exv10w23






Exhibit 10.23




EMPLOYMENT AGREEMENT




     This Employment Agreement (“Agreement”) is made and entered into as of February 7, 2005 (the
“Effective Date”), by and between Mariner Energy, Inc., a Delaware corporation (hereafter
“Company”), and Jesus Melendrez (hereafter “Executive”).



     1. Employment. During the Employment Period (as defined in Section 4 hereof),
the Company shall employ Executive, and Executive shall serve, as Vice President.



     2. Duties and Responsibilities of Executive.




     (a) During the Employment Period, Executive shall devote his full time and attention
during normal business hours to the business of the Company, will act in the best interests
of the Company and will perform with due care his duties and responsibilities. Executive’s
duties will include those normally incidental to the position of Vice President as well as
whatever additional duties may be assigned to him by the Board of Directors of the Company
(the “Board”) or the Chief Executive Officer of the Company. Executive agrees to cooperate
fully with the Board and the Chief Executive Officer of the Company and not to engage in any
activity that materially interferes with the performance of Executive’s duties hereunder.
During the Employment Period, Executive will not hold outside employment without the advance
written approval of the Board. Provided that it shall not be a violation of this Agreement
for Executive to (1) serve on corporate, civic, or charitable boards or committees (except
for boards or committees of a business organization that competes with the Company in any
business in which the Company is regularly engaged), which are listed on Exhibit A so long
as such service does not materially interfere with the performance of Executive’s duties and
responsibilities under this Agreement, as determined in the good faith opinion of the Board,
(2) manage personal investments, or (3) take vacation days and reasonable absences due to
injury or illness, as set forth herein and/or permitted by the general policies of the
Company.




     (b) Executive represents and covenants to the Company that he is not subject or a party
to any employment agreement, noncompetition covenant, nondisclosure agreement, or any other
agreement, covenant, understanding, or restriction that would prohibit Executive from
executing this Agreement and fully performing his duties and responsibilities hereunder, or
would in any manner, directly or indirectly, limit or affect the duties and responsibilities
that may now or in the future be assigned to Executive hereunder.




     (c) Executive acknowledges and agrees that Executive owes the Company a duty of loyalty
and that the obligations described in this Agreement are in addition to, and not in lieu of,
the obligations Executive owes the Company under the common law.



 









 





     3. Compensation.




     (a) During the Employment Period (as defined in Section 4 hereof), the Company
shall pay to Executive an annualized base salary of $187,500 (the “Base Salary”) in
consideration for Executive’s services under this Agreement, payable on a not less than
semi-monthly basis, in conformity with the Company’s customary payroll practices for
executive salaries. For all purposes of this Agreement, Executive’s Base Salary shall
include any portion thereof which is deferred under any nonqualified plan or arrangement.
Each year, the Board shall review Executive’s salary based on market survey data, corporate
performance, and performance of Executive. If, in its sole and complete discretion, the
Board determines that an increase in Executive’s salary is appropriate, the Board may make
such adjustment, and such adjusted salary shall thereafter be Executive’s Base Salary for
purposes of this Agreement. Executive’s Base Salary may not be reduced except as part of a
general reduction of salaries paid to management employees that is necessitated by business
conditions, as determined by the Board.




     (b) Executive may be eligible for an annual discretionary performance bonus with
respect to each calendar year during the Employment Period (the “Annual Bonus”). The
amount, if any, of Executive’s Annual Bonus will be determined by the Board in its sole and
complete discretion based on market survey data, corporate performance, and performance of
Executive. Bonus determinations will be made by the Board at a time convenient to the Board
but typically within 60 calendar days of the end of each calendar year. The Board will, on
an annual basis (at or near the beginning of each calendar year in the Employment Period)
establish a target bonus for Executive for the upcoming year, and will communicate such
target to Executive. If the Board determines to award Executive an Annual Bonus, it will be
payable in conformity with the Company’s customary payroll practices for executive bonuses.
The Board may also award additional bonuses or other compensation to Executive at any time
in its sole and complete discretion.




     (c) Any salary, bonus, and other compensation payments hereunder shall be subject to
such payroll and other taxes, withholdings, and deductions as may be required by applicable
law or with respect to Executive’s coverage in the Company’s insurance and other employee
benefit plans.



     4. Term of Employment. The initial term of this Agreement shall be for the period
beginning on the Effective Date and ending at midnight (EST) on March 2, 2006 (the “Initial Term”);
provided, however, that if the Company consummates an initial public offering of its common stock
prior to March 3, 2006, the Initial Term shall end on March 2, 2007. For all purposes of this
Agreement, the consummation of a sale under Rule 144A and/or Regulation D of equity securities of
the Company shall be treated as the consummation of an initial public offering by the Company. On
March 3, 2006 (or 2007, if applicable) and on March 3 of each succeeding year (each such date being
referred to as a “Renewal Date”), this Agreement shall automatically renew and extend for a period
of 12 months (a “Renewal Term”) unless written notice of non-renewal is delivered from one party to
the other at least 90 days prior to such



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Renewal Date (in which case the Termination Date shall be the day immediately prior to such
Renewal Date). Notwithstanding any other provision of this Agreement, this Agreement may be
terminated at any time during the Initial Term or the Renewal Term (if any) in accordance with
Section 6. The period from the Effective Date through the Termination Date of this Agreement,
regardless of the time or reason for such termination, shall be referred to herein as the
“Employment Period.” In the event that this Agreement is not renewed, Executive shall become an
at-will employee of the Company and the Company shall have the right to terminate Executive’s
employment with the Company at any time.




     5. Benefits. Subject to the terms and conditions of this Agreement, Executive shall
be entitled to the following benefits during the Employment Period:




     (a) Reimbursement of Business Expenses. The Company agrees to reimburse Executive for
reasonable business-related expenses incurred in the performance of Executive’s duties under
this Agreement.




