SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENERGY PARTNERS, LTD.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
(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 6, 2003
Notice is hereby given that the 2003 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 Tuesday, May 6, 2003, at 9:00 a.m., Central
Daylight Time, for the following purposes:
(1) to elect ten (10) directors to hold office until the Annual
Meeting of Stockholders in the year 2004 and until their successors are
duly elected and qualified; and
(2) 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 14, 2003 (the
"Record Date") will be entitled to notice of, and to vote at, the 2003 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
2003 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, 2003
PLEASE RETURN THE ENCLOSED PROXY CARD TODAY, WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING IN PERSON. STOCKHOLDERS WHO ATTEND THE 2003 ANNUAL MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON.
ENERGY PARTNERS, LTD.
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
The 2002 Annual Report to Stockholders, including audited financial
statements, is being mailed to stockholders, together with these proxy
materials, on or about March 31, 2003.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 2003
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 Tuesday, May 6,
2003 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 "2003
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 2003 ANNUAL MEETING
VOTING PROCEDURES
Stockholders of record at the close of business on March 14, 2003 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date,
there were outstanding and entitled to vote 27,661,892 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 ten (10) nominees for membership on the
Company's Board of Directors, Messrs. Bachmann, Beutner, Bumgarner,
Carlisle, Carter, Gershen, Hall, Hiltz and Phillips and Dr. Kelly, to serve
until the Annual Meeting of Stockholders in the year 2004 and until their
successors are duly elected and qualified; and
(2) At the discretion of the designated proxies named on the enclosed
Proxy Card, on any other matter that may properly come before the 2003
Annual Meeting, and any adjournment or postponement thereof.
PROXY SOLICITATION
Your proxy is being solicited by and on behalf of the Board of Directors of
the Company. The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition to solicitation of proxies
by mail, certain directors, officers, representatives and employees of the
Company may solicit proxies by telephone and personal interview. Such
individuals will not receive additional compensation from the Company for
solicitation of proxies, but may be reimbursed by the Company for reasonable
out-of-pocket expenses in connection with such solicitation. Banks, brokers and
other custodians, nominees and fiduciaries also will be reimbursed by the
Company, as necessary, for their reasonable expenses for sending proxy
solicitation materials to the beneficial owners of Common Stock.
OWNERSHIP OF COMMON AND PREFERRED STOCK BY
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock and Series D
Exchangeable Convertible Preferred Stock beneficially owned by each director; by
the Company's Chief Executive Officer; by each other executive officer of the
Company; by all directors and executive officers as a group; and by such persons
known to the Company to own beneficially more than five (5%) of the outstanding
Common Stock of the Company.
The information set forth below is as of the Record Date (except as to Mr.
Carlisle whose information is as of March 20, 2003) 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)................... 2,586,527 9.4 -- *
Austin M. Beutner (3)(7).................. 18,761 * -- *
John C. Bumgarner, Jr. (4)................ 33,955 * -- *
Jerry D. Carlisle (5)..................... 2,500 * -- *
Harold D. Carter (4)...................... 27,569 * -- *
Robert D. Gershen (4)(8).................. 19,293 * -- *
Gary L. Hall (6).......................... 1,696,067 5.8 16,317 4.4
William O. Hiltz (3)(7)................... 169,774 * -- *
Dr. Eamon M. Kelly (4).................... 27,569 * -- *
John G. Phillips (4)...................... 27,569 * -- *
Suzanne V. Baer (9)....................... 496,250 1.8 -- *
Clinton W. Coldren (10)................... 496,332 1.8 -- *
John H. Peper (11)........................ 157,994 * 1,020 *
Bruce R. Sidner (12)...................... 374,904 1.3 1,967 *
All directors and executive officers as a
group (14 persons)...................... 6,135,064 20.2 19,304 5.2
2
PERCENT OF
PERCENT OF CONVERTIBLE CONVERTIBLE
COMMON COMMON PREFERRED PREFERRED
BENEFICIAL OWNER SHARES SHARES(1) SHARES SHARES
---------------- --------- ---------- ----------- -----------
Candies Family Investments, L.L.C. and
affiliates (13)(14)..................... 2,218,713 7.5 123,019 32.9
Evercore Capital Partners L.P. and
affiliates (3)(7)(15)................... 9,417,910 34.1 -- *
Energy Income Fund, L.P. (8)(16).......... 4,689,525 17.0 -- *
---------------
* 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 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 14, 2003 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 14, 2003 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 a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 2003. Also includes 388 shares of Common Stock beneficially
owned by Mr. Bachmann and held in trust by the Energy Partners, Ltd. 401(k)
Plan. The address for Mr. Bachmann is Energy Partners, Ltd., 201 St.
