LGCY Legacy Reserves Inc. (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.    )

Check the appropriate box:

Payment of Filing Fee (Check the appropriate box):

303 W. Wall, Suite 1800
Midland, Texas 79701

May 20, 2019

To Our Stockholders:

You are cordially invited to attend the 2019 Annual Meeting of Stockholders (the “ Annual Meeting ”) of Legacy Reserves Inc. to be held on June 6, 2019 commencing at 10:30 a.m. local time at Midland Country Club located at 6101 N. Highway 349, Midland, Texas 79705. Proxy materials, which includes a Notice of the Annual Meeting, proxy statement and proxy card, are enclosed with this letter. The attached proxy statement is first being mailed to our stockholders on or about May 20, 2019. We have also enclosed our 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Our board of directors has called this Annual Meeting for you to consider and act upon:

Our board of directors recommends that you approve both of the above-listed proposals .

Your vote is important to us and our business. Even if you plan to attend the meeting, you are requested to sign, date and return the proxy card in the enclosed envelope or vote on the internet or by telephone as instructed. If you attend the meeting after having returned the enclosed proxy card (or voted by internet or telephone), 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 Corporate Secretary. If you would like to attend and your shares 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 share ownership.

We look forward to seeing you at the meeting.

	Sincerely,
	Paul T. Horne
	Chairman of the Board
	Legacy Reserves Inc.

303 W. Wall, Suite 1800
Midland, Texas 79701

NOTICE OF THE 2019
ANNUAL MEETING OF STOCKHOLDERS

The 2019 Annual Meeting of Stockholders (the “ Annual Meeting ”) of Legacy Reserves Inc. will be held on June 6, 2019, at 10:30 a.m. local time at Midland Country Club located at 6101 N. Highway 349, Midland, Texas 79705 for the following purposes:

Only stockholders of record at the close of business on May 16, 2019, are entitled to vote at the Annual Meeting and at any adjournment or postponement thereof. A list of such stockholders will be open to examination, during regular business hours, by any stockholder for at least ten days prior to the Annual Meeting, at our offices at 303 W. Wall, Suite 1800, Midland, Texas 79701. Stockholders of record holding a majority of the outstanding shares of common stock entitled to vote 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 Annual Meeting to stockholders or their duly authorized proxies. Admission to the Annual Meeting will be on a first-come, first-served basis. Registration will begin at 9:30 a.m. Each stockholder must present proof of ownership of our shares and a valid government-issued picture identification, such as a driver’s license or passport, to be admitted to the Annual Meeting. If your shares are held in the name of a bank, broker or other nominee and you plan to attend the Annual Meeting in person, you must bring proof of ownership, such as a legal proxy, your brokerage statement, the proxy card mailed to you by your bank, broker or other nominee or other proof of ownership as of the record date to be admitted to the Annual Meeting. Cameras, recording devices and other electronic devices will not be permitted at the meeting. The use of mobile phones or other electronic devices during the Annual Meeting is also prohibited.

	By Order of the Board of Directors,
	Paul T. Horne
	Chairman of the Board
	Legacy Reserves Inc.

Midland, Texas
May 20, 2019

Legacy Reserves Inc.
303 W. Wall, Suite 1800
Midland, Texas 79701

PROXY STATEMENT
FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2019

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

The Annual Meeting

Definitions:

Unless otherwise indicated, the terms “ Company ,” “ Legacy, ” “ we ,” “ our ,” and “ us ” are used in this proxy statement to refer to Legacy Reserves Inc. together with its subsidiaries for the periods after September 19, 2018, the date the we completed our transition from a master limited partnership to a corporation (the “ Corporate Reorganization ”). For the periods prior to September 20, 2018, unless the context requires otherwise or unless otherwise noted, all references to “ Partnership ,” “ Legacy, ” “ we ,” “ our ,” and “ us ” are to Legacy Reserves LP and its subsidiaries.

The terms “ Board ” and “ Board of Directors ” refer to our board of directors. The term “ compensation committee ” refers to the compensation committee of the Board of Directors. The term “a udit committee ” refers to the audit committee of the Board of Directors. The term “ nominating and governance committee ” refers to the nominating and governance committee of the Board of Directors. The term “ shares ” refers to shares of our common stock, par value $0.01.

What is a proxy statement and why is it important?

We hold a meeting of our stockholders annually. This year’s meeting will be held on June 6, 2019. Our Board of Directors is seeking your proxy to vote at the 2019 Annual Meeting of Stockholders (“ Annual Meeting ”). This proxy statement contains important information about the Company and each of the matters to be voted on at the Annual Meeting. We are mailing this proxy statement to stockholders on or about May 20, 2019. 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 or vote on the internet or by telephone as provided on your proxy card.

When and where is the Annual Meeting?

The Annual Meeting will be held on Thursday, June 6, 2019, at 10:30 a.m., local time, at Midland Country Club located at 6101 N. Highway 349, Midland, Texas 79705.

What am I being asked to vote upon?

You are being asked to (1) approve the election of the directors nominated to our Board of Directors to serve until the next annual meeting of stockholders; (2) ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019; and (3) 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 stockholders in favor of adopting the foregoing proposals.

Voting and Proxy Procedures

Who may vote at the Annual Meeting?

Only stockholders of record at the close of business on May 16, 2019, the record date for the Annual Meeting, are entitled to participate in the Annual Meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the Annual Meeting, or any postponements or adjournments of the Annual Meeting.

It is critical that you instruct your bank, broker or other nominee how you wish to vote your units on Proposal 1. Absent instructions from you, your broker may not vote your shares on this proposal and your shares will be considered broker non-votes, which will have no effect on the outcome of Proposal 1.

What are the voting rights of stockholders?

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

Who is soliciting my proxy?

Our Board of Directors and officers, on behalf of the Company, are soliciting proxies to be voted at the Annual Meeting.

What different methods can I use to vote?

By Written Proxy . Regardless of whether you plan to attend the Annual Meeting, 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.

By Internet . Go to the website set forth on the proxy card and follow the on-screen instructions. You will need the control number contained on your proxy card. Voting by internet is the fastest and lowest cost medium of voting your proxy.

By Telephone . Please dial the toll-free telephone number set forth on the proxy card and follow the audio instructions. You will need the control number contained on your proxy card.

If you properly follow the instructions above in time to vote, your “proxy” (Robert L. Norris and Micah C. Foster) are the individuals named as proxies on your proxy card) will vote your shares as you have directed. Unless otherwise directed by you, your proxy will vote your shares:

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 stockholders, 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 stockholders of record at the close of business on May 16, 2019 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 shares are held in the name of a bank, broker or other nominee and you plan to attend the Annual Meeting in person, you must bring proof of ownership, such as a legal proxy, your brokerage statement, the proxy card mailed to you by your bank, broker or other nominee or other proof of ownership as of the record date to be admitted to the Annual Meeting.

