Filed by the Registrant       þ
Filed by a Party other than the Registrant       o
Check the appropriate box:
o		Preliminary Proxy Statement
o		Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Section 240.14a-12

Legacy Reserves LP

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
		(2)		Aggregate number of securities to which transaction applies:
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		(4)		Proposed maximum aggregate value of transaction:
		(5)		Total fee paid:
o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
		(1)		Amount Previously Paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

 

 
Legacy Reserves LP
303 W. Wall, Suite 1400
Midland, Texas 79701

 

 

 

 

     The board of directors of our general partner has called this Annual Meeting for you to consider and act upon the election of directors of our general partner’s board of directors to serve until the next Annual Meeting of Unitholders. The current board of directors of our general partner unanimously recommends that you approve this proposal.

 

     Even if you plan to attend the meeting, you are requested to sign, date and return the proxy card in the enclosed envelope. If you attend the meeting after having returned the enclosed proxy card, you may revoke your proxy, if you wish, and vote in person. A proxy may also be revoked at any time before it is exercised by giving written notice to, or filing a duly exercised proxy bearing a later date with, our Secretary. If you would like to attend and your units are not registered in your own name, please ask the broker, trust, bank or other nominee that holds the units to provide you with evidence of your unit ownership.

 

 

	Sincerely,
	Cary D. Brown Chief Executive Officer and Chairman of the Board, Legacy Reserves GP, LLC, general partner of Legacy Reserves LP

 

 

 
Legacy Reserves LP
303 W. Wall, Suite 1400
Midland, Texas 79701

 

     The Annual Meeting of the Unitholders of Legacy Reserves LP, or the Partnership, will be held on Wednesday, May 12, 2010, at 10:30 a.m. local time at the Midland Petroleum Club located at 501 W. Wall, Midland, Texas 79701 for the following purposes:

 

1.		To elect seven (7) directors to the board of directors of our general partner, each to serve until the next Annual Meeting of Unitholders; and
2.		To transact any other business as may properly come before the Annual Meeting or any adjournment thereof, including, without limitation, the adjournment of the annual meeting in order to solicit additional votes from unitholders in favor of adopting the foregoing proposal.

 

     Only unitholders of record at the close of business on April 1, 2010, are entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof. A list of such unitholders will be open to examination, during regular business hours, by any unitholder for at least ten days prior to the Annual Meeting, at our offices at 303 W. Wall, Suite 1400, Midland, Texas 79701. Unitholders holding at least a majority of the outstanding units representing limited partner interests are required to be present or represented by proxy at the meeting to constitute a quorum.

 

     Please note that space limitations make it necessary to limit attendance at the meeting to unitholders, though each unitholder may be accompanied by one guest. Admission to the meeting will be on a first-come, first-served basis. Registration will begin at 9:30 a.m. Each unitholder may be asked to present valid picture identification, such as a driver’s license or passport. Unitholders holding units in brokerage accounts must bring a copy of a brokerage statement reflecting unit ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the meeting.

 

 

	By Order of the Board of Directors,
Midland, Texas April 12, 2010	Cary D. Brown Chief Executive Officer and Chairman of the Board, Legacy Reserves GP, LLC, general partner of Legacy Reserves LP

YOUR VOTE IS IMPORTANT   To ensure your representation at the meeting, please sign, date and return your proxy as promptly as possible. An envelope, which requires no postage if mailed in the United States, is enclosed for this purpose. Mailing your completed proxy will ensure your representation at the meeting, whether you attend or not. If you do attend the meeting and prefer to vote in person, you may do so.

 

