Document:

Exhibit 10.16

 

FORM OF INVESTOR RIGHTS AGREEMENT

 

This Investor Rights Agreement (this “Agreement”) is made and entered into effective as of September [·], 2012, by and among EFS-S LLC, a Delaware limited liability company (the “Investor”), Summit Midstream GP, LLC, a Delaware limited liability company (the “General Partner”), and Summit Midstream Partners, LLC, a Delaware limited liability company (the “Company,” and collectively with the General Partner, the “Partnership Parties”).  The above-named entities are sometimes referred to in this Agreement each as a “Party” and collectively as the “Parties.”

 

Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Amended and Restated Agreement of Limited Partnership of Summit Midstream Partners, LP (the “Partnership”), dated [·], 2012 (the “Partnership Agreement”).

 

R E C I T A L S

 

A.            The Company is (i) the sole member of the General Partner and (ii) a limited partner in the Partnership.

 

B.            Investor is a member of the Company.

 

C.            Pursuant to that certain Third Amended and Restated Limited Liability Company Operating Agreement, dated as of October 27, 2011, of the Company, as amended to date (the “Company LLC Agreement”), Investor is entitled to designate at any time, subject to certain conditions, either (i) one manager to the Company’s board of managers or (ii) one non-voting observer to the Company’s board of managers.

 

C.            As a condition to the consummation of the Partnership’s initial public offering of common units (the “IPO”), the Partnership Parties have agreed to grant the Investor similar management and investor rights in the General Partner as more fully set forth herein and the Investor has agreed to be bound by the obligations set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             REPRESENTATIONS AND WARRANTIES.

 

1.1           Representations and Warranties by the Investor: The Investor hereby represents and warrants to the Partnership Parties as follows:

 

(a)           Authorization and Execution.  (i) The Investor has all requisite limited liability company power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement; (ii) the execution, delivery and performance of this Agreement by the Investor and the consummation of the transactions contemplated hereby have been duly authorized by all requisite limited liability company action on the part of the Investor; (iii) this Agreement has been duly executed and delivered by the Investor and constitutes a legal, valid and binding obligation of the Investor, enforceable against it in accordance with its terms, subject

 

 

as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (iv) no governmental consent, approval, authorization, notification, license or clearance, and no filing or registration by the Investor with any governmental or regulatory authority, is required in order to permit the Investor to perform its obligations under this Agreement, except for such as have been obtained.

 

(b)           Non-Contravention.  The execution and delivery by the Investor of this Agreement, the performance by the Investor of its obligations hereunder, the consummation of the transactions contemplated hereby by the Investor and compliance by the Investor with the provisions hereof do not conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or give rise to a right of purchase under, result in the creation of any lien on any of the assets of the Investor or otherwise result in a detriment to the Investor under, (i) the limited liability company agreement of the Investor (as amended to date), (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license to which the Investor is a party or by which the Investor or any of its properties or assets is bound or (iii) any judgment, decree, order, writ, statute, rule or regulation applicable to the Investor (other than any filing that may be required under Section 13(d) and 16 of the Securities Exchange Act of 1934, as amended).

 

1.2           Representations and Warranties by the Partnership Parties.  Each of the Partnership Parties hereby jointly and severally represents and warrants to the Investor as follows:

 

(a)           Authorization and Execution.  (i) Each Partnership Party has all requisite limited liability company power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement; (ii) the execution, delivery and performance of this Agreement by each Partnership Party and the consummation of the transactions contemplated hereby have been duly authorized by all requisite limited liability company action on the part of such Partnership Party; (iii) this Agreement has been duly executed and delivered by each Partnership Party and constitutes a legal, valid and binding obligation of such Partnership Party, enforceable against it in accordance with its terms, subject as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (iv) no governmental consent, approval, authorization, notification, license or clearance, and no filing or registration by any Partnership Party with any governmental or regulatory authority, is required in order to permit any Partnership Party to perform its obligations under this Agreement, except for such as have been obtained.

 

(b)           Non-Contravention.  The execution and delivery by each Partnership Party of this Agreement, the performance by each Partnership Party of its obligations hereunder, the consummation of the transactions contemplated hereby by each Partnership Party and compliance by each Partnership Party with the provisions hereof do not conflict with or result in

 

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any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or give rise to a right of purchase under, result in the creation of any lien on any of the assets of any Partnership Party or otherwise result in a detriment to any Partnership Party under, (i) the certificate of formation or limited liability company operating agreement of any Partnership Party (each as amended to date), (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license to which any Partnership Party is a party or by which any Partnership Party or any of its properties or assets is bound or (iii) any judgment, decree, order, writ, statute, rule or regulation applicable to any Partnership Party.

