exv10w1



 





Exhibit 10.1




STONE ENERGY CORPORATION




EXECUTIVE CHANGE IN CONTROL SEVERANCE POLICY




(as amended and restated)




1. POLICY




     Stone Energy Corporation (the “Company”) will provide the severance benefits as defined herein
to designated executives of the Company who are terminated by the Company for other than Cause or
who leave for Good Reason on or within twenty-four (24) months after a Change in Control.



2. PURPOSE




     The purpose of this policy is to define the severance policy of the Company for designated
executives on or after a Change in Control.



3. SCOPE




     This policy shall only apply to certain executives designated by the Company’s Board of
Directors (the “Board”) in its sole discretion. No benefit shall be payable under this policy to
employees who enter into a separate written severance agreement with the Company on or after the
effective date of this policy and who are entitled to receive severance payments thereunder as a
result of a termination of service on or within twenty-four (24) months after a Change in Control.
As a condition precedent to receipt of any payments, benefits or other services under this policy,
each executive will be required to execute a binding release satisfactory to the Company pursuant
to which such executive releases the Company from any liability in connection with employment by
the Company.



4. PROCEDURE




     Executives who are terminated by the Company for other than Cause or who leave for Good Reason
as defined under this policy shall be provided the following payments, benefits and other services
as hereinafter defined, with payments to be made within eight (8) business days after execution of
a release, in substantially the form attached hereto as Attachment 1, provided such release is
executed within forty-five (45) days of the Executive’s termination date.



     4.1 Base Salary




The Company will pay the executive’s base salary up to the date of termination.



 









 





     4.2 Bonus




The Company will pay the executive a pro rata share of the bonus opportunity up to
the date of termination at the then projected year end rate of payout, in an
amount, if any, as determined by the Compensation Committee in its sole discretion.



     4.3 Severance




The executive will be eligible to receive a lump sum cash severance payment equal
to 2.99 times the sum of: (a) the executive’s base salary calculated using the
higher of the annual salary rate in effect at the time of termination or that in
effect on the date of the Change in Control and (b) any target bonus at the one
hundred percent (100%) level for which the executive is eligible for the fiscal
year in which termination occurs.



     4.4 Outplacement




The executive will be eligible to receive outplacement services the duration and
costs for which shall be determined by the then prevailing Human Resources
Department’s practice concerning use of outplacement services, which shall be
reasonable in amount and commensurate with the executive’s position and in no event
exceed a cost to the Company of 5% of the base annual salary of the executive.



     4.5 Other Benefits




Any other termination benefits will be managed consistent with current severance
practices for non-executive employees.



     4.6 Excise Tax




If any of the payments or benefits received by the executive designated to
participate, whether or not pursuant to this policy, will be subject to the Excise
Tax, then the Company shall pay to the executive an additional amount (“Gross-Up
Payment”) such that the net amount retained by the executive, after deduction of
any Excise Tax on the total payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the
amount the executive would have otherwise received without such Excise Tax;
provided, however, that if it shall be determined that the executive is entitled to
a Gross-Up Payment, but that the total to be paid to executive does not exceed one
hundred ten percent (110%) of the greatest amount (the “Reduced Amount”) that could
be paid to the executive such that the



 









 






receipt of the total would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the executive and the total payments to executive in the
aggregate shall be reduced to the Reduced Amount. Payment of the Gross-Up Payment,
if due hereunder, shall be made no later than the date the Excise Tax is remitted
to the applicable tax authorities.



5. DEFINITIONS



“Cause” for termination by the Company of the executive’s employment shall mean (i) the willful and
continued failure by the executive to substantially perform the executive’s duties with the Company
(other than any such failure resulting from the executive’s incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to the executive by the
Board which demand specifically identifies the manner in which the Board believes that the
executive has not substantially performed the executive’s duties, or (ii) the willful engaging by
the executive in conduct which is demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act,
on the executive’s part shall be deemed “willful” unless done, or omitted to be done, by the
executive not in good faith and without reasonable belief that the executive’s act, or failure to
act, was in the best interest of the Company.



