Exhibit 10.1
 

[energypartnerslogo.jpg]
201 St. Charles Avenue
Suite 3400
New Orleans, Louisiana 70170

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April 1, 2008
 
Carlson Capital, L.P.
Asgard Investment Corp.
Clint D. Carlson
Double Black Diamond Offshore LDC
James R. Latimer, III
Bryant H. Patton
Steven J. Pully
c/o Carlson Capital, L.P.
2100 McKinney Avenue
Suite 1600
Dallas, Texas  75201
Attention:  Steven J. Pully
 
Ladies and Gentlemen:
 
This letter memorializes your and our mutual understanding and agreements
regarding the nomination by Energy Partners, Ltd., a Delaware corporation (the
“Company”), of James R. Latimer, III (“Mr. Latimer”), Bryant H. Patton (“Mr.
Patton”) and Steven J. Pully (“Mr. Pully”, and together with Mr. Latimer and Mr.
Patton, the “Nominees”) for election as directors of the Company’s Board of
Directors (the “Board”) at the Company’s 2008 Annual Meeting of Stockholders
(“2008 Annual Meeting”).
 
The parties hereto agree as follows:
 
Section 1.1  
Company Agreements.

 
(a) The Company agrees to include the Nominees on the Board’s proposed slate of
eleven director nominees for election at the 2008 Annual Meeting (the “2008
Board Slate”).  Prior to the 2008 Annual Meeting, (i) the Board shall appoint
the Nominees immediately after the execution of this letter agreement, as
members of the Board; (ii) the Board shall recommend (and shall not change such
recommendation in a manner adverse to the Nominees unless required to do so by
the Board’s fiduciary duties) that the Company’s stockholders vote in favor of
the 2008 Board Slate (including the Nominees) and (iii) the Company shall
solicit proxies for the election of the 2008 Board Slate of nominees (including
the Nominees) at the 2008 Annual Meeting.  Assuming that each of the Nominees is
elected, the Board shall appoint the Nominees to such committees as it deems
appropriate and such appointments shall be consistent
 

 
 

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in number with the committee appointments that have been made with regard to the
current members of the Board.
 
(b) The Company agrees that each Nominee, if elected, shall receive (i) the same
benefits of director and officer insurance, and any indemnity and exculpation
arrangements available generally to the outside directors on the Board and (ii)
the same compensation for his service as a director as the compensation received
by other outside directors on the Board.
 
(c) The Company agrees that, subject to Section 1.3(b), until the Notice Date
(as defined below), Mr. Pully may be replaced by another designee of Carlson
Capital, L.P. and its affiliates who is reasonably acceptable to the Board of
Directors in the event that such Nominee dies or is unable to perform his duties
as a director.  The Company also agrees that, in the event the Board changes its
recommendation with respect to any of the Nominees as a result of the exercise
of its fiduciary duties, such Nominee may be replaced by another designee of
Carlson Capital, L.P. and its affiliates who is reasonably acceptable to the
Board of Directors (such individual being a “Replacement Nominee”).  Under such
circumstances, the Board shall take whatever actions are necessary to ensure
that said Replacement Nominee is elected at the 2008 annual meeting of
shareholders, including but not limited to the recirculation of the Company’s
proxy statement to include such Replacement Nominee as a Company nominee,
delaying the date of the 2008 annual meeting of shareholders to accommodate the
selection and nomination of such Replacement Nominee and supporting such
Replacement Nominee’s election in any such re-circulated proxy statement.
 
(d) The Company agrees that it will not, prior to the date that is 10 calendar
days prior to the expiration of the notice period contained in Section 2.10 of
the Company’s amended and restated bylaws regarding any Stockholder Matters (as
defined below) to be brought before the 2009 annual meeting of stockholders (the
“Notice Date”), (i) increase the size of the Board to more than eleven
directors; or (ii) amend its By-laws regarding the nomination of directors at
the 2009 annual meeting of stockholders.
 
Section 1.2  
Holders’ Agreements.

