U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from . . . . . . . . to . . . . . . . .
Commission File Number: 0-8898
MIDCOAST ENERGY RESOURCES, INC.
(Name of small business issuer in its charter)
Nevada 76-0378638
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 Louisiana, Suite 2950
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 650-8900
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.01 Per Share
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The revenues for the fiscal year ended December 31, 1995 were
$ 15,622,290
The aggregate market value of the Common Stock, par value $.01
per share, held by non-affiliates of Registrant as of March 28,
1996 was approximately $286,584. For the purposes of the
determination of the above stated amount only, all directors and
executive officers of the Registrant are presumed to be affiliates.
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed by
a court. Yes X No ____
The number of shares of Common Stock, par value $.01 per
share, outstanding as of March 28, 1996 was 328,557.
DOCUMENTS INCORPORATED BY REFERENCE
None
__________________________________________________________________
TABLE CONTENTS
Part III
Item 9.Directors, Executive Officers, Promoters and Control
Persons..............................................3
Item 10.Executive Compensation................................4
Item 11.Security Ownership of Certain Beneficial Owners and
Management...........................................5
Item 12.Certain Relationships and Related Transactions........6
Part III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Directors and executive officers of Midcoast Energy Resources, Inc.
(the "Company") and their respective ages and positions with the Company
are set forth in the following table:
Officer or
Director
Name Age Position Since
Dan C. Tutcher 47 Chairman of the Board, President and 1992
Chief Executive Officer
Stevens G. Herbst 59 Executive Vice President, Director 1992
Kenneth B. Holmes 64 Vice President and Director 1992
Duane S. Herbst 32 Secretary 1992
I.J. Berthelot, II 36 Vice President of Operations and 1995
Chief Engineer
Richard A. Robert 30 Chief Financial Officer and Treasurer 1996
Dan C. Tutcher has been Chairman of the Board,
President and Chief Executive Officer since the Company's formation
in 1992. Since 1989 Mr. Tutcher has also been President and Chief
Executive Officer of Magic Gas Corp. ("Magic Gas"). Prior to its
merger into the Company, in 1992, Mr. Tutcher served as a Director
of Nugget Oil Corporation ("Nugget"), from 1990 to 1992. He also
has held various positions in companies which constructed pipelines
and marketed gas, such as Gulf Gas Utilities, Inc. and Wildhorn
Corporation, where he served as Vice President from 1987 through
1989 and as President from 1984 through 1993, respectively.
Stevens G. Herbst serves as an officer of the Company
in a part-time capacity. As such, he has been Executive Vice
President since the Company's formation in 1992. From 1989 to 1992
Mr. Herbst was President of Midcoast Transmission Company
("Transmission"). Prior to its merger into the Company, in 1992,
Mr. Herbst served as a Director of Nugget from 1990 to 1992. In
1985, Mr. Herbst formed Texline Gas Company ("Texline") with
Mr. Holmes, where he serves as President. Mr. Herbst has also
served as President of Rainbow Investments Company ("Rainbow")
since 1977.
Kenneth B. Holmes, Jr. serves as an officer of the
Company in a part-time capacity. As such, he has been Vice
President of the Company since its formation in 1992 and Treasurer
from the same period until 1995. From 1989 to 1992 Mr. Holmes was
Vice President of Transmission. Prior to its merger into the
Company, in 1992, Mr. Holmes served as a Director of Nugget for the
period from 1990 to 1992. In 1985, Mr. Holmes formed Texline
jointly with Mr. Herbst where he serves as Vice President. Mr.
Holmes has also served as President of Promac Corporation since
1976.
Duane S. Herbst serves as an officer of the Company in
a part-time capacity. As such, he has served as Secretary of the
Company since its formation in 1992. From April 1992 until its
merger with the Company in September 1992 he served as President of
Nugget. From 1989 to the date hereof he has served as Vice
President of Rainbow. He is the son of Stevens G. Herbst.
I.J. "Chip" Berthelot, II is Vice President of
Operations and Chief Engineer and has served with the Company since
the Company's formation in 1992. Mr. Berthelot joined the Company
as Chief Engineer and became Vice President of Operations and Chief
Engineer in 1995. From 1991 to 1992 he was a gas contracts
representative with Mitchell Energy and Development Corporation.
