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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO
_______
Commission File Number: 0-8898
MIDCOAST ENERGY RESOURCES, INC.
(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)
ISSUER'S TELEPHONE NUMBER: (713) 650-8900
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT: Common Stock,
Par Value $.01 Per Share
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act during of 1934 during the preceding 12 months (or for
such shorter period that registrant was required to file such
reports), and (2)has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. []
The aggregate market value of the Common Stock, par value
$.01 per
share, held by non-affiliates of Registrant as of March 11, 1998 was
$96,263,945.
The number of shares of Common Stock, par value $.01 per
share,
outstanding as of March 31, 1998 was 5,681,330.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report (Items 10,
11, 12 and 13) is incorporated by reference from the registrant's
proxy statement to be filed pursuant to Regulation 14A with respect to
the annual meeting of shareholders scheduled to be held on May 15,
1998.
======================================================================
==========
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. Financial statements.
All financial statements of Midcoast Energy Resources, Inc. and
subsidiaries are included under Item 8 beginning on page 24 of this
Form 10-K.
2. Exhibits.
EXHIBITS DESCRIPTION OF EXHIBITS
2.1 Agreement for Purchase and Sale of Stock dated September 6,
1995, by and between Midcoast Holdings No. One, Inc. and Koch
Gateway Pipeline Company (Incorporated by reference from
Midcoast Form 10-KSB for the fiscal year ended December 31,
1995, as Exhibit 10.25).
2.2 First Amendment to Agreement for Purchase and Sale of Stock
dated September 6, 1995, by and between Midcoast Holdings No.
One, Inc. and Koch Gateway Pipeline Company dated October 2,
1995 (Incorporated by reference from Midcoast Form 10-KSB for
the fiscal year ended December 31, 1995, as Exhibit 10.26).
2.3 Agreement for Purchase and Sale of Stock dated September 13,
1995, by and between Five Flags Holding Company and Midcoast
Holdings No. One, Inc. (Incorporated by reference from Midcoast
Form 10-KSB for the fiscal year ended December 31, 1995, as
Exhibit 10.27).
2.4 Agreement for Purchase of Stock dated September 13, 1995, by
and between Midcoast Holdings No. One, Inc. and Rainbow
Investments Company (Incorporated by reference from Midcoast
Form 10-KSB for the fiscal year ended December 31, 1995, as
Exhibit 10.28).
2.5 Agreement for Purchase and Sale of Stock dated July 27, 1995,
by and between Williams Holdings of Delaware, Inc. and Midcoast
Holdings No. One, Inc. (Incorporated by reference from Midcoast
Form 8-K dated September 22, 1995).
2.6 Agreement for Sale and Purchase of Harmony Gas Processing Plant
and Related Gathering System dated October 3, 1996, by and
between Koch Hydrocarbon Company, a division of Koch
Industries, Inc. and Midcoast Holdings No. One, Inc.
(Incorporated by reference from Midcoast Form 8-K dated October
21, 1996, as Exhibit 2.1).
2.7 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).
3.1 Articles of Incorporation of Midcoast Energy Resources, Inc.
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1992).
3.2 Certificate of Amendment of Articles of Incorporation of
Midcoast Energy Resources, Inc. (Incorporated by reference
from Midcoast Registration Statement on Form SB-2 (No.
333-4643) dated August 8, 1996).
3.3 Bylaws of Midcoast Energy Resources, Inc. (Incorporated by
reference from Midcoast Form 10-KSB for the fiscal year ended
December 1, 1992).
4.1 Shareholder Agreement dated April 30, 1994, by and between
Midcoast Energy Resources, Inc. and Bill G. Bray (Incorporated
by reference from Midcoast Form 10-KSB for the fiscal year
ended December 31, 1994).
4.2 Shareholder Agreement dated April 30, 1994, by and between
Midcoast Energy Resources, Inc. and Duane S. Herbst
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1994).
4.3 Shareholder Agreement dated April 30, 1994, by and between
Midcoast Energy Resources, Inc. and Richard A. Robert
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1994).
4.4 Shareholder Agreement dated April 30, 1994, by and between
Midcoast Energy Resources, Inc. and I. J. Berthelot, II
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1994).
4.5 Specimen Certificate for Shares of Common Stock, par value $.01
per share. (Incorporated by reference from Midcoast
Registration Statement on Form SB-2 (No. 333-4643) dated
August 8, 1996).
4.6 Representative's Warrants. (Incorporated by reference from
Midcoast Registration Statement on Form SB-2 (No. 333-4643)
dated August 8, 1996).
4.7 Voting Proxy Agreement dated August 5, 1996, by and between Midcoast
Energy Resources, Inc., Stevens G. Herbst, Kenneth B. Holmes, Jr.,
Rainbow Investments Company and Texas Commerce Bank National
Association. (Incorporated by reference from Midcoast Registration
Statement on Form SB-2 (No. 333-4643) dated August 8, 1996).
4.8 Registration Rights Agreement dated August 5, 1996, by and
between Midcoast Energy Resources, Inc. and Stevens G. Herbst.
(Incorporated by reference from Midcoast Registration Statement
on Form SB-2 (No. 333-4643) dated August 8, 1996).
4.9 Registration Rights Agreement dated August 5, 1996, by and between
Midcoast Energy Resources, Inc. and Kenneth B. Holmes, Jr.
(Incorporated by reference from Midcoast Registration Statement on
Form SB-2 (No. 333-4643) dated August 8, 1996).
4.10 Registration Rights Agreement dated August 5, 1996, by and
between Midcoast Energy Resources, Inc. and Rainbow Investments
Company. (Incorporated by reference from Midcoast Registration
Statement on Form SB-2 (No. 333-4643) dated August 8, 1996).
* 4.11 Executive Severance Agreement by and between Midcoast Energy
Resources, Inc. and Dan Tutcher, dated August 15, 1997.
* 4.12 Executive Severance Agreement by and between Midcoast Energy
Resources, Inc. and I.J. Berthelot, II, dated August 15, 1997.
* 4.13 Executive Severance Agreement by and between Midcoast Energy
Resources, Inc. and Richard Robert, dated August 15, 1997.
* 4.14 Executive Severance Agreement by and between Midcoast Energy
Resources, Inc. and Duane Herbst, dated August 15, 1997.
10.1 Employment Agreement dated January 1, 1993, by and between
Midcoast Energy Resources, Inc. and Dan C. Tutcher
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1992).
10.2 Amendment to the Employment Agreement dated April 1, 1993, by
and between Midcoast Energy Resources, Inc. and Dan C. Tutcher
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1993).
10.3 Amendment to Employment Agreement dated April 14, 1997, by and
between Midcoast Energy Resources, Inc. and Dan Tutcher
(Incorporated by reference from Midcoast Form 10-QSB for the
three-month period ended March 31, 1997).
10.4 Employment Agreement dated April 30, 1994, by and between
Midcoast Energy Resources, Inc. and Richard A. Robert
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1994).
10.5 Amendment to the Employment Agreement dated April 8, 1996, by
and between Midcoast Energy Resources, Inc. and Richard A.
Robert (Incorporated by reference from Midcoast Form 10-QSB for
the three-month period ended March 31, 1996).
10.6 Employment Agreement dated July 1, 1994, by and between
Midcoast Energy Resources, Inc. and Bill G. Bray (Incorporated
by reference from Midcoast Form 10-KSB for the fiscal year
ended December 31, 1994).
10.7 Employment Agreement dated April 25, 1995, by and between
Midcoast Energy Resources, Inc. and I.J. Berthelot, II
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1995).
10.9 Amendment to Employment Agreement dated December 8, 1995, by
and between Midcoast Energy Resources, Inc. and I.J. Berthelot,
II (Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1995).
10.8 Amendment to Employment Agreement dated April 14, 1997, by and
between Midcoast Energy Resources, Inc. and I.J. Berthelot, II
(Incorporated by reference from Midcoast Form 10-QSB for the
three-month period ended March 31, 1997).
10.10 Assignment of Net Revenue Interest dated July 1, 1994, by and
between Texline Gas Company and Midcoast Energy Resources, Inc.
(Incorporated by reference from Midcoast Form 10-KSB for the
fiscal year ended December 31, 1994).
10.11 Assignment of Net Revenue Interest dated July 1, 1994, by and
between Rainbow Investments Co. and Midcoast Energy Resources,
Inc. (Incorporated by reference from Midcoast Form 10-KSB for
the fiscal year ended December 31, 1994).
10.12 Agreement dated March 31, 1994, by and between Midcoast Energy
Resources, Inc., and Stewart Petroleum Company (Incorporated by
reference from Midcoast Form 10-KSB for the fiscal year ended
December 31, 1993).
10.13 Operating Agreement of Pan Grande Pipeline, L.L.C. dated
February 28, 1996, by and between Midcoast Holdings No. One,
Inc. and Resource Energy Development, L.L.C. (Incorporated by
reference from Midcoast Form 10-KSB for the fiscal year ended
December 31, 1995).
10.14 Warrant by and between Triumph Resources Corporation and
Midcoast Energy Resources, Inc. (Incorporated by reference from
Midcoast Registration Statement on Form SB-2 (No. 333-4643)
dated August 8, 1996).
10.15 Midcoast Energy Resources, Inc. 1996 Incentive Stock Plan.
(Incorporated by reference from Midcoast Registration Statement
on Form SB-2 (No. 333-4643) dated August 8, 1996).
10.16 Credit Agreement dated August 22, 1996, by and between Bank
One, Texas N.A. and Midcoast Energy Resources, Inc., Magnolia
Pipeline Corporation and H&W Pipeline Corporation.
(Incorporated by reference from Midcoast Form 10-QSB for the
nine-month period ended September 30, 1996).
10.17 Midcoast Energy Resources, Inc. 1997 Non-Employee Director
Stock Option Plan (Incorporated by reference from Midcoast Form
10-QSB for the three-month period ended March 31, 1997).
10.18Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Richard A. Robert. (Incorporated
by reference from Midcoast Registration Statement on Form S-1
(No. 333-27885) dated June 26, 1997)
10.19Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and I.J. Berthelot, II. (Incorporated
by reference from Midcoast Registration Statement on Form S-1
(No. 333-27885) dated June 26, 1997)
10.20Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and E.P. Marinos (Incorporated by
reference from Midcoast Registration Statement on Form S-1 (No.
333-27885) dated June 26, 1997)
10.21Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Richard N. Richards.
(Incorporated by reference from Midcoast Registration Statement
on Form S-1 (No. 333-27885) dated June 26, 1997)
10.22Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Duane S. Herbst. (Incorporated by
reference from Midcoast Registration Statement on Form S-1 (No.
333-27885) dated June 26, 1997)
10.23Indemnity Agreement dated April 23, 1997 between Midcoast
Energy Resources, Inc. and Dan C. Tutcher. (Incorporated by
reference from Midcoast Registration Statement on Form S-1 (No.
333-27885) dated June 26, 1997)
10.24First Amendment to Credit Agreement dated May 30, 1997 by and
between Bank One, Texas N.A. and Midcoast Energy Resources,
Inc. , Magnolia Pipeline Corporation, H&W Pipeline Corporation,
Magnolia Resources, Inc., Magnolia Gathering Inc., Midcoast
Holdings No. One, Inc., Midcoast Gas Pipeline, Inc., Nugget
Drilling Corporation, Midcoast Marketing, Inc., AlaTenn Energy
Marketing Company, and Tennessee River Intrastate Gas Co.
(Incorporated by reference from Midcoast Registration Statement
on Form S-1 (No. 333-27885) dated June 26, 1997)
10.25Second Amendment to Credit Agreement dated October 31, 1997 by
and between Bank One, Texas N.A. and Midcoast Energy Resources,
Inc. , Magnolia Pipeline Corporation, H&W Pipeline Corporation,
Magnolia Resources, Inc., Magnolia Gathering Inc., Midcoast
Holdings No. One, Inc., Midcoast Gas Pipeline, Inc., Nugget
Drilling Corporation, Midcoast Marketing, Inc., AlaTenn Energy
Marketing Company, Tennessee river Intrastate Gas Co., Mid
Louisiana Gas Company, Mid Louisiana Gas Transmission Company
and Midla Energy Services Company. (Incorporated by reference
from Midcoast Form 8-K dated October 13, 1997).
10.26 First Amendment to Credit Agreement dated October 31, 1997 by and
between Bank One, Texas N.A. and Midcoast Interstate Transmission,
Inc. (f/k/a/ Alabama Tennessee Natural Gas Company). (Incorporated
by reference from Midcoast Form 8-K dated October 13, 1997).
*10.27 Third Amendment to Employment Agreement dated March 2, 1998 by and
between Midcoast Energy Resources, Inc. and Dan Tutcher.
*10.28 Third Amendment to Employment Agreement dated March 18, 1998 by and
between Midcoast Energy Resources, Inc. and I.J. Berthelot, II.
*10.29 Second Amendment to Employment Agreement dated March 18, 1998 by and
between Midcoast Energy Resources, Inc. and Richard Robert.
*11 -- Computation of Earnings Per Share
*21.1 -- Schedule listing subsidiaries of Midcoast Energy Resources,
Inc.
*27.1 -- Financial Data Schedule for the year ended December 31,
1997.
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* Filed herewith
(b) Reports of Form 8-K
A report on Form 8-K was filed during the fourth quarter of 1997.
Such report was filed on November 13, 1997 to report the Agreement and
Plan of Merger dated October 31, 1997 by and between Republic Gas
Partners, L.L.C. and Midcoast Energy Resources, Inc. In addition, a
report on Form 8-K/A was filed on January 12, 1998 as an amendment to
the Form 8-K filed on November 13, 1997 mentioned above. The amendment
was filed to include the required audited financial statements of
Republic Gas Partners, L.L.C. including the Historical Consolidated
Statement of Operations, Consolidated Statement of Members Deficit and
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1997 and year ended December 31, 1996 and the audited
Consolidated Balance Sheet at September 30, 1997 and December 31,
1996. In addition, the unaudited Midcoast Pro Forma Statement of
Operations for the nine months ended September 30, 1997 and for the
year ended December 31, 1996 and unaudited Pro Forma Balance Sheet at
September 30, 1997.
Signatures
In accordance with Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MIDCOAST ENERGY RESOURCES, INC.
