Document:

Exhibit 10.12

 

ATHLON ENERGY INC.

 

FORM OF DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT

 

This Director and Officer Indemnification Agreement (this “Agreement”) is made as of this      day of              2013, by and between Athlon Energy Inc., a Delaware corporation (the “Company”), and              (the “Indemnitee”).

 

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals to act as directors and officers;

 

WHEREAS, increased corporate litigation and investigations have subjected directors and officers to litigation risks and expenses, and the limitations on the availability and terms of director and officer liability insurance have made it increasingly difficult for the Company to attract and retain such persons;

 

WHEREAS, the Company’s certificate of incorporation contains provisions with respect to indemnification of the Company’s directors and officers as authorized by the Delaware General Corporation Law (“DGCL”), as amended, under which the Company is incorporated, and such certificate of incorporation expressly provides that the indemnification provided therein is not exclusive;

 

WHEREAS, in light of the fact that the certificate of incorporation and bylaws of the Company are subject to change and do not contain all the provisions and protections set forth in this Agreement, the Company has determined that the Indemnitee and other directors and officers of the Company may not be willing to commence serving or continue to serve in such capacities without additional protection;

 

WHEREAS, the Company desires and has requested the Indemnitee to commence serving or continue to serve as a director or officer of the Company, as the case may be, and has proffered this Agreement to the Indemnitee as an additional inducement to serve in such capacity; and

 

WHEREAS, the Indemnitee is willing to commence serving, or to continue to serve, as a director or officer of the Company, as the case may be, if the Indemnitee is furnished the indemnity provided for herein by the Company.

 

NOW, THEREFORE, in consideration of the promises and the covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Indemnitee do hereby covenant and agree as follows:

 

1.                                      Definitions.

 

(a)                                 “Change in Control” shall have the meaning set forth, as of the date hereof, in the award agreement to the Company’s 2013 Incentive Award Plan.

 

 

(b)                                 “Corporate Status” describes the status of a person who is serving or has served (i) as a director or officer of the Company, (ii) as a Company employee in a fiduciary capacity with respect to an employee benefit plan of the Company or (iii) as a director or officer of any other Entity at the request of the Company.  For purposes of subsection (iii) of this Section 1(b), without limitation, a director or officer of the Company who is serving or has served as a director or officer of a Subsidiary shall be deemed to be serving at the request of the Company.

 

(c)                                  “Disinterested Director” means a director of the Company who (i) is not and was not a party to the Proceeding in respect of which indemnification is sought by the Indemnitee and (ii) is determined to be “disinterested” under applicable Delaware state law.

 

(d)                                 “Entity” shall mean any corporation, partnership (general or limited), limited liability company, joint venture, trust, employee benefit plan, company, foundation, association, organization or other legal entity, other than the Company.

 

(e)                                  “Expenses” shall be construed broadly to mean all direct and indirect fees of any type or nature whatsoever, costs and expenses incurred in connection with any Proceeding, including, without limitation, all attorneys’ fees and costs, disbursements and retainers (including, without limitation, any fees, disbursements and retainers incurred by the Indemnitee pursuant to Section 10 of this Agreement), fees and disbursements of experts, witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), court costs, filing fees, transcript costs, fees of experts, travel expenses, duplicating, imaging, printing and binding costs, telephone and fax transmission charges, computer legal research costs, postage, delivery service fees, secretarial services, fees and expenses of third party vendors; the premium, security for, and other costs associated with any bond (including supersedeas or appeal bonds, injunction bonds, cost bonds, appraisal bonds or their equivalents), in each case incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding (including, without limitation, any judicial or arbitration Proceeding brought to enforce the Indemnitee’s rights under, or to recover damages for breach of, this Agreement), as well as all other “expenses” within the meaning of that term as used in Section 145 of the DGCL, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of types customarily and reasonably incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, actions, suits, or proceedings similar to or of the same type as the Proceeding with respect to which such disbursements or expenses were incurred.  Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding.

 

(f)                                   “Indemnifiable Expenses,” “Indemnifiable Liabilities” and “Indemnifiable Amounts” shall have the meanings ascribed to those terms in Section 2(a) below.

 

(g)                                  “Independent Counsel” means a law firm, or a person admitted to practice law in any State of the United States, that is experienced in matters of corporation law and shall not include any law firm or person who, under the applicable standards of professional conduct then

 

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prevailing, would have a conflict of interest in representing either the Company or the Indemnitee in an action to determine the Indemnitee’s rights under this Agreement.

 

(h)                                 “Liabilities” shall be broadly construed to mean, without limitation, all judgments, damages, liabilities, losses, penalties, taxes, fines and amounts paid in settlement, in each case, of any type whatsoever, in connection with a Proceeding.  References herein to “fines” shall include any excise tax assessed with respect to any employee benefit plan.

 

(i)                                     “Proceeding” shall be construed broadly to mean, without limitation, any threatened, pending, completed or reasonably likely claim, government, regulatory and self-regulatory action, suit, arbitration, mediation, alternate dispute resolution process, investigation (including any internal investigation), inquiry, administrative hearing, appeal, or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative, arbitrative or investigative nature, whether formal or informal, including a proceeding initiated by the Indemnitee pursuant to Section 10 of this Agreement to enforce the Indemnitee’s rights hereunder.

 

(j)                                    “Subsidiary” shall mean any Entity of which the Company owns (either directly or indirectly) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such Entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such Entity.

 

(k)                                 References herein to a director of any other Entity shall include, in the case of any Entity that is not managed by a board of directors, such other position, such as manager or trustee or member of the governing body of such Entity, that entails responsibility for the management and direction of such Entity’s affairs, including, without limitation, the general partner of any partnership (general or limited) and the manager or managing member of any limited liability company.

 

2.                                      Agreement to Indemnify.  The Company agrees to indemnify the Indemnitee to the fullest extent permitted, and in the manner permitted, by applicable law as in effect as of the date hereof or as such laws may, from time to time, be amended (but only if amended in a way that broadens the right to indemnification and advancement of expenses).  The rights to indemnification and advancement of expenses pursuant to this Agreement shall include, without limitation:

 

(a)                                 Indemnification for Third Party Proceedings.  Subject to the exceptions contained in Section 3(a) and Section 5 below, if the Indemnitee was or is a party or was or is otherwise involved in or was or is threatened to be made a party or is otherwise involved in any capacity to any Proceeding (other than an action by or in the right of the Company) by reason of the Indemnitee’s Corporate Status, the Indemnitee shall be indemnified by the Company to the fullest extent permitted by the DGCL, as the same may be amended from time to time, against all Expenses and Liabilities actually and reasonably incurred or paid by the Indemnitee or on the Indemnitee’s behalf in connection with such a Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable

 

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Amounts”).  In addition, the Indemnitee’s Corporate Status may allow for indemnification under certain agreements containing indemnity provisions with another Entity or protections under the organization documents of such other Entity.  In those instances, the Company shall remain wholly liable for making any indemnification payments for all Indemnifiable Amounts notwithstanding the payment obligation of such amounts by a third party to the Indemnitee; provided, however, that if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise, the Company shall not be liable under this Agreement to make any payment to the Indemnitee with respect to such Indemnifiable Amounts that have been satisfied.  Nothing hereunder is intended to affect any right of contribution of or against the Company in the event the Company and any other person or persons have co-equal obligations to indemnify (or advance expenses to) the Indemnitee.

 

(b)                                 Indemnification in Derivative Actions and Direct Actions by the Company.  Subject to the exceptions contained in Section 3(b) and Section 5 below, if the Indemnitee was or is a party or was or is otherwise involved in or was or is threatened to be made a party to or was or is otherwise involved in any capacity in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the Indemnitee’s Corporate Status, the Indemnitee shall be indemnified by the Company against all Indemnifiable Expenses.  In addition, the Indemnitee’s Corporate Status may allow for indemnification under certain agreements containing indemnity provisions with another Entity or protections under the organization documents of such other Entity.  In those instances, the Company shall remain wholly liable for making any indemnification payments for all Indemnifiable Expenses notwithstanding the payment obligation of such amounts by a third party to the Indemnitee; provided, however, that if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise, the Company shall not be liable under this Agreement to make any payment to the Indemnitee with respect to such Indemnifiable Expenses that have been satisfied.  Nothing hereunder is intended to affect any right of contribution of or against the Company in the event the Company and any other person or persons have co-equal obligations to indemnify (or advance expenses to) the Indemnitee.

 

(c)                                  In the event that Apollo Global Management, LLC or any of its affiliates (other than the Company) pays, forwards or otherwise satisfies any Indemnifiable Amounts to the Indemnitee, such amounts shall be promptly reimbursed by the Company to such payor to the extent that such Indemnifiable Amounts were required to be paid by the Company to the Indemnitee pursuant to the terms of the Agreement.

