemnity Claim with respect to which it is called upon to indemnify the indemnified party under the provisions of this Agreement; provided, that notice of the intention to so contest shall be delivered by the indemnifying party to the indemnified party within 20 days from the date of receipt by the indemnifying party of notice by the indemnified party of the assertion of the Indemnity Claim.  Any such contest may be conducted in the name and on behalf of the indemnifying party or the

 

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indemnified party as may be appropriate.  Such contest shall be conducted and prosecuted diligently to a final conclusion or settled in accordance with this Section 7.4 by reputable counsel employed by the indemnifying party and not reasonably objected to by the indemnified party, but the indemnified party shall have the right but not the obligation to participate in such proceedings and to be represented by counsel of its own choosing at its sole cost and expense.  The indemnifying party shall have full authority to determine all action to be taken with respect thereto; provided, however, that the indemnifying party will not have the authority to subject the indemnified party to any obligation whatsoever, other than the performance of purely ministerial tasks or obligations not involving material expense.  If the indemnifying party does not elect to contest any such Indemnity Claim or elects to contest such Indemnity Claim but fails diligently and promptly to prosecute or settle such claim, the indemnifying party shall be bound by the result obtained with respect thereto by the indemnified party. If the indemnifying party shall have assumed the defense of an Indemnity Claim, the indemnified party shall agree to any settlement, compromise or discharge of an Indemnity Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Indemnity Claim, which releases the indemnified party completely in connection with such Indemnity Claim and which would not otherwise adversely affect the indemnified party.

 

Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Indemnity Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Indemnity Claim) if the Indemnity Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the indemnified party which the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages.  If such equitable relief or other relief portion of the Indemnity Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages.

 

7.5                               Cooperation.  If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any Indemnity Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the Indemnity Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for any expenses incurred by it in so cooperating.  At no cost or expense to the indemnified party, the indemnifying party shall cooperate with the indemnified party and its counsel in contesting any Indemnity Claim.

 

7.6                               Right to Participate.  The indemnified party agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including Governmental Authorities, asserting any Indemnity Claim against the indemnified party or conferences with representatives of or counsel for such persons.

 

7.7                               Payment of Damages.  The indemnification required hereunder shall be made by periodic payments of the amount thereof during the course of the investigation or defense, within 10 days as and when reasonably specific bills are received or loss, liability, claim, damage or expense is incurred and reasonable evidence thereof is delivered.  In calculating any amount to be paid by an indemnifying party by reason of the provisions of this Agreement, the amount shall

 

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be reduced by all tax benefits and other reimbursements (including, without limitation, insurance proceeds) credited to or received by the other party related to the Damages.

 

7.8                               Limitations on Indemnification.

 

(a)                                 To the extent the Recipient Parties are entitled to indemnification for Damages pursuant to Section 7.2(a) or (b), the Contributors shall not be liable for those Damages unless the aggregate amount of Damages exceeds $850,000 (the “Deductible”), and then only to the extent of any such excess; provided, that the Contributors shall not be liable for Damages that exceed, in the aggregate, $8,500,000 (the “Cap”) less the Deductible.

 

(b)                                 Notwithstanding clause (a) above, to the extent the Recipient Parties are entitled to indemnification for Damages for claims pursuant to Section 7.2(b) (solely with respect to agreements and/or covenants to be performed after the Closing Date), Section 7.2(c), related to the proviso in the first sentence of Section 6.5  or arising from fraud, the Contributors shall be fully liable for such Damages without respect to the Deductible or the limitations in Section 7.8(a).

 

(c)                                  To the extent the Contributor Parties are entitled to indemnification for Damages pursuant to Section 7.1(a) or (b), the Recipients shall not be liable for those Damages unless the aggregate amount of Damages exceeds, in the aggregate, the Deductible, and then only to the extent of any such excess; provided, that the Recipients shall not be liable for Damages that exceed, in the aggregate, the Cap less the Deductible.

 

(d)                                 Notwithstanding clause (c) above, to the extent the Contributor Parties are entitled to indemnification for Damages pursuant to Section 7.1(c) or for claims arising from fraud, the Recipients shall be fully liable for such Damages without respect to the Deductible and the limitations in Section 7.8(c).

