UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

______________________________

FORM 8-K
______________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 19, 2014


 

EAGLE ROCK ENERGY PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)

Delaware
001-33016
68-0629883
(State or other jurisdiction of incorporation or organization)
Commission File Number
(I.R.S. Employer Identification No.)

1415 Louisiana Street, Suite 2700
Houston, Texas  77002
(Address of principal executive offices, including zip code)

(281) 408-1200
(Registrant’s telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
    





Item 5.02
 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Grants of Performance Units

On August 19, 2014, the Board of Directors (the “Board”) of Eagle Rock Energy G&P, LLC (the “Company”), the general partner of the general partner of Eagle Rock Energy Partners, L.P. (the “Partnership”), upon the recommendation of the Compensation Committee (“Committee”) of the Board, approved a target grant of phantom unit awards subject to performance and service-based vesting conditions (“Performance Units”) pursuant to the Amended and Restated Eagle Rock Energy Partners Long-Term Incentive Plan (as described in more detail below, the “Amended LTIP”) to the named executive officers of the Company as indicated in the following table:
 
 
 
Award Recipient
 
Target Number of Performance Units
Joseph A. Mills
 
213,675
Robert M. Haines
 
76,315
Charles C. Boettcher
 
88,360
Joseph E. Schimelpfening
 
67,475
Steven G. Hendrickson
 
64,265

The form award agreement applicable to such Performance Units (the “Performance Unit Agreement”) is attached hereto. Performance Units are described in the Amended LTIP as phantom units subject to restrictions that lapse based on the performance of the Partnership, as measured by total unitholder return in comparison to a peer group, and a continued service requirement.

Performance Units represent hypothetical units of the Partnership and are not actual common units of the Partnership (“Units”). Performance Units settle in Units rather than cash. The named executive officers shall not be, nor have any of the rights and privileges (including voting privileges) of, a unitholder or limited partner of the Partnership with respect to any Performance Units prior to the settlement of such Performance Units in Units of the Partnership at the applicable vesting times.

The right to receive Units with respect to the Performance Units depends on

(i)
the level of total unitholder return attained by the Partnership over the applicable performance period (generally July 1, 2014 through June 30, 2016), as measured against the Partnership’s peer group and as described in the Performance Unit Agreement, provided that the number of Units that may be earned in respect of the Performance Units will either be 0% of the Performance Units, for performance at anything less than the 50th percentile of the peer group, or in a range of 70% to 200% of the Performance Units, for performance from the 50th percentile to the 100th percentile of the peer group over the same performance period, and

(ii)
the satisfaction of a continued service requirement, which is generally continued service through June 30, 2016 for two-thirds (2/3) of the Performance Units and through June 30, 2017 for the remaining one-third (1/3) of the Performance Units.

In the event the Partnership pays any distributions in respect of its outstanding Units, the Performance Units and Earned Performance Units (as defined in the Performance Unit Agreement) will be grossed-up by an additional number of Performance Units or Earned Performance Units, as applicable, as determined in the Performance Unit Agreement. Any Performance Units that do not become Earned Performance Units (as defined in the Performance Unit Agreement) shall in all events terminate, expire and otherwise be forfeited by the named executive officer on the last day of the Performance Period (as defined in the Performance Unit Agreement).

Notwithstanding anything to the contrary in the foregoing, if a Change of Control (as defined in the Performance Unit Agreement) occurs prior to July 1, 2016, a named executive officer shall be deemed, subject to the terms of the Amended LTIP, to have earned a number of Earned Performance Units based on the Partnership’s total unitholder return as measured against the Partnership’s peer group, from July 1, 2014 through the date of the Change of Control as further described in the Performance Unit Agreement, but the final vesting (in Units) of such Earned Performance Units will remain subject to the named executive




officer’s continuous service with the Partnership or any successor to the Partnership through June 30, 2016 for two-thirds (2/3) of the Earned Performance Units and through June 30, 2017 for the remaining one-third (1/3) of the Earned Performance Units; provided, however, that if a named executive officer’s employment with the Company is terminated thereafter without Cause or for Good Reason (as such terms are defined in the Performance Unit Agreement), then the final vesting (in Units) shall be accelerated upon such termination but such vesting shall also be subject to pro-rationing for the length of such named executive officer’s employment service out of the period from July 1, 2014 through June 30, 2016 for two-thirds (2/3) and out of the period from July 1, 2014 through June 30, 2017 for the remaining one-third (1/3); provided further that the named executive officer executes a general release of all claims and does not revoke such release.

Notwithstanding anything to the contrary in the foregoing, if a Change of Control occurs on or after July 1, 2016, the final vesting (in Units) of the remaining unvested Earned Performance Units will continue to be subject to the named executive officer’s continuous service with the Partnership or any successor to the Partnership through June 30, 2017, provided that if a named executive officer’s employment with the Company is terminated thereafter without Cause or for Good Reason, then the final vesting (in Units) shall be accelerated upon such termination but such vesting shall also be subject to pro-rationing for the length of such named executive officer’s employment service out of the period from July 1, 2014 through June 30, 2017; provided further that the named executive officer executes a general release of all claims and does not revoke such release.

Upon any termination of a named executive officer’s employment with the Company due to death or Disability (as defined in the Performance Unit Agreement), any Earned Performance Units shall vest in full and any unearned Performance Units shall vest at 100%.

Further, upon any termination of a named executive officer’s employment with the Company prior to the last day of the Performance Period (as defined in the Performance Unit Agreement) or following the last day of the Performance Period, except as discussed above with respect to terminations due to death or disability or on or after a Change of Control without Cause or for Good Reason, all of the Performance Units (including Earned Performance Units) that remain outstanding and unvested shall terminate automatically and be cancelled; provided that the Committee, in its sole and absolute discretion, may decide to vest and make payment with respect to all or any portion of Performance Units (including Earned Performance Units) that remain outstanding and unvested immediately prior to the date of termination.

The foregoing summary of the Performance Unit Agreement is not a complete description of the terms of the form of Performance Unit Agreement and is qualified by reference to the full text of such agreement, which is attached as an exhibit hereto and incorporated by reference herein.

Grant of Restricted Units

On August 19, 2014, upon recommendation of the Committee, the Board also approved a grant of restricted Units (“Restricted Units”) to named executive officers of the Company pursuant to the Amended LTIP as indicated in the following table:
 
 
 
Award Recipient
 
Number of Restricted Units
Joseph A. Mills
 
23,445
Charles C. Boettcher
 
9,010
Joseph E. Schimelpfening
 
6,815
Steven G. Hendrickson
 
6,505

The form award agreement applicable to such Restricted Units (the “Restricted Unit Agreement”) is attached hereto. The Restricted Units are subject to restrictions on transferability and a substantial risk of forfeiture and are intended to retain and motivate the named executive officers. A named executive officer shall have all the rights of a unitholder in the Partnership with respect to the Restricted Units, including the right to vote and to receive distributions thereon if and when distributions are made by the Partnership to other unitholders. The Restricted Units vest and the forfeiture restrictions will lapse annually in substantially equal one-third (1/3) increments as long as the award recipient remains continuously employed by, or a service provider to, the Company and its affiliates.

        Notwithstanding the foregoing, if a Change of Control occurs prior to the final vesting date and a named executive officer’s employment or service relationship is terminated on or after the date of the Change of Control without Cause or for Good Reason (each term as defined in the Restricted Unit Agreement), then the restrictions on a number of Restricted Units shall automatically lapse on the 60th day following the date of termination subject to a pro-rationing such that the aggregate nu




mber of Restricted Units that have lapsed after such occurrence (including any that have lapsed prior to such occurrence) shall be equal to the product of (i) the total number of Restricted Units granted, times (ii) a fraction, the numerator of which is the Service Months (as defined in the Restricted Unit Agreement) and the denominator of which is 36; provided further that the named executive officer executes a general release of all claims and does not revoke such release. Upon a named executive officer’s termination due to death or Disability (as defined in the Restricted Unit Agreement) prior to the final vesting date, all Restricted Units that have not yet vested as of the date of termination shall immediately become fully vested and nonforfeitable. Upon any other termination of a named executive officer’s employment or service relationship that is not described above prior to the final vesting date, all of the Restricted Units shall terminate automatically and be cancelled; provided that the Committee, in its sole and absolute discretion, may decide to vest all or any portion of Restricted Units granted that remain outstanding and unvested immediately prior to the date of termination.

The foregoing summary of the Restricted Unit Agreement is not a complete description of the terms of the form of Restricted Unit Agreement and is qualified by reference to the full text of such agreement, which is attached as an exhibit hereto and incorporated by reference herein.

Amended and Restated Long-Term Incentive Plan

As previously described in a Current Report on Form 8-K filed by the Partnership on June 24, 2014, the Partnership’s unitholders approved the Amended LTIP to make, among others, the following changes to the then-existing Eagle Rock Energy Partners Long Term Incentive Plan:

•
to provide for an additional 7,500,000 Units to be available for awards under the Amended LTIP; 

•
to add language to the Amended LTIP to assist in administering the Amended LTIP with Section 16(b) of the Securities Exchange Act of 1934; 

•
to provide that awards and other rights under the Amended LTIP will be subject to any clawback policy that the Partnership adopts; 

•
to provide that dividend equivalents may be granted under the Amended LTIP in the form of units and phantom units in addition to cash; and 

•
to make certain other clarifying changes.

The Amended LTIP is described in greater detail in the Partnership’s proxy statement filed with the Securities and Exchange Commission on April 30, 2014. The foregoing summary of the Amended LTIP is not a complete description of the terms of the form of the Amended LTIP and is qualified by reference to the full text of such agreement, which is attached as an exhibit hereto and incorporated by reference herein.

Item 9.01.             Financial Statements and Exhibits

(d) Exhibits

Exhibit No.        Description

10.1
Amended and Restated Eagle Rock Energy Partners, L.P. Long-Term Incentive Plan dated June 24, 2014

10.2
Form of Performance Unit Agreement for Officers under the Amended and Restated Eagle Rock Energy Partners Long-Term Incentive Plan

10.3
Form of Restricted Unit Agreement for Officers under the Amended and Restated Eagle Rock Energy Partners Long-Term Incentive Plan.






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
EAGLE ROCK ENERGY PARTNERS, L.P.
 
 
 
 
 
By:
 
Eagle Rock Energy GP, L.P.,
 
 
 
its general partner
 
 
 
 
 
By:
 
Eagle Rock Energy G&P, LLC,
 
 
 
its general partner
 
 
 
 
Date: August 19, 2014
By:
 
/s/ Charles C. Boettcher
 
 
 
Charles C. Boettcher
 
 
 
Senior Vice President and General Counsel






Exhibit Index

Exhibit No.        Description

10.1
Amended and Restated Eagle Rock Energy Partners, L.P. Long-Term Incentive Plan dated June 24, 2014

10.2
Form of Performance Unit Agreement for Officers under the Amended and Restated Eagle Rock Energy Partners Long-Term Incentive Plan

10.3
Form of Restricted Unit Agreement for Officers under the Amended and Restated Eagle Rock Energy Partners Long-Term Incentive Plan.




