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Exhibit 10.2
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of this 5th day of September 2007 by and between MarkWest Hydrocarbon, Inc., a Delaware corporation, having its principal executive offices in Denver, Colorado (the “Company”) and , residing in , Colorado (the “Executive”).
WHEREAS, the Company derives its revenue and value through its natural gas liquids and gas marketing activities and through its ownership in MarkWest Energy Partners, L.P. (the “Partnership”), a publicly traded Delaware master limited partnership engaged in the gathering, transportation and processing of natural gas, the transportation and fractionation and storage of NGLs, and the gathering and transportation of crude oil;
WHEREAS, the Company’s ownership interest in the Partnership consists of ownership of an approximately 17% limited partner interest in MarkWest Energy Partners, L.P., and ownership of approximately 89.7% of MarkWest Energy GP, L.L.C. (the “GP”), the Partnership’s general partner;
WHEREAS, the Company and GP have entered into a services agreement (the “Services Agreement”) pursuant to which the Company acts in a management capacity providing day-to-day operational, business and asset management, accounting, information services, personnel, and related administrative services to the Partnership;
WHEREAS, the Executive is currently serving as of the Company, and in such capacity provides services to or on behalf of the Company and its affiliates, and to the Partnership and its affiliates pursuant to the Services Agreement; and
WHEREAS, the Company and the Executive mutually desire to formalize the employment arrangement of the Executive and to agree upon the terms of the Executive’s employment as the of the Company and, in addition, to agree as to certain benefits of said employment.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth below, the Company and the Executive hereby agree as follows:
1. TERM OF EMPLOYMENT: Subject to the terms of this Agreement, the Company hereby continues the employment of the Executive, and the Executive hereby accepts such continuing employment, effective September 5, 2007 (the “Effective Date”), for a period of three years, subject to earlier termination as provided in Paragraph 4, herein (the “Term”); provided, however, that the Term will automatically be extended by twelve months on the third anniversary of the Effective Date and on each anniversary of the Effective Date thereafter, unless one party to this Agreement provides written notice of non-renewal to the other party at least 30 days prior to the effective date of such automatic extension. The consequences of termination of employment to each party are as set forth in this Agreement. Portions of this Agreement that by their terms provide or imply that they survive the end of the Term shall survive the end of the Term.
2. POSITION AND DUTIES:
a. Position: During the Term, the Executive shall serve as of the Company and shall have such duties, responsibilities, and authority as are customarily required of and given to the of a public mid-stream energy company. The Executive shall report directly to the Company’s Chief Executive Officer and shall perform his or her duties and responsibilities primarily at the Company’s offices in Denver, Colorado.
b. Commitment of the Executive: During the Term, the Executive shall devote substantially Executive’s full business time, energy, and ability to the business of the Company, the Partnership, and their respective affiliates. As used in this Agreement, the term “Affiliate” means, with respect to any entity, any other entity that directly or indirectly controls, is controlled by, or is under common control with such first entity.
c. Other Positions and Services: The Executive may (i) with the prior written approval of the Company’s Board of Directors (the “Board”), which approval shall not be unreasonably withheld or delayed, serve as a director or trustee of other for profit corporations or businesses, provided, that if a directorship is approved and the Board later determines (A) that the directorship would violate Paragraph 7 of this Agreement, or (B) that that the Board no longer approves of the directorship, which approval shall not be unreasonably withdrawn, it shall notify the Executive in writing and the Executive shall resign such directorship within a reasonable period of time, (ii) serve on civic or charitable boards or committees, and (iii) deliver lectures, fulfill speaking engagements, or teach at educational institutions (and retain any fees therefrom); provided, however, that the Executive may not engage in any of the activities described in this Paragraph 2(c) to the extent such activities interfere materially with the performance of the Executive’s duties and responsibilities to the Company.
