SUPPLEMENTAL
INDEMNIFICATION AGREEMENT
SUPPLEMENTAL
INDEMNIFICATION AGREEMENT (this “Agreement”), made and
executed as of
, 2009, by and between Eagle Rock Energy G&P, LLC, a Delaware
limited liability company (“G&P”), Eagle Rock
Energy GP, L.P., a Delaware limited partnership (“GP”),
Eagle Rock Energy Partners, L.P., a Delaware limited partnership
(the “Partnership,” and collectively with G&P and
GP, the “Company”), and
, an individual resident of the State of
(the “Indemnitee”).
WHEREAS,
the Company is aware that, to induce and to retain highly competent
persons to serve G&P as directors or officers or in other
capacities, the Company must provide such persons with adequate
protection through insurance and indemnification against inordinate
risks of claims and actions against them arising out of their
service to and activities on behalf of G&P as to itself, on
behalf of and as general partner of GP, or on behalf of and as
general partner of the Partnership;
WHEREAS,
the Company recognizes that the increasing difficulty in obtaining
directors’ and officers’ liability insurance, the
increasing cost of such insurance and the general reductions in
coverage of such insurance have made attracting and retaining such
persons more difficult;
WHEREAS,
the Company recognizes the substantial increase in corporate
litigation in general, subjecting directors and officers to
expensive litigation risks at the same time as the availability and
coverage of liability insurance has been severely
limited;
WHERAS,
the Second Amended and Restated Limited Liability Company Agreement
of G&P (the “LLC Agreement”) and the First Amended
and Restated Agreement of Limited Partnership of the Partnership
(the “LP Agreement) contain indemnification provisions for
the benefit of Indemnitees, as defined therein, which include
members of the Board of Directors and officers of
G&P;
WHEREAS,
the Company recognizes that although the indemnification provisions
in the LLC Agreement and in the LP Agreement provide appropriate
levels of indemnification, this Agreement is intended to supplement
the indemnification provisions provided in the LLC Agreement and
the LP Agreement;
WHEREAS,
the Board of Directors of G&P has determined that it is in the
best interests of G&P’s member that the Company act to
assure such persons that there will be increased certainty of such
protection and the process and procedures by which an Indemnitee
seeks indemnification for acts involving the Company;
and
WHEREAS,
it is reasonable, prudent and necessary for the Company to obligate
itself contractually to indemnify such persons to the fullest
extent permitted by applicable law and to provide an express
process and procedure for seeking indemnification so that they will
continue to serve G&P as to itself, as general partner of GP
and, ultimately, as general partner of the Partnership free from
undue concern.
NOW,
THEREFORE, in consideration of the premises and the mutual promises
and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Indemnitee do hereby agree as
follows:
1. DEFINITIONS.
For purposes of this Agreement and if not otherwise defined herein,
the following terms shall have the meanings set forth
below:
(a)
“Disinterested Director” shall mean a director of
G&P who is not or was not a party to the Proceeding in respect
of which indemnification is being sought by the
Indemnitee.
(b)
“Expenses” shall include all reasonable
attorneys’ fees, accountants’ fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other
disbursements or expenses incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating or being
or preparing to be a witness in any Proceeding or establishing the
Indemnitee’s right of entitlement to indemnification for any
of the foregoing.
(c)
“Independent Counsel” shall mean a law firm of at least
100 attorneys or a member of a law firm of at least 100 attorneys
that neither is presently nor in the past five years has been
retained to represent (i) the Company or the Indemnitee or any
affiliate thereof in any matter material to either such party or
(ii) any other party to the Proceeding giving rise to a claim
for indemnification hereunder. Notwithstanding the foregoing, the
term “Independent Counsel” shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or the Indemnitee in an action to determine the
Indemnitee’s right to indemnification under this
Agreement.