Exhibit 10-1



EAGLE ROCK ENERGY PARTNERS
LONG TERM INCENTIVE PLAN
(As Amended and Restated Effective June 24, 2014)
The Eagle Rock Energy Partners Long Term Incentive Plan (the “Plan”) is hereby amended and restated effective June 24, 2014 (the “Effective Date”), by Eagle Rock Energy G&P, LLC, a Delaware limited liability company (the “General Partner”), the general partner of Eagle Rock Energy GP, L.P., a Delaware limited partnership (“ERGP”), which is, in turn, the general partner of Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Partnership”).
R E C I T A L S
WHEREAS, the Plan was adopted October 25, 2006, was subsequently amended effective May 15, 2008 and February 4, 2009, and was amended and restated effective September 17, 2010; and
WHEREAS, the General Partner desires to amend and restate the Plan to increase the number of Units available for issuance under the Plan, subject to approval by the unitholders of the Partnership, and to make certain other changes to the Plan.
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety, effective as of the Effective Date.
Section 1.Purpose of the Plan. The Plan is intended to promote the interests of the General Partner, the Partnership and their Affiliates by providing to Employees, Consultants and Directors incentive compensation awards based on Units to encourage superior performance. The Plan is also contemplated to enhance the ability of the General Partner, the Partnership and their Affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Partnership and to encourage them to devote their best efforts to advancing the business of the Partnership.

Section 2.Definitions. As used in the Plan, the following terms shall have the meanings set forth below:
(a)“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.

(b)“Award” means an Option, Unit Appreciation Right, Restricted Unit, Phantom Unit, Substitute Award, Unit Award or Other Unit Based Award granted under the Plan, and shall include any tandem DERs granted with respect to an Award.

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

(d)“Board” means the Board of Directors of the General Partner.

(e)“Change of Control” means, the occurrence of one of the following:

(i)    the consummation of an agreement to acquire or a tender offer for beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) by any “person” or “group” (within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act) such that afterwards such person or group has 40% or more of either (A) the then outstanding common equity securities of the Partnership (the “Outstanding Equity”) or (B) the combined voting power of the then outstanding voting securities of the Partnership (the “Outstanding Voting Securities”); provided, however, that for purposes of this subclause (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Partnership, (2) any acquisition by the Partnership, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Partnership or any of its Affiliates, (4) any acquisition by any entity pursuant to a transaction that complies with clauses (A), (B) or (C) of subclause (iv) below, or (5) any acquisition by any member of the NGP Group unless, prior to such acquisition but following the Effective Date, the aggregate




ownership of members of the NGP Group has been reduced to less than 20% of both the Outstanding Equity and the Outstanding Voting Securities; or
(ii)    the acquisition of beneficial ownership by any "person" or "group" (within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act) of 40% or more of the combined voting power of the then outstanding voting securities of ERGP and/or the General Partner (the “GP Outstanding Voting Securities”); provided, however, that for purposes of this subclause (ii), the following acquisitions shall not constitute a Change of Control: (A) any acquisition by the Partnership or any of its subsidiaries, (B) any transaction that is subject to subclause (iv) below, or (C) any acquisition of beneficial ownership of GP Outstanding Voting Securities solely by virtue of an acquisition of Outstanding Equity or Outstanding Voting Securities; or
(iii)    the limited partners of the Partnership approve, in one or a series of transactions, a plan of complete liquidation of the Partnership; or
(iv)     the consummation of a reorganization, merger or consolidation involving the Partnership or a sale or other disposition by the Partnership of all or substantially all of its assets or an acquisition of assets of another entity (a “Business Combination”), in each case, unless following such Business Combination: (A) the Outstanding Equity and Outstanding Voting Securities immediately prior to such Business Combination represent or are converted into or exchanged for securities that represent or are convertible into more than 50% of, respectively, the then outstanding equity securities and the combined voting power of the then outstanding voting securities, as the case may be, of the entity resulting from such Business Combination or the resulting public parent thereof (including, without limitation, any entity that as a result of such transaction owns the Partnership, or all or substantially all of the assets of the Partnership either directly or through one or more subsidiaries), as the case may be, (B) no "person" or "group" (within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act) (excluding any employee benefit plan (or related trust) of the Partnership or the entity resulting from the Business Combination or the resulting public parent thereof, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding equity securities of the entity resulting from such Business Combination or the resulting public parent thereof, as the case may be, or the combined voting power of the then outstanding voting securities of such entity, except to the extent that such ownership existed with respect to the Partnership prior to the Business Combination, and (C) at least a majority of the members of the board of directors or similar governing entity of the entity resulting from such Business Combination or the resulting public parent thereof, as the case may be, were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; provided, however, that clauses (A), (B) and (C) of this subclause (iv) shall not apply if the entity resulting from the Business Combination or the resulting public parent thereof, as the case may be, is a limited partnership unless 100% of the combined voting power of the voting securities of the general partner thereof is owned, directly or indirectly, by such limited partnership; or
(v)    individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board.
(f)“Code” means the Internal Revenue Code of 1986, as amended from time to time.

(g)“Committee” means the Board, the Compensation Committee of the Board or such other committee as may be appointed by the Board to administer the Plan.

(h)“Consultant” means an individual who renders consulting or advisory services to the General Partner or an Affiliate thereof, other than a member of the NGP Group.

(i)“DER” means a distribution equivalent right, being a contingent right, granted in tandem with a specific Award (other than a Restricted Unit or Unit Award), to receive with respect to each Unit subject to the Award an amount in cash, Units and/or Phantom Units, as determined by the Committee in its sole discretion, equal in value to the distributions made by the Partnership with respect to a Unit during the period such Award is outstanding.

(j)“Director” means a member of the Board or the board of an Affiliate of the General Partner who is not an Employee or a Consultant (other than in that individual’s capacity as a Director).





(k)“Employee” means an employee of the General Partner or an Affiliate of the General Partner, other than a member of the NGP Group.

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

(m)“Fair Market Value” means, on any relevant date, the closing sales price of a Unit on the principal national securities exchange or other market in which trading in Units occurs on the last market trading day prior to the applicable day (or, if there is no trading in the Units on such date, on the next preceding day on which there was trading) as reported in The Wall Street Journal (or other reporting service approved by the Committee). If Units are not traded on a national securities exchange or other market at the time a determination of Fair Market Value is required to be made hereunder, the determination of Fair Market Value shall be made by the Committee in good faith using a “reasonable application of a reasonable valuation method” within the meaning of Treasury Regulation Section 1.409A-l(b)(5)(iv)(B).

(n)“Incumbent Board” means the portion of the Board constituted of the individuals who are members of the Board as of the date this Plan is effective and any other individual who becomes a member of the Board after such date and who is either (i) an Appointed Director (as such term is defined in the Partnership Agreement), (ii) a Management Director (as such term is defined in the Partnership Agreement), or (iii) an Elected Director (as such term is defined in the Partnership Agreement) who was (x) redesignated as an Elected Director pursuant to the terms of the Partnership Agreement or by the Elected Directors, (y) appointed as an Elected Director or (z) nominated to serve as an elected Director by a vote of at least a majority of the Elected Directors then serving on the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as 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 Incumbent Board.
 
(o)“NGP Group” shall mean Natural Gas Partners VII, L.P., Natural Gas Partners VIII, L.P., NGP Energy Capital Management, and their respective Affiliates (other than the Partnership, the General Partner, ERGP and their respective subsidiaries) and their Affiliate’s respective directors, officers, shareholders, members, managers, representatives of management committees and employees (and members of their respective families and trusts for the primary benefit of such family members).

(p)“Option” means an option to purchase Units granted under the Plan.

(q)“Other Unit Based Awards” means Awards granted to an Employee, Director or Consultant pursuant to Section 6(e) hereof.

(r)“Participant” means an Employee, Consultant or Director granted an Award under the Plan.

(s)“Partnership Agreement” means the Agreement of Limited Partnership of the Partnership, as it may be amended or amended and restated from time to time.

(t)“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.

(u)“Phantom Unit” means a notional Unit granted under the Plan which upon vesting entitles the Participant to receive a Unit or an amount of cash equal to the Fair Market Value of a Unit, as determined by the Committee in its discretion.

(v)“Restricted Period” means the period established by the Committee with respect to an Award during which the Award remains subject to forfeiture and is either not exercisable by or payable to the Participant, as the case may be.

(w)“Restricted Unit” means a Unit granted under the Plan that is subject to a Restricted Period.

(x)“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.

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





(z)“Substitute Award” means an award granted pursuant to Section 6(g) of the Plan.

(aa)“UDR” means a distribution made by the Partnership with respect to a Restricted Unit.
(ab)“Unit” means a Common Unit of the Partnership.

(ac)“Unit Appreciation Right” means a contingent right granted to an Employee, Director or Consultant pursuant to Section 6(b) that entitles the holder to receive, in cash or Units, as determined by the Committee in its sole discretion, an amount equal to the excess of the Fair Market Value of a Unit on the exercise date of the Unit Appreciation Right (or another specified date) over the exercise price of the Unit Appreciation Right.

(ad)“Unit Award” means an award granted pursuant to Section 6(d) of the Plan.

Section 3.Administration.

(a)Authority of the Committee. 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 following and any applicable law, the Committee, in its sole discretion, may delegate any or all of its powers and duties under the Plan, including the power to grant Awards under the Plan, to the Chief Executive Officer of the General Partner, subject to such limitations on such delegated powers and duties as the Committee may impose, if any. Upon any such delegation all references in the Plan to the “Committee”, other than in Section 7, shall be deemed to include the Chief Executive Officer. Any such delegation shall not limit the Chief Executive Officer’s right to receive Awards under the Plan; provided, however, the Chief Executive Officer may not grant Awards to himself, a Director or any executive officer of the General Partner or an Affiliate, or take any action with respect to any Award previously granted to himself, a person who is an executive officer or a Director. 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 type or types of Awards to be granted to a Participant; (iii) determine the number of Units to be covered by Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled, exercised, canceled, or forfeited; (vi) interpret and administer the Plan and any instrument or agreement relating to an Award made under the Plan; (vii) 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 (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration 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, without limitation, the General Partner, the Partnership, any Affiliate, any Participant, and any beneficiary of any Participant.

(b)Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the General Partner, the Partnership or their Affiliates, the General Partner’s or the Partnership’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the General Partner, the Partnership or any of their Affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to this Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the General Partner with respect to any such action or determination.
 
(c)Exemptions from Section 16(b) Liability. It is the intent of the General Partner that the grant of any Awards to, or other transaction by, a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or another applicable exemption (except for transactions acknowledged by the Participant in writing to be non-exempt). Accordingly, if any provision of the Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 or such other exemption as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3.

Section 4.Units.





(a)Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c), the maximum number of Units that may be delivered with respect to Awards under the Plan, since its original inception, is 14,500,000 Units that can be used to make any Award of any type under the Plan. Units withheld from an Award to satisfy the Partnership’s or an Affiliate’s tax withholding obligations with respect to the Award shall not be considered to be Units delivered under the Plan for this purpose. If any Award is forfeited, cancelled, exercised, or otherwise terminates or expires without the actual delivery of Units pursuant to such Award (the grant of Restricted Units is not a delivery of Units for this purpose), the Units subject to such Award shall again be available for Awards under the Plan (including Units not delivered in connection with the exercise of an Option or Unit Appreciation Right). There shall not be any limitation on the number of Awards that may be granted and paid in cash.

(b)Sources of Units Deliverable Under Awards. Any Units delivered pursuant to an Award shall consist, in whole or in part, of Units acquired in the open market, from any Affiliate, the Partnership or any other Person, or any combination of the foregoing, as determined by the Committee in its discretion.

