Quicksilver Resources Inc. 2007 Executive Bonus Plan


    Exhibit
      10.1

    
 

    Quicksilver
      Resources Inc.

    2007
      Executive Bonus Plan

     

    Section
      1.  Eligibility: This 2007 Executive Bonus
      Plan (the “Plan”) provides for awards of incentive bonuses to executives of the
      Company. Only executives designated by the Compensation Committee of the
      Company’s Board of Directors (the “Compensation Committee”) are eligible to
      participate in the Plan. The Compensation Committee is authorized to establish
      the criteria for determining bonuses under the Plan, including performance
      measures and target incentive amounts. The Compensation Committee may grant
      a
      Cash Bonus Award, an Equity Bonus Award, or a combination thereof, to an
      eligible executive.

     

    Except
      as
      provided below, in order to receive a bonus under the Plan, an executive must
      be
      an active, full-time employee on the last business day of the Plan Year. The
      incentive bonus of a newly hired or promoted executive will be pro-rated based
      on the number of calendar days in the Plan Year that he or she participates
      in
      the Plan.

     

    If
      an
      eligible executive dies or becomes disabled and unable to work during the Plan
      Year, an award, pro-rated based on the number of calendar days in the Plan
      Year
      that he or she participated in the Plan before his or her death or disability,
      will be paid to the executive or his or her beneficiary at the same time and
      in
      the same manner as awards for the Plan Year are paid to other executives;
      provided, however, that notwithstanding any provision of the Plan to the
      contrary, an Equity Bonus Award will be paid in the form of a lump sum cash
      payment rather than in the form of Restricted Shares. The executive’s
      beneficiary under the Plan will be the beneficiary designated for the
      executive’s group life insurance plan. If no such beneficiary has been
      designated, the award will be paid to the executive’s estate.

     

    Section
      2.  Definitions:

     

    Board:
      The Board of Directors of the Company.

     

    Cash
      Bonus Awards: An incentive bonus award granted to an eligible executive
      pursuant to the Plan that is paid in a lump sum cash payment.

     

    Cash
      Flow from Operations: The Company’s cash flow from operations for the
      Plan Year, as determined in accordance with generally accepted accounting
      principles.

     

    Change
      in Control: The occurrence of any of the following events:

     

    (i)  any
      individual, entity or group (within the meaning of Section 13(d)(3) or
      14(d)(2) of the Exchange Act) is or becomes the beneficial owner (within the
      meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
      the
      combined voting power of the then-outstanding Voting Stock of the Company;
      provided, however, that the following acquisitions will not constitute a Change
      in Control: (A) any acquisition of Voting Stock of the Company directly from
      the
      Company that is approved by a majority of the Incumbent Directors; (B) any
      acquisition of Voting Stock of the Company by the Company or any subsidiary
      of
      the Company; (C) any acquisition of Voting Stock of the Company by the trustee
      or other fiduciary holding securities under any employee benefit plan (or
      related trust) sponsored or maintained by the Company or any subsidiary of
      the
      Company; and (D) any acquisition of Voting Stock of the Company

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      by
        Mercury Exploration Company, Quicksilver Energy, L.P., The
        Discovery Fund, Pennsylvania Avenue Limited Partnership, Pennsylvania Management
        Company, the estate of Frank Darden, Lucy Darden, Anne Darden Self, Glenn
        Darden
        or Thomas Darden, or their respective successors, assigns, designees, heirs,
        beneficiaries, trusts, estates or controlled affiliates;

    

     

    (ii)  a
      majority of the Board ceases to be comprised of Incumbent Directors;
      or

     

    (iii)  the
      consummation of a reorganization, merger or consolidation or sale or other
      disposition of all or substantially all of the consolidated assets of the
      Company (each, a “Business Combination Transaction”) immediately after which (A)
      the Voting Stock of the Company outstanding immediately prior to such Business
      Combination Transaction does not continue to represent (either by remaining
      outstanding or by being converted into Voting Stock of the entity surviving,
      resulting from, or succeeding to all or substantially all of the Company’s
      consolidated assets as a result of, such Business Combination Transaction or
      any
      parent of such entity), at least 50% of the combined voting power of the then
      outstanding shares of Voting Stock of the entity surviving, resulting from,
      or
      succeeding to all or substantially all of the Company’s consolidated assets as a
      result of, such Business Combination Transaction or any parent of any such
      entity (including, without limitation, an entity which as a result of such
      transaction owns the Company or all or substantially all of the Company’s assets
      either directly or through one or more subsidiaries).

     

    Code:
      The Internal Revenue Code of 1986, as amended.

     

    Earnings
      Per Share or EPS: The Company’s fully diluted Earnings Per Share as set
      forth in the Company’s Consolidated Statement of Earnings for the Plan Year, as
      determined in accordance with generally accepted accounting
      principles.

