U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended March 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-8898
Midcoast Energy Resources, Inc.
(Exact name of Registrant as Specified 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)
Registrant's telephone number, including area code: (713) 650-8900
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
On March 31, 1997, there were outstanding 2,499,999 shares of the
Company's common stock, par value $.01 per share.
Transitional Small Business Disclosure Format. Yes No X
MIDCOAST ENERGY RESOURCES, INC., and Subsidiaries
Quarterly Report on Form 10-QSB for the
Quarter Ended March 31, 1997
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and March 31, 1997 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and March 31, 1997 4
Consolidated Statement of Shareholders' Equity for
the three months ended March 31, 1997. 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and March 31, 1997
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations 9
PART II. OTHER INFORMATION 10
SIGNATURE 11
<PAGE>
MIDCOAST ENERGY RESOURCES, INC., and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,167,825 $ 3,041,418
Accounts receivable, no allowance
for doubtful accounts 8,891,808 5,021,126
Total current assets 10,059,633 8,062,544
PROPERTY, PLANT AND EQUIPMENT, at cost:
Natural gas transmission facilities 11,939,173 12,141,699
Investment in transmission facilities 1,302,303 1,325,407
Natural gas processing facilities 3,735,262 3,789,447
Oil and gas properties, using the full-cost
method of accounting 1,274,436 1,307,800
Other property and equipment 264,842 315,950
18,516,016 18,880,303
ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION (1,550,670) (1,732,437)
16,965,346 17,147,866
OTHER ASSETS, net of amortization 278,235 2,442,954
Total assets $ 27,303,214 $ 27,653,364
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 8,464,395 $ 6,060,779
Current portion of deferred income 83,000 83,000
Short-term borrowing from bank 180,000 -
Current portion of long-term debt
payable to banks 196,831 196,831
Total current liabilities 8,924,226 6,340,610
LONG-TERM DEBT PAYABLE TO Banks 4,015,146 5,942,861
DEFERRED INCOME 152,167 131,417
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 618,591 654,985
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10 million
shares authorized, 2,499,999
shares issued and outstanding at December 31,
1996 and March 31, 1997 25,000 25,000
Paid-in capital 26,941,660 26,941,660
Accumulated deficit (13,283,876) (12,351,969)
Unearned compensation (89,700) (31,200)
Total shareholders' equity 13,593,084 14,583,491
Total liabilities and shareholders'equity $ 27,303,214 $ 27,653,364
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
MIDCOAST ENERGY RESOURCES, INC., and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
March 31, March 31,
1996 1997
<S> <C> <C>
OPERATING REVENUES:
Sale of natural gas and transportation fees $ 5,510,278 $11,416,814
Natural gas processing revenue - 1,470,120
Sale of pipelines 22,500 -
Oil and gas revenue 50,769 77,320
Total operating revenues 5,583,547 12,964,254
OPERATING EXPENSES:
Cost of natural gas and transportation charges 4,675,938 10,298,512
Natural gas processing costs - 726,290
Cost of pipelines sold 2,153 -
Production of oil and gas 22,288 11,556
Depreciation, depletion and amortization 150,759 255,016
General and administrative 198,970 374,068
Total operating expenses 5,050,108 11,665,442
Operating income 533,439 1,298,812
NON-OPERATING ITEMS:
Interest expense (119,879) (95,282)
Minority interest in consolidated subsidiaries (20,633) (59,754)
Other income (expense), net (19,245) (11,869)
INCOME BEFORE INCOME TAXES 373,682 1,131,907
PROVISION FOR INCOME TAXES - -
Net income 373,682 1,131,907
5% CUMULATIVE PREFERRED STOCK DIVIDENDS (14,755) -
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 358,927 $ 1,131,907
NET INCOME PER COMMON SHARE $ .24 $ .45
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,465,827 2,499,999
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.<PAGE>
MIDCOAST ENERGY RESOURCES INC., and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
5%
Cumulative Total
Preferred Common Paid-in Accumulated Unearned Shareholders'
Stock Stock Capital Deficit Compensation Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 $200,000 $14,657 $18,824,681 $(14,775,102) $(106,800) $ 4,157,436
Shares issued in connection with
a financing agreement with an affiliate - 45 5,955 - - 6,000
Shares issued or vested under various
stock-based compensation arrangements - 298 38,401 - 17,100 55,799
Redemption of 200,000 shares of 5%
cumulative preferred stock (Note 8) (200,000) - 81,634 - (118,366)
Sale of 1,000,000 shares of common
stock - 10,000 7,990,989 - - 8,000,989
Net income - - - 1,914,089 - 1,914,089
5% cumulative preferred stock dividends - - - (22,863) - (22,863)
Common stock dividends, $.08 per share - - - (400,000) - (400,000)
BALANCE, DECEMBER 31, 1996 - 25,000 26,941,660 (13,283,876) (89,700) 13,593,084
Shares vested under various stock-based
compensation arrangements - - - - 58,500 58,500
Net income - - - 1,131,907 - 1,131,907
Common stock dividends, $.08 per share - - (200,000) - (200,000)
BALANCE, MARCH 31, 1997 (Unaudited) $ - $25,000 $26,941,660 $(12,351,969) $ (31,200) $14,583,491
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
MIDCOAST ENERGY RESOURCES, INC., and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income applicable to common shareholders $ 358,927 $ 1,131,907
Adjustments to arrive at net cash provided (used) in
operating activities-
Depreciation, depletion and amortization 136,328 255,016
Gain on sale of operating pipeline (20,347) -
Recognition of deferred income (20,750) (20,750)
Income on partnership investments (26,300) -
Minority interest in consolidated subsidiaries - 59,754
Issuance of common stock to employees - 17,875
Changes in working capital accounts-
Decrease in accounts receivable 227,967 3,870,682
Increase (decrease) in accounts payable and
accrued liabilities 652,376 (2,366,449)
Net cash provided by operating activities 1,308,201 2,948,035
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (104,823) (425,026)
Acquisition escrow deposit (Note 2) - (2,000,000)
Other (184,318) (197,131)
Net cash used in investing activities (289,141) (2,622,157)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank debt borrowings 1,653,000 2,110,000
Bank debt repayments (1,278,712) (362,285)
Proceeds from notes payable to shareholders
and affiliates 100,000 -
Repayments on notes payable to shareholders and affiliates (660,000) -
Dividends on common stock - (200,000)
Net cash provided by financing activities (185,712) 1,547,715
NET INCREASE IN CASH AND CASH EQUIVALENTS 833,348 1,873,593
CASH AND CASH EQUIVALENTS, beginning of period 106,152 1,167,825
CASH AND CASH EQUIVALENTS, end of period $ 939,500 $3,041,418
CASH PAID FOR INTEREST $ 137,722 $ 95,282
CASH PAID FOR INCOME TAXES $ - $ 51,476
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
MIDCOAST ENERGY RESOURCES, INC., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial information has been prepared by Midcoast
Energy Resources, Inc. ("Midcoast" or "the Company") in accordance with the
instructions to Form 10-QSB. The information furnished reflects all
adjustments, all of which were of a normal recurring nature, which are, in the
opinion of the Company, necessary for a fair presentation of the results for
the interim periods presented. Although the Company believes that the
disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Certain reclassification entries were
made with regard to the Consolidated Financial Statements for the three months
ended March 31, 1996 so that the presentation of the information is consistent
with reporting for the Consolidated Financial Statements for the three months
ended March 31, 1997. It is suggested that the financial information be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996.
2. ACQUISITIONS
In March 1997, the Company entered into a definitive purchase and sale
agreement (the "Agreement") to acquire the stock of three subsidiaries of
Atrion Corporation ("Atrion") for cash consideration of approximately $39.4
million subject to post closing adjustments and up to $2 million of deferred
contingent payments to be paid over an eight-year period. The Agreement
contains representations and warranties, indemnities and conditions to closing
customary to transactions of this type. The three subsidiaries include Alabama
Tennessee Natural Gas Company ("ATNG"), Tennessee River Intrastate Gas Company,
Inc. ("TRIGAS") and AlaTenn Energy Marketing Company, Inc. ("ATEMCO")
(collectively the "Atrion Subsidiaries"). ATNG owns and operates a 288 mile
interstate pipeline, with two compressor stations, that runs from Selmer,
Tennessee to Huntsville, Alabama. TRIGAS owns and operates a 38 mile pipeline
extending from Barton, Alabama to Courtland, Alabama and a one mile pipeline
in Morgan County, Alabama, which transport gas to two industrial customers.
ATEMCO is a natural gas marketing company which primarily services the natural
gas needs of the customers on ATNG and TRIGAS. The acquisition has been
approved by the board of directors of both the Company and Atrion, however, the
acquisition is subject to approval by Atrion's shareholders. In conjunction with
executing the purchase and sale agreement, Midcoast was required to deposit
$2.0 million in an escrow account maintained by the trust department of a bank.
In the event that Midcoast is unable or unwilling to consummate the transaction
after the necessary approvals have been received, the escrowed money will be
paid to Atrion as compensation for all damages. On the other hand, the
agreement also stipulates that if Atrion is unable or unwilling to consummate
the transaction, which includes not receiving shareholder approval, Midcoast
will receive $2.0 million as cash compensation for all damages. Consummation
of the transaction is anticipated during the second quarter of 1997 with
financing to be provided by Bank One, Texas N.A. (See Note 3).
3. BANK DEBT
In anticipation of acquiring the Atrion Subsidiaries, the Company executed a
commitment letter in March 1997 with its existing bank lender, Bank One, Texas
N.A. to increase the Company's borrowing availability under its agreement (the
"Credit Agreement") to $43.5 million. Pursuant to the consummation of the
acquisition, the Credit Agreement will be amended to include a $7.0 million
working capital line of credit and two reducing revolving lines of credit with
total availability of $36.5 million. Available credit under the reducing
revolving lines will be reduced by a total of approximately $244,000 per month
beginning June 1, 1997 with a balloon payment of $7.0 million on August 31,
1997. In addition to the fees currently required under the Credit Agreement,
a $100,000 fee will be due upon consummation of the Atrion subsidiaries
acquisition in consideration for extending the financing.
