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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Energy Partners, Ltd.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
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number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
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CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(ENERGY PARTNERS, LTD. LOGO)
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 2004
Notice is hereby given that the 2004 Annual Meeting of Stockholders of
Energy Partners, Ltd. (the "Company"), a Delaware corporation, will be held at
the Hotel Inter-Continental, Vieux Carre B Room, 444 St. Charles Ave., New
Orleans, Louisiana 70130, on Thursday, May 13, 2004, 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 2005 and until their successors are
duly elected and qualified;
(2) to ratify the appointment of KPMG LLP as the Company's independent
public accountants for the year ended December 31, 2004; and
(3) 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 17, 2004 (the
"Record Date") will be entitled to notice of, and to vote at, the 2004 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
2004 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
Executive Vice President, General
Counsel and Corporate Secretary
New Orleans, Louisiana
March 31, 2004
PLEASE RETURN THE ENCLOSED PROXY CARD TODAY, WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING IN PERSON. STOCKHOLDERS WHO ATTEND THE 2004 ANNUAL MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON.
ENERGY PARTNERS, LTD.
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
The 2003 Annual Report to Stockholders, including audited financial
statements, is being mailed to stockholders, together with these proxy
materials, on or about March 31, 2004.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 2004
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
13, 2004 at the Hotel Inter-Continental, Vieux Carre B Room, 444 St. Charles
Ave., New Orleans, Louisiana 70130 at 9:00 a.m., Central Daylight Time (the
"2004 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 2004 ANNUAL MEETING
VOTING PROCEDURES
Stockholders of record at the close of business on March 17, 2004 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date,
there were outstanding and entitled to vote 32,743,553 shares of the Company's
Common Stock (the "Company Shares" or the "Common Stock"). 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, provided that directors are elected by a plurality
of the votes of the shares present in person or represented by proxy and
entitled to vote at the meeting. Other than with respect to the election of
directors, 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, Bumgarner, Carlisle,
Carter, Dawkins, Gershen, Hiltz and Phillips and Dr. Kelly, to serve until
the Annual Meeting of Stockholders in the year 2005 and until their
successors are duly elected and qualified;
(2) FOR the ratification of the appointment of KPMG LLP as the
Company's independent public accountants for the year ending December 31,
2004; and
(3) At the discretion of the designated proxies named on the enclosed
Proxy Card, on any other matter that may properly come before the 2004
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.
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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 the four other most highly compensated
executive officers 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.
The information set forth below is as of the Record Date and is based upon
information supplied or confirmed by the named individuals:
PERCENT OF
PERCENT OF CONVERTIBLE CONVERTIBLE
COMMON COMMON PREFERRED PREFERRED
BENEFICIAL OWNER SHARES SHARES(1) SHARES SHARES
---------------- --------- ---------- ----------- -----------
Richard A. Bachmann(2).................... 2,663,850 8.1 -- *
John C. Bumgarner, Jr.(3)................. 41,211 * -- *
Jerry D. Carlisle(4)...................... 8,634 * -- *
Harold D. Carter(3)....................... 33,201 * -- *
Enoch L. Dawkins(5)....................... 2,000 * -- *
Robert D. Gershen(3)(6)................... 26,738 * -- *
Gary L. Hall(7)........................... 1,397,702 4.1 -- *
William O. Hiltz(8)....................... 147,525 * -- *
Dr. Eamon M. Kelly(3)..................... 33,703 * -- *
John G. Phillips(3)....................... 32,165 * -- *
Suzanne V. Baer(9)........................ 449,500 1.4 -- *
John H. Peper(10)......................... 209,724 * 1,020 *
Bruce R. Sidner(11)....................... 539,280 1.6 1,967 *
All directors and executive officers as a
group (13 persons)...................... 5,585,233 15.9 2,987 *
Candies Family Investments, L.L.C. and
affiliates(12).......................... 1,810,572 5.3 89,018 25.4
Energy Income Fund, L.P.(6)............... 3,487,856 10.7 -- *
State Street Research & Management
Company(13)............................. 1,765,800 5.4 -- *
---------------
* Represents beneficial ownership of less than 1%.
(1) Percentage ownership of a holder or class of holders is calculated by
dividing (1) the number of shares of Common Stock, including restricted
shares, outstanding attributed to such holder or class of holders, as the
case may be, plus the total number of shares of Common Stock underlying
options exercisable within sixty days from March 17, 2004 and Convertible
Preferred Stock and warrants held by such holder or class of holders, as
the case may be, by (2) the total number of shares of Common Stock
outstanding plus the total number of shares of Common Stock underlying
options exercisable within sixty days from March 17, 2004 and Convertible
Preferred Stock and warrants held by such holder or class of holders, as
the case may be, but not Common Stock underlying such securities held by
any other person.
(2) Based on an amended Schedule 13G filed with the Securities and Exchange
Commission on February 12, 2004. Includes 67,778 shares of Common Stock
subject to options granted to Mr. Bachmann under our Amended and Restated
2000 Long Term Stock Incentive Plan, which may be exercised within 60 days
from March 17, 2004. Also includes 933 shares of Common Stock beneficially
owned by Mr. Bachmann and held in trust by the Energy Partners, Ltd. 401(k)
Plan. The address for
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Mr. Bachmann is Energy Partners, Ltd., 201 St. Charles Avenue, Suite 3400,
New Orleans, Louisiana 70170.
(3) Includes 16,000 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 9,566 phantom shares accrued for Mr. Bumgarner
under our Stock and Deferral Plan for Non-Employee Directors.
(4) Includes 6,000 shares of Common Stock subject to options granted under our
2000 Stock Option Plan for Non-Employee Directors which are currently
exercisable. Includes 500 shares of Common Stock beneficially owned by Mr.
Carlisle's wife of which Mr. Carlisle disclaims beneficial ownership.
(5) Includes 2,000 shares of Common Stock subject to options granted to Mr.
Dawkins under our 2000 Stock Option Plan for Non-Employee Directors which
are currently exercisable.
