SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MIDCOAST ENERGY RESOURCES, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was defined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
MIDCOAST ENERGY RESOURCES, INC.
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Midcoast Energy Resources, Inc., a Nevada corporation
(the "Company"), will be held at the Boardroom of the American Stock Exchange
located at 86 Trinity Place, New York, New York on Friday, May 15, 1998, at
10:30 a.m., local time, for the following purposes:
1. To elect six Directors to serve until the next Annual Meeting of
stockholders or until their successors are duly elected and qualified;
2. To approve amendments to the Company's Articles of Incorporation
pursuant to which the Company will increase the authorized number of shares
of the Company's common stock, par value $.01 per share (the "Common
Stock") from 10 million shares to 25 million shares and to authorize 5
million shares of preferred stock;
3. To approve an amendment to the 1996 Incentive Stock Plan (the
"Incentive Plan") that would increase the number of shares of the
Company's Common Stock that could be issued under the Incentive Plan; and
4. To consider such other business as may properly come before the
Annual Meeting.
Stockholders of record at the close of business on April 3, 1998, and only
those stockholders of record will be entitled to vote at the Annual Meeting or
any adjournment thereof. A complete list of the stockholders entitled to vote at
the Annual Meeting will be available for examination by any stockholder at the
Company's executive offices, during ordinary business hours, for a period of at
least ten days prior to the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE PROXY IN THE ENCLOSED ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.
By Order of the Board of Directors
Duane S. Herbst
SECRETARY
Houston, Texas
April 15, 1998
<PAGE>
MIDCOAST ENERGY RESOURCES, INC.
1100 LOUISIANA, SUITE 2950
HOUSTON, TEXAS 77002
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1998
This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Midcoast Energy Resources, Inc., a
Nevada corporation (the "Company"), of proxies in the accompanying form to be
voted at the Annual Meeting of stockholders of the Company to be held on Friday,
May 15, 1998, at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders.
The shares covered by a proxy in the accompanying form which is properly
signed, dated, returned and not revoked will be voted in accordance with the
instructions contained therein regarding the election of Directors, the proposed
amendments to the Company's Articles of Incorporation ("Charter") to increase
the authorized number of shares of the Company's common stock and to authorize
preferred stock ("Charter Amendments"), the amendment ("Incentive Plan
Amendment") to the 1996 Incentive Stock Plan ("Incentive Plan"), and with
respect to any other matter which may properly come before the Annual Meeting,
in accordance with the judgment of the persons designated as proxies. Where
specific instructions are not indicated, the proxy will be voted FOR the
election of the six directors (each, a "Director") as nominated
("Nominees"); FOR the approval of amendments to the Charter to increase the
authorized shares of the Company's common stock from 10 million shares to 25
million shares and to authorize 5 million shares of preferred stock; and FOR the
approval of the amendment to the Incentive Plan. Any stockholder giving a proxy
will have the right to revoke such proxy at any time before it is voted at the
Annual Meeting by giving written notice of such revocation to the Secretary of
the Company, by submitting a duly executed proxy bearing a later date, or by
attending the Annual Meeting and withdrawing the proxy.
The Board has fixed the close of business on April 3, 1998, as the record
date for the determination of stockholders entitled to vote at the Annual
Meeting ("Record Date"). As of the Record Date, there were outstanding
5,681,880 shares of the Company's common stock, par value $.01 per share
("Common Stock"), each share of Common Stock having one vote on all matters
presented at the Annual Meeting. This proxy statement and the accompanying form
of proxy is being mailed on or about April 15, 1998, to all stockholders
entitled to vote at the Annual Meeting.
Only holders of Common Stock as of the Record Date will be entitled to vote
in person or by proxy at the Annual Meeting. A majority of the Company's issued
and outstanding shares of Common Stock, as of the Record Date, represented at
the Annual Meeting in person or by proxy, will constitute a quorum for the
transaction of business. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum. Votes withheld in
connection with the election of one or more Nominees will not be counted as
votes cast for such individuals. Abstentions and broker non-votes will have the
same effect as a vote against approval of adoption of the Charter Amendments and
the Incentive Plan Amendment. Under Nevada law, stockholders will have no
appraisal or similar dissenters' rights with respect to action on the election
of Directors, the Charter Amendments or the Incentive Plan Amendment. The
persons designated to vote shares covered by the Board's proxies intend to
exercise their judgment in voting such shares on the other matters that may
properly come before the Annual Meeting. Management does not expect that any
matters other than those referred to in this proxy statement will be presented
for action at the Annual Meeting.
1
<PAGE>
TABLE OF CONTENTS
PAGE
----
ELECTION OF DIRECTORS................... 3
Information Regarding the
Nominees.......................... 3
Director Compensation and Board
Committees........................ 4
Agreement Regarding the Election of
Directors......................... 5
Vote Required for Election......... 5
APPROVAL OF PROPOSED CHARTER
AMENDMENTS............................ 5
Vote Required for Approval......... 6
APPROVAL OF THE 1996 INCENTIVE STOCK
PLAN AMENDMENT........................ 6
Vote Required for Approval......... 7
OTHER INFORMATION....................... 8
Principal Stockholders............. 8
Executive Officers of the
Company........................... 9
Executive Compensation............. 10
Executive Employment Agreements.... 11
Compensation Committee Interlocks
and Insider Participation......... 12
Compensation Committee Report...... 12
Performance Graph.................. 14
Certain Relationships and Related
Transactions...................... 15
OTHER MATTERS........................... 15
Auditors........................... 15
Section 16(a) Beneficial Ownership
Reporting Compliance.............. 15
Miscellaneous Matters.............. 16
2
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ELECTION OF DIRECTORS
At the Annual Meeting, six Directors are to be elected, each Director to
hold office until the next annual meeting of stockholders or until his successor
is duly elected and qualified. The persons named in the accompanying proxy have
been designated by the Company's Board of Directors ("Board"), and unless
authority is withheld, they intend to vote for the election of the Nominees
named below to the Board. If any Nominee should become unavailable for election,
the proxy may be voted for a substitute Nominee selected by the persons named in
the proxy or the Board may be reduced accordingly; however, the Board is not
aware of any circumstances likely to render any Nominee unavailable.