     

    Equity
      Bonus Awards: An incentive bonus award granted to an eligible executive
      pursuant to the Plan that is denominated in a dollar amount but that is paid
      by
      a grant of a number of Restricted Shares having an aggregate market value on
      the
      date of grant equal to the dollar amount of the award earned under the Plan
      and
      vesting in installments of 33 1/3% on each of the first three anniversaries
      of
      the date of grant of such Restricted Shares.

     

    Exchange
      Act: The Securities Exchange Act of 1934, as amended.

     

    Incumbent
      Directors: The individuals who, as of the date first set forth above,
      are directors of the Company and any individual becoming a director subsequent
      to the date hereof whose election, nomination for election by the Company’s
      stockholders, or appointment, was approved by a vote of a majority of the
      then-Incumbent Directors (either by a specific vote or by approval of the proxy
      statement of the Company in which such person is named as a nominee for
      director, without objection to such nomination).

     

    Plan
      Year: January 1, 2007 through December 31, 2007.

     

    Production:
      The Company’s net production at the end of the Plan Year as set forth in the
      Company’s audited financial statements.

    
      
        
        

      

      
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    Qualitative
      Performance Measures: Those objective and subjective factors which the
      Compensation Committee may, in its discretion, consider in determining each
      eligible executive’s award. Qualitative Performance Measures may include such
      factors as the Chief Executive Officer’s recommendation with respect to an
      executive’s potential award, and such other factors as the Compensation
      Committee may elect to consider in its discretion.

     

    Quantitative
      Performance Levels: Performance levels based on Quantitative
      Performance Measures, as set forth in Table 1.

     

    Quantitative
      Performance Measures: Cash Flow from Operations, Earnings Per Share,
      Production and Reserve Growth.

     

    Restricted
      Shares: A grant of “Restricted Shares” within the meaning of and
      pursuant to the Quicksilver Resources Inc. 2006 Equity Plan.

     

    Reserve
      Growth: The annual percentage increase in additions of proven reserves,
      net of revision and production, for the Plan Year.

     

    Target
      Incentive: The unadjusted bonus an executive would earn under an award
      if each Quantitative Performance Measure is achieved at a Quantitative
      Performance Level equal to 100% of Budget. A Target Incentive is calculated
      by
      multiplying the executive’s base salary earned during the Plan Year by the
      executive’s Target Percent of Base Pay with respect to such award.

     

    Target
      Percent of Base Pay: A percentage of base salary assigned to each
      eligible executive by the Compensation Committee with respect to each award
      granted under the Plan.

     

    Voting
      Stock: The securities entitled to vote generally in the election of
      directors or persons who serve similar functions.

     

    Weighting
      Factor: The weighting percentage assigned to each Quantitative
      Performance Measure, as set forth in Table 1.

     

    Section
      3.  Calculation of Awards: With respect to
      each Quantitative Performance Measure, an executive’s Target Incentive for each
      award is multiplied by the “Percent Target Awarded” value corresponding to the
      Quantitative Performance Level set forth in Table 1 for that Quantitative
      Performance Measure and further multiplied by the Weighting Factor applicable
      to
      that Quantitative Performance Measure. The resulting products for each
      Quantitative Performance Measure are then summed to obtain an executive’s
      potential award or awards. The Compensation Committee may, in its discretion,
      adjust an executive’s potential award or awards based on consideration of
      Qualitative Performance Measures.

     

    If
      the
      Compensation Committee determines that, as a result of a change in the business,
      operations, corporate structure or capital structure of the Company, or the
      manner in which the Company conducts its business, or any other events or
      circumstances, the Quantitative Performance Measures or corresponding Percent
      Targets Awarded are no longer suitable, the Compensation Committee may in its
      discretion modify such Quantitative Performance Measures or percentages or
      the
      related minimum acceptable level of achievement, in whole or in part, with
      respect to the Plan Year as the Compensation Committee deems appropriate and
      equitable.

    
      
        
        

      

      
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    Section
      4.  Approval and Payment of Awards: Upon
      completion of the annual audit by the Company’s independent auditors of the
      results of the Company’s operations for the Plan Year, the Compensation
      Committee will, in writing, certify the extent to which the Quantitative
      Performance Levels for the Plan Year were met and determine the award or awards
      payable to each eligible executive. Payment of each Cash Bonus Award will be
      made in a lump sum payment in cash, and will be made no later than March 15
      following the end of the Plan Year. Restricted Shares granted in payment of
      Equity Bonus Awards will be granted no later than March 15 following the end
      of
      the Plan Year. The Company may deduct from any award such amounts as may be
      required to be withheld under any federal, state or local tax laws. It is the
      Company’s intention that any bonus awarded under the Plan will not constitute a
      deferral of compensation within the meaning of Section 409A of the
      Code.

