1
EXHIBIT 10.16
STOCK OWNERSHIP AGREEMENT UNITED STATES OF AMERICA
BY AND BETWEEN STATE OF LOUISIANA
ENERGY PARTNERS, LTD. PARISH OF ORLEANS
AND
THIS STOCK OWNERSHIP AGREEMENT (the "Agreement"), entered into in New
Orleans, Louisiana on this 5th day of June, 1998, by and between , an
individual of the full age of majority domiciled in the Parish (County) of ,
State of (hereinafter called "Director") and Energy Partners, Ltd., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter called "Company"), represented herein by its duly authorized
President, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
1. Shareholder's Agreement.
1.1. Purchase of Shares. Subject to the terms and conditions of
this Agreement, Director shall purchase from Company ten (10)
shares of no par value common stock of the Company
(hereinafter, the "Shares") at the price of one dollar ($1.00)
per share upon execution of this Agreement, receipt and
sufficiency of which is hereby acknowledged.
1.2. Stockholders' Agreement. On May 7, 1998 the Company entered
into an agreement entitled "Stockholders' Agreement by and
among Energy Partners, Ltd. and Energy Income Fund, L.P. and
the Individual Shareholders," a copy of which is attached
hereto and made part hereof (hereinafter "Stockholders'
Agreement"). The Stockholders' Agreement recites that Energy
Income Fund, L.P. will acquire 5,000 shares of the Company's
common stock and that the individual shareholders have
acquired 5,000 shares of the Company's common stock The
Company has subsequently issued, in addition to the 5,000
shares issued to the individual shareholders referred to
therein, an additional 40 shares, 10 to the Director and 10
each to three other directors elected to the Company's Board
of Directors on June 5, 1998. The parties hereto hereby adopt
all the terms and provisions of the Shareholders' Agreement,
with the exception that the individual shareholders hold 5,040
shares of common stock rather than 5,000 shares of common
stock as originally stated in the Stockholders' Agreement, and
agree that the Shares shall be subject to the Stockholders'
Agreement in the same manner as the 5,000 shares owned by the
individual stockholders referred to in the original
Stockholders' Agreement.
2
-2-
1.3. Transfer of Shares. No Shares may be sold, assigned, pledged,
transferred or otherwise alienated (each, "Transferred")
except in accordance with and pursuant to the terms and
conditions of this Agreement and the Stockholders' Agreement.
Additionally, as a condition precedent to any Transfer, the
transferee must validly executed the Stockholders' Agreement.
Unless otherwise prohibited in the Stockholders' Agreement,
the Shares may be pledged with the Company's consent, provided
that any lender's recourse for liquidation on debt repayment
shall be limited to selling the pledged Shares under the same
terms and conditions as though it was a Director. The lender
shall agree to the foregoing provisions as terms of the
pledge.
1.4. Restrictions on Transfer. Any Transfer or attempted Transfer
by Director in violation of this Agreement shall be null and
void and of no force or effect whatever. Any purported
transferee shall not be deemed to be a shareholder of the
Company and shall not be entitled to receive a new certificate
or any distributions on or with respect to the Shares.
Director hereby acknowledges the reasonableness of the
restrictions on Transfer imposed by this Agreement in view of
the Company's purposes and the relationship of the Director
with the Company. Accordingly, the restrictions on Transfer
contained herein shall be specifically enforceable. Director
hereby further agrees to hold the Company and each other
shareholder (each shareholder's successors and assigns) wholly
and completely harmless from any cost, liability or damage
(including, without limitation, liabilities for income taxes
and costs of enforcing this indemnity) incurred by any of such
indemnified persons as a result of a Transfer or attempted
Transfer in violation of this Agreement.
1.5. Subsequently Issued Shares. All Shares hereinafter issued to
Director or to Director's beneficiaries, heirs, successors in
interest, representatives or assigns with respect to any
Shares subject to this Agreement, whether by stock split,
stock dividend or otherwise, shall bear the same endorsement
and be subject to all the terms and conditions hereof.