INFORMATION REGARDING THE NOMINEES
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ------------------------------------- --- ------------------------------------- --------
<S> <C> <C>
Dan C. Tutcher....................... 49 Chairman of the Board, President and 1992
Chief Executive Officer
I. J. Berthelot, II.................. 38 Executive Vice President, Chief 1996
Operating Officer and Director
Ted Collins, Jr...................... 59 Director 1997
Jerry J. Langdon..................... 46 Director 1997
Richard N. Richards.................. 51 Director 1996
Bruce M. Withers..................... 71 Director 1997
</TABLE>
For certain information regarding the beneficial ownership of the Common
Stock by each of the Nominees, see "Other Information -- Principal
Stockholders."
DAN C. TUTCHER has been Chairman of the Board, President and Chief
Executive Officer since the Company's formation in 1992 and served as Treasurer
from 1995 to 1996. Since 1989, Mr. Tutcher has also been President and Chief
Executive Officer of Magic Gas Corp., a Texas corporation controlled by Mr.
Tutcher (f/k/a Midcoast Natural Gas, Inc.) ("Magic"). Prior to its merger into
the Company in 1992, Mr. Tutcher served as a Director of Nugget Oil Corporation
("Nugget"), from 1990 to 1992. He also serves on the Utilities Advisory Board
of Cigna Corporation and on the board of the Interstate Natural Gas Association
of America. Mr. Tutcher holds a Bachelors of Business Administration degree from
Washburn University.
I.J. (CHIP) BERTHELOT, II has been a Director since 1996 and serves as
Executive Vice President and Chief Operating Officer. Mr. Berthelot has been
with the Company since its formation in 1992. Mr. Berthelot joined the Company
as Chief Engineer and became Vice President of Operations in 1995, Chief
Operating Officer in 1996 and Executive Vice President in 1997. From 1991 to
1992 he was a gas contracts representative with Mitchell Energy and Development
Co. ("Mitchell Energy"). Prior to 1991, Mr. Berthelot was with Texline Gas
Company ("Texline") as a gas contracts representative from 1990 to 1991. He is
a Professional Engineer, licensed in Texas and holds a Bachelors of Science
degree in Petroleum and Natural Gas Engineering from Texas A&I University.
TED COLLINS, JR. has been a Director since 1997. Mr. Collins has served as
President since 1988 for Collins & Ware, Inc., a private corporation active in
oil and gas exploration, production and property acquisition. He served as
President of Enron Oil & Gas Company from 1986 to 1988 and prior to that held
positions as President with HNG/Internorth Exploration Company and HNG Oil
Company as well as Executive Vice President of American Quasar Petroleum
Company. Mr. Collins also serves on the boards of Hanover Compressor Company,
Queen Sand Resources, Inc. and Chaparral Resources, Inc. He graduated from the
University of Oklahoma with a Bachelors of Science degree in Geological
Engineering.
JERRY J. LANGDON has been a Director since 1997. Mr. Langdon has been
President of Republic Gas Corporation ("RGC") since 1993 and was President of
Mid Louisiana Gas Company ("Midla"), an interstate pipeline company, from 1995
through 1997. Mr. Langdon served as a commissioner with the
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<PAGE>
Federal Energy Regulatory Commission from 1988 through 1993 and while there,
co-authored the JOINT FERC/DOE NATURAL GAS DELIVERABILITY TASK FORCE REPORT. Mr.
Langdon also serves on the board for Costilla Energy, Inc. He graduated from the
University of Texas with a Bachelors of Science degree in Communications.
RICHARD (DICK) N. RICHARDS has been a Director since 1996. Mr. Richards has
been with NASA since 1980. Mr. Richards was an astronaut with NASA until 1995
and flew one mission as pilot and commanded three other missions of the space
shuttles Discovery and Columbia. Mr. Richards is currently the Manager of Space
Shuttle Program Integration. He also completed an assignment as Mission Director
of the third Hubble Space Telescope Space Shuttle servicing mission. He holds a
Bachelors of Science degree in Chemical Engineering from the University of
Missouri and a Masters of Science in Aeronautical Systems from the University of
West Florida.
BRUCE M. WITHERS has served as director since 1997. From August 1991 to
October 1996, Mr. Withers served as Chairman and Chief Executive Officer of
Trident NGL, Inc. and Vice Chairman of NGC Corporation ("NGC"). NGC is a
leading North American aggregator, processor, transporter and marketer of energy
products and services. Prior to joining NGC, Mr. Withers served as President of
the Transmission and Processing Division of Mitchell Energy for 17 years.
Mitchell Energy is engaged through its subsidiaries in the exploration for and
production of oil and gas, natural gas processing and gas gathering and
transmission. He has also served as President and Chief Operating Officer of
Liquid Energy Corp. and Southwestern Gas Pipeline, two affiliates of Mitchell
Energy. Mr. Withers holds a Bachelors of Science degree in Petroleum and Natural
Gas Engineering from Texas A&I University.
DIRECTOR COMPENSATION AND BOARD COMMITTEES
During the year ended December 31, 1997, the Board met six times. Each
Director, who was a Board member at the time, attended all Board meetings either
in person or by telephonic conference. Employee Directors do not receive
additional compensation for service on the Board or its committees. The Company
currently pays each non-employee Director a cash fee of $1,000 at the end of
each calendar quarter of service, $1,000 for each regular and special meeting of
the Board attended and $300 for each committee meeting attended plus any travel
expenses. Under the 1997 Non-Employee Director Stock Option Plan (the "Director
Plan"), pursuant to an annual election by the Director, these cash fees may be
converted into shares of the Company's Common Stock at the market price (as
defined in the Director Plan) on the last day of the quarter in which the fees
are paid. Employee Directors are eligible to participate in the Incentive Plan.
See "Other Information -- Compensation Committee Report."
The Director Plan entitles each newly-elected Director who is neither (i)
an employee of the Company nor (ii) a Director as a result of an acquisition or
financing transactions (a "New Director") to receive options to purchase up to
15,000 shares of Common Stock on their initial election. Further, the Director
Plan also entitles each existing Director and each New Director to receive an
option to purchase 5,000 shares on each date he is reelected to serve as a
member of the Board. Mr. Richards was issued an option to purchase 5,500 shares
pursuant to the Director Plan upon his re-election as Director in 1997 and Mr.
Withers was issued an option to purchase 16,500 shares upon his appointment to
the Board in 1997, both as adjusted for the 10% stock dividend paid by the
Company on March 2, 1998 to stockholders of record on February 13, 1998 (the
"Stock Dividend").
