Document:

EX 10.85 Transition Services Agreement

Exhibit 10.85
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this “Agreement”) is made and entered into as of the 27th day of January, 2015, by and between Covidien LP, a Delaware limited partnership (“Seller”), and The Spectranetics Corporation, a Delaware corporation (“Purchaser” and, together with Seller, each a “Party” and collectively, the “Parties”).  
RECITALS
WHEREAS, pursuant to that certain Asset Purchase Agreement (the “Purchase Agreement”), dated as of October 31, 2014, by and between Seller and Purchaser, Purchaser has acquired from Seller the Purchased Assets and assumed from Seller the Assumed Liabilities; 
WHEREAS, as contemplated by the Purchase Agreement, on the terms and subject to the conditions set forth herein, Seller shall provide to or procure for Purchaser certain transition services following the Closing; and
WHEREAS, this Agreement is entered into, among other things, pursuant to the proposed Decision and Order, which is designed to resolve the competitive concerns the FTC identified with the Acquisition, as described in the Complaint.
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, and agreements that are to be made and performed by the Parties hereto and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION

1.1    Definitions.  Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement, as it may be amended from time to time in accordance with the terms thereof, and the following terms shall have the meanings set forth below:
“Agreement” has the meaning set forth in the Preamble.
“Authorized Third Parties” has the meaning set forth in Section 2.4.
“Confidential Information” means: (A) in respect of Information provided in documentary form or by way of a model or in other tangible or intangible form, Information which at the time of disclosure to the Receiving Party is marked, or otherwise designated, to show expressly or by implication that it is imparted or disclosed in confidence; (B) in respect of Information that is imparted or disclosed orally or by demonstration or presentation, any Information that the Receiving Party has been expressly informed by the Disclosing Party at the time of disclosure to have been imparted or disclosed in confidence; (C) in respect of 

Information imparted or disclosed orally or by demonstration or presentation, any note or record of the disclosure; (D) other Information for which it should be reasonably apparent to the Receiving Party from the face or presentation of such Information that such Information should be treated confidentially; (E) any copy of any of the foregoing; and (F) the existence of the discussion or negotiations as contemplated herein or of the possibility of the transactions contemplated hereby.
“Disclosing Party” has the meaning set forth in Section 4.1(a).
“Force Majeure” has the meaning set forth in Section 7.15.
“Information” means (A) with respect to that disclosed by Seller, information relating to the Services provided pursuant to this Agreement, by or on behalf of Seller, to Purchaser, in oral or documentary form or by way of models or other tangible or intangible form or by demonstrations or presentations; and (B) with respect to that disclosed by Purchaser, information relating to Purchaser’s utilization or receipt of Services provided pursuant to this Agreement, by or on behalf of Purchaser, to Seller, in oral or documentary form or by way of models or other tangible or intangible form or by demonstrations or presentations, including the Purchaser Data. 
“Party” and “Parties” have the meanings set forth in the Preamble.  
“Permitted Disclosees” has the meaning set forth in Section 4.1(c).
“Proper Use” means: (A) with respect to Purchaser, the use of Seller’s Confidential Information for the purpose of conducting the Business (as defined in the Purchase Agreement) in connection with the Services; and (B) with respect to Seller, the use of Purchaser’s Confidential Information for the purpose of providing the Services.
“Purchase Agreement” has the meaning set forth in the Recitals.  
“Purchaser” has the meaning set forth in the Preamble.  
“Purchaser Data” means electronic data of Purchaser processed by, stored in, or accessible electronically via the servers or applications which are the subject of the Services. 
“Receiving Party” has the meaning set forth in Section 4.1.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Seller” has the meaning set forth in the Preamble.   
“Service Coordinator” has the meaning set forth in Section 2.2.
“Service Period” has the meaning set forth in Section 6.1.
“Services” has the meaning set forth in Section 2.1(a).

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“Services Schedule” has the meaning set forth in Section 2.1(a).
“Transition Period” has the meaning set forth in Section 2.1(a).
1.2    Interpretation.
(a)    The headings contained in this Agreement and any Exhibit or Schedule are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement.
(b)    The words “hereof,” “hereby,” “hereto,” “hereunder,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
(c)    Whenever the words “include,” “includes,” “including” or “among other things” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” unless otherwise specified.
(d)    Unless the context clearly requires otherwise, “or” shall be inclusive and not exclusive.
(e)    References to a Person are also to its successors and permitted assigns.
(f)    All references herein to “days” shall mean calendar days, unless otherwise indicated.  
(g)    All references to “dollars” and “$” are to the currency of the United States of America.      
ARTICLE II
TRANSITION SERVICES

2.1    Services.
(h)    Subject to the terms and conditions of this Agreement, Seller shall provide, and, as applicable, cause its Affiliates, representatives and Authorized Third Parties (as defined below) to provide, to Purchaser the transition services described on Schedule 2.1 attached hereto (the “Services Schedule”), and such modified or additional services as may be agreed upon by the Parties from time to time and set forth in written amendments to this Agreement (collectively, the “Services”), for the period from the Closing Date until the termination or expiration of this Agreement pursuant to Article VI below (the “Transition Period”).  Seller shall provide the Services or shall cause the Services to be provided to Purchaser in substantially the same manner as Seller generally provides such services or similar services to itself and its Affiliates.
(i)    Seller shall, and as applicable, shall cause its Affiliates, representatives and Authorized Third Parties to, (i) comply in all material respects with applicable Laws 

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relating to the performance of the Services and (ii) observe and comply in all material respects with any reasonable confidentiality, security, privacy or other policies of Purchaser relating to the performance of the Services which have been provided to Seller reasonably in advance.
(j)    To the extent permitted by Law and the applicable license or contract, Seller agrees to pass through to Purchaser any rights Seller may have with respect to Authorized Third Parties in connection with any failure by such Authorized Third Parties to comply in all material respects with applicable Laws relating to the performance of the Services or to observe and comply in all material respects with any reasonable confidentiality, security, privacy or other policies of Seller or Purchaser relating to the performance of the Services.
2.2    Service Coordinators.  Each of Seller and Purchaser shall nominate a representative to act as the primary contact person with respect to the provision of the Services (each such person, a “Service Coordinator”).  The Service Coordinators shall be managerial-level employees of Purchaser and Seller, as applicable.  The names of the initial Service Coordinators, and each of their respective phone numbers, facsimile numbers and email addresses, are set forth on Schedule 2.2 attached hereto.  Each of Seller and Purchaser may, in its sole discretion, change its Service Coordinator from time to time by providing written notice to the other Party of such change and the relevant contact information for the new Service Coordinator at least three (3) Business Days prior to such change taking effect.  Unless Seller and Purchaser otherwise agree in writing, all communications relating to this Agreement or to the Services shall be directed to the Service Coordinators in accordance with Section 7.2 hereof.
2.3    Access and Cooperation.  Purchaser shall, and shall cause its applicable Affiliates to, make available on a timely basis to Seller, its Affiliates and each Authorized Third Party such Information, cooperation and assistance reasonably requested by Seller, its Affiliates or such Authorized Third Party to enable Seller, its Affiliates or such Authorized Third Party to provide the Services.  Purchaser shall, and shall cause its applicable Affiliates to, provide to Seller, its Affiliates or the Authorized Third Party reasonable access to the premises of Purchaser and such Affiliates and the systems, software and networks located therein, to the extent necessary for the purpose of providing the Services.  Seller shall ensure that it, its Affiliates and each other Authorized Third Party complies in all material respects with applicable Law and Purchaser’s security and other policies and procedures, as may be provided to Seller by Purchaser in writing from time to time.   
2.4    Subcontractors.  Seller may subcontract any of its obligations under this Agreement to third-party service providers which have been approved by Purchaser (“Authorized Third Parties”), which approval shall not be unreasonably withheld, conditioned or delayed; provided that (i) the Services shall continue to be supplied in accordance with the provisions of this Agreement; (ii) Seller shall cause each such Authorized Third Party to be subject to the confidentiality obligations of Article IV; and (iii) Seller shall remain primarily liable for the provision of the Services to the extent that it is so liable under the terms and 

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conditions of this Agreement.  The Authorized Third Parties include those parties so identified in Schedule 2.4.
2.5    Consents.  Purchaser and Seller shall use commercially reasonable efforts to obtain, at Purchaser’s sole cost and expense, all licenses, approvals and consents of any third party required by Seller or its Affiliates to provide the Services; provided that to the extent any such license, approval or consent is not obtained, Purchaser and Seller shall cooperate with each other, upon written request of Purchaser, in endeavoring to obtain for Purchaser, at no cost to Seller, an arrangement with respect thereto to provide the Services.  Notwithstanding anything to the contrary in this Agreement, Seller shall not be obligated to provide, or cause to be provided, any Service or make available, or cause to be made available, to Purchaser the benefit of any third-party license or contract to the extent that such an action would violate the terms of Seller’s or its Affiliate’s license or contract with any third party, require Seller or its Affiliates to commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party to obtain any such license, approval or consent,  or that would otherwise require the payment by Seller or its Affiliates of additional fees or other consideration not reimbursed by Purchaser hereunder.
2.6    Compliance by Seller’s Personnel.  Seller shall use its commercially reasonable efforts to ensure that any Persons engaged in providing the Services on behalf of Seller (the “Personnel”) (i) comply with all of Purchaser’s reasonable and lawful requests, directions or regulations made known to Seller in relation to the safety and security of Purchaser’s premises, property or personnel and (ii) at all times while on Purchaser’s premises, maintain standards of conduct, efficiency, punctuality and attire that comply with Purchaser’s reasonable and lawful requests that are made known to Seller. 

ARTICLE III
FEES AND EXPENSES

3.1    Fees and Expenses.  The fees and expenses for each of the Services to be provided hereunder are set forth in the Services Schedule.
3.2    Billing and Payment; No Set-off.  Amounts payable in respect of Services under this Agreement shall be invoiced to Purchaser monthly in arrears and paid to Seller, as directed by Seller, which amounts shall be due within thirty (30) days after the date of invoice.  All amounts due and payable hereunder shall be invoiced and, except as set forth in the Services Schedule, paid in U.S. dollars without offset, set-off, deduction or counterclaim, however arising.
3.3    Additional Costs.  Purchaser shall reimburse Seller for Seller’s and its Affiliates’ reasonable and documented additional costs incurred in connection with the provision of the Services that have been approved by Purchaser in writing prior to the incurrence of such costs, which approval shall not be unreasonably withheld, conditioned or delayed.

