SUBSCRIPTION AGREEMENT FOR PARTNERSHIP INTEREST IN ALLDALE MINERALS II, LP

Exhibit 10.56

EXECUTION VERSION

SUBSCRIPTION AGREEMENT FOR PARTNERSHIP INTEREST IN

ALLDALE MINERALS II, LP

 

OFFERS AND SALES OF LIMITED PARTNER INTERESTS IN ALLDALE MINERALS II, LP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE OR FOREIGN SECURITIES LAWS, OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY FEDERAL, STATE OR FOREIGN AUTHORITY.  SUCH INTERESTS MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS SUCH INTERESTS ARE FIRST REGISTERED PURSUANT TO ALL SUCH APPLICABLE LAWS OR UNLESS COUNSEL SATISFACTORY TO THE GENERAL PARTNER SHALL HAVE RENDERED AN OPINION SATISFACTORY TO THE GENERAL PARTNER THAT SUCH REGISTRATION IS NOT REQUIRED.  THE SALE, ASSIGNMENT OR OTHER TRANSFER OF SUCH INTERESTS IS ALSO RESTRICTED BY ARTICLE IX OF THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ALLDALE MINERALS II, LP.

The undersigned, Alliance Resource Partners, L.P., a Delaware limited partnership ("Subscriber"), and ALLDALE MINERALS II, LP, a Texas limited partnership (the "Partnership"), and AllDale Minerals Management II, LLC, a Texas limited liability company (the "General Partner"), hereby agree as follows:

FIRST - SUBSCRIPTION: In accordance with the terms of the Amended and Restated Limited Partnership Agreement of the Partnership, as to be amended by the First Amendment ("the  "First Amendment") to the Amended and Restated Limited Partnership Agreement of the Partnership (as amended by the First Amendment, the "Limited Partnership Agreement") attached as Exhibit "A" to the Disclosure Letter, copies of which have been provided to the Subscriber, and subject to the terms and conditions of this Agreement, the Subscriber hereby subscribes for a Partnership Interest (as defined in the Limited Partnership Agreement) as a limited partner interest or general partner interest in the Partnership in the amount (the "Commitment") set forth on the signature page of this subscription agreement (this "Subscription Agreement" or this "Agreement") and of the Class of Interest and type of interest in the Partnership set forth below, which Commitment represents the Subscriber's portion of the Original Purchase Price (as defined in Appendix A to the First Amendment), and the Subscriber acknowledges that the Commitments of the Subscriber and its Affiliates may be adjusted by the parties to reflect the appropriate allocation of the Original Purchase Price between the Subscriber and its Affiliates. The Subscriber, at Closing (as defined below), will make a Capital Contribution of the full amount of the Commitment.   

 

Subscriber is subscribing for a Partnership Interest that is either (A) the following limited partner interest: (i)  a Sharing Ratio (as defined in the Limited Partnership Agreement), after giving effect to the Redemption (as defined in the First Amendment), of 27.18% (composed of a 2.17%

Converted GP Interest (as defined below) and limited partnership interest of 25.01% currently held by the Redeeming Partners (as defined in the First Amendment) other than the General Partner) and (ii) the General Partner's rights to the Transferred Carried Interest (as defined below); or (B) a general partner interest of 0.01% with a Sharing Ratio of 0.01%.  The limited partner Class of Interest subscribed for by Subscriber shall be composed of both Class A Interests and Class B Interests, as Subscriber shall determine.

 

"Converted GP Interest" means all of the General Partner's Sharing Ratio (excluding a Sharing Ratio of 0.01%) which is being converted upon the Redemption to a limited partner interest. 

 

"Transferred Carried Interest" means the rights to distributions to which the General Partner is entitled pursuant to Section 4.3(b)(i)(B), (b)(ii)(B-C) and (b)(iii)(B) and Section 4.3(c)(i)(B), (c)(ii)(B-C) and (c)(iii)(B) of the Limited Partnership Agreement (excluding the right to Net Redemption Proceeds (as defined in the First Amendment)).

 

 

SECOND – ACCREDITED INVESTOR: The Subscriber represents that it is an "accredited investor" within the meaning of Regulation D under the Securities Act of 1933, as amended ("Securities Act").

 

THIRD – SUBSCRIBER REPRESENTATIONS AND WARRANTIES: The Subscriber further represents, warrants, acknowledges and agrees with the Partnership and the General Partner as follows:

 

(a) Subscriber is entering into this Subscription Agreement relying solely on the facts and terms set forth in this Subscription Agreement and the Limited Partnership Agreement (collectively, the "Offering Documents") and Subscriber has received, read and understood each of the Offering Documents, including but not limited to those sections dealing with conflicts of interest, fees and tax consequences of an investment in the Partnership.  Subscriber has been given the opportunity to ask questions of, and receive answers from the General Partner, or one of its Affiliates, concerning the terms and conditions of the offering and other matters pertaining to an investment in the Partnership.  The General Partner has not made any representations of any kind or nature to induce the Subscriber to enter into this Subscription Agreement except as specifically set forth in the Offering Documents and the other Related Transaction Documents;

 

