SEPARATION AGREEMENT AND MUTUAL RELEASE AND SETTLEMENT

 

(a)

In accordance with Weyel’s existing and continuing obligations, Weyel agrees and acknowledges that, as a result of his employment, he has received or had access to Confidential Information (as defined in part 7(b) of the Employment Agreement) of Company, and that he shall remain subject to the restrictions regarding disclosure or use of such Confidential Information set out in part 7(b) of the Employment Agreement.  Weyel also shall comply with the provisions of part 7(b) of the Employment Agreement concerning return of Company documents or other tangible items containing Confidential Information regardless of whether such materials are paper or stored in electronic or other media.

 

(b)

Also in accordance with his existing and continuing obligations, Weyel further agrees to comply in all respects, for a period of one year following the Termination Date, with each of the non-solicitation provisions, concerning employees of and persons or entities having business relations with Company or other Energy XXI Entities, set out in part 7(d) of the Employment Agreement.

 

(c)

Except as otherwise provided herein, no later than 14 days following the execution by both Parties of this Separation Agreement, Weyel shall deliver to Company any property in his possession or control, including, without limitation, credit cards, telephone cards, office keys and security badges furnished by any of the Energy XXI Entities for his use (excluding his Company-provided automobile and other property to be conveyed to him pursuant to the terms of this Agreement).

 

(d)

Weyel, following the Termination Date, shall cooperate with, and assist, Company in defense of any claim, litigation, agency investigation or other administrative proceeding to which the Company or any of the Energy XXI Entities is a party.  Any such request will be reasonable with regard to the amount of time required for such assistance and with respect to other obligations which Weyel may have at the time.  If such assistance is more than occasional, Company shall reimburse Weyel for his time on a reasonable hourly basis (which shall be computed by dividing his last base salary by 2080 hours).  Nothing in this paragraph (d) is intended to cause Weyel to testify other than truthfully in any proceeding or affidavit or to require the Company to reimburse Weyel for time spent actually testifying beyond any maximum limit set by law or ethical rule in any jurisdiction in which such tes timony is to be given.  Weyel further agrees to cooperate and assist, following the Termination Date and to the extent requested by authorized Company representatives, with the transition to others of Company business matters for which he had responsibility or of which he had knowledge while employed.

(a)  

Company shall make a separation payment to Weyel in the gross amount of $2,940,000.00 USD (Two Million Nine Hundred Forty Thousand Dollars and No Cents) to be paid in a lump sum, less applicable withholding for taxes.  Weyel acknowledges that such separation payment, together with other benefits expressly provided herein, fully satisfies, and discharges and releases, any claim on his part for payments pursuant to the Employment Agreement (except as to those payments, rights, advantages and benefits thereunder expressly preserved under this Separation Agreement), any severance plan or program maintained by Company or any Energy XXI Entity or under any governing law.  Weyel and Company agree that the entire separation payment provided for by this paragraph is subject to the rabbi trust (to be established with a commercial banking institution), and timing and other provisions of part 6(d)(vi) of the Employment Agreement and shall be accomplished consistent with those provisions.  As such, the entire amount of such separation payment shall be paid into the trust by Company as soon as practical upon this Separation Agreement becoming effective.  Withholding for taxes owed by Weyel on the amount of the separation payment shall be made by the trustee from the trust at such time as the trust proceeds are distributed to Weyel.  Company shall pay the employer portion of the Medicare tax on the amount of the separation payment at such time.

(b)  

Weyel and his dependents (who as of 30 days prior to the Termination Date were covered) shall continue to be covered, at Company’s expense, under Company’s medical and dental benefits plans for Company executives, on the same terms as are in existence under such plans from time-to-time and as are applied to the chief financial officer of Company, and under such Company medical and dental expense reimbursement practices as apply to the chief financial officer of Company from time-to-time, and as stated in parts 6(d)(i)(B) and 6(d)(i)(C) of the Employment Agreement, for up to 36 months following the Termination Date.  Company’s obligation to continue to provide medical plan coverage shall terminate upon Weyel’s obtaining comparable replacement coverage (as provided in part 6(k) of the Employment Agreement), and in such event Weyel shall immediately notify Company.  Should Company be unable to provide coverage to Weyel under its medical benefits plan for any portion of the 36-month period following the Termination Date due to insurance policy or other limitations, then it may purchase reasonably comparable coverage for Weyel and his eligible dependents.  All provisions of part 6(k) of the Employment Agreement are incorporated into this Separation Agreement, including but not limited to the tax “make whole” provisions of part 6(k).