(6) Based on an amended Schedule 13G filed with the Securities and Exchange
Commission on February 17, 2004. 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. The address for Energy Income Fund is 136 Dwight
Road, Longmeadow, Massachusetts 01106.
(7) The shares owned by Mr. Hall include 301,126 warrants granted in the
acquisition of Hall-Houston Oil Company ("Hall-Houston"), which are
currently exercisable. Includes an aggregate of 1,084,614 warrants held by
Houston Explorer Group, L.P., Hall Equities, Inc., Hall Family Trust, Hall
Partners, L.P., Hall Consulting Company, Inc., and LPCR Investments Group,
L.P., which Mr. Hall, together with members of his immediate family in
certain instances, controls. Includes 11,111 shares of Common Stock subject
to options granted to Mr. Hall under our Amended and Restated 2000 Long
Term Stock Incentive Plan, which may be exercised within 60 days from March
17, 2004. Also includes 851 shares of Common Stock beneficially owned by
Mr. Hall and held in trust by the Energy Partners, Ltd. 401(k) Plan. The
address for Mr. Hall is Energy Partners, Ltd., 700 Louisiana, Suite 2100,
Houston, Texas 77002.
(8) Includes (a) 16,000 shares of Common Stock subject to options granted under
our 2000 Stock Option Plan for Non-Employee Directors to Mr. Hiltz, which
are currently exercisable, and (b) 11,525 phantom shares accrued for Mr.
Hiltz under our Stock and Deferral Plan for Non-Employee Directors. Mr.
Hiltz has assigned his rights to the stock options and phantom shares to an
affiliate of Evercore Partners and retains shared dispositive power with
respect to these securities.
(9) Includes 303,889 shares of Common Stock subject to options granted to Ms.
Baer under our Amended and Restated 2000 Long Term Stock Incentive Plan,
which may be exercised within 60 days from March 17, 2004.
(10) Includes (a) 57,778 shares of Common Stock subject to options granted to
Mr. Peper under our Amended and Restated 2000 Long Term Stock Incentive
Plan, which may be exercised within 60 days from March 17, 2004, (b)
116,713 warrants granted in the acquisition of Hall-Houston, which are
currently exercisable and (c) 1,020 shares of Convertible Preferred Stock
convertible into 11,944 shares of Common Stock. Also includes 74 shares of
Common Stock beneficially owned by Mr. Peper and held in trust by the
Energy Partners, Ltd. 401(k) Plan.
(11) Includes 486 shares of Convertible Preferred Stock convertible into 5,688
shares of Common Stock held in trusts for Mr. Sidner's minor children of
which Mr. Sidner is the trustee. Also includes (a) 75,556 shares of Common
Stock subject to options granted to Mr. Sidner under our Amended and
Restated 2000 Long Term Stock Incentive Plan, which may be exercised within
60 days from March 17, 2004, (b) 311,920 warrants granted in the
acquisition of Hall-Houston, which are currently exercisable and (c) 1,481
shares of Convertible Preferred Stock convertible into 17,348 shares of
Common Stock. Also includes 653 shares of Common Stock beneficially owned
by Mr. Sidner and held in trust by the Energy Partners, Ltd. 401(k) Plan.
(12) Based on an amended Schedule 13D filed with the Securities and Exchange
Commission on March 8, 2004, the shares beneficially owned by Candies
Family Investments, L.L.C. include (a) 89,018 shares of
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Convertible Preferred Stock convertible into 1,042,357 shares of Common
Stock, (b) 593,749 warrants granted in the acquisition of Hall-Houston,
which are currently exercisable, 75,680 shares of Common Stock distributed
in connection with the Hall-Houston acquisition and 12,700 shares of Common
Stock acquired through market purchases, held by Otto Candies, LLC and (c)
1,135 shares held in each of the following: Kevin S. Candies Children's
Trust II, Otto B. Candies Children's Trust and Paul B. Candies Children's
Trust. The address for Candies Family Investments, LLC and its affiliates
is P.O. Box 25, Des Allemands, Louisiana 70030.
(13) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 17, 2004. The address for State Street Research & Management
Company is One Financial Center, 31st Floor, Boston, Massachusetts
02111-2690.
MATTERS TO BE PRESENTED TO THE STOCKHOLDERS AT THE 2004 ANNUAL MEETING
ITEM 1 -- ELECTION OF DIRECTORS
At the 2004 Annual Meeting, nine (9) directors are to be elected, each of
whom will serve until the Annual Meeting of Stockholders in the year 2005 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, John C. Bumgarner, Jerry D. Carlisle, Harold D. Carter,
Enoch L. Dawkins, Robert D. Gershen, William O. Hiltz, Dr. Eamon M. Kelly and
John G. Phillips. Each nominee has consented to be nominated and to serve, if
elected.
The Board has determined that each of the nominees, other than Mr.
Bachmann, is "independent" as defined by New York Stock Exchange listing
standards.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NINE (9) NOMINEES: MESSRS. BACHMANN, BUMGARNER, CARLISLE, CARTER, DAWKINS,
GERSHEN, HILTZ AND PHILLIPS AND DR. KELLY.
INFORMATION ABOUT THE NOMINEES
Richard A. Bachmann, age 59, 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 Superior
Energy Services, Inc.
John C. Bumgarner, Jr., age 61, has been a director since January 2000. Mr.
Bumgarner is currently serving as managing member of Utica Plaza Management
Company, a family-owned real estate company. Mr. Bumgarner was chief operating
officer and president of strategic investments for Williams Communications
Group, Inc., a high technology company, from May 2001 to November 2002. Williams
Communications Group, Inc. filed a Plan of Reorganization with the U.S.
Bankruptcy Court for the Southern District of New York in August 2002. 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 Group, Inc. Mr. Bumgarner is also a director of Management
Planning Systems, Inc. and Sirenza Microdevices, Inc. Mr. Bumgarner is a former
treasurer of Skelly Oil.
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Jerry D. Carlisle, age 58, has been a director since March 2003. Mr.