     

    Section
      5.  Change in Control: If a Change in
      Control occurs during the Plan Year, the award payable to each eligible
      executive for the Plan Year will be determined at the highest level of
      achievement of the Quantitative Performance Levels, without regard to actual
      performance and without proration for less than a full Plan Year. The awards
      will be paid at such time following the Change in Control as the Compensation
      Committee determines in its discretion, but in no event later than 30 days
      after
      the date of an event which results in a Change in Control. Notwithstanding
      any
      provision of the Plan to the contrary, if a Change in Control occurs during
      the
      Plan Year, each Equity Bonus Award will be paid in the form of a lump sum cash
      payment rather than in the form of Restricted Shares.

     

    Section
      6.  No Contract: The Plan is not and will
      not be construed as an employment contract or as a promise or contract to pay
      awards to eligible executives or their beneficiaries. The Plan does not confer
      upon any eligible executive any right with respect to continuance of employment
      or other service with the Company or any subsidiary, nor will it interfere
      in
      any way with any right the Company or any subsidiary would otherwise have to
      terminate such person’s employment or other service at any time. A leave of
      absence of definite length approved by the Compensation Committee will not
      be
      deemed a termination of employment for purposes of the Plan; any other leave
      of
      absence will be deemed a termination of employment for purposes of the Plan.
      The
      Plan will be approved by the Compensation Committee and may be amended from
      time
      to time by the Compensation Committee without notice. No eligible executive
      or
      beneficiary may sell, assign, transfer, discount or pledge as collateral for
      a
      loan, or otherwise anticipate any right to payment of an award under the
      Plan.

     

    Section
      7.  Administration of the Plan: The
      Compensation Committee has the full authority and discretion to administer
      the
      Plan and to take any action that is necessary or advisable in connection with
      the administration of the Plan, including without limitation the authority
      and
      discretion to interpret and construe any provision of the Plan or of any
      agreement, notification or document evidencing an award of an incentive bonus.
      A
      majority of the Compensation Committee will constitute a quorum, and the action
      of the members of the Compensation Committee present at any meeting at which
      a
      quorum is present, or acts unanimously approved in writing, will be the acts
      of
      the Compensation Committee. The interpretation and construction by the
      Compensation Committee of any such provision and any determination by the
      Compensation Committee pursuant to any provision of the Plan or of any such
      agreement, notification or document will be final and conclusive. No member
      of
      the Compensation Committee will be liable for any such action or
      determination.

    
      
        
        

      

      
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    Section
      8.  Governing Law: The Plan, all awards and
      all actions taken under the Plan will be governed in all respects in accordance
      with the laws of the State of Texas, including without limitation, the Texas
      statute of limitations, but without giving effect to the principles of conflicts
      of laws of such State.

     

    Section
      9.  Limitation on Payment of Benefits:
      Notwithstanding any provision of the Plan to the contrary, if any amount to
      be
      paid or provided under the Plan would be an “Excess Parachute Payment,” within
      the meaning of Section 280G of the Code, but for the application of this
      sentence, then the payments to be paid or provided under the Plan will be
      reduced to the minimum extent necessary (but in no event to less than zero)
      so
      that no portion of any such payment, as so reduced, constitutes an Excess
      Parachute Payment; provided, however, that the foregoing reduction will be
      made
      only if and to the extent that such reduction would result in an increase in
      the
      aggregate payment to be provided, determined on an after-tax basis (taking
      into
      account the excise tax imposed pursuant to Section 4999 of the Code, any tax
      imposed by any comparable provision of state law, and any applicable federal,
      state and local income and employment taxes). Whether requested by an eligible
      executive or the Company, the determination of whether any reduction in such
      payments to be provided under the Plan or otherwise is required pursuant to
      the
      preceding sentence will be made at the expense of the Company by the Company’s
      independent accountants in effect prior to the Change in Control. The fact
      that
      the executive’s right to payments may be reduced by reason of the limitations
      contained in this Section 9 will not of itself limit or otherwise affect any
      other rights of the executive other than pursuant to the Plan. In the event
      that
      any payment intended to be provided under the Plan or otherwise is required
      to
      be reduced pursuant to this Section 9, the executive will be entitled to
      designate the payments to be so reduced in order to give effect to this Section
      9. The Company will provide the executive with all information reasonably
      requested by the executive to permit the executive to make such designation.
      In
      the event that the executive fails to make such designation within 10 business
      days of the Change in Control, the Company may effect such reduction in any
      manner it deems appropriate.

    
      
        
        

      

      
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    Table
      1

    

      QUICKSILVER
        RESOURCES INC.