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3.4    Late Payments.  Purchaser shall pay a late payment charge equal to two percent (2%) per month on all amounts due hereunder by Purchaser but not received by Seller on or before the due date.
3.5    Taxes.  The fees and expenses to be paid for the Services provided pursuant to this Agreement are exclusive of taxes.  Upon notice from Seller of the amount of any tax required to be paid in connection with the provision of the Services, Purchaser shall pay such taxes to Seller for remittance to the applicable taxing authorities.  Seller shall promptly furnish to Purchaser such evidence as may be required by the applicable taxing authorities to establish that any such tax has been paid by Seller to assist in obtaining any tax credits for the amounts withheld from payments pursuant to this Agreement.  
ARTICLE IV
CONFIDENTIALITY

4.1    Confidentiality.  Each Party (the “Receiving Party”) agrees that, from the date of this Agreement until the [●] anniversary of the date hereof, it shall, and shall cause its Affiliates and representatives to:
(a)    take reasonable measures to maintain the confidentiality of all Confidential Information of the other Party (the “Disclosing Party”);
(b)    use such Confidential Information only for the Proper Use;
(c)    permit access to such Confidential Information only to such of its directors, officers, employees and advisors having a need to know such Confidential Information (“Permitted Disclosees”), provided, that the Receiving Party shall inform each of those Permitted Disclosees of the confidential nature of such Confidential Information and instruct them to comply with the obligations of the Receiving Party in respect thereof, and the Receiving Party shall be responsible for any breach of this Section 4.1 by any of its Permitted Disclosees;
(d)    make copies of the Confidential Information of the Disclosing Party only to the extent that the same are reasonably required for the Proper Use;
(e)    treat all Confidential Information of the Disclosing Party with the degree of care to avoid disclosure to any third party as is used with respect to the Receiving Party’s own information of like importance which is to be kept confidential; and
(f)    promptly return all Confidential Information of the Disclosing Party to the Disclosing Party upon its written request or (at the Disclosing Party’s option) destroy all such Confidential Information and provide to the Disclosing Party a certificate of such destruction signed by a duly authorized officer of the Receiving Party.
4.2    No Release.  Where any Confidential Information of the Disclosing Party is the subject of any national or governmental security regulations, the Receiving Party shall, and 

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hereby undertakes to, take such measures as may be required by such regulations to protect such Confidential Information.  Without prejudice to any obligations imposed on and assumed by the Receiving Party under any national or governmental security regulations, the obligations of confidentiality herein shall not apply to any Information which the Receiving Party by its written records can show:
(a)    was in the possession of the Receiving Party before such Information was imparted or disclosed by the Disclosing Party;
(b)    is independently developed by any representative, agent or employee of the Receiving Party without access to or use or knowledge of the Information;
(c)    is in or subsequently comes into the public domain other than by breach by the Receiving Party of its obligations hereunder;
(d)    is received by the Receiving Party without restriction on disclosure or use from a third party which the Receiving Party reasonably believes is entitled to make such disclosure; 
(e)    is approved for release by the written agreement of the Disclosing Party; or
(f)    is required to be disclosed by Law or the rules of any Governmental Authority, provided, that, if the Receiving Party is to make such disclosure, it shall give the Disclosing Party as much prior notice thereof as is reasonably practicable so that the Disclosing Party may seek such protective orders or other confidentiality protection as the Disclosing Party, in its sole discretion, may elect, and the Receiving Party shall reasonably cooperate with the Disclosing Party in protecting the confidential or proprietary nature of such Confidential Information which is to be so disclosed.
ARTICLE V
NO WARRANTY; LIMITATION OF LIABILITY; INDEMNIFICATION

5.1    No Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SERVICES TO BE PURCHASED UNDER THIS AGREEMENT ARE PROVIDED AS IS, WHERE IS, WITH ALL FAULTS, AND WITHOUT WARRANTY OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, NON-INFRINGEMENT OR ANY OTHER WARRANTY WHATSOEVER.
5.2    Limitation of Liability.  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY:
(a)    THE MAXIMUM LIABILITY OF SELLER AND ITS AFFILIATES (AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES) TO, AND THE SOLE REMEDY OF, PURCHASER AND ITS 

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AFFILIATES (AND THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS, VENDORS AND EMPLOYEES) WITH RESPECT TO ANY AND ALL CLAIMS ARISING IN CONNECTION WITH THE PROVISION OF THE SERVICES BY SELLER, ANY OF ITS AFFILIATES OR ANY AUTHORIZED THIRD PARTY, REGARDLESS OF THE THEORY UPON WHICH THE LIABILITY IS PREMISED, SHALL NOT EXCEED THE LESSER OF (A) $[●] AND (B) THE AGGREGATE AMOUNT OF FEES RECEIVED BY SELLER WITH RESPECT TO THE PROVISION OF ALL SERVICES UNDER THIS AGREEMENT; 
(b)    IN NO EVENT SHALL SELLER OR ITS AFFILIATES (OR THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES) BE LIABLE TO PURCHASER OR ITS AFFILIATES (OR THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES) FOR INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR INDIRECT DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE PERFORMANCE OF THE SERVICES, EVEN IF SELLER OR ITS AFFILIATES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND PURCHASER HEREBY WAIVES ON BEHALF OF ITSELF, ITS AFFILIATES, DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES ANY CLAIM FOR SUCH DAMAGES INCLUDING ANY CLAIM FOR PROPERTY DAMAGE OR LOST PROFITS, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE; AND
(c)    EXCEPT TO THE EXTENT SET FORTH IN SECTION 2.4, IN NO EVENT SHALL SELLER OR ITS AFFILIATES BE LIABLE FOR THE ACTS OR OMISSIONS OF ANY AUTHORIZED THIRD PARTY.
5.3    Indemnification.
(a)    Seller shall indemnify and hold harmless Purchaser and its Affiliates (and their respective directors, officers, agents and employees) from and against any Losses arising out of, relating to or in connection with, any action or omission by Seller in providing the Services hereunder arising out of or resulting from Seller’s gross negligence, fraud or willful misconduct in connection with the Services.  
(b)    Purchaser shall indemnify and hold harmless Seller and its Affiliates (and their respective directors, officers, agents and employees) from and against any Losses arising out of, relating to or in connection with the provision of Services under this Agreement, except to the extent any such Loss arises from Seller’s gross negligence, fraud or willful misconduct in connection with the Services.  
ARTICLE VI
TERM AND TERMINATION

6.1    Term.  Unless earlier terminated pursuant to Section 6.2(b), with respect to each Service (or any portion thereof), the term of this Agreement as it relates thereto will be for a period beginning on the Closing Date and continuing until the earlier of: (a) [●] months from 

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the Closing Date; (b) the termination date as set forth in the Services Schedule with respect to such Service, if any; or (c) termination by Purchaser of such Service pursuant to Section 6.2(a); provided, however, that, if Seller’s material breach of this Agreement in respect of providing the Services set forth in Section 2 (Clinical Affairs Services), Section 5 (Quality Affairs Services), Section 6 (Regulatory Affairs Services) or Section 8 (Research and Development Services) of the Services Schedule causes a material delay in Purchaser’s receipt from the FDA of pre-market approval of the DCB Product (as such pre-market approval was being sought by Seller on the date hereof), the termination date for any such Service affected by such material breach may be extended at the reasonable request of Purchaser until the earlier of (i) such time as such pre-market approval shall have been obtained (or is no longer reasonably expected to be obtained) and (ii) two (2) years following the termination date as set forth in the Services Schedule with respect to such Service.  For purposes of this Agreement, the term “Service Period” shall mean, with respect to any particular Service, the period between the Closing Date and the effective date of termination of such Service pursuant to the terms of this Article VI.
6.2    Termination.
(c)    Any of the Services, or any portion thereof, may be terminated by Purchaser, in its sole discretion, at any time by furnishing thirty (30) calendar days’ prior written notice to Seller of Purchaser’s intention to terminate the applicable Service, which written notice shall specify (i) the Service (or portion thereof) being terminated and (ii) the date on which such Service (or portion thereof) shall be terminated; provided, however, that Purchaser shall be responsible for the payment of any and all charges and fees owed to Seller under this Agreement for such Service rendered prior to the later of (A) the effective date of termination of such Service and (B) in the event that Seller is contractually or legally required to incur expenses related to such Service beyond the effective date of termination, the date that Seller is no longer contractually or legally required to incur such expenses; provided that Seller shall have delivered written notice to Purchaser of its good faith estimate of any such expenses within ten (10) business days of its receipt of Purchaser’s notice of termination, which such notice of termination Purchaser may rescind within ten (10) business days of its receipt of Seller’s notice of such expenses.
(d)    Either Seller or Purchaser may terminate this Agreement upon written notice thereof to the other Party pursuant to Section 7.15.  Either Seller or Purchaser, with respect to (i) below, or Seller, with respect to (ii) below, may immediately terminate this Agreement by written notice to the other Party upon the occurrence of any of the following events:
(i)    the other Party (A) becomes insolvent, (B) makes an assignment for the benefit of creditors, (C) files or has filed against it any petition under a bankruptcy Law or any other Law for relief as a debtor (or similar Law in purpose or effect) or (D) enters into liquidation or dissolution proceedings;
(ii)    any amount or fee due under this Agreement remains unpaid by Purchaser for a period of more than fifteen (15) calendar days following 

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Purchaser’s receipt of a notice of delinquency; provided, however, that Seller may only terminate this Agreement pursuant to this Section 6.2(b)(iii) in the event Purchaser’s past due payment obligations under this Agreement exceed $100,000.
6.3    Post-Termination Cooperation.  Upon termination of any particular Service pursuant to this Article VI (other than termination pursuant to Section 6.2(b) by Seller), Seller shall use commercially reasonable efforts to provide such cooperation and assistance as is requested by Purchaser and necessary to enable the successful transition of the functions previously served by the terminated Service from Seller to Purchaser.  Purchaser shall reimburse Seller for all reasonable expenses incurred by Seller to provide such requested cooperation and assistance.
6.4    Effect of Termination.  Without prejudice to the survival of other agreements of the Parties, the right of Seller to receive the applicable payments for fees, if any, for the Services rendered under this Agreement shall survive the termination or expiration, in whole or in part, of this Agreement.  In addition, Article III, Article IV, Article V, Article VII, Section 6.3 and this Section 6.4 shall survive the termination or expiration of this Agreement.
ARTICLE VII
MISCELLANEOUS

7.1    Waiver.  Either Party may (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered pursuant to this Agreement or (c) waive compliance by the other Party with any of the agreements or conditions contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.  No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
7.2    Notices.  Any notice or other communication required or permitted under this Agreement shall be in writing and deemed to have been duly given (i) five (5) Business Days following deposit in the mails if sent by registered or certified mail, postage prepaid, (ii) when sent, if sent by facsimile transmission and if receipt thereof is confirmed by machine generated receipt, (iii) when delivered, if delivered personally to the intended recipient and (iv) one Business Day following deposit with a nationally recognized overnight courier service, in each case addressed as follows:
If to Seller:
Covidien
3033 Campus Drive
Plymouth, Minnesota 55441
Attn:      VP of Business Development

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with a copy (which shall not constitute notice) to:
Covidien
Vascular Therapies
3033 Campus Drive
Plymouth, Minnesota 55441
Attn:      Legal Department

and

Medtronic, Inc.
710 Medtronic Parkway
Minneapolis, MN 55432
Attn:  General Counsel
Facsimile:  (763) 572-5459

and

Cleary Gottlieb Steen & Hamilton LLP 
One Liberty Plaza 
New York, NY 10006 
Attn:    Victor I. Lewkow 
    Matthew P. Salerno
Facsimile:  (212) 225-3999
If to Purchaser:
The Spectranetics Corporation
9965 Federal Drive
Colorado Springs, CO 80921
Attn:    General Counsel
Facsimile:  (719) 447-2022

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

Cravath, Swaine & Moore LLP 
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attn:  Minh Van Ngo
Facsimile:  (212) 474-3700 

7.3    Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.  If any term or other provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid, illegal or unenforceable, (a) a suitable and 

