exv10w16



 




Exhibit
10.16





WESTERN GAS HOLDINGS, LLC




EQUITY INCENTIVE PLAN




SECTION 1. Purpose of the Plan.




     The Western Gas Holdings, LLC Equity Incentive Plan (the “Plan”) has been adopted by Western
Gas Holdings, LLC, a Delaware limited liability company (the “Company”) and the general partner of
Western Gas Partners, LP, a Delaware limited partnership (the “Partnership”). The Plan is intended
to promote the interests of the Company and its indirect parent, Anadarko Petroleum Corporation
(“Anadarko”), by providing to key executives of the Company or an Affiliate incentive compensation
to encourage superior performance.



SECTION 2. Definitions.




     As used in the Plan, the following terms shall have the meanings set forth below:



     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with, the
Person in question. As used herein, the term “control” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.



     “Award” means an Incentive Unit and any associated DERs granted under the Plan.



     “Award Agreement” means the written or electronic agreement by which an Award shall be
evidenced.



     “Board” means the Board of Directors of the Company.



     “Change in Capitalization” means any increase in the members’ capital contribution, any change
(including, without limitation, in the case of a dividend or other distribution in respect of
member interests, a change in value) in the member interests or any exchange of member interests
for a different number or kind of shares of ownership or other securities of the Company or another
entity, by reason of a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights, stock dividend, stock split or reverse stock
split, property dividend, or combination or exchange of member interests, repurchase of member
interests, change in corporate structure or otherwise. The following events shall be considered a
Change in Capitalization for the purposes of this Plan, but shall not represent all scenarios for
which a Change in Capitalization could be deemed to have occurred: (a) the issuance by the
Company, Anadarko or any other Affiliate of other ownership interests in the Company; (b) the sale,
transfer or dividend/distribution of assets, member interests or other securities (including
Partnership units) representing more than five percent (5%) of the value of the Company’s total
assets as determined at the end of the most recently completed month, including but not limited to
any sale or transfer by the Company of the Partnership’s general partner interest, the
Partnership’s incentive distribution rights or any Class B units or common



 









 







units received from the Partnership as a result of the Company’s election to exercise the
incentive distribution rights reset option under the Partnership Agreement; and (c) the initial
public offering of the Company (or its successor in interest, including in the event the Company
has changed its structure to a corporation or partnership) which may not otherwise constitute a
Change of Control of the Company.



     “Change of Control” shall mean the occurrence of either of the following after the effective
date of the Plan with respect to either Anadarko or the Company:



     Change of Control of Anadarko:




a) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a “Person”) acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding
shares of common stock of Anadarko (the “Outstanding Anadarko Common Stock”) or (ii) the
combined voting power of the then outstanding voting securities of Anadarko entitled to vote
generally in the election of directors (the “Outstanding Anadarko Voting Securities”);
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control of Anadarko: (i) any acquisition
directly from Anadarko, (ii) any acquisition by Anadarko, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Anadarko or any
corporation controlled by Anadarko or (iv) any acquisition pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or




(b) individuals who, as of the effective date of the Plan, constitute the Anadarko Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of
the Anadarko Board of Directors; provided, however, that any individual becoming a
director subsequent to the effective date of the Plan whose election, or nomination for
election by Anadarko’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the Anadarko
Board of Directors; or




(c) consummation by Anadarko of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Anadarko or the acquisition of
assets of another entity (a “Business Combination”), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Anadarko Common Stock and
Outstanding Anadarko Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,



-2-









 







without limitation, a corporation which as a result of such transaction owns Anadarko or all
or substantially all of Anadarko’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Anadarko Common Stock and Outstanding Anadarko
Voting Securities, as the case may be, (ii) no person (excluding any employee benefit plan
(or related trust) of Anadarko or such corporation resulting from such Business Combination)
beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Anadarko Board of Directors, providing for
such Business Combination; or




(d) approval by the stockholders of Anadarko of a complete liquidation or dissolution of
Anadarko.




Notwithstanding the foregoing, with respect to an Award that is (i) subject to Section 409A
and (ii) a Change of Control of Anadarko that would accelerate the timing of payment
thereunder pursuant to Section 6(i), the term “Change of Control” shall mean a change in the
ownership or effective control of Anadarko, or in the ownership of a substantial portion of
the assets of Anadarko as defined in Section 409A, but only to the extent inconsistent with
the above definition, and only to the minimum extent necessary to comply with Section 409A,
as determined by the Committee.



     Change of Control of the Company:




(a) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and
14(d)(2) of the Exchange Act, 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 the
Company;




(b) the members of the Company approve, in one or a series of transactions, a plan of
complete liquidation of the Company;




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




(d) the Company (either directly or indirectly as a result of a corporate restructuring)
becomes wholly or partially owned by the public.