Charles Avenue, Suite 3400, New Orleans, Louisiana 70170.
(3) Includes (a) 12,000 shares of Common Stock subject to options granted under
our 2000 Stock Option Plan for Non-Employee Directors to each of Messrs.
Beutner and Hiltz, which are currently exercisable, and (b) 6,761 and 7,774
phantom shares accrued for Messrs. Beutner and Hiltz, respectively, under
our Stock and Deferral Plan for Non-Employee Directors. Messrs. Beutner and
Hiltz have assigned their rights to the stock options and phantom shares
and retain shared dispositive power with respect to these securities.
(4) Includes 12,000 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 6,310 phantom shares accrued for Mr. Bumgarner
under our Stock and Deferral Plan for Non-Employee Directors.
(5) Includes 2,000 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.
(6) Based on a Schedule 13D filed with the Securities and Exchange Commission
on February 28, 2003, the shares owned by Mr. Hall include 2,448 shares of
Convertible Preferred Stock convertible into 28,665 shares of Common Stock,
301,126 warrants granted in the acquisition of Hall-Houston Oil Company
("Hall-Houston"), which are currently exercisable and 2,827 shares of
Common Stock jointly held by Mr. Hall and his wife and individually by Mr.
Hall's wife. Excludes 3,581 shares of Common Stock and 2,212 shares of
Convertible Preferred Stock beneficially owned by Mr. Hall's sons of which
Mr. Hall disclaims beneficial ownership. Includes an aggregate of 13,869
shares of Convertible Preferred Stock convertible into 162,400 shares of
Common Stock, 49,468 shares of Common Stock and 1,084,614 warrants held by
Houston Explorer Group, L.P., Hall Equities, Inc., Hall Family Trust, Hall
Partners, L.P., Hall Interests, Inc., Hall Consulting Company, Inc., LPCR
Investments Group, L.P., Hall-Houston Oil Company Employee Royalty Trust,
Hall-Houston 1996 Exploration and Development Facility Overriding Trust and
Hall-Houston Oil Company 2000 Exploration and Development Facility
Overriding Royalty Trust, which Mr. Hall, together with members of his
immediate family in certain instances, controls. Includes 66,637 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 14, 2003. Also includes 327 shares of Common Stock
beneficially owned by Mr. Hall and held in trust by the Energy
3
Partners, Ltd. 401(k) Plan. The address for Mr. Hall is Energy Partners,
Ltd., 201 St. Charles Avenue, Suite 3400, New Orleans, Louisiana 70170.
(7) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 14, 2003, the shares owned by Evercore Capital Partners L.P.
and its affiliates ("Evercore") are beneficially owned as follows:
- Evercore Capital Partners L.P. -- 6,168,263;
- Evercore Capital Offshore Partners L.P. -- 1,629,686;
- Evercore Capital Partners (NQ) L.P. -- 1,485,904; and
- Evercore Co-Investment Partnership L.P. -- 134,057.
Evercore Partners L.L.C. is the general partner of the first three Evercore
entities listed above and has sole voting and dispositive power of their
shares. Evercore Co-Investment G.P. L.L.C. is the general partner of
Evercore Co-Investment Partnership L.P. and has sole voting and dispositive
power with respect to its shares. Messrs. Beutner and Hiltz, each a
principal of Evercore, disclaim beneficial ownership of shares of our
capital stock owned by Evercore. Their shares in this table do not show the
indirect interest of each in the shares held by Evercore. Additionally, Mr.
Hiltz acquired 150,000 shares of our Common Stock prior to joining Evercore
and prior to Evercore's investment in the Company. Evercore disclaims
beneficial ownership of these shares of Common Stock owned by Mr. Hiltz.
(8) 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.
(9) Includes 400,000 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 14, 2003.
(10) Includes 770 shares beneficially owned by Mr. Coldren's wife, of which Mr.
Coldren disclaims beneficial ownership. Includes 25,000 shares of Common
Stock subject to options granted to Mr. Coldren under our Amended and
Restated 2000 Long Term Stock Incentive Plan, which may be exercised within
60 days from March 14, 2003. Also includes 136 shares of Common Stock
beneficially owned by Mr. Coldren and held in trust by the Energy Partners,
Ltd. 401(k) Plan.
(11) Includes (a) 25,000 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 14, 2003, (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.
(12) 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) 33,334 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 14, 2003, (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 246 shares of Common Stock beneficially owned
by Mr. Sidner and held in trust by the Energy Partners, Ltd. 401(k) Plan.
(13) Based on a Schedule 13D filed with the Securities and Exchange Commission
on March 7, 2003, the shares beneficially owned by Candies Family
Investments, L.L.C. include (a) 123,019 shares of Convertible Preferred
Stock convertible into 1,440,499 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, (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 and (d)
10,000 shares of Common Stock acquired through market purchases by Paul B.