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equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity, illegality or unenforceability, nor shall such invalidity, illegality or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
7.4    Entire Agreement.  This Agreement, together with the Purchase Agreement, the other Ancillary Agreements and the Confidentiality Agreement, contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof.  
7.5    Assignment.  Except as explicitly provided herein, neither Party may directly or indirectly transfer any of its rights or delegate any of its obligations hereunder without the prior written consent of the other Party; provided, however; that Purchaser shall be entitled to assign (without the consent of Seller) any or all of its rights or obligations under this Agreement to a Person that acquires all or substantially all of the DCB Business from Purchaser so long as Purchaser nonetheless remains fully responsible for the performance of all of its obligations hereunder.  Any purported transfer or delegation in violation of this Section 7.5 shall be null and void.
7.6    No Third-Party Beneficiaries.  Except for the rights granted under Section 5.3, this Agreement is for the sole benefit of the Parties and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
7.7    Amendment.  This Agreement may not be amended or modified except by an instrument in writing signed by the Parties.
7.8    Disputes.  In the event of any controversy or dispute arising out of or relating to this Agreement, the Service Coordinators shall in good faith attempt to resolve such dispute.  If after 20 days the Parties have not reached an agreement with respect to such dispute, either Party may file a claim against the other Party pursuant to Section 7.9 below.
7.9    Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.  
(a)    This Agreement, the rights of the Parties and all Proceedings arising in whole or in part under or in connection herewith shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to any conflicts of law principles of such state that might apply the law of another jurisdiction.  
(b)    With respect to any Proceeding relating to this Agreement, each Party irrevocably (i) agrees and consents to be subject to the exclusive jurisdiction of the United States District Court for the District of Delaware or any Delaware State court sitting in the City of Wilmington and (ii) waives any objection which it may have at any 

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time to the laying of venue of any Proceeding brought in any such court, waives any claim that such Proceeding has been brought in an inconvenient forum and further waives the right to object, with respect to such Proceeding, that such court does not have any jurisdiction over such Party.  The foregoing consent to jurisdiction shall not constitute general consent to service of process in the State of Delaware for any purpose except as provided above and shall not be deemed to confer rights on any Person other than the respective Parties to this Agreement.  Each of Seller and Purchaser irrevocably agrees that service of any process, summons, notice or document by United States registered mail to such Party’s address set forth above shall be effective service of process for any Proceeding in Delaware with respect to any matters for which it has submitted to jurisdiction pursuant to this Section 7.9(b).  Notwithstanding the foregoing, a Party may commence any Proceeding in any court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by any of the above-named courts.
(c)    EACH OF PURCHASER AND SELLER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION AS BETWEEN THE PARTIES DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR DISPUTES RELATING HERETO OR THERETO.  EACH OF PURCHASER AND SELLER (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE OTHER ANCILLARY AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.9(c)
7.10    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party (including by facsimile or pdf attachment), it being understood that all Parties need not sign the same counterpart.
7.11    No Presumption.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the authorship of any provisions of this Agreement.
7.12    Relationship of the Parties.  It is expressly understood and agreed that in rendering the Services hereunder, each of the Parties is acting as an independent contractor and 

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that this Agreement does not make the providing Party an employee, agent or other representative of the other Party for any purpose whatsoever.  Neither Party has the right or authority to enter into any contract, warranty, guarantee or other undertaking in the name or for the account of the other Party, or to assume or create any obligation or liability of any kind, express or implied, on behalf of the other Party, or to bind the other Party in any manner whatsoever, or to hold itself out as having any right, power or authority to create any such obligation or liability on behalf of the other Party or to bind the other Party in any manner whatsoever (except as to any actions taken by a Party at the express written request and direction of the other Party). No employee, contractor or subcontractor of either Party shall be deemed to be an employee, contractor or subcontractor of the other Party, it being fully understood and agreed that no employee of either Party is entitled to benefits or compensation from the other Party.  Each Party is wholly responsible for withholding and payment of all applicable national, state and local and other payroll taxes with respect to its own employees, including any contributions from them as required by Law. 
7.13    Availability of Equitable Relief.  The Parties hereto agree that irreparable damage would occur in the event that any provision of this Agreement were not performed in accordance with the terms hereof.  Accordingly, prior to the termination of this Agreement pursuant to Article VI, in the event of any breach or threatened breach by a Party of its obligations under this Agreement prior to the Closing, the affected Party shall be entitled to equitable relief (including specific performance of the terms hereof) without prejudice to any other rights or remedies that may otherwise be available to such other Party.
7.14    Construction of Agreements.  Notwithstanding any other provisions in this Agreement to the contrary, in the event and to the extent that there shall be a conflict between the provisions of this Agreement and the Purchase Agreement, the provisions of the Purchase Agreement shall control.
7.15    Force Majeure.  Seller shall not be responsible to Purchaser under this Agreement for failure or delay in performing any obligations under this Agreement (other than obligations regarding payment of money or confidentiality) due to factors beyond its reasonable control, including, without limitation, war, terrorism, hostilities, sabotage, revolution, riot, civil commotion, national emergency, strikes, lock-outs, failure of supplies of power or fuel, mechanical or equipment failures, prohibitions against imports or exports of any product, impossibility of obtaining components or a force majeure affecting a supplier of components that results in a shortage of supply of components, epidemics, explosion, fire, flood, earthquake, force of nature, natural disaster or any other act of God, or any Law, proclamation, regulation, ordinance, embargo, or other act or order of any court or Governmental Authority, each to the extent the same are beyond the reasonable control of the affected Party (each such factor, a “Force Majeure”).  Upon the occurrence of a Force Majeure, the Party failing or delaying performance shall use commercially reasonable efforts to promptly notify the other Party.  Any Party subject to a Force Majeure shall resume performing its obligations under this Agreement as soon as reasonably practicable.  Except as otherwise provided herein, if a Force Majeure occurs, the affected Party shall be excused from performing and the time for performance shall be extended as long as that Party is unable to perform as a result of the Force Majeure.  

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Notwithstanding the foregoing, if a Force Majeure continues, or is reasonably expected to continue, for a period of ninety (90) days or more, and such Force Majeure substantially impairs the affected Party’s performance of its obligations under this Agreement, the other Party shall have the right and option to terminate this Agreement upon written notice thereof to the affected Party.

[Signature page follows.]

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IN WITNESS WHEREOF, Seller and Purchaser have caused this Transition Services Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
	
				
	COVIDIEN LP
	THE SPECTRANETICS CORPORATION

	By:
	/s/ Matthew Nicolella
	By:
	/s/ Paul A. Gardon

	 
	Name: Matthew Nicolella 
	 
	Name: Paul A. Gardon

	 
	Title: Vice President and Assistant Secretary
	 
	Title: Senior Vice President

[SIGNATURE PAGE TO THE TRANSITION SERVICES AGREEMENT]

SCHEDULE 2.1
TRANSITION SERVICES AND FEES
	
						
	No.
	Service
	Service Period
	Fee/ Consideration

	1.
	Information Technology Services
The IT Services shall consist of Services provided by Seller to Purchaser and its Affiliates related to the following:
•  Transition of Seller’s IT information in a mutually agreed     upon file format (the “Data Transfer Services”), such information to include all data related to the Transferred Employees and employees that become employed by Purchaser or its Affiliates (collectively, “Hired Employees”), including:
•  Pay history, including base, bonus, long-term incentive, and any other pay components tracked in Seller’s IT systems
•  Action/Reason Code associated with pay history data above
•  Most recent year-end payroll summary
•  Use of communication / IT systems for Hired Employees
•  Transfer of Hired Employees’ mobile phones and phone numbers (including transfer of landline numbers) to Purchaser (subject to Purchaser making suitable arrangements with carriers, and noting that the phones will only work on the current carriers’ networks) 
•  Forwarding of current Seller e-mail addresses (including any aliases) to Purchaser-designated e-mail addresses for Hired Employees and provide access to email forwarding agreement
•  Copy and transfer of data and information (i.e., email, data, hard drive files) residing on any Hired Employee hardware (e.g. laptops) to Purchaser’s employee hardware
•  Order management with respect to DCB Products clinical trials
•  Any hardware leases and software licenses related to the foregoing
	Up to 12 months post-Closing
	For any Services provided more than 6 months after the Closing Date, Purchaser and Seller shall agree to any fees or consideration in accordance with an hourly rate of $50 in respect of Seller’s employees

	 
	 
	 
	 

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	2.
	 
	Clinical Affairs Services
The Clinical Affairs Services shall consist of  Services for Purchaser and its Affiliates related to the following:
•  Provision of assistance with respect to the Illumenate clinical trials of the DCB Products (the “Illumenate Trial Series”), including: 
•  To the extent Seller is currently utilizing a 3rd party Clinical Research Organization (“CRO”) as of Closing, transfer of CRO contractual relationship to Purchaser or to a 3rd party CRO selected by the Purchaser
•  To the extent Seller is not utilizing a 3rd party CRO as of Closing, transfer of Seller’s clinical affairs activities to Purchaser or to a 3rd party CRO selected by the Purchaser 
•  Transfer of data systems, data management, and biostatistics for the Illumenate Trial Series to Purchaser or to a 3rd party CRO selected by the Purchaser 
•  Provide all clinical data and reports in paper and electronic form, including statistical plan and data and support services related thereto
•  Transfer of clinical trial steering committee, clinical events committee and data safety monitoring board
•  Transfer of clinical trial protocol sponsorship with the FDA and, with respect to jurisdictions outside the United States, the relevant Competent Authorities and Ethics Boards, including submission of written request to the FDA and such Competent Authorities and Ethics Boards transferring ownership/sponsorship of any investigational device exemptions and related submissions and of clinical trial agreements (such as all regulatory filings and all correspondence, including meeting minutes, emails and phone call records)
	Up to 12 months post-Closing (except for support Services related to the transition of statistical plans and data, which shall be up to 6 months)
	For any Services provided more than 6 months after the Closing Date (except for support Services related to the transition of statistical plans and data, which shall be 3 months post-Closing), Purchaser and Seller shall agree to any fees or consideration in accordance with an hourly rate of $50 in respect of Seller’s employees

	3.
	Accounting and Finance Services
The Accounting and Finance Services shall consist of  Services for Purchaser and its Affiliates related to the following:
•  The transfer of any applicable vendor contracts, accounts payable and other contracts
•  The transfer of all historical expenses related to the DCB Products
	Up to 6 months post-Closing
	None

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	4.
	Minnesota Facilities Services
The Minnesota Facilities Services shall consist of Services for Purchaser and its Affiliates related to the following:
•  Access to Seller’s existing facilities in Plymouth, MN (the “Minnesota Facilities”), for Hired Employees and Purchaser’s existing employees, including access to manufacturing personnel and facilities, quality control personnel and facilities and clean room personnel and facilities related to (i) DCB Products and (ii) EverCross and NanoCross PTA Products (the “Relevant PTA Products”)
•  Transfer of Hired Employees from the Minnesota Facilities to a new facility in Minnesota to be designated by Purchaser
	Up to 6 months post-Closing
	None

	5.
	Quality Affairs Services
Quality Affairs Services shall consist of Services for Purchaser and its Affiliates related to the following:
•  Access to document control systems, procedures and records, employee training records, complaint handling procedures and records and any other similar information related to the DCB Products.  Data will be provided for  Relevant PTA Products for the last 12 months. 
•  For purposes related to replication of Relevant PTA Products lines, access to and transfer of documents to the extent primarily related to Relevant PTA Products, including those related to any device master records, design history files, design verifications and validations, process validations, device history records, manufacturing instructions yields and quality control systems and any other documents related to quality testing
•  Transfer of DCB and PTA quality system and related records and information (including records of personnel employed in functions  related to the DCB Products and standard operating procedures, work instructions, forms, and templates related to the DCB Products and Relevant PTA Products)
•  Delivery of compliance training records (including access to resources and materials related to DCB Products and Relevant PTA Products)
•  Transfer of all applicable documents in native file format or other editable format and support in verifying the accuracy of the content transferred onto Purchasers system
•  Provide historical CAPA reports existing in Service Provider's systems
•  Provide historical internal and external audit reports from audits conducted on the DCB Products and Relevant PTA Products and on the quality systems for the DCB Products and Relevant PTA Products and from audits conducted in respect of the associated suppliers of materials and components for such products
	Up to 12 months post-Closing
	For any Services provided more than  6 months after the Closing Date, Purchaser and Seller shall agree to any fees or consideration in accordance with an hourly rate of $50 in respect of Seller’s employees

