Exhibit 10.7

Memorial Production Partners LP

Key Employee Incentive Plan

 

Article 1
Purpose and Effective Date

1.1Purpose.  The purpose of this Plan is to provide certain key employees of the
Company and its affiliates additional compensation and incentive related to the
performance of the Company and its subsidiaries.  The Plan is intended to
represent the principal cash incentive compensation plan of the Company for
Participants through the end of its 2017 fiscal year.

1.2Effective Date.  The Plan shall be effective as of October 1, 2016.  The Plan
shall continue in effect until terminated in accordance with Section 6.1.

 

Article 2
Definitions

2.1Definitions.  For purposes of the Plan, the following terms shall have the
meanings set forth below.

“Board” means the Board of Directors of Memorial Production Partners GP LLC or
any successor thereto, or any committee or agent as delegated by the Board of
Directors of Memorial Production Partners GP LLC or any successor thereto in its
sole discretion.

“Cause” (for Termination of Employment) means (i) a Participant’s commission of,
conviction for, plea of guilty or nolo contendere to a felony or a crime
involving moral turpitude; (ii) a Participant’s engaging in conduct that
constitutes fraud, gross negligence or willful misconduct in connection with his
or her employment duties or responsibilities; (iii) a Participant’s
contravention, in any material respect, of specific lawful directions related to
a material duty or responsibility which is directed to be undertaken from the
person to whom such Participant reports; (iv) any acts by a Participant which
constitute embezzlement, misappropriation or breach of fiduciary duty resulting
or intending to result in such Participant’s personal gain or enrichment at the
expense of the Company or its affiliates; or (v) a Participant’s continued
failure to comply with a material policy of the Company or its affiliates after
receiving notice of failure to comply from the person to whom such Participant
reports.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.  

“Company” means Memorial Production Partners LP, and any successor thereto.

“Disability” of a Participant means, at the time of a Termination of Employment,
such Participant is unable to perform his or her duties for a period of 90
consecutive days as a result of physical or mental impairment, or illness or
injury.  

 

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“Effective Date” means October 1, 2016.

“Good Reason” means (i) a reduction in a Participant’s base salary in effect
immediately prior to such reduction; (ii) a reduction in the Plan Bonus
opportunity of a Participant for any then-current Performance Cycle under the
Plan; (iii) a required relocation of more than fifty (50) miles from a
Participant’s principal office with the Company, its affiliates or its
successor; or (iv) a material diminution in a Participant’s title, authority or
duties.

“Lease Operating Expenses” means, with respect to a Performance Cycle, the day
to day costs incurred by the Company and its subsidiaries to maintain production
of natural gas, NGLs and oil (including, without limitation, utilities, direct
labor, water injection and disposal, the cost of CO2 injection, materials and
supplies, compression, repairs and workover expenses).

“Participant” means a key employee of the Company or its affiliates designated
by the Board as a Participant in the Plan, as provided in Section 4.1.

“Performance Measures” means (i) Lease Operating Expenses, (ii) Production
and/or (iii) Safety, as defined in the Plan.  

“Performance Cycle” means each fiscal quarter of the Company during the term of
the Plan beginning on the Effective Date.  

“Permitted Reason” means Termination of Employment of a Participant by reason of
his or her death, Disability, by the Participant for Good Reason or by the
Company or its affiliates without Cause.

“Plan” means this Memorial Production Partners LP Key Employee Incentive Plan,
as amended from time to time.

“Plan Bonus” means the entitlement of a Participant to a bonus payment under the
Plan, expressed as a percentage of a Participant’s base salary or a fixed dollar
amount, at specified levels (threshold, target and maximum levels as determined
by the Board) payable for the applicable Performance Cycle.

“Production” means, with respect to a Performance Cycle, the average daily
production (oil, natural gas and NGLs) of the Company and its subsidiaries on a
MMcfe basis.

“Restructuring Transaction” means any restructuring, reorganization (whether or
not pursuant to chapter 11 of title 11 of the United States Code) and/or
recapitalization of substantially all of the Company’s and its subsidiaries’
assets or liabilities.

“Safety” means, with respect to a Performance Cycle, the Company’s and its
subsidiaries’ Total OSHA Recordable Injuries.

