eroc_ex10-1.htm


    
      

      

    

     

     

    
 

    Eagle
Rock Energy G&P, LLC

    2009
Short Term Incentive Bonus Plan

    


    


    Objective

    


    The
objective of the 2009 Short Term Incentive Bonus Plan (the “Plan”) is to
encourage the employees of Eagle Rock Energy G&P, LLC (the “Company”) to
conduct activities that result in the achievement of the Company’s financial
objectives. The Company serves as the general partner of the general partner of
Eagle Rock Energy Partners, L.P. (the “Partnership”) and receives reimbursement
from the Partnership for its expenses, including payments under this
Plan.  References in the Plan to “Enterprise” mean the Company, the
Partnership and all of its subsidiaries.

    


    


    Participants

    


    Regular
full-time employees who were 1) employed during 2009; 2) hired prior to October
1, 2009; and 3) who are active full-time employees at the time of bonus payment
are “Participants” in the Plan; provided, however, that the Company may cause an
employee who began employment after September 30, 2009 to be included as a
Participant, but only if such treatment is expressly set forth in a written
offer letter from the Company at the time of employment.  If bonus
payments are made under the Plan, they are expected to be paid at the end of
February 2010.  Any bonus payment made under the plan will be prorated
for the amount of time a Participant was employed with the Company during
2009.

    


    


    Plan
Provisions

    


    
      	
              ·  

            	
              The
      Plan will be administered by the Compensation Committee of the Board of
      Directors of the Company (the “Committee”), based on funding approval by
      the Board of Directors of the Company (the “BOD”), and subject to
      performance recommendations made by the Chief Executive Officer (“CEO”)
      and members of senior management (“Senior Management) as described in
      further detail in this Plan, as
follows:

            


    

    
      	
              o  

            	
              The
      BOD must first determine the Partnership’s 2009 financial results and
      approve a Funding Percentage, and the BOD has full discretion to fully or
      partially fund the Plan, or to deny
funding;

            


    

    
      	
              o  

            	
              The
      Committee has complete discretion in administering the Plan and approving
      individual bonus payments under the Plan after the BOD has approved a
      Funding Percentage.

            


    

    


    
      	
              ·  

            	
              Each
      Participant will be assigned and notified of their Target Bonus Percentage
      (as defined below) in writing during the First Quarter of 2009 or, if
      starting with the Company after such notification event, in a written
      offer letter at the time of initial employment.  The Target
      Bonus Percentage is a percentage of the Participant’s Annual Base
      Compensation (as defined below), and represents the target bonus
      opportunity based on achievement of the Enterprise Goals and the results
      of individual performance review appraisals performed at the end of 2009
      and/or early 2010.   Participants who have performed at an
      exceptional level and whose accomplishments are recognized by the
      Committee or Senior Management could earn up to 125% of their Target Bonus
      Percentage.    The Company will accrue at 100% of the
      Target Bonus Percentages for all Participants eligible to participate in
      the Plan, and the total bonus payouts for the Company cannot exceed the
      total accrued amounts for the pool of participants, unless an exception is
      made by the BOD.

            


    

    


    
      	
              ·  

            	
              Participants
      are not guaranteed to receive a bonus
payment.

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Bonus
Payments

    


    Each
Participant’s bonus payment will be calculated according to the following
formula:

    


    Bonus =
Annual Base Compensation

     *
Bonus Target Percentage

     *
Funding Percentage

     *
Individual Performance Factor

     *
Proration Factor

    


    where,

    


    
      	
              Annual
      Base Compensation =

            	
              regular
      base salary, or regular hourly rate *
2080.

            


    

    


    
      	
              Bonus
      Target Percentage =

            	
              %
      assigned by the Committee for Senior Management and by Senior Management
      for all other Participants, based on Participant’s position level in
      relation to other positions in the Company (e.g., requirements relative to
      the skills and knowledge required to perform the essential job functions,
      overall level of responsibility, decision making authority, and impact to
      the Company’s overall operations and financial
    performance).

            


    

    


    
      	
              Funding
      Percentage =

            	
              %
      determined by, and at the complete discretion of, the BOD and is expressly
      dependent on achievement of Enterprise financial, operational and safety
      goals (see “Enterprise Goals”
below).

            


    



    
      	
              Individual
      Performance Factor =

            	
              value
      from 0 to 125% depending on individual performance rating relative to
      Participant’s Performance Appraisal Rating (see Table
  1).

            


    

    


    
      	
              Proration
      Factor =

            	
              value
      from 0 to 1.0 depending on amount of service in plan
  year.