Prior to 1991 Mr. Berthelot was with Texline as a gas contracts
representative and engineer for the period from 1990 to 1991.
Richard A. Robert is Chief Financial Officer and
Treasurer and has served with the Company since 1992. Mr. Robert
joined the Company as Controller and became Treasurer and Chief
Financial Officer in 1996. From 1988 to 1992 Mr. Robert was an
audit associate in the energy audit division of Arthur Anderson and
Co.
Compliance with Section 16(a) of the Securities Exchange Act
To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during and
with respect to the fiscal year ended December 31, 1995, all
applicable Section 16(a) filing requirements were filed on a timely
basis.
ITEM 10. EXECUTIVE COMPENSATION
The following table reflects all forms of compensation
for services to the Company for the years ended December 31, 1995,
1994 and 1993 of the Chief Executive Officer of the Company.
During 1993 and 1994 only Mr. Tutcher was paid a salary. During
1995, 1994 and 1993 no other executive officers received
compensation which exceeded $100,000.
Name and Principal
Position Annual Compensation
Year Salary
Dan C. Tutcher, 1995 $125,000
(Chief Executive Officer)(1)
1994 $125,000
1993 $62,000
(1) The Company provides Mr. Tutcher certain personal benefits
including payments for a car allowance. Since the value of
such benefits did not exceed the lesser of $50,000 or 10% of
annual compensation, the amounts are omitted.
Additionally, the Company has not paid any bonuses nor granted
any options to any officers or directors of the Company.
Furthermore, the Company does not propose to issue any such options
in the foreseeable future.
Executive Employment Contracts. In January 1993, and as
subsequently amended in April 1993, Mr. Tutcher, the Chief
Executive Office and President of the Company, entered into a five-
year employment agreement with the Company pursuant to which he is
to receive an annual base salary of $125,000, beginning July 1,
1993, and may participate in any such executive level bonuses or
salary increases as the Board may approve. Mr. Tutcher is also
entitled to reimbursement for reasonable automobile expenses not to
exceed $500 each month and is eligible for participation in the
Company's group insurance plans. Mr. Tutcher is required to devote
his full business time and attention to the Company.
In April 1995, and subsequently amended in December 1995,
I. J. Berthelot, II, Vice President of Operations and Chief
Engineer, entered into a four-year employment agreement with the
Company. Pursuant to the employment agreement Mr. Berthelot is to
receive an annual base salary of $55,200, to be increased a minimum
of ten-percent (10%) annually, beginning on August 15, 1996. Mr.
Berthelot was also awarded thirteen thousand (13,000) shares of the
Company's Common Stock as consideration for executing the
agreement. Mr. Berthelot is required to devote his full business
time and attention to the Company.
In April 1994, and subsequently amended in April 1996,
Richard A. Robert, Chief Financial Officer and Treasurer, entered
into a three-year employment agreement with the Company. Pursuant
to the employment agreement, Mr. Robert is to receive an annual
base salary of $69,000, to be increased a minimum of ten-percent
(10%) annually, beginning on April 1, 1997. Mr. Robert was also
awarded two thousand (2,000) shares of the Company's Common Stock
as consideration for executing the agreement. Mr. Robert is
required to devote his full business time and attention to the
Company.
During 1996, the Company anticipates entering compensation
arrangements with each of Stevens G. Herbst and Kenneth B. Holmes
but the terms of such arrangement have yet to be determined.
In April 1996, Duane S. Herbst, Secretary, began receiving
an annual salary from the Company of $24,000 per year for his part-
time services as Secretary. Previously, the Company had a month-
to-month arrangement which provided a monthly payment of $1,050 to
compensate Rainbow for the Company's use of the time of Mr. Herbst.