(c)  

Weyel’s outstanding awards under the Energy XXI Services, LLC 2006 Long-Term Incentive Plan (“Plan”) shall become immediately exercisable and payable in full as of the Termination Date in accordance with part 6(l) of the Employment Agreement.  Said awards are reflected on Attachment A hereto.  Additionally, with regard to performance units, Company agrees that the Board of Directors will accept Weyel’s written direction as to the percentages of such units to be distributed in cash and stock, respectively.  Further, Weyel has requested and Company agrees to extend the period for the exercise of the stock options previously awarded to him until 180 days following his Termination Date.   Distributions from the Plan, to the ext ent feasible, will be paid, net of withholding for taxes, in either cash or stock consistent with any written directions from Weyel.  Weyel shall reimburse the Company immediately for taxes associated with any distributions for which it is not feasible for the company to withhold such taxes (e.g., restricted stock).  For these purposes, the fair market value of the stock shall be determined in accordance with the provisions of the Plan as reflected on Attachment “A” hereto.

(d)  

In addition to pro rata base salary and accrued, unused vacation referenced in part 1 above, Company shall pay Weyel his full bonus for Fiscal Year 2010 (ended June 30, 2010).  The Parties agree that the unpaid portion of such bonus remaining to be paid under this sub-part is $245,000.00 USD (Two Hundred Forty-Five Thousand Dollars and No Cents).

 

           (e)

Company and Weyel acknowledge that Weyel is a participant in Company’s and/or one or more Energy XXI Entities’ 401k plan, Profit Sharing plan, Group Term Life and Accidental Death and Dismemberment Insurance plans, and Executive Life Insurance program, and that the effect of the termination of Weyel’s employment on his rights and obligations under said plans and programs shall be governed and determined by the terms of such respective plans and programs (including any underlying policies of insurance).  Provided, however, that Company agrees to pay the premium cost for extending the term of the current policy of life insurance on Weyel’s person, in the amount of $3,000,000.00 (Three Million Dollars), provided under part 5(d) of the Employment Agreement, for 36 months following the Termination Date.  The provisions of part 5(d) of the Employment Agreement shall continue to apply to such policy of life insurance.  Additionally, Weyel’s account under the Energy XXI Services LLC Restorations Plan shall be paid to him one day after six months following the Termination Date pursuant to the terms of such plan.

 

(f)

Company agrees to convey to Weyel title to his company automobile (2010 Range Rover), security systems installed at his home prior to the Termination Date, his laptop computer, I-Pad and Blackberry.  Weyel may retain use of the mobile telephone number owned by him.  Weyel shall reimburse Company, on or before the Effective Date, for taxes owed on the values, as determined by Company, of these in kind payments.  If Weyel fails to do so, Company may withhold such taxes from any other payments due Weyel under this Separation Agreement.

 

(g)

Company will reimburse Weyel for reasonable and necessary business expenses incurred in the course of his employment prior to the Termination Date provided such expenses are submitted for reimbursement in accordance with Company’s usual practices within 14 days after Company signs this Separation Agreement.

 

(h)

Company agrees to waive its rights and to release Weyel from the restrictions and his obligations under part 7(c) of the Employment Agreement.

 

(i)

Should Weyel die, Company shall make any payments or distributions, not previously made and which remain owing under this Separation Agreement, to Weyel’s estate or heirs.

4.

