Document:

Exhibit 10.2

 

FORM OF

PURCHASE, SALE, CONTRIBUTION, CONVEYANCE AND

ASSUMPTION AGREEMENT

 

AMONG

 

LIME ROCK RESOURCES A, L.P.,

 

LIME ROCK RESOURCES B, L.P.,

 

LIME ROCK RESOURCES C, L.P.,

 

LRE GP, LLC,

 

LRR ENERGY, L.P.

 

AND

 

LRE OPERATING, LLC

 

 

TABLE OF CONTENTS

 

	
ARTICLE I DEFINITIONS
    	
4
    
	
 
    	
 
    
	
ARTICLE II CONTRIBUTIONS,   ACKNOWLEDGMENTS AND DISTRIBUTIONS
    	
6
    
	
 
    	
 
    
	
2.01
    	
Contribution of the MLP Assets by LRR-A
    	
6
    
	
2.02
    	
Contribution and Sale of Net Profit Interests by LRR-B
    	
7
    
	
2.03
    	
Contribution and Sale of Net Profit Interests by LRR-C
    	
8
    
	
2.04
    	
Public Cash Contribution
    	
8
    
	
2.05
    	
Distribution by the Partnership of the Credit Facility   Borrowings
    	
8
    
	
2.06
    	
Payment of Indebtedness Assumed from LRR-A by the   Partnership; Payment of Expenses by the Partnership; Cash Distribution by the   Partnership to the Property Contributors
    	
8
    
	
2.07
    	
Contribution of the MLP Assets by the Partnership to LRE   Operating
    	
9
    
	
2.08
    	
Direct Contribution of MLP Assets
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE III ADDITIONAL   TRANSACTIONS
    	
9
    
	
 
    	
 
    
	
3.01
    	
Purchase of Additional Common Units
    	
9
    
	
3.02
    	
Issuance of Additional Common Units to LRR-A
    	
9
    
	
3.03
    	
Issuance of Additional Common Units to LRR-B
    	
10
    
	
3.04
    	
Issuance of Additional Common Units to LRR-C
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE IV TITLE MATTERS
    	
10
    
	
 
    	
 
    
	
4.01
    	
Encumbrances
    	
10
    
	
4.02
    	
Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales   Laws
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE V FURTHER   ASSURANCES
    	
12
    
	
 
    	
 
    
	
5.01
    	
Further Assurances
    	
12
    
	
5.02
    	
Other Assurances
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VI REPRESENTATIONS   AND WARRANTIES
    	
13
    
	
 
    	
 
    
	
6.01
    	
Representations and Warranties of All Parties
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE VII MISCELLANEOUS
    	
14
    
	
 
    	
 
    
	
7.01
    	
Notices
    	
14
    
	
7.02
    	
Order of Completion of Transactions
    	
14
    
	
7.03
    	
Costs
    	
14
    
	
7.04
    	
Headings; References; Interpretation
    	
15
    
	
7.05
    	
Successors and Assigns
    	
15
    
	
7.06
    	
No Third Party Rights
    	
15
    
	
7.07
    	
Counterparts
    	
15
    
	
7.08
    	
Governing Law
    	
15
    
	
7.09
    	
Severability
    	
16
    
	
7.10
    	
Amendment or Modification
    	
16
    
	
7.11
    	
Integration
    	
16
    

 

i

 

	
SCHEDULE   I
    
	
SCHEDULE   II
    
	
 
    
	
ANNEX A  
    	
Form of   Assignment and Bill of Sale
    

 

ii

 

PURCHASE, SALE, CONTRIBUTION, CONVEYANCE AND

ASSUMPTION AGREEMENT

 

This Purchase, Sale, Contribution, Conveyance and Assumption Agreement (this “Agreement”), dated as of                        , 2011 (the “Closing Date”), is entered into by and among Lime Rock Resources A, L.P., a Delaware limited partnership (“LRR-A”), Lime Rock Resources B, L.P., a Delaware limited partnership (“LRR-B”), Lime Rock Resources C, L.P., a Delaware limited partnership (“LRR-C,” and together with LRR-A and LRR-B, the “Property Contributors”), LRE GP, LLC, a Delaware limited liability company (the “General Partner”), LRR Energy, L.P., a Delaware limited partnership (the “Partnership”), and LRE Operating, LLC, a Delaware limited liability company (“LRE Operating”).  LRR-B and LRR-C are referred to collectively as the “NPI Owners.” The above-named entities are sometimes referred to in this Agreement each as a “Party” and collectively as the “Parties.” Capitalized terms used herein shall have the meaning assigned to such terms in Article I.

 

RECITALS:

 

WHEREAS, the General Partner and Lime Rock Management LP, a Delaware limited partnership (“Lime Rock Management”), formed the Partnership pursuant to the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”) to engage in any lawful activity for which limited partnerships may be organized under the Delaware LP Act; and

 

WHEREAS, to accomplish the objectives and purposes in the preceding recital, each of the following actions has been taken prior to the date hereof:

 

1.                                       Lime Rock Management formed the General Partner pursuant to the Delaware Limited Liability Company Act (the “Delaware LLC Act’) and contributed $1,000 in exchange for all of the membership interests in the General Partner;

 

2.                                       the General Partner and Lime Rock Management formed the Partnership pursuant to the Delaware LP Act, and the General Partner contributed $1 to the Partnership in exchange for a 0.1% general partner interest in the Partnership, and Lime Rock Management contributed $999 to the Partnership in exchange for a 99.9% limited partner interest in the Partnership;

 

3.                                       the Partnership formed LRE Operating pursuant to the Delaware LLC Act and contributed $1,000 to LRE Operating in exchange for all of the membership interests in LRE Operating; and

 

WHEREAS, LRR-A owns certain working interests in the MLP Assets; and

 

WHEREAS, the NPI Owners own net profits interests that burden, among other properties, the MLP Assets; and

 

 

WHEREAS, concurrently with the consummation of the transactions contemplated hereby, each of the following actions shall occur on the Closing Date:

 

1.                                       Lime Rock Management will contribute $                     (the “LRM GP Contribution”), in the aggregate, to the General Partner in exchange for 100% of the Class A Interests in the General Partner;

 

2.                                       LRR-A will contribute $                         representing its pro rata share of the fair market value of the Incentive Distribution Rights, in the aggregate, to the General Partner in exchange for 14.2894% of the Class B Interests in the General Partner;

 

3.                                       LRR-B will contribute $                         representing its pro rata share of the fair market value of the Incentive Distribution Rights, in the aggregate, to the General Partner in exchange for 4.7376% of the Class B Interests in the General Partner;

 

4.                                       LRR-C will contribute $                         representing its pro rata share of the fair market value of the Incentive Distribution Rights, in the aggregate, to the General Partner in exchange for 80.9730% of the Class B Interests in the General Partner;

 

5.                                       Lime Rock Resources II-A, L.P., a Delaware limited partnership, will contribute $                         representing its pro rata share of the fair market value of the Incentive Distribution Rights, in the aggregate, to the General Partner in exchange for 16.39% of the Class C Interests in the General Partner;

 

6.                                       Lime Rock Resources II-C, L.P., a Delaware limited partnership, will contribute $                         representing its pro rata share of the fair market value of the Incentive Distribution Rights, in the aggregate, to the General Partner in exchange for 83.61% of the Class C Interests in the General Partner;

 

7.                                       the General Partner will contribute the LRM GP Contribution to the Partnership in exchange for a continuation of its prior 0.1% general partner interest in the Partnership, represented by                          general partner units;

 

8.                                       LRR-A will contribute the MLP Assets to the Partnership pursuant to the Assignment Document (as defined herein) in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, (iii) the right to receive a distribution of $                         (such distribution to be sourced first from Credit Facility Borrowings (as defined below) and then, to the extent necessary, from the proceeds received from the Offering (as defined below) to reimburse LRR-A for pre-formation capital expenditures), (iv) LRE Operating’s assumption of $                   of LRR-A’s existing indebtedness, and LRE Operating’s agreement to pay such indebtedness immediately following LRR-A’s contribution of the MLP Assets to the Partnership in exchange for a release of the lien on such MLP Assets securing such indebtedness, and (v) the right to receive, upon the expiration of the Option Period, (A) the number of additional common units that is equal to (x) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters (as defined herein) pursuant to the exercise of the Over-Allotment Option

 

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during the Option Period, multiplied by (y) 14.2894% (rounded down to the nearest whole number of common units), and (B) as reimbursement for pre-formation capital expenditures an amount equal to (x) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership with respect to common units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (y) 14.2894%;

 

9.                                       LRR-B will sell, transfer and assign those net profits interests described on Schedule I, insofar and only insofar as the same burden the MLP Assets, to the Partnership pursuant to the Assignment Document in exchange for (i) the right to receive a payment of $                         (such payment to be sourced first from the proceeds from the Offering and then, to the extent necessary, from Credit Facility Borrowings), and (ii) the right to receive, upon the earlier to occur of the expiration of the Over-Allotment Option period or the Option Closing Date, an amount equal to (A) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership on the Option Closing Date with respect to common units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 4.7376%; and LRR-B will contribute its remaining net profits interests that burden the MLP Assets to the Partnership pursuant to the Assignment Document in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, and (iii) the right to receive, upon the expiration of the Option Period, the number of additional common units that is equal to (A) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 4.7376% (rounded down to the nearest whole number of common units);