Candies.
4
(14) The address for Candies Family Investments, LLC and its affiliates is P.O.
Box 25, Des Allemands, Louisiana 70030.
(15) The address for Evercore and its affiliates is 65 East 55th Street, New
York, New York 10022.
(16) The address for Energy Income Fund is 136 Dwight Road, Longmeadow,
Massachusetts 01106.
MATTER TO BE PRESENTED TO THE STOCKHOLDERS AT THE 2003 ANNUAL MEETING
At the 2003 Annual Meeting, ten (10) directors are to be elected, each of
whom will serve until the Annual Meeting of Stockholders in the year 2004 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 ten (10) nominees listed below, unless otherwise directed.
The Board has nominated, and the proxies will vote to elect, the following
individuals as members of the Board of Directors to serve for a period of one
(1) year and until their respective successors are duly elected and qualified:
Richard A. Bachmann, Austin M. Beutner, John C. Bumgarner, Jerry D. Carlisle,
Harold D. Carter, Robert D. Gershen, Gary L. Hall, William O. Hiltz, Dr. Eamon
M. Kelly and John G. Phillips. Each nominee has consented to be nominated and to
serve, if elected.
Under our stockholder agreement, generally, Evercore is entitled to
nominate two persons to our Board of Directors. Messrs. Beutner and Hiltz were
nominated pursuant to this provision. Until the date that Energy Income Fund
owns less than 10% of our Common Stock on a fully diluted basis, Energy Income
Fund is entitled to nominate one person to our Board of Directors. Mr. Gershen
was nominated pursuant to this provision. Certain former Hall-Houston
shareholders are entitled to nominate one person to our Board of Directors until
those shareholders own less than 10% of our Common Stock on a fully diluted
basis. Mr. Hall was nominated pursuant to this provision. Our other stockholders
are entitled to nominate our six remaining directors. Messrs. Bachmann,
Bumgarner, Carlisle, Carter and Phillips and Dr. Kelly were nominated pursuant
to this provision. All of the parties to our stockholder agreement have agreed
to cooperate fully with the other stockholders in connection with the voting of
their shares of Common Stock. Messrs. Bachmann and Coldren, Ms. Baer, Evercore
and Energy Income Fund are parties to, and Messrs. Hall, Peper and Sidner and
the Candies Family Investments, L.L.C., as former Hall-Houston shareholders, are
third party beneficiaries under, our stockholder agreement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
TEN (10) NOMINEES: MESSRS. BACHMANN, BEUTNER, BUMGARNER, CARLISLE, CARTER,
GERSHEN, HALL, HILTZ AND PHILLIPS AND DR. KELLY.
INFORMATION ABOUT THE NOMINEES
Richard A. Bachmann, age 58, 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.
Austin M. Beutner, age 42, has been a director since January 2000. Mr.
Beutner is President of Evercore Partners, which he co-founded in 1996. He also
serves as chairman of Evercore Capital Partners and chairman and chief executive
officer of Evercore Ventures. Mr. Beutner serves on the boards of directors of
American Media, Inc., Business.com, Inc., Causeway Capital Management LLC,
Continental Energy Services, Inc., Earthlink, Inc., Encoda Systems, Inc.,
Telenet Holding N.V. and Vertis, Inc. He also serves as a trustee of the
California Institute of the Arts.
John C. Bumgarner, Jr., age 60, 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.
5
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 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. Mr. Bumgarner is also a director of Management Planning Systems,
Inc. and Sirenza Microdevices, Inc. Mr. Bumgarner is a former treasurer of
Skelly Oil.
Jerry D. Carlisle, age 57, 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 64, has been a director since May 1998. Since 1995,
Mr. Carter has been an independent oil and natural gas consultant and investment
advisor. Mr. Carter is a director of Brigham Exploration Company, an advisory
director of Abraxas Petroleum Corp., and former president of Sabine Corporation,
an independent oil and gas exploration company.
Robert D. Gershen, age 49, has been a director since May 1998. Mr. Gershen
is president of Associated Energy Managers, LLC, an investment management firm
specializing in private equity investments in the energy sector. He is also a
managing director of the general partner of Energy Income Fund, an investment
fund. Since 1989, Mr. Gershen has managed, through Associated Energy Managers,
three funds that invest in energy companies in the United States.
Gary L. Hall, age 53, has been vice chairman of the Company and a director
since January 2002, following the closing of the Hall-Houston acquisition. Prior
to joining the Company, Mr. Hall had been chairman of the board of directors and
chief executive officer of Hall-Houston since it began operations in 1983. He
has been involved in the oil and gas exploration and production business in the
Gulf of Mexico since 1976, serving in various positions with major integrated
and independent energy companies including Mobil Oil Company and Pogo Producing
Company.