 

3.                                      Exceptions to Indemnification.  The Indemnitee shall be entitled to indemnification under Section 2(a) and Section 2(b) above in all circumstances other than the following:

 

(a)                                 Exceptions to Indemnification for Third Party Proceedings.  If indemnification is requested under Section 2(a) and there has been a final non-appealable judgment by a court of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Indemnitee failed to meet the standard of conduct which makes it permissible under applicable law for the Company to indemnify the Indemnitee for Indemnifiable Amounts hereunder, (i) the Indemnitee shall not be entitled to payment of Indemnifiable Liabilities hereunder and (ii) no Indemnifiable Expenses shall be paid with respect

 

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to such claim, issue or matter unless the court of competent jurisdiction in which such Proceeding was brought shall determine upon application that, despite any adjudication of liability, the Indemnitee is entitled to indemnity for such Indemnifiable Expenses which such court shall deem proper.

 

(b)                                 Exceptions to Indemnification in Derivative Actions and Direct Actions by the Company.  If indemnification is requested under Section 2(b) and there has been a final non-appealable judgment by a court of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Indemnitee failed to meet the standard of conduct which makes it permissible under applicable law for the Company to indemnify the Indemnitee for Indemnifiable Amounts hereunder, (i) the Indemnitee shall not be entitled to payment of Indemnifiable Liabilities hereunder and (ii) no Indemnifiable Expenses shall be paid with respect to such claim, issue or matter unless the court of competent jurisdiction in which such Proceeding was brought shall determine upon application that, despite any adjudication of liability, the Indemnitee is entitled to indemnity for such Indemnifiable Expenses which such court shall deem proper.

 

4.                                      Procedure for Payment of Indemnifiable Amounts.

 

(a)                                 Subject to Section 8, the Indemnitee shall submit to the Company a written request specifying in reasonable detail the Indemnifiable Amounts for which the Indemnitee seeks payment under Section 2, Section 5 or Section 6 of this Agreement and a short description of the basis for the claim.  The Company shall pay such Indemnifiable Amounts to the Indemnitee within thirty (30) calendar days of receipt of the request.  At the request of the Company, the Indemnitee shall furnish such documentation and information as are reasonably available to the Indemnitee and necessary to establish that the Indemnitee is entitled to indemnification hereunder.

 

(b)                                 Upon written request by the Indemnitee for indemnification pursuant to the first sentence of Section 4(a) hereof, if required by applicable law and to the extent not otherwise provided pursuant to the terms of this Agreement, a determination with respect to the Indemnitee’s entitlement to indemnification under applicable law shall be made in the specific case as follows if there is a dispute between the Company and the Indemnitee with respect to the Indemnitee’s rights to indemnification hereunder:  (i) if a Change in Control shall have occurred and if so requested in writing by the Indemnitee, by Independent Counsel in a written opinion to the Board of Directors; or (ii) if a Change in Control shall not have occurred (or if a Change in Control shall have occurred but the Indemnitee shall not have requested that indemnification be determined by Independent Counsel as provided in subpart (i) of this Section 4(b)), (A) by a majority vote of a quorum of the Board of Directors consisting of Disinterested Directors or (B) if there is no such quorum of the Board of Directors consisting of Disinterested Directors or, if such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, or (C) if a quorum of Disinterested Directors so directs, by a majority of the stockholders of the Corporation.  Notice in writing of any determination as to the Indemnitee’s entitlement to indemnification shall be delivered to the Indemnitee promptly after such determination is made, and if such determination of entitlement to indemnification has been made by Independent Counsel in a written opinion to the Board of Directors, then such notice shall be accompanied by a copy of such written opinion.  If it is determined that the Indemnitee

 

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is entitled to indemnification, then payment to the Indemnitee of all amounts to which the Indemnitee is determined to be entitled (other than sums that were already advanced) shall be made within thirty (30) calendar days after such determination.  If it is determined that the Indemnitee is not entitled to indemnification, then the written notice to the Indemnitee (or, if such determination has been made by Independent Counsel in a written opinion, the copy of such written opinion delivered to the Indemnitee) shall disclose the basis upon which such determination is based.  The Indemnitee shall cooperate with the person, persons, or entity making the determination with respect to the Indemnitee’s entitlement to indemnification, including providing to such person, persons, or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.

 

(c)                                  If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4(b) hereof, the Independent Counsel shall be selected as provided in this Section 4(c).  If a Change in Control shall not have occurred (or if a Change in Control shall have occurred but the Indemnitee shall not have requested that indemnification be determined by Independent Counsel as provided in subpart (i) of Section 4(b)), then the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to the Indemnitee advising the Indemnitee of the identity of the Independent Counsel so selected.  If a Change in Control shall have occurred and the Indemnitee shall have requested that indemnification be determined by Independent Counsel, then the Independent Counsel shall be selected by the Indemnitee (unless the Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and the Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected.  In either event, the Indemnitee or the Company, as the case may be, may, within thirty (30) calendar days after such written notice of selection has been given, deliver to the Company or to the Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the law firm or person so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth the basis of such assertion.  Absent a proper and timely objection, the person so selected shall act as Independent Counsel.  If such written objection is so made and substantiated, the law firm or person so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Court of Chancery of the State of Delaware or another court of competent jurisdiction in the State of Delaware has determined that such objection is without merit.  If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4(b) hereof and, following the expiration of thirty (30) calendar days after submission by the Indemnitee of a written request for indemnification pursuant to Section 4(a) hereof, Independent Counsel shall not have been selected, or an objection thereto has been made and not withdrawn, then either the Company or the Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction in the State of Delaware for resolution of any objection that shall have been made by the Company or the Indemnitee to the other’s selection of Independent Counsel and/or for appointment as Independent Counsel of a law firm or person selected by such court (or selected by such person as the court shall designate), and the law firm or person with respect to whom all objections are so resolved or the law firm or person so appointed shall act as Independent Counsel under Section 4(b) hereof.  Upon the due

 

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commencement of any Proceeding pursuant to Section 10(e) hereof, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).  If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4(b) hereof, then the Company agrees to pay the reasonable fees and expenses of such Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

5.                                      Indemnification for Expenses if the Indemnitee is Wholly or Partly Successful.  Notwithstanding anything contained in this Agreement to the contrary, to the extent that the Indemnitee is or was, or is or was threatened to be made, by reason of the Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise, in defending any Proceeding, the Indemnitee shall be indemnified against all Indemnifiable Expenses incurred by the Indemnitee or on the Indemnitee’s behalf in connection with the defense of such Proceeding.  If the Indemnitee is not wholly successful in such Proceeding but is successful on the merits or otherwise as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.  If the Indemnitee is not wholly successful in such Proceeding, the Company also shall indemnify, hold harmless and exonerate the Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful.  For purposes of this Agreement, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.  Notwithstanding any of the foregoing, nothing herein shall be construed to limit the Indemnitee’s right to indemnification which he or she would otherwise be entitled to pursuant to Section 2 and Section 3 hereof, regardless of the Indemnitee’s success in a Proceeding.

 

6.                                      Indemnification for Expenses as a Witness.  Anything in this Agreement to the contrary notwithstanding, to the fullest extent permitted by applicable law, to the extent that the Indemnitee, by reason of the Indemnitee’s Corporate Status, is or was, or is or was threatened to be made, a witness in any Proceeding to which the Indemnitee is not a party, the Indemnitee shall be indemnified against all Indemnifiable Expenses incurred by the Indemnitee or on the Indemnitee’s behalf in connection therewith (including, for the avoidance of doubt, discovery expenses relating to locating and producing data or information that may be in the possession of the Indemnitee).  To the extent permitted by applicable law, the Indemnitee shall be entitled to indemnification for Expenses incurred in connection with being or threatened to be made a witness, as provided in this Section 6, regardless of whether the Indemnitee failed to meet the standard of conduct which makes it permissible under applicable law for the Company to indemnify the Indemnitee for Indemnifiable Amounts hereunder.

 

7.                                      Agreement to Advance Expenses; Conditions.  The Company shall pay to the Indemnitee all Indemnifiable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding to which the Indemnitee was or is a party or was or is otherwise involved or was or is threatened to be made a party to or was or is otherwise involved in any capacity in any Proceeding by reason of the Indemnitee’s Corporate Status, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding.  The Indemnitee

 

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hereby undertakes to repay the amount of Indemnifiable Expenses paid to the Indemnitee if it shall ultimately be determined by final judicial decision of a court of competent jurisdiction, from which decision there is no further right to appeal, that the Indemnitee is not entitled under this Agreement to, or is prohibited by applicable law from, indemnification with respect to such Indemnifiable Expenses.  Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest free.  The Indemnitee shall be entitled to advancement of Indemnifiable Expenses as provided in this Section 7 regardless of any determination by or on behalf of the Company that the Indemnitee failed to meet the standard of conduct which makes it permissible under applicable law for the Company to indemnify the Indemnitee for Indemnifiable Amounts hereunder.

 

8.                                      Procedure for Advance Payment of Expenses.  The Indemnitee shall submit to the Company a written request specifying in reasonable detail the Indemnifiable Expenses for which the Indemnitee seeks an advancement under Section 7 of this Agreement, together with documentation reasonably evidencing that the Indemnitee has incurred such Indemnifiable Expenses.  Payment of Indemnifiable Expenses under Section 7 shall be made no later than ten (10) calendar days after the Company’s receipt of such request.