 

2.             INVESTOR RIGHTS.

 

2.1           Investor Rights.

 

(a)           Prior to the termination of the rights provided for in this Article 2 pursuant to Sections 3.3 or 3.4, the Investor may, by providing the Company with a written notice, elect (a “Management Election”) to either (i) have the rights, and be subject to the obligations, set forth in Section 2.2 (“Director Rights”) or (ii) have the rights, and be subject to the obligations, set forth in Section 2.3 (“Observer Rights”).

 

(b)           The Investor may elect to change a Management Election by providing a written notice to the Company of such an election; provided, however that (i) if at any time the Investor so elects to have Observer Rights instead of Director Rights, then the Investor Director then in office may be removed in accordance with the provisions set forth in that certain First Amended and Restated Limited Liability Company Agreement, dated as of September [·], 2012, of the Company (the “GP LLC Agreement”) and the Investor shall no longer have Director Rights and (ii) if at any time the Investor so elects to have Director Rights instead of Observer Rights, the Investor Observer shall have no further rights to attend any Board meeting or to receive any Board materials and the Investor shall no longer have the Observer Rights.

 

(c)           For purposes of this Article 2, references to the General Partner shall include any Affiliate (as such term is defined in the Partnership Agreement) of the General Partner that serves as the successor general partner of the Partnership.

 

2.2           Director Rights.  If the Investor elects to have Director Rights in accordance with Section 2.2, then, so long as such election is in effect and such Director Rights have not terminated:

 

(a)           The Investor shall be entitled to designate one director of the board of directors (the “Board”) of the General Partner (the “Investor Director”).  The Investor shall have the right to designate the initial Investor Director (the “Initial Investor Director”), if any, upon the consummation of the IPO.  The Company shall appoint such Initial Investor Director who is so designated and is reasonably acceptable (as defined in Section 2.2(b)) to the Company, and the Initial Investor Director shall commence his or her service on the Board as of the date of such appointment. The Investor Director shall hold office until his or her successor is appointed pursuant to the terms of this Section 2.2 or until his or her earlier death, resignation or removal.

 

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(b)           The Investor may elect to remove the Investor Director at any time, with or without cause, and the Company shall remove such Investor Director at the request of the Investor.  In addition, the Company may elect, in its sole discretion, to remove the Investor Director that is no longer reasonably acceptable (as defined below) to the Company.  In the event of the death, resignation or removal of an Investor Director, the Investor may designate a replacement Investor Director by providing the Company with a written notice (the “Director Notice”) identifying any replacement Investor Director, who must be reasonably acceptable to the Company. The Company shall appoint such replacement Investor Director, and the replacement Investor Director shall commence his or her service on the Board on the date of delivery of the Director Notice, provided, however, that no replacement Investor Director will be appointed who is not reasonably acceptable to the Company. For purposes of this Agreement an Investor Director shall be deemed to be “reasonably acceptable” to the Company so long as such Investor Director is not an employee or director of any direct competitor of the General Partner, the Partnership or any of their affiliates and whose appointment would not require the Partnership to disclose any of the reportable events described under Item 401(f) of Regulation S-K of the Securities Act of 1933, as amended, and the rules and regulations thereunder (or any successor regulation thereto).

 

(c)           The Investor Director shall serve on the Board in accordance with the terms of the GP LLC Agreement and shall be entitled to all rights and protections provided thereunder to directors generally.

 

(d)           Notwithstanding anything in this Agreement to the contrary, the Investor’s Director Rights shall terminate upon the earlier of such time as (i) the Investor no longer holds a contribution percentage of ten percent (10%) in the Company, as reduced by the amount of the contribution percentage attributable to any limited liability company interests of the Company sold by the Investor pursuant to a drag along sale (the “GE Threshold Amount”) or (ii) the Company no longer owns 50% of the General Partner’s outstanding limited liability company interests and does not have the right to appoint at least one director to the Board. Immediately upon termination of the Investor’s Directors Rights, the Company shall be entitled to remove any Investor Director previously appointed to the Board.

 

(e)           No individual shall serve as an Investor Director if (i) such individual is a plaintiff in any litigation involving the General Partner, the Partnership or their affiliates or (ii) in the event that any relevant antitrust governmental authority requires such individual to terminate his position as an Investor Director, and in either such event, such individual shall immediately resign as a Director and, failing such a resignation, the Investor shall remove and replace such individual.  In the event that the Investor fails to remove and replace such individual, the Company may remove such individual by giving notice to the Investor to the effect that such individual has been removed pursuant to this clause (e).

