exv10w4





Exhibit
10.4


ENCORE ACQUISITION COMPANY




EMPLOYEE SEVERANCE PROTECTION PLAN




(As Amended and Restated Effective May 6, 2008)




          Encore Acquisition Company (the “Company”), having previously established the Employee
Severance Protection Plan (the “Plan”), hereby amends and restates the Plan as of May 6, 2008. The
purpose of the Plan is to ensure the continued availability of stable, motivated employee services
during periods of uncertainty due to a fundamental corporate change by entitling Participants to
termination benefits in the event of their termination in connection with the corporate change.
Additionally, the Plan responds to the increasing trend among the Company’s peer companies to
provide continuity protection to employees as an integral element of a competitive, multifaceted
compensation package.




SECTION 1. Definitions.




          As used in this Plan, the following terms shall have the following meanings:




          (a) “Board” shall mean the Board of Directors of the Company, as constituted from time to time
throughout the term of the Plan.




          (b) “Cause” shall be deemed to exist for a Participant’s termination if the Participant has:





     (i) committed any fraud, theft or other dishonesty or willful misconduct which
results in significant loss to the Company;




     (ii) been convicted of a felony, entered a plea of nolo contendere (no contest)
to a felony indictment or charge, or obtained a deferred adjudication following a
felony indictment or charge; or




     (iii) engaged in competitive behavior which could reasonably be expected to
adversely affect the Company in any significant respect, misappropriated or aided in
misappropriating a material opportunity of the Company or secured or attempted to
secure a significant personal benefit not fully disclosed and approved in accordance
with the Company’s policies and procedures, as in effect from time to time, in
connection with any transaction of, or on behalf of, the Company.



          (c) “CEO” shall mean Jon S. Brumley.




          (d) “Change in Control” shall mean:





     (i) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act) (a “Person”)) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 40% or more



 









 






of either (A) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that the following acquisitions shall not constitute a Change in Control:
(1) any acquisition directly from the Company, (2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (4) any
acquisition by any corporation pursuant to a transaction described in clauses (A),
(B) and (C) of subparagraph (iii) below or (5) any acquisition by a person or entity
that owns on May 6, 2008, more than 20% of the outstanding capital stock of the
Company at such date;




     (ii) individuals who, at the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to such
date whose election, or nomination for election by the stockholders of the Company,
was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or entity other than
the Board;




     (iii) Approval by the stockholders of the Company of a reorganization, merger,
share exchange or consolidation (a “Business Combination”), unless, in each case
following such Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a corporation that as a
result of such transaction owns the Company through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 40% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
Person owned 40% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities prior to the Business Combination and



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(C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or




     (iv) Approval by the stockholders of the Company of (A) a complete liquidation
or dissolution of the Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation with
respect to which, following such sale or other disposition, (1) more than 60% of,
respectively, the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) less than 40% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by any
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation), except to the extent that such Person owned 40% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities prior to
the sale or disposition and (3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such sale or other disposition of assets of the Company or were elected, appointed
or nominated by the Board.



          (e) “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor or
similar provision thereto.




          (f) “Effective Date” shall mean February 11, 2003.




          (g) “Level 1 Participant,” “Level 1A Participant” and “Level 2 Participant” shall have the
respective meanings set forth in Section 3(b).




          (h) “Participant” shall mean a person who meets the eligibility requirements set forth in
Section 3.




          (i) “Resignation for Good Reason” shall mean




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          (A) for Level 1 and Level 2 Participants, a resignation of employment by the Participant
within 30 days following the occurrence, without the Participant’s prior written consent, of one or
more of the following events:





     (i) any change in the Participant’s titles, duties or responsibilities that
results in the Participant’s not having titles, duties or responsibilities
equivalent to or greater than those the Participant had immediately prior to the
relevant Change in Control;




     (ii) any reduction in the Participant’s compensation level in effect
immediately prior to the relevant Change in Control with respect to base salary,
cash and non-cash perquisites, bonus and incentive program eligibility and payout
potential, including stock option and restricted stock awards, and welfare plans,
including medical insurance, life insurance, and disability insurance;




     (iii) the relocation of the Participant’s place of employment to a location
more than 50 miles from his office location immediately prior to the relevant Change
in Control; or




     (iv) any failure by the Company to comply with any of the provisions of the
Plan, other than a failure not occurring in bad faith and which is cured by the
Company promptly after receipt of notice thereof given by the Participant.