William O. Hiltz, age 51, has been a director since November 2000. Mr.
Hiltz is a principal of Evercore Partners and has been since joining that firm
in October 2000. From April 1995 until October 2000, Mr. Hiltz was a managing
director and head of the global energy group for UBS Warburg LLC and its
predecessor firms, SBC Warburg Dillon Read and Dillon, Read & Co. Inc.
Dr. Eamon M. Kelly, age 66, 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, a director of Gabelli Asset
Management, Inc., and a former director of LL&E.
John G. Phillips, age 80, 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.
CORPORATE GOVERNANCE
THE BOARD OF DIRECTORS
The directors hold regular meetings, attend special meetings as required
and spend such time on the affairs of the Company as their duties require.
During calendar year 2002, the Board of Directors held a total of six (6)
meetings, regular and special. All directors of the Company attended at least
seventy-five percent (75%) of the
6
meetings of the Board of Directors and of the committees on which they served
during the period, except for Messrs. Beutner and Bumgarner.
COMMITTEES OF THE BOARD
THE AUDIT COMMITTEE
The Board of Directors has an Audit Committee, the current members of which
are Messrs. Hiltz (Chairman) and Carter, Dr. Kelly and Mr. Carlisle (as of March
2003). The Board of Directors has determined that each of the members of the
Audit Committee is "independent" as defined by existing New York Stock Exchange
standards, and that Mr. Carlisle qualifies as an "audit committee financial
expert" under SEC rules. 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
2002, the Audit Committee held five (5) meetings.
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the Company's annual financial statements for 2002,
and fees billed for other services rendered by KPMG LLP.
Audit fees, excluding other audit related fees.............. $130,000
========
Financial information systems design and implementation..... --
========
All other fees:
Audit related fees(1)..................................... 136,000
Other non-audit services(2)............................... 97,500
--------
Total all other fees........................................ $233,500
========
---------------
(1) Audit related fees consisted of a business risk assessment and operational
internal audits, a benefit plan audit and fees for registration statements
related to our acquisition of Hall-Houston.
(2) Other non-audit fees consisted of tax consulting services.
The Audit Committee believes that the foregoing expenditures are compatible
with maintaining the independence of the Company's principal accountant.
THE COMPENSATION COMMITTEE
The Board of Directors also has a Compensation Committee, the current
members of which are Messrs. Beutner (Chairman), Bumgarner, Gershen and
Phillips. The Compensation Committee has a charter under which its
responsibilities and authorities include determining the compensation for all of
our executive officers, other than our chairman, president and chief executive
officer, and any other employee that the committee may designate from time to
time. Our Board of Directors determines the compensation of our chairman,
president and chief executive officer. In addition, the committee approves and
administers employee benefit plans and takes such other action as may be
appropriate or as directed by the Board of Directors to ensure that the
compensation policies of the Company are reasonable and fair. During fiscal year
2002, the Compensation Committee held one (1) meeting.
THE NOMINATING & GOVERNANCE COMMITTEE
Effective September 19, 2002, the Board of Directors formed a 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, recommending members of the Board of Directors to serve
on the various committees and reviewing director compensation. In
7
addition, the Nominating & Governance Committee reviews the Corporate Governance
Guidelines of the Company and is responsible for the oversight of the evaluation
of the Board of Directors and management. During fiscal year 2002, the
Nominating & Governance Committee held two (2) meetings.
The Nominating & Governance Committee will consider proposals for nominees
for director from stockholders which are made in writing to the Secretary of the
Company in compliance with the Company's By-laws.
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 2002.
Messrs. Beutner and Hiltz are principals of Evercore Capital Partners,
which owns more than 5% of our outstanding Common Stock. Pursuant to our
stockholder agreement, we paid an affiliate of Evercore a monitoring fee of
$250,000 in 2002. We also paid Evercore Capital Partners an investment banking
fee in 2002 of $400,000 for their services in connection with the Hall-Houston
acquisition.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $20,000 and meeting
fees of $1,000 for each Board or committee meeting attended (if held on separate
dates). Directors may defer all or a portion of their retainer, at the election
of each director, up to one half in cash and the remainder in Common Stock
(valued at fair market value), and the meeting fees are paid, at the election of
each director, in cash or Common Stock (valued at fair market value). Directors
are also reimbursed for their reasonable expenses.
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.
8
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 five other most highly compensated executive
officers who earned in excess of $100,000 in 2002.