How may I revoke my signed proxy card?

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 bank, broker or other nominee to vote your shares, you must follow directions received from your bank, broker or other nominee to change those instructions.

What does it mean if I get more than one proxy card?

It indicates that your shares 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 shares 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 bank, broker or other 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 30170, College Station, TX 77842-3170, Telephone: (781) 575-4238.

Quorum and Required Votes

How many votes are needed to hold the meeting?

A majority of the issued and outstanding shares entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the Annual Meeting. As of May 16, 2019, the record date, there were 114,812,812 shares issued and outstanding held by approximately 107 holders of record. Stockholders are entitled to one vote, exercisable in person or by proxy, for each share held by such stockholder on the record date. Our second amended and restated bylaws (“ bylaws ”) does not provide for cumulative voting.

Who will count the vote?

Representatives of Computershare Trust Company, N.A., our transfer agent, will tabulate the votes cast by proxy. The Inspector of Election will tabulate any votes cast at the Annual Meeting.

How many votes are required to approve the proposals?

Proposal 1 . Directors will be elected by a plurality of the votes cast in respect of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors.

Proposal 2 . The ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 will be determined by the affirmative vote of holders of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote thereon.

How are abstentions and broker non-votes counted?

Abstentions and broker non-votes are included in determining whether a quorum is present.

Proposal 1 . Abstentions and broker non-votes will not have an effect on the outcome of the election of directors. Banks, brokers or other nominees do not have the discretionary authority to vote on the directors standing for election.

Proposal 2 . Brokers have the discretionary authority to vote your shares on the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm if you have not furnished voting instructions within a specified period of time prior to the Annual Meeting. Abstentions will not have an effect on the outcome of this vote.

How are proxies solicited?

Proxies may be solicited by mail, telephone or other means by our officers, directors and 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 stockholders.

Additional Questions and Information

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 with respect to the procedures for voting your shares, you should contact:

Legacy Reserves Inc.
303 W. Wall, Suite 1800
Midland, Texas 79701
Attention: Albert E. Ferrara, III
General Counsel and Corporate Secretary

BACKGROUND OF THE SOLICITATION

On April 1, 2019, the Company received a letter from Baines Creek Partners, L.P. (“Baines Creek”), a beneficial holder of approximately 23.0% of our outstanding common stock, purporting to give notice (the “Notice Letter”) of Baines Creek’s intention to nominate three director candidates for election to the Company’s Board of Directors at the Annual Meeting. The Notice Letter was deficient because Baines Creek failed to satisfy the requirements set forth in Section 2.03(A)(1)(c) of the Bylaws to be a “stockholder of record” of the Company “at the time of giving of notice.” On April 9, 2019, the Company sent to Baines Creek a response letter to that effect. As a result, the Company does not believe that Baines Creek is entitled to nominate directors for election to the Board of Directors at the Annual Meeting. Since that date, Baines Creek has given no further indication of an intent to solicit proxies for the Annual Meeting. Therefore, the Company does not expect a “solicitation in opposition” as defined under Exchange Act Rule 14a-6(a) at the Annual Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 2019.

The Notice of the Annual Meeting and proxy statement are available at https://www.legacyreserves.com/proxy and our Annual Report on Form 10-K for the year ended December 31, 2018 is available at https://www.legacyreserves.com/annual-reports.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”
THE FOREGOING DIRECTOR NOMINEES.

CORPORATE GOVERNANCE

Board Participation

During the fiscal year ended December 31, 2018, our Board of Directors held 15 meetings. It is the policy of our Board of Directors to encourage directors to attend each meeting of stockholders. All of our directors serving on the Board of Directors at the time of the annual meeting held in 2018 attended the annual meeting held in 2018.

During 2018, the audit committee met 6 times, the compensation committee met 11 times, and the nominating and governance committee met 9 times.

Director Independence

As required by NASDAQ listing standards, a majority of the members of a listed company’s board of directors must qualify as independent as affirmatively determined by the board of directors. The Board of Directors determines the independence of each director in accordance with the rules and regulations of the Securities and Exchange Commission (“ SEC ”) and NASDAQ independence standards. The Board of Directors includes four individuals who the Board has determined meet the independence and experience standards established by the SEC and NASDAQ: Messrs. Granberry, Lawrence, Vann and York.

The Board annually reviews all relevant business relationships any director may have with Legacy and the independence standards established by NASDAQ.

Leadership Structure of the Board

Our current leadership structure of the Board comprises of a Chairman of the Board, Mr. Horne, and a Lead Independent Director, Mr. Vann. The Lead Independent Director has clearly defined leadership authority and responsibilities, which include presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors, and serving as liaison between the Chairman of the Board and the independent directors. Our Lead Independent Director is afforded direct and complete access to the Chairman of the Board at any time as such director deems necessary or appropriate.

In connection with Mr. Horne’s retirement as our Chief Executive Officer and the separation of the roles of Chairman of the Board and Chief Executive Officer, the nominating and governance committee has determined that following the annual meeting it will not reappoint Mr. Vann as, or appoint a new, Lead Independent Director. Mr. Horne will continue serve as Chairman of the Board. The nominating and governance committee believes that Mr. Horne’s history as one of Legacy’s founders, his industry experience and excellent performance in his previous roles at Legacy make him the appropriate leader of the Board. As prescribed by our bylaws, the Chairman of the Board of Directors has the power to preside at all meetings of the Board, and if the Chairman of the Board is not present, the Chief Executive Officer (if the Chief Executive Officer is a director and is not also the Chairman of the Board) will preside at such meeting. The independent directors will continue to hold executive sessions of the independent directors and be afforded direct and complete access to the Chairman of the Board at any time such director deems necessary or appropriate. The nominating and governance committee will reevaluate its view on the Board’s leadership structure periodically.

Risk Oversight

While it is the job of management to assess and manage our risk, the Board and its audit committee (each where applicable) discuss the guidelines and policies that govern the process by which risk assessment and management is undertaken and evaluate reports from various functions with the management team on risk assessment and management. The Board interfaces regularly with management and receives periodic reports that include updates on operational, financial, legal and risk management matters. The audit committee assists the Board in oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements, including those related to the health, safety and environmental performance of Legacy. The audit committee also reviews and assesses the performance of our internal audit function and our independent auditors. The Board receives regular reports from the audit committee. We do not believe that the Board’s role in risk oversight has an effect on the Board’s leadership structure.

Evaluation of Compensation Risk

Our compensation committee has reviewed the risks related to our employee compensation programs and overall compensation structure and internal controls. There are several design features of our compensation policy that reduce the likelihood of excessive risk-taking:

Committees of the Board

Our Board of Directors has standing audit, compensation and nominating and governance committees. Each committee has a written charter, which is available on our website at www.legacyreserves.com . Please note that the preceding Internet address is for information purposes only and is not intended to be a hyperlink. Accordingly, no information found or provided at that Internet address or at our website in general is intended or deemed to be incorporated by reference herein.

