EXHIBIT 10.4
EV ENERGY PARTNERS, L.P.
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The EV Energy Partners, LP Long-Term Incentive Plan (the "Plan") has been
adopted by EV Management, LLC, a Delaware limited liability company (the
"Company"), the general partner of EV Energy GP, L.P., a Delaware limited
partnership (the "General Partner") which is the general partner of EV Energy
Partners, LP, a Delaware limited partnership (the "Partnership"), and is
intended to promote the interests of the Partnership and the Company by
providing to Employees, Consultants and Directors incentive compensation awards
for superior performance that are based on Units. The Plan is also contemplated
to enhance the ability of the Company, 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:
"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.
"Award" means an Option, Restricted Unit, Phantom Unit, Substitute Award
or DERs granted under the Plan.
"Award Agreement" means the written or electronic agreement by which an
Award shall be evidenced.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"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.
"Consultant" means an individual, other than an Employee or a Director,
who provides services to the Company, the Partnership or an Affiliate.
"DER" means a contingent right to receive an amount in cash equal to the
cash distributions made by the Partnership with respect to a Unit during the
period such Award is outstanding.
"Director" means a member of the Board who is not an Employee or a
Consultant.
1
"Employee" means an employee of the Company or an Affiliate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing sales price of a Unit on the
applicable date (or if there is no trading in the Units on such date, on the
next preceding date on which there was trading) as reported in The Wall Street
Journal (or other reporting service approved by the Committee). In the event
Units are not traded on a national securities 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 in good faith by the Committee; provided, however,
that if the Award to which such Unit relates is subject to Code Section 409A,
the determination of Fair Market Value will be made consistent with the
requirements under Code Section 409A in order to satisfy any exception thereto,
but only to the extent inconsistent with the methods for determining Fair Market
Value above.
"Option" means an option to purchase Units granted under the Plan.
"Participant" means an Employee, Consultant or Director granted an Award
under the Plan.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of EV Energy Partners, LP, as it may be amended or amended
and restated from time to time.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Phantom Unit" means a phantom (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.
"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.
"Restricted Unit" means a Unit granted under the Plan that is subject to a
Restricted Period.
"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.
"SEC" means the Securities and Exchange Commission, or any successor
thereto.
"Substitute Award" means an award granted pursuant to Section 6(d)(viii)
of the Plan.
2
"UDR" means a distribution made by the Partnership with respect to a
Restricted Unit.
"Unit" means a Common Unit of the Partnership.
SECTION 3. ADMINISTRATION.
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 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 Company, 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; provided, however,
that such delegation shall not limit the Chief Executive Officer's right to
receive Awards under the Plan. Notwithstanding the foregoing, the Chief
Executive Officer may not grant Awards to, or take any action with respect to
any Award previously granted to, a person who is an officer subject to Rule
16b-3 or a member of the Board. 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 extent 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 the Company, the
Partnership, any Affiliate, any Participant, and any beneficiary of any Award.
SECTION 4. UNITS.
(a) Limits on Units Deliverable. Subject to adjustment as provided in
Section 4(c), the number of Units that may be delivered with respect to Awards
under the Plan is 775,000. Units withheld from an Award to satisfy the Company's
minimum 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 or with respect to such Award, the Units
subject to such Award shall again be available for Awards under the Plan. There
shall not be any limitation on the number of Awards that may be granted and paid
in cash.
3
(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) Adjustments. In the event of any distribution (whether in the form of
cash, Units, other securities, or other property), recapitalization, split,
reverse split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Units or other securities of the
Partnership, issuance of warrants or other rights to purchase Units or other
securities of the Partnership, or other similar transaction or event, the
Committee shall, in such manner as it may deem equitable, adjust the number and
type of Units (or other securities or property) with respect to which Awards may
be granted; provided, however, that the number of Units available under the Plan
shall (i) in the event of an increase in the number of Units outstanding, be
proportionately increased and the exercise price or Fair Market Value of the
Awards awarded shall be proportionately reduced; and (ii) in the event of a
reduction in the number of Units outstanding, be proportionately reduced, and
the exercise price or Fair Market Value of the Awards awarded shall be
proportionately increased.
SECTION 5. ELIGIBILITY.
Any Employee, Consultant or Director shall be eligible to be designated a
Participant and receive an Award under the Plan.
SECTION 6. AWARDS.
(a) Options. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom Options shall be granted, 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 a Substitute Award as provided in
Section 6(d)(viii), may not be less than its Fair Market Value as of the
date of grant.
(ii) Time and Method of Exercise. The Committee shall determine the
Restricted Period with respect to an Option grant, which may include,
without limitation, the 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 Company, a "cashless-broker"
exercise through procedures, including limitations, approved by the
Company, withholding Units from the Award upon exercise, or any
combination of methods, having a Fair Market Value on the exercise date
equal to the relevant exercise price.
4
(iii) Forfeitures. Except as otherwise provided in the terms of the
Option grant, upon termination of a Participant's employment with or
consulting services to the Company and its Affiliates or membership on the
Board, whichever is applicable, for any reason during the applicable
Restricted Period, all 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 such waiver
(i) is not adverse to the Participant to whom such Award was granted, (ii)
is consented to by such Participant, and (iii) does not cause the Award to
provide for the deferral of compensation in a manner that does not comply
with Code Section 409A (unless otherwise determined by the Committee).
(b) 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 as specified in the Award Agreements.
(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 grant agreement, UDRs shall be paid to
the holder of the Restricted Unit without restriction.