“Change in Control” – a Change in Control shall be deemed to have occurred for purposes of this
policy if the event set forth in any one of the following paragraphs shall have occurred:





(A) any Person (a “person or entity”) is or becomes the Beneficial Owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company) representing twenty percent (20%)
or more of the combined voting power of the Company’s then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (C) below; or




(B) the following individuals cease for any reason to constitute a majority of the number
of directors then serving: individuals, who, on the date hereof, constitute the Board and
any new director (other than a director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or recommended;
or



 









 






(C) there is consummated a scheme of arrangement, merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation, other than (i)
a merger or consolidation which would result in the voting securities of the Company
outstanding immediately prior to such scheme of arrangement, merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any subsidiary of the Company, at least sixty-five percent (65%) of
the combined voting power of the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or consolidation, or (ii) a scheme
of arrangement, merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the Company or its
Affiliates other than in connection with the acquisition by the Company of its Affiliates
of a business) representing twenty percent (20%) or more of the combined voting power of
the Company’s then outstanding securities; or




(D) the stockholders of the Company approve a plan of complete liquidation or dissolution
of the Company or there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an
entity, at least sixty-five percent (65%) of the combined voting power of the voting
securities of which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale.


Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue
of the consummation of any transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets of the Company immediately following such
transaction or series of transactions.



“Excise Tax” shall mean any excise tax imposed under section 4999 of the Internal Revenue Code.



“Good Reason” for termination by the executive of the executive’s employment shall mean the
occurrence (without the executive’s express written consent) on or within twenty-four (24) months
after any Change in Control of any one of the following acts by the Company:




 









 









(A) a material reduction in the executive’s annual base salary as in effect on the date of
the Change in Control or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all senior executives of the Company
and all senior executives of any Person in control of the Company;




(B) a material diminution in the authority, duties or responsibilities of the executive as
in effect immediately prior to the Change of Control; or




(C) a requirement that the executive transfer to a work location that is more than fifty
(50) miles from such executive’s principal work location immediately prior to the Change of
Control.


The executive’s right to terminate the executive’s employment for Good Reason shall not be affected
by the executive’s incapacity due to physical or mental illness. The executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.



For a termination by an executive to be for a Good Reason, the executive must first give written
notice to the Company in writing of the Good Reason event within 30 days of the initial existence
of the Good Reason event, and the Company shall then have 30 days from its receipt of such notice
to remedy the event and if the Company fails to timely remedy the event, the executive may
terminate his employment for Good Reason in the seven day period following the Company’s failure to
remedy the event. A termination by the executive for a Good Reason shall be deemed to be within 24
months after the Change of Control if the initial existence of the Good Reason event occurred
within 24 months after the Change of Control.




6. RESPONSIBILITY




     Except as otherwise stated herein, this policy will be administered by the Company’s Vice
President of Human Resources. This policy is subject to review, change or cancellation at any time
at the sole discretion of the Compensation Committee of the Board, provided, however, that the
policy shall not be changed as to the designated executives after a Change in Control.



7. SECTION 409A




     Notwithstanding anything in this Agreement to the contrary, if on the date of the executive’s
separation from service the executive is a “specified employee,” as defined in Section 409A of the
Code, then all or such portion of any severance payments or benefits under this Agreement that
would be subject to the additional tax provided by Section 409A(a)(1)(B) of the Code if not delayed
as required by Section 409A(a)(2)(B)(i) of the Code shall be delayed until the first day of the
seventh month following his separation from service date (or, if earlier, the executive’s date of
death) and shall be paid as a lump sum (without interest) on such date. No payment shall be made
under this Agreement



 









 







prior to the date the executive incurs a “separation from service,” within the meaning of Section
409A of the Internal Revenue Code and the regulations thereunder.



8. EFFECTIVE DATE




     The effective date of this policy is December 7, 2007. This policy replaces in full the prior
Executive Change in Control Severance Policy.