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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1993 or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _____________________
Commission file number 1-7176
THE COASTAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-1734212
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
COASTAL TOWER
NINE GREENWAY PLAZA
HOUSTON, TEXAS 77046-0995
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-1400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -----------------------
<S> <C>
Common Stock ($.33 1/3 par value) )
$1.19 Cumulative Convertible Preferred Stock, Series A ($.33 1/3 par value) )
$1.83 Cumulative Convertible Preferred Stock, Series B ($.33 1/3 par value) )
$2.125 Cumulative Preferred Stock, Series H ($.33 1/3 par value) )
11-3/4% Senior Debentures 10% Senior Notes ) New York Stock Exchange
11-1/8% Senior Subordinated Notes 9-3/4% Senior Debentures )
10-1/4% Senior Debentures 8-3/4% Senior Notes )
10-3/8% Senior Notes 9-5/8% Senior Debentures )
10-3/4% Senior Debentures 8-1/8% Senior Notes )
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Common Stock ($.33-1/3 par value)
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, 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. /x/
As of March 16, 1994, there were outstanding 104,218,335 shares of common
stock, 427,408 shares of Class A common stock, 64,403 shares of $1.19 Cumulative
Convertible Preferred Stock, Series A, 87,398 shares of $1.83 Cumulative
Convertible Preferred Stock, Series B, 35,252 shares of $5.00 Cumulative
Convertible Preferred Stock, Series C and 8,000,000 shares of $2.125 Cumulative
Preferred Stock Series H, of the Registrant. The aggregate market value on such
date of the voting stock of the Registrant held by non-affiliates was an
estimated $2.9 billion, based on the closing prices in the daily composite list
for transactions on the New York Stock Exchange and other markets.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for the 1994 Annual Meeting of
Stockholders, filed pursuant to Regulation 14A under the Securities Exchange Act
of 1934, referred to in Part III hereof.
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TABLE OF CONTENTS
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ITEM NO. PAGE
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Glossary.................................................................. (ii)
PART I
1. Business.................................................................. 1
Introduction........................................................... 1
Natural Gas Systems.................................................... 1
Operations........................................................... 1
General.............................................................. 1
Competition.......................................................... 2
ANR Pipeline......................................................... 3
Colorado............................................................. 5
ANR Storage.......................................................... 6
Gas System Reserves and Availability................................. 6
Reconciliation with FERC Form 15 Report.............................. 7
Wyoming Interstate Company, Ltd. .................................... 7
Great Lakes Gas Transmission Limited Partnership..................... 7
Coastal Gas Services Company......................................... 7
Regulations Affecting Gas Systems.................................... 8
Other Developments................................................... 10
Refining, Marketing and Distribution................................... 12
Exploration and Production............................................. 14
Coal................................................................... 17
Chemicals.............................................................. 18
Independent Power Production........................................... 19
Trucking Operations.................................................... 19
Competition............................................................ 20
Environmental.......................................................... 20
2. Properties................................................................ 21
3. Legal Proceedings......................................................... 21
4. Submission of Matters to a Vote of Security Holders....................... 22
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters................................................................. 23
6. Selected Financial Data................................................... 24
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
8. Financial Statements and Supplementary Data............................... 24
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.............................................................. 24
PART III
10. Directors and Executive Officers of the Registrant........................ 25
11. Executive Compensation.................................................... 26
12. Security Ownership of Certain Beneficial Owners and Management............ 26
13. Certain Relationships and Related Transactions............................ 26
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 27
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(i)
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GLOSSARY
"ANR Pipeline" means ANR Pipeline Company
"ANR Storage" means ANR Storage Company
"Bcf" means billion cubic feet
"BTU" means British thermal unit
"CGMC" means Coastal Gas Marketing Company
"CGS" means Coastal Gas Services Company
"CIG" or "Colorado" means Colorado Interstate Gas Company
"Coastal" or "Company" means The Coastal Corporation and its subsidiaries
"Empire" means Empire State Pipeline
"EPA" means Environmental Protection Agency
"FAS" means Statement of Financial Accounting Standards
"FASB" means Financial Accounting Standards Board
"FERC" means Federal Energy Regulatory Commission
"Great Lakes" means Great Lakes Gas Transmission Limited Partnership
"HIOS" means High Island Offshore System
"Interim Settlement" means ANR Pipeline's Stipulation and Agreement submitted to
the FERC which is more fully described in Item 1, Business, Regulations
Affecting Gas Systems - Rate Matters
"Huddleston" means Huddleston & Co., Inc., Houston, Texas
"Mcf" means thousand cubic feet
"MMcf" means million cubic feet
"NEB" means Canadian National Energy Board
"NGA" means Natural Gas Act of 1938, as amended
"NGPA" means Natural Gas Policy Act of 1978
"NGWDA" means Natural Gas Wellhead Decontrol Act of 1989
"OFE" means Office of Fossil Energy of the Department of Energy
"Order 636" means the FERC Order No. 636 series of orders which is more fully
described in Item 1, Business, Regulations Affecting Gas Systems - General
"TransCanada" means TransCanada PipeLines Limited
"UTOS" means U-T Offshore System
"WIC" means Wyoming Interstate Company, Ltd.
NOTES:
The terms "Coastal" and "Company" are used in this Annual Report for purposes of
convenience and are intended to refer to The Coastal Corporation and/or its
subsidiaries either individually or collectively, as the context may require.
These references are not intended to suggest that the various Coastal companies
referred to are not independent corporate entities having their separate
corporate identities and managements.
All natural gas volumes presented in this Annual Report are stated at a pressure
base of 14.73 pounds per square inch absolute and 60 degrees Fahrenheit.
(ii)
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
Coastal, acting through its subsidiaries, is a diversified energy holding
company with subsidiary operations in natural gas marketing, processing, storage
and transmission; petroleum refining, marketing and distribution; gas and oil
exploration and production; coal mining; chemicals; independent power
production; and trucking. The Company was incorporated under the laws of
Delaware in 1972 to become the successor parent, through a corporate
restructuring, of a corporate enterprise founded in 1955. The Company employed
approximately 16,000 persons as of December 31, 1993.
Annual Reports on Form 10-K for the year ended December 31, 1993, are also
filed by Coastal's subsidiaries, ANR Pipeline and Colorado, and by each of the
six limited partnership oil and gas drilling programs, of which Coastal's
subsidiary, Coastal Limited Ventures, Inc., is the managing general partner.
Such reports contain additional details concerning the reporting organizations.
The operating revenues and operating profit of the Company by industry
segment for the years ended December 31, 1993, 1992 and 1991, and the related
identifiable assets as of December 31, 1993, 1992 and 1991, are set forth in
Note 10 of the Notes to Consolidated Financial Statements included herein.
Information concerning inventories is set forth in Note 2 of the Notes to
Consolidated Financial Statements included herein.
NATURAL GAS SYSTEMS
OPERATIONS
GENERAL
Natural gas operations involve the production, purchase, gathering,
processing, transportation, balancing, storage and sale of natural gas to and
for utilities, industrial customers, distributors, other pipeline companies and
end-users.
ANR Pipeline is involved in the storage, transportation and balancing of
natural gas. ANR Pipeline provides these services for various customers through
its facilities located in Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Michigan, Mississippi, Missouri, Nebraska, New Jersey, Ohio,
Oklahoma, Tennessee, Texas, Wisconsin, Wyoming and offshore in federal waters.
Prior to November 1, 1993, ANR Pipeline was also engaged in the sale for resale
of natural gas. With ANR Pipeline's implementation of Order 636 effective
November 1, 1993, ANR Pipeline no longer provides a merchant service. However,
former gas sales customers of ANR Pipeline have largely retained their firm
storage and transportation service levels previously included in their "bundled"
gas sales services. ANR Pipeline will auction gas on the open market as part of
its gas restructuring program designed to handle the continuation of certain gas
purchase contracts pending renegotiation or expiration of such contracts. ANR
Pipeline's gas sales for resale customers previously included 51 local
distributors in Michigan, Wisconsin, Illinois, Indiana, Iowa, Kansas, Missouri,
Ohio and Tennessee. ANR Pipeline operates two major offshore gas pipeline
systems in the Gulf of Mexico which are owned by HIOS and UTOS, general
partnerships composed of ANR Pipeline subsidiaries and subsidiaries of other
pipeline companies. ANR Pipeline also operates Empire, a 156-mile pipeline
extending from Niagara Falls to Syracuse, New York, in which an affiliate of ANR
Pipeline has a 45% interest.
During 1993, approximately 62% of ANR Pipeline's gas supply was purchased
from gas producers and marketers in Illinois, Indiana, Kansas, Louisiana,
Michigan, Mississippi, Oklahoma, Texas, Wisconsin, Wyoming and the Texas and
Louisiana offshore areas; approximately 32% was obtained from three Canadian
suppliers; and approximately 6% was purchased from the Dakota Gasification
Company in North Dakota.
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ANR Pipeline's two interconnected large-diameter multiple pipeline systems
transport gas to the Midwest from (a) the Hugoton Field and other fields in the
Anadarko Basin in Texas and Oklahoma and (b) the Louisiana onshore and Louisiana
and Texas offshore areas. Gas from Wyoming and Canada is obtained by ANR
Pipeline through transportation and exchange agreements with other companies.
ANR Pipeline's principal pipeline facilities at December 31, 1993 consisted
of 12,657 miles of pipeline and 97 compressor stations with 1,069,788 installed
horsepower. At December 31, 1993, the design peak day delivery capacity of the
transmission system, considering supply sources, storage, markets and
transportation for others, was approximately 5.6 Bcf per day.
Colorado is involved in all phases of the production, gathering, processing,
transportation, storage and sale of natural gas. Colorado purchases and produces
natural gas and makes sales of such gas principally to local gas distribution
companies for resale. Separately, Colorado contracts to gather, process,
transport and store natural gas owned by third parties.
Colorado's gas transmission system extends from gas production areas in the
Texas Panhandle, western Oklahoma and western Kansas, northwesterly through
eastern Colorado to the Denver area, and from production areas in Montana,
Wyoming and Utah, southeasterly to the Denver area. Colorado's gas gathering and
processing facilities are located throughout the production areas adjacent to
its transmission system. Most of Colorado's gathering facilities connect
directly to its transmission system, but some gathering systems are connected to
other pipelines. Colorado also has certain gathering facilities located in New
Mexico. Colorado owns four underground gas storage fields; three located in
Colorado, and one in Kansas.
Colorado's principal pipeline facilities at December 31, 1993 consisted of
6,347 miles of pipeline and 65 compressor stations with approximately 346,000
installed horsepower. At December 31, 1993, the design peak day delivery
capacity of the transmission system was approximately 2.0 Bcf per day. The
underground storage facilities have a working capacity of approximately 29 Bcf
per year and a peak day delivery capacity of approximately 769 MMcf.
The Company formed CGS as a wholly-owned subsidiary in early 1993 to
consolidate its unregulated natural gas businesses. CGS and its subsidiaries
operate certain of Coastal's natural gas gathering and processing, gas supply
and marketing, price risk management and producer financing activities.
COMPETITION
ANR Pipeline and Colorado have historically competed with interstate and
intrastate pipeline companies in the sale, storage and transportation of gas and
with independent producers, brokers, marketers and other pipelines in the
gathering, processing and sale of gas within their service areas. On October 1,
1993 and November 1, 1993, Colorado and ANR Pipeline, respectively, implemented
Order 636 on their systems. As a consequence, ANR Pipeline is no longer a seller
of natural gas to resale customers. Order 636 also mandated implementation of
capacity release and secondary delivery point options allowing a pipeline's firm
transportation customers to compete with the pipeline for interruptible
transportation, which may result in reduced interruptible transportation revenue
of pipelines. Additional information on this subject is included under
"Regulations Affecting Gas Systems" included herein.
Natural gas competes with other forms of energy available to customers,
primarily on the basis of price. These competitive forms of energy include
electricity, coal, propane and fuel oils. Changes in the availability or price
of natural gas or other forms of energy, as well as changes in business
conditions, conservation, legislation or governmental regulations, capability to
convert to alternate fuels, changes in rate structure, taxes and other factors
may affect the demand for natural gas in the areas served by ANR Pipeline and
Colorado.
ANR Pipeline's storage, transportation and balancing services are influenced
by its customers' access to alternative providers of such services. ANR Pipeline
competes directly with Panhandle Eastern Pipe Line Company, Trunkline Gas
Company, Northern Natural Gas Company, Natural Gas Pipeline Company of America,
Michigan
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Consolidated Gas Company and CMS Energy Company in its principal market areas of
Michigan and Wisconsin for its storage, transportation and balancing business.
ANR PIPELINE
GAS SALES FOR RESALE AND TRANSPORTATION
ANR Pipeline transports gas to markets on its system and other markets under
transportation and exchange arrangements with other companies, including
distributors, intrastate and interstate pipelines, producers, brokers, marketers
and end-users. Typically, these arrangements call for ANR Pipeline to transport
such gas to points of interconnection with local distribution companies or other
interstate pipelines. Transportation service revenues provided by ANR Pipeline
amounted to $533 million for 1993 compared to $463 million for 1992 and $382
million for 1991.
During the period January through October of 1993, ANR Pipeline sold 228 Bcf
of gas, of which approximately 71% was sold to its three largest customers:
Michigan Consolidated Gas Company, Wisconsin Gas Company and Wisconsin Natural
Gas Company. Michigan Consolidated Gas Company serves the City of Detroit and
certain surrounding areas, the industrial cities of Grand Rapids and Muskegon,
the communities of Ann Arbor and Ypsilanti and numerous other communities in
Michigan. Wisconsin Gas Company serves the Milwaukee metropolitan area and
numerous other communities in Wisconsin. Wisconsin Natural Gas Company serves
the industrial cities of Racine, Kenosha, Appleton and their surrounding areas
in Wisconsin. In 1993, ANR Pipeline provided 71% and 33% of the total gas
requirements for Wisconsin and Michigan, respectively. Gas sales for resale by
ANR Pipeline amounted to $604 million for 1993, compared to $635 million for
1992 and $641 million for 1991.
ANR Pipeline's deliveries for the years 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
Total System Daily Average
Year Deliveries System Deliveries
- ---------------- -------------- -----------------
(Bcf) (MMcf)
<C> <C> <C>
1993 1,336 3,660
1992 1,335 3,648
1991 1,324 3,627
</TABLE>
On November 1, 1992, as part of its Interim Settlement, ANR Pipeline
implemented a restructuring of its traditional sales service by replacing
existing services with a combination of competitive service alternatives. This
restructuring provided a number of options for pipeline customers and was
designed to enhance competition in ANR Pipeline's service areas. Under this
restructuring, the sales service was "unbundled" on an interim basis into firm
sales, transportation, flexible storage and flexible delivery services. Prior to
the restructuring, the cost of providing transportation services for sales
customers was recovered as part of ANR Pipeline's total resale rate and
therefore, was classified as part of gas sales revenue. Under the restructuring,
these costs were recovered through a separate rate and were included in
transportation revenue. Additional information concerning the restructuring is
set forth in "Regulations Affecting Gas Systems - Rate Matters" included herein.
Effective November 1, 1993, ANR Pipeline implemented Order 636. This Order
required significant changes in the services provided by ANR Pipeline, and
resulted in the elimination of ANR Pipeline's merchant service. ANR Pipeline now
offers an array of "unbundled" storage, transportation and balancing service
options. Additional information concerning Order 636, including transportation
and storage, is set forth in "Regulations Affecting Gas Systems - General"
included herein.
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GAS PURCHASES
Effective November 1, 1993, as a result of the elimination of ANR Pipeline's
merchant service, as mentioned above, ANR Pipeline's gas purchases decreased
substantially. However, ANR Pipeline still purchases gas under a number of gas
purchase contracts. ANR Pipeline's Order 636 restructured tariff provides
mechanisms for the purpose of recovering from or refunding to its customers any
pricing differential between costs incurred to purchase this gas and the amount
ANR Pipeline recovers through auctioning of gas on the open market.
Of ANR Pipeline's gas purchases in 1993, approximately 62% was obtained
directly from producers, including 17% from affiliates. In addition, ANR
Pipeline received approximately 32% of its gas supply from Canadian suppliers
and 6% from a producer of synthetic fuels. The border price of gas originating
in Canada has been based on policies, established in 1984 by the NEB and the
OFE, allowing exporters and importers to negotiate market-responsive prices.
Gas purchase contracts with producers generally provide for minimum purchase
obligations based on estimated reserves under the well, the well's ability to
produce or allowable gas takes set by state regulatory agencies. The prices paid
depend upon, among other things, contractual requirements, market conditions,
and the quality, condition of delivery and location of the gas. Under the NGWDA,
effective July 26, 1989, all gas which would otherwise continue to be subject to
price controls under the NGPA was deregulated over a three-year period and
complete deregulation became effective January 1, 1993.
Some of ANR Pipeline's remaining gas purchase contracts with independent
producers contain provisions which require taking minimum volumes and/or making
prepayments for volumes not taken if purchases fall below specified levels
during the contract year ("take-or-pay"). Additional information on take-or-pay
matters is set forth in Note 3 of the Notes to Consolidated Financial Statements
included herein.
GAS STORAGE
ANR Pipeline owns seven and leases eight underground storage facilities in
Michigan. The total working storage capacity of the system is approximately 193
Bcf, with a maximum day delivery capacity of 2 Bcf as late as the end of
February. However, of the 193 Bcf, ANR Pipeline has proposed to the FERC to
reclassify 62.1 Bcf of working gas to recoverable base gas. ANR Pipeline also
has the contract rights for 42 Bcf of storage capacity provided by Blue Lake Gas
Storage Company, 30 Bcf of storage capacity provided by ANR Storage and 10 Bcf
of storage capacity provided by Michigan Consolidated Gas Company. The contract
with Michigan Consolidated Gas Company expires in March 1994. Underground
storage services of up to 166 Bcf of gas are provided by ANR Pipeline to
customers on a firm basis. ANR Pipeline also provides interruptible storage
services for customers on a short-term basis.
Coastal's independent engineers, Huddleston, have estimated that ANR
Pipeline's gas storage reserves as of December 31, 1993, 1992 and 1991 were
106.5 Bcf, 128 Bcf and 134 Bcf, respectively. The 1993 gas storage reserves are
comprised of 19.4 Bcf of natural gas, maintained under ANR Pipeline's own
account as working gas for system balancing and no-notice storage services; 25
Bcf of recoverable base gas reserves in seven owned storage fields; and 62.1 Bcf
of working gas which ANR Pipeline has proposed to the FERC to reclassify as
recoverable base gas. The decrease in the gas storage reserves between 1993 and
1992 reflects ANR Pipeline's elimination of its merchant service. Effective
November 1, 1993, ANR Pipeline storage reserves are solely used to facilitate
the overall operations of the system.
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COLORADO
GAS SALES, STORAGE AND TRANSPORTATION
Beginning in October 1993, Colorado implemented Order 636 on its system and
as required by the Order, Colorado's gas sales are now made at "upstream"
locations (typically the wellhead). Colorado's gas sales contracts extend
through September 30, 1996, but provide for reduced customer purchases to be
made each year. Under Order 636, Colorado's certificate to sell gas for resale
allows sales to be made at negotiated prices and not at prices established by
FERC. Colorado is also authorized to abandon all sales for resale at such time
as the contracts expire and without prior FERC approval.
Effective October 1, 1993, Colorado formed an unincorporated Merchant
Division to conduct most of Colorado's sales activity in the Order 636
environment. The gas sales volumes reported include those sales which continue
to be made by Colorado together with those of its Merchant Division.
Effective on October 1, 1993, Colorado assigned an undivided interest in a
portion of its company-owned leases (representing approximately 20% of
Colorado's owned reserves) to a new subsidiary. The subsidiary has entered into
a contract to sell the production to Colorado's Merchant Division, which
utilizes the gas primarily for its sales to Colorado's traditional customers.
The reserve volumes reported represent those interests retained by Colorado
together with those assigned to the new subsidiary.
Gas sales revenues were $223 million in 1993, compared to $261 million in
1992. This decrease is due largely to the fact that prior to the mandated
restructuring under Order 636 the costs of providing gathering, storage and
transportation services for sales customers were recovered as part of the total
resale rate and were classified as part of gas sales revenue. Subsequent to
restructuring, these costs are now recovered under separate rates for each
service.
Colorado has engaged in "open access" transportation and storage of gas owned
by third parties for several years. In addition, prior to October 1, 1993,
Colorado provided storage and transportation services as part of its "bundled"
sales service. As a result of Order 636, the Company has "unbundled" these
services from its sales services and will continue to provide these services to
third parties under individual contracts. Such services will be at negotiated
rates that are within minimum and maximum levels established by the FERC. Also,
pursuant to Order 636, Colorado, on September 30, 1993, sold all of its working
gas except for 3.8 Bcf which it retained for operational needs.
Colorado's deliveries for the years 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
Total System Daily Average
Year Deliveries System Deliveries
- ------------------------ -------------- -----------------
(Bcf) (MMcf)
<S> <C> <C>
1993 453 1,241
1992 428 1,169
1991 408 1,119
</TABLE>
GAS GATHERING AND PROCESSING
Prior to Order 636, Colorado gathered and processed gas incident to its
"bundled" sales service (which also included storage and transportation
activities). However, in compliance with the FERC mandated restructuring,
Colorado now provides gathering and processing services on an "unbundled" or
stand-alone basis. Colorado contracts for these services under terms which are
negotiated. With respect to gathering, Colorado is limited to charging rates
which are between minimum and maximum levels approved by the FERC. Processing
terms are not subject to FERC approval, but Colorado is required to provide
"open access" to its processing facilities.
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Colorado has 2,994 miles of gathering lines and 110,500 horsepower of
compression in its gathering operations. Colorado owns and operates six gas
processing plants which recovered approximately 86 million gallons of liquid
hydrocarbons in 1993, compared to 77 million gallons in 1992 and 61 million
gallons in 1991, and 4,400 long tons of sulfur in 1993 and 3,600 long tons in
both 1992 and 1991. Additionally, in 1993, Colorado processed approximately 12
million gallons of liquid hydrocarbons owned by others compared to 10 million in
1992 and 11 million in 1991. These plants, with a total operating capacity of
approximately 697 MMcf daily, recover mainly propane, butanes, natural gasoline,
sulfur and other by-products, which are sold to refineries, chemical plants and
other customers.
ANR STORAGE
ANR Storage develops and operates gas storage reservoirs to store gas for
customers under firm long-term contracts. ANR Storage owns four underground
storage fields and related facilities in northern Michigan, the working storage
capacity of which is approximately 53 Bcf, including 30 Bcf contracted to ANR
Pipeline. ANR Storage also owns a 50% equity interest in 3 joint venture storage
facilities located in Michigan and New York with a total working storage
capacity of approximately 60 Bcf, including 42 Bcf contracted to ANR Pipeline.
GAS SYSTEM RESERVES AND AVAILABILITY
ANR PIPELINE
With the termination of its merchant service, ANR Pipeline no longer reports
on gas system reserves and availability and, therefore, this report has been
replaced by a general discussion set forth in "Supply Area Deliverability",
presented below.
SUPPLY AREA DELIVERABILITY
Shippers on ANR Pipeline have direct access to the two most prolific gas
supply areas in the United States, the Gulf Coast and Midcontinent. Statistics
published by the Energy Information Agency, Office of Oil and Gas, U.S.
Department of Energy, indicate that approximately 82% of all natural gas in the
lower 48 states is produced from these two supply areas. Interconnecting
pipelines provide shippers with access to all other major gas supply areas in
the United States and Canada.
Gas deliverability available to shippers on ANR Pipeline's system from the
Midcontinent and Gulf Coast supply areas through direct connections and
interconnecting pipelines and gatherers is approximately 3,800 MMcf per day. An
additional 275 MMcf per day of deliverability is accessible to shippers on ANR
Pipeline owned, or partially owned, pipeline segments not directly connected to
an ANR Pipeline mainline.
ANR Pipeline remains active in locating and connecting new gas supply sources
to facilitate transportation arrangements made by third party shippers. During
1993, field development, newly connected supply sources and pipeline
interconnections contributed 515 MMcf per day to total deliverability accessible
to shippers on ANR Pipeline.
COLORADO
Colorado has reported in its Form 10-K for the year ended December 31, 1993
the current and future availability of Colorado's gas system reserves based on
information prepared by Huddleston, the Company's independent engineers.
Colorado, even with the restructuring under Order 636, continues to dedicate
certain of its reserves pursuant to contract. Additional information is set
forth in "Reserves Dedicated to a Particular Customer," presented below.
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RESERVES DEDICATED TO A PARTICULAR CUSTOMER
Colorado is committed to provide gas to Mesa Operating Company, formerly Mesa
Operating Limited Partnership ("Mesa"), a customer, from specific owned gas
reserves in the West Panhandle Field of Texas. Production from this area
contributed approximately 46% of Colorado's total supply in 1993. Approximately
68% of those volumes were delivered to Mesa. Under an agreement which was
effective January 1, 1991, as amended, Colorado has the right to take a
cumulative 23% of the total net production from such reserves for its customers
other than Mesa.
RECONCILIATION WITH FERC FORM 15 REPORT
The FERC Form 15 Annual Report of Gas Supplies is no longer required pursuant
to FERC Order No. 554 issued July 13, 1993.
WYOMING INTERSTATE COMPANY, LTD.
WIC, a limited partnership owned by two wholly-owned Coastal subsidiaries,
owns a 269-mile, 36-inch diameter pipeline across southern Wyoming. It has a
throughput capacity of approximately 500 MMcf of gas daily. The WIC pipeline
connects with an 88-mile western segment in which a Coastal subsidiary has a 10%
interest and is the center section of the 800-mile Trailblazer pipeline system
built by a group of companies to move gas from the Overthrust Belt and other
Rocky Mountain areas to supply midwestern and eastern markets. Colorado and
three other pipeline companies for which the WIC line transports gas have
entered into long-term contracts having demand volumes totaling 500 MMcf daily.
In 1993, the WIC line transported an average of 228 MMcf daily, compared to 261
MMcf daily in 1992. On January 1, 1992, WIC became an unrestricted open access
transporter.
GREAT LAKES GAS TRANSMISSION LIMITED PARTNERSHIP
Coastal and TransCanada, a non-affiliated company, each own 50% of Great
Lakes which owns a 1,985-mile, 36-inch diameter gas pipeline system from the
Manitoba-Minnesota border to an interconnection on the Michigan-Ontario border
at St. Clair, Michigan. Great Lakes transported 854 Bcf in 1993 as compared to
789 Bcf in 1992. Great Lakes has contract commitments to transport a total of
1.3 Bcf per day for TransCanada. It also transports up to 800 MMcf per day
primarily for United States markets, including 77 MMcf per day to ANR Pipeline.
Great Lakes exchanges gas with ANR Pipeline by delivering gas in the upper
peninsula of Michigan and receiving an equal amount of gas in the lower
peninsula of Michigan. This arrangement reduces the distance that gas must be
transported by Great Lakes and ANR Pipeline.
COASTAL GAS SERVICES COMPANY
The Company formed CGS, a wholly-owned subsidiary, in early 1993 to
consolidate its unregulated natural gas businesses. CGS and its subsidiaries
operate certain of Coastal's natural gas gathering and processing, gas supply
and marketing, price risk management and producer financing activities. CGS'
subsidiary, ANR Gas Supply Company, was formed to provide merchant services to
former ANR Pipeline customers contracting for such service. ANR Gas Supply
Company has executed 25 contracts with former ANR Pipeline customers with an
aggregate service commitment of 85 MMcf per day. CGMC is the largest of CGS's
subsidiaries and continues to be one of the most successful natural gas
marketing companies in North America. CGMC managed the sale and delivery of 828
Bcf of natural gas in 1993 as compared to 788 Bcf in 1992. CGMC conducts
business on over 60 pipelines and has over 1,000 producer and market customers
in North America, including imports and exports with Canada and Mexico.
7
<PAGE>
REGULATIONS AFFECTING GAS SYSTEMS
GENERAL
Under the NGA, the FERC has jurisdiction over ANR Pipeline, Colorado, WIC,
ANR Storage and Great Lakes as to sales, transportation, balancing of gas, rates
and charges, the construction of new facilities, extension or abandonment of
service and facilities, accounts and records, depreciation and amortization
policies and certain other matters. Under Order 636, the FERC has determined
that it will not regulate sales rates by pipelines including these companies.
Additionally FERC has asserted rate-regulation (but not certificate regulation)
over gathering. Colorado is challenging the FERC's assertion of rate
jurisdiction over gathering, but has agreed in a settlement that for three years
beginning October 1, 1993 Colorado will post in its tariff the minimum and
maximum gathering rates which will be established by FERC. ANR Pipeline,
Colorado, WIC, ANR Storage and Great Lakes, where required, hold certificates of
public convenience and necessity issued by the FERC covering their
jurisdictional facilities, activities and services.
ANR Pipeline, Colorado, WIC, ANR Storage and Great Lakes are also subject to
regulation with respect to safety requirements in the design, construction,
operation and maintenance of their interstate gas transmission and storage
facilities by the Department of Transportation. Operations on United States
government land are regulated by the Department of the Interior.
On November 1, 1990, the FERC issued Order No. 528 in which it sets forth
guidelines for an acceptable allocation method for a fixed direct charge to
collect take-or-pay settlement costs. Pursuant to Order No. 528, ANR Pipeline
has filed for and received approval to recover 75% of expenditures associated
with resolving producer claims and renegotiating gas purchase contracts. The
approved filings provide for recovery of 25% of such expenditures via a direct
bill to ANR Pipeline's former sales for resale customers and 50% via a surcharge
on all transportation volumes. Contract reformation and take-or-pay costs
incurred as a result of the mandated Order 636 restructuring will be recovered
under the transition costs mechanisms of Order 636 as well as through negotiated
agreements with ANR Pipeline's customers.
FERC Order Nos. 500 and 528 allowed regulated pipelines, including Colorado,
to recover, through a fixed charge, from 25% to 50% of the cost of payments made
to producers to extinguish outstanding claims under existing gas purchase
contracts or to secure reformation of existing contracts. Fixed charges are paid
by pipeline customers without regard to volumes of gas purchased. Under this
election, however, an amount equivalent to the amount included in the fixed
charge must be borne by the pipeline. Colorado has incurred costs related to
contract reformation and settlements of take-or-pay claims, a portion of which
have been recovered under Order Nos. 500 and 528.
On April 8, 1992, the FERC issued Order Nos. 636, 636-A and 636-B
(collectively "Order 636"), which required significant changes in the services
provided by interstate natural gas pipelines. Subsidiaries of the Company and
numerous other parties have sought judicial review of aspects of Order 636.
Notwithstanding those appeals, ANR Pipeline, Colorado, WIC, ANR Storage and
Great Lakes have successfully complied with the requirements of Order 636.
On July 2, 1993, Colorado submitted to the FERC an unanimous offer of
settlement which resolved all the Order 636 restructuring issues which had been
raised in its restructuring proceedings. That settlement was ultimately approved
(except for minor issues), and Colorado's restructured services became effective
October 1, 1993. Under that settlement, Colorado has "unbundled" its gas sales
from its other services. Separate gathering, transportation, storage, no notice
transportation and storage and other services are available on a "stand alone"
basis to any customers desiring them. Colorado's Order 636 transition costs are
not expected to be material and are expected to be recovered through Colorado's
rates.
ANR Pipeline placed its restructured services under Order 636 into effect on
November 1, 1993. ANR Pipeline now offers a wide range of "unbundled"
transportation, storage and balancing services. Several persons, including
8
<PAGE>
ANR Pipeline, have sought judicial review of aspects of the FERC's orders
approving ANR Pipeline's restructuring filings. Order 636 also provides
mechanisms for recovery of transition costs associated with compliance with that
Order. These transition costs include gas supply realignment costs, the cost of
stranded pipeline investment and the cost of new facilities required to
implement Order 636. ANR Pipeline expects that it will incur transition costs of
approximately $150 million. As a result of the recovery mechanisms provided
under Order 636, ANR Pipeline anticipates that these transition costs will not
have a material adverse effect on ANR Pipeline's consolidated financial position
or its results of operations.
RATE MATTERS
ANR PIPELINE. All of ANR Pipeline's 1993 service options were subject to
rate regulation by the FERC. Under the NGA, ANR Pipeline must file with the FERC
to establish or adjust its service rates. The FERC may also initiate proceedings
to determine whether ANR Pipeline rates are "just and reasonable."
On March 10, 1992, ANR Pipeline submitted to the FERC a comprehensive Interim
Settlement designed to resolve all outstanding issues resulting from its 1989
rate case and its 1990 proposed service restructuring proceeding. The Interim
Settlement involved, inter alia, an array of new sales, delivery, transportation
and storage service alternatives and the implementation of a gas inventory
charge, designed to compensate ANR Pipeline for the costs of standing ready to
serve its sales customers. The Interim Settlement reflected a decrease in cost
of service of approximately $45 million, which was largely attributable to a
reduction in depreciation rates from 3.4% to 1.82%. Also included was a
provision which allowed ANR Pipeline to direct bill its customers for its
remaining unrecovered purchased gas costs. The Interim Settlement became
effective November 1, 1992 and expired with ANR Pipeline's implementation of
Order 636 on November 1, 1993. Specific provisions of the Interim Settlement
relating to the deferral and future recovery of certain costs remain in effect.
On December 17, 1992, the FERC issued a policy statement that outlined
changes on how pipelines may recover the costs of employees' postretirement
benefits other than pensions. The FERC's policy will be to recognize, as a
component of jurisdictional cost-based rates, allowances for FAS No. 106 costs
of company employees when determined on an accrual basis, provided certain
conditions are met.
On November 1, 1993, ANR Pipeline filed a general rate increase with the
FERC. The proposed rates reflect a $121 million increase in ANR Pipeline's cost
of service from that approved in the Interim Settlement and a $218 million
increase over ANR Pipeline's approved rates for its restructured services. The
increase represents higher plant investment, Order 636 restructuring costs, rate
of return and tax rate changes and increased costs related to the required
adoption of recent accounting rule changes, i.e., FAS Nos. 106 and 112. (See
Note 11 of the Notes to Consolidated Financial Statements for a discussion of
FAS Nos. 106 and 112.) The FERC has permitted ANR Pipeline to place its new
rates into effect on May 1, 1994, subject to refund and subject to certain
required compliance changes and the outcome of an evidentiary hearing on all
remaining issues.
COLORADO. Under the NGA, Colorado continues to be required to file with the
FERC to establish or adjust certain of its service rates. The FERC may also
initiate proceedings to determine whether Colorado's rates are "just and
reasonable".
On March 31, 1993, Colorado filed at FERC to increase its rates by
approximately $26.5 million annually. Such rates (adjusted to reflect Colorado's
Order 636 program) became effective subject to refund on October 1, 1993.
WIC. WIC settled a rate case with the FERC, as principal payments and
associated interest of $68.1 million were paid to WIC's shippers on October 8,
1991, exclusive of amounts which are being held until the resolution of pending
bankruptcy proceedings involving its customer, Columbia Gas Transmission
Corporation, which is currently pending before the U.S. Bankruptcy Court for the
District of Delaware. Should such refunds be required, there would be no effect
on the results of operations as accruals have been previously established.
9
<PAGE>
In 1993 the FERC initiated proceedings under Section 5 of the NGA to
determine if WIC's rates approved in 1991 had become excessive. Administrative
hearings were held in December of 1993, but no decision has been issued. Any
decrease in rates that the FERC may ultimately require will only take effect
prospectively following the issuance of a final order by the FERC that is no
longer subject to rehearing by the agency.
Certain regulatory issues remain unresolved among ANR Pipeline, Colorado, WIC
and ANR Storage, their customers, their suppliers, and the FERC. ANR Pipeline,
Colorado, WIC and ANR Storage have made provisions which represent management's
assessment of the ultimate resolution of these issues. While these companies
estimate the provisions to be adequate to cover potential adverse rulings on
these and other issues, they cannot estimate when each of these issues will be
resolved.
OTHER DEVELOPMENTS
The Empire State Pipeline Project, in which an affiliate of ANR Pipeline has
a 45% interest and ANR Pipeline is the operator, was placed in service on
November 1, 1993. The 156-mile pipeline system, extending from Niagara Falls to
Syracuse, New York, will carry up to 570 MMcf per day to western and central New
York and provide ANR Pipeline access to markets in the Northeastern United
States.
In August 1993, ANR Pipeline and Arkla, Inc. ("Arkla") announced execution of
a restructured agreement under which ANR Pipeline will purchase an ownership
interest in 250 MMcf per day of capacity in existing natural gas transmission
facilities from Arkla. The restructured agreement resolved certain conditions
imposed by the FERC in its October 1, 1992 authorization of the original
purchase and sale agreement. As restructured, ANR Pipeline will own capacity
interests in facilities valued at approximately $90 million, subject to receipt
of all required regulatory approvals. The reduction in value of the facilities
from the original purchase and sale agreement is the result of negotiations
between ANR Pipeline and Arkla in light of the FERC's orders.
ANR Pipeline and a subsidiary of CGS are partners in the SunShine Pipeline
Project which is designed to capture a share of the growing Florida power
generation market, as well as markets located in Mississippi, Alabama and the
Florida Panhandle. SunShine Interstate Transmission Company ("SITCO"), the
interstate pipeline segments of this project, will extend 170 miles from
Pascagoula, Mississippi to Okaloosa, Florida where it will connect with Sunshine
Pipeline Company, ("SunShine") the intrastate segment of this project. SunShine
will be a 545-mile pipeline starting in Okaloosa and extending down Florida's
west coast to the Tampa area. ANR Pipeline, through a wholly-owned subsidiary,
will have a 40% interest in SITCO and a subsidiary of CGS will have a 40%
interest in SunShine. Florida Power Corporation and TransCanada will both hold a
30% equity interest in each of the two projects. SITCO will have an initial
capacity of 329.5 MMcf per day and SunShine will have an initial capacity of
249.5 MMcf per day. Both SITCO and SunShine have signed precedent agreements for
a portion of their initial pipeline capacity. SITCO, which will be subject to
FERC jurisdiction, has filed with the FERC to obtain a Certificate of Public
Convenience and Necessity. FERC approval is expected in March, 1995. SunShine,
which will be subject to the jurisdiction of the Florida Public Service
Commission ("FPSC"), has received approval of its request for a Determination of
Need from the FPSC. SunShine also expects environmental approval, in early 1995,
under the procedures set forth in Florida's Natural Gas Transmission Pipeline
Siting Act. Both projects are targeted to be placed into service in December
1995. The SunShine pipeline is expected to cost approximately $462 million and
the SITCO pipeline is expected to cost approximately $188 million.
A subsidiary of ANR Pipeline will have a 25% equity interest in the proposed
Liberty Pipeline project, a 38-mile pipeline extending from New Jersey across
New York Harbor to Long Island with a potential capacity of 500 MMcf per day.
The pipeline is expected to serve local distribution company participants and
independent power producers. A filing to obtain a Certificate of Public
Convenience and Necessity has been made and is currently pending before the
FERC. Subject to receiving applicable governmental approvals, an in-service date
of late 1995 is possible, at an estimated cost of $160 million.
ANR Pipeline (20% equity interest) and Interprovincial Pipe Line System Inc.
plan to participate in the construction of the InterCoastal Pipe Line, a project
designed to serve incremental markets in southern Ontario and
10
<PAGE>
potentially Quebec and the Northeastern United States. The project will involve
converting approximately 130 miles of existing oil pipeline to natural gas
service, originating in Sarnia, Ontario and extending to Toronto, and the
construction of approximately 25 miles of new pipeline. In connection with the
project, facilities in Michigan will be constructed by ANR Pipeline to deliver
gas from domestic sources. The project, which will have a maximum capacity of
175 MMcf per day, is projected to cost $37.6 million. The InterCoastal Pipe Line
is subject to regulatory approval in Canada, and the ANR Pipeline facilities are
subject to regulatory approvals in the United States. Filings seeking necessary
authorizations from the NEB were made in the second quarter of 1993, and with
the FERC on July 19, 1993. The project could be in service as early as November
1, 1994.
A subsidiary of ANR Pipeline and affiliates of TransCanada and Brooklyn Union
Gas Company have entered into a partnership agreement for the construction of
the Mayflower Pipeline, which is expected to expand natural gas sales and
storage services to markets in the Northeastern United States. ANR Pipeline will
have a 45% interest in this project. The proposed 240-mile pipeline will extend
east from the Iroquois Gas Transmission System at Canajoharie, New York to a
location near Boston, Massachusetts and have an initial design capacity of 350
MMcf per day. The total project cost is expected to be $540 million. The
pipeline is expected to be in service in late 1997. Construction of the project
is subject to receipt of all federal regulatory approvals.
Colorado owns approximately 20% of Natural Fuels Corporation ("NFC") which is
headquartered in Denver, Colorado. NFC's business is to develop compressed
natural gas ("CNG") as an alternative vehicular fuel. Major services provided by
NFC include vehicle conversions to CNG, fuel sales, CNG equipment sales,
maintenance services, and training. Besides operating a full service conversion
center which converts vehicles to CNG, NFC has installed 44 stations in
Colorado, 26 of which are open to the public. NFC, in joint partnership with
Total Petroleum, installs natural gas refueling facilities at selected Total
Petroleum stores along the Colorado Front Range. This project is one of the
largest public fueling station development commitments in the United States. As
of January 1994, seven stations were operational and one was under construction.
Also, Colorado is a co-sponsor in the testing of two Colorado Springs buses that
are powered by dual-fueled engines modified to run on up to 90% natural gas.