---

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING	1
The Annual Meeting	1
Voting and Proxy Procedures	1
Quorum and Required Votes	3
Additional Questions and Information	3
PROPOSAL 1 ELECTION OF DIRECTORS	4
Board of Directors	4
Voting	4
Recommendation and Proxies	4
Nominees for Election	5
CORPORATE GOVERNANCE	9
Management of Legacy Reserves LP	9
Board of Directors	9
Director Independence	9
Code of Ethics	14
COMPENSATION DISCUSSION AND ANALYSIS	14
Introduction	14
Corporate Governance	15
Executive Officer Compensation Strategy and Philosophy	16
Components of Compensation	16
COMPENSATION COMMITTEE REPORT	26
EXECUTIVE COMPENSATION	26
Summary Compensation Table	26
Grants of Plan-Based Awards for Fiscal Year 2009	28
Employment Agreements	29
Benefits Payable Upon Termination or Change in Control	30
Option Exercises and Units Vested in 2009	33
Equity Compensation Plan Information	34
DIRECTOR COMPENSATION	34
Director Compensation for the 2009 Fiscal Year	35
MANAGEMENT	35
Executive Officers	35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	38
Distribution Upon Liquidation	39
Transactions with Related Persons	39
Review, Approval and Ratification of Transactions with Related Persons	40
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	40
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	41
AUDIT COMMITTEE REPORT FOR FISCAL YEAR 2009	42
OTHER MATTERS	43
Required Vote	43
Section 16(a) Beneficial Ownership Reporting Compliance	43
Unitholder Proposals	43
Communications with Directors or the Board of Directors	43
Availability of Annual Report	44

 
Legacy Reserves LP
303 W. Wall, Suite 1400
Midland, Texas 79701
_______________

PROXY STATEMENT
FOR THE 2010 ANNUAL MEETING OF UNITHOLDERS
TO BE HELD ON MAY 12, 2010
_______________

 

 

 

     Unless otherwise indicated, the terms “Partnership,” “Legacy,” “we,” “our,” and “us” are used in this proxy statement to refer to Legacy Reserves LP together with our subsidiaries. The terms “board” and “board of directors” refer to our general partner’s board of directors.

 

 

     We hold a meeting of unitholders annually. This year’s meeting will be held on May 12, 2010. Our board of directors is seeking your proxy to vote at the 2010 Annual Meeting of Unitholders. This proxy statement contains important information about the Partnership and the election of directors to be voted on at the meeting. Please read these materials carefully so that you have the information you need to make informed decisions.

 

     You do not need to attend the Annual Meeting to vote. Instead, you may simply complete, sign and return the enclosed proxy card.

 

 

     The 2010 Annual Meeting of Unitholders of Legacy Reserves LP will be held on Wednesday, May 12, 2010, at 10:30 a.m., local time, at the Midland Petroleum Club located at 501 W. Wall, Midland, Texas 79701.

 

 

     You are being asked to approve the election of the directors nominated to our general partner’s board of directors to serve until the next Annual Meeting of Unitholders, and to consider and vote upon such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

 

 

 

     Only unitholders of record at the close of business on April 1, 2010, the record date for the Annual Meeting, are entitled to receive notice of and to participate in the Annual Meeting. If you were a unitholder of record on that date, you will be entitled to vote all of the units representing limited partner interests of Legacy Reserves LP, each referred to as a Unit, that you held on that date at the Annual Meeting, or any postponements or adjournments of the Annual Meeting. We are mailing this proxy statement to unitholders on or about April 12, 2010.

 

     IMPORTANT CHANGE: If your units are held in the name of your broker, it is critical that you instruct your broker how you wish to vote your units in the election of directors. In the past, brokers had discretion to vote their customers’ units in an election of directors, even when the customers had not provided the broker with voting instructions. However, as of January 1, 2010, brokers are no longer permitted to vote in the election of directors if the broker has not received instructions from the beneficial owner of the units. As a result, it is

 

 

 

     Each Unit is entitled to one vote on all matters. Your proxy card indicates the number of units that you owned as of the record date.

 

 

     Our general partner’s board of directors on behalf of the Partnership is soliciting proxies to be voted at the Annual Meeting.

 

 

     By Written Proxy. Whether you plan to attend the Annual Meeting or not, we urge you to complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Annual Meeting and vote in person.

 

     If you properly fill in your proxy card and send it to us in time to vote, your “proxy” (Steven H. Pruett or William M. Morris are the individuals named as proxies on your proxy card) will vote your units as you have directed. Unless otherwise directed in the proxy card, your proxy will vote your units for the election of the seven director nominees proposed by our general partner’s board of directors.

 

     If any other matter is presented, it is the intention of the persons named in the enclosed proxy card to vote proxies held by them in accordance with their best judgment. At the time this proxy statement was first mailed to unitholders, we knew of no matters that needed to be acted on at the Annual Meeting other than those discussed in this proxy statement.

 

     In Person. All unitholders of record may vote in person at the Annual Meeting. If you plan to attend the Annual Meeting and vote in person, we will give you a ballot when you arrive. However, if your units are held in the name of your broker, bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the beneficial owner of the units on the record date.