(c)Anti-dilution Adjustments. With respect to any “equity restructuring” event that could result in an additional compensation expense to the General Partner or the Partnership pursuant to the provisions of FASB Accounting Standards Codification, Topic 718 if adjustments to Awards with respect to such event were discretionary, the Committee shall equitably adjust the number and type of Units covered by each outstanding Award and the terms and conditions, including the exercise price and performance criteria (if any), of such Award to equitably reflect such restructuring event and shall adjust the number and type of Units (or other securities or property) with respect to which Awards may be granted after such event. With respect to any other similar event that would not result in an accounting charge under FASB Accounting Standards Codification, Topic 718 if the adjustment to Awards with respect to such event were subject to discretionary action, the Committee shall have complete discretion to adjust Awards in such manner as it deems appropriate with respect to such other event. In the event the Committee makes any adjustment pursuant to the foregoing provisions of this Section 4(c), the Committee shall make a corresponding and proportionate adjustment with respect to the maximum number of Units that may be delivered with respect to Awards under the Plan as provided in Section 4(a) and the kind of Units or other securities available for grant under the Plan.

Section 5.Eligibility. Any Employee, Consultant or Director shall be eligible to be designated a Participant and receive an Award under the Plan. Notwithstanding the foregoing, Employees, Consultants and Directors that provide services to Affiliates that are not considered a single employer with the Partnership under Code Section 414(b) or Code Section 414(c) shall not be eligible to receive Awards which are subject to Code Section 409A until the Affiliate adopts this Plan as a participating employer in accordance with Section 10.

Section 6.Awards.

(a)Options. The Committee may grant Options which are intended to comply with Treasury Regulation Section 1.409A-l(b)(5)(i)(A) only to Employees, Consultants or Directors performing services for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(a), “controlling interest” means (i) in the case of a corporation, ownership of stock possessing at least 50% of total combined voting power of all classes of stock of such corporation entitled to vote or at least 50% of the total value of shares of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a sole proprietorship, ownership of the sole proprietorship; or (iv) in the case of a trust or estate, ownership of an actuarial interest (as defined in Treasury Regulation Section 1.414(c)-2(b)(2)(ii)) of at least 50% of such trust or estate. The Committee may grant Options that are otherwise exempt from or compliant with Code Section 409A to any eligible Employee, Consultant or Director. The Committee shall have the authority to determine the number of Units to be covered by each Option, the purchase price therefor and the Restricted Period and other conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

(i)Exercise Price. The exercise price per Unit purchasable under an Option shall be determined by the Committee at the time the Option is granted but, except with respect to Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date of grant of the Option.





(ii)Time and Method of Exercise. The Committee shall determine the exercise terms and the Restricted Period with respect to an Option grant, which may include, without limitation, a provision for accelerated vesting upon the achievement of specified performance goals or other events, and the method or methods by which payment of the exercise price with respect thereto may be made or deemed to have been made, which may include, without limitation, cash, check acceptable to the General Partner, a “cashless-broker” exercise through procedures approved by the General Partner, or any combination of methods, having a Fair Market Value on the exercise date equal to the relevant exercise price.

(iii)Forfeitures. Except as otherwise provided in the terms of the Option grant, upon termination of a Participant’s employment with the General Partner and its Affiliates or membership on the Board, whichever is applicable, for any reason during the applicable Restricted Period, all unvested Options shall be forfeited by the Participant. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Options; provided that the waiver contemplated under this Section 6(a)(iii) shall be effective only to the extent that such waiver will not cause the Participant’s Options that are designed to satisfy Code Section 409A to fail to satisfy such section.

(b)Unit Appreciation Rights. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number of Units to be covered by each grant, whether Units or cash shall be delivered upon exercise, the exercise price therefor and the conditions and limitations applicable to the exercise of the Unit Appreciation Rights, including the following terms and conditions and such additional terms and conditions as the Committee shall determine, that are not inconsistent with the provisions of the Plan.
 
(i)Exercise Price. The exercise price per Unit Appreciation Right shall be determined by the Committee at the time the Unit Appreciation Right is granted but, except with respect to Substitute Awards, may not be less than the Fair Market Value of a Unit as of the date of grant of the Unit Appreciation Right.

(ii)Time of Exercise. The Committee shall determine the Restricted Period and the time or times at which a Unit Appreciation Right may be exercised in whole or in part, which may include, without limitation, accelerated vesting upon the achievement of specified performance goals or other events.

(iii)Forfeitures. Except as otherwise provided in the terms of the Unit Appreciation Right grant, upon termination of a Participant’s employment with or service to the General Partner, the Partnership and their Affiliates or membership on the Board, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding Unit Appreciation Rights awarded to the Participant shall be automatically forfeited on such termination. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Unit Appreciation Rights.

(c)Restricted Units and Phantom Units. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Restricted Units or Phantom Units shall be granted, the number of Restricted Units or Phantom Units to be granted to each such Participant, the Restricted Period, the conditions under which the Restricted Units or Phantom Units may become vested or forfeited and such other terms and conditions as the Committee may establish with respect to such Awards.

(i)UDRs. To the extent provided by the Committee, in its discretion, a grant of Restricted Units may provide that distributions made by the Partnership with respect to the Restricted Units shall be subject to the same forfeiture and other restrictions as the Restricted Unit and, if restricted, such distributions shall be held, without interest, until the Restricted Unit vests or is forfeited with the UDR being paid or forfeited at the same time, as the case may be. Absent such a restriction on the UDRs in the Award Agreement, UDRs shall be paid to the holder of the Restricted Unit without restriction at the same time as cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, UDRs shall only be paid in a manner that is either exempt from or in compliance with Code Section 409A.

(ii)Forfeitures. Except as otherwise provided in the terms of the Restricted Units or Phantom Units Award Agreement, upon termination of a Participant’s employment with, or




consultant services to, the General Partner and its Affiliates or membership on the Board, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding, unvested Restricted Units and Phantom Units awarded the Participant shall be automatically forfeited on such termination. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Restricted Units and/or Phantom Units; provided that the waiver contemplated under this Section 6(c)(ii) shall be effective only to the extent that such waiver will not cause the Participant’s Restricted Units and/or Phantom Units that are designed to satisfy Code Section 409A to fail to satisfy such section.

(iii)Lapse of Restrictions.

(A)Phantom Units. Unless otherwise specified in an Award Agreement, no later than the 15th calendar day following the vesting of each Phantom Unit, subject to the provisions of Section 8(b), the Participant shall be entitled to settlement of such Phantom Unit and shall receive one Unit or an amount in cash equal to the Fair Market Value of a Unit (for purposes of this Section 6(c)(iii)(A), as calculated on the last day of the Restricted Period), as determined by the Committee in its discretion.

(B)Restricted Units. Upon the vesting of each Restricted Unit, subject to satisfying the tax withholding obligations of Section 8(b), the Participant shall be entitled to have the restrictions removed from his or her Unit certificate so that the Participant then holds an unrestricted Unit.

(d)Unit Awards. A Unit Award of Units not subject to a Restricted Period may be granted under the Plan to any Employee, Consultant or Director as a bonus or additional compensation or in lieu of cash compensation the individual is otherwise entitled to receive, in such amounts as the Committee determines to be appropriate.

(e)Other Unit Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Units, as deemed by the Committee to be consistent with the purposes of this Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Units, purchase rights for Units, Awards with value and payment contingent upon performance of the Partnership or any other factors designated by the Committee, and Awards valued by reference to the book value of Units or the value of securities of or the performance of specified Affiliates of the General Partner or the Partnership. The Committee shall determine the terms and conditions of such Awards. Units delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(e) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Units, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under this Plan, may also be granted pursuant to this Section 6(e).

(f)DERs. To the extent provided by the Committee, in its discretion, an Award (other than a Restricted Unit or Unit Award) may include a tandem DER grant, which may provide that such DERs shall be paid directly to the Participant, be credited to a bookkeeping account (with or without interest in the discretion of the Committee) subject to the same vesting restrictions as the tandem Award, or be subject to such other provisions or restrictions as determined by the Committee in its discretion. Absent a contrary provision in the Award Agreement, DERs shall be paid to the Participant without restriction at the same time as cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, DERs shall only be paid in a manner that is either exempt from or in compliance with Code Section 409A. Further notwithstanding the foregoing, with respect to DERs that are granted in respect of an Award subject to performance conditions as described in Section 6(h)(ii), payment of such DERs shall be delayed until such time as the applicable performance conditions have been satisfied.

(g)Substitute Awards. Awards may be granted under the Plan in substitution for similar awards held by individuals who become Employees, Consultants or Directors as a result of a merger, consolidation or acquisition by the Partnership or an Affiliate of another entity or the assets of another entity. Such Substitute Awards that are Options may have exercise prices less than the Fair Market Value of a Unit on the date of the substitution if such substitution complies with Code Section 409A and the Treasury Regulations thereunder.

(h)General.





(i)Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Partnership or any Affiliate. Awards granted in addition to or in tandem with other Awards or awards granted under any other plan of the Partnership or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. Notwithstanding the foregoing but subject to Section 7(c) of the Plan, without the approval of unitholders, the Committee will not (i) exchange, substitute or otherwise reduce the exercise price of previously granted Options or Unit Appreciation Rights in a transaction that constitutes a “repricing” as such term is used in Rule 5635(c) of the NASDAQ Listing Rules, as amended from time to time, or (ii) cause the General Partner, ERGP, or the Partnership to offer to purchase or exchange for cash Options or Unit Appreciation Rights if, at the time of such offer, the Fair Market Value of a Unit is less than the exercise price of such Options or Unit Appreciation Rights.

(ii)Performance Conditions. The right of a Participant to exercise or receive, and/or the vesting or settlement of, any Award and the timing thereof may be subject to such performance conditions as may be specified by the Committee. The Committee shall establish any such performance conditions and goals based on one or more business criteria for the General Partner and/or the Partnership, on a consolidated basis, and/or for specified Affiliates or business or geographical units of the Partnership, as determined by the Committee in its discretion, which may include (but are not limited to) one or more of the following: (A) earnings per Unit, (B) increase in revenues, (C) increase in cash flow, (D) increase in cash flow from operations, (E) increase in cash follow return, (F) return on net assets, (G) return on assets, (H) return on investment, (I) return on capital, (J) return on equity, (K) economic value added, (L) operating margin, (M) contribution margin, (N) net income, (O) net income per Unit, (P) pretax earnings, (Q) pretax earnings before interest, depreciation and amortization, (R) pretax operating earnings after interest expense and before incentives, service fees, and extraordinary or special items, (S) total unitholder return, (T) debt reduction, (U) market share, (V) change in the Fair Market Value of the Units, (W) operating income, and (X) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of comparable companies.

(iii)Limits on Transfer of Awards.

(A)Except as provided in Section 6(h)(iii)(C) below, each Option and Unit Appreciation Right shall be exercisable only by the Participant during the Participant’s lifetime, or by the Person to whom the Participant’s rights shall pass by will or the laws of descent and distribution.

(B)Except as provided in Section 6(h)(iii)(C) below, no Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the General Partner, the Partnership or any Affiliate.

(C)To the extent specifically provided by the Committee with respect to an Option or Unit Appreciation Right, an Option or Unit Appreciation Right may be transferred by a Participant without consideration to immediate family members or related family trusts, limited partnerships or similar entities or on such terms and conditions as the Committee may from time to time establish.

(iv)Term of Awards. The term of each Award shall be for such period as may be determined by the Committee.

(v)Unit Certificates. All certificates for Units or other securities of the Partnership delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules,




regulations, and other requirements of the SEC, any stock exchange upon which such Units or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be inscribed on any such certificates to make appropriate reference to such restrictions.

(vi)Consideration for Grants. Awards may be granted for such consideration, including services, as the Committee shall determine.

(vii)Delivery of Units or other Securities and Payment by Participant of Consideration. Notwithstanding anything in the Plan or any Award Agreement to the contrary, delivery of Units pursuant to the exercise or vesting of an Award may be deferred for any period during which, in the good faith determination of the Committee, the General Partner is not reasonably able to obtain Units to deliver pursuant to such Award without violating applicable law or the applicable rules or regulations of any governmental agency or authority or securities exchange. No Units or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including, without limitation, any exercise price or tax withholding) is received by the General Partner.

