SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
ENERGY PARTNERS, LTD.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(ENERGY PARTNERS, LTD. LOGO)
201 ST. CHARLES AVE.
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2002
Notice is hereby given that the 2002 Annual Meeting of Stockholders of
Energy Partners, Ltd. (the "Company"), a Delaware corporation, will be held at
the Hotel Inter-Continental, 444 St. Charles Ave., New Orleans, Louisiana 70130,
on Thursday, May 9, 2002, at 9:00 a.m., Central Daylight Time, for the following
purposes:
(1) to elect nine (9) directors to hold office until the Annual
Meeting of Stockholders in the year 2003 and until their successors are
duly elected and qualified;
(2) to approve the Amended and Restated 2000 Long Term Stock Incentive
Plan of the Company;
(3) to ratify the selection of KPMG LLP as the Company's independent
certified public accountants to audit the Company's consolidated financial
statements for the year ending December 31, 2002; and
(4) to transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 15, 2002 (the
"Record Date") will be entitled to notice of, and to vote at, the 2002 Annual
Meeting, or any adjournment thereof, notwithstanding the transfer of any stock
on the books of the Company after the Record Date. A list of these stockholders
will be open for examination by any stockholder for any purpose germane to the
2002 Annual Meeting for a period of ten (10) days prior to the meeting at the
Company's principal executive offices at 201 St. Charles Ave., Suite 3400, New
Orleans, Louisiana 70170.
By Order of the Board of Directors,
/s/ John H. Peper
JOHN H. PEPER
Corporate Secretary and Executive Vice
President
of Law and Business Development
New Orleans, Louisiana
March 29, 2002
PLEASE RETURN THE ENCLOSED PROXY CARD TODAY, WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING IN PERSON. STOCKHOLDERS WHO ATTEND THE 2002 ANNUAL MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON.
ENERGY PARTNERS, LTD.
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
The 2001 Annual Report to Stockholders, including audited financial
statements, is being mailed to stockholders, together with these proxy
materials, on or about March 29, 2002.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2002
This Proxy Statement is furnished to the stockholders of Energy Partners,
Ltd. (the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board of Directors" or the "Board") for use at
the Annual Meeting of Stockholders of the Company to be held on Thursday, May 9,
2002 at the Hotel Inter-Continental, 444 St. Charles Ave., New Orleans,
Louisiana 70130 at 9:00 a.m., Central Daylight Time (the "2002 Annual Meeting"
or the "Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
ABOUT THE 2002 ANNUAL MEETING
VOTING PROCEDURES
Stockholders of record at the close of business on March 15, 2002 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date,
there were outstanding and entitled to vote 27,477,438 shares of the Company's
Common Stock (the "Company Shares"). The holders of a majority of the Company
Shares issued and outstanding and entitled to vote at the Meeting, present in
person or represented by proxy, will constitute a quorum. The person(s) whom the
Company appoints to act as inspector(s) of election will treat all Company
Shares represented by a returned, properly executed proxy as present for
purposes of determining the existence of a quorum at the Meeting. The Company
Shares present at the meeting, in person or by proxy, that are abstained from
voting will be counted as present for determining the existence of a quorum.
Each of the Company Shares will entitle the holder to one vote. Cumulative
voting is not permitted. All matters to be submitted to the stockholders require
an affirmative vote of the majority of votes present in person or represented by
proxy and entitled to vote. An abstention is counted as a vote against a matter
to be presented at the Meeting. A broker non-vote is not entitled to be voted
and therefore will not affect the outcome on any proposal in the Proxy
Statement. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and the broker has
not received voting instructions from the beneficial owner. Votes cast at the
meeting will be counted by the inspector(s) of election.
The Board of Directors is soliciting your proxy on the enclosed Proxy Card
to provide you with an opportunity to vote on all matters to come before the
meeting, whether or not you attend in person. If you execute and return the
enclosed Proxy Card, your shares will be voted as you specify. If you make no
specifications, your shares will be voted in accordance with the recommendations
of the Board, as set forth below. If you submit a Proxy Card, you may
subsequently revoke it by submitting a revised proxy or a written revocation at
any time before your original proxy is voted. You may also attend the meeting in
person and vote in person by ballot, which would cancel any proxy you previously
gave.
The Board of Directors urges you to vote, and solicits your proxy, as
follows:
(1) FOR the election of nine (9) nominees for membership on the
Company's Board of Directors, Messrs. Bachmann, Beutner, Bumgarner, Carter,
Gershen, Hall, Hiltz and Phillips and Dr. Kelly, to
serve until the Annual Meeting of Stockholders in the year 2003 and until
their successors are duly elected and qualified;
(2) FOR the approval of the Amended and Restated 2000 Long Term Stock
Incentive Plan of the Company;
(3) FOR the ratification of the selection of KPMG LLP as the Company's
independent certified public accountants to audit the Company's
consolidated financial statements for the year ending December 31, 2002;
and
(4) At the discretion of the designated proxies named on the enclosed
Proxy Card, on any other matter that may properly come before the 2002
Annual Meeting, and any adjournment or postponement thereof.
PROXY SOLICITATION
Your proxy is being solicited by and on behalf of the Board of Directors of
the Company. The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition to solicitation of proxies
by mail, certain directors, officers, representatives and employees of the
Company may solicit proxies by telephone and personal interview. Such
individuals will not receive additional compensation from the Company for
solicitation of proxies, but may be reimbursed by the Company for reasonable
out-of-pocket expenses in connection with such solicitation. Banks, brokers and
other custodians, nominees and fiduciaries also will be reimbursed by the
Company, as necessary, for their reasonable expenses for sending proxy
solicitation materials to the beneficial owners of Common Stock.
OWNERSHIP OF COMMON AND PREFERRED STOCK BY
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock and Series D
Exchangeable Convertible Preferred Stock beneficially owned by each director; by
the Company's Chief Executive Officer; by each other executive officer of the
Company; by all directors and executive officers as a group; and by such persons
known to the Company to own beneficially more than five (5%) of the outstanding
Common Stock of the Company.
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The information set forth below is as of the Record Date and is based upon
information supplied or confirmed by the named individuals:
<Table>
<Caption>
PERCENT OF
PERCENT OF CONVERTIBLE CONVERTIBLE
COMMON COMMON PREFERRED PREFERRED
BENEFICIAL OWNER SHARES SHARES SHARES SHARES
- ---------------- --------- ---------- ----------- -----------
Richard A. Bachmann(1).................... 2,529,999 9.1 -- *
Austin M. Beutner(2)(5)................... 11,079 * -- *
John C. Bumgarner, Jr.(3)................. 26,398 * -- *
Harold D. Carter(3)....................... 22,244 * -- *
Robert D. Gershen(3)(6)................... 11,076 * -- *
Gary L. Hall(4)(7)........................ 42,434 * 17,423 4.5
William O. Hiltz(2)(5).................... 161,404 * -- *
Dr. Eamon M. Kelly(3)..................... 22,244 * -- *
John G. Phillips(3)....................... 22,244 * -- *
Suzanne V. Baer(8)........................ 396,250 1.4 -- *
Clinton W. Coldren(9)..................... 471,196 1.7 -- *
John H. Peper(7).......................... 4,337 * 1,020 *
Bruce R. Sidner(7)(10).................... 6,368 * 1,967 *
All directors and executive officers as a
group (13 persons)...................... 3,727,273 13.4 20,411 5.3
Evercore Capital Partners L.P. and
affiliates(2)(5)(11).................... 9,433,910 33.9 -- *
Energy Income Fund, L.P.(6)(12)........... 4,689,525 16.8 -- *
</Table>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) The address for Mr. Bachmann is Energy Partners, Ltd., 201 St. Charles
Avenue, Suite 3400, New Orleans, Louisiana 70170.
(2) Includes (a) 8,000 shares of Common Stock subject to options granted under
our 2000 Stock Option Plan for Non-Employee Directors to each of Messrs.
Beutner and Hiltz, which are currently exercisable, and (b) 3,079 and 3,404
phantom shares accrued for Messrs. Beutner and Hiltz, respectively, under
our Stock and Deferral Plan for Non-Employee Directors. Messrs. Beutner and
Hiltz have assigned their rights to the stock options and phantom shares to
Evercore Partners L.L.C., an affiliate of Evercore Capital Partners L.P.
Messrs. Beutner and Hiltz retain shared dispositive power with respect to
these securities.
(3) Includes 8,000 shares of Common Stock subject to options granted under our
2000 Stock Option Plan for Non-Employee Directors to each of Messrs.
Bumgarner, Carter, Gershen and Phillips and Dr. Kelly, which are currently
exercisable. Also includes 2,753 phantom shares accrued for Mr. Bumgarner
under our Stock and Deferral Plan for Non-Employee Directors.
