EXHBIT 10.40
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement, effective as of April 17, 1995 (the
"Effective Date"), is by and between Midcoast Energy Resources, Inc.
("Employer" or "Midcoast") and X.X. Xxxxxxxxx, XX ("Employee").
Section I.: Employment and Scope of Service.
A. For and in consideration of the agreements set forth
herein, Employer hereby employs Employee, and Employee hereby
accepts employment from Employer in the capacity of Chief Engineer
of Employer, or in such other executive capacity as may be mutually
agreeable to the parties. Employee hereby agrees to perform the
services required of him in such capacity in good faith and with
reasonable diligence, such duties being those reasonable and
customary duties that are from time to time established, designated
and communicated to Employee by the President of Employer (the
"President") during the term of this Agreement.
B. Employer shall, at Employer's sole cost and expense,
provide Employee at Employer's principal place of business
reasonable office space and facilities, office supplies, and
reasonable secretarial and administrative assistance consistent
with Employee's position with Employer. In the event that Employee
deems the secretarial and administrative assistance provided to him
by the Employer to be unacceptable, Employee shall have the
authority to require that a satisfactory replacement be hired to
provide such services to Employee.
Section II.: Place of Employment.
Employee's duties under this Agreement shall be performed
principally and primarily at Employer's principal place of business
in Houston, Texas, and incidentally and secondarily at such other
place or places to which Employer, from time to time, may
reasonably request Employee to travel (at Employer's sole cost and
expense) in connection with Employee's duties hereunder.
Section III.: Time Devoted To Business.
Employee shall give best efforts and endeavors to the discharge of
his duties and responsibilities hereunder. Employee shall devote
his full business time and attention to Employer's business;
provided, however, that Employee may devote reasonable amounts of
time to personal, outside business, charitable, and professional
activities so long as such activities do not materially interfere
with the performance of Employee's duties hereunder; and provided
further, that subject to the foregoing, nothing in this Agreement
shall be construed to limit Employee's conduct of personal business
affairs nor private investments.
Section IV.: Term of Employment.
Employee's term of employment shall commence on the Effective Date
hereof and shall terminate on the fourth anniversary of such date,
unless earlier terminated in accordance with Section 6 hereof.
Section V.: Compensation.
In consideration of the services to be performed hereunder,
Employer agrees to pay or cause to be paid to Employee, and
Employee agrees to accept, the following:
A. Base Salary.Employee's base salary shall be Fifty-Five
Thousand, Two Hundred and No/100 Dollars ($55,200.00) for the first
year of this Agreement, payable in equal bi-monthly installments of
Two Thousand, Three Hundred and No/100 Dollars ($2,300.00) each.
Each year thereafter, Employee's salary shall be increased a
minimum of ten percent (10%) per annum. Employer shall make
appropriate deductions from Employee's salary for customary
withholding taxes and other employment taxes as required for
salaried compensation under Federal and State tax laws. The above-
described 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.
B. Stock Grant. Upon execution of this Agreement and in
order to further encourage Employee to remain in the service of the
Employer, Employee is hereby awarded thirteen thousand (13,000)
shares of Employer's Common Stock, $.01 par value per share (the
"Common Stock"), ten thousand (10,000) of which shall be issued as
of the Effective Date and three thousand (3,000) of which shall be
issued as of July 31, 1995. The 13,000 shares granted hereunder
(the "Shares") shall be subject to the following vesting schedule:
Aggregate
Date Number of Shares Vested
April 15, 1996 3,250
April 15, 1997 6,500
April 15, 1998 9,750
April 15, 1999 13,000
C. Tax Reimbursement. Employer shall reimburse Employee
for the federal income tax liability incurred by Employee which is
attributable solely to the issuance of the Shares, as well as any
additional tax liability that is attributable to the sums to be
reimbursed hereunder (collectively, the "Tax Reimbursement").
Employer and Employee estimate that such Tax Reimbursement shall
equal approximately Thirty-Six Thousand Dollars ($36,000). The
estimated Tax Reimbursement shall be paid to Employee in nine (9)
equal monthly installments of Four Thousand Dollars ($4,000),
payable on the last day of each month, beginning July 31, 1995,
with a final installment to be paid on March 31st, 1996. In the
event that Employee's actual Tax Reimbursement exceeds $36,000,
Employer shall reimburse Employee for such additional amount on or
before the date on which the actual tax liability is due. In the
event that Employee's actual Tax Reimbursement is less than
$36,000, Employee shall promptly refund the amount of the
overpayment to Employer.