Audit Committee

Membership

The audit committee has been established in accordance with Rule 10A-3 promulgated under the Exchange Act. The Board of Directors has appointed Messrs. Lawrence, Granberry and York as members of the audit committee. Mr. Lawrence serves as the chairman of the audit committee. Each of the members of the audit committee has been determined by the Board of Directors to be independent under NASDAQ’s standards for audit committee members to serve on its audit committee. In addition, the Board of Directors has determined that at least one member of the audit committee (Mr. Lawrence) has such accounting or related financial management expertise sufficient to qualify such person as the audit committee financial expert in accordance with Item 407 of Regulation S-K and NASDAQ requirements.

Responsibilities

The audit committee assists the Board of Directors in overseeing:

The audit committee is also charged with making regular reports to the Board of Directors and preparing any reports that may be required under NASDAQ-listing standards or SEC rules.

Compensation Committee

Membership

The compensation committee consists of three members of the Board of Directors, Messrs. Vann, Granberry and York, all of whom have been determined by the Board of Directors to be independent under NASDAQ listing standards. In addition, each member of the compensation committee qualifies as a “non-employee” director within the meaning of Rule 16b-3 promulgated under the Exchange Act. Mr. Vann is the chairman of the compensation committee.

Responsibilities

The compensation committee’s responsibilities under its charter are to:

Nominating and Governance Committee

Membership

The nominating and governance committee consists of Messrs. Granberry, Lawrence, and Vann. Mr. Granberry serves as the chairman of the nominating and governance committee. The Board of Directors has determined that all members of the nominating and governance committee are independent under NASDAQ listing standards.

Responsibilities

The responsibilities of the nominating and governance committee are to:

Further, the nominating and governance committee, at the request of the Board of Directors, will review specific matters that the Board of Directors believes may involve a conflict of interest. The nominating and governance committee will determine if the resolution of the conflict of interest is fair and reasonable to the stockholders. Any matters approved by the nominating and governance committee will be conclusively deemed to be fair and reasonable to Legacy and not a breach of any duties Legacy may owe to its stockholders.

Director Nominations

Under our bylaws, stockholders of record desiring to suggest a Board nominee must give prior written notice to our Corporate Secretary regarding the persons to be nominated. The notice must be received at our principal executive offices at the address shown on the cover page within the specified period and must be accompanied by the information and documents specified in our bylaws. A copy of our bylaws may be obtained by writing to our Corporate Secretary at the address shown on the cover page of this proxy statement.

Recommendations by stockholders of record for persons to be nominated for election as director nominees at the 2020 annual meeting of stockholders must be in writing, include the specified information described in our bylaws and follow the procedures outlined in our bylaws. Notice and the accompanying information must be received by our Corporate Secretary at our principal executive office at the address shown on the cover page of this proxy statement no later than March 8, 2020 and no earlier than February 7, 2020.

Our bylaws permit a stockholder (or a group of no more than 20 stockholders) who has maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years and has complied with

the other requirements set forth in our bylaws, to submit director nominees for inclusion in our proxy statement if the stockholder(s) and the nominee(s) satisfy the requirements set forth in our bylaws. Notice of director nominees submitted under these bylaw provisions must be received by our Corporate Secretary no later than January 21, 2020 and no earlier than December 22, 2019.

Our bylaws do not affect any stockholder’s right to request inclusion of proposals in our proxy statement pursuant to Rule 14a-8 of the Exchange Act or to submit proposals to be presented at the 2020 annual meeting of stockholders. For more information with respect to stockholder proposals, please see “Other Matters—Stockholder Proposals.”

Nomination Criteria

The nominating and governance committee is responsible for assessing the skills and characteristics that candidates for election to our Board of Directors should possess, as well as the composition of our Board of Directors as a whole. The assessments include qualifications under applicable independence standards and other standards applicable to our Board of Directors and its committees as well as consideration of skills and experience in the context of the needs of our Board of Directors. Each candidate must meet certain minimum qualifications including:

The nominating and governance committee may also consider the ability of a prospective candidate to work with the then-existing interpersonal dynamics of our Board of Directors and the candidate’s ability to contribute to the collaborative culture among the members of the Board of Directors.

The nominating and governance committee will also evaluate each nominee based upon a consideration of diversity, age, skills and experience in the context of the needs of the Board of Directors. The committee does not have a policy with regard to the consideration of diversity in identifying director nominees. Diversity, including diversity of experience, professional expertise, gender, race and age, is one factor considered in evaluating a nominee.

Based on this initial evaluation, the nominating and governance committee will determine whether to interview the candidate and, if warranted, will recommend that one or more of its members, other members of our Board of Directors or executive management, as appropriate, interview the candidate in person or by telephone. After completing this evaluation and interview process, the committee ultimately determines its list of nominees and submits it to the full Board of Directors for consideration and approval.

Code of Ethics

The Board of Directors has adopted a Code of Ethics applicable to all employees, officers and directors. The Code of Ethics is available on our website at www.legacyreserves.com and in print to any stockholder who requests it. Amendments to or waivers from the Code of Ethics will also be available on our website and reported as may be required under SEC rules; however, any technical, administrative or other non-substantive amendments to the Code of Ethics may not be posted. Please note that the preceding Internet address is for information purposes only and is not intended to be a hyperlink. Accordingly, no information found or provided at that Internet address or at our website in general is intended or deemed to be incorporated by reference herein.

COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis of compensation arrangements of the named executive officers of the Company should be read together with the compensation tables and related disclosures set forth below.

Introduction

For part of fiscal year 2018 (prior to the consummation of the transactions described below), our former general partner managed our operations and activities through its board of directors. Under our former fifth amended and restated agreement of limited partnership, we reimbursed our former general partner for direct and indirect general and administrative expenses incurred on our behalf, including the compensation of our former general partner’s executive officers. Our former general partner did not incur any reimbursable expenses related to the compensation of our former general partner’s executive officers for their management of us. Our former general partner’s executive officers were employed by our wholly-owned subsidiary, Legacy Reserves Services, Inc., and were directly compensated by Legacy Reserves Services, Inc. for their management of us pursuant to their employment agreements. Our executive officers are employed by Legacy Reserves Services LLC, our wholly-owned subsidiary and successor by conversion of Legacy Reserves Services, Inc., and are directly compensated by Legacy Reserves Services LLC for their management of us pursuant to their employment agreements. The compensation amounts disclosed, including amounts paid prior to the Corporate Reorganization, in this section and under “Executive Compensation” reflect the total compensation paid to our executive officers. For a description of the impact of the Corporate Reorganization on certain outstanding equity awards in Legacy Reserves LP held by our executive officers, please see page 28 .