(viii)Change of Control. No Award that constitutes a “deferral of compensation” within the meaning of Treasury Regulation Section 1.409A-1(b), whether by design, due to a subsequent modification in the terms and conditions of such Award or as a result of a change in applicable law following the date of grant of such Award, and that is not exempt from Section 409A of the Code pursuant to an applicable exemption (any such Award, a “409A Award”) shall become exercisable, or be settled or otherwise paid or distributed, pursuant to the Plan or the applicable Award Agreement, as a result of a Change of Control, unless the event constituting such Change of Control also constitutes a “change in the ownership or effective control” or “in the ownership of a substantial portion of the assets” of the General Partner or the Partnership within the meaning of Treasury Regulation Section 1.409A-3(i)(5); except that, to the extent permitted under Section 409A and the Treasury Regulations promulgated thereunder, the time of exercise, payment or settlement of a 409A Award shall be accelerated, or payment shall be made under the Plan in respect of such Award, upon the occurrence of a Change of Control, as determined by the Committee in its discretion, to the extent necessary to pay income, withholding, employment or other taxes imposed on such 409A Award. To the extent any 409A Award does not become exercisable or is not settled or otherwise payable upon a Change of Control as a result of the limitations described in the preceding sentence, it shall become exercisable or be settled or otherwise payable upon the occurrence of an event that qualifies as a permissible time of distribution in respect of such 409A Award under Section 409A and the Treasury Regulations promulgated thereunder, the Plan and the terms of the governing Award Agreement.
 
(ix)Additional Agreements. Each Employee, Consultant or Director to whom an Award is granted under this Plan may be required to agree in writing, as a condition to the grant of such Award or otherwise, to subject an Award that is exercised or settled following such Person’s termination of services with the General Partner, the Partnership or their Affiliates to a general release of claims and/or a noncompetition agreement in favor of the General Partner, the Partnership, and their Affiliates, with the terms and conditions of such agreement(s) to be determined in good faith by the Committee.

Section 7.Amendment and Termination. Except to the extent prohibited by applicable law:

(a)Amendments to the Plan. Except as required by the rules of the principal securities exchange on which the Units are traded and subject to Section 7(b) below, the Board may amend, alter, suspend, discontinue, or terminate the Plan in any manner, including increasing the number of Units available for Awards under the Plan, without the consent of any partner, Participant, other holder or beneficiary of an Award, or any other Person.

(b)Amendments to Awards. Subject to Section 7(a), the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided no change, other than pursuant to Section 7(c), in any Award shall materially reduce the benefit to a Participant without the consent of such Participant. Notwithstanding the foregoing, the Board may amend the Plan or an Award to cause such Award to be exempt from Code Section 409A or to comply with the requirements of Code Section 409A or any other applicable law.





(c)Actions Upon the Occurrence of Certain Events. Upon the occurrence of a Change of Control, any change in applicable law or regulation affecting the Plan or Awards thereunder, or any change in accounting principles affecting the financial statements of the Partnership, the Committee, in its sole discretion, without the consent of any Participant or holder of the Award, and on such terms and conditions as it deems appropriate, may take any one or more of the following actions in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or an outstanding Award:

(i)provide for either (A) the termination of any Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of such transaction or event the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the General Partner without payment); provided, that, in the event the occurrence giving rise to the Committee’s exercise of its powers under this Section 7(c) is a transaction pursuant to which the Partnership or the General Partner is survived by a successor entity with a readily tradable security, the Committee shall not have the authority to terminate and cash out any such Award pursuant to this Section 7(c)(i)(A) but will instead but required to provide for the assumption of such Awards by the successor or survivor entity in accordance with Section 7(c)(ii) below, or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

(ii)provide that such Award be assumed by the successor or survivor entity, or a parent or subsidiary thereof, or be exchanged for similar options, rights or awards covering the equity of the successor or survivor, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of equity interests and prices;

(iii)make adjustments in the number and type of Units (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Awards or in the terms and conditions of (including the exercise price), and the vesting and performance criteria included in, outstanding Awards, or both;

(iv)provide that such Award shall be exercisable or payable, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

(v)provide that the Award cannot be exercised or become payable after such event, i.e., shall terminate upon such event.

Notwithstanding the foregoing, (i) any such action contemplated under this Section 7 shall be effective only to the extent that such action will not cause any Award that is designed to satisfy Code Section 409A to fail to satisfy such section, and (ii) with respect to an above event that is an “equity restructuring” event that would be subject to a compensation expense pursuant to FASB Accounting Standards Codification, Topic 718, the provisions in Section 4(c) shall control to the extent they are in conflict with the discretionary provisions of this Section 7.
Section 8.General Provisions.

(a)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 recipient.

(b)Tax Withholding. Unless other arrangements have been made that are acceptable to the General Partner or an Affiliate, the Partnership or an Affiliate is authorized to withhold from any Award, from any payment due or transfer made under any Award or from any compensation or other amount owing to a Participant the amount (in cash, Units, Units that would otherwise be issued pursuant to such Award or other property) of any applicable taxes payable in respect of the grant of an Award, its exercise, the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the General Partner or Affiliate to satisfy its withholding obligations for the payment of such taxes; provided, that if such tax obligations are satisfied through the withholding of Units that are otherwise issuable to the Participant pursuant to an Award (or through the surrender of Units by the Participant to the Partnership or Affiliate), the number of Units that may be so withheld (or surrendered) shall be limited to the number of Units that have an aggregate Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such tax liabilities determined based on the applicable minimum statutory withholding rates for U.S. federal, state and/or local tax




purposes, including payroll taxes, as determined by the Partnership or an Affiliate. Notwithstanding the foregoing, with respect to any Participant who is subject to Rule 16b-3, such tax withholding may be effected by withholding, selling or receiving Units or other property and making cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee (which for these purposes shall be comprised of two or more “nonemployee directors” within the meaning of Rule 16b-3(b)(3) or the full Board and which such discretion may not be delegated to management).

(c)No Right to Employment or Services. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the General Partner or any Affiliate or to remain on the Board, as applicable. Furthermore, the General Partner or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan, any Award Agreement or other agreement.

(d)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 conflicts of laws principles.

(e)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.

(f)Other Laws. The Committee may refuse to issue or transfer any Units or other consideration under an Award if, in its sole discretion, it determines that the issuance or transfer of such Units or such other consideration might violate any applicable law or regulation, the rules of the principal securities exchange on which the Units are then traded, or entitle the Partnership or an Affiliate to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the General Partner by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.

(g)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 General Partner or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the General Partner or any Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the General Partner or such Affiliate.

(h)No Fractional Units. No fractional Units shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Units or whether such fractional Units or any rights thereto shall be canceled, terminated, or otherwise eliminated.

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

(k)Participation by Affiliates. In making Awards to Employees employed by an entity other than the General Partner, the Committee shall be acting on behalf of the Affiliate, and to the extent the Partnership has an obligation to reimburse the Affiliate for compensation paid for services rendered for the benefit of the Partnership, such payments or reimbursement payments may be made by the Partnership directly to the Affiliate.

(l)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.





(m)Code Section 409A. Notwithstanding any other provision of the Plan to the contrary, any Award subject to Code Section 409A is intended to satisfy the application of Code Section 409A to the Award.

(n)No Guarantee of Tax Consequences. None of the Board, the Committee, the Partnership nor the General Partner makes any commitment or guarantee that any federal, state or local tax treatment will (or will not) apply or be available to any Participant.

(o)Specified Employee under Code Section 409A. Subject to any other restrictions or limitations contained herein, in the event that a “specified employee” (as defined under Code Section 409A and the Treasury Regulations thereunder) becomes entitled to a payment under an Award which is a 409A Award on account of a “separation from service” (as defined under Code Section 409A and the Treasury Regulations thereunder), such payment shall not occur until the date that is six months plus one day from the date of such separation from service. Any amount that is otherwise payable within the six month period described herein will be aggregated and paid in a lump sum without interest.

(p)Clawback. This Plan is subject to any written clawback policies the General Partner or an Affiliate, with the approval of the Board, may adopt. Any such policy may subject a Participant’s Awards and amounts paid or realized with respect to Awards under this Plan to reduction, cancellation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including but not limited to an accounting restatement due to the General Partner or an Affiliate’s material noncompliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy adopted to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the Securities and Exchange Commission and that the General Partner or an Affiliate determines should apply to this Plan.

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 earliest of (i) the date terminated by the Board, (ii) all Units available under the Plan have been paid to Participants, or (iii) the 10th anniversary of the Effective Date. 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.

Section 10.Adoption by Affiliates. With the consent of the Committee, any Affiliate that is not considered a single employer with the Partnership under Code Section 414(b) or Code Section 414(c) may adopt the Plan for the benefit of its Employees, Consultants or Directors by written instrument delivered to the Committee before the grant to such Affiliate’s Employees, Consultants or Directors under the Plan of any 409A Award.





IN WITNESS WHEREOF, this Plan has been executed on June 24, 2014.

EAGLE ROCK ENERGY PARTNERS, L.P.

By: Eagle Rock Energy GP, L.P.,
its General Partner

By:     Eagle Rock Energy G&P, LLC,
its General Partner

By:        /s/ Joseph A. Mills
Name:        Joseph A. Mills
Title:        Chief Executive Officer






Exhibit 10-2




EAGLE ROCK ENERGY PARTNERS
LONG TERM INCENTIVE PLAN
(As Amended and Restated June 24, 2014)

PERFORMANCE UNIT AGREEMENT

This Performance Unit Agreement (this “Agreement”) is made and entered into by and between Eagle Rock Energy G&P LLC, a Delaware limited liability company (the “General Partner”), and [_____________________] (the “Service Provider”). This Agreement is effective as of the [_____] day of [________________], 20[__] (the “Date of Grant”). Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to such terms in Exhibit A attached hereto or in the Plan (as defined below), unless the context requires otherwise.
W I T N E S S E T H:
WHEREAS, Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Partnership”), has adopted the Eagle Rock Energy Partners Long Term Incentive Plan, as amended and restated June 24, 2014 (the “Plan”) to, among other things, attract, retain and motivate certain employees, officers and directors of the Partnership, ERGP, the General Partner and their respective Affiliates (collectively, the “Partnership Entities,” which term shall include any successor to the Partnership, ERGP or the General Partner and any other entity that is an Affiliate of such successor entity or entities); and
WHEREAS, the Board has authorized the grant of performance units, or phantom units subject to performance conditions, under the Plan to employees, officers and directors as part of their compensation for services provided to the Partnership Entities.
NOW, THEREFORE, in consideration of the Service Provider’s agreement to provide or to continue providing services, the Service Provider and the General Partner agree as follows:
1.    Grant of Performance Units. The General Partner hereby grants to the Service Provider, effective as of the Date of Grant, an award (the “Award”) of [___] performance units (the “Target Performance Units”), subject to all of the terms and conditions set forth in the Plan and this Agreement, whereby each performance unit represents the right to receive one Unit of the Partnership (each, a “Performance Unit”); provided, that, depending on the level of performance determined to be attained with respect to the applicable performance conditions as described in Sections 4 and 5, the number of Units that may be earned hereunder in respect of the Award may range from 0% to 200% of the Target Performance Units then credited to the Service Provider’s Performance Unit Account (the “Earned Performance Units”), which Earned Performance Units are also subject to satisfaction of the applicable Continuous Service Requirement. The Performance Units contemplated in this Agreement are described in the Plan as Phantom Units subject to restrictions that lapse based on the level of achievement of performance conditions and a continued service requirement.
2.    Performance Unit Account. Performance Units represent hypothetical Units and not actual Units. The General Partner shall establish and maintain a bookkeeping account on its records for the Service Provider (a “Performance Unit Account”) and shall record in such Performance Unit Account: (a) the number of Target Performance Units subject to the Award (including any additional Target Performance Units credited to the Service Provider pursuant to Section 3 hereof), (b) the number of Performance Units that have become