 

10.                                 LRR-C will sell, transfer and assign those net profits interests described on Schedule II, insofar and only insofar as the same burden the MLP Assets, to the Partnership pursuant to the Assignment Document in exchange for (i) the right to receive a payment of $                         (such payment to be sourced first from the proceeds from the Offering and then, to the extent necessary, from Credit Facility Borrowings), and (ii) the right to receive, upon the earlier to occur of the expiration of the Over-Allotment Option period or the Option Closing Date, an amount equal to (A) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership on the Option Closing Date with respect to common units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 80.9730%; and LRR-C will contribute its remaining net profits interests that burden the MLP Assets to the Partnership pursuant to the Assignment Document in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, and (iii) the right to receive, upon the expiration of the Option Period, the number of additional common units that is equal to (A) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 80.9730% (rounded down to the nearest whole number of common units);

 

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11.                                 in connection with the Partnership’s initial public offering of common units representing limited partner interests in the Partnership (the “Offering”), the public, through the Underwriters, will purchase from the Partnership for $                         in cash, less the Underwriters’ discount and commission of $                         per common unit, or $                         in the aggregate, and a structuring fee of 0.25% of the gross proceeds of the Offering,                          common units representing a                         % limited partner interest in the Partnership;

 

12.                                 LRE Operating will enter into the Credit Agreement (as defined herein) and borrow $                           (the “Credit Facility Borrowings”), the proceeds of which will be used to make distributions to the Property Contributors in accordance with the Property Contributor Cash Distributions (as defined below);

 

13.                                 the Partnership will use the proceeds from the Offering and proceeds from the Credit Facility Borrowings to pay (i) the indebtedness of LRR-A assumed by LRE Operating, (ii) transaction expenses, which are estimated to be $                         (exclusive of the Underwriters’ discount and commission and the structuring fee) and (iii) payments and distributions to the Property Contributors in accordance with the cash distributions described in steps 8 through 10 above (the “Property Contributor Cash Distributions”);

 

14.                                 the Partnership will contribute the MLP Assets to LRE Operating in exchange for the continuation of its membership interest in LRE Operating; and

 

15.                                 for purposes of convenience and recording, the Partnership will direct (i) LRR-A to directly transfer the MLP Assets and (ii) the NPI Owners to directly sell, assign, transfer or contribute, as the case may be, their net profits interests that burden the MLP Assets, each to LRE Operating pursuant to the terms of the Assignment Document.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

“Additional Units” means                          additional common units that may be issued by the MLP and sold by the Underwriters to the public pursuant to the Over-Allotment Option.

 

“Agreement” has the meaning assigned to such term in the preamble.

 

“Assignment Document” means the form of Assignment and Bill of Sale attached hereto as Exhibit A.

 

“Class A Interests” means the Class A member interests in the General Partner.

 

“Class B Interests” means the Class B member interests in the General Partner.

 

“Class C Interests” means the Class C member interests in the General Partner.

 

4

 

“Closing Date” has the meaning assigned to such term in the preamble.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Credit Agreement” means the Credit Agreement, dated as of                         , 2011, among Wells Fargo Bank, National Association, as Administrative Agent and Bank of America, N.A. as Syndication Agent, and the lenders party thereto on the one hand, and the Partnership and LRE Operating, on the other hand.

 

“Credit Facility Borrowings” has the meaning assigned to such term in the recitals.

 

“Delaware LLC Act” has the meaning assigned to such term in the recitals.

 

“Delaware LP Act” has the meaning assigned to such term in the recitals.

 

“General Partner” has the meaning assigned to such term in the preamble.

 

“Governmental Authority” means the United States, any foreign country, state, county, city or other incorporated or unincorporated political subdivision, agency or instrumentality thereof.

 

“Incentive Distribution Rights” has the meaning assigned to such term in the Partnership Agreement.

 

“Lime Rock Management” has the meaning assigned to such term in the recitals.

 

“LRE Operating” has the meaning assigned to such term in the preamble.

 

“LRM GP Contribution” has the meaning assigned to such term in the recitals.

 

“LRR-A” has the meaning assigned to such term in the preamble.

 

“LRR-B” has the meaning assigned to such term in the preamble.

 

“LRR-C” has the meaning assigned to such term in the preamble.

 

“Material Adverse Effect” has the meaning assigned to such term in Section 6.01(c)(i) hereof.

 

“MLP Assets” means the assets that will be transferred to LRE Operating pursuant to Section 2.1 of the Assignment Document.

 

“NPI Owners” has the meaning assigned to such term in the preamble.

 

“Offering” has the meaning assigned to such term in the recitals.

 

“Option Closing Date” has the meaning assigned to such term in the Underwriting Agreement.

 

5

 

“Option Period” has the meaning assigned to such term in the Underwriting Agreement.

 

“Over-Allotment Option” means the option to purchase all or any portion of the Additional Units to cover over-allotments, if any, granted by the Partnership to the Underwriters pursuant to the Underwriting Agreement.

 

“Partnership” has the meaning assigned to such term in the preamble.

 

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership to be entered into as of the Closing Date.

 

“Partnership Entities” means the General Partner, the Partnership and LRE Operating, collectively.

 

“Party” and “Parties” have the meanings assigned to such terms in the preamble.

 

“Property Contributor Cash Distributions” has the meaning assigned to such term in the recitals.

 

“Property Contributors” has the meaning assigned to such term in the preamble.

 

“Registration Statement” means the Registration Statement on Form S-1 initially filed with the Commission on May 6, 2011 (Registration No. 333-174017), as amended and effective on the date hereof.

 

“Transaction Documents” means those documents and instruments to be delivered hereunder by one or more Parties.

 

“Underwriters” means the underwriters named in Exhibit A to the Underwriting Agreement.

 

“Underwriting Agreement” means the underwriting agreement, dated as of                         , 2011, by and among the Partnership, the General Partner and Wells Fargo Securities, LLC, Citigroup Global Markets Inc., Raymond James & Associates, Inc., RBC Capital Markets Corporation and Barclays Capital Inc., as representatives of the Underwriters.

 

ARTICLE II

CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS

 

2.01                           Contribution of the MLP Assets by LRR-A.

 

LRR-A hereby agrees to contribute, assign, transfer, set over and deliver to the Partnership, for its own use forever, all of its right, title and interest to and in the MLP Assets on the Closing Date, as a capital contribution, which contribution shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, (iii) the right to receive a distribution of $                         (such distribution will be

 

6

 

sourced first from Credit Facility Borrowings and then, to the extent necessary, from the proceeds received from the Offering to reimburse LRR-A for pre-formation capital expenditures), (iv) LRE Operating’s assumption of $                   of LRR-A’s existing indebtedness, and LRE Operating does hereby assume such indebtedness and agree to pay such indebtedness immediately following LRR-A’s contribution of the MLP Assets to the Partnership in exchange for a release of the lien on such MLP Assets securing such indebtedness, provided that LRE Operating’s assumption of such indebtedness shall not affect the obligations of LRR-A to its lenders; LRR-A shall remain fully liable to such lenders for such indebtedness and LRR-A shall deal with such lenders as if such assumption had not occurred (however, between LRR-A, on the one hand, and LRE Operating, on the other, LRE Operating shall be deemed the obligor with respect to such indebtedness), and (v) the right to receive, upon the expiration of the Option Period, (A) the number of additional common units that is equal to (x) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option during the Option Period, multiplied by (y) 14.2894% (rounded down to the nearest whole number of common units), and (B) as reimbursement for pre-formation capital expenditures, an amount equal to (x) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership with respect to Additional Units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (y) 14.2894%.

 

2.02                           Contribution and Sale of Net Profit Interests by LRR-B.

 

LRR-B hereby agrees to sell, assign and transfer those net profits interests described on Schedule I, insofar and only insofar as the same burden the MLP Assets, to the Partnership on the Closing Date, which sale shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for (i) the right to receive a payment of $                         (such payment will be sourced first from proceeds from the Offering and then, to the extent necessary, from Credit Facility Borrowings), and (ii) the right to receive, upon the earlier to occur of the expiration of the Over-Allotment Option period or the Option Closing Date, an amount equal to (A) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership on the Option Closing Date with respect to common units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 4.7376%.  LRR-B hereby agrees to contribute its remaining net profits interests, insofar and only insofar as the same burden the MLP Assets, to the Partnership as a capital contribution on the Closing Date, which contribution shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, and (iii) the right to receive, upon the expiration of the Option Period, the number of additional common units that is equal to (A) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 4.7376% (rounded down to the nearest whole number of common units).

 

7

 

2.03                           Contribution and Sale of Net Profit Interests by LRR-C.

 

LRR-C hereby agrees to sell, assign and transfer those net profits interests described on Schedule II, insofar and only insofar as the same burden the MLP Assets, to the Partnership on the Closing Date, which sale shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for (i) the right to receive a payment of $                         (such payment will be sourced first from proceeds from the Offering and then, to the extent necessary, from Credit Facility Borrowings), and (ii) the right to receive, upon the earlier to occur of the expiration of the Over-Allotment Option period or the Option Closing Date, an amount equal to (A) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership on the Option Closing Date with respect to common units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 80.9730%.  LRR-C hereby agrees to contribute its remaining net profits interests, insofar and only insofar as the same burden the MLP Assets, to the Partnership as a capital contribution on the Closing Date, which contribution shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for (i)                          subordinated units representing a                         % limited partner interest in the Partnership, (ii)                          common units representing a                         % limited partner interest in the Partnership, and (iii) the right to receive, upon the expiration of the Option Period, the number of additional common units that is equal to (A) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (B) 80.9730% (rounded down to the nearest whole number of common units).