     (b) Benefit Plans and Programs. To the extent permitted by applicable law and subject
to the terms and eligibility requirements of any such plan or program, Executive will be
eligible to participate in all benefit plans and programs, including improvements or
modifications of the same, that are maintained by the Company generally for executive
employees of the Company, subject to the eligibility requirements and other terms and
conditions of those plans and programs. The Company will not, however, by reason of this
Section 5(b) be obligated either (1) to institute, maintain, or refrain from changing,
amending, or discontinuing any such benefit plan or program, or (2) to provide Executive
with all benefits provided to any other person or individual employed by the Company or any
of its affiliates.



     6. Termination of Employment.



     (a) Company’s Right to Terminate. At any time during the Initial Term or any
Renewal Term, the Company shall have the right to terminate this Agreement and
Executive’s employment with the Company for any of the following reasons:




     (1) Upon Executive’s death (in which case the
Termination Date shall be the date of Executive’s death);




     (2) Upon Executive’s Disability (as defined below);




     (3) For Cause (as defined in Section 7); or




     (4) For any other reason whatsoever, in the sole and complete discretion of the
Company.




(b) Executive’s Right to Terminate. At any time during the Initial Term or any
Renewal Term, Executive will have the right to terminate this Agreement and
Executive’s employment with the Company for:



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     (1) Good Reason (as defined in Section 7); or




     (2) For any other reason whatsoever, in the sole and complete discretion of
Executive.




(c) “Disability.” For purposes of this Agreement, “Disability” means that Executive
has sustained sickness or injury that renders Executive incapable of performing the
duties and services required of Executive hereunder for a period of 90 consecutive
calendar days or a total of 120 calendar days during any 12 month period.




(d) “Notices.” Any termination of this Agreement by the Company under Section 6(a)
(other than termination due to the death of Executive), or by Executive under
Section 6(b) shall be communicated by a Notice of Termination to the other party. A
“Notice of Termination” means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon and (2) if the termination is by
the Company for Cause or by Executive for Good Reason, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated. The Notice of Termination
must specify the Termination Date. In the case of a termination by the Company for
Cause or due to Executive’s Disability, or by Executive for Good Reason, the
Termination Date may be as early as the date notice is given but no later than 30
calendar days after notice is given, unless otherwise agreed to in writing by both
parties. In the case of a termination by the Company or by Executive for any other
reason, the Termination Date may be as early as 14 calendar days after notice is
given but no later than 60 calendar days after notice is given, unless otherwise
agreed to by the parties in writing.



     7. Severance Payments.




(a) Termination by the Company. If (1) the Company terminates this Agreement and
Executive’s employment with the Company and its affiliates during the Initial Term
or the Renewal Term (if any) pursuant to Section 6(a)(4), (2) Executive
signs and does not revoke a waiver and release agreement substantially similar to
Exhibit B, and (3) Executive continues to comply with Executive’s ongoing
obligations under Sections 11 and 12 of this Agreement, then, subject to
Section 7(h), the Company shall pay Executive severance in accordance with
Section 7(c). Such severance payments shall be in addition to payment by
the Company of all previously unpaid amounts (including, without limitation, salary,
bonuses, equity plans, incentive compensation plans, fringe benefits, and expense
reimbursements) owed to Executive under this Agreement with respect to periods prior
to the Termination Date.




(b) Termination by Executive. If (1) Executive terminates this Agreement and
Executive’s employment with the Company and its affiliates during the Initial



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Term or the Renewal Term (if any) pursuant to Section 6(b)(1), (2) Executive
signs and does not revoke a waiver and release agreement substantially similar to
Exhibit B, and (3) Executive continues to comply with Executive’s ongoing
obligations under Sections 11 and 12 of this Agreement, then, subject to
Section 7(h), the Company shall pay Executive severance in accordance with Section
7(c). Such severance payments shall be in addition to payment by the Company of all
previously unpaid amounts (including, without limitation, salary, bonuses, equity
plans, incentive compensation plans, fringe benefits, and expense reimbursements)
owed to Executive under this Agreement with respect to periods prior to the
Termination Date.




(c) Severance Amount. If the Company is required to pay Executive severance by the
express terms of Section 7(a) or 7(b), the Company shall pay Executive the
following as severance:




(1) Executive’s Base Salary at the highest rate in effect prior to the
Termination Date as salary continuation for a period of eighteen months commencing
on the date on which Executive’s employment with the Company is terminated (the
“Termination Date”) (the “Severance Period”), payable in equal monthly installments
pursuant to the Company’s customary payroll practices for executive salaries;
provided, however, that, at the option of the Company, the amounts payable under
this Section 7(c) may be paid by the Company in one lump sum.




(2) Executive, Executive’s spouse, and Executive’s dependents will continue to
be eligible for coverage under the Company’s group health plan or any successor plan
on the same basis as active executive employees of the Company, their spouses, and
their dependents for the duration of the Severance Period. If and when group health
coverage under another employer’s plan is made available to Executive, Executive’s
spouse, or Executive’s dependents, the Company’s obligations under this paragraph
will cease with respect to each person to whom such coverage is made available,
notwithstanding that such person may not in fact become covered under such other
employer’s plan. Executive’s portion of the premium for such coverage shall be
withheld from the salary continuation payments described in paragraph (1)
immediately above or, if salary continuation has been paid in a lump sum, Executive
shall reimburse the Company for Executive’s portion of the premium on a monthly
basis.




(3) An amount equal to the sum of amounts paid or payable to Executive as
bonuses by the Company for the year prior to the year in which the Termination Date
occurs. This amount will be payable in one lump sum, to Executive within 30 days
after the end of the Severance Period.




