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Exhibit 10.31
EXECUTION COPY
RESTATED
EMPLOYMENT AGREEMENT
This Agreement is made to be effective the 3rd day of May,
1995, by and between North Coast Energy, Inc., a Delaware corporation (the
"Company"), and Garry Regan ("Executive").
WITNESSETH:
WHEREAS, the Executive was a founder of the Company and has
served as its Chief Executive Officer;
WHEREAS, the Executive has been a guiding force in the
building, development, progress and success of the Company and has unique
knowledge and experience with respect to the Company's history, competitive
position and prospects which the Company considers essential to its continued
growth and stability;
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interest of the Company and its
shareholders to assure that the Company will have the continued dedication and
service of the Executive as its Chief Executive Officer;
WHEREAS, the Board believes it imperative to diminish the
possible distraction of the Executive by virtue of the personal uncertainties
and risks potentially associated with any changes in management continuity, and
in order to accomplish the foregoing, the Board proposes to cause the Company
to enter into a new employment arrangement with provisions for extension of the
employment relationship under appropriate circumstances;
WHEREAS, the Executive has indicated that he is willing to
continue in the employ of the Company as its Chief Executive Officer upon the
terms and conditions set forth in this Agreement and the Company desires to
employ Executive in accordance herewith;
WHEREAS, the Board of Directors originally approved the
specific terms of this Agreement on May 2, 1995, and the Board has recently
acknowledged and approved the necessity of restating this Agreement to clarify
certain provisions to reflect the original intent of the Board, the Company and
the Executive.
NOW THEREFORE, Executive and the Company hereby agree as
follows:
1. Employment.
(a) For the three (3) year period from and after
the effective date hereof ("Employment Period") the Company agrees to
employ Executive, and Executive agrees to be
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employed by the Company. Unless the Company and the Executive
mutually agree to a termination or renegotiation of this Agreement
following the completion of the first two (2) years of the Employment
Period, this Agreement and the Employment Period may be extended
automatically at the option of Executive for an additional three (3)
year period, ending on the sixth anniversary of the effective date of
this Agreement, unless sooner terminated pursuant to Section 6(a)
hereof. Such option shall be exercisable by the Executive in all
events, in his sole discretion, and without the consent of the Board,
any officer of the Company or other person. The Executive may
exercise such option at any time he so desires during the period
commencing ninety (90) days prior to the end of such two (2) year
period and ending one hundred twenty (120) days thereafter, by giving
notice of such exercise in writing to the Secretary of the Company.
(b) Executive shall serve as a senior executive
officer and shall perform such duties for the Company as may
reasonably be assigned to him by the Company's Board of Directors or
its Executive Committee. During the Employment Period, Executive will
devote his full time and best efforts to the business and welfare of
the Company.
2. Salary and Bonus.
(a) During the Employment Period the Company will
pay Executive for his services an annual Base Salary of One Hundred
Sixty-Five Thousand Dollars ($165,000). Such base salary shall be
paid in equal installments in accordance with the Company's normal
payroll practices or otherwise as the parties shall agree, but in any
event no less frequently than monthly. Executive's annual Base Salary
will be adjusted annually during the Employment Period to reflect
increases in the cost of living determined by reference to the
Consumer Price Index published by the Bureau of Labor Statistics,
United States Department of Labor for the most recently ended calendar
year (or if the Consumer Price Index is not available, a similar
generally available published index). Any increase in Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Base Salary shall not be reduced
after any such increase.
The Board of Directors is reviewing an
overall plan in the context of instituting performance based bonuses
and will undertake a review of Executive's salary in conjunction
therewith. Executive and the Company are entering into this Agreement
with the understanding that the above-referenced salary will be
reviewed by the Board (but not decreased, without Executive's written
consent) during the term of this Agreement and that appropriate
adjustments
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may be made in the discretion of the Board (notwithstanding any
decision with respect to any such bonus arrangements).