 

9.                                      Burden of Proof; Defenses; and Presumptions.

 

(a)                                 In any Proceeding pursuant to Section 10 hereof brought by the Indemnitee to enforce rights to indemnification or to an advancement of Indemnifiable Expenses hereunder, or in any Proceeding brought by the Company to recover an advancement of Indemnifiable Expenses (whether pursuant to the terms of an undertaking or otherwise), the burden shall be on the Company to prove that the Indemnitee is not entitled to be indemnified, or to such an advancement of Indemnifiable Expenses, as the case may be.

 

(b)                                 It shall be a defense in any Proceeding pursuant to Section 10 hereof to enforce rights to indemnification under Section 2(a) or Section 2(b) hereof (but not in any Proceeding pursuant to Section 10 hereof to enforce a right to an advancement of Indemnifiable Expenses under Section 7 and Section 8 hereof) that the Indemnitee has not met the standard of conduct which makes it permissible under applicable law for the Company to indemnify the Indemnitee for Indemnifiable Amounts hereunder, as the case may be, but the burden of proving such defense shall be on the Company.  With respect to any Proceeding pursuant to Section 10 hereof brought by the Indemnitee to enforce a right to indemnification hereunder, or any Proceeding brought by the Company to recover an advancement of Indemnifiable Expenses (whether pursuant to the terms of an undertaking or otherwise), neither (i) the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of such Proceeding that indemnification is proper in the circumstances because the Indemnitee has met the applicable standards of conduct, nor (ii) an actual determination by the Company (including by its directors or independent legal counsel) that the Indemnitee has not met such applicable standards of conduct, shall create a presumption that the Indemnitee has not met the applicable standards of conduct or, in the case of a Proceeding pursuant to Section 10 hereof brought by the Indemnitee seeking to enforce a right to indemnification, be a defense to such Proceeding.

 

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(c)                                  The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, in and of itself, adversely affect the right of the Indemnitee to indemnification hereunder or create a presumption that the Indemnitee did not act in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, shall not create a presumption that the Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(d)                                 For purposes of any determination of good faith, the Indemnitee shall be deemed to have acted in good faith if the Indemnitee’s action is reasonably based on the records or books of account of the Company or other Entity, including financial statements, or on information supplied to the Indemnitee by the officers of the Company or other Entity in the course of their duties, or on the advice of legal counsel for the Company or other Entity or on information or records given or reports made to the Company or other Entity by an independent certified public accountant or by an appraiser or other expert selected by the Company or other Entity.  The provisions of this Section 9(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.

 

(e)                                  The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or of another Entity shall not be imputed to the Indemnitee for purposes of determining the Indemnitee’s right to indemnification or advancement of Indemnifiable Expenses under this Agreement.

 

10.                               Remedies of the Indemnitees.

 

(a)                                 Right to Petition Court.  In the event that the Indemnitee makes a request for payment of Indemnifiable Amounts under Section 2 or Section 4 herein or a request for an advancement of Indemnifiable Expenses under Section 7 or Section 8 herein and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Indemnitee may petition a court to enforce the Company’s obligations under this Agreement.

 

(b)                                 Expenses.  The Company agrees to reimburse the Indemnitee in full for any Expenses actually and reasonably incurred by the Indemnitee in connection with investigating, preparing for, litigating, defending or settling any action brought by the Indemnitee under Section 10(a) above within thirty (30) calendar days of receipt of a written request specifying in reasonable detail the amount and nature of such Expenses; provided, however, that to the extent the Indemnitee is unsuccessful on the merits in such action then the Company shall have no obligation to reimburse the Indemnitee under this Section 10(b).

 

(c)                                  Validity of Agreement.  The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 10(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

 

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(d)                                 Failure to Act or Adverse Determination Not a Defense.  The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement or any adverse determination by the Company (including its Board of Directors or any committee thereof, independent legal counsel or stockholders) concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 10(a) above, and shall not create a presumption that such payment or advancement is not permissible.

 

(e)                                  Entitlement to Indemnification; Independent Counsel.  In the event that (i) a determination is made pursuant to Section 4 of this Agreement that the Indemnitee is not entitled to indemnification under this Agreement, (ii) if the determination of entitlement to indemnification is not to be made by Independent Counsel pursuant to Section 4(b) hereof, no determination of entitlement to indemnification shall have been made pursuant to Section 4(b) of this Agreement within thirty (30) calendar days after receipt by the Company of the Indemnitee’s written request for indemnification, (iii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 4(b) hereof, no determination of entitlement to indemnification shall have been made pursuant to Section 4(b) hereof within thirty (30) calendar days after receipt by the Company of the Indemnitee’s written request for indemnification, unless an objection to the selection of such Independent Counsel has been made and substantiated and not withdrawn, in which case the applicable time period shall be thirty (30) calendar days after the Court of Chancery of the State of Delaware or another court of competent jurisdiction in the State of Delaware (or such person appointed by such court to make such determination) has determined or appointed the person to act as Independent Counsel pursuant to Section 4(b) hereof, (iv) payment of indemnification is not made pursuant to Section 5 or Section 6 of this Agreement within thirty (30) calendar days after receipt by the Company of a written request therefor or (v) payment of indemnification pursuant to Section 5 or Section 6 of this Agreement is not made within thirty (30) calendar days after a determination has been made pursuant to Section 4(b) that the Indemnitee is entitled to indemnification, then the Indemnitee shall be entitled to seek an adjudication by the Court of Chancery of the State of Delaware of the Indemnitee’s entitlement to such indemnification or advancement of Indemnifiable Expenses.

 

(f)                                   Not Prejudiced by Adverse Determination.  In the event that a determination shall have been made pursuant to Section 4(b) of this Agreement that the Indemnitee is not entitled to indemnification, any Proceeding commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and the Indemnitee shall not be prejudiced by reason of that adverse determination.

 

11.                               Settlement of Proceedings.

 

(a)                                 The Indemnitee agrees that it will not settle, compromise or consent to the entry of any judgment as to the Indemnitee in any pending or threatened Proceeding (whether or not the Indemnitee is an actual or potential party to such Proceeding) in which Indemnitee has sought indemnification hereunder without the Company’s prior written consent, which consent will not be unreasonably withheld, unless such settlement, compromise or consent respecting

 

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such Proceeding includes an unconditional release of the Indemnitee and does not (i) require or impose any injunctive or other non-monetary remedy on the Company or its affiliates, (ii) require or impose an admission or consent as to any wrongdoing by the Company or its affiliates or (iii) otherwise result in a direct or indirect payment by or monetary cost to the Company or its affiliates.

 

(b)                                 The Company agrees that it will not settle, compromise or consent to the entry of any judgment as to the Indemnitee in any pending or threatened Proceeding (whether or not the Indemnitee is an actual or potential party to such Proceeding) in which the Indemnitee has sought indemnification hereunder without the Indemnitee’s prior written consent, which consent shall not be unreasonably withheld, unless such settlement, compromise or consent includes an unconditional release of the Indemnitee and does not (i) require or impose any injunctive or other non-monetary remedy on the Indemnitee, (ii) require or impose an admission or consent as to any wrongdoing by the Indemnitee or (iii) otherwise result in a direct or indirect payment by or monetary cost to the Indemnitee personally (as opposed to a payment to be made or cost to be paid by the Company on the Indemnitee’s behalf).

 

12.                               Notice by the Indemnitee.  The Indemnitee agrees to notify the Company promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding which could reasonably be expected to result in the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify the Indemnitee from the right to receive payments of Indemnifiable Amounts or advancements of Indemnifiable Expenses.

 

13.                               Representations and Warranties of the Company.  The Company hereby represents and warrants to the Indemnitee as follows:

 

(a)                                 Authority.  The Company has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by the Company.

 

(b)                                 Enforceability.  This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, shall be a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by equitable principles and applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors’ rights generally.

 

(c)                                  No Conflicts.  This Agreement, when executed and delivered by the Company in accordance with the provisions hereof, does not, and the Company’s performance of its obligations under the Agreement will not, violate the Company’s certificate of incorporation, bylaws, other agreements to which the Company is a party to or applicable law.

 

(d)                                 Insurance.  The Company shall use its reasonable best efforts to purchase and maintain a policy or policies of insurance (“D&O Insurance”) with reputable insurance companies with A.M. Best ratings of “A” or better, providing Indemnitee with coverage for any

 

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liability asserted against, or incurred by, Indemnitee or on Indemnitee’s behalf by reason of the fact that Indemnitee is or was or has agreed to serve as a director, officer, employee or agent of the Company, or while serving as a director or officer of the Company, is or was serving or has agreed to serve on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement.  Such D&O Insurance shall have coverage terms and policy limits at least as favorable to Indemnitee as the insurance coverage provided to any other director or officer of the Company.  If the Company has such insurance in effect at the time the Company receives from Indemnitee any notice of the commencement of an action, suit or proceeding, the Company shall give prompt notice of the commencement of such action, suit or proceeding to the insurers in accordance with the procedures set forth in the D&O Insurance.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such D&O Insurance.