(4) Mr. Hall, as a trustee, has the shared power to vote an aggregate of
574,931 shares of Common Stock held in two trusts, and the table includes
only those shares which Mr. Hall, certain family members and certain
entities he controls are entitled to receive upon distribution from the
trusts. Excludes 1,790 shares of Common Stock and 1,106 shares of
Convertible Preferred Stock beneficially owned by Mr. Hall's eldest son
regarding which Mr. Hall disclaims beneficial ownership. Includes
Convertible Preferred Stock jointly held by Mr. Hall and his wife and
individually by Mr. Hall's wife and Mr. Hall's youngest son. Also includes
an aggregate of 13,869 shares of Convertible Preferred Stock held by
Houston Explorer Group, L.P., Hall Equities, Inc., Hall Family Trust and
Hall Partners, L.P., which Mr. Hall, together with members of his immediate
family in certain instances, controls.
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(5) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 14, 2002, the shares owned by Evercore Capital Partners L.P.
and its affiliates ("Evercore") are beneficially owned as follows:
- Evercore Capital Partners L.P. -- 6,168,263;
- Evercore Capital Offshore Partners L.P. -- 1,629,686;
- Evercore Capital Partners (NQ) L.P. -- 1,485,904; and
- Evercore Co-Investment Partnership L.P. -- 134,057.
Evercore Partners L.L.C. is the general partner of the first three
Evercore entities listed above and has sole voting and dispositive power
of their shares, and has sole voting power and shares dispositive power
with respect to an additional 16,000 shares. Evercore Co-Investment G.P.
L.L.C. is the general partner of Evercore Co-Investment Partnership L.P.
and has sole voting and dispositive power with respect to its shares.
Messrs. Beutner and Hiltz, each a principal of Evercore, disclaim
beneficial ownership of shares of our capital stock owned by Evercore.
Their shares in this table do not show the indirect interest of each in
the shares held by Evercore. Additionally, Mr. Hiltz acquired 150,000
shares of our Common Stock prior to joining Evercore and prior to
Evercore's investment in the Company. Evercore disclaims beneficial
ownership of these shares of Common Stock owned by Mr. Hiltz.
(6) Mr. Gershen, a managing director of the general partner of Energy Income
Fund, has the sole power to vote and to dispose of all shares held by
Energy Income Fund. The shares shown for Mr. Gershen in this table do not
show his indirect interest in the shares held by Energy Income Fund.
(7) As a result of the acquisition of Hall-Houston Oil Company in January 2002,
Messrs. Hall, Peper and Sidner became executive officers of the Company and
Mr. Hall was appointed to the Company's Board of Directors.
(8) Includes 300,000 shares of Common Stock subject to options granted to Ms.
Baer under our 2000 Long Term Stock Incentive Plan, which may be exercised
within 60 days from March 15, 2002.
(9) Includes 770 shares beneficially owned by Mr. Coldren's wife, of which Mr.
Coldren disclaims beneficial ownership.
(10) Includes 486 shares of Convertible Preferred Stock held in trusts for Mr.
Sidner's minor children of which Mr. Sidner is the trustee.
(11) The address for Evercore and its affiliates is 65 East 55th Street, New
York, New York 10022.
(12) The address for Energy Income Fund is 136 Dwight Road, Longmeadow,
Massachusetts 01106.
MATTERS TO BE PRESENTED TO THE STOCKHOLDERS AT THE 2002 MEETING
ITEM 1 -- ELECTION OF DIRECTORS
At the 2002 Annual Meeting, nine (9) directors are to be elected, each of
whom will serve until the Annual Meeting of Stockholders in the year 2003 and
until their respective successors are duly elected and qualified. The persons
named as proxies on the enclosed Proxy Card intend to vote FOR the election of
each of the nine (9) nominees listed below, unless otherwise directed.
The Board has nominated, and the proxies will vote to elect, the following
individuals as members of the Board of Directors to serve for a period of one
(1) year and until their respective successors are duly elected and qualified:
Richard A. Bachmann, Austin M. Beutner, John C. Bumgarner, Harold D. Carter,
Robert D. Gershen, Gary L. Hall, William O. Hiltz, Dr. Eamon M. Kelly and John
G. Phillips. Each nominee has consented to be nominated and to serve, if
elected.
Under our stockholder agreement, generally, Evercore is entitled to
nominate four persons to our Board of Directors. Messrs. Beutner, Bumgarner,
Carter and Hiltz were nominated pursuant to this provision. Until the date that
Energy Income Fund owns less than 10% of our Common Stock on a fully diluted
basis, Energy Income Fund is entitled to nominate one person to our Board of
Directors. Mr. Gershen was nominated
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pursuant to this provision. Under an amendment to our stockholder agreement
entered into in connection with the acquisition of Hall-Houston Oil Company
("Hall-Houston"), certain former Hall-Houston shareholders are entitled to
nominate one person to our Board of Directors until those shareholders own less
than 10% of our Common Stock on a fully diluted basis. Mr. Hall was nominated
pursuant to this provision. Our other stockholders are entitled to nominate our
three remaining directors. Messrs. Bachmann and Phillips and Dr. Kelly were
nominated pursuant to this provision. All of the parties to our stockholder
agreement have agreed to cooperate fully with the other stockholders in
connection with the voting of their shares of Common Stock. All of the persons
listed under "Ownership of Common and Preferred Stock by Management and Certain
Beneficial Owners" other than Messrs. Hall, Peper and Sidner (all of whom, as
former Hall-Houston shareholders, are third party beneficiaries thereunder), are
parties to our stockholder agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NINE (9) NOMINEES: MESSRS. BACHMANN, BEUTNER, BUMGARNER, CARTER, GERSHEN, HALL,
HILTZ AND PHILLIPS AND DR. KELLY.
INFORMATION ABOUT THE NOMINEES
Richard A. Bachmann, age 57, has been president and chief executive officer
of the Company and chairman of its Board of Directors since the Company's
incorporation in January 1998. Mr. Bachmann began organizing the Company in
February 1997. From 1995 to January 1997, he served as director, president and
chief operating officer of The Louisiana Land and Exploration Company ("LL&E"),
an independent oil and gas exploration company. From 1982 to 1995, Mr. Bachmann
held various positions with LL&E, including director, executive vice president,
chief financial officer and senior vice president of finance and administration.
From 1978 to 1981, Mr. Bachmann was the treasurer of Itel Corporation. Prior to
1978, Mr. Bachmann served with Exxon International, Esso Central America, Esso
InterAmerica and Standard Oil of New Jersey. He is also a director of Penn
Virginia Corporation and Superior Energy Services, Inc.
Austin M. Beutner, age 41, has been a director since January 2000. Mr.
Beutner is President of Evercore Partners, which he co-founded in 1996. He also
serves as co-chairman of Evercore Capital Partners and chairman and chief
executive officer of Evercore Ventures. Mr. Beutner serves on the boards of
directors of American Media, Inc., Business.com, Inc., Causeway Capital
Management LLC, Continental Energy Services, Inc., Earthlink, Inc., eCompanies
LLC, Encoda Systems, Inc., Telenet Holding N.V. and Vertis, Inc. He also serves
as a trustee of the California Institute of the Arts.
John C. Bumgarner, Jr., age 59, has been a director since January 2000. Mr.
Bumgarner is currently serving as chief operating officer and president of
strategic investments for Williams Communications Group, a high technology
company. Mr. Bumgarner joined The Williams Companies, Inc. in 1977 and served as
senior vice president of Williams Corporate Development and Planning and then
served as president of Williams International Company prior to joining Williams
Communications in May 2001. Mr. Bumgarner is also a director of Management
Planning Systems, Inc., Apco Argentina Inc., PowerTel, Inc. (Australia), James
River Coal Company and Stanford Microdevices, Inc. Mr. Bumgarner is a former
treasurer of Skelly Oil.
Harold D. Carter, age 63, has been a director since May 1998. Since 1995,
Mr. Carter has been an independent oil and natural gas consultant and investment
advisor. Mr. Carter is a director of Brigham Exploration Company, an independent
oil and gas exploration company, and former president of Sabine Corporation, an
independent oil and gas exploration company.
Robert D. Gershen, age 48, has been a director since May 1998. Mr. Gershen
is president of Associated Energy Managers, LLC, an investment management firm
specializing in private equity investments in the energy sector. He is also a
managing director of the general partner of Energy Income Fund, an investment
fund. Since 1989, Mr. Gershen has managed, through Associated Energy Managers,
three funds that invest in energy companies in the United States. Mr. Gershen is
also a director of Arlington Oil & Gas Ltd.
Gary L. Hall, age 52, has been vice chairman of the Company and a director
since January 2002, following the closing of the Hall-Houston acquisition. Prior
to joining the Company, Mr. Hall had been chairman of the board of directors and
chief executive officer of Hall-Houston since it began operations in
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1983. He has been involved in the oil and gas exploration and production
business in the Gulf of Mexico since 1976, serving in various positions with
major integrated and independent energy companies including Mobil Oil Company
and Pogo Producing Company.
William O. Hiltz, age 50, has been a director since November 2000. Mr.