 

 

     You may revoke your proxy card or change your vote at any time before your proxy is voted at the Annual Meeting. You can do this in one of three ways:

     If you have instructed a broker to vote your units, you must follow directions received from your broker to change those instructions.

 

 

     It indicates that your units are held in more than one account, such as two brokerage accounts registered in different names. You should complete each of the proxy cards to ensure that all of your units are voted. We encourage you to register all of your brokerage accounts in the same name and address for better service. You should contact your broker, bank or nominee for more information. Additionally, our transfer agent, Computershare Trust Company, N.A., can assist you if you want to consolidate multiple accounts registered in your name by contacting our transfer agent at P.O. Box 43078, Providence, RI 02940-3078, Telephone: (781) 575-4238.

 

 

 

 

     A majority of the outstanding units as of the record date must be represented at the meeting in order to hold the meeting and conduct business. This is called a quorum. As of the record date, April 1, 2010, there were 40,070,201 units outstanding held by approximately 51 holders. Unitholders are entitled to one vote, exercisable in person or by proxy, for each unit, held by such unitholder on the record date. Our partnership agreement does not provide for cumulative voting.

 

 

 

 

     The affirmative vote of holders of a plurality of the units present or represented by proxy at the meeting and entitled to vote is required for the election of each director nominee. Therefore, abstentions and broker non-votes will not be taken into account in determining the outcome of the election of directors.

 

 

     Abstentions and broker non-votes are included in determining whether a quorum is present, but will not be included in vote totals and will not affect the outcome of the vote.

 

 

     Proxies may be solicited by mail, telephone, or other means by our general partner’s officers, directors and our employees. No additional compensation will be paid to these individuals in connection with proxy solicitations. We will pay for distributing and soliciting proxies and will reimburse banks, brokers and other custodians their reasonable fees and expenses for forwarding proxy materials to unitholders.

 

 

     If you would like additional copies of this proxy statement (which copies will be provided to you without charge) or if you have questions, including the procedures for voting your units, you should contact:

 

 

 

     The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2009 are available at http://ir.legacylp.com/annual-proxy.cfm.

 

 

 

 

 

     The Amended and Restated Limited Liability Company Agreement of our general partner provides that our general partner’s board of directors will consist of a number of directors as determined from time to time by resolution adopted by a majority of directors then in office, but shall not be less than seven, nor more than nine. Currently, our general partner’s board of directors has seven directors. Each of the nominees for election to the board of directors is currently a director of Legacy Reserves GP, LLC. If elected at the annual meeting, each of the nominees will be elected to hold office for a one year term and thereafter until his successor has been elected and qualified, or until his earlier death, resignation or removal.

 

 

     Directors are elected by a plurality of the votes present in person or represented by proxy and entitled to vote at the annual meeting. Units represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such units will be voted for the election of such substitute nominee as may be nominated by our general partner’s board of directors. Each person nominated for election has agreed to serve if elected, and we have no reason to believe that any nominee will be unable to serve.

 

 

 

     The persons named in the enclosed proxy card will vote all units over which they have discretionary authority FOR the election of the nominees named below. Although our general partner’s board of directors does not anticipate that any of the nominees will be unable to serve, if such a situation should arise prior to the meeting, the appointed persons will use their discretionary authority pursuant to the proxy and vote for the election of such substitute nominee as may be nominated by our general partner’s board of directors.

 

 

     Set forth below is biographical information for each person nominated for a one-year term expiring at the 2011 Annual Meeting. Each of the director nominees is an existing director standing for re-election.

 

 

