Exhibit 10.1


 


COPANO ENERGY, L.L.C.


MANAGEMENT INCENTIVE COMPENSATION PLAN


 


I.                                         PURPOSE


 


The purpose of this Plan is to aid Copano Energy, L.L.C. (“Copano” or “the
Company”) and its Affiliates in retaining and motivating management employees
of high caliber and good potential to manage and operate Copano and to aid
Copano in meeting its performance objectives. It is the judgment of the Board
that, in order to achieve these objectives, Copano must provide incentive
compensation to those individuals who significantly contribute to the
successful operation of Copano.


 


II.                                     EFFECTIVE
DATE


 


The Plan shall be and is hereby adopted effective as of January 1,
2005, and Awards under the Plan may be made with respect to the 2005 Plan Year
and each subsequent Plan Year.


 


III.                                 DEFINITIONS


 


Unless the meaning is clearly different when used in context, these
terms shall have the following meanings when used either in this Plan document
or in the annual Administrative Guidelines:


 


A.                                   “Administrative
Guidelines” shall mean the guidelines approved annually by the Committee to
provide for the administration of the Plan, including the method by which
incentive compensation payments will be determined.


 


B.                                     “Affiliate”
(i) shall mean 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 and (ii) with respect to the
Company, shall include Copano Operations for so long as Copano Operations
provides any general and administrative functions or field operating personnel
to the Company or its subsidiaries.  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.


 


C.                                     “Board”
shall mean the Board of Directors of Copano Energy, L.L.C.


 


D.                                    “CEO”
shall mean the Chief Executive Officer of Copano Energy, L.L.C.


 





















 


E.                                      “Change
of Control” shall mean the happening of any of the following events:


 


(i)                                     the
acquisition by any “person,” as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other
than the Company or an Affiliate of the Company (other than Copano Operations),
of “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more than 50%
of the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors; or


 


(ii)                                  the
consummation of a reorganization, merger, consolidation or other form of
business transaction or series of business transactions, in each case, with
respect to which persons who were the members of the Company immediately prior
to such reorganization, merger or consolidation or other transaction do not,
immediately thereafter, own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated company’s then outstanding voting securities; or


 


(iii)                               the
sale, lease or disposition (in one or a series of related transactions) by the
Company of all or substantially all the Company’s assets to any Person or its
Affiliates, other than the Company or its Affiliates (other than Copano
Operations); or


 


(iv)                              a
change in the composition of the Board, as a result of which fewer than a
majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors
who either (A) are directors of the Company as of the effective date of the
initial public offering of the Company’s equity interests, or (B) are elected,
or nominated for election, thereafter to the Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time of such election
or nomination or (C) are among the six initial independent directors of the
Company, but “Incumbent Director” shall not include an individual whose
election or nomination is in connection with (i) an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or an actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board or (ii) a
plan or agreement to replace a majority of the then Incumbent Directors; or


 


(v)                                 the
approval by the Board or the members of the Company of a complete or
substantially complete liquidation or dissolution of the Company.


 


F.                                      “Committee
Chairman” shall mean the Chairman of the Committee.


 


2





















 


G.                                     “Compensation
Committee” or “Committee” shall mean the compensation committee of the Board.


 


H.                                    “Copano
Operations” shall mean Copano/Operations, Inc., a Texas corporation.


 


I.                                         “Eligible
Employee” shall mean a person who is a management employee of the Company or a
subsidiary thereof or an employee of an Affiliate who performs services in a
management capacity on behalf of the Company or a subsidiary thereof.


 


J.                                        “Financial
Objectives” shall mean such financial criteria and objectives as the Committee
and CEO may select and the Board shall approve, and as reflected, from time to
time, in the Administrative Guidelines.