4. C0MMITTMENTS AND CONTINGENCIES
In January 1997, the Compensation Committee approved an amendment to the
Employment Agreement of Dan C. Tutcher, the Chief Executive Officer and
President of the Compnay extending the term to December 2001 and pursuant to
which he receives a base annual salary of $95,000 in 1997, $125,000 in 1998
and 1999 and $150,000 in 2000 and 2001. He may further participate in any such
executive level bonuses or salary increases as the Compensation Committee
may approve, is also entitled to reimbursement for reasonable automobile
expenses not to exceed $500 each month and is eligable for participation in the
Company's group insurance plans. Mr. Tutcher is required to devote his full
time and attention to the Company.
In September 1996, an involuntary petition for relief under Chapter 11 of the
United States Bankruptcy Code was filed against Stewart Petroleum Company
("Stewart") in the United States Bankruptcy Court for the District of Alaska
(the "Court") by certain working interest owners in the West McArthur River
Unit ("WMRU") Production Facility, operated by Stewart. The Company receives
a throughput fee for all oil and natural gas transported through the WMRU
pipeline; howevert,payment of the Company's throughput fees since August 1996
have been suspended by the Court, and only those claims deemed to be necessary
to avoid immediate and irreparable harm to the Stewart estate have been paid.
Stewart consented to an order for relief in January 1997 and Stewart, with the
petitioners, subsequently filed a joint Disclosure Statement and Plan of
Reorganization, as amended (the "Stewart Plan"). In April 1997, the Court
approved the Disclosure Statement and scheduled a Confirmation Hearing on the
Stewart Plan for May 22, 1997. The Stewart Plan provides for the payment of
the Company's claim and the Company believes it is adequately protected. As
such, the Company is continuing to accrue revenue for the throughput fees from
August 1996 to March 1997 which amounts to $142,959.
5. EMPLOYEE BENEFITS
In February 1997, the Company's Compensation Committee approved the granting
of 160,000 incentive stock options to certain key employees. The options were
issued at an exercise price equal to the fair market value on the date of grant
which was $10.50. The options vest in equal amounts over a five-year period
and expire in ten years from the date of grant. However, those options issued
to employees who own 10% or more of the Company's common stock were valued at
110% of fair market value on the date of grant ($11.55), vest in equal amounts
over a four and one-half year period, and expire five years from the date of
grant.
6. SUBSEQUENT EVENTS
In April 1997, the Board approved the adoption of the 1997 Non-Employee
Director Stock Option Plan (the "Director Plan"), which was subsequently
approved by the Company's shareholders in May 1997. The Director Plan
provides for the grant to non-employee: (i) Existing Directors (as defined) on
the Effective Date (as defined) a non-qualified stock option ("NQO") to
purchase 5,000 shares of common stock and (ii) New Directors (as defined) on
their initial election a NQO to purchase 15,000 shares of common stock, both
at an exercise price equal to the fair market value of the common stock on the
date of grant. The Director Plan also entitles each non-employee director to
receive a NQO to purchase 5,000 shares of common stock on each date he is
reelected to the Board.
The Compensation Committee has no discretion as to the selection of the non-
employee directors to whom NQOs are to be granted or Cash Fee Awards (as
defined) paid, the number of shares subject to any NQO granted, the exercise
price to any NQO granted or the ten-year maximum term of any NQO granted
thereunder. The Compensation Committee has the authority to interpret and
construe any provision of the Director Plan and to adopt such rules and
regulations for administering the Director Plan as it deems necessary. All
decisions and determinations of the Compensation Committee are final and
binding on all parties. The Company has agreed to indemnify each member of the
Compensation Committee against any cost, expense or liability arising out of
any action, omission or determination relating to the Director Plan, unless
such action, omission or determination was taken or made in bad faith and
without reasonable belief that it was in the best interest of the Company.
The Director Plan provides for the adjustment of the number of shares or
exercise price of any option awarded thereunder, in conjunction with
any stock dividend, any subdivision or combination of the outstanding
shares of common stock and any merger, consolidation, recapitalization of the
Company or other similar event which affects the issued and outstanding shares
of common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Operating Revenues:
Operating revenues generated during the three months ended March 31, 1997
totaled approximately $13.0 million as compared to $5.6 million for the three
months ended March 31, 1996, which represents a 132% increase in 1997. The
numerous pipeline acquisitions made during the second half of 1996 are the
primary reason for this increase, as well as the introduction of natural
gas processing revenues in connection with the acquisition of the Harmony gas
processing plant and gathering system (the "Harmony System"). Processing
revenues totalled approximately $1.5 million during the three months ended
March 31, 1997.
Operating Expenses:
Operating expenses for the three months ended March 31, 1997 totaled
approximately $11.7 million, or 131% higher than the comparable 1996 period.
As explained in the preceding section, the primary explanation for the increase
can be attributed to the numerous pipeline acquisitions made during the second
half of 1996 and the introduction of gas processing costs.
Depreciation, depletion, and amortization expense was approximately $255,000
in 1997, as compared to approximately $151,000 in 1996. The increase in 1997
is primarily attributable to the pipeline acquisitions in 1996.
General and administrative expenses incurred for the three months ended March
31, 1997 were approximately $374,000 or 88% higher than the same period in
1996. The Company continued to control its general and administrative
expenses in 1997, despite the Company's tremendous growth, by effectively
assimilating new business using existing resources.
Interest expense through three months of 1997 and 1996, was approximately
$95,000 and $120,000, respectively. The Company was servicing an average of
approximately $4.5 million in debt through March 31, 1997 as compared to an
average of $4.7 million in debt through March 31, 1996. The decline in
interest expense is primarily attributable to lower interest rates paid
by the Company under the Credit Agreement negotiated in August 1996.
Earnings:
The Company recognized operating income and net income of $1.3 million and $1.1
million respectively, for the three months ended March 31, 1997 as compared
to operating income and net income of $.5 million and $.4 million for the
three months ended March 31, 1996. Operating income increased by 143% over
1996, primarily due to the pipeline acquisitions discussed above, including the
gas processing income generated from the acquisition of the Harmony System.
Capital Resources and Liquidity
Prior to its common stock offering in August 1996, the Company had historically
funded its capital lenders. In August 1996, the Company repaid all outstanding
bank and related party indebtedness except for the debt of two subsidiaries,
which totaled approximately $5.0 million, with proceeds from the Company's
common stock offering. Also, the Company established a new $40 million credit
facility with Bank One, Texas N.A. in August 1996.
The new credit facility provided a three-year commitment with an initial
borrowing availability of $10.5 million comprised of a $1.5 million working
capital line of credit and a $9.0 million reducing revolving line of credit
(collectively the "Credit Agreement"). However, the borrowing availability
under each line is subject to revision, on a semi-annual basis, based on the
performance of the Company's existing assets and any asset dispositions or
additions from new construction or acquisitions. In anticipation of acquiring
the Atrion Subsidairies, the Company executed a commitment letter in March 1997
with its existing bank lender, Bank One, Texas N.A. to increase the Company's
borrowing availability under its Credit Agreement to $43.5 million. Pursuant
to the consummation of the acquisition, the Credit Agreement will be amended
to include a $7.0 million working capital line of credit and two reducing
revolving lines of credit with total availability of $36.5 million. Available
credit under the reducing revolving lines will be reduced by a total of
approximately $244,000 per month beginning June 1, 1997 with a balloon payment
of $7.0 million on August 31, 1997. The Credit Agreement contains a number
of covenants that, among other things, require the Company to maintain certain
financial ratios, and limit the Company's ability to incur additional
indebtedness, transfer or sell assets, create liens, or enter into a merger or
consolidation.
When borrowings under the Credit Agreement are less than 50% of available
credit, at the Company's option, interest will accrue at the London Interbank
Offering Rate plus 2.5% or the Bank One, Texas N.A. base rate plus .25% When
borrowings are greater than 50% of available credit, an additional .25% will
be added to the above interest rates. In addition, the Company is subject
to a non-recurring 1% facility fee as funds are borrowed, as well as a .375%
commitment fee payable quarterly on the unused portion of borrowing
availability. The Credit Agreement is secured by all accounts receivable,
contracts, and a first lien security interest in the Company's pipeline systems.
For three months ended March 31, 1997, the Company generated cash flow from
operating activities of approximately $ 2.9 million. The Company believes
that its existing Credit Agreement and funds provided by operations are
sufficient for it to meet its operating cash needs for the foreseeable future.
However, in March 1997 the Company entered into a definative agreement to
acquire the Atrion Subsidiaries for cash consideration of $39.4 million with
an additional $2.0 million of deferred contigent payments to be made over
an eight-year period. Based on the Company's revised borrowing availability
under the Credit Agreement as discussed above, adequate funds will be
available to the Company for the acquisition to be consumated subject to
Atrion's shareholders approvals expected during the second quarter of 1997.
However, the revised Credit Agreement will call for a balloon payment of
$7.0 million on August 31, 1997. The Company is currently evaluating its
options with respect to providing funding for repayment of the $7.0 million,
which may include additional debt or equity financing. There can be no
assurance, however, that the Company's efforts to raise additional capital
or obtain new financing will be successful.
As of December 31, 1996, the Company had net operating loss ("NOL") carry-
forwards of approximately $11.0 million expiring in various amounts from
1999 through 2008. These NOLs were generated by the Company's predecessor.
The ability of the Company to utilize the carryforwards is dependent upon
the Company generating sufficient taxable income and could be affected by
annual limitations on the use of such carryforwards due to a change in
stockholder control under the Internal Revenue Code. The Company's future
issuances of equity securities could trigger such a limitation. The
Company believes, however, that such a limitation would not materially
impact the Company's ability to utilize the NOL carryforwards prior to
their expiration.