Name			Principal Occupation		Age		Director Since
Cary D. Brown			Mr. Brown is Chairman of the board of directors of our general partner and Chief Executive Officer of our general partner and has served in such capacities since our founding in October 2005. Prior to October 2005, Mr. Brown co-founded two businesses, Moriah Resources, Inc. and Petroleum Strategies, Inc. Moriah Resources, Inc. was formed in 1992 to acquire oil and natural gas reserves. Petroleum Strategies, Inc. was formed in 1991 to serve as a qualified intermediary in connection with the execution of Section 1031 transactions for major oil companies, public independents and private oil and natural gas companies. Mr. Brown has served as Executive Vice President of Petroleum Strategies, Inc. since its inception in 1991. Mr. Brown served as an auditor for Grant Thornton in Midland, Texas from January 1991 to June 1991 and for Deloitte & Touche in Houston, Texas from June 1989 to December 1990. In 1995, Mr. Brown also co-founded and organized with Mr. Dale Brown The Executive Oil Conference held in Midland, Texas, which draws over 300 oil and natural gas industry professionals each year. Mr. Brown has a Bachelor of Business Administration degree, with honors, from Abilene Christian University. The board determined that Mr. Brown should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: the knowledge and experience attained through 20 years of experience in the oil and natural gas industry and 18 years of experience in the Permian Basin.		43		October 2005
Kyle A. McGraw			Mr. McGraw is a member of the board of directors of our general partner and also serves as the Executive Vice President of Business Development and Land of our general partner and has served in such capacities since our founding in October 2005. Mr. McGraw joined Brothers Production Company in 1983, and has served as its General Manager since 1991 and became President in 2003. Mr. McGraw is a registered professional engineer (inactive status) in the state of Texas. Mr. McGraw has a Bachelor of Science degree in Petroleum Engineering from Texas Tech University. The board determined that Mr. McGraw should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: the knowledge and experience attained through 27 years of experience in the oil and natural gas industry in the Permian Basin, experience as a petroleum engineer and managerial and executive experience attained through his service with Brothers Production Company where he has served in numerous capacities including reservoir and production engineering, acquisition evaluation and land management.		50		October 2005

 

Name			Principal Occupation		Age		Director Since
Dale A. Brown			Mr. Brown is a member of the board of directors of our general partner and has served in such capacity since our founding in October 2005. Mr. Brown has been President of Moriah Resources, Inc. since its inception in 1992 and President of Petroleum Strategies, Inc. since he co-founded it in 1991 with his son, Cary D. Brown. Additionally, Mr. Brown co-founded and organized with Mr. Cary Brown The Executive Oil Conference, which has been held annually in Midland, TX since 1995. Mr. Brown is a retired certified public accountant. Mr. Brown has a Bachelor of Science degree in Accounting from Pepperdine University. The board determined that Mr. Brown should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: financial literacy and experience as a Certified Public Accountant (retired at age 65) since 1967; the knowledge and experience attained through his service in the petroleum industry since 1972 and managerial experience attained through his service with Moriah Resources prior to contribution of its assets as part of the formation of Legacy in 2006.		67		October 2005
G. Larry Lawrence			Mr. Lawrence has been a member of the board of directors of our general partner since May 1, 2006. Since June 2006, Mr. Lawrence has been self-employed as a management consultant doing business as Crescent Consulting. From September 2006 to August 2009, he has served as Chief Financial Officer on a contract basis for Lynx Operating Company, a private company engaged in oil and gas operations with a primary business focus on gas processing. From May 2004 through April 2006, Mr. Lawrence served as Controller of Pure Resources, an exploration and production company and a wholly-owned subsidiary of Unocal Corporation which was acquired by Chevron Corporation. From June 2000 through May 2004, Mr. Lawrence was a practice manager of the Parson Group, LLC, a financial management consulting firm whose services included Sarbanes Oxley engagements with oil and natural gas industry clients. From 1973 through May 2000, Mr. Lawrence was employed by Atlantic Richfield Company (ARCO) where he most recently (from 1993 through 2000) served as Controller of ARCO Permian. Mr. Lawrence has a Bachelor of Arts degree in Accounting, with honors, from Dillard University. The board determined that Mr. Lawrence should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: financial expertise and experience as a chief financial officer and controller, Sarbanes Oxley consulting expertise, and financial reporting expertise and the knowledge and experience attained through his years of service in the preparation of publicly audited financial statements.		58		May 2006

 