 


K.                                    “Good
Reason” shall mean (a) a reduction, regardless of amount or nature, in a
Participant’s salary, bonus, benefits, or any other compensation or
employment-related benefits to which Participant does not consent, (b)
reassignment of Participant (without Participant consent) to any office located
more than 30 miles from where the office to which Participant is assigned is
located or (c) a material diminution in Participant’s job duties or
responsibilities to which Participant does not consent (other than diminutions
occasioned solely by reason of the Company having ceased to be a publicly-held
entity: for example, cessation of the public reporting responsibilities of
executive, legal and financial officers would not constitute “Good Reason”
diminutions).


 


L.                                      “Management
Incentive Compensation Award” or “Award” shall mean the amount of incentive
compensation payable in accordance with Article VIII to a Participant with
respect to a Plan Year as determined by considering such criteria as determined
in accordance with the Plan.


 


M.                                 “Operational
Objectives” shall mean such criteria and objectives with respect to the
operations of the Company as the Committee and CEO may select and the Board
shall approve, from time to time, in accordance with the Administrative
Guidelines.


 


N.                                    “Participant”
or “Participants” shall mean an Eligible Employee(s) to whom an opportunity for
incentive compensation hereunder has been given under Article VI or VII.


 


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


 


3





















 


P.                                      “Personal
Objectives” shall mean those personal objectives in effect from time to time
for a Participant in accordance with the Administrative Guidelines.


 


Q.                                    “Plan”
or “MICP” shall mean this Copano Energy, L.L.C. Management Incentive
Compensation Plan.


 


R.                                     “Plan
Year” shall mean each 12-month period beginning on January 1 and ending on
December 31.


 


S.                                      “Special
Incentive Award” shall mean the amount of special incentive compensation that a
Participant may be awarded as determined pursuant to Articles VII and VIII.


 


T.                                     “Target
Award” shall mean for any Plan Year the amount of incentive compensation
expressed as a percentage of the Participant’s actual base salary during such
Plan Year that shall be payable if the Participant’s Personal Objectives and
Financial and Operational Objectives are fully achieved.


 


U.                                    “Copano”
shall mean Copano Energy, L.L.C. and/or, when the context requires, its
Affiliates.


 


IV.                                 ADMINISTRATIVE
AND INTERPRETATION


 


A.                                   The
Plan shall be administered by the Committee or its designee. The Committee
shall have sole and absolute discretion to construe and interpret the Plan and
any instrument or agreement related thereto, including without limitation, the
power to construe and interpret doubtful or contested terms herein and therein,
and, subject to the provisions set forth, herein, to prescribe, amend and rescind
rules and regulations and make all other determinations necessary or desirable
for the Plan’s administration.


 


B.                                     Notwithstanding
any provision of law, or any explicit or implicit provision of this document,
any action taken, or finding, interpretation, ruling or decision made by the
Committee in the exercise of any of its rights, powers, authority or duties
under this Plan shall be final and conclusive as to all parties, including
without limitation all Participants and former Participants, regardless of
whether the Committee or one or more of its members may have an actual or
potential conflict of interest with respect to the subject matter of the
action, finding, interpretation, ruling or decision. No final action, finding,
interpretation, ruling or decision of the Committee shall be subject to de novo
review in any judicial proceeding. No final action, finding, interpretation,
ruling or decision of the Committee may be set aside unless it is held to have
been arbitrary and capricious by a final judgment of a court having
jurisdiction with respect to the issue. Nothing in the Plan shall be deemed to
give any officer or


 


4





















 


employee of Copano, or his or her legal representatives or assigns, any
right to participate in the Plan, except to such extent, if any, as the
Committee may authorize pursuant to the provisions of the Plan.


 


C.                                     The
Committee shall have the sole and absolute discretion to determine an
individual’s eligibility to participate, whether the performance of a
Participant warrants an Award pursuant to the Plan and any instrument or
agreement relating thereto, and the amount of any such Award. However, with
respect to employees other than the CEO, the CEO shall recommend to the
Committee whether each such employee is eligible to participate, whether the
performance of such employee warrants an Award and the amount of such Award.


 


D.                                    This
Plan shall be governed by, construed and enforced in accordance with the
internal laws of the State of Texas and, where applicable, the laws of the
United States.


