Exhibit 10.7
LEGACY RESERVES LP
LONG-TERM INCENTIVE PLAN
GRANT OF UNIT OPTION
Grantee______________________________________________
Grant Date____________________________________, 200__
1. GRANT OF OPTION. Legacy Reserves LP (the "Partnership") hereby grants to
you the right and option ("Option") to purchase all or any part of an
aggregate of ____ Units ("Units") of the Partnership under the Legacy
Reserves LP Long-Term Incentive Plan (the "Plan") on the terms and
conditions set forth herein and in the Plan, which is attached hereto as
Appendix A and is incorporated herein by reference as a part of this
Agreement. This grant of the Option does not include tandem DERs. In the
event of any conflict between the terms of this Agreement and the Plan,
the Plan shall control. Capitalized terms used in this Agreement but not
defined herein shall have the meanings ascribed to such terms in the Plan,
unless the context requires otherwise.
2. EXERCISE PRICE. The exercise price per Unit purchased pursuant to the
exercise of the Option shall be $[not less than FMV on date of grant],
subject to adjustment as provided in the Plan.
3. REGULAR VESTING. Except as otherwise provided in Section 4 below, the
Option shall vest and may be exercised in whole or in part (pursuant to
the terms of Section 5) in accordance with the following schedule:
CUMULATIVE VESTED
VESTING DATE VESTED INCREMENT PERCENTAGE
------------ ---------------- -----------------
____________ ________________ 33.3%
____________ ________________ 66.6%
____________ ________________ 100.0%
Your employment with the Partnership, the Company or any of their
Affiliates, as the case may be (the "Employer") must be continuous
from the Grant Date through the applicable vesting date in order for
the Award to become vested and exercisable under the provisions of
this Agreement.
There is no minimum or maximum number of vested Units that must be
purchased upon exercise of the Option according to the provisions of
this Agreement. Instead, the Option may be exercised, at any time
and from time to time during the term of the Option, to purchase any
number of whole Units that are then vested and exercisable according
to the provisions of this Agreement.
Nothwithstanding any of the foregoing, the Option shall not be
exercisable in any event after the expiration of 10 years from the
Grant Date.
4. EVENTS OCCURRING PRIOR TO REGULAR VESTING.
(a) DEATH OR DISABILITY. If your employment with the Employer terminates
as a result of your death or a disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
and in effect from time to time (the "Code")), the Option
automatically will become fully vested and exercisable in full upon
such termination and for the period thereafter that shall expire on
the earlier of (i) the 12 month anniversary of such termination date
or (ii) the expiration of the Option in accordance with Section 3
and, thereafter, the Option shall, to the extent not previously
exercised, automatically terminate and become null and void.
(b) TERMINATION BY THE PARTNERSHIP OTHER THAN FOR CAUSE. If your
employment is terminated by the Partnership for any reason other
than "Cause," as determined by the Partnership, the Option then held
by you automatically will become fully vested and exercisable in
full upon such termination and for the period thereafter that shall
expire on the earlier of (i) the 12 month anniversary of such
termination date or (ii) the expiration of the Option in accordance
with Section 3 and, thereafter, the Option shall, to the extent not
previously exercised, automatically terminate and become null and
void.
(c) OTHER TERMINATIONS. Except as provided in Section 3 hereof, if you
terminate from the Partnership for any reason other than as provided
in Sections 4(a) and (b) above, all unvested Options then held by
you automatically shall be forfeited without payment upon such
termination.
(d) CHANGE OF CONTROL. All outstanding Options held by you automatically
shall become fully vested and exercisable in full upon a Change of
Control.
For purposes of this Section 4, "employment with the Partnership"
shall include being an employee of or a director or consultant to
the Partnership or an Affiliate.
For purposes of this Section 4, "Cause" is defined as:
(1) an act by the Grantee of willful misrepresentation, fraud
or willful dishonesty intended to result in substantial
personal enrichment at the expense of the Partnership or an
Affiliate;
(2) the Grantee's willful misconduct with regard to the
Partnership or an Affiliate that is intended to have a
material adverse impact on the Partnership or an Affiliate;
(3) the Grantee's material, willful and knowing violation of
Partnership or Affiliate guidelines or policies or the
Grantee's fiduciary duties which has or is intended to have a
material adverse impact on the Partnership or an Affiliate;
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(4) the Grantee's willful or reckless behavior in the
performance of his or her duties which has a material adverse
impact on the Partnership or an Affiliate;
(5) the Grantee's conviction of, or pleading nolo contendere
or guilty to, a felony; or
(6) any other willful material breach by the Grantee of his or
her obligations to the Partnership or an Affiliate that, if
curable, is not cured within 20 days of receipt of written
notice from the Partnership or an Affiliate.
5. METHOD OF EXERCISE. To the extent that the Option has become exercisable,
the Option may be exercised from time to time by written notice to the
Partnership at its principal executive office addressed to the attention
of its Secretary (or such other office or person as the Partnership may
designate from time to time), in substantially the form attached hereto as
Appendix B or such other form as may be approved from time to time by the
Partnership, accompanied by the aggregate Exercise Price for the Units to
be purchased and any required tax withholding amount as may be determined
in the discretion of the Partnership.
6. PAYMENT OF EXERCISE PRICE. The purchase price of the Units as to which the
Option is exercised shall be paid in full at the time of exercise (a) in
cash (including by check acceptable to the Partnership), (b) if the Units
are readily tradable on a national securities market or exchange, through
a "cashless broker exercise" procedure (a "cashless broker exercise" is
not available for executive officers of the Partnership except to the
extent the exercise in such manner is approved in advance by the
Partnership) in accordance with a program established by the Partnership,
(c) any other method approved by the Partnership, or (d) any combination
of the foregoing. No fraction of a Unit shall be transferred upon exercise
of the Option.