This report includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act of 1934. All statements other than statements of historical fact
included in this report are forward looking statements. Such forward looking
statements include, without limitation, statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Capital Resources and Liquidity" regarding Midcoast's estimate of the
sufficiency of existing capital resources, its ability to raise additional
capital to fund cash requirements for future operations, whether funds provided
by operations will be sufficient to meet its operational needs in the
foreseeable future, and its ability to utilize NOL carryforwards prior to their
expiration. Although Midcoast believes that the expectations reflected in such
forward looking statements are reasonable, it can give no assurance that such
expectations reflected in such forward looking statments will prove to be
correct. The ability to achieve Midcoast's expectations is contigent
upon a number of factors which include (i) timely approval of Midcoast's
acquisition candidates by appropriate govermental and regulatory agencies,
(ii) effect of any current or future competition, (iii) retention of key
personnel and (iv) obtaining and timing of sufficient financing to fund
operations. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed in this report, including without limitation those statements
made in conjunction with the forward looking statements included in this
report. All subsequent written and oral forward looking statemnets
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits:
2.1 Stock Purchase Agreement dated March 18, 1997 by and between
Midcoast Energy Resources, Inc. and Atrion Corporation
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1996, as Exhibit 2.7).
10.1 Second Amendment to Employment Agreement dated April 17, 1995 by
and between Midcoast Energy Resources, Inc. and I.J.
Berthelot, II dated April 25, 1997.
10.2 Second Amendment to Employment Agreement dated April 1, 1993 by
and between Midcoast Energy Resources, Inc. and Dan C. Tutcher
dated April 14, 1997.
10.3 Indemnity Agreement dated April 23, 1997 between
Midcoast Energy Resources, Inc. and Richard A. Robert.
10.4 Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Dan C. Tutcher.
10.5 Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and I.J. Berthelot, II.
10.6 Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Duane S. Herbst.
10.7 Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Richard N. Richards.
10.8 Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and E.P. Marinos
10.9 1997 Non-employee Director Stock Option Plan.
b. Reports on Form 8-K:
None
<PAGE>
Signature
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MIDCOAST ENERGY RESOURCES, INC.
(Registrant)
BY: /s/ Richard A. Robert
Richard A. Robert
Principal Financial Officer
Treasurer
Principal Accounting Officer
Date: May 15, 1997
EXHIBIT 10.1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement ("Second Amendment") dated
April 25, 1997, is by and among Midcoast Energy Resources, Inc. (the
"Employer" or the "Company") and I. J. Berthelot, II (the "Employee").
WITNESSETH :
WHEREAS, the Employer and the Employee entered into an Employment
Agreement (the "Agreement"), effective April 17, 1995, as amended by that
certain Amendment to Employment Agreement, dated December 8, 1995 (the
"Amendment");
WHEREAS, during the negotiations between the Employer and the Employee,
at the time of the entry into the Amendment by the Employer and the Employee,
the Employer intended that all shares of the Company's Common Stock issued to
the Employee pursuant to Section 5(B) of the Agreement become fully vested
without any substantial risk of forfeiture on January 1, 1996, but a review
of the Amendment indicates that no such provision was reflected in the
Amendment; and
WHEREAS, the Employer and the Employee desire to cure this omission by
revising Section 5(B) of the Agreement to reflect the proper intent of the
Employer and the Employee which was not properly reflected in either of the
Agreement or the Amendment on the dates executed.
NOW, THEREFORE, in consideration of the foregoing, the Employer and the
Employee hereby agree as follows:
SECTION 5
COMPENSATION
1.Section 5(B) shall be deleted from the Agreement and replaced with
the following:
"B.Stock Grant. Upon execution of this Agreement and in
order to further encourage the Employee to remain in the
service of the Employer, the Employee is hereby awarded
thirteen thousand (13,000) shares of the Employer's common
stock, $.01 par value per share ("Common Stock"), ten
thousand (10,000) shares of Common Stock being issued as of
the effective date and three thousand (3,000) shares of
Common Stock being issued as of September 20, 1995. All
thirteen thousand (13,000) shares granted hereunder (the
"Shares") shall be fully vested on January 1, 1996 and such
Shares shall not be subject to a substantial risk of
forfeiture."
[SIGNATURE PAGE FOLLOWS]<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have duly executed
this Second Amendment, as of the date first written above.
EMPLOYER:
Midcoast Energy Resources, Inc.
/s/ Dan C. Tutcher
Dan C. Tutcher, President
EMPLOYEE:
/s/ I. J. Berthelot, II
I. J. Berthelot, II
EXHIBIT 10.2
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement ("Second Amendment") dated
April 14, 1997, is by and among Midcoast Energy Resources, Inc. (the
"Employer" or the "Company") and Dan C. Tutcher (the "Employee").
WITNESSETH
:
WHEREAS, the Employer and the Employee entered into that certain
Employment Agreement (the "Agreement") dated January 1, 1993, as amended by
that certain Amendment to Employment Agreement, dated April 1, 1993 (the
"Amendment"); and
WHEREAS, the Employer and the Employee desire to amend certain terms of
the Agreement.
NOW, THEREFORE, in consideration of the foregoing, the Employer and the
Employee hereby agree as follows:
SECTION 4
TERM OF EMPLOYMENT
1.Section 4 shall be deleted in its entirety and replaced with the
following:
"4.Term of Employment.
The term of employment of the Employee by the
Employer shall commence on the effective date hereof,
and shall terminate on the eighth anniversary of such
date, unless sooner terminated in accordance with
Section 7 below (the "Employment Period")."
SECTION 5
COMPENSATION
2.Section 5.A. shall be deleted in its entirety and replaced with the
following:
"A. Base Salary. For all services rendered under this
Agreement, the Employer agrees to pay to the Employee
during the Employment Period an annual salary in the
amounts and schedule set forth below:
CALENDAR YEAR
AMOUNT
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$95,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$125,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$150,000
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$150,000
or the equivalent amount payable on any other
periodic basis consistent with the Employer's
payroll procedures (but no less frequently than
monthly), subject only to such payroll and
withholding deductions as are required by
federal, state or local law, in addition to
bonuses (as set forth in Section 5.B.)."
[Signature Page Follows]<PAGE>
IN WITNESS WHEREOF, the Employer and the Employee have duly
executed this Agreement, as of the date first written above.
EMPLOYER:
Midcoast Energy Resources, Inc.
By: /s/ Richard A. Robert
Richard A. Robert,
Chief Financial Officer
EMPLOYEE:
/s/ Dan C. Tutcher
Dan C. Tutcher
EXHIBIT 10.3
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and Richard A. Robert ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Company on the condition that he
be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as Chief
Financial Officer and Treasurer of the Company. Indemnitee may at any time
and for any reason resign from such position (subject to any other contractual
obligation or any obligation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to continue Indemnitee
in any such position.
Section 2.Indemnification - General. The Company shall indemnify, and
advance Expenses (as hereinafter defined), to Indemnitee as provided in this
Agreement and to the fullest extent permitted by applicable law in effect on
the date hereof and to such greater extent as applicable law may thereafter
from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by Indemnitee
in any such capacity, he is, or is threatened to be made, a party to any
threatened, pending, or completed Proceeding (as hereinafter defined), other
than a Proceeding by or in the right of the Company. Pursuant to this Section
3, Indemnitee shall be indemnified to the full extent of the law against
Expenses, judgments, penalties, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such expenses, judgments, fines, penalties or
amounts paid in settlement) actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect
to any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 4. Proceedings by or in the Right of the Company. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 4
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to any threatened, pending or completed Proceeding brought by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
Section, Indemnitee shall be indemnified to the full extent of the law against
Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. Notwithstanding the foregoing, no indemnification against such
Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Company if applicable law prohibits such indemnification; provided, however,
that, if applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is pending
or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is, by reason of his Corporate Status, a party to
and is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding, the
Company shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section
and without limitation, the termination of any claim, issue or matter in such
a Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
Section 6.Indemnification for Expenses of a Witness. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within two days after the receipt by the Company of a statement
or statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking
by or on behalf of Indemnitee to repay any Expenses advanced if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses; provided, however, that Indemnitee shall not be
required to reimburse Company for any advancement of Expenses until a final
judicial determination is made (as to which all rights of appeal have been
exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee
and is reasonably necessary to determine whether and to what extent Indemnitee
is entitled to indemnification. The Secretary of the Company shall, promptly
upon receipt of such a request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such determination
be made by the Board or the stockholders, in which case by the person or
persons or in the manner provided for in clauses (ii) or (iii) of this Section
8(b)) in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board by a majority vote of a quorum consisting of Disinterested Directors (as
hereinafter defined), or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable, such quorum
of Disinterested Directors so directs, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C)
if so directed by the Board, by the stockholders of the Company; or (iii) as
provided in Section 9(b) of this Agreement; and, if it is so determined that
Indemnitee is entitled to Indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b)
hereof, the Independent Counsel shall be selected as provided in this Section
8(c). If a Change of Control shall not have occurred, the Independent Counsel
shall be selected by the Board, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, the Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 7 days after such
written notice of selection shall have been given, deliver to the Company or
to Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 18 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection
is made, the Independent Counsel so selected may not serve as Independent
Counsel unless and until a court has determined that such objection is without
merit. If, within 20 days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected without objection, either the Company or Indemnitee
may petition the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other person
as the court shall designate, and the person with respect to whom an objection
is so resolved or the person so appointed shall act as Independent Counsel
under Section 8(b) hereof. The Company shall pay any and all reasonable fees
and expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company shall
pay all reasonable fees and expenses incident to the procedures of this
Section 8(c), regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding
or arbitration pursuant to Section 10(a)(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for indemnification
in accordance with Section 8(a) of this Agreement, and the Company shall have
the burden of proof to overcome that presumption in connection with the making
by any person, persons or entity of any determination contrary to that
presumption.
(b)If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day
period may be extended for a reasonable time, not to exceed an additional 30
days, if the person, persons or entity making the determination with respect
to entitlement to indemnification in good faith requires such additional time
for the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to
indemnification is to be made by the stockholders pursuant to Section 8(b) of
this Agreement and if (A) within 15 days after receipt by the Company of the
request for such determination the Board has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within 75 days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within 15
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within 60 days after having been so called
and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant
to Section 8(b) of this Agreement.