(b) Subscriber has made an investigation of the pertinent facts relating to the operation of the Partnership and has reviewed the terms of the Limited Partnership Agreement to the extent that Subscriber deems necessary in order to be fully informed with respect thereto;

 

(c) Subscriber has such knowledge and experience in financial and business matters that Subscriber is capable of evaluating the merits and risks of an investment in the Partnership; and the Subscriber is able to bear the economic risk of a complete loss of its investment in the Partnership;

(d)(1) To the extent that the Subscriber's Partnership Interest is a limited partner interest, Subscriber will be acquiring the limited partner interest for investment, for its own account and not for the interest of any other person and not for distribution or resale to others, and Subscriber will not permit any other person to acquire a beneficial interest in the limited partner interest without the consent of the Partnership's general partner. Subscriber understands that the limited partner interests have not been registered under the Securities Act, and Subscriber agrees that its limited partner interest in the Partnership may not be sold, transferred, or otherwise disposed of except pursuant to an exemption from registration under the Securities Act. Subscriber will not assign its limited partner interest in the Partnership or any beneficial interest therein, in whole or in part, to any other person, nor will Subscriber be entitled to substitute for himself as a limited partner any other person, except in compliance with the Limited Partnership Agreement or this Agreement;

 

  (2) Subscriber understands the effect of the limitations on disposition and of its representation that its limited partner interest in the Partnership will not be sold, transferred or otherwise disposed of except pursuant to an exemption from registration under the Securities Act. Subscriber understands that transfers can be made only in compliance with the Limited Partnership Agreement;

 

FOURTH - AUTHORITY: If the Subscriber is a corporation, partnership, trust or other entity, the person executing this Agreement for the Subscriber has the full power and authority under the Subscriber's governing instruments to do so and the Subscriber has the full power and authority under its governing instruments to become a limited partner or general partner of the Partnership, as applicable.

 

FIFTH – ADMISSION: The Subscriber understands that the date of the Subscriber's admission as a Limited Partner (as defined in the Limited Partnership Agreement) or General Partner (as defined in the Limited Partnership Agreement), as applicable, subject to the terms and conditions of this Agreement, will be on the Closing Date (as defined below), and on the Closing Date the Subscriber will join in and agree to be bound by the Limited Partnership Agreement as a limited partner or general partner of the Partnership, as applicable.

SIXTH – REAFFIRMATION OF SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES: The Subscriber hereby agrees that any representation made hereunder will be deemed to be reaffirmed by it on the Closing Date.

 

SEVENTH – NOTICE REQUIREMENT: The Subscriber hereby agrees that if any of the statements, representations, warranties or covenants made by Subscriber herein become untrue or inaccurate, the undersigned shall immediately at such time notify the Partnership.

 

EIGHTH – REPRESENTATIONS AND WARRANTIES OF GENERAL PARTNER AND PARTNERSHIP:  Any representation "to the knowledge of the General Partner" or words of similar import means matters within the actual knowledge, without inquiry, of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇. Simultaneously herewith, the General Partner is delivering to Subscriber the Disclosure Letter. Matters disclosed in any particular paragraph of the Disclosure Letter shall qualify the

representation and warranty in the matching paragraph of this Section Eighth and any other representation and warranty to which the matters disclosed reasonably relate.  The fact that any item of information is disclosed in the Disclosure Letter shall not constitute an admission by the General Partner or Partnership that such item is material, that such item has had or would have a Material Adverse Effect, or that the disclosure of such be construed to mean that such information is required to be disclosed by this Agreement.

 

Subject to the foregoing provisions of this Section Eighth, and the other terms and conditions of this Agreement, the General Partner and the Partnership, hereby represent and warrant to Subscriber, as of the date hereof and as of the Closing (as defined below), and subject to the approval of the First Amendment, the following:

The General Partner is a limited liability company organized, validly existing and with the right to transact business in the state of Texas under the Laws of the state of Texas and is duly qualified to do business as a foreign limited liability company in each jurisdiction where it is required to be qualified by applicable law, except where the failure to so qualify would not have a Material Adverse Effect.  The Partnership is a limited partnership organized, validly existing and with the right to transact business in the state of Texas under the Laws of the state of Texas and is duly qualified to do business as a foreign limited partnership in each jurisdiction where it is required to be qualified by applicable law, except where the failure to so qualify would not have a Material Adverse Effect.

Each of the General Partner and Partnership has the requisite power to enter into and perform this Agreement and each other agreement, instrument or document to be executed by the General Partner or Partnership, as applicable, in connection with the transactions contemplated hereby and to consummate the transactions contemplated hereby and thereby.

The execution, delivery and performance of this Agreement and each other agreement, instrument or document to be executed by the General Partner and Partnership in connection with the transactions contemplated hereby, and the performance of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on the part of the General Partner and the Partnership.  This Agreement has been duly executed and delivered by each of the General Partner and the Partnership (and all documents required hereunder to be executed and delivered by the General Partner and the Partnership at Closing will be duly executed and delivered by the General Partner and Partnership, as applicable) and this Agreement constitutes, and at the Closing such other documents will constitute, the valid and binding obligations of each of the General Partner and Partnership, as applicable, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a Proceeding in equity or at law).