 
(a) The Holders (as defined below) have represented to the Company that Carlson
Capital, L.P., a Delaware limited partnership (“Carlson Capital”), Asgard
Investment Corp., a Delaware corporation (“Asgard”), Clint D. Carlson, an
individual (“Mr. Carlson”), Double Black Diamond Offshore LDC, a Cayman Islands
company (“Offshore”, and together with Carlson Capital, Asgard and Mr. Carlson,
the “Holders”) together hold, as of the date hereof, sole voting power with
respect to at least 2,994,968 shares (the “Voting Shares”) of Company common
stock, and the Company has relied upon this representation.
 
(b) The Holders agree (i) to retain sole voting rights to all of the Voting
Shares through the 2008 Annual Meeting, (ii) to cause all Voting Shares to be
present at the 2008 Annual Meeting for purposes of establishing a quorum and
(iii) to cause all shares of Company common stock owned by them, including the
Voting Shares, to be voted at the 2008 Annual Meeting (x) for all of the 2008
Board Slate and (y) as the Holders determine is appropriate on all other
proposals.
 

 
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(c) During the period commencing with the execution of this Agreement and ending
on the earlier to occur of (x) the date that is ten (10) calendar days prior to
the Notice Date (provided, however, that if the Company’s Board takes any action
to amend the Company’s amended and restated bylaws in such a manner as to
increase the time period prior to the 2009 annual meeting of stockholders by
which a holder of the Company’s Common Stock must provide timely notice to the
Company of (i) its nomination of a person or persons to the Board at a meeting
of the Company’s stockholders, (ii) or of its proposal to bring business before
a meeting of the Company’s stockholders (clause (i) and (ii) together, the
“Stockholder Matters”), then the Standstill Period (as defined herein) shall
expire ten (10) days prior to the date on which a stockholder must give notice
to the Company with respect to any Stockholder Matters), and (y) a material
breach by the Company of its obligations under this letter agreement (the
“Standstill Period”), neither Carlson Capital nor any of its Affiliates (as
defined below) nor the Nominees shall, directly or indirectly, other than as
expressly provided by this letter agreement and other than in a manner
consistent with the recommendations of the Board to the Company’s stockholders,
(i) solicit proxies or consents for the voting of any voting or other securities
of the Company or otherwise become a “participant,” directly or indirectly, in
any “solicitation” of “proxies” or consents to vote, or become a “participant”
in any “election contest” involving the Company or the Company’s securities (all
terms used herein and defined in Regulation 14A under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) having the meanings assigned to
them therein), (ii) seek to advise or influence any person with respect to the
voting of any securities of the Company, (iii) initiate, propose or otherwise
“solicit” the Company stockholders for the approval of shareholder proposals,
(iv) otherwise communicate with the Company’s stockholders or others pursuant to
Rule 14a-1(l)(2)(iv) under the Exchange Act, (v) otherwise engage in any course
of conduct, other than in the Nominees’ capacity as directors of the Company
with the Board and Company management, with the purpose of causing stockholders
of the Company to vote contrary to the recommendation of the Board on any matter
presented to the Company’s stockholders for their vote or challenging the
policies of the Company; provided, however, that the foregoing sections (i)
through (v) shall not prohibit the Holders from (x) making public statements
(including statements contemplated by Rule 14a-1(l)(2)(iv) under the Exchange
Act), or (y) engaging in discussions with other stockholders (so long as the
Holders do not seek directly or indirectly, either on their own or another’s
behalf, the power to act as proxy for a security holder and do not furnish or
otherwise request, or act on behalf of a person who furnishes or requests, a
form of revocation, abstention, consent or authorization), in each case with
respect to any matter being presented to the Company’s stockholders for their
vote; provided further, however, that notwithstanding anything to the contrary
contained herein, this letter agreement shall not prohibit the Holders from
making statements of any kind in the event such statement is made in response to
any negative or disparaging statements made by the Company with respect to the
Holders or the Nominees; or (vi) request this letter agreement be amended or
otherwise changed.  “Affiliate” means, with respect to Carlson Capital, any
person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, Carlson Capital,
including without limitation the Holders, and any employees, officers and
partners of Carlson Capital.
 