(d)
“Proceeding” shall mean any threatened, pending or
completed action, suit, arbitration, investigation, inquiry,
alternate dispute resolution mechanism, administrative or
legislative hearing, or any other proceeding (including, without
limitation, any securities laws action, suit, arbitration,
alternative dispute resolution mechanism, hearing or procedure)
whether civil, criminal, administrative, arbitrative or
investigative and whether or not based upon events occurring, or
actions taken, before the date hereof, and any appeal in or related
to any such action, suit, arbitration, investigation, hearing or
proceeding and any inquiry or investigation (including discovery),
whether conducted by or in the right of the Company or any other
person, that the Indemnitee in good faith believes could lead to
any such action, suit, arbitration, alternative dispute resolution
mechanism, hearing or other proceeding or appeal
thereof.
2. SERVICE
BY THE INDEMNITEE. The Indemnitee agrees to serve or to continue to
serve as a director or officer of G&P, on behalf of itself and
as general partner of GP and, ultimately, as general partner of the
Partnership, and will discharge his/her duties and responsibilities
to the best of his/her ability so long as the Indemnitee is duly
elected and
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appointed
in accordance with the provisions of G&P’s Certificate of
Formation (the “Certificate”), the LLC Agreement, and
the Delaware Limited Liability Company Act, as amended (the
“DLLCA”), or until his/her earlier death, retirement,
resignation or removal. The Indemnitee may at any time and for any
reason resign from such position (subject to any other obligation,
whether contractual or imposed by operation of law), in which event
this Agreement shall continue in full force and effect after such
resignation. Additionally, this Agreement shall remain in full
force and effect after the death, retirement or removal of the
Indemnitee. Nothing in this Agreement shall confer upon the
Indemnitee the right to continue in the employ of G&P or as a
director of G&P, or affect the right of G&P to terminate,
in G&P’s sole discretion (with or without cause) and at
any time, the Indemnitee’s employment or position as a
director, in each case, subject to any contractual rights of the
Indemnitee existing otherwise than under this Agreement.
3. INDEMNIFICATION.
The Company shall indemnify the Indemnitee and advance Expenses to
the Indemnitee as provided in this Agreement to the fullest extent
permitted by the Certificate, the LLC Agreement in effect as of the
date hereof and the DLLCA or other applicable law in effect on the
date hereof and to any greater extent that the LP Agreement, the
DLLCA, the Delaware Revised Uniform Limited Partnership Act, as
amended (the “DRULPA”), or applicable law may in the
future from time to time permit. Without diminishing the scope of
the indemnification provided by this Section 3, the rights of
indemnification of the Indemnitee provided hereunder shall include,
but shall not be limited to, those rights hereinafter set forth,
except that no indemnification shall be paid hereunder to the
Indemnitee:
(a)
on account of conduct of the Indemnitee which is adjudged in a
final adjudication by a court of competent jurisdiction from which
there is no further right of appeal or in a final adjudication of
an arbitration pursuant to Section 12, if Indemnitee elects to
seek such arbitration, to have been knowingly fraudulent or to
constitute conduct not in good faith or willful misconduct, or in
the case of a criminal matter, to have been knowingly
unlawful;
(b)
in any circumstance where such indemnification is expressly
prohibited by applicable law in effect as of the date of this
Agreement or subsequently determined to be prohibited by applicable
law;
(c)
with respect to liability for which payment is actually made to the
Indemnitee under a valid and collectible insurance policy or under
a valid and enforceable indemnity clause, LLC Agreement provision
or other agreement (other than this Agreement), except in respect
of any liability in excess of payment under such insurance, clause,
LLC Agreement provision or other agreement; or
(d)
if a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful.