“Termination of Employment” occurs when a Participant incurs a “separation from
service” from the Company or any of its affiliates as defined in Section 409A of
the Code and applicable regulations.

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Article 3
Administration of the Plan

3.1Administrator of the Plan.  The Plan shall be administered by the Board.

3.2Authority of Board.  The Board shall have full power and discretionary
authority to administer the Plan, including, without limitation, to: (i) 
interpret and construe the Plan, apply the terms of the Plan, interpret and
resolve all questions of fact under the Plan, (ii) determine the rights of any
person under the Plan, or the meaning of requirements imposed by the terms of
the Plan or an award, or any rule or procedure established by the Board, and to
resolve all disputes under the Plan, (iii) adopt, amend, and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(iv) correct any defect or omission or reconcile any good faith, unintentional
inconsistency in the Plan, and (v) make all other determinations and take all
other actions necessary or advisable for the implementation and administration
of the Plan, subject to the such limitations as may be imposed by the Code or
other applicable law. The Board may delegate administrative duties under the
Plan to one or more agents as it shall deem necessary or advisable.

3.3Plan Determinations.  No member of the Board or any person delegated
authority by the Board under the Plan shall be personally liable for any action
or determination made in good faith with respect to the Plan or as to any
settlement of any dispute between a Participant and the Company.  Any decision
or action taken by the Board acting in good faith with respect to the
administration or interpretation of the Plan shall be conclusive and binding
upon all persons.

 

Article 4
Eligibility and Participation

4.1Participants.  Key employees of the Company or its affiliates who have been
designated by the Board to participate in the Plan are set forth on Exhibit A
hereto.  Additional Participants may be designated by the Board from time to
time to participate in the Plan, and shall be notified by the Board in writing
of such participation.

 

Article 5
Bonus Payments

5.1Performance Measures.  The payment of the Participant’s Plan Bonus shall be
determined based upon the achievement by the Company and its subsidiaries of the
Performance Measures for each Performance Cycle under the Plan.  Performance
Measures for each Performance Cycle shall be weighted equally during the
applicable Performance Cycle, unless otherwise determined in good faith by the
Board prior to the end of the first month in such applicable Performance
Cycle.  In determining a Plan Bonus payable, the degree of achievement of each
Performance Measure and the specified levels thereof during the applicable
Performance

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Cycle shall be measured independently of other Performance Measures and then
weighted in accordance with the foregoing sentence. The specified levels of
achievement for each Performance Cycle (threshold, target and maximum levels of
achievement) for the payment of Plan Bonuses in respective amounts shall be
determined by the Board as soon as practicable following adoption of the Plan
and communicated to Participants.

5.2Plan Bonuses.  Each Participant shall be eligible to receive a Plan Bonus for
each Performance Cycle under the Plan for which the Participant is employed at
the beginning of the Performance Cycle, subject to the terms hereof.  Plan
Bonuses for the Participants set forth on Exhibit A hereto have been determined
by the Board upon adoption of the Plan.  The Board shall notify each Participant
of the Plan Bonus he or she shall be eligible to receive in writing
substantially in the form set forth on Exhibit B hereto.  Payment of the Plan
Bonus is based upon achievement by the Company and its subsidiaries of
performance levels established by the Board for the Performance Measures at the
specified levels, as provided in Section 5.1.

5.3Payment of Bonuses.  Any Plan Bonus earned by a Participant (if any) shall be
payable in a cash lump sum, within 30 days after the end of the Performance
Cycle, following the determination by the Board of the degree of achievement of
the Performance Measures.  Payments shall be made based on the applicable
threshold, target and maximum levels of achievement of the Performance Measures.
All payments shall be subject to applicable tax withholding
requirements.  Subject to Section 5.4, a Participant is required to remain
employed by the Company or an affiliate until the end of the Performance Cycle
to be eligible to receive a payment of a Plan Bonus.    