Arrangements with Respect to the Election of Directors
Pursuant to a Shareholder Agreement dated November 16,
1992, by and between the Company and Magic Gas, Stevens G. Herbst
and Kenneth B. Holmes, Jr.(collectively, the "Major Shareholders"),
all of the Major Shareholders have agreed that on each matter
submitted to a vote at a meeting of stockholders of the Company,
all stock owned by each of the Major Shareholders shall be voted as
a single unit in the manner specified by any two of the three Major
Shareholders. Additionally, each of the Major Shareholders has
agreed that he shall vote all of his shares of stock in manner
which shall elect Mr. Tutcher, Mr. Herbst and Mr. Holmes as
directors of the Company. Furthermore, any additional directors of
the Company and the identity of any such additional directors must
be unanimously agreed to by all three Major Shareholders.
As of April 12, 1996, the Major Shareholders owned an
aggregate of 264,593 shares of the Company's Common Stock which
represents 79.5% of the outstanding Common Stock of the Company.
Accordingly, the election of their nominees for directors named
herein is assured.
Board of Directors Meetings and Compensation
During the year ended December 31, 1995, the Board met
fourteen times. Each director attended all Board meetings either
in person or by telephonic conference. Directors who are employees
of the Company do not receive any compensation for serving as
directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth information based upon the
records of the Company and filings with the Securities and Exchange
Commission as of April 12, 1996, with respect to (i) each person
known to be the beneficial owner of more than five percent (5%) of
the Company's Common Stock and of its 5% cumulative preferred
stock, $1.00 par value per share (the "5% Preferred Stock"), (ii)
each executive officer and director of the Company, and (iii) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Common Stock 5% Preferred Stock
-------------------------- -----------------------
Percentage
Number of Percentage of Number of of Total
Name and Address Shares Outstanding Shares Outstanding Voting
of Beneficial Owner Owned (1) Shares Owned(1) Shares Percentage
- ------------------------ ----------- -------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
MAGIC GAS CORP.(2)...... 137,020 41.2 100,000 50.0 41.2
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
DAN C. TUTCHER(3)....... 137,020 41.2 100,000 50.0 41.2
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
KENNETH B. HOLMES, JR... 63,483 19.1 50,000 25.0 19.1
710 BUFFALO, SUITE 800
CORPUS CHRISTI, TEXAS 78401
STEVENS G. HERBST(7).... 64,090 19.3 50,000 25.0 19.3
710 BUFFALO, SUITE 800
CORPUS CHRISTI, TEXAS 78401
DUANE S. HERBST(5)...... 2,500 0.8 0 0.0 0.8
710 BUFFALO, SUITE 800
CORPUS CHRISTI, TEXAS 78401
I.J. BERTHELOT, II (4)(6) 17,500 5.3 0 0.0 5.3
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
RICHARD A. ROBERT(8).... 5,000 1.5 0 0.0 1.5
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
ALL DIRECTORS AND EXECUTIVE 289,593 87.2 200,000 100.0 87.2
OFFICERS AS A GROUP(6 PERSONS)
- -------------------------------
</TABLE>
(1) Except as otherwise noted, shares beneficially owned by each
person as of the record date were owned of record and each
person had sole voting and investment power with respect to
all shares beneficially held by such person.
(2) All of the outstanding stock of Magic Gas is owned by Dan C.
Tutcher and Kimberly Tutcher as husband and wife. Mr.
Tutcher serves as President, Chief Executive Officer and
Chairman of the Board of the Company.
(3) Includes 137,020 shares of Common Stock and 100,000 shares of
5% Preferred Stock held of record by Magic Gas.
(4) Includes 15,000 shares which are subject to certain vesting
requirements.
(5) Includes 1,200 shares which are subject to certain vesting
requirements.
(6) Mr. Berthelot holds 300 shares as custodian for minor
children under the Uniform Gift to Minors Act.
(7) Includes 1,000 shares held by record of Rainbow.