AUDIT COMMITTEE. The Board's Audit Committee was established in May 1996.
The Committee's functions include reviewing internal controls and recommending
to the Board the engagement of the Company's independent certified public
accountants, reviewing with such accountants a plan for and results of their
examination of the financial statements, and determining the independence of
such accountants. The Audit Committee presently consists of Messrs. Langdon,
Richards and Withers and met once during 1997.
4
<PAGE>
COMPENSATION COMMITTEE. The Board's Compensation Committee was established
in May 1996. The Compensation Committee administers the Incentive Plan. In this
capacity, the Compensation Committee recommends all option grants or awards to
Company officers, executives, employees and consultants. The Compensation
Committee also recommends the establishment of policies dealing with various
compensation, including compensation of executive officers, and any 401(k),
pension and profit sharing plans which may be created. The Compensation
Committee consists of Messrs. Collins, Richards and Withers and met two times
during 1997.
AGREEMENT REGARDING THE ELECTION OF DIRECTORS
In connection with the Company's acquisition through merger with Republic
Gas Partners, L.L.C. ("Republic"), the agreement and plan of merger required
that the Company take steps to elect two Directors designated by Republic to the
Board. In November 1997, Messrs. Collins and Langdon were elected to the Board.
In the event that their stock ownership falls below certain thresholds, one or
more of their resignations shall be delivered to the Company, pursuant to such
agreement.
VOTE REQUIRED FOR ELECTION
Provided that a quorum is present at the Annual Meeting, the six Nominees
who receive the greatest number of votes cast for election by the stockholders
entitled to vote therefore will be elected Directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES.
APPROVAL OF PROPOSED CHARTER AMENDMENTS
In order to provide the Company with the maximum flexibility to raise
capital to meet its future needs, the Board has adopted, and proposes that the
stockholders of the Company approve, the Charter Amendments, which would amend
the Charter to increase the authorized number of shares of Common Stock from ten
million shares to twenty-five million shares and authorize five million shares
of preferred stock (the "Preferred Stock"). As of the Record Date, 5,681,880
shares of Common Stock were issued and outstanding. In addition, the Company
presently has 307,450 shares reserved for issuance of stock options under the
Director Plan and the Incentive Plan. An aggregate of 257,950 shares of Common
Stock are issuable under currently outstanding stock options and 285,286 shares
of Common Stock are issuable under currently outstanding stock warrants. Thus,
the Company has 3,725,384 uncommitted shares of Common Stock available for
future issuance, and the Board believes this to be an insufficient number of
shares for effecting possible future transactions, including the conversion of
other securities that may be issued by the Company, such as Preferred Stock
(assuming the approval of the authorization of the Preferred Stock by the
stockholders), stock dividends, stock splits, financing arrangements or
acquisitions by the Company of other businesses if favorable acquisitions were
to become available.
With respect to the Preferred Stock, the Board has adopted and proposes
that the stockholders approve that the Board designate the number of shares
constituting any series, and to fix the preferences, conversion rights,
privileges and restrictions or other rights, including dividend rights, voting
rights, qualifications, redemption and conversion rights and liquidation
preferences (collectively, the "Limitations and Restrictions") of one or more
series of Preferred Stock. As such, the Board will, in the event of the approval
of this proposal by the Company's stockholders, be entitled to authorize the
creation and issuance of shares of Preferred Stock in one or more series with
such Limitations and Restrictions as may be determined in the Board's sole
discretion, with no further authorization by stockholders required for the
creation and issuance thereof. This authority will enable the Board to vary the
terms as to dividend rates and certain other rights of new series or classes
according to what the condition of the financial market, and that of the
Company, may seem to require for ready sale.
5
<PAGE>
The Board of Directors believes there is an insufficient number of equity
securities, including shares of Common Stock, available for effecting possible
future transactions such as financing arrangements and acquisitions by the
Company of other businesses, if favorable acquisitions become available, using
the Company's equity securities as consideration. All unissued shares of Common
Stock authorized by the Charter, as well as the additional shares of Common
Stock and Preferred Stock authorized by the Charter Amendments, will be
available for issuance at any time in the future at the discretion of the Board.
Such future issuances will not require further stockholder approval, unless such
approval is required by law, as in the case of consolidations and certain
statutory mergers, or by the rules of any securities exchanges on which the
Common Stock or Preferred Stock is then listed. If additional shares of Common
and Preferred Stock are not authorized for issuance through adoption of the
Charter Amendments, significant future issuances could not be effected without
the expense and delay associated with soliciting further action by stockholders
at a special meeting. Holders of the Common Stock and future holders of the
Preferred Stock have and will have respectively, no preemptive right to purchase
or otherwise acquire any shares of the Common or Preferred Stock that may be
issued in the future.
Except with respect to the shares of Common Stock issuable on the exercise
of outstanding options and warrants and those issuable pursuant to the Incentive
Plan and the Director Plan, the Company has no present plans for issuance of any
of the additional shares of Common Stock or Preferred Stock to be authorized by
the Charter Amendments, including any plan or intention to issue such shares as
a takeover defense. Nevertheless, the additional authorized shares could be used
to discourage persons from attempting to gain control of the Company or make
more difficult the removal of management. For example, additional shares could
be used to dilute the voting power of shares then outstanding or issued to
persons who would support the Board in opposing a takeover bid or a solicitation
in opposition to management. Management is not currently aware of any specific
effort to obtain control of the Company by means of a merger, tender offer,
solicitation in opposition to management, or otherwise.
If the Charter Amendments are approved by the requisite vote, the Company
will file Articles of Amendment to the Charter with the Nevada Secretary of
State promptly following the conclusion of the Annual Meeting. The proposed
Charter Amendments will fix the number of authorized shares of Common Stock at
twenty-five million and authorize five million shares of Preferred Stock and
will become effective on the date of filing.
VOTE REQUIRED FOR APPROVAL
The affirmative vote for the Charter Amendments by a majority of the shares
of Common Stock entitled to vote thereon will constitute approval of the Charter
Amendments.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE CHARTER AMENDMENTS.