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	6.
	Regulatory Affairs Services
Regulatory Affairs Services shall consist of Services for Purchaser and its Affiliates related to the following:
•  Provide the following documents to support transition to Purchaser’s systems: 
•  All current and historical US regulatory documents in paper and electronic form including any FDA comments or correspondence, including any FDA correspondence related to approval of advertising and promotional materials
•  All current and historical registrations and regulatory filings outside the US in paper and electronic form if available including any comments or correspondence with the notified body or regulatory agency and (where feasible) the distributor
•  Provide notifications to the FDA and EMA of the assignments of premarket approvals and authorizations to affix CE Marks
•  Provide timely access and resources to conduct ad-hoc teleconference meetings with any member of the Service Provider’s regulatory team to address any unanticipated questions
•  Provide other electronic documents including all regulatory filings, design dossiers, device master records associated with Product registration submissions in the US, EU and other applicable countries
	Up to 6 months post-closing
	None

	7.
	Sales and Marketing
Sales and Marketing Services shall consist of Services for Purchaser and its Affiliates related to the following:
•  Access to global training and marketing resources relating to the DCB Products (including clinical affairs resources and clinical science relating to the DCB Products)
•  Access to list of target accounts in EU for initial product launch and all market intelligence data related to the DCB Products
•  Subject to the consent of the relevant trade show vendor and presenter, transfer of podium time and access to presenters related to the DCB Products in connection with trade shows and access to or transfer of any current or planned published content relating to the DCB Products
	Up to 6 months post-Closing
	None

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	8.
	Research and Development Services
Research and Development Services shall consist of Services for Purchaser and its Affiliates related to the following:
•  Transfer of all existing projects primarily related to the DCB Products (including any shelf life extension projects) and provide support related to the completion of such projects
•  Access to research and development equipment used for any on-going projects primarily relating to the DCB Products
•  Delivery of training and support Services relating to DCB Product packaging
•  Purchaser may use Seller’s environmental chambers for DCB Product currently undergoing accelerated aging.  For purposes of clarification, Purchaser will be responsible for maintenance, execution and results of DCB Product aging
•  Transfer the design choices selected and any documentation created to support long term potential packaging changes.  For purposes of clarification, Purchaser will be responsible for maintenance, execution and results of any long term packaging changes.
•  Seller will complete any active pre-clinical work and assist in the transfer of any planned pre-clinical work
	Up to 6 Months post-Closing
	None

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	9.
	Manufacturing Services
Manufacturing Services shall consist of Services for Purchaser and its Affiliates related to the following.  For purposes of clarification, Purchaser will be responsible for replication and validation of manufacturing line of Relevant PTA Products.  Seller will provide subject matter experts and assist in replication and validation of any manufacturing line of Relevant PTA Products.
•  Access to current products and process development areas related to DCB Products
•  Delivery of equipment maintenance, engineering and calibration support
•  Delivery of purchasing / supplier quality assurance support in connection with raw material vendors relating to DCB Products and Relevant PTA Products
•  Training with respect to production of Relevant PTA Products and engineering and quality control related to PTA testing methods (including hands-on or in-person training on the production equipment at the Minnesota Facilities)
•  Validation of new PTA Balloon line at the Fremont, CA facility
•  Transfer and validation of extrusions to outside OEM manufacturer
•  Access and support relating to supplier contracts relating to the Relevant PTA Products (including permission to speak to suppliers relating to the Relevant PTA Products)
•  All production documentation related to Relevant PTA Products, including manufacturing equipment drawings, specifications, calibration methods and preventive maintenance
•  Transfer and establishment of manufacturing and production of Relevant PTA Products at the Seller’s Fremont, California facility
•  Engineering and technical support for Transfer and validation of PTA balloon line to Seller’s Fremont, California facility

Seller shall not be required to provide more than 120 man-hours per week of Manufacturing Services
	Up to 24 Months
	For any Services provided more than 12 months after the Closing Date, Purchaser and Seller shall agree to any fees or consideration in accordance with an hourly rate of $60 in respect of Seller’s employees

	10.
	Regulation S-X Financial Statements Services

Regulation S-X Financial Statements Services shall consist of Services for Purchaser related to the following:
•  Access to historical financial information of the DCB Business as may be reasonably necessary for Purchaser to prepare financial statements with respect to the DCB Business as of and for the fiscal years ended December 31, 2011, December 31, 2012 and December 31, 2013 (and any required interim statements) meeting the requirements applicable to a registrant pursuant to Regulation S-X promulgated under the Securities Act.

During the 21-month period commencing on the Closing Date, Purchaser may provide written notice to Seller requesting that Seller provide the Regulation S-X Financial Statements Services.  
	Up to 90 days after Seller’s receipt of notice from Purchaser.
	Reasonable and documented out-of-pocket costs that have been incurred by Seller or its representatives in connection with the provision of the Regulation S-X Financial Statements Services.

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SCHEDULE 2.2 
SERVICE COORDINATORS 
[To come.]

1

SCHEDULE 2.5 
AUTHORIZED THIRD PARTIES
[To come.]

1Exhibit 10.1 Hammond Employment Agreement

Exhibit 10.1

    
EMPLOYMENT AGREEMENT
The parties to this Employment Agreement (this “Agreement”) are Legacy Reserves Services, Inc., a Texas corporation (the “Employer”), Kyle M. Hammond (the “Employee”).  The parties desire to provide for the employment of the Employee as Executive Vice President and Chief Operating Officer of Legacy Reserves GP, LLC, a Delaware limited liability company (the “Company”) on the terms set forth herein effective as of March 1, 2015 (the “Effective Date”).  Legacy Reserves LP (“Legacy”), a Delaware limited partnership, is joining in this Agreement for the limited purposes of reflecting its agreement to the matters set forth herein as to it, but such joinder is not intended to make Legacy the employer of the Employee for any purpose.
		
	1.
	POSITION AND DUTIES.

1.1Employment; Titles; Reporting.  On the Effective Date, the Employer agrees to employ the Employee and the Employee agrees to enter employment with the Employer, upon the terms and subject to the conditions provided under this Agreement.  During the Employment Term (as defined in Section 2), the Employee will serve as Executive Vice President and Chief Operating Officer of the Company.  In such capacity, the Employee will report to and otherwise will be subject to the direction and control of the Board of Directors of the Company (including any committee thereof, the “Board”) and will have such duties, responsibilities and authorities as may be assigned to the Employee by the Board from time to time and otherwise consistent with such position in a public company, comparable in size to Legacy, which is engaged in natural gas and oil acquisition, development and production (including, but not limited to, maintaining, to the extent applicable, compliance with the Sarbanes-Oxley Act of 2002 and related regulations and all other federal, state and local laws and regulations, as well as all regulations and rules of any exchange or electronic trading system on which Legacy’s securities may be traded).
1.2Duties.  During the Employment Term, the Employee will devote substantially all of his full working time to the business and affairs of the Employer, the Company and Legacy, will use his best efforts to promote the Employer’s, the Company’s, and Legacy’s interests and will perform his duties and responsibilities faithfully, diligently and to the best of his ability, consistent with sound business practices.  The Employee may be required by the Board to provide services to, or otherwise serve as an officer or director of, any direct or indirect subsidiary of the Employer, the Company or Legacy (the Employer, the Company, Legacy and all such direct and indirect subsidiaries of the Employer, the Company or Legacy being referred to herein as the “Related Parties”), as applicable.  The Employee will comply with the Employer’s, the Company’s and Legacy’s policies, codes and procedures, as they may be in effect from time to time, applicable to executive officers of the Company and Legacy.  Nevertheless, the Employee may, with prior approval of the Board in each instance, engage in such other business and charitable activities that do not violate Section 7, create a conflict of interest with the Employer, the Company or Legacy or materially interfere with the performance of the Employee’s obligations to the Employer, the Company or Legacy under this Agreement.  The activities in which the Employee is engaged as of the Effective Date, all of which have been approved by the Board, are listed on Exhibit A hereto.  The activities listed on Exhibit A hereto as described by Employee to the Board on or before the Effective Date of this Agreement are not a violation of any provision of this Agreement.

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1.3Place of Employment.  The Employee will perform the Employee’s duties under this Agreement at the Company’s offices in Midland, Texas, with the likelihood of substantial business travel.
		
	2.
	TERM OF EMPLOYMENT.

The term of the Employee’s employment by the Employer under this Agreement (the “Employment Term”) will commence on the Effective Date and will continue until employment is terminated by either party under Section 5.  The date on which the Employee’s employment ends due to a “separation from service,” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and Final Treasury Regulation Section 1.409A-1(h) and the default presumptions thereof, is referred to in this Agreement as the “Termination Date.”
		
	3.
	COMPENSATION.

3.1Base Salary.  During the Employment Term, the Employee will be entitled to receive a base salary (“Base Salary”) at an annual rate of not less than $380,000 for services rendered to the Employer, the Company, Legacy, and any of their affiliates and their direct or indirect subsidiaries, payable in accordance with the Employer’s regular payroll practices.  The Employee’s Base Salary will be reviewed annually by the Board and may be adjusted upward in the Board’s sole discretion. 
3.2Annual Bonus Compensation.  During the Employment Term, the Employee will be eligible to receive incentive compensation in such amounts and at such times as the Board may determine in its sole discretion to award to him under any incentive compensation or other bonus plan or arrangement as may be established by the Board from time to time (collectively “Employee Bonus Plan”), subject to and payable in accordance with the terms and conditions of any such Employee Bonus Plan.  Any additional incentive compensation payable under any Employee Bonus Plan will be referred to in the aggregate in this Agreement as the Employee’s “Bonus.”
3.3Long-Term Incentive Compensation.  Awards of equity interests of Legacy (“Units”) and/or other forms of equity-based compensation to the Employee on or after the Effective Date may be made from time to time during the Employment Term by the Board in its sole discretion, whose decision will be based upon performance and award guidelines for executive officers of the Company and Legacy established periodically by the Board in its sole discretion.
		
	4.
	EXPENSES AND OTHER BENEFITS.

4.1Reimbursement of Expenses.  The Employee will be entitled to receive prompt reimbursement for all reasonable expenses, including professional fees, incurred by the Employee during the Employment Term (in accordance with the policies and practices presently followed by the Company or as may be established by the Board from time to time for the Company’s senior executive officers) in performing services under this Agreement, provided that the Employee properly accounts for such expenses in accordance with the Company’s and Legacy’s policies as in effect from time to time.

2

4.2Vacation.  The Employee will be entitled to paid vacation time each year during the Employment Term that will accrue in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company.
4.3Other Employee Benefits.  In addition to the foregoing, during the Employment Term, the Employee will be entitled to participate in and to receive benefits as a senior executive under all of the Related Parties’ employee benefit plans, programs and arrangements available to senior executives, subject to the eligibility criteria and other terms and conditions thereof, as such plans, programs and arrangements may be duly amended, terminated, approved or adopted by the Board from time to time.
		