          (B) for Level 1A Participants, a resignation of employment by the Participant for any one of
the following events without the Participant’s prior written consent:





     (i) a material diminution in the Participant’s base compensation;




     (ii) a material diminution in the Participant’s authority, duties, or
responsibilities;




     (iii) a material diminution in the authority, duties, or responsibilities of
the supervisor to whom the Participant is required to report, including a
requirement that the Participant report to a corporate officer or employee instead
of reporting directly to the Board;




     (iv) a material diminution in the budget over which the Participant retains
authority;




     (v) a material change in the geographic location at which the Participant must
perform the services; or




     (vi) any other action or inaction that constitutes a material breach of the
Plan by the Company.


A Level 1A Participant’s Resignation for Good Reason may not occur unless he has given notice to
the Company within 90 days of his knowledge of the initial existence of a condition described in
clauses (i) through (vi) above, and the Company shall have a period of at least 30 days (the




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“Correction Period”) during which it may remedy the condition. If the Company remedies the
condition within the Correction Period, the Level 1A Participant’s resignation in connection with
that condition will not qualify for a Resignation for Good Reason. A Level 1A Participant’s
Resignation for Good Reason may occur only within 30 days following the expiration of the
Correction Period.




          (j) “Specified Employee” shall mean a Participant who meets the requirements specified in Code
Section 409A(a)(2)(B).




SECTION 2. Plan Implementation.




          The Board and its designees shall be responsible for implementation of the terms and
provisions of the Plan.




SECTION 3. Eligibility and Participation.




          (a) Each regular full-time employee of the Company or any of its direct or indirect
wholly-owned subsidiaries, and each part-time employee who has completed 90 days of employment,
shall automatically become a Participant in the Plan. A Participant ceases to be a Participant
upon termination of employment, provided that any and all rights and obligations accruing to the
Participant under the Plan as a result of such employment termination shall survive the
Participant’s termination of participation in the Plan.




          (b) Participants shall participate at one of three levels. Each Participant who is a member
of the Company’s Strategic Group, as designated from time to time by the Board, and who is not
listed on the attached Schedule “A,” shall be a Level 1 Participant. Each participant who is
listed on the attached Schedule “A,” shall be a Level 1A Participant. Each other Participant shall
be Level 2 Participant. Any Level 2 Participant who becomes a member of the Strategic Group by
designation of the Board shall at such time automatically cease to be a Level 2 Participant and, if
not designated a Level 1A Participant on Schedule “A,” shall become a Level 1 Participant. In the
event that a Participant who was a member of the Strategic Group shall cease to be a member, such
Participant shall remain a Level 1 or Level 1A Participant, as applicable, despite no longer being
a member of the Strategic Group.




SECTION 4. Termination Benefits.




          (a) Following the termination of a Participant’s employment with the Company during the period
commencing 90 days prior to, and ending two years following, a Change in Control, the Participant
shall be entitled to receive the following benefits without further action by the Board:





          (I) In the event of termination by death or disability of the Participant, the
Participant’s involuntary termination by the Company for Cause, the Participant’s voluntary
termination other than a Resignation for Good Reason, the Participant shall be entitled to
receive within five days following such termination:




          (i) any compensation which is accrued and unpaid as of the date of
termination;



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          (ii) all unpaid accumulated and accrued benefits due under any benefit
plan or program of the Company in which the Participant was a participant;
and




          (iii) all payments with respect to accrued and unpaid reimbursable
expenses incurred by the Participant prior to the date of termination.