Hiltz is a principal of Evercore Partners and has been since joining that firm
in October 2000. From April 1995 until October 2000, Mr. Hiltz was a managing
director and head of the global energy group for UBS Warburg LLC and its
predecessor firms, SBC Warburg Dillon Read and Dillon, Read & Co. Inc.
Dr. Eamon M. Kelly, age 65, has been a director since May 1998. Since July
1998, Dr. Kelly has been president emeritus at Tulane University, where, from
February 1981 until June 1998, he served as president. Dr. Kelly is chairman of
the board of the National Science Foundation; professor of international
development at the Payson Center for International Development and Technology
Transfer at Tulane University; a director of Gabelli Group Capital Partners,
Inc. and Gabelli Asset Management, Inc.; and a former director of LL&E.
John G. Phillips, age 79, has been a director since May 1998. Since 1995,
Mr. Phillips has been an independent financial consultant. Mr. Phillips is
former chairman, president and chief executive officer of LL&E and, since 1972,
continues to serve as a director of the Whitney National Bank and Whitney
Holding Corporation. Mr. Phillips retired in 1985.
ITEM 2 -- AMENDED AND RESTATED 2000 LONG TERM STOCK INCENTIVE PLAN
The Board of Directors recommends a vote FOR the proposal to approve the
Amended and Restated 2000 Long Term Stock Incentive Plan of the Company (the
"Plan").
The Plan was approved by the Board of Directors and our stockholders in
September 2000. In January 2002, our Board of Directors amended and restated the
Plan, which is described more fully below, to provide for limited grants of
restricted shares and to increase the number of stock options which may be
granted in any year to any individual from 100,000 to 200,000.
The Board of Directors on March 21, 2002 unanimously approved an amendment
of the Plan, subject to stockholder approval, that increased the number of
shares of Common Stock issuable pursuant to the Plan to 4,800,000 shares. The
number of shares of Common Stock issuable has been increased such that the
shares available approximates 10% of the issued and outstanding Common Stock. As
of March 21, 2002, after giving effect to the amendment, 2,737,418 shares remain
available under the Plan.
The following summary of the Plan is qualified in its entirety by express
reference to the Plan, which is attached as Appendix A to this Proxy Statement.
GENERAL
The Plan is intended to provide incentives to attract, retain and motivate
employees and consultants in order to achieve the Company's long-term growth and
profitability objectives. The Plan provides for the grant to eligible persons of
stock options, restricted shares and performance shares (the "Awards"). The
maximum number of stock options which may be granted to an eligible participant
in any calendar year under the Plan is 200,000, and the maximum number of
restricted shares which may be granted under the Plan is 20% of the total
reserved for issuance under the Plan, in each case subject to certain
anti-dilution adjustments, as described below.
ADMINISTRATION AND ELIGIBILITY
The Plan will be administered by the Compensation Committee or such other
Board committee (or the entire Board) as may be designated by the Board (the
"Committee"). The Committee will determine which eligible employees, including
officers, receive Awards and the types, terms and conditions of Awards. The
Committee has the authority to waive conditions relating to an Award or
accelerate vesting of Awards. Approximately 149 employees, including officers,
are currently eligible to participate in the Plan.
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AWARDS
Both incentive stock options ("ISOs") intended to qualify for special tax
treatment in accordance with the Code and nonqualified stock options not
intended to qualify for special tax treatment under the Code may be granted
under the Plan. The Committee is authorized to set the terms relating to an
option, including exercise price and the time and method of exercise. The terms
of ISOs will comply with the provisions of Section 422 of the Code. ISOs may
only be granted to employees. Awards may be granted alone, in tandem with or in
exchange for any other Award.
Awards of restricted shares will be subject to such restrictions on
transferability and other restrictions, if any, as the Committee may impose.
Such restrictions will lapse under circumstances as the Committee may determine.
Except as otherwise determined by the Committee, eligible employees granted
restricted shares will have all of the rights of a stockholder, including the
right to vote restricted shares and receive dividends thereon, and unvested
restricted shares will be forfeited upon termination of employment during the
applicable restriction period.
Performance shares will provide for future issuance of shares to the
recipient upon the attainment of corporate performance goals established by the
Committee over specified performance periods. Except as otherwise determined by
the Committee, performance shares will be forfeited upon termination of
employment during any applicable performance period. Performance objectives may
vary from person to person and will be based upon one or more of the performance
criteria set forth in the Plan as the Committee may deem appropriate. The
Committee may revise performance objectives if significant events occur which
the Committee expects to have a substantial effect on such objectives. However,
if the performance shares are intended to qualify as performance-based
compensation under Section 162(m) of the Code, the Committee may not increase
the amount of compensation payable if it would disqualify the Award under
Section 162(m) of the Code.
CHANGE OF CONTROL
In the event of a change of control, all unvested Awards shall become
immediately exercisable, all restrictions shall lapse and any performance
criteria shall be deemed satisfied, unless otherwise provided in the applicable
Award agreement. For a definition of change of control, see Section 7(b) of the
Plan, which is attached as Appendix A to this Proxy Statement.
CAPITAL STRUCTURE CHANGES
If the Committee determines that any corporate transaction or event affects
the Common Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of eligible participants under the Plan,
then the Committee is authorized to make such equitable changes or adjustments
as it deems appropriate.
AMENDMENT AND TERMINATION
The Plan generally may be amended, suspended or terminated by the Board of
Directors at any time, in whole or in part.
TERM
Unless earlier terminated, the Plan will terminate as to future awards on
September 12, 2010.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences of the
Plan, and does not address the consequences under any state, local or foreign
tax laws.
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STOCK OPTIONS
In general, the grant of an option will not be a taxable event to the
recipient and it will not result in a deduction to the Company.
Upon the exercise of a nonqualified stock option, the participant will
recognize ordinary taxable income equal to the excess of the fair market value
of the shares of Common Stock received upon exercise over the exercise price.
The Company will generally be able to claim a deduction in an equivalent amount.
Any gain or loss upon a subsequent sale or exchange of the shares of Common
Stock will be capital gain or loss, long-term or short-term, depending on the
holding period for the shares of Common Stock.
Generally, a participant will not recognize ordinary taxable income at the
time of exercise of an ISO and no deduction will be available to the Company,
provided the option is exercised while the participant is an employee or within
three months following termination of employment (longer, in the case of
disability or death). If an ISO granted under the Plan is exercised after these
periods, the exercise will be treated for federal income tax purposes as the
exercise of a nonqualified stock option. The exercise of an ISO will result in
an increase in the participant's alternative minimum taxable income.
If shares of Common Stock acquired upon exercise of an ISO are sold or
exchanged more than one year after the date of exercise and more than two years
after the date of grant of the option, any gain or loss will be long-term
capital gain or loss. If shares of Common Stock acquired upon exercise of an ISO
are disposed of prior to the expiration of these one-year or two-year holding
periods (a "Disqualifying Disposition"), the participant will recognize ordinary
income at the time of disposition, and the Company will generally be entitled to
a deduction, in an amount equal to the excess of the fair market value of the
shares of Common Stock at the date of exercise over the exercise price. Any
additional gain will be treated as capital gain. Where shares of Common Stock
are sold or exchanged in a Disqualifying Disposition (other than certain related
party transactions) for an amount less than their fair market value at the date
of exercise, any ordinary income recognized in connection with the Disqualifying
Disposition will be limited to the amount of gain, if any, recognized in the
sale or exchange, and any loss will be a capital loss.
Certain additional rules apply if an option is exercised through the use of
shares of Common Stock previously owned by the participant.
RESTRICTED SHARES
A participant who receives restricted shares will generally recognize
ordinary income at the time that they "vest", i.e., either when they are not
subject to a substantial risk of forfeiture or when they are freely
transferable. The amount of ordinary income so recognized will be the fair
market value of the Common Stock at the time the income is recognized
(determined without regard to any restrictions other than restrictions which by
their terms will never lapse), less the amount, if any, paid for the restricted
shares. This amount is generally deductible for federal income tax purposes by
the Company. Any gain or loss upon a subsequent sale or exchange of the shares
of Common Stock, measured by the difference between the sale price and the fair
market value on the date restrictions lapse, will be capital gain or loss,
long-term or short-term, depending on the holding period for the shares of
Common Stock.
In lieu of the treatment described above, a participant may elect immediate
recognition of income under Section 83(b) of the Code. In such event, the
participant will recognize as income the fair market value of the restricted
shares at the time of grant (determined without regard to any restrictions other
than restrictions which by their terms will never lapse), and the Company will
generally be entitled to a corresponding deduction. If a Section 83(b) election
is made and the restricted shares are subsequently forfeited, the participant
will not be entitled to any offsetting tax deduction.
PERFORMANCE SHARES
When a participant receives payment with respect to any performance shares
granted to him or her under the Plan, the amount of cash and the fair market
value of any other property received will be ordinary income to such participant
and will be allowed as a deduction for federal income tax purposes to the
Company.