Executive Summary

We are a corporation headquartered in Midland, Texas, focused on the horizontal development of unconventional plays in the Permian Basin and the cost-efficient management of shallow-decline oil and natural gas wells in the Permian Basin, East Texas, Rocky Mountain and Mid-Continent regions of the United States. The fundamental philosophy of the Company with respect to compensation remained unchanged after the Corporate Reorganization. The Corporate Reorganization did not have a substantive impact on our business strategy or approach to executive compensation. The compensation policy applicable to our named executive officers (“ NEOs ”), which was initially adopted by our former general partner’s compensation committee and approved by its board of directors (the “ Compensation Policy ”), remains in place (mutatis mutandis to reflect the Corporate Reorganization) and is designed to make NEO total compensation comparable to that of similarly-sized exploration and production companies. The goals of our Compensation Policy are to:

To achieve these goals, our total compensation to our executive officers is comprised of base salary, annual cash incentive compensation (annual cash bonuses), and equity-based incentive compensation.

This CD&A provides information regarding the compensation and benefits provided our NEOs for 2018:

Cash Incentive Compensation. We believe meaningful annual cash incentive compensation to be a strong motivating factor that will result in significant increases in value and in growth. Payouts of annual cash incentive compensation to our executive officers during fiscal year 2019 were made in accordance with the Compensation Policy based on performance during fiscal year 2018. For more information regarding cash incentive compensation earned in fiscal year 2018 please see “— Components of Compensation — Cash Incentive Compensation (Cash Bonus) under the Compensation Policy. ”

Subjective Component of Cash Incentive Compensation . In determining cash incentive awards earned in fiscal year 2018, our compensation committee conducted a subjective evaluation of individual officer and Company performance attributable to fiscal year 2018 for 50% of target annual cash incentive compensation. Under the Compensation Policy, the compensation committee has the discretion to award up to 200% of the subjective component of target annual cash incentive compensation based on the performance of the individual officer and the Company.

Objective Component of Cash Incentive Compensation . The remaining 50% of target annual cash incentive compensation earned in fiscal year 2018 was objectively determined in accordance with the objective criteria set forth in our Compensation Policy, which are based on our results and the achievement of operational and financial goals and objectives during fiscal year 2018 and are designed to align the incentive compensation of each executive officer with stockholder return by rewarding performance that exceeds the specified target levels for EBITDA (which is defined here to mean Adjusted EBITDA, a non-GAAP financial measure, as described in our annual report on Form 10-K) and results in the actual ratio of Total Debt (as defined in our Third Amended and Restated Credit Agreement, as amended) to EBITDA being less than the specified target ratio. The respective criteria target levels, for purposes of the determination of annual objective cash incentive compensation only, are set by the compensation committee at the beginning of each year after considering management’s recommendation and the Company’s internal operating plan.

Set forth below are the target levels for EBITDA and the target ratios of Total Debt to EBITDA used to determine the objective component of each executive officer’s annual cash bonus that may be earned with respect to fiscal year 2018. Achievement of less than 75% of Target EBITDA or failure to achieve a Total Debt to EBITDA ratio that is less than 125% of the target Total Debt to EBITDA ratio, respectively, will result in no annual cash bonus awarded with respect to that particular performance measure.

Set forth in the table below is a summary of the target cash incentive award amounts attributable to performance during 2018 of each NEO pursuant to the Compensation Policy, expressed as a percentage of each of such executive officer’s applicable base salary.

Equity-Based Incentive Compensation. We believe meaningful equity participation by each NEO to be a strong motivating factor that will result in significant increases in value and in growth and serves as a powerful retention tool. Grants of equity-based compensation to our executive officers during fiscal year 2018 were made in accordance with the Compensation Policy based on performance during fiscal year 2017. As a result of the Corporate Reorganization, effective September 20, 2018, all outstanding equity awards held by our NEOs in Legacy Reserves LP vested in full and were paid out. In connection with the consummation of the Corporate Reorganization, to ensure the retention of our NEOs, the Company made additional equity awards in the Company to our NEOs.

The subjective or service-based component of equity-based incentive compensation (awarded as phantom units and associated distribution equivalent rights (“ DERs ”) prior to the Corporate Reorganization, and as restricted stock units and associated DERs in the aftermath of the Corporate Reorganization) is determined by a subjective evaluation of prior fiscal year performance by the compensation committee and took into consideration the importance of retaining our NEOs. The objective or performance-based component of equity-based incentive compensation, (awarded as phantom units and associated DERs prior to the Corporate Reorganization, and as restricted stock units and associated DERs in the aftermath of the Corporate Reorganization), is designed to reward our executive officers for their long-term performance and to align their interests with those of our stockholders.

Subjective Component of Equity–Based Incentive Compensation under the Compensation Policy (60% of target). Under the Compensation Policy, equity-based incentive compensation awarded under this component cliff vest after a three-year vesting period and are not subject to any performance criteria. The compensation committee has the discretion to award up to 200% of the subjective component of target equity-based incentive compensation.

Objective Component of Equity–Based Incentive Compensation under the Compensation Policy (40% of target). Under the Compensation Policy, the objective component is granted at 200% of the target amount each year but is subject to cliff vesting after a three-year performance period in accordance with an objective performance-related formula (as set forth under “Calculation of Vesting of Objective Component of Equity–Based Compensation under the Compensation Policy” below) based on our objective average annual total stockholder return and the following: 1) our total stockholder return compared to the total stockholder returns of a group of our exploration and production MLP peers, and 2) our total stockholder return compared to the total stockholder returns of a broader group of MLPs. All total stockholder returns are measured during the cumulative three-year vesting measurement period prior to the vesting date. If none or only a portion of the award vests as a result of target levels not being met, the unvested portion of the award will be forfeited.

Set forth in the table below is a summary of the target equity-based incentive award amounts attributable to performance during 2018 of each NEO pursuant to the Compensation Policy, expressed as a percentage of each of such executive officer’s applicable base salary. On February 16, 2018, the compensation committee adjusted target levels for Mr. LeRoy based upon input from our compensation consultant and a review of market data, as described below under “Selection of Compensation Comparative Data.”

2018 Say on Pay Vote

The compensation committee considers whether the executive compensation program serves the interests of our stockholders. In that respect, as part of its ongoing review of our executive compensation program, the compensation committee considered the approval by approximately 96% of the votes cast for our “say on pay” vote at the Partnership’s 2018 annual meeting of unitholders. After considering the 2018 “say on pay” results, the committee determined that our executive compensation philosophy, compensation objectives, and compensation elements continued to be appropriate and did not make any changes to our executive compensation program in response to the 2018 “say on pay” vote.