 

7.9                               Survival.

 

(a)                                 The liability of the Contributors for the breach of any of the representations and warranties of the Contributors set forth in Sections 3.1, 3.2, 3.3 and 3.11(a) shall be limited to claims for which the Recipients deliver written notice to the Contributors on or before the date that is two years after the Closing Date.  The liability of the Contributors for the breach of any of the representations and warranties of the Contributors set forth in Article III other than those set forth in the immediately previous sentence shall be limited to claims for which the Recipients deliver written notice to the Contributors on or before the date that is one year after the Closing Date.

 

(b)                                 The liability of the Recipients for the breach of any of the representations and warranties of the Recipients set forth in Article IV shall be limited to claims for which the Contributors deliver written notice to the Recipients on or before the date that is one year after the Closing Date.

 

7.10                        Sole Remedy.  After the Closing, no party shall have liability under this Agreement or the Transactions except as is provided in this Article VII (other than claims or causes of action arising from fraud) and as set forth in the Omnibus Agreement.

 

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7.11                        Express Negligence Rule.  THE INDEMNIFICATION AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS, LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF ANY INDEMNIFIED PARTY.  THE RECIPIENTS AND THE CONTRIBUTORS ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES CONSPICUOUS NOTICE.  NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED ELSEWHERE IN THIS AGREEMENT.

 

ARTICLE VIII
 TERMINATION

 

8.1                               Events of Termination.  This Agreement may be terminated at any time prior to the Closing Date:

 

(a)                                 by mutual written consent of OpCo and APLP;

 

(b)                                 by either OpCo or APLP in writing after the date that is six months after the date of this Agreement if the Closing has not occurred by that date, provided that as of that date the terminating party is not in default under this Agreement;

 

(c)                                  by either OpCo or APLP in writing without prejudice to other rights and remedies the terminating party or its affiliates may have (provided the terminating party and its affiliates are not otherwise in material default or breach of this Agreement, or have not failed or refused to close without justification hereunder), if the other party or its affiliates shall have (i) materially failed to perform its covenants or agreements contained herein required to be performed on or prior to the Closing Date, or (ii) materially breached any of its representations or warranties contained herein; provided, however, that in the case of clause (i) or (ii), the defaulting party shall have a period of 30 days following written notice from the non-defaulting party to cure any breach of this Agreement, if the breach is curable; provided further, that for purposes of this Section 8.1(c), the term “affiliates,” when used with respect to OpCo, shall not include GP LLC, GP or the Recipients and their respective subsidiaries, and, when used with respect to APLP, shall not include LP LLC, MLP LP LLC or the Contributors and their respective subsidiaries;

 

(d)                                 by either OpCo or APLP in writing, without liability, if there shall be any order, writ, injunction or decree of any Governmental Authority binding on the parties that prohibits or restrains any party from consummating the Transactions; provided, that the applicable party shall have used its reasonable best efforts to have any such order, writ, injunction or decree removed but it shall not have been removed within 30 days after entry by the Governmental Authority; or

 

17

 

(e)                                  by OpCo, if any Governmental Authority shall have indicated that any Contributor may be required to accept any condition or requirement of any regulatory approval that is or could reasonably be determined to be adverse to that Contributor or AROC.

 

8.2                               Effect of Termination.  In the event of the termination of this Agreement by a party as provided in Section 8.1, this Agreement shall thereafter become void except for this Section 8.2 and Section 9.3.  Nothing in this Section 8.2 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair any rights of any party under this Agreement.  If this Agreement is terminated by APLP pursuant to Section 8.1(c), then OpCo shall reimburse APLP for its out-of-pocket expenses incurred in connection with the negotiation, execution and performance of this Agreement (including legal fees and fees paid to Simmons, in either case incurred by APLP or the Conflicts Committee).  If this Agreement is terminated by OpCo pursuant to Section 8.1(e), then OpCo shall reimburse APLP for 50% of its out-of-pocket expenses incurred in connection with the negotiation, execution and performance of this Agreement (including legal fees and fees paid to Simmons, in either case incurred by APLP or the Conflicts Committee).

 

ARTICLE IX
 MISCELLANEOUS

 

9.1                               Transfer Restrictions.

 

(a)                                 For a 180-day period beginning on the Closing Date, neither the New Common Units nor any interest therein shall be transferable by MLP LP LLC without the prior written consent of APLP, except for transfers to affiliated entities of the Contributors in compliance with the provisions of the Securities Act, and the rules and regulations thereunder.  APLP shall require (in form and substance reasonably satisfactory to APLP) any proposed permitted transferee of any such New Common Units or any interest therein to be acquired from MLP LP LLC to agree to take and hold such New Common Units or any interest therein subject to the provisions and upon the conditions specified in this Section 9.1. Any transfer of those New Common Units or any interest therein otherwise than in accordance with the terms of this Agreement and the requirements of APLP’s Second Amended and Restated Agreement of Limited Partnership dated July 30, 2015, as may be amended, shall be null and void.