The execution, delivery and performance of this Agreement by each of the General Partner and the Partnership, and the transactions contemplated by this Agreement by them, will not (i) violate any provision of the Charter Documents of either the General Partner or the Partnership, (ii) result in a default (with due notice or lapse of time or both) or the creation of any Lien, or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any Contract, promissory note, bond, mortgage, indenture, loan or similar financing instrument to which the General Partner or Partnership is a party or which affects the Assets, (iii) violate any judgment, order, ruling, or decree applicable to the General Partner or the Partnership or (iv) violate any Laws applicable to the General Partner or Partnership. Other than as set forth in Section Eighth, paragraph (d) of the Disclosure Letter, there is no consent, approval, waiver or authorization of any Person required (or notice required to be given) under Law or by the terms of any Governmental Authorization or Contract to which the General Partner or Partnership is a party or the Partnership's Assets are bound, for the execution and delivery by the General Partner or Partnership of this Agreement and the consummation of the transactions contemplated hereby. 

The Partnership does not own or hold any stock or any membership, limited liability company, partnership or other equity interest in any Person.

Each Partner (as defined in the Limited Partnership Agreement) in the Partnership is identified in Section Eighth, paragraph (f) of the Disclosure Letter and set opposite each such Partner's name therein are the Partnership Interests (as defined in the Limited Partnership Agreement) held by each Partner in the Partnership, including each Partner's Capital Commitments, Capital Contributions, Remaining Commitments and Sharing Ratios (each as defined in the Limited Partnership Agreement).  Except for this Agreement, the Limited Partnership Agreement and the other Related Transaction Documents, there is not outstanding any option, warrant, right of first refusal, or other right to acquire any partnership interests or other interests in the Partnership and neither the General Partner nor the Partnership is party to or bound by any agreement to issue such option, warrant, right of first refusal or other right to acquire a partnership or other interest in the partnership.  The Partnership Interests are not certificated.  To the General Partner's knowledge, each of the Partnership Interests is held by the Partner to whom attributed in Section Eighth, paragraph (f) of the Disclosure Letter free and clear of all Liens.  All of the Partnership Interests identified in Section Eighth, paragraph (f) of the Disclosure Letter (i) are duly authorized and validly issued,  (ii) are non-assessable (except for the obligation to make  capital contributions equal to the Remaining Commitments under the Limited Partnership Agreement), (iii) were not issued in violation of any pre-emptive rights, right of first refusal or other rights of any Person, and (iv) were offered and sold by the Partnership in compliance with all applicable securities Laws.  Upon effectiveness of the Redemption (as defined in the First Amendment), the Subscriber, each of the other Alliance Parties and Cavalier Minerals JV, LLC, a Delaware limited liability company, shall be the only partners in the Partnership.  The partnership interests issued to Subscriber hereunder will (i) be duly authorized and validly issued, (ii) be non-assessable, except for the Subscriber's Commitment,  and (iii) not be issued in violation of any preemptive rights, right of first refusal or other rights of any Person (except for rights set forth in

the Limited Partnership Agreement, which will be waived upon effectiveness of the First Amendment). Except as disclosed in Section Eighth, paragraph (f) of the Disclosure Letter, the General Partner is the only general partner of the Partnership and has not, except as provided in the Related Transaction Documents, assigned, granted a Lien in or otherwise transferred to any Person, or agreed to assign, ▇▇▇▇▇ ▇ ▇▇▇▇ in or otherwise transfer to any Person, any of the General Partner's right, title and interest in, to and under the Partnership or the Limited Partnership Agreement.   Upon Closing, the Subscriber or one of the Alliance Parties will be the sole general partner of the Partnership pursuant to the Limited Partnership Agreement.

The Alliance Parties shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of the General Partner, Partnership, the Management Company or any of their Affiliates, for brokerage fees, finder's fees, agent's commissions or other similar forms of compensation in connection with the Offering Documents or any agreement or transaction contemplated hereby or thereby (including any fees or commissions owed to RBC ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇).  For the avoidance of doubt, Alliance shall pay its own expenses in accordance with Section Fourteenth, paragraph (j).

Except as disclosed in Section Eighth, paragraph (h) of the Disclosure Letter, there are no pending Proceedings against the Partnership or General Partner (or the Management Company with respect to the Partnership) before any Governmental Body or arbitrator to which the General Partner, Partnership or any Assets are subject, and to the General Partner's knowledge, no such Proceeding is threatened. 

(i)        The Partnership has timely filed all federal and state income Tax Returns and all other material Tax Returns that are required to be filed by it, and such Tax Returns are complete and accurate in all material respects and have not subsequently been amended.  The Partnership has paid all Taxes shown thereon as due and owing by it.  All material Taxes which the Partnership is obligated to withhold by Law, including from amounts owing to or allocable to any owner (including the Partners), employee, creditor or third party, have been duly withheld or collected and, to the extent required have been paid over to the proper Governmental Body.