D. Certain Purchase Rights. At any time after the Effective
Date and prior to the date on which an active trading market exists
in the Common Stock (as evidenced by the Common Stock's listing on
the New York Stock Exchange, the American Stock Exchange, or the
NASDAQ National Market System), Employee shall give Employer
written notice if he desires to sell any of the Shares. On receipt
of such notice, Employer and Employee shall seek to agree on a
purchase price for the Shares (the "Purchase Price"). If Employee
and Employer agree on a Purchase Price, the amount so agreed upon
shall be the Purchase Price. If Employer and Employee cannot reach
agreement within fifteen (15) days of the Employee's notice to
Employer, the Purchase Price shall be determined by appraisal by
one or more nationally recognized securities brokerage firms having
offices in more than ten states in the United States ("Appraiser")
in accordance with the following procedure.
1. 1.If Employer and Employee agree on a single
Appraiser, the fair market value of the Shares as determined by
such Appraiser shall constitute the Purchase Price. In such event,
the fees and expenses of the Appraiser shall be paid jointly by
Employee and Employer.
2. 2.If Employer and Employee cannot agree on a single
Appraiser within twenty (20) days following the date of Employee's
notice, Employer and Employee shall each designate an Appraiser and
promptly notify the other party of such designation. Each
Appraiser shall be instructed to value the Shares as a single unit,
and each shall render an opinion of the fair market value of the
Shares within thirty (30) days after their designation. The
Purchase Price in this event shall be the average of the
Appraisers' determinations of fair market value of the Shares.
Each of Employer and Employee shall pay the respective fees and
expenses of their appointed Appraiser.
3.Each Appraiser may consider any information, facts,
and circumstances which it deems relevant to determine the fair market
value of the Shares.
4.Employer and Employee shall each cooperate fully with
the designated Appraiser or Appraisers.
Nothing contained in this Section 6D. shall require the
Employer to purchase the Shares; but in the event that Employer
does not purchase the Shares within ten (10) days of the
determination of the Purchase Price pursuant to the procedure set
forth in this Section, Employer shall pay the fees and expenses of
all Appraisers and Employee may sell the Shares in any manner he
desires, subject only to applicable securities laws.
E. Investment Intent The Employee understands that the
Shares are "restricted" securities within the meaning of the
Securities Act of 1933, as amended (the "Act"), and the Employee
represents that such securities are being acquired by him for
investment, and not with a view to, or for resale in connection
with, any "distribution" within the meaning of the Act.
Employee further acknowledges and agrees that
certificates for the Shares delivered to him will bear the
following legend:
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE
HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH,
IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE, PLEDGE,
TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL
OR STATE SECURITIES LAWS.
F. Adjustments and Assumptions. The number of Shares
awarded hereunder shall be adjusted proportionately for any
increase or decrease in the number of outstanding shares of Common
Stock resulting from a stock split or other subdivision or
consolidation of shares or other capital adjustment, or the payment
of a stock dividend; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated.
Notwithstanding the foregoing, no adjustment shall be made upon the
issuance of new shares of Common Stock for fair consideration.
Employer and Employee intend that Employee, together with
members of his immediate family, shall own, or through the grant of
the Shares be entitled to own, at least five percent (5%) of the
outstanding shares of Common Stock (the "Employees' Stock
Position").
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.
Beginning with the Effective Date, Employee shall be entitled to
three (3) 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.
H. Miscellaneous Expenses. Employer shall promptly
reimburse Employee for all reasonable and necessary expenses
incurred or paid by Employee incident to Employee's employment
under this Agreement, including without limitation reasonable
business entertainment. and other reasonable and necessary expenses
directly associated with Employer's business.
Section VI.: Termination of Employment.
This Agreement may be terminated by either party at any time when
Employer and Employee shall mutually agree in writing.
A. This Agreement may be terminated at Employer's option
for cause. For purposes of this Agreement cause shall exist only if (i)
Employee materially defaults in the performance of his duties
hereunder and fails to cure such default within ten (10) days after
written notice thereof has been delivered to Employee by Employer,
or (ii) Employee commits any material act of fraud or malfeasance
bearing on Employee's performance of his duties hereunder.
B. This Agreement may likewise be terminated at Employer's
option in the event Employee becomes Disabled. For the purposes
this Agreement, "Disabled" shall mean an illness or injury that
renders Employee unable to reasonably perform his essential
functions for a continuous period of six (6) months or longer;
provided, however, that Employer shall make reasonable and
necessary accommodations to enable Employee to perform such
functions. During any period of disability prior to termination of
this Agreement, Employee shall be paid his regular compensation as
defined hereinabove; and provided, further, that Employer's
payments of such compensation shall be directly reduced by any
amounts actually paid to Employee pursuant to any disability
insurance policy purchased by Employer.
C. This Agreement may be terminated at Employee's option
upon a Change of Control of Midcoast. As used herein, "Change of
Control" means (i) the sale of all or substantially all of the
assets of Midcoast to any person (other than a wholly-owned
subsidiary of Midcoast) 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 Midcoast) 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 Midcoast 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
election), (iii) the acquisition by any person or group (as so
defined) or persons (other than a wholly-owned subsidiary of
Midcoast) of more than fifty percent (50%) of the total voting
power entitled to vote generally in the election of the directors,
managers or trustees of Midcoast, or (iv) the liquidation or
dissolution of Midcoast. 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.