 

2.3           Observer Rights.  If the Investor elects to have Observer Rights in accordance with Section 2.1, then, so long as such election is in effect and such Observer Rights have not terminated:

 

(a)           Subject to the provisions of this Section 2.3, the Investor shall be entitled (but shall not be obligated) to designate one person (an “Investor Observer”) to attend all

 

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meetings of the Board, solely in the capacity of a non-voting observer, by providing the Company with a written notice (the “Observer Notice”) identifying the Investor Observer. The Investor shall have the right to designate the initial Investor Observer, if any, upon the consummation of the IPO.  The Company shall appoint such Initial Investor Observer who is so designated and is reasonably acceptable (as defined in Section 2.2(b)) to the Company, and the Initial Investor Observer shall be entitled to such rights described herein as of the date of such appointment.

 

(b)           The Investor may elect to remove a previously appointed Investor Observer at any time, with or without cause, by providing written notice to the Company.

 

(c)           Subject to Sections 2.3(d) and (e), the General Partner shall provide the Investor Observer, upon written request of the Investor Observer, notice of each meeting of the Board and copies of any materials provided to the Directors or a committee of the Board, including all materials provided to Directors in connection with any action to be taken by the Board or a committee thereof without a meeting and copies of any written consents.

 

(d)           The Investor Observer shall only be allowed to observe meetings of the full Board (and not committee meetings or any meetings of the Board in executive session), and the Investor Observer shall in no circumstances have any right to participate in any vote, consent or other action of the Board or any committee thereof, nor shall the Investor Observer’s presence, vote, consent or other action be required for any action of the Board or any committee thereof.

 

(e)           The Investor acknowledges and agrees that the General Partner reserves the right (i) not to provide notice of any meeting of the Board, or any committee thereof, or any materials provided in connection with any meeting or otherwise to the Investor Observer, (ii) to exclude the Investor Observer from any meeting or portion thereof and (iii) to redact portions of any Board materials delivered to the Investor Observer, in each case where and to the extent that the Board determines in good faith (without the participation of the Investor Observer) that the delivery of any materials or attendance at any meeting or portion thereof by the Investor Observer would or may be reasonably necessary: (A) to preserve attorney-client, work product or similar privilege, (B) to comply with the terms and conditions of confidentiality agreements with third parties, (C) to comply with applicable law, or (D) if the Board determines that there exists, with respect to the subject of a meeting or of Board materials, an actual or potential conflict of interest between the Investor or the Investor Observer and the General Partner or the Partnership; provided that, in the event any of the actions described in subclauses (i), (ii) or (iii) of this Section 2.3(e) are taken, the Board, to the extent practicable, shall make reasonable and appropriate substitute disclosure arrangements under circumstances in which the restrictions of subclauses (A)-(D) of this Section 2.3(e) apply, including the execution of a joint defense agreement or similar arrangement.

 

(f)            The Investor Observer must, prior to being permitted to attend any Board meeting or receive any materials pursuant to this Section 2.3, enter into an agreement (an “Investor Observer Agreement”) with and for the benefit of the General Partner in the form attached hereto as Exhibit A affirming the terms of this Agreement and agreeing to abide with

 

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the limitations on observation rights, confidentiality restrictions and other terms set forth herein and therein.

 

(g)           No individual shall serve as an Investor Observer if (i) such individual is a plaintiff in any litigation involving the General Partner, the Partnership or their affiliates or (ii) in the event that any relevant antitrust governmental authority requires such individual to terminate his position as an Investor Observer, and either such event, such individual shall immediately resign as an Investor Observer and, failing such a resignation, the Investor shall remove and replace such individual.  In the event that the Investor fails to remove and replace such individual, the Company may remove such individual by giving notice to the Investor to the effect that such individual has been removed pursuant to this clause (g).

 

(h)           Notwithstanding anything in this Agreement to the contrary, the Investor’s Observer Rights shall terminate upon the earlier of such time as (i) the Investor no longer holds the GE Threshold Amount or (ii) the Company no longer owns at least 50% of the General Partner’s outstanding limited liability company interests and does not have the right to appoint at least one director to the Board or appoint at least one non-voting observer to the Board. If the Company no longer owns at least 50% of the General Partner’s outstanding limited liability company interests and does not have the right to appoint a director to the Board, but retains the right to appoint at least one non-voting observer to the Board, Investor shall retain its right to appoint one non-voting observer to the Board on the same terms and conditions as the Company’s non-voting observer.

 

2.4           Confidentiality.

 

(a)           The Investor agrees to (i) hold in confidence all confidential information and materials that it may receive from the Investor Observer or Investor Director (collectively “Investor Representatives”), who receives, or is given access to such information and materials, in connection with meetings of the Board and committees thereof pursuant to this Agreement (“Confidential Information”) and (ii) not disclose such Confidential Information to any third parties that are not either a direct or indirect wholly-owned subsidiary of General Electric Capital Corporation (the “GE Capital Affiliates”) or employed by the Investor or GE Capital Affiliates; provided that, upon making any such disclosure, the Investor shall notify such persons of the confidential nature of the information provided and each such person’s obligation to preserve the confidentiality of such information consistent with the provisions of this Agreement.  Notwithstanding the foregoing, the Investor may disclose such Confidential Information to its lawyers, accountants, auditors, and other professional advisers who have a duty of confidentiality, and the Investor agrees to instruct each such person regarding the use and disclosure restrictions applicable to Confidential Information as set forth in this Agreement.  The Investor shall not, and shall ensure that all persons receiving Confidential Information from the Investor shall not, use any such Confidential Information for any purpose other than the Investor’s internal monitoring of its investment in the Company and shall be responsible for any breach of this Agreement by any such person.

