UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 5, 2012
Date of earliest event reported: June 4, 2012
Constellation Energy Partners LLC
(Exact name of registrant as specified in its charter)
| Delaware | 001-33147 | 11-3742489 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 1801 Main Street, Suite 1300 Houston, TX |
77002 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (832) 308-3700
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement.
2012 Compensation Actions
Long-term Incentives
On April 5, 2012, the Company made performance-based grants to each of our named executive officers under the Company’s 2009 Omnibus Incentive Compensation Plan (the “Plan”), pursuant to forms of grant agreements as filed with the Company’s Current Report on Form 8-K dated April 6, 2012 (the “Prior Grants”). On June 4, 2012, the Company and each of our executive officers mutually terminated the Prior Grants, and as of such date they have no further force and effect. The Prior Grants were to have been paid in cash based on actual performance relative to pre-determined, equally weighted 2012 goals for natural gas and oil and natural gas liquids production.
On June 4, 2012, the Company made (i) a performance-based grant to be settled in Class B Common Units of the Company, if earned, and (ii) a performance-based grant to be settled in cash, if earned, to each of our named executive officers under the Plan, in each case based on actual performance relative to pre-determined, equally weighted 2012 goals for natural gas and oil and natural gas liquids production. The goals set forth for threshold, target and maximum performance levels in the June 4, 2012, grants have the same performance targets as specified in the Prior Grants. In the event that the pre-determined 2012 performance levels are achieved, these new grants shall have the effect of reducing the total fair value of the compensation paid to each of our named executive officers, while reducing the amount of cash payments to be made to our named executive officers from the amounts that would have been paid under the Prior Grants.
Unit-Based Awards
The awards contain a threshold and target payout level. No award payouts will be made for actual performance below a threshold level. For performance within the target range, award payouts will be made at 100%. For actual performance between the threshold and target level, award payouts will be determined using a linear interpolation between the threshold level and the low end of the target level. Awards will be earned based upon 2012 performance and issuance of the earned units will be made on January 2, 2013, except in the case of death, disability, involuntary termination or certain change of control events, which may accelerate the unit grants. The target awards of these unit-based grants are not part of the target-level bonuses of the named executive officers under their employment agreements.
The pre-determined 2012 performance levels required for a unit-based payout on January 2, 2013, are:
| Performance Level |
Payout % |
Natural Gas Production (weighted 50%) |
Oil/NGL Production (weighted 50%) | |||
| Target |
100% | from 11.4 Bcf to 14.0 Bcf* | from 144 Mbbls to 176 Mbbls* | |||
| Threshold |
50% | at least 10.2 Bcf | at least 128 Mbbls |
| * | Achievement of the performance metric anywhere within this range will result in a payout of 100% of the target Class B Common Units, with a linear interpolation between the threshold performance level and the low end of the target range performance level. |
The target unit grants for the named executive officers are as follows:
| • | Mr. Brunner – 190,114 Class B Common Units |
| • | Mr. Ward – 95,057 Class B Common Units |
| • | Ms. Mellencamp – 76,046 Class B Common Units |
| • | Mr. Hiney – 38,023 Class B Common Units |
The number of target units under these awards was calculated based on one-half of the target cash award under the Prior Grants divided by the 20-day simple average of the Company’s closing Common Unit price on NYSE Amex through April 5, 2012, or $2.63. The $2.63 unit price is 32.3% below the Company’s closing Common Unit price of $1.78 on June 4, 2012, which reduces the fair value of the compensation from that which would have been earned under the Prior Grants if the performance metrics are achieved.
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The foregoing description of the executives’ unit-based long-term incentive award is qualified in its entirety by the terms of a Grant Agreement Relating to 2012 Performance Award-Executives (Units), a form of which is filed as Exhibit 10.1 to this Form 8-K and incorporated by reference.