(d) Carlson Capital shall promptly notify the Company of any sale, transfer or
other disposition of securities of the Company that causes the aggregate
economic or voting
 

 
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ownership of the Holders to be less than five percent (5%) of the number of
shares of Common Stock outstanding as of the date hereof.
 
Section 1.3  
Nominee Agreements.

 
(a) Each Nominee agrees to provide to the Company, without unreasonable delay,
true and complete information regarding such Nominee required by law to be
included in the Company’s proxy materials relating to the 2008 Annual Meeting.
 
(b) Mr. Pully hereby irrevocably resigns as a director of the Company, effective
immediately upon adoption of a resolution of the Board (adopted by a majority of
the directors who are not Nominees), which resolution is adopted on or following
the first date on which the Holders’ aggregate economic or voting ownership of
the Company’s Common Stock is reduced to less than five percent (5%) of the
number of shares of Common Stock outstanding as of the date hereof.  The parties
hereto agree and acknowledge that no additional agreement, notice or action on
the part of Mr. Pully shall be necessary for the validity and effectiveness of
such resignations.
 
Section 1.4  
General.

 
(a) Each of the parties hereto represents and warrants to the other parties that
this letter agreement has been duly and validly authorized, executed and
delivered by such party and constitutes the valid and binding obligation of such
party enforceable against such party in accordance with their respective terms.
 
(b) Promptly following the execution of this letter agreement, the Company and
the Holders shall jointly issue the press release attached hereto as Exhibit A.
 
(c) The Company shall reimburse the Holders, or their designee(s), for all
reasonable costs and expenses incurred in connection with this letter agreement
or the potential nomination of directors by the Holders in connection with the
2008 Annual Meeting (including all reasonable legal fees and disbursements in
connection therewith).
 
(d) This letter agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and the respective successors.  No party
may assign any of its rights or obligations under this letter agreement to any
other person.  This letter agreement contains the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersedes all
prior and contemplated arrangements and understandings with respect
thereto.  This letter agreement may be signed in counterparts, each of which
shall constitute an original and all of which together shall constitute one and
the same agreement.  All notices and other communications required or permitted
hereunder shall be effective upon receipt and shall be in writing and may be
delivered in person, by facsimile, electronic mail, express delivery service or
U.S. mail, in which event it may be mailed by first-class, certified or
registered, postage prepaid, addressed to the party to be notified at the
addresses which may be designated in writing.  Each party hereto shall do and
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such other agreements, certificates, instruments
and documents as any other party hereto reasonably may request in order to carry
out the intent
 

 
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and accomplish the purposes of this agreement and the consummation of the
transactions contemplated hereby.
 
(e) If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon the
legality or enforceability of any other provision of this Agreement.
 
(f) This letter agreement and the legal relations hereunder between the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and performed therein, without
giving effect to the principles of conflicts of law thereof.  Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America, in each case located in the County of New Castle, for any
action, proceeding or investigation in any court or before any governmental
authority arising out of or relating to this letter agreement and the
transactions contemplated hereby (and agrees not to commence any action,
proceeding or investigation relating thereto except in such courts), and further
agrees that service of any process, summons, notice or document by registered
mail to the respective address set forth on the first page hereof shall be
effective service of process for any action, proceeding or investigation brought
against it in any such court.
 
(g) It is hereby agreed and acknowledged that it will be impossible to measure
in money the damages that would be suffered if the parties fail to comply with
any of the obligations herein imposed on them and that in the event of any such
failure, an aggrieved person will be irreparably damaged and will not have an
adequate remedy at law.  Any such person, therefore, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations,
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
 
[Signature pages follow]

 
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If the foregoing represents our mutual understanding and agreements please
execute this letter agreement below and it shall become effective as of the day
and year first written above.
 