4. ACTIONS
OR PROCEEDINGS OTHER THAN AN ACTION BY OR IN THE RIGHT OF THE
COMPANY. The Indemnitee shall be entitled to the indemnification
rights provided in this Agreement if the Indemnitee was or is a
party or is threatened to be a party to any Proceeding other than a
Proceeding by or in the right of the Company, by reason of the
fact
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that
the Indemnitee is or was a director, officer, employee, agent or
fiduciary of G&P, specifically, or the Company, in general, or
any of the Partnership’s direct or indirect wholly-owned
subsidiaries, or is or was serving at the request of G&P, or
any of the Partnership’s direct or indirect wholly-owned
subsidiaries, as a director, officer, employee, agent or fiduciary
of any other entity, including, but not limited to, another
corporation, partnership, limited liability company, employee
benefit plan, joint venture, trust or other enterprise, or by
reason of any act or omission by him/her in such capacity. Pursuant
to this Section 4, the Indemnitee shall be indemnified against
all judgments, penalties (including, but not limited to, excise and
similar taxes) and fines against the Indemnitee, and all Expenses,
liabilities and amounts paid in settlement which were actually and
reasonably incurred by, or in the case of retainers to be incurred
by, the Indemnitee or on Indemnitee’s behalf in connection
with such Proceeding (including, but not limited to, the
investigation, defense or appeal thereof).
5. ACTIONS
BY OR IN THE RIGHT OF THE COMPANY. The Indemnitee shall be entitled
to the indemnification rights provided in this Agreement if the
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding brought by or in the right of G&P, GP, or the
Partnership to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was a director, officer, employee,
agent or fiduciary of G&P, specifically, or the Company, in
general, or any of the Partnership’s direct or indirect
wholly-owned subsidiaries, or is or was serving at the request of
G&P, or any of the Partnership’s direct or indirect
wholly-owned subsidiaries, as a director, officer, employee, agent
or fiduciary of another entity, including, but not limited to,
another corporation, partnership, limited liability company,
employee benefit plan, joint venture, trust or other enterprise, or
by reason of any act or omission by him/her in any such capacity.
Pursuant to this Section 5, the Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred
by, or in the case of retainers to be incurred by, him/her in
connection with such Proceeding (including, but not limited to the
investigation, defense or appeal thereof); provided, however, that
no indemnification shall be made in respect of any claim, issue or
matter as to which the Indemnitee shall have been adjudged to be
liable to G&P, GP or the Partnership in a final adjudication by
a court of competent jurisdiction from which there is no further
right of appeal or in a final adjudication of an arbitration
pursuant to Section 12, if Indemnitee elects to seek such
arbitration, unless and only to the extent such court or tribunal
shall determine that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly
and reasonably entitled to indemnity for such Expenses which such
court or tribunal shall deem proper.
6. GOOD
FAITH DEFINITION. For purposes of this Agreement, the Indemnitee
shall be deemed to have acted in good faith and in a manner the
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, or, with respect to any criminal
Proceeding, to have had no reasonable cause to believe the
Indemnitee’s conduct was unlawful, if such action was based
on any of the following: (a) the records or books of the
account of the Company or other enterprise, including financial
statements; (b) information supplied to the Indemnitee by the
officers of the Company or other enterprise in the course of
his/her duties; (c) the advice of legal counsel for the
Company or other enterprise; or (d) information or records
given in reports made to the Company or other enterprise by an
independent certified public accountant or by an appraiser or other
expert selected with reasonable care by the Company or other
enterprise. The provisions of this Section 6 shall not be
deemed to be exclusive or to limit in any way the other
circumstances in which the
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Indemnitee
may be deemed to have met the applicable standard of conduct set
forth in this Agreement.
7. INDEMNIFICATION
FOR EXPENSES OF WITNESS. Notwithstanding the other provisions of
this Agreement, to the extent that the Indemnitee has served on
behalf of G&P, specifically, or the Company, in general, or any
of the Partnership’s direct or indirect wholly-owned
subsidiaries, or is or was serving at the request of G&P, or
any of the Partnership’s direct or indirect wholly-owned
subsidiaries, as a witness or other similar participant in any
Proceeding, the Indemnitee shall be indemnified against all
Expenses actually and reasonably incurred by, or in the case of
retainers to be incurred by, the Indemnitee in connection therewith
to be paid by G&P, within 15 days of receipt by G&P of
a statement from Indemnitee requesting such payment and detailing
such expenses.