(b) Executive may also receive such bonus as may
be awarded from time to time by the Board of Directors or the
Company's Compensation Committee acting on behalf of the Board of
Directors in the exercise of the Board's or the Committee's
discretion. The Company and Executive acknowledge that the
Compensation Committee of the Board of Directors is currently
reviewing potential arrangements for bonus plans, including
performance based bonuses.
3. Annual Incentive Compensation. Executive shall
receive from time to time for year long periods during the Employment Period
additional amounts as incentive compensation based on the sales and
profitability of the Company. Such amounts of incentive compensation shall be
determined by the Board of Directors of the Company upon recommendation of the
Company's Compensation Committee.
4. Expenses. The Company shall pay or reimburse
Executive for all reasonable (in type and amount) business expenses incurred by
him in the course of performing his duties for the Company during the
Employment Period. Executive shall furnish the Company with the documentation
required by the Internal Revenue Code of 1986, as amended (or by any successor
revenue statute) (the "Code") and the regulations thereunder in connection with
all such expenses including, without limitation, all approved business travel
and entertainment expenses, club membership fees, dues from professional
organizations, etc.
5. Benefits; Vacation.
5.1 Medical Benefits. During the Employment
Period, the Company shall maintain and pay for medical and hospitalization
insurance for the benefit of Executive and his family on the same terms and in
the same coverage amounts as provided to the Company's other executive-level
employees, or, in the alternative, reimburse Executive for the costs incurred
in directly purchasing such insurance.
5.2 Pension Benefits. Executive shall be
entitled to participate in any pension or profit-sharing plans maintained or
established by the Company for its employees generally, provided that he
satisfies any eligibility or other requirements therefor. Executive
acknowledges that Company may terminate or modify any currently existing
pension or profit-sharing plan in the exercise of its sole discretion. If
Executive's employment with the Company is terminated for any reason, then if
Executive so requests, the Company shall cause Executive's then-vested pension
or profit-sharing benefits to be distributed to the Executive in a lump sum,
provided that such
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distribution is permitted by applicable law and by the terms of the plan(s)
from which such benefits are payable.
5.3 Vacation. Executive shall be entitled to a
paid vacation during the Employment Period of six (6) weeks per year, to be
scheduled by Executive in consultation with the Company's Executive Committee.
The Company shall not be obligated to pay Executive for any vacation time not
taken by him.
5.4 Automobile. During the Employment Period,
the Company shall provide Executive with an automobile allowance of Seven
Hundred Fifteen Dollars ($715.00) per month, which amount shall be increased
annually by the Consumer Price Index (as provided in Section 2(a) hereof). The
Company shall pay the costs of insurance, fuel, oil, repairs and maintenance
incurred by Executive in connection with the business use of Executive's
automobile. Executive shall (i) furnish the Company with any documentation
required by the Code and the regulations thereunder in connection with
Executive's use of his automobile, and (ii) pay to the Company any amounts
required by law as a result of Executive's use of his automobile for
non-business purposes.
5.5 Life Insurance. The Company shall maintain
insurance on Executive's life in the amount of One Million Dollars ($1,000,000)
which shall be payable to Executive's designated beneficiary (or, if no
beneficiary has been designated by Executive, Executive's estate), upon the
death of Executive during the Employment Period.
6. Termination of Employment.
(a) By Company for Good Cause. Executive's
employment with the Company may be terminated at the option of and by written
notice from the Company if the Board of Directors of the Company shall find
"good cause" (as defined in Section 9(a) hereinafter) for termination. Upon
any such termination all rights, obligations and duties of the parties
hereunder shall immediately cease.