 
ENERGY PARTNERS, LTD.
 
 
By:        /s/ Richard A. Bachmann        
Name:  Richard A. Bachmann
Title:    Chairman and Chief Executive
             Officer

 
 

DOUBLE BLACK DIAMOND OFFSHORE LDC
 
By:  Carlson Capital, L.P., its investment manager
 
By:  Asgard Investment Corp., its general partner
 
        By:        /s/ Clint D. Carlson        
        Name:  Clint D. Carlson
        Title:    President
 
For purposes of paragraph 3 hereof only:
 
/s/ James R. Latimer, III        
James R. Latimer, III
 
For purposes of paragraph 3 hereof only:
 
/s/ Bryant H. Patton        
Bryant H. Patton
 
For purposes of paragraph 3 hereof only:
 
/s/ Steven J. Pully        
Steven J. Pully
 
CARLSON CAPITAL, L.P.
By:  Asgard Investment Corp., its general partner
        By:       /s/ Clint D. Carlson        
        Name:  Clint D. Carlson
        Title:    President
 
 
/s/ Clint D. Carlson        
Clint D. Carlson
ASGARD INVESTMENT CORP.
By:        /s/ Clint D. Carlson        
Name:  Clint D. Carlson
Title:    President
 
 

 
 
[LETTER AGREEMENT SIGNATURE PAGE]

 
 

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EXHIBIT A
 
Energy Partners Appoints Three New Directors and
Announces Slate for 2008 Annual Meeting
 
New Orleans, Louisiana, April 1, 2008…Energy Partners, Ltd. (“EPL” or the
“Company”) (NYSE:EPL) today announced that it has entered into an agreement with
Carlson Capital, L.P., pursuant to which three new directors – James R. Latimer
III, Bryant H. Patton, and Steven J. Pully – have been appointed to the Board,
effective immediately. These new directors were recommended by Carlson Capital,
which together with its affiliates owns approximately 9.4% of the Company’s
outstanding shares.

Additionally the EPL Board nominated to stand for re-election at the Company’s
2008 Annual Meeting of Stockholders on May 29, 2008 a slate of 11 members of the
Board, including the three new members and Richard A. Bachmann, John C.
Bumgarner, Jr., Jerry D. Carlisle, Harold D. Carter, Enoch L. Dawkins, Dr.
Norman C. Francis, Robert D. Gershen, and William R. Herrin, Jr.  Carlson
Capital and its affiliates have agreed to vote their shares in favor of all of
the Company’s nominees at the Annual Meeting.

Richard A. Bachmann, EPL’s Chairman and CEO, commented, “Adding three more
highly-qualified and experienced Board members is consistent with our commitment
both to good corporate governance and to building shareholder value.  With its
substantial investment in Energy Partners, Carlson Capital has demonstrated
confidence in the Company and its prospects for future success. We look forward
to working closely with the new directors as we implement our strategic plan,
and are grateful for the service and many contributions to EPL of our three
directors who are not standing for re-election. One of those directors, John
Phillips, will be named a director emeritus upon the completion of his current
term.”

Clint D. Carlson, President of Carlson Capital, said, “We are pleased to be
working constructively with EPL. We are confident that the new directors will
represent the interests of all EPL shareholders and we look forward to working
with EPL’s  Board and management to increase shareholder value.”

James R. Latimer, III
Mr. Latimer is head of The Latimer Companies, a private oil and gas exploration
and development company.  He is also a founder and partner of Blackhill
Partners/Blackhill Advisors, a financial advisory and merchant banking firm,
primarily in energy and technology industries. Mr. Latimer currently serves as a
director of Enron Creditors Recovery Corporation (formerly Enron Corp.) and NGP
Capital Resources Company, and is formerly a director of Magnum Hunter
Resources, Inc., Prize Energy Corp., and Falcon Drilling, Inc. Mr. Latimer’s
prior business experience includes work as a management consultant with McKinsey
& Company and serving as co-head of the Dallas regional office of Prudential
Capital.