Name			Principal Occupation		Age		Director Since
William D. (Bill)           Sullivan			Mr. Sullivan was appointed to the board of directors of our general partner upon completion of our private equity offering on March 15, 2006. Since May 2004, Mr. Sullivan has served as a director and since May 2009, as non-executive Chairman of the board of directors of St. Mary Land & Exploration Company, a publicly traded exploration and production company. Mr. Sullivan has served as director of Targa Resources GP, LLC (the general partner of Targa Resource Partners LP) since February 14, 2007. Targa is principally in the gas and gas liquids gathering, processing and logistics services business. Mr. Sullivan has served as a Director of Tetra Technologies, Inc. since August 2007. Tetra is principally in the oilfield services business. From May 2004 through its sale in August 2005, Mr. Sullivan served as a director of Gryphon Exploration Company, a privately held exploration and production company. Prior to joining the board of directors of St. Mary Land & Exploration Company and Gryphon Exploration Company, Mr. Sullivan was employed in various capacities by Anadarko Petroleum Corporation from 1981 to August 2003, most recently as Executive Vice President, Exploration and Production (from August 2001 through August 2003). From June 15, 2005 to August 5, 2005, Mr. Sullivan was president and CEO of Leor Energy L.P., a privately held exploration and production company. Mr. Sullivan has a Bachelor of Science degree in Mechanical Engineering, with high honors, from Texas A&M University. The board determined that Mr. Sullivan should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: the knowledge and experience attained through 25 years as an engineer, manager, and senior executive in the exploration and production business; his six years as a board member of several energy sector public companies and one private-equity owned company; executive experience with project, risk, economic analysis; capital allocation, strategic planning, organizational development, compensation program administration, corporate and asset acquisitions, mergers and integration, international and domestic oil and gas exploration, development, production, and business development; relationship management with equipment and service providers, government agencies and officials.		53		March 2006

 

Name			Principal Occupation		Age		Director Since
William R. Granberry			Mr. Granberry was appointed to the board of directors of our general partner on January 23, 2008. Mr. Granberry has been a member of the Board of Directors of The Williams Companies, Inc. (an integrated gas company with exploration and production, midstream, and gas pipeline operations) since November 2005 and a member of Compass Operating Company, LLC, a small, private oil and gas exploration, development and producing company with properties in West Texas and Southeast New Mexico since October 2004. From 1999 through September 2004, he managed investments and consulted with oil and gas companies. He invested in and became a board member of Just4Biz.com (a start-up internet company engaged in online office supply) in 1999 and served as Interim CEO for brief periods in 2000 and 2001. Just4Biz. com filed for bankruptcy in May 2001. Mr. Granberry was President and Chief Operating Officer of Tom Brown, Inc. from January 1996 to May 1999. Tom Brown, Inc. was a public oil and gas company with exploration, development, acquisition and production activities throughout the central United States. Mr. Granberry earned Bachelor of Science and Master of Science degrees in Petroleum Engineering from the University of Texas and upon graduation, worked for Amoco Production Company for 16 years. The board determined that Mr. Granberry should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: expertise in the oil and gas industry which was attained through his 44 years of service in engineering and service in executive positions with companies ranging from a large global energy company to small independents.		67		January 2008
Kyle D. Vann			Mr. Vann was appointed to the board of directors of our general partner upon completion of our private equity offering on March 15, 2006. From 1979 through January 2001, Mr. Vann was employed by Koch Industries. From February 2001 through December 2004, Mr. Vann served as Chief Executive Officer of Entergy — Koch, LP, an energy trading and transportation company. Mr. Vann continues to serve Entergy as a consultant and serves on the board and consults with Texon, LP, a private petroleum transportation company. On May 8, 2006, Mr. Vann was appointed to the board of directors of Crosstex Energy, L.P., a publicly traded midstream master limited partnership. In November 2009, Mr. Vann joined the Advisory Board of Haddington Ventures, LLC - a private equity firm. In January 2009, Mr. Vann Served as an advisory board member for Enexus, LLC, which is a subsidiary of Entergy Corporation. Mr. Vann has a Bachelor of Science degree in Chemical Engineering, with honors, from the University of Kansas. The board determined that Mr. Vann should be nominated to our board of directors due to his pertinent experience, qualifications, attributes and skills, which include: the knowledge and experience attained through 29 years of service in the commodity trading business and his background and expertise in risk assessment and leadership in the energy sector.		62		March 2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

---

• Maintain cash distributions of $0.52 with a coverage ratio of approximately 1.2 times;
   
• EBITDA (as such term is defined in the Partnership’s revolving credit facility) of $115 million on our base assets with $28 million of development expenditures including workover expenses based on a $50 per bbl and $5.50 per MMBtu Henry Hub gas prices, and $124.0 million with $100 million in acquisitions at a six times cash flow purchase multiple;
   
• Production cost of $14.30 per Boe, excluding severance, ad valorem taxes and workover expenses;
   
• Acquire $100 million of producing properties at six times cash flow; and
   
• Zero lost time accidents for Legacy employees.