(b) Disability. Executive's employment with the
Company may be terminated at the option of, and by written notice from, the
Company if Executive shall become disabled, which, for purposes of this
Agreement, shall be deemed to have occurred if (i) Executive shall be unable to
perform his duties on an active basis by reason of disability or impairment of
health for a period of at least one hundred eighty (180) consecutive calendar
days or (ii) the Company shall have received a certificate from a physician
reasonably acceptable to it and to Executive to the effect that Executive is
incapable of reasonably performing services under this Agreement as required
herein. Upon any such termination, the Company shall continue to pay Executive
as a disability benefit his base salary pursuant to Section 2(a) for
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the six (6) month period subsequent to the determination of Executive's
disability as set forth above. Subsequent to the conclusion of said six (6)
month period, the Company shall pay Executive, until such time as Executive
attains the age of sixty-five (65) years, a disability benefit equal to eighty
percent (80%) of Executive's Base Salary (adjusted annually as provided in
Section 2(a) hereof).
(c) Death. In the event of Executive's death his
employment with the Company shall be deemed terminated as of the end of the
month in which such death occurs and all rights, duties and obligations of the
parties under this Agreement shall thereupon cease, except that the Company
shall continue to pay to Executive's estate or his designated successor in
interest the amount of his Base Salary and any bonus pursuant to Section 2 for
a period of thirty-six (36) months subsequent to Executive's death.
7. Nondisclosure, Noncompetition and Noninterference.
Executive (i) shall at all times hold in strictest confidence any and all
confidential data and other confidential information within his knowledge
concerning the products, services, businesses, suppliers and customers of the
Company and its subsidiaries, (ii) shall not during the Employment Period, and
for a period of two (2) years thereafter, without the prior written consent of
the Company, either directly or indirectly operate or perform any advisory or
consulting services for, invest in (other than stock in a publicly-held
corporation which is traded on a recognized securities exchange), or otherwise
operate or become associated with in any capacity, any company, partnership,
organization, proprietorship, or other entity including, but not limited to
entities engaged in (a) business activities which may then be competitive with
business activities of the Company or its subsidiaries, (b) the marketing or
financing of partnerships, joint ventures or other entities which engage in oil
and/or gas exploration, development, drilling or (c) the ownership of any oil
and/or gas properties within those geographical areas in which the Company or
its subsidiaries now or then engages in its business and operations, including
the sale of partnership interests in its (or its subsidiaries') programs
(whether directly or through other brokers dealers), and (iii) shall not, any
time, without the prior written consent of the Company, directly or indirectly
induce or attempt to induce any employee, agent or other representative or
associate of the Company or its subsidiaries to terminate his or its
relationship with the Company or its subsidiaries, or in any way directly or
indirectly knowingly interfere with such a relationship or a relationship
between the Company or its subsidiaries and any of its (or its subsidiaries')
suppliers or customers in an attempt to induce any of the foregoing to modify
or any way then existing or then current relationship with the Company or its
subsidiaries. Executive acknowledges that compliance with the agreements in
this Section 7 is necessary to
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protect the Company and its subsidiaries and that a breach of such agreements
will result in irreparable and continuing damage to the Company and its
subsidiaries for which there will be no adequate remedy at law, and agrees that
in the event of any breach of said agreements, the Company and its subsidiaries,
and its (or its subsidiaries') successors and assigns, shall be entitled to
injunctive relief and to such other and further relief as is proper in the
circumstances.
8. Insurance. Executive agrees that the Company may
insure his life as a key employee of the Company and that he will submit to any
medical examination which may be reasonably requested by the Company for the
purpose of obtaining such insurance or for the purpose of obtaining the
insurance required pursuant to Section 5.5 hereof.
9. Payments to Executive Upon Termination of Employment.
(a) Definition of Termination. As used in this
Agreement, "Termination" shall mean the termination by the Company of
Executive's employment hereunder for any reason other than (i) "good cause," or
(ii) retirement at or after the normal retirement age under a qualified pension
plan maintained by the Company. "Good cause" shall mean only: (i) a material
breach by Executive of his duties and obligations under this Agreement, if such
breach continues for a period of six (6) months after Executive's receipt of a
written notice from the Company identifying the breach in reasonable detail, or
(ii) Executive's indictment for a felony offense or criminal conviction for
such felony offense or any offense involving dishonesty, fraud, theft, or moral
turpitude under federal or state law. After a Change in Control (as
hereinafter defined), the following shall also constitute a Termination:
(i) Relocation of the principal place at which
Executive's duties are to be performed to a location outside
the Cleveland Metropolitan Area;
(ii) A substantial reduction in the benefits or
prerequisites provided to Executive;
(iii) A substantial reduction in Executive's
responsibilities, authorities or functions; or
(iv) A substantial adverse change in Executive's
work conditions.