Cash-Based Awards
The cash-based awards contain a threshold, target and maximum payout level. No award payouts will be made for actual performance below a threshold level. For performance within the target range, award payouts will be made at 100%. For actual performance at a maximum level, award payouts will be made at 200%. For actual performance between the threshold and target level and between the target and maximum levels, award payouts will be determined using a linear interpolation between the low and high ends of the target levels, respectively. For actual performance above the target level, each executive also will be paid the cash value of the award times the corresponding percentage above the target performance level (100%) for the performance level achieved. Awards will be earned based upon 2012 performance and will be 100% vested as of December 31, 2012. Payment of the earned cash-based awards will be made on January 2, 2014, except in the case of death, disability, involuntary termination or certain change of control events, which may accelerate payment. The target cash values of the grants are part of the target-level bonuses of the named executive officers under their employment agreements.
The pre-determined 2012 performance levels required for a cash payout on January 2, 2014, are:
| Performance Level |
Payout % | Natural Gas Production (weighted 50%) |
Oil/NGL Production (weighted 50%) | |||
| Maximum |
200% | at least 15.2 Bcf | at least 192 Mbbls | |||
| Target |
100% | from 11.4 Bcf to 14.0 Bcf* | from 144 Mbbls to 176 Mbbls* | |||
| Threshold |
50% | at least 10.2 Bcf | at least 128 Mbbls |
| * | Achievement of the performance metric anywhere within this range will result in a payout of 100% of the cash value, with a linear interpolation between the threshold performance level and the low end of the target range performance level and between the high end of the target range performance level and the maximum performance level, respectively. |
The target cash payouts for the named executive officers are as follows:
| • | Mr. Brunner – $500,000 |
| • | Mr. Ward – $250,000 |
| • | Ms. Mellencamp – $200,000 |
| • | Mr. Hiney – $100,000 |
The target cash payouts under these awards were calculated based on one-half of the target cash awards under the Prior Grants.
The foregoing description of the executives’ cash-based long-term incentive award is qualified in its entirety by the terms of a Grant Agreement Relating to 2012 Performance Award-Executives (Cash), a form of which is filed as Exhibit 10.2 to this Form 8-K and incorporated by reference.
Item 1.02 Termination of a Material Definitive Agreement
On April 5, 2012, the Company made performance-based grants to each of our named executive officers under the Plan, pursuant to forms of grant agreements as filed with the Company’s Current Report on Form 8-K dated April 6, 2012, and incorporated herein by reference. On June 4, 2012, the Company and each of our executive officers mutually terminated the Prior Grants, and as of such date they have no further force and effect.
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| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The disclosure under Item 1.01 is incorporated by reference into this Item 5.02.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number |
Description | |
| 10.1 | Form of Grant Agreement Relating to 2012 Performance Award - Executives (Units). | |
| 10.2 | Form of Grant Agreement Relating to 2012 Performance Award – Executives (Cash). | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CONSTELLATION ENERGY PARTNERS LLC | ||||
| Date: June 5, 2012 | By: | /s/ Charles C. Ward | ||
| Charles C. Ward | ||||
| Chief Financial Officer and Treasurer | ||||
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EXHIBIT INDEX
| Exhibit Number |
Description | |
| 10.1 | Form of Grant Agreement Relating to 2012 Performance Award – Executives (Units). | |
| 10.2 | Form of Grant Agreement Relating to 2012 Performance Award – Executives (Cash). | |
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EXHIBIT 10.1
Constellation Energy Partners LLC
2009 Omnibus Incentive Compensation Plan
Grant Agreement Relating to
2012 Performance Award—Executives (Units)
Grantee:
Grant Date: , 2012
1. Grant of Performance Award.
(a) Grant. Constellation Energy Partners LLC, a Delaware limited liability company (the “Company”), hereby grants to you one Performance Award (the “Award”) under the Constellation Energy Partners LLC 2009 Omnibus Incentive Compensation Plan (the “Plan”) on the terms and conditions set forth herein and in the Plan, which is attached hereto as Appendix A and incorporated herein by reference as a part of this agreement (the “Grant Agreement”). The Award is a right to receive up to Units of the Company (the “Award Units”). The Company and the Grantee acknowledge and agree that the Grant Agreement Relating to 2012 Performance Award – Executives dated April 5, 2012 by and between the Company and Grantee is terminated and shall have no further force and effect as of the date hereof.