 

(b)           Each Party agrees that the Confidential Information shall not include information that:

 

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(i)            has become, through no act or failure to act on the part of the Investor or any Investor Representative, generally known or available to the public (including information that becomes available to the Investor by wholly lawful inspection or analysis of products sold to the public without reliance on information, knowledge, or data provided by the General Partner that has not become publicly known or been made available in the public domain);

 

(ii)           has been acquired by the Investor without any obligation of confidentiality before receipt of such information from the General Partner;

 

(iii)          has been furnished to the Investor by a third party without, to the Investor’s knowledge, any obligation of confidentiality;

 

(iv)          is information that the Investor can reasonably document was independently developed by or for the Investor;

 

(v)           is required to be disclosed pursuant to law, regulation, or by order of a court of competent jurisdiction; provided that the Investor shall disclose only that portion of the Confidential Information that is legally required to be disclosed and, to the extent reasonably practicable under the circumstances, promptly notify the General Partner of the Confidential Information to be disclosed and of the circumstances in which the disclosure is alleged to be required prior to disclosure and use its commercially reasonable efforts to cooperate with the General Partner in its efforts to seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement;

 

(vi)          is disclosed with the prior written consent of the General Partner; or

 

(vii)         is disclosed for the purpose of enforcement of this Agreement.

 

3.             ASSIGNMENT, AMENDMENT AND TERMINATION.

 

3.1           Assignment.  Except as expressly permitted by the terms hereof, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties without the prior written consent of each other Party, except that the Investor may transfer or assign any of its rights and obligations under this Agreement to any direct or indirect wholly owned subsidiary of General Electric Capital Corporation.

 

3.2           Amendment of Rights.  Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of each Party hereto.

 

3.3           Termination of Investor Rights.  Notwithstanding anything to the contrary in this Agreement, upon the Investor’s failure to maintain the GE Threshold Amount, all of the Investor’s rights under Sections 2.1, 2.2 and 2.3 shall terminate.

 

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3.4           Termination of Agreement.  Notwithstanding anything to the contrary in this Agreement, if at any time the Company no longer owns (i) any of the outstanding limited liability company interests of the General Partner or (ii) at least 50% of the General Partner’s outstanding limited liability company interests and does not have the right to appoint at least one director to the Board or appoint at least one non-voting observer to the Board, then this Agreement shall automatically terminate and be of no further force or effect; provided, however, that the provisions of Section 2.4 shall survive for two years upon any termination of this Agreement and the provisions of Article 4 shall survive indefinitely upon any termination of this Agreement.

 

4.             GENERAL PROVISIONS.

 

4.1           Notices.  All notices or requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier or telegram to such party.  Notice given by personal delivery or mail shall be effective upon actual receipt.  Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours.  All notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 4.1:

 

ANY PARTNERSHIP PARTY:

 

Summit Midstream GP, LLC
 2100 McKinney Avenue, Suite 1250
 Dallas, Texas 75201
 Attention:  General Counsel

 

With a copy (not itself constituting notice) to:

 

Latham & Watkins LLP
 811 Main Street, Suite 3700
 Houston, Texas 77002
 Telephone: (713) 546-5400
 Facsimile: (713) 546-5401
 Attention:  Brett E. Braden

 

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THE INVESTOR:

 

EFS-S LLC
 c/o GE Energy Financial Services
 800 Long Ridge Road
 Stamford, Connecticut 06927
 Telephone:
 Facsimile:  (203) 961-2606
 Attention:  Portfolio Manager - Summit

 

With a copy (not itself constituting notice) to:

 

Bingham McCutchen LLP
 399 Park Avenue
 New York, New York 10022
 Telephone: (212) 705-7000
 Facsimile: (212) 752-5378
 Attention: Tara A. Higgins

 

4.2           Entire Agreement.  This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

 

4.3           Governing Law.  This Agreement shall be subject to and governed by the laws of the State of Delaware, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.  Each Party hereby irrevocably submits to the exclusive jurisdiction of (a) the Delaware Court of Chancery, and (b) any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), for the purposes of any proceeding arising out of this Agreement or the transactions contemplated hereby.  The Parties irrevocably and unconditionally waive (and agree not to plead or claim) any objection to the laying of venue of any proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Delaware Court of Chancery, or (ii) any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware) or that any such proceeding brought in any such court has been brought in an inconvenient forum.