LONG TERM
COMPENSATION
AWARDS(1)
------------------------
SECURITIES
RESTRICTED UNDERLYING
BONUS SHARE OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($) AWARD(S)($) SARS(#) COMPENSATION($)(2)
--------------------------- ---- --------- ------- ----------- ---------- ------------------
Richard A. Bachmann............... 2002 350,000 -- 500,000 -- 6,189
Chairman, President and Chief 2001 320,000 154,000 -- 100,000 1,806
Executive Officer (3)(4) 2000 241,666 200,000 -- -- 1,806
Suzanne V. Baer................... 2002 218,750 175,000 94,143 75,000 1,924
Executive Vice President and 2001 200,000 72,000 -- 40,000 966
Chief Financial Officer (5) 2000 131,042 50,000 1,530,000 375,000 570
Clinton W. Coldren................ 2002 218,750 150,000 44,268 75,000 1,749
Executive Vice President and 2001 189,167 60,000 -- 40,000 630
Chief Operating Officer (6) 2000 125,000 50,000 -- -- 486
Gary L. Hall...................... 2002 300,000 -- -- 200,000 6,597
Vice Chairman (7)
John H. Peper..................... 2002 189,750 128,588 37,772 75,000 591
Executive Vice President,
General Counsel and Corporate
Secretary (6)(7)
Bruce R. Sidner................... 2002 225,000 225,000 66,407 100,000 4,860
Vice President of Exploration
(6)(7)
---------------
(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.
(3) As of March 31, 2003, the bonus for 2002 for Mr. Bachmann was not available.
Such bonus amount will be disclosed in the Proxy Statement for the 2004
Annual Meeting.
(4) On July 11, 2002, Mr. Bachmann was granted 60,240 restricted shares as a
Special Recognition Award. The shares fully vest on January 17, 2005. As of
December 31, 2002, the unvested portion of Mr. Bachmann's restricted shares
had a value of $644,600. Dividends, if any, will be paid on the restricted
shares at the same rate paid to all stockholders.
9
(5) Ms. Baer commenced employment with us in April 2000. In connection with her
employment agreement, Ms. Baer was granted 90,000 restricted shares (all of
which have vested) and options to purchase 375,000 shares of stock. On
January 17, 2002, Ms. Baer was granted 6,250 restricted shares which will
fully vest on January 17, 2004 and on March 18, 2003 she was granted 4,545
restricted shares, one half of which vest on March 18, 2004 and the
remainder vest on March 18, 2005. As of December 31, 2002, the unvested
portion of Ms. Baer's restricted shares had a value of $66,900. Dividends,
if any, will be paid on the restricted shares at the same rate paid to all
stockholders.
(6) On March 18, 2003, Messrs. Coldren, Peper and Sidner were granted 4,545,
3,878 and 6,818 restricted shares, respectively. One half of the shares vest
on March 18, 2004 and the remainder vest on March 18, 2005.
(7) Messrs. Hall, Peper and Sidner commenced employment with us in January 2002.
INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS
The table below sets forth information regarding stock options granted to
our Chief Executive Officer and our five other most highly compensated executive
officers during the fiscal year ended December 31, 2002. We did not grant any
stock appreciation rights during 2002.
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS GRANT
UNDERLYING GRANTED TO EXERCISE OR DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE PRESENT
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE VALUE(1)($)
---- ------------ ------------ ----------- --------------- -----------
Richard A. Bachmann......... -- -- -- -- --
Suzanne V. Baer (2)......... 75,000 6.9 7.98 January 17, 2012 204,000
Clinton W. Coldren (2)...... 75,000 6.9 7.98 January 17, 2012 204,000
Gary L. Hall (3)............ 200,000 18.5 7.98 January 15, 2012 543,000
John H. Peper (3)........... 75,000 6.9 7.98 January 15, 2012 204,000
Bruce R. Sidner (3)......... 100,000 9.2 7.98 January 15, 2012 271,000
---------------
(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
January 17, 2002, with a grant date stock value of $7.98, it assumed a stock
price volatility of 35%, a risk-free rate of return of 4.5% and a dividend
of $0 per year. The value has been reduced by approximately 25% to reflect
the probability of forfeiture due to termination of employment prior to
vesting or of a shortened option term due to termination of employment prior
to the expiration date.
(2) One-third of the option became exercisable on January 17, 2003, one-third is
exercisable beginning on January 17, 2004 and the remainder is exercisable
beginning on January 17, 2005.
(3) One-third of the option became exercisable on January 15, 2003, one-third is
exercisable beginning on January 15, 2004 and the remainder is exercisable
beginning on January 15, 2005.