APPROVAL OF THE 1996 INCENTIVE STOCK PLAN AMENDMENT
On May 8, 1997, the Company's stockholders approved the adoption of the
Incentive Plan and on November 11, 1997, the Compensation Committee adopted an
amendment to the Incentive Plan authorizing an increase from 253,000 shares of
Common Stock available for issuance under the Incentive Plan to 425,000 shares
of Common Stock authorized under the Incentive Plan, as adjusted for the Stock
Dividend. This increase by the Board was expressly made subject to the approval
of the Company's stockholders.
Under the Incentive Plan Amendment, the Company may grant Incentive Awards
(as defined in the Incentive Plan) with respect to a number of shares of Common
Stock up to 425,000 shares. Before the adoption of the Incentive Plan Amendment,
Incentive Awards with respect to 253,000 shares of Common Stock could be granted
under the Incentive Plan and as of March 31, 1998, the number of shares of
Common Stock not subject to outstanding stock options and available for future
issuance under the
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<PAGE>
Incentive Plan was 16,500. Thus, additional shares are required for the Company
to be able to continue to grant Incentive Awards with respect to shares of
Common Stock under the Incentive Plan.
The purpose of the Incentive Plan is to (i) align the personal financial
incentives of the employees and consultants of the Company ("Consultants") and
its subsidiaries (collectively, the "Participants") with the long-term growth
of the Company and the interests of the Company's stockholders through the
ownership and performance of the Company's Common Stock and (ii) enhance the
ability of the Company and its subsidiaries to attract and retain employees and
Consultants who share primary responsibility for the Company's management and
growth. The Compensation Committee believes that the Incentive Plan has
fulfilled these purposes and that the continued availability of equity
incentives under the Incentive Plan will be a significant factor in the
Company's ability to attract and retain key management personnel and retain
those employees and Consultants who share primary responsibility for the
Company's management and growth. All Participants, including officers (whether
or not Directors) of the Company and its subsidiaries are currently eligible to
participate in the Incentive Plan which approximates 103 employees. Persons who
are not in an employment or consulting relationship with the Company or any of
its subsidiaries, including non-employee Directors, are not eligible to
participate in the Incentive Plan.
The Incentive Plan provides that certain amendments to the Incentive Plan
may only be made with the approval of the stockholders of the Company. One
amendment that requires stockholder approval under the Incentive Plan is an
amendment that increases the maximum number of shares of Common Stock that is
reserved for issuance under the Incentive Plan. The foregoing summary of the
Incentive Plan Amendment is qualified in its entirety by reference to the full
text of the Incentive Plan Amendment, a copy of which is attached hereto as
Exhibit A.
The Board believes that the continued availability of Incentive Awards
under the Incentive Plan is important to the ability of the Company to attract
and retain qualified management personnel and Consultants. Therefore, the Board
strongly believes that the adoption of the Incentive Plan Amendment is in the
best interest of the Company and its stockholders.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of Common Stock
outstanding on the Record Date entitled to vote and represented at the Annual
Meeting in person or by proxy will constitute approval of the Incentive Plan
Amendment.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE ADOPTION OF THE INCENTIVE
PLAN AMENDMENT.
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<PAGE>
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth information based upon the records of the
Company and filings with the SEC as of April 1, 1998 (including shares that may
be acquired pursuant to outstanding stock options or warrants within 60 days of
such date) with respect to (i) each person known to be the beneficial owner of
more than 5% of the Company's Common Stock, (ii) each executive officer and each
of the Nominees named in "Election of Directors -- Information Regarding the
Nominees," and (iii) all Directors and executive officers as a group.
AMOUNT AND
NATURE OF PERCENTAGE OF
NAME AND ADDRESS BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER(1) OWNERSHIP(2) OWNED
- ------------------------------------- ------------ -------------
Wellington Management Co., LLP (3)... 490,050 8.6
75 State Street
Boston, MA 02109
Stevens G. Herbst (4)(5)(6).......... 320,432 5.6
710 Buffalo, Suite 800
Corpus Christi, Texas 78401
State of Wisconsin Investment Board
(7).................................. 314,270 5.5
121 East Wilson St.
Madison, WI 53702
Kennedy Capital Management, Inc
(8).................................. 289,580 5.1
10829 Olive Blvd.
St. Louis, MO 63141
Dan C. Tutcher (4)(9)................ 679,294 11.9
Ted Collins, Jr. (10)(11)............ 432,877 7.5
I. J. Berthelot, II (4)(12).......... 92,470 1.6
Jerry J. Langdon (10)(13)............ 44,812 *
Richard A. Robert (4)(14)............ 29,374 *
Bruce M. Withers (15)................ 16,500 *
Duane S. Herbst (4)(16).............. 16,117 *
710 Buffalo, Suite 800
Corpus Christi, Texas 78401
Richard N. Richards (14)(17)......... 8,257 *
All Nominees and Executive Officers
as a group (8 persons)
(4)(10)(15)........................ 1,319,701 22.6
- ------------
* Denotes less than 1%.
(1) Unless otherwise indicated, the address of each person listed above is 1100
Louisiana, Suite 2950, Houston, Texas 77002.
(2) Except as otherwise noted, shares beneficially owned by each person as of
the record date were owned of record and each person had sole voting and
investment power with respect to all shares beneficially held by such
person.
(3) According to the information provided to the Company as of December 31,
1997, by Wellington Management Co., L.L.P. as a parent holding company, and
its subsidiary, Wellington Trust Company, N.A. (together, "Wellington"),
Wellington has sole voting power for no shares, shared voting power for
325,050 shares, sole dispositive power for no shares and shared dispositive
power for 490,050 shares.
(4) The ownership shown in the table includes shares which may be acquired
within 60 days on the exercise of options granted under the Incentive Plan
by each of the persons and group, as follows: Mr. S. Herbst -- 5,940
shares; Mr. Tutcher -- 6,600 shares; Mr. Berthelot -- 6,600 shares; Mr.
Robert -- 4,840 shares; Mr. D. Herbst -- 3,850 shares and the
group -- 21,890 shares.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
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(5) Stevens G. Herbst is party to an irrevocable five-year voting proxy
agreement dated August 5, 1996 pursuant to which all voting power of such
shares owned of record and beneficially by Mr. Herbst will be voted by the
trust department of a banking institution. See "Principal
Stockholders -- Voting Proxy Agreement."
(6) Includes 4,906 shares held of record by Rainbow Investments Company
("Rainbow"), which is controlled by Stevens G. Herbst.