 

14.                               Contract Rights Not Exclusive; Subrogation.  The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable Expenses provided by this Agreement shall be in addition to, but not exclusive of, any other rights that the Indemnitee may have at any time under applicable law, the Company’s bylaws or certificate of incorporation, or any other agreement, vote of stockholders or directors (or a committee of directors), or otherwise, both as to action in the Indemnitee’s official capacity and as to action in any other capacity as a result of the Indemnitee’s serving in a Corporate Status.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy, given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.  In the event of any payment to or on behalf of the Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

15.                               Successors.  This Agreement shall be (a) binding upon all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law) and (b) binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Indemnitee.  This Agreement shall continue for the benefit of the Indemnitee and such heirs, personal representatives, executors and administrators after the Indemnitee has ceased to have Corporate Status.  The Company shall require and cause any successor(s) (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), by written agreement in form and substance reasonably satisfactory to the Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would

 

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be required to perform if no such succession had taken place; provided that no such assumption shall relieve the Company from its obligations hereunder and any obligations shall thereafter be joint and several.

 

16.                               Change in Law.  To the extent that a change in Delaware law (whether by statute or judicial decision) shall permit broader indemnification or advancement of expenses than is provided under the terms of the bylaws of the Company and this Agreement, the Indemnitee shall be entitled to such broader indemnification and advancements, and this Agreement shall be deemed to be amended to such extent, but only to the extent such amendment permits the Indemnitee to broader indemnification and advancement rights other than Delaware law permitted prior to the adoption of such amendment.

 

17.                               Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

 

18.                               Modifications and Waiver.  Except as provided in Section 16 above with respect to changes in Delaware law which broaden the right of the Indemnitee to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver.  In the event the Company or any of its subsidiaries enters into an indemnification agreement with another director or officer of the Company or any of its subsidiaries with respect to the subject matter hereof containing a term or terms more favorable to the indemnitee thereunder than the terms contained herein, the Indemnitee shall be afforded the benefit of such more favorable term or terms and such more favorable term or terms shall be deemed incorporated by reference herein as if set forth in full herein.  As promptly as practicable following the execution by the Company or the relevant subsidiary of any such indemnification agreement with any such other director or officer (i) the Company shall send a copy of the indemnification agreement to the Indemnitee, and (ii) if requested by the Indemnitee, the Company shall prepare, execute and deliver to the Indemnitee an amendment to this Agreement containing such more favorable term or terms.

 

19.                               General Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed

 

(a)                                 If to the Indemnitee, to:

 

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(b)                                 If to the Company, to:

 

Athlon Energy Inc.
 420 Throckmorton Street, Suite 1200
 Fort Worth, Texas 76102
 Facsimile:  (817) 984-8217

 

or to such other address as may have been furnished in the same manner by any party to the others.

 

20.                               Contribution.  To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

 

21.                               Specific Performance.  The parties recognize that if any provision of this Agreement is violated by the parties hereto, the Indemnitee may be without an adequate remedy at law.  Accordingly, in the event of any such violation, the Indemnitee shall be entitled, if the Indemnitee so elects, to institute proceedings, to enforce specific performance, to enjoin such violation, or to obtain any relief as the Indemnitee may elect to pursue.

 

22.                               Third Party Beneficiaries.  Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties hereto and their permitted successors and assigns, any rights or remedies under or by reason of this Agreement, except that Apollo Global Management, LLC or any of its affiliates (other than the Company) shall be third-party beneficiaries hereunder with respect to the obligations of the Company set forth in Section 2(c).

 

23.                               Governing Law.  This Agreement shall be exclusively governed by and construed and enforced under the laws of the State of Delaware without giving effect to the provisions thereof relating to conflicts of law of such state.

 

24.                               Consent to Jurisdiction.

 

(a)                                 Each of the Company and the Indemnitee hereby irrevocably and unconditionally (i) agrees and consents to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action, suit or proceeding that arises out of or relates to this Agreement and agrees that any such action instituted under this Agreement shall be brought only in the Court of Chancery of the State of Delaware (or in any other state court of the State of Delaware if the Court of Chancery does not have subject matter jurisdiction over such action), and not in any other state or federal court in the United States of America or any court or tribunal in any

 

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other country; (ii) consents to submit to the exclusive jurisdiction of the courts of the State of Delaware for purposes of any action or proceeding arising out of or in connection with this Agreement; (iii) waives any objection to the laying of venue of any such action or proceeding in the courts of the State of Delaware; and (iv) waives, and agrees not to plead or to make, any claim that any such action or proceeding brought in the courts of the State of Delaware has been brought in an improper or otherwise inconvenient forum.

 

(b)                                 Each of the Company and the Indemnitee hereby consents to service of any summons and complaint and any other process that may be served in any action, suit or proceeding arising out of or relating to this Agreement in any court of the State of Delaware by mailing by certified or registered mail, with postage prepaid, copies of such process to such party at its address for receiving notice pursuant to Section 19 hereof.  Nothing herein shall preclude service of process by any other means permitted by applicable law.

 

25.                               Counterparts.  This Agreement may be executed in one or more counterparts (including by PDF or facsimile), each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement.  Only one such counterpart need be produced to evidence the existence of this Agreement.

 

26.                               Headings.  The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

27.                               Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement, provided, however, that this Agreement is supplement to and in furtherance of the Company’s certificate of incorporation, bylaws, the DGCL and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of the Indemnitee thereunder.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
ATHLON   ENERGY INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INDEMNITEE:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    

 

[Signature Page to Indemnification Agreement]Exhibit 10.13

 

FORM OF TAX RECEIVABLE AGREEMENT

 

This TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of              , 2013, is hereby entered into by and among Athlon Energy Inc., a Delaware corporation (the “Corporation”), Athlon Holdings LP, a Delaware limited partnership (the “Partnership”), and each of the Partners (as defined herein).

 

RECITALS

 

WHEREAS, the Partners own limited partner interests (“Units”) in the Partnership, which is treated as a partnership for United States federal income tax purposes;

 

WHEREAS, the Corporation owns the general partner interest and limited partner interests in the Partnership;

 

WHEREAS, the Units held by the Partners are exchangeable for shares of common stock, par value $0.01 per share (the “Common Stock”), of the Corporation;

 

WHEREAS, the Partnership and each of its direct and indirect subsidiaries treated as a partnership for United States federal income tax purposes will have in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the “Code”), for each Taxable Year (as defined below) in which an exchange of Units for Common Stock occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Partnership and such subsidiaries (solely with respect to the Corporation) at the time of (i) any Section 734(b) Distribution (as defined below) or (ii) an exchange of Units for Common Stock or any other acquisition of Units by the Corporation or its successor (or any entity that is a member of the Corporation’s (or its successor’s) affiliated or consolidated group) for cash or otherwise (the transactions described in clauses (i) and (ii), collectively, an “Exchange”) (each such time described in clauses (i) and (ii), the “Exchange Date”) by reason of such Exchange and the payments under this Agreement;

 

WHEREAS, the income, gain, loss, expense and other Tax (as defined below) items of (i) the Corporation, as a partner of the Partnership (and in respect of each of the Partnership’s direct and indirect Subsidiaries (as defined below) treated as a partnership for United States federal income tax purposes) with respect to the Specified Assets (as defined below) may be affected by the Basis Adjustment (as defined below) and (ii) the Corporation may be affected by the Imputed Interest (as defined below); and

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the actual or deemed effect of the Basis Adjustment and the Imputed Interest on the liability for Taxes of the Corporation.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

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ARTICLE I
 DEFINITIONS

 

Definitions.  As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

“Advisory Firm” means any law or accounting firm that is nationally recognized as being an expert in Tax matters and that is agreed to by the Board.

 

“Advisory Firm Letter” means a letter from the Advisory Firm stating that the relevant schedule, notice or other information to be provided by the Corporation to the Exchanging Partner and all supporting schedules and work papers were prepared in a manner consistent with the terms of this Agreement and, to the extent not expressly provided in this Agreement, on a reasonable basis in light of the facts and law in existence on the date such schedule, notice or other information is delivered to the Exchanging Partner.

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR plus 300 basis points.

 

“Agreement” is defined in the Preamble of this Agreement.

 

“Amended Schedule” is defined in Section 2.04(b) of this Agreement.

 

“Amount Realized” means, in respect of an Exchange by an Exchanging Partner, the amount that is deemed for purposes of this Agreement to be the amount realized by the Exchanging Partner on the Exchange, which shall be the sum of (i) the Market Value of the Common Stock, the amount of cash and the amount or fair market value of other consideration received (or deemed received) by the Exchanging Partner in the Exchange and (ii) the Share of Liabilities attributable to the Units Exchanged.  The amount realized by an Exchanging Partner, as so determined, may differ from the amount realized by the Exchanging Partner for purposes of Section 1001 of the Code.