(4) Executive shall become 100% vested in all of the shares of restricted stock
granted to Executive under the Mariner Energy, Inc. Equity



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Participation Plan to the extent Executive is less than 100% vested in such
shares as of the Termination Date.




(5) Executive shall become 50% vested in all of the rights and interests
granted to Executive under the Company’s stock and other equity plans (other than
the Mariner Energy, Inc. Equity Participation Plan), including without limitation
any stock options, restricted stock, restricted stock units, performance units,
and/or performance shares to the extent Executive is less than 50% vested in such
award as of the Termination Date.




(6) Notwithstanding any other provision hereof, if the Company incurs an
obligation to pay severance under this Section 7(c) in connection with the
termination of Executive’s employment after the consummation of an initial public
offering by the Company, then, subject to Section 7(h), Executive shall be entitled
to receive the amounts specified in Section 8(a) in lieu of the amounts specified in
Sections 7(c)(1) and 7(c)(3).




(7) Payments under this Section 7(c) shall be in lieu of any severance benefits
otherwise due to Executive under any severance pay plan or program maintained by the
Company that covers its employees or executives generally. If Executive receives
payment under Section 8(a), payments otherwise payable under Section 7(c)(1) shall
terminate.




(d) Termination in Event of Executive’s Disability. If (1) the Company terminates
Executive’s employment with the Company and its affiliates during the Initial Term
or the Renewal Term (if any) pursuant to Section 6(a)(2), (2) Executive
signs and does not revoke a waiver and release agreement substantially similar to
Exhibit B, and (3) Executive continues to comply with Executive’s ongoing
obligations under Section 11 and 12 of this Agreement, then, subject to
Section 7(h), the Company shall pay Executive the severance described in accordance
with Section 7(e). Such severance payments shall be in addition to payment
by the Company of all previously unpaid amounts (including, without limitation,
salary, bonuses, equity plans, incentive compensation plans, fringe benefits, and
expense reimbursements) owed to Executive under this Agreement with respect to
periods prior to the Termination Date.




(e) Disability Severance. If the Company is required to pay Executive severance by
the express terms of Section 7(d), the Company shall pay Executive the following as severance:




(1) Executive’s Base Salary at the highest rate in effect prior to the
Termination Date as salary continuation for the duration of the Severance Period,
payable in equal monthly installments pursuant to the Company’s customary payroll
practices for executive salaries; provided, however, that, at the option of the
Company, the amounts payable under this Section 7(e) may be paid by the
Company in one lump sum.



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(2) Executive, Executive’s spouse, and Executive’s dependents will continue to
be eligible for coverage under the Company’s group health plan or any successor plan
on the same basis as active executive employees of the Company, their spouses, and
their dependents for the duration of the Severance Period. Executive’s portion of
the premium for such coverage shall be withheld from the salary continuation
payments described in paragraph (1) immediately above or, if salary continuation has
been paid in a lump sum, Executive shall reimburse the Company for Executive’s
portion of the premium on a monthly basis. If and when group health coverage under
another employer’s plan is made available to Executive, Executive’s spouse, or
Executive’s dependents, the Company’s obligations under this paragraph will cease
with respect to each person to whom such coverage is made available, notwithstanding
that such person may not in fact become covered under such other employer’s plan.




(3) An amount equal to the sum of amounts paid or payable to Executive as
bonuses awarded by the Company for the calendar year prior to the calendar year in
which the Termination Date occurs. This amount will be payable in one lump sum to
Executive within 30 days after the end of the Severance Period.




(4) Executive shall become 100% vested in all of the shares of restricted stock
granted to Executive under the Mariner Energy, Inc. Equity Participation Plan to the
extent Executive is less than 100% vested in such shares as of the Termination Date.




(5) Executive shall become 50% vested in all of the rights and interests
granted to Executive under the Company’s stock and other equity plans (other than
the Mariner Energy, Inc. Equity Participation Plan), including without limitation
any stock options, restricted stock, restricted stock units, performance units,
and/or performance shares to the extent Executive is less than 50% vested in such
award as of the Termination Date.




(6) Notwithstanding any other provision hereof, if the Company incurs an
obligation to pay severance under this Section 7(e) in connection with termination
of Executive’s employment after the consummation of an initial public offering by
the Company, then, subject to Section 7(h), Executive shall be entitled to receive
the amounts specified in Section 8(a) in lieu of the amounts specified in Sections
7(e)(1) and 7(e)(3).




(7) Payments under this Section 7(e) shall be in lieu of any severance benefits
otherwise due to Executive under any severance pay plan or program maintained by the
Company that covers its employees or executives generally.




(f) “Cause” means the occurrence or existence, prior to occurrence of circumstances
constituting Good Reason, of any of the following events:



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(1) Executive’s gross negligence or material mismanagement in performing, or
material failure or inability (excluding as a result of death or Disability) to
perform, Executive’s duties and responsibilities as described herein or as lawfully
directed by the Board or the Chief Executive Officer of the Company;




(2) Executive’s having committed any act of willful misconduct or material
dishonesty against the Company or any of its affiliates (including theft,
misappropriation, embezzlement, forgery, fraud, falsification of records, or
misrepresentation) or any act that results in, or could reasonably be expected to
result in, material injury to the reputation, business or business relationships of
the Company or any of its affiliates;




(3) Executive’s material breach of this Agreement, any fiduciary duty owed by
Executive to the Company or its affiliates, or any written workplace policies
applicable to Executive (including the Company’s code of conduct and policy on
workplace harassment) whether adopted on or after the date of this Agreement;




(4) Executive’s having been convicted of, or having entered a plea bargain, a
plea of nolo contendre or settlement admitting guilt for, any felony, any crime of
moral turpitude, or any other crime that could reasonably be expected to have a
material adverse impact on the Company’s or any of its affiliates’ reputations; or




(5) Executive’s having committed any material violation of any federal law
regulating securities (without having relied on the advice of the Company’s attorney
to perform required acts on the Chief Executive Officer’s behalf) or having been the
subject of any final order, judicial or administrative, obtained or issued by the
Securities and Exchange Commission, for any securities violation involving fraud,
including, for example, any such order consented to by Executive in which findings
of facts or any legal conclusions establishing liability are neither admitted nor
denied.