 

4.4           Waiver Of Jury Trial.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY ACTION OR PROCEEDING TO ENFORCE OR TO DEFEND ANY RIGHTS UNDER THIS AGREEMENT SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

4.5           Severability.  Each portion of this Agreement is intended to be severable.  If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

 

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4.6           Third Parties.  Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the Parties and their successors and permitted assigns, any rights or remedies under or by reason of this Agreement.

 

4.7           Successors and Assigns.  Subject to the provisions of Section 3.1, the provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the successors and permitted assigns of the Parties.

 

4.8           Construction.  As used in this Agreement, unless expressly stated otherwise or the context requires otherwise, (a) all references to a “Section” or “subsection” shall be to a Section or subsection of this Agreement, (b) the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to this Agreement as a whole and not to a particular Section, subsection, clause or other subdivision hereof, (c) the words used herein shall include the masculine, feminine and neuter gender, and the singular and the plural, (d) the word “including” shall mean “including, without limitation,” (e) the word “day” or “days” shall mean a calendar day or days and (f) the term “affiliate” shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person; provided that a person shall be deemed to control another person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other person, whether through the ownership of voting securities, by contract or otherwise.  The headings of the Sections of this Agreement are included for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation hereof or thereof.

 

4.9           Counterparts.  This Agreement may be executed simultaneously in any number of counterparts (including facsimile counterparts), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

4.10         Specific Performance.  Each Partnership Party, on the one hand, and the Investor, on the other hand, acknowledges and agrees that irreparable injury would occur in the event any of the provisions of Article 2 were not performed in accordance with their specific terms or were otherwise breached and that such injury would be not be compensable in damages. It is accordingly agreed that the Parties shall be entitled to specific enforcement of the terms of Article 2, and no party will take any action, directly or indirectly, in opposition to the other Party seeking relief on the grounds that any other remedy or relief is available at law or in equity.

 

[Remainder of Page Intentionally Blank]

 

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

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
EFS-S   LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
Aircraft   Services Corporation
    
	
 
    	
 
    	
its   managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Tyson   Yates
    
	
 
    	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PARTNERSHIP   PARTIES:
    
	
 
    	
 
    
	
 
    	
Summit   Midstream GP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Summit   Midstream Partners, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    

 

Signature Page to Investor Rights Agreement

 

 

EXHIBIT A
 FORM OF INVESTOR OBSERVER AGREEMENT

 

 

Summit Midstream GP, LLC

c/o Summit Midstream Partners, LP

2100 McKinney Avenue, Suite 1250

Dallas, Texas 75201

 

[                                ,       ]

 

[Name]
 [Address]

 

Re:          Summit Midstream GP, LLC — Investor Observer

 

Dear [                  ]:

 

Pursuant to that certain Investor Rights Agreement (the “Investor Rights Agreement”), dated as of September [·], 2012, by and among EFS-S LLC, a Delaware limited liability company (the “Investor”), Summit Midstream GP, LLC, a Delaware limited liability company (the “General Partner”), and Summit Midstream Partners, LLC, a Delaware limited liability company (the “Company”), you have been designated as an Investor Observer by the Investor.  Under the terms of the Investor Rights Agreement, prior to attending any Board meetings in your capacity as an Investor Observer or receiving any materials in connection therewith, you must enter into this agreement for the benefit of the General Partner.  Capitalized terms used but not defined herein are used with the meanings given to them in the Investor Rights Agreement.

 

In connection with your designation as an Investor Observer, your observation of meetings of the Board and the receipt of materials given to members of the Board in connection therewith, you hereby agree as follows:

 

1.             Investor Rights Agreement.  You hereby affirm the terms of the Investor Rights Agreement and agree that your observation of meetings of the Board and the receipt of materials given to Directors in connection therewith is subject in all respects to the terms of the Investor Rights Agreement.  You agree that there are no rights or privileges whatsoever arising from your status as an Investor Observer and agree to abide with the limitations on observation rights contained herein and in the Investor Rights Agreement.  You further certify that you are not a plaintiff in any litigation involving the General Partner, Summit Midstream Partners, LP, a Delaware limited partnership, or their affiliates and that by your signature hereto, you agree to automatically resign as an Investor Observer if you become a plaintiff in any such litigation.

 

2.             Confidentiality.  You hereby agree to hold in confidence and trust and not to use or disclose any Confidential Information provided to or learned by you in connection with or pursuant to your service as an Investor Observer, to the same extent that Confidential Information is required to be held in confidence by the Investor pursuant to Section 2.4 of the Investor Rights Agreement, whether such Confidential Information is provided to or learned by you at a meeting of the Board, through material delivered or distributed to you, or otherwise.