-3-









 






Notwithstanding the foregoing, with respect to an Award that is (i) subject to Section 409A
and (ii) a Change of Control of the Company that would accelerate the timing of payment
thereunder pursuant to Section 6(i), the term “Change of Control” shall mean a change in the
ownership or effective control of the Company, or in the ownership of a substantial portion
of the assets of the Company as defined in Section 409A and the authoritative guidance
issued thereunder, but only to the extent inconsistent with the above definition, and only
to the minimum extent necessary to comply with Section 409A as determined by the Committee.



     “Committee” means the Board or a committee of the Board appointed to administer the Plan.



     “DCF Valuation” means the aggregate dollar value derived by applying a discounted cash flow
methodology to the Company and its operations, and shall include all cash flows inuring to the
Company’s benefit, including but not limited to the cash flow related to assets owned by the
Company related to the Partnership (including but not limited to all incentive distribution rights
(“IDRs”), general partner units, common units, subordinated units, and Class B units (if any)),
calculated according to the following general description, but in any case subject to the sole
discretion and determination of the Committee:




(a) Cash available for distribution to all unitholders of the Partnership in the current (or
most recent) quarter will be multiplied by 4.0 to arrive at an annualized distribution
amount. Contractual IDR payments from the Partnership (with splits determined assuming the
calculated annualized distribution above) will be calculated and applied to determine the
relative general partner and limited partner dollar payout amounts from such annualized
distribution; and




(b) Expected annual distributions to all unitholders of the Partnership for each of the next
four years will then be calculated by using the annualized growth rate in the distribution
from the prior year. Such calculation will be determined by comparing the annualized
distribution calculated in clause (a) above to the actual distribution paid in the prior
year; and




(c) Contractual IDR payments from the Partnership in each of the next four years (with
splits determined by the amount of such future expected distributions) will be calculated
and applied to determine the relative general partner and limited partner dollar payout
amounts from such future expected distributions; and




(d) A terminal value will be calculated as of the fourth year based on the expected cash
payout to the general partner in year 4, multiplied by a number to be determined by the
Committee at the time of calculation, and a discount rate to be determined by the Committee
at the time of calculation; and




(e) The present value of all of the cash flows determined in the above paragraphs will be
determined, utilizing a discount rate to be determined by the Committee at the time of
calculation.



     “DER” means a distribution equivalent right which shall be granted in tandem with each
Incentive Unit, to receive (with respect to each Incentive Unit subject to the Award Agreement) a
credit equal to the value of the dividends or other distributions made by the Company to its
member(s) during the period such Award is outstanding.



-4-









 





     “Determined Value” means the then-current value of the Company as determined from time-to-time
by the Committee, where (a) in advance of the initial public offering of the Company such value
shall be reflected by (i) the DCF Valuation amount, plus (ii) any other value related to any other
assets of the Company, which value has not otherwise been captured by the DCF Valuation
methodology, less (iii) indebtedness of the Company, if any, and (b) upon the closing of an initial
public offering of the Company such value shall be reflected by the aggregate equity value of the
Company as determined using the market price of the Company’s equity securities.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended.



     “Executive” means an executive officer of the Company or an Affiliate thereof.



     “Fundamental Change” means:




	 	(a)	 	the Company ceases to be the general partner of the Partnership; or
	 
	 	(b)	 	the Company ceases to hold or to be entitled to receive the IDRs from the
Partnership, or any Class B units or common units received from the Partnership as a
result of the Company’s election to exercise the IDRs reset option under the
Partnership Agreement.





     “Incentive Unit” means a (notional) unit granted under the Plan which, upon the occurrence of
a Liquidation Event, entitles the Participant to receive an amount of cash equal to the Value of an
Incentive Unit (plus associated DERs, if any).



     “Liquidation Event” means an event that shall cause a Participant’s Awards to vest and become
payable pursuant to Section 6(g). A Liquidation Event shall occur upon the occurrence of both (a)
restrictions imposed on the Incentive Units pursuant to Section 6(b) lapse, and (b) the
earliest occurrence of any one of the following events with respect to an individual Participant:
(i) Change of Control; (ii) the closing of an initial public offering of the Company; (iii)
termination of employment (to the extent termination of employment is specified as a Liquidation
Event in the Award Agreement); (iv) death; (v) disability (as defined in the Anadarko benefit
plans); (vi) a date certain specified in the Award Agreement, if any; or (vii) such other time as
the Committee, in its sole discretion, may determine.



     “Participant” means an Executive granted an Award under this Plan.



     “Person” means an individual or a corporation, limited liability company, partnership, joint
venture, trust, unincorporated organization, association, governmental agency or political
subdivision thereof or other entity.



     “Rule 16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act or any successor
rule or regulation thereto as in effect from time to time.



     “SEC” means the Securities and Exchange Commission, or any successor thereto.



