Staff with more than 18 months service

 

QUEST ENERGY PARTNERS, L.P.

PHANTOM UNIT AWARD AGREEMENT

 

 

Date of Grant:

December 7, 2009

 

Number of Common Units:

______ Common Units

THIS AGREEMENT, dated as of December 7, 2009, is between Quest Energy GP, LLC, a
Delaware limited liability company (the "Company"), and _____________
("Recipient").

RECITALS:

A.        On November 14, 2007, the Board of Directors of the Company
established the Quest Energy Partners, L.P. Long-Term Incentive Plan (the
"Plan") under which the Company may grant employees, consultants and directors
certain equity-based awards.

B.        Recipient is a valued and trusted employee of the Company or one of
its Affiliates.

C.        The Company has elected to issue Recipient rights to Common Units of
Quest Energy Partners, L.P. (the "Partnership") (as the term "Common Unit" is
defined in the First Amended and Restated Agreement of Limited Partnership of
Quest Energy Partners, L.P., dated November 15, 2007, and as it may be amended
from time to time (the "Partnership Agreement") pursuant to and in accordance
with this Agreement, in order that Recipient thereby may be induced to obtain an
ownership interest in the Partnership and to advance the interests of the
Partnership and its Affiliates.

AGREEMENT:

In consideration of the mutual premises and covenants contained herein and other
good and valuable consideration paid by Recipient to the Company, the Company
and Recipient agree as follows:

 

Section 1.

Incorporation of Plan

All provisions of this Agreement and the rights of Recipient hereunder are
subject in all respects to the provisions of the Plan and the powers of the
Board therein provided. Capitalized terms used in this Agreement but not defined
shall have the meaning set forth in the Plan

 

Section 2.

Promise to Deliver Units

The Company will issue and deliver to Recipient, subject to the conditions set
forth in this Agreement, that number of Common Units of the Partnership
identified above opposite the heading "Number of Common Units" (the "Units").
The Units, which will be issued by the Partnership subject to the conditions set
forth herein, will be issued in the name of Recipient or a nominee of Recipient
on the applicable Transfer Date (as identified and defined below in this Section
2) for each such Unit. Once a Unit has been transferred, the Unit will be freely
transferable under

 

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this Agreement, subject only to such further limitations on transfer, if any, as
may exist under the Partnership Agreement, applicable law or any other agreement
binding upon Recipient.

Provided Recipient's right to receive the Units has not already been forfeited
pursuant to Section 4 and subject to any exceptions listed elsewhere herein,
Recipient's rights to the Units shall vest in proportional amounts (with any
number(s) not evenly divisible being allocated to the earliest tranche) on the
applicable dates identified below (the "Transfer Dates"), and the Units will be
transferred on, or no more than 10 days after, such Transfer Dates:

 

Number of Units

Transfer Date

______ Common Units

(20% of the total number of Units)

December 23, 2009

______ Common Units

(20% of the total number of Units)

September 23, 2010

_____ Common Units

(20% of the total number of Units)

September 23, 2011

_____ Common Units

(20% of the total number of Units)

September 23, 2012

_____ Common Units

(20% of the total number of Units)

September 23, 2013

 

 

Section 3.

Consideration to the Company

In consideration of the awarding of the Units by the Company, Recipient agrees
to render faithful and efficient services as an employee of the Company or an
Affiliate. Nothing in this Agreement will confer upon Recipient any right to
continue as an employee of the Company or an Affiliate or will interfere with or
restrict in any way the rights of the Company or an Affiliate, which are hereby
expressly reserved, to terminate Recipient’s employment with the Company or an
Affiliate at any time for any reason whatsoever, with or without cause.

 

Section 4.

