Quicksilver Gas Services LP Annual Bonus Plan

 

Section 1.  Eligibility:  This Annual Bonus Plan (the “Plan”) provides for awards of annual cash bonuses to officers and employees of Quicksilver Resources Inc. (“Quicksilver”) who provide services to Quicksilver Gas Services GP LLC, a Delaware limited liability company (the “General Partner”), the general partner of Quicksilver Gas Services LP, a Delaware limited partnership (the “Partnership”), for the benefit of the Partnership.  The Chief Executive Officer (as defined below) is authorized to establish the aggregate bonus pool available for awards under the Plan pursuant to the criteria set forth below.

 

Except as provided below for death and disability, (i) only Eligible Employees (as defined below) employed by Quicksilver as of November 1 of a Plan Year and meeting the criteria set forth below are eligible to participate in the Plan for such Plan Year and (ii) in order to receive a bonus under the Plan, an Eligible Employee must be an active, full-time employee in good standing on the date bonuses are paid hereunder.  The bonus of an Eligible Employee who is hired after the beginning of a Plan Year (but on or before November 1 of the Plan Year) will be pro-rated based on the number of calendar days in the Plan Year that he or she is an employee.

 

If an Eligible Employee dies or becomes disabled and unable to work during the Plan Year, a pro-rated award based on the number of calendar days in the Plan Year that he or she participated in the Plan before his or her death or disability will be paid to the employee or his or her beneficiary at the same time and in the same manner as awards for the Plan Year are paid to other employees.  An Eligible Employee’s beneficiary under the Plan will be the beneficiary designated under Quicksilver’s group life insurance plan.  If no such beneficiary has been designated, the award will be paid to the employee’s estate.

 

Section 2.  Definitions:

 

Board of Directors:  The Board of Directors of the General Partner.

 

Bonus Pool:  The maximum aggregate dollar amount that will be available to be allocated as cash bonuses to Eligible Employees under the Plan for a Plan Year.  The Bonus Pool will be the sum of each Eligible Employee’s Target Incentive multiplied by the “Percent Target Awarded” value corresponding to the estimated performance result as set forth in Table 1 for that Quantitative Performance Measure for the Plan Year and further multiplied by the Weighting Factor applicable to that Quantitative Performance Measure.

 

Chief Executive Officer:  The Chief Executive Officer of the General Partner.

 

Earnings per Unit:  The Partnership’s earnings per unit for the current Plan Year estimated as of October 31 of the Plan Year.

 

Eligible Employee:  An officer or employee of Quicksilver, including an employee of Quicksilver who is seconded to the General Partner, who provides services to the General Partner for the benefit of the Partnership and who is selected to participate in the Plan for a Plan Year by the Chief Executive Officer.

 

Performance Rating:  The performance rating assigned to each Eligible Employee by the Chief Executive Officer or his designees (or, with respect to an executive officer of the General Partner, the Board of Directors), based upon an assessment of the employee’s job performance during the Plan Year.  Each Eligible Employee will receive a percentage performance rating ranging from 0% to 200%, with a rating of 200% representing the highest level of performance.

 

Plan Year:  The calendar year.  The first Plan Year will begin January 1, 2008, and end December 31, 2008.

 

Quantitative Performance Goals:  Performance goals for each of the Quantitative Performance Measures as established by the Board of Directors.

 

Quantitative Performance Measures:  Earnings per Unit and Return on Average Capital Employed.

 

Return on Average Capital Employed:  The Partnership’s Return on Average Capital Employed for the current Plan Year estimated as of October 31 of the Plan Year.  Return on Average Capital Employed is determined by dividing (i) earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the period by (ii) the average Property, Plant and Equipment balance for the period.

 

Target Incentive:  The Chief Executive Officer will assign to each Eligible Employee a Target Incentive that is a function of his or her position and base salary, and which represents the unadjusted bonus that the employee would receive if he or she receives a Performance Rating of 100% for the Plan Year and the Bonus Pool is an amount sufficient to pay bonuses of 100% of Target Incentive for all Eligible Employees; provided, however, that with respect to an Eligible Employee who is an executive officer of the General Partner, the Target Incentive will be established by the Board of Directors.

 

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

 

Section 3.  Calculation of Awards: With respect to each Quantitative Performance Measure, an Eligible Employee’s Target Incentive is multiplied by the “Percent Target Awarded” value corresponding to the estimated performance result as set forth in Table 1 for that Quantitative Performance Measure and further multiplied by the Weighting Factor applicable to that Quantitative Performance Measure.  The resulting products for each Quantitative Performance Measure are then summed, and that sum is multiplied by the Eligible Employee’s Performance Rating, as assigned to each Eligible Employee based on an assessment of the employee’s job performance, to obtain the Eligible Employee’s award; provided, however, that the aggregate of the awards paid to Eligible Employees shall not exceed the Bonus Pool.

 

If an Eligible Employee terminates employment with Quicksilver before he or she has been paid an actual bonus under the Plan, the Chief Executive Officer may, but is not required to, adjust the Bonus Pool or award amounts in any manner that he deems necessary or appropriate to reflect the reduced participation in the Plan.

 

Section 4.  Payment of Awards:  Payment of an award will be made by the General Partner or Quicksilver in a lump sum payment in cash, and will be made no later than March 15 following

 

 

Section 5.  No Contract:  The Plan is not and will not be construed as an employment contract or as a promise or contract to pay awards to participants or their beneficiaries.  No person will accrue any right to a bonus under the Plan unless and until such award has been paid to such person.  The Plan has been approved by the Board of Directors and may be amended from time to time by the Board of Directors without notice; provided that the Chief Executive Officer may modify the Weighting Factors, Quantitative Performance Measures, Quantitative Performance Goals and Percent Target Awarded criteria set forth in Table 1 at the beginning of the Plan Year.  No participant or beneficiary may sell, assign, transfer, discount or pledge as collateral for a loan, or otherwise anticipate any right to payment of an award under the Plan.

 

Section 6.  Administration of the Plan:  The Chief Executive Officer (or, with respect to an award to an executive officer of the General Partner, the Board of Directors) has the full authority and discretion to administer the Plan and to take any action that is necessary or advisable in connection with the administration of the Plan, including without limitation the authority and discretion to interpret and construe any provision of the Plan or of any agreement, notification or document evidencing an award of an incentive bonus.  The interpretation and construction by the Chief Executive Officer or the Board of Directors of any such provision and any determination by the Chief Executive Officer or the Board of Directors pursuant to any provision of the Plan or of any such agreement, notification or document will be final and conclusive.  Neither the Chief Executive Officer nor any member of the Board of Directors will be liable for any such action or determination made in good faith.