(g) “Good Reason” means the occurrence, prior to occurrence of circumstances
constituting Cause, of any of the following events without Executive’s consent:




(1) Any material breach by the Company of this Agreement, provided that
Executive provides the Board written notice of such breach within 90 days from the
first date that he is aware, or reasonably should be aware, of such breach and such
breach is not remedied within 30 days of the Board’s receipt of such written notice;



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     (2) Any requirement by the Company that Executive relocate outside of the
Houston metropolitan area;




     (3) Failure of any successor to assume this Agreement not later than the date
as of which it acquires substantially all of the equity, assets or businesses of the
Company;




     (4) Any material reduction in Executive’s title, responsibilities, or duties;
or




     (5) The assignment to Executive of any duties materially inconsistent with his
duties as Vice President of the Company.




(h) Later Determinations. Notwithstanding any other provision of this Agreement, if
Executive’s employment with the Company is terminated such that Executive is
entitled to severance from the Company and within one year following such
termination the Board determines that Cause exists or existed on, prior to, or after
such termination, Executive shall not be entitled to any severance from the Company,
and any and all severance payments from the Company to Executive in any form or
amount shall cease and any such payments or reimbursements already made to Executive
must be returned to the Company.



     8. Change of Control.



     (a) Upon the termination of Executive’s employment with the Company for any reason other than
Cause at any time on or within nine months after a Change of Control that occurs during the
Employment Period or upon the occurrence of a Change of Control within nine months following a
termination of Executive’s employment that entitles Executive to severance under Section 7(c), the
Company shall pay Executive, subject to Section 8(d) below, an amount equal to 2.0 times the sum of
Executive’s Base Salary plus his Average Bonus Amount. The Executive’s “Average Bonus Amount” shall
be the average annual amount paid or payable to Executive as bonuses for the Company’s three
calendar years ended immediately prior to the occurrence of the Change of Control (or for the
number of calendar years that Executive has been an employee of the Company before the occurrence
of the Change of Control, if less than three); provided that any payment otherwise payable under
this Section 8(a) shall be subject to Section 7(h) notwithstanding that such payment is not a
severance payment.



     (b) Upon the occurrence of a Change of Control that occurs during the Employment Period or
within nine months following a termination of Executive’s employment that entitles Executive to
severance under Section 7(c), Executive shall become 100% vested in all of the rights and interests
granted to Executive under the Company’s stock and other equity plans, including without limitation
any stock options, restricted stock, restricted stock units, performance units, and/or performance
shares to the extent Executive is less than 100% vested in such award as of the Termination Date.



     (c) “Change of Control” means (i) after the Effective Date, any person or group of affiliated
or associated persons acquires more than 35% of the voting power of the Company; (ii)



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the consummation of a sale of all or substantially all of the assets of the Company; (iii) the
dissolution of the Company or (iv) the consummation of any merger, consolidation, or reorganization
involving the Company in which, immediately after giving effect to such merger, consolidation or
reorganization, less than 51% of the total voting power of outstanding stock of the surviving or
resulting entity is then “beneficially owned” (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) in the aggregate by the stockholders of the Company
immediately prior to such merger, consolidation or reorganization. Notwithstanding the foregoing,
a Change of Control shall not include any acquisitions resulting from the consummation of the
private placement offering of common stock of the Company under Rule 144A and/or Regulation D prior
to March 31, 2005.




     (d) Except as provided below, such Change of Control payments shall be in addition to payment
by the Company of all other amounts (including, without limitation, salary, bonuses, equity plans,
incentive compensation plans, fringe benefits, and expense reimbursements) owed to Executive under
other provisions of this Agreement. Notwithstanding the foregoing, if on or before the Change of
Control Executive becomes or has become entitled to payment pursuant to Section 7(c), the amount
payable under this Section 8 shall be reduced by the amount paid or payable to Executive under
Section 7(c).



     9. Gross-up Parachute Payment. In the event that Executive shall become entitled to
any amounts (the “Regular Amounts”), whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result in a change of
ownership covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended, or any
person affiliated with the Company or such person, that will be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed), the
Company shall pay to Executive an additional amount (the “Gross-up Payment”) such that the net
amount retained by Executive after payment of all applicable federal and state taxes on the sum of
the Regular Amount plus the Gross-up Payment, is equal to the net amount that would have been
retained by Executive after payment of all applicable federal and state taxes on the Regular Amount
if it had not been subject to the Excise Tax.



     10. Conflicts of Interest. Executive agrees that he shall promptly disclose to the
Board any conflict of interest involving Executive upon Executive becoming aware of such conflict.
Executive’s ownership of an interest not in excess of five percent in a business organization that
competes with the Company shall not be deemed to constitute a conflict of interest.



     11. Confidentiality. The Company agrees to provide Executive valuable Confidential
Information of the Company and of third parties who have supplied such information to the Company.
In consideration of such Confidential Information and other valuable consideration provided
hereunder, Executive agrees to comply with this Section 11.