 

2.04                           Public Cash Contribution.

 

The Parties acknowledge a cash contribution to be made on the Closing Date by the public through the Underwriters to the Partnership of $                            , less the Underwriters’ discount and commission of $                         per common unit, or $                         in the aggregate, and a structuring fee of 0.25% of the gross proceeds of the Offering, in exchange for                          common units representing a                         % limited partner interest in the Partnership.

 

2.05                           Distribution by the Partnership of the Credit Facility Borrowings.

 

The Parties acknowledge the distribution of the Credit Facility Borrowings to the Property Contributors to be made on the Closing Date in accordance with the Property Contributor Cash Distributions.

 

2.06                           Payment of Indebtedness Assumed from LRR-A; Payment of Expenses by the Partnership; Cash Distribution by the Partnership to the Property Contributors.

 

The Parties acknowledge (a) the payment to be made on the Closing Date by LRE Operating of the indebtedness assumed from LRR-A with proceeds from the Credit Facility Borrowings, (b) the payment to be made on the Closing Date by the Partnership, in connection with the Offering and the other transactions contemplated hereby, of transaction expenses in the amount of approximately $                         (exclusive of the Underwriters’ discount and the structuring fee) and (c) the payment and distribution of cash to be made on the Closing Date by the Partnership to the Property Contributors in accordance with the Property Contributor Cash Distributions.

 

8

 

2.07                           Contribution of the MLP Assets by the Partnership to LRE Operating.

 

The Partnership hereby agrees to contribute, assign, transfer, set over and deliver to LRE Operating, for its own use forever, all of its right, title and interest to and in the MLP Assets on the Closing Date, as a capital contribution, which contribution shall be deemed made pursuant to the terms set forth in the Assignment Document, in exchange for a continuation of its membership interest in LRE Operating.

 

2.08                           Direct Contribution of MLP Assets.

 

For convenience and purposes of recording the Assignment Document in the applicable counties where the MLP Assets are located, the Partnership hereby directs the Property Contributors to directly transfer and assign the MLP Assets to LRE Operating on the Closing Date pursuant to the Assignment Document and such other additional instruments and agreements as may be necessary to effect the same. Notwithstanding the terms of the Assignment Document, the MLP Assets shall be deemed to have been contributed and transferred from the Property Contributors to the Partnership and, immediately thereafter, from the Partnership to LRE Operating.

 

ARTICLE III
 ADDITIONAL TRANSACTIONS

 

3.01                           Purchase of Additional Common Units.

 

At the end of the Option Period, if the Over-Allotment Option is exercised in whole or in part, the public, through the Underwriters, will contribute additional cash to the Partnership in exchange for up to an additional                          common units on the basis of the initial public offering price per common unit set forth in the Registration Statement.

 

3.02                           Issuance of Additional Common Units to LRR-A.

 

At the end of the Option Period, (A) the Partnership will issue to LRR-A a number of additional common units that is equal to (x) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option during the Option Period, multiplied by (y) 14.2894% (rounded down to the nearest whole number of common units), and (B) LRR-A will receive a cash distribution as reimbursement for pre-formation capital expenditures equal to (x) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership with respect to Additional Units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (y) 14.2894%, representing a portion of the cash, if any, contributed by the Underwriters to the Partnership on each Option Closing Date pursuant to Section 3.01.

 

9

 

3.03                           Issuance of Additional Common Units to LRR-B.

 

At the end of the Option Period, (A) the Partnership will issue to LRR-B a number of additional common units that is equal to (x) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option during the Option Period, multiplied by (y) 4.7376% (rounded down to the nearest whole number of common units), and (B) LRR-B will receive a cash payment as additional purchase price for the net profits interests described on Schedule I equal to (x) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership with respect to Additional Units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (y) 4.7376%, representing a portion of the cash, if any, contributed by the Underwriters to the Partnership on each Option Closing Date pursuant to Section 3.01.

 

3.04                           Issuance of Additional Common Units to LRR-C.

 

At the end of the Option Period, (A) the Partnership will issue to LRR-C a number of additional common units that is equal to (x) the Additional Units minus the aggregate number of common units, if any, actually purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option during the Option Period, multiplied by (y)  80.9730% (rounded down to the nearest whole number of common units), and (B) LRR-C will receive a cash payment as additional purchase price for the net profits interests described on Schedule II equal to (x) the aggregate amount of net proceeds, if any, paid by the Underwriters to the Partnership with respect to Additional Units purchased by and issued to the Underwriters pursuant to the exercise of the Over-Allotment Option, multiplied by (y) 80.9730%, representing a portion of the cash, if any, contributed by the Underwriters to the Partnership on each Option Closing Date pursuant to Section 3.01.

 

ARTICLE IV
 TITLE MATTERS

 

4.01                           Encumbrances.

 

(a)                                  Except to the extent expressly provided in any other document executed in connection with this Agreement or the Offering, the contribution of the MLP Assets pursuant to this Agreement are made expressly subject to all recorded and unrecorded liens (other than consensual liens), easements, rights-of-way, contracts, permits, licenses, instruments, commitments, conveyances, encumbrances, agreements, defects, restrictions, advance claims and all laws, rules, regulations, ordinances, judgments and orders of Governmental Authorities or tribunals having or asserting jurisdiction over the MLP Assets and operations conducted thereon or in connection therewith, in each case to the extent the same are valid and enforceable and affect the MLP Assets, including all matters that a current survey or visual inspection of the MLP Assets would reflect.

 

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(b)                                 To the extent that certain jurisdictions in which the MLP Assets are located may require that documents be recorded in order to evidence the transfers of titles reflected in this Agreement, then the provisions set forth in Section 4.01(a) shall also be applicable to the transfers under such documents.

 

4.02                           Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales Laws.

 

(a)                                  EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, THE PARTIES ACKNOWLEDGE AND AGREE THAT NONE OF THE PARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE MLP ASSETS, INCLUDING THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE MLP ASSETS GENERALLY, INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THE MLP ASSETS, (B) THE INCOME TO BE DERIVED FROM THE MLP ASSETS, (C) THE SUITABILITY OF THE MLP ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THE MLP ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE MLP ASSETS. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, THE PARTIES ACKNOWLEDGE AND AGREE THAT EACH HAS HAD THE OPPORTUNITY TO INSPECT THE MLP ASSETS, AND EACH IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE MLP ASSETS AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANY OF THE PARTIES. NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE MLP ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EACH OF THE PARTIES ACKNOWLEDGES THAT TO THE FULLEST EXTENT PERMITTED BY LAW, THE CONTRIBUTION OF THE MLP ASSETS AS PROVIDED FOR HEREIN IS MADE IN AN “AS IS, WHERE IS” CONDITION WITH ALL FAULTS, AND THE MLP ASSETS ARE CONTRIBUTED AND CONVEYED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THIS SECTION SHALL SURVIVE SUCH CONTRIBUTION AND CONVEYANCE OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE MLP ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE.

 

11

 

(b)                                 Each contribution under the Assignment Document shall include all of the assigning party’s right, title and interest under and by virtue of all warranties pertaining to the MLP Assets, express or implied (including, without limitation, title warranties and manufacturers’, suppliers’ and contractors’ warranties), that have, prior to the date of such contribution, been made by any of the assigning party’s predecessors in title (excluding any affiliate of such assigning party) or by any third party manufacturers, suppliers and contractors. Each sale and contribution under the Assignment Document shall be made with full substitution and subrogation in and to all of the warranties that the assigning party has or may have against predecessors in title (excluding any affiliate of such assigning party) and with full subrogation of all rights accruing under the applicable statutes of limitations and all rights and actions of warranty against all former owners of the MLP Assets (excluding any affiliate of the assigning party).

 

(c)                                  Each of the Parties agrees that the disclaimers contained in this Section 4.02 are “conspicuous” disclaimers. Any covenants implied by statute or law by the use of the words “contribute,” “distribute,” “assign,” “transfer,” “deliver” or “set over” or any of them or any other words used in this Agreement are hereby expressly disclaimed, waived or negated.

 

(d)                                 Each of the Parties hereby waives compliance with any applicable bulk sales law or any similar law in any applicable jurisdiction in respect of the transactions contemplated by this Agreement.

 

ARTICLE V
 FURTHER ASSURANCES

 

5.01                           Further Assurances.

 

From and after the date hereof, and without any further consideration, the Parties agree to execute, acknowledge and deliver all such additional deeds, assignments, bills of sale, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate to (a) more fully assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this Agreement or (b) more fully and effectively vest in the applicable Parties and their respective successors and assigns beneficial and record title to the interests contributed and assigned by this Agreement or intended so to be and more fully and effectively carry out the purposes of this Agreement.