(ii) Forfeitures. Except as otherwise provided in the terms of the
Restricted Units or Phantom Units grant, upon termination of a
Participant's employment with or consulting services to the Company and
its Affiliates or membership on the Board, whichever is applicable, for
any reason during the applicable Restricted Period, all outstanding
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.
(iii) Lapse of Restrictions.
(A) Phantom Units. Upon or as soon as reasonably practical
following the vesting of each Phantom Unit, subject to the
provisions of Section 8(b), the Participant shall be entitled to
receive from the Company one Unit or cash equal to the Fair Market
Value of a Unit, as determined by the Committee in its discretion.
(B) Restricted Units. Upon or as soon as reasonably practical
following 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
5
removed from his or her Unit certificate so that the Participant
then holds an unrestricted Unit.
(c) DERs. The Committee shall have the authority to determine the
Employees, Consultants and Directors to whom DERs are granted, whether such DERs
are tandem or separate Awards, whether the DERs shall be paid directly to the
Participant, be credited to a bookkeeping account (with or without interest in
the discretion of the Committee) the vesting restrictions and payment provisions
applicable to the Award, and such other provisions or restrictions as determined
by the Committee in its discretion all of which shall be specified in the Award
Agreements.
(d) 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 Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or awards
granted under any other plan of the Company 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.
(ii) Limits on Transfer of Awards.
(A) Except as provided in Paragraph (C) below, each Option
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 Paragraph (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 Company, the Partnership or any Affiliate.
(C) To the extent specifically provided by the Committee with
respect to an Option, an Option 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.
(iii) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee and specified in the Award
Agreement.
(iv) 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
6
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 put on any such certificates to make appropriate
reference to such restrictions.
(v) Consideration for Grants. Awards may be granted for such
consideration, including services, as the Committee determines.
(vi) Delivery of Units or other Securities and Payment by
Participant of Consideration. Notwithstanding anything in the Plan or any
grant 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 Company is
not reasonably able to obtain Units to deliver pursuant to such Award
without violating the rules or regulations of any applicable law 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 grant agreement
(including, without limitation, any exercise price or tax withholding) is
received by the Company.
(vii) Substitute Awards. Awards may be granted under the Plan in
substitution of similar awards held by individuals who become Employees,
Consultants or Directors as a result of a merger, consolidation or
acquisition by the Company or an Affiliate of another entity or the assets
of another entity. A Substitute Award that is an Option may have an
exercise price less than the Fair Market Value of a Unit on the date of
such substitution, unless such exercise price causes any Award to provide
for the deferral of compensation in a manner that is subject to taxation
under Code Section 409A (unless otherwise determined 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 to any Award shall be made, other than
pursuant to Section 7(c), unless it (i) is not adverse to the Grantee to whom
such Incentive Award was granted, (ii) is consented to by such Grantee, and
(iii) does not cause the Incentive Award to provide for the deferral of
compensation in a manner that does not comply with Code Section 409A (unless
otherwise determined by the Committee).
(c) Actions Upon the Occurrence of Certain Events. In connection with any
changes in (1) applicable laws, (2) regulations, or (3) accounting principles
affecting the financial
7
statements of the Partnership, the Committee, in its sole discretion 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:
(A) provide for either (i) 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 Company without payment) or (ii) the replacement of
such Award with other rights or property selected by the Committee in its
sole discretion;
(B) provide that such Award be assumed by the successor or survivor
entity, or a parent or subsidiary thereof, or be substituted for by
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;
(C) 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 and/or in the terms and conditions of
(including the exercise price), and the vesting/performance criteria
included in, outstanding Awards;
(D) provide that such Award shall be exercisable or payable,
notwithstanding anything to the contrary in the Plan or the applicable
Award Agreement; and
(E) provide that the Award cannot be exercised or become payable
after such event, i.e., shall terminate upon such event.
Provided, however, that no action shall be taken under Section 7(c) if
such action causes any Award to provide for the deferral of compensation in a
manner that is subject to taxation under Code Section 409A (unless otherwise
determined by the Committee).
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 Company, the Company or any 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
8
or under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy its withholding obligations for the payment of
such taxes.
(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
Company or any Affiliate, continue consulting services or to remain on the
Board, as applicable. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment or consulting 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 Delaware without regard to its conflict 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 Compensation Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, 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 Company 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 Company or any participating Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any participating Affiliate pursuant to
an Award, such right shall be no greater than the right of any general unsecured
creditor of the Company or any participating 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.
9
(j) Facility Payment. Any amounts payable hereunder to any person under
legal disability or who, in the judgment of the Committee, is unable to properly
manage 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 which the
Committee may select, and the Company 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 by the Company, the Committee shall be acting on behalf of
the Affiliate, and to the extent the Partnership has an obligation to reimburse
the Company 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, and, if made to the Company, shall be
received by the Company as agent for 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) Compliance with Section 409A. To the extent that any provision of the
Plan or any Award Agreement is subject to Code Section 409A, the Plan and Award
Agreement shall be construed to qualify with the provisions of Code Section 409A
and related regulations and Treasury pronouncements ("Section 409A"). If any
provision provided herein results in the imposition of an excise tax on any
Participant under Section 409A, such provision will be reformed to avoid any
such imposition in such manner as the Company determines is appropriate to
comply with Section 409A.
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 date the Plan is approved by the unitholders of the Company.
However, unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, 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.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed in its
name and on its behalf by its duly authorized officer, effective as of September
26, 2006.
EV MANAGEMENT, LLC
By: /s/ Michael E. Mercer
------------------------
Michael E. Mercer
Senior Vice President and
Chief Financial Officer