8
PAYMENT OF WITHHOLDING TAXES
The Company may withhold, or require a participant to remit to the Company,
an amount sufficient to satisfy any federal, state or local withholding tax
requirements associated with Awards under the Plan.
NEW PLAN BENEFITS
The Plan has been in effect since September 2000. During 2001, our current
executive officers as a group received an aggregate of 180,000 stock options,
and all employees including officers but excluding current executive officers
received 337,808 stock options. Information regarding grants to the named
executive officers is contained in the Summary Compensation table on page 11. To
date during 2002, Ms. Baer and Mr. Coldren each received 75,000 stock options,
and Ms. Baer received 6,250 restricted shares, our current executive officers as
a group received 525,000 stock options (which includes 200,000, 75,000 and
100,000 stock options granted to Messrs. Hall, Peper and Sidner, respectively,
upon their joining the Company following the acquisition of Hall-Houston) and
6,250 restricted shares, and all employees including officers but excluding
current executive officers received 514,300 stock options and 27,750 restricted
shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE PLAN.
ITEM 3 -- APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of KPMG LLP as the Company's independent certified public accountants
to audit the Company's consolidated financial statements for the year ending
December 31, 2002. The persons designated as proxies will vote FOR the
ratification of KPMG LLP as the Company's independent certified public
accountants, unless otherwise directed. Representatives of KPMG LLP are expected
to be present at the Annual Meeting, with the opportunity to make a statement
should they choose to do so, and to be available to respond to questions, as
appropriate.
CORPORATE GOVERNANCE
THE BOARD OF DIRECTORS
The directors hold regular meetings, attend special meetings as required
and spend such time on the affairs of the Company as their duties require.
During calendar year 2001, the Board of Directors held a total of ten (10)
meetings, regular and special. All directors of the Company attended at least
seventy-five percent (75%) of the meetings of the Board of Directors and of the
committees on which they served during the period, except for Mr. Bumgarner.
COMMITTEES OF THE BOARD
THE AUDIT COMMITTEE
The Board of Directors has an Audit Committee, the current members of which
are Messrs. Hiltz (Chairman) and Carter and Dr. Kelly. The Audit Committee has a
charter under which its responsibilities and authorities include reviewing our
auditing, accounting, financial reporting and internal control functions and
making recommendations to the Board for the selection of independent
accountants. In addition, the Audit Committee monitors the quality of our
accounting principles and financial reporting, as well as the independence of
our independent accountants. During fiscal year 2001, the Audit Committee held
five (5) meetings.
9
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the Company's annual financial statements for 2001,
and fees billed for other services rendered by KPMG LLP.
<Table>
Audit fees, excluding other audit related fees.............. $120,000
========
Financial information systems design and implementation..... --
========
All other fees:
Audit related fees(1)..................................... 53,000
Other non-audit services(2)............................... 10,000
--------
Total all other fees........................................ $ 63,000
========
</Table>
- ---------------
(1) Audit related fees consisted of a business risk assessment and operational
internal audits.
(2) Other non-audit fees consisted of tax consulting services.
The Audit Committee believes that the foregoing expenditures are compatible
with maintaining the independence of the Company's principal accountant.
THE COMPENSATION COMMITTEE
The Board of Directors also has a Compensation Committee, the current
members of which are Messrs. Beutner (Chairman), Bumgarner, Gershen and
Phillips. The Compensation Committee has a charter under which its
responsibilities and authorities include determining the compensation for all of
our executive officers, other than our chairman, president and chief executive
officer, and any other employee that the committee may designate from time to
time. Our Board of Directors determines the compensation of our chairman,
president and chief executive officer. In addition, the committee approves and
administers employee benefit plans and takes such other action as may be
appropriate or as directed by the Board of Directors to ensure that the
compensation policies of the Company are reasonable and fair. During fiscal year
2001, the Compensation Committee held three (3) meetings.
THE NOMINATING COMMITTEE
We do not have a Nominating Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Beutner, Bumgarner, Gershen and Phillips served as members of the
Compensation Committee of the Board of Directors during fiscal year 2001.
Messrs. Beutner and Hiltz are principals of Evercore Capital Partners,
which owns more than 5% of our outstanding Common Stock. Pursuant to our
stockholder agreement, we paid an affiliate of Evercore a monitoring fee of
$250,000 in 2001. We also paid Evercore Capital Partners an investment banking
fee in 2002 for their services in connection with the Hall-Houston acquisition.
Mr. Gershen is a managing director of the general partner of Energy Income
Fund, which owns more than 5% of our outstanding Common Stock. In January 2001,
Energy Income Fund exercised an existing warrant and received 466,245 shares of
Common Stock.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $20,000 and meeting
fees of $1,000 for each Board or committee meeting attended (if held on separate
dates). Directors may defer all or a portion of their retainer, at the election
of each director, up to one half in cash and the remainder in Common Stock
(valued at fair market value), and the meeting fees are paid, at the election of
each director, in cash or Common Stock (valued at fair market value). Directors
are also reimbursed for their reasonable expenses.
10
Our 2000 Stock Option Plan for Non-employee Directors provides for
automatic grants of stock options to members of the Board of Directors who are
not employees of the Company or any subsidiary. An initial grant of a stock
option to purchase 4,000 shares of our Common Stock was made to each
non-employee director upon consummation of our initial public offering. An
initial grant of a stock option to purchase 2,000 shares will also be made to
each person who becomes a non-employee director after the effective date upon
his or her initial election or appointment. After the initial grant, each
non-employee director will receive an additional grant of a stock option to
purchase 4,000 shares of our Common Stock immediately following each annual
meeting. All stock options granted under the plan will have a per share exercise
price equal to the fair market value of a share of Common Stock on the date of
grant (as determined by the committee appointed to administer the plan), will be
fully vested and immediately exercisable and will expire on the earlier of (i)
ten years from the date of grant or (ii) 36 months after the optionee ceases to
be a director for any reason. The total number of shares of our Common Stock
that may be issued under the plan is 250,000, subject to adjustment in the case
of certain corporate transactions and events.
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION
The following table sets forth certain summary information for the prior
three years concerning the compensation earned by the Company's Chief Executive
Officer (Mr. Bachmann) and our four other most highly compensated executive
officers who earned in excess of $100,000 in 2001.
<Table>
<Caption>
LONG TERM COMPENSATION
AWARDS(1)
------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
-------------------- SHARE OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARD(S)($) SARS(#) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ----------- ---------- ------------------
Richard A. Bachmann, Chairman......... 2001 320,000 154,000 -- 100,000 1,806
President and Chief Executive 2000 241,666 200,000 -- -- 1,806
Officer 1999 200,000 -- -- -- 193,363
Suzanne V. Baer,...................... 2001 200,000 72,000 -- 40,000 966
Executive Vice President and 2000 131,042 50,000 1,530,000 375,000 570
Chief Financial Officer(3)
Clinton W. Coldren,................... 2001 189,167 60,000 -- 40,000 630
Executive Vice President and 2000 125,000 50,000 -- -- 486
Chief Operating Officer 1999 100,000 -- -- -- 40,046
John H. McCandless,................... 2001 167,500 50,000 -- 15,000 786
Vice President(4) 2000 125,000 50,000 -- -- 745
1999 100,000 -- -- -- 40,151
Maureen O. Sullivan,.................. 2001 175,000 26,000 -- 25,000 828
Vice President, General Counsel and 2000 43,888 -- 350,010 20,000 --
Corporate Secretary(5)
</Table>
- ---------------
(1) Under the Plan, all outstanding awards will become fully exercisable at the
time of a change of control of the Company.
(2) The following amounts were paid to these individuals on termination of our
royalty payment arrangement in 1999: Mr. Bachmann, $193,080; Mr. Coldren,
$39,981; and Mr. McCandless, $39,981. The remaining amounts in each year
represent the dollar value of term life insurance premiums paid by us for
the benefit of the executive officers.
(3) Ms. Baer commenced employment with us in April 2000. In connection with her
employment agreement, Ms. Baer was granted 90,000 restricted shares and
options to purchase 375,000 shares of stock. One-third of the restricted
shares vested upon each of the execution of the employment agreement and the
first anniversary of the agreement and the remainder will vest on the second
anniversary of the agreement. As of December 31, 2001, the unvested portion
of Ms. Baer's restricted shares, 30,000 shares, had a value of $226,500.
Dividends, if any, will be paid on the restricted shares at the same rate
paid to all stockholders.
11
(4) Mr. McCandless ceased being an executive officer in March 2001. Amounts for
2001 include payments made to him during the period he was not an executive
officer. Mr. McCandless terminated his employment with us effective March 1,
2002.
(5) Ms. Sullivan commenced employment with us in October 2000. In connection
with her employment agreement, Ms. Sullivan was granted 23,334 restricted
shares and options to purchase 20,000 shares of stock. Approximately 30% of
the restricted shares will vest upon the second anniversary of the agreement
and the remainder will vest on the third anniversary of the agreement. As of
December 31, 2001, the unvested portion of Ms. Sullivan's restricted shares,
23,334 shares, had a value of $176,172. Dividends, if any, will be paid on
the restricted shares at the same rate paid to all stockholders. Ms.
