LINN ENERGY, LLC
CHANGE OF CONTROL
PROTECTION PLAN
April, 25 2009
INTRODUCTION
The Compensation Committee of the
Incumbent Board (as defined below) recognizes that, as is the case
with many publicly held corporations, there exists the possibility
of a Change of Control of the Company (as defined
below). This possibility and the uncertainty it creates
may result in the loss or distraction of employees of the Company
and its Subsidiaries to the detriment of the Company and its
unitholders.
The Committee considers the
avoidance of such loss and distraction to be essential to
protecting and enhancing the best interests of the Company and its
unitholders. The Committee recognizes that the oil and gas industry
is currently facing shortages of qualified personnel making it
difficult to attract and retain highly qualified employees unless a
certain degree of security can be offered to such individuals
against organizational and personnel changes which could result
from a Change of Control (as defined below) of the
Company.
The Committee recognizes that its
employees and employees of Subsidiaries that become Employers (as
defined below) will be involved in evaluating or negotiating any
offers, proposals or other transactions which could result in a
Change of Control of the Company and believes that it is in the
best interest of the Company and its unitholders for such employees
to be in a position, free from personal financial and employment
considerations, to assess objectively and pursue aggressively the
interests of the Company and its unitholders in making these
evaluations and carrying on such negotiations.
In addition, the Committee believes
that it is consistent with the employment practices and policies of
the Company and its Subsidiaries and in the best interests of the
Company and its unitholders to treat fairly its employees whose
employment terminates in connection with or due to a Change of
Control.
Accordingly, the Committee has
determined that appropriate steps should be taken to assure the
Company and its Subsidiaries that have adopted this Plan of the
continued employment and attention and dedication to duty of their
employees and to seek to ensure the availability of their continued
service, notwithstanding the possibility, threat or occurrence of a
Change of Control.
To fulfill the above purposes, the
Committee hereby adopts the Linn Energy, LLC Change of Control
Protection Plan (the “ Plan ”), as of the
Effective Date, on the terms determined by the
Committee.
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102548826.14
ARTICLE I
ESTABLISHMENT OF
PLAN
As of the Effective Date, the
Company hereby establishes a separation compensation plan known as
the Linn Energy, LLC Change of Control Protection Plan, as set
forth in this document.
ARTICLE II
DEFINITIONS
As used herein the following words
and phrases shall have the following respective meanings unless the
context clearly indicates otherwise.
2.1
Affiliate . Any entity which controls, is controlled by, or
is under common control with, the Company.
2.2
Board . The Board of Directors of Linn Energy,
LLC.
2.3
Cause . For purposes of the Plan, the Company or
an Employer will have “ Cause ” to terminate the
Participant’s employment by reason of any of the following;
provided, however, that determination of whether one or more of the
elements of “Cause” has been met under this Plan shall
be in the reasonable discretion of the Incumbent Board.
(a) the
Participant’s conviction of, or plea of nolo
contendere to, any felony or to any crime or offense causing
substantial harm to any of the Company or its direct or indirect
Subsidiaries (whether or not for personal gain) or involving acts
of theft, fraud, embezzlement, moral turpitude or similar
conduct;
(b) the
Participant’s repeated intoxication by alcohol or drugs
during the performance of his or her duties;
(c) the
Participant’s willful and intentional misuse of any of the
funds of the Company or its direct or indirect
Subsidiaries;
(d) embezzlement
by the Participant;
(e) the
Participant’s willful and material misrepresentations or
concealments on any written reports submitted to any of the Company
or its direct or indirect Subsidiaries;
(f) the
Participant’s material failure to follow or comply with the
reasonable and lawful written directives of the Board and/or the
Company’s Chief Executive Officer; or
(g) conduct
constituting a material breach by the Participant of the
Company’s then current Code of Business Conduct and Ethics,
and any other written policy referenced therein; provided that, in
each case, the Participant knew or should have known such conduct
to be a breach;
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The Participant may be afforded a
reasonable opportunity to cure any act or omission that would
otherwise constitute “Cause” hereunder according to the
following terms: The Incumbent Board will give the Participant
written notice stating with reasonable specificity the nature of
the circumstances determined by the Incumbent Board in good faith
to constitute “Cause.” If, in the good faith judgment
of the Incumbent Board, the alleged breach is reasonably
susceptible to cure, the Participant will have 15 days from his or
her receipt of such notice to effect the cure of such circumstances
or such breach to the good faith satisfaction of the Incumbent
Board. The Incumbent Board will state whether the Participant will
have such an opportunity to cure in the initial notice of
“Cause” referred to above. If, in the good
faith judgment of the Incumbent Board the alleged breach is not
reasonably susceptible to cure, or such circumstances or breach
have not been satisfactorily cured within such 15 day cure period,
such breach will thereupon constitute “Cause”
hereunder.