 

(b)                                 Notwithstanding Section 9.1(a), neither the New Common Units nor any interest therein shall be transferable by MLP LP LLC, except for transfers to affiliated entities of the Contributors, until such time as the GP determines, based on advice of counsel, that each such New Common Unit should have, as a substantive matter, like intrinsic economic and federal income tax characteristics, in all material respects, to the intrinsic economic and federal income tax characteristics of an Initial Common Unit (as defined in APLP’s limited partnership agreement).  In connection with the condition imposed by this Section 9.1, the GP may take whatever steps are required to provide economic uniformity to such New Common Units, including the application of Section 6.2(c) of APLP’s limited partnership agreement.  For the avoidance of doubt, such determination by the GP may occur at any time following the Closing Date.

 

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9.2                               Registration Rights of MLP LP LLC and its Affiliates.

 

(a)                                 If (i) MLP LP LLC or any affiliate of MLP LP LLC (including for purposes of this Section 9.2, any affiliate of MLP LP LLC as of the date hereof notwithstanding that it may later cease to be an affiliate of MLP LP LLC) desires to sell New Common Units and (ii) Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable such holder of New Common Units (the “Holder”) to dispose of the number of New Common Units it desires to sell at the time it desires to do so without registration under the Securities Act, then at the option and upon the request of the Holder, APLP shall file with the SEC as promptly as practicable after receiving such request, and use all commercially reasonable efforts to cause to become effective and remain effective for a period of not less than six months following its effective date or such shorter period as shall terminate when all New Common Units covered by such registration statement have been sold, a registration statement under the Securities Act registering the offering and sale of the number of New Common Units specified by the Holder; provided, however, that APLP shall not be required to effect more than three registrations pursuant to this Section 9.2(a) and Section 9.2(b); and provided further, however, that if the Conflicts Committee determines that the requested registration would be materially detrimental to APLP or the limited partners of APLP (other than OpCo and its subsidiaries) because such registration would (x) materially interfere with a significant acquisition, reorganization or other similar transaction involving APLP, (y) require premature disclosure of material information that APLP has a bona fide business purpose for preserving as confidential or (z) render APLP unable to comply with requirements under applicable securities laws, then APLP shall have the right to postpone such requested registration for a period of not more than three months after receipt of the Holder’s request, such right pursuant to this Section 9.2(a) or Section 9.2(b) not to be utilized more than twice in any 12-month period.  In connection with any registration pursuant to the first sentence of this Section 9.2(a), APLP shall (i) promptly prepare and file (A) such documents as may be necessary to register or qualify the securities subject to such registration under the securities laws of such states as the Holder shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, APLP would become subject to general service of process or to taxation or qualification to do business as a foreign corporation or partnership doing business in such jurisdiction solely as a result of such registration, and (B) such documents as may be necessary to apply for listing or to list the New Common Units subject to such registration on a national securities exchange as the Holder shall reasonably request, and (ii) use commercially reasonable efforts to do any and all other acts and things that may be necessary or appropriate to enable the Holder to consummate a public sale of such New Common Units in such states. Except as set forth in Section 9.2(d), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions and excluding the legal fees and other expenses incurred by the Holder) shall be paid by APLP, without reimbursement by the Holder.

 

(b)                                 If any Holder holds New Common Units that it desires to sell and Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable such Holder to dispose of the number of New Common Units it desires to sell at the time it desires to do so without registration under the Securities Act, then at the option and upon the request of the Holder, APLP shall file with the Commission as promptly as practicable after receiving such request, and use all reasonable efforts to cause to become effective and remain effective for a period of not less than six months following its effective date or such shorter period as shall terminate when all New Common

 

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Units covered by a shelf registration statement have been sold, a “shelf” registration statement covering the New Common Units specified by the Holder on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission; provided, however, that APLP shall not be required to effect more than three registrations pursuant to Section 9.2(a) and this Section 9.2(b); and provided further, however, that if the Conflicts Committee determines in good faith that any offering under, or the use of any prospectus forming a part of, the shelf registration statement would be materially detrimental to APLP and its Partners because such offering or use would (x) materially interfere with a significant acquisition, reorganization or other similar transaction involving APLP, (y) require premature disclosure of material information that APLP has a bona fide business purpose for preserving as confidential or (z) render APLP unable to comply with requirements under applicable securities laws, then APLP shall have the right to suspend such offering or use for a period of not more than three months after receipt of the Holder’s request, such right pursuant to Section 9.2(a) or this Section 9.2(b) not to be utilized more than twice in any 12-month period.