Carlisle has been an adjunct professor of management at the University of New
Orleans since 1998 and vice president and director of DarC Marketing, Inc., a
family-owned marketing company, since 1997. From 1983 to 1997, Mr. Carlisle was
vice president, controller and chief accounting officer of LL&E and, from 1979
to 1983, he held various management positions at LL&E. Mr. Carlisle has a
masters of business administration from Loyola University, is a certified public
accountant, and serves as a trustee of the Mississippi State University Business
School.
Harold D. Carter, age 65, 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, a director of
Abraxas Petroleum Corp., and former president of Sabine Corporation, an
independent oil and gas exploration company.
Enoch L. Dawkins, age 66, has been a director since January 2004. Mr.
Dawkins has recently retired from Murphy Exploration and Production Co., where
he served as president from 1991 until 2003. From 1964 until 1991, Mr. Dawkins
held various operational, marketing and managerial positions at Ocean Drilling
and Exploration Company, including president from 1989 until its acquisition by
Murphy Oil Corporation in 1991. He is also a director of Superior Energy
Services, Inc.
Robert D. Gershen, age 50, 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,
LLC, three funds that invest in energy companies in the United States.
William O. Hiltz, age 52, has been a director since November 2000. Mr.
Hiltz is a senior managing director of Evercore Partners ("Evercore") 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 67, 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 a professor
of international development at the Payson Center for International Development
and Technology Transfer at Tulane University, and a former director of LL&E.
John G. Phillips, age 81, 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 from LL&E in 1985.
ITEM 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors is required by law and
applicable New York Stock Exchange rules to be directly responsible for the
appointment, compensation and retention of the Company's independent public
accountants. The Audit Committee has appointed KPMG LLP as the independent
public accountants for the year ending December 31, 2004. While stockholder
ratification is not required by the Company's By-laws or otherwise, the Board of
Directors is submitting the selection of KPMG LLP to the stockholders for
ratification as part of good corporate governance practices. If the stockholders
fail to ratify the selection, the Audit Committee may, but is not required to,
reconsider whether to retain KPMG LLP. Even if the selection is ratified, the
Audit Committee in its discretion may direct the appointment of different
independent public accountants at any time during the year if it determines that
such a change would be in the best interest of the Company and its stockholders.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of KPMG LLP as the Company's independent public accountants to audit
the Company's consolidated financial statements for the year ending December 31,
2004. The persons designated as proxies will vote FOR the ratification of KPMG
LLP as the Company's independent public accountants, unless otherwise directed.
Representatives of
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KPMG LLP are expected to be present at the 2004 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. The
Company's Corporate Governance Guidelines provide that directors are expected to
attend regular Board meetings and the Annual Meeting of Stockholders in person
and to spend the time needed and meet as frequently as necessary to properly
discharge their responsibilities. During calendar year 2003, the Board of
Directors held a total of nine (9) 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. Beutner. Mr. Beutner resigned from the Board on January
15, 2004. All but one of the Company's then current directors attended the
annual meeting of stockholders in 2003.
The non-management directors will meet in executive sessions semi-annually
to discuss such matters as they deem appropriate and, at least once a year, to
review the Compensation Committee's annual review of the chief executive
officer. These executive sessions will be chaired by the Chairman of the
Nominating & Governance Committee. Stockholders may communicate with the
non-management directors by following the procedures under "-- Communications
with Board of Directors."
COMMITTEES OF THE BOARD
THE AUDIT COMMITTEE
The Board of Directors has a standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, the
current members of which are Messrs. Carlisle (Chairman), Carter, Dawkins (as of
January 2004), Hiltz and Dr. Kelly. The Board of Directors has determined that
each of the members of the Audit Committee is "independent" as defined by New
York Stock Exchange ("NYSE") listing standards and the rules of the SEC
applicable to audit committee members, and that Mr. Carlisle qualifies as an
"audit committee financial expert" as described in Item 401(h) of Regulation
S-K. The Audit Committee has a charter under which its primary purpose is to
assist the Board in overseeing (1) the integrity of the Company's financial
statements, (2) the independent auditor's qualifications and independence, (3)
the performance of the Company's internal audit function and independent auditor
and (4) the compliance by the Company with legal and regulatory requirements.
The Audit Committee is directly responsible for the appointment and compensation
of the independent auditor. During fiscal year 2003, the Audit Committee held
six (6) meetings.
THE COMPENSATION COMMITTEE
The Board of Directors has a standing Compensation Committee, the current
members of which are Messrs. Bumgarner (Chairman), Gershen and Phillips. The
Compensation Committee has a charter under which its responsibilities and
authorities include reviewing the Company's compensation strategy, reviewing the
performance of and approving the compensation for the senior management (other
than the chief executive officer), evaluating the chief executive officer's
performance and, either as a committee or together with the other independent
directors, determining and approving the chief executive officer's compensation
level. 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. The Board of Directors has determined that each member of
the Compensation Committee is "independent" as defined by NYSE listing
standards. During fiscal year 2003, the Compensation Committee held four (4)
meetings.
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THE NOMINATING & GOVERNANCE COMMITTEE
The Board of Directors also has a standing Nominating & Governance
Committee, the current members of which are Dr. Kelly (Chairman) and Messrs.
Phillips and Gershen. The Nominating & Governance Committee has a charter under
which its responsibilities and authorities include identifying director
candidates and recommending director nominees for the next annual meeting of
stockholders or for any vacancy on the Board of Directors and recommending
members of the Board of Directors to serve on the various committees. In
addition, the Nominating & Governance Committee develops and recommends to the
Board of Directors the Corporate Governance Guidelines of the Company and is
responsible for the oversight of the evaluation of the Board of Directors and
management. The Board of Directors has determined that each member of the
Nominating & Governance Committee is "independent" as defined by NYSE listing
standards. During fiscal year 2003, the Nominating & Governance Committee held
two (2) meetings.
Copies of the charters for the committees, as well as the Company's
Corporate Governance Guidelines and Code of Business Conduct and Ethics (the
"Code"), will be available on the Company's website at www.eplweb.com by the
time of the 2004 Annual Meeting. The Company will also post on its website any
amendment to the Code and any waiver of the Code granted to any of its directors
or executive officers.