5.4Termination of Employment.  Notwithstanding the foregoing, in the event that
prior to payment of a Plan Bonus for a Performance Cycle that has commenced, a
Participant incurs a Termination of Employment for a Permitted Reason, such
Participant shall remain entitled to payment of the Plan Bonus determined on the
same basis as other Participants. Such Plan Bonus shall be paid at the same time
as paid to other Participants.  In the event that a Participant’s employment is
terminated for any other reason (i.e., voluntary termination other than for Good
Reason, or termination by the Company or an affiliate for Cause), the
Participant shall forfeit entitlement to payment of any future Plan Bonus.  

 

Article 6
Term of the Plan

6.1Termination and Amendment.  The Plan shall be effective as of the Effective
Date and shall remain in effect for the payment of Plan Bonuses through the end
of the Company’s 2017 fiscal year, and shall not be terminated by the Board
prior to such time.  The Plan shall not be effective for future periods, unless
extended by the Board.  Notwithstanding the foregoing, in the event of a
Restructuring Transaction, the Board in existence following such Restructuring
Transaction may, in its discretion and to the extent deemed advisable, terminate
the Plan solely with respect to Performance Cycles commencing after the
consummation date of the Restructuring Transaction. The Board shall not amend
the terms of the Plan in any manner that shall adversely affect any Plan Bonus
to which a Participant is entitled under the Plan.

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Article 7
Code Section 409A

7.1General.  It is intended that the rights of Participants under this Plan will
be exempt from Section 409A of the Code as a “short-term deferral” under the
applicable regulations.  The Plan shall be construed in a manner that effects
such intent.  Nevertheless, the tax treatment of the benefits provided under the
Plan is not warranted or guaranteed.  Neither the Company, its affiliates nor
their respective directors, officers or employees shall be held liable for any
taxes, interest, penalties or other monetary amounts owed by any Participant or
other taxpayer as a result of the Plan.

 

Article 8
Miscellaneous

8.1Funding of Plan.  At the discretion of the Board, a Participant’s right to
payment of benefits under the Plan may be paid by any of the following, in whole
or in some combination: (i) from the general assets of the Company, (ii) from a
trust or escrow established by the Company for purposes funding Plan benefits,
including, without limitation, a “secular trust” subject to section 402(b) of
the Code, or (iii) such other source of funding directed by the Company.  

8.2Nature of Payments.  The payments to be made by the Company to the
Participant under the Plan are intended to constitute additional compensation to
the Participant, and are subject to the withholding of taxes and all other legal
obligations with respect to the payment of compensation.  Any amounts paid to a
Participant under the Plan shall not be taken into account in determining the
amount of the Participant’s benefits under any benefit plan or program of the
Company or any affiliate.

8.3Rights Non-Transferable.  A Participants rights to benefits under the Plan
may not be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or one of its affiliates, and shall not be subject to any
lien, obligation, or liability of the Participant to any other party other than
the Company or one of its affiliates, and are not assignable or transferable by
a Participant other than by will or the laws of descent and distribution.

8.4Limitation of Rights.  Participation under the Plan, and the Company’s
obligations under the Plan, shall not in any way impose any obligation on the
Company to continue the employment of the Participant or provide future rights
to payments to the Participant or others.  

8.5Governing Law.  The Plan shall be construed, governed and enforced in
accordance with the law of Texas, except as such laws are preempted by
applicable federal law.

8.6Successors.  The Plan shall be binding upon and inure to the benefit of the
Company, its legal successors and its permitted assigns.

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Exhibit A

Participants

 

 

•

Bill Scarff

 

•

Chris Cooper

 

•

Bobby Stillwell

 

•

Jason Childress

 

•

Rich Smiley

 

•

Bruce Berwager

 

•

John Deck

 

•

David Beck

 

•

Matt Hoss

 

•

Martyn Willsher

 

 

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Exhibit B

Form of Notification Letter

Memorial Production Partners LP Key Employee Incentive Plan

 

 

Notification of Participation

 

Participant Name:  [___________]

 

Pursuant to the Memorial Production Partners LP Key Employee Incentive Plan (the
“Plan”), a copy of which has been provided to you, you have been designated by
the Board to participate as a Participant in the Plan as of October 1,
2016.  Subject to the terms and conditions of the Plan, your eligibility for a
Plan Bonus shall be as follows.    

 

Plan Bonus

Threshold

Target

Maximum

 

 

 

 

Capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Plan.