(c)The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, or (ii) advancement of Expenses is not timely made
pursuant to Section 7 of this Agreement, or (iii) the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant
to Section 8(b) of this Agreement and such determination shall not have been
made and delivered in a written opinion within 90 days after receipt by the
Company of the request for indemnification, or (iv) payment of indemnification
is not made pursuant to Section 6 of this Agreement within ten (10) days after
receipt by the Company of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a determination has
been made that Indemnitee is entitled to indemnification or such determination
is deemed to have been made pursuant to Sections 8 or 9 of this Agreement,
Indemnitee shall be entitled to an adjudication in an appropriate court of the
State of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Indemnitee shall commence such proceeding seeking an
adjudication or an award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence such proceeding pursuant to
this Section 10(a); provided, however, that the foregoing clause shall not
apply in respect of a proceeding brought by an Indemnitee to enforce his
rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in
any judicial proceeding or arbitration commenced pursuant to this Section 10
the Company shall have the burden of proving that Indemnitee is not entitled
to indemnification or advancement of Expenses, as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
in any judicial proceeding or arbitration commenced pursuant to this Section
10, absent (i) a misstatement by Indemnitee of a material fact, or an omission
of a material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this Agreement.
(e)In the event that Indemnitee, pursuant to this Section 10,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the
definition of Expenses in Section 18 of this Agreement) actually and
reasonably incurred by him in such judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but
not all of the indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the articles of incorporation, the bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
(b)To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, which such
person serves at the request of the Company, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee or
agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.
(d)The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties and
their respective successors, assigns (including any direct or indirect
successors by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), spouses,
heirs, executors, administrators, and personal and legal representatives. The
Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all, substantially all or a
substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to the Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or of
any other enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two year period; provided, however, that if any shorter period of limitations
is otherwise applicable to any such cause of action such shorter period shall
govern.
Section 14.Severability. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation,
each portion of any Section of this Agreement containing any such provision
held to be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or Advancement
of Expenses. Notwithstanding any other provision of this Agreement,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement with respect to any Proceeding, or any claim therein,
brought or made by him against the Company or the Individual Indemnitors,
unless the Company has joined in or consented to the initiation of such
Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated
under the Securities Exchange Act of 1934 (the "Act"), whether or not the
Company is then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the Effective Date (i) any "person" (as such term is used in
Section 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the
Board thereafter; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a
majority of the Board.
(b)"Corporate Status" describes the status of a person who is
or was a director, officer, employee, agent or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request of
the Company.
(c)"Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness
in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or investigation
that Indemnitee in good faith believes might lead to the institution of any
such action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other; Notwithstanding the foregoing, the term "Proceeding"
shall not include any action, suit, arbitration, alternate dispute resolution
mechanism, administrative hearing, or any inquiry or investigation initiated
by an Indemnitee pursuant to Section 10 of this Agreement to enforce his
rights under this Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a)If to Indemnitee, to:
Richard A. Robert
225 Litchfield Lane
Houston, Texas 77024
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chief Executive Officer,
President and Chairman of the Board
EXHIBIT 10.4
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and Dan C. Tutcher ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the
corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that
the Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition
that he be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree
as follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as
Chief Executive Officer, President and Chairman of the Board of the
Company. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation
imposed by operation of law), in which event the Company shall have no
obligation under this Agreement to continue Indemnitee in any such
position.
Section 2.Indemnification - General. The Company shall indemnify,
and advance Expenses (as hereinafter defined), to Indemnitee as provided in
this Agreement and to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of
the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by
Indemnitee in any such capacity, he is, or is threatened to be made, a
party to any threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified to the full
extent of the law against Expenses, judgments, penalties, fines and amounts
paid in settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such expenses,
judgments, fines, penalties or amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified to
the full extent of the law against Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in
respect of any claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters
in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For
purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
Section 6.Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within two days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses; provided, however,
that Indemnitee shall not be required to reimburse Company for any
advancement of Expenses until a final judicial determination is made (as to
which all rights of appeal have been exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including therein
or therewith such documentation and information as is reasonably available
to Indemnitee and is reasonably necessary to determine whether and to what
extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement
thereto shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such
determination be made by the Board or the stockholders, in which case by
the person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 8(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board consisting of Disinterested Directors is not obtainable
or, even if obtainable, such quorum of Disinterested Directors so directs,
by Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; or (iii) as provided in Section 9(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
Indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons
or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
8(b) hereof, the Independent Counsel shall be selected as provided in this
Section 8(c). If a Change of Control shall not have occurred, the
Independent Counsel shall be selected by the Board, and the Company shall
give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board, in which
event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 7 days after such written notice
of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent Counsel"
as defined in Section 18 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court has determined that
such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section
8(a) hereof, no Independent Counsel shall have been selected without
objection, either the Company or Indemnitee may petition the court in which
such Proceeding shall have been brought or is pending or other court of
competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
8(b) hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company
shall pay all reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 8(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption.
(b)If the person, persons or entity empowered or selected
under Section 8 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60
days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional 30 days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good
faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 9(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
15 days after receipt by the Company of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement.
(c)The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, or (ii) advancement of Expenses is
not timely made pursuant to Section 7 of this Agreement, or (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion
within 90 days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed
to have been made pursuant to Sections 8 or 9 of this Agreement, Indemnitee
shall be entitled to an adjudication in an appropriate court of the State
of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence
such proceeding pursuant to this Section 10(a); provided, however, that the
foregoing clause shall not apply in respect of a proceeding brought by an
Indemnitee to enforce his rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 10 shall be conducted in all respects as a de novo trial,
or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. If a Change of Control shall have
occurred, in any judicial proceeding or arbitration commenced pursuant to
this Section 10 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses,
as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section 10, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10
that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court or before any
such arbitrator that the Company is bound by all the provisions of this
Agreement.
(e)In the event that Indemnitee, pursuant to this Section
10, seeks a judicial adjudication of or an award in arbitration to enforce
his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 18 of this Agreement)
actually and reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be determined in
said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under
applicable law, the articles of incorporation, the bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof
shall be effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such amendment,
alteration or repeal.
(b)To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any
such director, officer, employee or agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to
enforce such rights.
(d)The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
parties and their respective successors, assigns (including any direct or
indirect successors by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company),
spouses, heirs, executors, administrators, and personal and legal
representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to the Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse,
heirs, executors or personal or legal representatives after the expiration
of two years from the date of accrual of such cause of action, and any
claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
Section 14.Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or
Advancement of Expenses. Notwithstanding any other provision of this
Agreement, Indemnitee shall not be entitled to indemnification or
advancement of Expenses under this Agreement with respect to any
Proceeding, or any claim therein, brought or made by him against the
Company or the Individual Indemnitors, unless the Company has joined in or
consented to the initiation of such Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed
to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the
Company occurring after the Effective Date of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule
or form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if after the Effective Date (i) any "person" (as
such term is used in Section 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (including for this purpose any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board.
(b)"Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was serving at the
request of the Company.
(c)"Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to
be a witness in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company or Indemnitee in any matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative, or other; Notwithstanding the
foregoing, the term "Proceeding" shall not include any action, suit,
arbitration, alternate dispute resolution mechanism, administrative
hearing, or any inquiry or investigation initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to
notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to
any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, or (ii)
mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
(a)If to Indemnitee, to:
Dan C. Tutcher
2207 Twin Oaks
Kemah, Texas 77565
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Richard A. Robert
Richard A. Robert
Chief Financial Officer and
Treasurer
INDEMNITEE
/s/ Dan C. Tutcher
Dan C. Tutcher
EXHIBIT 10.5
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and I.J. Berthelot, II ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the
corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that
the Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition
that he be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree
as follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as
Vice President of Operations, Chief Engineer and Director of the Company.
Indemnitee may at any time and for any reason resign from such position
(subject to any other contractual obligation or any obligation imposed by
operation of law), in which event the Company shall have no obligation
under this Agreement to continue Indemnitee in any such position.
Section 2.Indemnification - General. The Company shall indemnify,
and advance Expenses (as hereinafter defined), to Indemnitee as provided in
this Agreement and to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of
the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by
Indemnitee in any such capacity, he is, or is threatened to be made, a
party to any threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified to the full
extent of the law against Expenses, judgments, penalties, fines and amounts
paid in settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such expenses,
judgments, fines, penalties or amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified to
the full extent of the law against Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in
respect of any claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters
in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For
purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
Section 6.Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within two days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses; provided, however,
that Indemnitee shall not be required to reimburse Company for any
advancement of Expenses until a final judicial determination is made (as to
which all rights of appeal have been exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including therein
or therewith such documentation and information as is reasonably available
to Indemnitee and is reasonably necessary to determine whether and to what
extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement
thereto shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such
determination be made by the Board or the stockholders, in which case by
the person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 8(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board consisting of Disinterested Directors is not obtainable
or, even if obtainable, such quorum of Disinterested Directors so directs,
by Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; or (iii) as provided in Section 9(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
Indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons
or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
8(b) hereof, the Independent Counsel shall be selected as provided in this
Section 8(c). If a Change of Control shall not have occurred, the
Independent Counsel shall be selected by the Board, and the Company shall
give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board, in which
event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 7 days after such written notice
of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent Counsel"
as defined in Section 18 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court has determined that
such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section
8(a) hereof, no Independent Counsel shall have been selected without
objection, either the Company or Indemnitee may petition the court in which
such Proceeding shall have been brought or is pending or other court of
competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
8(b) hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company
shall pay all reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 8(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption.
(b)If the person, persons or entity empowered or selected
under Section 8 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60
days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional 30 days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good
faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 9(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
15 days after receipt by the Company of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement.