(a) “Confidential Information” means, without limitation and regardless of whether
such information or materials are expressly identified as confidential or
proprietary, (i) any and all non-public, confidential or proprietary information or
work product of the Company or its affiliates, (ii) any information that gives the



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Company or its affiliates a competitive business advantage or the opportunity of
obtaining such advantage, (iii) any information the disclosure or improper use of
which is reasonably expected to be detrimental to the interests of the Company or
its affiliates, (iv) any trade secrets of the Company or its affiliates, and (v) any
other information of or regarding the Company or any of its affiliates, or its or
their past, present or future, direct or indirect, potential or actual officers,
directors, employees, owners, or business partners, including but not limited to
information regarding any of their businesses, operations, assets (including any Oil
and Gas Interests as defined below), liabilities, properties, systems, methods,
models, processes, results, performance, investments, investors, financial affairs,
future plans, business prospects, acquisition or investment opportunities,
strategies, business partners, business relationships, contracts, contractual
relationships, organizational or personnel matters, policies or procedures,
management or compensation matters, compliance or regulatory matters, as well as any
technical, seismic, industry, market or other data, studies or research, or any
forecasts, projections, valuations, derivations or other analyses, performed,
generated, collected, gathered, synthesized, purchased or owned by, or otherwise in
the possession of, the Company or its affiliates or which Executive has learned of
through his employment with the Company. Confidential Information also includes any
non-public, confidential or proprietary information about or belonging to any third
party which has been entrusted to the Company or its affiliates. Notwithstanding
the foregoing, Confidential Information does not include any information which is or
becomes generally known by the public other than as a result of Executive’s actions
or inactions. “Oil and Gas Interests” means: (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties (including
revenues or net revenues therefrom) and assets of any kind and nature, direct or
indirect, including without limitation working, royalty and overriding royalty
interests, mineral interests, leasehold interests, production payments, operating
rights, net profits interests, other non-working interests and non-operating
interests; (b) interests in and rights with respect to Hydrocarbons and other
minerals or revenues therefrom and contracts or agreements in connection therewith
and claims and rights thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders, transfer orders,
mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts
and agreements and, in each case, interests thereunder), surface interests, fee
interests, reversionary interests, reservations and concessions; (c) easements,
rights of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and (d)
interests in equipment and machinery (including well equipment and machinery), oil
and gas production, gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing plants,
refineries and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing, regardless
of location. “Hydrocarbons”



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means oil, condensate gas, casinghead gas and other liquid or gaseous hydrocarbons.




(b) Protection. In return for the Company’s promise to provide Executive with
Confidential Information, Executive promises (i) to keep the Confidential
Information, and all documentation, materials and information relating thereto,
strictly confidential, (ii) not to use the Confidential Information for any purpose
other than as required in connection with fulfilling his duties as Vice President
for the benefit of the Company, and (iii) to return to the Company all documents
containing Confidential Information in Executive’s possession upon separation from
the Company for any reason. For the sake of clarity, Executive specifically
acknowledges and agrees that (x) the definition of Confidential Information in
Section 11(a) includes (but is not limited to) any nonpublic information about the
Oil and Gas Interests (as defined above) and any other assets, investments,
properties, sites or locations in which the Company or its affiliates have an
ownership or other interest or right, as well as any Oil and Gas Interests (as
defined above), assets, investments, properties, sites, locations, acquisitions or
other business prospects upon which the Company or its affiliates have expended
resources in the past, are currently expending resources, or are contemplating
expending resources in the future, and (y) that any use by Executive of such
Confidential Information other than as required in connection with fulfilling his
duties as Executive for the benefit of the Company will be a material breach of this
Agreement. The immediately preceding sentence has been included for the purpose of
highlighting certain aspects of the foregoing covenants and shall in no event be
read to limit or narrow the foregoing covenants.




(c) Scope. Executive understands and agrees that all Confidential Information, in
whatever medium (verbal, written, electronic or other), is subject to this Agreement
whether provided directly to Executive or not, whether provided to Executive prior
to the Effective Date of this Agreement or not, and whether inadvertently disclosed
to Executive or not. Confidential Information which was or is available to
Executive or to which Executive had or has access will be deemed to have been
provided to Executive. Executive also hereby agrees that Confidential Information
shall be deemed to include information regarding the assets of the Company, even if
such information was learned by Executive prior to formation of the Company.




(d) Value and Security. Executive understands and agrees that all Confidential
Information, and every portion thereof, constitutes the valuable intellectual
property of the Company, its affiliates, and/or third parties, and Executive further
acknowledges the importance of maintaining the security and confidentiality of the
Confidential Information and of not misusing the Confidential Information.




(e) Disclosure Required By Law. If Executive is legally required to disclose any
Confidential Information, Executive shall promptly notify the Company in



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writing of such request or requirement so that the Company may seek an appropriate
protective order or other relief. Executive agrees to cooperate with and not to
oppose any effort by the Company to resist or narrow such request or to seek a
protective order or other appropriate remedy. In any case, Executive will (a)
disclose only that portion of the Confidential Information that, according to the
advice of Executive’s counsel, is required to be disclosed (and Executive’s
disclosure of Confidential Information to Executive’s counsel in connection with
obtaining such advice shall not be a violation of this Agreement), (b) use
reasonable efforts (at the expense of the Company) to obtain assurances that such
Confidential Information will be treated confidentially, and (c) promptly notify the
Company in writing of the items of Confidential Information so disclosed.




(f) Third-Party Confidentiality Agreements. To the extent that the Company possesses
any Confidential Information which is subject to any confidentiality agreements
with, or obligations to, third parties, Executive will comply with all such
agreements or obligations in full. The immediately preceding sentence shall apply
only if the Company has provided Executive with a copy of such agreements, and
Executive may disclose such agreements and any related Confidential Information to
Company’s attorneys and rely on their advice regarding compliance therewith.