d. Investments: Except as may otherwise be permitted by this Agreement, without the prior express authorization of the Board, the Executive shall not, during the Term, directly or indirectly render services of a business, professional, or commercial nature to any other person or firm, whether for compensation or otherwise. Notwithstanding the foregoing, the Executive may be an investor, shareholder, joint venturer, or partner in any such business (hereinafter referred to as “Investor”); provided, that Executive’s status as an Investor shall not
(i) pose a conflict of interest with regard to Executive’s employment, (ii) require the Executive’s active involvement in the management or operation of such Investment (recognizing that the Executive shall be permitted to monitor and oversee the Investment), or (iii) interfere materially with the performance of the Executive’s duties and obligations hereunder. For the purposes of clause (i) of the preceding sentence, the Executive shall not be deemed to be subject to a conflict of interest merely by reason of the ownership of less than five percent (5%) of (i) the outstanding stock of any entity whose stock is traded on an established stock exchange or on the National Association of Securities Dealers Automated Quotation System, or (ii) the outstanding stock, partnership interests or other form of equity interest of any venture fund, investment pool or similar investment vehicle.
e. No Conflict: The Executive represents and warrants that, to the best of Executive’s knowledge after the review of Executive’s personal files, he has the full right and authority to enter into this Agreement and to render the services as required under this Agreement, and that by signing this Agreement and rendering such services he is not breaching any contract or legal obligation he owes to any third party.
3. COMPENSATION AND BENEFITS: During the Term, while the Executive is employed by the Company, the Company shall compensate the Executive for his or her services as set forth in this Paragraph 3. The Executive recognizes that during the Term of the Agreement, the Company reserves the right to change from time to time the terms and benefits of any retirement, welfare or fringe benefit plan of the Company, including the right to change any service provider, so long as such changes are also applicable generally to all executives of the Company.
a. Salary: During the Term, the Company shall pay the Executive a base salary at an annual rate of (the “Base Salary”). Base Salary shall be earned and shall be payable in periodic installments in accordance with the Company’s payroll practices. Amounts payable shall be reduced by standard withholding and other authorized deductions. The Compensation Committee of the Board (the “Compensation Committee”) will review the Executive’s salary at least annually and may adjust the Executive’s Base Salary in its sole discretion. Executive’s salary as so adjusted shall thereafter be treated as Executive’s Base Salary hereunder.
b. Cash Bonus / Short-Term Incentives: The Executive shall be eligible to receive bonuses/short-term cash incentives in accordance with the Company’s cash bonus/short-term incentive program(s) for senior management, as such program(s) may be modified from time to time. All bonuses/short-term cash incentives shall be paid in a manner that complies with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
c. Equity Compensation Programs:
(i) General. The Executive shall be entitled to participate in all equity compensation programs sponsored by the Company, the Partnership, or their Affiliates (the “Equity Plans”). The size and terms of any grants to be made to Executive shall be established
by the Compensation Committee, or the Compensation Committee of the Partnership, in their sole discretion.
(ii) Change of Control. All grants made under the Equity Plans (including those made prior to the effective date of this Agreement) shall vest in full immediately prior to the occurrence of a Change of Control. For purposes of this Agreement, a Change of Control shall mean the first to occur of:
(A) any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) other than (1) the Company or any Affiliate of the Company as of the date of this Agreement, (2) any employee benefit plan of the Company or any Affiliate of the Company, or (3) any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Company, is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities.
(B) the individual directors of the Board on the effective date of this Agreement (“Incumbent Directors”) cease to constitute at least two-thirds of the Board within any three (3) year period. For purposes of this paragraph, any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Incumbent Directors shall be considered an Incumbent Director. However, no director whose initial election to the Board occurs as a result of an actual or threatened election contest with respect to the election or removal of director or other actual or threatened solicitation of proxies or consents by or on behalf or a person other than the Board shall be considered a Incumbent Director;
(C) consummation of a reorganization, merger or consolidation of the Company (a “Business Combination”), in each case, unless, following such Business Combination, the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, by reason of such ownership of the Company’s voting securities immediately before the Business Combination, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the outstanding voting securities of the Company immediately prior to such Business Combination; or
(D) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
(E) any sale, lease, exchange, or other transfer or disposition of all or substantially all of the assets of the Partnership or the GP;
(F) consummation of any Business Combination with respect to the GP, unless, following such Business Combination, the individuals and entities who were the beneficial owners of outstanding voting securities of the GP as of the initial public offering of securities in the Partnership, beneficially own, by reason of such ownership of the GP’s voting securities, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the GP or all or substantially all of the GP’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the outstanding voting securities of the GP as of the initial public offering of securities in the Partnership; or
(G) the general partner of the Partnership (whether it be the GP or another entity) ceases to be an Affiliate of the Company.