(8) Includes 3,500 shares which are subject to certain vesting
requirements.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has obtained financing from certain officers
and directors and affiliates regarding the acquisition and
construction of pipelines. This financing enabled the Company to
take advantage of pipeline acquisition opportunities that would
have otherwise been unavailable to the Company. Furthermore, all
indebtedness to third parties has been personally guaranteed by Dan
C. Tutcher, Stevens G. Herbst, and Kenneth B. Holmes, Jr. In the
future, the Company's policy is that it will not continue to
obtain' financing or personal guarantees from these affiliates. In
addition, it is the Company's policy that any future transactions
between the Company and members of management or principal
stockholders will be on terms no less favorable to the Company than
those which could be obtained from unaffiliated third parties. No
future transaction will be entered into between the Company and
members of management or principal stockholders unless such
transactions are approved by a majority of the directors who are
not members of management or principal stockholders. Set forth
below are descriptions of such transactions:
Five Flags System. In December 1992, the Company acquired
100% of the outstanding capital stock of Five Flags Pipe Line
Company ("Five Flags") from Harbert Holdings No. One, Inc. for a
cash payment of $1,078,409. The principal assets of Five Flags
consisted of approximately 57 miles of natural gas pipelines
located in Escambia and Santa Rosa Counties, Florida. In
September 1993, all of the outstanding capital stock of Five Flags
was sold to Sunshine Interstate Pipeline Partners. In 1995, the
Company and Rainbow jointly re-acquired 100% of the outstanding
capital stock of Five Flags from Five Flags Holding Company. Total
cash consideration of $2,052,000 was paid for the stock, of which
the Company's share representing 91.25% interest in Five Flags
capital stock was acquired for $1,872,450. Rainbow's ownership
interest amounted to an 8.75% interest in the stock acquired for
$179,550. To finance this transaction, the Company borrowed funds
from Stevens G. Herbst, an officer and director of the Company (the
"Herbst Note"). The promissory note between the Company and
Mr. Herbst called for monthly payments of interest beginning April
1, 1996 through December 31, 1996 at which time both principal and
all accrued interest would be due in full. Interest on the Herbst
Note accrued at the prime rate plus two percent (2%). Shortly
after acquiring Five Flags stock the Company and Rainbow sold 100%
of the capital stock of Five Flags to Koch Company for $4,664,865.
A portion of the proceeds from the sale were used to repay the
Herbst Note of $1,872,450 plus accrued interest and the notes
associated with the acquisition of Magnolia.
Working Capital. In December, 1994, Texline loaned the
Company $275,000 for working capital pursuant to an unsecured 18
month promissory note between Texline and the Company, accruing
interest at the prime rate (the "Texline Note"). All amounts under
the original Texline Note, including any accrued interest were due
and payable on July 1, 1996. On March 1, 1996, the Texline Note
was restructured: (i) to extend the maturity date to April 1,
1997, (ii) to increase the interest rate to prime plus five percent
(5%), and (iii) to provide for monthly payments of accrued
interest. Total payments of principal and interest amounted to
$75,000 and $30,057 in 1995 and 1996, respectively. The principal
balance due to Texline at March 31, 1996, was $200,000. The
proceeds of such indebtedness were used by the Company for general
corporate purposes including the repayment of the other
indebtedness associated with project financings for the
construction of certain pipeline systems and for various pipeline
system acquisitions.
Cook Inlet Pipeline Construction. In addition to the
Texline Note, Texline provided short-term loans to fund the
Company's investment in Alaska until the Company could obtain
long-term bank financing. During 1994, short-term loans were made
by Texline for such purpose, accruing at the prime rate plus five
5%. A total of $316,250 in principal was loaned to the Company
which was subsequently repaid to Texline in 1994, including
interest in the amount of $4,005.
Texline and Rainbow also provided security for obtaining
the long-term bank financing for the Company's Alaska investment.
In consideration for providing such security, the Company assigned
a three percent (3%) and a two percent (2%) net revenue interest to
Texline and Rainbow, respectively, on the net income derived from
the Company's investment in the oil and natural gas gathering
pipelines near Cook Inlet, Alaska. However, the net revenue
interests apply only after all costs associated with the investment
have been recouped by the Company. As a result, at the date
hereof, no amounts have been paid under either assignment of the
net revenue interests.