8. PARTIAL
INDEMNIFICATION. If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a
portion of the judgments, penalties and fines and Expenses and
amounts paid in settlement actually and reasonably incurred by, or
in the case of retainers to be incurred by, the Indemnitee in
connection with the investigation, defense, appeal or settlement of
such Proceeding described in Sections 4 and 5 hereof, but is
not entitled to indemnification for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion
of such judgments, penalties and fines and Expenses and amounts
paid in settlement actually and reasonably incurred by, or in the
case of retainers to be incurred by, the Indemnitee to which the
Indemnitee is entitled. For purposes of this Section 8 and
without limitation, the termination of any claim, issue, or matter
in such a Proceeding described herein (a) by dismissal,
summary judgment, judgment on the pleading, or final judgment, with
or without prejudice, or (b) by agreement without payment or
assumption or admission of liability by Indemnitee, shall be deemed
to be a successful determination or result as to such claim, issue
or matter.
9. PROCEDURE
FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a)
To obtain indemnification under this Agreement, the Indemnitee
shall submit to G&P a written request, including documentation
and information which is reasonably available to the Indemnitee and
is reasonably necessary to determine whether the Indemnitee is
entitled to indemnification. The Secretary of G&P shall,
promptly upon receipt of a request for indemnification, advise the
Board of Directors that the Indemnitee has requested
indemnification. Any Expenses incurred by, or in the case of
retainers to be incurred by, the Indemnitee in connection with the
Indemnitee’s request for indemnification hereunder shall be
borne by the Company.
(b)
Upon written request by the Indemnitee for indemnification pursuant
to Sections 4 and 5 hereof, the entitlement of the Indemnitee
to indemnification pursuant to the terms of this Agreement shall be
determined by the following person or persons, who shall be
empowered to make such determination: (i) if requested by
Indemnitee, by Independent Counsel in a written opinion to the
Board of Directors, a copy of which shall be delivered to the
Indemnitee; or (ii) if not so requested, (A) by the Board
of Directors of G&P, by a majority vote of a quorum consisting
of Disinterested Directors, or (B) if a quorum consisting of
Disinterested Directors is not obtainable or if a majority vote of
a
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quorum
consisting of Disinterested Directors so directs, by Independent
Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the Indemnitee. The Independent Counsel
shall be selected by the Board of Directors of G&P. Such
determination of entitlement to indemnification shall be made not
later than 45 days after receipt by G&P of a written
request for indemnification. If it is so determined that the
Indemnitee is entitled to indemnification, payment to the
Indemnitee shall be made within 15 days after such
determination.
(c)
The Indemnitee shall be entitled to indemnification hereunder
without a separate determination by or on behalf of the Company
pursuant to Section 9(b) hereof, with respect to any Proceeding
and/or any claim, issue, or matter with respect thereto:
(i) which is resolved by agreement without any payment or
assumption or admission of liability by the Indemnitee; or
(ii) as to which a final decision on the merits has been made
by the court or other body with jurisdiction over that Proceeding,
in which the Indemnitee was not determined to be liable with
respect to such claim, issue, or matter asserted against the
Indemnitee in the Proceeding, or (iii) as to which a court or
arbitrator determines upon application that, despite such a
determination of liability on the part of the Indemnitee, but in
view of all the circumstances of the Proceeding and of the
Indemnitee’s conduct with respect thereto, the Indemnitee is
fairly and reasonably entitled to indemnification for such
judgments, penalties, fines, amounts paid in settlement, and
Expenses as such court or arbitrator shall deem proper; provided,
however, such decision shall have been rendered in or with respect
to the Proceeding for which the Indemnitee seeks indemnification
under this Agreement.
10. PRESUMPTIONS
AND EFFECT OF CERTAIN PROCEEDINGS.
(a)
In making a determination with respect to entitlement to
indemnification, the Indemnitee shall be presumed to be entitled to
full indemnification hereunder and the Company shall have the
burden of proof in the making of any determination contrary to such
presumption. Neither the failure of the
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