 

 

3.             Counterparts.  This Agreement may be executed by facsimile signatures by any party and such signature shall be deemed binding for all purposes hereof, without delivery of an original signature being thereafter required.  This Agreement may be executed in one or more counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document.

 

4.             Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to the conflicts of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SUMMIT   MIDSTREAM GP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
ACKNOWLEDGED   AND AGREED:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
[                              ]Exhibit 10.5

 

SOUTHCROSS ENERGY PARTNERS, L.P.

2012 LONG-TERM INCENTIVE PLAN

PHANTOM UNIT AGREEMENT

 

Pursuant to this Phantom Unit Agreement, dated as of [              ], 2012 (this “Agreement”), Southcross Energy GP, LLC (the “Company”), as the general partner of Southcross Energy Partners, L.P. (the “Partnership”), hereby grants to [                      ] (the “Participant”) the following award of Phantom Units (“Phantom Units”), pursuant and subject to the terms and conditions of this Agreement and the Southcross Energy Partners, L.P. 2012 Long-Term Incentive Plan (the “Plan”), the terms and conditions of which are hereby incorporated into this Agreement by reference.  Each Phantom Unit shall constitute a Phantom Unit under the terms of the Plan and is hereby granted in tandem with a corresponding DER, as further detailed in Section 3 below.  Except as otherwise expressly provided herein, all capitalized terms used in this Agreement, but not defined, shall have the meanings provided in the Plan.

 

GRANT NOTICE

 

Subject to the terms and conditions of this Agreement, the principal features of this Award are as follows:

 

Number of Phantom Units:  [        ] Phantom Units

 

Grant Date:  [                ], 2012

 

Vesting of Phantom Units: [Insert time-based vesting schedule].

 

Forfeiture of Phantom Units:  In the event of a cessation of the Participant’s Service for any reason, all Phantom Units that have not vested prior to or in connection with such cessation of Service shall thereupon automatically be forfeited by the Participant without further action and without payment of consideration therefor.

 

Payment of Phantom Units:  Vested Phantom Units shall be paid to the Participant in the form of Units as set forth in Section 5 below.

 

DERs: Each Phantom Unit granted under this Agreement shall be issued in tandem with a corresponding dividend equivalent right, or DER, which shall entitle the Participant to receive payments in an amount equal to Partnership distributions in accordance with Section 3 below.

 

 

TERMS AND CONDITIONS OF PHANTOM UNITS

 

1.             Grant.  The Company hereby grants to the Participant, as of the Grant Date, an award of [                ] Phantom Units, subject to all of the terms and conditions contained in this Agreement and the Plan.

 

2.             Phantom Units.  Subject to Section 4 below, each Phantom Unit that vests shall represent the right to receive payment, in accordance with Section 5 below, in the form of one (1) Unit.  Unless and until a Phantom Unit vests, the Participant will have no right to payment in respect of such Phantom Unit.  Prior to actual payment in respect of any vested Phantom Unit, such Phantom Unit will represent an unsecured obligation of the Partnership, payable (if at all) only from the general assets of the Partnership.

 

3.             Grant of Tandem DER. Each Phantom Unit granted hereunder is hereby granted in tandem with a corresponding DER, which shall remain outstanding from the Grant Date until the earlier of the payment or forfeiture of the related Phantom Unit.  Each vested DER shall entitle the Participant to receive payments, subject to and in accordance with this Agreement, in an amount equal to any distributions made by the Partnership in respect of the Unit underlying the Phantom Unit to which such DER relates.  The Company shall establish, with respect to each Phantom Unit, a separate DER bookkeeping account for such Phantom Unit (a “DER Account”), which shall be credited (without interest) on the applicable distribution dates with an amount equal to any distributions made by the Partnership during the period that such Phantom Unit remains outstanding with respect to the Unit underlying the Phantom Unit to which such DER relates.  Upon the vesting of a Phantom Unit, the DER (and the DER Account) with respect to such vested Phantom Unit shall also become vested.  Similarly, upon the forfeiture of a Phantom Unit, the DER (and the DER Account) with respect to such forfeited Phantom Unit shall also be forfeited.

 

4.             Vesting and Forfeiture.

 

(a)           Vesting.  Subject to Section 4(c) below, the Phantom Units shall vest in such amounts and at such times as are set forth in the Grant Notice above.

 

(b)           Accelerated Vesting.  Subject to Section 4(c) below, the Phantom Units shall vest in full upon the occurrence of any of the following events: [Insert circumstances resulting in accelerated vesting, if any].

 

(c)           Forfeiture.  Notwithstanding the foregoing, in the event of a cessation of the Participant’s Service for any reason, all Phantom Units that have not vested prior to or in connection with such cessation of Service shall thereupon automatically be forfeited by the Participant without further action and without payment of consideration therefor.  No portion of the Phantom Units which has not become vested at the date of the Participant’s cessation of Service shall thereafter become vested.