 

(c)                                  Except as provided in the first sentence of each of subsections (a) and (b) of this Section 9.2, APLP shall be deemed not to have used all reasonable efforts to keep the registration statement effective during the applicable period if it voluntarily takes any action that would result in Holders of New Common Units covered thereby not being able to offer and sell such New Common Units at any time during such period, unless such action is required by applicable law.

 

(d)                                 If APLP shall at any time propose to file a registration statement under the Securities Act for an offering of equity securities of APLP for cash (other than an offering relating solely to an employee benefit plan), APLP shall use all reasonable efforts to provide the Holders notice of its intention to file such registration statement and shall use all reasonable efforts to include such number or amount of securities held by the Holder in such registration statement as the Holder shall request; provided, that APLP is not required to make any effort or take any action to so include the securities of the Holder once the registration statement is declared effective by the Commission or otherwise becomes effective, including any registration statement providing for the offering from time to time of securities pursuant to Rule 415 of the Securities Act. If the proposed offering pursuant to this Section 9.2(d) shall be an underwritten offering, then, if the managing underwriter or managing underwriters of such offering advise APLP and the Holder in writing that in their opinion the inclusion of all or some of the Holder’s New Common Units would adversely and materially affect the success of the offering, APLP shall include in such offering only that number or amount, if any, of securities held by the Holder that, in the opinion of the managing underwriter or managing underwriters, will not adversely and materially affect the offering. All costs and expenses of any such registration and offering (other than the underwriting discounts and commissions and excluding the legal fees and other expenses incurred by the Holder) shall be paid by APLP, without reimbursement by the Holder.

 

(e)                                  The provisions of Section 9.2(a), Section 9.2(b) and Section 9.2(d) shall continue to be applicable with respect to MLP LP LLC (and any of MLP LP LLC’s affiliates) after GP ceases to be a general partner of APLP, during a period of two years subsequent to the effective date of such cessation and for so long thereafter as is required for the Holder to sell all of the New Common Units with respect to which it has requested during such two-year period inclusion in a registration statement otherwise filed or that a registration statement be filed;

 

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provided, however, that APLP shall not be required to file successive registration statements covering the same New Common Units for which registration was demanded during such two-year period. The provisions of Section 9.2(d) shall continue in effect thereafter.

 

(f)                                   The rights to cause APLP to register New Common Units pursuant to this Section 9.2 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such New Common Units if (i) APLP is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the number of New Common Units with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Section 9.2.

 

(g)                                  Any request to register New Common Units pursuant to this Section 9.2 shall (i) specify the New Common Units intended to be offered and sold by the person making the request, (ii) express such person’s present intent to offer such New Common Units for distribution, (iii) describe the nature or method of the proposed offer and sale of New Common Units, and (iv) contain the undertaking of such Person to provide all such information and materials and take all action as may be required in order to permit APLP to comply with all applicable requirements in connection with the registration of such New Common Units.

 

9.3                               Expenses.  Except as otherwise set forth herein, each party hereto shall pay its own expenses incident to this Agreement and all action taken in preparation for effecting the provisions of this Agreement.

 

9.4                               Right of Offset.  Each party agrees that, in addition to, and without limitation of, any right of set-off, lien or counterclaim a party may otherwise have, each party shall have the right and be entitled, at its option, to offset (a) balances held by it or by any of its affiliates for account of any other party at any of its offices and (b) other obligations at any time owing by such party in connection with any obligations to or for the credit or account of the other party, against any principal of or interest on any of such other party’s indebtedness or any other amount due and payable to such other party hereunder that is not paid when due.

 

9.5                               Notices.  Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other shall be in writing and delivered in person or by courier service requiring acknowledgment of receipt of delivery or mailed by certified mail, postage prepaid and return receipt requested, or by telecopier, as follows:

 

If to the Contributors or any other party except the Recipients, addressed to:

 

Archrock Services, L.P.