(ii)       There is no material dispute or claim concerning any Tax Liability of the Partnership claimed or raised by any Governmental Body of which the Partnership, General Partner or Management Company has received written notice or the General Partner has knowledge.  The Partnership has not waived any statute of limitations in respect of Taxes beyond the date hereof or agreed to any extension of time beyond the date hereof with respect to a material Tax assessment or deficiency.

(iii)      To the General Partner's knowledge, none of the Partners is a foreign person within the meaning of Treasury Regulation Section 1.1445-2(b)(2) and Section 1445(f)(3) of the Code.

(iv)      The Partnership is not a party to, bound by or obligated under, any Tax allocation, indemnity, sharing or similar Contract or arrangement (other than property Taxes payable with respect to properties leased from third parties).

(v)       Except as set forth in Section Eighth, paragraph (i)(v) of the Disclosure Letter, there are no Tax Liens upon any assets of the Partnership (other than Liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings by the Partnership and for which appropriate reserves have been reflected in the Financial Statements (as defined below)).

(vi)      The Partnership has not participated in a "listed transaction" or "reportable transaction" as defined in section 6707A of the Code or section 1.6011-4 of the Treasury Regulations (or any predecessor provision thereto) or any corresponding or similar provision of state or local Law.

(vii)     True and complete copies of the Partnership's Tax Returns have been provided to Subscriber.

(viii)    Except as set forth in Section Eighth, paragraph (i)(viii) of the Disclosure Letter, there are no past due ad valorem Taxes respecting any of the Assets, except those being contested in good faith in the ordinary course of business for which adequate reserves have been established in the Partnership's Financial Statements.

Except as disclosed in Section Eighth, paragraph (j) of the Disclosure Letter, since December 31, 2016, the Partnership and its Assets and operations have been and currently are, in material compliance with the provisions and requirements of all Laws of all Governmental Bodies having jurisdiction with respect to Partnership and its Assets.  The Partnership has obtained and is maintaining all federal, state and local governmental licenses, permits, franchises, orders, exemptions, variances, waivers, authorizations, certificates, consents, rights, privileges and applications therefor (the "Governmental Authorizations") that are presently necessary or required for the ownership and operation of the Assets as currently operated, and no violations exist in respect of any material Governmental Authorizations except where the failure to obtain or maintain or the violation of which would not cause a Material Adverse Effect.

(i)        Section Eighth, paragraph (k) of the Disclosure Letter sets forth, a true, complete and correct list as of the date of this Agreement (including amendments) of all Contracts to which the Partnership is a party or its Assets are bound, or respecting which the General Partner or Management Company is a party in connection with the Partnership, other than leases, easements, rights-of-way and other similar agreements affecting only mineral or other interests in real property.   Each Contract required to be listed at Section Eighth, paragraph (k) of the Disclosure Letter is a "Material Contract".

(ii)       Each Material Contract is in full force and effect to the extent provided therein and the General Partner has provided to the Subscriber a true and complete copy of each Material Contract and any and all amendments thereto.  The Partnership, General Partner and Management

Company is not, and to the General Partner's knowledge, no other party is, in default in any material respect under any Material Contract.  

There are no bankruptcy, reorganization or receivership Proceedings pending, being contemplated by or, to the General Partner's knowledge, threatened against the Partnership or General Partner.  Each of the Partnership and the General Partner is solvent.

The Partnership does not own any ▇▇▇▇▇, pipelines or other tangible assets, or any working interests, other than as set forth in Section Eighth, paragraph (m) of the Disclosure Letter. 

True, correct and complete copies of the balance sheets, statements of operations, statements of changes in partners' capital, statements of cash flows and related notes to financial statements of the Partnership as of and for the fiscal years ended on December 31, 2017, December 31, 2016 and December 31, 2015, as audited by the Company's accountants (the "Audited Financial Statements"), are contained in Section Eighth, paragraph (n) of the Disclosure Letter.  True, correct and complete copies of the unaudited balance sheet, statement of operations, statement of changes in partners' capital and statement of cash flows of the Partnership as of and for the period ended on September 30, 2018 (such financial statements, the "Interim Financial Statements" and such date, the "Interim Financial Statement Date") are also contained in Section Eighth, paragraph (n) of the Disclosure Letter.  The Audited Financial Statements and the Interim Financial Statements, present fairly, in all material respects, the consolidated financial position of the Partnership as of the dates thereof and the consolidated results of operations and cash flows of the Partnership for the periods covered by said statements, in accordance with GAAP consistently applied through the periods covered thereby, except for in the case of the Interim Financial Statements (i) year-end adjustments and (ii) the omission of footnote disclosures and other presentation items required by GAAP.  The Audited Financial Statements and the Interim Financial Statements are referred to collectively as the "Financial Statements". 

(i)        The Partnership has no Indebtedness.  Except as otherwise set forth in Section Eighth, paragraph (o) of the Disclosure Letter, the Partnerships have not granted or suffered to exist any Liens on any of the Assets of the Partnership other than the Permitted Encumbrances (as defined in Appendix A to the First Amendment).  The immediately preceding sentence shall not apply to any Liens that were in existence prior to such Assets being acquired by the Partnership where such Liens were not granted by the Partnership.   