(b) General. Capitalized terms used in this Grant Agreement but not defined herein shall have the meanings ascribed to such terms in the Plan, unless the context requires otherwise.
2. Vesting of the Award. The Award shall fully vest on the earlier of (the earlier of such dates, the “Vesting Date”):
(a) December 31, 2012,
(b) a Change of Control, or
(c) a Qualifying Event.
3. Determination of Unit Payout Amount.
(a) For fiscal year 2012, the Performance Metrics shall be based on the quantities of natural gas and oil/natural gas liquids that the Company produces from January 1, 2012 through December 31, 2012. If a “Threshold” or “Target” performance level of production is reached for one or both of the Performance Metrics (as set forth on Annex A), then the Award shall be granted in an number of Units equal to (a) the Award Units multiplied by 50% multiplied by the corresponding percentage for the performance level achieved up to the “Target” performance level (100%) for the natural gas Performance Metric (but only if the “Threshold” performance level is achieved), plus (b) the Award Units multiplied by 50% multiplied by the corresponding percentage for the performance level achieved up to the “Target” performance level (100%) for the oil/natural gas liquids Performance Metric (but only if the “Threshold” performance level is achieved). Amounts of production and the corresponding Award Units percentage shall be interpolated on a linear basis between each performance level based on the actual amounts of production as set forth on Annex A.
(b) On or before January 2, 2013, the Committee shall determine if the Performance Metrics have been achieved for purposes of this Grant Agreement and if so, at what level(s) so that, if achieved, the earned Units can be granted on January 2, 2013 pursuant to Section 4.
(c) Grantee shall have no ownership rights in respect of the Award Units until any Units are earned as provided in this Section 3.
4. Grant of Award. If an Award is to be granted pursuant to Section 3, then the Award shall be granted in Units on January 2, 2013 by the Company; provided, however, that if a Qualifying Event specified in clause (1) or (2) of the definition thereof occurs before December 31, 2012, the Award shall be deemed to fully vest on such date at the “Target” performance level, and 100% of the Award Units shall be granted (subject to Sections 8 and 9) within two (2) business days after the date of such Qualifying Event (and Section 5.1(b) of the Employment Agreement shall not be applicable to the Award). The earned Units shall be evidenced in book-entry form in the name of Grantee.
5. Target-Level Bonus. For purposes of Sections 5.2(a), 5.3(a) and 5.3(b) of the Employment Agreement, if a Qualifying Event to which such Section is applicable occurs in 2012, none of the Award shall be a “Target-Level Bonus” referred to therein (including in defined terms used therein).
6. Definitions. As used herein, the following terms shall have the following meanings:
(a) “Change of Control” has the meaning set forth in the Employment Agreement.
(b) “Employment Agreement” means that certain Amended and Restated Employment Agreement, effective April 5, 2012, between the Company and Grantee, as amended, restated or otherwise modified from time to time.
(c) “Operating Agreement” means that certain Second Amended and Restated Operating Agreement of the Company, dated as of November 20, 2006, as amended, restated or otherwise modified from time to time.
(d) “Performance Metrics” mean the achievement of one or more of the performance levels set forth in the table on Annex A attached hereto under the headings “Natural Gas Production” and “Oil/NGL Production”. The Performance Metrics shall be deemed achieved at the “Target” levels for each of the quarters in a year in which a Change of Control or Qualifying Event occurs.
(e) “Qualifying Event” means (1) death of Grantee, (2) delivery by the Company of a Disability Notice with respect to Grantee, (3) Involuntary Termination of Grantee, or (4) a PostRock Ownership Event (with each of the foregoing capitalized terms having the definitions therefore set forth in the Employment Agreement).
