First Amendment To Earnout Agreement

FIRST AMENDMENT
TO EARNOUT AGREEMENT


between


ENERGY PARTNERS, LTD.


and


PARTICIPANTS


Effective
July 1, 2002


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TABLE OF CONTENTS


Page
---- FIRST AMENDMENT TO EARNOUT AGREEMENT..............................................................................1


Article I DEFINITIONS AND INTERPRETATION..........................................................................2
1.1 Terms Defined Above................................................................................2
1.2 Terms Defined in Agreement.........................................................................2
1.3 References.........................................................................................2
1.4 Articles and Sections..............................................................................3
1.5 Number and Gender..................................................................................3
1.6 Incorporation of Schedule..........................................................................3


Article II AMENDMENTS.............................................................................................3
2.1 Amendment to Section 1.2...........................................................................3
2.2 Amendment to Section 6.1...........................................................................4
2.3 Amendment to Section 8.5...........................................................................4


Article III ACKNOWLEDGEMENT.......................................................................................4


Article IV RATIFICATION...........................................................................................5


Article V MISCELLANEOUS...........................................................................................5
5.1 Successors and Assigns.............................................................................5
5.2 Rights of Third Parties............................................................................5
5.3 Counterparts.......................................................................................5
5.4 Entire Agreement...................................................................................5
5.5 Invalidity.........................................................................................5
5.6 Governing Law......................................................................................5


SCHEDULE 1.......................................................................................................


FIRST AMENDMENT TO EARNOUT AGREEMENT


This FIRST AMENDMENT TO EARNOUT AGREEMENT (this "Amendment") executed effective as of July 1, 2002 (the "Effective Date") is by and among ENERGY PARTNERS, LTD., a Delaware corporation ("Energy Partners"), and those Participants (as such term is defined in the Earnout Agreement referred to hereinafter) who or which are signatories to this Amendment, being the owners and holders of a majority in interest of the Earnout Percentages (as such term is defined in the Earnout Agreement referred to hereinafter) and thus sufficient to cause this Amendment to be binding on all Participants.


WITNESSETH:


WHEREAS, Energy Partners and Hall-Houston Oil Company, a Texas corporation ("Hall-Houston"), acting for the benefit of the Participants, entered into an Earnout Agreement dated January 15, 2002 (the "Agreement");


WHEREAS, each of the Participants has become a party to the Agreement by executing and providing to Energy Partners an Adoption Agreement (as such term is defined in the Agreement);


WHEREAS, it is presently contemplated that Hall-Houston may merge into its sole shareholder, Energy Partners;


WHEREAS, prior to such merger being contemplated, Hall-Houston proposed to convey to Energy Partners, subject to obtaining execution of this Amendment by all necessary parties, an undivided fifty percent (50%) working interest in each of those of the Initial Ring Fenced Properties (as such term is defined in the Agreement) referred to in Section 6.1 of the Agreement (prior to giving effect to this Amendment) other than East Cameron Block 378 (collectively, the "Deleted Interests") in exchange for an undivided fifty percent (50%) working interest in each of the Federal Offshore Oil and Gas Leases described in Schedule 1 hereto (collectively, the "Added Interests"), the entire leasehold estate in such leases (the "Additional Ring Fenced Properties") being owned, as of the Effective Date, by Energy Partners as the lessee named in such leases;


WHEREAS, regardless of whether the contemplated merger of Hall-Houston into Energy Partners occurs, it is intended that (i) the Additional Ring Fenced Properties be considered Ring Fenced Properties for all purposes of the Agreement, (ii) the Added Interests be considered as within the scope of the Agreement for all purposes (which Added Interests, absent the merger of Hall-Houston into Energy Partners, may be conveyed to Hall-Houston by Energy Partners), and (iii) the Deleted Interests and the interests of Energy Partners in the Additional Ring Fenced Properties in excess of the Added Interests (collectively with the Deleted Interests, the "Excluded Interests") not be considered as within the scope of the Agreement for any purpose (which Deleted Interests, absent the merger of Hall-Houston into Energy Partners, may be conveyed to Energy Partners by Hall-Houston);


WHEREAS, consistent with such intentions as to the Added Interests and the Excluded Interests, Energy Partners will commit a portion of the $13,000,000 of capital referred to in Section


-1-


6.1 of the Agreement to fund the share (excluding in all cases, including following a merger of Hall-Houston into Energy Partners, the Excluded Interests) of the cost of drilling and evaluation of two wells in addition to the four wells presently referred to in Section 6.1 of the Agreement attributable to the interests of Energy Partners and its subsidiaries (as such interests may exist from time to time) considered within the scope of the Agreement, one such additional well to be located on each of the Additional Ring Fenced Properties; and


WHEREAS, Energy Partners and the additional signatories hereto desire to amend the Agreement in the particulars hereinafter provided and to acknowledge (i) the Additional Ring Fenced Properties as being Ring Fenced Properties for all purposes under the Agreement, (ii) the Added Interests as being considered within the scope of the Agreement for all purposes, and (iii) the Excluded Interests as not being considered within the scope of the Agreement for any purpose;


NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:


ARTICLE I


DEFINITIONS AND INTERPRETATION


1.1 Terms Defined Above. As used in this First Amendment to Ear ...