 

(a)

It is not the intention of Weyel or Company that the termination of employment contemplated herein is in anticipation of a change in control of Company or any similar event as described in section 280G of the Internal Revenue Code and the rules promulgated pursuant thereto.  The Parties are of the belief that the payments and benefits to be received by Weyel pursuant to this Separation Agreement, and timing and methods set out herein of accomplishing those payments and benefits, will not result in tax liabilities under sections 409A, 4999 or 280G of the Internal Revenue Code and applicable regulations thereunder.  Nevertheless, in the event this belief is incorrect and the Internal Revenue Service assesses taxes under any of the foregoing provisions, then Weyel and Company shall each have those rights and obligations assigned to them in part 6(h) of the Employment Agreement.  Weyel shall cooperate fully with any contest by Company of any such tax assessment, including before the courts.

 

(b)

Company shall pay such amounts to Weyel as necessary to satisfy the “make whole” provisions of part 6(k) of the Employment Agreement.

 

(c)

Except as otherwise provided for in this part 4 of this Separation Agreement, Weyel shall be exclusively liable for the payment of all taxes (other than the employer’s portion of Social Security and Medicare taxes) due as a result of the consideration received pursuant to this Agreement, and Company will withhold such amounts for taxes as it reasonably determines are required under law or regulation.

 

(a)

In consideration of the benefits to be received by Weyel and Company’s promises and waivers under this Separation Agreement, as a material inducement to Company to enter into this Separation Agreement, and in satisfaction of the requirements of the Stock Option Agreement between himself and Energy XXI Services, LLC, Weyel, on behalf of himself and his heirs, executors, administrators, assigns, and successors, hereby releases and waives, and acquits and discharges Company, all Energy XXI Entities, and each and all of their respective employees, officers, directors, shareholders, partners, trustees, insurers, agents, representatives and benefits plans and their fiduciaries (collectively, including Company, the “Energy XXI Parties”) (in both their official and individual capacities), collectively and individually, with respect to and from, any and all claims and any and all causes of action, of an y kind or character, whether now known or unknown, he may have against any of them which exist as of the date Weyel executes this Separation Agreement, including, but not limited to: (a) any claim for salary, bonuses, benefits, stock, stock options or units, performance based units, expense reimbursement, and any other form of compensation regardless of its nature, (b) damages of any nature, (c) costs and attorneys’ fees, (d) all claims or causes of action arising from his employment or termination of employment, (e) any alleged discriminatory employment practices, including but not limited to any and all claims and causes of action arising under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621, et seq. (“ADEA”), (f) any and all claims and causes of action arising under any other federal, state or local laws pertaining to employment or equal employment opportunity, and (g) any other act or omission occurring on or before the date of Weyel’s execution of this Separation Agreement.  Provided, however, that Weyel’s release, acquittal and discharge of any and all claims herein shall not apply to or relieve the Energy XXI Entities from any of their obligations, and Weyel preserves all rights to which he is entitled: (i) under this Separation Agreement, including, but not limited to, those under parts 6(d)(i), 6(d)(vi), 6(d)(vii), 6(g), 6(h) (except to the extent modified by 4(a) of this Separation Agreement), 6(k), 6(l), 13 and 14 of the Employment Agreement, the terms of which are incorporated into this Agreement, and (ii) under the Indemnity and Hold Harmless Agreement dated November 3, 2008, under the incentive compensation plan through the Termination Date, and with respect to Weyel’s status, following the Termination Date, as a stockholder and as a holder of stock options, and any right to a defense, and to contribution and indemnity under law and any written agreement and any insuran ce policy (subject to the terms of such policy with respect to terminated officers or employees).  Further, in the event of Weyel’s death, his estate and heirs shall have all rights and benefits provided under this Separation Agreement.  Weyel understands and agrees that this release and waiver of all claims extends to his rights and entitlements under the Employment Agreement and that all such rights and entitlements, except to the extent expressly preserved in this Separation Agreement (including in the foregoing proviso), are hereby extinguished.  This release also applies to any claims brought by any person or agency or class action under which Weyel may have a right or benefit.