	5.
	TERMINATION OF EMPLOYMENT.

5.1Death.  The Employee’s employment under this Agreement will terminate upon his death.
5.2Termination by the Employer.
(a)Terminable at Will.  The Employer may terminate the Employee’s employment under this Agreement at any time with or without Cause (as defined below).
(b)Definition of Cause.  For purposes of this Agreement, the Employer will have “Cause” to terminate the Employee’s employment under this Agreement by reason of any of the following:  (i) the Employee’s conviction of, or plea of nolo contendere to, any felony or to any crime or offense causing substantial harm to Legacy or its direct or indirect subsidiaries (whether or not for personal gain) or involving acts of theft, fraud, embezzlement, or moral turpitude or similar conduct; (ii) the Employee’s being charged with any felony or crime, which charge or publicity arising from or related thereto has caused harm or, in the good faith judgment of the Board, may cause substantial harm to Legacy or its direct or indirect subsidiaries; (iii) the Employee’s repeated intoxication by alcohol or drugs during the performance of the Employee’s duties; (iv) malfeasance in the conduct of the Employee’s duties, including, but not limited to, (A) willful and intentional misuse or diversion of any of the Related Parties’ funds, (B) embezzlement or (C) fraudulent or willful and material misrepresentations or concealments on any written reports submitted to any of the Related Parties; (v) the Employee’s material failure to perform the duties of the Employee’s employment consistent with the Employee’s position, expressly including the provisions of this Agreement, or material failure to follow or comply with the reasonable and lawful written directives of the Board; (vi) a material breach of this Agreement; or (vii) a material breach by the Employee of written policies of the Related Parties concerning employee discrimination or harassment.
(c)Notice and Cure Opportunity in Certain Circumstances.  The Employee may be afforded a reasonable opportunity to cure any act or omission that would otherwise constitute “Cause” hereunder according to the following terms:  The Board will cause the Employer to give the Employee written notice stating with 

3

reasonable specificity the nature of the circumstances determined by the Board in good faith to constitute “Cause.”  If, in the good faith judgment of the Board, the alleged breach is reasonably susceptible to cure, the Employee will have fifteen (15) days from his receipt of such notice to effect the cure of such circumstances or such breach to the good faith satisfaction of the Board.  The Board will state whether the Employee will have such an opportunity to cure in the initial notice of “Cause” referred to above.  If, in the good faith judgment of the Board, the alleged breach is not reasonably susceptible to cure, or such circumstances or breach have not been satisfactorily cured within such fifteen (15) day cure period, such breach will thereupon constitute “Cause” hereunder.
5.3Termination by the Employee.
(a)Terminable at Will.  The Employee may terminate his employment under this Agreement at any time with or without Good Reason (as defined below).
(b)Notice and Cure Opportunity.  If such termination is with Good Reason, the Employee will give the Employer written notice within thirty (30) days of the date the circumstance giving rise to the Good Reason first existed, which will identify with reasonable specificity the grounds for the Employee’s resignation and provide the Employer with thirty (30) days from the day such notice is given to cure the alleged grounds for resignation contained in the notice. A termination will not be for Good Reason if such notice is given by the Employee to the Employer more than thirty (30) days after the occurrence of the event that the Employee alleges is Good Reason for the Employee’s termination hereunder.
(c)Definition of Good Reason.  For purposes of this Agreement, “Good Reason” will mean any of the following to which the Employee has not consented in writing:  (a) a reduction in the Employee’s Base Salary; (b) a relocation of the Employee’s primary place of employment to a location more than 20 miles from Midland, Texas; or (c) any material reduction in the Employee’s title, authority or responsibilities as Executive Vice President and Chief Operating Officer of the Company.
5.4Notice of Termination.  Any termination of the Employee’s employment by the Employer or by the Employee during the Employment Term (other than termination pursuant to Section 5.1) will be communicated by written Notice of Termination to the other party hereto in accordance with Section 9.8.  For purposes of this Agreement, a “Notice of Termination” means a written notice that (a) indicates the specific termination provision in this Agreement relied upon, (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which Termination Date will be not more than thirty (30) days after the giving of such notice).  However, if the Employee submits a Notice of Termination  specifying a Termination Date other than the date of Employer’s receipt of such notice, the Employer may, at its sole discretion, change the Termination Date to any date on or after the date of Employer’s receipt of such Notice of Termination and before the Termination Date specified by the Employee in the Notice of Termination.  If the Employer changes the Termination Date from the Termination Date the Employee specified in the Notice of Termination, the 

4

Employment Term shall be from the Effective Date until the Termination Date selected by the Employer.
5.5Disability.  If the Employer determines in good faith that the Disability (as defined herein) of the Employee has occurred during the Employment Term, it may, without breaching this Agreement, give to the Employee written notice in accordance with Section 5.4 of its intention to terminate the Employee’s employment.  In such event, the Employee’s employment with the Employer will terminate effective on the fifteenth (15th) day after receipt of such notice by the Employee (the “Disability Effective Date”), provided that, within the fifteen (15) days after such receipt, the Employee will not have returned to full-time performance of the Employee’s duties.  “Disability” means the determination by a physician selected by the Employer that the Employee has been unable to perform the Employee’s usual and customary duties under this Agreement for a period of at least one hundred twenty (120) consecutive days or a non-consecutive period of one hundred eighty (180) days during any twelve-month period as a result of incapacity due to mental or physical illness or disease.  At any time and from time to time, upon reasonable request by the Employer, the Employee will submit to reasonable medical examination for the purpose of determining the Employee’s ability to perform the essential functions of the job position, with or without any reasonable accommodation.
		
	6.
	COMPENSATION OF THE EMPLOYEE UPON TERMINATION.

6.1Death.  If the Employee’s employment under this Agreement is terminated by reason of the Employee’s death, the Employer will pay to the person or persons designated by the Employee for that purpose in a notice filed with the Employer, or, if no such person will have been so designated, to the Employee’s estate the amount of (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date (or, if earlier, as required by applicable law), (b) any accrued but unpaid Bonus paid in a lump sum, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable in accordance with the terms of the applicable Employee Bonus Plan, (c) a pro rata portion of any Bonus for the fiscal year in which the Termination Date occurs, paid in a lump sum at such time as bonuses for the annual period are paid to other executive officers of the Company in accordance with the terms of the applicable Employee Bonus Plan, and determined by multiplying the Employee’s target Bonus for such period by a fraction, the numerator of which is the number of days from the first day of the fiscal year of the Company in which such termination occurs through and including the Termination Date and the denominator of which is 365 (“Pro Rata Bonus”), and (d) any other amounts that may be reimbursable by the Employer to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Employer thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Related Parties in accordance with the terms of such plans or programs and any payments or benefits required to be made or provided under applicable law.
6.2Disability.  In the event of the Employee’s termination by reason of Disability pursuant to Section 5.5, the Employee will continue to receive his Base Salary and participate in applicable employee benefit plans or programs of the Related Parties (on an equivalent basis to Section 6.4(a)(iv) below) through the Termination Date, subject to offset 

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dollar-for-dollar by the amount of any disability income payments provided to the Employee under any bona fide disability policy or program (within the meaning of Final Treasury Regulation Section 1.409A-1(a)(5)) funded by any of the Related Parties that covers a substantial number of employees of the Related Parties and was established prior to the date the Employee incurred a Disability, and will receive the amount of (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date (or, if earlier, as required by applicable law), (b) any accrued but unpaid Bonus paid in a lump sum, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable in accordance with the terms of the applicable Employee Bonus Plan, (c) the Employee’s Pro-Rata Bonus paid in a lump sum, payable at such time as bonuses for the annual period are paid to other executive officers of the Company in accordance with the terms of the applicable Employee Bonus Plan, and (d) any other amounts that may be reimbursable by the Employer to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Employer thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Related Parties in accordance with the terms of such plans or programs and any payments or benefits required to be made or provided under applicable law.
6.3By the Employer for Cause or the Employee Without Good Reason.  If the Employee’s employment is terminated by the Employer for Cause, or if the Employee terminates Employee’s employment other than for Good Reason, the Employee will receive the amount of (a) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date (or, if earlier, as required by applicable law), (b) any accrued but unpaid Bonus paid in a lump sum, which Bonus will be payable at such time as the bonuses of other executive officers of the Company are payable in accordance with the terms of the applicable Employee Bonus Plan, and (c) any other amounts that may be reimbursable by the Employer to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date, and the Employer thereafter will have no further obligation to the Employee under this Agreement, other than for payment of any amounts accrued and vested under any employee benefit plans or programs of the Related Parties in accordance with the terms of such plans or programs and any payments or benefits required to be made or provided under applicable law.
6.4By the Employee for Good Reason or the Employer other than for Cause.
(a)Severance Benefits on Non-Change of Control Termination.  Subject to the provisions of Section 6.4(b) and Section 6.4(d), if prior to or more than one (1) year after the occurrence of a Change of Control (as defined below) the Employer terminates the Employee’s employment without Cause, or the Employee terminates his employment for Good Reason, then the Employee will be entitled to the following benefits (the “Severance Benefits”):
(i)an amount equal to (A) the Employee’s accrued but unpaid Base Salary through the Termination Date paid in a lump sum within thirty (30) days following the Termination Date (or, if earlier, as required by applicable law), (B) any accrued but unpaid Bonus paid in a lump sum, which Bonus will be 

6

payable at such time as the bonuses of other executive officers of the Company are payable in accordance with the terms of the applicable Employee Bonus Plan, and (C) any other amounts that may be reimbursable by the Employer to the Employee as expressly provided under this Agreement paid in a lump sum within thirty (30) days following the Termination Date or, if earlier, as required by applicable law;
(ii)twenty-four (24) monthly payments paid on the first monthly payroll date of the Company each month in an amount equal to one-twelfth (1/12) of the Employee’s annual Base Salary at the highest rate in effect at any time during the thirty-six (36) month period prior to the Termination Date plus the average annual Bonus of the two (2) years preceding the Termination Date, commencing with the first monthly payroll date of the Company in the first month beginning after sixty (60) days following the Termination Date;
(iii)a cash amount equal to the Employee’s Pro-Rata Bonus for the fiscal year in which the Termination Date occurs, paid in a lump sum at such time as bonuses for the annual period are paid to other executive officers of the Company in accordance with the terms of the applicable Employee Bonus Plan; and
(iv)to the extent that the Employee elects COBRA continuation coverage, the Employer will pay the full cost of the Employee’s COBRA continuation coverage for the maximum period as COBRA continuation coverage is required to be provided under applicable law; provided, however, that the benefits described in this Section 6.4(a)(iv) may be discontinued prior to the end of the period provided in this Section 6.4(a)(iv) to the extent, but only to the extent, that the Employee receives substantially similar benefits from a subsequent employer (“COBRA Benefit”).
(b)Change of Control Benefits.  Subject to the provisions of Section 6.4(d), if within the one (1) year period following the occurrence of a Change of Control, the Employer terminates the Employee’s employment without Cause, or the Employee terminates the Employee’s employment for Good Reason, then, in lieu of the Severance Benefits under Section 6.4(a), the Employee will be entitled to benefits (the “Change of Control Benefits”) identical to those set forth in Section 6.4(a) except that the amount described in clause (ii) will be equal to thirty-six (36) monthly payments and will be paid in a lump sum within sixty (60) days following the Termination Date, provided that if the sixty (60) day period begins in one taxable year and ends in a second taxable year, the payment shall not be made until the second taxable year.
(c)Definition of Change of Control.  For purposes of this Agreement, a “Change of Control” will mean the first to occur of the following, provided that such Change of Control qualifies as a change in ownership, change in effective control or a change in ownership of a substantial portion of assets of Legacy within the meaning of Section 409A of the Code:

