Item 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 17, 2017, the Board of Directors
(the "Board") of EV Management, LLC (the “Company”), on behalf of the general partner of EV Energy Partners,
L.P. (the “Partnership”), and upon the recommendation of the Compensation Committee of the Board (the "Committee"),
approved and adopted:
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An Employment Agreement between the Company and Michael E. Mercer,
President and Chief Executive Officer of the Company;
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An Employment Agreement between the Company and Nicholas Bobrowski,
Vice President and Chief Financial Officer of the Company;
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The 2017-2018 Key Employee Incentive Plan of the Company; and
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Retention Bonus Agreements by and between the Company and each of
Michael E. Mercer and Nicholas Bobrowski.
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The plans and agreements were recommended
by the Committee and adopted by the Board as a means for the Company to retain the services of certain key employees of the Company
and provide those key employees with incentives in order for them to remain with the Company and achieve certain performance goals
for the Partnership.
Employment Agreements
The Employment Agreements between the Company
and Messrs. Mercer and Bobrowski were executed on November 17, 2017 (the “Effective Date”).
The Employment Agreement with Mr. Mercer
provides that he will serve as President and Chief Executive Officer of the Company for a term beginning on the Effective Date
and continuing through December 31, 2018, subject to automatic one-year renewals of the term if neither Mr. Mercer nor the Company
submits a notice of termination at least 60 days prior to the end of the then- current term. The agreement may be terminated by
either party, at any time, subject to certain severance obligations in the event Mr. Mercer is terminated by the Company without
cause or if he dies or is disabled.
Mr. Mercer's employment agreement provides
for a minimum annual base salary of $400,000, subject to upward adjustment by the Company (but not a decrease), in its sole discretion.
Under his employment agreement, Mr. Mercer
will be entitled to receive severance pay upon his separation of service from the Company under certain circumstances. Payment
of any such severance amounts is conditioned on Mr. Mercer’s execution of a release of claims (in a form provided by the
Company) and his not revoking such release.
In the event Mr. Mercer’s service
is terminated due to (i) his terminating his employment for “good reason,” (ii) termination of his employment by the
Company “without cause” or (iii) his employment agreement not being renewed by the Company, he will be entitled to
receive from the Company a lump-sum cash payment equal to two times his annual base salary in effect as of the termination date.
In addition, under any such circumstances,
Mr. Mercer will also be entitled to receive from the Company a cash amount equal to either (i) the target bonus amount he is eligible
to receive under the applicable key employee incentive plan (if still effective at the time of such termination) or (ii) the amount
he earned as a bonus in the year prior to the year of the termination, whichever circumstance applies and whichever amount is greater.
Mr. Mercer will also receive continued group health plan coverage following the termination date for himself and his eligible spouse
and dependents, at the same cost charged by the Company to its officers receiving coverage under such plan.
Mr. Mercer will not be entitled to receive
a severance pay in the event of his resignation of other voluntary termination of employment by him without “good reason,”
his termination by the Company “for cause” or a termination due to his death or disability.
“Good reason” is defined in
Mr. Mercer’s employment agreement as the occurrence of (i) a reduction of his annual base salary; (ii) a material reduction
in his authority, duties or responsibilities; (iii) a material diminution in the authority, duties or responsibilities of his supervisor,
if any; (iv) his primary place of employment being moved to a location greater than 50 miles away from its then-current location;
or (v) any other action or inaction that constitutes a material breach by the Company of the employment agreement. “Cause”
is defined as (w) Mr. Mercer’s conviction of a felony or entering a plea of nolo contendere to such crime; (x) his commission
of a demonstrable act of fraud, or misappropriation of material funds or property of the Company, the Partnership or any affiliate
thereof; (y) without approval of the Board or the Committee, his engagement in any activity that directly competes with the business
of the Company, the Partnership or any affiliate thereof, or which would directly result in a material injury to the business or
reputation of the Company, the Partnership or any affiliate thereof; or (z) a continued nonperformance of his duties.
The Employment Agreement described above
entered into by Mr. Mercer replaces his former employment agreement with the Company dated October 1, 2006.
The Company’s employment agreement
with Nicholas Bobrowski is effective as of the Effective Date, and contains the same terms and conditions as Mr. Mercer's, except
that Mr. Bobrowski is to serve as Vice President and Chief Financial Officer of the Company, and his minimum annual base salary
will be $300,000.