Sullivan ceased being an executive officer in January 2002 and will
terminate her employment with us in March 2002.
INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS
The table below sets forth information regarding stock options granted to
our Chief Executive Officer and our four other most highly compensated executive
officers during the fiscal year ended December 31, 2001. We did not grant any
stock appreciation rights during 2001.
<Table>
<Caption>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE PRESENT VALUE(1)($)
- ---- ------------ ------------ ----------- --------------- -------------------
Richard A. Bachmann(2)................. 100,000 17.1 10.80 April 30, 2011 321,000
Suzanne V. Baer(2)..................... 40,000 6.8 10.80 April 30, 2011 129,000
Clinton W. Coldren(2).................. 40,000 6.8 10.80 April 30, 2011 129,000
John H. McCandless(2).................. 15,000 2.6 10.80 April 30, 2011 53,000
Maureen O. Sullivan(3)................. 25,000 4.3 10.80 April 30, 2011 89,000
</Table>
- ---------------
(1) The value has been calculated using a variation of the Black-Scholes stock
option valuation methodology. The applied model used the grant date of April
30, 2001, with a grant date stock value of $10.80, it assumed a stock price
volatility of 35%, a risk-free rate of return of 4.50% and a dividend of $0
per year. The value has been reduced by approximately 25% to reflect the
probability of forfeiture due to termination of employment prior to vesting
or of a shortened option term due to termination of employment prior to the
expiration date.
(2) One-half of the option is exercisable beginning on April 30, 2004 and the
remainder is exercisable beginning on April 30, 2005.
(3) One-third of the option is exercisable beginning on April 30, 2002,
one-third is exercisable beginning on April 30, 2003 and the remainder is
exercisable beginning on April 30, 2004.
The table below sets forth information concerning the value of unexercised
stock options held by our Chief Executive Officer and our four other most highly
compensated executive officers as of December 31, 2001. No stock options were
exercised by any of these individuals during 2001.
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Richard A. Bachmann................................. -- 100,000 -- --
Suzanne V. Baer..................................... 150,000 265,000 -- --
Clinton W. Coldren.................................. -- 40,000 -- --
John H. McCandless.................................. -- 15,000 -- --
Maureen O. Sullivan................................. 6,666 38,334 -- --
</Table>
- ---------------
(1) Based on the positive difference, if any, between the closing sale price of
the Company's Common Stock of $7.55 on December 31, 2001, as reported by the
New York Stock Exchange, and the exercise price of such options.
12
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
We have employment and stock ownership agreements with each of our
executive officers. Each of the agreements provides that the executive officer
will not compete with us for a period of two years following termination of his
or her employment. In addition, the Company securities owned by each of the
executive officers are subject to restrictions on transfer. The agreements also
have the following terms:
- Mr. Bachmann's agreement expires on November 17, 2003. Under the
agreement, Mr. Bachmann is prohibited from soliciting or inducing our
employees to discontinue their employment with us and from interfering
with our third-party contractual relationships for a period ending two
years following his employment with us. Mr. Bachmann must offer a
predetermined number of his shares of Common Stock to Evercore or our
other management stockholders on resignation or termination for cause.
- Ms. Baer's agreement expires on April 17, 2003. Under the agreement, Ms.
Baer was granted 90,000 restricted shares. One-third of the restricted
shares vested upon each of the execution and the first anniversary of the
agreement, and the remainder will vest on the second anniversary of the
agreement. Ms. Baer also received an option to purchase 375,000 shares of
Common Stock, 150,000 at approximately $7.67 per share which vested upon
the first anniversary of the agreement, 150,000 at approximately $8.82
per share which vests on the second anniversary of the agreement and
75,000 at approximately $10.14 per share which vests on the third
anniversary of the agreement. Ms. Baer must exercise each option within
five years from the vesting date or the option will lapse. Any unvested
stock options or restricted shares will vest if Ms. Baer is terminated
without cause.
- Mr. Coldren's agreement expires on November 17, 2003. Under the
agreement, Mr. Coldren must offer a predetermined number of his shares of
Common Stock to Mr. Bachmann, Evercore or our other management
stockholders on resignation or termination for cause.
- The agreement of each of Messrs. Hall, Peper and Sidner expires on
January 15, 2005. Under the agreements, Messrs. Hall, Peper and Sidner
will receive annual salaries of at least $300,000, $174,000 and $225,000,
respectively, and received options to purchase 200,000, 75,000 and
100,000 shares of Common Stock, respectively, at an exercise price equal
to $7.98 per share, the market price of the Common Stock on the date of
their appointment as executive officers. These options will vest over
three years and any unvested options will be forfeited in the case of
termination for cause or voluntary termination by the executive officer.
Each executive officer must exercise each option within 10 years from the
date of the agreement or the option will lapse. The executives may not be
involuntarily terminated without cause, except in connection with a
change of control, in which case our compensation obligations under the
agreements would cease after a 90-day notice period. Upon a change of
control of the Company, the executive officers' options and other
incentive awards as to which there are no conditions for vesting other
than continued employment will become fully vested and become fully
exercisable. In addition, each executive officer is prohibited from
soliciting or otherwise attempting to induce our other employees to
discontinue their relationship with us and from interfering with our
third-party contractual relationships for a period ending two years
following his employment with us.
Ms. Sullivan will terminate her employment with us in March 2002. We expect
that we will enter into a separation agreement with Ms. Sullivan pursuant to
which upon termination of employment she will relinquish her restricted shares
and stock options in return for a cash payment.
13
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee for
inclusion in this proxy pursuant to the rules of the Securities and Exchange
Commission with respect to executive compensation:
The Compensation Committee (the "Committee") determines the general
compensation policies of the Company, determines the compensation to be paid to
certain officers and administers the Plan. The Committee is composed of four (4)
independent, non-employee directors: Messrs. Beutner, Bumgarner, Gershen and
Phillips.
PHILOSOPHY OF COMPENSATION
The objectives of the Company's compensation program are (i) to attract and
retain the best available executive talent, (ii) to motivate executives to
achieve the Company's goals, (iii) to link executive and stockholder interests
through performance rewards and (iv) to provide compensation that can recognize
individual contributions to corporate objectives. The Committee's compensation
philosophy is designed so that a substantial component of each executive's
potential annual compensation is entirely dependent upon measurable improvement
to shareholder value. The Committee engages outside compensation consultants to
assist it in determining appropriate levels of compensation. The Committee
expects recommendations from the Company's Chief Executive Officer but exercises
its own judgment and makes its own determination.
TYPES OF COMPENSATION
The Company provides two main types of compensation:
(1) annual compensation, consisting of a market-median base salary and
an incentive bonus based primarily on the performance of the Company's
Common Stock; and
(2) long-term compensation, consisting of stock options, the value of
which are also directly linked to the value of a share of the Company's
Common Stock.
ANNUAL COMPENSATION
At least once each year, the Committee reviews the Company's executive
compensation program. The annual base salary of each executive is determined by
an analysis of the compensation paid to other executive officers in similar
positions in the energy industry. Market data is derived from a combination of
sources, including published survey data for the energy industry and peer group
data. A competitive base salary is consistent with the Company's long-term
objectives of attracting and retaining highly qualified, competent executives.
The incentive bonus is particularly aligned with the interests of the
Company's stockholders. Incentive bonuses are based on the increase in value of
the Company's Common Stock as well as qualitative factors that the Compensation
Committee may deem appropriate. Although a target bonus percentage is
predetermined for each executive on the basis of market practices, the incentive
bonus is not limited to a maximum percentage of salary. The Committee will
determine each year whether a threshold level of performance below the Company's
objectives is deserving of any bonus percentage, taking into account external
factors beyond the control of the executives.
LONG-TERM COMPENSATION
The Company adopted the Plan on September 12, 2000, and the shareholders
approved it on September 15, 2000. The Plan permits the Committee to select the
officers and employees of the Company who will receive awards, to determine the
types of awards to be granted to each such person and to establish the terms of
each award.
The Committee considers stock options to be an important part of the
Company's long-term incentive program for officers and employees as these awards
create an alignment of interests with the Company's stockholders. Because a
significant percentage of the Company's Common Stock is owned by the executive
officers of the Company, including the Chief Executive Officer, the grant of
options to date has been used primarily to attract and retain other officers and
employees.
14
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee's compensation philosophy applies in all respects to the
Company's Chief Executive Officer, Richard A. Bachmann. Mr. Bachmann's base
salary of $320,000 for 2001 was commensurate with the median base salary for
chief executive officers of similarly situated exploration and production
companies. Mr. Bachmann was awarded a $154,000 bonus in 2001 related in large
part to his contribution to the Company's initial public offering in November
2000.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 limits the
deductibility for federal income taxes of compensation in excess of $1 million
paid to a publicly held company's chief executive officer and any of the other
four highest-paid executive officers, except for "performance-based"
compensation. The Committee is aware of this limitation and intends to consider
the effects of Section 162(m) on the Company when making compensation decisions.