The table below sets forth information concerning the value of unexercised
stock options held by our Chief Executive Officer and our five other most highly
compensated executive officers as of December 31, 2002. No stock options were
exercised by any of these individuals during 2002.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Richard A. Bachmann................... -- 100,000 -- --
Suzanne V. Baer....................... 300,000 190,000 736,500 246,000
Clinton W. Coldren.................... -- 115,000 -- 204,000
Gary L. Hall.......................... -- 200,000 -- 544,000
John H. Peper......................... -- 75,000 -- 204,000
Bruce R. Sidner....................... -- 100,000 -- 272,000
10
---------------
(1) Based on the positive difference, if any, between the closing sale price of
the Company's Common Stock of $10.70 on December 31, 2002, as reported by
the New York Stock Exchange, and the exercise price of such options.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
We have employment and stock ownership agreements with each of our
executive officers. Each of the agreements provides that the executive officer
will not compete with us for a period of two years following termination of his
or her employment. In addition, the Company securities owned by each of the
executive officers are subject to restrictions on transfer. The agreements also
have the following terms:
- Mr. Bachmann's agreement expires on November 17, 2003. Under the
agreement, Mr. Bachmann is prohibited from soliciting or inducing our
employees to discontinue their employment with us and from interfering
with our third-party contractual relationships for a period ending two
years following his employment with us. Mr. Bachmann must offer a
predetermined number of his shares of Common Stock to Evercore or our
other management stockholders on resignation or termination for cause.
- Ms. Baer's agreement expires on April 17, 2003. Under the agreement, Ms.
Baer was granted 90,000 restricted shares, all of which have vested. Ms.
Baer also received an option to purchase 375,000 shares of Common Stock,
150,000 at approximately $7.67 per share which vested upon the first
anniversary of the agreement, 150,000 at approximately $8.82 per share
which vested upon the second anniversary of the agreement and 75,000 at
approximately $10.14 per share which vests on the third anniversary of
the agreement. Ms. Baer must exercise each option within five years from
the vesting date or the option will lapse. Any unvested stock options or
restricted shares will vest if Ms. Baer is terminated without cause.
- Mr. Coldren's agreement expires on November 17, 2003. Under the
agreement, Mr. Coldren must offer a predetermined number of his shares of
Common Stock to Mr. Bachmann, Evercore or our other management
stockholders on resignation or termination for cause.
- The agreement of each of Messrs. Hall, Peper and Sidner expires on
January 15, 2005. Under the agreements, Messrs. Hall, Peper and Sidner
will receive annual salaries of at least $300,000, 174,000 and $225,000,
respectively, and received options to purchase 200,000, 75,000 and
100,000 shares of Common Stock, respectively, at an exercise price equal
to $7.98 per share, the market price of the Common Stock on the date of
their appointment as executive officers. These options will vest over
three years and any unvested options will be forfeited in the case of
termination for cause or voluntary termination by the executive officer.
Each executive officer must exercise each option within 10 years from the
date of the agreement or the option will lapse. The executives may not be
involuntarily terminated without cause, except in connection with a
change of control, in which case our compensation obligations under the
agreements would cease after a 90-day notice period. Upon a change of
control of the Company, the executive officers' options and other
incentive awards as to which there are no conditions for vesting other
than continued employment will become fully vested and become fully
exercisable. In addition, each executive officer is prohibited from
soliciting or otherwise attempting to induce our other employees to
discontinue their relationship with us and from interfering with our
third-party contractual relationships for a period ending two years
following his employment with us.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee for
inclusion in this proxy pursuant to the rules of the Securities and Exchange
Commission with respect to executive compensation:
The Compensation Committee (the "Committee") determines the general
compensation policies of the Company, determines the compensation to be paid to
certain officers and administers the Company's Amended and Restated 2000 Long
Term Stock Incentive Plan. The Committee is composed of four (4) non-employee
directors: Messrs. Beutner, Bumgarner, Gershen and Phillips.
11
PHILOSOPHY OF COMPENSATION
The objectives of the Company's compensation program are (i) to attract and
retain the best available executive talent, (ii) to motivate executives to
achieve the Company's goals, (iii) to link executive and stockholder interests
through performance rewards and (iv) to provide compensation that can recognize
individual contributions to corporate objectives. The Committee's compensation
philosophy is designed so that a substantial component of each executive's
potential annual compensation is entirely dependent upon measurable improvement
to 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 primarily on the performance of the Company's
Common Stock; and
(2) long-term compensation, consisting of stock options, the value of
which are also directly linked to the value of a share of the Company's
Common Stock and restricted shares of Common Stock.
ANNUAL COMPENSATION
At least once each year, the Committee reviews the Company's executive
compensation program. The annual base salary of each executive is determined by
an analysis of the compensation paid to other executive officers in similar
positions in the energy industry. Market data is derived from a combination of
sources, including published survey data for the energy industry and peer group
data. A competitive base salary is consistent with the Company's long-term
objectives of attracting and retaining highly qualified, competent executives.