 


E.                                      Notwithstanding
anything herein to the contrary, terms of participation in the Plan by Eligible
Employees will be at the absolute and sole discretion of the Committee and
shall be a matter for action by the Committee only.


 


V.                                     ELIGIBLE
EMPLOYEES


 


A.                                   The
CEO shall submit a list to the Committee of those Eligible Employees whom he or
she believes should be participating in the Plan prior to the beginning of each
Plan Year. The Committee shall then determine which Eligible Employees shall be
Participants with respect to such Plan Year. Members of the Committee and any
member of the Board who is not an employee of Copano are ineligible to receive
Awards under this Plan.


 


B.                                     Employees
who subsequently become Eligible Employees during the Plan Year may become
Participants, with the approval of the CEO and the Committee Chairman, but, in
the discretion of the CEO and Committee Chairman may only be eligible for an
Award calculated pro rata based upon the period of actual service during the
Plan Year.


 


VI.                                 TARGET
AWARDS


 


A.                                   With
the assistance of the CEO (See Article IV), the Committee shall assign each
Eligible Employee, who is designated a Participant pursuant to Article V, a
Target Award. Such Target Award will determine the incentive compensation that
may be paid to the Participant if all Personal Objectives, Financial Objectives
and Operational Objectives are fully achieved. The Target Award shall be
determined in accordance with the Administrative Guidelines.


 


B.                                     Participants
who receive a promotion during a Plan Year to a position that is generally
recognized to have a higher Target Award, will be given a


 


5





















 


Target Award commensurate with their new position, which will be
applicable to the salary earned between the effective date of the promotion and
the end of the Plan Year.


 


C.                                     Pursuant
to the Administrative Guidelines, the CEO and the Committee each year shall
designate what portions of the Target Award will be earned if the Participant
achieves his or her Personal Objectives, Financial Objectives and Operational
Objectives, respectively.


 


D.                                    At
the beginning of a Plan year, all Participants eligible for a Target Award may
be required to establish Personal Objectives, which will be stated in specific,
measurable terms that will be directly related to activities that will improve
operating results. Personal Objectives must be approved by the CEO and are
subject to review by the Committee. Such Personal Objectives provide the basis
for evaluating individual achievement at the end of the applicable Plan Year
and the amount of the Award earned under the Personal Objective component.  The CEO and the Committee may make subjective
adjustments to the evaluation of personal performance in determining the amount
of the Target Award that has been earned through personal performance.


 


E.                                      At
the beginning of the Plan Year the CEO and the Committee shall establish
Financial Objectives and Operational Objectives for the Plan Year, which shall
be approved by the Board. Such Financial Objectives and Operational Objectives
shall state the financial and operational targets which must be achieved for
individual Participants to realize the full measure of that portion of Target Awards
determined by financial and/or operational performance.


 


F.                                      Target
Awards will be rounded to the nearest $100.


 


G.                                     The
Personal Objectives, Financial Objectives and/or Operational Objectives may be
revised from time to time during the Award determination period at the
discretion of the Committee and the CEO, and with respect to the Financial or
Operational Objectives, the approval of the Board.


 


VII.                             SPECIAL
INCENTIVE AWARDS


 


When appropriate, and subject to the approval of the Committee, the CEO
may recommend a Special Incentive Award in recognition of exemplary performance
on a specific project or issue to any Eligible Employee. The amount of such
Special Incentive Award shall be determined pursuant to Article VIII.


 


6





















 


VIII.                         AMOUNT
OF INCENTIVE COMPENSATION AWARDS


 


A.                                   At
the close of each Plan Year, the CEO shall recommend the amount of each Award
to be paid to each Participant, other than the CEO (if participating), and
shall submit the recommendation to the Committee. The recommendation with
respect to an Award shall be based on the following guidelines:


 


1.                                       A
Participant shall be eligible for an Award based upon accomplishment of
Personal, Financial and Operational Objectives as outlined in the Administrative
Guidelines.