 

(b)

In consideration of the benefits to be received by Company and the other Energy XXI Entities, including Weyel’s release and waiver of claims and other promises, under this Separation Agreement, Company and the other Energy XXI Entities, on behalf of themselves and their successors and assigns, and on behalf of the Energy XXI Parties to the extent any such Energy XXI Party is claiming through or on behalf of the Company or any Energy XXI Entity, hereby release and waive, and acquit and discharge Weyel, his family members, heirs and estate (Weyel’s Released Parties) with respect to and from, any and all claims and any and all causes of action, of any kind or character, whether now known or unknown, such entities may have against any of them which exist as of the date Company’s representative executes this Separation Agreement, including, but not limited to any claim in connection with Weyel’ ;s application for employment, acceptance of employment, employment, performance of his duties and tasks and projects on behalf of Company and the Energy XXI Entities, and/or his termination and/or separation of employment from Company and the Energy XXI Entities, including but not limited to all claims based on city, state, federal and foreign statutes, torts, contracts, breaches of fiduciary duty, indebtedness, losses, charges, liabilities and demands, in law and/or in equity.  The claims and causes of action from which Company and the Energy XXI Entities are releasing the Weyel Released Parties include, but are not limited to, those for breach of contract, tortious interference with existing contract, tortious interference with prospective contact, violation or breach of a covenant not to compete or other personal service agreement, conversion, breach of fiduciary duty, common-law and statutory fraud, intentional infliction of emotional distress, invasion of privacy, libel and slander, both pers onal and business disparagement, malicious civil prosecution, negligence, negligent hiring, negligent misrepresentation, usury, breach of warranty, claims for damages or injunctive relief of any nature, including but not limited to exemplary damages, attorney’s fees, court costs and interest, and any claim that Weyel is vicariously or jointly liable for any acts or omissions of Company and the Energy XXI Entities.  Provided, however, that this release and waiver of claims and causes of action by Company and the Energy XXI Entities (i) shall be effective only to the extent allowed by applicable law and not unauthorized under or inconsistent with any policies of insurance (including with respect to subrogation rights) currently in effect, and (ii) shall not excuse or relieve Weyel from any obligations or restrictions under parts 7(b), 7(d), 7(e) or 7(f) of the Employment Agreement, the terms of which are incorporated herein.

 

(c)

Weyel and Company and the Energy XXI Entities represent and warrant that they have not and will not bring or assert, or accept any benefit from, any lawsuit, claim, complaint, charge, demand for mediation or arbitration before any court or government agency with respect to the matters released in this Separation Agreement.  Weyel and Company and the Energy XXI Entities warrant that they are the sole owners of all claims and causes of action released in this Separation Agreement, and that no portion of any existing or potential claim or cause of action has been sold, assigned, pledged or hypothecated by any of them to any third party.  Weyel understands that this Separation Agreement is not intended to waive or interfere with his right to institute a proceeding with any government agency where such waiver would be contrary to law.  However, in connection with any such proceeding, Wey el waives any right or entitlement to additional compensation or other individual relief except to the extent, if any, such waiver is prohibited by law.

 

(a)

In return for this Separation Agreement, he will receive consideration beyond that to which he was already entitled before entering into this Separation Agreement;

 

(b)

He has been advised and understands that he has 21 days to review this Separation Agreement before accepting its terms;

 

(c)

He is hereby being advised in writing by Company to consult with an attorney before signing this Separation Agreement; and

 

(d)

If he accepts this Separation Agreement, he will have seven (7) days following the date of his execution hereof to revoke his acceptance of this Separation Agreement by delivering within said time period written notice of such revocation to the General Counsel of Company.

Award

Value

Notes

Restricted Stock 9,608 unvested (2011) — accelerated payment

Valued at 7/23/10 closing price of $17.08.

RSU's 9,608 unvested (2011) —accelerated payment

Valued at 7/23/10 closing price of $17.08.

Options 100,000 @17.50

Exercise period extended until 180th day following date of termination of employment.

PSU's 196,000 unvested—accelerated payment

Calculated based on 7/23/10 closing price of $17.08 and maximum payout equivalent to 294,000 performance based units and 49,000 time based units.