 

(d)           Payment.  Vested Phantom Units shall be subject to the payment provisions set forth in Section 5 below.

 

5.             Payment of Phantom Units and DERs.

 

(a)           Phantom Units.    Unpaid, vested Phantom Units shall be paid to the

 

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Participant in the form of Units in a lump-sum as soon as reasonably practical, but not later than forty-five (45) days, following the date on which such Phantom Units vest.  Payments of any Phantom Units that vest in accordance herewith shall be made to the Participant (or in the event of the Participant’s death, to the Participant’s estate) in whole Units in accordance with this Section 5.

 

(b)           DERs.    Unpaid, vested DERs shall be paid to the Participant as follows: as soon as reasonably practical, but not later than forty-five (45) days, following the date on which a Phantom Unit and related DER vests, the Participant shall be paid an amount in cash equal to the amount then credited to the DER Account maintained with respect to such Phantom Unit.

 

(c)           Potential Delay.  Notwithstanding anything to the contrary in this Agreement, no amounts payable under this Agreement shall be paid to the Participant prior to the expiration of the six (6)-month period following his “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) (a “Separation from Service”) to the extent that the Company determines that paying such amounts prior to the expiration of such six (6)-month period would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code.  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of the applicable six (6)-month period (or such earlier date upon which such amounts can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of the Participant’s death), such amounts shall be paid to the Participant.

 

6.             Tax Withholding.  The Company and/or its Affiliates shall have the authority and the right to deduct or withhold, or to require the Participant to remit to the Company and/or its Affiliates, an amount sufficient to satisfy all applicable federal, state and local taxes (including the Participant’s employment tax obligations) required by law to be withheld with respect to any taxable event arising in connection with the Phantom Units and the DERs.  In satisfaction of the foregoing requirement, unless otherwise determined by the Committee, the Company and/or its Affiliates shall withhold Units otherwise issuable in respect of such Phantom Units having a Fair Market Value equal to the sums required to be withheld.  In the event that Units that would otherwise be issued in payment of the Phantom Units are used to satisfy such withholding obligations, the number of Units which shall be so withheld shall be limited to the number of Units which have a Fair Market Value (which, in the case of a broker-assisted transaction, shall be determined by the Committee, consistent with applicable provisions of the Code) on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

 

7.             Rights as Unit Holder.  Neither the Participant nor any person claiming under or through the Participant shall have any of the rights or privileges of a holder of Units in respect of any Units that may become deliverable hereunder unless and until certificates representing such Units shall have been issued or recorded in book entry form on the records of the Partnership or its transfer agents or registrars, and delivered in certificate or book entry form to the Participant or any person claiming under or through the Participant.

 

8.             Non-Transferability.  Neither the Phantom Units nor any right of the Participant under the Phantom Units may be assigned, alienated, pledged, attached, sold or

 

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otherwise transferred or encumbered by the Participant (or any permitted transferee) other than by will or the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company, the Partnership and any of their Affiliates.

 

9.             Distribution of Units.  Unless otherwise determined by the Committee or required by any applicable law, rule or regulation, neither the Company nor the Partnership shall deliver to the Participant certificates evidencing Units issued pursuant to this Agreement and instead such Units shall be recorded in the books of the Partnership (or, as applicable, its transfer agent or equity plan administrator).  All certificates for Units issued pursuant to this Agreement and all Units issued pursuant to book entry procedures hereunder shall be subject to such stop transfer orders and other restrictions as the Company may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities Exchange Commission, any stock exchange upon which such Units are then listed, and any applicable federal or state laws, and the Company may cause a legend or legends to be inscribed on any such certificates or book entry to make appropriate reference to such restrictions.  In addition to the terms and conditions provided herein, the Company may require that the Participant make such covenants, agreements, and representations as the Company, in its sole discretion, deems advisable in order to comply with any such laws, regulations, or requirements.  No fractional Units shall be issued or delivered pursuant to the Phantom Units and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of fractional Units or whether such fractional Units or any rights thereto shall be canceled, terminated, or otherwise eliminated.

 

10.           Partnership Agreement.  Units issued upon payment of the Phantom Units shall be subject to the terms of the Plan and the Partnership Agreement.  Upon the issuance of Units to the Participant, the Participant shall, automatically and without further action on his or her part, (i) be admitted to the Partnership as a Limited Partner (as defined in the Partnership Agreement) with respect to the Units, and (ii) become bound, and be deemed to have agreed to be bound, by the terms of the Partnership Agreement.

 

11.           No Effect on Service.  Nothing in this Agreement or in the Plan shall be construed as giving the Participant the right to be retained in the employ or service of the Company or any Affiliate thereof.  Furthermore, the Company and its Affiliates may at any time dismiss the Participant from employment or consulting free from any liability or any claim under the Plan or this Agreement, unless otherwise expressly provided in the Plan, this Agreement or any other written agreement between the Participant and the Company or an Affiliate thereof.