(Registrant)
BY:/S/ DAN C. TUTCHER
Dan C. Tutcher
Chief Executive Officer
Date: February 2, 1999
In accordance with the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES CAPACITY IN WHICH SIGNED
/S/ DAN C. TUTCHER Chairman of the Board
(Dan C. Tutcher) Chief Executive Officer
Date: and President
/S/ I. J. BERTHELOT, II Executive Vice President,
Chief Operating
(I. J. Berthelot, II) Officer and Director
Date:
/S/ TED COLLINS, JR. Director
(Ted Collins, Jr.)
Date:
/S/ RICHARD N. RICHARDS Director
(Richard N. Richards)
Date:
/S/ RICHARD A. ROBERT Treasurer, Principal
Financial Officer
(Richard A. Robert) Principal Accounting
Officer
Date:
S/ BRUCE M. WITHERS Director
(Bruce M. Withers)
Date:
<TABLE>
MIDCOAST ENERGY RESOURCES, INC AND SUBSIDIARIES
EXHIBIT 11: COMPUTATION OF EARNINGS PER COMMON SHARE
Year Ended Year Ended
December 31, December 31,
1996 1997
<S> <C> <C>
Weighted average common shares outstanding,
Basic........................................... $2,074,155 $4,092,135
Net effect of dilutive stock options - based on
the treasury stock method using average market
price........................................... 3,964 109,030
Weighted average common shares outstanding,
Diluted........................................ 2,078,119 4,201,165
Net income..................................... $1,891,226 $5,764,451
Earnings per common share,Basic................. $ .91 $ 1.41
Earnings per common share,Diluted............... $ .91 $ 1.37
</TABLE>
<TABLE>
MIDCOAST ENERGY RESOURCES, INC AND SUBSIDIARIES
EXHIBIT 21.1: SUBSIDIARIES OF THE REGISTRANT
Year of State of
Name Incorporation Incorporation Ownership
<S> <C> <C> <C>
Magnolia Resources, Inc. 1996 Mississippi 100%
Magnolia Gathering, Inc. 1996 Alabama 100%
Magnolia Pipeline Corporation 1989 Alabama 100%
H & W Pipeline Corporation * 1976 Alabama 100%
Midcoast Holdings No. One, Inc. 1993 Delaware 100%
Arcadia/Midcoast Pipeline of New York L.L.C.* 1996 New York 50%
Nugget Drilling Corporation * 1982 Minnesota 100%
Midcoast Marketing, Inc. 1991 Texas 100%
Midcoast Interstate Transmission, Inc. 1966 Alabama 100%
Tennessee River Intrastate Gas Company, Inc. 1986 Alabama 100%
Mid Louisiana Gas Transmission Company 1987 Delaware 100%
Mid Louisiana Gas Company 1953 Delaware 100%
Midcoast Gas Pipeline, Inc. 1997 Texas 100%
Pan Grande Pipeline, L.L.C. 1996 Texas 50%
Starr County Gathering System - A Joint Venture 1996 Texas 60%
* Presently Inactive
</TABLE>
MIDCOAST ENERGY RESOURCES, INC AND SUBSIDIARIES
EXHIBIT 27.1: FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED DECEMBER 31,1997.
PERIOD TYPE
12 MOS
FISCAL YEAR END
12/31/97
PERIOD END
12/31/97
CASH
307,652
SECURITIES
--
RECEIVABLES
27,523,904
ALLOWANCES
--
INVENTORY
1,225,490
CURRENT ASSETS
29,057,046
PP&E
100,581,046
DEPRECIATION
3,029,031
TOTAL ASSETS
128,038,321
CURRENT LIABILITIES 27,169,289
BONDS
--
COMMON
56,813
PREFERRED-MANDATORY --
PREFERRED
--
OTHER - SE 61,394,291
TOTAL LIABILITY & EQUITY 128,038,321
SALES 112,744,030
TOTAL REVENUES 112,744,030
CGS 100,404,927
TOTAL COSTS 105,452,704
OTHER EXPENSES 310,137
LOSS PROVISION --
INTEREST EXPENSE 1,066,738
INCOME PRETAX 5,914,451
INCOME TAX 150,000
INCOME CONTINUING 5,764,451
DISCONTINUED --
EXTRAORDINARY --
CHANGES --
NET INCOME 5,764,451
EPS BASIC 1.41
EPS DILUTED 1.37
EXECUTIVE SEVERANCE AGREEMENT
by and between
Midcoast Energy Resources, Inc.
and
Dan C. Tutcher
Effective August 15, 1997
TABLE OF CONTENTS
Article
Section Page
1 Definitions 1
2 Severance Benefits
2.1 Right to Severance Benefits 5
2.2 Description of Severance Benefits 6
2.3 Termination for Total and Permanent Disability
6
2.4 Termination for Retirement or Death 6
2.5 Termination for Cause or by the Executive Other
7
Than for Good Reason
2.6 Notice of Termination 7
3 Form and Timing of Severance Benefits
3.1 Form and Timing of Severance Benefits 7
3.2 Withholding of Taxes 7
4 Golden Parachute Tax Gross-Up and Tax Indemnity
4.1 Severance Benefits to be Grossed-Up by the
Company 7
4.2 Procedure for Establishing the Tax Gross-Up
Payment 8
4.3 Subsequent Imposition of Excise Tax 8
5 The Company's Payment Obligation
5.1 Payment Obligations Absolute 8
5.2 Contractual Rights to Benefits 9
6 Term of Agreement 9
7 Legal Remedies
7.1 Payment of Legal Fees 9
7.2 Arbitration 9
8 Successors
8.1 Company's Successors 10
8.2 Executive's Successors 10
TABLE OF CONTENTS (Cont'd)
Article
Section Page
9 Miscellaneous
9.1 Employment Status 10
9.2 Beneficiaries 10
9.3 Entire Agreement 10
9.4 Gender and Number 11
9.5 Severability 11
9.6 Modification 11
9.7 Applicable Law 11
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of August,
1997, by and between Midcoast Energy Resources Inc., a Nevada
corporation with its principal office at 1100 Louisiana Street,
Suite 2950, Houston, Texas 77002 (the "Company") and Dan C.
Tutcher (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes there is the possibility that a
Change-in-Control of the Company may arise in the future;
WHEREAS, in the event of a prospective Change-in-Control of the
Company, the Company believes it imperative that it be able to
rely on the Executive to continue in the Executive's position,
provide advice that is in the best interests of the Company, and
act without being distracted by the personal uncertainties and
risks created by the possibility of a Change-in-Control;
WHEREAS, the Company and the Executive desire to enter into this
Agreement whereby severance benefits will be paid to the
Executive if a Change-in-Control of the Company occurs and the
Executive's employment is consequently actually or constructively
terminated by the Company or its successor under the
circumstances described herein;
NOW, THEREFORE, to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration,
the Company and the Executive agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Agreement" means this Executive Severance Agreement.
(b) "Base Salary" means the salary of record paid to the
Executive as annual salary, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Section 9.2.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" shall be determined by the Board (by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board on the terms described
below), in good faith, and shall mean the occurrence of any
one or more of the following:
(i) The willful and continued failure by the
Executive to substantially perform the Executive's
duties (other than any such failure resulting from the
Executive's Disability) after a written demand for
substantial performance has been delivered by the Board
to the Executive that specifically identifies the
manner in which the Board believes that the Executive
has not substantially performed the Executive's duties,
and the Executive fails to remedy such failure within
thirty (30) calendar days after receiving such notice;
or
(ii) The Executive's conviction (including by
trial, plea of guilty or plea of nolo contendere) for
committing an act of fraud, embezzlement, theft, or
other act constituting a felony; or
(iii) The Executive's willful engaging in
misconduct which is demonstrably and materially
injurious to the Company. No act, or failure to act,
on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that
the Executive's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less
than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for the
purpose of making a determination of whether Cause for
termination exists (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the
Board), finding in the good faith that Cause exists and
specifying the particulars thereof in detail.
(g) "Change-in-Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of
the following events occurs on or following the Effective
Date of this Agreement:
(i) Any Person (other than those Persons in
control of the Company on the Effective Date of this
Agreement, a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly
by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the
Company) becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive
years (not including any period prior to the Effective
Date of this Agreement), individuals who were members
of the Board at the beginning of such period (and any
new Director whose election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office
who either were Directors at the beginning of such
period or whose election or nomination for election was
so approved) cease for any reason to constitute a
majority thereof; or
(iii) The stockholders of the Company approve: (A)
a plan of complete liquidation of the Company, (B) an
agreement for the sale or disposition of all or
substantially all the Company's assets, or (C) a
merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined
voting power of the securities of the Company (or such
surviving entity) outstanding immediately after such
merger, consolidation, or reorganization; or
(iv) The Board determines in its sole and
absolute discretion that there has been a
Change-in-Control of the Company.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and shall include regulations promulgated under the
Code.
(i) "Committee" means the Compensation Committee of the
Board or any other committee appointed by the Board to
perform the functions of the Compensation Committee.
(j) "Company" means Midcoast Energy Resources, Inc., a
Nevada corporation (including any and all subsidiaries), or
any successor thereto as provided in Article 8.
(k) "Disability" means:
(i) The mental or physical disability, either
occupational or non-occupational in cause, which
satisfies the definition of "total and permanent
disability" in the disability policy or plan provided
by the Corporation covering the Executive; or
(ii) If no such policy or plan is then covering
the Executive, a physical or mental infirmity which, as
determined by the Committee, in good faith, upon
receipt of and in reliance on sufficient competent
medical advice from one or more individuals, selected
by the Committee, who are qualified to give
professional medical advice, prevents the Executive
from substantially performing his duties.
(l) "Effective Date" means the date this Agreement is
approved by the Board or by the Committee if duly empowered
by the Board to so act, or such other date as shall
designate in its resolution approving this Agreement.
(m) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which causes the
payment of Severance Benefits hereunder.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Executive" means Dan C. Tutcher.
(p) "Good Reason" means any event or condition described
in Subsections (i) through (ix) below which occurs
simultaneous with or after a Change-in-Control:
(i) A change in the Executive's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status,
title, position or responsibilities as in effect
immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which, in
the Executive's reasonable judgment, are inconsistent
with his status, title, position or responsibilities;
or any removal of the Executive from or failure to
reappoint or reelect the Executive to any of such
offices or positions held by the Executive prior to
such Change-in-Control, except in connection with the
termination of his employment for Disability,
Retirement, Cause, as a result of his death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's Base Salary
or any failure to pay the Executive any compensation or
benefits to which the Executive is entitled within five
(5) days of the date due;
(iii) A failure to increase the Executive's Base
Salary at least annually at a percentage of Base Salary
no less than the average percentage increase (other
than increases resulting from the Executive's
promotion) granted to the Executive during the three
(3) full years ended prior to a Change-in-Control (or
such lesser number of full years during which the
Executive was employed), unless such failure occurs in
connection with the failure of the Company and the
acquiring company to increase the base salary for the
fiscal year in which such failure occurs for all
executive-level employees;
(iv) The Company's requiring the Executive to be
based at any place outside the City of Houston, Texas;
(v) The failure by the Company to (A) continue
in effect (without reduction in benefit level and/or
reward opportunities) any material compensation or
employee benefit plans in which the Executive was
participating immediately prior to the
Change-in-Control, unless a substitute or replacement
plan has been implemented which provides substantially
identical compensation and benefits to the Executive;
(vi) The insolvency or the filing (by any party,
including the Company) of a petition for the bankruptcy
of the Company;
(vii) Any material breach by the Company of any
provision of this Agreement or any employment agreement
between the Executive and the Company;
(viii) Any purported termination of the
Executive's employment for Cause by the Company which
is not for Cause; or
(ix) The failure of the Company to obtain an
agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree
to perform this Agreement.
Additionally, any event described in Subsections (i)
through (ix) above which occurs prior to a
Change-in-Control, but which the Executive reasonably
demonstrates (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated
to effect a Change-in-Control (a "Third Party"), or (B)
otherwise arose in connection with, or in anticipation of a
Change-in-Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to
the Change-in-Control.
(q) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
(r) "Qualifying Termination" means the termination of the
Executive's employment with the Company for either of the
following reasons:
(i) The Executive resigns for Good Reason; or
(ii) The Company terminates the Executive for any
reason other than for Cause.
(s) "Retirement" means:
(i) The Executive's voluntary termination of
employment with the Company at or following "normal
retirement age" (as defined in the Company's retirement plan
covering the Executive) or,
(ii) If there is no such plan, the Executive's
voluntary termination of employment with the Company at or
following age 65.
(t) "Severance Benefits" means the compensation described
in Section 2.2 and Article 4.
Article 2. Severance Benefits
2.1. Right to Severance Benefits.
(a) The Executive shall be entitled to receive from the
Company the Severance Benefits described in Section 2.2 if
there has been a Change-in-Control of the Company and if,
within eighteen (18) calendar months thereafter (except as
provided in the flush language at the end of Section 1(p)),
the Executive's employment with the Company shall end by
reason of a Qualifying Termination.
(b) The Executive shall not be entitled to receive such
Severance Benefits if the Executive is terminated for Cause,
if the Executive resigns other than for Good Reason, or if
his employment with the Company ends due to his death,
Retirement or Disability (refer to Sections 2.3 to 2.5 for a
summary of severance compensation payable to the Executive
in connection with a termination of employment for any such
reason).
2.2. Description of Severance Benefits. If the Executive becomes
entitled to receive Severance Benefits, as provided in
Sections 2.1, the Company shall pay to or provide the
Executive with the following:
(a) An amount equal to three (3) times the highest rate
of the Executive's annual Base Salary in effect at any time
up to and including the Effective Date of Termination.
(b) An amount equal to three (3) times the greater of:
(i) the Executive's average annual bonus earned over the
last three (3) years as reflected, or as would have been
reflected, in the Executive Compensation table of the
Company's annual proxy statement, or (ii) the Executive's
target bonus established for the bonus plan year in which
the Executive's Effective Date of Termination occurs.
(c) An amount equal to the Executive's unpaid Base Salary
and accrued, unused vacation through the Effective Date of
Termination.
(d) A continuation of any Company-provided or sponsored
life insurance and healthcare-related benefits under which
the Executive and/or the Executive's family is covered as of
the effective date of the Change-in-Control. These benefits
shall be provided by the Company to the Executive
immediately upon the Effective Date of Termination and shall
continue to be provided for thirty-six (36) months from the
Effective Date of Termination; such benefit shall be
provided to the Executive at the same premium cost, and at
the same coverage level, as in effect as of the Executive's
Effective Date of Termination; and any such benefit shall be
discontinued prior to the end of the thirty-six (36) month
period if the Executive receives a substantially similar
benefit from a subsequent employer, as determined by the
Committee in good faith.