(c)The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, or (ii) advancement of Expenses is
not timely made pursuant to Section 7 of this Agreement, or (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion
within 90 days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed
to have been made pursuant to Sections 8 or 9 of this Agreement, Indemnitee
shall be entitled to an adjudication in an appropriate court of the State
of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence
such proceeding pursuant to this Section 10(a); provided, however, that the
foregoing clause shall not apply in respect of a proceeding brought by an
Indemnitee to enforce his rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 10 shall be conducted in all respects as a de novo trial,
or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. If a Change of Control shall have
occurred, in any judicial proceeding or arbitration commenced pursuant to
this Section 10 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses,
as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section 10, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10
that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court or before any
such arbitrator that the Company is bound by all the provisions of this
Agreement.
(e)In the event that Indemnitee, pursuant to this Section
10, seeks a judicial adjudication of or an award in arbitration to enforce
his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 18 of this Agreement)
actually and reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be determined in
said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under
applicable law, the articles of incorporation, the bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof
shall be effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such amendment,
alteration or repeal.
(b)To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any
such director, officer, employee or agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to
enforce such rights.
(d)The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
parties and their respective successors, assigns (including any direct or
indirect successors by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company),
spouses, heirs, executors, administrators, and personal and legal
representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to the Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse,
heirs, executors or personal or legal representatives after the expiration
of two years from the date of accrual of such cause of action, and any
claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
Section 14.Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or
Advancement of Expenses. Notwithstanding any other provision of this
Agreement, Indemnitee shall not be entitled to indemnification or
advancement of Expenses under this Agreement with respect to any
Proceeding, or any claim therein, brought or made by him against the
Company or the Individual Indemnitors, unless the Company has joined in or
consented to the initiation of such Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed
to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the
Company occurring after the Effective Date of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule
or form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if after the Effective Date (i) any "person" (as
such term is used in Section 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (including for this purpose any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board.
(b)"Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was serving at the
request of the Company.
(c)"Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to
be a witness in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company or Indemnitee in any matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative, or other; Notwithstanding the
foregoing, the term "Proceeding" shall not include any action, suit,
arbitration, alternate dispute resolution mechanism, administrative
hearing, or any inquiry or investigation initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to
notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to
any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, or (ii)
mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
(a)If to Indemnitee, to:
I.J. Berthelot II
2636 Silver Falls
Kingwood, Texas 77339
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chief Executive Officer,
President and Chairman of theBoard
INDEMNITEE
/s/ I. J. Berthelot, II
I. J. Berthelot, II
EXHIBIT 10.6
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and Duane S. Herbst ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the
corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that
the Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition
that he be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree
as follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as
Vice President of Corporate Affairs and Secretary of the Company.
Indemnitee may at any time and for any reason resign from such position
(subject to any other contractual obligation or any obligation imposed by
operation of law), in which event the Company shall have no obligation
under this Agreement to continue Indemnitee in any such position.
Section 2.Indemnification - General. The Company shall indemnify,
and advance Expenses (as hereinafter defined), to Indemnitee as provided in
this Agreement and to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of
the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by
Indemnitee in any such capacity, he is, or is threatened to be made, a
party to any threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified to the full
extent of the law against Expenses, judgments, penalties, fines and amounts
paid in settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such expenses,
judgments, fines, penalties or amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified to
the full extent of the law against Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in
respect of any claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters
in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For
purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
Section 6.Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within two days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses; provided, however,
that Indemnitee shall not be required to reimburse Company for any
advancement of Expenses until a final judicial determination is made (as to
which all rights of appeal have been exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including therein
or therewith such documentation and information as is reasonably available
to Indemnitee and is reasonably necessary to determine whether and to what
extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement
thereto shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such
determination be made by the Board or the stockholders, in which case by
the person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 8(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board consisting of Disinterested Directors is not obtainable
or, even if obtainable, such quorum of Disinterested Directors so directs,
by Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; or (iii) as provided in Section 9(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
Indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons
or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
8(b) hereof, the Independent Counsel shall be selected as provided in this
Section 8(c). If a Change of Control shall not have occurred, the
Independent Counsel shall be selected by the Board, and the Company shall
give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board, in which
event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 7 days after such written notice
of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent Counsel"
as defined in Section 18 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court has determined that
such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section
8(a) hereof, no Independent Counsel shall have been selected without
objection, either the Company or Indemnitee may petition the court in which
such Proceeding shall have been brought or is pending or other court of
competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
8(b) hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company
shall pay all reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 8(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption.
(b)If the person, persons or entity empowered or selected
under Section 8 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60
days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional 30 days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good
faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 9(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
15 days after receipt by the Company of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement.
(c)The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, or (ii) advancement of Expenses is
not timely made pursuant to Section 7 of this Agreement, or (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion
within 90 days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed
to have been made pursuant to Sections 8 or 9 of this Agreement, Indemnitee
shall be entitled to an adjudication in an appropriate court of the State
of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence
such proceeding pursuant to this Section 10(a); provided, however, that the
foregoing clause shall not apply in respect of a proceeding brought by an
Indemnitee to enforce his rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 10 shall be conducted in all respects as a de novo trial,
or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. If a Change of Control shall have
occurred, in any judicial proceeding or arbitration commenced pursuant to
this Section 10 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses,
as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section 10, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10
that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court or before any
such arbitrator that the Company is bound by all the provisions of this
Agreement.
(e)In the event that Indemnitee, pursuant to this Section
10, seeks a judicial adjudication of or an award in arbitration to enforce
his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 18 of this Agreement)
actually and reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be determined in
said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under
applicable law, the articles of incorporation, the bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof
shall be effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such amendment,
alteration or repeal.
(b)To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any
such director, officer, employee or agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to
enforce such rights.
(d)The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
parties and their respective successors, assigns (including any direct or
indirect successors by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company),
spouses, heirs, executors, administrators, and personal and legal
representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to the Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse,
heirs, executors or personal or legal representatives after the expiration
of two years from the date of accrual of such cause of action, and any
claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
Section 14.Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or
Advancement of Expenses. Notwithstanding any other provision of this
Agreement, Indemnitee shall not be entitled to indemnification or
advancement of Expenses under this Agreement with respect to any
Proceeding, or any claim therein, brought or made by him against the
Company or the Individual Indemnitors, unless the Company has joined in or
consented to the initiation of such Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed
to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the
Company occurring after the Effective Date of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule
or form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if after the Effective Date (i) any "person" (as
such term is used in Section 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (including for this purpose any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board.
(b)"Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was serving at the
request of the Company.
(c)"Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to
be a witness in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company or Indemnitee in any matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative, or other; Notwithstanding the
foregoing, the term "Proceeding" shall not include any action, suit,
arbitration, alternate dispute resolution mechanism, administrative
hearing, or any inquiry or investigation initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to
notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to
any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, or (ii)
mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
(a)If to Indemnitee, to:
Duane S. Herbst
5313 Greenbriar
Corpus Christi, Texas 78413
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chief Executive Officer,
President and Chairman of the
Board
INDEMNITEE
/s/ Duane S. Herbst
Duane S. Herbst
EXHIBIT 10.7
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and Richard N. Richards ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as directors or in other capacities unless
they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the
corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that
the Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Company on the condition
that he be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree
as follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as
Director of the Company. Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or
any obligation imposed by operation of law), in which event the Company
shall have no obligation under this Agreement to continue Indemnitee in any
such position.
Section 2.Indemnification - General. The Company shall indemnify,
and advance Expenses (as hereinafter defined), to Indemnitee as provided in
this Agreement and to the fullest extent permitted by applicable law in
effect on the date hereof and to such greater extent as applicable law may
thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of
the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by
Indemnitee in any such capacity, he is, or is threatened to be made, a
party to any threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified to the full
extent of the law against Expenses, judgments, penalties, fines and amounts
paid in settlement (including all interest, assessments and other charges
paid or payable in connection with or in respect of such expenses,
judgments, fines, penalties or amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified to
the full extent of the law against Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in
respect of any claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement,
to the extent that Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters
in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in
connection with each successfully resolved claim, issue or matter. For
purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim,
issue or matter.
Section 6.Indemnification for Expenses of a Witness.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection
with any Proceeding within two days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses; provided, however,
that Indemnitee shall not be required to reimburse Company for any
advancement of Expenses until a final judicial determination is made (as to
which all rights of appeal have been exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including therein
or therewith such documentation and information as is reasonably available
to Indemnitee and is reasonably necessary to determine whether and to what
extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement
thereto shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such
determination be made by the Board or the stockholders, in which case by
the person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 8(b)) in a written opinion to the Board, a copy of
which shall be delivered to Indemnitee; (ii) if a Change of Control shall
not have occurred, (A) by the Board by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board consisting of Disinterested Directors is not obtainable
or, even if obtainable, such quorum of Disinterested Directors so directs,
by Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; or (iii) as provided in Section 9(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
Indemnification, payment to Indemnitee shall be made within ten (10) days
after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons
or entity upon reasonable advance request any documentation or information
which is not privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
8(b) hereof, the Independent Counsel shall be selected as provided in this
Section 8(c). If a Change of Control shall not have occurred, the
Independent Counsel shall be selected by the Board, and the Company shall
give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board, in which
event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 7 days after such written notice
of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent Counsel"
as defined in Section 18 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such
written objection is made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court has determined that
such objection is without merit. If, within 20 days after submission by
Indemnitee of a written request for indemnification pursuant to Section
8(a) hereof, no Independent Counsel shall have been selected without
objection, either the Company or Indemnitee may petition the court in which
such Proceeding shall have been brought or is pending or other court of
competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section
8(b) hereof. The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company
shall pay all reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such Independent
Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 8(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption.
(b)If the person, persons or entity empowered or selected
under Section 8 of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within 60
days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional 30 days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good
faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 9(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
15 days after receipt by the Company of the request for such determination
the Board has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this
Agreement.