 


2.                                       A
Participant whose employment ceases by reason of death, disability (as
determined by the Committee in its sole discretion) or retirement on or after
reaching age 65 or, if prior to age 65, if approved by the Committee, and a
Participant whose employment with the Company or an Affiliate is terminated
without “cause” shall be eligible for an Award based on a pro rata portion of
Participant’s Target Award through Participant’s termination date.


 


3.                                       Notwithstanding
anything to the contrary herein, in the event of (i) the termination of a
Participant’s employment by the Company or an Affiliate without “cause” or (ii)
the termination of employment by the Participant for “Good Reason”, in either
case within one year of a Change of Control, such Participant shall be entitled
to a pro rata portion of his or her Target Award through Participant’s
termination date.


 


4.                                       If
a Participant’s employment terminates for any reason other than those set forth
in Article VIII.A. 2 or 3 above, he or she will not be entitled to any portion
of a Target Award.


 


5.                                       Recommendations
with respect to Special Incentive Awards shall be based upon such guidelines as
the CEO shall deem appropriate in his or her sole discretion.


 


B.                                     After
the CEO makes his or her recommendation, the Committee shall meet for the
purpose of determining the amounts and approving the payment of Awards. The
Committee shall base its determination on the amount of any Award for the CEO
(providing the CEO is a Participant) upon the guidelines set forth in Paragraph
A above and such other factors as the Committee, in its sole discretion, shall
determine.


 


C.                                     In
no event shall an Award exceed 200% of the Participant’s actual base annual
salary during the Plan Year, nor shall a Special Incentive Award exceed 50% of
the Participant’s actual base annual salary during the Plan Year.


 


7





















 


D.                                    Awards
are not to be considered compensation of an employee for purposes of
calculating pensions or any other benefits unless the terms of a pension or
other benefit plan, program or agreement specifically provides that the Award
shall be considered in the calculation of such benefits.


 


IX.                                FORM
AND SETTLEMENT OF INCENTIVE COMPENSATION AWARDS


 


A.                                   Awards
shall be paid in cash by Copano in a single lump sum payment. The Committee
shall have complete and absolute authority to determine the settlement of each
individual Award. Awards shall be paid as soon as reasonably practicable
following approval by the Committee or its designee, but no later than March 15
following the close of such Plan Year, subject to restrictions outlined in the
Administrative Guidelines applicable to such Plan Year.


 


B.                                     If
a Participant dies before the payment of an Award any rights to the payment of such
Award shall be paid pursuant to a designation of beneficiary form executed by a
Participant and on file with the Director of Personnel or if none, to his or
her estate or legal representative.


 


C.                                     Should
a Participant become incompetent or payment otherwise becomes due to a person
who is a minor or incompetent, the Committee is authorized to pay the funds due
to the parent of the minor or to the guardian of the minor or incompetent or
directly to the minor or to apply those funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.


 


D.                                    Copano
shall calculate the deductions from the Award paid under the Plan for any taxes
required to be withheld by federal, state or local government and shall cause
them to be withheld.


 


X.                                    LIMITATIONS


 


A.                                   No
Participant or any other person shall have any interest in Copano, or any other
company affiliated with Copano, any fund or in any specific asset or assets of
Company or its affiliates by reason of an Award that has been made, but has not
been paid or distributed. No right or benefit provided in this Plan shall be
transferable by the Participant except, upon his death, as provided in this
Plan. No right or benefit under this Plan shall be subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Participant or the Participant’s beneficiary. Any attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge the same shall
be void. No right or benefit under this Plan shall in any manner be liable for
or subject to any debts, contracts, liabilities or torts of the person entitled
to such benefits. If any Participant or any beneficiary becomes bankrupt or
attempts to anticipate, alienate, sell, assign, pledge, encumber or charge any
right or


 


8





















 


benefit under this Plan, that right or benefit shall, in the discretion
of the Committee, cease. In that event, the Committee may have Copano hold or
apply the right or benefit or any part of it to the benefit of the Participant,
his or her spouse, children or other dependents or any of them in any manner
and in any proportion the Committee believes to be proper in its sole and
absolute discretion, but is no required to do so.