2.3. Termination for Total and Permanent Disability. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated due to Disability, the Company
shall pay the Executive the Executive's full Base Salary and
accrued, unused vacation through the Effective Date of
Termination, at the rate then in effect, plus the
Executive's additional compensation and benefits, if any,
shall be determined in accordance with the Company's
retirement, insurance, and other applicable plans and
programs then in effect, and the Company shall have no
further obligations to the Executive under this Agreement.
2.4. Termination for Retirement or Death. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated by reason of Retirement or death,
the Company shall pay the Executive the Executive's full
Base Salary and accrued, unused vacation through the
Effective Date of Termination, at the rate then in effect,
plus the Executive's additional compensation and benefits,
if any, shall be determined in accordance with the Company's
retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect, and the
Company shall have no further obligations to the Executive
under this Agreement.
2.5. Termination for Cause or by the Executive Other Than for
Good Reason. Following a Change-in-Control of the Company,
if the Executive's employment is terminated either (i) by
the Company for Cause, or (ii) by the Executive for any
reason other than Good Reason, the Company shall pay the
Executive the Executive's full Base Salary and accrued,
unused vacation through the Effective Date of Termination,
at the rate then in effect, plus all other amounts to which
the Executive is entitled under any compensation and benefit
plans of the Company, at the time such payments are due, and
the Company shall have no further obligations to the
Executive under this Agreement.
2.6. Notice of Termination. Any termination by the Executive for
any reason or by the Company for Cause shall be communicated
by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
Article 3. Form and Timing of Severance Benefits
3.1. Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 2.2(a), (b), and (c) shall be
paid in cash to the Executive in a single lump sum as soon
as practicable following the Effective Date of Termination,
but in no event beyond fifteen (15) days from such Date.
3.2. Withholding of Taxes. The Company shall withhold from any
amounts payable under this Agreement all Federal, state,
city, or other taxes as legally shall be required.
Article 4. Golden Parachute Tax Gross-Up and Tax Indemnity
4.1. Severance Benefits to be Grossed-Up by the Company.
(a) When Severance Benefits Are to be Grossed-Up. If
Severance Benefits payable to the Executive plus any other
benefits realized by the Executive in connection with the
Change-in-Control of the Company (in the aggregate "Total
Payments") would, in whole or in part, constitute an "excess
parachute payment" the Company shall pay to the Executive in
cash an amount equal to the "tax gross-up" as determined
below with respect to the Executive's Severance Benefits.
The term "excess parachute payment" shall have the meaning,
and shall be valued, as provided in the Code.
(b) "Tax Gross-Up" Defined. The term "tax gross-up"
means the sum of the (i) excise tax imposed on the
Executive's Severance Benefits pursuant to Sections 280G and
4999 of the Code, plus (ii) federal, state and local income
taxes payable by the Executive with respect to the Company's
payment of such excise tax, plus (iii) federal, state and
local employment taxes payable by the Executive with respect
to the Company's payment of such excise tax, plus (iv)
iterations of income and employment taxes on (ii) plus
(iii).
(c) Guidance for Interpreting and Applying Article 4.
The objective of Article 4 is for the Company to pay the
Executive a cash payment to place the Executive in the same
net after-tax position as if no portion of the Executive's
Severance Benefits were subject to the excise tax imposed by
Sections 280G and 4999 of the Code. This Article 4 shall be
interpreted and applied accordingly.
4.2. Procedure for Establishing the Tax Gross-Up Payment.
(a) Within sixty (60) days following
delivery of the Notice of Termination (as described in
Section 2.6) or notice by the Company to the Executive
of its belief that there is a payment or benefit due
the Executive which will result in a "excess parachute
payment" as defined in Section 280G of the Code, the
Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which
need not be unqualified, as the Executive may choose,
which sets forth: (i) the amount of the Executive's
"annualized includible compensation for the base
period" (as defined in Code Section 280G(d)(1)); (ii)
the present value of the Total Payments; (iii) the
amount and present value of any "excess parachute
payment"; (iv) the amount of the Code Section 4999
excise tax payable with respect to the Executive's
Severance Benefits, and (v) the amount of the "tax
gross-up" payment as defined above. The opinion of
such legal counsel shall be supported by the opinion of
a certified public accounting firm and, if necessary, a
firm of recognized executive compensation consultants.
Such opinion shall be binding upon the Company and the
Executive.
(b) The provisions of this Section 4.2(b),
including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive
presumption that: (i) the compensation and benefits
provided for in Section 2.2 and (ii) any other
compensation earned prior to the Effective Date of
Termination by the Executive pursuant to the Company's
compensation programs (if such payments would have been
made in the future in any event, even though the timing
of such payment is triggered by the Change-in-Control),
are reasonable.
4.3. Subsequent Imposition of Excise Tax. If, notwithstanding
compliance with the provisions of Sections 4.1 and 4.2, it
is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any
portion of the Total Payments is considered to be a
"parachute payment," subject to excise tax under Section
4999 of the Code, which was not contemplated to be a
"parachute payment" at the time of payment, the Executive
shall be entitled to receive a lump sum cash payment
sufficient to place the Executive in the same net after-tax
position, computed by using the Executive's marginal total
tax rate for the year in which the payment contemplated
under this Section 4.3 is made.
Article 5. The Company's Payment Obligation
5.1. Payment Obligations Absolute.
(i) The Company's obligation to make the
Severance Payments and the arrangements provided for
herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including,
without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company
may have against the Executive or anyone else. All
amounts payable by the Company shall be final, and the
Company shall not seek to recover all or any part of
such payment from the Executive or from whomsoever may
be entitled thereto, for any reasons whatsoever, except
as may be consistent with Section 2.2(d).
(ii) The Executive shall not be obligated to
seek other employment in mitigation of the amounts
payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of
the Company's obligations to make the Severance
Payments and arrangements required to be made under
this Agreement, except to the extent provided in
Section 2.2(d).
5.2. Contractual Rights to Severance Benefits. This Agreement
establishes and vests in the Executive a contractual right
to the Severance Benefits to which the Executive is entitled
hereunder. However, nothing herein contained shall require
or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
Article 6. Term of Agreement
6.1 Term. This Agreement will commence on the Effective Date
and shall continue in effect for eighteen (18) months, the
last day of which shall be the "Expiration Date". However,
at the end of such eighteen (18) month period and, if
extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for
one (1) additional year, unless the Board or the Committee
(as is consistent with Section 1(i)) delivers written notice
three (3) months prior to the end of such term, or extended
term, to the Executive, that the Agreement will not be
extended. In such case, the Agreement will terminate at the
end of the term, or extended term, then in progress.
However, in the event a Change-in-Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) eighteen (18)
months beyond the month in which such Change-in-Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all Severance
Benefits required hereunder have been paid to the Executive.
Article 7. Legal Remedies
7.1. Payment of Legal Fees. To the extent permitted by law and
except as provided in Section 7.2, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of the Company's refusal to provide the Severance
Benefits to which the Executive becomes entitled under this
Agreement.
7.2. Arbitration. The Executive shall have the right and option
to elect (in lieu of litigation) to have any dispute or
controversy arising under or in connection with this
Agreement settled be arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by
the Executive within two hundred (200) miles from the
location of his job with the Company, in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by
the Company.
Article 8. Successors
8.1 Company's Successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company or of any division
or subsidiary thereof to expressly assume and agree to
perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company
would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such
assumption and agreement prior to the effective date of any
such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
or successor entity in the same amount and on the same terms
as the Executive would be entitled to hereunder if the
Executive had terminated his employment with the Company
voluntarily for Good Reason. For the purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective
Date of Termination.
8.2 Executive's Successors. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If
the Executive should die while any amount would still be
payable to the Executive hereunder had the Executive
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms
of this Agreement, to the Executive's Beneficiary. If the
Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the
Executive's estate.
Article 9. Miscellaneous
9.1. Employment Status. The Executive and the Company
acknowledge that, except as may be provided under any other
agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will,"
and, prior to the effective date of a Change-in-Control
(except as provided in the flush language at the end of
Section 1(p)), may be terminated by either the Executive or
the Company at any time.
9.2. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designation at any
time.
9.3. Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect
to the subject matter hereof.
9.4. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include
the feminine, the plural shall include the singular, and the
singular shall include the plural.
9.5. Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
9.6. Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by authorized member of the Committee, or
by the respective parties' legal representatives and
successors.
9.7. Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the state of Texas shall be
the controlling law in all matters relating to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on this 15th day of
August, 1997.
Executive
Midcoast Energy Resources, Inc.
By:
Dan C. Tutcher
ATTEST:Midcoast Energy Resources, Inc.
(Corporate Seal)
By:
Duane S. Herbst, Secretary
EXECUTIVE SEVERANCE AGREEMENT
by and between
Midcoast Energy Resources, Inc.
and
I. J. Berthelot II
Effective August 15, 1997
TABLE OF CONTENTS
Article
Section Page
1 Definitions 1
2 Severance Benefits
2.1 Right to Severance Benefits 5
2.2 Description of Severance Benefits 5
2.3 Termination for Total and Permanent Disability
6
2.4 Termination for Retirement or Death 6
2.5 Termination for Cause or by the Executive Other
7
Than for Good Reason
2.6 Notice of Termination 7
3 Form and Timing of Severance Benefits
3.1 Form and Timing of Severance Benefits 7
3.2 Withholding of Taxes 7
4 Golden Parachute Tax Gross-Up and Tax Indemnity
4.1 Severance Benefits to be Grossed-Up by the
Company 7
4.2 Procedure for Establishing the Tax Gross-Up
Payment 8
4.3 Subsequent Imposition of Excise Tax 8
5 The Company's Payment Obligation
5.1 Payment Obligations Absolute 8
5.2 Contractual Rights to Benefits 9
6 Term of Agreement 9
7 Legal Remedies
7.1 Payment of Legal Fees 9
7.2 Arbitration 9
8 Successors
8.1 Company's Successors 10
8.2 Executive's Successors 10
TABLE OF CONTENTS (Cont'd)
Article
Section Page
9 Miscellaneous
9.1 Employment Status 10
9.2 Beneficiaries 10
9.3 Entire Agreement 10
9.4 Gender and Number 11
9.5 Severability 11
9.6 Modification 11
9.7 Applicable Law 11
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of August,
1997, by and between Midcoast Energy Resources Inc., a Nevada
corporation with its principal office at 1100 Louisiana Street,
Suite 2950, Houston, Texas 77002 (the "Company") and I. J.
Berthelot II (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes there is the possibility that a
Change-in-Control of the Company may arise in the future;
WHEREAS, in the event of a prospective Change-in-Control of the
Company, the Company believes it imperative that it be able to
rely on the Executive to continue in the Executive's position,
provide advice that is in the best interests of the Company, and
act without being distracted by the personal uncertainties and
risks created by the possibility of a Change-in-Control;
WHEREAS, the Company and the Executive desire to enter into this
Agreement whereby severance benefits will be paid to the
Executive if a Change-in-Control of the Company occurs and the
Executive's employment is consequently actually or constructively
terminated by the Company or its successor under the
circumstances described herein;
NOW, THEREFORE, to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration,
the Company and the Executive agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Agreement" means this Executive Severance Agreement.
(b) "Base Salary" means the salary of record paid to the
Executive as annual salary, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Section 9.2.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" shall be determined by the Board (by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board on the terms described
below), in good faith, and shall mean the occurrence of any
one or more of the following:
(i) The willful and continued failure by the
Executive to substantially perform the Executive's
duties (other than any such failure resulting from the
Executive's Disability) after a written demand for
substantial performance has been delivered by the Board
to the Executive that specifically identifies the
manner in which the Board believes that the Executive
has not substantially performed the Executive's duties,
and the Executive fails to remedy such failure within
thirty (30) calendar days after receiving such notice;
or
(ii) The Executive's conviction (including by
trial, plea of guilty or plea of nolo contendere) for
committing an act of fraud, embezzlement, theft, or
other act constituting a felony; or
(iii) The Executive's willful engaging in
misconduct which is demonstrably and materially
injurious to the Company. No act, or failure to act,
on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that
the Executive's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less
than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for the
purpose of making a determination of whether Cause for
termination exists (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the
Board), finding in the good faith that Cause exists and
specifying the particulars thereof in detail.
(g) "Change-in-Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of
the following events occurs on or following the Effective
Date of this Agreement:
(i) Any Person (other than those Persons in
control of the Company on the Effective Date of this
Agreement, a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly
by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the
Company) becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive
years (not including any period prior to the Effective
Date of this Agreement), individuals who were members
of the Board at the beginning of such period (and any
new Director whose election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office
who either were Directors at the beginning of such
period or whose election or nomination for election was
so approved) cease for any reason to constitute a
majority thereof; or
(iii) The stockholders of the Company approve: (A)
a plan of complete liquidation of the Company, (B) an
agreement for the sale or disposition of all or
substantially all the Company's assets, or (C) a
merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined
voting power of the securities of the Company (or such
surviving entity) outstanding immediately after such
merger, consolidation, or reorganization; or
(iv) The Board determines in its sole and
absolute discretion that there has been a
Change-in-Control of the Company.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and shall include regulations promulgated under the
Code.
(i) "Committee" means the Compensation Committee of the
Board or any other committee appointed by the Board to
perform the functions of the Compensation Committee.
(j) "Company" means Midcoast Energy Resources, Inc., a
Nevada corporation (including any and all subsidiaries), or
any successor thereto as provided in Article 8.
(k) "Disability" means:
(i) The mental or physical disability, either
occupational or non-occupational in cause, which
satisfies the definition of "total and permanent
disability" in the disability policy or plan provided
by the Corporation covering the Executive; or
(ii) If no such policy or plan is then covering
the Executive, a physical or mental infirmity which, as
determined by the Committee, in good faith, upon
receipt of and in reliance on sufficient competent
medical advice from one or more individuals, selected
by the Committee, who are qualified to give
professional medical advice, prevents the Executive
from substantially performing his duties.
(l) "Effective Date" means the date this Agreement is
approved by the Board or by the Committee if duly empowered
by the Board to so act, or such other date as shall
designate in its resolution approving this Agreement.
(m) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which causes the
payment of Severance Benefits hereunder.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Executive" means I. J. Berthelot II.