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(i)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), of 35% or more of either (A) the then-outstanding equity interests of Legacy (the “Outstanding Legacy Equity”) or (B) the combined voting power of the then-outstanding voting securities of Legacy entitled to vote generally in the election of directors (the “Outstanding Legacy Voting Securities”); provided, however, that, for purposes of this Section 6.4(c)(i), the following acquisitions will not constitute a Change of Control: (1) any acquisition directly from Legacy; (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Legacy or any affiliated company; (3) any acquisition by any corporation or other entity pursuant to a transaction that complies with Section 6.4(c)(iii)(A), Section 6.4(c)(iii)(B) or Section 6.4(c)(iii)(C); or (4) any acquisition of Units from Legacy arising out of or in connection with an IPO or private placement of Legacy’s securities;
(ii)Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Legacy’s Unitholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii)Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Legacy or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of Legacy or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Legacy Equity and the Outstanding Legacy Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding equity interests and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation, resulting from such Business Combination (including, without limitation, a corporation or other entity that, as a result of such transaction, owns Legacy or all or substantially all of Legacy’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Legacy Equity and the Outstanding Legacy Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any 

8

employee benefit plan (or related trust) of Legacy or such corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding equity interests of the corporation or other entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation or other entity, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation or equivalent body of any other entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination.
(d)Conditions to Receipt of Severance Benefits.
(i)Release.  Any Severance Benefits or Change of Control Benefits to which the Employee may be entitled under Section 6.4(a) or Section 6.4(b) shall be payable only upon a termination of employment of the Employee, provided the Employee executes (and does not revoke) a release (“the “Release”), which, among other things, will include an affirmation of the restrictive covenants set forth in Section 7 and a non-disparagement provision, in a form and substance satisfactory to the Employer, of any claims, whether arising under federal, state or local statute, common law or otherwise, against the Employer and the Related Parties which arise or may have arisen on or before the date of the Release, other than any claims under this Agreement or any rights to indemnification from the Employer and the Related Parties pursuant to any provision of the Related Parties’ organizational documents or any directors and officers liability insurance maintained by any of the Related Parties.  The Release shall be provided to the Employee within five (5) business days following the Termination Date and must be signed by the Employee and returned to the Employer (and not revoked) within fifty-five (55) days following the Termination Date.  If the Employee fails or otherwise refuses to execute a Release, the Employee will not be entitled to any Severance Benefits or Change of Control Benefits, as the case may be, or any other benefits provided under this Agreement, and the Employer will have no further obligations with respect to the provision of those benefits except as may be required by law.
(ii)Limitation on Benefits.  If, following a termination of employment that gives the Employee a right to the payment of Severance Benefits under Section 6.4(a) or Section 6.4(b), the Employee violates in any material respect any of the covenants in Section 7 or any other provision of the Release, the Employee will have no further right or claim to any payments or other benefits to which the Employee may otherwise be entitled under Section 6.4(a) or Section 6.4(b) from and after the date on which the Employee engages in such activities and the Employer will have no further obligations with respect to such payments or benefits, and the covenants in Section 7 will nevertheless continue in full force and effect.

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6.5Severance Benefits Not Includable for Employee Benefits Purposes.  Except to the extent the terms of any applicable benefit plan, policy or program provide otherwise, any benefit programs of any of the Related Parties that take into account the Employee’s income or length of service will exclude any and all Severance Benefits and Change of Control Benefits provided under this Agreement.
6.6Exclusive Severance Benefits.  The Severance Benefits payable under Section 6.4(a) or the Change of Control Benefits payable under Section 6.4(b), if they become applicable under the terms of this Agreement, will be in lieu of any other severance or similar benefits that would otherwise be payable under any other agreement, plan, program or policy of the Employer.
6.7Section 280G of the Code.
(a)    Notwithstanding anything in this Agreement to the contrary, in the event that any severance and other benefits provided to or for the benefit of the Employee or his legal representatives and dependents pursuant to this Agreement and any other agreement, benefit, plan, or policy of the Related Parties (this Agreement and such other agreements, benefits, plans, and policies collectively being referred to herein as the “Change of Control Arrangements”) constitute “parachute payments” within the meaning of Section 280G(b)(2) of the Code (such severance and other benefits being referred to herein as the “Change of Control Payments”) that would be subject to the excise tax imposed by Section 4999 of the Code (such excise tax referred to in this Agreement as the “Excise Tax”), then (i) if the shareholder approval exemption set forth in Section 280G(b)(5) is available, then the Employer and the Employee shall take all steps necessary, including, without limitation, waiver of rights by the Employee, to seek shareholder approval for such Change of Control Payments in accordance with Section 280G(b)(5) of the Code and the regulations promulgated thereunder; or (ii) if the shareholder approval exemption set forth in Section 280G(b)(5) is not available, then the Employer will provide the Employee with a computation of (A) the maximum amount of Change of Control Payments that could be made under the Change of Control Arrangements, without the imposition of the Excise Tax (said maximum amount being referred to as the “Capped Amount”); (B) the value of all Change of Control Payments that could be made pursuant to the terms of the Change in Control Arrangements (all said payments, distributions and benefits being referred to as the “Uncapped Payments”); (C) the dollar amount of Excise Tax which the Employee would become obligated to pay pursuant to Section 4999 of the Code as a result of receipt of the Uncapped Payments; and (D) the net value of the Uncapped Payments after reduction by (1) the amount of the Excise Tax, (2) the estimated income taxes payable by the Employee on the difference between the Uncapped Payments and the Capped Amount, assuming that the Employee is paying the highest marginal tax rate for state, local and federal income taxes, and (3) the estimated hospital insurance taxes payable by the Employee on the difference between the Uncapped Payments and the Capped Amount based on the hospital insurance tax rate under Section 3101(b) of the Code (the “Net Uncapped Amount”).  If the Capped Amount is greater than the Net Uncapped Amount, the Employee shall be entitled to receive or commence to receive the Change of Control Payments equal to the Capped Amount; or if the Net Uncapped Amount is greater than the Capped Amount, the Employee shall be entitled to receive or commence to receive the Change of Control Payments equal to the Uncapped Payments.  If the Employee receives the Uncapped Payments, then the Employee shall be solely responsible for 

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the payment of the Excise Tax due from the Employee and attributable to such Uncapped Payments, with no right of additional payment from any of the Related Parties as reimbursement for such taxes.

(b)    Unless the Employer and the Employee otherwise agree in writing, any determination required under this Section 6.7 shall be made in writing by tax counsel or by an independent public accounting firm agreed to by the Employer and the Employee (the “Auditor”), whose determination shall be conclusive and binding upon the Employer and the Employee.  For purposes of making the calculations required by this Section 6.7, the Auditor may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Employer and the Employee shall furnish to the Auditor such information and documents as the Auditor may reasonably request in order to make a determination under this Section 6.7.  The Employer shall bear all costs the Auditor may reasonably incur in connection with any calculations contemplated by this Section 6.7.
		
	7.
	RESTRICTIVE COVENANTS.

7.1Confidential Information.  The Employee hereby acknowledges that in connection with the Employee’s employment by the Employer the Employee has been provided and will be provided Confidential Information (as defined below) (including, without limitation, procedures, memoranda, notes, records and customer and supplier lists whether such information has been or is made, developed or compiled by the Employee or otherwise has been or is made available to Employee), including information Employee has not received before, regarding the business and operations of the Related Parties.  The Employee further acknowledges that such Confidential Information is unique, valuable, considered trade secrets and deemed proprietary by the Related Parties, and that the receipt of this Confidential information creates a special relationship of trust and confidence between the Employer, the Company, Legacy and the Employee.  Employee thus acknowledges and agrees that it is fair and reasonable for the Employer, the Company and Legacy to take steps to protect itself.  For purposes of this Agreement, “Confidential Information” includes, without limitation, any information heretofore or hereafter acquired, developed or used by any of the Related Parties relating to Business Opportunities or Intellectual Property or other geological, geophysical, economic, financial or management aspects of the business, operations, properties or prospects of the Related Parties, whether oral or in written form.  The Employee agrees that all Confidential Information is and will remain the property of the Related Parties.  The Employee further agrees, except for disclosures occurring in the good faith performance of Employee’s duties for the Related Parties, during the Employment Term and at all times thereafter, to hold in the strictest confidence all Confidential Information, and not to, directly or indirectly, duplicate, sell, use, lease, commercialize, disclose or otherwise divulge to any person or entity any portion of the Confidential Information or use any Confidential Information for Employee’s own benefit or profit or allow any person, entity or third party, other than the Related Parties and authorized executives of the same, to use or otherwise gain access to any Confidential Information.  The Employee will have no obligation under this Agreement with respect to any information that becomes generally available to the public other than as a result of a disclosure by the Employee or Employee’s agent or other representative or becomes available to the Employee on a non-confidential basis from a source other than the Related Parties through no breach of any 

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agreement with the Employer or any of the Related Parties.  Further, the Employee will have no obligation under this Agreement to keep confidential any of the Confidential Information to the extent that a disclosure of it is required by law or is consented to by the Employer, the Company or Legacy in writing; provided, however, that if and when such a disclosure is required by law, the Employee promptly will provide the Employer with notice of such requirement, so that an appropriate protective order may be sought, and will cooperate with the Employer in any attempt by Employer to obtain any such appropriate protective order.
7.2Return of Property.  The Employee agrees that all Confidential Information, whether prepared by the Employee or otherwise coming into Employee’s possession, is and shall remain the exclusive property of the Employer and/or Related Parties.  Employee further agrees to deliver promptly to the Employer, upon termination of Employee’s employment hereunder, or at any other time when the Employer so requests, all documents relating to the business of the Related Parties, including without limitation: all geological and geophysical reports and related data such as maps, charts, logs, seismographs, seismic records and other reports and related data, calculations, summaries, memoranda and opinions relating to the foregoing, production records, electric logs, core data, pressure data, lease files, well files and records, land files, abstracts, title opinions, title or curative matters, contract files, notes, records, drawings, manuals, correspondence, financial and accounting information, customer lists, statistical data and compilations, patents, copyrights, trademarks, trade names, inventions, formulae, methods, processes, agreements, contracts, manuals or any documents relating to the business of the Related Parties and all copies thereof and therefrom; provided, however, that the Employee will be permitted to retain copies of any documents or materials solely of a personal nature or otherwise related to the Employee’s rights under this Agreement.  Employee further agrees that, after Employee provides a copy of such information or documents to the Employer, Employee will immediately delete any information or documents relating to the Employer’s business from any computer, cellular phone or other digital or electronic device owned by Employee.
7.3Non-Compete Obligations.  In consideration of the payments, benefits and other obligations of the Employer to the Employee pursuant to this Agreement, including, without limitation, the Employer’s obligation to provide the Employee with Confidential Information pursuant to Section 7.1 hereof, and in order to protect such Confidential Information and preserve the goodwill of the Related Parties, the Employee hereby covenants and agrees to the following provisions.
(a)Non-Compete Obligations During Employment Term.  The Employee agrees that during the Employment Term:
(i)the Employee will not, other than through the Related Parties, unless approved in writing by a majority of the Board of Directors, engage or participate in any manner, whether directly or indirectly, through any family member or as an employee, employer, consultant, agent, principal, partner, more than one percent shareholder, officer, director, licensor, lender, lessor or in any other individual or representative capacity, in any business or activity which is engaged in leasing, acquiring, exploring, or producing, gathering or marketing 