(ii)       Except as otherwise set forth in Section Eighth, paragraph (o) of the Disclosure Letter and as reflected on the Interim Financial Statements, the Partnership has no Liabilities required to be reflected on or referenced in financial statements in accordance with GAAP, except Liabilities other than Indebtedness which have arisen after the Interim Financial Statement Date

in the ordinary course of business under any Contracts to which the Partnership is a party or its Assets are bound or trade payables.

(iii)      Except for the Interests (as defined in Appendix A to the First Amendment), the Partnership owns and has good and valid title to all the Assets reflected as owned in the Interim Financial Statements and all the Assets (other than Interests) acquired by the Partnership since the Interim Financial Statement Date, except for such Assets as have been disposed of in the ordinary course of business. 

The Partnership has no employees and has never had any employees.

Section Eighth, paragraph (q) of the Disclosure Letter contains a true and complete list of the name and location of each bank, trust company, savings and loan association or other financial institution at which the Partnership, or the General Partner or Management Company for the Partnership, has an account, safety deposit box or custody agreement, along with the account names and numbers, or other identifying information for safety deposit boxes or custody agreements, and the names of the Persons authorized to draw thereon or to withdraw therefrom.

TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, NO REPRESENTATION OR WARRANTY IS MADE BY THE PARTNERSHIP, GENERAL PARTNER AND MANAGEMENT COMPANY TO THE SUBSCRIBER AS TO THE CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OF ANY ASSETS OF THE  PARTNERSHIP, AND THE PARTNERSHIP AND GENERAL PARTNER ARE NOT MAKING ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH RESPECT TO ANY PROJECTIONS OR FORECASTS HERETOFORE DELIVERED OR MADE AVAILABLE TO SUBSCRIBER RELATING TO THE PARTNERSHIP.

NINTH – CONDITIONS OF SUBSCRIBER TO CLOSE:  The obligations of the Subscriber under this Agreement, including the obligation to make any Capital Contribution and join in the Limited Partnership Agreement, shall be subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions (any of which the Subscriber may waive in writing in whole or any part):  

Governmental Body that would prevent the consummation of the transactions contemplated hereby or impose material conditions with respect thereto. 

TENTH – CONDITIONS OF PARTNERSHIP: 

The obligations of the Partnership under this Agreement to accept the Capital Contribution and admit the Subscriber as a Partner, shall be subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions (any of which the General Partner on behalf of the Partnership may waive in writing in whole or any part):  

or imposes material conditions with respect thereto shall have been issued and remain in effect and no action shall have been taken, and no statute, rule or regulation shall have been enacted, by any Governmental Body that would prevent the consummation of the transactions contemplated hereby or impose material conditions with respect thereto. 

ELEVENTH – ADDITIONAL COVENANTS AND AGREEMENTS:    

(i)        Subscriber shall make the Capital Contribution to the Partnership required hereby by wire transfer of immediately available funds to the Partnership's account designated by the General Partner in writing;

(ii)       The Subscriber shall execute and deliver the joinder agreement in the form attached to the Disclosure Letter as Exhibit "C";

(iii)      The First Amendment will become effective, and in accordance therewith and as contemplated thereby, (A) the Subscriber, or its successor or assign, shall, immediately prior to the Redemption, be admitted as a Partner to the Partnership (if this Agreement is for a limited partner interest, the Subscriber shall be admitted as a limited partner of the Partnership and if this Agreement is for a general partner interest, the Subscriber shall be admitted as the general partner of the Partnership), (B) the Redemption (as defined in the First Amendment) shall occur and (C) the Redeeming Partners shall automatically withdraw from the Partnership and cease to be Partners;

(iv)      The Management Agreement will become effective; and

(v)       The General Partner shall deliver to the Partnership and Subscriber releases in the form attached to the Disclosure Letter as Exhibit "D" from the General Partner, the ▇▇▇▇ Entities (as defined in the Limited Partnership Agreement) and General Partner's other Affiliates as requested by Subscriber, Bluegrass Minerals Management, LLC, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇.    

The foregoing transactions shall, for all accounting and Tax purposes, be deemed to occur and given effect as of 12:01 a.m. on the Closing Date. 

business and affairs in the ordinary course of business and consistent with past practice and in compliance with the Limited Partnership Agreement, (ii) use its commercially reasonable efforts to preserve intact the current business organization of the Partnership and maintain its relations and goodwill with lessors, lessees, suppliers, agents and other Persons having business relationships with the Partnership, (iii) comply in all material respects with applicable Laws, the Contracts of the Partnership and the Limited Partnership Agreement, and (iv) keep in full force and effect, without amendment, all material rights relating to the business and Assets of the Partnership.  Except as otherwise expressly permitted by this Agreement, without the prior written consent of the Subscriber, the Partnership will not (and the General Partner will not permit the Partnership to):  

From the date hereof to the Closing, General Partner and the Partnership will use commercially reasonable efforts to comply with and fulfill its duties and obligations under all leases and other Contracts to which the Partnership is a party or by which its Assets are bound.  

audit unless such disclosure is prohibited by law.  Promptly upon becoming aware of any breach of any representation, warranty or covenant of the General Partner or Partnership contained herein, the General Partner shall notify Subscriber in writing of such breach and the circumstances giving rise thereto.  Any disclosure of a breach shall not relieve the breaching party of any Liability for such breach.

subject to any fiduciary duties, to each Limited Partner such Limited Partner approve, execute and deliver the First Amendment.