• Accomplished 1.3x coverage ratio while paying out $2.08 in annualized distribution;
   
• Generated $120.0 million of EBITDA against a goal of $115 million without acquisitions, and a goal of $124.0 million with $100 million in acquisitions at a six times cash flow purchase multiple;
   
• Lowered production costs to $14.02 per Boe as compared to a goal of $14.30;
   
• Acquired $8.4 million of properties at four times cash flow with an additional $130 million acquisitions pending at year end; and
   
• Only one lost time accident involving an auto collision that was not the fault of the lease operator.

---

• EBITDA (as defined in the Partnership’s revolving credit facility); and
   
• Growth in cash distributions per unit.

---

____________________
 

---

• Reduced production costs 24% to $14.22 per Boe in the first half of 2009 from $17.37 per Boe for the year ending December 31, 2008;
   
• With limited capital investment available, stabilized oil, natural gas liquids and natural gas production;
   
• Maintained Legacy’s borrowing capacity over the period; and
   
• Raised net proceeds, before offering expenses, of $57.6 million through the public offering and sale of 3,795,000 units.

---

---

____________________
 

---

---

---

---

____________________

---

---

____________________

____________________
 

---

---

---

____________________

---

• the executive officer’s conviction of or plea of nolo contendere to any felony or crime or offense causing substantial harm to the Partnership, general partner, or its direct or indirect subsidiaries, or involving acts of theft, fraud, embezzlement, moral turpitude or similar conducts;
   
• the executive officer’s repeated intoxication by alcohol or drugs during the performance of his duties;
   
• the executive officer’s malfeasance in the conduct of the executive’s duties including, but not limited to, willful and intentional misuse or diversion of any funds, embezzlement or fraudulent or willful material misrepresentations or concealments on any written reports;
   
• the executive officer’s material failure to perform the duties of his employment consistent with his position, expressly including the provisions of the employment agreements or material failure to follow or comply with the reasonable and lawful written directives of the board;
   
• a material breach of the employment agreement; or
   
• a material breach by the executive officer of written policies of the Partnership, the general partner, or any of our direct or indirect subsidiaries.

• a reduction in the executive officer’s base salary;
   
• the relocation of the executive officer’s primary place of employment to a location more than 20 miles from Midland, Texas; or
   
• any material reduction in the executive officer’s title, authority or responsibilities.

• the acquisition by any individual or entity of beneficial ownership of 35% or more of either (i) the then-outstanding equity interests of the Partnership or (ii) the combined voting power of the then-outstanding voting securities of the Partnership entitled to vote generally in the election of directors, provided

---

• where individuals who constitute the board at the time of the agreement cease to constitute at least a majority of the board, unless an individual becoming a director subsequent to the date of the agreement was approved by a vote of at least a majority of the directors then comprising the board, excluding any individual whose election occurs as a result of an actual or threatened election contest;
   
• consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Partnership or any of its subsidiaries, a sale or other disposition of all assets or equity interests of another entity by the Partnership or any of its subsidiaries unless all or substantially all of the individuals and entities that were the beneficial owners of the outstanding equity and voting securities immediately prior to such transaction beneficially own more than 50% of the then-outstanding equity interests and the combined voting power of the then-outstanding voting securities entitled to vote after such business transaction in substantially the same proportions as their ownership immediately prior to such transaction, no person beneficially owns 35% or more of the entity resulting from such transaction, except to the extent that such ownership existed prior to the transaction, and at least a majority of the members of the board of directors of the corporation or equivalent body of any other entity resulting from such transactions were members of the board at the time of the execution of the initial agreement or of the action of the board providing for such transaction; or
   
• consummation of a complete liquidation or dissolution of the Partnership.

____________________
 

---

 

---

____________________
 

---

---

• each person known by us to be a beneficial owner of 5% or more of our outstanding units;
   
• each of the directors of our general partner;
   
• each named executive officer of our general partner; and
   
• all directors and executive officers of our general partner as a group.

____________________
 

---

____________________
 

---

---

• approved by the conflicts committee;
   
• approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates;
   
• on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
   
• fair and reasonable to us, taking into account the totality of the relationships between the parties involved, including other transactions that may be particularly favorable or advantageous to us.

---

---

---

---

---

---