 

“Basis Adjustment” means the deemed adjustment to the Tax basis of a Specified Asset, arising in respect of an Exchange, as calculated under Section 2.01 of this Agreement, under the principles of Sections 743(b) and 754 of the Code (including in situations where, following an Exchange, the Partnership remains in existence as an entity for tax purposes, or situations where, following one or more Section 734(b) Distributions, the Partnership remains in existence as an entity for tax purposes) and, in each case, comparable sections of state, local and foreign Tax laws.  Notwithstanding any other provision of this Agreement, the amount of any Basis Adjustment resulting from an Exchange of one or more Units shall be determined without regard to any Pre-Exchange Transfer of such Units and as if any such Pre-Exchange Transfer had not occurred.  Immediately after any Section 732 Event, “Basis Adjustment” means a portion of the tax basis of a Specified Asset, equal to the Basis Adjustment attributable to such Specified Asset immediately prior to such Section 732 Event, including, for this purpose, any increase in the

 

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basis of a Specified Asset pursuant to Section 1012 of the Code and Revenue Ruling 99-6, 1999-1 C.B. 532, due to an Exchange that causes the Partnership to become an entity disregarded as separate from its owner for tax purposes.

 

“Beneficial Owner”, with respect to a security, means a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security.  The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

 

“Board” means the board of directors of the Corporation.

 

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.

 

“Change of Control” means the occurrence of either of the following events:

 

(a)                                 the sale, lease or transfer (other than by way of merger or consolidation, including any merger or consolidation involving an Affiliate of the Corporation solely for the purpose of reorganizing the Corporation in another jurisdiction to realize tax or other benefits), in one or a series of related transactions, of all or substantially all the assets of the Corporation and its Subsidiaries, taken as a whole, to a Person other than any of the Permitted Holders; or

 

(b)                                 the Corporation becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or in a related series of transactions, by way of merger, consolidation, amalgamation or other business combination or purchase of Beneficial Ownership, of more than 50% of the total capital stock of the Corporation that is entitled to vote in the election of the Board.

 

Notwithstanding the foregoing, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporation immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Corporation immediately following such transaction or series of transactions.

 

“Code” is defined in the Recitals of this Agreement.

 

“Common Stock” is defined in the Recitals of this Agreement.

 

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“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporation” is defined in the Preamble of this Agreement.

 

“Corporation Return” means the United States federal, state, local and/or foreign Tax Return, as applicable, of the Corporation filed with respect to Taxes of any Taxable Year.

 

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporation, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.

 

“Default Rate” means LIBOR plus 625 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state, local and foreign Tax law, as applicable, or any other event (including the execution of an IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

 

“Dispute” is defined in Section 7.08(a) of this Agreement.

 

“Early Payment Right” is defined in Section 4.04 of this Agreement.

 

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

 

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

 

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

“Early Termination Rate” means LIBOR plus 300 basis points.

 

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

 

“Exchange” is defined in the Recitals of this Agreement, and “Exchanged” and “Exchanging” shall have correlative meanings.

 

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

 

“Exchange Basis Schedule” is defined in Section 2.02 of this Agreement.

 

“Exchange Date” is defined in the Recitals of this Agreement.

 

“Exchange Payment” is defined in Section 5.01.

 

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“Exchanging Partner” means a Partner that Exchanges some or all of its Units.

 

“Expert” is defined in Section 7.09 of this Agreement.

 

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation) using the same methods, elections, conventions and similar practices used on the relevant Corporation Return, but using the Non-Stepped Up Tax Basis instead of the Tax basis reflecting the Basis Adjustments of the Specified Assets and excluding any deduction attributable to Imputed Interest.

 

“Imputed Interest” means any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state, local and foreign Tax law with respect to the Corporation’s payment obligations under this Agreement.

 

“Interest Amount” is defined in Section 3.01(b) of this Agreement.

 

“IPO” means the initial public offering of Common Stock by the Corporation.

 

“IPO Date” means the date on which the Corporation contributes to the Partnership the net proceeds received by the Corporation in connection with the IPO.

 

“IRS” means the United States Internal Revenue Service.

 

“LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two Business Days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such month (or portion thereof).

 

“LP Agreement” means the Amended and Restated Limited Partnership Agreement of the Partnership, dated on or about the date hereof, as such agreement may be amended from time to time.

 

“Management Group” means the group consisting of the directors, executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as the case may be, on the date hereof together with (1) any new directors whose election by the Board or whose nomination for election by the equity holders of the Corporation or any direct or indirect parent of the Corporation, as applicable, was approved by a vote of a majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable, then still in office who are directors on the date hereof or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Corporation or any direct or indirect parent of the Corporation, as applicable, hired at a time when the directors on the date hereof together with the directors so approved constituted a majority of the directors of the Corporation or any direct or indirect parent of the Corporation, as applicable.

 

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“Market Value” means the closing price of the Common Stock on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Common Stock is then traded or listed, as reported by the Wall Street Journal; provided that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Common Stock on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Common Stock is then traded or listed, as reported by the Wall Street Journal; provided further, that if the Common Stock is not then listed on a National Securities Exchange or Interdealer Quotation System, “Market Value” shall mean the cash consideration paid for Common Stock, or the fair market value of the other property delivered for Common Stock, as determined by the Board in good faith.

 

“Material Objection Notice” is defined in Section 4.02 of this Agreement.

 

“Net Tax Benefit” is defined in Section 3.01(b) of this Agreement.

 

“Non-Stepped Up Tax Basis” means, with respect to any asset at any time, the tax basis that such asset would have had at such time if no Basis Adjustment had been made or, immediately after any Section 732 Event, the tax basis that such asset would have had if the Basis Adjustment were not included in such asset’s tax basis.

 

“Objection Notice” is defined in Section 2.04(a) of this Agreement.

 

“Original Partners” means the partners set forth on Annex A hereto.

 

“Partners” means the parties hereto, other than the Corporation and the Partnership, and each other Person who from time to time executes a Joinder Agreement in the form attached hereto as Exhibit A.

 

“Partnership” is defined in the Preamble of this Agreement.

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

“Permitted Holders” means, at any time, each of

 

(a)                                 Apollo Investment Fund VII, L.P. and its parallel funds (the “Apollo Funds”), Apollo Global Management, LLC and any of their respective Affiliates other than any portfolio companies (collectively, the “Equity Investor”) and any Person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with the Equity Investor; provided that the Equity Investor (x) owns a majority of the voting power and (y) controls a majority of the Board,

 

(b)                                 the Management Group,

 

(c)                                  any Person that has no material assets other than the capital stock of the Corporation and, directly or indirectly, holds or acquires 100% of the capital stock of the

 

6

 

Corporation that is entitled to vote in the election of the Board, and of which no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than any of the other Permitted Holders specified in clauses (i) and (ii) above, holds more than 50% of the total voting power of the capital stock of such Person that is entitled to vote in the election of the board of directors of such Person and (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) the members of which include any of the Permitted Holders specified in clauses (i) and (ii) above and that, directly or indirectly, hold or acquire Beneficial Ownership of the total capital stock of the Corporation that is entitled to vote in the election of the Board (a “Permitted Holder Group”), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member and (2) no Person or other “group” (other than Permitted Holders specified in clauses (i) and (ii) above) Beneficially Owns more than 50% on a fully diluted basis of the total capital stock of the Corporation that is entitled to vote in the election of the Board held by the Permitted Holder Group.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Pre-Exchange Transfer” means any transfer (including upon the death of a Partner) of one or more Units (i) that occurs prior to an Exchange of such Units, and (ii) to which Section 743(b) of the Code applies.

 

“Realized Tax Benefit” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the Hypothetical Tax Liability over the “actual” liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), such “actual” liability to be computed with the adjustments described in this Agreement.  If all or a portion of the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

“Realized Tax Detriment” means, for a Taxable Year and for all Taxes collectively, the net excess, if any, of the “actual” liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year), such “actual” liability to be computed with the adjustments described in this Agreement, over the Hypothetical Tax Liability for such Taxable Year.  If all or a portion of the actual liability for Taxes of the Corporation (or the Partnership, but only with respect to Taxes imposed on the Partnership and allocable to the Corporation for such Taxable Year) for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.

 

“Reconciliation Dispute” is defined in Section 7.09 of this Agreement.

 

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“Reconciliation Procedures” is defined in Section 2.04(a) of this Agreement.

 

“Schedule” means any Exchange Basis Schedule or Tax Benefit Schedule and the Early Termination Schedule.

 

“Section 732 Event” is defined in Section 2.01(c) of this Agreement.

 

“Section 734(b) Distribution” means any actual or deemed distribution to the Partners by the Partnership to which Section 734(b)(1) of the Code (or any similar provision of state, local or foreign tax law) applies.

 

“Senior Obligations” is defined in Section 5.01 of this Agreement.

 

“Share of Base Liabilities”, as to any Unit at the time of an Exchange, means the product of (i) the lesser of (x) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, at the time of the Exchange and (y) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, immediately prior to the IPO Date and (ii) the percentage share of the Unit in the profits of the Partnership immediately prior to the IPO Date, as set out on Annex A to this Agreement; provided, however, that for purposes of this definition, the amount of the liabilities of the Partnership at the time of the Exchange shall be increased by any reduction in the liabilities of the Partnership at or after the time of the IPO arising from the use of the proceeds of the IPO, or any other contribution to the capital of the Partnership, to fund or repay liabilities.