Earned Performance Units, and (c) whether the Continuous Service Requirement applicable to Earned Performance Units has been satisfied. The Service Provider shall not have any interest in any fund or specific assets of the Partnership by reason of this Award or the Performance Unit Account established for the Service Provider.
3.    Rights of Service Provider. No Units shall be issued to the Service Provider at the time the grant is made, and the Service Provider shall not be, nor have any of the rights and privileges of, a unitholder or limited partner of the Partnership with respect to any Performance Units recorded in the Performance Unit Account. The Service Provider shall have no voting rights with respect to the Performance Units. In the event (i) the Partnership pays any distributions in respect of its outstanding Units, and (ii) on such record date the Service Provider holds Performance Units granted pursuant to this Agreement that have not vested and been settled, then the Service Provider’s Performance Unit Account shall, as of the date such distribution is paid to unitholders of the Partnership, be credited with an additional number of Performance Units, rounded down to the nearest whole Unit, equal to (a) the aggregate amount of the distributions that would have been received by the Service Provider if the Service Provider were the record owner, as of such record date, of the number of Units underlying the number of Target Performance Units held in such Service Provider’s Performance Unit Account as of such record date, divided by (b) the Fair Market Value of a Unit on the date such distribution is paid to unitholders of the Partnership; provided, that, if the record date for such distribution occurs following the last day of the Performance Period but prior to the 12 month anniversary of the last day of the Performance Period, then any distributions that would have been received by the Service Provider if the Service Provider were the record owner, as of such date, of the number of Units underlying the number of Earned Performance Units with respect to which the Continuous Service Requirement has not been satisfied (i.e., initially 1/3 of the Earned Performance Units at the end of the Performance Period) as of such record date shall increase the number of such Earned Performance Units by a number equal to (a) the aggregate amount of the distributions that would have been so received by the Service Provider, divided by (b) the Fair Market Value of a Unit on the date such distribution is paid to the unitholders of the Partnership. Any additional number of Performance Units credited in accordance with the preceding sentence shall be added to the number of Target Performance Units or Earned Performance Units, as applicable held in the Service Provider’s Performance Unit Account, shall increase the number of the Target Performance Units or Earned Performance Units, as applicable subject to the Award and shall be subject to all of the terms and conditions set forth in the Plan and this Agreement, including without limitation, those performance and other conditions described in Section 4, that are applicable to Target Performance Units or Earned Performance Units, as applicable.
4.    Vesting of Performance Units. The Performance Units are restricted in that they may be forfeited by the Service Provider and in that they may not, except as otherwise provided in the Plan, be transferred or otherwise disposed of by the Service Provider. Subject to the terms and conditions of this Agreement, the forfeiture restrictions on the Performance Units shall lapse, and a number of Performance Units shall vest and become earned and nonforfeitable based on: (a) the extent to which the Partnership has satisfied the performance conditions set forth on Exhibit A, which, along with the corresponding percentage of the Target Performance Units then credited to the Performance Unit Account that have become earned in accordance with the table set forth on Exhibit A, shall be determined by the Committee in its sole discretion (for the avoidance of doubt, such number of Performance Units that become so earned are referred to herein as Earned Performance Units); and (b) the Service Provider’s satisfaction of the Continuous Service Requirement. For purposes of this Award, the “Continuous Service Requirement” means (i) with respect to 2/3 of the Earned Performance Units as determined at the end of the Performance Period, the Service Provider’s continuous active service with the Partnership Entities through the last day of the Performance Period, and (ii) with respect to the remaining 1/3 of the Earned Performance Units as determined at the end of the Performance Period (and as may be subsequently grossed-up for distributions as discussed in Section




3 above), the Service Provider’s continuous active service with the Partnership Entities through the date that is the 12 month anniversary of the last day of the Performance Period. Any Performance Units that do not become Earned Performance Units shall in all events terminate, expire and otherwise be forfeited by the Service Provider on the last day of the Performance Period.
5.    Effect of Change of Control and Termination of Service.
(a)Change of Control. Notwithstanding any provision herein to the contrary, if a Change of Control occurs prior to the end of the Performance Period (the date of such occurrence, the “Change of Control Date”) and the Service Provider has remained in continuous service with the Partnership Entities through the Change of Control Date, then, (i) the Service Provider shall be deemed to have earned a number of Performance Units equal to the number of Earned Performance Units the Service Provider would have earned in accordance with Section 4, but assuming that (A) the Performance Period ended on the Change of Control Date, and (B) the determination of whether, and to what extent, the Partnership has satisfied the performance conditions set forth on Exhibit A shall be based on actual performance against the stated criteria through the Change of Control Date; and (ii) the number of Earned Performance Units determined in accordance with clause (i) of this Section 5(a) (as may be grossed-up for further distributions in accordance with Section 3 above) shall become vested and nonforfeitable and the Continuous Service Requirement with respect to such Earned Performance Units shall be deemed satisfied if either (A) the Service Provider remains in continuous active service with the Partnership Entities from the Change of Control Date through (1) the last day of the Performance Period with respect to 2/3 of the Earned Performance Units, and (2) the date that is the 12 month anniversary of the last day of the Performance Period, with respect to the remaining 1/3 of the Earned Performance Units; or (B) the Service Provider’s employment or service relationship with the Partnership Entities is terminated on or after the Change of Control Date by a Partnership Entity without Cause or by the Service Provider for Good Reason; provided, that, if the Continuous Service Requirement is deemed satisfied by virtue of this clause (B), then the number of Earned Performance Units with respect to which payment shall be made pursuant to Section 6 hereof shall be a number equal to the sum of (x) the product of (i) 2/3 of the total number of Earned Performance Units determined under this Section 5(a) times (ii) a fraction, the numerator of which is the number of full months (counting the month in which the Service Provider’s termination of employment or service relationship occurs as a full month), beginning with the month in which the Performance Period commences, during which the Service Provider was employed by, or provided services to, the Partnership Entities (the “Service Months”), or such greater number up to 24 as determined by the Committee in its sole discretion, and the denominator of which is 24 and (y) the product of (i) 1/3 of the total number of Earned Performance Units determined under this Section 5(a) times (ii) a fraction, the numerator of which is the Service Months, or such greater number up to 36 as determined by the Committee in its sole discretion, and the denominator of which is 36; provided further, that, upon such termination of employment or service, the Service Provider executes a release of all claims against the Partnership Entities (the form of which shall be delivered to the Service Provider on the date of termination) within 45 days following the Service Provider’s date of termination and does not subsequently revoke such release within the seven (7) day period following its execution; provided, however, that, if the Service Provider does not execute such release or executes and later revokes such release, the Service Provider shall not have satisfied the Continuous Service Requirement pursuant to this clause (B). Notwithstanding any provision contained herein to the contrary, if a Change of Control occurs following the last day of the Performance Period but prior to the date that is the 12 month anniversary of the last day of the Performance Period, then, the number of Earned Performance Units determined in accordance with Section 4 with respect to which the Continuous Service Requirement has not been satisfied as of such Change of Control Date (i.e., 1/3 of the Earned Performance Units at the end of the Performance Period, as grossed-up for further distributions as provided in Section 3 above) shall become vested and nonforfeitable and the Continuous Service Requirement with respect to such Earned Performance Units shall be deemed satisfied if either (i) the Service Provider




remains in continuous active service with the Partnership Entities from the Change of Control Date through the date that is the 12 month anniversary of the last day of the Performance Period; or (ii) the Service Provider’s employment or service relationship with the Partnership Entities is terminated on or after the Change of Control Date by a Partnership Entity without Cause or by the Service Provider for Good Reason; provided, that, if the Continuous Service Requirement is deemed satisfied by virtue of this clause (ii), then the number of Earned Performance Units with respect to which payment shall be made pursuant to Section 6 hereof shall be a number equal to the product of (A) such number of Earned Performance Units, times (B) a fraction, the numerator of which is the Service Months, or such greater number up to 36 as determined by the Committee in its sole discretion, and the denominator of which is 36; provided further, that, upon such termination of employment or service, the Service Provider executes a release of all claims against the Partnership Entities (the form of which shall be delivered to the Service Provider on the date of termination) within 45 days following the Service Provider’s date of termination and does not subsequently revoke such release within the seven (7) day period following its execution; provided, however, that if the Service Provider does not execute such release or executes and later revokes such release, the Service Provider shall not have satisfied the Continuous Service Requirement pursuant to this clause (ii).

(b)Termination Generally. Subject to Sections 5(a) and 5(c), (i) upon termination of the Service Provider’s employment or other service relationship with the Partnership Entities prior to the last day of the Performance Period, all of the Performance Units shall terminate automatically and be cancelled upon such termination, or (ii) upon termination of the Service Provider’s employment or other service relationship with the Partnership Entities following the last day of the Performance Period but prior to the date that is the 12 month anniversary of the last day of the Performance Period, the number of Earned Performance Units determined in accordance with Section 4 that remain unvested because the Continuous Service Requirement with respect to such Earned Performance Units has not been satisfied as of such date of termination, shall terminate automatically and be cancelled upon such termination, and , in each case, neither the Service Provider nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives shall have any rights with respect to such cancelled Performance Units. Notwithstanding the foregoing, the Committee, in its sole and absolute discretion on such terms and conditions as it shall determine, may decide in certain situations not otherwise addressed in Sections 5(a) or 5(c) to vest and make payment with respect to all or any portion of the Performance Units granted pursuant to this Agreement that remain outstanding and unvested immediately prior to the Service Provider’s termination.
  
(c)Termination due to Death or Disability. If the Service Provider’s employment or service relationship with the Partnership Entities is terminated due to the Service Provider’s death or Disability (i) prior to the last day of the Performance Period, then (A) the Service Provider shall be deemed to have earned a number of Earned Performance Units equal to 100% of the Target Performance Units then credited to the Service Provider’s Performance Unit Account as of the date of such termination, and (B) the Continuous Service Requirement with respect to such Earned Performance Units shall be deemed satisfied and such number of Earned Performance Units shall be immediately vested and nonforfeitable as of the date of such termination, or (ii) following the last day of the Performance Period but prior to the date that is the 12 month anniversary of the last day of the Performance Period, then the number of Earned Performance Units determined in accordance with Section 4 that remain unvested as of the date of such termination shall become immediately vested and nonforfeitable on such date and the Continuous Service Requirement with respect to such Earned Performance Units shall be deemed satisfied.