 

5.02                           Other Assurances.

 

(a)                                  From time to time after the date hereof, and without any further consideration, each of the Parties shall execute, acknowledge and deliver all such additional instruments, notices and other documents, and will do all such other acts and things, all in accordance with applicable law, as may be necessary or appropriate to more fully and effectively carry out the purposes and intent of this Agreement.

 

(b)                                 Without limiting the generality of the foregoing, the Parties acknowledge that they have used their good faith efforts to identify all of the assets being contributed to the Partnership in connection with the Offering. However, it is possible that assets intended to be sold and contributed to the Partnership were not identified and therefore are not included in the MLP Assets. To the extent that such assets are identified at a later date, the Parties shall take the appropriate actions required in order to convey all such assets to the Partnership (or its successors or assigns).

 

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ARTICLE VI
 REPRESENTATIONS AND WARRANTIES

 

6.01                           Representations and Warranties of All Parties.

 

Each of the Parties to this Agreement hereby represents and warrants severally as to itself as follows:

 

(a)                                  Formation and Good Standing. Such Party is a limited partnership or limited liability company, duly formed, validly existing and in good standing as a limited partnership or limited liability company, as applicable, under the laws of its jurisdiction of formation.  Such Party is duly qualified to do business and is in good standing as a foreign limited partnership or limited liability company, as applicable, in each jurisdiction where the character of the properties owned or leased by it or the nature of the businesses transacted by it requires it to be so qualified.

 

(b)                                 Authority, Execution and Enforceability. Such Party has full limited partnership or limited liability company, as applicable, power and authority to enter into this Agreement and the Transaction Documents to be delivered by such Party hereunder and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Transaction Documents to be delivered by such Party hereunder and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by such Party. Such Party has duly executed and delivered this Agreement and the Transaction Documents to be delivered by such Party hereunder, and this Agreement and the Transaction Documents to be delivered by such Party hereunder constitute such Party’s legal, valid and binding obligation, enforceable against it in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies).

 

(c)                                  No Conflicts. Neither the execution, delivery nor performance of this Agreement or the Transaction Documents to be delivered by such Party hereunder by such Party will:

 

(i)                                     require the approval or consent of any Governmental Authority, other than such approvals or consents that have been obtained or, if not obtained, would not, individually or in the aggregate, result in a material adverse effect on the business, properties, financial condition or results of operations of the Partnership Entities taken as a whole (a “Material Adverse Effect”);

 

(ii)                                  result in the breach or violation of any term or provision of its certificate of limited partnership, certificate of formation, agreement of limited partnership, limited liability company agreement, as applicable, or other formation and governing documents;

 

(iii)                               result in the breach or violation or constitute a default or give rise to any right of termination, cancellation or acceleration under any material agreement to which it is bound or by which its property or business is affected, except for such breaches, violations or defaults (or rights of termination, cancellation or acceleration) that would not, individually or in the aggregate, have a Material Adverse Effect; or

 

13

 

(iv)                              violate any federal, state, local or other governmental law or ordinance, or any order, writ, injunction, decree, rule or regulation of any Governmental Authority applicable to such Party, except such violations that would not, individually or in the aggregate, have a Material Adverse Effect.

 

ARTICLE VII
 MISCELLANEOUS

 

7.01                           Notices.

 

All notices and other communications provided for or permitted hereunder shall be made in writing by facsimile, courier service or personal delivery:

 

(a)                                  if to the General Partner, the Partnership or LRE Operating:

 

	
Heritage Plaza 
    
	
1111 Bagby Street, Suite 4600
    
	
Houston, TX 77002
    
	
Attention:
    	
Chief   Executive Officer
    
	
Telephone:
    	
(713)   292-9510
    
	
Facsimile:
    	
(713)   292-9560
    

 

(b)                                 if to the Property Contributors:

 

	
Heritage Plaza
    
	
1111 Bagby Street, Suite 4600
    
	
Houston, TX 77002
    
	
Attention:
    	
Chief   Executive Officer
    
	
Telephone:
    	
(713)   292-9510
    
	
Facsimile:
    	
(713)   292-9560
    
	
 
    	
 
    

 

All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered, when receipt acknowledged, if sent via facsimile; and when actually received, if sent by any other means.

 

7.02                           Order of Completion of Transactions.

 

The transactions provided for in Article II of this Agreement shall be completed on the Closing Date in the order set forth in Article II of this Agreement.

 

7.03                           Costs.

 

Except for the transaction expenses set forth in Section 2.06, the Partnership shall pay all expenses, fees and costs, including sales, use and similar taxes, arising out of the contributions, conveyances and deliveries to be made hereunder, and shall pay all documentary, filing,

 

14

 

recording, transfer, deed and conveyance taxes and fees required in connection therewith. In addition, the Partnership shall be responsible for all costs, liabilities and expenses (including court costs and reasonable attorneys’ fees) incurred in connection with the delivery of any document pursuant to Article V.

 

7.04                           Headings; References; Interpretation.

 

All Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this agreement as a whole, including, without limitation, all Schedules, Annexes, and Exhibits attached hereto, and not to any particular provision of this Agreement. All references herein to Articles, Sections, and Exhibits shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement, and the Annexes and Exhibits attached hereto, and all such Schedules, Annexes and Exhibits attached hereto are hereby incorporated herein and made a part hereof for all purposes. All personal pronouns used in this Agreement, whether used in the masculine, feminine, or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The terms “include,” “includes,” “including” or words of like import shall be deemed to be followed by the words “without limitation.”

 

7.05                           Successors and Assigns.

 

This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns.

 

7.06                           No Third Party Rights.

 

The provisions of this Agreement are intended to bind the Parties as to each other and are not intended to and do not create rights in any other person or confer upon any other person any benefits, rights or remedies, and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement.

 

7.07                           Counterparts.

 

This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the Parties.

 

7.08                           Governing Law.

 

This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas applicable to contracts made and to be performed wholly within such state, without giving effect to conflict of laws principles thereof that would require the application of the laws of another jurisdiction.

 

15

 

7.09                           Severability.

 

If any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Agreement at the time of execution of this Agreement.

 

7.10                           Amendment or Modification.

 

This Agreement may be amended or modified from time to time only by the written agreement of all of the Parties. Each such instrument shall be reduced to writing and shall be designated on its face as an amendment to this Agreement.

 

7.11                           Integration.

 

This Agreement and the instruments referenced herein supersede all previous understandings or agreements among the Parties, whether oral or written, with respect to the subject matter hereof and thereof. This document and such instruments contain the entire understanding of the Parties. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the Parties after the date hereof.

 

[Signature Page Follows]

 

16

 

IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of the date first written above.

 

	
 
    	
LRR   ENERGY, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
LRE GP,   LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Jaime   R. Casas
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
LRE   GP, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Jaime   R. Casas
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
LRE   OPERATING, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
LRR   Energy, L.P., its sole member
    
	
 
    	
By:
    	
LRE GP,   LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Jaime   R. Casas
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
LIME   ROCK RESOURCES A, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Lime   Rock Resources A GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
By:
    	
Lime   Rock Resources GP, L.P.,
    
	
 
    	
 
    	
its   sole member
    
	
 
    	
By:
    	
LRR GP,   LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Eric D.   Mullins
    
	
 
    	
Title:
    	
Co-Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
LIME   ROCK RESOURCES B, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Lime   Rock Resources GP, L.P.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
By:
    	
LRR GP,   LLC, it general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Eric D.   Mullins
    
	
 
    	
Title:
    	
Co-Chief   Executive Officer
    

 

Signature Page to Contribution Agreement

 

 

	
 
    	
LIME   ROCK RESOURCES C, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Lime   Rock Resources C GP, LLC,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
By:
    	
Lime   Rock Resources GP, L.P.,
    
	
 
    	
 
    	
its   sole member
    
	
 
    	
By:
    	
LRR GP,   LLC, its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Eric D.   Mullins
    
	
 
    	
Title:
    	
Co-Chief   Executive Officer
    

 

Signature Page to Contribution Agreement

 

 

SCHEDULE I

 

[Net Profits Interests Sold by LRR-B]

 

I-1

 

SCHEDULE II

 

[Net Profits Interests Sold by LRR-C]

 

II-1

 

ANNEX A

 

Form of Assignment and Bill of Sale

 

 

ASSIGNMENT AND BILL OF SALE

 

This Assignment and Bill of Sale (this “Assignment”) is among (a) Lime Rock Resources A, L.P., a Delaware limited partnership (the “Assignor”), Lime Rock Resources B, L.P., a Delaware limited partnership (“LRR-B”), and Lime Rock Resources C, L.P., a Delaware limited partnership (“LRR-C,” and together with LRR-B, the “NPI Owners”), each of whose address is Heritage Plaza, 1111 Bagby Street, Suite 4600, Houston, Texas 77002, and (b) LRE Operating, LLC, a Delaware limited liability company (“Assignee”), whose address is Heritage Plaza, 1111 Bagby Street, Suite 4600, Houston, Texas 77002, and is effective as of 12:01 a.m., Central Time, on                         , 2011 (the “Effective Time”).