NOMINEE QUALIFICATIONS
When seeking candidates for director, the Nominating & Governance Committee
may solicit suggestions from incumbent directors, management, stockholders or
others. While the Nominating & Governance Committee has authority under its
charter to retain a search firm for this purpose, no such firm was utilized in
2003. After conducting an initial evaluation of a potential candidate, the
Nominating & Governance Committee will interview that candidate if it believes
such candidate might be suitable to be a director. The Nominating & Governance
Committee may also ask the candidate to meet with management. If the Nominating
& Governance Committee believes a candidate would be a valuable addition to the
Board, it will recommend to the full Board that candidate's election.
The Nominating & Governance Committee selects each nominee based on the
nominee's skills, achievements and experience. The Nominating & Governance
Committee considers a variety of factors in selecting candidates, including, but
not limited to the following: independence, wisdom, integrity, an understanding
and general acceptance of the Company's corporate philosophy, valid business or
professional knowledge and experience, a proven record of accomplishment with
excellent organizations, an inquiring mind, a willingness to speak one's mind,
an ability to challenge and stimulate management and a willingness to commit
time and energy.
This year, Mr. Dawkins, who was elected as a director by the Board in
January 2004, is standing for election by the stockholders for the first time.
Mr. Dawkins was initially recommended to the Nominating & Governance Committee
for consideration by our chief executive officer who believed he would make a
valuable addition to the Board.
COMMUNICATIONS WITH BOARD OF DIRECTORS
The Nominating & Governance Committee, on behalf of the Board, reviews
letters from stockholders concerning the Company's annual general meeting and
governance process and makes recommendations to the Board based on such
communications. Stockholders can send communications to the Board by mail in
care of the Corporate Secretary at 201 St. Charles Avenue, Suite 3400, New
Orleans, Louisiana 70170, and should specify the intended recipient or
recipients. All such communications, other than unsolicited commercial
solicitations or communications, will be forwarded to the appropriate director
or directors for review. Any such unsolicited commercial solicitation or
communication not forwarded to the appropriate director or directors will be
available to any non-management director who wishes to review it.
8
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 2003.
Messrs. Beutner and Hiltz are principals of Evercore, which through
affiliates owned more than 5% of our outstanding Common Stock until November
2003. Pursuant to our stockholder agreement, we paid an affiliate of Evercore a
monitoring fee of $250,000 in 2003. The stockholder agreement terminated in
November 2003 when Evercore's affiliates sold their remaining interest in the
Company. Evercore may provide investment banking services to us from time to
time. Evercore provided no such services during fiscal year 2003.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $27,500 and meeting
fees of $1,000 for each Board or committee meeting attended (even if held on the
same date). The Chairman of the Audit Committee receives an additional $15,000
per year, each other Audit Committee member receives an additional $5,000 per
year and the Chairman of each of the Compensation Committee and the Nominating &
Governance Committee receives an additional $10,000 per year. 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 in cash. Directors are also reimbursed for
their reasonable expenses.
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.
9
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 $100,000 in 2003.
LONG TERM
COMPENSATION
AWARDS(1)
-----------------------
SECURITIES
RESTRICTED UNDERLYING
SHARE OPTIONS/ ALL OTHER
SALARY BONUS AWARD(S) SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(2)
--------------------------- ---- ------- ------- ---------- ---------- ------------
Richard A. Bachmann.................... 2003 372,000 500,000 90,630 53,334 9,096
Chairman, President and Chief 2002 350,000 270,000 500,000 -- 6,189
Executive Officer(3)(4) 2001 320,000 154,000 -- 100,000 1,806
Suzanne V. Baer........................ 2003 232,500 200,000 -- 26,667 2,138
Executive Vice President and 2002 218,750 175,000 94,143 75,000 1,924
Chief Financial Officer(5) 2001 200,000 72,000 -- 40,000 966
Gary L. Hall........................... 2003 300,000 -- -- 33,333 7,518
Vice Chairman(6) 2002 300,000 -- -- 200,000 6,597
John H. Peper.......................... 2003 201,500 175,000 151,050 23,333 4,495
Executive Vice President, General 2002 189,750 128,588 37,772 75,000 591
Counsel and Corporate Secretary(6)(7)
Bruce R. Sidner........................ 2003 232,500 230,000 453,150 26,667 5,801
Vice President of Exploration(6)(8) 2002 225,000 225,000 66,407 100,000 4,860
---------------
(1) Under the Amended and Restated 2000 Long Term Stock Incentive Plan, all
outstanding awards will become fully exercisable at the time of a change of
control of the Company.
(2) The amounts in each year represent the dollar value of term life insurance
premiums paid by us for the benefit of the executive officers, and the
dollar value of the Company match to the Energy Partners, Ltd. 401(k) Plan
on the employees' behalf. The plan requires that the match be held in our
Common Stock for a period of two years. In 2003, Mr. Peper's amount also
includes relocation expenses.
(3) The 2002 bonus for Mr. Bachmann was paid in 2003 and was not available at
the time of the Proxy Statement for the 2003 Annual Meeting of Stockholders.
Such bonus amount is included in the year 2002 disclosure above.
(4) On July 11, 2002, Mr. Bachmann was granted 60,240 restricted shares as a
Special Recognition Award. The shares vest on January 17, 2005. On May 6,
2003, Mr. Bachmann was awarded 9,000 restricted shares, half of which vest
on May 6, 2004 and the remainder on May 6, 2005. As of December 31, 2003,
the unvested portion of Mr. Bachmann's restricted shares had a value of
$962,436. Dividends, if any, will be paid on the restricted shares at the
same rate paid to all stockholders.
(5) On January 17, 2002, Ms. Baer was granted 6,250 restricted shares which
fully vested on January 17, 2004 and on March 18, 2003 she was granted 4,545
restricted shares, one half of which vested on March 18, 2004 and the
remainder vest on March 18, 2005. As of December 31, 2003, the unvested
portion of Ms. Baer's restricted shares had a value of $150,051. Dividends,
if any, will be paid on the restricted shares at the same rate paid to all
stockholders.