TWELFTH - TERMINATION:

This Agreement may be terminated at any time prior to the Closing by written notice given prior to or at the Closing:

Agreement such that the condition set forth in paragraph (b) of Section Ninth would not be satisfied, and such violation or breach has not been waived by Subscriber or cured by the General Partner within fifteen (15) days following Subscriber's written notice of same to the General Partner; or (ii) by the General Partner if there is a material violation or breach by Subscriber of its representations or warranties contained in this Agreement such that the condition set forth in paragraph (b) of Section Tenth would not be satisfied, and such violation or breach has not been waived by the General Partner or cured by the Subscriber within fifteen (15) days following General Partner's written notice of same to the Subscriber;

Each party's right of termination under this Section Twelfth is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies.  In the event of termination of this Agreement as provided in this Section Twelfth, the provisions of this Agreement shall immediately become of no further force and effect (other than this Section Twelfth and Section Fourteenth, each of which shall survive the termination of this Agreement) without any party being liable to any other party; provided,  however, that in the event that this Agreement is terminated pursuant to paragraph (a) or (b) of Section Twelfth, the parties shall be entitled to all damages available at law and in equity for breaches of this Agreement by the other parties.

THIRTEENTH  -       INDEMNIFICATION:

anniversary of the Final Redemption Payment Date. For the avoidance of doubt and subject to the below provisos, after Closing neither party shall be entitled to initiate any action, claim or litigation relating to any representation (including Fundamental Representations), warranty, covenant or agreement after its termination in accordance with this paragraph (a) and waives all rights in respect thereof (such actions, claims or litigations forever being barred) it being understood that this limitation constitutes the expression of the parties' desire to reduce the statute of limitations with respect to any such action, claim or litigation; provided, however, if an Indemnified Party (as defined below) provides written notice to the Indemnifying Party (as defined below) of a claim for indemnification respecting the breach of a representation, warranty, covenant or agreement prior to the termination of such representation, warranty, covenant or agreement, such representation, warranty, covenant or agreement shall survive solely with respect to such claim (and any and all actions and litigation arising out of such claim brought within two years of such notice of such claim), shall not terminate and shall survive until such claim for indemnification (and related actions and litigation brought within two years of such notice of such claim) are finally resolved; provided, further, that such indemnification will continue to be limited as set forth in paragraph (d) of this Section Thirteenth, which also survives.  Furthermore, the parties stipulate that they agree that this is an agreement relating to the sale or purchase of a business entity for purposes of Texas Civil Practice & Remedies Code §16.070(b), if, however, it is determined not to be an agreement relating to the sale or purchase of a business entity for purposes of Texas Civil Practice & Remedies Code §16.070(b), then the relevant termination dates will be two years from the Closing Date. 

Indemnified Party without the prior written consent of the Indemnified Party (not to be unreasonably withheld).  If the Indemnifying Party assumes and thereafter conducts the defense of the Third Party Claim, the Indemnifying Party will not have to pay the cost of counsel of the Indemnified Party.  Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to defend or control the defense of any Third Party Claim if (I) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, or in the case of any non-criminal Proceeding by a Governmental Body that would reasonably be expected to materially and adversely affect the operations or conduct of the Partnership; (II) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party; (III) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such Third Party Claim; (IV) the Indemnified Party reasonably believes that the Losses relating to such Third Party Claim could exceed the maximum amount that such Indemnified Party could then be entitled to recover under the applicable provisions of this Section Thirteenth; or (V) the Indemnifying Party does not provide the Indemnified Party with reasonable evidence that the Indemnifying Party has the financial resources to defend such Third Party Claim and to fulfill its indemnification obligations under this Section Thirteenth.  

Affiliates shall be deemed to have waived any rights to indemnification with respect to such breach.

Indemnified Party shall not be permitted to seek payment for that Loss under another Section of this Agreement.

FOURTEENTH – MISCELLANEOUS:

 

and construed under, the laws of the State of Texas and all rights and remedies shall be governed by said laws, without regard to conflict of laws principles.

AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.

if to Subscriber, to the address set forth on the signature page hereto.

with a copy to:

R. ▇▇▇▇▇▇▇ ▇▇▇▇▇

Senior Vice President, General Counsel and Secretary

Alliance Resource Partners, L.P.

▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

 

e-mail:  ▇▇.▇▇▇▇▇@▇▇▇▇.▇▇▇

 

and

▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Mains PLLC

Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇

▇▇▇ ▇. ▇▇▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇, ▇▇  ▇▇▇▇▇

 

e-mail:  ▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇

 

if to the General Partner or Partnership:

▇▇▇▇ ▇▇▇▇▇▇

General Counsel, ▇▇▇▇ Operating Company

▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇

▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇▇ ▇▇▇▇▇▇ of America

e-mail:  ▇▇▇▇@▇▇▇▇-▇▇▇▇▇▇.▇▇▇

 

 

Any such communication will be effective (i) if given by e-mail transmission, when transmitted to the applicable address specified in (or pursuant to) this paragraph (h) (with confirming copy by United States mail), (ii) if given by United States mail (which must be by certified mail), on the earlier of the date of receipt or the fifth day after deposit in the mail, (iii) if given by overnight delivery by courier of national reputation, on the first Business Day after depositing with such courier properly addressed or (iv) if given by hand

delivery or any other means not referenced in clause (i), (ii) or (iii) of this sentence, on the date of receipt.

FIFTEENTH - DEFINITIONS:    

 

Capitalized terms used and not otherwise defined herein have the same meanings as set forth in Exhibit "A" attached hereto and incorporated herein by reference.

 

 

 

[Signature Page Follows]

 

ALLDALE MINERALS II, LP - SUBSCRIPTION AGREEMENT

SIGNATURE PAGE

 

By signing below, the Subscriber (1) confirms that the information contained in the Agreement provided by Subscriber is accurate and complete, (2) agrees to the terms of the Agreement and the Limited Partnership Agreement and (3) requests that the records of the Partnership reflect the Subscriber's admission as a limited partner or general partner, as applicable, at the Closing as contemplated by the terms of the Agreement.

 

 

Check as applicable:

 

_X_    This Subscription Agreement is for a limited partner interest

 

____   This Subscription Agreement is for a general partner interest

 

Address:         ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇

▇▇▇▇▇, ▇▇  ▇▇▇▇▇

Attention:  __________

Tax Identification Number:_________

 

 

The Partnership and General Partner join in this Agreement as of the date set forth above.

 

 

 

EXHIBIT "A"

to Subscription Agreement

 

When used in the Agreement, the following terms shall have the following meanings:

 

"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise; provided that, the Partnership and any other investment vehicles managed or controlled by the General Partner, the Management Company or DOC shall not be considered an Affiliate of them.

 

"Alliance Parties" means Alliance Resource Partners, L.P., a Delaware limited partnership, and each of its Affiliates that is a subscriber under any Related Transaction Document, including a subscriber by assignment from Alliance Resource Partners, L.P. 

 

"Assets" means all properties and assets, real and personal, tangible and intangible, owned or held by the Partnership.

 

"Capital Contribution" means a capital contribution to the Partnership by the Subscriber hereunder.

 

"Charter Documents" means, with respect to any Person, the certificate of incorporation, articles of organization, articles of incorporation or association, certificate of partnership, certificate of limited partnership, certificate of formation and by-laws, the limited liability company agreement, operating agreement, or limited partnership agreement or other agreement or agreements that establish the legal organization and personality of such Person and its governance, in each case as amended.

 

"Code" means the Internal Revenue Code of 1986, as amended.

 

"Contract" means, with respect to any Person, any note, bond, mortgage, lease, permit, concession, franchise, license, arrangement, undertaking, contract, commitment, obligation, guaranty, credit agreement, indenture, deed of trust or other instrument, document or agreement (in each case whether written or oral) by which that Person, or any of its present or future properties or assets, is legally bound or subject.

 

"Disclosure Letter" means that certain disclosure letter, dated of even date herewith, delivered by the General Partner and certain of its Affiliates to Subscriber and the other Alliance Parties under the Related Transaction Documents.

 

"GAAP" means United States generally accepted accounting principles, as consistently applied by the Partnership in accordance with its past practices.

 

"Governmental Body" means any federal, state, local, municipal, or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.

 

"Indebtedness" means, with respect to the Partnership, all Liabilities as of the determination date (including the current portion thereof) of the Partnership (other than accounts payable and trade payables in the ordinary course of business) (i) for the principal amount, plus any related accrued and unpaid interest, fees and prepayment premiums, penalties or other breakage costs, of any borrowed money, including, without limitation, any such obligations under a credit facility or which are evidenced by any note, bond, debenture or other debt security, and short-term vendor loan payables, (ii) with respect to leases required to be capitalized in accordance with GAAP, (iii) under any letter of credit, performance bond, bankers' acceptance or similar instrument to the extent drawn

upon, (iv) under any interest rate swap, hedging or similar arrangement (valued at the termination value thereof if such arrangement were terminated as of the determination date), (v) issued or assumed as the deferred purchase price of property (calculated as the maximum amount of deferred purchase price owing as of the determination date (whether or not then due and payable) (but excluding trade accounts payable and accruals), (vi) with respect to any Liability of any other Person of the type referenced in clauses (i) through (v), the payment of which the Partnership is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise and (vii) with respect to any Liability of any other Person of the type referred to in clauses (i) through (vi) that is secured by any Lien on any Asset of the Partnership (whether or not such Liability is assumed by the Partnership).

 

"Laws" means any and all applicable laws, statutes, rules, regulations, ordinances, orders, codes, decrees, writs, injunctions, judgments, or principles of common law that are promulgated, issued, or enacted by a Governmental Body.