1.6. Legend. In addition to other legends required under the
Stockholders' Agreement and applicable securities laws, the
Shares which are subject to this Agreement shall contain the
following legend:
"The shares represented by this certificate are
subject to repurchase by Energy Partners, Ltd. and
such shares may not be sold or otherwise transferred
except pursuant to the Stock Ownership Agreement,
dated June 5, 1998, by and between the shareholder to
whom this certificate was issued, the shareholder's
spouse and
3
-3-
Energy Partners, Ltd., a copy of which is on file in
the office of the Corporate Secretary of the
Company."
1.7. Shareholder Rights Upon Termination of Director's Duties. If
Director ceases to be a member of the Board of Directors of
the Company for any reason, all of Director's rights to the
Shares may be acquired as set forth in Section 1.11 hereof at
a price equal to the fair market value of the Shares as
hereafter defined.
1.8. Shareholder Rights Upon Judgment of Separation or Divorce. In
the event of a judgment of separation or divorce involving
Director in which a portion of Director's Shares are
transferred to Director's spouse/ex-spouse, Director shall
have sixty (60) days from the date of such transfer to
purchase said Shares from the spouse/ex-spouse. If Director
does not purchase said Shares within the sixty (60) day time
period, then within four (4) months of said transfer, all of
Director's rights to the Shares transferred to Director's
spouse/ex-spouse may be acquired as set forth in Section 1.11
hereof. If the Shares are owned as community property or in
joint ownership, Director's spouse shall execute this
Agreement in acknowledgment and agreement to such sale of
Shares. The spouse, by executing this Agreement, shall also
acknowledge and agree that following such sale of their
Shares, the spouse will have no further interest whatsoever in
this Agreement or any claims under it.
1.9. Purchase Price. (a) If the Director's Shares are acquired as
set forth in Section 1.11, or if the Director purchases the
spouse/ex-spouse's Shares, the purchase price shall be based
upon the "fair market value" of the Shares as of the end of
the fiscal year of the Company immediately preceding the date
of the event giving rise to the right to purchase and payment
shall be made in cash. "Fair market value" shall be determined
by both the purchaser and seller by obtaining two (2) separate
appraisals of the Shares by each party, and reaching an
agreement on the fair market value based upon the two (2)
appraisals. However, if no agreement can be reached within
five (5) business days of the date of the latest appraisal,
the two appraisers will obtain a third appraisal, with costs
split evenly between the purchaser and the seller, and the
fair market value will be the average of the three (3)
appraisals.
(b) If the Director does not purchase the Shares from the
spouse/ex-spouse, then the Shares may be acquired as set forth
in Section 1.11 hereof for the fair market value established
based upon the average of an appraisal obtained by Company and
an appraisal obtained by Director determined as of the end of
the fiscal year of the Company immediately preceding the date
of the event giving
4
-4-
rise to the right to purchase, within four (4) months of the
transfer to the spouse/ex-spouse.
1.10. Interests of Director Spouse Upon Death. By executing this
Agreement, the spouse of Director agrees to execute within
sixty (60) days hereof, a valid last will and testament
containing a legacy to Director consisting of all interests in
the Shares that the spouse owns jointly or through a community
property regime. The last will and testament shall also
contain a provision that should such disposition impinge upon
the legitime of the spouse's forced heirs, that Director shall
have the right within six (6) months of the spouse's death to
purchase such Shares at a price based upon an independent
appraisal determined as of the December thirty-first (31st)
immediately prior to the date of the spouse's death Should
Director fail to purchase such Shares, the Shares may be
acquired as set forth in Section 1.11 hereof at the fair
market value as determined using the procedure set forth in
Subparagraph 1.9(b) above, within four (4) months of the
spouse's death.
1.11. Option to Purchase. As more fully described in Sections 3 and
4 of the Stockholders' Agreement, any right or option to
purchase any shares pursuant to this Agreement shall first be
exercisable by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, or his designee, who shall
first have the option to purchase all of the Shares under the
applicable terms and conditions. Company shall have the option
to purchase or redeem the Shares if not purchased by ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ under the same applicable terms and conditions,
and so long as the Stockholders' Agreement is in effect,
Energy Income Fund, L.P., or its designee, shall have the
option to purchase all of the Shares not purchased by ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ or Company under the same applicable terms and
conditions.