(6) Messrs. Hall, Peper and Sidner commenced employment with us in January 2002.
Mr. Hall has announced his resignation as Vice Chairman and a director of
the Company.
(7) On March 18, 2003, Mr. Peper was granted 3,878 restricted shares. One half
of the shares vested on March 18, 2004 and the remainder vest on March 18,
2005. On May 6, 2003, Mr. Peper was granted 15,000 restricted shares all of
which vest on May 6, 2006. As of December 31, 2003, the unvested portion
10
of Mr. Peper's restricted shares had a value of $262,404. Dividends, if any,
will be paid on the restricted shares at the same rate paid to all
stockholders.
(8) On March 18, 2003, Mr. Sidner was granted 6,818 restricted shares. One half
of the shares vested on March 18, 2004 and the remainder vest on March 18,
2005. On May 6, 2003, Mr. Sidner was granted 45,000 restricted shares all of
which vest on May 6, 2006. As of December 31, 2003, the unvested portion of
Mr. Sidner's restricted shares had a value of $720,270. Dividends, if any,
will be paid on the restricted shares at the same rate paid to all
stockholders.
INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS
The table below sets forth information regarding stock options granted to
our Chief Executive Officer and our four other most highly compensated executive
officers during the fiscal year ended December 31, 2003. We did not grant any
stock appreciation rights during 2003.
INDIVIDUAL GRANTS
---------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE VALUE($)(1)
---- ------------ ------------ ----------- ----------- -----------
Richard A. Bachmann(2)............ 53,334 10.3 10.07 May 6, 2013 249,000
Suzanne V. Baer(2)................ 26,667 5.1 10.07 May 6, 2013 124,000
Gary L. Hall(2)................... 33,333 6.4 10.07 May 6, 2013 155,000
John H. Peper(2).................. 23,333 4.5 10.07 May 6, 2013 109,000
Bruce R. Sidner(2)................ 26,667 5.1 10.07 May 6, 2013 124,000
---------------
(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 May
6, 2003, with a grant date stock value of $10.07, it assumed a stock price
volatility of 49%, a risk-free rate of return of 4.5% and a dividend of $0
per year. The value has been reduced by approximately 4% to reflect the
probability of forfeiture due to termination of employment prior to vesting
or of a shortened option term due to termination of employment prior to the
expiration date.
(2) One-third of the options are exercisable on May 6, 2004, one-third are
exercisable beginning on May 6, 2005 and the remainder are exercisable
beginning on May 6, 2006.
The table below sets forth information concerning the value of unexercised
stock options held by our Chief Executive Officer and our four other most highly
compensated executive officers as of December 31, 2003.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF VALUE FISCAL YEAR END(#) FISCAL YEAR END($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
Richard A. Bachmann....... -- -- -- 153,334 -- 514,269
Suzanne V. Baer........... 150,000 882,000 275,000 91,667 1,340,000 374,135
Gary L. Hall.............. -- -- 133,333 100,000 789,331 522,334
John H. Peper............. -- -- 50,000 48,333 296,000 237,365
Bruce R. Sidner........... -- -- 66,667 60,000 394,669 299,466
---------------
(1) Fair market value on date of exercise minus the exercise price of the stock
options.
(2) Based on the positive difference, if any, between the closing sale price of
the Company's Common Stock of $13.90 on December 31, 2003, as reported by
the New York Stock Exchange, and the exercise price of such options.
11
LONG-TERM INCENTIVE PLAN -- 2003 PERFORMANCE SHARES AWARDS
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUT
PERFORMANCE PERIOD UNTIL ----------------------------
SHARES GRANTED PAYOUT THRESHOLD TARGET MAXIMUM
-------------- ------------ --------- ------ -------
Richard A. Bachmann.................... 26,666 3 Years -- 26,666 53,332
Suzanne V. Baer........................ 13,333 3 Years -- 13,333 26,666
Gary L. Hall........................... 16,667 3 Years -- 16,667 33,334
John H. Peper.......................... 11,667 3 Years -- 11,667 23,334
Bruce R. Sidner........................ 13,333 3 Years -- 13,333 26,666
The payout can vary depending on the Company's achievement of reserve per
share goals, value per proved reserves and a three year average of total
stockholder return all computed after a 3-year cycle. Payout is equal to the
number of shares times a performance modifier based on the percent by which
actual performance exceeds or falls short of the base target.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
We have employment and stock ownership agreements with each of Messrs.
Peper and Sidner which expire on January 15, 2005 and January 15, 2007,
respectively. Under the agreements, Messrs. Peper and Sidner will receive annual
salaries of at least $174,000 and $245,000, respectively, and received options
to purchase 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. In addition, in connection with a recent
extension of the term of his agreement, Mr. Sidner received a grant of 71,429
restricted shares, which will vest on January 14, 2007, subject to his continued
employment with the Company and subject to earlier vesting in the event of
death, disability, involuntary termination without cause, termination for good
reason or a change of control. If an executive is terminated without cause in
connection with a change of control, 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 not conditions for vesting other than continued employment will
become fully vested and become fully exercisable. In addition, each executive
officer is prohibited from competing with us, 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 of up to
two years following termination of his employment with us.
We have an employment and stock ownership agreement with Mr. Hall which
expires on January 15, 2005 and entitles Mr. Hall to an annual salary of
$300,000. Mr. Hall received options to purchase 200,000 shares of Common Stock
on the date of his appointment as an executive officer. In connection with Mr.
Hall's decision not to stand for re-election as a director and to resign as an
employee of the Company by May 13, 2004, and in consideration of his efforts in
integrating Hall-Houston Oil Company, the Company has agreed to pay Mr. Hall the
salary he would have earned through the term of his agreement and to accelerate
the vesting of all of his unvested options. These options will be exercisable
for twelve (12) months following his resignation.
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") reviews the general
compensation policies of the Company, approves the compensation to be paid to
certain officers and administers the Company's Amended
12
and Restated 2000 Long Term Stock Incentive Plan. The Committee is composed of
three (3) non-employee directors: Messrs. Bumgarner, Gershen and Phillips.