On July 8, 1993, Young Gas Storage Company, Ltd. ("Young"), a limited
partnership, filed an application with the FERC for a Certificate of Public
Convenience and Necessity authorizing, in part, the development, construction
and operation of an underground natural gas storage field. The $44.4 million
storage field project, to be located in Morgan County, Colorado, will be capable
of storing 5.3 Bcf of working gas with a withdrawal rate of 200 MMcf per day
when fully developed in 1998. The total capacity is under long-term contracts.
On March 3, 1994, the FERC issued an Order Granting Preliminary Determination
which approved the non-environmental aspects of the project. The Company is
reviewing this Order and intends to seek rehearing with respect to some aspects
of this Order. CIG Gas Storage Company and Young Gas Storage Company, the two
general partners in the Young Partnership, are affiliates of Coastal. The
limited partner is the City of Colorado Springs, a municipal corporation of the
State of Colorado.
CGS has established a producer and market services division to provide
financing services to producers. This division will arrange funding for
acquisitions and development of oil and gas reserves and other producer capital
requirements. As a result of these activities, CGS will obtain access to long-
term oil and gas supplies enhancing CGS' marketing capabilities.
Coastal States Gas Transmission Company, a subsidiary of the Company, is
building a natural gas intrastate pipeline from the Bob West Field in South
Texas to run initially 26 miles north to the Midcon Texas Pipeline System at a
cost of approximately $8 million. This new pipeline is expected to be completed
prior to June 1994 and will transport up to 200 MMcf per day of natural gas
without compression and up to 350 MMcf per day with compression.
Funding for certain pending and proposed natural gas pipeline projects is
anticipated to be provided through non-recourse financings in which the
projects' assets and contracts will be pledged as collateral. This type of
financing typically requires the participants to make equity investments
totaling approximately 20% to 30% of the cost of the project, with the remainder
financed on a long-term basis.
11
<PAGE>
REFINING, MARKETING AND DISTRIBUTION
The Company has subsidiary operations involved in refining, marketing and
distribution of petroleum products. The petroleum industry is highly competitive
in the United States and throughout most of the world. This industry also
competes with other industries in supplying the energy needs of various types of
consumers.
REFINING
Subsidiaries of the Company operated their wholly-owned refineries at 87% of
year 1993 average combined capacity compared to 82% in 1992. The aggregate sales
volumes (millions of barrels) of Coastal's wholly-owned refineries for the three
years ended December 31, 1993, were 134.9 (1993), 136.7 (1992) and 141.2 (1991).
A joint venture, Pacific Refining Company, had sales of 19.9 million barrels in
1993, 21.3 million barrels in 1992 and 27.4 million barrels in 1991 which were
excluded from Coastal's 1993, 1992 and 1991 sales. Of the total refinery sales
in 1993, 30% was gasoline, 46% was middle distillates, such as jet fuel, diesel
fuel and home heating oil, and 24% was heavy industrial fuels and other
products.
The average daily processing capacity of crude oil at December 31, 1993,
average daily throughput and storage capacity at the Company's wholly-owned
operating refineries are set forth below:
<TABLE>
<CAPTION>
Refinery Location
- ---------------- ---------------------- Average Daily
Daily Throughput (Barrels) Storage
Capacity ----------------------- Capacity
(Barrels) 1993 1992 (Barrels)
-------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Aruba Aruba 175,000 136,400 123,800 8,000,000
Corpus Christi Corpus Christi, Texas 95,000 79,300 78,600 7,500,000
Eagle Point Westville, New Jersey 125,000 109,300 101,500 10,400,000
Mobile Mobile, Alabama 17,500 13,500 12,400 600,000
------- ------- ------- ----------
Total Operating 412,500 338,500 316,300 26,500,000
</TABLE>
The Company has curtailed refining operations at its three Kansas refinery
locations as part of an overall restructuring plan for refining and marketing
undertaken in 1992. Two of these locations, Wichita and El Dorado, are still
operating as refined products terminals. Refinery units have been mothballed and
are being evaluated for utilization either by the company or by third parties.
Pacific Refining at Hercules, California has a refining capacity of 55,000
barrels per day at December 31, 1993. Since January 1989, the China National
Chemicals Import & Export Corporation has held a 50% interest in Coastal's west
coast refining and marketing properties, including Pacific Refining Company. The
Hercules refinery was operated during 1993 and processed 46,200 barrels per day
of crude oil and other feedstocks. Present plans are to continue operation of
the refinery through 1994 and most likely through 1995, consistent with
resolution of regulatory issues and attainment of earnings objectives. The
Company is evaluating several future options for the facility. These include
expansion of asphalt facilities and installation of Clean Air Act of 1990 and
California Air Resources Board regulations compliance upgrades and conversion of
the Hercules site to alternative uses.
In addition, Coastal's international operations include a minority interest,
through a foreign subsidiary, in a refinery located in Hamburg, Germany which
has a refining capacity of 100,000 barrels per day and a storage capacity of
1,800,000 barrels for crude oil and 5,200,000 barrels for products.
The Company's refineries produce a full range of petroleum products ranging
from transportation fuels to paving asphalt. The refineries are operated to
produce the particular products required by customers within each refinery's
geographic area. In 1993, the products emphasized included premium gasolines and
products for specialty markets such as petrochemical feedstocks, aviation fuels
and asphalt.
12
<PAGE>
MARKETING AND DISTRIBUTION
REFINED PRODUCTS MARKETING. Sales volumes for distribution activities of
Coastal subsidiaries, including products from Company refineries and purchases
from other suppliers, for the three years ended December 31, 1993, are set forth
below (thousands of barrels):
<TABLE>
<CAPTION>
Type of Sale 1993 1992 1991
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Company Produced Refined Products....... 134,925 136,664 141,224
Refined Products Purchased from Others.. 140,635 162,280 128,146
Natural Gas Liquids..................... 18,155 17,038 13,914
------- ------- -------
Total.................... 293,715 315,982 283,284
======= ======= =======
</TABLE>
Subsidiaries of the Company market refined products and liquefied petroleum
gas at wholesale in 36 states through 322 terminals. Coastal Refining &
Marketing, Inc. serves customers in the Midwest, Mississippi Valley and the
Southwest through 221 product and liquified petroleum gas terminals in 27
states. On the Gulf and East Coasts, Coastal Fuels Marketing, Inc., Coastal Oil
New York, Inc. and Coastal Oil New England, Inc. serve home, industry, utility,
defense and marine energy needs. In 1993, these subsidiaries' sales volumes were
132 million barrels, which accounted for approximately 45% of the total
marketing and distribution sales. Effective January 1, 1994, the refined
products marketing operations of these subsidiaries were consolidated into
Coastal Refining & Marketing, Inc. International subsidiaries that acquire
feedstocks for the refineries and products for the distribution system are
located in Aruba, Bahrain, Bermuda, London, Madrid and Singapore.
In March 1993, Coastal Petroleum N.V., a subsidiary of Coastal, and The Subic
Bay Metropolitan Authority signed a long-term lease for petroleum storage
facilities located at the former U.S. naval base at Subic Bay in the
Philippines. Coastal is leasing 304 acres of land, with 68 individual storage
tanks totalling 2.4 million barrels of storage, most of which are underground,
and 40 miles of pipeline connecting the terminal with other facilities within
the Subic Bay Freeport Zone. Additionally, in late 1993, another subsidiary of
Coastal signed a joint venture agreement with a subsidiary of the Malaysian
national oil company, Petronas, for use of the entire capacity of this storage
facility for independent marketing efforts throughout the region and for joint
marketing in the Subic Bay Freeport Zone.
The Company, through Coastal Mart, Inc. and branded marketers, conducts
retail marketing, using the C-MART(R) and/or COASTAL(R) trademarks, in 36 states
through approximately 1,532 Coastal branded outlets, with 578 of those outlets
operated by the Company. Fleet fueling operations include 17 outlets in Texas
and 7 in Florida.
Coastal Unilube, Inc., based in West Memphis, Arkansas, blends, packages and
distributes lubricants and automotive products under the UNILUBE(R), DUPLEX(R),
CUI(R) and UNIPRO(R) brand names. Coastal Unilube, Inc. distributes lubricants
and automotive products through 14 warehouses servicing customers in 36 states.
TRANSPORTATION. The Company's transportation facilities include petroleum
liquids pipelines, tank cars, tankers, tank trucks and barges. Coastal has
approximately 3,900 miles of pipeline for gathering and transporting an average
of 334,000 barrels daily of crude oil, condensate, natural gas liquids and
refined products. These lines are located principally in Texas and Kansas and
include 358 miles of crude oil pipelines, 784 miles of refined products
pipelines and 671 miles of natural gas liquids pipelines, all 100% owned and
operated by Coastal subsidiaries, and 1,997 miles of 50% owned crude oil
pipelines and 80 miles of jointly-owned products pipelines with less than a 50%
interest. In 1993, throughput of crude oil pipelines averaged 148,199 barrels
per day, compared to 155,386 barrels per day in 1992. In 1993, throughput of
refined products and natural gas liquid pipelines averaged 186,430 barrels per
day, compared to 162,696 barrels per day in 1992.
Other transportation facilities for marketing operations of Coastal
subsidiaries include a regional tank truck fleet which distributes refined and
liquefied petroleum gas products to customers in parts of Florida, New England
and
13
<PAGE>
New York, and another fleet of trucks, which transport petroleum products and
liquefied petroleum gas products for Coastal marketing subsidiaries serving the
Texas area.
The marine transportation total fleet at December 31, 1993 consisted of 17
tug boats, 24 oil barges, 6 owned tankers used for the transportation of refined
petroleum products and crude oil and 3 time-chartered tankers.
EXPLORATION AND PRODUCTION
GAS AND OIL PROPERTIES
Coastal subsidiaries are engaged in gas and oil exploration, development and
production operations in the United States and Argentina. Argentine operations
are discussed in Supplemental Information on Oil & Gas Producing Activities
(Unaudited), as set forth in Item 14(a)1 hereof. United States operations are
principally in Alabama, Arkansas, California, Colorado, Kansas, Louisiana,
Michigan, Mississippi, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah,
West Virginia, Wyoming and offshore in the Gulf of Mexico.
In 1993, the Company's domestic operations sold approximately 53% of all the
gas it produced to its natural gas system affiliates and a gas brokerage
affiliate. The Company's domestic operations make short-term gas sales directly
to industrial users and distribution companies to increase utilization of its
excess current gas production capacity. Oil is sold primarily under short-term
contracts at field prices posted by the principal purchasers of oil in the areas
in which the producing properties are located.
Acreage held under gas and oil mineral leases as of December 31, 1993 is
summarized as follows:
<TABLE>
<CAPTION>
UNDEVELOPED DEVELOPED
----------- ---------
AREA GROSS NET GROSS NET
- ------------------------------------- ----- ----------- --------- ---
(Thousands of Acres)
<S> <C> <C> <C> <C>
Domestic........................... 1,093 798 1,792 962
Federal Offshore (Gulf of Mexico).. 66 32 54 20
----- --- ----- ---
TOTAL.......................... 1,159 830 1,846 982
===== === ===== ===
</TABLE>
The domestic net acreage held for production is concentrated principally in
Texas (37%), Utah (20%), Oklahoma (10%), West Virginia (7%), Kansas (6%) and
Wyoming (6%). Approximately 21%, 22% and 23% of the Company's total undeveloped
net acreage is under leases that have minimum remaining primary terms expiring
in 1994, 1995 and 1996, respectively.
Productive wells as of December 31, 1993 are as follows (domestic):
<TABLE>
<CAPTION>
TYPE OF WELL GROSS NET
- -------------------------- ----- -----
<S> <C> <C>
Oil..................... 3,860 1,016
Gas..................... 2,574 1,372
----- -----
TOTAL............... 6,434 2,388
===== =====
</TABLE>
14
<PAGE>
EXPLORATION AND DRILLING
During 1993, Coastal's domestic exploration and production units participated
in drilling 158 gross wells, 75.5 net wells, to the Company's interest.
Coastal's participation in wells drilled in the three years ended December 31,
1993, is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- ----------
EXPLORATORY WELLS GROSS NET GROSS NET GROSS NET
- ---------------------------------- ----- ---- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Oil........................... 1 0.5 6 1.8 7 4.6
Gas........................... - - 3 1.7 7 5.3
Dry Holes..................... 7 4.1 16 9.1 9 6.5
---- ----- ---- ----- ---- ----
8 4.6 25 12.6 23 16.4
==== ===== ==== ===== ==== ====
DEVELOPMENT WELLS
- ---------------------------------
Oil.......................... 44 18.6 47 18.4 24 5.3
Gas.......................... 104 51.2 141 108.5 89 62.0
Dry Holes.................... 2 1.1 11 8.3 7 3.2
--- ---- ---- ----- ---- ----
150 70.9 199 135.2 120 70.5
=== ==== ==== ===== ==== ====
</TABLE>
Wells in progress as of December 31, 1993 are as follows (domestic):
<TABLE>
<CAPTION>
TYPE OF WELL GROSS NET
------------ ----- ---
<S> <C> <C>
Exploratory............................. 3 1.2
Development............................. 9 2.2
--- ---
Total.................................. 12 3.4
=== ===
</TABLE>
During the course of 1992 and 1991 development drilling focused on natural
gas wells which qualified under a federal tax incentive program providing for
future tax credits on wells producing from tight sands gas formations. To
qualify, wells must have been spudded before January 1, 1993. During 1993,
development drilling focused on replacing and increasing production capacity as
natural gas prices stabilized at acceptable levels.
Coastal Limited Ventures, Inc., a domestic subsidiary of Coastal, is the
general partner in six limited partnership drilling programs which have been
offered to Coastal's employees and shareholders. Information pertaining thereto
can be located in the Annual Report on Form 10-K filed by each limited
partnership and available from the Company.
GAS AND OIL PRODUCTION
Natural gas production during 1993 averaged 334 MMcf daily, compared to 277
MMcf daily in 1992. Production from non-pipeline-owned wells averaged 207 MMcf
daily in 1993, compared to 147 MMcf daily in 1992. Crude oil, condensate and
natural gas liquids production averaged 13,534 barrels daily in 1993, compared
to 13,002 barrels daily in 1992.
15
<PAGE>
The following table shows gas, oil, condensate and natural gas liquids
production volumes attributable to Coastal's domestic interest in gas and oil
properties for the three years ended December 31, 1993:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NATURAL GAS
OIL CONDENSATE LIQUIDS
GAS (THOUSANDS (THOUSANDS (THOUSANDS
YEAR (MMCF) OF BARRELS) OF BARRELS) OF BARRELS)
- --------------------- ---------- ---------- ---------- ----------
1993 122,011 3,908 440 592
1992 101,502 3,823 496 440
1991 89,346 3,398 512 179
</TABLE>
Many of Coastal's domestic gas wells are situated in areas near, and are
connected to, its gas systems. In other areas, gas production is sold to
pipeline companies and other purchasers.
Generally, Coastal's domestic production of crude oil, condensate and natural
gas liquids is purchased at the lease by its marketing and refinery affiliates.
Some quantities are delivered via Coastal's gathering and transportation lines
to its refineries, but most quantities are redelivered to Coastal through
various exchange agreements.
The following table summarizes sales price (net of production taxes) and
production cost information for domestic exploration and production operations
during the three years ended December 31, 1993:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Average sales price (net of production taxes):
Gas - per Mcf..................................... $ 1.93 $ 1.76 $ 1.67
Oil - per barrel.................................. 16.21 18.21 19.15
Condensate - per barrel........................... 15.55 17.40 18.67
Natural Gas Liquids - per barrel.................. 8.75 9.62 13.36
Average production cost per unit (equivalent Mcf).. 0.67 0.79 0.97
</TABLE>
NATURAL GAS PROCESSING
ANR Production Company and Coastal Oil & Gas Corporation, domestic
subsidiaries of the Company, are also engaged in the processing of natural gas
for the extraction and sale of natural gas liquids. In 1993, total revenues of
$36.7 million were generated from the extraction and sale of 136 million gallons
of ethane, propane, iso-butane, normal butane and natural gasoline from natural
gas processing plants. Sales prices of natural gas liquids fluctuate widely as a
result of market conditions and changes in the prices of other fuels and
chemical feedstocks.
COMPANY-OWNED RESERVES
Coastal's domestic proved reserves of crude oil, condensate and natural gas
liquids at December 31, 1993, as estimated by Huddleston, its independent
engineers, were 28.8 million barrels, compared to 33.1 million barrels at the
end of 1992. Proved gas reserves as of December 31, 1993, net to Coastal's
interest, were estimated by the engineers to be 925.5 Bcf compared to 974.8 Bcf
as of December 31, 1992.
For information as to Company-owned reserves of oil and gas, see
"Supplemental Information On Oil and Gas Producing Activities" as set forth in
Item 14(a)1 hereof.
16
<PAGE>
COMPETITION
In the United States, the Company competes with major integrated oil
companies and independent oil and gas companies for suitable prospects for oil
and gas drilling operations. The availability of a ready market for gas
discovered and produced depends on numerous factors frequently beyond the
Company's control. These factors include the extent of gas discovery and
production by other producers, crude oil imports, the marketing of competitive
fuels, and the proximity, availability and capacity of gas pipelines and other
facilities for the transportation and marketing of gas. The production and sale
of oil and gas is subject to a variety of federal and state regulations,
including regulation of production levels.
REGULATION
In all states in the United States in which Coastal engages in oil and gas
exploration and production, its activities are subject to regulation. Such
regulations may extend to requiring drilling permits, the spacing of wells, the
prevention of waste and pollution, the conservation of natural gas and oil, and
various other matters. Such regulations may impose restrictions on the
production of natural gas and crude oil by reducing the rate of flow from
individual wells below their actual capacity to produce. Likewise, oil and gas
operations on all federal lands are subject to regulation by the Department of
the Interior and other federal agencies.
COAL
The Company, through ANR Coal Company and its subsidiaries ("ANR Coal") in
the eastern United States and through Coastal States Energy Company and its
subsidiaries ("Coastal States Energy") in the west, produces and markets high
quality bituminous coal from its reserves in Kentucky, Virginia, West Virginia
and Utah. In addition, subsidiaries of ANR Coal lease interests in their
reserves to unaffiliated producers and market third-party coal through brokerage
sales operations.
At December 31, 1993, coal properties consisted of the following:
<TABLE>
<CAPTION>
Coal Holdings (Acres)
---------------------------------------------------- Clean,
Owned Leased Recoverable
---------------------------- Exchanged Total Tons
Fee Mineral Surface (Net) Acres (Millions)(1)
------ ----------- ------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kentucky............... 11,351 65,107 2,271 25,746 104,475 222
Virginia............... 23,765 37,531 2,021 22,724 86,041 168
West Virginia.......... 2,165 36,772 4,156 124,352 167,445 230
Utah................... - 2,480 - 32,077 34,557 251
------ ------- ----- ------- ------- ---
TOTAL................ 37,281 141,890 8,448 204,899 392,518 871
====== ======= ===== ======= ======= ===
</TABLE>
- ------------------------
(1) Based on a 65% recovery rate.
In September 1993, a subsidiary of the Company acquired Soldier Creek Coal
Company and its parent, Sage Point Coal Company. This acquisition added
approximately 86 million tons of new recoverable coal reserves to Coastal's
reserve base. Substantially all of the acquired reserves satisfy the sulfur
emissions requirements of the Clean Air Act of 1990.
17
<PAGE>
At December 31, 1993, the Company controlled approximately 871 million
recoverable tons of bituminous coal reserves. Production in 1993 from the
Company's reserves totalled 23.6 million tons of which 18.4 million tons were
produced from captive operations and 5.2 million tons were produced by lessees
under royalty agreements. In its eastern captive operations, ANR Coal contracts
with independent mine operators to mine and deliver coal to Company owned and
operated processing and loading facilities. Captive production and processing
from ANR Coal and Coastal States Energy in 1993 totalled 9.2 and 9.2 million
tons, respectively.
Captive sales from ANR Coal and Coastal States Energy were 7.2 million and
8.9 million tons, respectively, in 1993. Brokerage sales in which the Company
receives a commission on coal sold for third parties totalled 1.3 million tons
for the same period.
In 1993, approximately 70% of sales were to domestic utilities, 12% of sales
were to domestic industrial customers and 18% of sales were to export markets
primarily in Asia and Canada. Of the total 1993 tonnage sold, 12.1 million tons
(75%) were sold under long-term contracts. At December 31, 1993, the weighted
average remaining life of these contracts was 63 months.
The Company had approximately 21.2 million tons of annual production capacity
at December 31, 1993. In the eastern United States, the Company owns and
operates five coal preparation plants and nine loading facilities with a
combined annual capacity of 10.6 million tons. Coastal States Energy's mines in
Utah employ three longwall mining systems, diesel shuttle cars and have a
combined annual capacity of 10.6 million tons.
In addition to its bituminous coal operations, the Company controls
overriding royalty interests in approximately 484 million tons of lignite
reserves in North Dakota. Production from these reserves in 1993 totalled 16.1
million tons.
The Company, through its captive operations, leasing programs and brokerage
activities, participates in all aspects of the national bituminous coal industry
and is a significant competitor in international coal markets. A significant
portion of its eastern reserves and all of its Utah reserves are low-sulfur,
compliance coal which will allow the Company to remain a major supplier of steam
coal to domestic utilities under the Clean Air Act of 1990.
The Company competes with a large number of coal producers and land holding
companies across the United States. The principal factors affecting the
Company's coal sales are price, quality (BTU, sulfur and ash content), royalty
rates, employee productivity and rail freight rates.
CHEMICALS
Coastal Chem, Inc. ("Coastal Chem"), a Coastal subsidiary, operates a plant
near Cheyenne, Wyoming, which produces anhydrous ammonia, ammonium nitrate,
nitric acid, food grade liquid carbon dioxide and urea for use as agricultural
fertilizers, livestock feed supplements, blasting agents and various other
industrial applications. This plant has the capacity to produce 500 tons per day
of anhydrous ammonia, 750 tons per day of ammonium nitrate, 275 tons per day of
urea, 700 tons per day of nitric acid and 400 tons per day of food grade liquid
carbon dioxide. Coastal Chem also owns a plant at Table Rock, Wyoming, which has
a production capacity of 150 tons of liquid fertilizer per day. In addition,
Coastal Chem operates a low density ammonium nitrate ("LoDAN/(R)/") facility in
Battle Mountain, Nevada. The LoDAN/(R)/ is used primarily as a blasting agent in
surface mining. This facility produces 400 tons per day of LoDAN/(R)/.
Coastal Chem completed a urea expansion project in 1992 with full production
commencing in mid 1993. This expanded facility increased the previous capacity
of 175 tons per day to 275 tons per day. During the last six months, the
facility has operated at its designed capacity.
18
<PAGE>
Coastal Chem commenced production from its integrated methyl tertiary butyl
ether ("MTBE") plant in 1993. MTBE is a gasoline additive which adds oxygen and
boosts octane of the blended mixture. The plant has a production capacity of
4,000 barrels per day.
Sales volumes for the three years ended December 31, 1993, are set forth
below (thousands of tons):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Agricultural Sales....................... 222 214 238
Industrial Sales......................... 410 407 365
MTBE..................................... 119 - -
---- ---- ----
TOTAL.................................. 751 621 603
==== ==== ====
</TABLE>
INDEPENDENT POWER PRODUCTION
Coastal Power Production Company ("Coastal Power") and certain of its
affiliates develop, operate and are equity participants in cogeneration plants
which produce and sell electricity and thermal products, including steam and
chilled water. Affiliates of Coastal Power currently own interests in four
operating cogeneration facilities in the United States.
Capitol District Energy Center Cogeneration Associates ("CDECCA") owns a
cogeneration facility with an approximate 56 megawatt capacity. An affiliate of
Coastal Power owns a 50% interest in CDECCA and is the project manager and
Coastal Technology, Inc. ("CTI"), a Coastal subsidiary, is the operator of the
plant. Electricity from the facility is sold to the local utility under a long-
term contract. Steam and chilled water produced from the plant help to serve the
thermal requirements of the City of Hartford and the plant's co-owner.
An affiliate of Coastal Power is the managing partner and 50% owner of a
combined cycle cogeneration plant at Coastal's Eagle Point, New Jersey refinery.
The plant has a permitted nameplate rating of approximately 260 megawatts and
currently operates at approximately 225 megawatts. Power from the plant is sold
to a local utility and Coastal's refinery under long-term contracts. Steam from
the plant is also sold to the refinery under long-term contract. Gas supply and
transmission is provided to the cogeneration plant by other Coastal affiliates.
CTI is the operator of the cogeneration plant.
Coastal Power and an affiliate own a gas-fired cogeneration facility in
Fulton, New York with an approximate 47 megawatt capacity. Electricity from this
project is sold under a long-term contract to a New York utility. Steam is sold
to a neighboring plant owned by a major candy manufacturer. Approximately half
of the gas supply requirements for the cogeneration plant are supplied by an
affiliate of Coastal Power. CTI is the plant operator.
Coastal, through a wholly-owned subsidiary, has a 10.9% equity interest in
the Midland Cogeneration Venture Limited Partnership, the largest gas-fired
cogeneration plant in the United States. Coastal subsidiaries supply and
transport a portion of the gas to this facility.
TRUCKING OPERATIONS
ANR Freight System, Inc. ("ANR Freight") is a regional common and contract
carrier by motor vehicle, conducting operations in both interstate and
intrastate commerce.
During 1993, ANR Freight transported approximately 1.4 million tons of
freight, consisting of both truckload shipments (10,000 pounds or more) and less
than truckload (LTL) shipments (less than 10,000 pounds) versus
19
<PAGE>
1.3 million tons in 1992. LTL shipments comprised approximately 42% of total
tonnage hauled by ANR Freight and generated approximately 82% of its operating
revenues. As of December 31, 1993, ANR Freight operated 40 terminals and almost
4,000 trucks, tractors and trailers.
Regulatory actions by the Interstate Commerce Commission ("ICC") allowing
relatively easy entry into and expansion of the motor freight business have
tended to increase competition among motor carriers and also between motor
carriers and other modes of transportation. ANR Freight competes primarily with
other regular route motor carriers of general freight and, to a lesser extent,
with irregular route motor carriers, individual truckers and private carriers
(for truckload general freight) and with surface freight forwarders, railroads,
airlines and air freight forwarders. The extent of competition between various
modes of transportation is largely determined by their rate structures and by
the service requirements of the shippers. Over-capacity in the motor carrier
industry has increased competition for freight, and discounting programs, which
effectively reduce the rates filed with the ICC, have been adopted by many
carriers. ANR Freight continues to participate, on a limited basis, in
collective rate making within the regional rate bureaus as authorized by the
Interstate Commerce Act. ANR Freight also carries freight under contract and
under general and individually published tariff arrangements.
ANR Freight is subject to regulation by the ICC with regard to accounting.
The carriers are regulated as to rates and routes of travel by the ICC for
freight transported in interstate commerce and by state regulatory agencies for
freight transported in intrastate commerce. The Department of Transportation
regulates certain aspects of carrier operations such as the transportation of
hazardous materials, motor vehicle maintenance, motor vehicle safety devices and
appliances and driver qualifications. Various states regulate the gross weight
and length of vehicles which travel over the highways of such states.
COMPETITION
Coastal and its subsidiaries are subject to competition. In all the Company's
business segments, competition is based primarily on price with factors such as
reliability of supply, service and quality being considered.
The coal, chemicals, independent power production and trucking subsidiaries
of Coastal are engaged in highly competitive businesses against competitors,
some of which have significantly larger facilities and market share. See the
discussion of competition under "Natural Gas Systems," "Refining, Marketing and
Distribution" and "Exploration and Production" herein.
ENVIRONMENTAL
The Company's operations are subject to extensive federal, state and local
environmental laws and regulations. The Company anticipates annual capital
expenditures of $20 to $40 million over the next several years aimed at
compliance with such laws and regulations. Additionally, appropriate
governmental authorities may enforce the laws and regulations with a variety of
civil and criminal enforcement measures, including monetary penalties and
remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." Certain subsidiaries of the Company have been named as a potentially
responsible party ("PRP") in several "Superfund" waste disposal sites. At the 15
sites for which the EPA has developed sufficient information to estimate total
clean-up costs of approximately $350 million, the Company estimates its pro-rata
exposure to be paid over a period of several years is approximately $5 million
and has made appropriate provisions. At 3 other sites, the EPA is currently
unable to provide the Company with an estimate of total clean-up costs and,
accordingly, the Company is unable to calculate its share of those costs.
Finally, at 5 other sites, the Company has
20
<PAGE>
paid amounts to other PRPs as its proportional share of associated clean-up
costs. As to these latter sites, the Company believes that its activities were
de minimis.
The following administrative proceedings and suits involve subsidiaries of
the Company:
1. In October 1993, the Bay Area Air Quality Management District brought an
administrative action against Pacific Refining Company, in which Coastal has an
indirect 50% interest. In March 1994, the parties agreed upon a structured
settlement amount of $300,000 regarding certain compliance issues relating to
the installation of a sulfur recovery unit at Pacific Refining Company's
refinery.
2. In January 1993, the State of Texas filed suit against the Corpus Christi,
Texas refinery of Coastal Refining & Marketing, Inc., a subsidiary of Coastal,
alleging failure to comply in 1992 with certain administrative orders relating
to groundwater contamination and seeking penalties in unspecified amounts. The
Company believes that this suit could result in monetary sanctions which, while
not material to the Company and its subsidiaries, could exceed $100,000.
3. In February 1993, the State of Texas filed suit against Coastal Refining &
Marketing, Inc., seeking civil penalties in unspecified amounts for alleged
public nuisance odor violations occurring in 1991 and 1992 at the Corpus Christi
refinery. In July 1993, the proceeding was amended to include a claim for excess
benzene emissions and to seek civil penalties. The Company believes that this
suit could result in monetary sanctions which, while not material to the Company
and its subsidiaries, could exceed $100,000.
There are additional areas of environmental remediation responsibilities
which may fall on the Company. Future information and developments will require
the Company to continually reassess the expected impact of these environmental
matters. However, the Company has evaluated its total environmental exposure
based on currently available data, including its potential joint and several
liability, and believes that compliance with all applicable laws and regulations
will not have a material adverse impact on the Company's liquidity or financial
position.
ITEM 2. PROPERTIES.
Information on properties of Coastal is included in Item 1, "Business" and
certain encumbrances on its properties are described in Note 5 of the Notes to
Consolidated Financial Statements included herein.
The real property owned by the Company with regard to its subsidiary
pipelines is owned in fee and consists principally of sites for compressor and
metering stations and microwave and terminal facilities. With respect to the
subsidiary owned storage fields, the Company holds title to gas storage rights
representing ownership of, or has long-term leases on, various subsurface strata
and surface rights and also holds certain additional mineral rights. Under the
NGA, the Company and its pipeline subsidiaries may acquire by the exercise of
the right of eminent domain, through proceedings in United States District
Courts or in state courts, necessary rights-of-way to construct, operate and
maintain pipelines and necessary land or other property for compressor and other
stations and equipment necessary to the operation of pipelines. All of the
principal properties of ANR Pipeline are subject to the lien of its Mortgage and
Deed of Trust dated as of September 1, 1948, securing its First Mortgage Pipe
Line Bonds, and some of such properties are subject to "permitted liens" as
defined in such Mortgage and Deed of Trust. The First Mortgage Pipe Line Bonds
were retired in 1993 and ANR Pipeline is in the process of terminating the
associated Mortgage and Deed of Trust.
ITEM 3. LEGAL PROCEEDINGS.
In December 1992, certain of Colorado's natural gas lessors in the West
Panhandle Field filed a complaint in the U.S. District Court for the Northern
District of Texas, claiming underpayment, breach of fiduciary duty, fraud and
negligent misrepresentation. Management believes that Colorado has numerous
defenses to the lessors' claims, including (i) that the royalties were properly
paid, (ii) that the majority of the claims were released by written agreement,
and (iii) that the majority of the claims are barred by the statute of
limitations.
21
<PAGE>
A subsidiary of Coastal has initiated a suit against TransAmerican Natural
Gas Corporation ("TransAmerican") in the District Court of Webb County, Texas,
for breach of two gas purchase agreements. In February 1993, TransAmerican filed
a Third Party Complaint and a Counterclaim in this action against Coastal and
certain subsidiaries. TransAmerican alleges breach of contract, fraud,
conspiracy, duress, tortious interference and violations of the Texas Free
Enterprises and Anti-trust Act arising out of the gas purchase agreements.
TransAmerican seeks compensatory damages, exemplary damages and attorney fees.
The trial began on March 14, 1994.
Numerous other lawsuits and other proceedings which have arisen in the
ordinary course of business are pending or threatened against the Company or its
subsidiaries.
Although no assurances can be given and no determination can be made at this
time as to the outcome of any particular lawsuit or proceeding, the Company
believes there are meritorious defenses to substantially all of the above claims
and that any liability which may finally be determined should not have a
material adverse effect on the Company's consolidated financial position.
Additional information regarding legal proceedings is set forth in Notes 3 and
14 of the Notes to Consolidated Financial Statements included herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
22
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The principal market on which Coastal Common Stock is traded is the New York
Stock Exchange; Coastal Common Stock is also listed on The Stock Exchange in
London, the Stock Exchanges of Dusseldorf, Frankfurt, Hamburg and Munich in
Germany and on the Amsterdam Stock Exchange. The Class A Common Stock of Coastal
is non-transferable; however, such stock is convertible share-for-share into
Coastal Common Stock. As of March 16, 1994, the approximate number of holders of
record of Common Stock was 12,550 and of the Class A Common Stock was 3,900.
The following table presents the high and low sales prices for Coastal common
shares based on the daily composite listing of transactions for New York Stock
Exchange stocks.
<TABLE>
<CAPTION>
1993 1992
------------------------ -------------------------
Quarters High Low Dividends High Low Dividends
- ---------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $27.38 $23.50 .10 $26.25 $22.00 .10
Second Quarter 28.50 25.63 .10 29.00 22.13 .10
Third Quarter 31.38 25.63 .10 30.00 24.00 .10
Fourth Quarter 29.50 26.13 .10 30.00 23.13 .10
</TABLE>
Coastal expects to continue paying dividends in the future. Dividends of $.09
per share were paid on the Class A Common Stock for each quarterly period in
1993 and 1992. At December 31, 1993, under the most restrictive of its financing
agreements, the Company was prohibited from paying dividends and distributions
on its Common Stock, Class A Common Stock and preferred stocks in excess of
approximately $409.9 million.
23
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data (in millions of dollars except per
share amounts) is derived from the Consolidated Financial Statements included
herein and Item 6 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992. The Notes to Consolidated Financial Statements
included herein contain other information relating to this data.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1993 1992 1991 1990 1989
--------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenues $10,136.1 $10,062.9 $ 9,554.8 $ 9,613.8 $8,747.5
Earnings (loss) before extraordinary item 118.3 (126.8) 8.7 264.2 218.9
Net earnings (loss) 115.8 (126.8) 8.7 264.2 218.9
Earnings (loss) per common and common
equivalent share before extraordinary
item 1.02 (1.23) .08 2.52 2.33
Net earnings (loss) per common and
common equivalent share 1.00 (1.23) .08 2.52 2.33
Cash dividends per common share* .40 .40 .40 .40 .30
Total assets 10,227.1 10,579.8 10,520.3 10,399.8 9,938.0
Debt, excluding current maturities 3,812.5 4,306.1 3,865.6 3,438.8 3,250.9
Mandatory redemption preferred stock,
excluding current maturities 26.6 36.7 49.2 65.1 78.6
</TABLE>
* In addition, cash dividends of $.36, $.36, $.36 and $.18, respectively, were
paid on the Company's Class A Common Stock in 1993, 1992, 1991 and 1990.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Management's Discussion and Analysis of Financial Condition and Results
of Operations is presented on pages F-1 through F-7 hereof.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Financial Statements and Supplementary Data required hereunder are
included in this Annual Report as set forth in Item 14(a) hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item with respect to the directors is
set forth under "Election of Directors" and "Information Regarding Directors" in
the Coastal Proxy Statement for the May 5, 1994 Annual Meeting of Stockholders
filed pursuant to Regulation 14A under the Securities Exchange Act of
1934, and is incorporated herein by reference.
The executive officers of the Registrant as of March 16, 1994, were as
follows:
<TABLE>
<CAPTION>
NAME (AGE), YEAR FIRST
ELECTED AN OFFICER POSITIONS AND OFFICES WITH THE REGISTRANT
---------------------- -----------------------------------------
<S> <C>
O. S. Wyatt, Jr. (69), 1955 Chairman of the Board of Directors and Chief
Executive Officer
David A. Arledge (49), 1982 President, Chief Operating Officer, Chief
Financial Officer and Director
Harold Burrow (79), 1974 Vice Chairman of the Board of Directors,
Chairman of the Board of Directors of Colorado
James F. Cordes (53), 1985 Executive Vice President and Director
James A. King (54), 1992 Executive Vice President
Sam F. Willson, Jr. (64), 1974 Executive Vice President
Jerry D. Bullock (64), 1992 Senior Vice President
Jeffrey A. Connelly (47), 1988 Senior Vice President and Treasurer
Carl A. Corrallo (50), 1993 Senior Vice President and General Counsel
Donald H. Gullquist (50), 1994 Senior Vice President
Coby C. Hesse (46), 1986 Senior Vice President and Controller
Dan J. Hill (53), 1978 Senior Vice President
Jose J. Iglesias (48), 1992 Senior Vice President
Kenneth O. Johnson (73), 1978 Senior Vice President and Director
Austin M. O'Toole (58), 1974 Senior Vice President and Secretary
Jack C. Pester (59), 1987 Senior Vice President
James L. Van Lanen (49), 1985 Senior Vice President
M. Truman Arnold (65), 1993 Vice President
Daniel F. Collins (52), 1989 Vice President
Robert C. Hart (49), 1994 Vice President
Robert G. Holsclaw (59), 1983 Vice President
Charles M. Oglesby (41), 1991 Vice President
M. Frank Powell (43), 1993 Vice President
E. C. Simpson (58), 1990 Vice President
</TABLE>
The above named persons bear no family relationship to each other. Their
respective terms of office expire coincident with the officer elections at the
Annual Board of Directors' meeting which follows Coastal's Annual Meeting of
Stockholders. Each of the officers named above have been officers of Coastal,
ANR Pipeline and/or Colorado for five years or more with the following
exceptions:
Mr. Arnold was elected Vice President of Coastal in August 1993. He has been
a Vice President of Coastal States Management Corporation, a subsidiary of
Coastal, since 1977.
Mr. Bullock was elected Senior Vice President of Coastal in August 1992. From
1987 to 1990, he was an Executive Vice President of British Petroleum's BP
Exploration Company and a director and a member of the
25
<PAGE>
management committee of BP Exploration USA. From 1990 to 1992, he was an
independent petroleum consultant for several major exploration companies.
Mr. Corrallo was elected Senior Vice President and General Counsel of Coastal
in March 1993. He has served as a Senior Vice President of Coastal States
Management Corporation, a subsidiary of Coastal, since August 1991 and prior
thereto as Vice President since December 1986.
Mr. Gullquist was elected Senior Vice President of Coastal in March 1994.
From 1988 to 1989 he served as Vice President, Finance at Enron Corporation;
from 1989 to 1990 he served as president of Enron Finance Corporation.
Mr. Hart was elected Vice President of Coastal in March 1994. From 1989
through 1994, he was president of Hart Associates, Inc., an energy development
firm.
Mr. Iglesias was elected a Senior Vice President of Coastal in January 1992.
He was president of Mobile Bay Refining Company from 1982 to 1987 and of Mo-Bel
Corporation from 1987 to 1990.
Mr. King was elected Executive Vice President of Coastal in May 1992. From
1987 to 1990, he was Senior Vice President of refining, supply and
transportation for Crown Central Petroleum Corporation.
Mr. Oglesby was elected a Vice President of Coastal in August 1991. He served
as an Executive Vice President of Colorado and ANR Pipeline from January 1988 to
May 1993. He was Senior Vice President for Marketing and Transportation of
Valero Transmission Company from 1985 to 1987.
Mr. Powell was elected Vice President of Coastal and Senior Vice President of
Coastal States Management Corporation in August 1993. From 1984 to 1993 he was
in private law practice with the law firms of Powell, Popp & Ikard and Powell &
Associates representing Coastal and other corporations. Prior thereto he was
employed at Coastal since 1978.
Mr. Simpson was elected a Vice President of Coastal in April 1990 and of
Colorado in May 1990. He has been a Vice President of Coastal States Management
Corporation, a subsidiary of Coastal, for the past ten years.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is set forth under "Executive
Compensation" in the Coastal Proxy Statement for the May 5, 1994 Annual Meeting
of Stockholders filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this item is set forth under "Stock Ownership,"
"Election of Directors" and "Information Regarding Directors" in the Coastal
Proxy Statement for the May 5, 1994 Annual Meeting of Stockholders filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is set forth under "Election of
Directors," "Transactions with Management and Others" and "Certain Business
Relationships" in the Coastal Proxy Statement for the May 5, 1994 Annual Meeting
of Stockholders filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934, and is incorporated herein by reference.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report or
incorporated herein by reference:
1. Financial Statements and Supplemental Information.
The following Consolidated Financial Statements of Coastal and
Subsidiaries and Supplemental Information are included in response to Item
8 hereof on the attached pages as indicated:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.................... F-8
Statement of Consolidated Operations for
the years ended December 31, 1993, 1992
and 1991....................................... F-9
Consolidated Balance Sheet at December 31, 1993
and 1992 ...................................... F-10
Statement of Consolidated Cash Flows for the
years ended December 31, 1993, 1992 and 1991 F-12
Statement of Consolidated Common Stock and .....