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hydrocarbons and related products (“Competing Business”), unless set forth on the approved activities list on Exhibit A; and
(ii)all investments made directly or indirectly by the Employee (whether in Employee’s own name or in the name of any family members or other nominees or made by the Employee’s controlled affiliates) in a Competing Business will be made solely through the Related Parties, unless approved in writing by a majority of the Board of Directors or unless such activity is set forth on Exhibit A; and the Employee will not directly or indirectly through any family members or other person or entity and will not permit any of Employee’s controlled affiliates to: (A) invest or otherwise participate alongside the Related Parties in any Business Opportunities relating to or arising from a Competing Business, or (B) invest or otherwise participate in any business or activity relating to or arising from a Competing Business, regardless of whether any of the Related Parties ultimately participates in such business or activity, in either case, except through the Related Parties, unless approved in writing by a majority of the Board of Directors or unless such activity is set forth on Exhibit A.
(b)Non-Compete Obligations After Termination Date.  The Employee agrees that the Employee will not in the Geographic Area engage or participate in any manner, whether directly or indirectly through any family member or other person or as an employee, employer, consultant, agent principal, partner, more than one percent shareholder, officer, director, licensor, lender, lessor or in any other individual or representative capacity, unless approved in writing by a majority of the Board of Directors or unless such activity is set forth on Exhibit A:
(i)During the 90-day period following the Termination Date, in any business or activity that is a Competing Business; and/or
(ii)During the one (1) year-period following the Termination Date, in any business or activity which is a publicly traded oil and gas income distribution company or partnership or a privately held company or partnership that is contemplating an initial public offering as an oil and gas income distribution company or partnership that is in direct competition with the business of the Related Parties in the leasing, acquiring, exploring, producing, gathering or marketing of hydrocarbons and related products; provided, that this subsection (ii) will not preclude the Employee from making investments in securities of oil and gas companies that are registered on a national stock exchange if (A) the aggregate amount owned by the Employee and all family members and affiliates does not exceed 5% of such company’s outstanding securities, and (B) the aggregate amount invested in such investments by the Employee and all family members and affiliates after the date hereof does not exceed $500,000.
(iii)If Employee, in the future, seeks or is offered employment, or any other position or capacity with a Competing Business, Employee agrees to inform each new employer or entity, before accepting employment, of the existence of the restrictions in Section 7.  Further, before taking any employment 

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position with any Competing Business during the two-year period following the Termination Date, Employee agrees to give prior written notice to the Employer of the name of such Competing Business and Employee’s intent to take a position with such Competing Business.  The Employer shall be entitled to advise such Competing Business of the provisions of Section 7 and to otherwise deal with such Competing Business to ensure that the provisions of Section 7 are enforced and duly discharged.
(c)Not Applicable Following Change of Control Termination.  If Employee’s employment is terminated within one (1) year after a Change of Control by the Employee for Good Reason or by the Employer without Cause, the Employee will not be subject to the covenants contained in this Section 7.3.
(d)Geographic Area.  For purposes of this Agreement, the “Geographic Area” shall mean (i) any county or parish in which the Related Parties own any oil and gas interests or conducts operations on the Termination Date or in which the Related Parties have owned any oil and gas interests or conducted operations at any time during the six months immediately preceding the Termination Date; or (ii) any county or parish adjacent to any county or parish described in clause (i) of this Section 7.3(d).
7.4Non-Solicitation.  During the Employment Term and for a period of twenty-four (24) months after the Termination Date, the Employee, directly or indirectly, will not, whether for Employee’s own account or for the account of any other person or entity:
(a)Other than for the benefit of and on behalf of the Related Parties during the Employment Term, solicit, attempt to transact business with, accept business from, transact business with, encourage or entice to end a relationship with any of the Related Parties, encourage or entice to lessen or alter a relationship with any of the Related Parties any client or customer of any of the Related Parties with whom Employee had any contact with - whether orally, in person or in any writing - during Employee’s employment with the Employer or about whom or which the Employee learned of or obtained Confidential Information about during the Employee’s employment with the Employer.  The restrictions in this Section 7.4(a) concerning solicitations, attempting to transact business, transacting business, or accepting business applies only to solicitations for, or accepting business on behalf of, any Competing Business.  Additionally, Employee agrees that, among other actions, any notification, update or other communication to any such client or customer of Employee’s non-employment with the Employer or Employee’s relationship or status with any other company, individual or entity - whether such notification or update is through LinkedIn, Facebook, any other social media outlet, email, letter or by any other method - constitutes a solicitation of business and an attempt to transact business with such client or customer; and
(b)solicit, hire, endeavor to entice away from the Related Parties, discuss or encourage leaving employment with the Related Parties or working for or providing services to any person or entity other than the Related Parties, or otherwise interfere with the relationship of the Related Parties with any person who is currently employed by the Related Parties (including, without limitation, any independent 

14

contractors, engineers, geologists, sales representatives or organizations) or who had such a relationship with any of the Related Parties within the twelve (12) months preceding such solicitation, hiring, enticement, discussion, encouragement or interference.
7.5Assignment of Developments.  Employee hereby assigns to the Employer any rights Employee may have or acquire in Business Opportunities (defined below) and Proprietary Information (defined below) and recognizes that all Proprietary Information shall be the sole property of the Employer and its assigns and that the Employer and its assigns shall be the sole owner of all trade secret rights, patent rights, copyrights, and all other rights throughout the world (collectively, “Proprietary Rights”) related thereto.  “Proprietary Information” means trade secrets, confidential knowledge, data or any other proprietary information of the Employer.  By way of illustration but not limitation, Proprietary Information includes:  (i) trade secrets, inventions, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, knowhow, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “Inventions”); and (ii) tangible and intangible information relating to formulations, products, processes, know-how, designs, formulas, methods, developmental or experimental work, testing trials, improvements, discoveries, plans for research, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers, and information regarding the skills and compensation of other employees of the Employer.  Employee further hereby assigns to the Employer all of Employee’s right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by Employee, either alone or jointly with others, during the Employee’s employment with Employer, prior to the Effective Date or in conjunction or at the request of any other person or entity and related in any manner to leasing, acquiring, exploring, or producing, gathering or marketing hydrocarbons and related products, or any other line of business in which the Employer becomes involved during Employee’s employment with the Employer (collectively, “Prior O&G Inventions”).  Inventions and Prior O&G Inventions are hereinafter referred to as “Company Inventions.”  Employee recognizes that this Agreement does not require assignment of any invention which Employee developed entirely on Employee’s own time without using the Employer’s equipment, supplies, facilities or trade secret information, unless that invention (a) relates at the time of conception or reduction to practice of the invention to leasing, acquiring, exploring, or producing, gathering or marketing hydrocarbons and related products, or any other portion of the Employer’s business or actual or demonstrably anticipated research or development of the Employer; or (b) results from any services performed by Employee for the Employer.  Employee also assigns to, or as directed by, the Employer all of Employee’s right, title and interest in and to any and all Inventions, full title to which is required to be in the United States by a contract between the Employer and the United States or any of its agencies.  Employee also acknowledges that all original works of authorship which are made by Employee (solely or jointly with others) within the scope of the services that Employee provides to the Employer and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 U.S.C., Section 101).  Employee also agrees to promptly and fully disclose to Employer any and all Company Inventions and to assign to the Employer in the future when any such Company Inventions are first reduced to practice or first fixed in a tangible form all of Employee’s right, title and interest in and to any and all such Company Inventions.  Employee further agrees to assist the Employer in every proper way to obtain and from time to time enforce United States 

15

and foreign Proprietary Rights relating to Company Inventions in any and all countries.  To that end, Employee will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Employer may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof.  In addition, Employee will execute, verify and deliver assignments of such Proprietary Rights to the Employer or its designee.  In the event the Employer is unable for any reason, after reasonable effort, to secure Employee’s signature on any document needed in connection with the actions specified in this Section 7.5, Employee hereby irrevocably designates and appoints the Employer and its duly authorized officers and agents as Employee’s agent and attorney in fact, which appointment is coupled with an interest, to act for and in Employee’s behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 7.5 with the same legal force and effect as if executed by Employee.  Employee hereby waives and quitclaims to the Employer any and all claims, of any nature whatsoever, which Employee now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Employer.  Employee agrees to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Employer) of all Proprietary Information developed by Employee and all Inventions made by Employee during Employee’s employment with the Employer, which records shall be available to and remain the sole property of the Employer at all times.  Except for the Prior O&G Inventions, those Inventions, if any, patented or unpatented, that Employee made prior to Employee’s employment with the Employer are excluded from the scope of this Agreement.  For purposes of this Agreement, “Business Opportunities” means all business ideas, prospects, proposals or other opportunities pertaining to the lease, acquisition, exploration, production, gathering or marketing of hydrocarbons and related products and the exploration potential of geographical areas on which hydrocarbon exploration prospects are located, which are wholly or partially developed by the Employee or by a Competing Business during the Employment Term or originated by any third party and brought to the attention of the Employee during the Employment Term, together with information relating thereto (including, without limitation, geological and seismic data and interpretations thereof, whether in the form of maps, charts, logs, seismographs, calculations, summaries, memoranda, opinions or other written or charted means).  However, Business Opportunities do not include the activities listed on Exhibit A hereto as described by Employee to the Board on or before the Effective Date of this Agreement.
7.6Non-Disparagement.  Employee agrees that the Employer’s goodwill and reputation are assets of great value to the Employer which were obtained through great cost, time and effort.  Therefore, Employee agrees that during Employee’s employment with the Employer and after the termination of Employee’s employment for any reason, Employee will not in any way disparage, libel or defame the Employer or any of the Related Parties or any of their businesses or business practices, products or services, or employees, officers, directors or owners.
7.7Injunctive Relief.  The Employee acknowledges that a breach of any of the covenants contained in this Section 7 may result in material, irreparable injury to the Employer for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat of breach, the Employer will be entitled to obtain a temporary restraining order and/or a preliminary or permanent 

16

injunction restraining the Employee from engaging in activities prohibited by this Section 7 or such other relief as may be required to specifically enforce any of the covenants in this Section 7. To the extent that the Employer seeks a temporary restraining order (but not a preliminary or permanent injunction), the Employee agrees that a temporary restraining order may be obtained ex parte.
7.8Adjustment of Covenants.  The parties consider the covenants and restrictions contained in this Section 7 to be reasonable, that they give rise to the Employer’s interest in restraining Employee as specified herein, and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the Employer and/or the Related Parties.  In addition, the Employee agrees that the Employee shall not assert that, and it should not be considered that, any provisions of this Section 7 are otherwise void, voidable or unenforceable or should be voided or held unenforceable.  However, in the event any court of competent jurisdiction or arbitration panel holds any provision of this Agreement to be invalid or unenforceable, such invalid or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required, and the remaining provisions shall not be affected and shall remain in full force and effect.  Employee further agrees that in the event any of the covenants contained in Section 7 shall be held by any court or arbitration panel to be effective in any particular area or jurisdiction only if said covenant is modified to limit its duration or scope, then the court or arbitration panel, as applicable, shall have such authority to reform the covenant and the Employer and Employee shall consider such covenant(s) and/or other provisions of Section 7 to be amended with respect to that particular jurisdiction so as to comply with the order of any such court or arbitration panel and, as to all other jurisdictions, the covenants contained herein shall remain in full force and effect as originally written.
7.9Forfeiture Provision.
(a)Detrimental Activities.  If the Employee engages in any activity that violates any covenant or restriction contained in Section 7, in addition to any other remedy the Employer may have at law or in equity, (i) the Employee will be entitled to no further payments or benefits from the Employer under this Agreement or otherwise, except for any payments or benefits required to be made or provided under applicable law, (ii) all unexercised Unit options, restricted Units and other forms of equity compensation held by or credited to the Employee will terminate effective as of the date on which the Employee engages in that activity in accordance with the terms of the applicable agreements and plans, as amended from time to time, unless terminated sooner by operation of another term or condition of this Agreement or the applicable plans and agreements, and (iii) any exercise, payment or delivery pursuant to any equity compensation award that occurred within one year prior to the date on which the Employee engages in that  activity may be rescinded within one year after the first date that a majority of the members of the Board first became aware that the Employee engaged in that activity.  In the event of any such rescission, the Employee will pay to the Employer the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery, in such manner and on such terms and conditions as may be required.