(b) Termination Without Change of Control. Upon
a Termination other than after a Change of Control, the Company shall pay to
Executive or, in the event of his subsequent death, to his beneficiary or
beneficiaries, or his estate, as the case
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may be, monthly for a period of seventy-two (72) months the monthly salary
payable under Section 2 of this Agreement. Such payments shall commence on the
last day of the month following the Termination and shall continue until
Executive obtains other employment ("Other Employment"), but in no event for a
greater time period than the lesser of (i) the remaining term of this Agreement
or (ii) said period of seventy-two (72) months; provided, however, if the
compensation from Other Employment is less than that which would have been
payable to Executive by the Company under this Section 9(b), the Company shall
pay Executive the difference for the remainder of the seventy-two (72) month
period.
(c) Termination After Change of Control. Upon a
Termination after a Change of Control, the Company shall pay to the Executive
and provide Executive, his beneficiaries, dependents and estate, at Executive's
election, either (A) six (6) times the average annual salary, bonus, and
incentive compensation amounts paid to Executive under Sections 2 and 3 during
the three (3) year period immediately preceding a Termination after a Change of
Control in seventy-two (72) equal payments for a period of seventy-two (72)
months, or (B) a lump sum equal to the aggregate of the monthly amounts payable
under subsection 9(c)(ii)(A) discounted to present value at a discount rate of
7% per annum, applied to each monthly payment from the time it would have
become payable to the date of Termination.
(d) Continuation of Benefits. During a period of
seventy-two (72) months beginning with the Termination, Executive, his
dependents, beneficiaries and estate shall continue to be covered and to accrue
service credits for all purposes under all employee benefit plans of the
Company, including, without limitation the Company's pension plan and those
benefit programs provided by Section 5, as if Executive were still employed
during such period under this Agreement.
(e) Funding of Continuation of Benefits. If and
to the extent benefits or service credit for benefits provided by Sections 5
and 9(d) shall not be payable or provided under any such plans to Executive,
his dependents, beneficiaries and estate, by reason of his no longer being an
employee of the Company as a result of termination of employment, the Company
shall itself (i) pay or provide for payment of such benefits to Executive, his
dependents, beneficiaries and estate, and (ii) to the extent any such service
credits may not be available to Executive, pay or provide for the payment of
benefits, including, but not limited to, pension benefits as if Executive
continued to accrue such service credits for seventy-two (72) months. Any such
payment relating to retirement shall commence on a date selected by Executive
which must be a date on which payments under the Company's qualified pension
plan or successor plan may commence.
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(f) Retirement After Change of Control. If the
Termination occurs after a Change of Control, and if Executive elects to have
benefits commence prior to the normal retirement age under the qualified
pension plan or any successor plan maintained by the Company and thereby incurs
an actuarial reduction in his monthly benefits under such plan, the Company
shall itself pay, or provide for payment of, the difference between the full
non-actuarially reduced monthly pension amount that would have been payable
under the pension plan if the benefits commenced at normal retirement age or
upon the occurrence of some other event or the satisfaction of some other
conditions specified in the pension plan and the actuarially reduced amount
paid upon the early commencement of benefits.
(g) Offset of Disability Insurance Payments. Any
payments to be made by the Company pursuant to any provision of this Section 9
shall be offset and reduced by and to the extent the Executive receives any
proceeds from Company purchased disability insurance policies. Any such offset
or reduction shall be made only in the amount of any such proceeds which are
attributable to a period following any "termination" for purposes of this
Section.