7. Forfeiture.
(a) Subject to Sections 2 and 7(b), any Award that is then unvested shall become forfeited, null and void on the date on which Grantee’s employment by the Company or its Affiliates is terminated.
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(b) Except as provided in Section 5 hereof, but otherwise notwithstanding anything to the contrary herein, if Grantee’s Employment Agreement provides for a treatment of the Award that differs from this Section 7, then the terms of the Employment Agreement shall control upon the termination of Grantee’s employment by the Company or its Affiliates.
(c) The Committee may, in its discretion, waive in whole or in part any forfeiture pursuant to this Section 7.
8. Termination of Employment. For all purposes of this Grant Agreement, Grantee shall be considered to have terminated employment with the Company when Grantee incurs a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder. If any payment under this Grant Agreement would be subject to additional taxes under Section 409A of the Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then such payment shall be paid on the date that is six months after the date of Grantee’s termination of employment with the Company (or if such payment date does not fall on a business day of the Company, the next following business day of the Company), or such earlier date upon which such payment can be paid under Section 409A of the Code without being subject to such additional taxes.
9. Withholding of Tax.
(a) The Company or any Affiliate is authorized to withhold from any grant of Units made pursuant to this Grant Agreement or from any compensation or other amount owing to Grantee the amount (in cash, Units, other securities or other property) of any applicable taxes payable at the minimum statutory rate in respect of this Grant Agreement, the vesting or any payment or transfer under the Grant Agreement and to take such other action as may be necessary in the opinion of the Company to satisfy its withholding obligations for the payment of such taxes, and in this regard, such withholding obligation may be satisfied by Grantee timely remitting (in cash, check or wire transfer) to the Company or the Internal Revenue Service, at the Company’s election, the amount of any such applicable taxes (as determined by the Company).
(b) Net Units. Unless Grantee satisfies the tax withholding obligation set forth above by timely remitting such amounts to the Company or the Internal Revenue Service (at the Company’s election) by cash, check or wire transfer, all Units to be issued pursuant to this Grant Agreement shall be net of tax withholding, such that the tax withholding obligation of Grantee in respect of this Grant Agreement and such Units is satisfied through the retention by the Company of a number of Units equal to Grantee’s aggregate tax withholding obligation divided by the per-unit Fair Market Value for the date immediately prior to the date of such issuance of Units.
10. Limitations on Transfer. All rights under this Grant Agreement shall belong to Grantee alone and may not be transferred, assigned, pledged or hypothecated by Grantee 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 Grantee to transfer, assign, pledge, hypothecate or otherwise dispose of such rights contrary to the provisions in this Grant 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.
11. Binding Effect. This Grant Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and upon any person lawfully claiming under Grantee.
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12. Entire Agreement and Amendment. This Grant Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the Award 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 made null and void and of no further force and effect. Grantee and the Company agree that, with respect to the Award, the vesting provisions set forth in this Grant Agreement supersede, and govern and control over, any performance criteria achievement and vesting provisions set forth in the Plan.
13. Notices. Any notices given in connection with this Grant Agreement shall, if issued to Grantee, be delivered to Grantee’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. Payment of cash or other property to Grantee, or to Grantee’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 Company may require Grantee or Grantee’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 reasonably determine.
15. Reorganization of the Company. The existence of this Grant Agreement shall not affect in any way the right or power of the Company and its Affiliates or their respective unitholders, stockholders or other equity holders to make or authorize (a) any or all adjustments, recapitalizations, reorganizations or other changes in the respective capital structures or businesses of any of the Company and its Affiliates; (b) any merger or consolidation of any of the Company and its Affiliates; (c) any issue of bonds, debentures or securities affecting the Award or the rights thereof; (d) the dissolution or liquidation of any of the Company and its Affiliates, or any sale or transfer of all or any part of their assets or business; or (e) any other corporate act or proceeding, whether of a similar character or otherwise.