Other Stockholders' Equity for the years ended
December 31, 1993, 1992 and 1991............... F-13
Notes to Consolidated Financial Statements...... F-14
Supplemental Information on Oil & Gas
Producing Activities (Unaudited)............... F-32
Supplemental Statistics for Coal Mining
Operations (Unaudited) ........................ F-36
</TABLE>
2. Financial Statement Schedules.
The following schedules of Coastal and Subsidiaries are included on the
attached pages as indicated:
<TABLE>
<CAPTION>
Page
----
<C> <S>
Schedule III Condensed Financial Information of the Registrant.......... S-1
Schedule V Property, Plant and Equipment.............................. S-6
Schedule VI Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment............................ S-8
Schedule VIII Valuation and Qualifying Accounts.......................... S-9
Schedule IX Short-Term Borrowings...................................... S-10
Schedule X Supplementary Income Statement Information................. S-11
</TABLE>
Schedules other than those referred to above are omitted as not applicable or
not required, or the required information is shown in the Consolidated Financial
Statements or Notes thereto.
3. Exhibits.
<TABLE>
<C> <S>
3.1+ Restated Certificate of Incorporation of Coastal, as restated on
March 22, 1994. (Filed as Module TCC-Artl-Incorp on March 28, 1994).
3.2+ By-Laws of Coastal, as amended on January 16, 1990 (Exhibit 3.4 to
Coastal's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
4 (With respect to instruments defining the rights of holders of long-
term debt, the Registrant will furnish to the Commission, on request,
any such documents).
10.1+ The Coastal Corporation Stock Option Plan (Exhibit 10.1 to
Coastal's Annual Report on Form 10-K for the fiscal year ended
December 31, 1980).
</TABLE>
27
<PAGE>
<TABLE>
<C> <S>
10.2+ Employment Agreement between Coastal States Gas Corporation and Sam
F. Willson, Jr., dated December 1, 1979 (Exhibit 10.41 to Coastal's
Annual Report on Form 10-K for the fiscal year ended December 31,
1980).
10.3+ First Amendment of The Coastal Corporation Stock Option Plan, dated
September 3, 1981 (Exhibit 10.11 to Coastal's Annual Report on Form
10-K for the fiscal year ended December 31, 1982).
10.4+ 1984 Stock Option Plan (Appendix B to Coastal's Proxy Statement for
the 1984 Annual Meeting of Stockholders, dated May 14, 1984).
10.5+ 1985 Stock Option Plan (Appendix A to Coastal's Proxy Statement for
the 1986 Annual Meeting of Stockholders, dated March 27, 1986).
10.6+ The Coastal Corporation Performance Unit Plan effective as of
January 1, 1987 (Exhibit 10.5 to Coastal's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987).
10.7+ The Coastal Corporation Replacement Pension Plan effective as of
November 1, 1987 (Exhibit 10.6 to Coastal's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987).
10.8+ Description of Coastal's Key Employees Bonus Plan (Exhibit 10.7 to
Coastal's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987).
10.9+ The Coastal Corporation Stock Purchase Plan, as restated on January
1, 1994 (Appendix B to Coastal's Proxy Statement for the 1994 Annual
Meeting of Stockholders dated March 29, 1994).
10.10+ The Coastal Corporation Stock Grant Plan, effective December 1,
1988 (Exhibit 10.12 to Coastal's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988).
10.11+ The Coastal Corporation Deferred Compensation Plan for Directors
(Exhibit 10.13 to Coastal's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988).
10.12+ The Coastal Corporation 1990 Stock Option Plan (Exhibit 10.13 to
Coastal's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989).
10.13+ Employment Agreement between The Coastal Corporation and James F.
Cordes dated April 12, 1990 (Exhibit 10.13 to Coastal's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990).
10.14* The Coastal Corporation Deferred Compensation Plan.
10.15+ The Coastal Corporation 1994 Incentive Stock Plan (Appendix A to
Coastal's Proxy Statement for the 1994 Annual Meeting of Stockholders
dated March 29, 1994).
10.16* Pension Plan for Employees of The Coastal Corporation as of January 1,
1993, includes Plan as Restated as of January 1, 1989 and First
Amendment dated July 27, 1992, Second Amendment dated December 9, 1992,
Third Amendment dated October 29, 1993.
11* Statement re Computation of Per Share Earnings.
21* Subsidiaries of Coastal.
23.1* Consent of Deloitte & Touche.
24* Powers of Attorney (included on signature pages herein).
</TABLE>
28
<PAGE>
<TABLE>
<C> <S>
99+ Indemnity Agreement revised and updated as of April, 1988 (Exhibit 28
to Coastal's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990).
</TABLE>
_________________________
Note:
+ Indicates documents incorporated by reference from the prior filing
indicated.
* Indicates documents filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31, 1993.
29
<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints David A. Arledge,
Coby C. Hesse and Austin M. O'Toole and each of them, any one of whom may act
without the joinder of the others, as his attorney-in-fact to sign on his behalf
and in the capacity stated below and to file all amendments to this Annual
Report on Form 10-K, which amendment or amendments may make such changes and
additions thereto as such attorney-in-fact may deem necessary or appropriate.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE COASTAL CORPORATION
(Registrant)
By: DAVID A ARLEDGE
--------------------
David A. Arledge
President
March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: O. S. WYATT, JR.
---------------------
O. S. Wyatt, Jr.
Chairman of the Board and Chief Executive Officer
March 29, 1994
By: DAVID A. ARLEDGE
----------------------
David A. Arledge
Principal Financial Officer and Director
March 29, 1994
By: COBY C. HESSE
---------------------
Coby C. Hesse
Principal Accounting Officer
March 29, 1994
By: JOHN M. BISSELL
---------------------
John M. Bissell
Director
March 29, 1994
* * *
30
<PAGE>
By: GEORGE L. BRUNDRETT, JR. By: KENNETH O. JOHNSON
---------------------------- ---------------------------
George L. Brundrett, Jr. Kenneth O. Johnson
Director Director
March 29, 1994 March 29, 1994
By: ERVIN O. BUCK By: JEROME S. KATZIN
---------------------------- ---------------------------
Ervin O. Buck Jerome S. Katzin
Director Director
March 29, 1994 March 29, 1994
By: HAROLD BURROW By: THOMAS R. McDADE
---------------------------- ---------------------------
Harold Burrow Thomas R. McDade
Director Director
March 29, 1994 March 29, 1994
By: ROY D. CHAPIN, JR. By: J. HOWARD MARSHALL, II
---------------------------- ---------------------------
Roy D. Chapin, Jr. J. Howard Marshall, II
Director Director
March 29, 1994 March 29, 1994
By: JAMES F. CORDES By: L. D. WOODDY, JR.
---------------------------- ---------------------------
James F. Cordes L. D. Wooddy, Jr.
Director Director
March 29, 1994 March 29, 1994
By: ROY L. GATES
----------------------------
Roy L. Gates
Director
March 29, 1994
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Notes to Consolidated Financial Statements contain information that is
pertinent to the following analysis.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses the following consolidated ratios to measure liquidity and
ability to meet future funding needs and debt service requirements.
<TABLE>
<CAPTION>
1993 1992 1991
----- ------ -----
<S> <C> <C> <C>
Net return on average common stockholders' equity...... 5.2% (6.0%) .4%
Cash flow from operating activities to long-term debt.. 21.2% 10.1% 12.8%
Total debt to total capitalization..................... 64.3% 69.3% 66.6%
Times interest earned (before tax)..................... 1.4 .6 1.0
</TABLE>
The changes in the ratio of net return on average common stockholders' equity
can be attributed primarily to changes in earnings, as earnings increased in
1993 and decreased in 1992. The 1993 increase in the cash flow from operating
activities to long-term debt ratio resulted from increased cash flow from
operations and reduced long-term debt, while the 1992 decrease can be attributed
to decreased cash flow from operations and increased long-term debt. The total
debt to total capitalization ratio improved in 1993 as debt was paid down while
equity was increased through retained earnings and stock issuances. The 1992
increase was due to increased debt and reduced equity. The 1993 increase in the
times interest earned ratio resulted from increased earnings and reduced
interest expense; while the 1992 decrease resulted from decreased earnings and
increased interest expense.
Cash flows provided from operating activities were $809.8 million in 1993 and
$434.2 million in 1992. The 1993 increase can be attributed to increased
earnings and a reduction in inventories and other working capital requirements.
Capital expenditures amounted to $392.7 million in 1993 and $573.5 million in
1992. The Company, which had emphasized its capital expansion program in 1992
and 1991 in order to expand its earnings base, returned to a lower level of
capital spending in 1993, as it emphasized debt reduction. Prepayments for gas
supply and payments for settlement of natural gas contract disputes required
investments of $11.4 million and $43.8 million in 1993 and 1992, respectively.
The Company was able to reduce total debt by $471.3 million in 1993 primarily
by the use of internally generated funds and $193.5 million of proceeds
resulting from the issuance of preferred stock in April 1993. Dividend payments
increased by $11.0 million as a result of the new preferred stock issue.
Capital expenditures for 1994, including the Company's equity investments in
partnerships and joint ventures, are currently budgeted at approximately $500.0
million. These expenditures are primarily for completion of projects in process,
operational necessities, environmental requirements, expansion projects and
increased efficiency. Other expansion opportunities will continue to be
evaluated.
Financing for budgeted expenditures and mandatory debt retirements in 1994
will be accomplished by the use of internally generated funds, existing credit
lines and new financings.
Funding for certain proposed natural gas pipeline projects is anticipated to
be provided through non-recourse project financings in which the projects'
assets and contracts will be pledged as collateral. Equity participation by
other entities will also be considered. To the extent required, cash for equity
contributions to projects will be from general corporate funds.
F-1
<PAGE>
On September 23, 1993, ANR Pipeline filed a shelf registration statement with
the Securities and Exchange Commission for the public offering of up to $200
million in senior unsecured debt securities which became effective October 5,
1993. In February 1994, ANR Pipeline completed an offering of $125.0 million of
7-3/8% Debentures due in 2024. The net proceeds from the sale will be used for
capital expenditures and for other general corporate purposes.
Unused lines of credit at December 31, 1993, were as follows (millions of
dollars):
<TABLE>
<CAPTION>
<S> <C>
Short-term............................ $413.0
Long-term............................. 544.6
------
$957.6
======
</TABLE>
Credit agreements of certain subsidiaries contain covenants which limit the
making of advances to affiliates and payment of dividends. Where applicable,
restrictions are generally in the form of computed capacities with respect to
advances and the payment of dividends. At December 31, 1993, net assets of
consolidated subsidiaries amounted to approximately $5.1 billion, of which
approximately $1.7 billion was restricted. These provisions have not and are not
expected to have any meaningful impact on the ability of the Company to meet its
cash obligations.
In 1994, the Company adopted Statement of Financial Accounting Standards
("FAS") No. 112, "Employer's Accounting for Postemployment Benefits." This
standard covers the accounting for estimated costs of benefits provided to
former or inactive employees before their retirement. The implementation of this
new standard is not expected to have a significant effect on the Company's
results of operations or financial position.
In 1993, the Company adopted changes in accounting for post-retirement
benefits as required by FAS No. 106, "Employer's Accounting for Postretirement
Benefits Other Than Pensions." See Note 11 in the Notes to Consolidated
Financial Statements.
The Company's operations are subject to extensive federal, state and local
environmental laws and regulations. The Company anticipates annual capital
expenditures of $20 to $40 million over the next several years aimed at
compliance with such laws and regulations. Additionally, appropriate
governmental authorities may enforce the laws and regulations with a variety of
civil and criminal enforcement measures, including monetary penalties and
remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." Certain subsidiaries of the Company have been named as a potentially
responsible party ("PRP") in several "Superfund" waste disposal sites. At the 15
sites for which the Environmental Protection Agency ("EPA") has developed
sufficient information to estimate total clean-up costs of approximately $350
million, the Company estimates its pro-rata exposure to be paid over a period of
several years is approximately $5 million, and has made appropriate provisions.
At three other sites, EPA is currently unable to provide the Company with an
estimate of total clean-up costs and, accordingly, the Company is unable to
calculate its share of those costs. Finally, at five other sites, the Company
has paid amounts to other PRPs as its proportional share of associated clean-up
costs. As to these latter sites, the Company believes that its activities were
de minimis.
There are additional areas of environmental remediation responsibilities
which may fall on the Company. Future information and developments will require
the Company to continually reassess the expected impact of these environmental
matters. However, the Company has evaluated its total environmental exposure
based on currently available data, including its potential joint and several
liability, and believes that compliance with all applicable laws and regulations
will not have a material adverse impact on the Company's liquidity or financial
position.
RESULTS OF OPERATIONS
The Company operates principally in the following lines of business: natural
gas, refining and marketing, exploration and production, and coal.
F-2
<PAGE>
NATURAL GAS. Natural gas operations involve the production, purchase,
gathering, storage, transportation and sale of natural gas, principally to
utilities, industrial customers and other pipelines, and include the operations
of natural gas liquids extraction plants.
In the fourth quarter of 1993, ANR Pipeline Company and Colorado Interstate
Gas Company ("CIG") placed their Order 636 (See Note 14 in the Notes to
Consolidated Financial Statements) service structures into effect and now offer
an array of unbundled transportation, storage and balancing service options.
Under Order 636, the interstate pipeline companies will no longer offer sales
for resale services, with the exception of certain gas sales services provided
by CIG, which are being phased out over a three-year period. Former gas sales
customers of the interstate pipelines have largely retained their firm storage
and transportation services levels. These services were previously contracted as
part of bundled sales services. Consequently, while operating revenues will be
reduced as a result of the implementation of Order 636, purchases and other
related costs will be reduced by a similar amount.
<TABLE>
<CAPTION>
Millions of Dollars
---------------------------------------
1993 1992 1991
--------------- -------- --------
<S> <C> <C> <C>
Operating revenues........................ $3,247.9 $2,746.8 $2,405.5
Depreciation, depletion and amortization.. 145.4 187.1 177.0
Operating profit.......................... 405.2 403.1 402.2
Total throughput volume (Bcf)............. 1,908 1,885 1,878
</TABLE>
1993 Versus 1992. The increase in operating revenues of $501 million can be
attributed to increased sales volumes for the interstate pipelines and gas
marketing companies, higher prices for the gas marketing companies, and
increased storage and transportation revenues. Decreased gas sales prices for
the interstate pipelines partially offset the increase. Total throughput volumes
for the interstate pipelines increased by approximately 1%, while the volume for
the gas marketing companies increased by 10%.
Purchases increased $529 million over 1992, primarily due to volume increases
for the interstate pipelines and gas marketing companies and cost of gas
increases for the gas marketing companies, resulting in a reduction in the gross
profit of $28 million.
The operating profit increase of $2 million results from increased sales
volumes of $7 million; higher storage and transportation revenues of $137
million; and reduced depreciation, depletion and amortization of $41 million
offset by lower margins of $166 million, increased operating expenses of $11
million and other decreases of $6 million. The primary factor contributing to
the increase in storage and transportation revenues and the decrease in margins
is the restructuring of pipeline bundled sales services into separate service
components, as required by changing regulations. The depreciation, depletion and
amortization decrease of $41 million results from lower pipeline rates for ANR
Pipeline due to a settlement with the FERC.
1992 Versus 1991. Operating revenues increased in 1992 as a result of
increased sales volumes for the interstate pipelines and gas marketing
companies, higher prices for the gas marketing companies, increased storage and
transportation revenues and the benefit from resolution of outstanding rate
matters and litigation. Decreased gas sales prices for the interstate pipelines
partially offset the increase.
Purchases increased by $267 million in 1992, primarily due to volume
increases for interstate pipelines and gas marketing companies and higher costs
for the gas marketing companies, resulting in a gross profit increase of $74
million.
The operating profit increase of $1 million results from increased sales
volumes of $14 million, improved storage and transportation revenues of $37
million and other increases of $21 million which were partially offset by lower
margins of $32 million, increased operating expenses of $29 million and
increased depreciation, depletion and amortization of $10 million. The other
increases are primarily due to the settlement of outstanding rate matters and
litigation. The sales volumes were up and the margins were down for both the
interstate pipeline companies and gas marketing companies. The storage and
transportation revenue increase results from increased transportation volumes
F-3
<PAGE>
and improved storage revenues. The operating expense increase results from
increases for compressor fuel, gas and gas liquids handling charges and rate
settlement related expenses. The depreciation, depletion and amortization
increase results from a non-recurring 1991 retroactive adjustment related to
Wyoming Interstate Company, Ltd.
REFINING AND MARKETING. Refining and marketing operations involve the
purchase, transportation and sale of refined products, crude oil, condensate and
natural gas liquids; the operation of refining and chemical plants; the sale at
retail of gasoline, petroleum products and convenience items; petroleum product
terminaling and marketing of crude oil and refined petroleum products worldwide.
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------------
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Operating revenues........................ $6,200.9 $6,561.1 $6,297.6
Depreciation, depletion and amortization.. 45.6 98.1 40.3
Operating profit (loss)................... 98.0 (192.1) (99.3)
Refined product sales (MM Bbls)........... 294 316 283
</TABLE>
1993 Versus 1992. The decrease in operating revenues of $360 million results
from decreased sales prices and lower volumes. Sales volumes decreased primarily
due to a reduction in the sales of products purchased from others. In addition,
crude processing was suspended at the Company's three refineries in Kansas
during 1993.
Purchases for the refining and marketing segment decreased by $550 million, a
result of lower costs and volumes, and increased emphasis on hedging activities
to minimize the impact of price volatility. This resulted in an increased gross
profit of $190 million. Increased margins of $187 million, increased revenues
from marine operations of $4 million and other increases of $8 million, which
were partially offset by reduced volumes of $9 million, make up the gross profit
increase. A portion of the margin increase can be attributed to the Company
concentrating on marketing higher margin, value-added products and services. The
Company eliminated almost 50 marginal third party locations from its
distribution system in 1993. These steps also added to the volume decline in
1993.
The operating profit increase of $290 million results from the improved gross
profit of $190 million, reduced operating expenses of $47 million and lower
depreciation, depletion and amortization of $53 million. The reduction in
operating expenses results from the suspension of crude oil processing at the
Company's refineries in Kansas and the nonrecurrence of the related $35 million
restructuring charge in 1992. Partially offsetting these decreases were
increased expenses for new foreign operations. Depreciation, depletion and
amortization decreased as a result of a 1992 restructuring charge of $50 million
not recurring.
1992 Versus 1991. The increase in 1992 operating revenues of $264 million can
be attributed to increased volumes, primarily for the terminal and marketing
operations, which were partially offset by decreased prices and reduced marine
revenues. The lower prices affected all areas of the segment's operations.
Purchases for the segment increased by $185 million, a result of increased
volumes and lower costs, resulting in a gross profit increase of $79 million.
This $79 million gross profit increase results from volume increases of $84
million and margin increases of $37 million being partially offset by lower
marine revenues of $17 million, reduced gross profit from the sale, trading and
exchanging of third-party products of $12 million and other decreases of $13
million.
The operating profit decrease of $93 million results from increased operating
expenses of $114 million and increased depreciation, depletion and amortization
of $58 million more than offsetting the increased gross profit of $79 million.
The increased operating expenses are attributable to charges for restructuring
and increased maintenance costs. Depreciation, depletion and amortization
increased primarily from a $50 million charge for the restructuring of certain
refining assets.
F-4
<PAGE>
EXPLORATION AND PRODUCTION. Exploration and production operations involve
the exploration, development and production of natural gas, crude oil,
condensate and natural gas liquids. The segment also includes related intrastate
natural gas marketing activities and gas plant processing operations.
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Operating revenues........................................ $ 357.3 $ 310.0 $ 327.6
Depreciation, depletion and amortization.................. 109.1 83.2 69.4
Operating profit.......................................... 49.9 45.8 45.2
Natural gas production (MMcf/d)........................... 207 147 119
Oil, condensate and natural gas liquids production (bpd).. 13,534 13,002 11,202
Average sales price-net of production taxes (dollars):
Gas (per Mcf)............................................ $ 1.93 $ 1.76 $ 1.67
Oil, condensate and natural gas liquids (per bbl)........ 15.26 17.33 18.83
</TABLE>
1993 Versus 1992. The increase in operating revenues of $47 million can be
attributed to increased sales volumes for all products and increased natural gas
prices being partially offset by lower prices for oil, condensate and natural
gas liquids. Natural gas revenue increases of $51 million were partially offset
by decreases for oil, condensate and natural gas liquids of $3 million and other
of $1 million.
The operating profit increase of $4 million results from increased volumes
for all products of $48 million and natural gas price increases of $13 million
being offset by reduced prices for crude oil, condensate and natural gas liquids
of $13 million, increased operating expenses of $15 million, increased
depreciation, depletion and amortization of $26 million and other of $3 million.
The increase in operating expenses results from additional wells in operation
and higher costs associated with operating natural gas plants. Depreciation,
depletion and amortization increased as a result of an increase in volumes.
1992 Versus 1991. Operating revenues decreased in 1992 as reduced revenues
from gas brokerage, lower prices for crude oil, condensate and plant products
and decreased other income were partially offset by increased natural gas prices
and increased volumes for all products. The decrease in other income is due to
the sale in 1991 of two gathering systems.
The operating profit increase for the segment resulted from increased volumes
for all products of $31 million and increased natural gas prices of $5 million
being partially offset by lower prices for oil, condensate and natural gas
liquids of $10 million; increased depreciation, depletion and amortization of
$14 million; reduced revenue from gas brokerage of $2 million and other
decreases of $9 million. Included in the other decreases are non-recurring gains
of $7 million from 1991 property sales. The increase in depreciation, depletion
and amortization can be attributed to increased volumes.
COAL. Coal operations include mining, processing and marketing of coal from
Company-owned reserves and from other sources, and the brokering of coal for
others.
<TABLE>
<CAPTION>
Millions of Dollars
------------------------
1993 1992 1991
-------- ------ ------
<S> <C> <C> <C>
Operating revenues............................. $443.2 $447.4 $465.2
Depreciation, depletion and amortization....... 28.5 28.4 27.1
Operating profit............................... 95.1 92.8 91.8
Captive and brokered sales (millions of tons).. 17.4 16.9 16.6
</TABLE>
F-5
<PAGE>
1993 Versus 1992. The decrease in coal revenues results from decreased prices
more than offsetting increased volumes sold and brokered. The purchase of the
Soldier Creek Mine in late 1993 added 600,000 tons/year of new capacity.
The operating profit increase results from increased volumes of $13 million,
reduced operating expenses of $6 million and other of $1 million more than
offsetting lower prices of $18 million. Operating expenses were reduced by
expanding the percentage of overall production from the lower-cost Utah
operations.
1992 Versus 1991. The decrease in operating revenues is a result of decreased
sales volumes and lower prices. The tonnage, excluding brokerage, decreased
approximately 1%. Sales prices decreased at all mines.
Operating profit increased in 1992 as decreases for coal costs and operating
expenses of $20 million more than offset reduced revenues of $18 million and
increased depreciation, depletion and amortization of $1 million. The decrease
for coal costs and operating expenses results from lower volumes sold and more
efficient operations.
OTHER. Other operations involve trucking, power production operations and
other activities.
<TABLE>
<CAPTION>
Millions of Dollars
--------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Operating revenues........................ $187.0 $196.3 $169.6
Depreciation, depletion and amortization.. 7.9 7.6 7.1
Operating loss............................ (12.8) (19.7) (4.3)
</TABLE>
1993 Versus 1992. The $9 million reduction in operating revenues results from
volume decreases for the trucking operations and lower cogeneration revenues.
The $7 million decrease in operating loss results from reduced operating
expenses of $16 million, primarily for the trucking operations, exceeding the
revenue decline; as trucking operations increased by $11 million offset by a $4
million decrease for the other operations. The decreased operating expenses
result from reduced wages and lower rent expense.
1992 Versus 1991. The $27 million increase in 1992 in operating revenues can
be attributed to volume increases for the trucking operations and increased
cogeneration revenues. The operating loss increase of $15 million results from a
$19 million increased loss for trucking partially offset by a $4 million income
increase for other operations, as increased operating expenses more than offset
improved revenues. The increased operating expenses of $41 million are a result
of increased freight volumes and increased cogeneration activities.
OTHER INCOME - NET
1993 Versus 1992. Other income-net increased by $53 million in 1993 due to
increased equity income from unconsolidated subsidiaries of $8 million,
nonrecurrence of the 1992 writedown of refining investments and other assets of
$43 million and other increases of $2 million.
1992 Versus 1991. Other income-net decreased by $43 million in 1992 as a
result of decreased gains from sales of investments of $13 million, the
writedown of refining investments and other assets in 1992 of $43 million,
reduced dividend and interest income of $6 million and other decreases of $18
million offset by increased equity income from unconsolidated subsidiaries of
$37 million.
INTEREST AND DEBT EXPENSE
1993 Versus 1992. Interest and debt expense decreased by $43 million in 1993,
primarily as a result of lower average debt outstanding and lower interest rates
more than offsetting reduced capitalized interest and other financial costs. At
December 31, 1993, after giving effect to interest rate swaps, approximately 16%
of the Company's debt was tied to money market-related rates.
F-6
<PAGE>
1992 Versus 1991. Interest and debt expense increased by $47 million in 1992,
primarily as a result of higher average debt outstanding and reduced capitalized
interest more than offsetting lower average interest rates and reduced interest
on pipeline customer refunds.
TAXES ON INCOME
Income taxes fluctuated primarily as a result of changing levels of income
before taxes and changes in the effective federal income tax rate. The 1993
taxes include a $29 million charge for the cumulative effect of adjusting the
deferred federal income tax liability to reflect the change in the corporate
federal income tax rate from 34% to 35%.
EXTRAORDINARY ITEM
The extraordinary loss, net of income taxes, resulted from the early
retirement of debt. See Note 13 in the Notes to Consolidated Financial
Statements.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
The Coastal Corporation
Houston, Texas
We have audited the accompanying consolidated balance sheets of The Coastal
Corporation and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, common stock and other stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1993. Our audits also included the financial statement schedules listed in
the Index at Item 14(a)2. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Coastal Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for postretirement benefits other than
pensions to conform with Statement of Financial Accounting Standards No. 106.
DELOITTE & TOUCHE
Houston, Texas
February 3, 1994
F-8
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Millions of Dollars Except Per Share)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1993 1992 1991
---------- ---------- ---------
<S> <C> <C> <C>
OPERATING REVENUES........................................ $10,136.1 $10,062.9 $9,554.8
--------- --------- --------
OPERATING COSTS AND EXPENSES
Purchases................................................ 7,338.1 7,458.0 7,129.3
Operating expenses....................................... 1,806.9 1,851.5 1,650.0
Depreciation, depletion and amortization................. 355.7 423.5 339.9
--------- --------- --------
9,500.7 9,733.0 9,119.2
--------- --------- --------
OPERATING PROFIT.......................................... 635.4 329.9 435.6
--------- --------- --------
OTHER INCOME-NET.......................................... 68.9 15.4 58.5
--------- --------- --------
OTHER EXPENSES (BENEFITS)
General and administrative............................... 60.1 58.6 57.4
Interest and debt expense................................ 442.5 485.2 437.8
Taxes on income.......................................... 83.4 (71.7) (9.8)
--------- --------- --------
586.0 472.1 485.4
--------- --------- --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM................. 118.3 (126.8) 8.7
Extraordinary item-loss on early extinguishment of debt.. (2.5) - -
--------- --------- --------
NET EARNINGS (LOSS)....................................... 115.8 (126.8) 8.7
DIVIDENDS ON PREFERRED STOCK.............................. 11.3 .5 .5
--------- --------- --------
NET EARNINGS (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS...................................... $ 104.5 $ (127.3) $ 8.2
========= ========= ========
EARNINGS (LOSS) PER SHARE
Before extraordinary item................................ $ 1.02 $ (1.23) $ .08
Extraordinary item....................................... (.02) - -
--------- --------- --------
NET EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE.................................. $ 1.00 $ (1.23) $ .08
========= ========= ========
</TABLE>
See Notes to Consolidated Financial Statements
F-9
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................. $ 159.2 $ 43.5
Receivables, less allowance for doubtful accounts
$16.1 million (1993) and $16.5 million (1992)........ 1,284.9 1,562.4
Inventories........................................... 992.2 1,252.7
Prepaid expenses and other............................ 137.3 169.3
--------- ---------
Total Current Assets................................. 2,573.6 3,027.9
--------- ---------
PROPERTY, PLANT AND EQUIPMENT-AT COST
Natural gas systems................................... 5,461.6 5,393.1
Refining, crude oil and chemical facilities........... 1,821.3 1,697.2
Gas and oil properties-at full-cost................... 1,204.2 1,194.1
Other................................................. 677.0 633.1
--------- ---------
9,164.1 8,917.5
Accumulated depreciation, depletion and amortization.. 3,216.0 2,981.7
--------- ---------
5,948.1 5,935.8
--------- ---------
OTHER ASSETS
Goodwill.............................................. 563.3 582.2
Investments-equity method............................. 424.7 330.2
Other................................................. 717.4 703.7
--------- ---------
1,705.4 1,616.1
--------- ---------
$10,227.1 $10,579.8
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
F-10
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and preferred stock redeemable within one year............... $ 271.7 $ 229.1
Accounts payable........................................................... 1,649.1 1,791.3
Accrued expenses........................................................... 374.0 397.2
Current maturities on long-term debt....................................... 95.1 115.4
--------- ---------
Total Current Liabilities................................................. 2,389.9 2,533.0
--------- ---------
DEBT
Long-term debt, excluding current maturities............................... 3,612.8 4,106.5
Subordinated long-term debt, excluding current maturities.................. 199.7 199.6
--------- ---------
3,812.5 4,306.1
--------- ---------
DEFERRED CREDITS AND OTHER
Deferred income taxes...................................................... 1,339.9 1,339.5
Other deferred credits..................................................... 380.1 354.6
--------- ---------
1,720.0 1,694.1
--------- ---------
MANDATORY REDEMPTION PREFERRED STOCK
Issued by subsidiaries..................................................... 26.6 36.7
--------- ---------
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
Cumulative preferred stock (with aggregate
liquidation preference of $210.1 million)................................. 2.7 .1
Class A common stock - Issued (1993-422,857 shares; 1992-444,868 shares)... .1 .1
Common stock - Issued (1993-108,512,342 shares; 1992-107,967,176 shares).. 36.2 36.0
Additional paid-in capital................................................. 1,209.3 1,006.7
Retained earnings.......................................................... 1,162.7 1,099.9
--------- ---------
2,411.0 2,142.8
Less common stock in treasury-at cost (1993 and 1992-4,415,394 shares)..... 132.9 132.9
--------- ---------
2,278.1 2,009.9
--------- ---------
$10,227.1 $10,579.8
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
F-11
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
NET CASH FLOW FROM OPERATING ACTIVITIES
Earnings (loss)before extraordinary item................. $ 118.3 $(126.8) $ 8.7
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization
before restructuring charges........................... 358.8 377.1 342.3
Deferred income taxes................................... 45.8 (75.6) (53.3)
Amortization of producer contract reformation costs..... 48.3 45.0 17.4
Gain on sale of securities.............................. - - (13.2)
Undistributed earnings from equity investments.......... (54.4) (16.0) (7.7)
Restructuring charges................................... - 125.0 -
Other................................................... (21.0) 30.4 (63.3)
Working capital and other changes, excluding
changes relating to cash and non-operating activities:
Accounts receivable.................................... 231.5 (77.5) 339.1
Inventories............................................ 260.5 104.6 (39.7)
Prepaid expenses and other............................. (45.2) 13.6 49.1
Accounts payable....................................... (109.6) .5 (22.5)
Accrued expenses....................................... (23.2) 33.9 (63.7)
------- ------- --------
809.8 434.2 493.2
------- ------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............... (392.7) (573.5) (728.9)
Proceeds from sale of property, plant and equipment...... 29.3 14.7 69.0
Additions to investments................................. (74.3) (69.5) (103.6)
Proceeds from investments................................ 39.5 97.9 135.3
Gas supply prepayments and settlements................... (11.4) (43.8) (81.0)
Recovery of gas supply prepayments....................... 31.8 9.1 28.5
------- ------- --------
(377.8) (565.1) (680.7)
------- ------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Increase (decrease) in short-term notes.................. 42.6 (158.6) (148.8)
Redemption of mandatory redemption preferred stock....... (10.1) (12.5) (14.9)
Proceeds from issuing common stock....................... 11.9 7.1 6.0
Proceeds from issuing preferred stock.................... 193.5 - -
Proceeds from long-term debt issues...................... 233.1 684.3 1,043.3
Payments to retire long-term debt........................ (734.3) (327.7) (703.0)
Dividends paid........................................... (53.0) (42.0) (42.0)
------- ------- --------
(316.3) 150.6 140.6
------- ------- --------
Net Increase (Decrease) In Cash and Cash Equivalents...... 115.7 19.7 (46.9)
Cash and cash equivalents at beginning of year........... 43.5 23.8 70.7
------- ------- --------
Cash and cash equivalents at end of year................. $ 159.2 $ 43.5 $ 23.8
======= ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
F-12
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK
AND OTHER STOCKHOLDERS' EQUITY
(Millions of Dollars and Thousands of Shares)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1993 1992 1991
------------------- ----------------- -------------------
Shares Amount Shares Amount Shares Amount
-------- --------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock, Par Value 33-1/3c
Per Share, Authorized 50,000,000 Shares
Cumulative Convertible Preferred:
$1.19, Series A: Beginning
balance...................................... 69 $ - 72 $ - 76 $ -
Converted to common............................ (4) - (3) - (4) -
------- ------- ------- -------- ------- --------
Ending balance............................... 65 - 69 - 72 -
======= ------- ======= -------- ======= --------
$1.83, Series B: Beginning
balance........................................ 95 .1 109 .1 118 .1
Converted to common............................ (6) - (14) - (9) -
------- ------- ------- -------- ------- --------
Ending balance............................... 89 .1 95 .1 109 .1
======= ------- ======= -------- ======= --------
$5.00, Series C: Beginning
balance........................................ 36 - 36 - 37 -
Converted to common............................ (1) - - - (1) -
------- ------- ------- -------- ------- --------
Ending balance............................... 35 - 36 - 36 -
======= ------- ======= -------- ======= --------
Cumulative Preferred:
$2.125, Series H, Liquidation amount of
$25 per share:
Beginning balance.............................. - - - - - -
Issuance....................................... 8,000 2.6 - - - -
------- -------- ------- -------- ------- --------
Ending balance............................... 8,000 2.6 - - - -
======= -------- ======= -------- ======= --------
Class A Common Stock, Par Value 33-1/3c
Per Share, Authorized 2,700,000 Shares
Beginning balance.............................. 445 .1 449 .2 481 .2
Converted to common............................ (108) - (27) (.1) (45) -
Conversion of preferred stock and
exercise of stock options..................... 86 - 23 - 13 -
------- -------- ------- -------- ------- --------
Ending balance............................... 423 .1 445 .1 449 .2
====== -------- ======= -------- ======= --------
Common Stock, Par Value 33-1/3c
Per Share, Authorized 250,000,000 Shares
Beginning balance.............................. 107,967 36.0 107,713 35.8 107,518 35.8
Conversion of preferred stock.................. 42 - 63 - 51 -
Conversion of Class A common stock............. 108 - 27 .1 45 -
Exercise of stock options...................... 395 .2 164 .1 99 -
------- -------- ------- -------- ------- --------
Ending balance............................... 108,512 36.2 107,967 36.0 107,713 35.8
======= -------- ======= -------- ======= --------
Additional Paid-In Capital
Beginning balance............................... 1,006.7 999.7 993.7
Issuance of Series H preferred stock............ 190.9 - -
Exercise of stock options....................... 11.7 7.0 6.0
-------- -------- --------
Ending balance............................... 1,209.3 1,006.7 999.7
-------- -------- --------
Retained Earnings
Beginning balance............................... 1,099.9 1,268.7 1,302.0
Net earnings (loss) for period.................. 115.8 (126.8) 8.7
Cash dividends on preferred stock............... (11.3) (.5) (.5)
Cash dividends on Class A common stock,
36c(1993), 36c(1992) and 36c(1991) per share.. (.2) (.2) (.2)
Cash dividends on common stock, 40c(1993),
40c(1992) and 40c(1991) per share............. (41.5) (41.3) (41.3)
-------- -------- --------
Ending balance................................ 1,162.7 1,099.9 1,268.7
-------- -------- --------
Less Treasury Stock-At Cost..................... 4,415 132.9 4,415 132.9 4,415 132.9
======= -------- ======= -------- ======= ========
Total........................................... $2,278.1 $2,009.9 $2,171.6
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-13
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
accounts of the Company and its wholly owned subsidiaries, after eliminating all
significant intercompany transactions. The equity method of accounting is used
for investments in which the Company has a 20% to 50% continuing interest and
exercises significant influence. Investments in which the Company has less than
a 20% interest are accounted for by the cost method.
STATEMENT OF CASH FLOWS - For purposes of this statement, cash equivalents
include time deposits, certificates of deposit and all highly liquid instruments
with original maturities of three months or less. Cash flows of a hedging
instrument that are accounted for as a hedge of an identifiable transaction are
classified in the same category as the cash flows from the item being hedged.
The Company made cash payments for interest and financing fees (net of amounts
capitalized) of $447.2 million, $480.6 million and $426.6 million in 1993, 1992
and 1991, respectively. Cash payments (refunds) for income taxes amounted to
$21.0 million, ($9.8) million and $81.0 million for 1993, 1992 and 1991,
respectively.
INVENTORIES - Inventories of refined products and crude oil are accounted for
by the first-in, first-out cost method ("FIFO") or market, if lower. Natural gas
inventories are accounted for on the basis used for rate making and in reporting
to the Federal Energy Regulatory Commission ("FERC"). Colorado Interstate Gas
Company ("CIG") uses the last-in, first-out method, while ANR Pipeline Company
uses the first-in, first-out method. Inventories of coal are accounted for at
average cost, or market, if lower. Inventories of materials and supplies are
accounted for at average cost.
HEDGES - The Company frequently enters into futures and other contracts to
hedge the price risks associated with inventories, commitments and certain
anticipated transactions. Coastal defers the impact of changes in the market
value of these contracts until such time as the hedged transaction is completed.
PROPERTY, PLANT AND EQUIPMENT - Property additions include acquisition costs,
administrative costs and, where appropriate, capitalized interest allocable to
construction. Capitalized interest amounted to $8.4 million, $10.7 million and
$22.1 million in 1993, 1992 and 1991, respectively. All costs incurred in the
acquisition, exploration and development of gas and oil properties, including
unproductive wells, are capitalized under the full-cost method of accounting.
Depreciation, depletion and amortization of gas and oil properties are
provided on the unit-of-production basis whereby the unit rate for depreciation,
depletion and amortization is determined by dividing the total unrecovered
carrying value of gas and oil properties plus estimated future development costs
by the estimated proved reserves included therein, as estimated by an
independent engineer. The average amortization rate per equivalent unit of a
thousand cubic feet of gas production for oil and gas operations was $1.00 each
for 1993, 1992 and 1991. Provisions for depletion of coal properties, including
exploration and development costs, are based upon estimates of recoverable
reserves using the unit-of-production method. Provision for depreciation of
other property is primarily on a straight-line basis over the estimated useful
life of the properties.
Costs of minor property units (or components thereof) retired or abandoned
are charged or credited, net of salvage, to accumulated depreciation, depletion
and amortization. Gain or loss on sales of major property units is credited or
charged to income.
GOODWILL - Goodwill, which primarily relates to the acquisitions of American
Natural Resources Company and Colorado Interstate Gas Company, amounted to
$563.3 million at December 31, 1993, and is being amortized on a straight-line
basis over a 40-year period. Amortization expense charged to operations was
approximately $19.0
F-14
<PAGE>
million for 1993, 1992 and 1991, respectively. As warranted by facts and
circumstances, the Company periodically assesses the recoverability of the cost
of goodwill from future operating income.
INCOME TAXES - The Company follows the liability method of accounting for
deferred income taxes as required by the provisions of Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes.
REVENUE RECOGNITION - The Company's subsidiaries recognize revenues for the
sale of their respective products in the period of delivery. Revenues for
services are recognized in the period the services are provided.
CURRENCY TRANSLATION - The U.S. dollar is the functional currency for
substantially all the Company's foreign operations. For those operations, all
gains and losses from currency translations are included in income currently.
EARNINGS PER SHARE - Earnings (loss) per common and common equivalent share
amounts are based on the average number of common and Class A common shares
outstanding during each period, assuming conversion of preferred stocks which
are common stock equivalents and exercise of all stock options having exercise
prices less than the average market price of the common stock using the treasury
stock method.
Average shares entering into the computations are:
<TABLE>
<CAPTION>
<S> <C>
1993............... 104,744,124
1992............... 103,827,362
1991............... 104,651,450
</TABLE>
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 71 (FAS 71) - The interstate
natural gas pipeline operations and certain storage subsidiaries are subject to
the regulations and accounting procedures of the FERC. These subsidiaries meet
the criteria and, accordingly, follow the reporting and accounting requirements
of FAS 71.
RECLASSIFICATION OF PRIOR PERIOD STATEMENTS - Certain minor reclassifications
have been made to conform with current reporting practices. The effect of the
reclassifications was not material to the Company's results of operations or
financial position.