D. This Agreement shall automatically terminate upon
Employee's death.
E. This Agreement may be terminated, at Employee's sole
option, in the event that Employee's Stock Position is reduced to
less than five percent (5%) of Employer's outstanding Common Stock
on a fully diluted basis, unless such reduction is accompanied by
a proportionate reduction in the Common Stock ownership of Messrs.
Xxxxx Xxxxxx and Xxxxxxx Xxxxxx and Midcoast Natural Gas, Inc. (the
"Principal Stockholders"), or their respective successors or
assigns. Notwithstanding the foregoing, Employee shall have no
rights pursuant to this section and no breach of any provision of
this Agreement shall be deemed to have occurred, if a Principal
Stockholder increases his or its ownership position by virtue of
the conversion of shares of Midcoast's 5% Cumulative Preferred
Stock to Common Stock. Moreover, the issuance of Preferred Stock
or other stock senior to the Common Stock for fair consideration
shall not entitle the Employee to terminate this Agreement pursuant
to this provision.
F. In the event this Agreement is terminated under
Paragraphs 6C., 6E., or 6F., the full amount of compensation
remaining to be paid during the primary term of this Agreement
shall be paid to Employee or to his surviving heirs, as determined
at law or according to his Last Will and Testament, as applicable,
in a lump sum discounted to reflect the current value of all future
payments due hereunder at a discount rate of twelve percent (12%).
G. Notwithstanding anything in this Agreement to the
contrary, in the event that this Agreement is terminated by an
action on the part of the Employee or pursuant to Section 6B. prior
to the vesting of all the Shares issued hereunder, only the Shares
which were vested at the time of the termination of the Agreement
shall be held by the Employee with no risk of forfeiture. In the
event of termination of this Agreement pursuant to Section 6C.,
6D., 6E. or 6F., all Shares issued to the Employee hereunder shall
immediately vest in full.
Section VII.: Non-Disclosure of Confidential Information.
During the continuation of his employment hereunder, and at
all times thereafter, Employee shall keep with absolute secrecy and
shall not reveal, disclose, or publish to any person or entity
other than the President or other persons designated by the
President, or otherwise utilize (other than for the proper
performance of Employee's duties) any information of a confidential
or secret nature, including, without limitation, all trade secrets,
designs, inventions, computer software or other electronic data,
financial information, customer lists and business prospects
concerning the specific affairs of the Employer or any person or
entity owned by or owning, whole or in part, the Employer
("Confidential Information"). Except for information generated by
Employee during the course of his employment or otherwise available
to Employee by and through his Chief Engineer's position and
training, for a period of one (1) year after termination of this
Agreement, Employee shall not utilize the Confidential Information
to compete any manner with Employer with respect to Employer's then
active accounts or customers.
Section VIII.: General Provisions.
A. Notices. Any notice or other communications given or
made under or pursuant to this Agreement shall be given in writing,
shall be effective on receipt, and may be delivered to the relevant
party or sent by first class, postage prepaid, or sent by telefax
or facsimile transmission addressed to each party at the following
address or such other address as any party may hereafter designate
by written notice:
Employer
Employee Midcoast Energy Resources, Inc.
Attention: Xxx X. Xxxxxxx
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
X.X. Xxxxxxxxx, XX
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
B. Other Agreements. This Agreement constitutes the entire
agreement of the parties hereto, expressly superseding all prior
understandings, commitments, and agreements other than those
expressly referred to in this Agreement, whether written or oral
between Employer and Employee.
C. Governing Law.This Agreement shall be governed by and
construed in all respects in accordance with the laws of the State
of Texas.
D. No Waiver. The failure of either party to insist in
one or more instances on the performance of any of the terms or
conditions of this Agreement shall not be considered as a waiver or
relinquishment of any right granted hereunder or of the future
performance of any such term, covenant, or condition.
E. Severability. If any provision of this Agreement shall
be invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby.
F. Headings. Any headings or titles of sections or
paragraphs are for convenience only and shall not limit nor amplify
the provisions of this Agreement.
G. Binding Agreement. This Agreement shall inure to the
benefit of and be binding on the undersigned parties and their
respective heirs, executors, successors, and assigns. Neither party
hereto may assign any or all of such party's rights or obligations
hereunder without prior written consent of the other party hereto.
In Witness Hereof, the parties hereto have executed this
Agreement, effective as of the day and year first set forth above.
EMPLOYER:
Midcoast Energy Resources, Inc.
By: ____________________________
Xxx X. Xxxxxxx, President
EMPLOYEE:
____________________________