(c)The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right
of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that Indemnitee had reasonable cause to believe
that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, or (ii) advancement of Expenses is
not timely made pursuant to Section 7 of this Agreement, or (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion
within 90 days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed
to have been made pursuant to Sections 8 or 9 of this Agreement, Indemnitee
shall be entitled to an adjudication in an appropriate court of the State
of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the rules of the
American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence
such proceeding pursuant to this Section 10(a); provided, however, that the
foregoing clause shall not apply in respect of a proceeding brought by an
Indemnitee to enforce his rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 10 shall be conducted in all respects as a de novo trial,
or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. If a Change of Control shall have
occurred, in any judicial proceeding or arbitration commenced pursuant to
this Section 10 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses,
as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration commenced pursuant
to this Section 10, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10
that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and shall stipulate in any such court or before any
such arbitrator that the Company is bound by all the provisions of this
Agreement.
(e)In the event that Indemnitee, pursuant to this Section
10, seeks a judicial adjudication of or an award in arbitration to enforce
his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 18 of this Agreement)
actually and reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be determined in
said judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of expenses
sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of
any other rights to which Indemnitee may at any time be entitled under
applicable law, the articles of incorporation, the bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or any provision hereof
shall be effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such amendment,
alteration or repeal.
(b)To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any
such director, officer, employee or agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to
enforce such rights.
(d)The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
parties and their respective successors, assigns (including any direct or
indirect successors by purchase, merger, consolidation or otherwise to all
or substantially all of the business and/or assets of the Company),
spouses, heirs, executors, administrators, and personal and legal
representatives. The Company shall require and cause any successor
(whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to the Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and
no cause of action shall be asserted by or in the right of the Company or
any affiliate of the Company against Indemnitee, Indemnitee's spouse,
heirs, executors or personal or legal representatives after the expiration
of two years from the date of accrual of such cause of action, and any
claim or cause of action of the Company or its affiliate shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
Section 14.Severability. If any provision of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or
Advancement of Expenses. Notwithstanding any other provision of this
Agreement, Indemnitee shall not be entitled to indemnification or
advancement of Expenses under this Agreement with respect to any
Proceeding, or any claim therein, brought or made by him against the
Company or the Individual Indemnitors, unless the Company has joined in or
consented to the initiation of such Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed
to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the
Company occurring after the Effective Date of a nature that would be
required to be reported in response to item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule
or form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change in Control shall
be deemed to have occurred if after the Effective Date (i) any "person" (as
such term is used in Section 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage interest;
(ii) the Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning of
such period constituted the Board (including for this purpose any new
director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board.
(b)"Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was serving at the
request of the Company.
(c)"Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to
be a witness in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company or Indemnitee in any matter material to either such party,
or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, or proceeding, whether civil,
criminal, administrative, investigative, or other; Notwithstanding the
foregoing, the term "Proceeding" shall not include any action, suit,
arbitration, alternate dispute resolution mechanism, administrative
hearing, or any inquiry or investigation initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to
notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to
any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, or (ii)
mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed:
(a)If to Indemnitee, to:
Richard N. Richards
18610 Upper Bay Road
Houston, Texas 77058
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chief Executive Officer,
President and Chairman of the
Board
INDEMNITEE
/s/ Richard N. Richards
Richard N. Richards
EXHIBIT 10.8
AGREEMENT
This Agreement, made and entered into this 23rd day of April, 1997
("Agreement"), is by and between Midcoast Energy Resources, Inc., a Nevada
corporation ("Company"), and E. P. Marinos ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, the corporation;
WHEREAS, the current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the
difficulty of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased
certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest
extent permitted by applicable law so that they will serve or continue to
serve the Company free from undue concern that they will not be so
indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Company on the condition that he
be so indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1.Services by Indemnitee. Indemnitee agrees to serve as
Director of the Company. Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have
no obligation under this Agreement to continue Indemnitee in any such
position.
Section 2.Indemnification - General. The Company shall indemnify, and
advance Expenses (as hereinafter defined), to Indemnitee as provided in this
Agreement and to the fullest extent permitted by applicable law in effect on
the date hereof and to such greater extent as applicable law may thereafter
from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
Section 3.Proceedings Other Than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined) or by reason of anything done or not done by Indemnitee
in any such capacity, he is, or is threatened to be made, a party to any
threatened, pending, or completed Proceeding (as hereinafter defined), other
than a Proceeding by or in the right of the Company. Pursuant to this Section
3, Indemnitee shall be indemnified to the full extent of the law against
Expenses, judgments, penalties, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such expenses, judgments, fines, penalties or
amounts paid in settlement) actually and reasonably incurred by him or on his
behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect
to any criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 4. Proceedings by or in the Right of the Company. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 4
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to any threatened, pending or completed Proceeding brought by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
Section, Indemnitee shall be indemnified to the full extent of the law against
Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. Notwithstanding the foregoing, no indemnification against such
Expenses shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Company if applicable law prohibits such indemnification; provided, however,
that, if applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Company in such event if and only to the extent
that the court in which such Proceeding shall have been brought or is pending
or other court of competent jurisdiction, shall determine.
Section 5.Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is, by reason of his Corporate Status, a party to
and is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding, the
Company shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section
and without limitation, the termination of any claim, issue or matter in such
a Proceeding by dismissal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
Section 6.Indemnification for Expenses of a Witness. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith.
Section 7.Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within two days after the receipt by the Company of a statement
or statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking
by or on behalf of Indemnitee to repay any Expenses advanced if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses; provided, however, that Indemnitee shall not be
required to reimburse Company for any advancement of Expenses until a final
judicial determination is made (as to which all rights of appeal have been
exhausted or lapsed).
Section 8.Procedure for Determination of Entitlement to
Indemnification.
(a)To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee
and is reasonably necessary to determine whether and to what extent Indemnitee
is entitled to indemnification. The Secretary of the Company shall, promptly
upon receipt of such a request for indemnification, advise the Board in
writing that Indemnitee has requested indemnification.
(b)Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent Counsel (as
hereinafter defined) (unless Indemnitee shall request that such determination
be made by the Board or the stockholders, in which case by the person or
persons or in the manner provided for in clauses (ii) or (iii) of this Section
8(b)) in a written opinion to the Board, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board by a majority vote of a quorum consisting of Disinterested Directors (as
hereinafter defined), or (B) if a quorum of the Board consisting of
Disinterested Directors is not obtainable or, even if obtainable, such quorum
of Disinterested Directors so directs, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C)
if so directed by the Board, by the stockholders of the Company; or (iii) as
provided in Section 9(b) of this Agreement; and, if it is so determined that
Indemnitee is entitled to Indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c)In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b)
hereof, the Independent Counsel shall be selected as provided in this Section
8(c). If a Change of Control shall not have occurred, the Independent Counsel
shall be selected by the Board, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, the Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 7 days after such
written notice of selection shall have been given, deliver to the Company or
to Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 18 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection
is made, the Independent Counsel so selected may not serve as Independent
Counsel unless and until a court has determined that such objection is without
merit. If, within 20 days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected without objection, either the Company or Indemnitee
may petition the court in which such Proceeding shall have been brought or is
pending or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the court or by such other person
as the court shall designate, and the person with respect to whom an objection
is so resolved or the person so appointed shall act as Independent Counsel
under Section 8(b) hereof. The Company shall pay any and all reasonable fees
and expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company shall
pay all reasonable fees and expenses incident to the procedures of this
Section 8(c), regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding
or arbitration pursuant to Section 10(a)(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
Section 9.Presumptions and Effect of Certain Proceedings.
(a)In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for indemnification
in accordance with Section 8(a) of this Agreement, and the Company shall have
the burden of proof to overcome that presumption in connection with the making
by any person, persons or entity of any determination contrary to that
presumption.
(b)If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and
Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day
period may be extended for a reasonable time, not to exceed an additional 30
days, if the person, persons or entity making the determination with respect
to entitlement to indemnification in good faith requires such additional time
for the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to
indemnification is to be made by the stockholders pursuant to Section 8(b) of
this Agreement and if (A) within 15 days after receipt by the Company of the
request for such determination the Board has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within 75 days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within 15
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within 60 days after having been so called
and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant
to Section 8(b) of this Agreement.
(c)The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
Section 10.Remedies of Indemnitee.
(a)In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, or (ii) advancement of Expenses is not timely made
pursuant to Section 7 of this Agreement, or (iii) the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant
to Section 8(b) of this Agreement and such determination shall not have been
made and delivered in a written opinion within 90 days after receipt by the
Company of the request for indemnification, or (iv) payment of indemnification
is not made pursuant to Section 6 of this Agreement within ten (10) days after
receipt by the Company of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a determination has
been made that Indemnitee is entitled to indemnification or such determination
is deemed to have been made pursuant to Sections 8 or 9 of this Agreement,
Indemnitee shall be entitled to an adjudication in an appropriate court of the
State of Nevada, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses, and Company
hereby consents to service of process and to appear in any such proceeding.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Indemnitee shall commence such proceeding seeking an
adjudication or an award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence such proceeding pursuant to
this Section 10(a); provided, however, that the foregoing clause shall not
apply in respect of a proceeding brought by an Indemnitee to enforce his
rights under Section 5 of the Agreement.
(b)In the event that a determination shall have been made
pursuant to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in
any judicial proceeding or arbitration commenced pursuant to this Section 10
the Company shall have the burden of proving that Indemnitee is not entitled
to indemnification or advancement of Expenses, as the case may be.
(c)If a determination shall have been made or deemed to have
been made pursuant to Section 8 or 9 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination
in any judicial proceeding or arbitration commenced pursuant to this Section
10, absent (i) a misstatement by Indemnitee of a material fact, or an omission
of a material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d)The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this Agreement.
(e)In the event that Indemnitee, pursuant to this Section 10,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the
definition of Expenses in Section 18 of this Agreement) actually and
reasonably incurred by him in such judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but
not all of the indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
Section 11.Non-Exclusivity; Insurance; Subrogation; No Duplicate
Payments.
(a)The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the articles of incorporation, the bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
(b)To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, which such
person serves at the request of the Company, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee or
agent under such policy or policies.
(c)In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents
as are necessary to enable the Company to bring suit to enforce such rights.
(d)The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
Section 12.Binding Effect; Survival of Rights. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties and
their respective successors, assigns (including any direct or indirect
successors by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), spouses,
heirs, executors, administrators, and personal and legal representatives. The
Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all, substantially all or a
substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to the Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or of
any other enterprise at the Company's request.