(g) Survival. The covenants made by Executive in this Section 11, other than
Paragraph (f) hereof, will be effective only during the Employment Period and for
the two-year period immediately following the Employment Period, and to that extent
(and only that extent) shall survive termination of this Agreement. The covenants
made by Executive in Paragraph (f) of this Section 11 will be effective during the
period specified in the confidentiality agreements described therein.



     12. No Solicitation. Executive shall not, for a period of one year after the
Termination Date, either as principal, agent, independent contractor, consultant, director,
officer, employee, employer, advisor, stockholder, partner, member, joint venturer, owner or in any
other individual or representative capacity whatsoever, whether paid or unpaid, either for his own
benefit or for the benefit of any other person or entity, either (A) contact or solicit, with
respect to hiring, any person known by Executive to be or to have been, at any time during the
12-month period immediately preceding the Termination Date, an employee of the Company or its
affiliates, or (B) induce or otherwise counsel, advise or encourage any employee of the Company or
its affiliates to leave the employment of the Company or their respective employment with the
Company’s affiliates, as the case may be; provided, however, that this restriction shall not apply
to any solicitations contained in an advertisement directed generally to the public or the trade,
nor to any contacts resulting from such a solicitation. If Executive fails to comply with this
Section 12, the Company shall be entitled to, among other remedies, compliance by Executive
with the terms of this section for an additional period of time that shall equal the period over
which such noncompliance occurred. Notwithstanding any other provision hereof, this Section 12
shall not apply (1) if the Company terminates Executive’s employment with the Company and its
affiliates pursuant to Section 6(a)(4) or pursuant to delivery by the Company to Executive
of a



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notice of non-renewal in accordance with Section 4, (2) if Executive terminates
Executive’s employment with the Company and its affiliates pursuant to Section 6(b)(1), or
(3) after the occurrence of a Change of Control.




     13. Defense of Claims. Executive agrees that, during the Employment Period and for a
period of 36 months after the Termination Date, upon request from the Company, Executive will
cooperate with the Company and its affiliates in the defense of any claims or actions that may be
made by or against the Company or any of its affiliates that relate to Executive’s prior areas of
responsibility, except if Executive’s reasonable interests are adverse to the Company or affiliates
in such claim or action. If Executive is not an employee of the Company or an affiliate at such
time, the Company agrees to compensate Executive for his time spent on such matters at the rate of
$150 per hour, and in addition, to pay or reimburse Executive for all of Executive’s reasonable
travel and other direct expenses incurred, or to be reasonably incurred, to comply with Executive’s
obligations under this Section 13, provided Executive provides reasonable documentation of
same.



     14. Withholdings: Right of Offset. The Company may withhold and deduct from any
payments made or to be made pursuant to this Agreement (a) all federal, state, local and other
taxes as may be required pursuant to any law or governmental regulation or ruling, (b) any
deductions consented to in writing by Executive, and (c) any other sums owed by Executive to the
Company, any affiliate, or any employee benefit plan or program of the Company or any affiliate.



     15. Severability. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision contained herein be held
unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 17),
the parties hereby agree and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however, if such provision
cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other
provision of this Agreement.



     16. Title and Headings; Construction. Titles and headings to Sections hereof are for
the purpose of reference only and shall in no way limit, define or otherwise affect the provisions
hereof. Any and all Exhibits referred to in this Agreement are, by such reference, incorporated
herein and made a part hereof for all purposes. The words “herein”, “hereof”, “hereunder” and
other compounds of the word “here” shall refer to the entire Agreement and not to any particular
provision hereof.



     17. Arbitration; Injunctive Relief; Attorneys’ Fees.




     (a) Subject to Section 17(b), any dispute, controversy or claim between
Executive and the Company arising out of or relating to this Agreement, Executive’s
employment with Company, or the termination of either will be finally settled by arbitration
in Houston, Texas before, and in accordance with the rules for the resolution of employment
disputes then obtaining of, the American Arbitration Association. The arbitrator’s award
shall be final and binding on both parties.



14









 






     (b) Notwithstanding Section 17(a), an application for emergency or temporary
injunctive relief by either party shall not be subject to arbitration under this Section
17; provided, however, that the remainder of any such dispute (beyond the
application for emergency or temporary injunctive relief) shall be subject to arbitration
under this Section 17. Executive acknowledges that Executive’s violation of
Sections 11 and/or 12 of this Agreement will cause irreparable harm to the Company,
Executive agrees not to contest that Executive’s violation of Sections 11 and/or 12
of this Agreement will cause irreparable harm to the Company and Executive agrees that the
Company shall be entitled as a matter of right to specific performance of Executive’s
obligations under Sections 11 and 12 and an injunction, from any court of competent
jurisdiction, restraining any violation or further violation of such agreements by Executive
or others acting on his/her behalf, without any showing of irreparable harm and without any
showing that the Company does not have an adequate remedy at law. The Company’s right to
injunctive relief shall be cumulative and in addition to any other remedies provided by law
or equity.




     (c) Each side shall share equally the cost of the arbitrator and bear its own costs and
attorneys’ fees incurred in connection with any arbitration, unless a statutory claim
authorizing the award of attorneys’ fees is at issue, in which event the arbitrator may
award a reasonable attorneys’ fee in accordance with the jurisprudence of that statute.




     (d) Nothing in this Section 17 shall prohibit a party to this Agreement from
(i) instituting litigation to enforce any arbitration award or (ii) joining another party to
this Agreement in a litigation initiated by a person which is not a party to this Agreement.