16. Certain Restrictions. By executing this Grant Agreement, Grantee acknowledges that he or she has received a copy of the Plan and agrees that Grantee will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply with the securities laws or any other applicable laws, rules or regulations or with this document or the terms of the Plan.
17. Amendment and Termination. No amendment or termination of this Grant Agreement that adversely affects the rights of the Grantee shall be made by the Company at any time without the prior written consent of Grantee.
18. Governing Law. This grant shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement to be effective as of , 2012.
| Constellation Energy Partners LLC |
Grantee | |||||||
| By: | By: | |||||||
| Name: | Name: | |||||||
| Title: | Title: | |||||||
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Annex A
Performance Metrics
| Performance Level |
Payout % |
Natural Gas Production (weighted 50%) |
Oil/NGL Production (weighted 50%) | |||
| Target |
100% | from 11.4 bcf to 14.0 bcf* |
from 144 mbbls to 176 mbbls* | |||
| Threshold |
50% | at least 10.2 bcf | at least 128 mbbls | |||
| * | Achievement of the Performance Metric anywhere within this range will result in a payout of 100% of the Award Units, with a linear interpolation between the Threshold performance level and the low end of the Target range performance level. |
APPENDIX A
CONSTELLATION ENERGY PARTNERS LLC
2009 OMNIBUS INCENTIVE COMPENSATION PLAN
EXHIBIT 10.2
Constellation Energy Partners LLC
2009 Omnibus Incentive Compensation Plan
Grant Agreement Relating to
2012 Performance Award—Executives (Cash)
Grantee:
Grant Date: , 2012
1. Grant of Performance Award.
(a) Grant. Constellation Energy Partners LLC, a Delaware limited liability company (the “Company”), hereby grants to you one Performance Award (the “Award”) under the Constellation Energy Partners LLC 2009 Omnibus Incentive Compensation Plan (the “Plan”) on the terms and conditions set forth herein and in the Plan, which is attached hereto as Appendix A and incorporated herein by reference as a part of this agreement (the “Grant Agreement”). The Award has a value of $ (the “Cash Value”). The Company and the Grantee acknowledge and agree that the Grant Agreement Relating to 2012 Performance Award – Executives dated April 5, 2012 by and between the Company and Grantee is terminated and shall have no further force and effect as of the date hereof.
(b) General. Capitalized terms used in this Grant Agreement but not defined herein shall have the meanings ascribed to such terms in the Plan, unless the context requires otherwise.
2. Vesting of the Award. The Award shall fully vest on the earlier of (the earlier of such dates, the “Vesting Date”):
(a) December 31, 2012,
(b) a Change of Control, or
(c) a Qualifying Event.
3. Determination of Cash Payout Amount.
(a) For fiscal year 2012, the Performance Metrics shall be based on the quantities of natural gas and oil/natural gas liquids that the Company produces from January 1, 2012 through December 31, 2012. If a “Threshold,” “Target” or “Maximum” performance level of production is reached for one or both of the Performance Metrics (as set forth on Annex A), then the Award shall be paid in an amount equal to (a) the Cash Value multiplied by 50% multiplied by the corresponding percentage for the performance level achieved for the natural gas Performance Metric (but only if the “Threshold” performance level is achieved), plus (b) the Cash Value multiplied by 50% multiplied by the corresponding percentage for the performance level achieved for the oil/natural gas liquids Performance Metric (but only if the “Threshold” performance level is achieved), plus (c) the Cash Value multiplied by 50% multiplied by the corresponding percentage in excess of the “Target” performance level (100%) for the performance level achieved for the natural gas Performance Metric , plus (d) the Cash Value multiplied by 50% multiplied by the corresponding percentage in excess of the “Target” performance level (100%) for the performance level achieved for the oil/natural gas liquids Performance Metric. Amounts of production and the corresponding Cash Value percentage shall be interpolated on a linear basis between each performance level based on the actual amounts of production as set forth on Annex A.