          (II) In the event of either the Participant’s involuntary termination by the Company
other than for Cause or the Participant’s Resignation for Good Reason, the Participant shall
be entitled to receive, except as required by Section 7 for Specified Employees, within five
days following such termination (or in the case of a Participant terminated within 90 days
prior to the Change in Control, on the date selected by the Company during the 90-day period
beginning 5 days following such termination or, if earlier, on the date of the Change in
Control if such event qualifies as a “change in control event” within the meaning of Treas.
Reg. § 1.409A-3(i)(5)):




          (i) any compensation which is accrued and unpaid as of the date of
termination;




          (ii) all unpaid accumulated and accrued benefits due under any benefit
plan or program of the Company in which the Participant was a participant;




          (iii) all payments with respect to accrued and unpaid reimbursable
expenses incurred by the Participant prior to the date of termination;




          (iv) benefits equal to:




	 	(A)	 	if the
Participant is a Level 1 or Level 1A Participant:






	 	(1)	 	a lump-sum cash payment equal to the product of
two (2) (or, in the case of the CEO, two and
one-half (21/2)) multiplied by the sum of the
Participant’s then annual base salary plus the
amount of any cash bonus under the Company’s
annual incentive bonus plan earned by the
Participant with respect to the most recently
completed fiscal year of the Company (or, if the
Participant became employed after the most
recent fiscal year-end prior to a termination
covered under this Section 4, the target annual
cash bonus for such Participant as determined by
the Company); and




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	 	(2)	 	to the extent permitted under the Company’s
medical, dental and life insurance benefit plans
and subject to the Participant’s timely payment
to the Company of the Participant’s portion of
premiums payable under such plans, continued
insurance coverage, for a period of 36 months
following the Participant’s termination of
employment, under such plans providing the same
benefits that are provided to employees of the
Company, or, if participation in such plans is
not permitted following the Participant’s
termination of employment, then the Company
shall obtain and maintain equivalent insurance
coverage in effect for such period; provided
that if during such period the Participant
obtains other employment with substantially
comparable medical, dental and life insurance
benefits, then the Participant’s insurance
benefit coverage hereunder shall then cease; or






	 	(B)	 	if the
Participant is a Level 2 Participant:






	 	(1)	 	a lump-sum cash payment equal to the Participant’s
then annual base salary plus the amount of any
cash bonus under the Company’s annual incentive
bonus plan earned by the Participant with
respect to the most recently completed fiscal
year of the Company (or, if the Participant
became employed after the most recent fiscal
year-end prior to a termination covered under
this Section 4, the target annual cash bonus for
such Participant as determined by the Company);
and
	 
	 	(2)	 	to the extent permitted under the Company’s
medical, dental and life insurance benefit plans
and subject to the Participant’s timely payment
to the Company of the Participant’s portion of
premiums payable under such plans, continued
insurance coverage, for a period of 24 months
following the Participant’s termination of
employment, under such plans providing the same
benefits that are provided to employees of




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	 	 	 	the Company, or, if participation in such
plans is not permitted following the
Participant’s termination of employment, then
the Company shall obtain and maintain
equivalent insurance coverage in effect for
such period; provided that if during such
period the Participant obtains other
employment with substantially comparable
medical, dental and life insurance benefits,
then the Participant’s insurance benefit
coverage hereunder shall then cease; and






	 	(C)	 	to the extent
provided for under the Company’s 2000 Incentive Stock
Plan, or any subsequent or other benefit plan of the
Company providing for the grant or award of stock
options, restricted stock, performance shares, phantom
stock or other equity-based incentive awards, the
acceleration of the vesting of the Participant’s stock
options, restricted stock, performance shares and other
awards, subject to and in accordance with the provisions
of such plans and the procedures, requirements and
conditions relating to or limiting the Participant’s
receipt of benefits under such plans.