(d)Definitions

i.Cause. The term “Cause” means a determination made in good faith by two-thirds (2/3) of the Board that the Service Provider (A) willfully and continually failed




to substantially perform the Service Provider’s duties with the Partnership Entities (other than a failure resulting from the Service Provider’s incapacity due to physical or mental illness) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Service Provider specifying the manner in which the Service Provider has failed to substantially perform, (B) willfully engaged in conduct which is demonstrably and materially injurious to the Partnership Entities, monetarily or otherwise, (C) has been convicted of, or has plead guilty or nolo contendere to, a misdemeanor involving moral turpitude or a felony, (D) has committed an act of fraud, or material embezzlement or material theft, in each case, in the course of the Service Provider’s employment relationship with the Partnership Entities, or (E) has materially breached (I) the Service Provider’s duties or obligations to the Partnership Entities under any applicable common law or the provisions of the governing documents of the Partnership Entities or (II) any obligations of the Service Provider under any agreement (including any non-compete, non-solicitation or confidentiality covenants) entered into between the Service Provider and any Partnership Entity; provided, however, that no termination of the Service Provider’s services shall be for Cause as set forth in clause (B), (D) or (E) above until (1) there shall have been delivered to the Service Provider a copy of a written notice setting forth that the Service Provider was guilty of the conduct described in clause (B), (D) or (E) above, as applicable, and specifying the particulars thereof in detail and (2) the Service Provider shall have been provided an opportunity to be heard by the Board (with the assistance of the Service Provider’s counsel if the Service Provider so desires). No act or failure to act on the part of the Service Provider shall be considered “willful” unless the Service Provider has intentionally or deliberately acted or failed to act with knowledge that such action or failure to act was likely to be materially injurious to the Partnership Entities. Notwithstanding anything contained herein or in the Plan to the contrary, no failure to perform by the Service Provider after a notice of termination is given shall constitute Cause.

ii.Change of Control. The term “Change of Control” has the meaning given such term in the Plan; provided, that, for the avoidance of doubt, a sale or other disposition by one or more members of the NGP Group of all or substantially all of their aggregate ownership, as of the Date of Grant, of the Outstanding Equity and the Outstanding Voting Securities shall not, in and of itself, constitute a Change of Control for purposes of this Agreement.

iii.Disability. The term “Disability” means (A) a physical or mental impairment of sufficient severity that, in the opinion of the Board, the Service Provider is unable to continue performing the duties assigned to the Service Provider prior to such impairment or the Service Provider’s condition entitles the Service Provider to disability benefits under any insurance or employee benefit plan of any Partnership Entity in which the Service Provider participates, and (B) the impairment or condition is cited by the employing Partnership Entity as the reason for the Service Provider’s termination.

iv.Good Reason. The term “Good Reason” means the occurrence of any of the following events or conditions: (A) a change in the Service Provider’s status, title, position or responsibilities (including reporting responsibilities) which represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto, the assignment to the Service Provider of any duties or responsibilities that are inconsistent with such status, title, position or responsibilities, or any removal of the Service Provider from or failure to reappoint or reelect the Service Provider to any of such positions, except in




connection with the termination of the Service Provider services for Cause, due to the Service Provider’s Disability or death, or by the Service Provider voluntarily without Good Reason, (B) a reduction in the Service Provider’s annual base salary, (C) a change in the geographic location at which the Service Provider must perform services (without the consent of the Service Provider) to a location more than thirty-five (35) miles from the location at which the Service Provider normally performs such services as of the Date of Grant, except for reasonably required business travel that is not materially greater than such travel requirements prior to the Date of Grant, (D) the failure by the Partnership Entities to continue in effect any material compensation or benefit plan in which the Service Provider was participating as of the Date of Grant or to provide the Service Provider with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each compensation or employee benefit plan, program and practice as in effect immediately prior to the Date of Grant (or as in effect following the Date of Grant, if greater), (E) any material breach by a Partnership Entity of any provision of the Plan or of any provision of the Service Provider’s employment agreement, if any, or (F) any purported termination of the Service Provider’s service relationship for Cause by a Partnership Entity that does not otherwise comply with the terms of the Plan, this Agreement or the Service Provider’s employment agreement, if any. In the case of the Service Provider’s allegation of Good Reason, (1) the Service Provider shall provide notice to the Committee of the event alleged to constitute Good Reason within 90 days of the occurrence of such event, (2) the Partnership Entities shall have the opportunity to remedy the alleged Good Reason event within 30 days from receipt of notice of such allegation, and (3) if not remedied within that 30-day period, the Service Provider’s employment or service relationship with the Partnership Entities shall terminate on the day following the last day of such 30-day period.

6.    Settlement Date; Manner of Settlement. Payment in respect of Earned Performance Units for which the applicable Continuous Service Requirement has been satisfied shall be made no later than 60 days following the last day of the Performance Period, except that, notwithstanding the foregoing, (a) with respect to that portion of the Earned Performance Units for which the Continuous Service Requirement ends on the date that is the 12 month anniversary of the last day of the Performance Period, payment in respect to such Earned Performance Units shall be made no later than the 30th day following such 12 month anniversary date or, in the case of a termination of the Service Provider’s employment or service by a Partnership Entity without Cause or by the Service Provider for Good Reason, in either case, following a Change of Control Date that occurs after the end of the Performance Period but prior to the 12 month anniversary of the last day of the Performance Period, no later than the 60th day following the date of such termination; (b) in the event of a Change of Control occurring prior to the end of the Performance Period, payment in respect to Earned Performance Units pursuant to Section 5(a) shall be made no later than (i) the 30th day following the last day of the Performance Period or the date that is the 12 month anniversary of the last day of the Performance Period, whichever is the applicable vesting date on which the Continuous Service Requirement for such Earned Performance Units is satisfied, or (ii) if the Service Provider’s employment or service is terminated following the Change of Control Date either by a Partnership Entity without Cause or by the Service Provider for Good Reason, the 60th day following the date of such termination; and (c) in the event of the Service Provider’s death or Disability, payment in respect of Performance Units deemed to be earned pursuant to Section 5(c) shall be made no later than the 30th day following termination of the Service Provider’s employment or service due to death or Disability. All payments with respect to Performance Units shall be made in Units. If the settlement of any Performance Units would yield a fractional Unit, such fractional Unit shall be rounded up to the next whole Unit. The Service Provider agrees that any Units that he acquires upon payment of the Performance Units will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws, the Plan or the rules, regulations and




other requirements of the U.S. Securities and Exchange Commission (the “SEC”) and any stock exchange upon which the Units are then listed. The Service Provider also agrees that any certificates representing the Units acquired under this Award may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws. In addition to the terms and conditions provided herein, the Partnership may require that the Service Provider make such covenants, agreements, and representations as the Committee, in its sole discretion, deems advisable in order to comply with any such laws, rules, regulations, or requirements.
7.    Limitations on Transfer. The Service Provider agrees that he shall not dispose of (meaning, without limitation, sell, transfer, pledge, exchange, hypothecate or otherwise dispose of) any Performance Units or other rights hereby acquired prior to the date the Performance Units are vested and settled. Any attempted disposition of the Performance Units in violation of the preceding sentence shall be null and void and the Performance Units that the Service Provider attempted to dispose of shall be forfeited.
8.    Adjustment. The number of Performance Units granted to the Service Provider pursuant to this Agreement shall be adjusted to reflect distributions of the Partnership paid in units, unit splits or other changes in the capital structure of the Partnership, all in accordance with the Plan. All provisions of this Agreement shall be applicable to such new or additional or different units or securities distributed or issued pursuant to the Plan to the same extent that such provisions are applicable to the units with respect to which they were distributed or issued.
9.    Violation of Law, Regulation or Rule. The General Partner shall not be required to deliver any Units hereunder if, upon the advice of counsel for the General Partner, such acquisition or delivery would violate the Securities Act of 1933 or any other applicable federal, state, or local law or regulation or the rules of the exchange upon which the Partnership’s Units are traded.
10.    Copy of Plan. By the execution of this Agreement, the Service Provider acknowledges receipt of a copy of the Plan.
11.    Notices. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any such notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered or, whether actually received or not, on the third business day (on which banking institutions in the State of Texas are open) after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The General Partner or the Service Provider may change at any time and from time to time by written notice to the other, the address which it or he previously specified for receiving notices. The General Partner and the Service Provider agree that any notices shall be given to the General Partner or to the Service Provider at the following addresses:
General Partner:    Eagle Rock Energy G&P, LLC
Attn: Charles C. Boettcher
P.O. Box 2968
Houston, Texas 77252-2968
Phone: (281) 408-1260
Fax: (281) 715-4142

Service Provider:
At the Service Provider’s current address as shown in the General Partner’s records.




12.    General Provisions.
(a)    Administration. This Agreement shall at all times be subject to the terms and conditions of the Plan. The Committee shall have sole and complete discretion with respect to all matters reserved to it by the Plan and decisions of a majority of the Committee with respect thereto and with respect to this Agreement shall be final and binding upon the Service Provider and the General Partner.
(b)    No Effect on Service. Nothing in this Agreement or in the Plan shall be construed as giving the Service Provider the right to be retained in the employ or service of the Partnership Entities. Furthermore, the Partnership Entities may at any time terminate the service relationship with the Service Provider free from any liability or any claim under the Plan or this Agreement, unless otherwise expressly provided in the Plan, this Agreement or other written agreement.
(c)    Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to conflicts of law principles thereof.
(d)    Amendments. This Agreement may be amended only by a written agreement executed by the General Partner and the Service Provider, except that the Committee may unilaterally waive any conditions or rights under, amend any terms of, or alter this Agreement provided no such change (other than pursuant to Section 4(c) or 7(c) of the Plan) materially reduces the rights or benefits of the Service Provider with respect to the Performance Units without his consent.
(e)    Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the General Partner or the Partnership and upon any person lawfully claiming under the Service Provider.
(f)    Entire Agreement. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subject matter hereof, and contain all the covenants, promises, representations, warranties and agreements between the parties with respect to the Performance Units granted hereby. Without limiting the scope of the preceding sentence, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.
(g)    No Liability for Good Faith Determinations. Neither the Partnership Entities nor the members of the Committee and the Board shall be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Performance Units granted hereunder.
(h)    No Guarantee of Interests. The Board and the Partnership Entities do not guarantee the Units from loss or depreciation.
(i)    Tax Withholding. Upon any taxable event arising in connection with the Performance Units, the Partnership Entities shall have the authority and the right to deduct or withhold, or to require the Service Provider to remit to a Partnership Entity, an amount sufficient to satisfy all applicable federal, state and local taxes (including the Service Provider’s employment tax obligations) required by law to be withheld with respect to such event. In satisfaction of the foregoing requirement, unless other arrangements have been made by the Service Provider that are acceptable to the applicable Partnership Entity and unless otherwise determined by the Board (which such determination may not be delegated), the General Partner or one of its Affiliates shall withhold Units otherwise issuable in respect of such Performance Units having a Fair Market Value on the date of withholding equal to the aggregate amount of taxes required to be withheld with respect to such event based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.