 
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Bryant H. Patton
Mr. Patton is the President of BRYCAP Investments, Inc., a merchant banking firm
specializing in energy related companies that he founded in 1989.  In 2000, he
also co-founded Camden Resources, Inc., a private oil and gas exploration and
production company, and served as executive vice president until the company was
acquired at the end of 2007.  Prior to founding Camden Resources, Inc. and
BRYCAP Investments, Inc., Mr. Patton served as senior vice president of
Associated Energy Managers, an investment fund manager of institutional
investments in independent oil and gas companies. Mr. Patton also is a director
of Abraxas Energy Partners, L.P. and has served as a director of a number of
private oil and gas companies. Mr. Patton has almost thirty years of experience
in the energy industry, having started his career in the energy industry in 1977
with his family oil and gas company, TTE, Inc.

Steven J. Pully
Mr. Pully is a consultant in the asset management industry and acts as a
consultant to Carlson Capital, L.P.  From December 2001 to October 2007, Mr.
Pully worked for Newcastle Capital Management, L.P., an investment partnership,
where he served as President from January 2003 through October 2007.   He served
as Chief Executive Officer of New Century Equity Holdings Corp. from June 2004
through October 2007 and is a director of that company.  Mr. Pully is also a
director of Peerless Systems Corp.  Prior to joining Newcastle Capital
Management, he served as a managing director in the investment banking
department of Banc of America Securities, Inc. and was a senior managing
director in the investment banking department of Bear Stearns & Co. Inc. Mr.
Pully’s primary focus as an investment banker was on the energy sector.  Mr.
Pully is licensed as an attorney and CPA in the state of Texas and is also a CFA
charterholder.

About EPL

Founded in 1998, EPL is an independent oil and natural gas exploration and
production company based in New Orleans, Louisiana. The Company’s operations are
focused along the U.S. Gulf Coast, both onshore in south Louisiana and offshore
in the Gulf of Mexico.

About Carlson Capital

Founded in 1993, Carlson Capital serves as the investment advisor of the Black
Diamond group of hedge funds.  It employs a multi-strategy, non-directional
approach in the global equity and debt markets.  Based in Dallas, Carlson
Capital has over ninety employees and offices in New York, London, and
Greenwich, Connecticut. 

Forward-Looking Statements

 
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This press release may contain forward-looking information and statements
regarding EPL. Any statements included in this press release that address
activities, events or developments that EPL expects, believes or anticipates
will or may occur in the future are forward-looking statements. These include
statements regarding:
 
 
·  
reserve and production estimates;

 
 
·  
oil and natural gas prices;

 
 
·  
the impact of derivative positions;

 
 
·  
production expense estimates;

 
 
·  
cash flow estimates;

 
 
·  
future financial performance;

 
 
·  
planned capital expenditures; and

 
 
·  
other matters that are discussed in EPL’s filings with the Securities and
Exchange Commission.

 
 
These statements are based on current expectations and projections about future
events and involve known and unknown risks, uncertainties, and other factors
that may cause actual results and performance to be materially different from
any future results or performance expressed or implied by these forward-looking
statements. Please refer to EPL’s filings with the SEC, including its Form 10-K
for the year ended December 31, 2007, for a discussion of these risks.
 
 
Additional Information and Where to Find It. Security holders may obtain
information regarding the Company from EPL’s website at www.eplweb.com, from the
Securities and Exchange Commission’s website at www.sec.gov, or by directing a
request to: Energy Partners, Ltd. 201 St. Charles Avenue, Suite 3400, New
Orleans, Louisiana 70170, Attn: Secretary, (504) 569-1875.
 
Contact:
For Energy Partners, Ltd.
T.J. Thom, 504-799-4830
or
Al Petrie, 504-799-1953

Media:
Joele Frank, Wilkinson Brimmer Katcher
Steve Frankel or Jeremy Jacobs, 212-355-4449

 
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For Carlson Capital, L.P.
Perry Street Communications
Jon Morgan, 212-741-0014

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