 

RECITALS

 

WHEREAS, Assignor owns certain oil and gas properties and related assets in the States of New Mexico, Oklahoma and Texas; and

 

WHEREAS, the NPI Owners own net profits interests that burden, among other properties, the Assets (as hereinafter defined) pursuant to the instruments described in Exhibit B hereto (the “Existing NPI Interests”); and

 

WHEREAS, Assignor, Assignee and the NPI Owners have entered into that certain Purchase, Sale, Contribution, Conveyance and Assumption Agreement, dated as of                         , 2011 (the “Contribution Agreement”), among Assignor, Assignee, the NPI Owners, LRE GP, LLC, a Delaware limited liability company (the “General Partner”), and LRR Energy, L.P., a Delaware limited partnership (the “Partnership”), pursuant to which (a) Assignor has agreed to contribute, assign, transfer, set over and deliver to the Partnership all of its right, title and interest to and in the MLP Assets (as defined in the Contribution Agreement), as a capital contribution, upon the terms and conditions set forth in the Contribution Agreement; (b) the Partnership has agreed to contribute, assign, transfer, set over and deliver to Assignee all of its right, title and interest to and in the MLP Assets, including the Assets, as a capital contribution, upon the terms set forth in the Contribution Agreement; and (c) the NPI Owners have agreed to sell and contribute their net profits interests insofar and only insofar as the same burden the Assets, upon the terms set forth in the Contribution Agreement and this Assignment; and

 

WHEREAS, the Partnership has requested that Assignor convey directly to Assignee all of Assignor’s right, title and interest to and in the MLP Assets for convenience and recording purposes.

 

NOW, THEREFORE, in consideration of the mutual benefits derived and to be derived from the Contribution Agreement and this Assignment by each of the parties hereto and other good and valuable consideration, the parties hereby agree as follows:

 

A-1

 

ARTICLE 1
 DEFINED TERMS; CONSTRUCTION

 

Section 1.1            Definitions. Capitalized terms used in this Assignment and not otherwise defined herein shall have the meanings given to such terms in the Contribution Agreement.

 

Section 1.2            Construction. Unless the context requires otherwise: (a) any pronoun used in this Assignment shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Assignment; (c) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; and (d) the terms “hereof,” “herein” and “hereunder” refer to this Assignment as a whole and not to any particular provision of this Assignment. The headings contained in this Assignment are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Assignment.

 

ARTICLE 2
 ASSIGNMENT OF ASSETS

 

Section 2.1            Assignment. Assignor, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, hereby contributes, assigns, transfers, sets over and delivers to Assignee all of Assignor’s right, title and interest in and to the following (excepting the Excluded Assets defined below) (individually, an “Asset,” and collectively, the “Assets”):

 

(a)           (i) the oil and gas leases more particularly described in Exhibit A—Part 1 (Assignor’s interests in such leases, collectively, the “Leases”), (ii) the mineral fee interests, royalty interests, overriding royalty interests, production payments, net profits interests, carried interests and reversionary interests described in Exhibit A—Part 1 and/or relating to the lands described in any instrument described in Exhibit A—Part 1 (Assignor’s interests in the foregoing, the “Mineral Interests”) and (iii) the interests in any units arising on account of the Leases or Mineral Interests having been pooled or unitized into such units (Assignor’s interests in such units, the “Unit Interests”);

 

(b)           all existing oil and gas wells attributable to the Leases, Mineral Interests or Unit Interests (Assignor’s interests in such wells, collectively and including the wells set forth on Exhibit A—Part 2, the “Wells,” and the Leases, Mineral Interests, Unit Interests and Wells being hereinafter collectively referred to as the “Properties”);

 

(c)           all production facilities, structures, tubular goods, well equipment, lease equipment, production equipment, pipelines, inventory and all other personal property, fixtures and facilities to the extent appurtenant to or used primarily in connection with the Properties (collectively, the “Facilities”);

 

(d)           to the extent transferable, all permits, licenses, servitudes, easements, rights-of-way, surface fee interests and other surface use agreements to the extent used primarily in connection with the ownership or operation of the Properties or the Facilities;

 

A-2

 

(e)           all oil, gas and other hydrocarbons produced or processed in association therewith (collectively, “Hydrocarbons”) from or attributable to the Properties from and after the Effective Time and all Hydrocarbons produced therefrom prior to the Effective Time that are in storage prior to the Effective Time and that are upstream of the sales metering point as of the Effective Time;

 

(f)            to the extent transferable, all contracts, agreements, commitments and other arrangements (“Contracts”) relating to the ownership or operation of the Properties or other Assets, including the production, storage, treatment, transportation, processing, purchase, sale, disposal or other disposition of production therefrom or in connection therewith, including the commodity derivative contracts listed on Exhibit A—Part 3;

 

(g)           all gas or pipeline imbalances relating to the Properties; and

 

(h)           all records, files, orders, maps, and data that relate to the Properties, Facilities or other Assets that are in Assignor’s possession, to the extent that Assignor has the right to transfer same to Assignee without the payment of any fee, penalty or other consideration, but excluding any of the foregoing to the extent that (i) transfer is restricted by third party agreement or applicable law and (ii) Assignor is unable to obtain, using commercially reasonable efforts, a waiver of, or otherwise satisfy, such transfer restriction (provided that Assignor shall not be required to provide consideration or undertake obligations to or for the benefit of the holders of such rights in order to obtain any necessary consent or waiver of such transfer restriction) (subject to such exclusion, collectively referred to as the “Files”).

 

TO HAVE AND TO HOLD the Assets unto Assignee forever, subject, however, to all the terms and conditions of this Assignment.

 

Section 2.2            Excluded Assets. The Assets shall not include, and there is excepted, reserved and excluded from the sale and assignment contemplated hereby, the following (the “Excluded Assets”):

 

(a)           all corporate, financial, tax and legal records of Assignor that relate to Assignor’s business generally (including the ownership and operation of the Assets) or that relate to the other Excluded Assets, together with a duplicate copy (electronic or otherwise) of all of the Files;

 

(b)           any trade credits, accounts receivable, proceeds or revenues attributable to the Assets and accruing prior to the Effective Time;

 

(c)           all Hydrocarbons produced from or attributable to the Properties with respect to any periods of time prior to the Effective Time that are not upstream of the sales metering point as of the Effective Time, and all proceeds attributable thereto;

 

(d)           all refunds of costs, taxes or expenses attributable to any periods of time prior to the Effective Time;

 

(e)           all proceeds from the settlements of Contract disputes with purchasers of Hydrocarbons from or attributable to the Properties, including settlement of take-or-pay disputes, insofar as said proceeds are attributable to any periods of time prior to the Effective Time;

 

A-3

 

(f)            all bonds, letters of credit and guarantees, if any, posted by Assignor or its Affiliates with Governmental Authorities and relating to the Assets;

 

(g)           all rights, titles, claims and interests of Assignor or its Affiliates under any insurance policy or agreement, to any insurance proceeds or to or under any bond or bond proceeds and attributable to periods of time prior to the Effective Time;

 

(h)           all rights and claims relating to the Assets and attributable to periods of time prior to the Effective Time, including audit rights;

 

(i)            all privileged attorney-client (i) communications and (ii) other documents (other than title opinions);

 

(j)            all materials and information that cannot be disclosed to Assignee as a result of confidentiality obligations to third parties;

 

(k)           all amounts paid by third parties to Assignor or its Affiliates as overhead for periods of time accruing prior to the Effective Time under any joint operating agreements burdening the Assets;

 

(l)            all commodity derivative contracts listed on Exhibit D; and

 

(m)          any matter required to be excluded pursuant to the provisions of Section 2.1(h) of this Assignment.

 

Section 2.3            Retained Rights and Obligations. The execution and delivery of this Assignment by Assignor, and the execution and acceptance of this Assignment by Assignee, shall not operate to release or impair any surviving rights or obligations of Assignor or Assignee under the Contribution Agreement or any other document executed in connection with the Offering, including that certain Omnibus Agreement, dated as of                         , 2011 among the General Partner, the Partnership, Assignee, LRR GP, LLC, Assignor, the NPI Owners and Lime Rock Management LP (the “Omnibus Agreement”).

 

ARTICLE 3
 ENCUMBRANCES DISCLAIMERS

 

Section 3.1            Disclaimers and Subrogation of Warranties and Representations.

 

(a)           Except to the extent expressly provided in any other document executed in connection with the Contribution Agreement or the Offering, the contribution of the Assets pursuant to this Assignment is made expressly subject to all recorded and unrecorded liens (other than consensual liens), easements, rights-of-way, contracts, permits, licenses, instruments, commitments, conveyances, encumbrances, agreements, defects, restrictions, advance claims and all laws, rules, regulations, ordinances, judgments and orders of Governmental Authorities or tribunals having or asserting jurisdiction over the Assets and operations conducted thereon or in connection therewith, including Existing NPI Interests, in each case, to the extent the same are valid and enforceable and affect the Assets, including all matters that a current survey or visual inspection of the Assets would reflect.