(p) "Good Reason" means any event or condition described
in Subsections (i) through (ix) below which occurs
simultaneous with or after a Change-in-Control:
(i) A change in the Executive's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status,
title, position or responsibilities as in effect
immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which, in
the Executive's reasonable judgment, are inconsistent
with his status, title, position or responsibilities;
or any removal of the Executive from or failure to
reappoint or reelect the Executive to any of such
offices or positions held by the Executive prior to
such Change-in-Control, except in connection with the
termination of his employment for Disability,
Retirement, Cause, as a result of his death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's Base Salary
or any failure to pay the Executive any compensation or
benefits to which the Executive is entitled within five
(5) days of the date due;
(iii) A failure to increase the Executive's Base
Salary at least annually at a percentage of Base Salary
no less than the average percentage increase (other
than increases resulting from the Executive's
promotion) granted to the Executive during the three
(3) full years ended prior to a Change-in-Control (or
such lesser number of full years during which the
Executive was employed), unless such failure occurs in
connection with the failure of the Company and the
acquiring company to increase the base salary for the
fiscal year in which such failure occurs for all
executive-level employees;
(iv) The Company's requiring the Executive to be
based at any place outside the City of Houston, Texas;
(v) The failure by the Company to (A) continue
in effect (without reduction in benefit level and/or
reward opportunities) any material compensation or
employee benefit plans in which the Executive was
participating immediately prior to the
Change-in-Control, unless a substitute or replacement
plan has been implemented which provides substantially
identical compensation and benefits to the Executive;
(vi) The insolvency or the filing (by any party,
including the Company) of a petition for the bankruptcy
of the Company;
(vii) Any material breach by the Company of any
provision of this Agreement or any employment agreement
between the Executive and the Company;
(viii) Any purported termination of the
Executive's employment for Cause by the Company which
is not for Cause; or
(ix) The failure of the Company to obtain an
agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree
to perform this Agreement.
Additionally, any event described in Subsections (i)
through (ix) above which occurs prior to a
Change-in-Control, but which the Executive reasonably
demonstrates (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated
to effect a Change-in-Control (a "Third Party"), or (B)
otherwise arose in connection with, or in anticipation of a
Change-in-Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to
the Change-in-Control.
(q) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
(r) "Qualifying Termination" means the termination of the
Executive's employment with the Company for either of the
following reasons:
(i) The Executive resigns for Good Reason; or
(ii) The Company terminates the Executive for any
reason other than for Cause.
(s) "Retirement" means:
(i) The Executive's voluntary termination of
employment with the Company at or following "normal
retirement age" (as defined in the Company's retirement plan
covering the Executive) or,
(ii) If there is no such plan, the Executive's
voluntary termination of employment with the Company at or
following age 65.
(t) "Severance Benefits" means the compensation described
in Section 2.2 and Article 4.
Article 2. Severance Benefits
2.1. Right to Severance Benefits.
(a) The Executive shall be entitled to receive from the
Company the Severance Benefits described in Section 2.2 if
there has been a Change-in-Control of the Company and if,
within eighteen (18) calendar months thereafter (except as
provided in the flush language at the end of Section 1(p)),
the Executive's employment with the Company shall end by
reason of a Qualifying Termination.
(b) The Executive shall not be entitled to receive such
Severance Benefits if the Executive is terminated for Cause,
if the Executive resigns other than for Good Reason, or if
his employment with the Company ends due to his death,
Retirement or Disability (refer to Sections 2.3 to 2.5 for a
summary of severance compensation payable to the Executive
in connection with a termination of employment for any such
reason).
2.2. Description of Severance Benefits. If the Executive becomes
entitled to receive Severance Benefits, as provided in
Sections 2.1, the Company shall pay to or provide the
Executive with the following:
(a) An amount equal to three (3) times the highest rate
of the Executive's annual Base Salary in effect at any time
up to and including the Effective Date of Termination.
(b) An amount equal to three (3) times the greater of:
(i) the Executive's average annual bonus earned over the
last three (3) years as reflected, or as would have been
reflected, in the Executive Compensation table of the
Company's annual proxy statement, or (ii) the Executive's
target bonus established for the bonus plan year in which
the Executive's Effective Date of Termination occurs.
(c) An amount equal to the Executive's unpaid Base Salary
and accrued, unused vacation through the Effective Date of
Termination.
(d) A continuation of any Company-provided or sponsored
life insurance and healthcare-related benefits under which
the Executive and/or the Executive's family is covered as of
the effective date of the Change-in-Control. These benefits
shall be provided by the Company to the Executive
immediately upon the Effective Date of Termination and shall
continue to be provided for thirty-six (36) months from the
Effective Date of Termination; such benefit shall be
provided to the Executive at the same premium cost, and at
the same coverage level, as in effect as of the Executive's
Effective Date of Termination; and any such benefit shall be
discontinued prior to the end of the thirty-six (36) month
period if the Executive receives a substantially similar
benefit from a subsequent employer, as determined by the
Committee in good faith.
2.3. Termination for Total and Permanent Disability. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated due to Disability, the Company
shall pay the Executive the Executive's full Base Salary and
accrued, unused vacation through the Effective Date of
Termination, at the rate then in effect, plus the
Executive's additional compensation and benefits, if any,
shall be determined in accordance with the Company's
retirement, insurance, and other applicable plans and
programs then in effect, and the Company shall have no
further obligations to the Executive under this Agreement.
2.4. Termination for Retirement or Death. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated by reason of Retirement or death,
the Company shall pay the Executive the Executive's full
Base Salary and accrued, unused vacation through the
Effective Date of Termination, at the rate then in effect,
plus the Executive's additional compensation and benefits,
if any, shall be determined in accordance with the Company's
retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect, and the
Company shall have no further obligations to the Executive
under this Agreement.
2.5. Termination for Cause or by the Executive Other Than for
Good Reason. Following a Change-in-Control of the Company,
if the Executive's employment is terminated either (i) by
the Company for Cause, or (ii) by the Executive for any
reason other than Good Reason, the Company shall pay the
Executive the Executive's full Base Salary and accrued,
unused vacation through the Effective Date of Termination,
at the rate then in effect, plus all other amounts to which
the Executive is entitled under any compensation and benefit
plans of the Company, at the time such payments are due, and
the Company shall have no further obligations to the
Executive under this Agreement.
2.6. Notice of Termination. Any termination by the Executive for
any reason or by the Company for Cause shall be communicated
by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
Article 3. Form and Timing of Severance Benefits
3.1. Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 2.2(a), (b), and (c) shall be
paid in cash to the Executive in a single lump sum as soon
as practicable following the Effective Date of Termination,
but in no event beyond fifteen (15) days from such Date.
3.2. Withholding of Taxes. The Company shall withhold from any
amounts payable under this Agreement all Federal, state,
city, or other taxes as legally shall be required.
Article 4. Golden Parachute Tax Gross-Up and Tax Indemnity
4.1. Severance Benefits to be Grossed-Up by the Company.
(a) When Severance Benefits Are to be Grossed-Up. If
Severance Benefits payable to the Executive plus any other
benefits realized by the Executive in connection with the
Change-in-Control of the Company (in the aggregate "Total
Payments") would, in whole or in part, constitute an "excess
parachute payment" the Company shall pay to the Executive in
cash an amount equal to the "tax gross-up" as determined
below with respect to the Executive's Severance Benefits.
The term "excess parachute payment" shall have the meaning,
and shall be valued, as provided in the Code.
(b) "Tax Gross-Up" Defined. The term "tax gross-up"
means the sum of the (i) excise tax imposed on the
Executive's Severance Benefits pursuant to Sections 280G and
4999 of the Code, plus (ii) federal, state and local income
taxes payable by the Executive with respect to the Company's
payment of such excise tax, plus (iii) federal, state and
local employment taxes payable by the Executive with respect
to the Company's payment of such excise tax, plus (iv)
iterations of income and employment taxes on (ii) plus
(iii).
(c) Guidance for Interpreting and Applying Article 4.
The objective of Article 4 is for the Company to pay the
Executive a cash payment to place the Executive in the same
net after-tax position as if no portion of the Executive's
Severance Benefits were subject to the excise tax imposed by
Sections 280G and 4999 of the Code. This Article 4 shall be
interpreted and applied accordingly.
4.2. Procedure for Establishing the Tax Gross-Up Payment.
(a) Within sixty (60) days following
delivery of the Notice of Termination (as described in
Section 2.6) or notice by the Company to the Executive
of its belief that there is a payment or benefit due
the Executive which will result in a "excess parachute
payment" as defined in Section 280G of the Code, the
Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which
need not be unqualified, as the Executive may choose,
which sets forth: (i) the amount of the Executive's
"annualized includible compensation for the base
period" (as defined in Code Section 280G(d)(1)); (ii)
the present value of the Total Payments; (iii) the
amount and present value of any "excess parachute
payment"; (iv) the amount of the Code Section 4999
excise tax payable with respect to the Executive's
Severance Benefits, and (v) the amount of the "tax
gross-up" payment as defined above. The opinion of
such legal counsel shall be supported by the opinion of
a certified public accounting firm and, if necessary, a
firm of recognized executive compensation consultants.
Such opinion shall be binding upon the Company and the
Executive.
(b) The provisions of this Section 4.2(b),
including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive
presumption that: (i) the compensation and benefits
provided for in Section 2.2 and (ii) any other
compensation earned prior to the Effective Date of
Termination by the Executive pursuant to the Company's
compensation programs (if such payments would have been
made in the future in any event, even though the timing
of such payment is triggered by the Change-in-Control),
are reasonable.
4.3. Subsequent Imposition of Excise Tax. If, notwithstanding
compliance with the provisions of Sections 4.1 and 4.2, it
is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any
portion of the Total Payments is considered to be a
"parachute payment," subject to excise tax under Section
4999 of the Code, which was not contemplated to be a
"parachute payment" at the time of payment, the Executive
shall be entitled to receive a lump sum cash payment
sufficient to place the Executive in the same net after-tax
position, computed by using the Executive's marginal total
tax rate for the year in which the payment contemplated
under this Section 4.3 is made.
Article 5. The Company's Payment Obligation
5.1. Payment Obligations Absolute.
(i) The Company's obligation to make the
Severance Payments and the arrangements provided for
herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including,
without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company
may have against the Executive or anyone else. All
amounts payable by the Company shall be final, and the
Company shall not seek to recover all or any part of
such payment from the Executive or from whomsoever may
be entitled thereto, for any reasons whatsoever, except
as may be consistent with Section 2.2(d).
(ii) The Executive shall not be obligated to
seek other employment in mitigation of the amounts
payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of
the Company's obligations to make the Severance
Payments and arrangements required to be made under
this Agreement, except to the extent provided in
Section 2.2(d).
5.2. Contractual Rights to Severance Benefits. This Agreement
establishes and vests in the Executive a contractual right
to the Severance Benefits to which the Executive is entitled
hereunder. However, nothing herein contained shall require
or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
Article 6. Term of Agreement
6.1 Term. This Agreement will commence on the Effective Date
and shall continue in effect for eighteen (18) months, the
last day of which shall be the "Expiration Date". However,
at the end of such eighteen (18) month period and, if
extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for
one (1) additional year, unless the Board or the Committee
(as is consistent with Section 1(i)) delivers written notice
three (3) months prior to the end of such term, or extended
term, to the Executive, that the Agreement will not be
extended. In such case, the Agreement will terminate at the
end of the term, or extended term, then in progress.
However, in the event a Change-in-Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) eighteen (18)
months beyond the month in which such Change-in-Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all Severance
Benefits required hereunder have been paid to the Executive.
Article 7. Legal Remedies
7.1. Payment of Legal Fees. To the extent permitted by law and
except as provided in Section 7.2, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of the Company's refusal to provide the Severance
Benefits to which the Executive becomes entitled under this
Agreement.
7.2. Arbitration. The Executive shall have the right and option
to elect (in lieu of litigation) to have any dispute or
controversy arising under or in connection with this
Agreement settled be arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by
the Executive within two hundred (200) miles from the
location of his job with the Company, in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by
the Company.
Article 8. Successors
8.1 Company's Successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company or of any division
or subsidiary thereof to expressly assume and agree to
perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company
would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such
assumption and agreement prior to the effective date of any
such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
or successor entity in the same amount and on the same terms
as the Executive would be entitled to hereunder if the
Executive had terminated his employment with the Company
voluntarily for Good Reason. For the purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective
Date of Termination.
8.2 Executive's Successors. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If
the Executive should die while any amount would still be
payable to the Executive hereunder had the Executive
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms
of this Agreement, to the Executive's Beneficiary. If the
Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the
Executive's estate.
Article 9. Miscellaneous
9.1. Employment Status. The Executive and the Company
acknowledge that, except as may be provided under any other
agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will,"
and, prior to the effective date of a Change-in-Control
(except as provided in the flush language at the end of
Section 1(p)), may be terminated by either the Executive or
the Company at any time.
9.2. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designation at any
time.
9.3. Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect
to the subject matter hereof.
9.4. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include
the feminine, the plural shall include the singular, and the
singular shall include the plural.
9.5. Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
9.6. Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by authorized member of the Committee, or
by the respective parties' legal representatives and
successors.
9.7. Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the state of Texas shall be
the controlling law in all matters relating to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on this 15th day of
August, 1997.
Executive:
Midcoast Energy Resources, Inc.:
By:
I. J. Berthelot II
Dan C. Tutcher, President & CEO
ATTEST:Midcoast Energy Resources, Inc.