NOTE 2. INVENTORIES
Inventories at December 31 were (millions of dollars):
<TABLE>
<CAPTION>
1993 1992
-------- ---------
<S> <C> <C>
Refined products, crude oil
and chemicals....................................... $ 568.8 $ 734.8
Natural gas in underground storage................... 260.4 360.0
Coal, materials and supplies......................... 163.0 157.9
-------- ---------
$ 992.2 $ 1,252.7
======== =========
</TABLE>
Elements included in inventory cost are material, labor and manufacturing
expenses.
The excess of replacement cost over the carrying value of natural gas in
underground storage carried by the last-in, first-out method was approximately
$52.6 million and $47.8 million at December 31, 1993 and 1992, respectively.
Natural gas in underground storage at December 31, 1993, includes $161.5
million, pending approval by the FERC, which is to be transferred to Property,
Plant and Equipment for regulatory and accounting purposes.
F-15
<PAGE>
NOTE 3. TAKE-OR-PAY OBLIGATIONS
Other assets include $134.0 million and $225.6 million at December 31, 1993
and 1992, respectively, relating to prepayments for gas under gas purchase
contracts with producers and settlement payment amounts relative to the
restructuring of gas purchase contracts as negotiated with producers. Currently,
FERC regulations allow for the billing of a portion of the costs of take-or-pay
settlements and renegotiating gas purchase contracts. Prepayments are normally
recoupable through future deliveries of natural gas.
As a result of the implementation of Order 636 by CIG on October 1, 1993 (See
Note 14 in the Notes to Consolidated Financial Statements), CIG's future gas
sales will be made at negotiated prices and will not be subject to regulatory
price controls. This will not affect the recoverability or the results of
pending take-or-pay litigation or any take-or-pay or contractual reformation
settlements that CIG may achieve with respect to periods before October 1, 1993.
A portion of the costs associated with take-or-pay incurred prior to October 1,
1993, may continue to be recovered by CIG pursuant to FERC's Order No. 528.
Contract reformation and take-or-pay costs incurred as a result of the
mandated Order 636 restructuring will be recovered under the transition cost
mechanisms of Order 636, as well as through negotiated agreements with
customers. The Company believes that these mechanisms provide adequate coverage
for such costs.
Several producers have instituted litigation arising out of take-or-pay
claims against subsidiaries of the Company. In the Company's experience,
producers' claims are generally vastly overstated and do not consider all
adjustments provided for in the contract or allowed by law. The subsidiaries
have resolved the majority of the exposure with their suppliers for
approximately 13% of the amounts claimed. At December 31, 1993, the Company
estimated that unresolved asserted and unasserted producers' claims amounted to
approximately $31 million. The remaining disputes will be settled where possible
and litigated if settlement is not possible.
At December 31, 1993, the Company was committed to make future purchases
under certain take-or-pay contracts with fixed, minimum or escalating price
provisions. Based on contracts in effect at that date, and before considering
reductions provided in the contracts or applicable law, such commitments are
estimated to be $38 million, $30 million, $23 million, $15 million and $4
million for the years 1994-1998, respectively, and $9 million thereafter. Such
commitments have also not been adjusted for all amounts which may be assigned or
released, or for the results of future litigation or negotiation with producers.
The Company has made provisions, which it believes are adequate, for payments
to producers that may be required for settlement of take-or-pay claims and
restructuring of future contractual commitments. In determining the net loss
relating to such provisions, the Company has also made accruals for the
estimated portion of such payments which would be recoverable pursuant to FERC-
approved settlements with customers.
NOTE 4. INVESTMENTS
The Company has interests in corporations and partnerships which are
accounted for on an equity basis. These investments, included in Other Assets,
are Great Lakes Gas Transmission Limited Partnership (50% interest), which
operates an interstate pipeline system; Pacific Refining Company (50% interest),
which operates a refinery and terminal facilities in California; Javelina
Company (40% interest), which operates a gas processing plant in Corpus Christi,
Texas; Eagle Point Cogeneration Partnership (50% interest), which operates a
cogeneration facility in New Jersey; corporate joint ventures (50% interest),
which have developed gas and oil properties in Argentina; and several pipeline
and other ventures. The Company's investment in these entities, including
advances, amounted to $424.7 million and $330.2 million at December 31, 1993 and
1992, respectively. The Company's equity in income of the investments was $71.9
million, $63.8 million and $26.6 million in 1993, 1992 and 1991, respectively,
while dividends and partnership distributions received amounted to $17.5
million, $47.8 million and $18.9 million in 1993, 1992 and 1991, respectively.
The 1992 equity in income excludes the restructuring charges as discussed in
Note 10.
F-16
<PAGE>
Summarized financial information of these entities is as follows (millions of
dollars):
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
--------- ---------
<S> <C> <C>
Current assets......................................................... $ 272.9 $ 375.0
Noncurrent assets...................................................... 2,208.1 1,955.2
--------- ---------
$ 2,481.0 $ 2,330.2
========= =========
Current liabilities.................................................... $ 353.2 $ 369.3
Noncurrent liabilities................................................. 1,129.7 1,139.1
Deferred credits....................................................... 155.5 113.3
Equity................................................................. 842.6 708.5
--------- ---------
$ 2,481.0 $ 2,330.2
========= =========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Revenues................................................................ $ 1,165.2 $ 1,126.4 $ 1,038.2
Operating income........................................................ 192.8 194.1 74.4
Net income.............................................................. 123.7 108.6 25.1
</TABLE>
F-17
<PAGE>
NOTE 5. DEBT
LONG-TERM DEBT - Balances at December 31 were (millions of dollars):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
The Coastal Corporation:
Notes payable to banks (term credit facilities)................................... $ 100.0 $ 111.8
Notes payable to banks (revolving credit agreements).............................. 80.0 25.0
Swiss franc bonds, 5-3/4%, due 1996............................................... 68.3 119.1
Senior notes:
11-1/4%, due 1996................................................................ - 500.0
10-3/8%, due 2000................................................................ 249.8 249.8
10%, due 2001.................................................................... 298.9 298.8
8-3/4%, due 1999................................................................. 150.0 150.0
8-1/8%, due 2002................................................................. 249.2 249.1
Japanese yen notes, 6.3%,
due 1995 to 1997................................................................. 199.4 199.4
Senior debentures:
11-3/4%, due 2006................................................................ 400.0 400.0
10-1/4%, due 2004................................................................ 199.8 199.8
10-3/4%, due 2010................................................................ 149.5 149.5
9-3/4%, due 2003................................................................. 298.6 298.5
9-5/8%, due 2012................................................................. 149.1 149.0
Other............................................................................. .1 .1
--------- ---------
2,592.7 3,099.9
--------- ---------
Subsidiary Companies:
Notes payable to banks (revolving credit agreements).............................. 473.5 340.5
Notes payable to banks (project financing), due 1995.............................. 46.5 52.6
Long-term notes, 9% to 13-1/2%, due 1994 through 2005............................. 8.2 34.0
First mortgage pipeline bonds, 8-5/8% to 10-5/8%.................................. - 56.0
Debentures, 9-5/8% to 10%, due 2005-2021.......................................... 477.5 499.1
Capitalized lease obligations, 9-3/4% to 11.99%................................... 32.3 48.5
Swiss franc bonds, 6%, due 1995................................................... 58.2 58.1
Other, due 2004-2012.............................................................. 19.0 33.2
--------- ---------
1,115.2 1,122.0
--------- ---------
Total Long-Term Debt.............................................................. 3,707.9 4,221.9
Less Current Maturities........................................................... 95.1 115.4
--------- ---------
$3,612.8 $4,106.5
========= =========
</TABLE>
At December 31, 1993, long-term credit agreements with banks totaled $1,198.1
million, including $308.0 million available to The Coastal Corporation. Loans
under these agreements bear interest at money market-related rates (weighted
average 4.16% at December 31, 1993). Annual commitment fees range up to 1/2%
payable on the unused portion of the applicable facility. At December 31, 1993,
$653.5 million was outstanding. Notes payable to banks of $400.0 million are
obligations of a wholly owned subsidiary, Coastal Natural Gas Company (CNG), for
which CNG has pledged the common stock of its first-tier subsidiaries as
collateral. The agreements contain restrictive covenants which, among other
things, limit the payment of dividends by CNG and the amount of additional
indebtedness of CNG and its subsidiaries.
The subsidiary project financing note bears interest at money market-related
rates.
F-18
<PAGE>
Various agreements contain restrictive covenants which, among other things,
limit the payment of advances or dividends by certain subsidiaries and
additional indebtedness of certain subsidiaries. At December 31, 1993, net
assets of consolidated subsidiaries amounted to approximately $5.1 billion, of
which $1.7 billion was restricted by such provisions.
In February 1994, ANR Pipeline Company sold $125.0 million of 7-3/8%
Debentures due in 2024. The net proceeds from the sale will be used for capital
expenditures and for other general corporate purposes.
INTEREST RATE AND CURRENCY SWAPS - The Company has entered into a number of
interest rate swap agreements which have effectively fixed interest rates on
$563.5 million of floating rate debt. Under these agreements, Coastal will pay
the counterparties interest at a fixed rate, and the counterparties will pay
Coastal interest at a variable rate based on the London Interbank Offered Rate
(LIBOR). At December 31, 1993, the weighted average fixed rate payable under
these agreements was 9.61%. The Company has also entered into a number of
offsetting interest rate swap agreements which have effectively converted $250.0
million of fixed rate debt into floating rate debt. Terms expire at various
dates through the third quarter of 1996.
The foreign currency exposure relating to certain of the Swiss franc
denominated debt of the Company and one of its subsidiaries and Japanese yen
denominated debt of the Company has been hedged to maturity, resulting in
effective borrowing costs ranging from 8.2% to 11.1%.
Coastal and its subsidiaries have entered into these interest rate and
currency swaps with major banking institutions to reduce the impact of interest
rate and exchange rate fluctuations with respect to certain floating rate and
foreign currency denominated debt. In certain instances, the Company has also
entered into interest rate swaps to convert a portion of its fixed rate debt
into floating rates. Coastal is exposed to loss if one or more of the
counterparties default. Interest rate swap transactions generally involve
exchanges of fixed and floating interest payment obligations without exchanges
of underlying principal amounts. Similarly, currency swaps involve exchanges of
interest payments in differing currencies but provide for the exchange of
principal amounts at maturity, usually through an escrow arrangement to limit
credit risk. Consequently, Coastal's exposure to credit loss is significantly
less than the contracted amounts.
Neither the Company nor the counterparties are required to collateralize
their respective obligations under these swaps. At December 31, 1993, Coastal
had no exposure to credit loss on interest rate swaps and approximately $108.7
million of exposure to credit loss on currency swaps.
SUBORDINATED LONG-TERM DEBT - Balances at December 31 were (millions of
dollars):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Subordinated Notes, 11-1/8%, due 1998............ $199.7 $199.6
Less Current Maturities......................... - -
------ ------
$199.7 $199.6
====== ======
</TABLE>
MATURITIES - The aggregate amounts of long-term debt (including subordinated)
maturities for the five years following 1993 are (millions of dollars):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1994 $ 95.1 1997 $ 236.0
1995 269.6 1998 234.2
1996 502.3
</TABLE>
NOTES PAYABLE - At December 31, 1993, Coastal and its subsidiaries had $264.0
million of outstanding indebtedness to banks under short-term lines of credit,
compared to $221.4 million at December 31, 1992. As of December 31, 1993, $413.0
million was available to be drawn under short-term credit lines.
F-19
<PAGE>
RESTRICTIONS ON PAYMENT OF DIVIDENDS - Under the terms of the most
restrictive of the Company's financing agreements, approximately $409.9 million
was available at December 31, 1993, for payment of dividends on the Company's
common and preferred stocks.
GUARANTEES - Coastal and certain subsidiaries have guaranteed specific
obligations of several unconsolidated affiliates. Such affiliates are generally
not required to collateralize their contingent liabilities to the Company. At
December 31, 1993, the Company had guaranteed 50% of a construction financing
entered into by a partially owned partnership, 45% of a construction financing
of a second partnership and 100% of a construction financing entered into by a
third partnership. The Company's proportionate share of the outstanding
principal balances under these guarantees was $135.0 million at December 31,
1993. Other guarantees and indemnities related to obligations of unconsolidated
affiliates amounted to approximately $224.9 million as of the same date. The
Company anticipates that two of the guaranteed construction loans will be
refinanced in 1994 and the third in early 1995, all on a non-recourse basis. The
Company is of the opinion that its unconsolidated affiliates will be able to
perform under their respective financings and other obligations and that no
payments will be required and no losses will be incurred under such guarantees
and indemnities.
Coastal and certain subsidiaries have guaranteed approximately $16.7 million
of obligations of third parties under leases and borrowing arrangements. Where
possible, the Company has obtained security interests and guarantees by the
principals. Cash requirements and losses under these guarantees are expected to
be nominal.
NOTE 6. LEASES
The Company and its subsidiaries had rental expense of approximately $98.2
million, $92.6 million and $98.1 million in 1993, 1992 and 1991, respectively,
excluding leases covering natural resources. Aggregate minimum lease payments
under existing noncapitalized long-term leases are estimated to be $82.8
million, $80.5 million, $77.3 million, $71.0 million, and $59.5 million for the
years 1994-1998, respectively, and $720.7 million thereafter.
NOTE 7. MANDATORY REDEMPTION PREFERRED STOCK
Shares and aggregate redemption value of mandatory redemption preferred stock
outstanding, excluding shares redeemable within one year, were (thousands of
shares and millions of dollars):
<TABLE>
<CAPTION>
Subsidiaries Stock
------------------
Shares Value
------ ------
<S> <C> <C>
Balance, December 31, 1990................. 2,115 $ 65.1
Redemptions................................ (346) (15.9)
----- ------
Balance, December 31, 1991................. 1,769 49.2
Redemptions................................ (577) (12.5)
----- ------
Balance, December 31, 1992................. 1,192 36.7
Redemptions................................ (326) (10.1)
----- ------
Balance, December 31, 1993................. 866 $ 26.6
===== ======
</TABLE>
CIG has 550,000 shares of $100 par value cumulative preferred stock
authorized, of which 5,560 shares were outstanding at December 31, 1993. The
stock outstanding is due in 1997 with an annual dividend rate of 5.5%. The
series is to be redeemed at par value through annual sinking fund payments.
ANR Pipeline Company had 1,086,640 outstanding shares of $1.00 par value
redeemable cumulative preferred stock at December 31, 1993. The stock consists
of three series with dividends per share of $2.675, $2.12 and $12.00. The $2.675
and $2.12 series were issued at $25 per share and the $12.00 series was issued
at $100 per share. The
F-20
<PAGE>
current per share redemption prices are $25.268 for the $2.675 Series (decreases
to issue price by 1995), $25.318 for the $2.12 Series (decreases to issue price
by 1996) and $103.790 for the $12.00 Series (decreases to issue price by 1999).
All series are to be redeemed through annual sinking fund payments.
The aggregate amount of share redemption requirements for the five years
following 1993 are (millions of dollars):
<TABLE>
<S> <C> <C> <C>
1994 $7.7 1997 $3.7
1995 7.7 1998 2.5
1996 5.1
</TABLE>
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of the Company's financial instruments have
been determined by the Company, using appropriate market information and
valuation methodologies. Considerable judgment is required to develop the
estimates of fair value, thus, the estimates provided herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
<TABLE>
<CAPTION>
(Millions of dollars)
----------------------------------------------
December 31, 1993 December 31, 1992
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents............. $ 159.2 $ 159.2 $ 43.5 $ 43.5
Notes receivable...................... 62.8 64.2 64.8 64.8
Financial liabilities:
Short-term debt....................... 264.0 264.0 221.4 221.4
Long-term debt and currency swaps..... 3,875.3 4,203.5 4,373.0 4,457.2
Mandatory redemption preferred stock.. 34.3 34.9 44.4 44.5
Interest rate swaps and options....... 80.3 106.3 64.8 120.0
</TABLE>
The estimated value of the Company's long-term debt and mandatory
redemption preferred stock is based on interest rates at December 31, 1993 and
1992, respectively, for new issues with similar remaining maturities. The fair
market value of the Company's interest rate and foreign currency swaps is based
on the estimated termination values at December 31, 1993 and 1992, respectively.
NOTE 9. COMMON AND PREFERRED STOCK
Shares of common stock and Class A common stock reserved for future issuance
as of December 31, 1993 were:
<TABLE>
<CAPTION>
Class A
Common Common
Stock Stock
---------- -------
<S> <C> <C>
Employee stock options......................................... 2,294,372 44,743
Conversion of outstanding Class A common stock................. 422,857 -
Conversion of Class A common stock subject to future issuance.. 67,107 -
Conversion of preferred stock:
$1.19, Series A, redemption value of $33 per share............ 233,945 6,476
$1.83, Series B, redemption value of $50 per share............ 322,126 8,917
$5.00, Series C, redemption value of $100 per share........... 251,854 6,971
---------- -------
3,592,261 67,107
========== =======
</TABLE>
F-21
<PAGE>
Common stock reserved for conversion is at the rate of one share for each
share of Class A common stock, 3.6125 shares for each share of Series A or
Series B preferred stock and 7.1121094 shares for each share of Series C
preferred stock. Each share of common stock and Series A, Series B and Series C
preferred stock is entitled to one vote while each share of Class A common stock
is entitled to 100 votes. However, 25% of the Company's directors standing for
election at each annual meeting will be determined solely by holders of the
common stock and preferred stocks mentioned above, voting as a class.
In April 1993, the Company completed the public offering of 8,000,000 shares
of $2.125 Cumulative Preferred Stock, Series H, at $25 per share. The net
proceeds from the sale were used to retire short- and long-term debt of the
Company.
Under the 1980 Stock Option Plan, no options were exercisable at December 31,
1993, and 904 common shares and 25 Class A common shares were exercisable at
December 31, 1992. No additional options may be granted under the 1980 Plan.
Under the 1984 Plan, 4,113 Class A common shares and 13,442 common shares
were available for granting of options, and options for 39,262 Class A common
shares and 92,288 common shares were exercisable at December 31, 1993. At
December 31, 1992, nine Class A common shares and 12 common shares were
available for granting of options, and options for 124,448 Class A common shares
and 185,080 common shares were exercisable.
Under the 1985 Plan, 69,758 common shares were available for granting of
options, and options for 953,898 common shares were exercisable at December 31,
1993. At December 31, 1992, 102,773 common shares were available for granting of
options, and options for 1,194,414 common shares were exercisable.
Under the 1990 Plan, 23,717 common shares were available for granting of
options, and options for 181,380 common shares were exercisable at December 31,
1993. At December 31, 1992, 368,690 common shares were available for granting of
options, and options for 42,002 common shares were exercisable.
Options are currently granted under the plans at 100% of market value. The
following table presents a summary of stock option transactions for the three
years ended December 31, 1993:
<TABLE>
<CAPTION>
Class A Option
Common Common Price
Stock Stock Per Share
---------- ------- ---------
<S> <C> <C> <C>
December 31, 1990.... 2,372,561 208,325 $ 6.26-35.94
Granted............. 446,800 - 31.50-35.94
Exercised........... (214,537) (27,566) 6.26-28.59
Revoked or expired.. (28,432) (50) 9.87-35.94
--------- -------- ------------
December 31, 1991.... 2,576,392 180,709 7.12-35.94
Granted............. 20,000 - 25.94-28.56
Exercised........... (214,867) (50,116) 7.12-28.59
Revoked or expired.. (147,500) - 17.08-35.94
--------- -------- ------------
December 31, 1992.... 2,234,025 130,593 7.91-35.94
Granted............. 639,879 - 25.50-27.00
Exercised........... (412,128) (85,859) 7.91-28.59
Revoked or expired.. (274,321) (4,104) 26.06-35.94
--------- -------- ------------
December 31, 1993.... 2,187,455 40,630 $ 7.91-35.94
========= ========= ============
</TABLE>
F-22
<PAGE>
NOTE 10. SEGMENT REPORTING
The Company operates principally in the following lines of business: natural
gas, refining and marketing, exploration and production, and coal. Natural gas
operations involve the production, purchase, gathering, storage, transportation
and sale of natural gas, principally to utilities, industrial customers and
other pipelines, and include the operation of natural gas liquids extraction
plants.
Refining and marketing operations involve the purchase, transportation and
sale of refined products, crude oil, condensate and natural gas liquids; the
operation of refineries and a chemical plant; the sale at retail of gasoline,
petroleum products and convenience items; petroleum product terminaling; and
marketing of crude oil and refined petroleum products worldwide.
Exploration and production operations involve the exploration, development
and production of natural gas, crude oil, condensate and natural gas liquids.
The segment also includes related intrastate natural gas marketing activities
and gas plant processing operations.
Coal operations include the mining, processing and marketing of coal from
Company-owned reserves and from other sources, and the brokering of coal for
others.
Other operations include regional trucking operations involving activities as
common carriers in interstate and intrastate commerce and activities in power
production and other projects.
Operating revenues by segment include both sales to unaffiliated customers,
as reported in the Company's Statement of Consolidated Operations, and
intersegment sales, which are accounted for on the basis of contract, current
market or internally established transfer prices. The intersegment sales are
primarily sales from the exploration and production segment to the natural gas
and refining and marketing segments and from the natural gas segment to the
refining and marketing segment.
Operating profit is total revenues less interest income from affiliates and
operating costs and expenses. Operating expenses exclude income taxes, corporate
general and administrative expenses and interest.
Identifiable assets by segment are those assets that are used in the
Company's operations in each segment. Corporate assets are those assets which
are not specifically identifiable with a segment.
F-23
<PAGE>
The Company's operating revenues, operating profit, capital expenditures, and
depreciation, depletion and amortization expense for the years ended December
31, 1993, 1992 and 1991, and identifiable assets as of December 31, 1993, 1992
and 1991, by segment, are shown as follows (millions of dollars):
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING REVENUES
Natural gas....................................... $ 3,247.9 $ 2,746.8 $ 2,405.5
Refining and marketing............................ 6,200.9 6,561.1 6,297.6
Exploration and production........................ 357.3 310.0 327.6
Coal.............................................. 443.2 447.4 465.2
Other............................................. 187.0 196.3 169.6
Adjustments and eliminations...................... (300.2) (198.7) (110.7)
--------- --------- ---------
Consolidated totals.............................. $10,136.1 $10,062.9 $ 9,554.8
========= ========= =========
OPERATING PROFIT (LOSS)
Natural gas....................................... $ 405.2 $ 403.1 $ 402.2
Refining and marketing............................ 98.0 (192.1) (99.3)
Exploration and production........................ 49.9 45.8 45.2
Coal.............................................. 95.1 92.8 91.8
Other............................................. (12.8) (19.7) (4.3)
--------- --------- ---------
Consolidated totals.............................. $ 635.4 $ 329.9 $ 435.6
========= ========= =========
CAPITAL EXPENDITURES
Natural gas....................................... $ 119.8 $ 231.7 $ 181.5
Refining and marketing............................ 130.3 173.3 391.5
Exploration and production........................ 91.8 126.8 95.4
Coal.............................................. 36.0 33.3 44.7
Other............................................. 9.5 2.6 11.8
--------- --------- ---------
Segment totals................................... 387.4 567.7 724.9
Corporate assets.................................. 5.3 5.8 4.0
--------- --------- ---------
Consolidated totals.............................. $ 392.7 $ 573.5 $ 728.9
========= ========= =========
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE
Natural gas....................................... $ 145.4 $ 187.1 $ 177.0
Refining and marketing............................ 45.6 98.1 40.3
Exploration and production........................ 109.1 83.2 69.4
Coal.............................................. 28.5 28.4 27.1
Other............................................. 7.9 7.6 7.1
--------- --------- ---------
Segment totals................................... 336.5 404.4 320.9
Corporate assets.................................. 3.4 4.2 3.0
--------- --------- ---------
Consolidated totals.............................. $ 339.9 $ 408.6 $ 323.9
========= ========= =========
IDENTIFIABLE ASSETS
Natural gas....................................... $ 5,562.5 $ 5,719.7 $ 5,748.5
Refining and marketing............................ 2,745.9 3,054.1 3,019.0
Exploration and production........................ 801.5 835.8 781.9
Coal.............................................. 450.3 434.6 438.9
Other............................................. 199.7 203.2 210.6
--------- --------- ---------
Segment totals................................... 9,759.9 10,247.4 10,198.9
Corporate assets.................................. 467.2 332.4 321.4
--------- --------- ---------
Consolidated totals.............................. $10,227.1 $10,579.8 $10,520.3
========= ========= =========
</TABLE>
F-24
<PAGE>
Refining and marketing revenues include gross profit arising from the
selling, trading and exchanging of third party products. Approximate amounts
from these transactions included in revenues and the impact on earnings,
exclusive of interest costs, were (millions of dollars):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- -----
<S> <C> <C> <C>
Revenues............................................... $ 3.1 $ 1.1 $13.1
Impact on earnings..................................... 2.0 .7 8.5
</TABLE>
The number and magnitude of such transactions may vary significantly from
year to year, particularly in view of conditions in world petroleum markets.
Results for 1992 reflect a primarily non-cash $125 million pretax charge for
restructuring certain refining and marketing operations. The charge reflects
numerous actions to reduce costs and working capital, limit risks and eliminate
marginal activities, and primarily relates to reducing the carrying value of
certain assets. Eighty-five million dollars of the charge relates to wholly
owned assets and was made against operating profit. The remaining $40 million
relates to partially owned investments and was included in Other Income-Net.
OTHER INCOME - Net for 1991 includes gains of $13.2 million from the sale of
securities. Also included are equity method earnings related to the business
segments as follows (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Natural gas.................................... $55.1 $53.6 $31.5
Refining and marketing......................... (3.4) (7.6) (8.3)
Exploration and production..................... 4.7 5.1 -
Power production............................... 16.4 13.7 4.9
Other.......................................... (.9) (1.0) (1.5)
----- ----- -----
$71.9 $63.8 $26.6
===== ===== =====
</TABLE>
Revenues from sales to any single customer during 1993, 1992 or 1991 did not
amount to 10% or more of the Company's consolidated revenues for any year.
NOTE 11. BENEFIT PLANS
The Company has non-contributory pension plans covering substantially all
U.S. employees. These plans provide benefits based on final average monthly
compensation and years of service. The Company's funding policy is to contribute
the amount necessary for the plan to maintain its qualified status under the
Employee Retirement Income Security Act of 1974. The pension benefit for 1993,
1992 and 1991 is shown in the following table (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Service cost - benefit earned during the period.. $ 16.3 $ 15.2 $ 13.9
Interest cost on projected benefit obligation.... 37.6 38.5 34.4
Actual return on assets.......................... (92.5) (25.3) (108.7)
Net amortization and deferral.................... 18.9 (47.5) 44.1
------ ------ -------
Net periodic pension benefit..................... $(19.7) $(19.1) $ (16.3)
====== ====== =======
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.25% in 1993 and 8.25% in 1992 and 1991. The
expected increase in future compensation levels was 4% in 1993 and 6% in 1992
and 1991, and the expected long-term rate of return on assets was 11%.
F-25
<PAGE>
The following table sets forth the funded status of the plans and the amounts
recognized in the Company's Consolidated Balance Sheet (millions of dollars):
<TABLE>
<CAPTION>
December 31,
-----------------
1993 1992
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations: Accumulated benefit
obligation, including vested benefits of $442.5 million and
$371.5 million, respectively........................................ $(492.4) $(410.3)
======= =======
Projected benefit obligation for service rendered to date............ $(539.6) $(506.3)
Plan assets, primarily equity securities, at fair value.............. 827.6 762.5
------- -------
Plan assets in excess of projected benefit obligation................ 288.0 256.2
Unrecognized net assets at January 1, 1993 and 1992,
being recognized over average remaining service
lives............................................................... (76.1) (85.4)
Prior service cost, not yet recognized............................... 7.1 6.1
Unrecognized net loss from past experience different from
that assumed........................................................ 15.9 19.9
------- -------
Prepaid pension cost................................................. $ 234.9 $ 196.8
======= =======
</TABLE>
Plan assets include common stock and Class A common stock of the Company
amounting to a total of 3.75 million shares at December 31, 1993 and 1992.
The Company also participates in several multi-employer pension plans for the
benefit of its employees who are union members. Company contributions to these
plans were $7.1 million each for 1993, 1992 and 1991. The data available from
administrators of the multi-employer pension plans is not sufficient to
determine the accumulated benefit obligations, nor the net assets attributable
to the multi-employer plans in which Company employees participate.
The Company also makes contributions to a thrift plan, which is a trusteed,
voluntary and contributory plan for eligible employees of the Company. The
Company's contributions, which match the contributions made by employees,
amounted to $17.7 million, $16.6 million and $15.4 million in 1993, 1992 and
1991, respectively.
The Company provides certain health care and life insurance benefits for
retired employees. Substantially all U.S. employees are provided these benefits.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("FAS 106"). FAS 106 requires the Company to accrue the estimated cost
of retiree benefit payments during the years the employee provides services. The
Company previously expensed the cost of these benefits, which are principally
health care, as claims were incurred. FAS 106 allows recognition of the
cumulative effect of the liability in the year of the adoption or the
amortization of the obligation over a period of up to 20 years. The Company has
elected to recognize the initial postretirement benefit obligation of
approximately $133.1 million over a period of 20 years. The Company's cash flows
were not affected by implementation of FAS 106 and the incremental impact on the
Company's 1993 results of operations before income taxes is approximately $13.6
million, of which $8.3 million is being deferred by the Company's rate regulated
subsidiaries. The subsidiaries have filed to include such deferred costs in
their rates.
F-26
<PAGE>
[CAPTION]
<TABLE>
(Millions of dollars)
---------------------
<S> <C>
Accumulated postretirement benefit obligation as of December 31, 1993:
Retirees................................................................ $(105.3)
Fully eligible plan participants........................................ (18.8)
Other active plan participants.......................................... (25.3)
-------
(149.4)
Plan assets at fair value................................................ 2.1
-------
Accumulated postretirement benefit obligations in excess of plan assets.. (147.3)
Unrecognized net transition obligation................................... 126.4
Unrecognized net loss from past experience different from that assumed... 9.3
-------
Postretirement benefit obligation included in balance sheet as of
December 31, 1993....................................................... $ (11.6)
=======
Net periodic postretirement benefit cost for the year ended
December 31, 1993, consisted of the following components:
Service cost - benefits earned during the period........................ $ 1.7
Interest cost on accumulated postretirement benefit obligation.......... 10.6
Amortization of transition obligation................................... 6.7
Deferred regulatory asset............................................... (8.3)
-------
Net periodic postretirement benefit expense............................. $ 10.7
=======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 16.0% in 1993, declining gradually to 7.0%
by the year 2004. A one percentage point increase in the assumed health care
cost trend rate for each year would increase the accumulated postretirement
benefit obligation as of December 31, 1993, and net postretirement health care
cost by approximately 4.7%. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7.25%.
The Company adopted Statement of Financial Accounting Standards No. 112,
"Employer's Accounting for Postemployment Benefits" ("FAS 112") effective
January 1, 1994. This standard covers the accounting for estimated costs of
benefits provided to former or inactive employees before their retirement. The
effect of the new standard will not have a material effect on the Company's
results of operations or financial position.
NOTE 12. TAXES ON INCOME
Pretax earnings (loss) before extraordinary item are composed of the
following (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1993 1992 1991
------ -------- -------
<S> <C> <C> <C>
United States................................. $171.0 $(139.9) $(25.4)
Foreign....................................... 30.7 (58.6) 24.3
------ ------- ------
$201.7 $(198.5) $ (1.1)
====== ======= ======
</TABLE>
F-27
<PAGE>
Provisions for income taxes (benefits) before extraordinary item are composed
of the following (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1993 1992 1991
------ -------- -------
<S> <C> <C> <C>
Current Income Taxes:
Federal................ $34.3 $ 2.5 $ 35.7
State.................. 3.3 1.4 7.8
----- ------ ------
37.6 3.9 43.5
----- ------ ------
Deferred Income Taxes:
Federal................ 39.0 (84.2) (57.1)
State.................. 6.8 8.6 3.8
----- ------ ------
45.8 (75.6) (53.3)
----- ------ ------
Taxes on Income......... $83.4 $(71.7) $ (9.8)
===== ====== ======
</TABLE>
The Company and the Internal Revenue Service ("IRS") Appeals Office have
concluded a tentative settlement of all contested adjustments to federal income
tax returns filed for the years 1982 through 1984. The settlement is in the
process of being finalized. The Company's federal income tax returns filed for
the years 1985 through 1987 have been examined by the IRS, and the Company has
received notice of proposed adjustments to the returns for each of those years.
The Company currently is contesting certain of these adjustments with the IRS
Appeals Office. Examinations of the Company's federal income tax returns for
1988, 1989 and 1990 are currently in progress. It is the opinion of management
that adequate provisions for federal income taxes have been reflected in the
consolidated financial statements.
The Company increased its deferred tax liability as a result of legislation
enacted in 1993 increasing the Corporate federal income tax rate from 34% to 35%
commencing in 1993.
Provisions for income taxes were different than the amount computed by
applying the statutory U.S. federal income tax rate to earnings before tax. The
reasons for these differences are (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Tax expense (benefit) by applying the U.S. federal income
tax rate of 35% (1993) and 34% (1992 and 1991)............ $ 70.6 $(67.5) $ (.3)
Increases (reductions) in taxes resulting from:
Tight sands gas credit.................................... (13.0) - (2.1)
State income tax cost..................................... 6.6 6.6 7.7
Preferred stock dividends................................. 1.4 1.8 2.3
Goodwill.................................................. 6.4 6.4 6.4
Exclusion for dividends and equity earnings............... (3.4) (3.0) (3.4)
Full normalization........................................ (5.4) (6.1) (5.5)
Depletion................................................. (6.3) (5.8) (4.5)
Increase in federal tax rate.............................. 29.0 - -
Other..................................................... (2.5) (4.1) (10.4)
------ ------ ------
Taxes on income............................................ $ 83.4 $(71.7) $ (9.8)
====== ====== ======
</TABLE>
F-28
<PAGE>
Deferred tax liabilities (assets) which are recognized for the estimated
future tax effects attributable to temporary differences and carryforward are
(millions of dollars):
<TABLE>
<CAPTION>
December 31,
-----------------
1993 1992
------ ------
<S> <C> <C>
Excess of book basis over tax basis of
property, plant and equipment.................... $1,403.1 $1,344.6
Pensions and benefit costs........................ 41.2 34.0
Purchase gas and other recoverable cost........... 52.6 41.9
-------- --------
Deferred tax liabilities.......................... 1,496.9 1,420.5
-------- --------
Provisions for rate refunds and contested claims.. (3.9) (23.3)
Inventory adjustments............................. (27.4) (42.0)
Alternative minimum tax credit carryforward....... (145.9) (100.4)
Other............................................. (3.3) (16.1)
-------- --------
Deferred tax assets............................... (180.5) (181.8)
-------- --------
Deferred income taxes............................. $1,316.4 $1,238.7
======== ========
</TABLE>
NOTE 13. EXTRAORDINARY ITEM
In June 1993, the Company retired $500.0 million of 11 1/4% Senior Notes due
in 1996. The transaction resulted in an extraordinary loss of $2.5 million ($.02
per share), net of income taxes of $1.3 million.
NOTE 14. LITIGATION AND REGULATORY MATTERS
LITIGATION - In December 1992, certain of CIG's natural gas lessors in the
West Panhandle Field filed a complaint in the U.S. District Court for the
Northern District of Texas, claiming underpayment, breach of fiduciary duty,
fraud and negligent misrepresentation. Management believes that CIG has numerous
defenses to the lessors' claims, including (i) that the royalties were properly
paid, (ii) that the majority of the claims were released by written agreement,
and (iii) that the majority of the claims are barred by the statute of
limitations.
A subsidiary of Coastal has initiated a suit against TransAmerican Natural
Gas Corporation in the District Court of Webb County, Texas for breach of two
gas purchase agreements. In February 1993 TransAmerican Natural Gas Corporation
filed a Third Party Complaint and a Counterclaim in this action against Coastal
and certain subsidiaries. TransAmerican alleges breach of contract, fraud,
conspiracy, duress, tortious interference and violations of the Texas Free
Enterprises and Anti-trust Act arising out of the gas purchase agreements.
TransAmerican seeks compensatory damages, exemplary damages and attorney fees.
The matter is set for trial on March 14, 1994.
Numerous other lawsuits and other proceedings which have arisen in the
ordinary course of business are pending or threatened against the Company or its
subsidiaries.
Although no assurances can be given and no determination can be made at this
time as to the outcome of any particular lawsuit or proceeding, the Company
believes there are meritorious defenses to substantially all of the above claims
and that any liability which may finally be determined should not have a
material adverse effect on the Company's consolidated financial position.
RATE REGULATION - On April 8, 1992, the FERC issued Order No. 636 ("Order
636"), which required significant changes in the services provided by interstate
natural gas pipelines. Subsidiaries of the Company and numerous other parties
have sought judicial review of aspects of Order 636.
ANR Pipeline placed its restructured services under Order 636 into effect on
November 1, 1993. ANR Pipeline now offers a wide range of unbundled
transportation, storage and balancing services. Several persons, including ANR
Pipeline, have sought judicial review of aspects of the FERC's orders approving
ANR Pipeline's restructuring filings.
Order 636 also provides mechanisms for recovery of transition costs
associated with compliance with that Order. These transition costs include gas
supply realignment costs, the cost of stranded pipeline investment and the cost
of new facilities required to implement Order 636. ANR Pipeline expects that it
will incur transition costs of
F-29
<PAGE>
approximately $150 million. As a result of the recovery mechanisms provided
under Order 636, the Company anticipates that these transition costs will not
have a material adverse effect on the Company's consolidated financial position
or its results of operations.
On December 17, 1992, the FERC issued a policy statement that outlined
changes on how pipelines may recover the costs of employees' post-retirement
benefits other than pensions. The FERC's policy will be to recognize, as a
component of jurisdictional cost-based rates, allowances for FAS 106 costs of
company employees when determined on an accrual basis, provided certain
conditions are met.
On November 1, 1993, ANR Pipeline filed a general rate increase with the
FERC. The proposed rates reflect a $121 million increase in ANR Pipeline's cost
of service from that approved in the settlement of ANR Pipeline's last rate case
and a $218 million increase over ANR Pipeline's approved rates for its
restructured services. The increase represents higher plant investment, Order
636 restructuring costs, rate of return and tax rate changes and increased costs
related to the required adoption of recent accounting rule changes, i.e., FAS
106 and FAS 112. The FERC has permitted ANR Pipeline to place its new rates into
effect on May 1, 1994, subject to refund, and subject to further orders.
On July 2, 1993, CIG submitted to the FERC an unanimous offer of settlement
which resolved all the Order 636 restructuring issues which had been raised in
its restructuring proceedings. That settlement was ultimately approved (except
for minor issues), and CIG's restructured services became effective October 1,
1993.
CIG has "unbundled" its gas sales from its other services. Separate
gathering, transportation, storage and other services are available on a "stand-
alone" basis to any customers desiring them. CIG's Order 636 transition costs
are not expected to be material.
On March 31, 1993, CIG filed at FERC to increase its rates by approximately
$26.5 million annually. Such rates (adjusted to reflect CIG's Order 636 program)
became effective subject to refund on October 1, 1993.
CIG, ANR Pipeline, ANR Storage Company and Wyoming Interstate Company, Ltd.,
subsidiaries, are regulated by the FERC. Certain regulatory issues remain
unresolved among these companies, their customers, their suppliers and the FERC.
The Company has made provisions which represent management's assessment of the
ultimate resolution of these issues. While the Company estimates the provisions
to be adequate to cover potential adverse rulings on these and other issues, it
cannot estimate when each of these issues will be resolved.
ENVIRONMENTAL REGULATION - The Company's operations are subject to extensive
federal, state and local environmental laws and regulations. The Company
anticipates annual capital expenditures of $20 to $40 million over the next
several years aimed at compliance with such laws and regulations. Additionally,
appropriate governmental authorities may enforce the laws and regulations with a
variety of civil and criminal enforcement measures, including monetary penalties
and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." Certain subsidiaries of the Company have been named as a potentially
responsible party ("PRP") in several "Superfund" waste disposal sites. At the 15
sites for which the EPA has developed sufficient information to estimate total
clean-up costs of approximately $350 million, the Company estimates it pro-rata
exposure to be paid over a period of several years is approximately $5 million
and has made appropriate provisions. At three other sites, the EPA is currently
unable to provide the Company with an estimate of total clean-up costs and,
accordingly, the Company is unable to calculate its share of those costs.
Finally, at five other sites, the Company has paid amounts to other PRPs as its
proportional share of associated clean-up costs. As to these latter sites, the
Company believes that its activities were de minimis.
There are additional areas of environmental remediation responsibilities
which may fall on the Company. Future information and developments will require
the Company to continually reassess the expected impact of these environmental
matters. However, the Company has evaluated its total environmental exposure
based on currently available data, including its potential joint and several
liability, and believes that compliance with all applicable laws and regulations
will not have a material adverse impact on the Company's liquidity or financial
position.