 

A-4

 

(b)           EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THE CONTRIBUTION AGREEMENT OR THE OFFERING, ASSIGNOR, THE NPI OWNERS AND ASSIGNEE ACKNOWLEDGE AND AGREE THAT NO PARTY HAS MADE, NO PARTY DOES MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE ASSETS OR THE EXISTING NPI INTERESTS, INCLUDING THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE PROPERTIES GENERALLY, INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS THEREON, (B) THE INCOME TO BE DERIVED FROM THE PROPERTIES, (C) THE SUITABILITY OF THE PROPERTIES FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THE PROPERTIES OR THEIR OPERATION WITH ANY LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTIES. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THE CONTRIBUTION AGREEMENT OR THE OFFERING, ASSIGNOR AND ASSIGNEE ACKNOWLEDGE AND AGREE THAT ASSIGNEE HAS HAD OPPORTUNITY TO INSPECT THE PROPERTIES, AND IT IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTIES AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANY OTHER PARTY. NONE OF ASSIGNOR NOR ASSIGNEE IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTIES FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EACH SUCH PARTY ACKNOWLEDGES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE CONTRIBUTION OF THE ASSETS AS PROVIDED FOR HEREIN IS MADE IN AN “AS IS, WHERE IS” CONDITION WITH ALL FAULTS, AND THE ASSETS ARE CONTRIBUTED AND TRANSFERRED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY ASSIGNOR, THE NPI OWNERS AND ASSIGNEE AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS OR THE EXISTING NPI INTERESTS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE.

 

(c)           Each of Assignor, the NPI Owners and Assignee agrees that the disclaimers contained in this Section 3.1 are “conspicuous” disclaimers. Any covenants implied by statute or law by the use of the words “contribute,” “distribute,” “assign,” “transfer,” “deliver” or “set over” or any of them or any other words used in this Assignment are hereby expressly disclaimed, waived or negated.

 

A-5

 

Section 3.2            Subrogation. Assignor hereby transfers and assigns unto Assignee, its successors and assigns, all of its right, title and interest under and by virtue of all warranties pertaining to the Assets, express or implied (including title warranties and manufacturers’, suppliers’  and contractors’ warranties), that have heretofore been made by any of Assignor’s predecessors in title (excluding any affiliate of Assignor) or by any third party manufacturers, suppliers and contractors. This Assignment is made with full substitution and subrogation in and to all of the warranties that Assignor has or may have against predecessors in title (excluding any affiliate of Assignor) and with full subrogation of all rights accruing under the applicable statutes of limitations and all rights and actions of warranty against all former owners of the Assets (excluding any affiliate of Assignor).

 

ARTICLE 4
 ASSUMED OBLIGATIONS

 

Section 4.1            Assumed Obligations. Assignee agrees to assume, and does hereby assume, all of Assignor’s obligations under the Leases, Mineral Interests, Unit Interests and Contracts, including the obligation to properly plug and abandon, or to replug if subsequently required, the Wells and any previously plugged wells located on the lands covered by the Leases and otherwise comply with all applicable restoration or reclamation requirements according to the terms of the Leases and Unit Interests and the rules and regulations of governmental authorities having jurisdiction (the “Plugging Obligations”).  Subject to the indemnification obligations set forth in the Omnibus Agreement, in addition to the Plugging Obligations and other obligations discussed in the foregoing sentence, Assignee agrees to assume and does hereby (and Assignee’s successors and assigns will) assume and agree to be bound by and bear all costs, expenses and liabilities arising out of the ownership and/or operation of the Assets, whether or not such costs, expenses or liabilities accrued prior to, on or after the Effective Time, including, without limitation, the environmental condition of the Assets.

 

ARTICLE 5
 SALE AND CONTRIBUTION OF EXISTING NPI INTERESTS

 

Section 5.1            Sale and Contribution. In consideration of the premises, including the mutual benefits derived and to be derived from the Contribution Agreement and this Assignment, effective immediately following the assignment described in Section 2.1, the NPI Owners hereby sell, transfer and assign to Assignee, without warranty, express, implied or statutory, the Existing NPI Interests and any other net profits interests owned by the NPI Owners, to the extent and only to the extent that such Existing NPI Interests and any other net profits interests affect the Assets (the NPI Owners and Assignee acknowledging that to the extent that the Existing NPI Interests and other net profits interests affect properties other than the Assets, such Existing NPI Interests and other net profits interests shall remain in full force and effect and shall not be transferred hereby).

 

Section 5.2            Merger. Assignee and the NPI Owners hereby agree that effective upon the sale and contribution described in Section 5.1, the Existing NPI Interests and other net profits interests affecting the Assets shall be merged into the greater estate owned by Assignee in the Assets and extinguished.

 

A-6

 

 

ARTICLE 6
 MISCELLANEOUS

 

Section 6.1            Separate Assignments. Where separate assignments of the Assets or releases of the Existing NPI Interests have been or will be executed for filing with, and approval by, applicable Governmental Authorities, any such separate assignments (a) shall evidence this Assignment and assignment of the applicable Assets and/or the applicable Existing NPI Interests herein made and shall not constitute any additional assignment of such properties, (b) are not intended to modify, and shall not modify, any of the terms, covenants and conditions or limitations on warranties set forth in this Assignment and are not intended to create, and shall not create, any representations, warranties or additional covenants of or by Assignor to Assignee and (c) shall be deemed to contain all of the terms and provisions of this Assignment, as fully and to all intents and purposes as though the same were set forth at length in such separate assignments.

 

Section 6.2            Exhibits. All exhibits attached hereto are hereby made part hereof and incorporated herein by this reference. References in such exhibits to instruments on file in the public records are notice of such instruments for all purposes. Unless provided otherwise, all recording references in such exhibits are to the appropriate records of the counties in which the Assets are located.

 

Section 6.3            Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER STATE ARE MANDATORILY APPLIED TO THE DISPUTED MATTER.

 

Section 6.4            Successors and Assigns.  This Assignment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

 

Section 6.5            Counterparts. This Assignment may be executed in any number of counterparts, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts shall constitute but one instrument. Any signature hereto delivered by a party by facsimile transmission shall be deemed an original signature hereto. Exhibit A may be redacted for filing in each county or parish, such that the exhibit filed in any county or parish will describe only those Assets located in such county or parish.

 

A-7

 

EXECUTED as of the date of the parties’ acknowledgments below, but effective as of the Effective Time.

 

	
ASSIGNOR:
    	
 
    	
WITNESSES:
    
	
 
    	
 
    	
 
    	
 
    
	
LIME ROCK RESOURCES A, L.P.
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
Lime   Rock Resources A GP, LLC,
    	
 
    	
 
    
	
 
    	
its   general partner
    	
 
    	
 
    
	
By:
    	
Lime   Rock Resources GP, L.P.,

its   sole member
    	
 
    	
 
    
	
By:
    	
LRR GP,   LLC, its general partner
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
Eric D.   Mullins
    	
 
    	
 
    
	
Title:
    	
Co-Chief   Executive Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
LIME ROCK RESOURCES B, L.P.
    	
 
    	
WITNESSES:
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
Lime   Rock Resources GP, L.P.,
    	
 
    	
 
    
	
 
    	
its   general partner
    	
 
    	
 
    
	
By:
    	
LRR GP,   LLC, it general partner
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
Eric D.   Mullins
    	
 
    	
 
    
	
Title:
    	
Co-Chief   Executive Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
LIME ROCK RESOURCES C, L.P.
    	
 
    	
WITNESSES:
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
Lime   Rock Resources C GP, LLC,
    	
 
    	
 
    
	
 
    	
its   general partner
    	
 
    	
 
    
	
By:
    	
Lime   Rock Resources GP, L.P.,
    	
 
    	
 
    
	
 
    	
its   sole member
    	
 
    	
 
    
	
By:
    	
LRR GP,   LLC, its general partner
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
Eric D.   Mullins
    	
 
    	
 
    
	
Title:
    	
Co-Chief   Executive Officer
    	
 
    	
 
    

 

SIGNATURE PAGE TO
 ASSIGNMENT AND BILL OF SALE

 

A-8

 

	
ASSIGNEE:
    	
 
    	
WITNESSES:
    
	
 
    	
 
    	
 
    	
 
    
	
LRE OPERATING, LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
LRR   Energy, L.P., its sole member
    	
 
    	
 
    
	
By:
    	
LRE GP,   LLC, its general partner
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
Jaime   R. Casas
    	
 
    	
 
    
	
Title:
    	
Chief   Financial Officer
    	
 
    	
 
    

 

	
Prepared   By:
    	
 
    	
Return   To:
    
	
Randolph   W. Bryant
    	
 
    	
 
    
	
Andrews   Kurth LLP
    	
 
    	
 
    
	
600   Travis, Suite 4200
    	
 
    	
 
    
	
Houston,   TX 77002
    	
 
    	
 
    
	
(713)   220-4200
    	
 
    	
 
    

 

[Sample forms of acknowledgment.]

 

	
STATE   OF TEXAS
    	
§
    
	
 
    	
§
    
	
COUNTY   OF HARRIS
    	
§
    

 

BE IT REMEMBERED, THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for Harris County, Texas, and being authorized in such county and state to take acknowledgments, hereby certifies that, on this      day of                          2011, there personally appeared before me                                  of LRR GP, LLC, a Delaware limited liability company (“LRR GP”), the general partner of Lime Rock Resources GP, L.P., a Delaware limited partnership (“Lime Rock GP”), the sole member of Lime Rock Resources A GP, LLC, the general partner of Lime Rock Resources A, L.P. (“LRR-A”), known to me to be such authorized signatory on behalf of LRR-A, such limited partnership being a party to the foregoing instrument, and I hereby further certify as follows:

 

	
[NEW   MEXICO],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual on behalf   of LRR-A, in the capacity stated above.
    