(7) According to the information provided to the Company, as of March 5, 1998,
the State of Wisconsin Investment Board reported a beneficial ownership of
314,270 shares.
(8) According to the information provided to the Company as of March 18, 1998,
Kennedy Capital Management, Inc. reported a beneficial ownership of 289,580
shares.
(9) Includes 672,364 shares of Common Stock held of record by Magic, an
affiliate of Mr. Tutcher, 110 shares owned by Mr. Tutcher's daughter and
220 shares held as custodian for minor children under the Uniform Gift to
Minors Act.
(10) The ownership shown in the table includes shares which may be acquired
within 60 days on the exercise of warrants issued in connection with the
acquisition of Midla, by each of the persons and group, as follows: Cortez
Natural Gas, Inc., an affiliate of Mr. Collins ("Cortez") -- 111,596
shares; RGC, an affiliate of Mr. Langdon -- 12,953 shares and the
group -- 124,549 shares.
(11) Includes 321,181 shares of Common Stock issued to Cortez, in connection
with the acquisition of Midla.
(12) Includes 2,453 shares which are subject to certain vesting requirements and
1,470 shares held as custodian for minor children under the Uniform Gift to
Minor Act.
(13) Includes 31,859 shares of Common Stock issued to RGC, in connection with
the acquisition of Midla.
(14) Includes 8,994 shares which are subject to certain vesting requirements.
(15) The ownership shown in the table includes shares which may be acquired
within 60 days on the exercise of options granted under the Director Plan
by each of the persons and group as follows: Mr. Withers -- 16,500 shares;
Mr. Richards -- 5,500 shares and the group -- 22,000 shares.
(16) Includes 1,472 shares which are subject to certain vesting requirements.
(17) Includes 2,757 shares which are beneficially owned by Mr. Richards and his
wife.
VOTING PROXY AGREEMENT. In July 1996, Stevens G. Herbst, Kenneth B.
Holmes, Jr. and the Company entered into an irrevocable five-year voting proxy
agreement. Pursuant to the voting proxy agreement, all shares of Common Stock
owned of record and beneficially by Messrs. Herbst and Holmes will be voted by
the trust department of a banking institution. Pursuant to this agreement, the
appointed proxy holder is empowered and authorized to represent Messrs. Herbst
and Holmes and to vote their shares in the same proportion as all other shares
of Common Stock are voted which are held of record and beneficially by
stockholders who are not officers, Directors, or Affiliates (as defined) of the
Company. Messrs. Herbst and Holmes have retained the power to receive dividends
and sell their shares.
REGISTRATION RIGHTS AGREEMENT. Messrs. Herbst and Holmes each have certain
piggyback registration rights with regard to shares of Common Stock held by
them, so long as the Voting/Proxy Agreement is in place, subject to certain
limitations. Should the number of shares to be registered in any underwritten
offering be cut-back by the underwriter in such registrations, the number of
shares offered by both the Company and the principal stockholders shall be
reduced proportionately. The Company will bear the expenses of such
registrations of the Common Stock, except for any underwriting discounts and
commissions.
EXECUTIVE OFFICERS OF THE COMPANY
The Company currently has four executive officers: Dan C. Tutcher,
President and Chief Executive Officer; I. J. Berthelot, II, Executive Vice
President and Chief Operating Officer; Richard A. Robert, Chief Financial
Officer and Treasurer; and Duane S. Herbst, Vice President of Corporate Affairs
and Secretary (the "Executive Officers"). See "Election of
Directors-Information Regarding the Nominees" for biographical information
concerning Messrs. Tutcher and Berthelot.
9
<PAGE>
RICHARD A. ROBERT (32) is Chief Financial Officer and Treasurer and has
been with the Company since its formation in 1992. Mr. Robert joined the Company
as Controller and became Chief Financial Officer and Treasurer in 1996. From
1988 to 1992 he was an audit associate in the energy audit division of Arthur
Anderson and Co. Mr. Robert is a certified public accountant and is a member of
the Texas Society of Certified Public Accountants. He holds a Bachelors of
Business Administration degree in Accounting from Southwest Texas State
University.
DUANE S. HERBST (34) has been Secretary of the Company since its formation
in 1992 and Vice President of Corporate Affairs since 1996. From April 1992
until its merger with the Company in September 1992 he held the office of
President of Nugget. Since 1989 he has been Vice President of Rainbow. He holds
a Masters of Business Administration degree from the University of Texas and a
Bachelors of Science degree in Finance from Trinity University. Mr. Herbst is
the son of Stevens G. Herbst.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table reflects all forms of
compensation for services to the Company for the years ended December 31, 1997,
1996 and 1995 for the Chief Executive Officer, the Executive Vice President, and
the Chief Financial Officer of the Company (collectively the "Named Executive
Officers"). During this time no other executive officer received compensation,
including bonuses which exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------------
------------------------------------ RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS(1) OPTIONS/SARS(2) COMPENSATION(3)
- ------------------------------ ---- -------- ------- ------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dan C. Tutcher, 1997 $ 95,000 $ 5,000 -- -- 33,000 $11,662
Chief Executive 1996 $125,000 -- -- -- -- $12,400
Officer 1995 $125,000 -- -- -- -- $ 6,675
I. J. Berthelot, II, 1997 $ 86,246 $ 7,500 $ 36,235(4) $ 49,840 33,000 $ 4,190
Executive Vice 1996 $ 59,110 -- $ 5,586(4) $ 91,383 -- $ 1,518
President 1995 $ 64,206 $ 1,200 $ 16,170(4) $ 4,200 -- --
Richard A. Robert, 1997 $ 77,162 $12,500 $ 16,896(4) $ 49,840 24,200 $ 8,809
Chief Financial 1996 $ 65,125 -- $ 5,586(4) $ 25,383 -- $ 8,228
Officer 1995 $ 50,654 $ 1,200 -- $ 4,200 -- $ 4,800
</TABLE>
- ------------
(1) Restricted stock holdings of Messrs. Berthelot and Robert were 2,453 and
8,994, respectively, as of December 31, 1997 and their fair market value
based on the per share closing price of the Company's Common Stock of
$19.602 on December 31, 1997 was $48,084 and $176,300, respectively.
Dividends are payable on the restricted shares to the extent and on the same
date as dividends are paid on the Common Stock.
