ENERGY PARTNERS, LTD.
CHANGE OF CONTROL SEVERANCE PLAN
1. Purpose.
The purpose of the Energy Partners, Ltd. Change of Control Severance Plan
is to encourage officers and other key employees of Energy Partners, Ltd. to
make and continue careers with Energy Partners, Ltd. by providing participants
with certain severance benefits upon an involuntary termination of employment by
Energy Partners, Ltd. without Cause or voluntary termination by a participant
for Good Reason within two years following a Change of Control.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means with respect to any Participant (i) the
Participant's conviction of a felony, (ii) dishonesty, (iii) the
Participant's failure to perform his or her duties, (iv) insubordination,
(v) theft, (vi) wrongful disclosure of confidential information, (vii)
conflict of interest that is undisclosed and not approved by the Company's
Board, (viii) violation of written Company policies applicable to all
employees, or (ix) engaging in any manner, directly or indirectly, in a
business that competes with the business of the Company in any capacity
that is undisclosed and not approved by the Company's Board.
(c) "Change of Control" means and shall be deemed to have occurred if:
(i) any person (within the meaning of the Exchange Act), other
than the Company or a Related Party, 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
(ii) 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, cease for any reason to constitute a majority of the members
of the Board; or
(iii) 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 (A) 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 (B) 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
(iv) 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.
(d) "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.
(e) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Plan.
(f) "Company" means Energy Partners, Ltd., a corporation organized
under the laws of Delaware, or any successor corporation.
(g) "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.
(h) "Good Reason" for termination shall exist with respect to a
Participant if, without the Participant's consent, any of the following
events occur:
(i) a reduction in the Participant's base salary, or the
elimination or significant reduction of a material benefit under any
employee benefit plan or program of the Company or any Subsidiary in
which the Participant participates, other than an elimination or
reduction that affects other senior executive officers in a similar
way;
(ii) the loss of any of the Participant's titles or positions, a
significant diminution in the Participant's duties and
responsibilities or the assignment to the Participant of duties and
responsibilities inconsistent with the Participant's titles or
positions; or
(iii) any requirement that the Participant relocate outside the
greater metropolitan area in which the Participant is employed
immediately prior to the Change of Control.
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Notwithstanding the foregoing, if the Company ceases to be a public
company, an event otherwise described in clause (ii) above shall not
be deemed to have occurred merely because the Participant's title,
position, duties or responsibilities are changed in connection with
the Company's ceasing to be a public company, provided the
Participant's authority, functions, duties and responsibilities
otherwise remain substantially the same as the authority, functions,
duties and responsibilities of a person with the Participant's
position (determined before the change) within a comparably sized
independent private energy company.
A termination of employment by a Participant shall not be considered
to be for Good Reason unless the termination occurs within sixty (60)
days after the Participant has knowledge of the event constituting
Good Reason.
(i) "Participant" means an officer or other key employee of the
Company who has been designated by the Committee as a Participant in the
Plan pursuant to Section 3 of the Plan.
(j) "Plan" means this Energy Partners, Ltd. Change of Control
Severance Plan.
(k) "Related Party" means (i) a majority-owned subsidiary of the
Company, (ii) an employee or group of employees of the Company or any
majority-owned subsidiary of the Company, (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or any majority-owned subsidiary of the Company, or (iv) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of Voting Securities.
(l) "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.
(m) "Voting Securities" means any securities of the Company which
carry the right to vote generally in the election of directors.
3. Participation.
The Committee shall from time to time designate the officers and other key
employees of the Company who shall be Participants in the Plan, and may at any
time prior to a Change of Control remove from the list of Participants any
person who was previously designated as a Participant. In no event shall any
person who is covered by a Change of Control Severance Agreement with the
Company be a Participant in the Plan.
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4. Administration.
(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 the officers and other key employees who shall be
Participants in the Plan;
(ii) 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;
(iii) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
rules and regulations hereunder; and
(iv) 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, Participants, any person
claiming any rights under the Plan from or through any Participant, 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 the authority, subject to such terms
as the Committee shall determine, to perform administrative functions.
(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,
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) 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.
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5. Severance Benefits.
In the event that (i) there is a Change of Control of the Company, and (ii)
the employment of a Participant terminates within two years following said
Change of Control either by reason of an involuntary termination of employment
by the Company without Cause or a voluntary termination of employment by the
Participant for Good Reason, the Participant will be entitled to receive the
following severance benefits:
(a) a cash lump sum within 30 days following such termination of
employment in an amount equal to the Designated Multiple (as defined below)
multiplied by the sum of (i) the Participant's annual rate of base salary
for the year of termination of the Participant's employment and (ii) the
Participant's average annual bonus from the Company for the three calendar
years preceding the calendar year in which such termination of employment
occurs (or, if the Participant was employed by the Company for less than
three years preceding the calendar year in which such termination of
employment occurs, the greater of the Participant's average annual bonus
for all of the calendar years during which he or she was employed by the
Company before the calendar year in which such termination of employment
occurs or the Participant's target bonus for the calendar year in which
such termination of employment occurs); and
(b) the Company shall continue to provide the Participant for the
Designated Period (as defined below) following termination of the
Participant's employment with the same level of medical and life insurance
benefits as the Participant was receiving immediately prior to termination
of employment, provided, however, that as a condition to receiving such
benefits, the Participant shall be required to pay for such benefits the
same portion of the required premium for such coverage that the Participant
was required to pay immediately before termination of his or her
employment.