1.12. Mandatory Sale of Shares. Notwithstanding anything to the
contrary set forth herein and as more fully described in
Section 5 of the Stockholders' Agreement, if a bona fide offer
to purchase eighty-five percent (85%) of the Shares of the
Company is received by the Company from an independent third
party at a price per Share which is supported by appraisals,
and if the holders of eighty-five percent (85%) of the Shares
then outstanding have agreed to tender their Shares pursuant
to such offer, Director agrees to sell all Shares that
Director holds on the terms and conditions set forth in such
offer.
1.13. Restriction on Sale of Shares. If the shares of the Company's
common stock which are the same class of shares as Director's
Shares are sold to the public through a recognized stock
exchange, underwritten in an initial public offering, or
otherwise, Director agrees that, for a period of five (5)
years from the date of such sale to the public, Director shall
not sell such number of Shares in excess
5
-5-
of the lesser of: (A) the number of Shares permitted to be
sold by Director pursuant to any underwriting and/or
subscription agreement or (B) fifty percent (50%) of the
Shares held by Director. If Director desires to sell more
Shares than set forth above, Director may, at the option of
the Company, sell such Shares to the Company at the lesser of
book value as of the preceding December 31, or the then market
value of the stock as traded on a recognized stock exchange.
2. Miscellaneous.
2.1. Entire Agreement. In any circumstance where there is a
conflict between the provisions of the Stockholders' Agreement
and this Agreement, except as provided in Section 2.7 below,
the provisions of the Stockholders' Agreement shall prevail,
but only so long as the Stockholders' Agreement is in force
and effect. Capitalized terms not defined herein shall have
the meaning set forth in the Stockholders' Agreement. Without
limiting the generality of the foregoing, this Agreement
embodies the entire agreement between the parties hereto
regarding to the subject matter hereof, and shall supersede
any and all prior agreements whether written or oral relating
to employment and/or Shares of the Company owned by Director,
and shall be binding upon Director and Director's heirs,
legatees, legal representatives, successors, donees,
transferees and assigns, and Director does hereby authorize
and obligate Director's executors, heirs and legatees to
comply with the terms of this Agreement. The parties shall not
be bound by or be liable for any statement, representation,
promise, inducement or understanding of any kind or nature
regarding the subject matter hereof which is not set forth
herein. No changes, amendments or modifications of any of the
terms or conditions of this document shall be valid unless
reduced to writing and signed by all parties hereto, Company
being represented by its President or his designee.
2.2. Severability. If any provision of this Agreement shall be
declared unlawful or incapable of execution or in conflict
with the Stockholders' Agreement, such facts shall in no way
affect the validity of any other portion hereof which can be
given reasonable effect without the provision declared invalid
or incapable of execution; nor shall such fact operate to
nullify or rescind this Agreement, but shall only serve to
render ineffective the provisions declared invalid of the
remainder, or the intent of the Agreement as a whole.
2.3. Applicable Law. This document shall be construed for all
purposes as a Louisiana document and shall be interpreted and
enforced in accordance with the laws of the State of
Louisiana.
6
-6-
2.4. Number and Gender. As used herein, the singular shall include
the plural and vice versa and words used in one gender shall
include all others as appropriate.
2.5. Additional Documents. The parties hereto agree to execute what
ever documents or instruments and to perform whatever acts may
be reasonably required to fulfill the requirements and/or
intents hereof.
2.6. Legal Assistance. The parties hereto have each consulted with
legal counsel or have had the opportunity to consult with
legal counsel regarding the terms and conditions of this
Agreement.
2.7. Termination. The Terms and Conditions of this Agreement shall
terminate at the earlier of (i) one year following the
completion of a Qualified Public Offering, (ii) one year
following transfer of more than seventy-five percent (75%) of
the authorized, issued and outstanding stock of the Company by
sale, merger or otherwise or (iii) by written agreement of all
parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have set forth their hand and
seal on the day, month and year first above written in multiple originals, each
of which shall have the same force and effect as if it were the sole original.
WITNESSES: ENERGY PARTNERS, LTD.
By:
---------------------------------- ----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
----------------------------------
---------------------------------- -------------------------------------
Director
----------------------------------
---------------------------------- Acknowledged and agreed to the terms
hereof:
---------------------------------- -------------------------------------
Spouse