-5-









 





     “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.



     “Value of an Incentive Unit” means the dollar value ascribed to an Incentive Unit and shall at
all times be calculated by dividing the then-current Determined Value by one million (1,000,000).



SECTION 3. Administration.




     The Plan shall be administered by the Committee. A majority of the Committee shall constitute
a quorum, and the acts of the members of the Committee who are present at any meeting thereof at
which a quorum is present, or acts unanimously approved by the members of the Committee in writing,
shall be the acts of the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate Participants; (ii) determine the
number of Incentive Units (and associated DERs) to be covered by Awards; (iii) determine the terms
and conditions of any Award; (iv) interpret and administer the Plan and any instrument or agreement
relating to a grant made under the Plan; (v) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper administration of
the Plan; and (vi) make any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Subject to Section 7 of the Plan, the
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan
or an Award Agreement in such manner and to such extent as the Committee deems necessary or
appropriate. Unless otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, the Partnership, any Affiliate, any Participant,
and any beneficiary of any Award.



SECTION 4. Incentive Units.




     (a) Limits on Incentive Units Granted. Subject to adjustment as provided in Section
4(b), the number of Incentive Units (and associated DERs) that may be granted under the Plan is one
hundred thousand (100,000) Incentive Units. However, if any Award is forfeited, cancelled or
otherwise terminates or expires without payment, the Incentive Units subject to such Award shall
again be available for grants under other Awards under the Plan.



     (b) Adjustments.




     (i) In the event of a Change in Capitalization, the Committee shall, in such manner as
it may deem equitable in preventing the valuation dilution or enlargement of the potential
benefits intended to be provided with respect to all Awards granted under this Plan, adjust
the number of Incentive Units (or other securities or property) with respect to which Awards
are then outstanding and Awards that may be granted in the future. No adjustments may be
made under this Section (absent the written consent of the Participant) that would, in any
respect, reduce the value of such Participant’s Award.



-6-









 






     (ii) In the event of a Fundamental Change, the Committee shall, in such manner as it
may deem equitable to prevent the substantial dilution of benefits intended to be provided
with respect to all Awards granted under this Plan, take all available action to preserve
such benefits, including to the extent possible by replacing Awards under this Plan with
similar awards at Affiliates which have succeeded the Company with regard to the underlying
Fundamental Change.



SECTION 5. Eligibility.




     Any Executive who performs services for the benefit of the Company shall be eligible to be
granted an Award under the Plan by the Committee.



SECTION 6. Awards.




     (a) Grant of Incentive Units. The Committee shall have the authority to
determine the Executives to whom Incentive Units shall be granted and the number of Incentive Units
to be granted to each such Participant. Awards may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for any award granted under any
other plan of the Company, Anadarko, the Partnership, or any other Affiliate.



     (b) Restrictions. The Committee shall have the authority to determine the time period
over which the Incentive Units shall be restricted and/or the conditions if any (including but not
limited to any performance metrics) under which the Incentive Units may become unrestricted or may
become forfeited.



     (c) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee, up to a maximum period of ten years.



     (d) Consideration for Grants. Awards may be granted for such consideration, including
services, as the Committee determines.



     (e) DERs. Each grant of Incentive Units shall include rights to dividends or
distributions made by the Company to its member(s) or other owner(s), and such DER amounts credited
to an Award shall accrue and be subject to the same restrictions and payment requirements as the
Incentive Units with which such DERs are associated.



     (f) Lapse of Restrictions. Upon the satisfaction of the restrictions imposed on an
Award, such restrictions associated with such Award shall lapse, in whole or in part, as applicable
and defined in each Award Agreement.



     (g) Payment of Awards. Award payments shall be made in the form of a lump sum cash
payment to a Participant, equal to the Value of an Incentive Unit for each Incentive Unit (plus any
amounts credited and accrued with respect to DERs associated with such Incentive Units), less
applicable withholding taxes as provided in Section 8(c). Such payment(s) shall be paid as soon as
practicable following the occurrence a Liquidation Event, but in no event shall such payment be
made later than March 15th of the year following the calendar year in which such
Liquidation Event occurred.



-7-









 





     (h) Forfeitures. Except as otherwise provided in the terms of the Award Agreement,
upon termination a Participant’s employment with Anadarko and its Affiliates all of such
Participant’s Incentive Units (and associated DERs, if any) that have not had restrictions lapse
shall be forfeited as of such termination, except in the event of termination of employment on or
following a Change of Control in which event such Participant’s Award shall vest pursuant to
Section 6(i) and be paid pursuant to Section 6(g). The Committee may, in its discretion, waive in
whole or in part such forfeiture with respect to a Participant’s Award(s).