          (b) In the event that any benefits accruing to a Participant hereunder, and the acceleration
of vesting of stock options, restricted stock or other equity-based awards, shall result in the
Participant’s being subject to the excise tax imposed by Code Section 4999 or comparable state or
local tax laws, then the Company shall pay to the Participant such additional amount as shall be
necessary (after taking into account all federal, state and local income taxes payable by the
Participant as a result of the receipt of such additional payment) to place the Participant in the
same after-tax position he would have been in had no such excise tax (or any interest or penalties
thereon) been paid or incurred. Except as required by Section 7 for Specified Employees, the
Company shall make such additional payment upon the earlier of (i) the time at which the Company
withholds such excise tax from any payments to the Participant or (ii) 30 days after the
Participant notifies the Company that the Participant has filed a tax return which provides that
such excise tax is due and payable in reliance on a written opinion of the Participant’s tax
counsel that it is more likely than not that such excise tax is due and payable, but in no event
later than the December 31 next following the Participant’s taxable year in which the Participant
remits the related taxes. If the Participant pays any such excise tax as a result of an adjustment
to the Participant’s tax liability by any federal, state or local tax authority, the Company will
pay to the Participant within 30 days after notification thereof to the Company, but in no event
later than the December 31 next following the Participant’s taxable year in which the Participant
remits the related taxes the additional payment provided hereunder resulting from such excise tax
liability. In the event the Participant makes a payment pursuant to the preceding sentence, the
Participant will negotiate in good faith with the Company procedures reasonably requested by the
Company to afford the Company the ability to contest the imposition of such excise tax,



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provided that the Participant will not be required to afford the Company any right to contest
the applicability of any such excise tax to the extent that the Participant reasonably determines
that such contest is inconsistent with the overall tax interests of the Participant. The Company
will hold in confidence and not disclose, without the prior written consent of the Participant, any
information with regard to the Participant’s tax position which the Company obtains pursuant to
this paragraph.




          (c) The Company shall continue to maintain, for a period of at least 36 months following the
termination of any Participant entitled to benefits under Section 4(a)(II) and who was an officer
of the Company at any time after the Change in Control, director and officer liability insurance
covering past officers of the Company. Such director and officer insurance coverage shall provide
to past officers substantially the same benefits afforded to present officers of the Company.




          (d) In the event of a termination of employment under this Section 4, the Participant shall be
under no obligation to seek other employment or mitigate the amount of any payment provided for
herein, and, subject to Section 4(b) no reduction shall be made to any amount paid or payable to
the Participant hereunder.




          (e) The Company shall be the primary obligor with respect to the obligations to Participants
hereunder irrespective of whether the Participant is employed by the Company or any wholly owned
subsidiary of the Company. Each subsidiary of the Company which employs any Participant shall be a
secondary obligor. If for any reason the Company is unable to pay to each Participant the amounts
due hereunder, then any subsidiary with which any Participant is employed shall be responsible for
any deficiency of payments to the relevant Participant.




SECTION 5. Interest.




          In the event that the Company fails to make timely payment in full of the payments to a
Participant under the Plan, then the Participant shall be entitled to receive interest on any
unpaid amount at a rate equal to the maximum discount rate permitted under Code Section 280G(d)(4).




SECTION 6. Expenses.




          In the event that any Participant incurs any costs or expenses to enforce or defend his rights
under the Plan, then such Participant shall be entitled to recover from the Company all such costs
and expenses, including attorney’s fees, reasonably incurred by or on behalf of such Participant.




SECTION 7. Delay of Payments.




          Notwithstanding any provision to the contrary in the Plan, if a Participant (other than a
Level 1A Participant) is deemed on the date of the Participant’s separation from service to be a
Specified Employee, and the stock of the Company is publicly traded, then the payments specified as
being subject to this Section 7 shall not be made or provided to the extent required by Section
409A until the later of (A) the payment date set forth in the Plan or (B) the date that is the
earliest of (i) the expiration of the six-month period measured from the date of Participant’s



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separation from service, (ii) the date of Participant’s death, or (iii) such other date that
complies with, or is exempt from, the requirements of Code Section 409A (the “Delay Period”).
Payments subject to the Delay Period shall be paid to the Participant without interest for such
delay in payment. All other payments and benefits due under the Plan that are not subject to the
foregoing shall be paid or provided in accordance with the normal payment dates specified for them
herein.