            


    

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    


    2009
Enterprise Goals

    


    
      	
              Financial
      Goals:

            	 
      
	
              · Adjusted
      EBITDA

            	
              $[****]

            
	
              · Maintenance
      Capital Expenditures

            	
              Not
      to exceed $20,000,000 (excluding increases for any new acquisitions or
      major organic growth projects)

            
	
              · Growth
      Capital Expenditures

            	
              Not
      to exceed $20,000,000 (excluding increases for any new
      acquisitions)

            
	
              · Target
      IRR (for Capital Projects)

            	
              To
      be at (or greater than):

            
	 
      	
              18%
      IRR for Midstream Business; and

            
	 
      	
              25%
      IRR for Upstream Business

            
	
              · Operating
      Expenses

            	
              Not
      to exceed

            
	 
      	
              $55,000,000
      in aggregate ($[****]/Mcfe) for Midstream Business

            
	 
      	
              $25,000,000
      in aggregate ($[****]/Mcfe) for Upstream Business

            
	
              · Finding
      & Development Costs (Upstream)

            	
              Not
      to exceed $10.50 / BOE

            
	
              Environmental
      and Safety Goals:

            	 
      
	
              · Recordable
      Incident Rate

            	
              Not
      to exceed 2.0

            
	
              · Spills

            	
              No
      major NRC Recordable Spills

            
	
              · Regulatory
      Compliance Program:

            	
              -
      Complete Environmental Air Permitting Audits

            
	 
      	
              -
      Complete Permitting for Disclosed Air Permitting
    Deficiencies

            
	 
      	
              -
      File Regulatory Forms on time and Training for key Operations personnel on
      TCEQ rules

            
	 
      	
              -
      Continue to implement proactive Environmental, Health and Safety
      Program

            
	 
      	
              -
      Implement Drug and Alcohol Program Required Training Matrix and Internal
      Audit Plan

            
	
              Governance
      Goals:

            	 
      
	
              · Sarbanes
      Oxley Compliance

            	
              No
      material weaknesses in Sarbanes Oxley Section 404 Attestation Audit of
      Internal Controls Over Financial
Reporting

            


    

    


    
      
        
          
            [****]  Indicates
redacted terms for which confidential treatment has been requested from the
Securities and Exchange Commission.

          

           


        

        
           


          
            

          

        

        
           


        

      



    


    Individual
Goals and Performance Appraisal Rating

    
      	
              ·  

            	
              Each
      Participant will document a set of measurable 2009 goals by the later of
      February 15, 2009 or one month of their employment start
      date.  These goals should support the achievement of the 2009
      Enterprise Goals and must be approved by Participant’s immediate
      supervisor.  Senior Management’s goals must also be approved by
      the Committee.

            


    

    
      	
              ·  

            	
              The
      achievement of these goals will be a key factor in determining a
      Participant’s Performance Appraisal
Rating.

            


    

    
      	
              ·  

            	
              The
      Committee will determine the Performance Appraisal Rating for the Chief
      Executive Officer and approve the Performance Appraisal Ratings of Senior
      Management, with recommendations of the Chief Executive Officer, and
      Senior Management will determine the Performance Appraisal Ratings for all
      other Participants, with recommendations made by the immediate supervisor
      and all other supervisors in between such supervisor and Senior
      Management.

            


    

     

    Individual
Performance Factor

    
      	
              ·  

            	
              The
      Committee, with respect to Senior Management, and Senior Management, with
      respect to all other Participants, will consider the Performance Appraisal
      Rating and, in their discretion, further evaluate the Participant’s
      performance by assigning an Individual Performance Factor within the
      appropriate range (Table 1) which indicates the eligible percentage to
      receive up to 125% of their bonus target percentage for exceptional
      contributions.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	
               
      

            	
              Table
      1

            


    

    
      	
               
      

            	
              Individual
      Performance Factors

            


    

    


    


    
      	
              Performance
      Appraisal Rating

            	
              Individual
      Performance Factor

            
	 
      	 
      
	
              1 -
      Exceptional

            	
              91
      - 125%

               

            
	
              2 -
      Strong

            	
              81
      - 90%

               

            
	
              3 -
      Fully Met Expectations

               

            	
              51
      - 80%

            
	
              4 -
      Acceptable, but improvement is needed

               

            	
              25
      - 50%

            
	
              5 - Performance
      Requires Improvement

               

            	
              0%

            


    

    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Example
Bonus Calculation

    


    Assume
the Company achieves most, but not all, of its 2009 Enterprise
Goals.  The BOD reviews the performance of the company and determines
that a Funding Percentage of 90% is appropriate.  Participant A is an
operator who was rated “Exceptional” by his supervisor, based on his achievement
of his individual goals.  Management determines that Participant A
should receive an Individual Performance Factor of 91% based on the Performance
Appraisal Rating.  Participant A makes $25/hr and was hired on April
1, 2009.

    


    In this
example,

    


    Annual
Base Compensation
=                                                                           $25/hr
* 2080 hours = $52,000

    


    Bonus
Target Percentage
=                                                                                     6%

    


    
      	
              Funding
      Percentage =

            	
              90%
      (determined by the BOD’s assessment of achievement of 2009 Enterprise
      Goals)

            


    

    


    
      	
              Individual
      Performance Factor =

            	
              91%
      (based on Performance Appraisal Rating and Senior Management
      discretion)

            


    

    


    
      	
              Proration
      factor =

            	
              75%
      (Participant A worked 9 months during
2009)

            


    

    


    So,

    


    Bonus
payment = $52,000 * 0.06 * 0.90 * 0.91 * 0.75 = $1,916.46

    


    


    


    APPROVED AND ADOPTED
FEBRUARY 4, 2009 BY

    THE BOARD OF
DIRECTORS