(Corporate Seal)
By:
Duane S. Herbst, Secretary
EXECUTIVE SEVERANCE AGREEMENT
by and between
Midcoast Energy Resources, Inc.
and
Richard Robert
Effective August 15, 1997
TABLE OF CONTENTS
Article
Section Page
1 Definitions 1
2 Severance Benefits
2.1 Right to Severance Benefits 5
2.2 Description of Severance Benefits 5
2.3 Termination for Total and Permanent Disability
6
2.4 Termination for Retirement or Death 6
2.5 Termination for Cause or by the Executive Other
7
Than for Good Reason
2.6 Notice of Termination 7
3 Form and Timing of Severance Benefits
3.1 Form and Timing of Severance Benefits 7
3.2 Withholding of Taxes 7
4 Golden Parachute Tax Gross-Up and Tax Indemnity
4.1 Severance Benefits to be Grossed-Up by the
Company 7
4.2 Procedure for Establishing the Tax Gross-Up
Payment 8
4.3 Subsequent Imposition of Excise Tax 8
5 The Company's Payment Obligation
5.1 Payment Obligations Absolute 8
5.2 Contractual Rights to Benefits 9
6 Term of Agreement 9
7 Legal Remedies
7.1 Payment of Legal Fees 9
7.2 Arbitration 9
8 Successors
8.1 Company's Successors 10
8.2 Executive's Successors 10
TABLE OF CONTENTS (Cont'd)
Article
Section Page
9 Miscellaneous
9.1 Employment Status 10
9.2 Beneficiaries 10
9.3 Entire Agreement 10
9.4 Gender and Number 11
9.5 Severability 11
9.6 Modification 11
9.7 Applicable Law 11
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of August,
1997, by and between Midcoast Energy Resources Inc., a Nevada
corporation with its principal office at 1100 Louisiana Street,
Suite 2950, Houston, Texas 77002 (the "Company") and Richard
Robert (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes there is the possibility that a
Change-in-Control of the Company may arise in the future;
WHEREAS, in the event of a prospective Change-in-Control of the
Company, the Company believes it imperative that it be able to
rely on the Executive to continue in the Executive's position,
provide advice that is in the best interests of the Company, and
act without being distracted by the personal uncertainties and
risks created by the possibility of a Change-in-Control;
WHEREAS, the Company and the Executive desire to enter into this
Agreement whereby severance benefits will be paid to the
Executive if a Change-in-Control of the Company occurs and the
Executive's employment is consequently actually or constructively
terminated by the Company or its successor under the
circumstances described herein;
NOW, THEREFORE, to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration,
the Company and the Executive agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Agreement" means this Executive Severance Agreement.
(b) "Base Salary" means the salary of record paid to the
Executive as annual salary, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Section 9.2.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" shall be determined by the Board (by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board on the terms described
below), in good faith, and shall mean the occurrence of any
one or more of the following:
(i) The willful and continued failure by the
Executive to substantially perform the Executive's
duties (other than any such failure resulting from the
Executive's Disability) after a written demand for
substantial performance has been delivered by the Board
to the Executive that specifically identifies the
manner in which the Board believes that the Executive
has not substantially performed the Executive's duties,
and the Executive fails to remedy such failure within
thirty (30) calendar days after receiving such notice;
or
(ii) The Executive's conviction (including by
trial, plea of guilty or plea of nolo contendere) for
committing an act of fraud, embezzlement, theft, or
other act constituting a felony; or
(iii) The Executive's willful engaging in
misconduct which is demonstrably and materially
injurious to the Company. No act, or failure to act,
on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that
the Executive's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less
than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for the
purpose of making a determination of whether Cause for
termination exists (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the
Board), finding in the good faith that Cause exists and
specifying the particulars thereof in detail.
(g) "Change-in-Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of
the following events occurs on or following the Effective
Date of this Agreement:
(i) Any Person (other than those Persons in
control of the Company on the Effective Date of this
Agreement, a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly
by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the
Company) becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive
years (not including any period prior to the Effective
Date of this Agreement), individuals who were members
of the Board at the beginning of such period (and any
new Director whose election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office
who either were Directors at the beginning of such
period or whose election or nomination for election was
so approved) cease for any reason to constitute a
majority thereof; or
(iii) The stockholders of the Company approve: (A)
a plan of complete liquidation of the Company, (B) an
agreement for the sale or disposition of all or
substantially all the Company's assets, or (C) a
merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined
voting power of the securities of the Company (or such
surviving entity) outstanding immediately after such
merger, consolidation, or reorganization; or
(iv) The Board determines in its sole and
absolute discretion that there has been a
Change-in-Control of the Company.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and shall include regulations promulgated under the
Code.
(i) "Committee" means the Compensation Committee of the
Board or any other committee appointed by the Board to
perform the functions of the Compensation Committee.
(j) "Company" means Midcoast Energy Resources, Inc., a
Nevada corporation (including any and all subsidiaries), or
any successor thereto as provided in Article 8.
(k) "Disability" means:
(i) The mental or physical disability, either
occupational or non-occupational in cause, which
satisfies the definition of "total and permanent
disability" in the disability policy or plan provided
by the Corporation covering the Executive; or
(ii) If no such policy or plan is then covering
the Executive, a physical or mental infirmity which, as
determined by the Committee, in good faith, upon
receipt of and in reliance on sufficient competent
medical advice from one or more individuals, selected
by the Committee, who are qualified to give
professional medical advice, prevents the Executive
from substantially performing his duties.
(l) "Effective Date" means the date this Agreement is
approved by the Board or by the Committee if duly empowered
by the Board to so act, or such other date as shall
designate in its resolution approving this Agreement.
(m) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which causes the
payment of Severance Benefits hereunder.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Executive" means Richard Robert.
(p) "Good Reason" means any event or condition described
in Subsections (i) through (ix) below which occurs
simultaneous with or after a Change-in-Control:
(i) A change in the Executive's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status,
title, position or responsibilities as in effect
immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which, in
the Executive's reasonable judgment, are inconsistent
with his status, title, position or responsibilities;
or any removal of the Executive from or failure to
reappoint or reelect the Executive to any of such
offices or positions held by the Executive prior to
such Change-in-Control, except in connection with the
termination of his employment for Disability,
Retirement, Cause, as a result of his death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's Base Salary
or any failure to pay the Executive any compensation or
benefits to which the Executive is entitled within five
(5) days of the date due;
(iii) A failure to increase the Executive's Base
Salary at least annually at a percentage of Base Salary
no less than the average percentage increase (other
than increases resulting from the Executive's
promotion) granted to the Executive during the three
(3) full years ended prior to a Change-in-Control (or
such lesser number of full years during which the
Executive was employed), unless such failure occurs in
connection with the failure of the Company and the
acquiring company to increase the base salary for the
fiscal year in which such failure occurs for all
executive-level employees;
(iv) The Company's requiring the Executive to be
based at any place outside the City of Houston, Texas;
(v) The failure by the Company to (A) continue
in effect (without reduction in benefit level and/or
reward opportunities) any material compensation or
employee benefit plans in which the Executive was
participating immediately prior to the
Change-in-Control, unless a substitute or replacement
plan has been implemented which provides substantially
identical compensation and benefits to the Executive;
(vi) The insolvency or the filing (by any party,
including the Company) of a petition for the bankruptcy
of the Company;
(vii) Any material breach by the Company of any
provision of this Agreement or any employment agreement
between the Executive and the Company;
(viii) Any purported termination of the
Executive's employment for Cause by the Company which
is not for Cause; or
(ix) The failure of the Company to obtain an
agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree
to perform this Agreement.
Additionally, any event described in Subsections (i)
through (ix) above which occurs prior to a
Change-in-Control, but which the Executive reasonably
demonstrates (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated
to effect a Change-in-Control (a "Third Party"), or (B)
otherwise arose in connection with, or in anticipation of a
Change-in-Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to
the Change-in-Control.
(q) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
(r) "Qualifying Termination" means the termination of the
Executive's employment with the Company for either of the
following reasons:
(i) The Executive resigns for Good Reason; or
(ii) The Company terminates the Executive for any
reason other than for Cause.
(s) "Retirement" means:
(i) The Executive's voluntary termination of
employment with the Company at or following "normal
retirement age" (as defined in the Company's retirement plan
covering the Executive) or,
(ii) If there is no such plan, the Executive's
voluntary termination of employment with the Company at or
following age 65.
(t) "Severance Benefits" means the compensation described
in Section 2.2 and Article 4.
Article 2. Severance Benefits
2.1. Right to Severance Benefits.
(a) The Executive shall be entitled to receive from the
Company the Severance Benefits described in Section 2.2 if
there has been a Change-in-Control of the Company and if,
within eighteen (18) calendar months thereafter (except as
provided in the flush language at the end of Section 1(p)),
the Executive's employment with the Company shall end by
reason of a Qualifying Termination.
(b) The Executive shall not be entitled to receive such
Severance Benefits if the Executive is terminated for Cause,
if the Executive resigns other than for Good Reason, or if
his employment with the Company ends due to his death,
Retirement or Disability (refer to Sections 2.3 to 2.5 for a
summary of severance compensation payable to the Executive
in connection with a termination of employment for any such
reason).
2.2. Description of Severance Benefits. If the Executive becomes
entitled to receive Severance Benefits, as provided in
Sections 2.1, the Company shall pay to or provide the
Executive with the following:
(a) An amount equal to three (3) times the highest rate
of the Executive's annual Base Salary in effect at any time
up to and including the Effective Date of Termination.
(b) An amount equal to three (3) times the greater of:
(i) the Executive's average annual bonus earned over the
last three (3) years as reflected, or as would have been
reflected, in the Executive Compensation table of the
Company's annual proxy statement, or (ii) the Executive's
target bonus established for the bonus plan year in which
the Executive's Effective Date of Termination occurs.
(c) An amount equal to the Executive's unpaid Base Salary
and accrued, unused vacation through the Effective Date of
Termination.
(d) A continuation of any Company-provided or sponsored
life insurance and healthcare-related benefits under which
the Executive and/or the Executive's family is covered as of
the effective date of the Change-in-Control. These benefits
shall be provided by the Company to the Executive
immediately upon the Effective Date of Termination and shall
continue to be provided for thirty-six (36) months from the
Effective Date of Termination; such benefit shall be
provided to the Executive at the same premium cost, and at
the same coverage level, as in effect as of the Executive's
Effective Date of Termination; and any such benefit shall be
discontinued prior to the end of the thirty-six (36) month
period if the Executive receives a substantially similar
benefit from a subsequent employer, as determined by the
Committee in good faith.
2.3. Termination for Total and Permanent Disability. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated due to Disability, the Company
shall pay the Executive the Executive's full Base Salary and
accrued, unused vacation through the Effective Date of
Termination, at the rate then in effect, plus the
Executive's additional compensation and benefits, if any,
shall be determined in accordance with the Company's
retirement, insurance, and other applicable plans and
programs then in effect, and the Company shall have no
further obligations to the Executive under this Agreement.
2.4. Termination for Retirement or Death. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated by reason of Retirement or death,
the Company shall pay the Executive the Executive's full
Base Salary and accrued, unused vacation through the
Effective Date of Termination, at the rate then in effect,
plus the Executive's additional compensation and benefits,
if any, shall be determined in accordance with the Company's
retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect, and the
Company shall have no further obligations to the Executive
under this Agreement.
2.5. Termination for Cause or by the Executive Other Than for
Good Reason. Following a Change-in-Control of the Company,
if the Executive's employment is terminated either (i) by
the Company for Cause, or (ii) by the Executive for any
reason other than Good Reason, the Company shall pay the
Executive the Executive's full Base Salary and accrued,
unused vacation through the Effective Date of Termination,
at the rate then in effect, plus all other amounts to which
the Executive is entitled under any compensation and benefit
plans of the Company, at the time such payments are due, and
the Company shall have no further obligations to the
Executive under this Agreement.
2.6. Notice of Termination. Any termination by the Executive for
any reason or by the Company for Cause shall be communicated
by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
Article 3. Form and Timing of Severance Benefits
3.1. Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 2.2(a), (b), and (c) shall be
paid in cash to the Executive in a single lump sum as soon
as practicable following the Effective Date of Termination,
but in no event beyond fifteen (15) days from such Date.
3.2. Withholding of Taxes. The Company shall withhold from any
amounts payable under this Agreement all Federal, state,
city, or other taxes as legally shall be required.
Article 4. Golden Parachute Tax Gross-Up and Tax Indemnity
4.1. Severance Benefits to be Grossed-Up by the Company.
(a) When Severance Benefits Are to be Grossed-Up. If
Severance Benefits payable to the Executive plus any other
benefits realized by the Executive in connection with the
Change-in-Control of the Company (in the aggregate "Total
Payments") would, in whole or in part, constitute an "excess
parachute payment" the Company shall pay to the Executive in
cash an amount equal to the "tax gross-up" as determined
below with respect to the Executive's Severance Benefits.
The term "excess parachute payment" shall have the meaning,
and shall be valued, as provided in the Code.
(b) "Tax Gross-Up" Defined. The term "tax gross-up"
means the sum of the (i) excise tax imposed on the
Executive's Severance Benefits pursuant to Sections 280G and
4999 of the Code, plus (ii) federal, state and local income
taxes payable by the Executive with respect to the Company's
payment of such excise tax, plus (iii) federal, state and
local employment taxes payable by the Executive with respect
to the Company's payment of such excise tax, plus (iv)
iterations of income and employment taxes on (ii) plus
(iii).
(c) Guidance for Interpreting and Applying Article 4.
The objective of Article 4 is for the Company to pay the
Executive a cash payment to place the Executive in the same
net after-tax position as if no portion of the Executive's
Severance Benefits were subject to the excise tax imposed by
Sections 280G and 4999 of the Code. This Article 4 shall be
interpreted and applied accordingly.
4.2. Procedure for Establishing the Tax Gross-Up Payment.
(a) Within sixty (60) days following
delivery of the Notice of Termination (as described in
Section 2.6) or notice by the Company to the Executive
of its belief that there is a payment or benefit due
the Executive which will result in a "excess parachute
payment" as defined in Section 280G of the Code, the
Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which
need not be unqualified, as the Executive may choose,
which sets forth: (i) the amount of the Executive's
"annualized includible compensation for the base
period" (as defined in Code Section 280G(d)(1)); (ii)
the present value of the Total Payments; (iii) the
amount and present value of any "excess parachute
payment"; (iv) the amount of the Code Section 4999
excise tax payable with respect to the Executive's
Severance Benefits, and (v) the amount of the "tax
gross-up" payment as defined above. The opinion of
such legal counsel shall be supported by the opinion of
a certified public accounting firm and, if necessary, a
firm of recognized executive compensation consultants.
Such opinion shall be binding upon the Company and the
Executive.
(b) The provisions of this Section 4.2(b),
including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive
presumption that: (i) the compensation and benefits
provided for in Section 2.2 and (ii) any other
compensation earned prior to the Effective Date of
Termination by the Executive pursuant to the Company's
compensation programs (if such payments would have been
made in the future in any event, even though the timing
of such payment is triggered by the Change-in-Control),
are reasonable.
4.3. Subsequent Imposition of Excise Tax. If, notwithstanding
compliance with the provisions of Sections 4.1 and 4.2, it
is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any
portion of the Total Payments is considered to be a
"parachute payment," subject to excise tax under Section
4999 of the Code, which was not contemplated to be a
"parachute payment" at the time of payment, the Executive
shall be entitled to receive a lump sum cash payment
sufficient to place the Executive in the same net after-tax
position, computed by using the Executive's marginal total
tax rate for the year in which the payment contemplated
under this Section 4.3 is made.