(2) See "Options Grant Table," for certain information regarding options
granted during fiscal year ended December 31, 1997.
(3) Represents the Company's matching contributions to the Midcoast Energy
Resources, Inc. Profit Sharing Plan and Trust (401(k) Plan) and certain
personal benefits, including car allowances.
(4) Includes amounts paid by the Company as reimbursement for taxes incurred on
appreciation of shares of stock issued as consideration for executing
employment agreements. See "Executive Employment Agreements."
EMPLOYEE OPTIONS. Under the Company's Incentive Plan, options to purchase
shares of Common Stock may be granted to executive officers and other employees.
As of December 31, 1997, 236,500 shares were reserved for outstanding options
and 16,500 shares were reserved and remained available for future option grants
pursuant to the Incentive Plan. The Company has not granted any options to
Executive Officers other than those options that were granted pursuant to the
Incentive Plan in February 1997 as listed on the table set forth below.
10
<PAGE>
OPTION GRANTS TABLE. The following table provides information concerning
stock options granted to the Named Executive Officers during the year ended
December 31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS/ PRICE APPRECIATION FOR
UNDERLYING SARS GRANTED EXERCISE OPTION TERM(1)
OPTIONS/SARS TO EMPLOYEES PRICE PER EXPIRATION ----------------------
NAME GRANTED(2) IN FISCAL YEAR SHARE(2) DATE 5% ($) 10% ($)
- ------------------------------------- ------------- -------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dan C. Tutcher(3).................... 33,000 14.0% $10.500 02/07/02 $ 55,510 $ 160,786
I. J. Berthelot, II(4)............... 33,000 14.0% 9.545 02/07/07 200,091 507,071
Richard A. Robert(4)................. 24,200 10.2% 9.545 02/07/07 145,268 368,137
</TABLE>
- ------------
(1) Under the terms of the Incentive Plan, the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options. Because the exercise price of all
options is at or above the market price per share of Common Stock at the
date of grant, the potential realizable value of the options assuming 0%
stock price appreciation is zero.
(2) The options granted and exercise price per share reported herein has been
adjusted for the Stock Dividend. Each option granted under the Incentive
Plan becomes immediately exercisable on the occurrence of a Change in
Control (as defined in the Incentive Plan). No stock appreciation rights
were granted during 1997.
(3) Mr. Tutcher's options vest at 20% per year with the balance vesting in
August 2001.
(4) These options vest 20% per year.
OPTION EXERCISES AND YEAR-END OPTION VALUES. The following table sets
forth information with respect to options exercised by the Named Executive
Officers during 1997, and with respect to unexercised options to purchase shares
of Common Stock which have been granted to the Named Executive Officers and held
by them at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
OPTIONS EXERCISED DURING UNDERLYING UNEXERCISED IN-THE-MONEY
1997 OPTIONS/SARS AT OPTIONS/SARS AT
--------------------------- FISCAL YEAR END(1) FISCAL YEAR END(2)
SHARES VALUE ------------------------------ -------------------------------
ACQUIRED # REALIZED $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ ------------- ------------- --------------- ------------- ---------------
<S> <C> <C>
Dan C. Tutcher....................... -- -- -- 33,000 -- $300,366
I. J. Berthelot, II.................. -- -- -- 33,000 -- $331,881
Richard A. Robert.................... -- -- -- -- 24,200 -- $243,379
</TABLE>
- ------------
(1) In February 1998, 20% of each of the Executive Officer's options vested and
became exercisable.
(2) Calculated by multiplying the number of shares underlying outstanding
in-the-money options by the difference between the last sales price of the
Common Stock on December 31, 1997 ($19.602 per share as adjusted for the
Stock Dividend) and the exercise price, which ranges between $9.545 and
$10.50 per share. Options are in-the-money if the fair market value of the
underlying Common Stock exceeds the exercising price of the option.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Named Executive Officers have entered into employment contracts, as
amended, which provide for employment terms of varying lengths, the longest of
which expires in April 2001. Pursuant to such employment agreements, Messrs.
Tutcher and Robert will receive an annual base salary of $150,000, $135,000 and
$125,000 in 1998, respectively. Two of the Named Executive Officers, Messrs.
Berthelot and Robert, were awarded 63,790 and 9,814 shares of Common Stock,
respectively, as consideration for their entry into such agreements. These
agreements may be terminated by mutual consent or at the option of the Company
for cause, death or disability. In the event termination is due to death,
disability or defined
11
<PAGE>
changes in the ownership of the Company, the full amount of compensation
remaining to be paid during the term of the agreement will be paid to the
employee or their estate, after discounting at 12% to reflect the current value
of unpaid amounts. See " -- Compensation Committee Report."
In August 1997, the Company entered into Executive Severance Agreements
with the Executive Officers (the "Agreements"), pursuant to which the
Executive Officers are entitled to certain severance benefits in the event of a
Change of Control of the Company (as defined in the Agreements), and in
conjunction with a Qualifying Termination (as defined in the Agreements) of the
Executive Officer. These severance benefits include payment of an amount equal
to three times the Executive Officer's annual base salary and bonus and the
continuation for 36 months of any Company provided or sponsored life and
healthcare related benefits under which the Executive Officer and/or the
Executive Officer's family is covered as of the effective date of the Change in
Control. The term of the Agreements are 18 months, which are automatically
extended an additional year unless the Board delivers written notice of
termination three months prior to the end of such term.
Pursuant to separate stockholder's agreements dated April 30, 1994 by and
between the Company and Messrs. Berthelot, Robert and Herbst, each officer was
respectively, issued 12,267, 12,267, and 7,360 shares, of the Company's Common
Stock as additional consideration for their services to the Company. Such
shares, reduced each year pursuant to a five-year vesting schedule, are subject
to the Company's repurchase upon the termination of the respective officer's
employment, for any reason, after a 30-day notice period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee has ever served as an executive
officer of the Company. The Company issued securities to Messrs. Richards and
Withers upon their reelection and appointment to the Board, respectively. See
"Director Compensation and Board Committees." The Company has also issued
securities to Cortez which is controlled by Mr. Collins, and certain
registration rights regarding the securities acquired, in connection with the
Company's acquisition through merger of Republic. See
" -- Certain Relationships and Related Transactions."