 

"Liabilities" means any and all liabilities or obligations of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise.  

 

"Lien" means any lien, mortgage, security interest, pledge, easement, charge, indenture, deed of trust, right of way, restriction on the use of real or personal property, encroachment or other encumbrance, or any restriction on transfer (except for restrictions on transfer under applicable securities laws), right of first refusal, right of first offer, put right, redemption right, option, warrant, proxy, voting agreement, voting trust, conditional sale or other title retention device or arrangement or transfer for the purpose of the payment of any Indebtedness or otherwise, or any restriction similar to any of the foregoing.

 

"Limitation Exception" means a breach of or inaccuracy in a Fundamental Representation by the General Partner, or any intentional misrepresentation or fraud by the General Partner.

 

"Losses" means, with respect to any Person, any losses, liabilities, claims, judgments, fines, loss in value, penalties, damages, expenses, fees, costs or amounts incurred by such Person (including reasonable attorneys' fees, costs or expenses and all reasonable fees, costs or expenses paid in connection with the investigation, defense and compromise of any claim or loss), but excluding punitive, exemplary, special, indirect and consequential damages and also excluding lost revenues lost profits and diminution of value, except to the extent punitive, exemplary, special, indirect and consequential damages, lost revenues and lost profits are part of a Third Party Claim made against an Indemnified Party; provided, however, that the definition of Losses shall not limit a party's liability for any such damages that constitute diminution of value and are proven to constitute actual direct damages.

 

"Management Company" means ▇▇▇▇ Operating Company, a Texas corporation.

 

"Material Adverse Effect" means any adverse effect on the ownership, operation or value of the Partnership or Assets, which is material to the ownership, operation or value of the Assets, taken as a whole, or the Partnership, and if curable, is not cured by AllDale Minerals Management II, LLC or its Affiliates within 30 days after AllDale Minerals Management II, LLC or its Affiliates becomes aware of such material adverse effect; provided, however, that the following shall not be deemed to constitute, create, or cause a Material Adverse Effect: any changes, circumstances or effects that (a) affect generally the oil and gas industry, such as fluctuations in the price of commodities, industry inputs, or Hydrocarbons, (b) result from international, national, regional, state, or local economic conditions, (c) result from general developments or conditions in the oil and gas industry, (d) result from changes in Laws (including regulatory or enforcement policy) or accounting principles (including interpretations thereof), (e) result from any public announcement of the transactions contemplated by this Agreement, (f) result from the failure of a Governmental Body to act or omit to act pursuant to Law, (g) result

from an outbreak or escalation of hostilities (whether nationally or internationally), or the occurrence of any other calamity or crisis (whether nationally or internationally), including terrorist attacks or (h) any natural or man-made disasters or other force majeure events.

 

"Person" means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, government or agency or subdivision thereof or any other entity.

 

"Proceeding" means any suit, legal action, or legal, administrative, arbitration or other alternative dispute resolution proceeding, hearing or formal investigation.

 

"Related Transaction Documents" means the following:

 

a.          That certain Subscription Agreement for Partnership Interest in AllDale Minerals, LP, dated December 14, 2018, by and among Alliance Resource Partners, LP, AllDale Minerals, LP and AllDale Minerals Management, LLC, for a limited partner interest;

 

b.         That certain Subscription Agreement for Partnership Interest in AllDale Minerals, LP, dated December 14, 2018, by and among Alliance Resource Partners, LP, AllDale Minerals, LP and AllDale Minerals Management, LLC, for a general partner interest;

 

c.          That certain Subscription Agreement for Partnership Interest in AllDale Minerals II, LP, dated December 14, 2018, by and among Alliance Resource Partners, LP, AllDale Minerals II, LP and AllDale Minerals Management II, LLC, for a limited partner interest; and

 

d.         That certain Subscription Agreement for Partnership Interest in AllDale Minerals II, LP, dated December 14, 2018, by and among Alliance Resource Partners, LP, AllDale Minerals II, LP and AllDale Minerals Management II, LLC, for a general partner interest.

 

"Tax" or "Taxes" means any federal, state, local or foreign income, gross receipts, capital stock, franchise, profits, state nonresident withholding, withholding, social security, unemployment, disability, employment, property, ad valorem, unmined minerals, ad valorem, stamp, severance, excise, motor fuels, heavy vehicle, occupation, sales, use, transfer, value added, unclaimed property, alternative minimum, estimated or other tax, charge, fee, duty, levy or other assessment that is imposed by any Governmental Body, in each case including any interest, penalty or addition thereto that is attributable to any nonpayment thereof or any failure to properly prepare or file a Tax Return.

"Tax Benefit" means any refund of Taxes paid or reduction in the amount of Taxes which otherwise would have been paid due to a deduction, credit or other Tax benefit or allowance arising by reason of the event giving rise to a claim under Section Thirteenth of this Agreement.

"Tax Return" means any return, report, information return or other document (including schedules or any related or supporting information) required to be filed with any Governmental Body in connection with the determination, assessment, payment or collection of any Tax.

 

"Treasury Regulations" means regulations promulgated by the United States Treasury related to the Code.