PHILOSOPHY OF COMPENSATION
The objectives of the Company's compensation program are (i) to attract and
retain the best available talent, (ii) to motivate employees to achieve the
Company's goals, (iii) to link employee 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 employee's
potential annual compensation is entirely dependent upon measurable improvement
to stockholder 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 in part 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, restricted shares of Common Stock and performance shares.
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 quantitative and 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 2000 Long Term Stock Incentive Plan (as amended and
restated, the "Plan") on September 12, 2000, and the stockholders approved it on
September 15, 2000. The Board of Directors amended and restated the Plan in
January 2002 and unanimously approved an amendment of the Plan on March 21,
2002. The stockholders approved the amended and restated Plan on May 9, 2002.
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.
13
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 $372,000 for 2003 was commensurate with the median base salary for
chief executive officers of similarly situated exploration and production
companies. In May 2003, Mr. Bachmann was granted 9,000 shares of Restricted
Stock equal to $90,630 grant date fair value which vest one half on May 6, 2004
and the remainder on May 6, 2005, 53,334 stock options which vest ratably over
three years and 26,666 performance shares which are paid three years from date
of grant, subject to the Company's achievement of specified goals. In March
2004, Mr. Bachmann was awarded a bonus for 2003 of $500,000.
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
John C. Bumgarner, Chairman
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. The Board of Directors adopted and approved a new Audit
Committee Charter on January 15, 2004. A copy of the Audit Committee Charter is
attached to this Proxy Statement as Appendix A.
It is not the responsibility of the Audit Committee to plan or conduct
audits, to determine that the Company's financial statements are in all material
respects complete and accurate in accordance with generally accepted accounting
principles, or to certify the Company's financial statements. This is the
responsibility of management and the independent public accountants. It is also
not the responsibility of the Audit Committee to guarantee the opinion of the
independent public accountants or assure compliance with laws and regulations
and the Company's Code of Business Ethics.
Based on the Audit Committee's review of the audited financial statements
as of and for the fiscal year ended December 31, 2003 and its discussions with
management regarding such audited financial statements, its receipt of written
disclosures and the letter from the independent public accountants required by
Independence Standards Board Standard No. 1, its discussions with the
independent public accountants 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, 2003 be included in
the Company's Annual Report on Form 10-K for such fiscal year.
FEES BILLED TO THE COMPANY BY KPMG LLP DURING FISCAL YEARS ENDED DECEMBER 31,
2003 AND 2002
Audit Fees. Audit fees (including expenses) billed (or billable) to the
Company by KPMG LLP with respect to fiscal 2003 and fiscal 2002 were $312,300
and $168,000, respectively.
Audit-Related Fees. Audit-related fees (including expenses) billed (or
billable) to the Company by KPMG LLP with respect to fiscal 2003 and fiscal 2002
were $14,000 and $10,000, respectively. Such fees were in connection with the
Company's benefit plan audit.
14
Tax Fees. Tax fees (including expenses) billed by KPMG LLP with respect to
fiscal 2003 and fiscal 2002 were $5,200 and $97,500, respectively. Such fees
were primarily in connection with tax consulting services.
All Other Fees. All other fees (including expenses) billed by KPMG LLP
with respect to fiscal 2003 and fiscal 2002 were $3,200 and $88,000,
respectively. Such fees were primarily in connection with a business risk
assessment and operational internal audits.
The Audit Committee believes that the foregoing expenditures are compatible
with maintaining the independence of the Company's public accountants.
The Audit Committee has adopted procedures for pre-approving all audit and
permissible non-audit services provided by the independent public accountants.
The Audit Committee will annually review and pre-approve the audit, review and
attest services to be provided during the next audit cycle by the independent
public accountants and may annually review and pre-approve permitted non-audit
services to be provided during the next audit cycle by the independent public
accountants. To the extent practicable, the Audit Committee will also review and
approve a budget for such services. Services proposed to be provided by the
independent public accountants that have not been pre-approved during the annual
review and the fees for such proposed services must be pre-approved by the Audit
Committee or its designated subcommittee. Additionally, fees for previously
approved services that are expected to exceed the previously approved budget
must also be pre-approved by the Audit Committee or its designated subcommittee.
All requests or applications for the independent public accountants to provide
services to the Company shall be submitted to the Audit Committee or its
designated subcommittee by the Chief Financial Officer or Controller and must
address whether, in his or her view, the request or application is consistent
with applicable laws, rules and regulations relating to auditor independence.
Audit Committee
Jerry D. Carlisle, Chairman
Harold D. Carter, Member
Enoch L. Dawkins, Member
William O. Hiltz, Member
Dr. Eamon M. Kelly, Member
15
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative return (assuming
reinvestment of any dividends) for (i) the Company, (ii) the S&P 500 Index, and
(iii) the Company's peer group composed of twelve (12) independent oil and gas
exploration and production companies with activities focused in the Gulf of
Mexico region (ATP Oil & Gas Corporation, Cabot Oil & Gas Corporation, Comstock
Resources, Inc., Denbury Resources Inc., Houston Exploration Company, Newfield
Exploration Company, Remington Oil and Gas Corporation, St. Mary Land &
Exploration Company, Spinnaker Exploration Company, Stone Energy Corporation,
The Meridian Resource Corporation, 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.
COMPARISON OF 38 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.
----------------------------------------------------------------------------
11/2/00 12/00 12/01 12/02 12/03
----------------------------------------------------------------------------
Energy Partners, Ltd. 100.00 83.75 50.33 71.33 92.67
S&P 500 100.00 92.57 81.57 63.54 81.77
Peer Group 100.00 134.33 104.53 100.68 133.75
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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, 2003, all applicable filings were made timely, except that
Energy Income Fund, L.P., a ten percent holder of whom Mr. Gershen is a managing
director of the general partner, reported late the sale of 1,201,669 shares of
common stock made in a public offering, and Ms. Baer, Mr. Peper and Mr. Sidner
reported a week late the receipt of restricted shares in March 2003.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a discussion of certain relationships and related transactions with our
directors and greater than 5% stockholders, 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 2004 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 2005 ANNUAL MEETING
Stockholder proposals intended to be included in the Proxy Statement
relating to the Company's 2005 Annual Meeting pursuant to Rule 14a-8 ("Rule
14a-8") under the Exchange Act must be received by the Corporate Secretary of
the Company no later than December 1, 2004 and must otherwise comply with Rule
14a-8.