     18. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS. THE
EXCLUSIVE VENUE FOR THE RESOLUTION OF ANY DISPUTE RELATING TO THIS AGREEMENT OR EXECUTIVE’S
EMPLOYMENT (THAT IS NOT SUBJECT TO ARBITRATION UNDER SECTION 17 FOR ANY REASON) SHALL BE IN THE
STATE AND FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS AND THE PARTIES HEREBY EXPRESSLY CONSENT
TO THE JURISDICTION OF THOSE COURTS.



     19. Entire Agreement and Amendment. This Agreement contains the entire agreement of
the parties with respect to Executive’s employment and the other matters covered herein (except to
the extent that other agreements are specifically referenced herein); moreover, this Agreement
supersedes all prior and contemporaneous agreements and understandings, oral or written, between
the parties hereto concerning the subject matter hereof and thereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both parties hereto.



     20. Survival of Certain Provisions. Wherever appropriate to the intention of the
parties hereto, the respective rights and obligations of said parties, including, but not limited
to,



15









 





the rights and obligations set forth in Sections 6 through 18 hereof, shall survive
any termination or expiration of this Agreement for any reason.




     21. Waiver of Breach. No waiver by either party hereto of a breach of any provision
of this Agreement by the other party, or of compliance with any condition or provision of this
Agreement to be performed by such other party, will operate or be construed as a waiver of any
subsequent breach by such other party or any similar or dissimilar provision or condition at the
same or any subsequent time. The failure of either party hereto to take any action by reason of
any breach will not deprive such party of the right to take action at any time while such breach
continues.



     22. Assignment. Neither this Agreement nor any rights or obligations hereunder shall
be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of
the laws of intestate succession) or by the Company, except that the Company may assign this
Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all
of the equity, assets or businesses of the Company, if such successor expressly agrees to assume
the obligations of the Company hereunder.



     23. Notices. Notices provided for in this Agreement shall be in writing and shall be
deemed to have been duly received (a) when delivered in person or sent by facsimile transmission,
(b) on the first business day after such notice is sent by air express overnight courier service,
or (c) on the third business day following deposit in the United States mail, registered or
certified mail, return receipt requested, postage prepaid and addressed, to the following address,
as applicable:




	 	(1)	 	If to Company, addressed to:
	 
	 	 	 	Mariner Energy, Inc.


Attn: Chief Executive Officer


2101 Citywest Blvd.


19th Floor, Bldg. 2


Houston, TX 77042
	 
	 	(2)	 	If to Executive, addressed to the address set forth below
Executive’s name on the execution page hereof;





or to such other address as either party may have furnished to the other party in writing in
accordance with this Section 23.




     24. Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist of a copy hereof
containing multiple signature pages, each signed by one party, but together signed by both parties
hereto.



16









 





     25. Definitions. The parties agree that as used in this Agreement the following terms
shall have the following meanings: an “affiliate” of a person shall mean any person directly or
indirectly controlling, controlled by, or under common control with, such person; the terms
“controlling, controlled by, or under common control with” shall mean the possession, directly or
indirectly, of the power to direct or influence or cause the direction or influence of management
or policies (whether through ownership of securities or other ownership interest or right, by
contract or otherwise) of a person; the term “person” shall mean a natural person, partnership
(general or limited), limited liability company, trust, estate, association, corporation,
custodian, nominee, or any other individual or entity in its own or any representative capacity, in
each case, whether domestic or foreign.



SIGNATURE PAGE FOLLOWS




17









 








     IN WITNESS WHEREOF, Executive and the Company have executed this Agreement to be effective for
all purposes as of the Effective Date.



	 	 	 	 	 
	 	EXECUTIVE:

 	 
	 
	 	Signature:  	 /s/ Jesus Melendrez
 	 
	 	 	Jesus Melendrez 	 
	 
	 	Date: 

	 
	 	Address for Notices:







5301 Pocahontas

Bellaire, TX 77401







MARINER ENERGY, INC.

 	 
	 	By: /s/ Scott D. Josey
	 
	 	Scott D. Josey 
	 
	 	Chief Executive Officer and President
	 
	 
	 	Date:





18









 






	 	 	 	 	 



Exhibit A




NONE



A-1









 





Exhibit B




WAIVER AND RELEASE AGREEMENT





     This Waiver and Release Agreement (the “Agreement”) is between Mariner Energy, Inc., a
Delaware company (“Company”), and Jesus Melendrez (“Executive”), as provided pursuant to that
employment agreement between Executive and Company dated February 7, 2005 (the “Employment
Agreement”) and attached hereto as Exhibit A.



     WHEREAS, Executive’s employment with Company is being terminated; and



     WHEREAS, Executive will be paid certain severance benefits in exchange for his release and
waiver of his claims against the Company Releasee (as defined below) pursuant to this Agreement;



     NOW, THEREFORE, the parties agree to the following.



     1. Complete Release and Other Consideration from Executive. In exchange for the
severance benefits provided under Section 2 of this Agreement, Executive agrees as follows:




	 	a.	 	Complete Release. On behalf of Executive and
Executive’s heirs and assigns, Executive fully releases Company and its direct
and indirect, past present and future, parents, subsidiaries, affiliates,
divisions, predecessors, successors, and assigns, and, with respect to all such
entities, their partners, members, shareholders, owners, officers, directors,
attorneys, agents, representatives and employees (collectively, the “Company
Releasees”), from any and all claims, demands, damages, losses, expenses,
liabilities and causes of action (including claims for attorneys’ fees)
(collectively, “Claims”), known or unknown, that Executive, his heirs,
executors, administrators, and assigns may have or may claim to have against
any of the Company Releasees based upon facts occurring on or prior to the date
Executive signs this Agreement, including but not limited to any claims arising
out of Executive’s employment relationship with and service as an employee,
officer or director of Company, and the termination of such relationship or
service, (the “Release”); provided, however, that this Release shall not apply
to Company’s obligations under this Agreement. This Release includes, without
limitation, any claims arising out of any contract (express or implied); any
tort (whether based on negligent, grossly negligent, or intentional conduct);
or any federal, state, or local law, including, without limitation, the Age
Discrimination in Employment Act and the Employee Retirement Income Security
Act (“ERISA”), other than benefits that Executive is entitled to under the
terms of an ERISA plan. This Release does not include any claims under the Age
Discrimination in Employment Act that may arise after this Agreement is
executed.