COMPENSATION COMMITTEE REPORT
The compensation committee of the Board (the "Committee") has furnished
the following report on executive compensation for fiscal 1997:
Under the supervision of the Committee, the Company seeks to relate a
significant portion of potential total executive compensation to the Company's
financial performance. In general, executive financial rewards may be segregated
into the following significant components: base compensation, bonus and stock-
based benefits.
Base compensation for the Executive Officers is intended to afford a
reasonable degree of financial security and flexibility to those individuals who
were regarded by the Committee as acceptably discharging the levels and types of
responsibility implicit in the various executive positions. Each Named Executive
Officer has executed an employment contract with the Company under which their
base compensation level for 1997, as adjusted, if applicable, for mid-year
escalations called for in the agreements, were as follows: Mr. Tutcher $95,000,
Mr. Berthelot $70,000 and Mr. Robert $80,000. In the case of Mr. Herbst, base
compensation of $48,000 for fiscal 1997 was set by the Committee. Base pay
reflected in the employment contracts held by those certain Executive Officers
was set based on arms length negotiations of each officer's employment contract.
In negotiating the base pay for the Executive Officers, consideration was given
to the compensation plans of executives in other pipeline companies. The
Committee believes such base pay is reasonable in light of the average
compensation for executive officers of the Company's competitors. In addition,
the Committee considered the salary histories of each Executive Officer, and his
past performance, credentials, age and experience with the Company, as well as
his perceived future utility to the Company.
12
<PAGE>
Annual bonuses are intended to reflect a policy of requiring a minimum
level of Company financial performance before any bonuses are earned by the
Executive Officers, with bonuses for achieving higher levels of performance
directly tied to the level achieved. The following bonuses were awarded and paid
in 1997 to Executive Officers for their performance in 1997: Mr. Tutcher $5,000;
Mr. Berthelot $7,500; Mr. Robert $12,500; and Mr. Herbst $2,500.
The Board is of the view that the periodic grant of stock options to the
Executive Officers is calculated to align the executive's economic interests
with those of stockholders and to provide a direct and continuing focus upon the
goal of increasing stockholder value. The Company granted options covering an
aggregate of 109,450 shares of the Company's Common Stock to Executive Officers
during 1997 at 100% of the market price for the Common Stock on the date of
grant for all Executive Officers except Mr. Tutcher whose options were priced at
110% of the market price on the date of grant. These options were issued as
follows: Mr. Tutcher 33,000 shares; Mr. Berthelot 33,000 shares; Mr. Robert
24,200 shares; and Mr. Herbst 19,250 shares. The options vest over a five-year
period and the Compensation Committee presently anticipates that such grants in
the future will be considered only as appropriate.
The Committee intends, with any necessary concurrence of the Board, to
continue to consider alternate forms of stock or other incentive based
compensation, with a view to affording the maximum possible long-term
performance based benefits to senior executives, at the least possible cost, and
with the greatest attainable economic efficiency to the Company, with such
benefits designed as nearly as practicable to align directly the economic
interest of the Executive Officers with those of the Company's stockholders.
COMPOSITION OF THE COMMITTEE. No Committee member is a member of
management. Collectively, the committee members owned, controlled or represented
an aggregate of 457,634 shares (including shares that may be acquired pursuant
to outstanding stock options or warrants within 60 days), or approximately 7.9%
of the Common Stock outstanding and, accordingly, also maintain a substantial
interest in the Company's performance.
The Compensation Committee
Ted Collins, Jr.
Richard N. Richards
Bruce M. Withers
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph, prepared by Standard & Poor's Compustat
Group, compares the performance of the Common Stock to the S&P SmallCap 600
Index and to an index of peer companies selected by the Company. The graph
covers the period from August 9, 1996 (the date on which the Company's Common
Stock was registered under Section 12(g) of the Securities Exchange Act of 1934)
to December 31, 1997. The graph assumes that the value of the investment in the
Common Stock and each index was $100 at August 9, 1996 and that all dividends
were reinvested. The Peer Group is weighted by market capitalization.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
9 AUG. 96 DEC. 1996 DEC. 1997
--------- --------- ---------
Midcoast Energy Resources, Inc.......... $ 100 $ 95.07 $201.38
S&P SmallCap 600 Index.................. $ 100 $112.52 $141.31
Peer Group.............................. $ 100 $135.18 $129.31
- ------------
(1) Peer Group consists of Aquila Gas Pipeline, Continental Natural Gas, Inc., K
N Energy, Markwest Hydrocarbon, Inc., NGC Corporation, Transmontaigne Oil
Co., and Western Gas Resources, Inc. All of the members of the Peer Group
are natural gas pipeline and processing companies.
This graph depicts the past performance of the Common Stock and in no way
should be used to predict future performance. The Company does not make or
endorse any predictions as to future share performance.
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, ("Securities Act") or under the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
graph by reference, and shall not otherwise be deemed filed under such acts.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1997, the Company completed its acquisition through merger of
Republic, which owned Midla, Mid Louisiana Gas Transmission Company and Mid
Louisiana Marketing Company. Cortez and RGC, corporations controlled by Messrs.
Collins and Langdon respectively, were both owners of Republic, along with a
third corporation. As a result of the merger, Cortez, which owned 90% of
Republic, received $2,678,629, 321,281 shares of Common Stock and warrants for
111,596 shares of Common Stock, and RGC, which owned 5% of Republic, received
$265,629, 31,859 shares of Common Stock and warrants for 12,953 shares of Common
Stock. In connection with this acquisition, the Company agreed to elect Messrs.
Collins and Langdon to the Board and to grant Cortez and RGC certain demand and
piggyback registration rights regarding the shares of Common Stock and warrants
purchased. Under the terms of the agreement and plan of merger, the Republic
partners received a total of $3,210,000 cash, 385,000 shares of Common Stock,
warrants for 110,000 shares of Common Stock and an additional 27,500 warrants
subject to certain contingencies. The Company also repaid approximately $19.1
million in Republic indebtedness. The consideration paid by the Company pursuant
to the Republic merger was based on arms-length negotiations among the parties.
In July 1997, the Company effected an underwritten public offering of
2,415,000 million shares of Common Stock (the "Offering"). Of the shares sold
in the offering, 100,000 shares were, prior to the Offering, owned by Kenneth B.