Notwithstanding the foregoing subparagraphs (A) through (G), in no event shall any transaction or series of transactions entered into between the Company, the Partnership, the GP, or their respective Affiliates as of the date of this Agreement or entities wholly owned by the forgoing, or changes associated therewith, be considered a Change in Control.
d. Retirement Plans: The Executive shall be entitled to participate in all retirement plans applicable generally to other senior executives of the Company, in accordance with the terms of such plans, as they may be amended from time to time.
e. Welfare Benefit Plans: The Executive and Executive’s family, as the case may be, shall be eligible to participate in and shall receive all benefits under the Company’s welfare benefit plans and programs applicable generally to other senior executives of the Company (collectively, as amended from time to time, the “Company Plans”), in accordance with the terms of the Company Plans.
f. Vacation and Sick Leave: Executive shall be entitled to paid vacation, sick leave, and paid time off in accordance with the plans, policies, and programs in effect generally with respect to other senior executives of the Company, including the limitations, if any, on the carry-over of accrued but unused time.
g. Expenses: The Company shall reimburse the Executive for reasonable expenses for cellular telephone usage, entertainment, travel, meals, lodging, and similar items incurred in the conduct of the Company’s business. Such expenses shall be reimbursed in accordance with the Company’s expense reimbursement policies and guidelines.
h. Fringe Benefits and Perquisites. Executive and Executive’s family, as the case may be, shall be eligible for all other fringe benefits or perquisites offered generally to senior executives of the Company (and their families, as applicable).
i. Officers and Directors Liability Insurance; Indemnification: During Executive’s employment with the Company and thereafter so long as Executive may have
liability arising out of Executive’s service as an officer or director of the Company or any Affiliate, the Company agrees to continue and maintain a director’s and officer’s liability insurance policy (“D&O Insurance”) covering Executive in an amount that is reasonable and customary based on the size and business activities of the Company, the Partnership, and their Affiliates, and the authorities, power, responsibilities, and duties of Executive. To the fullest extent permitted by the indemnification provisions of the Company’s governing instruments in effect as of the date of this Agreement and the indemnification provisions of the governing laws of the jurisdiction of the Company’s formation in effect from time to time (collectively, the “Indemnification Provisions”), and in each case subject to the conditions thereof, the Company shall (i) indemnify the Executive, as a director (if applicable) and officer of the Company or an Affiliate of the Company or a trustee or fiduciary of an employee benefit plan of the Company or an Affiliate of the Company, or, if the Executive shall be serving in such capacity at the Company’s request, as a director or officer of any other entity (other than an Affiliate of the Company) or as a trustee or fiduciary of an employee benefit plan not sponsored by the Company or an Affiliate of the Company, against all liabilities and reasonable expenses that may be incurred by the Executive in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal or administrative, or investigative and whether formal or informal, because the Executive is or was a director or officer of the Company or any Affiliate, a director or officer of such other entity or a trustee or fiduciary of such employee benefit plan, and against which the Executive may be indemnified by the Company, and (ii) pay for or advance to Executive the reasonable expenses incurred by the Executive in the defense of any proceeding to which the Executive is a party because the Executive is or was a director or officer of the Company or an Affiliate, a director or officer of such other entity or a trustee or fiduciary of such employee benefit plan. The rights of the Executive under the Indemnification Provisions shall survive the termination of the employment of the Executive by the Company.
4. TERMINATION: The Executive’s employment with the Company during the Term may be terminated by the Company or the Executive pursuant to this Paragraph 4, subject to the provisions of Paragraph 5:
a. Death or Disability: If the Executive has a Disability (as defined below), the Company may give to the Executive written notice of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that, within the 30-day period after such receipt, the Executive shall not have returned to full-time performance of the Executive’s material duties. For purposes of this Agreement, “Disability” shall mean any physical or mental condition which prevents the Executive, for a period of 90 consecutive days, from performing and carrying out Executive’s material duties and responsibilities with the Company, as determined under the Company’s long-term disability plan. The Executive’s employment hereunder shall terminate automatically upon the Executive’s death.