Compensation Committee
Austin M. Beutner, Chairman
John C. Bumgarner, Member
Robert D. Gershen, Member
John G. Phillips, Member
REPORT OF THE AUDIT COMMITTEE
The Audit Committee acts under a written charter adopted and approved by
the Board of Directors on September 12, 2000. Each of the members of the Audit
Committee is "independent" as defined by New York Stock Exchange standards.
It is not the responsibility of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are in all
material respects complete and accurate in accordance with generally accepted
accounting principles. This is the responsibility of management and the
independent auditors. It is also not the responsibility of the Audit Committee
to assure compliance with laws and regulations and the Company's Code of
Conduct.
Based on the Audit Committee's review of the audited financial statements
as of and for the fiscal year ended December 31, 2001 and its discussions with
management regarding such audited financial statements, its receipt of written
disclosures and the letter from independent auditors required by Independence
Standards Board Standard No. 1, its discussions with the independent auditors
regarding such auditor's independence, the matters required to be discussed by
the Statement on Auditing Standards 61 and other matters the Audit Committee
deemed relevant and appropriate, the Audit Committee recommended to the Board of
Directors that the audited financial statements as of and for the fiscal year
ended December 31, 2001 be included in the Company's Annual Report on Form 10-K
for such fiscal year.
Audit Committee
William O. Hiltz, Chairman
Harold D. Carter, Member
Dr. Eamon M. Kelly, Member
15
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative return (assuming
reinvestment of any dividends) for the Company, the S&P 500 Index and a peer
group composed of ten (10) independent oil and gas exploration and production
companies with activities focused in the Gulf of Mexico region (Forest Oil
Corporation, The Meridian Resource Corporation, Newfield Exploration Company,
Noble Affiliates, Inc., Ocean Energy, Inc., Pogo Producing Company, Spinnaker
Exploration Company, Stone Energy Corporation, Houston Exploration Company and
Westport Resources Corporation), which the Company believes compete with the
Company and are believed by the Company to be companies that analysts would most
likely use to compare with an investment in the Company. Two companies included
in our peer group in 2000 have been removed in 2001, Chieftain International
Inc. because it was acquired in 2001 and EEX Corporation because it divested of
all assets in our focus area which is the shallow waters of the Gulf of Mexico.
The information contained in this graph was prepared by Research Data Group,
Inc.
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG ENERGY PARTNERS, LTD., THE S&P 500 INDEX
AND A PEER GROUP
[PERFORMANCE GRAPH]
* $100 invested on 11/2/00 in stock or on 10/31/00 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------
11/2/00 12/00 12/01
- ---------------------------------------------------------------------------------------------------
Energy Partners Ltd. 100.00 83.75 50.33
S&P 500 100.00 92.57 81.57
Peer Group 100.00 126.37 107.71
</Table>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent (10%) of
the Company's Common Stock to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission. To the Company's
knowledge, with respect to the year ended December 31, 2001, all applicable
filings were made timely.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a discussion of certain relationships and related transactions with our
directors and greater than 5% shareholders, see "Corporate
Governance -- Compensation Committee Interlocks and Insider Participation."
OTHER MATTERS
Management of the Company is not aware of other matters to be presented for
action at the 2002 Annual Meeting; however, if other matters are presented, it
is the intention of the persons named in the accompanying proxy card to vote in
accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Stockholder proposals intended to be included in the Proxy Statement
relating to the Company's 2003 Annual Meeting pursuant to Rule 14a-8 ("Rule
14a-8") under the Securities Exchange Act of 1934, as amended, must be received
by the Corporate Secretary of the Company no later than November 29, 2002 and
must otherwise comply with Rule 14a-8.
Any shareholder proposals received outside of the Rule 14a-8 procedure for
consideration at the Company's 2003 Annual Meeting must be delivered to the
Corporate Secretary of the Company no later than March 10, 2003, but no earlier
than February 8, 2003. If such timely notice of a stockholder proposal is not
given, the proposal may not be brought before the 2003 Annual Meeting. If timely
notice is given but is not accompanied by a written statement to the extent
required by applicable securities laws, the Company may exercise discretionary
voting authority over proxies with respect to such proposal, if presented at the
2003 Annual Meeting.
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY TO AVOID UNNECESSARY
EXPENSE. ALL STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OWNED,
TO PARTICIPATE IN THE 2002 ANNUAL MEETING BY RETURNING THEIR PROXY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.
By Order of the Board of Directors
/s/ Richard A. Bachmann
RICHARD A. BACHMANN
Chairman of the Board
President and Chief Executive Officer
New Orleans, Louisiana
March 29, 2002
17
APPENDIX A
ENERGY PARTNERS, LTD.
AMENDED AND RESTATED 2000 LONG TERM STOCK INCENTIVE PLAN
1. Purposes.
The purposes of the Amended and Restated 2000 Long Term Stock Incentive
Plan are to advance the interests of Energy Partners, Ltd. and its shareholders
by providing a means to attract, retain, and motivate employees of the Company
upon whose judgment, initiative and efforts the continued success, growth and
development of the Company is dependent.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan; provided that the Company directly
or indirectly owns at least 20% of the combined voting power of all classes
of stock of such entity or at least 20% of the ownership interests in such
entity.
(b) "Award" means any Option, Performance Share or Restricted Share
granted to an Eligible Person under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which
have been designated by the Eligible Person in his or her most recent
written beneficiary designation filed with the Company to receive the
benefits specified under this Plan upon the death of the Eligible Person,
or, if there is no designated Beneficiary or surviving designated
Beneficiary, then the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
(g) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Plan; provided, however, that the Committee shall consist of two or more
directors of the Company, each of whom is a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act, to the extent applicable.
(h) "Company" means Energy Partners, Ltd., a corporation organized
under the laws of Delaware, or any successor corporation.
(i) "Eligible Person" means an employee of the Company, a Subsidiary
or an Affiliate, including any director who is an employee, or a consultant
to the Company, a Subsidiary or an Affiliate.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(k) "Fair Market Value" means, with respect to Shares or other
property, the fair market value of such Shares or other property determined
by such methods or procedures as shall be established from time to time by
the Committee. If the Shares are listed on any established stock exchange
or a national market system, unless otherwise determined by the Committee
in good faith, the Fair Market Value of a Share shall mean the closing
price of the Share on the date on which it is to be valued hereunder (or,
if
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the Shares were not traded on that day, the next preceding day that the
Shares were traded) on the principal exchange on which the Shares are
traded, as such prices are officially quoted on such exchange.
(l) "ISO" means any option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "NQSO" means any Option that is not an ISO.
(n) "Option" means a right, granted under Section 5(b), to purchase
Shares.
(o) "Participant" means an Eligible Person who has been granted an
Award under the Plan.
(p) "Performance Share" means a performance share granted under
Section 5(c).
(q) "Plan" means this Amended and Restated 2000 Long Term Stock
Incentive Plan.
(r) "Restricted Shares" means an Award of Shares under Section 5(d)
that may be subject to certain restrictions and to a risk of forfeiture.
(s) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(t) "Shares" means common stock, par value $0.01 per share, of the
Company.
(u) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
shares possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. Definitions.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, and the Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Eligible Persons to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each
Eligible Person;
(iv) to determine the type and number of Awards to be granted, the
number of Shares to which an Award may relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to, any
exercise price and any bases for adjusting such exercise price, any
restriction or condition, any schedule for lapse of restrictions or
conditions relating to transferability or forfeiture, exercisability, or
settlement of an Award, and waiver or accelerations thereof, and waivers of
performance conditions relating to an Award, based in each case on such
considerations as the Committee shall determine), and all other matters to
be determined in connection with an Award;
(v) to determine whether, to what extent, and under what circumstances
an Award may be settled, or the exercise price of an Award may be paid, in
cash, Shares, other Awards, or other property, or an Award may be canceled,
forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other property payable with
respect to an Award will be deferred either automatically, at the election
of the Committee, or at the election of the Eligible Person;
(vii) to determine whether, to what extent, and under what
circumstances any cash, Shares, other Awards, or other property payable on
a deferred basis will be adjusted for interest or earnings equivalents and,
if so, the basis for determining such equivalents;
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(viii) to prescribe the form of each Award Agreement, which need not
be identical for each Eligible Person;
(ix) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(x) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument
hereunder;
(xi) to accelerate the exercisability or vesting of all or any portion
of any Award or to extend the period during which an Award is exercisable;
and
(xii) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem necessary
or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall have
sole discretion in exercising its authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, Subsidiaries, Affiliates, Eligible Persons,
any person claiming any rights under the Plan from or through any Eligible
Person, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any Subsidiary or Affiliate the
authority, subject to such terms as the Committee shall determine, to perform
administrative functions and, with respect to Awards granted to persons not
subject to Section 16 of the Exchange Act, to perform such other functions as
the Committee may determine, to the extent permitted under Rule 16b-3 (if
applicable) and applicable law.