Article 5. The Company's Payment Obligation
5.1. Payment Obligations Absolute.
(i) The Company's obligation to make the
Severance Payments and the arrangements provided for
herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including,
without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company
may have against the Executive or anyone else. All
amounts payable by the Company shall be final, and the
Company shall not seek to recover all or any part of
such payment from the Executive or from whomsoever may
be entitled thereto, for any reasons whatsoever, except
as may be consistent with Section 2.2(d).
(ii) The Executive shall not be obligated to
seek other employment in mitigation of the amounts
payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of
the Company's obligations to make the Severance
Payments and arrangements required to be made under
this Agreement, except to the extent provided in
Section 2.2(d).
5.2. Contractual Rights to Severance Benefits. This Agreement
establishes and vests in the Executive a contractual right
to the Severance Benefits to which the Executive is entitled
hereunder. However, nothing herein contained shall require
or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
Article 6. Term of Agreement
6.1 Term. This Agreement will commence on the Effective Date
and shall continue in effect for eighteen (18) months, the
last day of which shall be the "Expiration Date". However,
at the end of such eighteen (18) month period and, if
extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for
one (1) additional year, unless the Board or the Committee
(as is consistent with Section 1(i)) delivers written notice
three (3) months prior to the end of such term, or extended
term, to the Executive, that the Agreement will not be
extended. In such case, the Agreement will terminate at the
end of the term, or extended term, then in progress.
However, in the event a Change-in-Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) eighteen (18)
months beyond the month in which such Change-in-Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all Severance
Benefits required hereunder have been paid to the Executive.
Article 7. Legal Remedies
7.1. Payment of Legal Fees. To the extent permitted by law and
except as provided in Section 7.2, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of the Company's refusal to provide the Severance
Benefits to which the Executive becomes entitled under this
Agreement.
7.2. Arbitration. The Executive shall have the right and option
to elect (in lieu of litigation) to have any dispute or
controversy arising under or in connection with this
Agreement settled be arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by
the Executive within two hundred (200) miles from the
location of his job with the Company, in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by
the Company.
Article 8. Successors
8.1 Company's Successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company or of any division
or subsidiary thereof to expressly assume and agree to
perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company
would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such
assumption and agreement prior to the effective date of any
such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
or successor entity in the same amount and on the same terms
as the Executive would be entitled to hereunder if the
Executive had terminated his employment with the Company
voluntarily for Good Reason. For the purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective
Date of Termination.
8.2 Executive's Successors. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If
the Executive should die while any amount would still be
payable to the Executive hereunder had the Executive
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms
of this Agreement, to the Executive's Beneficiary. If the
Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the
Executive's estate.
Article 9. Miscellaneous
9.1. Employment Status. The Executive and the Company
acknowledge that, except as may be provided under any other
agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will,"
and, prior to the effective date of a Change-in-Control
(except as provided in the flush language at the end of
Section 1(p)), may be terminated by either the Executive or
the Company at any time.
9.2. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designation at any
time.
9.3. Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect
to the subject matter hereof.
9.4. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include
the feminine, the plural shall include the singular, and the
singular shall include the plural.
9.5. Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
9.6. Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by authorized member of the Committee, or
by the respective parties' legal representatives and
successors.
9.7. Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the state of Texas shall be
the controlling law in all matters relating to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on this 15th day of
August, 1997.
EXECUTIVE:
Midcoast Energy Resources, Inc.:
By:
Richard Robert
Dan C. Tutcher, President & CEO
ATTEST:Midcoast Energy Resources, Inc.
(Corporate Seal)
By:
Duane S. Herbst, Secretary
EXECUTIVE SEVERANCE AGREEMENT
by and between
Midcoast Energy Resources, Inc.
and
Duane S. Herbst
Effective August 15, 1997
TABLE OF CONTENTS
Article
Section Page
1 Definitions 1
2 Severance Benefits
2.1 Right to Severance Benefits 5
2.2 Description of Severance Benefits 6
2.3 Termination for Total and Permanent Disability
6
2.4 Termination for Retirement or Death 6
2.5 Termination for Cause or by the Executive Other
7
Than for Good Reason
2.6 Notice of Termination 7
3 Form and Timing of Severance Benefits
3.1 Form and Timing of Severance Benefits 7
3.2 Withholding of Taxes 7
4 Golden Parachute Tax Gross-Up and Tax Indemnity
4.1 Severance Benefits to be Grossed-Up by the
Company 7
4.2 Procedure for Establishing the Tax Gross-Up
Payment 8
4.3 Subsequent Imposition of Excise Tax 8
5 The Company's Payment Obligation
5.1 Payment Obligations Absolute 8
5.2 Contractual Rights to Benefits 9
6 Term of Agreement 9
7 Legal Remedies
7.1 Payment of Legal Fees 9
7.2 Arbitration 9
8 Successors
8.1 Company's Successors 10
8.2 Executive's Successors 10
TABLE OF CONTENTS (Cont'd)
Article
Section Page
9 Miscellaneous
9.1 Employment Status 10
9.2 Beneficiaries 10
9.3 Entire Agreement 10
9.4 Gender and Number 11
9.5 Severability 11
9.6 Modification 11
9.7 Applicable Law 11
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into this 15th day of August,
1997, by and between Midcoast Energy Resources Inc., a Nevada
corporation with its principal office at 1100 Louisiana Street,
Suite 2950, Houston, Texas 77002 (the "Company") and Duane S.
Herbst (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company believes there is the possibility that a
Change-in-Control of the Company may arise in the future;
WHEREAS, in the event of a prospective Change-in-Control of the
Company, the Company believes it imperative that it be able to
rely on the Executive to continue in the Executive's position,
provide advice that is in the best interests of the Company, and
act without being distracted by the personal uncertainties and
risks created by the possibility of a Change-in-Control;
WHEREAS, the Company and the Executive desire to enter into this
Agreement whereby severance benefits will be paid to the
Executive if a Change-in-Control of the Company occurs and the
Executive's employment is consequently actually or constructively
terminated by the Company or its successor under the
circumstances described herein;
NOW, THEREFORE, to induce the Executive to remain in the employ
of the Company, and for other good and valuable consideration,
the Company and the Executive agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Agreement" means this Executive Severance Agreement.
(b) "Base Salary" means the salary of record paid to the
Executive as annual salary, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Beneficiary" means the persons or entities
designated or deemed designated by the Executive pursuant to
Section 9.2.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" shall be determined by the Board (by the
affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board on the terms described
below), in good faith, and shall mean the occurrence of any
one or more of the following:
(i) The willful and continued failure by the
Executive to substantially perform the Executive's
duties (other than any such failure resulting from the
Executive's Disability) after a written demand for
substantial performance has been delivered by the Board
to the Executive that specifically identifies the
manner in which the Board believes that the Executive
has not substantially performed the Executive's duties,
and the Executive fails to remedy such failure within
thirty (30) calendar days after receiving such notice;
or
(ii) The Executive's conviction (including by
trial, plea of guilty or plea of nolo contendere) for
committing an act of fraud, embezzlement, theft, or
other act constituting a felony; or
(iii) The Executive's willful engaging in
misconduct which is demonstrably and materially
injurious to the Company. No act, or failure to act,
on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that
the Executive's action or omission was in the best
interest of the Company.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less
than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board called and held for the
purpose of making a determination of whether Cause for
termination exists (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the
Board), finding in the good faith that Cause exists and
specifying the particulars thereof in detail.
(g) "Change-in-Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of
the following events occurs on or following the Effective
Date of this Agreement:
(i) Any Person (other than those Persons in
control of the Company on the Effective Date of this
Agreement, a trustee or other fiduciary holding
securities under an employee benefit plan of the
Company, or a corporation owned directly or indirectly
by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the
Company) becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or
(ii) During any period of two (2) consecutive
years (not including any period prior to the Effective
Date of this Agreement), individuals who were members
of the Board at the beginning of such period (and any
new Director whose election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office
who either were Directors at the beginning of such
period or whose election or nomination for election was
so approved) cease for any reason to constitute a
majority thereof; or
(iii) The stockholders of the Company approve: (A)
a plan of complete liquidation of the Company, (B) an
agreement for the sale or disposition of all or
substantially all the Company's assets, or (C) a
merger, consolidation, or reorganization of the Company
with or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined
voting power of the securities of the Company (or such
surviving entity) outstanding immediately after such
merger, consolidation, or reorganization; or
(iv) The Board determines in its sole and
absolute discretion that there has been a
Change-in-Control of the Company.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and shall include regulations promulgated under the
Code.
(i) "Committee" means the Compensation Committee of the
Board or any other committee appointed by the Board to
perform the functions of the Compensation Committee.
(j) "Company" means Midcoast Energy Resources, Inc. a
Nevada corporation (including any and all subsidiaries), or
any successor thereto as provided in Article 8.
(k) "Disability" means:
(i) The mental or physical disability, either
occupational or non-occupational in cause, which
satisfies the definition of "total and permanent
disability" in the disability policy or plan provided
by the Corporation covering the Executive; or
(ii) If no such policy or plan is then covering
the Executive, a physical or mental infirmity which, as
determined by the Committee, in good faith, upon
receipt of and in reliance on sufficient competent
medical advice from one or more individuals, selected
by the Committee, who are qualified to give
professional medical advice, prevents the Executive
from substantially performing his duties.
(l) "Effective Date" means the date this Agreement is
approved by the Board or by the Committee if duly empowered
by the Board to so act, or such other date as shall
designate in its resolution approving this Agreement.
(m) "Effective Date of Termination" means the date on
which a Qualifying Termination occurs which causes the
payment of Severance Benefits hereunder.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Executive" means Duane S. Herbst.
(p) "Good Reason" means any event or condition described
in Subsections (i) through (ix) below which occurs
simultaneous with or after a Change-in-Control:
(i) A change in the Executive's status, title,
position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, represents an adverse change from his status,
title, position or responsibilities as in effect
immediately prior thereto; the assignment to the
Executive of any duties or responsibilities which, in
the Executive's reasonable judgment, are inconsistent
with his status, title, position or responsibilities;
or any removal of the Executive from or failure to
reappoint or reelect the Executive to any of such
offices or positions held by the Executive prior to
such Change-in-Control, except in connection with the
termination of his employment for Disability,
Retirement, Cause, as a result of his death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's Base Salary
or any failure to pay the Executive any compensation or
benefits to which the Executive is entitled within five
(5) days of the date due;
(iii) A failure to increase the Executive's Base
Salary at least annually at a percentage of Base Salary
no less than the average percentage increase (other
than increases resulting from the Executive's
promotion) granted to the Executive during the three
(3) full years ended prior to a Change-in-Control (or
such lesser number of full years during which the
Executive was employed), unless such failure occurs in
connection with the failure of the Company and the
acquiring company to increase the base salary for the
fiscal year in which such failure occurs for all
executive-level employees;
(iv) The Company's requiring the Executive to be
based at any place outside the City of Corpus Christi,
Texas;
(v) The failure by the Company to (A) continue
in effect (without reduction in benefit level and/or
reward opportunities) any material compensation or
employee benefit plans in which the Executive was
participating immediately prior to the
Change-in-Control, unless a substitute or replacement
plan has been implemented which provides substantially
identical compensation and benefits to the Executive;
(vi) The insolvency or the filing (by any party,
including the Company) of a petition for the bankruptcy
of the Company;
(vii) Any material breach by the Company of any
provision of this Agreement or any employment agreement
between the Executive and the Company;
(viii) Any purported termination of the
Executive's employment for Cause by the Company which
is not for Cause; or
(ix) The failure of the Company to obtain an
agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree
to perform this Agreement.
Additionally, any event described in Subsections (i)
through (ix) above which occurs prior to a
Change-in-Control, but which the Executive reasonably
demonstrates (A) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated
to effect a Change-in-Control (a "Third Party"), or (B)
otherwise arose in connection with, or in anticipation of a
Change-in-Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to
the Change-in-Control.
(q) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
(r) "Qualifying Termination" means the termination of the
Executive's employment with the Company for either of the
following reasons:
(i) The Executive resigns for Good Reason; or
(ii) The Company terminates the Executive for any
reason other than for Cause.
(s) "Retirement" means:
(i) The Executive's voluntary termination of
employment with the Company at or following "normal
retirement age" (as defined in the Company's retirement plan
covering the Executive) or,
(ii) If there is no such plan, the Executive's
voluntary termination of employment with the Company at or
following age 65.
(t) "Severance Benefits" means the compensation described
in Section 2.2 and Article 4.
Article 2. Severance Benefits
2.1. Right to Severance Benefits.
(a) The Executive shall be entitled to receive from the
Company the Severance Benefits described in Section 2.2 if
there has been a Change-in-Control of the Company and if,
within eighteen (18) calendar months thereafter (except as
provided in the flush language at the end of Section 1(p)),
the Executive's employment with the Company shall end by
reason of a Qualifying Termination.
(b) The Executive shall not be entitled to receive such
Severance Benefits if the Executive is terminated for Cause,
if the Executive resigns other than for Good Reason, or if
his employment with the Company ends due to his death,
Retirement or Disability (refer to Sections 2.3 to 2.5 for a
summary of severance compensation payable to the Executive
in connection with a termination of employment for any such
reason).
2.2. Description of Severance Benefits. If the Executive becomes
entitled to receive Severance Benefits, as provided in
Sections 2.1, the Company shall pay to or provide the
Executive with the following:
(a) An amount equal to three (3) times the highest rate
of the Executive's annual Base Salary in effect at any time
up to and including the Effective Date of Termination.
(b) An amount equal to three (3) times the greater of:
(i) the Executive's average annual bonus earned over the
last three (3) years as reflected, or as would have been
reflected, in the Executive Compensation table of the
Company's annual proxy statement, or (ii) the Executive's
target bonus established for the bonus plan year in which
the Executive's Effective Date of Termination occurs.
(c) An amount equal to the Executive's unpaid Base Salary
and accrued, unused vacation through the Effective Date of
Termination.
(d) A continuation of any Company-provided or sponsored
life insurance and healthcare-related benefits under which
the Executive and/or the Executive's family is covered as of
the effective date of the Change-in-Control. These benefits
shall be provided by the Company to the Executive
immediately upon the Effective Date of Termination and shall
continue to be provided for thirty-six (36) months from the
Effective Date of Termination; such benefit shall be
provided to the Executive at the same premium cost, and at
the same coverage level, as in effect as of the Executive's
Effective Date of Termination; and any such benefit shall be
discontinued prior to the end of the thirty-six (36) month
period if the Executive receives a substantially similar
benefit from a subsequent employer, as determined by the
Committee in good faith.