b. Cause: The Company may terminate this Agreement immediately upon written notice to the Executive if, after the Executive is given an opportunity to be heard by the Board and to present evidence on Executive’s behalf, a formal determination is made by a majority of the directors on the Board and at least two-thirds of the Board’s non-employee
directors, that the Executive should be terminated for “Cause”. Any one or more of the following events shall constitute “Cause”:
(i) conviction of (or pleading nolo contendere to) a felony that is injurious to the business or reputation of the Company, the Partnership, or their Affiliates;
(ii) engaging in intentional wrongdoing (including without limitation, theft, fraud, embezzlement, or willful misappropriation of the funds or property of the Company, the Partnership, or their Affiliates), or failure by Executive to substantially adhere to the Company work rules, policies or procedures, that is injurious to the business or reputation of the Company, the Partnership, or their Affiliates, or breach of fiduciary duties for enrichment of the Executive;
(iii) illegal or prohibited treatment of or relations with any employee, agent or consultant of the Company, the Partnership, or their Affiliates or of any person with whom the Company, the Partnership, or their Affiliates have a business relationship, in the form of illegal or prohibited discrimination, harassment, abuse, assault or other actions of a similar nature;
(iv) Executive has failed to perform substantially Executive’s material duties as contemplated by Paragraph 2 above (other than such failure resulting from incapacity due to physical or mental illness), which, for avoidance of doubt, shall include Executive’s insubordination to his or her direct or indirect reports or to the Board, after (i) a written demand for corrected performance is delivered to Executive by the Board which identifies specifically the manners in which the Board believes Executive has not performed substantially Executive’s material duties, and (ii) Executive’s failure to cure such items identified in the Board’s letter within 30 days.
(v) any material breach of Executive’s obligations under this Agreement including, but not limited to, a breach of Executive’s obligations under Paragraph 7; provided, however, that in the event such breach is curable and is actually cured within ten (10) days after written notice detailing the nature and facts of such breach is delivered to Executive, the breach shall not be considered “Cause” for Executive’s termination.
(vi) engaging in actions or behavior that bring Executive into public hatred, disrepute, scorn, or ridicule, or shock, insult, or offend the community or public morals or decency, in each case resulting in injury to the business or reputation of the Company or inhibiting the ability of Executive to effectively represent publicly the Company, the Partnership, or their Affiliates.
c. Other than Death or Disability or Cause: The Company may terminate the Executive’s employment upon thirty (30) days written notice to the Executive at any time and for any reason other than Death, Disability, or Cause.
d. Termination by Executive: The Executive may terminate Executive’s employment upon thirty (30) days written notice to the Company at any time and for any reason.
5. OBLIGATIONS OF THE COMPANY AND THE EXECUTIVE UPON TERMINATION:
a. Death or Disability: If the Executive’s employment is terminated by reason of the Executive’s death or Disability during the Term, the Term shall end and the Company shall provide to Executive or Executive’s legal representatives:
(i) payment of the sum of (A) any Base Salary and bonus earned but not yet paid to the Executive through the date of termination, and (B) any other compensation earned through the date of termination but not yet paid or delivered to the Executive (“Accrued Obligations”),
(ii) the payments and benefits provided in Paragraph 5(g),
(iii) payment to the Executive of a lump sum equal to (A) 24 months of the Executive’s then current Base Salary, (B) two (2) times the average annual bonus earned by the Executive for the two most recently completed fiscal years, and (C) a pro-rata portion of the target amount of the annual bonus for the fiscal year of termination, calculated based on the portion of such fiscal year the Executive is employed. The lump sum payment shall be made within thirty (30) days of termination or, if the payment, or any portion thereof, must be delayed to comply with Code Section 409A because the individual is a “specified employee” as defined in Code Section 409A(a)(2)(B)(i), the payment, or the portion so delayed, shall be made on the soonest date permissible without triggering the additional tax due under Code Section 409A;
(iv) subject to Paragraph 3(c), the accelerated vesting of each stock option or unit option, phantom unit, restricted stock or restricted unit, or other equity incentive award granted under the Equity Plans (or portion thereof) that would have otherwise vested solely upon the Executive remaining in the continuous employment of the Company for a period of twelve (12) months after the date of termination, and
(v) payment of all premiums for properly elected group health plan continuation coverage for Executive and his or her spouse and dependents pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the lesser of (A) the number of months of Base Salary to be paid to Executive under subparagraph (iii)(A), above, or (B) the duration of such COBRA coverage. All such premiums shall be paid on the first day of the month. In addition, in the event that payment of such premiums is taxable to executive, the Company shall pay to Executive