 

“Share of Excess Liabilities”, as to any Unit at the time of an Exchange, means the product of (i) the excess, if any, of (x) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, at the time of the Exchange over (y) the aggregate amount of the liabilities of the Partnership, for purposes of Section 752 and Section 1001 of the Code, immediately prior to the IPO Date and (ii) the percentage share of the Unit in the profits of the Partnership at the time of the Exchange; provided, however, that for purposes of this definition, the amount of the liabilities of the Partnership at the time of the Exchange shall be increased by any reduction in the liabilities of the Partnership at or after the time of the IPO arising from the use of the proceeds of the IPO, or any other contribution to the capital of the Partnership, to fund or repay liabilities.

 

“Share of Liabilities”, as to any Unit at the time of an Exchange, means the sum of (i) the Unit’s Share of Base Liabilities and (ii) the Unit’s Share of Excess Liabilities, if any.

 

“Specified Assets” means the assets held by the Partnership, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity for purposes of the applicable Tax, at the time of the Exchange.

 

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls more than 50% of the voting shares or other similar interests of such Person or the sole general partner interest or managing member or similar interest of such Person.

 

“Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

 

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“Tax Benefit Schedule” is defined in Section 2.03 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

“Taxable Year” means a taxable year of the Corporation as defined in Section 441(b) of the Code or comparable section of state, local or foreign Tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is prepared), ending on or after the IPO Date.

 

“Tax” or “Taxes” means any and all United States federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, whether as an exclusive or on an alternative basis, and any interest related to such Tax.

 

“Taxing Authority” means any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Units” is defined in the Recitals of this Agreement.

 

“Valuation Assumptions” means, as of an Early Termination Date, the assumptions that (1) in each Taxable Year ending on or after such Early Termination Date, the Corporation will have taxable income sufficient to fully use the deductions arising from the Basis Adjustment or the Imputed Interest during such Taxable Year, (2) the federal income tax rates and state, local and foreign income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) any loss carryovers generated by the Basis Adjustment or the Imputed Interest and available as of the date of the Early Termination Schedule will be used by the Corporation on a pro rata basis from the date of the Early Termination Schedule through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets will be disposed of on the 15th anniversary of the earlier of the Basis Adjustment and the Early Termination Date, provided, that in the event of a Change of Control, non-amortizable assets shall be deemed disposed of at the earlier of (i) the time of sale of the relevant asset or (ii) as generally provided in this Valuation Assumption (4), and (5) if, at the Early Termination Date, there are Units that have not been Exchanged, then each such Unit shall be deemed to be Exchanged for the Market Value of the Common Stock and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.

 

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ARTICLE II
 DETERMINATION OF CUMULATIVE REALIZED TAX BENEFIT

 

Section 2.01                             Basis Adjustment.  The Corporation and the Partners acknowledge that as a result of:

 

(a)                                 an Exchange and pursuant to applicable law, the Corporation’s tax basis in the Specified Assets shall be increased by the excess, if any, of (i) the sum of (x) the Amount Realized by the Exchanging Partner in the Exchange, plus (y) the amount of payments made pursuant to this Agreement with respect to such Exchange (other than payments attributable to Imputed Interest), over (ii) the Corporation’s share of the Partnership’s Tax basis for such Specified Assets immediately after the Exchange, attributable to the Units Exchanged, determined as if (x) the Partnership remains in existence as an entity for tax purposes, and (y) the Partnership had not made the election provided by Section 754 of the Code.  For the avoidance of doubt, the Corporation’s share of the Partnership’s Tax basis for such Specified Assets that is attributable to the Units Exchanged shall be considered to be an amount of the Tax basis of the Specified Assets, without regard to any Basis Adjustment, proportionate to the ratio that the number of Units Exchanged bears to the number of outstanding Units immediately prior to such Exchange.  For purposes of this Agreement, in computing the effect of the Basis Adjustment on the Tax liability of the Corporation:

 

(1)                                 the actual basis adjustment to each Specified Asset under Section 732 or Section 743(b) of the Code shall be recovered by the Corporation in accordance with its actual recovery for purposes of the applicable Tax; and

 

(2)                                 the portion of the Basis Adjustment for each Specified Asset described in this Section 2.01(a) that exceeds the actual basis adjustment to such Specified Asset under Section 732 or Section 743(b) of the Code shall be deemed to be amortized by the Corporation on a straight line basis over the 10 years following the Exchange;

 

(b)                                 a Section 734(b) Distribution and pursuant to applicable law, the Partnership’s basis in the Specified Assets shall be increased by (i) the gain, if any, recognized by the Partner pursuant to Section 731(a)(1) of the Code (or any similar provision of state, local or foreign tax law) and in the case of distributed property to which Section 732(a)(2) or (b) of the Code applies, (ii) the excess, if any, of (w) the Partnership’s adjusted basis in property distributed to the Partner (as adjusted by Section 732(d) of the Code, if applicable) immediately prior to the distribution over (x) the adjusted basis of such property in the hands of the Partner as determined under Section 732 of the Code; and

 

(c)                                  an actual or deemed liquidation of the Partnership or other transaction pursuant to which the tax basis of Specified Assets is determined in whole or in part pursuant to Section 732 of the Code (a “Section 732 Event”), the tax basis of such Specified Assets shall be adjusted to equal the distributee’s tax basis in the applicable interest in the Partnership.

 

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To the extent that the adjustment to the Partnership’s basis with respect to the Corporation, in any of the Partnership’s assets, that is expected to result from an Exchange is limited because of a change in law, the Basis Adjustment shall be correspondingly limited.  For the avoidance of doubt, payments made under this Agreement shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.  The Corporation and the Partners hereby agree to treat any payments made under this Agreement (other than the portion thereof that is treated as Imputed Interest) as additional consideration for the applicable Exchanged Units.

 

Section 2.02                             Exchange Basis Schedule.  Within 90 calendar days after the end of the Taxable Year in which an Exchange or a Section 732 Event occurs, and in any event at least 90 calendar days prior to the filing of the United States federal income tax return of the Corporation for each Taxable Year in which any Exchange or Section 732 Event has been effected, the Corporation shall deliver to each Exchanging Partner a schedule (an “Exchange Basis Schedule”) that shows, in reasonable detail, for purposes of Taxes, the information required under Sections 732, 734(b), 743(b) and 755 of the Code, and the Treasury Regulations thereunder, to calculate the Basis Adjustment with respect to such Exchange or Section 732 Event, including, without limitation, (i) the actual unadjusted Tax basis of the Specified Assets as of each applicable Exchange Date, (ii) with respect to each class of the Specified Assets, the Basis Adjustment as a result of the Exchanges or Section 732 Events effected in such Taxable Year calculated in the aggregate, (iii) the period or periods, if any, over which the Specified Assets are amortizable and/or depreciable,  (iv) the period or periods, if any, over which each Basis Adjustment is amortizable and/or depreciable (which, for non-amortizable assets shall be based on the Valuation Assumptions) and (v) all supporting information (including work papers and valuation reports, if any) reasonably necessary to support the calculation of the Basis Adjustment with respect to such Exchange, Section 732 Event or Section 734(b) Distribution.

 

Section 2.03                             Tax Benefit Schedule.  Within 45 calendar days after the filing of the United States federal income tax return of the Corporation for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, the Corporation shall provide to each Exchanging Partner a schedule showing, in reasonable detail, the calculation of the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year and the calculation of any payment to be made to the Partner pursuant to Article III with respect to such Taxable Year (a “Tax Benefit Schedule”).  The Schedule will become final as provided in Section 2.04(a) and may be amended as provided in Section 2.04(b) (subject to the procedures set forth in Section 2.04(b)).

 

Section 2.04                             Procedures, Amendments.

 

(a)                                 Procedure.  Every time the Corporation delivers to an Exchanging Partner an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.04(b), but excluding any Early Termination Schedule or amended Early Termination Schedule, the Corporation shall also (x) deliver to the Exchanging Partner schedules and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Letter supporting such Schedule and (y) allow the Exchanging Partner reasonable access at no cost to the appropriate representatives at the Corporation and the Advisory Firm in connection with a review of such Schedule.  The applicable Schedule shall become final and binding on all parties unless the Exchanging Partner, within 30 calendar days after receiving an Exchange

 

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Basis Schedule or amendment thereto or a Tax Benefit Schedule or amendment thereto, provides the Corporation with notice of a material objection to such Schedule (“Objection  Notice”).  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days of receipt by the Corporation of an Objection Notice, if with respect to an Exchange Basis Schedule or a Tax Benefit Schedule, the Corporation and the Exchanging Partner shall employ the reconciliation procedures as described in Section 7.09 of this Agreement (the “Reconciliation Procedures”).

 

(b)                                 Amended Schedule.  The applicable Schedule for any Taxable Year may be amended from time to time by the Corporation (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a material change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year or (vi) to adjust the Exchange Basis Schedule to take into account payments made pursuant to this Agreement (such Schedule, an “Amended Schedule”).  The Corporation shall provide any Amended Schedule to the Exchanging Partner within 30 calendar days of the occurrence of an event referred to in clauses (i) through (vi) of the preceding sentence, and any such Amended Schedule shall be subject to approval procedures similar to those described in Section 2.04(a).