2.3. Termination for Total and Permanent Disability. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated due to Disability, the Company
shall pay the Executive the Executive's full Base Salary and
accrued, unused vacation through the Effective Date of
Termination, at the rate then in effect, plus the
Executive's additional compensation and benefits, if any,
shall be determined in accordance with the Company's
retirement, insurance, and other applicable plans and
programs then in effect, and the Company shall have no
further obligations to the Executive under this Agreement.
2.4. Termination for Retirement or Death. Following a
Change-in-Control of the Company, if the Executive's
employment is terminated by reason of Retirement or death,
the Company shall pay the Executive the Executive's full
Base Salary and accrued, unused vacation through the
Effective Date of Termination, at the rate then in effect,
plus the Executive's additional compensation and benefits,
if any, shall be determined in accordance with the Company's
retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect, and the
Company shall have no further obligations to the Executive
under this Agreement.
2.5. Termination for Cause or by the Executive Other Than for
Good Reason. Following a Change-in-Control of the Company,
if the Executive's employment is terminated either (i) by
the Company for Cause, or (ii) by the Executive for any
reason other than Good Reason, the Company shall pay the
Executive the Executive's full Base Salary and accrued,
unused vacation through the Effective Date of Termination,
at the rate then in effect, plus all other amounts to which
the Executive is entitled under any compensation and benefit
plans of the Company, at the time such payments are due, and
the Company shall have no further obligations to the
Executive under this Agreement.
2.6. Notice of Termination. Any termination by the Executive for
any reason or by the Company for Cause shall be communicated
by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's
employment under the provision so indicated.
Article 3. Form and Timing of Severance Benefits
3.1. Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 2.2(a), (b), and (c) shall be
paid in cash to the Executive in a single lump sum as soon
as practicable following the Effective Date of Termination,
but in no event beyond fifteen (15) days from such Date.
3.2. Withholding of Taxes. The Company shall withhold from any
amounts payable under this Agreement all Federal, state,
city, or other taxes as legally shall be required.
Article 4. Golden Parachute Tax Gross-Up and Tax Indemnity
4.1. Severance Benefits to be Grossed-Up by the Company.
(a) When Severance Benefits Are to be Grossed-Up. If
Severance Benefits payable to the Executive plus any other
benefits realized by the Executive in connection with the
Change-in-Control of the Company (in the aggregate "Total
Payments") would, in whole or in part, constitute an "excess
parachute payment" the Company shall pay to the Executive in
cash an amount equal to the "tax gross-up" as determined
below with respect to the Executive's Severance Benefits.
The term "excess parachute payment" shall have the meaning,
and shall be valued, as provided in the Code.
(b) "Tax Gross-Up" Defined. The term "tax gross-up"
means the sum of the (i) excise tax imposed on the
Executive's Severance Benefits pursuant to Sections 280G and
4999 of the Code, plus (ii) federal, state and local income
taxes payable by the Executive with respect to the Company's
payment of such excise tax, plus (iii) federal, state and
local employment taxes payable by the Executive with respect
to the Company's payment of such excise tax, plus (iv)
iterations of income and employment taxes on (ii) plus
(iii).
(c) Guidance for Interpreting and Applying Article 4.
The objective of Article 4 is for the Company to pay the
Executive a cash payment to place the Executive in the same
net after-tax position as if no portion of the Executive's
Severance Benefits were subject to the excise tax imposed by
Sections 280G and 4999 of the Code. This Article 4 shall be
interpreted and applied accordingly.
4.2. Procedure for Establishing the Tax Gross-Up Payment.
(a) Within sixty (60) days following
delivery of the Notice of Termination (as described in
Section 2.6) or notice by the Company to the Executive
of its belief that there is a payment or benefit due
the Executive which will result in a "excess parachute
payment" as defined in Section 280G of the Code, the
Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which
need not be unqualified, as the Executive may choose,
which sets forth: (i) the amount of the Executive's
"annualized includible compensation for the base
period" (as defined in Code Section 280G(d)(1)); (ii)
the present value of the Total Payments; (iii) the
amount and present value of any "excess parachute
payment"; (iv) the amount of the Code Section 4999
excise tax payable with respect to the Executive's
Severance Benefits, and (v) the amount of the "tax
gross-up" payment as defined above. The opinion of
such legal counsel shall be supported by the opinion of
a certified public accounting firm and, if necessary, a
firm of recognized executive compensation consultants.
Such opinion shall be binding upon the Company and the
Executive.
(b) The provisions of this Section 4.2(b),
including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive
presumption that: (i) the compensation and benefits
provided for in Section 2.2 and (ii) any other
compensation earned prior to the Effective Date of
Termination by the Executive pursuant to the Company's
compensation programs (if such payments would have been
made in the future in any event, even though the timing
of such payment is triggered by the Change-in-Control),
are reasonable.
4.3. Subsequent Imposition of Excise Tax. If, notwithstanding
compliance with the provisions of Sections 4.1 and 4.2, it
is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any
portion of the Total Payments is considered to be a
"parachute payment," subject to excise tax under Section
4999 of the Code, which was not contemplated to be a
"parachute payment" at the time of payment, the Executive
shall be entitled to receive a lump sum cash payment
sufficient to place the Executive in the same net after-tax
position, computed by using the Executive's marginal total
tax rate for the year in which the payment contemplated
under this Section 4.3 is made.
Article 5. The Company's Payment Obligation
5.1. Payment Obligations Absolute.
(i) The Company's obligation to make the
Severance Payments and the arrangements provided for
herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including,
without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Company
may have against the Executive or anyone else. All
amounts payable by the Company shall be final, and the
Company shall not seek to recover all or any part of
such payment from the Executive or from whomsoever may
be entitled thereto, for any reasons whatsoever, except
as may be consistent with Section 2.2(d).
(ii) The Executive shall not be obligated to
seek other employment in mitigation of the amounts
payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of
the Company's obligations to make the Severance
Payments and arrangements required to be made under
this Agreement, except to the extent provided in
Section 2.2(d).
5.2. Contractual Rights to Severance Benefits. This Agreement
establishes and vests in the Executive a contractual right
to the Severance Benefits to which the Executive is entitled
hereunder. However, nothing herein contained shall require
or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
Article 6. Term of Agreement
6.1 Term. This Agreement will commence on the Effective Date
and shall continue in effect for eighteen (18) months, the
last day of which shall be the "Expiration Date". However,
at the end of such eighteen (18) month period and, if
extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for
one (1) additional year, unless the Board or the Committee
(as is consistent with Section 1(i)) delivers written notice
three (3) months prior to the end of such term, or extended
term, to the Executive, that the Agreement will not be
extended. In such case, the Agreement will terminate at the
end of the term, or extended term, then in progress.
However, in the event a Change-in-Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) eighteen (18)
months beyond the month in which such Change-in-Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all Severance
Benefits required hereunder have been paid to the Executive.
Article 7. Legal Remedies
7.1. Payment of Legal Fees. To the extent permitted by law and
except as provided in Section 7.2, the Company shall pay all
legal fees, costs of litigation, prejudgment interest, and
other expenses incurred in good faith by the Executive as a
result of the Company's refusal to provide the Severance
Benefits to which the Executive becomes entitled under this
Agreement.
7.2. Arbitration. The Executive shall have the right and option
to elect (in lieu of litigation) to have any dispute or
controversy arising under or in connection with this
Agreement settled be arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by
the Executive within two hundred (200) miles from the
location of his job with the Company, in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the award of the
arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by
the Company.
Article 8. Successors
8.1 Company's Successors. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) of all or substantially all of
the business and/or assets of the Company or of any division
or subsidiary thereof to expressly assume and agree to
perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company
would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such
assumption and agreement prior to the effective date of any
such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company
or successor entity in the same amount and on the same terms
as the Executive would be entitled to hereunder if the
Executive had terminated his employment with the Company
voluntarily for Good Reason. For the purposes of
implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective
Date of Termination.
8.2 Executive's Successors. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If
the Executive should die while any amount would still be
payable to the Executive hereunder had the Executive
continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms
of this Agreement, to the Executive's Beneficiary. If the
Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the
Executive's estate.
Article 9. Miscellaneous
9.1. Employment Status. The Executive and the Company
acknowledge that, except as may be provided under any other
agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will,"
and, prior to the effective date of a Change-in-Control
(except as provided in the flush language at the end of
Section 1(p)), may be terminated by either the Executive or
the Company at any time.
9.2. Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. Such designation must be in
the form of a signed writing acceptable to the Committee.
The Executive may make or change such designation at any
time.
9.3. Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect
to the subject matter hereof.
9.4. Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include
the feminine, the plural shall include the singular, and the
singular shall include the plural.
9.5. Severability. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed
and enforced as if the illegal or invalid provision had not
been included. Further, the captions of this Agreement are
not part of the provisions hereof and shall have no force
and effect.
9.6. Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by authorized member of the Committee, or
by the respective parties' legal representatives and
successors.
9.7. Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the state of Texas shall be
the controlling law in all matters relating to this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on this 15th day of
August, 1997.
Executive
Midcoast Energy Resources, Inc.
By:
Duane S. Herbst
Dan C. Tutcher, President & CEO
ATTEST:Midcoast Energy Resources, Inc.
(Corporate Seal)
By:
Duane S. Herbst, Secretary
THIRD AMENDMENT
Dan C. Tutcher
Page 4 of 3
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement ("Third Amendment")
is dated the 2nd day of March, 1998, and is by and between Midcoast
Energy Resources, Inc. (the "Employer" or the "Company") and Dan C.
Tutcher (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer and the Employee entered into an
Employment Agreement (the "Agreement"), on January 1, 1993, to be
effective April 1, 1993 ("Effective Date"), as amended by that
certain Amendment to Employment Agreement, dated April 1, 1993 (the
"First Amendment"), and as further amended by that certain Second
Amendment to Employment Agreement, dated April 14, 1997 (the "Second
Amendment") (the Agreement, the First Amendment and the Second
Amendment shall be herein jointly referred to as the "Agreement as
Amended"); and
WHEREAS, Employer and Employee agree that it is in both of their
best interests to amend Section 5(A), Base Salary, Section 5(C),
Other Benefits, and Section 6(D), Termination of Employment, and add
Section 5(F), Executive Benefits, Section 6(C), Change of Control,
Section 8, Accelerated Vesting of Stock Options, Section 9, Covenant
Not To Compete, and Section 10, Solicitation of Customers.
NOW, THEREFORE, in consideration of the foregoing, the Employer
and the Employee agree as follows:
1. Section 5 (A), Base Salary, is deleted from the Agreement as
Amended and replaced with the following:
A. Base Salary. For all services rendered under this
Agreement as Amended, beginning January 1, 1998, the
Employer agrees to pay the Employee during the Employment
Period an annual minimum salary ("Salary") in the amount of
ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00)
per year, payable in equal semi-monthly installments of SIX
THOUSAND TWO HUNDRED FIFTY AND NO/100 DOLLARS ($6,250.00)
each, or the equivalent amount payable on any other
periodic basis consistent with the Employer's payroll
procedures (but no less frequently than monthly). Employer
shall make appropriate deductions from Employee's Salary
for customary withholding taxes and other employment taxes
as required for salaried compensation under Federal, State
or Local laws. The foregoing is Employee's minimum Salary
and may be adjusted upward from time to time by Employer's
Board of Director's Compensation Committee. Employee's
Salary shall be in addition to any bonuses (in cash or
stock), which shall be given from time to time at the
discretion of Company's Board of Director's Compensation
Committee.
2. Section 5(C), Other Benefits, is amended by adding the
following:
C. Other Benefits. Employee shall be entitled to
vacation pay in accordance with Employer's written
corporate policy and to additional paid or unpaid vacation
as approved by the President. Such vacation shall be on a
calendar year basis. Effective January 1, 1998, Employee
shall be entitled to four (4) weeks vacation pay. In
addition, Employee shall be entitled to such holidays and
sick leave as well as other benefits, including fringe
benefits, provided other employees of Employer and other
benefits as may be agreed to by the parties.
3. The following is added to the Agreement as Amended:
Section 5, Compensation, Subsection F, Executive Benefits.
The Employee shall receive benefits similar to those
provided other employees in similar executive level
positions who from time to time may be employed by
Employer.
Section 6, Termination of Employment, Subsection C, Change
of Control. This Agreement as Amended may be terminated at
Employee's option upon a Change of Control of Company. As
used herein, "Change of Control" means (i) the sale of all
or substantially all of the assets of Company to a person
(other than a wholly-owned subsidiary of Company) or
related group (as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) of persons (other than
a wholly-owned subsidiary of Company) as an entirety or
substantially as an entirety in one transaction or series
of related transactions, (ii) the first day on which a
majority of the members of the board of directors of
Company are not continuing Directors (i.e., any member of
the board of directors who is a member of the board of
directors on the date hereof or who was nominated for
election to the board of directors with the affirmative
vote of 2/3 of the continuing Directors who are members of
the board of directors at the time of such nomination or
elections), (iii) the acquisition by any person or group
(as so defined) or persons (other than a wholly-owned
subsidiary of Company) of more than twenty-five percent
(25%) of the total voting power entitled to vote generally
in the election of the directors, managers or trustees of
Company, (iv) the liquidation or dissolution of Company, or
(v) Employee is not the acting president and/or chief
executive officer of Employer. In the event Employee
elects to terminate his employment under this provision,
Employee shall receive a lump sum payment equal to fifty
percent (50%) of Employee's then current annual salary upon
written notice of such election.
Section 8: Accelerated Vesting of Stock Options. All of
the stock options previously or hereinafter granted to the
Employee under any and all agreements with Employer shall
become immediately exercisable and vested (i) should the
Employer discharge Employee, or (ii) upon termination of
this Agreement as Amended, as long as such vesting is
allowable under the Employer's stock option plan pursuant
to which Employee received such options.
Section 9: Covenant Not To Compete. For a period of twenty-
four (24) months from the date of any termination of
Employee's employment with the Employer, Employee shall not
(i) accept employment with or render any services to or
form an association with any business directly competitive
with the Employer in the areas where it is doing business,
or (ii) employ or offer to employ, in a professional
capacity in any business directly competitive with the
Employer, in the areas where it is doing business, anyone
who is or has been a director, office, shareholder, or
employee of the Employer. Employee acknowledges that the
restrictions imposed by this agreement are fully understood
and will not preclude Employee from becoming gainfully
employed following a termination of employment with the
Employer.