Copies of the Employment Agreements are
filed as Exhibits 10.1 and 10.2 to this Form 8-K and are incorporated herein by reference. The foregoing description of the Employment
Agreements does not purport to be complete and is qualified in its entirety by the full text of such Employment Agreements.
2017-2018 Key Employee Incentive Plan
The Company’s 2017-2018
Key Employee Incentive Plan (the “Incentive Plan”) is an incentive program designed to motivate Company officers
to achieve the Partnership’s performance objectives and reward officers when those objectives are met or exceeded.
The Incentive Plan features pre-established target levels related to three key performance measures for the
Partnership: quarterly production, lease operating expenses (“LOE”) and Adjusted EBITDAX of the Partnership. The
plan was adopted as of November 17, 2017 and is in effect for the four consecutive calendar quarters beginning October 1, 2017
through September 30, 2018.
Actual cash bonuses that may be payable
under the Incentive Plan will be determined and earned based on the achievement of quarterly threshold, target and maximum performance
metrics and goals as of the end of each calendar quarter during the term of the plan. Each such quarterly period is referred to
as a “performance period” under the Incentive Plan. In addition to cash bonuses being determined on a quarterly basis,
each performance metric shall also be measured cumulatively as of the end of each performance period, and to the extent the Partnership’
performance equals or exceeds the cumulative performance goals/metrics, a “catch-up payment” will also be made to the
participants.
For
Mr. Mercer, his quarterly threshold amount is $50,000, his quarterly target amount is $100,000 and his quarterly maximum amount
is $150,000. For Mr. Bobrowski, his quarterly threshold amount is $26,250, his quarterly target amount is $52,500 and his quarterly
maximum amount is $78,750. Each of the performance metrics
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production,
LOE and Adjusted EBITDAX — is weighted equally (33.33% for each performance metric) in determining the total amount eligible
for the participant to earn. For the term of the Incentive Plan, the aggregate of all four quarterly and all cumulative amounts
that may be paid to Mr. Mercer and to Mr. Bobrowski are:
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For Mr. Mercer, $200,000 (threshold amount), $400,000 (target amount)
and $600,000 (maximum amount), and
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For
Mr. Bobrowski, $105,000 (threshold amount), $210,000 (target amount) and $315,000 (maximum amount).
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These amounts assume that all quarterly
payments and cumulative payments are made under the applicable category (threshold, target or maximum).
A copy of the Incentive Plan is filed as
Exhibit 10.3 to this Form 8-K and is incorporated herein by reference. The foregoing description of the Incentive Plan does not
purport to be complete and is qualified in its entirety by the full text of such Incentive Plan.
Retention Bonus Agreements
Michael E. Mercer and, Nicholas Bobrowski
have each entered into a Retention Bonus Agreement (a “Retention Agreement”) with the Company dated as of November
17, 2017. Each Retention Agreement provides that the Company will pay each such officer a cash lump sum payment within 15 days
of the date that such officer executed and returned a copy of his Retention Agreement to the Company.
In the event that the officer’s employment
with the Company terminates for any reason other than a “Qualifying Termination” before December 31, 2018 (the “Completion
Date”), that officer will be required to repay to the Company within 15 days of such termination, the total amount of the
retention bonus previously paid to him, net of any taxes that the officer is required to pay in respect of the retention bonus
and determined by taking into account any tax benefit that may be available in respect of such repayment. However, if the officer’s
employment terminates because of a Qualifying Termination before the Completion Date, and that officer executes and does not revoke
a customary release of claims in a form reasonably satisfactory to the Company, then such officer will not be required to repay
any portion of his retention bonus previously paid.
Under
each Retention Agreement, the term “Qualifying Termination” means the termination of the officer’s employment
(i) by the Company for a reason other than “cause,” (ii) by the officer for “good reason,” or (iii) due
to such officer’s death or disability. The definitions of the terms “cause” and “good reason” are
similar to, but not identical to, the definitions of those terms contained in the Employment Agreements for Messrs. Mercer and
Bobrowski (see “
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Employment
agreements
” above).
Under their respective Retention Agreements,
the amount of Mr. Mercer’s retention bonus is $550,000 and the amount of Mr. Bobrowski’s retention bonus is $290,000.
The foregoing description of the Retention
Agreements does not purport to be complete and is qualified in its entirety by the full text of the Retention Agreements, copies
of which are filed as Exhibits 10.4 and 10.5 to this Form 8-K and incorporated by reference herein.