Forfeiture of Right to Receive Units Prior to Transfer

Unless otherwise provided herein, if the Company or its Affiliate terminates
Recipient's employment or Recipient terminates employment with the Company or
its Affiliate, for any reason and including without limitation death or
Disability, before one or more of the Transfer Dates for some or all of the
Units, all of the Recipient's right to receive additional Units under this
Agreement and all rights to receive Distribution Equivalent Rights ("DERs"), if
any, shall immediately be forfeited. Upon such forfeiture, Recipient shall have
no further rights under this Agreement. Notwithstanding the foregoing, any DERs
that have been declared but not yet paid prior to the Recipient's termination
and any Units, to the extent they have vested but not yet been transferred, will
be paid and transferred to Recipient or Recipient's designated beneficiary, as
the case may be, within 60 days of the date of Recipient's termination of
employment.

 

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Section 5.

No Assignment of Rights

Subject to any exceptions set forth elsewhere herein, none of the rights to
receive the Units or DERs may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of by Recipient, and Recipient agrees not to
attempt to sell, assign, transfer, pledge, hypothecate or otherwise dispose of
such rights. Any attempt to sell, assign, transfer, pledge, hypothecate or
otherwise dispose of a right to receive a Unit or DER under this Agreement shall
be null and void.

 

Section 6.

Acknowledgement of Rights of the Company in Event of Change in Control  

By executing this Agreement, Recipient agrees and acknowledges that in the event
of a Change in Control (as defined below), the Company shall accelerate the
Transfer Dates applicable to the Units to the date of the Change in Control. No
such action shall be taken in a manner that would cause the Units to be subject
to Section 409A of the Internal Revenue Code (the "Code").

For purposes of this Agreement, a "Change in Control" means and shall be deemed
to have occurred upon the occurrence of one or more of the following events:

(i)        any "person" or "group" within the meaning of those terms as used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended,
other than an Affiliate of the Company, shall become the beneficial owner, by
way of merger, consolidation, recapitalization, reorganization or otherwise, of
50% or more of the combined voting power of the equity interests in Quest
Resource Corporation, the Company or the Partnership;

(ii)       the limited partners of the Partnership approve, in one or a series
of transactions, a plan of complete liquidation of the Partnership;

(iii)      the sale or other disposition by either the Company or the
Partnership of all or substantially all of its assets in one or more
transactions to any Person other than the Company or an Affiliate of the
Company; or

(iv)      a transaction resulting in a Person other than the Company or an
Affiliate of the Company being the general partner of the Partnership.

Notwithstanding anything in this Agreement to the contrary, none of the
transactions that will occur in connection with the "recombination" described in
the Registration Statement of PostRock Energy Corporation ("PostRock") on Form
S-4 filed with the Securities and Exchange Commission (the "SEC") on October 6,
2009 (Registration No. 333-162366) (the "Recombination") shall be considered a
Change in Control for purposes of this Agreement.

In the event of the completion of the Recombination, without any requirement or
obligation to obtain the Recipient’s consent, the Compensation Committee of the
Board of Directors of PostRock shall provide that any unvested Units hereunder
shall be exchanged for rights covering the equity of PostRock, with appropriate
adjustments as to the number and kind of equity interests; such rights shall be
evidenced in such manner as determined by the Compensation Committee. Any rights
with respect to DERs or the transfer of Units upon a Change in Control hereunder
shall not apply to any PostRock equity interests received in exchange for the
Units, and such rights shall be of

 

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no further force and effect on or after the date of the Recombination. The
determinations of such Compensation Committee with respect to the exchange,
adjustments, and terms and conditions of the PostRock equity interests received
in exchange for the Units shall be made in accordance with the Agreement and
Plan of Merger, dated July 2, 2009, as amended, governing the Recombination and
shall be conclusive and binding on all parties.

 

Section 7.

Voting Rights and DERs

Recipient shall have no voting rights with respect to any of the Units until a
Unit has been transferred to Recipient. Following a Transfer Date, Recipient
shall have such voting rights, if any, as are provided to the holders of Units
under the Partnership’s partnership agreement or as provided under applicable
law. From the Date of Grant until the Transfer Date, Recipient shall be entitled
to receive DERs. Such DERs will be paid to Recipient as soon as reasonably
practicable following the date such distributions are paid to holders of the
Units of the same type to which such DERs relate, but in no event later than the
60th day after the date of such corresponding distribution. Under no
circumstances shall Recipient's right to receive the benefit of DERs on the
Units be interpreted or construed as such Units being owned by Recipient or as
Recipient having any rights as a holder of Common Units greater than those set
forth herein. Following a Transfer Date, no DERs shall be paid on any Unit that
has been delivered; however, Recipient shall be entitled to any distribution
made to holders of the same type of Unit under the Partnership Agreement with
respect to such unrestricted Unit. For the avoidance of doubt, at no point in
time will Participant be entitled to both actual distributions paid on Common
Units and DERs.