2.4
Change of Control. The first to occur of:
(a) The
acquisition by any individual, entity or group (within the meaning
of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the “ Exchange Act ”))
(a “ Person ”), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of thirty-five percent (35%) or more of either (i) the
then-outstanding equity interests of the Company (the “
Outstanding Linn Energy Equity ”) or (ii) the
combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the “ Outstanding Linn Energy Voting
Securities ”); provided, however, that, for purposes
of this Section 2.4(a) , the following acquisitions will not
constitute a Change of Control: (1) any acquisition directly from
the Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliated company,
or (4) any acquisition by any corporation or other entity pursuant
to a transaction that complies with Section 2.4(c)(i) ,
Section 2.4(c)(ii) or Section 2.4(c)(iii)
;
(b) Any
time at which individuals who, as of the Effective Date, constitute
the Board (the “ Incumbent Board ”) cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company’s unitholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board will be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Incumbent Board;
(c) Consummation
of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the
Company or any of its Subsidiaries, a sale or other disposition of
all or substantially all of the assets of the Company, or the
acquisition of assets or equity interests of another entity by the
Company, or any of its Subsidiaries (each, a “ Business
Combination ”), in each case
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unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities that were the beneficial owners of the Outstanding Linn
Energy Equity and the Outstanding Linn Energy Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of the
then-outstanding equity interests and the combined voting power of
the then-outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation or other entity resulting from such Business
Combination (including, without limitation, a corporation or other
entity that, as a result of such transaction, owns the Company or
all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Linn Energy Equity and the
Outstanding Linn Energy Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation or other entity resulting from such
Business Combination) beneficially owns, directly or indirectly,
thirty-five percent (35%) or more of, respectively, the
then-outstanding equity interests of the corporation or other
entity resulting from such Business Combination or the combined
voting power of the then-outstanding voting securities of such
corporation or other entity, except to the extent that such
ownership existed prior to the Business Combination, and (iii) 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 Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(d) Consummation
of a complete liquidation or dissolution of the Company.
2.5
Code . The Internal Revenue Code of 1986, as amended from
time to time.
2.6
Committee. The Compensation Committee of the
Incumbent Board.
2.7
Company . Linn Energy, LLC.
2.8
Confidential Information. “Confidential
Information” includes, without limitation, any information
heretofore or hereafter acquired, developed or used by any of the
Company or its direct or indirect Subsidiaries relating to Business
Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the
business, operations, properties or prospects of the Company or its
direct or indirect Subsidiaries, whether oral or in written
form. “ Business Opportunities
” means all business ideas, prospects,
proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of
hydrocarbons and related products and the exploration potential of
geographical areas on which hydrocarbon exploration prospects are
located, which are developed by the Participant during the period
of the Participant’s employment with the Company or any of
its Affiliates (“ Employment Term ”), or
originated by any third party and brought to the attention of the
Participant during the Employment Term, together with information
relating thereto (including, without limitation, geological and
seismic data and interpretations thereof, whether in the form of
maps, charts, logs, seismographs, calculations, summaries,
memoranda, opinions or other written or charted
means). “ Intellectual Property
” means all ideas, inventions,
discoveries,
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processes, designs, methods,
substances, articles, computer programs and improvements
(including, without limitation, enhancements to, or further
interpretation or processing of, information that was in the
possession of the Participant prior to the date of this Plan),
whether or not patentable or copyrightable, which do not fall
within the definition of Business Opportunities, which the
Participant discovers, conceives, invents, creates or develops,
alone or with others, during the Employment Term, if such
discovery, conception, invention, creation or development (a)
occurs in the course of the Participant’s employment with the
Company or its direct or indirect Subsidiaries, or (b) occurs with
the use of any of the time, materials or facilities of the Company
or its direct or indirect Subsidiaries, or (c) in the good faith
judgment of the Board, relates or pertains in any material way to
the purposes, activities or affairs of the Company or its direct or
indirect Subsidiaries.