Holmes, a former officer and Director of the Company, and at the time of the
Offering, an 11.3% stockholder of the Company. The Company paid the registration
costs associated with the Offering on behalf of Mr. Holmes. In addition, the
Company and Mr. Holmes entered into an underwriting agreement containing
customary indemnification provisions under which the Company is obligated to
indemnify Mr. Holmes for certain liabilities, including liability under the
Securities Act, and Mr. Holmes is obligated to indemnify the Company for certain
liabilities, including liability under the Securities Act. As of the date
hereof, Mr. Holmes is neither an officer, Director or 5% stockholder of the
Company.
OTHER MATTERS
AUDITORS
Hein + Associates LLP ("Hein"), certified public accountants, have served
as the independent auditors of the Company for a number of years. It is not
proposed that any formal action be taken at the Annual Meeting with respect to
the continued employment of Hein. It is not anticipated that representatives of
Hein will be present at the Annual Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and Directors and persons who own more than 10% of any registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") as well as to
furnish the Company with a copy of each such report. Additionally, SEC
regulations require the Company to identify in its proxy statement any
individual for whom one of the above referenced reports was not filed on a
timely basis during the most recent fiscal year or prior fiscal years.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during and with respect to the fiscal year ended December
31, 1997, all applicable Section 16 (a) filing requirements were complied with,
except that Ted Collins, Jr., Jerry J. Langdon, and Bruce Withers were each late
in filing a Form 3 pertaining to the commencement of their appointment to the
Board.
15
<PAGE>
MISCELLANEOUS MATTERS
The Company is including herewith a copy of its annual report on Form 10-K,
covering the fiscal year ended December 31, 1997 which has been filed with the
SEC. Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the 1999 annual meeting of
stockholders is required to submit such proposals to the Company on or before
December 17, 1998. Any such proposals should be timely sent by certified mail,
return receipt requested, to the Secretary of the Company, 1100 Louisiana, Suite
2950, Houston, Texas 77002. The cost of soliciting proxies in the accompanying
form will be borne by the Company, including the reimbursement of banks, brokers
and other custodians, Nominees and fiduciaries for expenses in forwarding
solicitation material to the beneficial owners of the Company's Common Stock. In
addition to solicitations by mail, a number of regular employees of the Company
may, if necessary to assure the presence of a quorum, solicit proxies in person
or by telephone.
By Order of the Board of Directors
Duane S. Herbst
SECRETARY
Houston, Texas
April 15, 1998
16
<PAGE>
EXHIBIT A
AMENDMENT TO THE
1996 INCENTIVE STOCK PLAN
The 1996 Incentive Stock Plan ("Incentive Plan") of Midcoast Energy
Resources, Inc. is hereby amended as follows, effective November 11, 1997,
subject to stockholder approval:
1. The second paragraph of Section 3 is amended to read as follows in
its entirety:
The Committee may grant Options, shares of Restricted Stock, Performance
Awards, shares of Phantom Stock and Stock Bonuses under the Plan with respect to
a number of shares of Common Stock that in the aggregate at any time does not
exceed 425,000 shares of Common Stock, subject to adjustment pursuant to Section
12 hereof. The grant of a Cash Bonus shall not reduce the number of shares of
Common Stock with respect to which Options, shares of Restricted Stock,
Performance Awards, shares of Phantom Stock or Stock Bonuses may be granted
pursuant to the Plan. Notwithstanding any provision in the Plan to the contrary,
the maximum number of shares of Common Stock that may be subject to Incentive
Awards granted to any one individual during any calendar year shall be 50,000
shares of Common Stock, subject to adjustment under Section 12 hereof. The
limitation set forth in the preceding sentence shall be applied in a manner
which will permit compensation generated in connection with the exercise of
Options and the payment of Performance Awards to constitute "qualified
performance-based compensation" for purposes of Section 162(m) of the Code,
including, without limitation, counting against such maximum number of shares,
to the extent required under Section 162(m) of the Code and applicable
interpretive authority thereunder, any shares subject to Options that are
canceled or repriced.
A-1
<PAGE>
MIDCOAST ENERGY RESOURCES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL STOCKHOLDERS' MEETING
TO BE HELD ON MAY 15, 1998
The undersigned stockholder of Midcoast Energy Resources, Inc. (the
"Company") hereby appoints Dan C. Tutcher and Duane S. Herbst or either of them,
attorneys and proxies of the undersigned, each with full power of substitution,
to vote on behalf of the undersigned at the Annual Meeting of Stockholders to be
held at the Boardroom of the American Stock Exchange located at 86 Trinity
Place, New York, New York at 10:30 a.m., local time, and at any adjournments of
said meeting, all of the shares of common stock in the name of the undersigned
or which the undersigned may be entitled to vote.
(PLEASE SIGN ON REVERSE SIDE) SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
<PAGE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE USING
DARK INK ONLY.
Withhold
For all nominees Authority to vote
(except as indicated all nominees listed
below) at right
1. Election of [ ] [ ] NOMINEES: Dan C. Tulcher
Directors I.J. Berthelot, II
Ted Collins, Jr.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE Jerry J. Langdon
FOR ANY INDIVIDUAL NOMINEE, WRITE THAT Richard N. Richards
NOMINEE'S NAME ON THE LINE PROVIDED BELOW: Bruce M. Withers
- -------------------------------------
FOR AGAINST ABSTAIN
2. To approve the amendments to the Company's [ ] [ ] [ ]
Articles of Incorporation.
3. To approve the amendment to the 1996 [ ] [ ] [ ]
Incentive Stock Plan.
4. In their discretion, upon such other matters as may properly come before the
Annual Meeting, hereby revoking any proxy or proxies heretofore given by the
undersigned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND PROPOSALS ABOVE
AND IF NO CONTRARY SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES NAMED HEREIN, FOR THE APPROVAL OF PROPOSAL 2 AND FOR
THE APPROVAL OF PROPOSAL 3.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, the Proxy Statement and the Company's annual report on
Form 10-K furnished herewith.
PLEASE SIGN AND RETURN IN THE ENVELOPE ENCLOSED.
Stockholder's Signature ________________________
Stockholder's Signature ________________________
Date:_______________, 1998
NOTE: SIGNATURES SHOULD AGREE WITH THE NAME PRINTED HEREON. If stock is held in
the name of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardian, and attorneys should indicate the
capacity in which they sign. Attorneys should submit powers of attorney.