The incentive bonus is particularly aligned with the interests of the
Company's stockholders. Incentive bonuses are based on the increase in value of
the Company's Common Stock as well as qualitative factors that the Compensation
Committee may deem appropriate. Although a target bonus percentage is
predetermined for each executive on the basis of market practices, the incentive
bonus is not limited to a maximum percentage of salary. The Committee will
determine each year whether a threshold level of performance below the Company's
objectives is deserving of any bonus percentage, taking into account external
factors beyond the control of the executives.
LONG-TERM COMPENSATION
The Company adopted the 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.
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 $350,000 for 2002 was commensurate with the median
12
base salary for chief executive officers of similarly situated exploration and
production companies. In July 2002, Mr. Bachmann was granted a Special
Recognition Award in the form of 60,240 shares of Restricted Stock equal to
$500,000 grant date fair value. The shares vest on January 17, 2005.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 limits the
deductibility for federal income taxes of compensation in excess of $1 million
paid to a publicly held company's chief executive officer and any of the other
four highest-paid executive officers, except for "performance-based"
compensation. The Committee is aware of this limitation and intends to consider
the effects of Section 162(m) on the Company when making compensation decisions.
Compensation Committee
Austin M. Beutner, Chairman
John C. Bumgarner, Member
Robert D. Gershen, Member
John G. Phillips, Member
REPORT OF THE AUDIT COMMITTEE
The Audit Committee acts under a written charter adopted and approved by
the Board of Directors. The Board of Directors adopted and approved a new Audit
Committee Charter on November 21, 2002. 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 auditors. It is also not the
responsibility of the Audit Committee to guarantee the independent auditor's
report 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, 2002 and its discussions with
management regarding such audited financial statements, its receipt of written
disclosures and the letter from independent auditors required by Independence
Standards Board Standard No. 1, its discussions with the independent auditors
regarding such auditor's independence, the matters required to be discussed by
the Statement on Auditing Standards 61 and other matters the Audit Committee
deemed relevant and appropriate, the Audit Committee recommended to the Board of
Directors that the audited financial statements as of and for the fiscal year
ended December 31, 2002 be included in the Company's Annual Report on Form 10-K
for such fiscal year.
Audit Committee
William O. Hiltz, Chairman
Harold D. Carter, Member
Dr. Eamon M. Kelly, Member
13
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,
(iii) the Company's previous peer group, as used in 2001, composed of ten (10)
independent oil and gas exploration and production companies with activities
focused in the Gulf of Mexico region (Forest Oil Corporation, The Meridian
Resource Corporation, Newfield Exploration Company, Noble Energy, Inc., Ocean
Energy, Inc., Pogo Producing Company, Spinnaker Exploration Company, Stone
Energy Corporation, Houston Exploration Company and Westport Resources
Corporation) and (iv) the new peer group, which has been modified to remove
Forest Oil Corporation, Noble Energy, Inc., Ocean Energy, Inc. and Pogo
Producing Company as they are much larger and their geographic area of
operations is more diversified. These companies have been replaced by ATP Oil &
Gas Corporation, Denbury Resources Inc., Remington Oil and Gas Corporation, St.
Mary Land & Exploration Company, Comstock Resources, Inc. and Cabot Oil & Gas
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 26 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
--------------------------------------------------------------------------------
Energy Partners, Ltd. 100.00 83.75 50.33 71.33
S&P 500 100.00 92.57 81.57 63.54
New Peer Group 100.00 134.33 104.53 100.68
Old Peer Group 100.00 125.90 108.73 109.94
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent (10%) of
the Company's Common Stock to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission. To the Company's
knowledge, with respect to the year ended December 31, 2002, all applicable
filings were made timely, except
14
that (a) Mr. Bumgarner filed his Form 5 approximately two weeks late, (b) Mr.
Gershen reported late the receipt of approximately 400 shares of common stock
received as Board meeting fees, and (c) Messrs. Coldren, Hall, Peper and Sidner
and Ms. Baer reported late the options and restricted stock received in January
2002 as set forth in the Summary Compensation table, all of which were required
to be reported on Form 5.
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."
INDEPENDENT AUDITORS
The Audit Committee has retained KPMG LLP as the Company's independent
certified public accountants to audit the Company's consolidated financial
statements for the year ending December 31, 2003. Representatives of KPMG LLP
are expected to be present at the Annual Meeting, with the opportunity to make a
statement should they choose to do so, and to be available to respond to
questions, as appropriate.