For purposes of subsection (a) above, the "Designated Multiple" shall
be either one or two as the Committee may designate with respect to
the applicable Participant. For purposes of subsection (b) above, the
Designated Period shall be twelve months in the case of a Participant
whose Designated Multiple is one, and eighteen months in the case of a
Participant whose Designated Multiple is two.
6. Vesting in Stock Options, Restricted Stock and Other Equity-Based
Awards.
In the event of a Change of Control of the Company, all stock options,
shares of restricted stock, restricted share units and other awards payable in
shares of stock of the Company granted by the Company to a Participant shall
become fully vested and shall (in the case of stock options) become fully
exercisable, and (in the case of restricted stock) all restrictions shall lapse;
provided, however, that in the case of any performance shares, performance share
units or other awards the vesting of which is tied to the satisfaction of a
performance measure or measures, the performance cycle shall end upon a Change
of Control and the Participant shall vest in only such number of shares or units
that the Participant would have earned if the performance cycle had ended as of
the end of the period covered by the most recently issued year-end finan-
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cial statement just prior to the date of the Change of Control plus such
additional number of shares or units as the plan administrator shall determine
in respect of any period of the performance cycle not covered by such year-end
statement.
7. Golden Parachute Reduction.
Notwithstanding the other provisions of this Plan, in the event that the
amount of payments or other benefits payable to a Participant under this Plan,
together with any payments or benefits payable under any other plan, program,
arrangement or agreement maintained by the Company or one of its affiliates,
would constitute an "excess parachute payment" (within the meaning of Section
280G of the Code), the payments under this Plan shall be reduced (by the minimum
possible amounts) until no amount payable to the Participant under this Plan
constitutes an "excess parachute payment" (within the meaning of Section 280G of
the Code); provided, however, that no such reduction shall be made if the net
after-tax payment (after taking into account Federal, state, local or other
income and excise taxes) to which the Participant would otherwise be entitled
without such reduction would be greater than the net after-tax payment (after
taking into account Federal, state, local or other income and excise taxes) to
the Participant resulting from the receipt of such payments with such reduction.
If, as a result of subsequent events or conditions (including a subsequent
payment or absence of a subsequent payment under this Plan or other plans,
programs, arrangements or agreements maintained by the Company or one of its
affiliates), it is determined that payments under this Plan to a Participant
have been reduced by more than the minimum amount required to prevent any
payments from constituting an "excess parachute payment," then an additional
payment shall be promptly made to the Participant in an amount equal to the
additional amount that can be paid without causing any payment to constitute an
"excess parachute payment." All determinations required to be made under this
Section 7, including whether a payment would result in an "excess parachute
payment" and the assumptions to be utilized in arriving at such determination,
shall be made by a Big Four accounting firm selected by the Company which shall
provide detailed supporting calculations both to the Company and the Participant
as requested by the Company or the Participant. All fees and expenses of the
accounting firm shall be borne solely by the Company and shall be paid by the
Company. All determinations made by the accounting firm under this Section 7
shall be final and binding upon the Company and the Participant.
8. Withholding.
The Company or any Subsidiary is authorized to withhold from any payment or
benefit under the Plan or any payroll or other payment to a Participant, amounts
of withholding and other taxes due in connection with any payment or benefit
under the Plan, and to take such other action as the Committee may deem
advisable to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any payment
or benefit under the Plan.
9. Changes to the Plan.
The Board may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of shareholders of the Company or Participants; provided,
however, that no amendment, alteration, suspension, discontinuation, or
termination of the Plan shall be permitted after a
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Change of Control of the Company which would adversely affect a Participant's
right to benefits in connection with that Change of Control.
10. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan. With respect to any
payments or benefits not yet made to a Participant under the Plan, nothing
contained in the Plan shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
11. Nonexclusivity of the Plan.
The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other compensation or
severance arrangements as it may deem desirable, and such arrangements may be
either applicable generally or only in specific cases.
12. Not Compensation for Benefit Plans.
No benefits payable under this Plan shall be deemed salary or compensation
for the purpose of computing benefits under any other benefit plan or other
arrangement of the Company for the benefit of its employees or directors unless
the Company shall determine otherwise.
13. No Right to Employment.
Nothing contained in this Plan shall give any Participant the right to be
retained in the employment of the Company or any of its affiliated or associated
corporations or affect the right of any such employer to dismiss any
Participant.
14. Governing Law.
The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of Delaware without giving effect to principles of conflict of laws.
15. Effective Date.
This Plan shall become effective as of March 24, 2005.
16. Title 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.
Participants in the Change of Control Severance Plan include:
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T. Rodney Dykes
William Flores, Jr.