SECTION 8. Reimbursements.




          All reimbursements and in kind benefits provided under the Plan shall be made or provided in
accordance with the requirements of Code Section 409A, including, where applicable, the requirement
that (i) any reimbursement shall be for expenses incurred during the Participant’s lifetime (or
during a shorter period of time specified in the Plan), (ii) the amount of expenses eligible for
reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses
eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii)
the reimbursement of an eligible expense will be made on or before the last day of the calendar
year following the year in which the expense is incurred, and (iv) the right to reimbursement or in
kind benefits is not subject to liquidation or exchange for another benefit.




SECTION 9. Termination, Amendment of the Plan.




          The Plan may be terminated by action of the Board at any time with respect to the Plan’s
application to persons commencing employment with the Company subsequent to the Plan’s termination.
The Board may terminate the Plan as to all Participants beginning on the third anniversary of the
Plan’s adoption and on each anniversary thereafter; provided, however, that the Plan may not be
terminated during the two years following a Change in Control. The Plan is not otherwise
terminable. The Board may revise or amend the Plan from time to time, but only to the extent that
any such revision or amendment would not adversely affect any right of a Participant under the Plan
without the consent of such Participant.




SECTION 10. No Employment Right.




          Nothing contained in the Plan shall confer upon any Participant any right to continued
employment with the Company or any of its subsidiaries or in any way limit the right of the Company
or any of its subsidiaries to terminate the Participant’s employment at any time.




SECTION 11. Unfunded Plan.




          The Company’s liability to pay benefits under the Plan shall constitute an unfunded, unsecured
liability of the Company. Nothing contained in the Plan shall create or be construed to create a
trust of any kind. No Participant, or anyone claiming under a Participant, shall acquire any right
or security or other interest in any assets, funds or property of the Company or any subsidiary by
virtue of the Plan.




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SECTION 12. Notices.




          All notices and other communications provided for herein shall be in writing and shall be
deemed to have been duly given when personally delivered or five days after deposit with the United
States Postal Service to be sent by registered or certified mail, postage prepaid return receipt
requested, addressed to the Company, attention to the general counsel, at its principal place of
business and to the Participant at his address as shown on the records of the Company or to such
other address as the Company shall have received in writing from the Participant.




SECTION 13. Governing Law.




          The Plan shall be governed by and construed in accordance with the laws of the State of Texas.




SECTION 14. Severability.




          In the event that any provision of the Plan shall be determined to be invalid or unenforceable
for any reason, in whole or in part, the remaining provisions of the Plan shall be unaffected
thereby and shall remain in full force and effect to the fullest extent permitted by law.




SECTION 15. Successors.




          The Plan shall be binding upon and inure to the benefit of any successor or assign of the
Company, whether directly or indirectly and whether by way of merger, consolidation, operation of
law, assignment or other acquisition of substantially all of the assets or business of the Company,
in the same manner and to the full extent that the Company is obligated hereunder, and such
successor or assign shall be deemed the “Company” for all purposes of the Plan. In the event that
any such successor or assign shall not by operation of law be bound by all of the Company’s
obligations hereunder, then the Company shall require such successor or assign to expressly and
unconditionally assume all of the Company’s obligations under the Plan.




[Signature Page Follows]




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          IN WITNESS WHEREOF, the Company has authorized the execution of this Plan by its duly
authorized officer.




	 	 	 	 	 
	 	ENCORE ACQUISITION COMPANY

 	 
	 	By  	/s/ Jon S. Brumley
 	 
	 	 	Jon S. Brumley 	 
	 	 	Chief Executive Officer and President 	 
	 




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