(j)    Insider Trading Policy. The terms of the Partnership’s insider trading policy with respect to Units are incorporated herein by reference.
(k)    Term Validity. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable law, then such provision will be deemed to be modified to the minimum extent necessary to render it legal, valid and enforceable; and if such provision cannot be so modified, then this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly. In the event of any conflict between the terms and conditions of this Agreement and the Plan, the provisions of the Plan shall control.
(l)    Headings. The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.
(m)    Gender. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.
(n)    Clawback. Notwithstanding any provisions in the Plan or this Agreement to the contrary, any portion of the payments and benefits provided under this Agreement or pursuant to the sale of any Units issued hereunder shall be subject to any clawback or other recovery by the Partnership Entities to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or any SEC rule.
(o)    Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Service Provider agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Partnership may be required to deliver (including, without limitation, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports, and all other forms of communications) in connection with this and any other award made or offered by the Partnership. Electronic delivery may be via a Partnership electronic mail system or by reference to a location on a Partnership intranet to which the Service Provider has access. The Service Provider hereby consents to any and all procedures the Partnership has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Partnership may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.
(p)    Section 409A. None of the Performance Units or any other amounts paid or credited pursuant to this Agreement are intended to constitute or provide for a deferral of compensation that is subject to Section 409A of the Code. To the extent that the Committee determines that any Performance Units or other amounts are not exempt from Section 409A of the Code, the Committee may (but shall not be required to) amend this Agreement in a manner intended to comply with the requirements of Section 409A of the Code or an exemption therefrom (including amendments with retroactive effect), or take any other actions as it deems necessary or appropriate to (a) exempt the Performance Units or other amounts from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Performance Units, or (b) comply with the requirements of Section 409A of the Code. To the extent applicable, this Agreement shall be interpreted in accordance with the provisions of Section 409A of the Code. Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or benefit hereunder constitutes non-exempt “nonqualified deferred compensation” for purposes of Section 409A of the Code, (A) if such payment or benefit would otherwise be payable or distributable hereunder by reason of the Service Provider’s termination of employment or service, then all references to the Service Provider’s termination of employment or service shall be construed to mean a “separation from service” within the




meaning of Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), and the Service Provider shall not be considered to have a termination of employment or service unless such termination constitutes a Separation from Service with respect to the Service Provider, and (B) if such payment or benefit would otherwise be payable or distributable hereunder upon a Change of Control, then no such payment or distribution shall be made unless such Change of Control also constitutes a “change in the ownership of a corporation,” a “change in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets,” in each case, within the meaning of Treasury Regulation Section 1.409A-3(i)(5), as applied to non-corporate entities, or unless another payment date in Section 6 that is also a permissible payment event under Section 409A of the Code earlier occurs. Notwithstanding anything to the contrary in this Agreement, no amounts payable under this Agreement on account of the Service Provider’s Separation From Service shall be paid to the Service Provider prior to the expiration of the six (6) month period following the Service Provider’s Separation From Service to the extent that the Partnership Entities determine that paying such amounts prior to the expiration of such six (6) month period would result in a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amount is delayed as a result of the preceding sentence, then on the first business day following the end of the applicable six (6) month period (or such earlier date upon which such amount may be paid under Section 409A of the Code without resulting in a prohibited distribution), the amount shall be paid to the Service Provider.
IN WITNESS WHEREOF, the General Partner has caused this Agreement to be executed by its officer thereunto duly authorized, and the Service Provider has set his hand as to the date and year first above written.

EAGLE ROCK ENERGY G&P, LLC


By:    
    
Name:     
    
Title:     


SERVICE PROVIDER


_____________________________________________
[Name]







EXHIBIT A

1.
Definitions
a.
“Beginning Price” means the average volume-weighted closing price per Unit for the 30 consecutive trading days immediately preceding the first day of the Performance Period.

b.
“Ending Price” means the average volume-weighted closing price per Unit for the last 30 consecutive trading days of the Performance Period.

c.
“Performance Peer Group” means the following peer companies, which may be updated from time to time by the Committee in its sole discretion; provided, however, that in order to be included in the calculation pursuant to Section 2 of this Exhibit A, a company must remain in the Performance Peer Group on the last day of the Performance Period:

i.
Atlas Resource Partners;

ii.
Breitburn Energy Partners;

iii.
Constellation Energy Partners;

iv.
EV Energy Partners;

v.
Legacy Reserves;

vi.
Linn Energy;

vii.
LRR Energy;

viii.
Memorial Production Partners;

ix.
Mid-Con Energy Partners;

x.
New Source Energy Partners;

xi.
QR Energy; and

xii.
Vanguard Natural Resources.

d.
“Performance Period” means the period beginning July 1, 2014 and ending June 30, 2016; provided that the Performance Period may end earlier than the stated date in accordance with Section 5(a) of the Agreement.

e.
“Total Unitholder Return” or “TUR” means, as to the Partnership and each company in the Performance Peer Group, (i) the Ending Price minus the Beginning Price plus (ii) any distributions (whether cash or unit-based) made per Unit during the Performance Period.





2.
Calculation of TUR Ranking. At the end of the Performance Period, the TUR of the Partnership and of each company in the Performance Peer Group shall be calculated by the Committee in its good faith discretion. The percentile ranking of the Partnership’s TUR as compared to the TUR of each member of the Performance Peer Group, based on the number of members in the Performance Peer Group on the last day of the Performance Period, shall (except as otherwise provided in Section 5(c) of the Agreement) determine the percentage of Target Performance Units then credited to a Service Provider’s Performance Unit Account that become Earned Performance Units using the table below. The Committee shall have sole discretion for determining the Partnership’s TUR percentile ranking and the number of Earned Performance Units, and any such determinations shall be conclusive. For the avoidance of doubt, in determining the Partnership’s TUR percentile ranking, the relevant factor in the Committee’s determination is the percentage of members of the Performance Peer Group for which the TUR of the Partnership exceeds the TUR of members of the Performance Peer Group over the Performance Period such that, if the TUR of the Partnership is higher than all members of the Performance Peer Group over the Performance Period, the Partnership shall have achieved the 100th percentile ranking by virtue of having a TUR that is higher than 100% of the Performance Peer Group.
TUR Percentile Ranking within Performance Peer Group over Performance Period
Percentage of Target Performance Units Earned*
100th percentile
200.0%
95th percentile
185.7%
90th percentile
171.4%
85th percentile
157.1%
80th percentile
142.9%
75th percentile
128.6%
70th percentile
114.3%
65th percentile
100.0%
60th percentile
90.0%
55th percentile
80.0%
50th percentile
70.0%
Less than 50th percentile
0.00%

* If the Partnership’s TUR percentile ranking is above the 50th percentile and between two percentile points in the above table, the actual number of Earned Performance Units will be calculated using straight line interpolation between the two such percentile points.



Exhibit 10-3



EAGLE ROCK ENERGY PARTNERS
LONG TERM INCENTIVE PLAN
(As Amended and Restated June 24, 2014)

RESTRICTED UNIT AGREEMENT
This Restricted Unit Agreement (this “Agreement”) is made and entered into by and between Eagle Rock Energy G&P LLC, a Delaware limited liability company (the “General Partner”), and _______________ (the “Service Provider”). This Agreement is entered into as of the ___ day of [______________], 20[__] (the “Date of Grant”). Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan (as defined below), unless the context requires otherwise.
W I T N E S S E T H:
WHEREAS, Eagle Rock Energy Partners, L.P., a Delaware limited partnership (the “Partnership”), has adopted the Eagle Rock Energy Partners Long Term Incentive Plan, as amended and restated June 24, 2014 (the “Plan”), to, among other things, attract, retain and motivate certain employees, officers and directors of the Partnership, ERGP, the General Partner and their respective Affiliates (collectively, the “Partnership Entities,” which term shall include any successor to the Partnership, ERGP or the General Partner and any other entity that is an Affiliate of such successor entity or entities); and
WHEREAS, the Board has authorized the grant of restricted units under the Plan to employees, officers and directors as part of their compensation for services provided to the Partnership Entities.
NOW, THEREFORE, in consideration of the Service Provider’s agreement to provide or to continue providing services to the Partnership Entities, the Service Provider and the General Partner agree as follows:
SECTION 1.    Grant.
The General Partner hereby grants to the Service Provider as of the Date of Grant an award of _____ Units, subject to the terms and conditions set forth in the Plan, which is incorporated herein by reference, and in this Agreement, including, without limitation, those restrictions described in Section 2 (the “Restricted Units”).
SECTION 2.    Restricted Units.
The Restricted Units are restricted in that they may be forfeited to the General Partner and in that they may not, except as otherwise provided in Section 6, be transferred or otherwise disposed of by the Service Provider until such restrictions are removed or expire as described in Sections 4 and 5 of this Agreement. The General Partner shall issue in the Service Provider’s name the Restricted Units and shall retain the Restricted Units until the restrictions on such Restricted Units expire or until the Restricted Units are forfeited as described in Sections 4 and 5 of this Agreement. The Service Provider agrees that the General Partner will hold the Restricted Units pursuant to the terms of this Agreement until such time as the Restricted Units are either delivered to the Service Provider or forfeited pursuant to this Agreement.
SECTION 3.    Rights of Service Provider; Unit Distribution Rights.
Effective as of the Date of Grant, the Service Provider shall be treated for all purposes as a Unit holder with respect to all of the Restricted Units granted to him pursuant to Section 1 (except that the Service




Provider shall not be treated as the owner of the Units for federal income tax purposes until the Restricted Units vest (unless the Service Provider makes an election under section 83(b) of the Code, in which case the Service Provider shall be treated as the owner of the Units for all purposes on the Date of Grant)) and shall, except as provided herein, have all of the rights and obligations of a unit holder with respect to all such Restricted Units, including any right to vote with respect to such Restricted Units and to receive any UDRs thereon if, as, and when declared and paid by the Partnership, including, without limitation, any UDRs consisting of the distribution of special purchase or other rights. Notwithstanding the preceding provisions of this Section 3, the Restricted Units shall be subject to the restrictions described herein, including, without limitation, those described in Section 2.
SECTION 4.    Forfeiture and Expiration of Restrictions. Subject to the terms and conditions of this Agreement, the restrictions described in Section 2 shall lapse and the Restricted Units shall become vested and nonforfeitable (“Vested Units”), provided the Service Provider has continuously provided services to the Partnership Entities, without interruption, from the Date of Grant through each applicable vesting date (each, a “Vesting Date”), in accordance with the following schedule:
Vesting Date
Cumulative Vested Percentage
On [__________]
33%
On [__________]
66%
On [__________]
100%

SECTION 5.    Effect of Change of Control and Termination of Service.
(a)Change of Control. Notwithstanding anything herein to the contrary, if a Change of Control occurs prior to the final Vesting Date (the date of such occurrence, the “Change of Control Date”) and the Service Provider’s employment or service relationship is terminated on or after the Change of Control Date by a Partnership Entity without Cause or by the Service Provider for Good Reason, then the restrictions on a number of Restricted Units shall automatically lapse on the 60th day following the date of such termination such that the number of Restricted Units for which the restrictions have lapsed as of the 60th day following the Service Provider’s date of termination will be equal to the product of (i) the total number of Restricted Units granted to the Service Provider pursuant to this Agreement, times (ii) a fraction, the numerator of which is the number of full months (counting the month in which the Service Provider’s termination of employment or service relationship occurs as a full month), beginning with the month in which the Date of Grant occurred, during which the Service Provider was employed by, or provided services to, the Partnership Entities, or such greater number up to 36 as determined by the Committee in its sole discretion, and the denominator of which is 36; provided, that, upon such termination of employment or service, the Service Provider executes a release of all claims against the Partnership Entities (the form of which shall be delivered to the Service Provider on the date of termination) within 45 days following the Service Provider’s date of termination and does not subsequently revoke such release within the seven (7) day period following its execution; provided further, that, if the Service Provider does not execute such release or executes and later revokes such release, the Service Provider shall not be entitled to receive the accelerated vesting described in this Section 5(a).

(b)Termination Generally. Subject to Sections 5(a) and 5(c), upon termination of the Service Provider’s employment or service relationship with the Partnership Entities, all Restricted Units granted pursuant to this Agreement that have not yet vested as of the date of termination shall terminate automatically and be cancelled upon such termination and neither the Service




Provider nor any of his or her heirs, beneficiaries, executors, administrators or other personal representatives shall have any rights with respect to such cancelled Restricted Units. Notwithstanding the foregoing, the [Committee] [Chief Executive Officer of the General Partner], in [its] [his] sole and absolute discretion on such terms and conditions as it shall determine, may decide in certain situations not otherwise addressed in Sections 5(a) or 5(c) to vest all or any portion of the Restricted Units granted pursuant to this Agreement that remain outstanding and unvested immediately prior to the Service Provider’s termination.

(c) Termination due to Death or Disability. If the Service Provider’s employment or service relationship with the Partnership Entities is terminated due to the Service Provider’s death or Disability prior to the final Vesting Date, then all Restricted Units granted pursuant to this Agreement that have not yet vested as of the date of termination shall immediately become fully vested and nonforfeitable as of the date of such termination.