Corporate Governance

Compensation Committee Authority

Prior to the Corporate Reorganization, executive officer compensation was administered by the compensation committee of the Board of Directors of our former general partner, which for 2018 was composed of three members, Messrs. Vann, Granberry and Sullivan. Currently, executive officer compensation is administered by our compensation committee, which is composed of three members, Messrs. Vann, Granberry and York. The Board of Directors appoints the compensation committee members and, pursuant to the compensation committee’s charter adopted on September 18, 2018, delegates to the compensation committee the responsibility for, among other things, determining and approving the compensation for our executive officers and reviewing and making recommendations to our Board of Directors with respect to our incentive compensation and other stock-based plans.

The Board of Directors has determined that each committee member is independent under NASDAQ-listing standards, SEC rules and the relevant securities laws, and that each member qualifies as a “non-employee” director within the meaning of Rule 16-3 promulgated under the Exchange Act.

Decision-Making Process and Role of Executive Officers

Compensation decisions for executive officers involve both objective and subjective criteria. In evaluating performance and compensation for 2018, the compensation consultant first provided information to the compensation committee regarding competitive market data. The second component of the decision-making process was our current and former Chief Executive Officer providing a written overview of performance by the Company, including an overview of the performance by each NEO, in light of established operational and financial goals and objectives. After reviewing this written overview, the compensation committee met with the current and former Chief Executive Officer in order to ask questions regarding the information set forth in the written overview and to gather any additional information needed in order to approve the compensation of all of the NEOs.

In determining the compensation of the NEOs, the compensation committee took into account the information provided by the compensation consultant. The compensation committee then evaluated the performance of the NEOs in light of established operational and financial goals and objectives and determined as a committee, together with any other independent directors participating in the process, the NEOs’ compensation.

Executive Officer Compensation Strategy and Philosophy

Our Compensation Policy is designed to provide our executive officers total compensation comparable to that of executives at similarly sized exploration and production companies.

Our executive officer compensation strategy is designed to:

In meeting the goal of sustainable growth, we intend to invest in our long-term opportunities while meeting our short-term commitments. As all our executive officers hold shares in the Company, we have attempted to maintain competitive levels of compensation while focusing on the growth of our business. Through this approach, our executives receive cash and equity-based compensation for their services. We believe that the design of our executive compensation program creates alignment of interests with our stockholders.

Components of Compensation

Named Executive Officer Compensation

Total compensation to our executive officers is comprised of base salary, cash incentive compensation (annual cash bonus), and equity-based incentive compensation.

2018 Performance Goals and Objectives

For the 2018 performance year, the operational and financial goals and objectives established at the beginning of 2018 were as follows:

These goals and objectives, as supplemented by more detailed supporting goals and objectives put forth by our NEOs, provided a framework for the compensation committee to assess our 2018 performance and to determine NEOs’ total compensation levels. Relative weight is not assigned to any of these goals and objectives. Additionally, the financial goals were based on various assumptions, with the understanding that our actual financial performance would be assessed based on factors considered relevant by the compensation committee at the time compensation for the NEOs was reviewed and determined.

2018 Performance Assessment for Determination of Incentive Compensation under the Compensation Policy

The compensation committee assessed the 2018 performance of executive officers for purposes of the determination of the subjective components of cash incentive compensation and its consideration of equity-based incentive compensation earned with respect to fiscal year 2018 based on the attainment of the foregoing goals and objectives and the performance-related factors that it considered to be relevant.

Among other relevant considerations, the compensation committee considered the following achievements by the Company and the executive officers during 2018:

Base Salaries

Overview

We pay base salary to attract talented executives and provide a fixed base of cash compensation. Under the compensation committee’s charter, the compensation committee determines and approves the base salaries of all of our executive officers.

It is the intent of the compensation committee to have the base salaries of our NEOs reviewed on an annual basis as well as at the time of a promotion or other material change in responsibilities.

2018 Base Salary Determinations

Based on the input of Meridian, our 2018 compensation consultant, a review of market data of NEOs at comparable exploration and production companies, and, with respect to Mr. Westcott, his promotion to President, effective March 1, 2018, base salaries were set at the following: Mr. Horne: $675,000; Mr. Westcott: $500,000; Mr. Hammond: $450,000; Mr. McGraw: $380,000; and Mr. LeRoy: $320,000. In connection with their promotions as of March 1, 2019 to Chief Executive Officer and President and Chief Operating Officer, respectively, the base salaries of Mr. Westcott and Mr. Hammond were increased to $675,000 and $500,000, in each case, effective on the date of such promotion.

Cash Incentive Compensation (Cash Bonus) under the Compensation Policy

Overview

As a component of total compensation, the compensation committee chooses to pay annual incentives to drive the achievement of key results and to recognize individuals based on their contributions to those results. The compensation committee recognizes that short-term results often support the achievement of long-term operating goals. The amount of annual incentives is based upon our results and the achievement of operational and financial goals and objectives. The range and target amounts are recommended to the compensation committee by our Chief Executive Officer. For 2018, the compensation committee did not approve an increase in the target amounts for any of the NEOs.

In determining cash incentive awards earned during a fiscal year, a subjective evaluation of the individual officer and Company performance (subjective criteria) for the fiscal year that such awards are to be earned and our results and the achievement of operational and financial goals and objectives during such fiscal year (objective criteria) are considered.

The objective and subjective components of the cash incentive compensation each comprise 50% of the target bonus available expressed as a percentage of annual salary for each executive officer, as set forth in the following table for fiscal year 2018.

Objective Component of Cash Bonus

The objective component (up to 50% of the annual target cash incentive compensation) is based on two measures of equal weight:

The percentage levels that may be earned each year are based on the ranges of performance levels with respect to each target as set forth in the following table, as determined by straight-line interpolation.

Achievement of less than 75% of Target EBITDA or failure to achieve a Total Debt to EBITDA ratio that is less than 125% of the target Total Debt to EBITDA ratio, respectively, will result in no annual cash bonus awarded with respect to that particular performance measure.

These objective measures are intended to align the cash incentive compensation of each executive officer with stockholder return by rewarding performance that achieves the EBITDA and Total Debt to EBITDA targets. The respective target levels of EBITDA and Total Debt to EBITDA, respectively, for purposes of the annual cash bonus determination only, will be set by the compensation committee at the beginning of each year after considering management’s recommendation.

During 2018, the Company achieved EBITDA of $277.5 million, or 81.36% of the $341.1 million target EBITDA, resulting in a Percentage Earned (pursuant to the table above) of 25.43% (weighted at 50%, yielding 12.71%) and Total Debt to EBITDA at year-end 2018 was 4.9x, or 128.84% of the 3.8x target, resulting in a Percentage Earned of 0% (weighted at 50%, yielding 0%), resulting in bonus amounts at 12.71% of the potential target level of the objective component of the cash incentive compensation (the “ Objective Factor ” as set forth in the table below).