Section 13.Limitations Period. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors or personal or legal representatives after the expiration of two
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company or its affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two year period; provided, however, that if any shorter period of limitations
is otherwise applicable to any such cause of action such shorter period shall
govern.
Section 14.Severability. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation,
each portion of any Section of this Agreement containing any such provision
held to be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
Section 15. Exception to Right of Indemnification or Advancement
of Expenses. Notwithstanding any other provision of this Agreement,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement with respect to any Proceeding, or any claim therein,
brought or made by him against the Company or the Individual Indemnitors,
unless the Company has joined in or consented to the initiation of such
Proceeding.
Section 16.Identical Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of
this Agreement.
Section 17.Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction thereof.
Section 18.Definitions. For purposes of this Agreement:
(a)"Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated
under the Securities Exchange Act of 1934 (the "Act"), whether or not the
Company is then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the Effective Date (i) any "person" (as such term is used in
Section 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to such
person attaining such percentage interest; (ii) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a majority of the
Board thereafter; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a
majority of the Board.
(b)"Corporate Status" describes the status of a person who is
or was a director, officer, employee, agent or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the request of
the Company.
(c)"Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d)"Effective Date" means the date of this Agreement.
(e)"Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses paid or incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness
in a Proceeding, including on appeal.
(f)"Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
(g)"Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, administrative hearing, inquiry or
investigation, whether civil, criminal, administrative or other (whether
instituted by the Company or any other party), or any inquiry or investigation
that Indemnitee in good faith believes might lead to the institution of any
such action, suit, or proceeding, whether civil, criminal, administrative,
investigative, or other; Notwithstanding the foregoing, the term "Proceeding"
shall not include any action, suit, arbitration, alternate dispute resolution
mechanism, administrative hearing, or any inquiry or investigation initiated
by an Indemnitee pursuant to Section 10 of this Agreement to enforce his
rights under this Agreement.
Section 19.Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provision of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
Section 20.Notice by Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
Section 21.Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a)If to Indemnitee, to:
E. P. Marinos
2901 Seargent Stret
Seabrook, Texas 77586-3209
(b)If to the Company, to:
MIDCOAST ENERGY RESOURCES, INC.
700 Louisiana, Suite 2950
Houston, Texas 77002
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 22.Governing Law. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Nevada.
Section 23.Miscellaneous. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MIDCOAST ENERGY RESOURCES, INC.
By: /s/ Dan C. Tutcher
Dan C. Tutcher
Chief Executive Officer,
President and Chairman of the Board
INDEMNITEE
/s/ E. P. Marinos
E. P. Marinos
EXBIBIT 10.9
MIDCOAST ENERGY RESOURCES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose of the Plan. This Midcoast Energy Resources, Inc. 1997
Non-Employee Director Stock Option Plan (the "Plan") is adopted, subject to
stockholder approval, for the benefit of the directors of the Midcoast Energy
Resources, Inc. (the "Company") who, at the time of their service, are not
employees of the Company or any of its subsidiaries (the "Non-Employee
Directors"), and is intended to advance the interests of the Company by
providing the Non-Employee Directors with additional incentive to serve the
Company by increasing their proprietary interest in the success of the
Company.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or the Compensation Committee, which Compensation
Committee shall consist of not less than two members of the Board. For the
purposes of this Plan, a majority of the members of the Compensation Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any question
brought before that meeting. No member of the Compensation Committee shall
be liable for any act or omission of any other member of the Compensation
Committee or for any act or omission on his own part, including (without
limitation) the exercise of any power or discretion given to him under this
Plan, except those resulting from his own gross negligence or willful
misconduct.
(b) The Compensation Committee shall have full authority to
administer the Plan, including authority to interpret and construe any
provision of the Plan and the terms of any option ("Option") or cash fee award
("Cash Fee Award") granted under it and to adopt such rules and regulations
for administering the Plan as it may deem necessary. Decisions of the
Compensation Committee shall be final and binding on all parties.
Notwithstanding the above, the selection of Non-Employee Directors to whom
Options are to be granted, the number of shares subject to any Option, the
exercise price of any Option and the ten-year maximum term of any Option shall
be as hereinafter provided, and the Compensation Committee shall have no
discretion as to such matters.
3. Stock Reserved for the Plan. The total number of shares of the
Company's common stock, par value $.01 per share (the "Common Stock") with
respect to which Options may be granted under the Plan, shall not exceed the
aggregate of 50,000 shares; provided, that the class and aggregate number of
shares which may be subject to the Options granted hereunder shall be subject
to adjustment in accordance with the provisions of Section 15 of this Plan.
Such shares may be treasury shares or authorized but unissued shares. The
Company shall reserve for issuance pursuant to this Plan such number of shares
of Common Stock as may from time to time be subject to Options granted
hereunder. If any Option expires or is canceled prior to its exercise in
full, the shares theretofore subject to such Option may again be made subject
to an Option under the Plan. All Options granted under the Plan will
constitute non-qualified options ("NQO").
4. Grant of Options.
(a) Non-Employee Directors on the Effective Date of this Plan:
Initial Grant. Subject to the provisions of Section 18 hereof, there shall
be granted to each person who is a Non-Employee Director on the effective date
of this Plan (an "Existing Director") a one-time NQO to purchase 5,000 shares
of Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date.
(b) Non-Employee Directors Elected after the Effective Date of this
Plan: Initial Grant. Subject to the provisions of Section 18 hereof, for so
long as this Plan is in effect and shares are available for the grant of NQOs
hereunder, each person who is elected as a Non-Employee Director of the
Company after the effective date of this Plan and who is (A) not an Existing
Director, (B) not appointed or elected to the Board in connection with or as
a result of the completion of a financing or acquisition transaction in which
the appointment or election of such person, or the execution of an agreement
obligating the parties thereto to vote in favor of the appointment or election
of such person, is a condition to the obligation of any party to the
transaction to complete the transaction and (C) not otherwise an employee of
the Company or any of the Company's subsidiaries (as defined in Section 424(f)
of the Internal Revenue Code of 1986, as amended (the "Code") (a "New
Director") (Existing Directors and New Directors are hereinafter sometimes
referred to herein as "Eligible Directors") shall be granted a one-time NQO
to purchase 15,000 shares of Common Stock at a per share exercise price equal
to the Fair Market Value (defined below) of a share of Common Stock on such
date (subject to the adjustments provided in Section 15 hereof). This Section
4(b) shall only apply to a Non-Employee Director the first time he or she is
elected a director of the Company. Persons elected to be a director for a
second or any subsequent term shall be granted NQOs in accordance with Section
4(c) below.
(c) Annual Option Grant to Non-Employee Directors: Subsequent Grant.
Subject to the provisions of Section 18 hereof, for so long as this Plan is
in effect and there are shares available for the grant of NQOs hereunder
(beginning with those Eligible Directors reelected at the Company's 1998
annual meeting of stockholders), each Eligible Director who shall be reelected
a Non-Employee Director for his or her second or any subsequent term after the
effective date of this Plan, shall be granted an NQO to purchase 5,000 shares
of Common Stock at a per share exercise price equal to the Fair Market Value
(defined below) of a share of Common Stock on such date (subject to the
adjustments provided in Section 15 hereof). This Section 4(c) shall only
apply to an Eligible Director on his or her second or any subsequent election
to the Company's Board of Directors.
(d) For the purposes of this Section 4, the "Fair Market Value" as of
any particular date shall mean (i) the closing sales price on the immediately
preceding business day of a share of Common Stock as reported on the principal
securities exchange on which shares of Common Stock are then listed or
admitted to trading or (ii) if not so reported, the average of the closing bid
and asked prices for a share of Common Stock on the immediately preceding
business day as quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or (iii) if not quoted on NASDAQ, the
average of the closing bid and asked prices for a share of Common Stock as
quoted by the National Quotation Bureau's "Pink Sheets" or the National
Association of Securities Dealers' OTC Bulletin Board System. If the price
of a share of Common Stock shall not be so reported, the Fair Market Value of
a share of Common Stock shall be determined by the Compensation Committee in
its absolute discretion.
5. Cash Fee Awards.
At the direction of the Board, the Company may pay cash fees to
Eligible Directors from time to time for serving on the Board and for
attendance at meetings of the Board or committees thereof (the "Cash Fee
Awards"). Each Eligible Director may elect on the date of each annual meeting
of stockholders, in a writing delivered to the Company's principal executive
offices at 1100 Louisiana, Suite 2950, Houston, Texas 77002, to have his Cash
Fee Awards paid to him in shares of Common Stock, such number of shares of
Common Stock to be determined by dividing the amount of each Cash Fee Award
by the Fair Market Value (as defined in Section 4(d)) of a share of Common
Stock on the last day of the calendar month in which the Cash Fee Award is
awarded. Such election by an Eligible Director to have his Cash Fee Awards
paid to him in shares of Common Stock shall remain valid until the date of the
next annual meeting of stockholders, and if the Eligible Director does not
make another written election of conversion of Cash Fee Awards at that time,
his Cash Fee Awards for the next year shall be paid in cash.
6. Option Agreement. Each NQO granted under the Plan shall be
evidenced by an agreement, in a form approved by the Compensation Committee,
which shall be subject to the terms and conditions of the Plan. Any agreement
may contain such other terms, provisions and conditions as may be determined
by the Compensation Committee and that are not inconsistent with the Plan.
7.Vesting and Term of Options. Each NQO granted under this Plan
shall vest in full on the date of grant; provided, however, that no NQO shall
be exercisable until the expiration of six (6) months after the date of grant,
and provided, further, that such NQO shall be subject to termination as
provided in Section 9 hereof. Each option agreement shall provide that the
NQO shall expire ten years from the date of grant, unless sooner terminated
pursuant to Section 9 hereof.