 


B.                                     Nothing
in this Plan shall be construed:


 


1.                                       To
give any employee of Copano or an Affiliate any right to be designated a
Participant in the Plan;


 


2.                                       To
give a Participant any right to receive an Award except in accordance with the
terms of this Plan;


 


3.                                       To
limit in any way the right of Copano or an Affiliate to terminate a Participant’s
employment at any time and for any reason;


 


4.                                       To
evidence any Copano agreement or understanding, expressed or implied, that
Copano will employ a Participant in any particular position or for any
particular remuneration or time; or


 


5.                                       To
give a Participant or any other person claiming through him any interest or
right under this Plan other than that of an unsecured general creditor or
Copano.


 


C.                                     Participants
shall forfeit without payment all rights with respect to an Award in the
following circumstances (unless the Administrative Guidelines published by the
Committee provide otherwise):


 


1.                                       If
a Participant’s employment is terminated for any reason other than those set
forth in Article VIII.A. 2 and 3 above;


 


2.                                       If
the Participant engages in willful, deliberate or gross misconduct; or


 


3.                                       If,
in the sole determination of the Committee, the Participant engages in
competitive activities, or activities to the detriment of Copano following the
Participant’s termination of employment and prior to payment of the Award.


 


XI.                                NATURE
OF PLAN


 


It is also specifically recognized by both Copano and the Participants
that this Plan is only a general corporate commitment and that each Participant
must rely upon the general credit of Copano for the fulfillment of its
obligations hereunder. Under all circumstances the rights of Participants to
any asset held by Copano will be no greater than the rights expressed in this
Plan. Nothing contained in this Plan shall constitute a


 


9





















 


guarantee by Copano that the assets of Copano will be sufficient to pay
any benefits under this Plan or would place the Participant in a secured
position ahead of general creditors of Copano; the Participants are only
unsecured creditors of Copano with respect to their Plan benefits and the Plan
constitutes a mere contingent promise by Copano to make payments in the future
if earned pursuant to the terms of the Plan and the Administrative Guidelines.
Although Copano may establish a trust to accumulate assets to fulfill its
obligations, the Plan and the trust, if so established, will no create any
lien, claim, encumbrance, right, title or other interest of any kind whatsoever
in any Participant in any asset held by Copano, contributed to the trust or
otherwise designated to be used for payment of any of its obligations created
in this agreement. No specific assets of Copano have been or shall be set
aside, or shall in any way be transferred to the trust or shall be pledged in
any way for the performance of Copano’s obligation under this Plan which would
remove such assets from being subject to the general creditors of Copano.


 


XII.                            AMENDMENT,
SUSPENSION OR TERMINATION OF THE PLAN


 


The Board may at any time amend, suspend or terminate the Plan, in
whole or in part, except that no amendment, suspension or termination shall
reduce any benefits payable to a Participant or his or her spouse, estate or
legal representative or shall reduce any benefit awarded to a Participant prior
to the date of such amendment, suspension or termination, except as provided in
Section X of this Plan.


 


XIII.                        SUCCESSORS
AND ASSIGNS


 


The provisions of the Plan shall be binding upon Copano and its
successors and upon the Participants and their legal representatives.


 


IX.                                UNFUNDED
ARRANGEMENT


 


It is intended that this Plan shall be unfunded for federal tax
purposes and for purposes of Title 1 of the Employee Retirement Income Security
Act of 1974, as amended.


 


X.                                    MISCELLANEOUS


 


Wherever applicable, the masculine pronoun as used herein shall be
deemed to means the feminine, the feminine pronoun the masculine, the singular
the plural and the plural the singular.


 


	
   

  	
  COPANO ENERGY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John R. Eckel, Jr.

  
	
   

  	
  John R. Eckel, Jr.

  
	
   

  	
  Chairman and Chief Executive Officer

  



 


10