(h) Legal Fees. The Company shall pay all legal
fees and expenses which Executive may incur as a result of the Company
contesting the validity or enforceability of the provisions of this Section 9
and further shall be entitled to receive interest at the prime rate in effect
at the Huntington National Bank of Cleveland for any delay in payment from the
date such payment was due.
(i) Mitigation. Executive shall not be required
to mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise nor, if the Event of Termination occurs after a
Change of Control, shall any amounts received from other employment or
otherwise by Executive offset in any manner the obligations of the Company
hereunder.
(j) No Dismissal Allowance. No payments or
benefits pursuant to Section 9 of this Agreement shall constitute a Dismissal
Allowance, as defined in the Company's Pension Plan, Severance Payments, or any
other offset against or deduction from any pension payable to Executive under
the Company's present qualified pension plan or any successor or substitute or
supplemental defined benefit or defined contribution plan maintained by the
Company.
(k) Change of Control Defined. A "Change of
Control" shall be deemed to have occurred, if at any time during the period of
employment of Executive pursuant to this Agreement, (i) a change occurs which
would be required to be reported as a change in control in a proxy statement
filed under the Securities
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Exchange Act of 1934; or (ii) the Company shall cease to have a class of equity
securities registered under Section 12 of the Securities Act of 1934; or (iii)
more than fifty percent (50%) of the Company's outstanding Common Stock, or
equivalent in voting power of any class or classes of outstanding securities of
the Company ordinarily entitled to vote in elections of directors, shall be
acquired by any other corporation or other person or group ("Group" shall mean
persons who act in concert as described in Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended).
10. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, or twenty-four (24) hours after being sent by standard form of
telecommunications, or five (5) days after being mailed (by registered or
certified mail, return receipt requested), in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice);
(a) If to Executive:
Garry Regan
6735 Walnut Drive
Gates Mills, Ohio 44040
(b) If to Company:
North Coast Energy, Inc.
5311 Northfield Road, Suite 320
Bedford Heights, Ohio 44146
With a copy to:
Michael D. Phillips, Esq.
Calfee, Halter & Griswold
McDonald Investment Center
800 Superior Avenue, Suite 1400
Cleveland, Ohio 44114-2688
11. Assignment. Except as set forth herein, no rights or
obligations of any kind under this Agreement shall, without the written consent
of the other party, be transferable to or assignable by Executive or by the
Company or any other person to be subject to alienation, encumbrance,
garnishment, attachment, execution or levy of any kind, voluntary or
involuntary. This Agreement shall be binding upon and shall inure to the
benefit of the Company, Executive and their respective successors, heirs,
personal representatives and permitted assigns.
12. Severability. In the event any provision or term of
this Agreement is determined by any judicial, quasi-judicial or
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administrative body to be void or not enforceable to any extent for any reason,
it is the agreed-upon intent of the parties hereto that such provision or term
and all other provisions or terms of this Agreement shall remain in full force
and effect to the maximum extent permitted.
13. No Rights in Any Property or Company. The
undertakings of the Company to pay Executive herein set forth constitute merely
the unsecured promises of the Company. No property of the Company (or any of
its subsidiaries) is or shall be, by reason of this Agreement, held in trust
for Executive. Executive shall not have, by reason of this Agreement, any
right, title or interest of any kind in or to any property of the Company (or
any of its subsidiaries).
14. Governing Law. This Agreement is executed in and
shall be construed in accordance with and governed by the laws of the State of
Ohio.
15. Entire Agreement. This Agreement contains the entire
agreement between the parties concerning the subject matter hereof and may be
changed only by a written agreement signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement
to be effective on the date first above written.
NORTH COAST ENERGY, INC.
By: /s/ CHARLES M. LOMBARDY
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Charles M. Lombardy,
Chief Executive Officer
("Company")
/s/ GARRY REGAN
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Garry Regan
("Executive")
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