F-30
<PAGE>
NOTE 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Results of operations by quarter for the years ended December 31, 1993 and
1992 were (millions of dollars except per share):
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1993 1993 1993 1993
---------- -------------- ---------- ---------
<S> <C> <C> <C> <C>
Operating revenues......................... $2,647.1 $2,631.9 $2,307.9 $2,549.2
Less purchases............................. 1,968.6 1,949.0 1,635.1 1,785.4
-------- -------- -------- --------
678.5 682.9 672.8 763.8
Other income and expenses.................. 653.5 654.1 684.2 687.9
-------- -------- -------- --------
Earnings (loss) before extraordinary item.. 25.0 28.8 (11.4) 75.9
Extraordinary item - loss on early
extinguishment of debt.................... - (2.5) - -
-------- -------- -------- --------
Net earnings (loss)........................ $ 25.0 $ 26.3 $ (11.4) $ 75.9
======== ======== ======== ========
Earnings (loss) per share:
Before extraordinary item................. $ .24 $ .25 $ (.15) $ .68
Extraordinary item........................ - (.02) - -
-------- -------- -------- --------
Net earnings (loss) per common and
common share equivalent share............. $ .24 $ .23 $ (.15) $ .68
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1992 1992 1992 1992
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues......................... $2,536.1 $2,398.6 $2,594.0 $2,534.2
Less purchases............................. 1,908.0 1,734.1 1,912.8 1,903.1
-------- -------- -------- --------
628.1 664.5 681.2 631.1
Other income and expenses.................. 634.1 652.4 659.5 785.7
-------- -------- -------- --------
Net earnings (loss)........................ $ (6.0) $ 12.1 $ 21.7 $ (154.6)
======== ======== ======== ========
Net earnings (loss) per common and common
equivalent share.......................... $ (.06) $ .11 $ .21 $ (1.49)
======== ======== ======== ========
</TABLE>
F-31
<PAGE>
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
Reserves, capitalized costs, costs incurred in oil and gas acquisition,
exploration and development activities, results of operations and the
standardized measure of discounted future net cash flows are presented for the
exploration and production segment. Natural gas systems reserves and the related
standardized measure of discounted future net cash flows are separately
presented for natural gas operations. Substantially all of the Company's
properties are located in the United States. In 1992, the Company acquired an
equity method investment with operations in Argentina.
The 1991 revisions of previous estimates of Natural Gas Systems reserves of
natural gas are related to the Company's independent engineer's interpretation
of an agreement, effective January 1, 1991, between the Company's subsidiary,
CIG, and Mesa Operating Limited Partnership. Such revisions are not due to
change in gross reserve estimates for the affected properties.
ESTIMATED QUANTITIES OF PROVED RESERVES
<TABLE>
<CAPTION>
Natural Exploration
Gas and
Systems Production
--------- ----------------------
Natural Gas (MMcf): Developed Developed Undeveloped Total
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
1993.................................................... 379,795 422,657 123,077 925,529
1992.................................................... 418,831 466,695 89,306 974,832
1991.................................................... 456,580 395,694 168,915 1,021,189
Oil, Condensate and Natural Gas Liquids (000 barrels):
1993.................................................... 7 24,851 3,935 28,793
1992.................................................... 14 26,242 6,818 33,074
1991.................................................... 13 22,937 7,485 30,435
</TABLE>
F-32
<PAGE>
Changes in proved reserves since the end of 1990 are shown in the following
table.
<TABLE>
<CAPTION>
Oil, Condensate and
Natural Gas Natural Gas Liquids
(MMcf) (000 barrels)
-------------------------- -------------------------------
Natural Exploration Natural Exploration
Gas and Gas and
Total Proved Reserves Systems Production Systems Production
------------ ------------ --------------- --------------
<S> <C> <C> <C> <C>
Total, end of 1990.............. 302,673 592,830 11 33,054
Production during 1991.......... (45,845) (43,501) (2) (4,087)
Extensions and discoveries...... - 34,252 - 1,275
Acquisitions.................... - 11,267 - 676
Sales of reserves in-place...... - (53,254) - (299)
Revisions of previous quantity
estimates and other............ 199,752 23,015 4 (197)
------- ------- -- ------
Total, end of 1991.............. 456,580 564,609 13 30,422
------- ------- -- ------
Production during 1992.......... (47,754) (53,748) (2) (4,757)
Extensions and discoveries...... - 59,052 - 4,167
Acquisitions.................... - 15,489 - 1,579
Sales of reserves in-place...... - (414) - (95)
Revisions of previous quantity
estimates and other............ 10,005 (28,987) 3 1,744
------- ------- -- ------
Total, end of 1992.............. 418,831 556,001 14 33,060
------- ------- -- ------
Production during 1993.......... (46,524) (75,487) (1) (4,939)
Extensions and discoveries...... - 103,876 - 2,746
Acquisitions.................... - 3,706 - 345
Sales of reserves in-place...... - (8,639) - (198)
Revisions of previous quantity
estimates and other............ 7,488 (33,723) (6) (2,228)
------- ------- -- ------
Total, end of 1993.............. 379,795 545,734 7 28,786
======= ======= == ======
</TABLE>
Total proved reserves for natural gas systems exclude storage gas and liquids
volumes. The natural gas systems storage gas volumes are 147,549, 183,741 and
191,351 million cubic feet and storage liquids volumes are approximately
150,000, 159,000 and 207,000 barrels at December 31, 1993, 1992 and 1991,
respectively.
CAPITALIZED COSTS RELATING TO EXPLORATION AND PRODUCTION ACTIVITIES
<TABLE>
<CAPTION>
Accumulated
Depreciation,
Capitalized Depletion and
Proved and Unproved Properties Cost Amortization
- ------------------------------ ---------------- ----------------
(Millions of Dollars) December 31, 1993
----------------------------------
<S> <C> <C>
Undeveloped.......................... $ 51 $ 18
Developed............................ 1,103 503
------ -----
$1,154 $ 521
------ -----
December 31, 1992
----------------------------------
Undeveloped.......................... $ 67 $ 17
Developed............................ 1,070 471
------ -----
$1,137 $ 488
------ -----
</TABLE>
The Company follows the full-cost method of accounting for oil and gas
properties.
F-33
<PAGE>
COSTS INCURRED IN OIL AND GAS ACQUISITION, EXPLORATION AND DEVELOPMENT
ACTIVITIES
(Millions of dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Property acquisition costs:
Proved.......................................... $ 6 $ 6 $ 12
Unproved........................................ 11 14 20
Exploration costs................................ 6 11 12
Development costs................................ 65 93 46
</TABLE>
RESULTS OF OPERATIONS FOR EXPLORATION AND PRODUCTION ACTIVITIES
(Millions of dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Revenues:
Sales.......................................... $ 139 $ 120 $ 108
Transfers...................................... 96 79 63
------ ----- -----
Total.......................................... 235 199 171
------ ----- -----
Production costs................................ (71) (65) (66)
Operating expenses.............................. (28) (27) (27)
Depreciation, depletion and amortization........ (107) (81) (67)
------ ----- -----
29 26 11
Income tax benefit (expense).................... 3 (9) (3)
------ ----- -----
Results of operations for producing activities
(excluding corporate overhead and interest
costs)....................................... $ 32 $ 17 $ 8
====== ===== =====
</TABLE>
The average amortization rate per equivalent Mcf was $1.00 for the years 1993,
1992 and 1991.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVE QUANTITIES.
Future cash inflows from the sale of proved reserves and estimated production
and development costs as calculated by the Company's independent engineers are
discounted by 10% after they are reduced by the Company's estimate for future
income taxes. The calculations are based on year-end prices and costs, statutory
tax rates and nonconventional fuel source tax credits that relate to existing
proved oil and gas reserves in which the Company has mineral interests.
F-34
<PAGE>
The standardized measure is not intended to represent the market value of
reserves and, in view of the uncertainties involved in the reserve estimation
process, including the instability of energy markets, may be subject to material
future revisions (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1993 1992 1991
Natural Exploration Natural Exploration Natural Exploration
Gas and Gas and Gas and
Systems Production Systems Production Systems Production
-------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Future cash inflows...... $ 299 $1,698 $ 331 $1,838 $335 $1,527
Future production and
development costs....... (63) (647) (51) (717) (56) (709)
Future income tax
expenses................ (82) (237) (95) (223) (94) (122)
----- ------ ----- ------ ---- ------
Future net cash flows.... 154 814 185 898 185 696
10% annual discount for
estimated timing of
cash flows.............. (59) (252) (82) (289) (75) (240)
----- ------ ----- ------ ---- ------
Standardized measure of
discounted future net
cash flows.............. $ 95 $ 562 $ 103 $ 609 $110 $ 456
===== ====== ===== ====== ==== ======
</TABLE>
Principal sources of change in the standardized measure of discounted future net
cash flows during each year are (millions of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1993 1992 1991
Natural Exploration Natural Exploration Natural Exploration
Gas and Gas and Gas and
Systems Production Systems Production Systems Production
-------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales and transfers,
net of production
costs................... $ (35) $(164) $ (52) $(134) $(50) $(105)
Net changes in prices
and production costs.... (1) 7 12 147 (40) (216)
Extensions and
discoveries............. - 139 - 88 - 25
Acquisitions............. - 5 - 22 - 15
Sales of reserves
in-place................ - (5) - - - (44)
Development costs
incurred during the
period that reduced
estimated future
development costs....... - 21 8 56 - 21
Revisions of previous
quantity estimates,
timing and other......... 12 (87) 11 3 60 (10)
Accretion of discount.... 12 56 12 36 12 58
Net change in income
taxes................... 4 (19) 2 (65) 6 109
----- ----- ----- ----- ---- -----
Net change............... $ (8) $ (47) $ (7) $ 153 $(12) $(147)
===== ===== ===== ===== ==== =====
</TABLE>
None of the amounts include any value for natural gas systems storage gas, which
was approximately 41 Bcf of gas for CIG, 107 Bcf for ANR Pipeline and 150,000
barrels of liquids for CIG at the end of 1993.
Share of Equity Method Investment - At December 31, 1993, the net investment in
Argentine properties amounted to $58.5 million, representing net proved reserves
of 144.5 Bcf of gas and 6.51 million barrels of oil, condensate and natural gas
liquids. The standardized measure of discounted future net cash flows related to
these reserves is $78.6 million at December 31, 1993. The Company's share of
earnings for 1993 was approximately $5 million.
F-35
<PAGE>
SUPPLEMENTAL STATISTICS FOR COAL MINING OPERATIONS
The following table contains Coastal's estimated recoverable coal reserves
for operating properties. Reserves estimates are prepared by independent mining
consultants and by internal sources (Coastal geologists and engineers). The
reliability of the estimates is a function of the amount and quality of the
geological data generated to date on each property and varies considerably from
property to property. The reserve amounts are subject to change depending on
additional geological data generated and/or actual mining operations.
<TABLE>
<CAPTION>
TOTAL RECOVERABLE RESERVES
(Millions of tons)
December 31,
------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Total, beginning of year........... 789 806 828 818 719
Production......................... (24) (18) (18) (18) (16)
Purchases (sales).................. 115 8 (5) 40 110
Changes in estimates............... (9) (7) 1 (12) 5
------ ------ ------ ------ ------
Total, end of year................. 871 789 806 828 818
------ ------ ------ ------ ------
Average market price sold per ton.. $25.80 $27.29 $28.07 $27.81 $26.89
====== ====== ====== ====== ======
</TABLE>
F-36
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
THE COASTAL CORPORATION
BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 114.6 $ 5.0
Receivables..................................................................... 17.5 14.2
Receivables from subsidiaries................................................... 1,360.8 1,625.8
Prepaid expenses and other...................................................... 1.4 1.3
-------- --------
Total Current Assets........................................................... 1,494.3 1,646.3
-------- --------
PROPERTY, PLANT AND EQUIPMENT - at cost, net..................................... 7.3 7.7
-------- --------
INVESTMENTS IN SUBSIDIARIES AND OTHER ASSETS:
Investment in subsidiaries at cost plus equity in undistributed earnings since
acquisition.................................................................... 2,766.7 2,568.4
Due from subsidiaries........................................................... 1,710.2 1,415.6
Deferred federal income taxes................................................... 85.5 139.6
Other assets.................................................................... 252.4 226.2
-------- --------
4,814.8 4,349.8
-------- --------
$6,316.4 $6,003.8
======== ========
</TABLE>
See Notes to Condensed Financial Statements.
S-1
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
THE COASTAL CORPORATION
BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable............................... $ 253.5 $ 198.4
Accounts payable and accrued expenses....... 151.1 166.2
Payable to subsidiaries..................... 620.0 185.8
Current maturities on long-term debt........ 15.1 62.7
-------- --------
Total Current Liabilities.................. 1,039.7 613.1
-------- --------
DUE TO SUBSIDIARIES.......................... 61.7 -
-------- --------
DEBT:
Long-term debt.............................. 2,577.6 3,037.2
Subordinated long-term debt................. 199.7 199.6
-------- --------
2,777.3 3,236.8
-------- --------
DEFERRED CREDITS AND OTHER................... 159.6 144.0
-------- --------
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY.. 2,278.1 2,009.9
-------- --------
$6,316.4 $6,003.8
======== ========
</TABLE>
See Notes to Condensed Financial Statements.
S-2
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
THE COASTAL CORPORATION
STATEMENT OF OPERATIONS
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
OPERATING REVENUES........................................ $ 1.0 $ 1.4 $ .9
OPERATING COSTS AND EXPENSES.............................. - - -
------ ------- ------
OPERATING PROFIT.......................................... 1.0 1.4 .9
------ ------- ------
OTHER INCOME:
Equity in net earnings of subsidiaries................... 263.9 31.8 86.6
Interest income from subsidiaries - net.................. 119.6 137.4 172.3
Other income - net....................................... 20.0 20.8 40.0
------ ------- ------
403.5 190.0 298.9
------ ------- ------
OTHER EXPENSES (BENEFITS):
General and administrative............................... 12.1 11.3 5.8
Interest and debt expense................................ 364.6 391.1 338.1
Taxes on income.......................................... (90.5) (84.2) (52.8)
------ ------- ------
286.2 318.2 291.1
------ ------- ------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM................. 118.3 (126.8) 8.7
Extraordinary item-loss on early extinguishment of debt.. (2.5) - -
------ ------- ------
NET EARNINGS (LOSS)....................................... $115.8 $(126.8) $ 8.7
====== ======= ======
</TABLE>
See Notes to Condensed Financial Statements.
S-3
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
THE COASTAL CORPORATION
STATEMENT OF CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings (loss) before extraordinary item..................... $ 118.3 $(126.8) $ 8.7
Items not requiring (providing) cash:
Depreciation, depletion and amortization......................... .5 .5 .4
Deferred income taxes............................................ (36.2) (36.6) (72.0)
Distributed (undistributed) subsidiary earnings.................. (197.3) 110.6 (18.3)
Gain on sale of securities....................................... - - (13.2)
Other............................................................ (9.0) (5.9) (14.6)
Working capital and other changes, excluding changes relating to
cash and non-operating activities:
Receivables..................................................... (3.3) (7.7) 2.4
Prepaid expenses and other...................................... (.1) (.1) 1.4
Accounts payable and accrued expenses........................... (15.1) 63.7 (15.4)
------- ------- -------
(142.2) (2.3) (120.6)
------- ------- -------
Cash Flow from Investing Activities:
Purchases of property, plant and equipment........................ (.9) (1.0) (.8)
Net change in accounts with subsidiaries.......................... 553.3 (239.9) (145.6)
Additions to investments.......................................... (1.0) (4.0) (39.9)
Proceeds from investments......................................... - 84.8 133.2
------- ------- -------
551.4 (160.1) (53.1)
------- ------- -------
Cash Flow from Financing Activities:
Increase (decrease) in short-term notes........................... 55.1 (152.6) (172.7)
Proceeds from issuing common stock................................ 11.9 7.1 6.0
Proceeds from issuing preferred stock............................. 193.5 - -
Proceeds from long-term debt issues............................... 80.1 543.8 670.0
Payments to retire long-term debt................................. (587.2) (190.0) (287.3)
Dividends paid.................................................... (53.0) (42.0) (42.0)
------- ------- -------
(299.6) 166.3 174.0
------- ------- -------
Net Increase in Cash and Cash Equivalents.......................... 109.6 3.9 .3
Cash and Cash Equivalents at Beginning of Year..................... 5.0 1.1 .8
------- ------- -------
Cash and Cash Equivalents at End of Year........................... $ 114.6 $ 5.0 $ 1.1
======= ======= =======
</TABLE>
See Notes to Condensed Financial Statements.
S-4
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
THE COASTAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The financial statements of the Company
reflect the investment in wholly-owned subsidiaries using the equity method.
Statement of Cash Flows -- For purposes of this statement, cash equivalents
include time deposits, certificates of deposit and all highly liquid instruments
with original maturities of three months or less. The Company made cash payments
for interest and financing fees of $357.1 million, $375.6 million and $313.6
million in 1993, 1992 and 1991, respectively. Cash payments (refunds - primarily
from subsidiaries) for income taxes amounted to $(49.8) million, $(63.9) million
and $(6.9) million for 1993, 1992 and 1991, respectively.
Federal Income Taxes -- The Company follows the liability method of
accounting for income taxes as required by the provisions of FAS 109,
"Accounting for Income Taxes."
The Company files a consolidated federal income tax return with its wholly-
owned subsidiaries. Members of the consolidated group with taxable incomes are
charged with the amount of income taxes as if they filed separate federal income
tax returns, and members providing deductions and credits which result in income
tax savings are allocated credits for such savings.
Reclassification of Prior Period Statements - Certain minor reclassifications
of prior period statements have been made to conform with current reporting
practices. The effect of the reclassifications was not material to the Company's
results of operations or financial position.
NOTE 2. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements and related Notes
of Coastal and Subsidiaries for additional information.
NOTE 3. DEBT AND GUARANTEES
Information on the debt of the Company is disclosed in Note 5 of the Notes to
Consolidated Financial Statements included herein. The Company has guaranteed
certain long-term debt of its subsidiaries (approximately $82.4 million
outstanding at December 31, 1993, including current maturities) and certain
other obligations arising in the ordinary course of business. The Company and
certain of its subsidiaries have entered into interest rate and currency swaps
with major banking institutions. The Company is exposed to loss if one or more
counterparties default. In addition, the Company or certain of its subsidiaries
are guarantors on certain bank loans of corporations and partnerships in which
the Company or certain subsidiaries have equity interests. Information on the
swaps and guarantees is disclosed in Note 5 of the Notes to Consolidated
Financial Statements.
The aggregate amounts of long-term debt (including subordinated debt)
maturities of Coastal for the five years following 1993 are (millions of
dollars):
<TABLE>
<S> <C> <S> <C>
1994.......... $ 15.1 1997.......... $231.9
1995.......... 162.6 1998.......... 230.0
1996.......... 98.3
</TABLE>
NOTE 4. DIVIDENDS RECEIVED
Cash dividends received from consolidated subsidiaries were as follows: 1993
- - $66.6 million, 1992 - $142.8 million and 1991 - $68.1 million.
S-5
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Millions of Dollars)
<TABLE>
<CAPTION>
Balance at Other Balance
Beginning Additions Retire- Changes- at End
Classification of Year at Cost ments Add (Deduct) of Year
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
- ----------------------------
Refining, crude oil and chemical facilities.. $1,697.2 $130.3 $ 17.7 $ 6.2 (A) $1,821.3
5.3 (B)
Gas systems.................................. 5,393.1 119.8 46.7 (7.2)(A) 5,461.6
2.6 (B)
Gas and oil properties....................... 1,194.1 91.8 20.2 (17.3)(A) 1,204.2
(5.3)(B)
(38.9)(C)
Coal......................................... 463.6 36.0 .7 4.6 (A) 511.3
7.8 (B)
Trucking..................................... 46.1 4.0 5.2 - 44.9
Other........................................ 123.4 10.8 2.3 (.7)(A) 120.8
(10.4)(B)
-------- ------ ------ ------ --------
$8,917.5 $392.7 $ 92.8 $(53.3) $9,164.1
======== ====== ====== ====== ========
Year Ended December 31, 1992
- ----------------------------
Refining, crude oil and chemical facilities.. $1,536.4 $173.3 $ 9.7 $ (2.8)(A) $1,697.2
Gas systems.................................. 5,193.2 231.7 18.9 4.5 (A) 5,393.1
(17.4)(E)
Gas and oil properties....................... 1,110.7 126.8 17.9 4.5 (A) 1,194.1
(30.0)(C)
Coal......................................... 434.0 33.3 .4 (3.7)(A) 463.6
.4 (B)
Trucking..................................... 44.9 .7 8.8 9.3 (A) 46.1
Other........................................ 121.0 7.7 .2 (1.7)(A) 123.4
(.4)(B)
(3.0)(D)
-------- ------ ------ ------ --------
$8,440.2 $573.5 $ 55.9 $(40.3) $8,917.5
======== ====== ====== ====== ========
Year Ended December 31, 1991
- ----------------------------
Refining, crude oil and chemical facilities.. $1,152.5 $391.5 $ 15.1 $ 7.5 (A) $1,536.4
Gas systems.................................. 5,017.7 181.5 17.5 4.1 (A) 5,193.2
7.4 (E)
Gas and oil properties....................... 1,099.4 95.4 48.9 (8.9)(A) 1,110.7
(26.3)(C)
Coal......................................... 390.7 44.7 .9 (.5)(A) 434.0
Trucking..................................... 57.5 3.7 20.6 4.3 (A) 44.9
Other........................................ 84.1 12.1 .2 (10.7)(A) 121.0
35.7 (E)
-------- ------ ------ ------ --------
$7,801.9 $728.9 $103.2 $ 12.6 $8,440.2
======== ====== ====== ====== ========
</TABLE>
- --------------------
(A) Reclassifications and other miscellaneous adjustments.
(B) Intercompany transfer.
(C) Amortization of exploration cost charged to income.
(D) Writedown of property, plant and equipment.
(E) Reclass -- Investment in partially-owned company.
S-6
<PAGE>
Depreciation, depletion and amortization of gas and oil properties costs are
provided on the unit-of-production basis whereby the unit rate for depreciation,
depletion and amortization is determined by dividing the total unrecovered
carrying value of all gas and oil properties plus estimated future development
costs by the estimated proved reserves included therein, as estimated by an
independent engineer. Provisions for depletion of coal properties are based upon
estimates of recoverable reserves using the unit-of-production method. Provision
for depreciation of other property is made primarily on a straight-line basis
over the estimated useful lives of the property.
The annual rates of depreciation are as follows:
<TABLE>
<S> <C> <C> <C>
Refining, crude oil and chemical facilities.. 3.0% -- 20.0%
Gas systems.................................. 0.7% -- 20.0%
Coal facilities.............................. 5.0% -- 33.3%
Transportation equipment..................... 5.0% -- 33.3%
Office and miscellaneous equipment........... 2.5% -- 20.0%
Buildings and improvements................... 1.3% -- 33.3%
</TABLE>
S-7
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
(Millions of Dollars)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Other Balance
Beginning Costs and Retire- Changes at End
Description of Year Expenses ments Add (Deduct) of Year
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
- ----------------------------
Refining, crude oil and chemical facilities.. $ 501.4 $ 45.6 $12.9 $ 6.8 (A) $ 542.0
1.1 (B)
Gas systems.................................. 1,743.8 145.4 20.4 (1.8)(A) 1,867.0
Gas and oil properties....................... 502.1 70.2 20.6 (17.3)(A) 533.3
(1.1)(B)
Coal......................................... 177.7 28.5 (.7) 4.6 (A) 213.9
2.4 (B)
Trucking..................................... 14.9 3.3 2.6 2.2 (A) 17.8
Other........................................ 41.8 8.0 .5 (4.9)(A) 42.0
(2.4)(B)
-------- ------ ----- ------ --------
$2,981.7 $301.0 $56.3 $(10.4) $3,216.0
======== ====== ===== ====== ========
Year Ended December 31, 1992
- ----------------------------
Refining, crude oil and chemical facilities.. $ 407.6 $ 98.1 $ 5.9 $ 1.6 (A) $ 501.4
Gas systems.................................. 1,574.0 187.1 16.1 (1.2)(A) 1,743.8
Gas and oil properties....................... 461.8 53.2 17.6 4.7 (A) 502.1
Coal......................................... 150.1 28.4 .3 (.6)(A) 177.7
.1 (B)
Trucking..................................... 7.2 3.6 6.0 10.1 (A) 14.9
Other........................................ 34.0 8.2 .2 (.1)(A) 41.8
(.1)(B)
-------- ------ ----- ----- --------
$2,634.7 $378.6 $46.1 $14.5 $2,981.7
======== ====== ===== ===== ========
Year Ended December 31, 1991
- ----------------------------
Refining, crude oil and chemical facilities.. $ 371.1 $ 40.3 $ .1 $ (3.7)(A) $ 407.6
Gas systems.................................. 1,414.1 177.0 15.2 (1.9)(A) 1,574.0
Gas and oil properties....................... 439.9 43.1 9.3 (11.9)(A) 461.8
Coal......................................... 125.0 27.1 (.8) (2.8)(A) 150.1
Trucking..................................... 9.5 3.8 13.8 7.7 (A) 7.2
Other........................................ 26.6 6.3 .1 1.2 (A) 34.0
-------- ------ ----- ------ --------
$2,386.2 $297.6 $37.7 $(11.4) $2,634.7
======== ====== ===== ====== ========
</TABLE>
- ---------------
(A) Reclassifications and other miscellaneous adjustments.
(B) Intercompany transfer.
S-8
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(Millions of Dollars)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Other of Year
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993
- ----------------------------
Allowance for doubtful accounts $16.5 $11.2 $(11.6)(A) $16.1
===== ===== ====== =====
Year Ended December 31, 1992
- ----------------------------
Allowance for doubtful accounts $16.7 $9.0 $ (9.2)(A) $16.5
===== ==== ====== =====
Year Ended December 31, 1991
- ----------------------------
Allowance for doubtful accounts $22.4 $6.8 $(12.5)(A) $16.7
===== ==== ====== =====
</TABLE>
- -----------------
(A) Accounts charged off net of recoveries.
S-9
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
(Millions of Dollars)
<TABLE>
<CAPTION>
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest
Category of Aggregate at End Interest During the During the Rate During
Short-Term Borrowings of Year Rate Year Year the Year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1993
Notes payable to banks $263.5 3.93% $404.4 $216.0 3.80%
====== ==== ====== ====== ====
December 31, 1992
Notes payable to banks $221.4 4.31% $717.0 $517.1 4.43%
====== ==== ====== ====== ====
December 31, 1991
Notes payable to banks $380.0 5.79% $724.3 $454.5 6.66%
====== ==== ====== ====== ====
</TABLE>
The average amount of borrowings were computed by averaging the daily
outstanding balances. Where interest expense was affected by commitment and/or
facility fees, the weighted average interest rates were computed by averaging
the daily interest rates, including such fees. If there were no such fees, the
weighted average interest rates were computed by dividing the total interest for
the year by the average aggregate borrowings outstanding.
S-10
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
Year Ended December 31,
-----------------------------
1993 1992 1991
--------- -------- --------
<S> <C> <C> <C>
Maintenance and repairs (1) $193.2 $188.8 $180.2
Taxes, other than payroll and income taxes (2) 140.6 130.2 126.0
</TABLE>
- -----------
(1) Amounts are charged to operating costs and expenses with the exception of
an insignificant amount which, together with other expenses, are
redistributed to operating, construction and other accounts.
(2) Production taxes are charged against operating revenues.
S-11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
- ------ --------
[C] [S]
3.1+ Restated Certificate of Incorporation of Coastal, as restated on March
22, 1994. (Filed as Module TCC-Artl-Incorp on March 28, 1994).
3.2+ By-Laws of Coastal, as amended on January 16, 1990 (Exhibit 3.4 to
Coastal's Annual Report on Form 10-K for the fiscal year ended December
31, 1989).
4 (With respect to instruments defining the rights of holders of long-term
debt, the Registrant will furnish to the Commission, on request, any
such documents).
10.1+ The Coastal Corporation Stock Option Plan (Exhibit 10.1 to Coastal's
Annual Report on Form 10-K for the fiscal year ended December 31, 1980).
10.2+ Employment Agreement between Coastal States Gas Corporation and Sam F.
Willson, Jr., dated December 1, 1979 (Exhibit 10.41 to Coastal's Annual
Report on Form 10-K for the fiscal year ended December 31, 1980).
10.3+ First Amendment of The Coastal Corporation Stock Option Plan, dated
September 3, 1981 (Exhibit 10.11 to Coastal's Annual Report on Form 10-K
for the fiscal year ended December 31, 1982).
10.4+ 1984 Stock Option Plan (Appendix B to Coastal's Proxy Statement for the
1984 Annual Meeting of Stockholders, dated May 14, 1984).
10.5+ 1985 Stock Option Plan (Appendix A to Coastal's Proxy Statement for the
1986 Annual Meeting of Stockholders, dated March 27, 1986).
10.6+ The Coastal Corporation Performance Unit Plan effective as of January 1,
1987 (Exhibit 10.5 to Coastal's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987).
10.7+ The Coastal Corporation Replacement Pension Plan effective as of
November 1, 1987 (Exhibit 10.6 to Coastal's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987).
10.8+ Description of Coastal's Key Employees Bonus Plan (Exhibit 10.7 to
Coastal's Annual Report on Form 10-K for the fiscal year ended December
31, 1987).
10.9+ The Coastal Corporation Stock Purchase Plan, as restated on January 1,
1994 (Appendix B to Coastal's Proxy Statement for the 1994 Annual
Meeting of Stockholders dated March 29, 1994).
10.10+ The Coastal Corporation Stock Grant Plan, effective December 1, 1988
(Exhibit 10.12 to Coastal's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988).
10.11+ The Coastal Corporation Deferred Compensation Plan for Directors
(Exhibit 10.13 to Coastal's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988).
10.12+ The Coastal Corporation 1990 Stock Option Plan (Exhibit 10.13 to
Coastal's Annual Report on Form 10-K for the fiscal year ended December
31, 1989).
10.13+ Employment Agreement between The Coastal Corporation and James F. Cordes
dated April 12, 1990 (Exhibit 10.13 to Coastal's Annual Report on Form
10-K for the fiscal year ended December 31, 1990).
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document
- ------ --------
<C> <S>
10.14* The Coastal Corporation Deferred Compensation Plan.
10.15+ The Coastal Corporation 1994 Incentive Stock Plan (Appendix A to
Coastal's Proxy Statement for the 1994 Annual Meeting of Stockholders
dated March 29, 1994).
10.16* Pension Plan for Employees of The Coastal Corporation as of January 1,
1993, includes Plan as Restated as of January 1, 1989 and First
Amendment dated July 27, 1992, Second Amendment dated December 9, 1992,
Third Amendment dated October 29, 1993.
11* Statement re Computation of Per Share Earnings.
21* Subsidiaries of Coastal.
23.1* Consent of Deloitte & Touche.
24* Powers of Attorney (included on signature pages herein).
99+ Indemnity Agreement revised and updated as of April, 1988 (Exhibit 28 to
Coastal's Annual Report on Form 10-K for the fiscal year ended December
31, 1990).
</TABLE>
_________________________
Note:
+ Indicates documents incorporated by reference from the prior filing
indicated.
* Indicates documents filed herewith.
<PAGE>
<PAGE> 1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE COASTAL CORPORATION<PAGE>
<PAGE> 2
RESTATED CERTIFICATE OF INCORPORATION
OF
THE COASTAL CORPORATION
The original Certificate of Incorporation of THE COASTAL CORPORATION
(hereinafter called the Corporation), was filed on September 7, 1972 under
the name "Coastal States Gas Corporation". This Restated Certificate of
Incorporation only restates and integrates and does not further amend the
provisions of the Certificate of Incorporation of the Corporation as
heretofore amended or supplemented and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of Incorporation:
FIRST: The name of the corporation is:
THE COASTAL CORPORATION
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the Corporation's registered agent at such address is
The Corporation Trust Company.
THIRD: The purposes of the Corporation are to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 302,700,000 shares, consisting
of 250,000,000 shares of Common Stock, par value $.33-1/3 per share ("Common
Stock"), 50,000,000 shares of Preferred Stock, par value $.33-1/3 per share
("Preferred Stock"), and 2,700,000 shares of Class A Common Stock, par value
$.33-1/3 per share ("Class A Common Stock").
The powers, preferences and rights, and the qualifications,
limitations and restrictions thereof, of each class of stock, and the
express grant of authority to the Board of Directors to fix by resolution
the designations and the powers, preferences and rights of each share of
Preferred Stock and the qualifications, limitations and restrictions thereof
which are not fixed by this Certificate of Incorporation, are as follows:
(A) Common Stock and Class A Common Stock.
Except as provided in this Article FOURTH, the Common Stock and the
Class A Common Stock shall have the same rights and privileges and shall
rank equally, share ratably and be identical in all respects as to all
matters.
(1) Dividends, Combinations, and Subdivisions.
(a) Subject to the rights of the holders of
Preferred Stock, holders of Common Stock and Class A Common
Stock shall be entitled to receive such dividends, payable in
cash or otherwise, as may be declared thereon by the Board of
Directors from time to time out of assets or funds of the
Corporation legally available therefor, provided that no
dividend may be declared and paid to holders of Class A
Common Stock unless at the same time the Board of Directors
shall also declare and pay to the holders of Common Stock a
per share dividend greater than the per share dividend
declared and paid to holders of Class A Common Stock. In
-1-<PAGE>
<PAGE> 3
addition, the Board of Directors may declare and pay
dividends to the holders of Common Stock without declaring
and paying dividends to the holders of Class A Common Stock.
(b) In the event that the outstanding shares of
either the Common Stock or the Class A Common Stock are
changed into, exchanged for or reclassified into a different
number, class or kind of shares of the Corporation or any
other corporation or entity which does not result in the
receipt by the Corporation of any new consideration (other
than a transfer of surplus of the Corporation) without such
action being taken on a proportionate basis with respect to
the other class of common stock, whether such change,
exchange or reclassification occurs through a reorganization,
recapitalization, stock split or otherwise, then the
requirement that a greater per share dividend be declared and
paid with respect to the Common Stock shall be appropriately
and equitably adjusted to reflect such action.
(c) Notwithstanding the foregoing, the requirement
that a greater per share dividend be declared and paid with
respect to the Common Stock shall not apply (i) to a dividend
paid in partial or complete liquidation of the Corporation or
(ii) in the event of a dividend payable in shares of Common
Stock. In the event that a dividend payable in Common Stock
is declared on the Common Stock, the Board of Directors shall
also declare a dividend on the Class A Common Stock payable
in Common Stock equal on a per share basis to the number of
shares of Common Stock which are paid to holders of Common
Stock.
(2) Voting.
(a) Except as expressly provided herein, at every
meeting of stockholders of the Corporation, every holder of
Common Stock shall be entitled to one vote in person or by
proxy for each share of Common Stock standing in his name on
the transfer books of the Corporation and every holder of
Class A Common Stock shall be entitled to one hundred votes
in person or by proxy for each share of Class A Common Stock
standing in his name on the transfer books of the
Corporation. At every meeting of the stockholders called for
the election of directors, the holders of Common Stock,
voting as a class with the Preferred Stock entitled to vote,
shall be entitled to elect one-quarter (1/4) of the number of
directors to be elected at such meeting (excluding from such
number any directors to be elected by the holders of
Preferred Stock), and if one-quarter (1/4) of such number of
directors is not a whole number, then the holders of Common
Stock, voting as a class with the Preferred Stock entitled to
vote, shall be entitled to elect the next higher whole number
of directors to be elected at such meeting, and the holders
of Class A Common Stock shall have no voting rights with
respect to the election of such directors. The holders of
Class A Common Stock, Common Stock and Preferred Stock
entitled to vote, voting as a single class, shall be entitled
to elect the remaining directors to be elected at such
meeting (excluding from such number any directors to be
elected by the holders of Preferred Stock). If, during the
interval between annual meetings of stockholders for the
election of directors, the number of directors who have been
elected by either the holders of Common Stock voting as a
-2-<PAGE>
<PAGE> 4
class with the Preferred Stock entitled to vote or by the
holders of Class A Common Stock, Common Stock and Preferred
Stock entitled to vote, shall, by reason of resignation,
death, retirement, disqualification or removal, be reduced,
the vacancy or vacancies in the directors so created may be
filled by a majority vote of the remaining directors then in
office, even if less than a quorum, or by a sole remaining
director. Any director elected by the remaining directors
then in office to fill any vacancy in the directors
designated by the holders of Common Stock and Preferred Stock
entitled to vote may be removed from office by vote of the
holders of a majority of the shares of Common Stock voting as
a class with the Preferred Stock entitled to vote.
(b) Except as may otherwise be required by law or
by this Article FOURTH, the holders of Common Stock and Class
A Common Stock shall vote together as a single class, subject
to any voting rights which may be granted to holders of
Preferred Stock.
(3) Conversion.
(a) Each share of Class A Common Stock may at any
time be converted into one fully paid and nonassessable share
of Common Stock. Such right shall be exercised by the
surrender of the certificate representing such share of Class
A Common Stock to be converted to the Corporation at any time
during normal business hours at the principal executive
offices of the Corporation, or if an agent for the
registration of transfer of shares of Class A Common Stock is
then duly appointed and acting (said agent being hereinafter
called the "Transfer Agent") then at the office of the
Transfer Agent, accompanied by a written notice of the
election by the holder thereof to convert and (if so required
by the Corporation or the Transfer Agent) by instruments of
transfer, in form satisfactory to the Corporation and to the
Transfer Agent, duly executed by such holder or his duly
authorized attorney, and transfer tax stamps or funds
therefor, if required pursuant to subparagraph (e) below.
(b) As promptly as practicable after the surrender
for conversion of a certificate representing shares of Class
A Common Stock in the manner provided in subparagraph (a)
above and the payment in cash of any amount required by the
provisions of subparagraphs (a) and (e), the Corporation will
deliver or cause to be delivered at the office of the
Transfer Agent to or upon the written order of the holder of
such certificate, a certificate or certificates representing
the number of full shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the
surrender of the certificate representing shares of Class A
Common Stock, and all rights of the holder of such shares as
such holder shall cease at such time and the person or
persons in whose name or names the certificate or
certificates representing the shares of Common Stock are to
be issued shall be treated for all purposes as having become
the record holder or holders of such shares of Common Stock
at such time; provided, however, that any such surrender and
payment on any date when the stock transfer books of the
Corporation shall be closed shall constitute the person or
-3-<PAGE>
<PAGE> 5
persons in whose name or names the certificate or
certificates representing shares of Common Stock are to be
issued as the record holder or holders thereof for all
purposes immediately prior to the close of business on the
next succeeding day on which such stock transfer books are
open.
(c) No adjustments in respect of dividends shall be
made upon the conversion of any share of Class A Common
Stock, provided, however, that if a share shall be converted
subsequent to the record date for the payment of a dividend
or other distribution on shares of Class A Common Stock but
prior to such payment, the registered holder of such share at
the close of business on such record date shall be entitled
to receive the dividend or other distribution payable on such
share on the date set for payment of such dividend or other
distribution notwithstanding the conversion thereof or the
Corporation's default in payment of the dividend due on such
date.
(d) The Corporation covenants that it will at all
times reserve and keep available, solely for the purpose of
issuance upon conversion of the outstanding shares of Class A
Common Stock, such number of shares of Common Stock as shall
be issuable upon the conversion of all such outstanding
shares, provided, that nothing contained herein shall be
construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the outstanding
shares of Class A Common Stock by delivery of purchased
shares of Common Stock which are held in the treasury of the
Corporation. The Corporation covenants that if any shares of
Common Stock, required to be reserved for purposes of
conversion hereunder require registration with or approval of
any governmental authority under any federal or state law
before such shares of Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly
registered or approved, as the case may be. The Corporation
covenants that all shares of Common Stock which shall be
issued upon conversion of the shares of Class A Common Stock,
will, upon issue, be fully paid and nonassessable and not
subject to any preemptive rights.
(e) The issuance of certificates for shares of
Common Stock upon conversion of shares of Class A Common
Stock shall be made without charge for any stamp or other
similar tax in respect of such issuance. However, if any
such certificate is to be issued in a name other than that of
the holder of the share or shares of Class A Common Stock
converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax
which may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the
Corporation that such tax has been paid.
(f) At any time while there are shares of Class A
Common Stock issued and outstanding, the Board of Directors
of the Corporation may, in its sole discretion, by a majority
vote of the Directors then in office convert all outstanding
shares of Class A Common Stock into Common Stock on a share
for share basis. Notice of automatic conversion of Class A
Common Stock specifying the date fixed for said conversion
shall be mailed, postage prepaid, at least 20 days but not
-4-<PAGE>
<PAGE> 6
more than 30 days prior to said conversion date to the
holders of record of the Class A Common Stock at their
respective addresses as the same shall appear on the books of
the Corporation. Following the expiration of such notice
period, each outstanding share of Class A Common Stock shall
be deemed to be a share of Common Stock for all purposes.
(4) Transfer.
(a) No person holding shares of Class A Common
Stock (a "Class A Holder") may transfer, and the Corporation
and the Transfer Agent shall not register the transfer of,
such shares of Class A Common Stock, whether by sale,
assignment, gift, devise, bequest, appointment or otherwise.
Any purported transfer of shares of Class A Common Stock
shall be null and void and of no effect and the purported
transfer by a Class A Holder will result in the immediate and
automatic conversion of the shares of Class A Common Stock
held by such Class A Holder into shares of Common Stock. The
purported transferee shall have no rights as a stockholder of
the Corporation and no other rights against, or with respect
to, the Corporation except the right to receive shares of
Common Stock upon the immediate and automatic conversion of
his shares of Class A Common Stock into shares of Common
Stock. Upon the death of any Class A Holder which is a
natural person, or the liquidation, dissolution or winding up
of the business or affairs of any corporation, partnership or
trust, the shares of Class A Common Stock held by such person
shall immediately and automatically convert into an equal
number of shares of Common Stock.