16666 Northchase Drive

Houston, Texas 77060

Attention: General Counsel

Telecopy: (281) 836-8061

 

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with a copy, which will not constitute notice, to:

 

Latham & Watkins LLP

811 Main Street, Suite 3700

Houston, Texas 77002

Attention: Ryan J. Maierson

Telecopy: (713) 546-5401

 

If to the Recipients, addressed to:

 

Archrock Partners, L.P.

16666 Northchase Drive

Houston, Texas 77060

Attention: James G. Crump

Telecopy: (281) 836-8061

 

with a copy, which will not constitute notice, to:

 

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, 44th Floor

Houston, Texas 77002

Attention: Chris LaFollette and John Goodgame

Telecopy: (713) 236-0822

 

Notice given by personal delivery, courier service or telecopier shall be effective upon actual receipt.  Notice given by mail shall be effective at the close of business on the third business day following the day when placed in the mail, certified, with postage prepaid and return receipt requested, appropriately addressed.  Any party may change any address to which notice is to be given to it by giving notice as provided above of such change of address.

 

9.6                               Governing Law.  This Agreement shall be governed and construed in accordance with the substantive laws of the State of Texas without reference to principles of conflicts of law that would result in the application of the laws of another jurisdiction.

 

9.7                               Public Statements.  The parties hereto shall consult with each other and no party shall issue any public announcement or statement with respect to the Transactions without the consent of the other parties, which shall not be unreasonably withheld or delayed, unless the party desiring to make such announcement or statement, after seeking such consent from the other parties, obtains advice from legal counsel that a public announcement or statement is required by applicable law or stock exchange regulations.

 

9.8                               Form of Payment.  All payments hereunder shall be made in United States dollars and, unless the parties making and receiving such payments shall agree otherwise or the provisions hereof provide otherwise, shall be made by wire or interbank transfer of immediately available funds on the date such payment is due to such account as the party receiving payment may designate at least three business days prior to the proposed date of payment.

 

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9.9                               Entire Agreement; Amendments and Waivers.  This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including the exhibits and schedules hereto (collectively, the “Constituent Documents”), (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (b) are not intended to confer upon any other person or entity any rights or remedies hereunder except as Article VII or Article IX contemplates or except as otherwise expressly provided herein or therein.  Each party to this Agreement agrees that (i) no other party to this Agreement (including its agents and representatives) has made any representation, warranty, covenant or agreement to or with such party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth in the Constituent Documents, and (ii) such party has not relied upon any representation, warranty, covenant or agreement relating to this Agreement or the Transactions other than those referred to in clause (i) above.  No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by each party to be bound thereby.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

 

9.10                        Binding Effect and Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns, but, except as provided in Section 9.2(f), neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by operation of law or otherwise, by any party hereto without the prior written consent of the other parties.

 

9.11                        Severability.  If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the parties shall meet promptly and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect and will not be affected or impaired in any way thereby.

 

9.12                        Interpretation.  The parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefore waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

9.13                        Headings and Schedules.  The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.  The schedules referred to herein are attached hereto and incorporated herein by this reference, and unless the context expressly requires otherwise, those schedules are incorporated in the definition of “Agreement.”

 

9.14                        Counterparts.  This Agreement may be executed in one or more counterparts, including electronic, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid

 

23

 

and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

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EXECUTED as of the date first set forth above.

 

	
 
    	
ARCHROCK, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   SERVICES, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   SERVICES LEASING LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   GP LP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Pamela A. Jasinski
    
	
 
    	
Name:
    	
Pamela   A. Jasinski
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   GP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    

 

Contribution Agreement Signature Page

 

 

	
 
    	
ARCHROCK   MLP LP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Pamela A. Jasinski
    
	
 
    	
Name:
    	
Pamela   A. Jasinski
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   GENERAL PARTNER, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Archrock   GP LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   PARTNERS OPERATING LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARCHROCK   PARTNERS LEASING LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    

 

Contribution Agreement Signature Page

 

 

	
 
    	
ARCHROCK   PARTNERS, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Archrock   General Partner, L.P.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Archrock   GP LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David S. Miller
    
	
 
    	
Name:
    	
David   S. Miller
    
	
 
    	
Title:
    	
Senior   Vice President and Chief Financial Officer
    

 

Contribution Agreement Signature Page

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