 

12.           Severablility.  If any provision of this Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Agreement, such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall remain in full force and effect.

 

13.           Tax Consultation.  None of the Board, the Committee, the Company nor the Partnership has made any warranty or representation to Participant with respect to the income tax consequences of the issuance of the Phantom Units, the DERs, the Units or the transactions contemplated by this Agreement, and the Participant represents that he or she is in no manner relying on such entities or their representatives for tax advice or an assessment

 

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of such tax consequences.  The Participant understands that the Participant may suffer adverse tax consequences in connection with the Phantom Units and DERs granted pursuant to this Agreement.  The Participant represents that the Participant has consulted with any tax consultants that the Participant deems advisable in connection with the Phantom Units and DERs.

 

14.           Amendments, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee.  Except as provided in the preceding sentence, this Agreement cannot be modified, altered or amended, except by an agreement, in writing, signed by both the Partnership and the Participant.

 

15.           Lock-Up Agreement.  The Participant shall agree, if so requested by the Company or the Partnership and any underwriter in connection with any public offering of securities of the Partnership or any Affiliate thereof, not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any Units held by him or her for such period, not to exceed one hundred eighty (180) days following the effective date of the relevant registration statement filed under the Securities Act in connection with such public offering, as such underwriter shall specify reasonably and in good faith.  The Company or the Partnership may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period.  Notwithstanding the foregoing, the 180-day period may be extended for up to such number of additional days as is deemed necessary by such underwriter or the Company or Partnership to continue coverage by research analysts in accordance with FINRA Rule 2711 or any successor rule.

 

16.           Conformity to Securities Laws.  The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and all applicable state securities laws and regulations.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Phantom Units and DERs are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

17.           Code Section 409A.  None of the Phantom Units, the DERs or any amounts paid pursuant to this Agreement are intended to constitute or provide for a deferral of compensation that is subject to Section 409A of the Code.  Nevertheless, to the extent that the Committee determines that the Phantom Units or DERs may not be exempt from (or compliant with) Section 409A of the Code, the Committee may (but shall not be required to) amend this Agreement in a manner intended to comply with the requirements of Section 409A of the Code or an exemption therefrom (including amendments with retroactive effect), or take any other actions as it deems necessary or appropriate to (a) exempt the Phantom Units or DERs from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Phantom Units or DERs, or (b) comply with the requirements of Section 409A of the Code.  To the extent applicable, this Agreement shall be interpreted in accordance with the provisions of Section 409A of the Code.  Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or benefit hereunder constitutes non-exempt “nonqualified deferred compensation”

 

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for purposes of Section 409A of the Code, and such payment or benefit would otherwise be payable or distributable hereunder by reason of the Participant’s cessation of Service, all references to the Participant’s cessation of Service shall be construed to mean a Separation from Service, and the Participant shall not be considered to have a cessation of Service unless such cessation constitutes a Separation from Service with respect to the Participant.

 

18.           Adjustments; Clawback.  The Participant acknowledges that the Phantom Units are subject to modification and forfeiture in certain events as provided in this Agreement and Section 7 of the Plan.  The Participant further acknowledges that the Phantom Units, DERs and Units issuable hereunder, whether vested or unvested and whether or not previously issued, are subject to clawback as provided in Section 8(o) of the Plan.

 

19.           Successors and Assigns.  The Company or the Partnership may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company and the Partnership.  Subject to the restrictions on transfer contained herein, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

 

20.           Governing Law.  The validity, construction, and effect of this Agreement and any rules and regulations relating to this Agreement shall be determined in accordance with the laws of the State of Delaware without regard to its conflicts of laws principles.

 

21.           Headings.  Headings are given to the sections and subsections of this Agreement solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Agreement or any provision hereof.

 

[Signature page follows]

 

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The Participant’s signature below indicates the Participant’s agreement with and understanding that this award is subject to all of the terms and conditions contained in the Plan and in this Agreement, and that, in the event that there are any inconsistencies between the terms of the Plan and the terms of this Agreement, the terms of the Plan shall control.  The Participant further acknowledges that the Participant has read and understands the Plan and this Agreement, which contains the specific terms and conditions of this grant of Phantom Units.  The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Agreement.

 

 

	
 
    	
SOUTHCROSS   ENERGY GP, LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:  [            ]
    
	
 
    	
Its:   [            ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SOUTHCROSS   ENERGY PARTNERS, L.P.,
    
	
 
    	
a   Delaware limited partnership
    
	
 
    	
 
    
	
 
    	
By:  [Southcross   Energy GP, LLC]
    
	
 
    	
Its:   [General   Partner]
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
“PARTICIPANT”
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[Name]
    

 

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