OTHER MATTERS
Management of the Company is not aware of other matters to be presented for
action at the 2003 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 2004 ANNUAL MEETING
Stockholder proposals intended to be included in the Proxy Statement
relating to the Company's 2004 Annual Meeting pursuant to Rule 14a-8 ("Rule
14a-8") under the Securities Exchange Act of 1934, as amended, must be received
by the Corporate Secretary of the Company no later than December 1, 2003 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 2004 Annual Meeting must be delivered to the
Corporate Secretary of the Company no later than March 7, 2004, but no earlier
than February 5, 2004. If such timely notice of a stockholder proposal is not
given, the proposal may not be brought before the 2004 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
2004 Annual Meeting.
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY TO AVOID UNNECESSARY
EXPENSE. ALL STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OWNED,
TO PARTICIPATE IN THE 2003 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, 2003
15
APPENDIX A
ENERGY PARTNERS, LTD.
AUDIT COMMITTEE CHARTER
The Audit Committee, in its capacity as a committee of the Board, shall
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 with management, the internal auditors and the independent auditor in
separate executive sessions at least quarterly.
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 and applicable law, including the Sarbanes-Oxley Act of 2002.
The members of the Audit Committee may be replaced by the Board.
The Audit Committee members must be (or become within a reasonable time
after appointment) 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.
Following the date upon which such requirements become effective by
Securities and Exchange Commission ("SEC") rulemaking or as otherwise required
by applicable laws, rules or regulations, Audit Committee members may not accept
any fees from the Company except for compensation as a Board or committee member
and must not be an "affiliated person" of the Company or any subsidiary. An
Audit Committee member may receive his or her fee in cash and/or company stock
or options or other in-kind consideration ordinarily available to directors, as
well as all of the regular benefits that other directors receive.
The Audit Committee must have at least one member who is a "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 Chairman may be elected by the full Board of Directors.
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 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 and 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.
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). 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 and the independent auditor the effect of
regulatory and accounting initiatives on the Company's financial statements.
6. 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.
7. 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.
8. Review any exceptions to the Company's Code of Business Ethics and the
actions management has taken to resolve the exceptions.
9. Review with the Company's counsel any legal, regulatory and
environmental matters that may have a material impact on the Company's financial
statements.
10. Review the activities 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.
11. 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 of
the independent auditor (including the sole authority to hire and fire the
Company's independent auditor), for their compensation (including as to fees and
terms) 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
related work. The independent auditor shall report directly to the Audit
Committee. The
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performance of any audit or 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 issue 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, (c) any steps taken to deal with any
such issues, and (d) in order to assess the auditor's independence, all
relationships between the independent auditor and the Company. Evaluate the
qualifications, performance and independence of the independent auditor, taking
into account the opinions of management. In addition to assuring the regular
rotation of the lead audit partner as required by law, the Audit Committee
should further 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 policies for the Company's hiring of employees or former employees
of the independent auditor who were engaged on the Company's account, but in no
event should such employees have participated in any capacity in the audit of
the Company during the one year period preceding the date of the initiation of
the Company 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) the management letter 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. Meet separately, periodically, with management, with internal auditors
(or other personnel responsible for the internal audit function) and with the
independent auditors.
9. Review with the independent auditor any audit problems or difficulties
and management's response.
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.
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2. Annually prepare a report as required by the SEC to be included in the
Company's annual proxy statements.
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 Chairman 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.
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Please Mark Here for Address Change or Comments SEE REVERSE SIDE [ ]
(1) Proposal to approve the election of the following ten (10) nominees for
membership on the Company's Board of Directors: Messrs. 01 Richard A.
Bachmann; 02 Austin M. Beutner; 03 John C. Bumgarner; 04 Jerry D. Carlisle;
05 Harold D. Carter; 06 Robert D. Gershen; 07 Gary L. Hall, 08 William O.
Hiltz; 09 John G. Phillips; and 10 Dr. Eamon M. Kelly, each to serve until
the Annual Meeting of Stockholders in the year 2004, and until their
successors are duly elected and qualified.
FOR [ ] WITHHOLD [ ]
To withhold authority to vote for any nominee, write the name of that nominee in
the space provided below
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PLEASE MARK, SIGN, DATE AND RETURN USING THE ENCLOSED ENVELOPE.
(2) 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 AND 2. Receipt of the proxy statement, dated March
31, 2003, is hereby acknowledged.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the board of directors' recommendation. The proxies cannot vote
your shares unless you sign and return this card.
Signature Signature Date
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Please sign your name exactly as it appears hereon. Joint owners must each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title as it appears thereon.
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ENERGY PARTNERS, LTD.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 2003
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 Tuesday, May 6, 2003 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)
Address Change / Comments (Mark the corresponding box on the reverse side)
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