	
 
    	
 
    	
 
    
	
[OKLAHOMA],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual as the   holder of the offices stated above, on behalf of LRR-A, as stated above.
    
	
 
    	
 
    	
 
    
	
[TEXAS],
    	
 
    	
This   instrument was acknowledged before me on this day, by the foregoing   individual, in his capacity as an officer of the aforementioned entities, on   behalf of LRR-A.
    

 

A-9

 

	
STATE   OF TEXAS
    	
§
    
	
 
    	
§
    
	
COUNTY   OF HARRIS
    	
§
    

 

BE IT REMEMBERED, THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for Harris County, Texas, and being authorized in such county and state to take acknowledgments, hereby certifies that, on this      day of                          2011, there personally appeared before me                                  of LRR GP, the general partner of Lime Rock GP, the general partner of Lime Rock Resources B, L.P., a Delaware limited partnership (“LRR-B”), known to me to be such authorized signatory on behalf of LRR-B, such limited partnership being a party to the foregoing instrument, and I hereby further certify as follows:

 

	
[NEW   MEXICO],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual on behalf   of LRR-B, in the capacity stated above.
    
	
 
    	
 
    	
 
    
	
[OKLAHOMA],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual as the   holder of the offices stated above, on behalf of LRR-B, as stated above.
    
	
 
    	
 
    	
 
    
	
[TEXAS],
    	
 
    	
This   instrument was acknowledged before me on this day, by the foregoing   individual, in his capacity as an officer of the aforementioned entities, on   behalf of LRR-B.
    

 

	
STATE   OF TEXAS
    	
§
    
	
 
    	
§
    
	
COUNTY   OF HARRIS
    	
§
    

 

BE IT REMEMBERED, THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for Harris County, Texas, and being authorized in such county and state to take acknowledgments, hereby certifies that, on this      day of                          2011, there personally appeared before me                                  of LRR GP, the general partner of Lime Rock GP, the sole member of Lime Rock Resources C GP, LLC, the general partner of Lime Rock Resources C, L.P. (“LRR-C”), known to me to be such authorized signatory on behalf of LRR-C, such limited partnership being a party to the foregoing instrument, and I hereby further certify as follows:

 

	
[NEW   MEXICO],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual on behalf   of LRR-C, in the capacity stated above.
    
	
 
    	
 
    	
 
    
	
[OKLAHOMA],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual as the   holder of the offices stated above, on behalf of LRR-C, as stated above.
    

 

A-10

 

	
[TEXAS],
    	
 
    	
This   instrument was acknowledged before me on this day, by the foregoing   individual, in his capacity as an officer of the aforementioned entities, on   behalf of LRR-C.
    

 

	
STATE   OF TEXAS
    	
§
    
	
 
    	
§
    
	
COUNTY   OF HARRIS
    	
§
    

 

BE IT REMEMBERED, THAT I, the undersigned authority, a notary public duly qualified, commissioned, sworn and acting in and for Harris County, Texas, and being authorized in such county and state to take acknowledgments, hereby certifies that, on this      day of                          2011, there personally appeared before me                                  of LRE GP, LLC, a Delaware limited liability company (“LRE GP”), the general partner of LRR Energy, L.P., a Delaware limited partnership (the “Partnership”), the sole member of LRE Operating, LLC, a Delaware limited liability company (“LRE Operating”), known to me to be such authorized signatory on behalf of LRE Operating, such limited partnership being a party to the foregoing instrument, and I hereby further certify as follows:

 

	
[NEW   MEXICO],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual on behalf   of LRE Operating, in the capacity stated above.
    
	
 
    	
 
    	
 
    
	
[OKLAHOMA],
    	
 
    	
This   instrument was acknowledged before me by the foregoing individual as the   holder of the offices stated above, on behalf of LRE Operating, as stated   above.
    
	
 
    	
 
    	
 
    
	
[TEXAS],
    	
 
    	
This   instrument was acknowledged before me on this day, by the foregoing   individual, in his capacity as an officer of the aforementioned entities, on   behalf of LRE Operating.
    

 

 

IN WITNESS WHEREOF, I have hereunto set my hand and official seal in the City of Houston, Texas, on the day and year first above written.

 

 

	
 
    	
 
    
	
 
    	
Notary   Public in and for the State of Texas
    

 

A-11

 

Exhibit A

 

Part 1 — Leases

 

	
Unique ID
    	
 
    	
Field Name
    	
 
    	
Original
   Lessor/Grantor
    	
 
    	
Original Lessee/Grantee
    	
 
    	
Effective
    Date
    	
 
    	
Book/
    volume
    	
 
    	
Page
    	
 
    	
State
    	
 
    	
County
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Exhibit A-1

 

1

 

Exhibit A

 

Part 2 — Wells

 

	
Aries Propnum
    	
 
    	
API
    	
 
    	
County
    	
 
    	
State
    	
 
    	
Field Name
    	
 
    	
Well #
    	
 
    	
Well name
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Exhibit A-2

 

1

 

Exhibit A

 

Part 3 — Commodity Derivative Contracts

 

Exhibit A-3

 

1

 

Exhibit B

 

Instruments Governing Net Profits Interests

 

Exhibit B

 

1

 

Exhibit C

 

Excluded Commodity Derivative Contracts

 

Exhibit C

 

1Exhibit 10.3

 

LRE GP, LLC

 

LONG TERM INCENTIVE PLAN

 

Section 1.              Purpose of the Plan. The LRE GP, LLC Long-Term Incentive Plan (the “Plan”) has been adopted on               , 2011 (the “Effective Date”) by LRE GP, LLC, a Delaware limited liability company, the general partner (“General Partner”) of LRR Energy, L.P., a Delaware limited partnership (the “Partnership”). The Plan is intended to promote the interests of the General Partner, the Partnership and their Affiliates by providing to Employees, Consultants and Directors incentive compensation awards based on Units to encourage superior performance. The Plan is also contemplated to enhance the ability of the General Partner, the Partnership and their Affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Partnership and to encourage them to devote their best efforts to advancing the business of the Partnership.

 

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

 

(a)           “409A Award” has the meaning specified in Section 6(h)(vii).

 

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

 

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

 

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

 

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

 

(f)            “Change of Control” means, and shall be deemed to have occurred upon one or more of the following events: (i) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than members of the General Partner, the Partnership, or an Affiliate of either the General Partner or the Partnership, shall become the beneficial owner, by way of merger, consolidation, recapitalization, reorganization or otherwise, of 50% or more of the voting power of the voting securities of the General Partner or the Partnership; (ii) the members of the General Partner or the limited partners of the Partnership approve, in one or a series of transactions, a plan of complete liquidation of the General Partner or the Partnership; (iii) the sale or other disposition by the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than one or more of its Affiliates; or (iv) the General Partner or an Affiliate of the General Partner or the Partnership ceases to be the general partner of the Partnership.

 

1

 

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

 

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

 

(i)            “Consultant” means an individual who renders consulting or advisory services to the General Partner or an Affiliate thereof.

 

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

 

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

 

(l)            “Effective Date” has the meaning set forth in Section 1.

 

(m)          “Employee” means an employee of the General Partner or an Affiliate of the General Partner, including Lime Rock Management LP and Lime Rock Resources Operating Company, Inc.

 

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

 

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

 

(p)           “General Partner” has the meaning set forth in Section 1.

 

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

 

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

 

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

 

(t)            “Partnership” has the meaning set forth in Section 1.

 

2

 

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

 

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

 

(w)          “Plan” has the meaning set forth in Section 1.

 

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

 

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

 

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

 

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

 

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

 

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

 

(dd)         “Unit” means a common unit representing a limited partner interest of the Partnership.

 

(ee)         “Unit Appreciation Right” means a contingent right granted to an Employee, Director or Consultant pursuant to Section 6(b) that entitles the holder to receive, in cash or Units, as determined by the Committee in its sole discretion, an amount equal to the excess of the Fair Market Value of a Unit on the exercise date of the Unit Appreciation Right (or another specified date) over the exercise price of the Unit Appreciation Right.

 

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

 

Section 3.              Administration.

 

(a)           Authority of the Committee. The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. Subject to the following and any applicable law, the Committee, in its sole discretion, may delegate any or all of its powers and duties under the Plan, including the power to grant Awards under the Plan, to either or both of the Co-Chief Executive Officers of the General Partner, subject to such limitations on such delegated powers and duties as the 

 

3

 

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

 

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

 

Section 4.              Units.

 

(a)           Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c), the number of Units that may be delivered with respect to Awards under the Plan is             . Units withheld from an Award or surrendered by a Participant to satisfy the Partnership’s or an Affiliate’s tax withholding obligations or to satisfy the payment of any exercise price with respect to the Award (including the withholding of Units with respect to Restricted Units) shall not be considered to be Units delivered under the Plan for this purpose and shall again be available for Awards under the Plan. If any Award is forfeited, cancelled, exercised, or otherwise terminates or expires without the actual delivery of Units pursuant to such Award (the grant of 

 

4

 

Restricted Units is not a delivery of Units for this purpose), the Units subject to such Award shall again be available for Awards under the Plan (including Units not delivered in connection with the exercise of an Option or Unit Appreciation Right). There shall not be any limitation on the number of Awards that may be granted and paid in cash.