Magnolia System Acquisition. In connection with the
acquisition of Magnolia Pipeline Corporation in 1995, the Company
borrowed $1,200,000 from Rainbow (the "Rainbow Note") to finance
the purchase price of the pipeline system. Funds from the Rainbow
Note together with proceeds from the sale of the Five Flags stock
to Koch Gateway Pipeline Company, were used to repay the owner
financing from The Williams Company, for the purchase of Magnolia.
The Rainbow Note provides for interest at the prime rate plus five
percent (5%) and was due and payable monthly beginning April 1,
1996, with a final maturity of January 31, 1997. As additional
consideration for extending the funds borrowed under the
Rainbow Note, the Company granted Rainbow a five percent (5%) net
revenue interest in Magnolia's earnings before interest, income
taxes and depreciation, to be paid on a monthly basis. The Company
has the right to repurchase this net revenue interest from Rainbow
for a cash payment of $25,000. However, the repurchase amount is
increased an additional $25,000 on November 1, 1995 and each
following month up to a maximum of $500,000. The Rainbow Note was
paid in full on December 20, 1995, including accrued interest in
the amount of $35,260. To date, no payments have been made towards
the net revenue interest.
Additional Working Capital. Rainbow also loaned the
Company a total of $660,000 in December 1995 for additional working
capital purposes pursuant to an unsecured twelve-month promissory
note accruing interest at the prime rate plus five percent (5%).
All amounts under this working capital note were due and payable on
January 1, 1997. On January 12, 1996 the Company repaid all
principal amounts due under the note to Rainbow as well as accrued
interest in the amount of $4,039 which was also paid to Rainbow.
The proceeds of such indebtedness were used by the Company for
general corporate purposes including the repayment of the other
indebtedness associated with project financings for the
construction of certain pipeline systems and for various pipeline
system acquisitions.
Seahawk Acquisition. In connection with the acquisition of
certain pipeline systems in March 1996, the Company borrowed
$100,000 from Rainbow for its equity contribution to Pan Grande
Pipeline L.L.C.("Pan Grande") pursuant to a promissory note between
the Company and Rainbow, bearing interest at the prime rate plus
five percent (5%). This note is secured by the Company's interest
in Pan Grande. The note is payable in 60 monthly installments of
$1,667 plus accrued interest, with a final maturity date of
March 15, 2001. Rainbow has committed to loan up to an additional
$75,000 in the event the Salt Creek System is purchased. In
consideration for the financing of the equity contribution and the
commitment for additional financing, the Company issued Rainbow
1,000 shares of the Company's Common Stock.
Exxon Production Acquisition. In May 1995, Texline
provided a $173,822 loan to partially finance the acquisition of a
working interest in oil and gas production from two leases located
in Starr County, Texas from Exxon Corporation, a publicly traded
company. The loan, as amended in March 1996, matures on April 1,
1997. No collateral was required to obtain this loan, although, as
additional consideration for obtaining the loan, Texline was
assigned a one-half percent (.5%) working interest in the oil and
gas properties. Monthly payments in the amount of 25% of the
Company's net revenue from the production from these properties are
paid to Texline and applied first to interest then principal. An
additional one-half percent (.5%) working interest in the
properties will be assigned to Texline if all principal and
interest amounts due under the loan are not paid by June 1, 1996.
Total payments of interest amounted to $3,346 and $7,477 in 1995
and through March 31, 1996, respectively.
SIGNATURES
In accordance with the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant authorized this
report to be signed on its behalf by the undersigned, in the City
of Houston, State of Texas on this 29th day of April, 1996.
Midcoast Energy Resources, Inc.
By:___________________________________________
Dan C. Tutcher, Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
In accordance with the requirements of the Securities
Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant in the capacities and on this
29th day of April, 1996.
Signature Title
/s/ Dan C. Tutcher Chairman of the Board, Chief Executive
Dan C. Tutcher Officer and President (Principal
Executive Officer)
/s/ Stevens G. Herbst Executive Vice President, Director
Stevens G. Herbst
/s/ Kenneth B. Holmes, Jr. Vice President, Director
Kenneth B. Holmes, Jr.
/s/ Richard A. Robert Treasurer, Principal Financial Officerl
Richard A. Robert and Principal Accounting Officer