     (i) Change of Control. Unless specifically provided otherwise in the Award Agreement,
upon a Change of Control all outstanding Awards shall automatically vest and become payable
pursuant to Section 6(g).



     (j) Valuation. The Committee shall from time-to-time calculate and define the
then-current Determined Value. The Committee shall have sole discretion in making such
determination, though it may seek the advice or input of third parties to assist it as it may deem
beneficial or necessary to the accuracy or timeliness of such determination.



SECTION 7. Amendment and Termination.




     Except to the extent prohibited by applicable law:




     (a) Amendments to the Plan. Subject to Section 7(b) below, the Board or
Committee may amend, alter, suspend, discontinue, or terminate the Plan in any manner,
including increasing the number of Incentive Units available for Awards under the Plan,
without the consent of any Participant, other holder or beneficiary of an Award, or any
other Person.




     (b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter any Award theretofore granted, provided no change in any
Award shall materially reduce the benefit to a Participant without the consent of such
Participant.




     (c) Actions Upon the Occurrence of Certain Events. Upon the occurrence of any
change in applicable law or regulation affecting the Plan or Awards thereunder, or any
change in accounting principles materially affecting the financial statements of the
Company, the Committee, in its sole discretion and on such terms and conditions as it deems
appropriate, shall take any and all such action as necessary to prevent dilution or
enlargement of the benefits or potential benefits intended to be conferred under the Plan or
an outstanding Award; provided, however, that such actions shall not reduce the benefits or
potential benefits to be realized by a Participant without the express written consent of
such Participant (unless such actions were specifically required by applicable law).



SECTION 8. General Provisions.




     (a) Limits on Transfer of Awards. No Award and no right under any such Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a



-8-









 







Participant other than by will or the laws of descent and distribution, other than a sale or
disposition to the Company, Anadarko or any Affiliate.



     (b) No Rights to Award. No Person shall have any claim to be granted any Award under
the Plan, and there is no obligation for uniformity of treatment of Participants. The terms and
conditions of Awards need not be the same with respect to each Participant.



     (c) Tax Withholding. The Company shall withhold from an Award any applicable taxes
payable in respect of the grant of the Award, the lapse of restrictions thereon, or any payment
made under the Award and shall take such other action as may be necessary in the opinion of the
Company to satisfy its withholding obligations for the payment of such taxes.



     (d) No Right to Employment. The grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company, Anadarko or any Affiliate.



     (e) Governing Law. The validity, construction, and effect of the Plan and any rules
and regulations relating to the Plan shall be determined in accordance with the laws of the State
of Texas without regard to its conflict of laws principles.



     (f) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award,
or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable law, or if it cannot be
construed or deemed amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person
or Award and the remainder of the Plan and any such Award shall remain in full force and effect.



     (g) Other Laws. The Committee may refuse to pay any consideration under an Award if,
in its sole discretion, it determines that the payment of such consideration might violate any
applicable law or regulation, the rules of the principal securities exchange on which any
applicable Company securities are then traded, or entitle the Company or an Affiliate to recover
the same under Section 16(b) of the Exchange Act, if applicable.



     (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company and a Participant or any other Person. To the extent that any Person acquires a right to
receive payments from the Company pursuant to an Award, such right shall be no greater than the
right of any general unsecured creditor of the Company or any participating Affiliate.



     (i) Headings. Headings are given to the Sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.



     (j) Facility Payment. Any amounts payable hereunder to any person under legal
disability or who, in the judgment of the Committee, is unable to manage properly his financial
affairs, may be paid to the legal representative of such person, or may be applied for the benefit



-9-









 







of such person in any manner that the Committee may select, and the Company shall be relieved
of any further liability for payment of such amounts.



     (k) Gender and Number. Words in the masculine gender shall include the feminine
gender, the plural shall include the singular and the singular shall include the plural.



     (l) Compliance with Section 409A. Nothing in the Plan or any Award Agreement shall
operate or be construed to cause the Plan or an Award to fail to comply with the requirements of
Section 409A. The applicable provisions of Section 409A and the regulations and guidelines issued
thereunder are hereby incorporated by reference and shall control over any Plan or Award Agreement
provision in conflict therewith.



SECTION 9. Term of the Plan.




     The Plan shall be effective on the date of its approval by the Board and shall continue until
the earlier of (a) the date terminated by the Board or Committee or (b) all Incentive Units
available under the Plan have been paid to Participants. Unless otherwise expressly provided in
the Plan or in an applicable Award Agreement, however, any Award granted prior to such termination,
and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under such Award, shall extend beyond such
termination date.



     IN WITNESS WHEREOF, the Company has caused the Plan to be executed effective as of January
     , 2008.



	 	 	 	 	 
	 

	 	WESTERN GAS HOLDINGS, LLC	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Robert G. Gwin	 	 
	 

	 	President and Chief Executive Officer	 	 







-10-