2.9
Date of Separation from Service . The date on which a
Participant ceases to be an Employee of an Employer as a result of
a Separation from Service as determined in accordance with the
provisions of Section 409A of the Code and the Internal Revenue
Service and Treasury guidance thereunder.
2.10
Disability . The earlier of (a) written
determination by a physician selected by the Company or the
Participant’s Employer that the Participant has been unable
to perform substantially the Participant’s usual and
customary duties for a period of at least 120 consecutive days or a
non-consecutive period of 180 days during any twelve-month period
as a result of incapacity due to mental or physical illness or
disease; and (b) “disability” as such term is defined
in the Company’s or Employer’s applicable long-term
disability insurance plan.
2.11
Effective Date . The date first written
above.
2.12
Employee . Any employee of an Employer,
regardless of position, who is normally scheduled to work 30 or
more hours per week for such Employer.
2.13
Employee Participant . Any Employee of an Employer who is
designated as an Employee Participant pursuant to Section
3.1 below.
2.14
Employer . The Company and any Subsidiary that participates
in the Plan pursuant to Article V hereof.
2.15
ERISA . The Employee Retirement Income Security Act of 1974,
as amended from time to time.
2.16
Good Reason. Any of the following to which the
Participant will not consent in writing, but only if the Date of
Separation from Service is within two years after a Change of
Control:
(a) a
material diminution in the Participant’s base salary as in
effect immediately preceding the Change of Control (or as such
amount may be increased subsequent to a Change of
Control);
(b) a
material diminution in the Participant’s authority, duties or
responsibilities; or
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(c) a
relocation of the Participant’s primary place of employment
to a location more than 50 miles from the Employer’s location
on the day immediately preceding the Change of Control.
If termination is by the Participant
with Good Reason, the Participant will give the Participant’s
Employer written notice, which will identify with reasonable
specificity the grounds for the Participant’s resignation and
provide the Participant’s Employer with 30 days from the day
such notice is given to cure the alleged grounds for resignation
contained in the notice. A termination will not be for Good Reason
if the Participant’s Employer has cured the alleged grounds
for resignation contained in the notice within 30 days after
receipt of such notice or if such notice is given by the
Participant to the Participant’s Employer more than 30 days
after the occurrence of the event that the Participant alleges is
Good Reason for his or her termination hereunder.
2.17
Incumbent Board . The term “Incumbent Board” has
the meaning set forth in Section 2.4(b) .
2.18
Managerial Participant . Subject to Section 3.2
hereof, any Employee who has sufficient responsibilities and/or a
sufficiently critical role, as determined by executive management,
to be designated as a Managerial Participant, as such determination
and designation may be made by executive management on an annual
basis in writing, and as may be supplemented or changed from time
to time.
2.19
Notice of Termination . A notice which indicates the reasons
relied upon as the basis for any termination of employment and
which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Participant’s employment; no purported termination of
employment shall be effective without such Notice of
Termination.
2.20
Participant . An Employee who is designated as a participant
pursuant to Section 3.1 .
2.21
Plan . The Linn Energy, LLC Change of Control Protection
Plan.
2.22
Plan Administrator . The named fiduciary of the Plan as
described in Section 8.1 hereof.
2.23
Separation Benefits . The benefits described in Article IV
that are provided to qualifying Participants under the
Plan.
2.24
Separation from Service . An Employee separates from service
with the Employer if the Employee dies, retires or otherwise has a
termination of employment with the Employer. Whether a
termination of employment has occurred is determined based on
whether the facts and circumstances indicate that the Employer and
the Employee reasonably anticipated that no further services would
be performed after a certain date or that the level of bona fide
services the Employee would perform after such date (as an employee
or independent contractor) would permanently decrease to no more
than 20 percent of the average level of bona fide services
performed over the immediately preceding 36-month period (or the
full period in which the Employee provided services to the Employer
if the Employee has been providing services for
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less than 36 months). An
Employee will not be deemed to have experienced a Separation from
Service if such Employee is on military leave, sick leave, or other
bona fide leave of absence, to the extent such leave does not
exceed a period of six months or, if longer, such lo