(b) Prior to filing the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2012, the Committee shall determine the Performance Metrics results for purposes of this Grant Agreement, and the Cash Value related thereto shall be deemed earned as of December 31, 2012.
4. Payment of Award. If an Award is payable pursuant to Section 3(a), then the Award shall be paid in cash on January 2, 2014 by the Company or any Affiliate; provided, however, that (a) if a Qualifying Event specified in clause (1) or (2) of the definition thereof occurs before December 31, 2013, the Award shall be deemed to fully vest on such date at the “Target” performance level, and 100% of the Cash Value shall be paid (subject to Sections 8 and 9) in cash within ten (10) days after the date of such Qualifying Event (and Section 5.1(b) of the Employment Agreement shall not be applicable to the Award) and (b) if a Qualifying Event occurs after the applicable Vesting Date, the amount payable pursuant to Section 3 shall be paid (subject to Sections 8 and 9) in cash within ten (10) days after the date of such Qualifying Event, but in no event later than January 2, 2014.
5. Target-Level Bonus. For purposes of Sections 5.2(a), 5.3(a) and 5.3(b) of the Employment Agreement, if a Qualifying Event to which such Section is applicable occurs in 2012, 100% of the Cash Value shall be deemed the “Target-Level Bonus” referred to therein (including in defined terms used therein). For purposes of Sections 5.2(a) and 5.3(a) of the Employment Agreement, if a Qualifying Event to which such Section is applicable occurs in 2013, 100% of the Cash Value shall be deemed the “Target-Level Bonus” referred to therein (including in defined terms used therein).
6. Definitions. As used herein, the following terms shall have the following meanings:
(a) “Change of Control” has the meaning set forth in the Employment Agreement.
(b) “Employment Agreement” means that certain Amended and Restated Employment Agreement, effective April 5, 2012, between the Company and Grantee, as amended, restated or otherwise modified from time to time.
(c) “Operating Agreement” means that certain Second Amended and Restated Operating Agreement of the Company, dated as of November 20, 2006, as amended, restated or otherwise modified from time to time.
(d) “Performance Metrics” mean the achievement of one or more of the performance levels set forth in the table on Annex A attached hereto under the headings “Natural Gas Production” and “Oil/NGL Production”. The Performance Metrics shall be deemed achieved at the “Target” levels for each of the quarters in a year in which a Change of Control or Qualifying Event occurs.
(e) “Qualifying Event” means (1) death of Grantee, (2) delivery by the Company of a Disability Notice with respect to Grantee, (3) Involuntary Termination of Grantee, or (4) a PostRock Ownership Event (with each of the foregoing capitalized terms having the definitions therefore set forth in the Employment Agreement).
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7. Forfeiture.
(a) Subject to Sections 2 and 7(b), any Award that is then unvested shall become forfeited, null and void on the date on which Grantee’s employment by the Company or its Affiliates is terminated.
(b) Notwithstanding anything to the contrary herein, if Grantee’s Employment Agreement provides for a treatment of the Award that differs from this Section 7, then the terms of the Employment Agreement shall control upon the termination of Grantee’s employment by the Company or its Affiliates.
(c) The Committee may, in its discretion, waive in whole or in part any forfeiture pursuant to this Section 7.
8. Termination of Employment. For all purposes of this Grant Agreement, Grantee shall be considered to have terminated employment with the Company when Grantee incurs a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder. If any payment under this Grant Agreement would be subject to additional taxes under Section 409A of the Code because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then such payment shall be paid on the date that is six months after the date of Grantee’s termination of employment with the Company (or if such payment date does not fall on a business day of the Company, the next following business day of the Company), or such earlier date upon which such payment can be paid under Section 409A of the Code without being subject to such additional taxes.