Subjective Cash Award

Each executive officer was awarded the annual cash bonuses in the amounts determined by the percentage of target levels available, as set forth under “% of Subjective Factor Earned” in the table below, and the potential target level of the subjective component of cash incentive compensation for 2018 (the “ Subjective Factor ” as set forth below). Under the Compensation Policy, the compensation committee has the discretion to award up to 200% of the subjective target annual cash bonus.

Based on the Company’s and the individual executive officers’ accomplishments and performances as set forth above, under the caption “—2018 Performance Assessment for Determination of Incentive Compensation under the Compensation Policy,” the compensation committee set the subjective portion of the annual cash bonus as shown in the table below.

The chart below illustrates the cash incentive award bonus earned during 2018 for each NEO in accordance with the performance level/percentage earned calculation set forth in the Compensation Policy:

Equity-Based Incentive Compensation – Overview

We consider equity-based incentive compensation to be an important element of our compensation program for NEOs. We believe meaningful equity participation by each NEO to be a strong motivating factor that ties the interests of our executive officers directly to the interests of our stockholders. We also believe that equity-based incentive compensation serves as an important attraction and retention tool. Our award structure for long-term equity-based incentives employs a mix of subjective and objective measures as set forth below.

In prior years, the compensation committee of our former general partner awarded NEOs phantom units. After the Corporate Reorganization, we made grants of restricted stock units as all other equity awards had otherwise vested in full. These new grants were made under the Company’s 2018 Omnibus Incentive Plan (the “ 2018 Incentive Plan ”), which was adopted in connection with the Corporate Reorganization and approved by a majority of unitholders at the September 19, 2018 special meeting of the Partnership. Pursuant to the 2018 Incentive Plan, the Board of Directors (or any committee authorized by the Board of Directors to administer the plan) may grant stock options, restricted stock awards, performance awards, other stock-based awards, and other cash-based awards.

In light of the Company’s pursuit of strategic alternatives, the compensation committee did not make grants of equity-based compensation to executive officers in 2019 based on the Company’s performance during fiscal year 2018.

Equity-Based Incentive Compensation under the Compensation Policy

Subjective or Service-Based Component. The subjective or service-based component is determined by a subjective evaluation of prior fiscal year performance and, with respect to each executive officer, may be awarded up to 200% of the specified percentage of annual salary as set forth in the tables below. Once granted, the only condition to vesting will be that the executive officer remain in the service of the Company until the end of the respective 3-year cliff vesting period. The vesting of service-based equity-based awards, once granted, is not subject to the attainment of any performance criteria.

Objective or Performance-Based Component under the Compensation Policy. The objective component is granted each year at 200% of the target percentage listed in the table below, but the amount vested at the end of the three-year performance period is determined on the vesting date in accordance with an objective performance-related formula (as set forth under “Calculation of Vesting of Objective Component of Equity-Based Compensation under the Compensation Policy” below) based on the objective average annual total stockholder return and our total stockholder return compared to the total stockholder returns of a group of our peers as well as the total stockholder returns of a broader group of MLPs achieved during the cumulative three-year performance period prior to the vesting date. If none or only a portion of the award vests as a result of target levels not being met, the unvested portion of the award will be forfeited.

Prior to the Corporate Reorganization, all equity-based incentive compensation awards were phantom units, with associated DERs. After the Corporate Reorganization, all-equity based incentive compensation awards will be restricted stock units with time-based and performance-based vesting. In each case, these awards were up to 200% of the specified percentage of annual salary as set forth in the following table. On February 16, 2018, the compensation committee adjusted target levels for Mr. LeRoy based upon input from our compensation consultant and a review of market data, as described above under “Selection of Compensation Comparative Data.”

Calculation of Vesting of Objective Component of Equity-Based Compensation under the Compensation Policy

In connection with the Corporate Reorganization, all outstanding awards granted under the Partnership LTIP, including all objective phantom units awarded to the NEOs on March 1, 2018, automatically vested in full pursuant to the terms of the Partnership LTIP and the individual award agreements thereunder. Under the individual phantom unit award agreements, such vested phantom units (and any related DERs) were generally to be settled in cash. Although no such election was made, pursuant to certain amendments entered into by the Company with such executives, the executives were given the right to elect to reinvest a portion of such cash proceeds to which he was otherwise entitled in shares of our common stock (subject to a certain cap amount). In December 2018, each of our NEOs entered into a settlement agreement with respect to outstanding phantom units issued under the Partnership LTIP (the “ Phantom Unit Settlement Agreement ”). Pursuant to the terms of the Phantom Unit Settlement Agreement, each NEO that was to receive a cash amount in settlement of their phantom units became eligible instead to receive a portion of that settlement amount and forfeited, without consideration, his right to receive any remaining portion of the settlement amount. The aggregate settlement amount to be awarded to all executive officers, including each of NEOs, was $13.8 million, and the executive officers, including each of NEOs, agreed to forfeit an aggregate of $7.8 million pursuant to the Phantom Unit Settlement Agreements, each in proportion to each executive officer’s settlement amount.

2018 Objective Phantom Unit Vesting

In accordance with description of the objective component of equity compensation as set forth in the Compensation Policy and calculated as described above in “— Equity-Based Incentive Compensation ” and “— Calculation of Vesting of Objective Component of Equity-Based Compensation ,” the phantom units granted to each executive officer, automatically vested in full pursuant to the terms of the Partnership LTIP and the individual award agreements thereunder, in connection with the Corporate Reorganization. Under the individual phantom unit award agreements, such vested phantom units (and any related DERs) were generally to be settled in cash. As described above, pursuant to the terms of the Phantom Unit Settlement Agreement, each NEO that was to receive a cash amount in settlement of their phantom units became eligible instead to receive a portion of that settlement amount and forfeited, without consideration, his right to receive any remaining portion of the settlement amount. The aggregate settlement amount to be awarded to all executive officers, including each of NEOs, was $13.8 million, and the executive officers, including each of NEOs, agreed to forfeit an aggregate of $7.8 million pursuant to the Phantom Unit Settlement Agreements, each in proportion to each executive officer’s settlement amount.

2018 Adjustments to Compensation Policy

On February 16, 2018, the compensation committee approved an amendment to the Compensation Policy. The amendment to the Compensation Policy applies to incentive awards granted to Mr. LeRoy commencing in fiscal year 2019 with respect to the Company’s and Mr. LeRoy’s performance during fiscal year 2018 and provides that Mr. LeRoy’s target value of units awarded as a percentage of annual salary will be set at 100% and 50% for the subjective and objective components, respectively. As mentioned above, the Company did not make any substantial modifications to the Compensation Policy in fiscal year 2018 in the aftermath of the Corporate Reorganization, although changes may be made in fiscal year 2019 and beyond as necessary.

Letter Agreements with our NEOs

As previously disclosed on Form 8-K on October 31, 2018, we entered into letter agreements with three of our NEOs on October 31, 2018, as described below.