(c) Limitation of Liability. Each member of the Committee 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 other employee of the Company or any
Subsidiary or Affiliate, the Company's independent certified public accountants,
or other professional retained by the Company to assist in the administration of
the Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
(d) Limitation on Committee's Discretion. Anything in this Plan to the
contrary notwithstanding, in the case of any Award which is intended to qualify
as "performance-based compensation" within the meaning of Section 162(m)(4)(C)
of the Code, unless the Award Agreement specifically provides otherwise, the
Committee shall have no discretion to increase the amount of compensation
payable under the Award to the extent such an increase would cause the Award to
lose its qualification as such performance-based compensation.
(e) Quorum, Acts of Committee. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members, shall be acts of the Committee.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total
number of Shares reserved for issuance in connection with Awards under the Plan
shall be 4,800,000. No Award may be granted if the number of Shares to which
such Award relates, when added to the number of Shares previously issued under
the Plan, exceeds the number of Shares reserved under the preceding sentence. If
any Awards are forfeited, canceled, terminated, exchanged or surrendered or such
Award is settled in cash or otherwise terminates without a distribution of
Shares to the Participant, any Shares counted against the number of Shares
reserved and available under the Plan with respect to such Award shall, to the
extent of any such forfeiture, settlement, termination, cancellation, exchange
or surrender, again be available for Awards under the Plan. Upon the
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exercise of any Award granted in tandem with any other Awards, such related
Awards shall be canceled to the extent of the number of Shares as to which the
Award is exercised.
(b) Subject to adjustment as provided in Section 4(c) hereof, (i) the
maximum number of Shares with respect to which Options may be granted during a
calendar year to any Eligible Person under this Plan shall be 200,000 Shares and
(ii) the maximum number of Restricted Shares which may be granted shall be
limited to 20% of the number of shares reserved for issuance pursuant to Section
4(a) hereof.
(c) In the event that the Committee shall determine that any dividend in
Shares, recapitalization, Share split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Eligible Persons under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares
which may thereafter be issued under the Plan, (ii) the number and kind of
shares, other securities or other consideration issued or issuable in respect of
outstanding Awards, and (iii) the exercise price relating to any Award;
provided, however, in each case that, with respect to ISOs, such adjustment
shall be made in accordance with Section 424(a) of the Code, unless the
Committee determines otherwise. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria and performance
objectives included in, Awards in recognition of unusual or non-recurring events
(including, without limitation, events described in the preceding sentence)
affecting the Company or any Subsidiary or Affiliate or the financial statements
of the Company or any Subsidiary or Affiliate, or in response to changes in
applicable laws, regulations, or accounting principles; provided, however, that,
in the case of an Award which is intended to qualify as "performance-based
compensation" within the meaning of Section 162(m)(4)(C) of the Code, such
authority shall be subject to Section 3(d) hereof.
(d) Any Shares distributed pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or treasury Shares including Shares
acquired by purchase in the open market or in private transactions.
5. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth
in this Section 5. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 8(d)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms regarding forfeiture
of Awards or continued exercisability of Awards in the event of termination of
employment by the Eligible Person.
(b) Options. The Committee is authorized to grant Options, which may be
NQSOs or ISOs, to Eligible Persons on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under an
Option shall be determined by the Committee, and the Committee may, without
limitation, set an exercise price that is based upon achievement of
performance criteria if deemed appropriate by the Committee.
(ii) Option Term. The term of each Option shall be determined by the
Committee.
(iii) Time and Method of Exercise. The Committee shall determine at
the date of grant or thereafter the time or times at which an Option may be
exercised in whole or in part (including, without limitation, upon
achievement of performance criteria if deemed appropriate by the
Committee), the methods by which such exercise price may be paid or deemed
to be paid (including, without limitation, broker-assisted exercise
arrangements), the form of such payment (including, without limitation,
cash, Shares, notes or other property), and the methods by which Shares
will be delivered or deemed to be delivered to Eligible Persons.
(iv) ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code, including
but not limited to the requirement that the ISO shall be
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granted within ten years from the earlier of the date of adoption or
shareholder approval of the Plan. ISOs may only be granted to employees of
the Company or a Subsidiary.
(c) Performance Shares. The Committee is authorized to grant Performance
Shares to Eligible Persons on the following terms and conditions:
(i) Performance Period and Criteria. The Committee shall determine a
performance period (the "Performance Period") of one or more years and
shall determine the performance objectives for grants of Performance
Shares. Performance objectives may vary from Eligible Person to Eligible
Person and shall be based upon one or more of the following performance
criteria as the Committee may deem appropriate: total stockholder return,
earnings, earnings per share, operating income, net income, pro forma net
income, return on stockholders' equity, return on designated assets, net
asset value, economic value added, revenues, expenses, operating profit
margin, operating cash flow, cash flow per share, and net profit margin.
The performance objectives may be determined by reference to the
performance of the Company, or of a Subsidiary or Affiliate, or of a
division or unit of any of the foregoing. Performance Periods may overlap
and Eligible Persons may participate simultaneously with respect to
Performance Shares for which different Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the
Committee shall determine for each Eligible Person or group of Eligible
Persons with respect to that Performance Period the range of number of
Shares, if any, which may be fixed or may vary in accordance with such
performance or other criteria specified by the Committee, which shall be
paid to an Eligible Person as an Award if the relevant measure of Company
performance for the Performance Period is met.
(iii) Significant Events. If during the course of a Performance
Period there shall occur significant events as determined by the Committee
which the Committee expects to have a substantial effect on a performance
objective during such period, the Committee may revise such objective;
provided, however, that, in the case of an Award which is intended to
qualify as "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code, such authority shall be subject to Section 3(d)
hereof.
(iv) Forfeiture. Except as otherwise determined by the Committee, at
the date of grant or thereafter, upon termination of employment during the
applicable Performance Period, Performance Shares for which the Performance
Period was prescribed shall be forfeited; provided, however, that the
Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in an individual case, that restrictions or forfeiture
conditions relating to Performance Shares will be waived in whole or in
part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Performance Shares.
(v) Payment. Each Performance Share may be paid in whole Shares, or
cash, or a combination of Shares and cash either as a lump sum payment or
in installments, all as the Committee shall determine, at the time of grant
of the Performance Share or otherwise, commencing as soon as practicable
after the end of the relevant Performance Period. The Committee must
certify in writing prior to the payment of any Performance Share that the
performance objectives and any other material terms were in fact satisfied.
(d) Restricted Shares. The Committee is authorized to grant Restricted
Shares to Eligible Persons on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to
such restrictions on transferability and other restrictions, if any, as the
Committee may impose at the date of grant or thereafter, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including, without limitation, upon achievement of
performance criteria if deemed appropriate by the Committee), in such
installments, or otherwise, as the Committee may determine. Except to the
extent restricted under the Award Agreement relating to the Restricted
Shares, an Eligible Person granted Restricted Shares shall have all of the
rights of a shareholder including, without limitation, the right to vote
Restricted Shares and the right to receive dividends thereon. The Committee
must certify in writing prior
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to the lapse of restrictions conditioned on achievement of performance
criteria that such performance criteria were in fact satisfied.
(ii) Forfeiture. Except as otherwise determined by the Committee, at
the date of grant or thereafter, upon termination of employment during the
applicable restriction period, Restricted Shares and any accrued but unpaid
dividends or (and any accrued but unpaid interest or earnings equivalents
thereon) that are at that time subject to restrictions shall be forfeited;
provided, however, that the Committee may provide, by rule or regulation or
in any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Shares will be
waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in
part the forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name of
the Eligible Person, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Shares, and the Company shall retain physical possession of the
certificate.
(iv) Dividends. Dividends paid on Restricted Shares shall be either
paid at the dividend payment date, or deferred (with or without the
crediting of interest or earnings equivalents thereon as determined by the
Committee) for payment to such date as determined by the Committee, in cash
or in unrestricted Shares having a Fair Market Value equal to the amount of
such dividends; provided, however, that any such dividends (and any
interest or earnings equivalents credited thereon) shall be subject to
forfeiture upon such conditions, if any, as the Committee may specify.
Shares distributed in connection with a Share split or dividend in Shares,
and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted
Shares with respect to which such Shares or other property has been
distributed.
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted to Eligible
Persons either alone or in addition to, in tandem with, or in exchange or
substitution for, any other Award granted under the Plan or any award granted
under any other plan or agreement of the Company, any Subsidiary or Affiliate,
or any business entity to be acquired by the Company or a Subsidiary or
Affiliate, or any other right of an Eligible Person to receive payment from the
Company or any Subsidiary or Affiliate. Awards may be granted in addition to or
in tandem with such other Awards or awards, and may be granted either as of the
same time as or a different time from the grant of such other Awards or awards.