 

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

 

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

 

Section 5.              Eligibility. Any Employee, Consultant or Director shall be eligible to be designated a Participant and receive an Award under the Plan. Notwithstanding the foregoing, Employees, Consultants and Directors that provide services to Persons that are not considered a single employer with the Partnership under Code Section 414(b) or Code Section 414(c) shall not be eligible to receive Awards that are subject to Code Section 409A until the Affiliate adopts this Plan as a participating employer in accordance with Section 10. Further, if the Units issuable pursuant to an Award are intended to be registered with the SEC on Form S-8, then only Employees, Consultants, and Directors of the Partnership or a parent or subsidiary of the Partnership (within the meaning of General Instruction A.1(a) to Form S-8) will be eligible to receive such an Award.

 

Section 6.              Awards.

 

(a)           Options. The Committee may grant Options that are intended to comply with Treasury Regulation Section 1.409A-l(b)(5)(i)(A) only to Employees, Consultants or Directors performing services for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(a), “controlling interest” means (i) in the case of a corporation, ownership of stock possessing at least 50% of total combined voting power of all classes of stock of such corporation entitled to vote or at least 50% of the total value of shares of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a sole 

 

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proprietorship, ownership of the sole proprietorship; or (iv) in the case of a trust or estate, ownership of an actuarial interest (as defined in Treasury Regulation Section 1.414(c)-2(b)(2)(ii)) of at least 50% of such trust or estate. The Committee may grant Options that are otherwise exempt from or compliant with Code Section 409A to any eligible Employee, Consultant or Director. The Committee shall have the authority to determine the number of Units to be covered by each Option, the purchase price therefor and the Restricted Period and other conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

 

(i)            Exercise Price. The exercise price per Unit purchasable under an Option that does not provide for the deferral of compensation under Treasury Regulation Section 1.409A-1(b)(5)(i)(A) shall be determined by the Committee at the time the Option is granted but, except with respect to Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date of grant of the Option. The exercise price per Unit purchasable under an Option that does not provide for the deferral of compensation by reason of satisfying the short-term deferral rule set forth in Treasury Regulation Section 1.409A-1(b)(4) or that is compliant with Code Section 409A shall be determined by the Committee at the time the Option is granted.

 

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

 

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

 

(b)           Unit Appreciation Rights. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number of Units to be covered by each grant, whether Units or cash shall be delivered upon exercise, the exercise price therefor and the conditions and limitations applicable to the exercise of the Unit Appreciation Rights, including the terms and conditions in Section 6(b)(i) - (iii) below and such additional terms and conditions as the Committee shall determine, that are not inconsistent with the provisions of the Plan. The Committee may grant Unit Appreciation Rights 

 

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which are intended to comply with Treasury Regulation Section 1.409A-1(b)(5)(i)(A) only to Employees, Consultants or Directors performing services for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(b), “controlling interest” shall have the same meaning set forth in Section 6(a). The Committee may grant Unit Appreciation Rights that are otherwise exempt from or compliant with Code Section 409A to any eligible Employee, Consultant or Director.

 

(i)            Exercise Price. The exercise price per Unit Appreciation Right shall be determined by the Committee at the time the Unit Appreciation Right is granted and may be more or less than the Fair Market Value of a Unit as of the date of grant of the Award. Notwithstanding the foregoing, the exercise price per Unit that may be acquired under a Unit Appreciation Right that does not provide for the deferral of compensation under Treasury Regulation Section 1.409A-1(b)(5)(i)(A) shall not be less than the Fair Market Value of a Unit as of the date of grant of the Unit Appreciation Right.

 

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

 

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

 

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

 

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

 

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

 

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

 

(iii)          Lapse of Restrictions.

 

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

 

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

 

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

 

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

 

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(f)            DERs. To the extent provided by the Committee, in its discretion, an Award (other than a Restricted Unit or Unit Award) may include a tandem DER grant, which may provide that such DERs shall be paid directly to the Participant, be credited to a bookkeeping account (with or without interest in the discretion of the Committee) subject to the same vesting restrictions as the tandem Award, or be subject to such other provisions or restrictions as determined by the Committee in its discretion. Absent a contrary provision in the Award Agreement, DERs shall be paid to the Participant without restriction at the same time as cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, DERs shall only be paid in a manner that is either exempt from or in compliance with Code Section 409A.

 

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

 

(h)           General.

 

(i)            Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Partnership or any Affiliate of the Partnership. Awards granted in addition to or in tandem with other Awards or awards granted under any other plan of the Partnership or any Affiliate of the Partnership may be granted either at the same time as or at a different time from the grant of such other Awards or awards.

 

(ii)           Limits on Transfer of Awards.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vii)         Change of Control. Except as otherwise provided in this paragraph (vii) or as otherwise provided by the Committee pursuant to Section 7(c), Awards under the Plan will vest or become exercisable, as applicable, upon a Change of Control.  No Award that constitutes a “deferral of compensation” within the meaning of Treasury Regulation Section 1.409A-1(b), whether by design, due to a subsequent modification in the terms and conditions of such Award or as a result of a change in applicable law following the date of grant of such Award, and that is not exempt from Section 409A of the Code pursuant to an applicable exemption (any such Award, a “409A Award”) shall become exercisable, or be settled or otherwise paid or distributed, pursuant to the Plan or the applicable Award Agreement, as a result of a Change of Control, unless the event constituting such Change of Control also constitutes a “change in the ownership or effective control” or “a change in the ownership of a substantial portion of the assets” of the General Partner or the Partnership within the meaning of Treasury Regulation Section 1.409A-3(i)(5); except that, to the extent permitted under Section 409A and the Treasury Regulations promulgated thereunder, the time of exercise, payment or settlement of a 409A Award shall be accelerated, or payment shall be made under the Plan in respect of such Award, upon the occurrence of a Change of Control, as determined by the Committee in its discretion, to the extent necessary to pay income, withholding, employment or other taxes imposed on such 409A Award. To the extent any 409A Award does not become exercisable or is not settled or otherwise payable upon a Change of Control as a result of the limitations described in the preceding sentence, it shall become exercisable or be settled or otherwise payable upon the occurrence of an 

 

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event that qualifies as a permissible time of distribution in respect of such 409A Award under Section 409A and the Treasury Regulations promulgated thereunder, the Plan and the terms of the governing Award Agreement.

 

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

 

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

 

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

 

(b)           Amendments to Awards. Subject to Section 7(a), the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided no change, other than pursuant to Section 4(c) or 7(c), in any Award shall materially reduce the benefit to a Participant without the consent of such Participant. Notwithstanding the foregoing, the Board may amend the Plan or an Award to cause such Award to be exempt from Code Section 409A or to comply with the requirements of Code Section 409A or any other applicable law.

 

(c)           Actions Upon the Occurrence of Certain Events. Upon the occurrence of a Change of Control, any change in applicable law or regulation affecting the Plan or Awards thereunder, or any change in accounting principles affecting the financial statements of the Partnership, the Committee, in its sole discretion, without the consent of any Participant or holder of the Award, and on such terms and conditions as it deems appropriate, may take any one or more of the following actions in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or an outstanding Award:

 

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

 

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authority to terminate and cash out any such Award pursuant to this Section 7(c)(i)(A) but will instead but required to provide for the assumption of such Awards by the successor or survivor entity in accordance with Section 7(c)(ii), or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

 

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

 

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

 

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

 

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

 

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

 

Section 8.              General Provisions.

 

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

 

(b)           Tax Withholding. Unless other arrangements have been made that are acceptable to the General Partner, the Partnership or one of their Affiliates, as applicable, the General Partner, the Partnership or such Affiliate, as applicable, is authorized to withhold from any Award, from any payment due or transfer made under any Award or from any compensation or other amount owing to a Participant the amount (in cash, Units, Units that would otherwise be issued pursuant to such Award or other property) of any applicable taxes payable in respect of the grant of an Award, its exercise, the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the General Partner, the Partnership or the applicable Affiliate to satisfy its withholding obligations for the payment of such taxes. Notwithstanding the foregoing, with respect to any Participant who is subject to Rule 16b-3, such tax withholding automatically shall be effected by “netting” or withholding Units otherwise deliverable to the Participant on the vesting or payment of such Award.

 

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

 

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

 

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

 

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

 

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

 

(h)           No Fractional Units. No fractional Units shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Units or whether such fractional Units or any rights thereto shall be canceled, terminated, or otherwise eliminated.

 

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

 

(j)            Facility Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial 

 

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affairs, may be paid to the legal representative of such person, or may be applied for the benefit of such person in any manner that the Committee may select, and the General Partner shall be relieved of any further liability for payment of such amounts.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 10.            Claw-back Policy.  All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Units underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Partnership or the General Partner, including, without limitation, any claw-back policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.

 

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Section 11.            Adoption by Affiliates. With the consent of the Committee, any Affiliate of the Partnership or the General Partner that is not considered a single employer with the Partnership under Code Section 414(b) or Code Section 414(c) may adopt the Plan for the benefit of its Employees, Consultants or Directors by written instrument delivered to the Committee before the grant to such Affiliate’s Employees, Consultants or Directors under the Plan of any 409A Award.

 

****

 

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