The Company and Mr. Horne entered into a transition letter agreement (the “ Horne Transition Agreement ”) in connection with Mr. Horne’s transition out of the role of Chief Executive Officer. Under the Horne Transition Agreement, all outstanding equity awards will continue to vest on the basis of, and only to the extent of, his continued service with the Company on its Board. Mr. Horne is entitled to an annual fee of $120,000 in connection with such service.

The Company and Mr. LeRoy entered into a transition letter agreement (the “ LeRoy Transition Agreement ”) in connection with Mr. LeRoy’s transition out of the role of Vice President and General Counsel and into the role of Senior Legal Advisor. The LeRoy Transition Agreement supersedes the terms of Mr. LeRoy’s prior employment agreement with the Company. Under the LeRoy Transition Agreement, Mr. LeRoy is entitled to a base salary of $235,000 for 2019 for his service as Senior Legal Advisor. He will continue to be eligible for an annual bonus and certain equity awards. Under the LeRoy Transition Agreement, if Mr. LeRoy’s employment is terminated by us for without cause or by Mr. LeRoy with good reason, subject to his performance of all post-employment obligations and the execution and non-revocation of a release, any outstanding equity awards granted to Mr. LeRoy in 2019 or earlier will fully vest, in each chase within 60 days of such termination of employment. Under the LeRoy Transition Agreement, Mr. LeRoy may terminate his employment for “good reason” if three of the five individuals serving as executive officers of the Company as of March 1, 2019 are no longer with the Company, provided that the general counsel as of March 1, 2019 must also no longer be with the Company.

The Company and Mr. McGraw entered into a separation letter agreement (the “ McGraw Separation Agreement ”) in connection with Mr. McGraw’s retirement from the Company as of December 31, 2018. The McGraw Separation Agreement supersedes the terms of Mr. McGraw’s prior employment agreement with the Company. Under the agreement, any vested equity awards that had not yet been settled as of December 31, 2018 will be settled at the same time vested equity awards are generally settled for other executive officers. In addition, under the McGraw Separation Agreement, in connection with his retirement, Mr. McGraw received a lump sum cash payment of $2,133,210.

Perquisites and Other Personal Benefits

We maintain a 401(k) plan. The plan permits eligible full-time employees, including NEOs, to make voluntary, pre-tax contributions to the plan up to a specified percentage of compensation, subject to applicable tax limitations. We may make a discretionary matching contribution to the plan for each eligible employee equal to 8.0% of an employee’s annual compensation not in excess of $275,000 for 2018, subject to applicable tax limitations. Eligible employees who elect to participate in the plan are generally vested in any matching contribution after commencement of employment with the Company.

We maintain an employee benefit plan that provides our employees with the opportunity to enroll in our health, dental and life insurance plans. We pay all of our employees’ health and life insurance premiums and offer certain other optional insurance programs that require the employee to pay the applicable premium. Our dental plan requires the employee to pay a portion of the premium, and we pay the remainder. We provide these benefits so that we will remain competitive in the employment market and offer the benefits to all employees on the same basis.

described above, pursuant to the terms of the Phantom Unit Settlement Agreement, each NEO that was to receive a cash amount in settlement of their phantom units became eligible instead to receive a portion of that settlement amount and forfeited, without consideration, his right to receive any remaining portion of the settlement amount. The aggregate settlement amount to be awarded to all executive officers, including each of NEOs, was $13.8 million, and the executive officers, including each of NEOs, agreed to forfeit an aggregate of $7.8 million pursuant to the Phantom Unit Settlement Agreements, each in proportion to each executive officer’s settlement amount.

Option Exercises and Units Vested in 2018

None of our executive officers exercised options during 2018. On February 16, 2018, pursuant to certain objective criteria, the compensation committee determined that no phantom units vested which were granted to Westcott, McGraw, LeRoy and Horne in 2015. As described above, in connection with the Corporate Reorganization, all outstanding awards granted under the Partnership LTIP automatically vested in full pursuant to the terms of the Partnership LTIP and the individual award agreements thereunder.

The following table reflects all of the phantom units and restricted stock units held by our named executive officers which vested during 2018.

Employment Agreements

Through our wholly-owned subsidiary Legacy Reserves Services, Inc., at the beginning of 2018, we had employment agreements with Messrs. Horne, Hammond, McGraw, Westcott, and LeRoy. These agreements established that Legacy Reserves Services, Inc. employed the executive officers. Each of the employment agreements

initially became effective on September 20, 2018, in connection with the Corporate Reorganization. Since then, Messrs. Westcott and Hammond have entered into amended and restated employment agreements, both effective October 31, 2018, in connection with their promotions to Chief Executive Officer and President and Chief Operating Officer, respectively, on March 1, 2019. In addition, on October 31, 2018, Mr. LeRoy entered into a transition letter agreement in connection with his transition out of the role of Vice President and General Counsel and Mr. McGraw entered into a separation letter agreement in connection with his retirement from the Company as of December 31, 2018, which in each case supersede that NEO’s respective prior employment agreement.

The employment agreements provide that each executive officer is entitled to participate in equity and non-equity incentive programs that we may establish from time to time and incentive compensation will be paid at the discretion of the Board of Directors or our compensation committee. See “ Compensation Discussion and Analysis—Components of Compensation—Named Executive Officer Compensation .”

As noted above in “ Compensation Discussion and Analysis—Letter Agreements with our NEOs ,” Mr. Horne, Mr. McGraw, and Mr. LeRoy each entered into a letter agreement with the Company in 2018. As a result, the terms and conditions of each of such NEO’s provision of services to the Company was governed, in part or in full (as applicable), by such letter agreement.

Intellectual Property and Non-Compete Clauses

The employment and letter agreements with each of our NEOs require that the executive officer must promptly disclose and assign any individual rights that he may have in any intellectual property and business opportunities to us. For purposes of the employment and letter agreements, intellectual property includes trade secrets, inventions, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, knowhow, improvements, discoveries, developments, designs and techniques and business opportunities include 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. Under the non-compete provisions of these agreements, the executive officers are prohibited from engaging or participating, with any person or entity, in any activity pertaining to the leasing, acquiring, exploring, producing, gathering or marketing hydrocarbons and related products during the term of the executive officer’s employment and the executive officer may not invest in any other such business unless prior approval is granted in writing by our Board of Directors. The non-compete provisions of the employment agreements limit the executives’ right to engage in these activities for a period of one year after termination of employment in counties and/or parishes where we do business, and limit investment to 3% of the total outstanding securities of publicly traded companies engaged in similar businesses for a period of one year after termination unless such competitive activity is approved in writing by a majority of the independent directors of our Board of Directors. The employment and letter agreements also prohibit the executive officer from soliciting any of our employees or customers for two years following termination.