(b) Shares of Class A Common Stock shall be
registered in the name(s) of the beneficial owner(s) thereof
(as hereafter defined) and not in "street" or "nominee"
names; provided, however, certificates representing shares of
Class A Common Stock issued as a stock dividend on the
Corporation's then outstanding common stock may be registered
in the same name and manner as the certificates representing
the shares of Common Stock with respect to which the shares
of Class A Common Stock are issued. For the purposes of this
paragraph 4, the term "beneficial owner(s)" of any shares of
Class A Common Stock shall mean the person or persons who
possess the power to dispose, or to direct the disposition
of, such shares. Any shares of Class A Common Stock
registered in "street" or "nominee" name may be transferred
to the beneficial owner of such shares on the record date for
such stock dividend, upon proof satisfactory to the
Corporation and the Transfer Agent that such person was in
fact the beneficial owner of such shares on the record date
for such stock dividend.
(c) Notwithstanding anything to the contrary set
forth herein, any Class A Holder may pledge such holder's
shares of Class A Common Stock to a pledgee pursuant to a
bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares
shall not be transferred to, or registered in the name of,
the pledgee and shall remain subject to the provisions of
this paragraph 4 of Section A. In the event of foreclosure
or other similar action by the pledgee, such pledged shares
of Class A Common Stock may not be transferred to the pledgee
and may only be converted into shares of Common Stock.
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(d) The Corporation shall note on the certificates
representing the shares of Class A Common Stock the
restrictions on transfer and registration of transfer imposed
by this paragraph 4.
(e) For purposes of this paragraph 4:
(i) Each joint owner of shares of Class A
Common Stock shall be considered a Class A Holder of
such shares.
(ii) A minor for whom shares of Class A
Common Stock are held pursuant to a Uniform Gifts to
Minors Act or similar law shall be considered a Class
A Holder of such shares.
(iii) Unless otherwise specified, the term
"person" includes a natural person, corporation,
partnership, unincorporated association, firm, joint
venture, trust or other entity.
(iv) Persons participating in the Thrift or
Employee Stock Ownership Plans of the Corporation (or
any similar or successor plans) shall be deemed to be
the Class A Holders of the shares of Class A Common
Stock allocated to their accounts pursuant to such
plans.
(5) Distribution of Assets.
(a) In the event the Corporation shall be
liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid to or set
aside for the holders of the Preferred Stock of all series
then outstanding the full preferential amounts to which they
are respectively entitled under this Article FOURTH and their
respective Certificates of Designation, the holders of the
Class A Common Stock shall be entitled to share ratably with
the holders of the Common Stock of the Corporation as a
single class in the remaining net assets of the Corporation,
that is, an equal amount of net assets for each share of
Common Stock and Class A Common Stock. A merger or
consolidation of the Corporation with or into any other
corporation or a sale or conveyance of all or any part of the
assets of the Corporation (which shall not in fact result in
the liquidation of the Corporation and the distribution of
assets to stockholders) shall not be deemed to be a voluntary
or involuntary liquidation or dissolution or winding up of
the Corporation within the meaning of this paragraph 5.
(6) Authorized Shares; Fractional Shares.
(a) The number of authorized shares of Class A
Common Stock may not be increased unless approved by the
holders of a majority of the then outstanding shares of
Common Stock and Preferred Stock entitled to vote, voting
together as a single class.
(b) No fractional shares of Common Stock shall be
issued upon conversion of shares of Class A Common Stock. In
lieu of fractional shares, the Transfer Agent shall pay an
amount in cash equal to the closing market price of the
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shares of Common Stock on the conversion date multiplied by
the fraction of a share of Common Stock that would otherwise
be issuable.
(B) Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or
more series as may be determined from time to time by the Board of
Directors, each such series to be distinctly designated. Except in respect
of the particulars fixed by the Board of Directors for series provided for
by the Board of Directors as permitted hereby, all shares of Preferred Stock
shall be of equal rank and shall be identical. All shares of any one series
of Preferred Stock so designated by the Board of Directors shall be alike in
every particular, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon shall be
cumulative. The voting rights, if any, of each such series and the
preferences and relative, participating, optional and other special rights
of each such series and the qualifications, limitations and restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and the Board of Directors of the Corporation is hereby
expressly granted authority to fix, by resolutions duly adopted prior to the
issuance of any shares of a particular series of Preferred Stock so
designated by the Board of Directors, the voting powers of stock of such
series, if any, and the designations, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions of such series, including, but without limiting
the generality of the foregoing, the following:
(a) The rate and times at which, and the terms and
conditions on which, dividends on Preferred Stock of such
series will be paid;
(b) The right, if any, of the holders of Preferred
Stock of such series to convert the same into, or exchange
the same for, shares of other classes or series of stock of
the Corporation and the terms and conditions of such
conversion or exchange, including provision for adjustment of
the conversion price or rate in such events as the Board of
Directors shall determine;
(c) The redemption price or prices and the time or
times at which, and the terms and conditions on which,
Preferred Stock of such series may be redeemed; and
(d) The rights of the holders of Preferred Stock of
such series upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation.
Subject to the provisions of this Article FOURTH, shares of one or
more series of Preferred Stock may be authorized or issued in an aggregate
amount not exceeding the total number of shares of Preferred Stock
authorized by this Certificate of Incorporation, from time to time as the
Board of Directors of the Corporation shall determine, and for such
consideration as shall be fixed by the Board of Directors.
DESIGNATION OF $1.19 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES A
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Restated Certificate of Incorporation of the Corporation, this Board of
Directors hereby creates a series of the Preferred Stock, par value 33-1/3
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<PAGE> 9
cents per share, of the Corporation, to consist of 123,169 shares of such
Preferred Stock, and this Board of Directors hereby fixes the designations,
preferences and relative, participating, optional or other special rights of
the shares of such series, and the qualifications, limitations, or
restrictions thereof (in addition to the designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Restated Certificate of Incorporation of the Corporation which are
applicable to Preferred Stock of all series) as follows:
I. DESIGNATION
The designation of the series of Preferred Stock created by this
resolution shall be "$1.19 Cumulative Convertible Preferred Stock, Series A"
(hereinafter called the "Series A Preferred Stock").
II. CASH DIVIDENDS ON SERIES A PREFERRED STOCK
(a) The holders of the Series A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of the funds
of the Corporation legally available therefor, cumulative cash dividends at
the annual rate of $1.19 per share, payable quarterly on the 15th day of
March, June, September and December in each year. If the dividend on the
Series A Preferred Stock for any dividend period shall not have been paid or
set apart in full for the Series A Preferred Stock, the aggregate deficiency
shall be cumulative and shall be fully paid or set apart for payment before
any dividends shall be paid upon or set apart for the Common Stock of the
Corporation. Accumulations of dividends on the Series A Preferred Stock
shall not bear interest.
(b) Cash dividends on the Series A Preferred Stock shall commence
to accrue and shall be cumulative from September 16, 1972, reduced by any
dividends accrued on the $1.19 Cumulative Convertible Preferred Stock,
Series A, without par value, of Coastal States Gas Producing Company, a
Delaware corporation.
(c) If dividends on the Series A Preferred Stock are not paid in
full or declared in full and sums set apart for the payment thereof, then no
dividends shall be declared and paid on any Preferred Stock unless declared
and paid ratably on all shares of each series of the Preferred Stock then
outstanding, including dividends accrued or in arrears, if any, in
proportion to the respective amounts that would be payable per share if all
such dividends were declared and paid in full. The term "dividends accrued
or in arrears" whenever used herein with reference to the Preferred Stock
shall be deemed to mean an amount which shall be equal to dividends thereon
at the annual dividend rates per share for the respective series from the
date or dates on which such dividends commence to accrue to the end of the
then current quarterly dividend period for such stock (or, in the case of
redemption, to the date of redemption), less the amount of all dividends
paid upon such stock.
III. REDEMPTION OF SERIES A PREFERRED STOCK
(a) The Series A Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation by resolution of its Board of
Directors, at any time and from time to time on or after July 1, 1973, at
thirty-three dollars ($33.00) per share, plus all dividends accrued and
unpaid on such Series A Preferred Stock up to the date fixed for redemption,
upon giving the notice hereinafter provided.
(b) If less than all of the outstanding shares of Series A
Preferred Stock are to be redeemed the shares to be redeemed shall be
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<PAGE> 10
determined by lot in such usual manner and subject to such regulations as
the Board of Directors in its sole discretion shall prescribe.
(c) At least 45 days but not more than 90 days prior to the date
fixed for the redemption of shares of the Series A Preferred Stock, a
written notice shall be mailed to each holder of record of shares of Series
A Preferred Stock to be redeemed in a postage prepaid envelope addressed to
such holder at his post office address as shown on the records of the
Corporation, notifying such holder of the election of the Corporation to
redeem such shares, stating the date fixed for redemption thereof (here-
inafter referred to as the redemption date), and calling upon such holder to
surrender to the Corporation on the redemption date at the place designated
in such notice his certificate or certificates representing the number of
shares specified in such notice of redemption. On or after the redemption
date each holder of shares of Series A Preferred Stock to be redeemed shall
present and surrender his certificate or certificates for such shares to the
Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the redemption date (unless default shall be made by the Corporation
in payment of the redemption price) all dividends on the shares of Series A
Preferred Stock designated for redemption in such notice shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price thereof upon
the surrender of certificates representing the same, shall cease and
determine and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation, and such
shares shall not be deemed to be outstanding for any purpose whatsoever. At
its election the Corporation prior to the redemption date may deposit the
redemption price of the shares of Series A Preferred Stock so called for
redemption in trust for the holders thereof with a bank or trust company
(having a capital and surplus of not less than $5,000,000) in the Borough of
Manhattan, City and State of New York, or in any other city in which the
Corporation at the time shall maintain a transfer agency with respect to
such stock, in which case such notice to holders of the Series A Preferred
Stock to be redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of the
redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such price on or after the date
fixed in such redemption notice (which shall not be later than the
redemption date) against payment of the redemption price. From and after the
making of such deposit, the shares of Series A Preferred Stock so designated
for redemption shall not be deemed to be outstanding for any purpose
whatsoever, and the rights of the holders of such shares shall be limited to
the right to receive the redemption price of such shares, without interest,
upon surrender of the certificates representing the same to the Corporation
at said office of such bank or trust company, and the right of conversion
(on or before the tenth day prior to the date fixed for redemption) herein
provided. Any funds so deposited which shall not be required for such
redemption because of the exercise of such right of conversion after the
date of such deposit shall be returned to the Corporation forthwith. Any
interest accrued on such funds shall be paid to the Corporation from time to
time. Any moneys so deposited which shall remain unclaimed by the holders of
such Series A Preferred Stock at the end of six years after the redemption
date shall be returned by such bank or trust company to the Corporation,
after which the holders of the Series A Preferred Stock shall have no
further interest in such moneys.
IV. VOTING RIGHTS
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(a) At every meeting of stockholders of the Corporation, every
holder of Series A Preferred Stock shall be entitled to one vote for each
share of Series A Preferred Stock standing in his name on the books of the
Corporation, with the same and identical voting rights, except as expressly
provided herein, as a holder of a share of Common Stock.
(b) The Series A Preferred Stock and any other stock having
voting rights shall vote together as one class, except as provided by law
and in Article VII hereof, and except that while the holders of Preferred
Stock, voting as a class, are entitled to elect two (2) directors of the
Corporation as hereinafter provided, they shall not be entitled to
participate with the holders of the Common Stock in the election of any
other directors.
(c) In case at any time the equivalent of six or more full
quarterly dividends (whether consecutive or not) on any series of Preferred
Stock shall be in arrears, then during the period (hereinafter in this
subparagraph (c) called the Class Voting Period) commencing with such time
and ending with the time when all arrears in dividends on all Preferred
Stock shall have been paid and the full dividend on all Preferred Stock for
the then current quarterly dividend period shall have been paid or declared
and set a part for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the Class Voting
Period, the holders of Preferred Stock represented in person or by proxy at
said meeting shall be entitled, as a class, to the exclusion of the holders
of all other classes of stock of the Corporation, to elect two directors of
the Corporation, each share of Preferred Stock entitling the holder thereof
to one vote.
Any director who shall have been elected by holders of Preferred
Stock or by any director so elected as herein contemplated, may be removed
at any time during a Class Voting Period, either for or without cause, by,
and only by, the affirmative votes of the holders of record of a majority of
the outstanding shares of Preferred Stock given at a special meeting of such
stockholders called for the purpose and any vacancy thereby created may be
filled during such Class Voting Period by the holders of Preferred Stock,
present in person or represented by proxy at such meeting. Any director to
be elected by the Board of Directors of the Corporation to replace a
director elected by holders of Preferred Stock, or elected by a director as
in this sentence provided, and who dies, resigns, or otherwise ceases to be
a director shall except as otherwise provided in the preceding sentence be
elected by the remaining director theretofore elected by the holders of
Preferred Stock. At the end of the Class Voting Period the holders of
Preferred Stock shall be automatically divested of all voting power vested
in them under this subparagraph (c) but subject always to the subsequent
vesting hereunder of voting power in the holders of Preferred Stock in the
event of any similar default or defaults thereafter. The term of all
directors elected pursuant to the provisions of this subparagraph (c) shall
in all events expire at the end of the Class Voting Period.
V. PRIORITY OF SERIES A PREFERRED STOCK IN EVENT OF DISSOLUTION
In the event of any liquidation, dissolution, or winding up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the holders of the Series A Preferred Stock shall be entitled to receive,
out of the remaining net assets of the Corporation, the amount of thirty-
three dollars ($33.00) in cash for each share of Series A Preferred Stock,
plus an amount equal to all dividends accrued and unpaid on each such share
up to the date fixed for distribution, before any distribution shall be made
to the holders of the Common Stock of the Corporation. If upon any
liquidation, dissolution or winding up of the Corporation, the assets
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distributable among the holders of any series of Preferred Stock shall be
insufficient to permit the payment in full to the holders of all series of
the Preferred Stock of all preferential amounts payable to all such holders,
then the entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of all series of the Preferred Stock
in proportion to the respective amounts that would be payable per share if
such assets were sufficient to permit payment in full.
VI. CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK
(a) Subject to the provisions of this Article VI, the holder of
record of any Series A Preferred Stock shall have the right, at his option,
at any time after the issuance of such share(s) to convert each share of
Series A Preferred Stock into one fully-paid and non-assessable share of
Common Stock of the Corporation.
In case any shares of the Series A Preferred Stock shall have been
called for redemption, such right of conversion in respect to the shares so
called for redemption shall cease and terminate at the close of business on
the tenth (10th) day prior to the date fixed for the redemption of such
shares, unless default shall be made in the payment of the redemption price.
(b) Any holder of a share or shares of Series A Preferred Stock
desiring to convert such Series A Preferred Stock into Common Stock shall
surrender the certificate or certificates representing the share or shares
of Series A Preferred Stock so to be converted, duly endorsed to the
Corporation or in blank, at the office of any Transfer Agent for the Series
A Preferred Stock (or such other place as may be designated by the
Corporation), and shall give written notice to the Corporation at said
office that he elects to convert the same, and setting forth the name or
names (with the address or addresses) in which the shares of Common Stock
are to be issued.
If the last day for the exercise of the conversion right in the city
where the principal place of business of any Transfer Agent for the Series A
Preferred Stock (or in the city of the principal office of such other entity
as the Corporation shall have designated as the place so to surrender Series
A Preferred Stock for conversion, as aforesaid) shall be a legal holiday or
a day on which banking institutions are authorized by law to close, then
such conversion right may be exercised in such city on the next succeeding
day not in such city a legal holiday or a day on which banking institutions
are authorized by law to close.
(c) Conversion of Series A Preferred Stock shall be subject to
the following additional terms and provisions:
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(1) As promptly as practicable after the surrender for
conversion of any Series A Preferred Stock, the Corporation shall
deliver or cause to be delivered at the principal office of any
Transfer Agent for the Series A Preferred Stock (or such other place
as may be designated by the Corporation), to or upon the written
order of the holder of such Series A Preferred Stock, certificates
representing the shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct,
and cash in respect to any fraction of a share as provided in
sub-paragraph (3) below. Shares of the Series A Preferred Stock shall
be deemed to have been converted as of the close of business on the
date of the surrender of the Series A Preferred Stock for conversion,
as provided above, and the rights of the holders of such Series A
Preferred Stock shall cease at such time, and the person or persons
in whose name or names the certificate for such shares are to be
issued shall be treated for all purposes as having become the record
holder or holders of such Common Stock at such time; provided,
however, that any such surrender on any date when the stock transfer
books of the Corporation shall be closed shall constitute the person
or persons in whose name or names the certificates for such shares
are to be issued as the record holder or holders thereof for all
purposes at the close of business on the next succeeding day on which
such stock transfer books are open.
(2) The Corporation shall make no payment or adjustment on
account of any dividends accrued on the shares of the Series A
Preferred Stock surrendered for conversion.
(3) The Corporation shall not be required to issue any
fractions of shares of Common Stock upon conversions of Series A
Preferred Stock. If more than one share certificate of Series A
Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock which
shall be issuable upon conversion of such Series A Preferred Stock
shall be computed on the basis of the aggregate number of shares of
Series A Preferred Stock so surrendered. If any interest in a
fractional share of Common Stock would otherwise be deliverable upon
the conversion of any Series A Preferred Stock, the Corporation shall
make adjustment for such fractional share interest by payment of an
amount in cash equal to the same fraction of the market value of a
full share of Common Stock of the Corporation. For such purpose, the
market value of a share of Common Stock shall be the last recorded
sale price of such share of Common Stock on the New York Stock
Exchange on the day immediately preceding the date upon which such
shares are surrendered for conversion, or, if there be no such
recorded sale price on such day, the last quoted bid price per share
of the Common Stock on such Exchange at the close of trading on such
date. If the Common Stock shall not at the time be dealt in on the
New York Stock Exchange, such market value of the Common Stock shall
be the prevailing market value of the Common Stock on any other
securities exchange or in the open market, as determined by the
Corporation, which determination shall be conclusive.
(4) In the event that the Corporation shall at any time
subdivide or combine in a greater or lesser number of shares the
outstanding shares of Common Stock, the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock shall
be proportionately increased in the case of subdivision or decreased
in the case of a combination effective in either case at the close of
business on the date when such subdivision or combination shall
become effective.
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(5) In the event that the Corporation shall be
recapitalized, consolidated with or merged into any other
corporation, or shall sell or convey to any other corporation all or
substantially all of its property as an entirety, provision shall be
made as part of the terms of such recapitalization, consolidation,
merger, sale or conveyance so that any holder of Series A Preferred
Stock may thereafter receive in lieu of the Common Stock otherwise
issuable to him upon conversion of his Series A Preferred Stock, but
at the conversion ratio stated in this Article VI which would
otherwise be applicable at the time of conversion, the same kind and
amount of securities or assets as may be distributable upon such
recapitalization, consolidation, merger, sale or conveyance with
respect to the Common Stock of the Corporation.
(6) In the event that the Corporation shall at any time
pay to the holders of Common Stock a dividend in Common Stock, the
number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock shall be proportionately increased,
effective at the close of business on the record date for
determination of the holders of Common Stock entitled to such
dividend.
(7) No adjustment of the conversion ratio shall be made by
reason of any declaration or payment to the holders of the Common
Stock of the Corporation of a dividend or distribution payable in any
property or securities other than Common Stock, any redemption of the
Common Stock, any issuance of any securities convertible into Common
Stock, or for any other reason, except as expressly provided herein.
(8) The Corporation shall at all times reserve and keep
available solely for the purpose of issuance upon conversion of
Series A Preferred Stock, as herein provided, such number of shares
of Common Stock as shall be issuable upon the conversion of all
outstanding Series A Preferred Stock.
(d) The issuance of certificates for shares of Common Stock upon
conversion of the Series A Preferred Stock shall be made without charge for
any tax in respect of such issuance. However, if any certificate is to be
issued in a name other than that of the holder of record of the Series A
Preferred Stock so converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance, or shall
establish to the satisfaction of the Corporation that such tax has been paid
or is not due and payable.
VII. LIMITATIONS
So long as any shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or the written
consent as provided by law, of the holders of at least two-thirds ( ) of the
outstanding shares of Series A Preferred Stock, voting as a class,
(a) create, authorize or issue any class or series of stock
ranking either as to payment of dividends or distribution of assets prior to
the Series A Preferred Stock; or
(b) change the preferences, rights or powers with respect to the
Series A Preferred Stock so as to affect such stock adversely;
but nothing herein contained shall require such a class vote or consent (i)
in connection with any increase in the total number of authorized shares of
Common Stock, or (ii) in connection with authorization or increase of any
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class of stock ranking on a parity with the Series A Preferred Stock;
provided, however, that no such vote or written consent of the holders of
the Series A Preferred Stock shall be required if, at or prior to the time
when the issuance of any such prior stock is to be made or any such change
is to take effect, as the case may be, provision is made for the redemption
of all shares of Series A Preferred Stock at the time outstanding, and
further provided, that the provisions of this Article VII shall not in any
way limit the right and power of the Corporation to issue the presently
authorized but unissued shares of stock, or bonds, notes, mortgages,
debentures, and other obligations, and to incur indebtedness to banks and to
other lenders.
DESIGNATION OF $1.83 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Restated Certificate of Incorporation of the Corporation, this Board of
Directors hereby creates a series of the Preferred Stock, par value 33-1/3
cents per share, of the Corporation, to consist of 348,015 shares of such
Preferred Stock, and this Board of Directors hereby fixes the designations,
preferences and relative, participating, optional or other special rights of
the shares of such series, and the qualifications, limitations, or
restrictions thereof (in addition to the designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Restated Certificate of Incorporation of the Corporation which are
applicable to Preferred Stock of all series) as follows:
I. DESIGNATION
The designation of the series of Preferred Stock created by this
resolution shall be "$1.83 Cumulative Convertible Preferred Stock, Series B"
(hereinafter called the "Series B Preferred Stock").
II. CASH DIVIDENDS ON SERIES B PREFERRED STOCK
(a) The holders of the Series B Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of the funds
of the Corporation legally available therefor, cumulative cash dividends at
the annual rate of $1.83 per share, payable quarterly on the 15th day of
March, June, September and December in each year. If the dividend on the
Series B Preferred Stock for any dividend period shall not have been paid or
set apart in full for the Series B Preferred Stock, the aggregate deficiency
shall be cumulative and shall be fully paid or set apart for payment before
any dividends shall be paid upon or set apart for the Common Stock of the
Corporation. Accumulations of dividends on the Series B Preferred Stock
shall not bear interest.
(b) Cash dividends on shares of Series B Preferred Stock into
which shares of the Common Stock, par value $5.00 per share, of Colorado
Interstate Corporation, a Delaware corporation, are converted on January 2,
1973, shall commence to accrue and shall be cumulative from December 16,
1972. As to shares of Series B Preferred Stock issued on or after January 3,
1973, cash dividends shall accrue and be cumulative from such date as shall
make the dividend rights per share of the shares of Series B Preferred Stock
so issued uniform with the dividend rights per share of the shares of Series
B Preferred Stock then outstanding, excluding rights to dividends declared
and directed to be paid to shareholders of record as of a date preceding the
date of issuance of the shares being issued.
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(c) If dividends on the Series B Preferred Stock are not paid in
full or declared in full and sums set apart for the payment thereof, then no
dividends shall be declared and paid on any Preferred Stock unless declared
and paid ratably on all shares of each series of the Preferred Stock then
outstanding, including dividends accrued or in arrears, if any, in
proportion to the respective amounts that would be payable per share if all
such dividends were declared and paid in full. The term "dividends accrued
or in arrears" whenever used herein with reference to the Preferred Stock
shall be deemed to mean an amount which shall be equal to dividends thereon
at the annual dividend rates per share for the respective series from the
date or dates on which such dividends commence to accrue to the end of the
then current quarterly dividend period for such stock (or, in the case of
redemption, to the date of redemption), less the amount of all dividends
paid upon such stock.
III. REDEMPTION OF SERIES B PREFERRED STOCK
(a) The Series B Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation by resolution of its Board of
Directors, at any time and from time to time on or after December 1, 1977,
at fifty dollars ($50.00) per share, plus all dividends accrued and unpaid
on such Series B Preferred Stock up to the date fixed for redemption, upon
giving the notice hereinafter provided.
(b) If less than all of the outstanding shares of Series B
Preferred Stock are to be redeemed the shares to be redeemed shall be
determined by lot in such usual manner and subject to such regulations as
the Board of Directors in its sole discretion shall prescribe.
(c) At least 45 days but not more than 90 days prior to the date
fixed for the redemption of shares of the Series B Preferred Stock, a
written notice shall be mailed to each holder of record of shares of Series
B Preferred Stock to be redeemed in a postage prepaid envelope addressed to
such holder at his post office address as shown on the records of the
Corporation, notifying such holder of the election of the Corporation to
redeem such shares, stating the date fixed for redemption thereof (here-
inafter referred to as the redemption date), and calling upon such holder to
surrender to the Corporation on the redemption date at the place designated
in such notice his certificate or certificates representing the number of
shares specified in such notice of redemption. On or after the redemption
date each holder of shares of Series B Preferred Stock to be redeemed shall
present and surrender his certificate or certificates for such shares to the
Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the redemption date (unless default shall be made by the Corporation
in payment of the redemption price) all dividends on the shares of Series B
Preferred Stock designated for redemption in such notice shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price thereof upon
the surrender of certificates representing the same, shall cease and
determine and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation, and such
shares shall not be deemed to be outstanding for any purpose whatsoever. At
its election the Corporation prior to the redemption date may deposit the
redemption price of the shares of Series B Preferred Stock so called for
redemption in trust for the holders thereof with a bank or trust company
(having a capital and surplus of not less than $5,000,000) in the Borough of
Manhattan, City and State of New York, or in any other city in which the
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<PAGE> 17
Corporation at the time shall maintain a transfer agency with respect to
such stock, in which case such notice to holders of the Series B Preferred
Stock to be redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of the
redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such price on or after the date
fixed in such redemption notice (which shall not be later than the
redemption date) against payment of the redemption price. From and after the
making of such deposit, the shares of Series B Preferred Stock so designated
for redemption shall not be deemed to be outstanding for any purpose
whatsoever, and the rights of the holders of such shares shall be limited to
the right to receive the redemption price of such shares, without interest,
upon surrender of the certificates representing the same to the Corporation
at said office of such bank or trust company, and the right of conversion
(on or before the tenth day prior to the date fixed for redemption) herein
provided. Any funds so deposited which shall not be required for such
redemption because of the exercise of such right of conversion after the
date of such deposit shall be returned to the Corporation forthwith. Any
interest accrued on such funds shall be paid to the Corporation from time to
time. Any moneys so deposited which shall remain unclaimed by the holders of
such Series B Preferred Stock at the end of six years after the redemption
date shall be returned by such bank or trust company to the Corporation,
after which the holders of the Series B Preferred Stock shall have no
further interest in such moneys.
IV. VOTING RIGHTS
(a) At every meeting of stockholders of the Corporation, every
holder of Series B Preferred Stock shall be entitled to one vote for each
share of Series B Preferred Stock standing in his name on the books of the
Corporation, with the same and identical voting rights, except as expressly
provided herein, as a holder of a share of Common Stock.
(b) The Series B Preferred Stock and any other stock having
voting rights shall vote together as one class, except as provided by law
and in Article VII hereof, and except that while the holders of Preferred
Stock, voting as a class, are entitled to elect two (2) directors of the
Corporation as hereinafter provided, they shall not be entitled to
participate with the holders of the Common Stock in the election of any
other directors.
(c) In case at any time the equivalent of six or more full
quarterly dividends (whether consecutive or not) on any series of Preferred
Stock shall be in arrears, then during the period (hereinafter in this
subparagraph (c) called the Class Voting Period) commencing with such time
and ending with the time when all arrears in dividends on all Preferred
Stock shall have been paid and the full dividend on all Preferred Stock for
the then current quarterly dividend period shall have been paid or declared
and set apart for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the Class Voting
Period, the holders of Preferred Stock represented in person or by proxy at
said meeting shall be entitled, as a class, to the exclusion of the holders
of all other classes of stock of the Corporation, to elect two directors of
the Corporation, each share of Preferred Stock entitling the holder thereof
to one vote.
Any director who shall have been elected by holders of Preferred
Stock or by any director so elected as herein contemplated, may be removed
at any time during a Class Voting Period, either for or without cause, by,
and only by, the affirmative votes of the holders of record of a majority of
the outstanding shares of Preferred Stock given at a special meeting of such
stockholders called for the purpose and any vacancy thereby created may be
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<PAGE> 18
filled during such Class Voting Period by the holders of Preferred Stock,
present in person or represented by proxy at such meeting. Any director to
be elected by the Board of Directors of the Corporation to replace a
director elected by holders of Preferred Stock, or elected by a director as
in this sentence provided, and who dies, resigns, or otherwise ceases to be
a director shall, except as otherwise provided in the preceding sentence, be
elected by the remaining director theretofore elected by the holders of
Preferred Stock. At the end of the Class Voting Period the holders of
Preferred Stock shall be automatically divested of all voting power vested
in them under this subparagraph (c) but subject always to the subsequent
vesting hereunder of voting power in the holders of Preferred Stock in the
event of any similar default or defaults thereafter. The term of all
directors elected pursuant to the provisions of this subparagraph (c) shall
in all events expire at the end of the Class Voting Period.
V. PRIORITY OF SERIES B PREFERRED STOCK IN EVENT OF DISSOLUTION
In the event of any liquidation, dissolution, or winding-up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the holders of the Series B Preferred Stock shall be entitled to receive,
out of the remaining net assets of the Corporation, the amount of fifty
dollars ($50.00) in cash for each share of Series B Preferred Stock, plus an
amount equal to all dividends accrued and unpaid on each such share up to
the date fixed for distribution, before any distribution shall be made to
the holders of the Common Stock of the Corporation. If upon any liquidation,
dissolution or winding-up of the Corporation, the assets distributable among
the holders of any series of Preferred Stock shall be insufficient to permit
the payment in full to the holders of all series of the Preferred Stock of
all preferential amounts payable to all such holders, then the entire assets
of the Corporation thus distributable shall be distributed ratably among the
holders of all series of the Preferred Stock in proportion to the respective
amounts that would be payable per share if such assets were sufficient to
permit payment in full.
VI. CONVERSION OF SERIES B PREFERRED STOCK INTO COMMON STOCK
(a) Subject to the provisions of this Article VI, the holder of
record of any Series B Preferred Stock shall have the right, at his option,
at any time after the issuance of such share(s) to convert each share of
Series B Preferred Stock into one fully paid and nonassessable share of
Common Stock of the Corporation.
In case any shares of the Series B Preferred Stock shall have been
called for redemption, such right of conversion in respect to the shares so
called for redemption shall cease and terminate at the close of business on
the tenth (10th) day prior to the date fixed for the redemption of such
shares, unless default shall be made in the payment of the redemption price.
(b) Any holder of a share or shares of Series B Preferred Stock
desiring to convert such Series B Preferred Stock into Common Stock shall
surrender the certificate or certificates representing the share or shares
of Series B Preferred Stock so to be converted, duly endorsed to the
Corporation or in blank, at the office of any Transfer Agent for the Series
B Preferred Stock (or such other place as may be designated by the
Corporation), and shall give written notice to the Corporation at said
office that he elects to convert the same, and setting forth the name or
names (with the address or addresses) in which the shares of Common Stock
are to be issued.
If the last day for the exercise of the conversion right in the city
where the principal place of business of any Transfer Agent for the Series B
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<PAGE> 19
Preferred Stock (or in the city of the principal office of such other entity
as the Corporation shall have designated as the place so to surrender Series
B Preferred Stock for conversion, as aforesaid) shall be a legal holiday or
a day on which banking institutions are authorized by law to close, then
such conversion right may be exercised in such city on the next succeeding
day not in such city a legal holiday or a day on which banking institutions
are authorized by law to close.
(c) Conversion of Series B Preferred Stock shall be subject to
the following additional terms and provisions:
(1) As promptly as practicable after the surrender for
conversion of any Series B Preferred Stock, the Corporation shall
deliver or cause to be delivered at the principal office of any
Transfer Agent for the Series B Preferred Stock (or such other place
as may be designated by the Corporation), to or upon the written
order of the holder of such Series B Preferred Stock, certificates
representing the shares of Common Stock issuable upon such
conversion, issued in such name or names as such holder may direct,
and cash in respect to any fraction of a share as provided in
sub-paragraph (3) below. Shares of the Series B Preferred Stock shall
be deemed to have been converted as of the close of business on the
date of the surrender of the Series B Preferred Stock for conversion,
as provided above, and the rights of the holders of such Series B
Preferred Stock shall cease at such time, and the person or persons
in whose name or names the certificate for such shares are to be
issued shall be treated for all purposes as having become the record
holder or holders of such Common Stock at such time; provided,
however, that any such surrender on any date when the stock transfer
books of the Corporation shall be closed shall constitute the person
or persons in whose name or names the certificates for such shares
are to be issued as the record holder or holders thereof for all
purposes at the close of business on the next succeeding day on which
such stock transfer books are open.
(2) The Corporation shall make no payment or adjustment on
account of any dividends accrued on the shares of the Series B
Preferred Stock surrendered for conversion.
(3) The Corporation shall not be required to issue any
fractions of shares of Common Stock upon conversions of Series B
Preferred Stock. If more than one share certificate of Series B
Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock which
shall be issuable upon conversion of such Series B Preferred Stock
shall be computed on the basis of the aggregate number of shares of
Series B Preferred Stock so surrendered. If any interest in a
fractional share of Common Stock would otherwise be deliverable upon
the conversion of any Series B Preferred Stock, the Corporation shall
make adjustment for such fractional share interest by payment of an
amount in cash equal to the same fraction of the market value of a
full share of Common Stock of the Corporation. For such purpose, the
market value of a share of Common Stock shall be the last recorded
sale price of such share of Common Stock on the New York Stock
Exchange on the day immediately preceding the date upon which such
shares are surrendered for conversion, or, if there be no such
recorded sale price on such day, the last quoted bid price per share
of the Common Stock on such Exchange at the close of trading on such
date. If the Common Stock shall not at the time be dealt in on the
New York Stock Exchange, such market value of the Common Stock shall
be the prevailing market value of the Common Stock on any other
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<PAGE> 20
securities exchange or in the open market, as determined by the
Corporation, which determination shall be conclusive.
(4) In the event that the Corporation shall at any time
subdivide or combine in a greater or lesser number of shares the
outstanding shares of Common Stock, the number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock shall
be proportionately increased in the case of subdivision or decreased
in the case of a combination effective in either case at the close of
business on the date when such subdivision or combination shall
become effective.
(5) In the event that the Corporation shall be
recapitalized, consolidated with or merged into any other
corporation, or shall sell or convey to any other corporation all or
substantially all of its property as an entirety, provision shall be
made as part of the terms of such recapitalization, consolidation,
merger, sale or conveyance so that any holder of Series B Preferred
Stock may thereafter receive in lieu of the Common Stock otherwise
issuable to him upon conversion of his Series B Preferred Stock, but
at the conversion ratio stated in this Article VI which would
otherwise be applicable at the time of conversion, the same kind and
amount of securities or assets as may be distributable upon such
recapitalization, consolidation, merger, sale or conveyance with
respect to the Common Stock of the Corporation.
(6) In the event that the Corporation shall at any time
pay to the holders of Common Stock a dividend in Common Stock, the
number of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock shall be proportionately increased,
effective at the close of business on the record date for
determination of the holders of Common Stock entitled to such
dividend.
(7) No adjustment of the conversion ratio shall be made by
reason of any declaration or payment to the holders of the Common
Stock of the Corporation of a dividend or distribution payable in any
property or securities other than Common Stock, any redemption of the
Common Stock, any issuance of any securities convertible into Common
Stock, or for any other reason, except as expressly provided herein.
(8) The Corporation shall at all times reserve and keep
available solely for the purpose of issuance upon conversion of
Series B Preferred Stock, as herein provided, such number of shares
of Common Stock as shall be issuable upon the conversion of all
outstanding Series B Preferred Stock.
(d) The issuance of certificates for shares of Common Stock upon
conversion of the Series B Preferred Stock shall be made without charge for
any tax in respect of such issuance. However, if any certificate is to be
issued in a name other than that of the holder of record of the Series B
Preferred Stock so converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance, or shall
establish to the satisfaction of the Corporation that such tax has been paid
or is not due and payable.
VII. LIMITATIONS
So long as any shares of Series B Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or the written
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<PAGE> 21
consent as provided by law, of the holders of at least two-thirds ( ) of the
outstanding shares of Series B Preferred Stock, voting as a class,
(a) create, authorize or issue any class or series of stock
ranking either as to payment of dividends or distribution of assets prior to
the Series B Preferred Stock; or
(b) change the preferences, rights or powers with respect to the
Series B Preferred Stock so as to affect such stock adversely;
but nothing herein contained shall require such a class vote or consent (i)
in connection with any increase in the total number of authorized shares of
Common Stock, or (ii) in connection with authorization or increase of any
class of stock ranking on a parity with the Series B Preferred Stock;
provided, however, that no such vote or written consent of the holders of
the Series B Preferred Stock shall be required if, at or prior to the time
when the issuance of any such prior stock is to be made or any such change
is to take effect, as the case may be, provision is made for the redemption
of all shares of Series B Preferred Stock at the time outstanding, and
further provided, that the provisions of this Article VII shall not in any
way limit the right and power of the Corporation to issue the presently
authorized but unissued shares of stock, or bonds, notes, mortgages,
debentures, and other obligations, and to incur indebtedness to banks and to
other lenders.
DESIGNATION OF $5.00 CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES C
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Restated Certificate of Incorporation of the Corporation, this Board of
Directors hereby creates a series of the Preferred Stock, par value 33-1/3
cents per share, of the Corporation, to consist of 100,000 shares of such
Preferred Stock, and this Board of Directors hereby fixes the designations,
preferences and relative, participating, optional or other special rights of
the shares of such series, and the qualifications, limitations, or
restrictions thereof (in addition to the designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Restated Certificate of Incorporation of the Corporation which are
applicable to Preferred Stock of all series) as follows:
I. DESIGNATION
The designation of the series of Preferred Stock created by this
resolution shall be "$5.00 Cumulative Convertible Preferred Stock, Series C"
(hereinafter called the "Series C Preferred Stock").
II. CASH DIVIDENDS ON SERIES C PREFERRED STOCK
(a) The holders of the Series C Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of the funds
of the Corporation legally available therefor, cash dividends at the annual
rate of $5.00 per share, payable quarterly on the first day of January,
April, July and October in each year. If the dividend on the Series C
Preferred Stock for any dividend period shall not have been paid or set
apart in full for the Series C Preferred Stock, the aggregate deficiency
shall be cumulative and shall be fully paid or set apart for payment before
any dividends shall be paid upon or set apart for the Common Stock of the
Corporation. Accumulations of dividends on the Series C Preferred Stock
shall not bear interest.
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<PAGE> 22
(b) Cash dividends on the Series C Preferred Stock shall commence
to accrue and shall be cumulative from January 2, 1973.
(c) If dividends on the Series C Preferred Stock are not paid in
full or declared in full and sums set apart for the payment thereof, then no
dividends shall be declared and paid on any Preferred Stock unless declared
and paid ratably on all shares of each series of the Preferred Stock then
outstanding, including dividends accrued or in arrears, if any, in
proportion to the respective amounts that would be payable per share if all
such dividends were declared and paid in full. The term "dividends accrued
or in arrears" whenever used herein with reference to the Preferred Stock
shall be deemed to mean an amount which shall be equal to dividends thereon
at the annual dividend rates per share for the respective series from the
date or dates on which such dividends commence to accrue to the end of the
then current quarterly dividend period for such stock (or, in the case of
redemption, to the date of redemption), less the amount of all dividends
paid upon such stock.
III. REDEMPTION OF SERIES C PREFERRED STOCK
(a) The Series C Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation by resolution of its Board of
Directors, at any time and from time to time on or after July 1, 1977, at
the following optional redemption prices per share, plus in each case all
dividends accrued and unpaid on such Series C Preferred Stock up to the date
fixed for redemption, upon giving the notice hereinafter provided:
If redeemed on or prior to June 30, 1982, $106;
If Redeemed
During the
12 Mouth
Period Ending
June 30
1983 . . . . . . . . . . . . . . . $105
1984 . . . . . . . . . . . . . . . 104
1985 . . . . . . . . . . . . . . . 103
1986 . . . . . . . . . . . . . . . 102
1987 . . . . . . . . . . . . . . . 101
and $100 after June 30, 1987.
(b) If less than all of the outstanding shares of Series C
Preferred Stock are to be redeemed, the shares to be redeemed shall be
determined by lot in such usual manner and subject to such regulations as
the Board of Directors in its sole discretion shall prescribe.