      2007
        EXECUTIVE BONUS PLAN

       

      
        I. Quantitative
          Performance Measures and Weighting Factors

         

      

      

        
          	
                  Performance

                  Measure

                	
                   

                  Weighting
                    Factor

                
	
                  Earnings
                    Per Share (EPS)

                	
                  20%

                
	
                  Cash
                    Flow from Operations

                	
                  20%

                
	
                  Production

                	
                  35%

                
	
                  Reserve
                    Growth

                	
                  25%

                


        

      

       

       

       

    

     

    
      II. Determination
        of Targets Attained

      

        

           

          
            	
                    Quantitative
                      Performance Levels1

                  	Percent
                    Target Awarded 
	
                    120%
                      of Budget or greater

                  	
                    200.00%

                  
	
                    119%
                      of Budget

                  	
                    175.00%

                  
	
                    118%
                      of Budget

                  	
                    175.00%

                  
	
                    117%
                      of Budget

                  	
                    175.00%

                  
	
                    116%
                      of Budget

                  	
                    175.00%

                  
	
                    115%
                      of Budget

                  	
                    175.00%

                  
	
                    114%
                      of Budget

                  	
                    150.00%

                  
	
                    113%
                      of Budget

                  	
                    150.00%

                  
	
                    112%
                      of Budget

                  	
                    150.00%

                  
	
                    111%
                      of Budget

                  	
                    150.00%

                  
	
                    110%
                      of Budget

                  	
                    150.00%

                  
	
                    109%
                      of Budget

                  	
                    125.00%

                  
	
                    108%
                      of Budget

                  	
                    125.00%

                  
	
                    107%
                      of Budget

                  	
                    125.00%

                  
	
                    106%
                      of Budget

                  	
                    125.00%

                  
	
                    105%
                      of Budget

                  	
                    125.00%

                  
	
                    104%
                      of Budget

                  	
                    100.00%

                  
	
                    103%
                      of Budget

                  	
                    100.00%

                  
	
                    102%
                      of Budget

                  	
                    100.00%

                  
	
                    101%
                      of Budget

                  	
                    100.00%

                  
	
                    100%
                      of Budget

                  	
                    100.00%

                  
	
                    99%
                      of Budget

                  	
                    90.00%

                  
	
                    98%
                      of Budget

                  	
                    90.00%

                  
	
                    97%
                      of Budget

                  	
                    90.00%

                  
	
                    96%
                      of Budget

                  	
                    90.00%

                  
	
                    95%
                      of Budget

                  	
                    90.00%

                  
	
                    94%
                      of Budget

                  	
                    80.00%

                  
	
                    93%
                      of Budget

                  	
                    80.00%

                  
	
                    92%
                      of Budget

                  	
                    80.00%

                  
	
                    91%
                      of Budget

                  	
                    80.00%

                  
	
                    90%
                      of Budget

                  	
                    80.00%

                  
	
                    89%
                      of Budget

                  	
                    70.00%

                  
	
                    88%
                      of Budget

                  	
                    70.00%

                  
	
                    87%
                      of Budget

                  	
                    70.00%

                  
	
                    86%
                      of Budget

                  	
                    70.00%

                  
	
                    85%
                      of Budget

                  	
                    70.00%

                  
	
                    84%
                      of Budget

                  	
                    60.00%

                  
	
                    83%
                      of Budget

                  	
                    60.00%

                  
	
                    82%
                      of Budget

                  	
                    60.00%

                  
	
                    81%
                      of Budget

                  	
                    60.00%

                  
	
                    80%
                      of Budget

                  	
                    60.00%

                  
	
                    Less
                      than 80% but more than 50% of Budget

                  	
                    50.00%

                  
	
                    50%
                      of Budget or below

                  	
                    25.00%2 

                  


          

          

            “Budget”
              represents (i) with respect to Earnings Per Share, Cash Flow from
              Operations and Production, the applicable performance measure budgeted
              for the
              Plan Year in the Company’s 2007 Budget (the “2007 Budget”) approved by the Board
              on January 11, 2007, and (ii) with respect to Reserve Growth, the
              performance goal established by the Compensation Committee for purposes
              of the
              Plan on April 10, 2007.

          

        

        
           

          The
            Quantitative Performance Levels for the Plan Year will be calculated
            so as to
            exclude the effects of any extraordinary or nonrecurring events (including
            any
            material restructuring charges, financial or otherwise), or any changes
            in
            accounting principles, acquisitions or divestitures, and may be adjusted
            as
            otherwise permitted by the Equity Plan.

        

        

          

          
            
              1
                Actual performance will be rounded to the closest whole percentage
                of Budget to
                determine the Quantitative Performance Level attained.

            

             

          

          
            2
              The Percent Target Awarded for a Quantitative Performance Level less
              than 50% of
              Budget may be any percent from 0 to 25%, at the discretion of the Compensation
              Committee.