 

ARTICLE III
  TAX BENEFIT PAYMENTS

 

Section 3.01                             Payments.

 

(a)                                 Payments.  Within five calendar days after a Tax Benefit Schedule that was delivered to an Exchanging Partner becomes final in accordance with Section 2.04(a), the Corporation shall pay to such Exchanging Partner for such Taxable Year the Tax Benefit Payment determined pursuant to Section 3.01(b).  Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account of the Exchanging Partner previously designated by such Partner to the Corporation.  For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal income tax payments.

 

(b)                                 A “Tax Benefit Payment” means an amount, not less than zero, equal to the sum of the Net Tax Benefit and the Interest Amount.  The “Net Tax Benefit” for each Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year over the total amount of payments previously made under this Section 3.01, excluding payments attributable to an Interest Amount; provided, however, that for the avoidance of doubt, no Partner shall be required to return any portion of any previously made Tax Benefit Payment.  The

 

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“Interest Amount” for a given Taxable Year shall equal the interest on the Net Tax Benefit for such Taxable Year calculated at the Agreed Rate from the due date (without extensions) for filing the Corporation Return with respect to Taxes for the most recently ended Taxable Year until the Payment Date.  Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to Units that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by using Valuation Assumptions (1), (2), (3), and (4), substituting in each case the terms “the date on which a Change of Control becomes effective” for an “Early Termination Date.”  The Net Tax Benefit and the Interest Amount shall be determined separately with respect to each separate Exchange, on a Unit-by-Unit basis by reference to the Amount Realized by the Exchanging Partner on the Exchange of a Unit and the resulting Basis Adjustment to the Corporation.

 

Section 3.02                             No Duplicative Payments.  Notwithstanding anything in this Agreement to the contrary, it is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement.  It is also intended that the provisions of this Agreement will result in 85% of the Corporation’s Cumulative Net Realized Tax Benefit, and the Interest Amount thereon, being paid to the Partners pursuant to this Agreement.  The provisions of this Agreement shall be construed in the appropriate manner so that these fundamental results are achieved.

 

Section 3.03                             Pro Rata Payments.  For the avoidance of doubt, to the extent that (i) the Corporation’s deductions with respect to any Basis Adjustment is limited in a particular Taxable Year or (ii) the Corporation lacks sufficient funds to satisfy its obligations to make all Tax Benefit Payments due in a particular taxable year, the limitation on the deduction, or the Tax Benefit Payments that may be made, as the case may be, shall be taken into account or made for the Exchanging Partner in the same proportion as Tax Benefit Payments would have been made absent the limitations in clauses (i) and (ii) of this paragraph, as applicable.

 

ARTICLE IV
  TERMINATION AND PUT RIGHT

 

Section 4.01                             Early Termination and Breach of Agreement.

 

(a)                                 The Corporation may terminate this Agreement with respect to all of the Units held (or previously held and Exchanged) by all Partners at any time by paying to the Partners the Early Termination Payment; provided, however, that this Agreement shall only terminate upon the receipt of the Early Termination Payment by all Partners, and provided, further, that the Corporation may withdraw any notice to execute its termination rights under this Section 4.01(a) prior to the time of any Early Termination Payment.  Upon payment of the Early Termination Payments by the Corporation, neither the Partners nor the Corporation shall have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporation and the Partner as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is

 

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included in the Early Termination Payment).  For the avoidance of doubt, if an Exchange occurs after the Corporation makes the Early Termination Payments with respect to all Partners, the Corporation shall have no obligations under this Agreement with respect to such Exchange, and its only obligations under this Agreement in such case shall be its obligations to all Partners under Section 4.03(a).

 

(b)                                 In the event that the Corporation breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the U.S. Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but shall not be limited to, (1) the Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of a breach, (2) any Tax Benefit Payment agreed to by the Corporation and any Partners as due and payable but unpaid as of the date of a breach and (3) any Tax Benefit Payment due for the Taxable Year ending with or including the date of a breach.  Notwithstanding the foregoing, in the event that the Corporation breaches this Agreement, the Partners shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof.  The parties agree that the failure to make any payment due pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due.

 

(c)                                  The Corporation, the Partnership and each of the Partners hereby acknowledge that, as of the date of this Agreement, the aggregate value of the Tax Benefit Payments cannot reasonably be ascertained for United States federal income tax or other applicable Tax purposes.

 

Section 4.02                             Early Termination Notice.  If the Corporation chooses to exercise its right of early termination under Section 4.01 above, the Corporation shall deliver to each present or former Partner notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) showing in reasonable detail the calculation of the Early Termination Payment for that Partner.  The Corporation shall also (x) deliver to the Partner schedules and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Letter supporting such Schedule and (y) allow the Partner reasonable access at no cost to the appropriate representatives at the Corporation and the Advisory Firm in connection with a review of such Schedule.  The Early Termination Schedule shall become final and binding on all parties unless the Partner, within 30 calendar days after receiving the Early Termination Schedule, provides the Corporation with notice of a material objection to such Schedule (“Material Objection Notice”).  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Partner shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.

 

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Section 4.03                             Payment upon Early Termination.

 

(a)                                 Within three calendar days after agreement between the Partner and the Corporation of the Early Termination Schedule, the Corporation shall pay to the Partner an amount equal to the Early Termination Payment.  Such payment shall be made by wire transfer of immediately available funds to a bank account designated by the Partner.

 

(b)                                 The “Early Termination Payment” as of the date of the delivery of an Early Termination Schedule shall equal with respect to any Partner the sum of the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by the Corporation to the Partner beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

 

Section 4.04                             Early Payment Right.  Each Partner shall have the right (the “Early Payment Right”) to terminate this Agreement with respect to all, but not less than all, of the Units held (or previously held and Exchanged) by such Partner upon notice in writing to the Corporation.  Within 30 calendar days of a Partner notifying the Corporation in writing of its exercise the Early Payment Right, the Corporation shall provide such Partner with the information required by Section 4.02 of this Agreement as if the Corporation had exercised its termination right under Section 4.01 of this Agreement, including, without limitation, an Early Termination Schedule containing the Early Termination Payment with respect to such Partner.  The Early Termination Schedule shall become final and binding on all parties unless the Partner, within 30 calendar days after receiving the Early Termination Schedule, provides the Corporation with a Material Objection Notice.  If the parties, for any reason, are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by the Corporation of the Material Objection Notice, the Corporation and the Partner shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.  Within three calendar days after agreement between the Partner and the Corporation of the Early Termination Schedule, the Corporation shall make the Early Termination Payment to such Partner on the terms and within the time period required by Section 4.03 of this Agreement.

 

ARTICLE V
  SUBORDINATION AND LATE PAYMENTS

 

Section 5.01                             Subordination.  Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment or Early Termination Payment required to be made by the Corporation to the Partners under this Agreement (an “Exchange Payment”) shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporation and its Subsidiaries (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of the Corporation that are not Senior Obligations.

 

Section 5.02                             Late Payments by the Corporation.  The amount of all or any portion of any Exchange Payment not made to any Partner when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Exchange Payment was due and payable.

 

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ARTICLE VI
  NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.01                             Original Partner Participation in the Corporation’s and the Partnership’s Tax Matters.  Except as otherwise provided herein, the Corporation shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporation and the Partnership, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.  Notwithstanding the foregoing, the Corporation shall notify the applicable Original Partner of, and keep the applicable Original Partner reasonably informed with respect to, the portion of any audit of the Corporation and the Partnership by a Taxing Authority the outcome of which is reasonably expected to affect the applicable Original Partner’s rights and obligations under this Agreement, and shall provide to the applicable Original Partner reasonable opportunity to provide information and other input to the Corporation, the Partnership and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporation and the Partnership shall not be required to take any action that is inconsistent with any provision of the LP Agreement.

 

Section 6.02                             Consistency.  Except upon the written advice of an Advisory Firm, and except for items that are explicitly described as “deemed” or in similar manner by the terms of this Agreement, the Corporation and the Exchanging Partner agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Basis Adjustment and each Tax Benefit Payment) in a manner consistent with that specified by the Corporation in any Schedule required to be provided by or on behalf of the Corporation under this Agreement.  Any dispute concerning such advice shall be subject to the terms of Section 7.09; provided, however, that only an Original Partner shall have the right to object to such advice pursuant to this Section 6.02.  In the event that an Advisory Firm is replaced with another firm acceptable to the Corporation and the Exchanging Partner, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with the previous Advisory Firm, unless otherwise required by law or the Corporation and the Exchanging Partner agree to the use of other procedures and methodologies.

 

Section 6.03                             Cooperation.  The Exchanging Partner shall (a) furnish to the Corporation in a timely manner such information, documents and other materials as the Corporation may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any tax return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the Corporation and its representatives to provide explanations of documents and materials and such other information as the Corporation or its representatives may reasonably request in connection with any of the matters described in clause (a) above and (c) reasonably cooperate in connection with any such matter, and the Corporation shall reimburse the Exchanging Partner for any reasonable third-party costs and expenses incurred pursuant to this Section.