The non-compete provisions contained in the employment agreements will not apply to investments by the executive officers made prior to the effective date of their respective employment agreements, provided that the investments were identified in an exhibit to the employment agreement. In addition, the non-compete provisions will not apply if we terminate the executive officer’s employment within two years following a change of control.

Severance and Change in Control Payments

Pursuant to the terms of the employment and letter agreements as of December 31, 2018, we may have been obligated to make severance payments to our NEOs following the termination of their employment. These benefits are described below under “ —Benefits Payable Upon Termination or Change in Control .” One of our named executive officers, Mr. McGraw, retired from his position as Executive Vice President and Chief Development Officer of the Company effective December 31, 2018. In connection with his retirement, Mr. McGraw received a lump sum cash payment of $2,133,210.

The employment agreements with our NEOs did not include any obligation to make gross-up payments associated with any excise tax that could have been imposed by Section 4999 of the Internal Revenue Code. However, each employment agreement contains a “Section 280G best net after-tax” provision, which provides that, if the total payments to the NEO under the agreement would exceed the applicable threshold under Section 280G of the Internal Revenue Code, then those payments will be reduced to the applicable Section 280G threshold to avoid the imposition of excise taxes under Section 4999 of the Internal Revenue Code in the event, and only to the extent, such reduction would result in a better after-tax result for the NEO.

Each NEO will have a 15-day cure period prior to termination for cause under these agreements.

“ Good Reason ” is defined under each employment agreement as:

“ Good Reason ” is defined under Mr. LeRoy’s transition letter agreement as:

In each case, for “Good Reason” to exist, the employee must provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within sixty (60) days of becoming aware of the occurrence of such circumstances, and actually terminate employment within thirty (30) days following the expiration of the Employer’s thirty (30)-day cure period described above.

Under the employment agreements, if the employment of any NEO is terminated by us for cause or by the executive officer without good reason, we are not obligated to make any severance payments to the executive officer, other than certain accrued benefits representing earned but unpaid items through the date of termination. The amount that an executive officer is entitled to receive upon a termination of his employment by us without cause or by the executive officer with good reason is based on the executive officer’s salary and his incentive compensation. Under the severance provisions of each executive officer’s employment agreement, they are each entitled to severance pay in the amount of two years’ of annual base salary payable monthly at the highest rate in effect at any time during the 36 month period prior to termination, two times the annual bonus in effect preceding the termination and an amount equal to the executive’s pro-rata bonus for the fiscal year in which the termination occurs, such pro-rata bonus at such time as bonuses for the annual period are paid to other executive officers of the Company in accordance with the terms of the applicable bonus plan). In addition, the executive officers are entitled to the full costs of the executive’s COBRA continuation coverage until the earlier of (i) the expiration of the maximum period required under applicable law, or (ii) the date on which executive receives substantially similar benefits from a subsequent employer.

Under the LeRoy Transition Agreement, if his employment is terminated by us for cause or by the executive officer without good reason, subject to his performance of all post-employment obligations and the execution and non-revocation of a release, any outstanding equity awards granted to Mr. LeRoy in 2019 or earlier will fully vest, in each chase within 60 days of such termination of employment.

Change in Control Benefits

Pursuant to the employment agreements, we may be required to make payments to our NEOs who have employment agreements upon a change in control, which occurs upon any of the following (provided that, with respect to any amounts that may be characterized as “nonqualified deferred compensation,” any such change in

control qualifies as a change in ownership, change in effective control or change in ownership of a substantial portion of assets of the Partnership within the meaning of Section 409A of the Internal Revenue Code):

If a termination without cause or by the executive officer with good reason occurs within two years following a change in control, the executive officer will be entitled to a lump-sum payment in an amount equal to the sum of (i) 36 months of his annual base salary (where each monthly amount equals one-twelfth of such executive’s annual base salary), determined at the highest rate in effect at any time during the 36-month period prior to the termination and (ii) three times his annual target bonus, determined at the target amount in effect immediately prior to the termination. Such lump-sum payment will be payable within 60 days following the date of termination, provided that

if the 60-day period begins and ends in two distinct taxable years, any such payment will not be made until the second taxable year. In addition, the executive will be entitled to receive an amount equal to any accrued but unpaid bonus and a cash amount equal to the executive’s pro-rata bonus for the fiscal year in which the date of termination occurs, in each case, payable at such time as bonuses of other executive officers are paid such bonuses, and the full costs of the executive’s COBRA continuation coverage until the earlier of (i) the expiration of the maximum period required under applicable law, or (ii) the date on which executive receives substantially similar benefits from a subsequent employer.

Pay Ratio Disclosure

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following disclosure about the estimated ratio of the annual total compensation of our employees to the annual total compensation of Mr. Horne, our Chief Executive Officer as of December 31, 2018. We believe the ratio below is a reasonable estimate calculated in accordance with Item 402(u) of Regulation S-K. SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.

Ratio

For 2018, the median of the annual total compensation of all of our employees, other than Mr. Horne, was an estimated $134,434. Mr. Horne’s annual total compensation, as reported in the Total column of the 2018 Summary Compensation Table, was $12,563,418. Based on this information, the ratio of the annual total compensation of Mr. Horne to the median of the estimated annual total compensation of all employees is 93 to 1.

Identification of Median Employee

We selected December 31, 2017 as the date on which to determine our median employee. As permitted by SEC rules, we have used the same median employee as we did for purposes of our 2018 proxy statement because we do not believe there has been a change in our employee population or employee compensation arrangements that would significantly impact the pay ratio disclosure. For purposes of identifying the median employee from the employee population base, we considered the gross W-2 wages of all of our employees, as compiled from our payroll records. In addition, we measured compensation for purposes of determining the median employee using the 12-month period ending December 31, 2017.

2013, Mr. Elliott served as IT Director for Compressor Systems, Inc. From October 2008 to December 2010, Mr. Elliott served as Infrastructure Director for Key Energy Services. From March 2005 to August 2008, Mr. Elliott served as IT Manager for Basic Energy Services. Mr. Elliott began his career with Pure Resources, a Division of Unocal, in August of 2000 until March 2005. Mr. Elliott has a Computer Science degree from Texas State Technical College. Mr. Elliott has 19 years of technology and oil and gas industry experience.

Micah C. Foster is Chief Accounting Officer and Controller of Legacy. Mr. Foster was appointed Chief Accounting Officer in April 2012. Mr. Foster joined Legacy’s predecessor in January 2006 and served as Financial Accountant from March 2006 to July 2008, Financial Reporting Manager from July 2008 to July 2010, and Assistant Controller from July 2010 to October 2011. In October 2011, Mr. Foster was promoted to Controller. Prior to joining Legacy, Mr. Foster worked as staff auditor and then senior auditor at Ernst & Young, LLP from July 2003 to January 2006. Mr. Foster holds a BBA in Accounting and Finance from Abilene Christian University and is a Certified Public Accountant.