Any stockholder proposals received outside of the Rule 14a-8 procedure for
consideration at the Company's 2005 Annual Meeting must be delivered to the
Corporate Secretary of the Company no later than March 14, 2005, but no earlier
than February 12, 2005. If such timely notice of a stockholder proposal is not
given, the proposal may not be brought before the 2005 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
2005 Annual Meeting.
Stockholder proposals for nominees for directors must comply with the
procedures set forth in Section 2.10 of the Company's By-laws. In order to
recommend a nominee for a director position, a stockholder must be a stockholder
of record at the time of giving notice and must be entitled to vote at the
meeting at which such nominee will be considered. Stockholder recommendations
must be made pursuant to written notice delivered to the Secretary at the
principal executive offices of the Company (i) in the case of a nomination for
election at an annual meeting, not later than 60 days nor earlier than 90 days
prior to the first anniversary of the preceding year's annual meeting; and (ii)
in the case of a special meeting at which directors are to be elected, not
earlier than the close of business on the 90th day prior to such special meeting
and not later than the close of business on the later of the 60th day prior to
such special meeting or the tenth day following the day on which public
announcement is first made of the date of the meeting and of the nominees
proposed by the Board of Directors to be elected at the special meeting. In the
event that the date of the annual meeting is changed by more than 30 days from
the anniversary date of the preceding year's annual meeting, the stockholder
notice described above will be deemed timely if it is received not earlier than
the close of business on the 90th day prior to such annual meeting and not later
than the close of business on the later of the 60th day prior to such annual
meeting or the tenth day following the day on which public announcement of the
date of such meeting is first made.
The stockholder notice must set forth the following:
- As to each person the stockholder proposes to nominate for election as a
director, (i) the name, age, business address and residence address of
the person, (ii) the principal occupation and employment of the person,
(iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person and (iv)
all information relating to such person that would be required to be
disclosed in solicitations of proxies for the election of directors
pursuant to Regulation 14A under the Exchange Act and Rule 14a-11
thereunder, including such person's written consent to being named as a
nominee and to serving as a director if elected, and
- As to the nominating stockholder and the beneficial owner, if any, of
such stock, (i) such stockholder's and beneficial owner's, name and
address as they appear on the Company's books, (ii) the class and number
of shares of the Company's capital stock which are owned beneficially or
of record by such
17
stockholder and such beneficial owner, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant
to which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by
proxy at the annual meeting to nominate the person named in its notice,
(v) a representation whether the stockholder or the beneficial owner, if
any, intends or is part of a group which intends to (a) deliver a proxy
statement and/or form of proxy to holders of at least the percentage of
the Company's outstanding capital stock required to elect the nominee
and/or (b) otherwise solicit proxies from stockholders in support of such
nomination and (vi) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act, and
the rules and regulations promulgated thereunder.
In addition to complying with the foregoing procedures, any stockholder
nominating a director must comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder. Recommendations must also
include a written statement from the candidate expressing a willingness to
serve.
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 2004 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 31, 2004
18
APPENDIX A
ENERGY PARTNERS, LTD.
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee, in its capacity as a committee of the
Board, is to assist the Board in overseeing (1) the integrity of the financial
statements of the Company, (2) the independent auditor's qualifications and
independence, (3) the performance of the Company's internal audit function and
independent auditor and (4) the compliance by the Company with legal and
regulatory requirements.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the responsibility or duty of the Audit Committee to:
certify the Company's financial statements, guarantee the auditor's report, plan
or conduct audits or determine that the Company's financial statements and
disclosures are complete and accurate or are in accordance with generally
accepted accounting principles or applicable rules and regulations. It is also
not the responsibility of the Audit Committee to assure compliance with laws and
regulations or with the Company's Code of Business Ethics, or to set or
determine the adequacy of the Company's reserves. These are the responsibilities
of management and the independent auditor, as appropriate.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, independent or outside
legal, accounting, or other consultants or experts of its choice as it deems
necessary or appropriate in the performance of its duties. The Audit Committee
may request any officer or employee of the Company or the Company's counsel or
independent auditor to attend any meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee. The Audit Committee
shall meet periodically with management, the internal auditors and the
independent auditor in separate executive sessions.
AUDIT COMMITTEE COMPOSITION
The members of the Audit Committee shall be appointed annually by the Board
on the recommendation of the Nominating & Governance Committee. The Audit
Committee shall consist of no fewer than three members. The members of the Audit
Committee shall meet the independence requirements of the New York Stock
Exchange, the Securities and Exchange Commission and other applicable laws,
rules and regulations. No Audit Committee member shall simultaneously serve on
the audit committee of more than two other public companies unless the Board of
Directors determines that such simultaneous service would not impair the ability
of that Audit Committee member effectively to serve on the Audit Committee.
The members of the Audit Committee may be replaced by the Board.
The Audit Committee members must be financially literate, as such
qualification is interpreted by the Board in its business judgment. In addition,
at least one member must have accounting or related financial management
expertise, as the Board interprets such qualification in its business judgment.
The Audit Committee must have at least one member who is an "audit
committee financial expert," as defined by the SEC, on or prior to the date
required by the SEC.
The Audit Committee may delegate authority to an individual member of the
committee or to subcommittees to the extent permitted by applicable laws, rules
and regulations, including those of the New York Stock Exchange.
A Chairperson may be elected by the Board.
A-1
RESPONSIBILITIES OF AUDIT COMMITTEE
GENERAL
(1) Discuss with management and the independent auditor the annual audited
financial statements, including disclosures made in management's discussion and
analysis, and any related certifications required to be made by any officer of
the Company, and recommend to the Board whether the audited financial statements
should be included in the Company's Form 10-K.