B-1









 












	 	b.	 	Confidentiality. Except as may be required by law or
court order or as may be necessary in an action arising out of this Agreement,
Executive agrees not to disclose the existence or terms of this Agreement to
anyone other than Executive’s immediate family, attorneys, tax advisors, and
financial counselors, provided that Executive first informs them of this
confidentiality clause and secures their agreement to be bound by it.
Executive understands and agrees that a breach of this confidentiality
provision by any of these authorized persons will be deemed a material breach
of this Agreement by Executive.






	 	c.	 	Executive agrees not to bring or join any lawsuit against any
of the Company Releasees in any court (except as necessary to protect
Executive’s rights under this Agreement or with respect to Executive’s entry
into this Agreement) relating to Executive’s employment, events occurring
during Executive’s employment or the termination of Executive’s employment.
Executive represents that, as of the effective date of this Agreement,
Executive has not brought or joined any lawsuit or filed any charge or claim
against any of the Company Releasees in any court or before any government
agency. If Executive brings or joins any lawsuit against any of the Company
Releasees in any court (except as necessary to protect Executive’s rights under
this Agreement or with respect to Executive’s entry into this Agreement)
relating to Executive’s employment, events occurring during Executive’s
employment or the termination of Executive’s employment, and Executive is the
prevailing party in such lawsuit, Executive shall be obligated to return to the
Company all amounts paid to Executive as benefits under this Agreement, to the
extent permitted under applicable law and ordered by the court. Further, if
any Company Releasee is the prevailing party in any lawsuit Executive brings
against such Company Releasee relating to Executive’s employment that has been
waived in this Agreement, to the extent permitted by applicable law (such as if
Executive’s claims are found to be brought in bad faith), Executive agrees to
pay all costs and expenses incurred by such person or entity, including
reasonable attorneys’ fees, in defending against such lawsuit.






This Agreement is not intended to indicate that any Claims exist or that, if they do
exist, they are meritorious. Rather, Executive is simply agreeing that, in return
for the Company’s payment provided by this Agreement, any and all potential Claims
that Executive may have against the Company Releasees, regardless of whether they
actually exist, are expressly settled, compromised and waived. By signing this
Agreement, Executive and the Company Releasees are bound by it. Anyone who succeeds
to Executive’s rights and responsibilities, such as heirs or the executor of
Executive’s estate, is also bound by this Agreement. The waiver and release
provisions of this Agreement do not apply to any rights or claims that may arise
after its effective date. This Release also applies to any claims brought by any
person or agency or class action under which Executive may have a right or benefit.



B-2









 





     2. Consideration from Company. In exchange for Executive’s obligations under this
Agreement, the Company shall pay Executive those severance payments and benefits described in
Sections 7, 8 and 9, as applicable, of the Employment Agreement, which are incorporated
herein by reference and made a part of this Agreement. Executive acknowledges that Executive is
not otherwise entitled to receive such severance payments and benefits, these severance payments
and benefits are conditioned on Executive’s compliance with the terms of this Agreement and the
Employment Agreement, including without limitation Sections 11 and 12 thereof. Executive
acknowledges and agrees that Company will withhold any taxes required by applicable law from the
severance payments and benefits.



     3. Right to Consult an Attorney; Period of Review. Executive is encouraged to consult
with an attorney before signing this Agreement. From the date this Agreement is first presented to
Executive, Executive will have 21 [45, if applicable] days in which to review this Agreement.
Executive may use as little or much of this 21 [45]-day review period as Executive chooses.



     4. Entire Agreement; Amendment; Continuing Obligations. This Agreement and the
Employment Agreement together contain the entire agreement of the parties with respect to the
termination of Executive’s employment and the other matters covered herein and therein; moreover,
this Agreement supersedes all prior and contemporaneous agreements and understandings, oral or
written, between the parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both parties hereto.
Executive hereby reaffirms and agrees to continue to abide by all of Executive’s continuing
obligations under Sections 11 through 18 of the Employment Agreement.



     5. Revocation. Upon signing this Agreement, Executive will have 7 days to revoke the
Agreement. To properly revoke the Agreement, Company must receive written notice of revocation
from Executive by the close of business on the 7th day after the date the Agreement is signed by
Executive. Written notice must be delivered pursuant to Section 23 of the Employment
Agreement. Executive understands that failure to revoke his acceptance of this Agreement within 7
days after the date he signs it will result in this Agreement being permanent and irrevocable.



     6. Choice of Law. This Agreement will be governed in all respects by the laws of the
State of Texas, without regard to its choice of law principles. This Agreement is subject to the
arbitration provisions in Section 17 of the Employment Agreement.



     7. Effectiveness of Agreement. This Agreement will be effective, and the severance
payments and benefits provided in Section 2 of this Agreement will be made and provided,
only if Executive executes this Agreement within 21 [45] days of receiving it and only if Executive
does not revoke this Agreement under Section 5 above.



B-3









 





	 	 	 	 	 
	 	EXECUTIVE

 	 
	 	 Signature: 	 
 	 
	 	 	Jesus Melendrez 	 
	 
	 	Date:


	 
	 	MARINER ENERGY, INC.

 	 
	 	By:  
	 
	 	[Name] 
	 
	 	[Title]

	 
	 
	 	Date:


	 




B-4