8. Exercise of Options. NQOs shall be exercisable at any time after
the expiration of six (6) months from the date of grant, subject to
termination as provided in Section 9 hereof. NQOs shall be exercised by
written notice to the Company setting forth the number of shares with respect
to which the NQO is being exercised and specifying the address to which the
certificates representing such shares are to be mailed. Such notice shall be
accompanied by cash or certified check, bank draft, or postal or express money
order payable to the order of the Company, for an amount equal to the product
obtained by multiplying the exercise price of the NQO by the number of shares
of Common Stock with respect to which the NQO is then being exercised. As
promptly as practicable after receipt of such written notification and
payment, the Company shall deliver to the Eligible Director a certificate or
certificates representing the number of shares of Common Stock with respect
to which such NQO has been so exercised, issued in the Eligible Director's
name; provided, however, that such delivery shall be deemed effected for all
purposes when the Company's transfer agent shall have deposited such
certificates in the United States mail, addressed to the Eligible Director,
at the address specified pursuant to this Section 8.
Any NQO granted under the Plan may be exercised by a broker-dealer
acting on behalf of an Eligible Director if (i) the broker-dealer has received
from the Eligible Director or the Company a duly endorsed agreement evidencing
such NQO and instructions signed by the Eligible Director requesting the
Company to deliver the shares of Common Stock subject to such NQO to the
broker-dealer on behalf of the Eligible Director and specifying the account
into which such shares should be deposited and (ii) the broker-dealer and the
Eligible Director have otherwise complied with Section 220.3(e)(4) of
Regulation T, 12 CFR Part 220.
9. Termination of Options.
Except as may be otherwise expressly provided in this Plan or otherwise
determined by the Compensation Committee, each NQO, to the extent it shall not
have been exercised previously, shall terminate on the earliest of the
following:
(a) On the last day of the three-month period commencing on the date
on which the Eligible Director ceases to be a member of the Board for any
reason other than the death of the Eligible Director, during which period the
Eligible Director shall be entitled to exercise all NQOs held by the Eligible
Director on the date on which the Eligible Director ceased to be a member of
the Board that could have been exercised on such date;
(b) On the last day of the six-month period commencing on the date of
the Eligible Director's death while serving as a member of the Board, during
which period the executor or administrator of the Eligible Director's estate
or the person or persons to whom the Eligible Director's NQO shall have been
transferred by will or the laws of descent or distribution, shall be entitled
to exercise all NQOs in respect of the number of shares that the Eligible
Director would have been entitled to purchase had the Eligible Director
exercised such NQOs on the date of his death;
(c) Ten years after the date of grant of such NQO; or
(d) The point in time when no shares of Common Stock reserved for
issuance pursuant to NQOs granted under the Plan are available.
10. Assignability of Options. During the term of an NQO, the NQO
shall not be assignable or otherwise transferable except by will or by the
laws of descent and distribution. Each NQO shall be exercised during the
Eligible Director's lifetime only by the Eligible Director.
11. No Rights as Stockholder. No Eligible Director shall have any
rights as a stockholder with respect to shares covered by an NQO until the
date of issuance of a stock certificate or certificates representing such
shares. Except as provided in Section 15 hereof, no adjustment for dividends
or otherwise shall be made if the record date therefor is prior to the date
of issuance of certificates representing shares of Common Stock purchased
pursuant to exercise of this NQO.
12. Extraordinary Corporate Transactions. If the Company effects a
merger, consolidation, acquisition, separation, reorganization, liquidation
or similar transaction, the Company may substitute new options for the NQOs
outstanding under the Plan or a corporation other than the Company, including
(without limitation) a parent or subsidiary of the Company, may assume the
Company's duties as to NQOs outstanding under the Plan. Notwithstanding the
foregoing or the provisions of Section 14 hereof, in the event such
corporation or parent or subsidiary of the Company does not substitute new and
substantially equivalent option rights for, or assume, the NQOs then
outstanding under the Plan, all such outstanding NQOs shall be canceled,
immediately prior to the effective date of such extraordinary corporate
transaction, and in full consideration of such cancellation, the Eligible
Director to whom the NQO was granted shall be paid an amount in cash equal to
the excess of (i) the value, as determined by the Compensation Committee in
its absolute discretion, of the property (including cash) received by the
holder of a share of Common Stock as a result of such event less (ii) the
exercise price of the NQO.
Except as otherwise expressly provided in this Plan, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
on direct sale or on the exercise of rights or warrants to subscribe therefor,
or on conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock then subject to outstanding NQOs.
13. Investment Representations. If the shares issuable on exercise
of an NQO are not registered under the Securities Act of 1933, as amended (the
"Securities Act"), the Company may imprint on the certificate representing
such shares the following legend or any other legend that counsel for the
Company considers necessary or advisable to comply with the Securities Act:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE
CORPORATION OF AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, THAT REGISTRATION IS NOT REQUIRED
FOR SUCH SALE OR TRANSFER.
The Company may, but shall in no event be obligated to, register any
securities covered under this Plan pursuant to the Securities Act and, if any
shares are so registered, the Company may remove any legend on certificates
representing such shares. The Company shall not be obligated to take any
other affirmative action to cause the exercise of an NQO or the issuance of
shares pursuant thereto to comply with any law or regulation of any
governmental authority.
14. Amendment or Termination. The Board may amend, modify, revise or
terminate this Plan at any time and from time to time; provided, however, that
without the further approval of the holders of a majority of the Company's
outstanding securities present and in person or by proxy and entitled to vote
at an annual or special meeting of the stockholders, or if the provisions of
the Company's charter or bylaws or applicable state law prescribes a greater
degree of stockholder approval for this action, without the degree of
stockholder approval so required, the Board may not (a) materially increase
the benefits accruing to Eligible Directors under this Plan; (b) except as
provided in Section 15 hereof, materially increase the number of shares of
Common Stock that may be issued under this Plan; or (c) materially modify the
requirements as to eligibility for participation in this Plan. All NQOs
granted under this Plan shall be subject to the terms and provisions of this
Plan and any amendment, modification or revision of this Plan shall be deemed
to amend, modify or revise all NQOs outstanding under this Plan at the time
of such amendment, modification or revision. If this Plan is terminated by
action of the Board, all outstanding NQOs may be terminated.
15. Changes in the Company's Capital Structure. The existence of
outstanding NQOs shall not affect in any way the right or power of the Company
or its stockholders to make or authorize the dissolution or liquidation of the
Company, any sale or transfer of all or any part of the Company's assets or
business, any reorganization or other corporate act or proceeding, whether of
a similar character or otherwise, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred or prior preference stock senior to or affecting
the Common Stock or the rights thereof; provided, however, that if (a) the
outstanding shares of Common Stock of the Company shall be subdivided into a
greater number of shares or (b) the outstanding shares of Common Stock shall
be combined a smaller number of shares thereof, then (x) the number of shares
of Common Stock available for the grant of NQOs under the Plan shall be
proportionally adjusted to equal the product obtained by multiplying such
number of available shares remaining by a fraction, the numerator of which is
the number of outstanding shares of Common Stock after giving effect to such
combination or subdivision and the denominator of which is that number of
outstanding shares of Common Stock prior to such combination or subdivision,
(y) the exercise price of any NQO then outstanding under the Plan shall be
proportionately adjusted to equal the product obtained by multiplying such
exercise price by a fraction, the numerator of which is the number of
outstanding shares of Common Stock prior to such combination or subdivision
and the denominator of which is that number of outstanding shares of Common
Stock after giving effect to such combination or subdivision, and (z) the
number of shares of Common Stock issuable on the exercise of any NQO then
outstanding under the Plan or thereafter granted under the Plan shall be
proportionately adjusted to equal the product obtained by multiplying such
number of shares of Common Stock by a fraction, the numerator of which is the
number of outstanding shares of Common Stock after giving effect to such
combination or subdivision and the denominator of which is that number of
outstanding shares of Common Stock prior to such combination or subdivision.
16. Compliance with Other Laws and Regulations. The Plan, the grant
and exercise of NQOs thereunder, and the obligation of the Company to sell and
deliver shares acquirable on exercise of such NQOs, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any governmental or regulatory agency or national securities exchange as
may be required. The Company shall not be required to sell or issue any
shares on exercise of any NQO if the issuance of such shares shall constitute
a violation by the Eligible Director or the Company of any provisions of any
law or regulation of any governmental authority. Each NQO granted under this
Plan shall be subject to the requirement that, if at any time the Board or the
Compensation Committee shall determine that (i) the listing, registration or
qualification of the shares subject thereto on any securities exchange or
under any state or federal law of the United States or of any other country
or governmental subdivision thereof, (ii) the consent or approval of any
governmental regulatory body, or (iii) the making of investment or other
representations, are necessary or desirable in connection with the issue or
purchase of shares subject thereto, no such NQO may be exercised in whole or
in part unless such listing, registration, qualification, consent, approval
or representation shall have been effected or obtained, free of any conditions
not acceptable to the Compensation Committee. Any determination in this
connection by the Compensation Committee shall be final, binding and
conclusive.
17.Indemnification of Compensation Committee and Board of Directors.
The Company shall, to the fullest extent permitted by law, indemnify, defend
and hold harmless any person who at any time is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) in any
way relating to or arising out of this Plan or any NQOs granted hereunder by
reason of the fact that such person is or was at any time a director of the
Company or a member of the Compensation Committee against judgments, fines,
penalties, settlements and reasonable expenses (including attorneys' fees)
actually incurred by such person in connection with such action, suit or
proceeding. This right of indemnification shall inure to the benefit of the
heirs, executors and administrators of each such person and is in addition to
all other rights to which such person may be entitled by virtue of the bylaws
of the Company or as a matter of law, contract or otherwise.
18. Effective Date of the Plan. This Plan shall become effective,
subject to stockholder approval, within 90 days following the date of the
approval by the stockholders of the Plan, or at such earlier time as
determined by the Compensation Committee. This Plan, and all NQOs granted
under this Plan prior to stockholder approval, shall be void and of no further
force and effect unless this Plan shall have been approved by the requisite
vote of the stockholders entitled to vote at a meeting of the stockholders of
the Company called for such purpose prior to April 14, 1998. No NQO shall be
granted pursuant to this Plan on or after April 14, 2007.
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