 

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ARTICLE VII
  MISCELLANEOUS

 

Section 7.01                             Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender’s facsimile machine if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service.  All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

if to the Corporation, to:

 

Athlon Energy Inc.
 420 Throckmorton Street
 Suite 1200
 Fort Worth, Texas 76102
 Attention: Chief Financial Officer
 Facsimile: (817) 984-8217

 

with a copy (which shall not constitute notice to the Corporation) to:

 

Latham & Watkins LLP
 811 Main Street
 Suite 3700
 Houston, Texas 77002
 Attention: Sean T. Wheeler
 Facsimile: (713) 546-5401

 

if to the Partnership, to:

 

Athlon Holdings LP
 420 Throckmorton Street
 Suite 1200
 Fort Worth, Texas 76102
 Attention: Chief Financial Officer
 Facsimile: (817) 984-8217

 

with a copy (which shall not constitute notice to the Corporation) to:

 

Latham & Watkins LLP
 811 Main Street
 Suite 3700
 Houston, Texas 77002
 Attention: Sean T. Wheeler
 Facsimile: (713) 546-5401

 

If to the Exchanging Partner, to:

 

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The address and facsimile number set forth in the records of the Partnership.

 

Any party may change its address or facsimile number by giving the other party written notice of its new address or facsimile number in the manner set forth above.

 

Section 7.02                             Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.  Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

Section 7.03                             Entire Agreement; No Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 7.04                             Governing Law.  This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

 

Section 7.05                             Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

Section 7.06                             Successors; Assignment; Amendments; Waivers.  No Partner may assign this Agreement to any person without the prior written consent of the Corporation; provided, however, that (i) to the extent Units are effectively transferred in accordance with the terms of the LP Agreement, the transferring Partner shall have the option to assign to the transferee of such Units the transferring Partner’s rights under this Agreement with respect to such transferred Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the Corporation, agreeing to become a “Partner” for all purposes of this Agreement, except as otherwise provided in such joinder, and (ii) once an Exchange has occurred, any and all payments that may become payable to a Partner pursuant to this Agreement with respect to the Exchanged Units may be assigned to any Person or Persons, including a liquidating trust, as long as any such Person has executed and delivered, or, in connection with such assignment, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to the

 

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Corporation, agreeing to be bound by Section 7.12 and acknowledging specifically the terms of the next paragraph.  For the avoidance of doubt, if a Person transfers Units (regardless of whether the transferee is a “Permitted Transferee” under the terms of the LP Agreement) but does not assign to the transferee of such Units such Person’s rights, if any, under this Agreement with respect to such transferred Units, such Person shall be entitled to receive the Tax Benefit Payments, if any, due hereunder with respect to, including any Tax Benefit Payments arising in respect of a subsequent Exchange of, such Units.

 

Notwithstanding the foregoing provisions of this Section 7.06, no transferee described in clause (i) of the immediately preceding paragraph shall have the right to enforce the provisions of Section 2.04, 4.02, 6.01 or 6.02 of this Agreement, and no assignee described in clause (ii) of the immediately preceding paragraph shall have any rights under this Agreement except for the right to enforce its right to receive payments under this Agreement.

 

No provision of this Agreement may be amended unless such amendment is approved in writing by each of the Corporation and the Partnership and by Original Partners who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Original Partners hereunder if the Corporation had exercised its right of early termination on the date of the most recent Exchange prior to such amendment (excluding, for purposes of this sentence, all payments made to any Original Partner pursuant to this Agreement since the date of such most recent Exchange); provided, that no such amendment shall be effective if such amendment will have a disproportionate effect on the payments certain Partners will or may receive under this Agreement unless all such Partners disproportionately affected consent in writing to such amendment.  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives.  The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.  Notwithstanding anything to the contrary herein, in the event an Original Partner transfers his Units to a Permitted Transferee (as defined in the LP Agreement), excluding any other Original Partner, such Original Partner shall have the right, on behalf of such transferee, to enforce the provisions of Sections 2.04, 4.02 or 6.01 with respect to such transferred Units.

 

Section 7.07                             Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

Section 7.08                             Resolution of Disputes.

 

(a)                                 Any and all disputes which are not governed by Section 7.09, including but not limited to any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-

 

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performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute”) shall be finally settled by arbitration conducted by a single arbitrator in Fort Worth, Texas in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the Dispute fail to agree on the selection of an arbitrator within ten calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment.  The arbitrator shall be a lawyer admitted to the practice of law in the State of Texas and shall conduct the proceedings in the English language.  Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.  In addition to monetary damages, the arbitrator shall be empowered to award equitable relief, including, but not limited to an injunction and specific performance of any obligation under this Agreement.  The arbitrator is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover punitive, exemplary or similar damages with respect to any Dispute.   The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal.  Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets.

 

(b)                                 Notwithstanding the provisions of paragraph (a), the Corporation may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each Partner (i) expressly consents to the application of paragraph (c) of this Section 7.08 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporation as such Partner’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise such Partner of any such service of process, shall be deemed in every respect effective service of process upon the Partner in any such action or proceeding.

 

(c)                                  (i)  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN FORT WORTH, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT.  Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award.  The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another; and

 

(ii)  The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to

 

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personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.08 and such parties agree not to plead or claim the same.

 

Section 7.09                             Reconciliation.  In the event that the Corporation and the Exchanging Partner are unable to resolve a disagreement with respect to the matters governed by Sections 2.04, 4.02 and 6.02 within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties.  The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with either the Corporation or the Exchanging Partner or other actual or potential conflict of interest.  If the parties are unable to agree on an Expert within 15 calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise.  The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on such date and such Tax Return may be filed as prepared by the Corporation, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporation except as provided in the next sentence.  The Corporation and each Exchanging Partner shall bear their own costs and expenses of such proceeding, unless an Exchanging Partner has a prevailing position that is more than 10% of the payment at issue, in which case the Corporation shall reimburse such Exchanging Partner for any reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on the Corporation and the Exchanging Partner and may be entered and enforced in any court having jurisdiction.

 

Section 7.10                             Withholding.  The Corporation shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporation is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law.  To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Exchanging Partner.

 

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Section 7.11                             Admission of the Corporation into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If the Corporation becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state, local or foreign law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.

 

(b)                                 If any entity that is obligated to make an Exchange Payment hereunder transfers one or more assets to a corporation with which such entity does not file a consolidated tax return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Exchange Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution.  The consideration deemed to be received by such entity shall be equal to the fair market value of the contributed asset, plus (i) the amount of debt to which such asset is subject, in the case of a contribution of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a contribution of a partnership interest.

 

Section 7.12                             Confidentiality.  Each Partner and assignee acknowledges and agrees that the information of the Corporation is confidential and, except in the course of performing any duties as necessary for the Corporation and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such Person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporation and its Affiliates and successors, concerning the Partnership and its Affiliates and successors or the other Partners, learned by the Partner heretofore or hereafter.  This clause 7.12 shall not apply to (i) any information that has been made publicly available by the Corporation or any of its Affiliates and successors, becomes public knowledge (except as a result of an act of such Partner in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for a Partner to prepare and file his or her Tax returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns.  Notwithstanding anything to the contrary herein, each Partner and assignee (and each employee, representative or other agent of such Partner or assignee, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Corporation, the Partnership, the Partners and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to the Partners relating to such tax treatment and tax structure.

 

If a Partner or assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporation shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporation or any of its Subsidiaries or the other Partners and the accounts and funds managed by the Corporation and that money damages alone shall not provide an adequate

 

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remedy to such Persons.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13                             LP Agreement.  This Agreement shall be treated as part of the partnership agreement of the Partnership as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

Section 7.14                             Partnerships.  The Corporation hereby agrees that, to the extent it acquires a general partnership interest, managing member interest or similar interest in any Person after the date hereof, it shall cause such Person to execute and deliver a joinder to this Agreement and such Person shall be treated as a “partnership” for all purposes of this Agreement.

 

[remainder of this page intentionally left blank]

 

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IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

 

	
 
    	
ATHLON   ENERGY INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
ATHLON   HOLDINGS LP
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

 

	
 
    	
PARTNERS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Robert C. Reeves
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Nelson K. Treadway
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
William B. D. Butler
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Bud W. Holmes
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Jennifer L. Palko
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
David B. McClelland
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
James R. Plemons
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Melvyn E. Foster, Jr.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Matt Cashion
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Janis F. Gould
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Juan   Coronado
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Sharon   Braddy
    

 

 

IN WITNESS WHEREOF, the Corporation, the Partnership and each Partner have duly executed this Agreement as of the date first written above.

 

	
 
    	
PARTNERS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
John   Souders
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Sheryl   Turner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Lauryl   Ellis
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Robert   Lange
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Dallas   Rysavy
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
J.W.   Reddin
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Dustin   Cummings
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Margie   Pellerin
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Joey   Bernard
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Ian   Bowersock
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Cristan C.   Erdelac

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