The per Share exercise price of any Option which is granted in connection with
the substitution of awards granted under any other plan or agreement of the
Company or any Subsidiary or Affiliate or any business entity to be acquired by
the Company or any Subsidiary or Affiliate, shall be determined by the
Committee, in its discretion.
(b) Terms of Awards. The term of each Award granted to an Eligible Person
shall be for such period as may be determined by the Committee; provided,
however, that in no event shall the term of any ISO exceed a period of ten years
from the date of its grant (or such shorter period as may be applicable under
Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Shares, or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest or earnings equivalents to be
credited with respect to such payments.
(d) Nontransferability. Unless otherwise set forth by the Committee in an
Award Agreement, Awards shall not be transferable by an Eligible Person except
by will or the laws of descent and distribution (except
A-6
pursuant to a Beneficiary designation) and shall be exercisable during the
lifetime of an Eligible Person only by such Eligible Person or his or her
guardian or legal representative. An Eligible Person's rights under the Plan may
not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not
be subject to claims of the Eligible Person's creditors.
7. Change of Control Provisions.
(a) Acceleration of Exercisability and Lapse of Restrictions. In the event
of a Change of Control, the following acceleration provisions shall apply unless
otherwise provided by the Committee at the time of the Award grant:
All outstanding Awards pursuant to which the Participant may have
rights the exercise of which is restricted or limited, shall become fully
exercisable at the time of the Change of Control. Unless the right to lapse
of restrictions or limitations is waived or deferred by a Participant prior
to such lapse, all restrictions or limitations (including risks of
forfeiture and deferrals) on outstanding Awards subject to restrictions or
limitations under the Plan shall lapse, and all performance criteria and
other conditions to payment of Awards under which payments of cash, Shares
or other property are subject to conditions shall be deemed to be achieved
or fulfilled and shall be waived by the Company at the time of the Change
of Control.
(b) Definitions of Certain Terms. For purposes of this Section 7, the
following definitions, in addition to those set forth in Section 2, shall apply:
(i) "Change of Control" means and shall be deemed to have occurred if:
(a) any person (within the meaning of the Exchange Act), other than
the Company, a Related Party or Evercore Capital Partners, L.P. or its
affiliates or any person to whom Evercore Capital Partners, L.P and its
affiliates transfer all of their interests in the Company, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of Voting Securities representing 25
percent or more of the total voting power of all the then-outstanding
Voting Securities; or
(b) the individuals who, as of the effective date of the Plan,
constitute the Board, together with those who first become directors
subsequent to such date and whose recommendation, election or nomination
for election to the Board was approved by a vote of at least a majority
of the directors then still in office who either were directors as of
the effective date of the Plan or whose recommendation, election or
nomination for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of the
members of the Board; or
(c) a merger, consolidation, recapitalization or reorganization of
the Company or a Subsidiary, reverse split of any class of Voting
Securities, or an acquisition of securities or assets by the Company or
a Subsidiary is consummated, other than (I) any such transaction in
which the holders of outstanding Voting Securities immediately prior to
the transaction receive (or, in the case of a transaction involving a
Subsidiary and not the Company, retain), with respect to such Voting
Securities, voting securities of the surviving or transferee entity
representing more than 50 percent of the total voting power outstanding
immediately after such transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction, or (II) any such transaction
which would result in a Related Party beneficially owning more than 50
percent of the voting securities of the surviving entity outstanding
immediately after such transaction; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets other
than any such transaction which would result in a Related Party owning
or acquiring more than 50 percent of the assets owned by the Company
immediately prior to the transaction.
A-7
(ii) "Related Party" means (a) a majority-owned subsidiary of the
Company; (b) an employee or group of employees of the Company or any
majority-owned subsidiary of the Company; (c) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
majority-owned subsidiary of the Company; or (d) a corporation owned
directly or indirectly by the stockholders of the Company in substantially
the same proportion as their ownership of Voting Securities.
(iii) "Voting Securities" means any securities of the Company which
carry the right to vote generally in the election of directors.
8. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the granting
and exercising of Awards thereunder, and the other obligations of the Company
under the Plan and any Award Agreement, shall be subject to all applicable
federal and state laws, rules and regulations, and to such approvals by any
regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Shares under any Award
until completion of such stock exchange or market system listing or registration
or qualification of such Shares or other required action under any state or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares in compliance with applicable laws, rules and regulations. No
provisions of the Plan shall be interpreted or construed to obligate the Company
to register any Shares under federal or state law.
(b) No Right to Continued Employment or Service. Neither the Plan nor any
action taken thereunder shall be construed as giving any employee or director
the right to be retained in the employ or service of the Company or any of its
Subsidiaries or Affiliates, nor shall it interfere in any way with the right of
the Company or any of its Subsidiaries or Affiliates to terminate any employee's
or director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other payment
to an Eligible Person, amounts of withholding and other taxes due in connection
with any transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and Eligible Persons to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include authority to
withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of an Eligible Person's tax obligations.
(d) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of shareholders of the Company or
Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's shareholders to the extent such shareholder approval is required under
Section 422 of the Code; provided, however, that, without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him or her. The Committee may
waive any conditions or rights under, amend any terms of, or amend, alter,
suspend, discontinue or terminate, any Award theretofore granted, prospectively
or retrospectively; provided, however, that, without the consent of a
Participant, no amendment, alteration, suspension, discontinuation or
termination of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Person or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Eligible Persons and employees.
No Award shall confer on any Eligible Person any of the rights of a shareholder
of the Company unless and until Shares are duly issued or transferred to the
Eligible Person in accordance with the terms of the Award.
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(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award shall give any such Participant any rights that are greater than those of
a general creditor of the Company; provided, however, that the Committee may
authorize the creation of trusts or make other arrangements to meet the
Company's obligations under the Plan to deliver cash, Shares, other Awards, or
other property pursuant to any Award, which trusts or other arrangements shall
be consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of options and other awards otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this Plan
shall be deemed salary or compensation for the purpose of computing benefits
under any benefit plan or other arrangement of the Company for the benefit of
its employees or directors unless the Company shall determine otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional Shares or whether such fractional Shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of Delaware without giving effect to
principles of conflict of laws.
(k) Effective Date; Plan Termination. The Plan shall become effective as
of September 12, 2000 (the "Effective Date"), subject to approval by the vote of
the holders of a majority of the shares of stock of the Company within 12 months
after the Effective Date. Awards may be made prior to such approval by
stockholders, but each such Award shall be subject to the approval of this Plan
by the stockholders, and if this Plan shall not be so approved, all Awards
granted under this Plan shall be of no effect. The Plan shall terminate as to
future awards on the date which is ten (10) years after the Effective Date.
(l) Prior Option. Upon approval of the Plan by stockholders of the
Company, the stock option granted to Suzanne Baer on April 17, 2000 shall be
considered an Option granted under the Plan.
(m) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
A-9
Please mark
your votes as [X]
indicated in
this example
(1) Proposal to approve the election of the following nine (9) nominees for
membership on the Company's Board of Directors: Messrs. 01 Richard A.
Bachmann; 02 Austin M. Beutner; 03 John C. Bumgarner; 04 Harold D.
Carter; 05 Robert D. Gershen; 06 Gary L. Hall, 07 William O. Hiltz; 08
John G. Phillips; and 09 Dr. Eamon M. Kelly, each to serve until the
Annual Meeting of Stockholders in the year 2003, and until their
successors are duly elected and qualified.
FOR WITHHOLD
[ ] [ ]
To withhold authority to vote for any nominee, write the name of that nominee in
the space provided below
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PLEASE MARK, SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE.
(2) Proposal to approve the Company's Amended and Restated 2000 Long Term
Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) Proposal to ratify the selection of KPMG LLP as the Company's
independent certified public accountants to audit the Company's
consolidated financial statements for the year ending December 31,
2002.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(4) To consider and take action upon any other matter which may properly
come before the meeting or any adjournment or postponement thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1, 2, 3, AND 4. Receipt of the proxy statement, dated
March 29, 2002, is hereby acknowledged.
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the board of directors' recommendation. The proxies cannot vote your shares
unless you sign and return this card.
Signature Signature Date
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Please sign your name exactly as it appears hereon. Joint owners must each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give your full title as it appears thereon.
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o FOLD AND DETACH HERE o
ENERGY PARTNERS, LTD.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned stockholder of Energy Partners, Ltd., a Delaware corporation
("EPL"), hereby appoints Richard A. Bachmann and John G. Phillips, or either of
them, as proxies, each with power to act without the other and with full power
of substitution, on behalf of the undersigned to vote the number of shares of
Common Stock of EPL that the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of Energy Partners, Ltd. to be
held on Thursday, May 9, 2002 at~9:00 a.m. Central Daylight Time, at the Hotel
Inter-Continental, 444 St. Charles Ave., New Orleans, Louisiana 70130 and at any
adjournment or postponement thereof, on the following matters:
(Continued and to be signed on the other side)
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o FOLD AND DETACH HERE o