(d)Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

(i)    Cause. The term “Cause” means a determination made in good faith by [two-thirds (2/3) of the Board] [the Chief Executive Officer of the General Partner] that the Service Provider (A) willfully and continually failed to substantially perform the Service Provider’s duties with the Partnership Entities (other than a failure resulting from the Service Provider’s incapacity due to physical or mental illness) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Service Provider specifying the manner in which the Service Provider has failed to substantially perform, (B) willfully engaged in conduct which is demonstrably and materially injurious to the Partnership Entities, monetarily or otherwise, (C) has been convicted of, or has plead guilty or nolo contendere to, a misdemeanor involving moral turpitude or a felony, (D) has committed an act of fraud, or material embezzlement or material theft, in each case, in the course of the Service Provider’s employment relationship with the Partnership Entities, or (E) has materially breached (I) the Service Provider’s duties or obligations to the Partnership Entities under any applicable common law or the provisions of the governing documents of the Partnership Entities or (II) any obligations of the Service Provider under any agreement (including any non-compete, non-solicitation or confidentiality covenants) entered into between the Service Provider and any Partnership Entity; provided, however, that no termination of the Service Provider’s services shall be for Cause as set forth in clause (B), (D) or (E) above until (1) there shall have been delivered to the Service Provider a copy of a written notice setting forth that the Service Provider was guilty of the conduct described in clause (B), (D) or (E) above, as applicable, and specifying the particulars thereof in detail and (2) the Service Provider shall have been provided an opportunity to be heard by the [Board] [the Chief Executive Officer of the General Partner] (with the assistance of the Service Provider’s counsel if the Service Provider so desires). No act or failure to act on the part of the Service Provider shall be considered “willful” unless the Service Provider has intentionally or deliberately acted or failed to act with knowledge that such action or failure to act was likely to be materially injurious to the Partnership Entities. Notwithstanding anything contained herein or in the Plan to the contrary, no failure to perform by the Service Provider after a notice of termination is given shall constitute Cause.
(ii)    Change of Control. The term “Change of Control” has the meaning given such term in the Plan; provided, that, for the avoidance of doubt, a sale or other disposition by one or more members of the NGP Group of all or substantially all of their aggregate ownership,




as of the Date of Grant, of the Outstanding Equity and the Outstanding Voting Securities shall not, in and of itself, constitute a Change of Control for purposes of this Agreement.
(iii)    Disability. The term “Disability” means (A) a physical or mental impairment of sufficient severity that, in the opinion of the [Board] [the Chief Executive Officer of the General Partner], the Service Provider is unable to continue performing the duties assigned to the Service Provider prior to such impairment or the Service Provider’s condition entitles the Service Provider to disability benefits under any insurance or employee benefit plan of any Partnership Entity in which the Service Provider participates, and (B) the impairment or condition is cited by the employing Partnership Entity as the reason for the Service Provider’s termination.
(iv)    Good Reason. The term “Good Reason” means the occurrence of any of the following events or conditions: (A) a change in the Service Provider’s status, title, position or responsibilities (including reporting responsibilities) which represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto, the assignment to the Service Provider of any duties or responsibilities that are inconsistent with such status, title, position or responsibilities, or any removal of the Service Provider from or failure to reappoint or reelect the Service Provider to any of such positions, except in connection with the termination of the Service Provider services for Cause, due to the Service Provider’s Disability or death, or by the Service Provider voluntarily without Good Reason, (B) a reduction in the Service Provider’s annual base salary, (C) a change in the geographic location at which the Service Provider must perform services (without the consent of the Service Provider) to a location more than thirty-five (35) miles from the location at which the Service Provider normally performs such services as of the Date of Grant, except for reasonably required business travel that is not materially greater than such travel requirements prior to the Date of Grant, (D) the failure by the Partnership Entities to continue in effect any material compensation or benefit plan in which the Service Provider was participating as of the Date of Grant or to provide the Service Provider with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each compensation or employee benefit plan, program and practice as in effect immediately prior to the Date of Grant (or as in effect following the Date of Grant, if greater), (E) any material breach by a Partnership Entity of any provision of the Plan or of any provision of the Service Provider’s employment agreement, if any, or (F) any purported termination of the Service Provider’s service relationship for Cause by a Partnership Entity that does not otherwise comply with the terms of the Plan, this Agreement or the Service Provider’s employment agreement, if any. In the case of the Service Provider’s allegation of Good Reason, (1) the Service Provider shall provide notice to the Committee of the event alleged to constitute Good Reason within 90 days of the occurrence of such event, (2) the Partnership Entities shall have the opportunity to remedy the alleged Good Reason event within 30 days from receipt of notice of such allegation, and (3) if not remedied within that 30-day period, the Service Provider’s employment or service relationship with the Partnership Entities shall terminate on the day following the last day of such 30-day period.
SECTION 6.    Limitations on Transfer.
The Service Provider agrees that he shall not dispose of (meaning, without limitation, sell, transfer, pledge, exchange, hypothecate or otherwise dispose of) any Restricted Units hereby acquired prior to the applicable Vesting Dates, including pursuant to a domestic relations order issued by a court of competent jurisdiction, unless such transfer is expressly approved in writing by the [Committee] [the Chief Executive




Officer of the General Partner]. Any attempted disposition of the Restricted Units in violation of the preceding sentence shall be null and void.
SECTION 7.    Nontransferability of Agreement.
This Agreement and all rights under this Agreement shall not be transferable by the Service Provider other than by will or pursuant to applicable laws of descent and distribution. Any rights and privileges of the Service Provider in connection herewith shall not be transferred, assigned, pledged or hypothecated by the Service Provider or by any other person or persons, in any way, whether by operation of law, or otherwise, and shall not be subject to execution, attachment, garnishment or similar process. In the event of any such occurrence, the Restricted Units shall automatically be forfeited. Notwithstanding the foregoing, all or some of the Restricted Units or rights under this Agreement may be transferred if such transfer is approved in writing by the [Committee] [the Chief Executive Officer of the General Partner].
SECTION 8.    Adjustment of Restricted Units.
The number of Restricted Units granted to the Service Provider pursuant to this Agreement shall be adjusted to reflect unit splits or other changes in the capital structure of the Partnership, all in accordance with the Plan. All provisions of this Agreement shall be applicable to such new or additional or different units or securities distributed or issued pursuant to the Plan to the same extent that such provisions are applicable to the Units with respect to which they were distributed or issued.
SECTION 9.    Delivery of Vested Units.
Promptly following the expiration of the restrictions on the Restricted Units as contemplated in Sections 4 and/or 5 of this Agreement, and subject to Section 10, the General Partner shall cause to be issued and delivered to the Service Provider or the Service Provider’s designee the number of Restricted Units as to which restrictions have lapsed, free of any restrictive legend relating to the lapsed restrictions, and shall pay to the Service Provider any previously unpaid UDRs distributed with respect to the Restricted Units. Neither the value of the Restricted Units nor the UDRs shall bear any interest owing to the passage of time.
SECTION 10.    Securities Act.
The General Partner shall have the right, but not the obligation, to cause the Restricted Units to be registered under the appropriate rules and regulations of the SEC. The General Partner shall not be required to deliver any Units hereunder if, in the opinion of counsel for the General Partner, such delivery would violate the Securities Act of 1933 or any other applicable federal or state securities laws or regulations. By accepting this grant, the Service Provider agrees that any Units that the Service Provider may acquire upon vesting of this Award will not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws.
SECTION 11. Copy of Plan.
By the execution of this Agreement, the Service Provider acknowledges receipt of a copy of the Plan.
SECTION 12. Notices.
Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any such notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered or, whether actually received or not, on the third business day (on which banking institutions in the State of Texas are open) after it is deposited in the




United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The General Partner or the Service Provider may change at any time and from time to time by written notice to the other, the address which it or he previously specified for receiving notices. The General Partner and the Service Provider agree that any notices shall be given to the General Partner or to the Service Provider at the following addresses:

General Partner:    Eagle Rock Energy G&P, LLC
Attn: Charles C. Boettcher
P.O. Box 2968
Houston, Texas 77252-2968
Phone: (281) 408-1260
Fax: (281) 715-4142

Service Provider:
At the Service Provider’s current address as shown in the General Partner’s records.
SECTION 13. General Provisions.    
(a)    Administration. This Agreement shall at all times be subject to the terms and conditions of the Plan. The Committee shall have sole and complete discretion with respect to all matters reserved to it by the Plan and decisions of the Committee with respect thereto and with respect to this Agreement shall be final and binding upon the Service Provider and the General Partner.
(b)    Continuation of Service. This Agreement shall not be construed to confer upon the Service Provider any right to continue in the service of the Partnership Entities.
(c)    Governing Law. This Agreement shall be interpreted and administered under the laws of the State of Texas, without giving effect to any conflict of laws provisions.
(d)    Amendments. This Agreement may be amended only by a written agreement executed by the General Partner and the Service Provider, except that the Committee may unilaterally waive any conditions or rights under, amend any terms of, or alter this Agreement provided no such change (other than pursuant to Section 4(c) or 7(c) of the Plan) materially reduces the rights or benefits of the Service Provider with respect to the Restricted Units without his consent.
(e)    Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the General Partner and upon any person lawfully claiming under the Service Provider.
(f)    Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to this subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to the Restricted Units granted hereby. Without limiting the scope of the preceding sentence, all prior understandings and agreements, if any, among the parties hereto relating to the subject matter hereof are hereby null and void and of no further force and effect.
(g)    No Liability for Good Faith Determinations. Neither the Partnership Entities, nor the members of the Committee or the Board, nor any officer of the General Partner, shall be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Restricted Units granted hereunder.




(h)    No Guarantee of Interests. The Board and the Partnership Entities do not guarantee the Units from loss or depreciation.
(i)    Withholding Taxes. Upon any taxable event arising in connection with the Restricted Units, the Partnership Entities shall have the authority and the right to deduct or withhold, or to require the Service Provider to remit to a Partnership Entity, an amount sufficient to satisfy all applicable federal, state and local taxes (including the Service Provider’s employment tax obligations) required by law to be withheld with respect to such event. In satisfaction of the foregoing requirement, unless other arrangements have been made by the Service Provider that are acceptable to the applicable Partnership Entity and unless otherwise determined by the Board (which such determination may not be delegated), the General Partner or one of its Affiliates shall withhold Units otherwise issuable in respect of such Restricted Units having a Fair Market Value on the date of withholding equal to the aggregate amount of taxes required to be withheld with respect to such event based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.
(j)    Insider Trading Policy. The terms of the General Partner’s Insider Trading Policy with respect to Units are incorporated herein by reference.
(k)    Term Validity. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable law, then such provision will be deemed to be modified to the minimum extent necessary to render it legal, valid and enforceable; and if such provision cannot be so modified, then this Agreement will be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties will be construed and enforced accordingly. In the event of any conflict between the terms and conditions of this Agreement and the Plan, the provisions of the Plan shall control.
(l)    Clawback. Notwithstanding any provisions in the Plan or this Agreement to the contrary, any portion of the payments and benefits provided under this Agreement or pursuant to the sale of any Units issued hereunder shall be subject to any clawback or other recovery by the Partnership Entities to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or any SEC rule.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





IN WITNESS WHEREOF, the General Partner has caused this Agreement to be executed by its officer thereunto duly authorized, and the Service Provider has set his hand as to the date and year first above written.

EAGLE ROCK ENERGY G&P, LLC


    


By:_____________________________
    
Name: Joseph A. Mills

Title: Chief Executive Officer






______________________________________    
Name of Service Provider