7. RIGHTS AS A UNITHOLDER. Unless and until a certificate or certificates
representing such Units shall have been transferred by the Partnership to
you, you (or the person permitted to exercise the Option in the event of
your death) shall not be or have any of the rights or privileges of a
unitholder of the Partnership with respect to Units acquirable upon an
exercise of the Option.
8. LIMITATIONS UPON TRANSFER. All rights under this Agreement shall belong to
you alone and may not be transferred, assigned, pledged, or hypothecated
by you in any way (whether by operation of law or otherwise), other than
by will or the laws of descent and distribution and shall not be subject
to execution, attachment, or similar process. Upon any attempt by you to
transfer, assign, pledge, hypothecate, or otherwise dispose of such rights
contrary to the provisions in this Agreement or the Plan, or upon the levy
of any attachment or similar process upon such rights, such rights shall
immediately become null and void.
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9. RESTRICTIONS. By accepting this grant, you agree that any Units which you
may acquire by exercising the Option will not be sold or otherwise
disposed of in any manner which would constitute a violation of any
applicable federal or state securities laws. You also agree that (i) the
certificates representing the Units purchased under the Option may bear
such legend or legends as the Committee deems appropriate in order to
assure compliance with applicable securities laws, (ii) the Company may
refuse to register the transfer of the Units purchased under the Option on
the transfer records of the Partnership if such proposed transfer would in
the opinion of counsel satisfactory to the Partnership constitute a
violation of any applicable securities law, and (iii) the Partnership may
give related instructions to its transfer agent, if any, to stop
registration of the transfer of the Units to be purchased under the
Option.
10. WITHHOLDING OF TAX. To the extent that the exercise of an Option results
in the receipt of compensation by you with respect to which the
Partnership or an Affiliate has a tax withholding obligation pursuant to
applicable law, unless other arrangements have been made by you that are
acceptable to the Partnership or such Affiliate, you shall deliver to the
Partnership or the Affiliate such amount of money as the Partnership or
the Affiliate may require to meet its withholding obligations under such
applicable law. No payment of a Unit shall be made pursuant to this
Agreement until you have paid or made arrangements approved by the
Partnership or the Affiliate to satisfy in full the applicable tax
withholding requirements of the Partnership or Affiliate with respect to
such event.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Partnership and upon any
person lawfully claiming under you.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with regard to the subject matter hereof, and contains all the
covenants, promises, representations, warranties and agreements between
the parties with respect to the Restricted Units granted hereby. Without
limiting the scope of the preceding sentence, all prior understandings and
agreements, if any, among the parties hereto relating to the subject
matter hereof are hereby null and void and of no further force and effect.
Any modification of this Agreement shall be effective only if it is in
writing and signed by both you and an authorized officer of the Company.
13. NOTICES. Any notices given in connection with this Grant Agreement shall,
if issued to Participant, be delivered to Participant's current address on
file with the Company, or if issued to the Company, be delivered to the
Company's principal offices.
14. EXECUTION OF RECEIPTS AND RELEASES. Any payment of cash or any issuance or
transfer of Units or other property to Participant, or to Participant's
legal representatives, heirs, legatees or distributees, in accordance with
the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Partnership may
require Participant or Participant's legal representatives, heirs,
legatees or distributees, as a condition precedent to such payment or
issuance, to execute a release and receipt therefor in such form as it
shall determine.
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15. GOVERNING LAW. This grant shall be governed by, and construed in
accordance with, the laws of the State of Texas, without regard to
conflicts of laws principles thereof.
LEGACY RESERVES LP GRANTEE
By: Legacy Reserves GP, LLC, its General Partner
By: _________________________________________ By: ________________________
Name: _______________________________________ Name: ______________________
Title: ______________________________________ Title: _____________________
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APPENDIX A
LEGACY RESERVES LP
LONG-TERM INCENTIVE PLAN
(EFFECTIVE AS OF _________, 2006)
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APPENDIX B
LEGACY RESERVES LP
LONG-TERM INCENTIVE PLAN
UNIT OPTION EXERCISE NOTE
PLEASE PRINT:
TODAY'S DATE: __________________________________________________________________
OPTIONHOLDER NAME: _____________________________________________________________
MAILING ADDRESS: _______________________________________________________________
Attention: _________________________________
I hereby exercise my Option to acquire ________ Units, as defined in the LEGACY
RESERVES LP Long-Term Incentive Plan (the "Plan"), at my exercise price per Unit
of $_____________. Enclosed is the original of my Grant of Unit Option (the
"Option Agreement") evidencing my Option hereby exercised and consideration in a
form provided for in my Option Agreement in the amount of $___________.
I hereby represent that I have previously received a copy of the Plan from the
Partnership and that I understand the terms and restrictions described therein
and agree to be bound by the terms of such document and my Option Agreement.
By: ___________________________
Receipt of Notice and Payment in Full Acknowledged:
By: ____________________________________
Name: __________________________________
Date: __________________________________
NOTE: IF EXERCISING THE OPTION REPRESENTED BY THE ENCLOSED OPTION AGREEMENT TO
PURCHASE LESS THAN ALL OF THE UNITS TO WHICH THE OPTION RELATES, THE ORIGINAL
OPTION AGREEMENT WILL BE RETURNED WITH AN APPROPRIATE NOTATION EVIDENCING THE
UNITS FOR WHICH THE OPTION HAS BEEN EXERCISED.
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