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(b)Right of Set-Off.  The Employee consents to a deduction from any amounts the Employer owes the Employee from time to time (including amounts owed as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Employee by the Employer), to the extent of the amounts the Employee owes the Employer under Section 7.9(a) above.  Whether or not the Employer elects to make any set-off in whole or in part, if the Employer does not recover by means of set-off the full amount the Employee owes, calculated as set forth above, the Employee agrees to pay immediately the unpaid balance to the Employer.  In the discretion of the Board, reasonable interest may be assessed on the amounts owed, calculated from the later of (i) the date the Employee engages in the prohibited activity and (ii) the applicable date of exercise, payment or delivery.
		
	8.
	Tax Matters.

8.1Section 409A of the Code.
(a)Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payments and benefits set forth herein shall either be exempt from the requirements of Section 409A of the Code, or shall comply with the requirements of Section 409A of the Code, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from or in compliance with Section 409A of the Code.  Notwithstanding anything in this Agreement or elsewhere to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “non-qualified deferred compensation” within the meaning of Section 409A of the Code upon or following a termination of the Employee’s employment unless such termination is also a “separation from service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” and the date of such separation from service shall be the Termination Date for purposes of any such payment or benefits.
(b)To the extent that the Employer determines that any provision of this Agreement would cause the Employee to incur any additional tax or interest under Section 409A of the Code, the Employer shall be entitled to reform such provision to attempt to comply with or be exempt from Section 409A of the Code through good faith modifications in accordance with applicable guidance.  To the extent that any provision hereof is modified in order to comply with Section 409A of the Code, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Employee and the Employer without violating the provisions of Section 409A of the Code and shall be made in accordance with applicable guidance.
(c)Notwithstanding any provision in this Agreement or elsewhere to the contrary, if on his Termination Date the Employee is deemed to be a “specified employee” within the meaning of Section 409A of the Code, any payments or benefits due upon a termination of the Employee’s employment under any arrangement that constitutes a “deferral of compensation” within the meaning of Section 409A of the Code (whether under this Agreement, any other plan, program, payroll practice or any equity grant) and which do not otherwise qualify 

18

under the exemptions under Treas. Reg. § 1.409A-1 (including without limitation, the short-term deferral exemption and the permitted payments under Treas. Reg. § 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided to the Employee in a lump sum (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) on the earlier of (i) the date which is the 1st day of the 7th calendar month that begins after the date of the Employee’s “separation from service” (as such term is defined in Section 409A of the Code) for any reason other than death, and (ii) the date of the Employee’s death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit.
(d)For purposes of the application of Treas. Reg. § 1.409A-1(b)(4) (or any successor provision), each payment under this Agreement to the Employee (including any installment payments) shall be deemed a separate payment.
(e)In no event may the Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a “deferral of compensation” within the meaning of Section 409A of the Code.
(f)With respect to any expense, reimbursement or in-kind benefit provided pursuant to this Agreement that constitutes a “deferral of compensation” within the meaning of Section 409A of the Code, (a) the expenses eligible for reimbursement or in-kind benefits provided to the Employee must be incurred during the Employment Term, (b) the amount of expenses eligible for reimbursement or in-kind benefits provided to the Employee during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to the Employee in any other calendar year, (c) the reimbursements for expenses for which the Employee is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred, and (d) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
(g)With respect to the payment of any amount under this Agreement to which Section 409A of the Code applies, neither the Employee nor the Related Parties may defer or accelerate any payment other than as provided hereunder or as provided under Treas. Reg. § 1.409A-2(b)(7) or Treas. Reg. § 1.409A-3(j)(4).
8.2Tax Withholding.  All payments (or transfers of property) to the Employee shall be subject to tax withholding in accordance with applicable law.
		
	9.
	MISCELLANEOUS.

9.1No Expectation of Privacy.  The Employee understands and agrees that the Employee has no expectation of privacy with respect to the Employer’s telecommunications, networking, or information processing systems (including, without limitation, stored, created or accessed computer files, e-mail messages, and voice messages) and that the Employee’s activity and any files or messages on or use of any such systems may be accessed, monitored, copied, disclosed, and saved by the Employer at any time without notice to the Employee.
9.2Assignment; Successors; Binding Agreement.  This Agreement may not be 

19

assigned by either party, whether by operation of law or otherwise, without the prior written consent of the other party, except that any right, title or interest of the Employer arising out of this Agreement may be assigned to any corporation or entity controlling, controlled by, or under common control with the Employer, or succeeding to the business and substantially all of the assets of the Employer or any affiliates for which the Employee performs substantial services.  Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the parties and their respective heirs, legatees, devisees, personal representatives, successors and assigns.
9.3Modification and Waiver.  Except as otherwise provided below (or as set forth in Section 7.8), no provision of this Agreement may be modified, waived, or discharged unless such waiver, modification or discharge is duly approved by the Board and is agreed to in writing by the Employee and such officer(s) as may be specifically authorized by the Board to effect it.  No waiver by any party of any breach by any other party of, or of compliance with, any term or condition of this Agreement to be performed by any other party, at any time, will constitute a waiver of similar or dissimilar terms or conditions at that time or at any prior or subsequent time.
9.4Entire Agreement.  This Agreement embodies the entire understanding of the parties hereof, and, upon the Effective Date, will supersede all other oral or written agreements or understandings between them regarding the subject matter hereof.  However, this Agreement does not supersede any non-competition, non-disclosure, non-solicitation, confidentiality, intellectual property assignment, or non-disparagement provisions or agreements that the Employee and the Employer have previously entered, and the Employer and the Employee agree that this Agreement and any such prior provisions and/or agreements are both enforceable and may run concurrently and both be enforced.  No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter of this Agreement, has been made by either party which is not set forth expressly in this Agreement.
9.5Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of Texas other than the conflict of laws provision thereof.
9.6Consent to Jurisdiction and Service of Process.
(a)Section 7 Disputes.  In the event of any dispute, controversy or claim between the Employer and the Employee arising out of or relating to the interpretation, application or enforcement of the provisions of Section 7, the Employer and the Employee agree and consent to the personal jurisdiction of the state and local courts of Midland County, Texas and/or the United States District Court for the Western District of Texas for resolution of the dispute, controversy or claim, and that those courts, and only those courts, will have jurisdiction to determine any dispute, controversy or claim related to, arising under or in connection with Section 7 of this Agreement.  The Employer and the Employee also agree that those courts are convenient forums for the parties to any such dispute, controversy or claim and for any potential witnesses and that process issued out of any such court or in accordance with the rules of practice of that court may be served by mail or other forms of substituted service to the Employer at the 

20

address of its principal executive offices and to the Employee at his last known address as reflected in the Employer’s records.
(b)Disputes Other Than Under Section 7.  In the event of any dispute relating to this Agreement, other than a dispute relating solely to Section 7, the parties will use their best efforts to settle the dispute, claim, question, or disagreement.  To this effect, they will consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.  If such a dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Commercial Mediation Rules before resorting to arbitration, litigation, or some other dispute resolution procedure.  If the parties do not reach such solution through negotiation or mediation within a period of sixty (60) days, then, upon notice by either party to the other, all disputes, claims, questions, or differences will be finally settled by arbitration administered by the American Arbitration Association in accordance with the provisions of its Commercial Arbitration Rules.  The arbitrator will be selected by agreement of the parties or, if they do not agree on an arbitrator within thirty (30) days after either party has notified the other of his or its desire to have the question settled by arbitration, then the arbitrator will be selected pursuant to the procedures of the American Arbitration Association (the “AAA”) in Midland, Texas.  The determination reached in such arbitration will be final and binding on all parties.  Enforcement of the determination by such arbitrator may be sought in any court of competent jurisdiction.  Unless otherwise agreed by the parties, any such arbitration will take place in Midland, Texas, and will be conducted in accordance with the Commercial Arbitration Rules of the AAA.
9.7Withholding of Taxes.  The Employer will withhold from any amounts payable under the Agreement all federal, state, local or other taxes as legally will be required to be withheld.
9.8Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):

to the Employer, to:

Attn:  Chairman of the Board
Legacy Reserves Services, Inc.
303 W. Wall, Suite 1800
Midland, Texas  79701

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to the Employee, to:

Kyle M. Hammond
303 W. Wall, Suite 1800
Midland, Texas  79701

Addresses may be changed by written notice sent to the other party at the last recorded address of that party.
9.9Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.
9.10Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.
9.11Headings.  The headings used in this Agreement are for convenience only, do not constitute a part of the Agreement, and will not be deemed to limit, characterize, or affect in any way the provisions of the Agreement, and all provisions of the Agreement will be construed as if no headings had been used in the Agreement.
9.12Construction.  As used in this Agreement, unless the context otherwise requires:  (a) the terms defined herein will have the meanings set forth herein for all purposes; (b) references to “Section” are to a section hereof; (c) “include,” “includes” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import; (d) “writing,” “written” and comparable terms refer to printing, typing, lithography and other means of reproducing words in a visible form; (e) “hereof,” “herein,” “hereunder” and comparable terms refer to the entirety of this Agreement and not to any particular section or other subdivision hereof or attachment hereto; (f) references to any gender include references to all genders; and (g) references to any agreement or other instrument or statute or regulation are referred to as amended or supplemented from time to time (and, in the case of a statute or regulation, to any successor provision).
9.13.Capacity; No Conflicts.  The Employee represents and warrants to the Employer that:  (i) the Employee has full power, authority and capacity to execute and deliver this Agreement, and to perform the Employee’s obligations hereunder, (ii) such execution, delivery and performance will not (and with the giving of notice or lapse of time, or both, would not) result in the breach of any agreement or other obligation to which the Employee is a party or is otherwise bound, and (iii) this Agreement is the Employee’s valid and binding obligation, enforceable in accordance with its terms.

[SIGNATURE PAGE FOLLOWS]

    

22

IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as of the Effective Date.
    
	
					
	 
	 
	EMPLOYER:
	 

	 
	 
	LEGACY RESERVES SERVICES, INC.

	 
	 
	 
	 
	 

	 
	 
	By:
	/s/ Paul T. Horne
	 

	 
	 
	Name:
	Paul T. Horne
	 

	 
	 
	Title:
	President and Chief Executive Officer
	 

	 
	 
	 
	 
	 

	 
	 
	EMPLOYEE:
	 

	 
	 
	 
	 
	 

	 
	 
	By:
	/s/ Kyle M. Hammond
	 

	 
	 
	Name:
	Kyle M. Hammond
	 

	 
	 
	 
	 
	 

	 
	 
	AGREED AND ACKNOWLEDGED:
	 

	 
	 
	 
	 
	 

	 
	 
	COMPANY:
	 

	 
	 
	LEGACY RESERVES GP, LLC
	 

	 
	 
	 
	 
	 

	 
	 
	By:
	/s/ Paul T. Horne
	 

	 
	 
	Name:
	Paul T. Horne
	 

	 
	 
	Title:
	President and Chief Executive Officer
	 

	 
	 
	 
	 
	 

	 
	 
	LEGACY:
	 

	 
	 
	LEGACY RESERVES LP
	 

	 
	 
	By:
	Legacy Reserves GP, LLC
	 

	 
	 
	 
	Its General Partner
	 

	 
	 
	 
	 
	 

	 
	 
	By:
	/s/ Paul T. Horne
	 

	 
	 
	Name:
	Paul T. Horne
	 

	 
	 
	Title:
	President and Chief Executive Officer
	 

                                

                        

23

EXHIBIT A

APPROVED OUTSIDE ACTIVITIES AS OF EFFECTIVE DATE

Director of FireWheel Energy, LLC
Director of Blanks Ranch Properties, LLC

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