(2) Discuss with management and the independent auditor the Company's
quarterly financial statements, including disclosures made in management's
discussion and analysis and any related certifications required to be made by
any officer of the Company, prior to the filing of its Form 10-Q, including the
results of the independent auditor's reviews of the quarterly financial
statements.
(3) Discuss with management and the independent auditor (a) major issues
regarding accounting principles and financial statement presentations, including
any significant changes in the Company's selection or application of accounting
principles, and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies, (b) analyses prepared by management and/or the independent auditor
setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including analyses
of the effects of alternative GAAP methods on the financial statements and (c)
the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the Company's financial statements.
(4) Discuss with management the Company's earnings press releases, as well
as financial information and earnings guidance provided to analysts and rating
agencies. The Audit Committee's responsibility to discuss earnings releases as
well as financial information and earnings guidance may be done generally (i.e.,
discussion of the types of information to be disclosed and the type of
presentation to be made, particularly any "pro forma" or "adjusted" non-GAAP
information). The Audit Committee need not discuss in advance each earnings
release or each instance in which the Company may provide earnings guidance.
(5) Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
(6) Review annually with management and the independent auditors the
Company's Code of Business Ethics, as well as review the actions taken to
monitor compliance with the Code of Business Ethics.
(7) Review any exceptions to the Company's Code of Business Ethics and the
actions management has taken to resolve the exceptions.
(8) Review with the Company's counsel any legal, regulatory and
environmental matters that may have a material impact on the Company's financial
statements.
(9) Review the responsibilities, budget and staffing of the Company's
internal audit program, including the proposed annual audit plan, periodic
progress reports on the status of the plan, and summaries of any significant
issues raised during the performance of internal audits.
(10) Review and assess compliance with all applicable rules and regulations
of the SEC and the New York Stock Exchange specifically applicable to the
composition and responsibilities of the Audit Committee.
INDEPENDENT AUDITORS
(1) The Audit Committee shall be directly responsible for the appointment,
compensation (including as to fees and terms) and retention of the independent
auditor and for oversight of the work of the independent auditor (including
resolution of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company. The
independent auditor shall report directly to the Audit Committee. The
A-2
performance of any audit or permitted non-audit services by the independent
auditor shall be subject to prior approval in accordance with applicable laws,
rules or regulations.
(2) Review the experience and qualifications of the lead partner of the
independent auditor.
(3) Obtain and review a report from the independent auditor at least
annually describing (a) the auditor's internal quality-control procedures, (b)
any material issues raised by the most recent quality-control review, or peer
review, of the firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting one or more
independent audits carried out by the firm and any steps taken to deal with any
such issues, and (c) (to assess the auditor's independence), all relationships
between the independent auditor and the Company. After reviewing such report and
the independent auditor's work throughout the year, evaluate the qualifications,
performance and independence of the independent auditor, taking into account the
opinions of management and the Company's internal auditors. In addition to
assuring the regular rotation of the lead (or coordinating) audit partner
(having primary responsibility for the audit) as required by law, the Audit
Committee shall consider whether, in order to assure continuing auditor
independence, there should be regular rotation of the audit firm itself. The
Audit Committee shall present its conclusions to the Board and take any actions
deemed necessary or desirable by the Audit Committee to satisfy itself as to the
qualifications, performance and independence of the independent auditor.
(4) Set clear policies for the Company's hiring of employees or former
employees of the independent auditor, but in no event shall any such employee
who has participated in any capacity in the audit of the Company be hired in a
management position with the Company during the one year period preceding the
date of the initiation of the Company's most recent audit.
(5) Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit. In particular, discuss:
(a) The adoption of, or changes to, the Company's significant auditing
and accounting principles and practices as suggested by the independent
auditor, internal auditors or management;
(b) Any management or internal control letter provided, or proposed to
be provided, by the independent auditor and the Company's response to that
letter; and
(c) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.
(6) Receive, and take any required or appropriate action in relation to,
all reports and other communications which the independent auditor is required
to make to the Audit Committee, including timely reports concerning:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management officials of the Company, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
independent auditor; and
(c) other material written communications between the independent
auditor and the management of the Company, such as any management letter or
schedule of unadjusted differences.
(7) Discuss with the independent auditors their judgments about the
quality, not just the acceptability, of the Company's accounting principles as
applied in its financial reporting.
(8) Review with the independent auditor any audit problems or difficulties
and management's response.
A-3
OTHER AUDIT COMMITTEE RESPONSIBILITIES
(1) Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
(2) Annually prepare an audit committee report as required by the SEC to be
included in the Company's annual proxy statement.
(3) Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Audit Committee or the Board deems
necessary or appropriate.
(4) The Audit Committee shall make regular reports to the Board.
(5) The Audit Committee shall annually review the Audit Committee's own
performance.
(6) The Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board for approval.
MEETINGS
The Audit Committee may meet as often as may be necessary or appropriate,
but must meet at least quarterly. Meetings may be called by the Chairperson of
the Committee and/or the President and Chief Executive Officer of the Company.
All meetings of the Audit Committee shall be held pursuant to the Bylaws of the
Company with regard to notice and waiver thereof, and written minutes of each
meeting shall be duly filed in the Company's records. Reports of meetings of the
Audit Committee shall be made to the Board at its next regularly scheduled
meeting following the Audit Committee meeting accompanied by any recommendations
to the Board approved by the Audit Committee.
A-4
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 John C. Bumgarner; 03 Jerry D. Carlisle; 04 Harold D. Carter;
05 Enoch L. Dawkins; 06 Robert D. Gershen; 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 2005, 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
--------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE.
(2) Proposal to ratify the selection of KPMG LLP as the Company's independent
public accountants to audit the Company's consolidated financial statements
for the year ending December 31, 2004.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) 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 AND 3. Receipt of the proxy statement, dated March
31, 2004, 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
------------------ ----------------- --------------------
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.
- FOLD AND DETACH HERE -
ENERGY PARTNERS, LTD.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 2004
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 13, 2004 at 9:00 a.m., Central Daylight Time, at the Hotel
Inter-Continental, Vieux Carre B Room, 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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