9. Withholding of Tax. The Company or any Affiliate is authorized to withhold from any payment due pursuant to this Grant Agreement or from any compensation or other amount owing to Grantee the amount (in cash, Units, other securities or other property) of any applicable taxes payable at the minimum statutory rate in respect of this Grant Agreement, the vesting or any payment or transfer under the Grant Agreement and to take such other action as may be necessary in the opinion of the Company to satisfy its withholding obligations for the payment of such taxes, and in this regard, such withholding obligation may be satisfied by Grantee timely remitting (in cash, check or wire transfer) to the Company or the Internal Revenue Service, at the Company’s election, the amount of any such applicable taxes (as determined by the Company).
10. Limitations on Transfer. All rights under this Grant Agreement shall belong to Grantee alone and may not be transferred, assigned, pledged or hypothecated by Grantee 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 Grantee to transfer, assign, pledge, hypothecate or otherwise dispose of such rights contrary to the provisions in this Grant 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.
11. Binding Effect. This Grant Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and upon any person lawfully claiming under Grantee.
12. Rights of Grantee. Any benefits payable under Section 3 shall be provided from the general assets of the Company. Grantee’s rights arising under this Grant Agreement shall not rise above those of a general creditor of the Company.
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13. Entire Agreement and Amendment. This Grant Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the Award 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 made null and void and of no further force and effect. Grantee and the Company agree that, with respect to the Award, the vesting provisions set forth in this Grant Agreement supersede, and govern and control over, any performance criteria achievement and vesting provisions set forth in the Plan.
14. Notices. Any notices given in connection with this Grant Agreement shall, if issued to Grantee, be delivered to Grantee’s current address on file with the Company, or if issued to the Company, be delivered to the Company’s principal offices.
15. Execution of Receipts and Releases. Payment of cash or other property to Grantee, or to Grantee’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 Company may require Grantee or Grantee’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 reasonably determine.
16. Reorganization of the Company. The existence of this Grant Agreement shall not affect in any way the right or power of the Company and its Affiliates or their respective unitholders, stockholders or other equity holders to make or authorize (a) any or all adjustments, recapitalizations, reorganizations or other changes in the respective capital structures or businesses of any of the Company and its Affiliates; (b) any merger or consolidation of any of the Company and its Affiliates; (c) any issue of bonds, debentures or securities affecting the Award or the rights thereof; (d) the dissolution or liquidation of any of the Company and its Affiliates, or any sale or transfer of all or any part of their assets or business; or (e) any other corporate act or proceeding, whether of a similar character or otherwise.
17. Certain Restrictions. By executing this Grant Agreement, Grantee acknowledges that he or she has received a copy of the Plan and agrees that Grantee will enter into such written representations, warranties and agreements and execute such documents as the Company may reasonably request in order to comply with the securities laws or any other applicable laws, rules or regulations or with this document or the terms of the Plan.
18. Amendment and Termination. No amendment or termination of this Grant Agreement that adversely affects the rights of the Grantee shall be made by the Company at any time without the prior written consent of Grantee.
19. Governing Law. This grant shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflicts of laws principles thereof.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Grant Agreement to be effective as of , 2012.
| Constellation Energy Partners LLC | Grantee | |||||||
| By: |
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By: |
| |||||
| Name: | Name: | |||||||
| Title: | Title: | |||||||
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Annex A
Performance Metrics
| Performance Level |
Payout % | Natural Gas Production (weighted 50%) |
Oil/NGL Production (weighted 50%) | |||
| Maximum |
200% | at least 15.2 bcf | at least 192 mbbls | |||
| Target |
100% | from 11.4 bcf to 14.0 bcf* | from 144 mbbls to 176 mbbls* | |||
| Threshold |
50% | at least 10.2 bcf | at least 128 mbbls | |||
| * | Achievement of the Performance Metric anywhere within this range will result in a payout of 100% of the Cash Value, with a linear interpolation between the Threshold performance level and the low end of the Target range performance level and between the high end of the Target range performance level and the Maximum performance level, respectively. |
APPENDIX A
CONSTELLATION ENERGY PARTNERS LLC
2009 OMNIBUS INCENTIVE COMPENSATION PLAN