 

Section 8.

Adjustments

Notwithstanding any provision herein to the contrary, in the event of any change
in the number of outstanding Common Units of the Partnership effected without
receipt of consideration therefor by the Partnership, by reason of a merger,
reorganization, consolidation, recapitalization, separation, liquidation, unit
dividend, unit split, unit combination or other change in the corporate
structure of the Partnership affecting the Common Units, the Recipient's right
to receive Units under this Agreement will be automatically adjusted to
accurately and equitably reflect the effect thereon of such change. In the event
of a dispute concerning such adjustment, the decision of the Company will be
conclusive. The Recombination is not a change subject to the provisions of this
Section 8.

 

Section 9.

Amendment and Cancellation

This Agreement may be amended or cancelled at any time provided that, to the
extent any amendment would be materially adverse to Recipient or in the event of
the cancellation of this Agreement, both the Company and Recipient consent to
the terms of such amendment or cancellation. The foregoing notwithstanding, no
amendment or cancellation shall be made or valid that would result in the Units
becoming subject to Code Section 409A.

 

Section 10.

Withholding of Tax

To the extent that the transfer of a Unit results in the receipt of compensation
by Recipient with respect to which the Company or an Affiliate has a tax
withholding obligation pursuant to applicable law, unless other arrangements
have been made by Recipient that are acceptable to the Company or such
Affiliate, Recipient shall deliver to the Company or the Affiliate such amount
of money as the Company or the Affiliate may require to meet its withholding

 

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obligations under such applicable law. No Units will be transferred under this
Agreement until Recipient has paid or made arrangements approved by the Company
or the Affiliate to satisfy in full the applicable tax withholding requirements
of the Company or Affiliate with respect to such event.

 

Section 11.

Entire Agreement

This Agreement constitutes the entire agreement of the parties with regard to
the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
the Units granted hereby. Without limiting the scope of the preceding sentence,
all prior understandings and agreements, if any, among the parties hereto
relating to the subject matter hereof are hereby null and void and of no further
force and effect. Except as provided with respect to the exchange of the Units
for PostRock equity interests in the event of the completion of the
Recombination as set forth in Section 6, a modification of this Agreement shall
be effective only if it is in writing and signed by both Recipient and an
authorized officer of the Company.

 

Section 12.

Designation of Beneficiary

Recipient may designate a person or persons to receive, in the event of
Recipient's death, any Units then being transferred or other property then or
thereafter distributable relating to the Units. Such designation must be made
either in the space indicated at the end of this Agreement or upon forms
supplied by and delivered to the Company or its delegate and may be revoked in
writing. If Recipient fails effectively to designate a beneficiary, the estate
of Recipient will be deemed to be the beneficiary of Recipient with respect to
any such Units or other property.                

 

Section 13.

Applicable Law

This Agreement will be governed by and construed in accordance with the laws of
the State of Delaware, excluding its conflict of laws provisions.

 

Section 14.

Section 409A

The rights to, and distribution of, the Units granted hereunder are intended to
be exempt from the requirements of Section 409A of the Code under the
"short-term deferral exclusion" as defined thereunder, and this Agreement shall
be interpreted and administered in a manner consistent with that intent.

[Execution and Beneficiary Designation Page To Follow]

 

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The parties to this Agreement have executed this Agreement effective as of the
date first above stated.

 

 

 

QUEST ENERGY GP, LLC

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

RECIPIENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Designation of Beneficiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Relationship to Recipient)

 

 

 

 

 

 

 

 

 

 

 

(Name of Beneficiary)

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

(City, State, Zip Code)

 

 

 

 

 

 

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