(c) At least 45 days but not more than 90 days prior to the date
fixed for the redemption of shares of the Series C Preferred Stock, a
written notice shall be mailed to each holder of record of shares of Series
C Preferred Stock to be redeemed in a postage prepaid envelope addressed to
such holder at his post office address as shown on the records of the
Corporation, notifying such holder of the election of the Corporation to
redeem such shares, stating the date fixed for redemption thereof
(hereinafter referred to as the redemption date), and calling upon such
holder to surrender to the Corporation on the redemption date at the place
designated in such notice his certificate or certificates representing the
number of shares specified in such notice of redemption. On or after the
redemption date each holder of shares of Series C Preferred Stock to be
redeemed shall present and surrender his certificate or certificates for
such shares to the Corporation at the place designated in such notice and
thereupon the redemption price of such shares shall be paid to or on the
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<PAGE> 23
order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be cancelled. In
case less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares. From and after the redemption date (unless default shall be made by
the Corporation in payment of the redemption price) all dividends on the
shares of Series C Preferred Stock designated for redemption in such notice
shall cease to accrue, and all rights of the holders thereof as stockholders
of the Corporation, except the right to receive the redemption price thereof
upon the surrender of certificates representing the same, shall cease and
determine and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation, and such
shares shall not be deemed to be outstanding for any purpose whatsoever. At
its election the Corporation prior to the redemption date may deposit the
redemption price of the shares of Series C Preferred Stock so called for
redemption in trust for the holders thereof with a bank or trust company
(having a capital and surplus of not less than $5,000,000) in the Borough of
Manhattan, City and State of New York, or in any other city in which the
Corporation at the time shall maintain a transfer agency with respect to
such stock, in which case such notice to holders of the Series C Preferred
Stock to be redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of the
redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such price on or after the date
fixed in such redemption notice (which shall not be later than the
redemption date) against payment of the redemption price. From and after the
making of such deposit, the shares of Series C Preferred Stock so designated
for redemption shall not be deemed to be outstanding for any purpose
whatsoever, and the rights of the holders of such shares shall be limited to
the right to receive the redemption price of such shares, without interest,
upon surrender of the certificates representing the same to the Corporation
at said office of such bank or trust company, and the right of conversion
(on or before the tenth day prior to the date fixed for redemption) herein
provided. Any funds so deposited which shall not be required for such
redemption because of the exercise of such right of conversion after the
date of such deposit shall be returned to the Corporation forthwith. Any
interest accrued on such funds shall be paid to the Corporation from time to
time. Any moneys so deposited which shall remain unclaimed by the holders of
such Series C Preferred Stock at the end of six years after the redemption
date shall be returned by such bank or trust company to the Corporation,
after which the holders of the Series C Preferred Stock shall have no
further interest in such moneys.
IV. VOTING RIGHTS
(a) At every meeting of stockholders of the Corporation, every
holder of Series C Preferred Stock shall be entitled to one vote for each
share of Series C Preferred Stock standing in his name on the books of the
Corporation, with the same and identical voting rights, except as expressly
provided herein, as a holder of a share of Common Stock.
(b) The Series C Preferred Stock and any other stock having voting
rights shall vote together as one class, except as provided by law and in
Article VII hereof, and except that while the holders of Preferred Stock,
voting as a class, are entitled to elect two (2) directors of the
Corporation as hereinafter provided, they shall not be entitled to
participate with the holders of the Common Stock in the election of any
other directors.
(c) In case at any time the equivalent of six or more full
quarterly dividends (whether consecutive or not) on any series of Preferred
Stock shall be in arrears, then during the period (hereinafter in this
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<PAGE> 24
subparagraph (c) called the Class Voting Period) commencing with such time
and ending with the time when all arrears in dividends on all Preferred
Stock shall have been paid and the full dividend on all Preferred Stock for
the then current quarterly dividend period shall have been paid or declared
and set apart for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the Class Voting
Period, the holders of Preferred Stock represented in person or by proxy at
said meeting shall be entitled, as a class, to the exclusion of the holders
of all other classes of stock of the Corporation, to elect two directors of
the Corporation, each share of Preferred Stock entitling the holder thereof
to one vote.
Any director who shall have been elected by holders of Preferred
Stock or by any director so elected as herein contemplated, may be removed
at any time during a Class Voting Period, either for or without cause, by,
and only by, the affirmative votes of the holders of record of a majority of
the outstanding shares of Preferred Stock given at a special meeting of such
stockholders called for the purpose and any vacancy thereby created may be
filled during such Class Voting Period by the holders of Preferred Stock,
present in person or represented by proxy at such meeting. Any director to
be elected by the Board of Directors of the Corporation to replace a
director elected by holders of Preferred Stock, or elected by a director as
in this sentence provided, and who dies, resigns, or otherwise ceases to be
a director shall, except as otherwise provided in the preceding sentence, be
elected by the remaining director theretofore elected by the holders of
Preferred Stock. At the end of the Class Voting Period the holders of
Preferred Stock shall be automatically divested of all voting power vested
in them under this subparagraph (c) but subject always to the subsequent
vesting hereunder of voting power in the holders of Preferred Stock in the
event of any similar default or defaults thereafter. The term of all
directors elected pursuant to the provisions of this subparagraph (c) shall
in all events expire at the end of the Class Voting Period.
V. PRIORITY OF SERIES C PREFERRED STOCK IN EVENT OF DISSOLUTION
In the event of any liquidation, dissolution, or winding-up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the holders of the Series C Preferred Stock shall be entitled to receive,
out of the remaining net assets of the Corporation, an amount per share
equal to the price per share set forth in Article III hereof applicable to
optional redemption in cash, plus an amount equal to all dividends accrued
and unpaid on each such share up to the date fixed for distribution, before
any distribution shall be made to the holders of the Common Stock of the
Corporation. If upon any liquidation, dissolution or winding-up of the
Corporation, the assets distributable among the holders of any series of
Preferred Stock shall be insufficient to permit the payment in full to the
holders of all series of the Preferred Stock of all preferential amounts
payable to all such holders, then the entire assets of the Corporation thus
distributable shall be distributed ratably among the holders of all series
of the Preferred Stock in proportion to the respective amounts that would be
payable per share if such assets were sufficient to permit payment in full.
VI. CONVERSION OF SERIES C PREFERRED STOCK INTO COMMON STOCK
(a) Each share of the Series C Preferred Stock shall be
convertible at any time at the option of the holder thereof, into shares
(calculated as to each conversion to the nearest 1/100th of a share) of
Common Stock (for purposes of this Article VI, the term "Common Stock" means
the common stock, par value 33-1/3 cents per share, of the Corporation, as
authorized at the date of adoption of this resolution, or stock of any other
class or classes into which such common stock or any such other class may
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<PAGE> 25
thereafter be changed or reclassified) at the rate of 1.96875 shares of
Common Stock for each share of the Series C Preferred Stock, subject to
adjustment as hereinafter provided; provided, however, that as to any shares
of the Series C Preferred Stock called for redemption such right of
conversion shall cease and terminate at the close of business on the fifth
business day prior to the date fixed for redemption.
(b) Any holder of shares of the Series C Preferred Stock electing
to convert such shares or any portion thereof shall deliver the certificates
therefor to the principal office of any transfer agent for the Common Stock,
with the form of notice of election to convert endorsed on such certificates
fully completed and duly executed. The conversion right with respect to any
such shares of the Series C Preferred Stock shall be deemed to have been
exercised at the date upon which the certificates therefor with such notice
of election duly executed shall have been so delivered, and the person or
persons entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
Common Stock upon said date.
(c) No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon conversion of shares of the Series C
Preferred Stock. If more than one share of the Series C Preferred Stock
shall be surrendered for conversion at one time by the same holder, the
number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of the Series C Preferred Stock so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon
conversion of any share or shares of the Series C Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of the last sales price (or the quoted
closing bid price if there were no sales) per share of Common Stock on the
New York Stock Exchange on the business day next preceding the date of
conversion, or, if the Common Stock is not then listed on the New York Stock
Exchange, an amount equal to the same fraction of the market price per share
of Common Stock (as determined in a manner prescribed by the Board of
Directors of the Corporation) at the close of business on such next
preceding business day.
(d) The number of shares of Common Stock issuable upon conversion
of each share of the Series C Preferred Stock as provided in this Article VI
shall be subject to adjustment from time to time in certain instances as
follows:
(1) In case of any combination or subdivision of the
outstanding shares of Common Stock of the Corporation, or in case any
dividend or other distribution payable in Common Stock shall be
declared or made upon the Common Stock, then in each such case from
and after the effective date of such combination or subdivision or
the record date for determining stockholders entitled to receive such
dividend or distribution, as the case may be, the number of shares of
Common Stock deliverable upon the conversion of a share of the Series
C Preferred Stock shall be decreased or increased in proportion to
the decrease or increase in the number of outstanding shares of
Common Stock through such combination, subdivision or stock dividend
or distribution;
(2) In case of any other capital reorganization or
reclassification of capital stock of the Corporation, or in case of
consolidation or merger of the Corporation with another corporation,
the number of shares of stock or other securities or property
(including cash) which would have been delivered upon such
reorganization, reclassification, merger or consolidation to a holder
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<PAGE> 26
of the number of shares of Common Stock into which each share of the
Series C Preferred Stock, would have been convertible immediately
prior to such reorganization, reclassification, consolidation or
merger shall thereafter be deliverable upon the conversion of a share
of the Series C Preferred Stock, and appropriate adjustment (as
determined by the Board of Directors) shall be made with respect to
the rights and interest thereafter of the holders of the Series C
Preferred Stock under this clause (2) to the end that the conversion
rights of holders of the Series C Preferred Stock hereunder shall be
applicable, as nearly as reasonably may be, in relation to any shares
or other property thereafter deliverable upon conversion of the
Series C Preferred Stock.
Whenever the number of shares of Common Stock deliverable upon the
conversion of the Series C Preferred Stock shall be adjusted pursuant to the
provisions hereof, the Corporation shall forthwith mail a notice to each
record holder of shares of the Series C Preferred Stock at his address
appearing on the stock transfer books of the Corporation stating the
adjusted number of shares of Common Stock deliverable upon the conversion of
a share of the Series C Preferred Stock, and showing in reasonable detail
the facts requiring such adjustment and the method of calculation thereof.
No adjustment is to be made upon conversion of shares of the Series C
Preferred Stock for dividends accrued thereon or for dividends upon the
Common Stock issuable upon such conversion.
(e) The Corporation shall at all times reserve and keep available,
out of its authorized and unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Series C Preferred Stock, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all shares of the Series C Preferred Stock from
time to time outstanding.
VII. LIMITATIONS
So long as any shares of Series C Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or the written
consent as provided by law, of the holders of at least two-thirds ( ) of the
outstanding shares of Series C Preferred Stock, voting as a class,
(a) create, authorize or issue any class or series of stock
ranking either as to payment of dividends or distribution of assets prior to
the Series C Preferred Stock; or
(b) change the preferences, rights or powers with respect to the
Series C Preferred Stock so as to affect such stock adversely;
but nothing herein contained shall require such a class vote or consent (i)
in connection with any increase in the total number of authorized shares of
Common Stock, or (ii) in connection with authorization or increase of any
class of stock ranking on a parity with the Series C Preferred Stock;
provided, however, that no such vote or written consent of the holders of
the Series C Preferred Stock shall be required if, at or prior to the time
when the issuance of any such prior stock is to be made or any such change
is to take effect, as the case may be, provision is made for the redemption
of all shares of Series C Preferred Stock at the time outstanding, and
further provided, that the provisions of this Article VII shall not in any
way limit the right and power of the Corporation to issue the presently
authorized but unissued shares of stock, or bonds, notes, mortgages,
debentures, and other obligations, and to incur indebtedness to banks and to
other lenders.
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<PAGE> 27
DESIGNATION OF $2.125 CUMULATIVE PREFERRED STOCK, SERIES H
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation, this Board of Directors
hereby creates a series of the preferred stock, par value 33-1/3 cents per
share (the "Preferred Stock"), of the Corporation, to consist of 8,000,000
shares of such Preferred Stock, and this Board of Directors hereby fixes the
designations, preferences and relative, participating, optional or other
special rights of the shares of such series, and the qualifications,
limitations, or restrictions thereof (in addition to the designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof, set forth in
the Certificate of Incorporation of the Corporation which are applicable to
Preferred Stock of all series) as follows:
I. DESIGNATION
The designation of the series of Preferred Stock created by this
resolution shall be "$2.125 Cumulative Preferred Stock, Series H"
(hereinafter called the "Series H Preferred Stock").
II. CASH DIVIDENDS ON SERIES H PREFERRED STOCK
(a) The holders of the Series H Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of the funds
of the Corporation legally available therefor, cumulative cash dividends on
the shares of the Series H Preferred Stock at the annual rate of $2.125 per
share, payable quarterly on March 15, June 15, September 15 and December 15,
commencing June 15, 1993. Dividends shall be cumulative from April 26, 1993.
Each such dividend shall be paid to the holders of record of shares of the
Series H Preferred Stock as they appear on the stock register of the Corpo-
ration on such record date, not more than 30 days nor less than 10 days
preceding the dividend payment date thereof, as shall be fixed by the Board
of Directors of the Corporation or a duly authorized committee thereof.
Dividends in arrears on the Series H Preferred Stock shall accrue dividends
at the dividend rate payable on the Preferred Stock.
(b) If dividends are not paid in full or declared in full and sums
set apart for the payment thereof upon the Series H Preferred Stock and any
other Preferred Stock ranking on a parity as to dividends with the Series H
Preferred Stock, all dividends declared upon shares of Series H Preferred
Stock and any other Preferred Stock ranking on a parity as to dividends
shall be declared pro rata so that in all cases the amount of dividends
declared per share on the Series H Preferred Stock and any other Preferred
Stock ranking on a parity as to dividends shall be in the same proportion as
the amount of dividends that would be paid on all shares of Series H Pre-
ferred Stock and such other parity Preferred Stock if all such dividends
(including dividends accrued or in arrears) were paid in full. Except as
provided in the preceding sentence, unless full cumulative dividends on the
Series H Preferred Stock have been paid or declared in full and sums set
aside for the payment thereof, no dividends shall be declared or paid or set
aside for payment or other distribution made upon the common stock, par
value 33-1/3 cents per share, of the Corporation (the "Common Stock"), or
the Class A common stock, par value 33-1/3 cents per share, of the
Corporation (the "Class A Common Stock") or any other capital stock of the
Corporation ranking junior to or on a parity with the Series H Preferred
Stock as to dividends or liquidation rights, nor shall any Common Stock,
Class A Common Stock or any other capital stock of the Corporation ranking
junior to or on a parity with the Series H Preferred Stock as to dividends
or liquidation rights be redeemed, purchased or otherwise acquired for any
consideration (or any payment made to or available for a sinking fund for
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<PAGE> 28
the redemption of any shares of such stock) by the Corporation or any
subsidiary of the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to the Series H Preferred Stock as
to dividends and liquidation rights).
The term "dividends accrued or in arrears" whenever used herein with
reference to the Preferred Stock shall be deemed to mean an amount which
shall be equal to dividends thereon at the annual dividend rates per share
for the respective series from the date or dates on which such dividends
commence to accrue to the end of the then current quarterly dividend period
for such Preferred Stock (or, in the case of redemption, to the date of
redemption), less the amount of all dividends paid, or declared in full and
sums set aside for the payment thereof, upon such Preferred Stock.
(c) Dividends payable on the Series H Preferred Stock for any
period less than a full quarterly dividend period shall be computed on the
basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in the period for which payable.
III. OPTIONAL REDEMPTION OF SERIES-H PREFERRED STOCK
(a) The Series H Preferred Stock shall be redeemable, in whole or
in part, at the option of the Corporation by resolution of its Board of
Directors, at any time and from time to time on or after April 15, 1998 at
the redemption price of $25 per share, plus in each case, all dividends
accrued and unpaid on such Series H Preferred Stock up to the date fixed for
redemption upon giving notice as provided below.
(b) If less than all of the outstanding shares of Series H
Preferred Stock are to be redeemed the shares to be redeemed shall be
determined pro rata or by lot in such usual manner and subject to such
regulations as the Board of Directors in its sole discretion shall
prescribe.
(c) At least 30 days but not more than 60 days prior to the date
fixed for the redemption of shares of the Series H Preferred Stock, a
written notice shall be mailed to each holder of record of shares of Series
H Preferred Stock to be redeemed in a postage prepaid envelope addressed to
such holder at his post office address as shown on the records of the Cor-
poration, notifying such holder of the election of the Corporation to redeem
such shares, stating the date fixed for redemption thereof (hereinafter
referred to as the "Redemption Date"), and calling upon such holder to
surrender to the Corporation on the Redemption Date at the place designated
in such notice his certificate or certificates representing the number of
shares specified in such notice of redemption. On or after the Redemption
Date each holder of shares of Series H Preferred Stock to be redeemed shall
present and surrender his certificate or certificates for such shares to the
Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the Redemption Date (unless default shall be made by the Corporation
in payment of the redemption price) all dividends on the shares of Series H
Preferred Stock designated for redemption in such notice shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price thereof
(including all accrued and unpaid dividends up to the Redemption Date) upon
the surrender of certificates representing the same, shall cease and
terminate and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation, and such
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<PAGE> 29
shares shall not be deemed to be outstanding for any purpose whatsoever. At
its election the Corporation prior to the Redemption Date may deposit the
redemption price (including all accrued and unpaid dividends up to the
Redemption Date) of the shares of Series H Preferred Stock so called for
redemption in trust for the holders thereof with a bank or trust company
(having a capital, surplus and undivided profits aggregating not less than
$50,000,000) in The Borough of Manhattan, City and State of New York, the
City of Houston, State of Texas, or in any other city in which the Cor-
poration at the time shall maintain a transfer agency with respect to such
stock, in which case such notice to holders of the Series H Preferred Stock
to be redeemed shall state the date of such deposit, shall specify the
office of such bank or trust company as the place of payment of the
redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such price on or after the date
fixed in such redemption notice (which shall not be later than the
Redemption Date) against payment of the redemption price (including all
accrued and unpaid dividends up to the Redemption Date). From and after the
making of such deposit, the shares of Series H Preferred Stock so designated
for redemption shall not be deemed to be outstanding for any purpose whatso-
ever, and the rights of the holders of such shares shall be limited to the
right to receive the redemption price of such shares (including all accrued
and unpaid dividends up to the Redemption Date), without interest, upon
surrender of the certificates representing the same to the Corporation at
said office of such bank or trust company. Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any moneys so
deposited which shall remain unclaimed by the holders of such Series H
Preferred Stock at the end of two years after the Redemption Date shall be
returned by such bank or trust company to the Corporation, after which the
holders of the Series H Preferred Stock shall have no further interest in
such moneys.
(d) Shares of the Series H Preferred Stock retired pursuant to the
provisions of this Article III shall not be reissued.
IV. VOTING RIGHTS
(a) The holders of the Series H Preferred Stock shall not, except
as required by law or as set forth herein, have any right or power to vote
on any question or in any proceeding or to be represented at, or to receive
notice of, any meeting of stockholders. On any matters on which the holders
of the Series H Preferred Stock shall be entitled to vote, they shall be
entitled to one vote for each share held.
(b) In case at any time the equivalent of six or more full
quarterly dividends (whether consecutive or not) on any series of Preferred
Stock shall be in arrears, then during the period (hereinafter in this
paragraph (b) called the "Class Voting Period") commencing with such time
and ending with the time when all arrears in dividends on all Preferred
Stock shall have been paid and the full dividend on all Preferred Stock for
the then current quarterly dividend period shall have been paid or declared
and set apart for payment, at any meeting of the stockholders of the
Corporation held for the election of directors during the Class Voting
Period, the holders of a majority of the outstanding shares of Preferred
Stock represented in person or by proxy at said meeting shall be entitled,
as a class, to the exclusion of the holders of all other classes of stock of
the Corporation, to elect two directors of the Corporation, each share of
Preferred Stock entitling the holder thereof to one vote.
Any director who shall have been elected by holders of Preferred
Stock, or by any director so elected as herein contemplated, may be removed
at any time during a Class Voting Period, either for or without cause, by,
and only by, the affirmative votes of the holders of record of a majority of
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<PAGE> 30
the outstanding shares of Preferred Stock given at a special meeting of such
stockholders called for the purpose, and any vacancy thereby created may be
filled during such Class Voting Period by the holders of Preferred Stock,
present in person or represented by proxy at such meeting. Any director
elected by holders of Preferred Stock, or elected by a director as in this
sentence provided, who dies, resigns, or otherwise ceases to be a director
shall, except as otherwise provided in the preceding sentence, be replaced
by the remaining director theretofore elected by the holders of Preferred
Stock. At the end of the Class Voting Period the holders of Preferred Stock
shall be automatically divested of all voting power vested in them under
this paragraph (b) but subject always to the subsequent vesting hereunder of
voting power in the holders of Preferred Stock in the event of any similar
cumulated arrearage in payment of quarterly dividends occurring thereafter.
The term of all directors elected pursuant to the provisions of this
paragraph (b) shall in all events expire at the end of the Class Voting
Period.
(c) In case at any time the equivalent of four or more full
quarterly dividends (whether consecutive or not) on the Series H Preferred
Stock shall be in arrears, then during the period (hereinafter in this
paragraph (c) called the "Special Series Voting Period") commencing with
such time and ending with the time when all arrears in dividends shall have
been paid and the full dividends on the Series H Preferred Stock for the
then current Quarterly Dividend Period shall have been paid or declared and
set apart for payment, at any meeting of the stockholders of the Corporation
held for the election of directors during the Special Series Voting Period,
the holders of Series H Preferred Stock represented in person or by proxy at
said meeting shall be entitled, as a class, to the exclusion of the holders
of all other classes or series of capital stock of the Corporation, to elect
one director of the Corporation, each share of Series H Preferred Stock
entitling the holder thereof to one vote.
Any director who shall have been elected by holders of Series H
Preferred Stock, or by any director so elected as herein contemplated, may
be removed at any time during a Special Series Voting Period, either for or
without cause, by, and only by, the affirmative votes of the holders of
record of a majority of the outstanding shares of Series H Preferred Stock
given at a special meeting of such stockholders called for the purpose, and
any vacancy thereby created may be filled during such Special Series Voting
Period by the holders of Series H Preferred Stock, present in person or
represented by proxy at such meeting. Any director elected by holders of
Series H Preferred Stock who dies, resigns, or otherwise ceases to be a
director shall be replaced by the affirmative vote of the holder of record
of a majority of the outstanding shares of Series H Preferred Stock at a
special meeting of holders of Series H Preferred Stock called for that
purpose. At the end of the Special Series Voting Period the holders of
Series H Preferred Stock shall be automatically divested of all voting power
vested in them under this paragraph (c) but subject always to the subsequent
vesting hereunder of voting power in the holders of Series H Preferred Stock
in the event of any similar cumulated arrearage in payment of quarterly
dividends occurring thereafter. The term of any director elected pursuant to
the provision of this paragraph (c) shall in all events expire at the end of
the Special Series Voting Period.
The voting rights of holders of Series H Preferred Stock pursuant to
this paragraph (c) shall be separate from and in addition to the voting
rights granted to all holders of Preferred Stock pursuant to paragraph (b)
of this Article IV.
V. PRIORITY OF SERIES H PREFERRED
STOCK IN EVENT OF DISSOLUTION
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<PAGE> 31
In the event of any liquidation, dissolution, or winding up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the holders of the Series H Preferred Stock shall be entitled to receive,
out of the remaining net assets of the Corporation, the amount of
twenty-five dollars ($25) in cash for each share of Series H Preferred
Stock, plus an amount equal to all dividends accrued and unpaid on each such
share up to the date fixed for distribution, before any distribution shall
be made to the holders of the Common Stock, the Class A Common Stock or any
other capital stock of the Corporation ranking junior to the Series H Pre-
ferred Stock with regard to such distribution. If upon any liquidation,
dissolution or winding up of the Corporation, the assets distributable among
the holders of any series of Preferred Stock ranking (as to any such
distribution) on a parity with the Series H Preferred Stock shall be
insufficient to permit the payment in full to the holders of all such series
of Preferred Stock of all preferential amounts payable to all such holders,
then the entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of all series of the Preferred Stock
ranking (as to any such distribution) on a parity with the Series H
Preferred Stock in proportion to the respective amounts that would be
payable per share if such assets were sufficient to permit payment in full.
For purposes of this Article V, a distribution of assets in any
dissolution, winding up or liquidation shall not include (i) any
consolidation or merger of the Corporation with or into any other
corporation, (ii) any dissolution, liquidation, winding up, or
reorganization of the Corporation immediately followed by reincorporating of
another corporation or (iii) a sale or other disposition of all or
substantially all of the Corporation's assets to another corporation;
provided that in each case, effective provision is made in the certificate
of incorporation of the resulting and surviving corporation or otherwise for
the protection of the rights of the holders of Series H Preferred Stock.
VI. CONVERSION OF SERIES H PREFERRED STOCK
The Series H Preferred Stock shall not be convertible into any other
capital stock of the Corporation.
VII. RANKING OF SERIES H PREFERRED STOCK
With regard to rights to receive dividends and distributions upon
dissolution of the Corporation, the Series H Preferred Stock shall rank pari
passu with any other Preferred Stock of the Corporation, other than
Preferred Stock of a series which by its terms ranks junior in right of
dividends or distributions on dissolution to the Series H Preferred Stock,
and shall rank prior to all other capital stock of the Corporation
outstanding at the time of issuance of the Series H Preferred Stock.
VIII. LIMITATIONS
So long as any shares of Series H Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote or the written
consent as provided by law, of the holders of at least two-thirds (2/3) of
the outstanding shares of Series H Preferred Stock, voting as a class,
(a) create, authorize or issue any class or series of stock
ranking either as to payment of dividends or distribution of assets prior to
the Series H Preferred Stock; or
(b) change the preferences, rights or powers with respect to the
Series H Preferred Stock so as to affect such stock adversely;
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<PAGE> 32
but nothing herein contained shall require such a class vote or consent (i)
in connection with any increase in the total number of authorized shares of
Preferred Stock, Common Stock or Class A Common Stock, or (ii) in connection
with authorization or increase of any other class or series of stock ranking
junior to or on a parity with the Series H Preferred Stock; provided,
however, that no such vote or written consent of the holders of the Series H
Preferred Stock shall be required under clause (a) or (b) above if, at or
prior to the time when the issuance of any such prior stock is to be made or
any such change is to take effect, as the case may be, provision is made for
the redemption of all shares of Series H Preferred Stock at the time
outstanding, and further provided, that the provisions of this Article VIII
shall not in any way limit the right and power of the Corporation to issue
the presently authorized but unissued shares of stock, or bonds, notes,
mortgages, debentures, and other obligations, and to incur indebtedness to
banks and to other lenders.
FIFTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived any improper personal benefit. If the Delaware General Corporation
Law is amended after approval by the stockholders of this article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or pro-
tection of a director of the Corporation existing at the time of such repeal
or modification.
SIXTH: The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less
than three nor more than eighteen directors, the exact number of directors
to be determined from time to time by resolution adopted by affirmative vote
of a majority of the entire Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors constituting the entire Board of Directors. At
the special meeting of stockholders at which this Article is adopted, Class
I, II and III directors shall be elected to serve until the 1984, 1985 and
1986 annual meetings of stockholders, respectively.
At each annual meeting of stockholders beginning with 1984,
successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes
so as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that
shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the
year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of
Directors that results from an increase in the number of directors may be
filled by a majority of the Board of Directors then in office, and any other
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vacancy occurring in the Board of Directors may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining
term as that of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at
an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article SIXTH unless expressly provided by such terms.
No person (other than a person nominated by or on behalf of the Board
of Directors) shall be eligible for election as a director at any annual or
special meeting of stockholders unless a written request that his or her
name be placed in nomination is received from a stockholder of record by the
Secretary of the Corporation not less than 30 days prior to the date fixed
for the meeting, together with the written consent of such person to serve
as a director.
The Board of Directors is expressly authorized and empowered to make,
alter and repeal the By-Laws of the Corporation, subject to the power of the
stockholders of the Corporation to alter or repeal any By-Law adopted by the
Board of Directors.
Except to the extent prohibited by law, the Board of Directors shall
have the right (which, to the extent exercised, shall be exclusive) to
establish the rights, powers, duties, rules and procedures that from time to
time shall govern the Board of Directors and each of its members, including
without limitation the vote required for any action by the Board of
Directors, and that from time to time shall affect the directors' power to
manage the business and affairs of the Corporation; and, notwithstanding any
other provision of this Certificate of Incorporation to the contrary, no
By-Law shall be adopted by stockholders which shall impair or impede the
implementation of the foregoing.
SEVENTH: No action shall be taken by stockholders of the Corporation
except at an annual or special meeting of stockholders of the Corporation.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of the Corporation or of any creditor or stockholder of the
Corporation or on the application of any receiver or receivers appointed for
the Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors and/or of the stockholders or class of stockholders of
the Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
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<PAGE> 34
class of creditors, and/or on all the stockholders or class of stockholders,
of the Corporation, as the case may be, and also on the Corporation.
NINTH: The names and mailing addresses of the persons who are to
serve as directors of the Corporation until their successors are elected and
qualify are as follows:
Name Mailing Address
---- ---------------
Oscar S. Wyatt, Jr. . . . . . . . Post Office Drawer 521
Corpus Christi, Texas 78403
Harry G. Fair . . . . . . . . . . Post Office Drawer 521
Corpus Christi, Texas 78403
Norman S. Davis . . . . . . . . . 1515 National Bank of
Commerce Building
San Antonio, Texas 78205
H. T. Capelle . . . . . . . . . . Post Office Drawer 521
Corpus Christi, Texas 78403
Tracy N. DuBose . . . . . . . . . Lincoln Liberty Life Building
Houston, Texas 77002
Roy L. Gates . . . . . . . . . . Post Office Drawer 521
Corpus Christi, Texas 78403
Leon Jaworski . . . . . . . . . . Fulbright, Crooker & Jaworski
Bank of the Southwest Building
Houston, Texas 77002
Will E. Odom . . . . . . . . . . Post Office Box 595
Austin, Texas 78767
Harold Vance . . . . . . . . . . 1429 Bank of the
Southwest Building
Houston, Texas 77002
Jack Ware . . . . . . . . . . . . Post Office Drawer 1827
Uvalde, Texas 78801
TENTH: The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provision contained in this
Restated Certificate of Incorporation, and other provisions authorized by
the laws of the State of Delaware at the time in force may be added or
inserted, in the manner now or hereafter prescribed by law; and all rights,
preferences and privileges of whatsoever nature conferred upon stockholders,
directors or any other persons whomsoever by and pursuant to this Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article.
ELEVENTH: 1. The affirmative vote or consent of the holders of
eighty-five per cent (85%) of the voting power of all shares of stock of the
Corporation entitled to vote in elections of directors, considered for the
purposes of this Article ELEVENTH as one class, shall be required for the
adoption or authorization of a business combination (as hereinafter defined)
with any other entity (as hereinafter defined) if, as of the record date for
the determination of stockholders entitled to notice thereof and to vote
thereon or consent thereto, such other entity is the beneficial owner,
directly or indirectly, of more than twenty, per cent (20%) of the voting
power of all shares of stock of the Corporation entitled to vote in
elections of directors considered for the purposes of this Article ELEVENTH,
as one class; provided that such eighty-five per cent (85%) voting
requirement shall not be applicable if:
(a) The cash, or fair market value of
other consideration, to be received per share
by holders of shares of any class of capital
stock of the Corporation in such business
combination bears the same or a greater
-33-<PAGE>
<PAGE> 35
percentage relationship to the market price of
such shares of capital stock immediately prior
to the announcement of such business
combination as the highest per share price
(including brokerage commissions and/or
soliciting dealers' fees) which such other
entity has theretofore paid for any of such
shares of capital stock already owned by it
bears to the market price of such shares of
capital stock immediately prior to the
commencement of acquisition of such shares of
capital stock by such other entity;
(b) The cash or fair market value of
other consideration, to be received per share
by holders of shares of any class of capital
stock of the Corporation in such business
combination (i) is not less than the highest
per share price (including brokerage
commissions and/or soliciting dealers' fees)
paid by such other entity in acquiring any of
its holdings of such shares of capital stock,
and (ii) is not less than the earnings per
share of Common Stock of the Corporation for
the four full consecutive fiscal quarters
immediately preceding the record date for
solicitation of votes on such business
combination, multiplied by the then
price/earnings multiple (if any) of such other
entity as customarily computed and reported in
the financial community;
(c) After such other entity has
acquired twenty per cent (20%) voting interest
and prior to the consummation of such business
combination: (i) such other entity shall have
taken steps to ensure that the Corporation's
Board of Directors included at all times
representation by continuing director(s) (as
hereinafter defined) proportionate to the
stockholdings of the Corporation's public
capital stockholders not affiliated with such
other entity (with a continuing director to
occupy any resulting fractional board
position); (ii) there shall have been no
reduction in the rate of dividends payable on
the Corporation's Capital Stock except as
necessary to ensure that a quarterly dividend
payment does not exceed 12.5% of the net income
of the Corporation for the four full
consecutive fiscal quarters immediately
preceding the declaration date of such
dividend, or except as may have been approved
by a unanimous vote of the directors; (iii)
such other entity shall not have acquired any
newly issued shares of Capital Stock, directly
or indirectly, from the Corporation (except
upon conversion of securities acquired by it
prior to obtaining twenty per cent (20%) voting
interest or as a result of a pro rata stock
dividend or stock split); and (iv) such other
entity shall not have acquired any additional
-34-<PAGE>
<PAGE> 36
shares of the Corporation's outstanding Capital
Stock or securities convertible into Capital
Stock except as a part of the transaction which
results in such other entity acquiring twenty
per cent (20%) voting interest;
(d) Such other entity shall not have
(i) received the benefit, directly or
indirectly (except proportionately as a
stockholder) of any loans, advances,
guarantees, pledges or other financial
assistance or tax credits provided by the
Corporation, or (ii) made any major change in
the Corporation's business or equity capital
structure without the unanimous approval of the
directors in either case prior to the
consummation of such business combination; and
(e) A proxy statement responsive to the
requirements of the Securities Exchange Act of
1934 shall be mailed to public stockholders of
the Corporation for the purpose of soliciting
stockholder approval of such business
combination and shall contain at the front
thereof, in a prominent place, any
recommendations as to the advisability (or
inadvisability) of the business combination
which the continuing directors, or any of them,
may choose to state and, if deemed advisable by
a majority of the continuing directors, an
opinion of a reputable investment banking firm
as to the fairness (or not) of the terms of
such business combination, from the point of
view of the remaining public stockholders of
the Corporation (such investment banking firm
to be selected by a majority of the continuing
directors and to be paid a reasonable fee for
their services by the Corporation upon receipt
of such opinion).
The provisions of this Article ELEVENTH
shall also apply to a business combination with
any other entity which at any time has been the
beneficial owner, directly or indirectly, of
more than twenty per cent (20%) of the voting
power of all shares of stock of the Corporation
entitled to vote in elections of directors
considered for the purpose of this Article
ELEVENTH as one class, notwithstanding the fact
that such other entity has reduced its voting
interest to below twenty per cent (20%) of the
voting power of all of the Corporation's stock
if, as of the record date for the determination
of stockholders entitled to notice of and to
vote on or consent to the business combination,
such other entity is an "affiliate" of the
Corporation (as hereinafter defined).
2. As used in this Article ELEVENTH, (a) the term "other entity"
shall include any corporation, person or other entity and any other entity
with which it or its "affiliate" or "associate" (as defined below) has any
agreement, arrangement or understanding, directly or indirectly, for the
-35-<PAGE>
<PAGE> 37
pure of acquiring, holding, voting or disposing of stock of the Corporation,
or which is its "affiliate" or "associate" as those terms defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act
of 1934 as in effect on May 27, 1982, together with the successors and
assigns of such persons in any transaction or series of transactions not
involving a public offering of the corporation's stock within the meaning of
the Securities Act of 1933; (b) another entity shall be deemed to be the
beneficial owner of any shares of stock of the Corporation which the other
entity (as defined above) has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise; (c) the outstanding shares of any class of stock of the
Corporation shall include shares deemed owned through application of clause
(b) above but shall not include any other shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights, warrants
or options, or otherwise; (d) the term "business combination" shall include
any merger or consolidation of the Corporation with or into any other
corporation, or the sale or lease of all or any substantial part of the
assets of the Corporation to, or any sale or lease to the Corporation or any
subsidiary thereof in exchange for securities of the Corporation of any
assets (except assets having an aggregate fair market value of less than
$5,000,000) of any other entity; (e) the term "continuing director" shall
mean a person who was a member of the Board of Directors of the Corporation
elected by the public stockholders prior to the time that such other entity
acquired in excess of ten percent (10%) of the voting power of all
outstanding shares of stock of the Corporation entitled to vote in the
election of directors, or a person recommended to succeed a continuing
director by a majority of continuing directors; (f) for the purposes of
sub-paragraphs l(a) and (b) of this article ELEVENTH the term "other
consideration to be received" shall mean Capital Stock of the Corporation
retained by its existing public stockholders in the event of a business
combination with such other entity in which the Corporation is the surviving
corporation and (g) the determination of "market price" shall give effect to
any stock dividend, stock split, subdivision or reclassification with
respect to any shares of capital stock of the Corporation involved in such
business combination.
3. A majority of the continuing directors shall have the power
and duty to determine for the purposes of this Article ELEVENTH on the basis
of information known to them whether (a) such other entity beneficially owns
more than twenty per cent (20%) of the voting power of all shares of stock
of the Corporation entitled to vote in election of directors, (b) an other
entity is an "affiliate" or "associate" (as defined above) of another, (c)
an other entity as an agreement, arrangement or understanding with another,
or (d) the assets being acquired by the Corporation, or any subsidiary
thereof, have an aggregate fair market value of less than $5,000,000.
4. No amendment to the Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article ELEVENTH,
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote or consent of eighty-five per cent (85%)
of the voting power of all shares of stock of the Corporation entitled to
vote in election of directors, considered for the purposes of this Article
ELEVENTH as one class; provided that this paragraph 4 shall not apply to,
and such eighty-five per cent (85%) vote or consent shall not be required
for, any amendment, alteration, change or repeal unanimously recommended to
the stockholders by the Board of Directors of the Corporation if all of such
directors are persons who would be eligible to serve as "continuing
directors" within the meaning of paragraph 2 of this Article ELEVENTH.
5. Nothing contained in this Article ELEVENTH shall be construed
to relieve any other entity, from any fiduciary obligation imposed by law.
-36-<PAGE>
<PAGE> 38
6. The provisions of this Article ELEVENTH shall not apply to any
transaction described in Section I of this Article ELEVENTH:
(a) If the Board of Directors of the
Corporation shall have approved by resolution a
memorandum of understanding with the other
corporation, person or entity with whom the
transaction is proposed prior to the time that
such other corporation, person or entity shall
have become a beneficial owner of five percent
(5%) or more of the outstanding shares of any
class of capital stock of the Corporation
entitled to vote in elections of directors; or
(b) If the transaction is approved
prior to its consummation by a resolution
adopted at a meeting of the Board of Directors
at which at least two-thirds of such members of
the Board of Directors who are not involved
with and/or representing the corporation,
person or entity with whom the transaction is
proposed approve the same; or
(c) If the transaction involves only
the Corporation, or any of its subsidiaries,
and a corporation of which a majority of the
outstanding shares of each class of capital
stock entitled to vote in elections of
directors is owned of record or beneficially by
the Corporation or any of its subsidiaries.
This Restated Certificate of Incorporation was duly adopted
by the Board of Directors of the Corporation in accordance with Section 245
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, THE COASTAL CORPORATION has caused this
Certificate to be signed by DAVID A. ARLEDGE its President, and attested by
AUSTIN M. O'TOOLE, its Senior Vice President and Secretary, this 21st day of
March, 1994.
THE COASTAL CORPORATION
By: ----------------------------------
[CORPORATE SEAL] DAVID A. ARLEDGE
President
ATTEST:
- ----------------------------------
AUSTIN M. O'TOOLE
Senior Vice President and Secretary
STATE OF TEXAS ^U
^U
COUNTY OF HARRIS ^U
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<PAGE> 39
On the 21st day of March, 1994, personally appeared before me,
DAVID A. ARLEDGE, President of The Coastal Corporation, known to me
personally to be such, and acknowledged that he signed said Restated
Certificate of Incorporation and he acknowledged that said Restated
Certificate of Incorporation was his act and deed and the act and deed
of The Coastal Corporation and that the facts stated therein are true.
----------------------------------
MARTA I. RAMIREZ, Notary Public
[NOTARIAL SEAL] Expiration Date: August 19, 1997
----------------
-38-<PAGE>
<PAGE> 40
<PAGE>
EXHIBIT 10.14
THE COASTAL CORPORATION
DEFERRED COMPENSATION PLAN
1. Participants. Any employee ("Employee") of The Coastal Corporation
("Corporation"), or any directly or indirectly wholly owned subsidiary of the
Corporation ("Subsidiary"), who has been designated as eligible to participate
under this plan ("Plan") by the Board of Directors of the Corporation ("Board"),
may elect to become a participant ("Participant") under the Plan by filing a
written notice ("Notice") with the Corporation or a Subsidiary of the
Corporation for whom the Employee performs his services ("Employer"), in the
form prescribed by the Board of Directors.
2. Deferred Compensation. Any Participant may elect, in accordance with Section
5 of this Agreement, to defer annually the receipt of a portion of the
compensation (salary and/or bonus) otherwise payable to him by an Employer in
any calendar year, which portion shall be designated by him. Any compensation
deferred pursuant to this Section shall be recorded by the Corporation in a
deferred compensation account ("Account") maintained in the name of the
Participant, which Account shall be credited on each date for payment of
compensation in accordance with the Employer's normal practices, (a) with
respect to salary, with a dollar amount equal to (i) the total amount of salary
deferred during a calendar year under the Plan, divided by (ii) the total number
of such dates for payment of salary occurring during the calendar year and (b)
with respect to bonus, the amount of bonus deferred.
The Corporation shall furnish each Participant with an annual statement of
his Account. The Corporation shall also credit interest to the Account from the
date received until final distribution of the Account pursuant to the Section 4
of the Plan. The amount of compensation that a Participant elects to defer under
this Section will remain constant until suspended or modified by the filing of
another election with the Corporation by a Participant in accordance with
Section 5 of the Plan.