Section 10: Solicitation of Customers. Unless waived in
writing by Employer, Employee further agrees that he will
not, directly or indirectly, during the course of
employment and for two (2) years thereafter upon
termination of this employment contract either voluntarily
or involuntarily, or for any reason whatsoever, solicit the
trade or patronage of any of Employer's existing customers
or prospective customers with whom Employer is negotiating,
on the date of termination, regardless of the location of
such customers or prospective customers of the Employer
throughout the United States with respect to any
technologies, services, product, trade secret, or other
matters in which the Employer is active.
4. All other provisions of the Agreement as Amended shall remain in
full force and effect and shall not be affected by this Third
Amendment.
IN WITNESS HEREOF, the parties hereto have executed this Third
Amendment, as of the date first written above.
EMPLOYER: EMPLOYEE:
MIDCOAST ENERGY RESOURCES, INC.
By: ________________________________
_____________________________
Name: ______________________________ Dan C. Tutcher
Title: _______________________________
D:\ck96gc\443.doc
THIRD AMENDMENT
I.J. Berthelot, II
Page 6 of 4
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
This Third Amendment to Employment Agreement ("Third
Amendment") dated the 18th day of March 1998, is by and between
Midcoast Energy Resources, Inc. (the "Employer" or the "Company")
and I.J. Berthelot, II (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer and the Employee executed a Third
Amendment to Employment Agreement, dated March 17, 1998, which is
superseded by this Third Amendment to Employment Agreement.
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 "First Amendment") and as further
amended by that certain Second Amendment to Employment Agreement,
dated April 25, 1997 (the "Second Amendment") (the Agreement,
First Amendment and the Second Amendment shall be herein jointly
referred to as the "Agreement as Amended");
WHEREAS, Employer and Employee agree that it is in both of
their best interests to amend Section 4, Term of Employment,
Section 5(A), Base Salary, Section 5(G), Other Benefits, and
Section 6(D), Termination of Employment, and add Section 5(I),
Automobile Allowance, Section 5(J), Executive Benefits, Section
9, Accelerated Vesting of Stock Options, Section 10, Covenant Not
To Compete, and Section 11, Solicitation of Customers.
NOW, THEREFORE, in consideration of the foregoing, the
Employer and the Employee agree as follows:
1. Section 4, Term of Employment, shall be deleted from the
Agreement as Amended and replaced with the following:
Employee's term of employment shall commence on the
Effective Date of the Agreement and shall terminate on
the sixth (6th) anniversary of such date, unless
earlier terminated in accordance with Section 6,
Termination of Employment.
2. Section 5 (A), Base Salary, shall be deleted from the
Agreement as Amended and replaced with the following:
"A. Base Salary. For all services rendered under
this Agreement as Amended, beginning January 1, 1998,
the Employer agrees to pay the Employee during the
Employment Period an annual minimum salary ("Salary")
in the amount of ONE HUNDRED THIRTY FIVE THOUSAND AND
NO/100 DOLLARS ($135,000.00) per year, payable in equal
semi-monthly installments of FIVE THOUSAND SIX HUNDRED
TWENTY FIVE AND NO/100 DOLLARS ($5,625.00) each, or the
equivalent amount payable on any other periodic basis
consistent with the Employer's payroll procedures (but
no less frequently than monthly). Employer shall make
appropriate deductions from Employee's Salary for
customary withholding taxes and other employment taxes
as required for salaried compensation under Federal,
State or Local laws. The foregoing is Employee's
minimum Salary and may be adjusted upward from time to
time by Employer's Board of Director's Compensation
Committee. Employee's Salary shall be in addition to
any bonuses (in cash or stock), which shall be given
from time to time at the discretion of the President."
3. Section 5(G), Other Benefits, shall be deleted from the
Agreement as Amended and replaced with the following:
G. Other Benefits. Employee shall be entitled to
vacation pay in accordance with Employer's written
corporate policy and to additional paid or unpaid
vacation as approved by the President. Such vacation
shall be on a calendar year basis. Effective January
1, 1998, Employee shall be entitled to four (4) weeks
vacation pay. In addition, Employee shall be entitled
to such holidays and sick leave as well as other
benefits, including fringe benefits, provided other
employees of Employer and other benefits as may be
agreed to by the parties.
4. Section 6(D), Termination of Employment, shall be deleted
from the Agreement as Amended and replace with the
following:
D. This Agreement as Amended may be terminated at
Employee's option upon a Change of Control of Company.
As used herein, "Change of Control" means (i) the sale
of all or substantially all of the assets of Company to
a person (other than a wholly-owned subsidiary of
Company) or related group (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of
1934) of persons (other than a wholly-owned subsidiary
of Company) as an entirety or substantially as an
entirety in one transaction or series of related
transactions, (ii) the first day on which a majority of
the members of the board of directors of Company are
not continuing Directors (i.e., any member of the board
of directors who is a member of the board of directors
on the date hereof or who was nominated for election to
the board of directors with the affirmative vote of 2/3
of the continuing Directors who are members of the
board of directors at the time of such nomination or
elections), (iii) the acquisition by any person or
group (as so defined) or persons (other than a wholly-
owned subsidiary of Company) of more than twenty-five
percent (25%) of the total voting power entitled to
vote generally in the election of the directors,
managers or trustees of Company, (iv) the liquidation
or dissolution of Company, or (v) either Dan Tutcher or
Employee is not the acting president and/or chief
executive officer of Employer. In the event Employee
elects to terminate his employment under this
provision, Employee shall receive a lump sum payment
equal to fifty percent (50%) of Employee's then current
annual salary upon written notice of such election.
5. The following is added to the Agreement as Amended:
Section 5: Compensation, Subsection I. Automobile
Allowance. Effective January 1, 1998, Employee shall,
in lieu of being furnished with a company automobile,
receive a monthly automobile allowance of FIVE HUNDRED
AND NO/100 DOLLARS ($500.00).
Section 5: Compensation, Subsection J. Executive
Benefits. The Employee shall receive benefits similar
to those provided other employees in similar executive
level positions who from time to time may be employed
by Employer.
Section 9: Accelerated Vesting of Stock Options. All
of the stock options previously or hereinafter granted
to the Employee under any and all agreements with
Employer shall become immediately exercisable and
vested (i) should the Employer discharge Employee, or
(ii) upon termination of this Agreement as Amended, as
long as such vesting is allowable under the Employer's
stock option plan pursuant to which Employee received
such options.
Section 10: Covenant Not To Compete. For a period of
twenty-four (24) months from the date of any
termination of Employee's employment with the Employer,
Employee shall not (i) accept employment with or render
any services to or form an association with any
business directly competitive with the Employer in the
areas where it is doing business, or (ii) employ or
offer to employ, in a professional capacity in any
business directly competitive with the Employer, in the
areas where it is doing business, anyone who is or has
been a director, office, shareholder, or employee of
the Employer. Employee acknowledges that the
restrictions imposed by this agreement are fully
understood and will not preclude Employee from becoming
gainfully employed following a termination of
employment with the Employer.
Section 11: Solicitation of Customers. Unless waived
in writing by Employer, Employee further agrees that he
will not, directly or indirectly, during the course of
employment and for two (2) years thereafter upon
termination of this employment contract either
voluntarily or involuntarily, or for any reason
whatsoever, solicit the trade or patronage of any of
Employer's existing customers or prospective customers
with whom Employer is negotiating, on the date of
termination, regardless of the location of such
customers or prospective customers of the Employer
throughout the United States with respect to any
technologies, services, product, trade secret, or other
matters in which the Employer is active.
6. All other provisions of the Agreement as Amended shall
remain in full force and effect and shall not be affected by
this Third Amendment.
IN WITNESS HEREOF, the parties hereto have executed this Third
Amendment, as of the date first written above.
EMPLOYER: EMPLOYEE:
MIDCOAST ENERGY RESOURCES, INC.
By: ________________________________
_____________________________
Dan C. Tutcher, President I. J.
Berthelot, II
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SECOND AMENDMENT
Richard A. Robert
Page 4 of 4
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement ("Third
Amendment") is dated March 18, 1998, and is by and between
Midcoast Energy Resources, Inc. (the "Employer" or the "Company")
and Richard A. Robert (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer and the Employee entered into an
Employment Agreement (the "Agreement"), effective April 30, 1994
("Effective Date"), as amended by that certain Amendment to
Employment Agreement, dated April 8, 1996 (the "First
Amendment")(the Agreement and First Amendment shall be herein
jointly referred to as the "Agreement as Amended"); and
WHEREAS, Employer and Employee agree that it is in both of
their best interests to amend Section 4, Term of Employment,
Section 5(A), Base Salary, Section 5(C), Other Benefits, and
Section 6(A)(v), Termination of Employment, and add Section 5(F),
Automobile Allowance, Section 5(G), Executive Benefits, Section
9, Accelerated Vesting of Stock Options, Section 10, Covenant Not
To Compete, and Section 11, Solicitation of Customers.
NOW, THEREFORE, in consideration of the foregoing, the
Employer and the Employee agree as follows:
1. Section 4, Term of Employment, shall be deleted from the
Agreement as Amended and replaced with the following:
Employee's term of employment shall commence on
the Effective Date of the Agreement and shall
terminate on the seventh (7th) anniversary of such
date, unless earlier terminated in accordance with
Section 6, Termination of Employment.
2. Section 5 (A), Base Salary, shall be deleted from the
Agreement as Amended and replaced with the following:
"A. Base Salary. For all services rendered under
this Agreement as Amended, beginning January 1, 1998,
the Employer agrees to pay the Employee during the
Employment Period an annual minimum salary ("Salary")
in the amount of ONE HUNDRED TWENTY FIVE THOUSAND AND
NO/100 DOLLARS ($125,000.00) per year, payable in equal
semi-monthly installments of FIVE THOUSAND TWO HUNDRED
EIGHT AND 33/100 DOLLARS ($5,208.33) each, or the
equivalent amount payable on any other periodic basis
consistent with the Employer's payroll procedures (but
no less frequently than monthly). Employer shall make
appropriate deductions from Employee's Salary for
customary withholding taxes and other employment taxes
as required for salaried compensation under Federal,
State or Local laws. The foregoing is Employee's
minimum Salary and may be adjusted upward from time to
time by Employer's Board of Director's Compensation
Committee. Employee's Salary shall be in addition to
any bonuses (in cash or stock), which shall be given
from time to time at the discretion of the President."
3. Section 5(C), Other Benefits, shall be amended by adding the
following:
C. Other Benefits. Employee shall be entitled to
vacation pay in accordance with Employer's written
corporate policy and to additional paid or unpaid
vacation as approved by the President. Such vacation
shall be on a calendar year basis. Effective January
1, 1998, Employee shall be entitled to four (4) weeks
vacation pay. In addition, Employee shall be entitled
to such holidays and sick leave as well as other
benefits, including fringe benefits, provided other
employees of Employer and other benefits as may be
agreed to by the parties.
4. Section 6, Termination of Employment, subsection (A)(v)
shall be amended by adding the following:
(v) This Agreement as Amended may be terminated at
Employee's option upon a Change of Control of Company.
As used herein, "Change of Control" means (i) the sale
of all or substantially all of the assets of Company to
a person (other than a wholly-owned subsidiary of
Company) or related group (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of
1934) of persons (other than a wholly-owned subsidiary
of Company) as an entirety or substantially as an
entirety in one transaction or series of related
transactions, (ii) the first day on which a majority of
the members of the board of directors of Company are
not continuing Directors (i.e., any member of the board
of directors who is a member of the board of directors
on the date hereof or who was nominated for election to
the board of directors with the affirmative vote of 2/3
of the continuing Directors who are members of the
board of directors at the time of such nomination or
elections), (iii) the acquisition by any person or
group (as so defined) or persons (other than a wholly-
owned subsidiary of Company) of more than twenty-five
percent (25%) of the total voting power entitled to
vote generally in the election of the directors,
managers or trustees of Company, (iv) the liquidation
or dissolution of Company, or (v) either Dan Tutcher or
I.J. Berthelot, II are not the acting president and/or
chief executive officer of Employer.
5. The following is added to the Agreement as Amended:
Section 5: Compensation, Subsection F. Automobile
Allowance. Effective January 1, 1998, Employee shall,
in lieu of being furnished with a Company automobile,
receive a monthly automobile allowance of FIVE HUNDRED
AND NO/100 DOLLARS ($500.00).
Section 5: Compensation, Subsection G. Executive
Benefits. The Employee shall receive benefits similar
to those provided other employees in similar executive
level positions who from time to time may be employed
by Employer.
Section 9: Accelerated Vesting of Stock Options. All
of the stock options previously or hereinafter granted
to the Employee under any and all agreements with
Employer shall become immediately exercisable and
vested (i) should the Employer discharge Employee, or
(ii) upon termination of this Agreement as Amended, as
long as such vesting is allowable under the Employer's
stock option plan pursuant to which Employee received
such options.
Section 10: Covenant Not To Compete. For a period of
twenty-four (24) months from the date of any
termination of Employee's employment with the Employer,
Employee shall not (i) accept employment with or render
any services to or form an association with any
business directly competitive with the Employer in the
areas where it is doing business, or (ii) employ or
offer to employ, in a professional capacity in any
business directly competitive with the Employer, in the
areas where it is doing business, anyone who is or has
been a director, office, shareholder, or employee of
the Employer. Employee acknowledges that the
restrictions imposed by this agreement are fully
understood and will not preclude Employee from becoming
gainfully employed following a termination of
employment with the Employer.
Section 11: Solicitation of Customers. Unless waived
in writing by Employer, Employee further agrees that he
will not, directly or indirectly, during the course of
employment and for two (2) years thereafter upon
termination of this employment contract either
voluntarily or involuntarily, or for any reason
whatsoever, solicit the trade or patronage of any of
Employer's existing customers or prospective customers
with whom Employer is negotiating, on the date of
termination, regardless of the location of such
customers or prospective customers of the Employer
throughout the United States with respect to any
technologies, services, product, trade secret, or other
matters in which the Employer is active.
6. All other provisions of the Agreement as Amended shall
remain in full force and effect and shall not be affected by
this Second Amendment.
IN WITNESS HEREOF, the parties hereto have executed this Second
Amendment, as of the date first written above.
EMPLOYER: EMPLOYEE:
MIDCOAST ENERGY RESOURCES, INC.
By: ________________________________
_____________________________
Dan C. Tutcher, President Richard A.
Robert
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