3. Interest on Deferred Amounts. All amounts credited to an Account shall be
credited with interest at an annual rate to be determined by the Corporation
each year. Such interest rate shall be based on debt obligations issued by the
U.S. Treasury with a ten year maturity plus an upward adjustment to approximate
the difference between such rate and the average cost of borrowed capital of
comparable maturity for the Corporation until the Account has been fully
distributed to a Participant or to the beneficiary or beneficiaries designated
by the Participant in a writing delivered to the Corporation.
4. Distribution.
(a) A Participant may elect a method of distribution in the same manner as
the Participant elects to participate in the Plan. Such election shall be
made prior to the time any amount subject to the distribution election is
earned. The election is irrevocable. A different election may be made
with respect to different periods of deferred compensation provided such
elections are made in advance of earning any portion of the compensation
subject to the election. Such distribution may not begin until the
Participant terminates employment for any reason, including death.
Interest on the deferred amounts shall be prorated by any method selected
by the Corporation to portions of the Account of the Participant which
are subject to different distribution directions of the Participant
and/or the distribution method selected by the Corporation, as provided
herein.
With respect to all or any portion of the Account of a Participant with
respect to which the Participant has not submitted a valid distribution
election, the Corporation shall determine the method of distribution as
described in the following provisions.
(b) Upon termination of employment with the Corporation and all other
Employers for any reason other than death, subject to the provisions of
subsection (f), the Participant will be entitled to receive all amounts
credited to the Participant's Account as of the date of termination of
employment. Subject to the provisions of subsection (a), the Company
shall determine whether the Participant will receive distribution of all
amounts payable to him under this paragraph (b) in a lump sum or in
installments over a designated period of years, pursuant to the
provisions of paragraph (e) of this Section.
1
<PAGE>
(c) Upon termination of a Participant's employment with the Corporation and
all other Employers by reason of his death, subject to the provisions of
subsection (f) the Participant's designated beneficiary or beneficiaries
will be entitled to receive all amounts credited to the Account of the
Participant as of the date of his death. Subject to the provisions of
subsection (a), such amounts shall be payable in a lump sum or in
installments over a designated period of years, pursuant to the
provisions of paragraph (e) of this Section.
(d) Subject to the provisions of subsection (a), upon the death of the
Participant prior to complete distribution to him of the entire balance
of his Account (and after the date of termination of employment with the
Corporation and all other Employers), the balance of his Account on the
date of his death shall be payable to the Participant's designated
beneficiary or beneficiaries pursuant to the paragraph (e) of this
Section.
(e) Subject to the provisions of subsections (a) and (f), the Corporation, in
its discretion, shall direct distribution of the amounts credited to a
Participant's Account, including interest credited thereon, to a
Participant or his beneficiary or beneficiaries pursuant to the preceding
paragraphs of this Section, in a lump sum, or in installments over such
period of years as the Corporation shall determine. Distribution shall be
made or commence on the first day of the month next following (i) the
date upon which the Participant's service as an Employee terminates in
the event of a distribution pursuant to subsections (b) or (c) of this
Section, or (ii) the date of the Participant's death in the event of a
distribution pursuant to paragraph (d) of this Section. Subsequent
installments, if any, shall be made on the annual, quarterly, or monthly
anniversary dates of the date of the first installment as determined by
the Corporation. Each such installment, if any, shall include interest
credited to the balance of the Account.
(f) Notwithstanding any election of a Participant to the contrary, any
portion of a Participant's Account for which no deduction is allowed due
to the restrictions contained in Section 162(m) of the Internal Revenue
Code of 1986, as amended, shall not be payable from such Account until
after the time such restrictions cease to apply to such portion of the
Participant's Account.
5. Election To Defer. The Notice by which a Participant elects to defer
compensation as provided in this Plan shall be in writing, signed by the
Participant, and delivered to the Corporation prior to the time any cash
compensation to be deferred is earned by the Participant and prior to the time
any such cash compensation to be deferred is otherwise payable to the
Participant. Such election (and any subsequent election) will continue until
suspended or modified in a writing delivered by the Participant to the
Corporation, which new election shall only apply to compensation otherwise
earned and payable to the Participant after the end of the calendar year in
which such election is delivered to the Corporation. Any deferral election made
by the Participant shall be irrevocable with respect to any compensation covered
by such election, including the compensation payable in the calendar year in
which the election suspending or modifying the prior election is delivered to
the Corporation.
6. Participant's Rights Unsecured. The right of the Participant or his
designated beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Corporation, and neither the Participant
nor his designated beneficiary shall have any rights in or against any amount
credited to his Account or any other specific assets of the Corporation. All
amounts credited to an Account shall constitute general assets of the
Corporation and may be disposed of by the Corporation at such time and for such
purposes as it may deem appropriate. An Account may not be encumbered or
assigned by a Participant or any beneficiary.
7. Amendments to the Plan. The Board may amend the Plan at any time, without the
consent of the Participants or their beneficiaries, provided, however, that no
amendment shall divest any Participant or beneficiary of the credits to his
Account, or of any rights to which he would have been entitled if the Plan had
been terminated immediately prior to the effective date of such amendment.
8. Termination of the Plan. The Board may terminate the Plan at any time. Upon
termination of the Plan, distribution of the credits to a Participant's Account
shall be made in the manner and at the time heretofore prescribed; provided that
no additional credits shall be made to the Account of a Participant following
termination of the Plan other than interest thereon credited pursuant to Plan
provisions.
9. Expenses. Costs of administration of the Plan will be paid by the Corporation
and/or such of its Subsidiaries with Employees participating in the Plan as may
be determined by the Board.
2
<PAGE>
10. Notices. Any notice or election required or permitted to be given hereunder
shall be in writing and shall be deemed to be filed (a) on the date it is
personally delivered to the Secretary of the Corporation or a Subsidiary, as the
case may be; or (b) three business days after it is sent by registered or
certified mail, addressed to such Secretary at the principal office of the
Corporation.
3
<PAGE>
THE COASTAL CORPORATION
Election To Participate in Deferred
Compensation Plan
and Designation of Beneficiary
Pursuant to The Coastal Corporation Deferred Compensation Plan (the"Plan"), I
hereby elect to defer, as provided in the Plan, the receipt of the portion
indicated below of compensation earned by me in connection with the performance
of my services as an Employee of The Coastal Corporation ("the Corporation") or
a wholly owned subsidiary thereof (collectively, the "Employers") beginning
_______________________. (Note: After initial enrollment, changes can be made
only as of January 1 of a subsequent year.)
The portion of my compensation for the year to be deferred is:
_______ All of my compensation in excess of $1,000,000;
_______ % of my performance bonus; and/or
_______ % of my salary.
The proceeds of my Account under the Plan are to be distributed following my
termination of service as an Employee of the Corporation and all other
Employers:
_______ As a single sum upon termination of service;
_______ As a single sum in the calendar year following the calendar year of
such termination of service;
_______ As installments on a monthly basis for a period of _______ months;
or
_______ As specified below:
_________________________________________________
I hereby designate _____________________________ as my beneficiary to
receive all amounts held for me under the Plan which have not been paid to me in
the event of my death.
- ---------------------------------- -----------------------------------------
Witness Date_____________________________________
4
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EXHIBIT 10.16
PENSION PLAN
FOR EMPLOYEES OF
THE COASTAL CORPORATION
As of January 1, 1993
Includes Plan as Restated as of January 1, 1989 and
First Amendment dated July 27, 1992
Second Amendment dated December 9, 1992
Third Amendment dated October 29, 1993
<PAGE>
PENSION PLAN FOR EMPLOYEES OF
THE COASTAL CORPORATION
TABLE OF CONTENTS
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INTRODUCTION......................................................... 1
I. DEFINITIONS.......................................................... 3
1.1 "Accrued Benefit".............................................. 3
1.2 "Actuarial Equivalent"......................................... 3
1.2A "Average Annual Compensation".................................. 3
1.2B "Basic Compensation"........................................... 3
1.3 "Beneficiary".................................................. 4
1.4 "Board"........................................................ 4
1.5 "Break in Service"............................................. 4
1.5A "Coastal"...................................................... 4
1.6 "Code"......................................................... 4
1.7 "Committee".................................................... 4
1.8 "Company"...................................................... 4
1.9 "Compensation"................................................. 5
1.9A "Covered Compensation"......................................... 5
1.10 "Employee"..................................................... 5
1.11 "ERISA"........................................................ 6
1.11A "Final Average Compensation"................................... 6
1.12 "Final Average Earnings"....................................... 6
1.13 "Highly Compensated Participant"............................... 7
1.14 "Hour of Service".............................................. 7
1.15 "Normal Retirement Date"....................................... 8
1.15A "Normal Retirement Age"........................................ 8
1.16 "Participant".................................................. 8
1.16A "Period of Severance".......................................... 8
1.17 "Plan"......................................................... 8
1.18 "Plan Year".................................................... 8
1.19 "Related Employer"............................................. 8
1.20 "Retirement Date".............................................. 8
1.21 "Retirement Income"............................................ 9
1.22 "Spouse"....................................................... 9
1.22A "Subsidiary"................................................... 9
1.22B "Taxable Wage Base"............................................ 9
1.23 "Trust"........................................................ 9
1.24 "Trust Fund"................................................... 9
1.25 "Trustee"...................................................... 9
1.26 None........................................................... 9
1.27 None........................................................... 9
1.28 "Years of Service"............................................. 9
II. ELIGIBILITY AND PARTICIPATION........................................ 11
2.1 Employee........................................................ 11
2.2 Prior Plans..................................................... 11
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III. COMPANY CONTRIBUTIONS................................................ 11
3.1 Company Contributions.......................................... 11
3.2 Forfeitures.................................................... 11
3.3 Irrevocability................................................. 12
3.4 Contributions Conditioned on Qualification and Deductibility... 12
IV. PARTICIPANT CONTRIBUTIONS............................................ 12
4.1 Participant Contributions...................................... 12
4.2 Participant Contributions - Prior and Merged Plans............. 12
4.3 Accrued Benefit Derived from Employee Contributions............ 13
V. BENEFITS............................................................. 13
5.1 Normal Retirement Benefit...................................... 13
5.2 Postponed Retirement Benefit................................... 16
5.3 Early Retirement Benefit....................................... 16
5.4 Termination of Vested Participant.............................. 17
5.5 Death Benefits................................................. 17
5.6 Elective Deferral.............................................. 21
5.7 Suspension of Benefits......................................... 21
5.7A Alternative to Receive Retirement Income During Reemployment... 23
5.8 Maximum Benefit................................................ 23
VI. NORMAL AND OPTIONAL FORMS OF RETIREMENT INCOME....................... 26
6.1 Normal Form of Payment......................................... 26
6.2 Election of the Form of Benefits............................... 26
6.3 Optional Forms of Payment...................................... 27
6.4 Administrative Powers Relating to Payments..................... 28
6.5 General Limitation............................................. 28
6.6 Small Amounts.................................................. 28
6.7 Commencement of Benefits....................................... 29
6.8 No Guaranty of Benefits........................................ 30
6.9 Medium of Payments............................................. 31
6.10 Assets for Benefit Payment..................................... 31
6.11 Funding Through Insurance Contracts............................ 31
VII. PLAN ADMINISTRATION.................................................. 31
7.1 Company Responsibility......................................... 31
7.2 Powers and Duties of Committee................................. 32
7.3 Organization and Operation of Committee........................ 32
7.4 Records and Reports of Committee............................... 32
7.5 Claims Procedure............................................... 32
7.6 Compensation and Expenses of Committee......................... 33
7.7 Indemnity of Committee Members................................. 33
7.8 Standard of Judicial Review.................................... 33
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VIII.THE TRUSTEE.......................................................... 33
8.1 Trustee........................................................ 33
8.2 Payment of Benefits............................................ 33
IX. PROVISION TO PREVENT DISCRIMINATION.................................. 33
9.1 Purpose........................................................ 33
9.2 Definitions.................................................... 34
9.3 Limitations.................................................... 34
9.4 Employees Whose Benefits are Restricted........................ 34
9.5 Determination Date for Assets and Liabilities.................. 35
X. ROLLOVER CONTRIBUTIONS............................................... 35
10.1 Rollovers and Transfers from Other Plans....................... 35
XI. AMENDMENT AND TERMINATION............................................ 35
11.1 Amendment...................................................... 35
11.2 Involuntary Termination of Plan................................ 35
11.3 Voluntary Termination of or Permanent Discontinuance of
Contributions to the Plan...................................... 35
11.4 Effect of Termination or Discontinuance of Contributions....... 36
11.5 Distribution of Funds Upon Termination......................... 36
11.6 Method of Payment.............................................. 36
11.7 Notice of Amendment, Termination or Partial Termination........ 37
XII. MISCELLANEOUS........................................................ 37
12.1 Duty To Furnish Information and Documents...................... 37
12.2 Committee's Annual Statements and Available Information........ 37
12.3 No Enlargement of Employment Rights............................ 37
12.4 Applicable Law................................................. 37
12.5 Unclaimed Funds................................................ 37
12.6 Merger or Consolidation of Plan................................ 37
12.7 Interest Nontransferable....................................... 38
12.8 Prudent Man Rule............................................... 38
12.9 Limitations on Liability....................................... 38
12.10 Headings....................................................... 38
12.11 Gender and Number.............................................. 38
12.12 ERISA and Approval Under Code.................................. 38
12.13 Extension of Plan to Related Employers......................... 39
12.14 Amendment Procedure............................................ 39
12.15 Expenses of Administration..................................... 39
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<C> <S> <C>
XIII.TOP-HEAVY PROVISIONS................................................ 39
13.1 Top-Heavy Status.............................................. 39
13.2 Definitions................................................... 39
13.3 Determination of Top-Heavy Status............................. 40
13.4 Actuarial Assumptions......................................... 40
13.5 Vesting....................................................... 41
13.6 Minimum Benefit............................................... 41
13.7 Compensation.................................................. 42
13.8 Collective Bargaining Agreements.............................. 42
13.9 Maximum Allocation............................................ 42
13.10 Safe-Harbor Rule.............................................. 42
FIRST SUPPLEMENT......................................................... 43
SECOND SUPPLEMENT........................................................ 52
THIRD SUPPLEMENT......................................................... 56
FOURTH SUPPLEMENT........................................................ 85
FIFTH SUPPLEMENT......................................................... 86
SIXTH SUPPLEMENT......................................................... 86
SUFCO/UFCO SUPPLEMENT.................................................... 87
</TABLE>
4
<PAGE>
PENSION PLAN FOR EMPLOYEES OF THE
---------------------------------
COASTAL CORPORATION
-------------------
January 1, 1993
---------------
Includes Plan as Restated as of January 1, 1989,
------------------------------------------------
First Amendment dated July 27, 1992
-----------------------------------
and Second Amendment dated December 9, 1992
-------------------------------------------
INTRODUCTION
------------
COASTAL PLAN
------------
As of July 1, 1973, the Pension Plan for Salaried Employees of Coastal
States Gas Corporation and the Pension Plan for Hourly-Wage Employees of Coastal
States Gas Corporation were adopted in order to combine the pension plan
provisions as related to salaried and hourly-wage employees, respectively, of
Coastal States Gas Producing Company, Colorado Interstate Corporation, CIC
Industries, Inc. and Union Petroleum Corporation.
As of January 1, 1976 the pension plans for both salaried employees and
hourly-wage employees were restated and retitled the Pension Plan for Exempt
Employees of Coastal States Gas Corporation and the Pension Plan for Non-Exempt
Employees of Coastal States Gas Corporation, respectively. The provisions of
the plans as effective January 1, 1976 applied only to persons who were active
employees or on an approved leave of absence as of January 1, 1976. Any former
employee of Coastal States Gas Corporation and any of its subsidiaries who had
retired or whose service had been terminated on or before January 1, 1976 was
eligible only for those benefits, if any, which were provided by the plans that
were in effect prior to January 1, 1976 and any benefits provided by subsequent
Plan provisions which specifically included such former employees. Upon
reemployment after January 1, 1976 such former employees may become entitled to
benefits under the plans as in effect after such date, but only in accordance
with provisions of those plans.
As of September 1, 1977 the exempt and non-exempt plans were merged into
a single plan titled "Pension Plan for Employees of Coastal States Gas
Corporation" and the trusts associated with the two plans were merged into a
single trust entitled "The Pension Trust For Employees of Coastal States Gas
Corporation."
As of December 31, 1979, the name of the plan was changed to "Pension
Plan For Employees of The Coastal Corporation" (hereinafter the "Coastal Plan").
As of January 1, 1980, the name of the trust was changed to "Pension Trust For
Employees of The Coastal Corporation."
As of January 1, 1982, the name of the trust was changed to "The Coastal
Corporation Pension Trust." As of July 19, 1983, an additional trust known as
"The Coastal Corporation Second Pension Trust" was adopted.
As of January 1, 1985 the Pension Plan for Employees of The Coastal
Corporation was again restated to incorporate all of the various amendments and
supplements which had been adopted prior to 1985 into a single document.
As of January 1, 1989, the Pension Plan for Employees of The Coastal
Corporation was restated to incorporate all of the various amendments and
supplements which had been adopted as of such date into a single document.
These supplements included two added as of January 1, 1989, with respect to the
merger into the Coastal Plan of the American Natural Resources System Companies
Employees' Retirement Plan (hereinafter the "ANR Plan") and The Coastal Refinery
Employees' Pension Plan (hereinafter the "Refinery Plan") which are discussed in
the following paragraphs.
1
<PAGE>
ANR PLAN
--------
The initial effective date of the ANR Plan is January 1, 1960. It was
amended and restated as of January 1, 1975 and again as of January 1, 1986.
As of January 1, 1989, the ANR Plan merged into the Coastal Plan.
REFINERY PLAN
-------------
As of July 1, 1969, the Retirement Plan for Employees of Caney Branch
Coal Company, Inc. was adopted to provide retirement benefits to eligible
employees of Caney Branch Coal Company, Inc.
On October 3, 1980, certain assets of Caney Branch Coal Company, Inc.
were acquired by McCoy Caney Coal Company. McCoy Caney Coal Company continued
the Plan in order to provide retirement benefits for Plan Participants and for
its eligible employees including former employees of Caney Branch Coal Company,
Inc. who were Plan Participants and who were subsequently employed by McCoy
Caney Coal Company.
As of July 1, 1985, the Retirement Plan for Employees of Caney Branch
Coal Company, Inc. was restated.
As of July 1, 1987, the Retirement Plan for Employees of Caney Branch
Coal Company, Inc. was amended to change the name of the Plan to "The Coastal
Corporation Refinery Employees' Pension Plan" (hereinafter the "Refinery Plan"),
to provide for adoption of the Plan by Related Companies, and to amend the Plan
with respect to Service after 1985 for Related Companies who adopted the Plan
and with respect to Service for McCoy Caney Coal Company after 1987.
As of July 1, 1987, Derby Refining Company adopted the Plan with respect
to field class, nonexempt employees at its El Dorado refining facility. The
Plan provisions as of the time of adoption also apply for all Service at Derby
Refining Company prior to such adoption.
As of January 1, 1989, the Refinery Plan was merged into The Coastal
Plan.
SUFCo RETIREMENT PLAN
---------------------
As of January 1, 1976, the Retirement Plan for Mining Employees of
Southern Utah Fuel Company and the Retirement Trust for Mining Employees of
Southern Utah Fuel Company were adopted in order to facilitate the retirement of
eligible employees.
As of January 1, 1979 the pension plan and the trust were renamed the
"SUFCo Retirement Plan" (hereinafter the "SUFCo Plan") and the "SUFCo Retirement
Trust", respectively.
As of July 19, 1983 an additional trust known as "SUFCo Second
Retirement Trust" was adopted.
As of January 1, 1985 the SUFCo Plan was restated to incorporate all of
the various amendments which had been adopted prior to 1985 into a single
document.
As of January 1, 1992 the SUFCo Plan was merged into the Coastal Plan
and a supplement was added to the Coastal Plan which applies to participants in
the SUFCo Plan prior to the merger.
2
<PAGE>
TERMINATION OF SERVICE
----------------------
This document contains the provisions in effect as of the dates
indicated and applies to former employees and participants in the various
predecessor plans only to the extent specified in this Plan or required by
applicable statutes, including ERISA and the Code. Any person entitled to a
benefit for prior service shall have such benefit computed pursuant to the
provisions of the Plan which covered such person at the time of such service
unless this document specifically includes provisions to the contrary with
respect to such service. The benefits due a participant upon termination of
employment are established by provisions of the Plan in effect at the time of
such termination unless specifically stated to the contrary in a subsequent
amendment to the Plan.
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used herein the following words and phrases shall have the
meanings stated below unless a different meaning is required by the context.
1.1 "Accrued Benefit" means the amount of Retirement Income payable to
a Participant in the normal form described in Section 6.1 of the Plan,
commencing at his Normal Retirement Date, as computed under Section 5.1 of the
Plan considering the Participant's Basic Compensation and his Years of Service
to the date of his termination of employment with the Company.
1.2 "Actuarial Equivalent" means any one of two or more benefits of
equivalent value as determined actuarially on the basis of such rate of interest
and rates of mortality as shall have been adopted by the Company for such
purpose. Until and unless the Plan is amended to change such assumptions, the
mortality rates used shall be those of the Unisex Pension Mortality Table
Projected to 1984 and the assumed interest rate shall be eight percent,
compounded annually. For purposes of determining single-sum cash settlements
under the Plan including Sections 6.6, and 11.6, the interest rate used shall be
(a) the interest rate that would be used (as of the date of distribution) by the
Pension Benefit Guaranty Corporation for purposes of determining the present
value of a lump-sum distribution on plan termination if the Participant's vested
Accrued Benefit (using such rate) does not exceed $25,000, or (b) 120% of such
PBGC rate if the Participant's vested Accrued Benefit exceeds $25,000 (as
determined under clause (a)). In no event, however, shall the present value
determined under clause (b) be less than $25,000.
1.2A "Average Annual Compensation" means the average over a period of 3
consecutive Plan Years of the Employee's Compensation plus any amounts
contributed by the Company, a Related Employer or a Subsidiary pursuant to a
salary reduction agreement and which is not includible in the gross income of
the Employee under Section 125, 402(a)(8), 402(h) or 403(b) of the Code. The 3
consecutive Plan Year period shall be the 3 Plan Years of the 10 most recent
Plan Years during which the calculation will yield the highest average. The
periods of 3 consecutive Plan Years and 10 most recent Plan Years shall not
include any Plan Year in which the Employee has less than 1,000 Hours of Service
and the Plan Year in which the Employee terminates employment. For this purpose,
the year before and the year after a year in which the Employee has less than
1,000 Hours of Service are deemed consecutive years.
In no event shall Average Annual Compensation of a Participant taken
into account under the Plan for any Plan Year exceed $150,000 (or such greater
amount provided pursuant to Section 401(a)(17) of the Code).
1.2B "Basic Compensation" means fixed salaries and wages per hour based
on an eight hour per day schedule and sales commissions earned after June 30,
1991 paid to the Employee by the Company, a Subsidiary or a Related Employer for
the Plan Year excluding (a) any compensation for overtime services, commissions
(except sales commissions earned after June 30, 1991), bonuses, expense
allowances or other incentive compensation and (b) the Company, a Subsidiary or
Related Employer cost or contribution for any employee benefit plan, including
this Plan. For this purpose, an Employer contribution pursuant to a salary
reduction agreement to a plan which meets the qualification requirements of
Section 401(k) of the Code and any amount which is excluded from gross income
3
<PAGE>
pursuant to Section 125 of the Code are included in Basic Compensation. In no
event shall the Basic Compensation of a Participant taken into account under the
Plan for any Plan Year exceed $150,000 (or such greater amount provided pursuant
to Section 401(a)(17) of the Code).
1.3 "Beneficiary" means any person or persons designated as such by the
Participant on a form supplied by the Administrator to receive Retirement Income
payable under the provisions of Articles IV, V and VI of the Plan. If no such
designation is in effect at the time of the death of the Participant, or if no
person so designated shall survive the Participant, the Beneficiary shall be the
Spouse of the Participant if then living, otherwise the legal representative of
such deceased Participant; or if there shall be no such legal representative
duly appointed and qualified within six months of the date of death of such
deceased Participant, then such persons as, at the date of his death, would be
entitled to share in the distribution of such deceased Participant's personal
estate under the provisions of the statute governing the descent of intestate
property, then in force and effect in the state, or foreign jurisdiction outside
the United States, of which the Participant was a resident at the date of his
death, in the proportions specified in such statute. The determination by the
Administrator of the identity of such person or persons shall be final,
conclusive and binding on all persons, and the Administrator shall be fully
protected and shall incur no liability regardless of any error that it may make
in such determination.
1.4 "Board" means the Board of Directors of Coastal.
1.5 (a) "Break in Service", means a Period of Severance of at least
twelve consecutive months. A Break in Service shall be deemed to
commence on the first day of the Period of Severance and shall be deemed
to end on the day in which the Employee again performs an Hour of
Service for the Company.
(b) If any Employee who is absent from work with the Company
because of (i) the Employee's pregnancy, (ii) the birth of the
Employee's child, (iii) the placement of a child with the Employee in
connection with the Employee's adoption of the child, or (iv) caring for
such child immediately following such birth or placement, shall be
absent for such reason beyond the first anniversary of the first date of
absence, his Period of Severance, solely for purposes of preventing a
Break in Service, shall commence on the second anniversary of the first
day of such absence. The period of time between the first and second
anniversaries of the first date of such absence shall not be counted as
a Period of Severance or a period of employment.
(c) The provisions of subsection (b) will not apply to an Employee
unless the Employee furnishes to the Administrator such timely
information that the Administrator may reasonably require to establish
(i) that the absence from work is for one of the reasons specified in
subsection (b) and (ii) the number of days for which there was such an
absence.
1.5A "Coastal" means The Coastal Corporation, a Delaware corporation, or
any successor corporation resulting from a merger or consolidation with Coastal
or a transfer of substantially all of the assets of Coastal, if such successor
or transferee shall adopt and continue the Plan by appropriate corporate action,
pursuant to Section 11.2 of the Plan.
1.6 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.7 "Committee" means the Plan Administrative Committee described in
Section 7.1 of the Plan.
1.8 (a) "Company" means The Coastal Corporation, Subsidiaries and
Related Companies. Provided, however, that where required by the
context, statute or regulation, Company refers to Coastal, Related
Companies, Subsidiaries or combinations of such entities which are in
the same controlled group (as described in the definition of Related
Employer) as is appropriate.
(b) Notwithstanding the preceding subsection (a) of this Section
1.8, any period of employment with a Subsidiary or a Related Employer
prior to the time such Subsidiary or a Related
4
<PAGE>
Employer became a Subsidiary or a Related Employer shall be included for
purposes specified in such preceding subsection (a) only if the Plan
specifically provides for such inclusion.
1.9 "Compensation" means an Employee's total earnings from the Company
paid during a Plan Year for Services rendered, including bonuses, overtime and
commissions, but excluding any contributions or benefits under this Plan or any
other pension, profit sharing, insurance, hospitalization or other plan or
policy maintained by the Company for the benefit of such Employee, and all other
extraordinary and unusual payments. Notwithstanding the preceding provisions of
this Section 1.9, for purposes of Sections 5.8 and 13.6, compensation shall have
the meaning set forth in Sections 5.8(j). In no event shall the Basic
Compensation of a Participant taken into account under the Plan for any Plan
Year exceed $150,000 (or such greater amount provided pursuant to Section
401(a)(17) of the Code).
1.9A "Covered Compensation" means the average (without indexing) of the
taxable wage bases in effect for the Employee for each calendar year during the
35 year period ending with the last day of the calendar year in which the
Employee attains (or will attain) social security retirement age. The Covered
Compensation of an Employee is automatically adjusted for each Plan Year.
1.10 "Employee" means an individual employed as a Regular Employee by
the Company, a Subsidiary, or a Related Employer during a period of time with
respect to which the Company, such Subsidiary or a Related Employer has adopted
the Plan subject to the definitions and restrictions which follow.
(a) "Regular Employee" means a person employed in an established
job which is normally scheduled for at least twenty hours per week. A
Regular Employee who ceases to be an active employee because such person
becomes disabled and eligible to receive disability income benefits
under a disability plan maintained by the Company, a Subsidiary or
Related Employer shall be considered a Regular Employee during the
period of time such person is eligible to receive disability income
under such disability plan and is credited with Hours of Service
pursuant to provisions of this Plan. Persons employed for a specific
period of time or for the duration of a specific project are classified
as temporary employees and are not Regular Employees. Persons who are
on unpaid leave of absence are not Regular Employees during such
absence.
(b) "Employee" does not include any individual covered by a
collective bargaining agreement between employee representatives and the
Company, a Subsidiary or a Related Employer if retirement benefits were
the subject of good faith bargaining between such employee
representatives and the Company, Subsidiary or a Related Employer and
such individual is not required by such agreement to be covered by this
Plan.
(c) A person employed by the Company, a Subsidiary or a Related
Employer during a period of time with respect to which such employer
does not adopt the Plan shall not be considered an Employee due to such
employment.
(d) Any person who is, with respect to the United States, a
nonresident alien and who does not receive earned income from sources
within the United States from the Company, a Subsidiary or a Related
Employer is not an Employee with respect to such periods of time.
(e) Any person who is eligible to participate in any other defined
benefit pension plan maintained by the Company, a Subsidiary or a
Related Employer is not an Employee for purposes of this Plan with
respect to employment which provides eligibility for such other plan.
(f) Any United States citizen on the payroll of a foreign
Subsidiary shall be considered to be employed by a domestic Subsidiary
provided there is in effect an agreement between the Internal Revenue
Service and such domestic Subsidiary which requires such domestic
Subsidiary to pay, with respect to foreign Hours of Service, an amount
equivalent to the tax under the Federal Insurance Contributions Act, and
provided further that contributions under a funded plan of deferred
5
<PAGE>
compensation are not provided by any other person with respect to the
remuneration paid to such United States citizen by such foreign
Subsidiary.
(g) A person who is not an employee of the Company, a Subsidiary
or a Related Employer and who performs services for the Company,
Subsidiary or a Related Employer pursuant to an agreement between the
Company, a Subsidiary or a Related Employer and a leasing organization
shall be considered a "leased employee" after such person performs such
services for a twelve-month period and the services are of a type
historically performed by employees. A person who is considered a
leased employee of the Company, a Subsidiary or a Related Employer shall
not be considered an Employee for purposes of the Plan. If a leased
employee subsequently became an Employee and thereafter participates in
the Plan, he shall receive credit for vesting under Section 5.4 for his
period of employment as a leased employee, except to the extent that
Section 414(n)(5) of the Code was satisfied with respect to such
Employee while he was a leased employee.
(h) Prior to April 1, 1990, Employee was not limited to Regular
Employee.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974,
Public Law No. 93-406, as amended and in force from time to time.
1.11A "Final Average Compensation" means the Average Annual
Compensation of the Employee calculated for the 3 consecutive Plan Year period
ending prior to the year the Employee terminates employment. If the Employee has
not received Compensation from the Company, a Related Employer or a Subsidiary
for 3 Plan Years, the entire period during which such Employee received
Compensation shall be used in the calculation. In determining Final Average
Compensation for an Employee, Average Annual Compensation in excess of the
Taxable Wage Base in effect at the beginning of that year shall not be taken
into account.
1.12 (a) "Final Average Earnings" means twelve times the Employee's
average monthly rate of Basic Compensation during the five consecutive
calendar years within the last ten calendar years of his Years of
Service affording the highest such average. The Employee's average
monthly rate of Basic Compensation will be determined by dividing the
total Basic Compensation received by him during such five-calendar-year
period by the number of months for which he received Basic Compensation
in such five-calendar-year period.
(b) The number of months for which he received Basic Compensation
will be computed, to the extent he was paid on other than a monthly
basis, by determining the number of pay periods ending within such five-
calendar-year period for which he received Basic Compensation from the
Employer and converting such pay periods into months. Such conversions,
for years after 1991, shall be based on factors derived using the
average of 365.25 days per calendar year and, for years before 1992, by
dividing the number of pay periods, if weekly, by 4-1/3, if biweekly, by
2-1/6, and, if semi-monthly, by 2.
(c) In computing Final Average Earnings for an Employee who has
begun to receive Basic Compensation following a full calendar year or
calendar years during which he did not receive Basic Compensation
because of a leave of absence granted by the employer or because of his
reemployment prior to a Break in Service, such full calendar year or
calendar years during which he did not receive Basic Compensation shall
be ignored or excluded in determining the ten calendar years and the
five successive calendar years to be used in determining the Employee's
Final Average Earnings at a subsequent date.
(d) An Employee who was disabled due to illness or injury and was
eligible to receive disability income benefits under a disability plan
maintained by the Company, a Subsidiary or a Related Employer shall have
his Final Average Earnings based upon his last rate of Basic
Compensation prior to such eligibility to receive such disability
benefits for the period of time such Employee was eligible to receive
such disability benefits and was credited with Hours of Service pursuant
to provisions of this Plan.
6
<PAGE>
1.13 "Highly Compensated Participant" means a Participant who, during
the current Plan Year or the preceding Plan Year, (a) was at any time a five-
percent owner of the Company, (b) received Compensation from the Company in
excess of $75,000 (or such greater amount provided by the Secretary of the
Treasury pursuant to Section 414(q) of the Code), (c) received Compensation from
the Company in excess of $50,000 (or such greater amount provided by the
Secretary of the Treasury pursuant to Section 414(q) of the Code) and was in the
top-paid group of Employees for such Year, or (d) was at any time an officer of
the Company and received Compensation from the Company greater than 50% of the
amount in effect under Section 415(b)(1)(A) of the Code for such Plan Year. The
provisions of Section 414(q) of the Code shall apply in determining whether a
Participant is a Highly Compensated Participant. The Company for any Plan Year
may elect to identify Highly Compensated Participants based upon the current
Plan Year to the extent permitted by Section 414(q) of the Code and Regulations
issued thereunder.
1.14 (a) "Hour of Service" for all purposes except vesting means (i)
each Hour for which an Employee is paid or entitled to payment for the
performance of duties for the Company, a Subsidiary or a Related
Employer; and (ii) each Hour for which an Employee is directly or
indirectly paid by the Company, a Subsidiary or a Related Employer or is
entitled to payment from the Company, a Subsidiary or a Related Employer
during which no duties are performed by reason of vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military
duty or leave of absence. Each Hour of Service for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by
the Company, a Subsidiary or a Related Employer shall be included under
either (i) or (ii) as may be appropriate. Hours of Service shall be
credited:
(A) in the case of Hours referred to in clause (i) of the first
sentence of this subsection, for the computation period in which
the duties are performed;
(B) in the case of Hours referred to in clause (ii) of the
first sentence of this subsection, for the computation period or
periods in which the period during which no duties are performed
occurs; and
(C) in the case of Hours for which back pay is awarded or
agreed to by the Company, a Subsidiary or a Related Employer for
the computation period or periods to which the award or agreement
pertains rather than to the computation period in which the award,
agreement or payment is made.
(b) In determining Hours of Service an Employee who is employed by
the Company, a Subsidiary or a Related Employer on other than an hourly
rated basis shall be credited with ten Hours of Service per day for each
day the Employee would, if hourly rated, be credited with service
pursuant to clause (i) of the first sentence of subsection (a). If an
Employee is paid for reasons other than the performance of duties
pursuant to clause (ii) of the first sentence of subsection (a): (i) in
the case of a payment made or due that is calculated on the basis of
units of time, an Employee shall be credited with the number of
regularly scheduled working hours included in the units of time on the
basis of which the payment is calculated; and (ii) an Employee without a
regular work schedule shall be credited with eight Hours of Service per
day (to a maximum of forty Hours of Service per week) for each day that
the Employee is so paid. Hours of Service shall be calculated in
accordance with Department of Labor Regulations Section 2530.200b-2 or
any future legislation or regulation that amends, supplements or
supersedes that section.
(c) Hour of Service includes each Hour for which an Employee or a
former Employee is disabled and eligible to receive disability income
benefits under a disability plan maintained by the Company, a Subsidiary
or a Related Employer. Hours of Service during such disability periods
shall be determined pursuant to the procedure in subsection (b) for an
Employee without a regular work schedule. Provided, however, that if the
cause of the disability of such disabled Employee or former Employee is
nonoccupational, Hours of Service credited pursuant to this provision
shall not exceed the greater of the number of Hours of Service equal to
three Years of Service or the number of Hours
7
<PAGE>
of Service such Employee or former Employee had credited under the Plan
prior to the time such Employee or former Employee became disabled.
(d) Hour of Service for purposes of vesting only, means an hour
for which an Employee is paid or entitled to payment by the Company, a
Subsidiary or a Related Employer for the performance of duties for the
Company, a Subsidiary or a Related Employer and an hour for which an
Employee or a former Employee is disabled and eligible to receive
disability income benefits under a disability plan maintained by the
Company, a Subsidiary, or a Related Employer. Provided, however, that if
the cause of the disability of such disabled Employee or former Employee
is nonoccupational, Hours of Service credited pursuant to this provision
shall not exceed the greater of the number of Hours of Service equal to
three Years of Service or the number of Hours of Service such Employee
or former Employee had credited under the Plan prior to the time such
Employee or former Employee became disabled. Hours of Service during
such disability periods shall be determined pursuant to the procedure in
subsection (b) for an Employee without a regular work schedule.
1.15 "Normal Retirement Date" means the first day of the calendar month
next following the date the Participant attains Normal Retirement Age. The
Accrued Benefit of a Participant shall become nonforfeitable and fully vested on
his attainment of Normal Retirement Age.
1.15A "Normal Retirement Age" means the date the Participant attains
the age of sixty-five years except that, in the case of a Participant who
commences participation in the Plan after attainment of sixty years of age,
Normal Retirement Age is the fifth anniversary of the date such Participant
commenced participation in the Plan. For purposes of this definition,
participation shall include the Year of Service required to be eligible to
become a Participant in the Plan. The Accrued Benefit of a Participant shall
become nonforfeitable and fully vested upon attainment of Normal Retirement Age
while employed by the Company, a Subsidiary or a Related Employer.
1.16 "Participant" means an Employee who meets the eligibility
requirements of Sections 2.1 or 2.2 of the Plan. An Employee, however, who has
deposited a rollover contribution pursuant to Article X shall be deemed a
Participant for purposes of the Plan to the extent that the provisions of the
Plan apply to the Transfer Account of such Employee.
1.16A "Period of Severance" means a continuous period of time during
which an Employee is not employed by the Company. Such a period shall begin on
the earlier of: (i) the day on which the Employee quits, retires, is discharged
or dies; or (ii) the first anniversary of the date on which the Employee
separates from service with the Company for any reason other than the reasons
set forth in clause (i) above, such as vacation, holiday, sick-ness, disability,
leave of absence or layoff. A Period of Severance shall end on the date on
which an Employee again performs an Hour of Service for the Company. A Period of
Severance does not include a period of time for which an Employee or former
Employee is credited with an Hour of Service.
1.17 "Plan" means the "Pension Plan for Employees of The Coastal
Corporation" as described in this instrument, including supplements and as it
may be amended and in force from time to time.
1.18 "Plan Year" is the fiscal year of Coastal, which is currently
designated as the twelve-month period from January 1 through December 31 of each
year.
1.19 "Related Employer" means: (i) any corporation that is a member of a
controlled group of corporations (as defined in Section 414(b) of the Code) that
includes the Company; (ii) any trade or business (whether incorporated or
unincorporated) that is under common control (as defined in Section 414(c) of
the Code) with the Company; and (iii) any member of an affiliated service group
(as defined in Section 414(m) of the Code) that includes the Company.
1.20 "Retirement Date" means a Participant's "Normal Retirement Date,"
"Postponed Retirement Date" or "Early Retirement Date," as defined in Sections
1.15, 5.2 and 5.3 of the Plan respectively.
8
<PAGE>
1.21 "Retirement Income" means a pension or any other payment or
payments payable under the terms of the Plan.
1.22 "Spouse" means the person who is legally married to a Participant
throughout the one-year period ending on the earlier of the date on which
Retirement Income payments to the Participant commence or the date of such
Participant's death. For purposes of the preceding sentence, if a Participant
marries a person within the one-year period preceding the date on which
Retirement Income payments to him commence, and the Participant remains married
to such person for at least a one-year period ending on or before the date of
the Participant's death, then the Participant and such person will be treated as
having been married throughout the one-year period ending on the date Retirement
Income payments to the Participant commence.
1.22A "Subsidiary" means any corporation or unincorporated trade,
business or partnership in which Coastal owns or controls, directly or
indirectly, at least fifty percent of the outstanding voting securities in such
corporation or at least fifty percent of the ownership interest in such
unincorporated entity.
1.22B "Taxable Wage Base" means the contribution and benefit base under
section 230 of the Social Security Act.
1.23 "Trust" means The Coastal Corporation Pension Trust and The Coastal
Corporation Second Pension Trust as amended from time to time.
1.24 "Trust Fund" means the cash and other properties held and
administered in accordance with the provisions of the Trust.
1.25 "Trustee" with respect to each Trust is defined in such Trust
agreement.
1.26 NONE
1.27 NONE
1.28 "Years of Service", means a period of time consisting of an
Employee's period of employment with the Company, a Subsidiary or a Related
Employer determined as follows. Years of Service is defined differently for
purposes of eligibility to participate, vesting and determination of Retirement
Income.
(a) Eligibility. (i) For purposes of eligibility to participate
in the Plan, Years of Service shall be based upon the twelve-
consecutive-month period commencing upon an Employee's date of
employment or reemployment with the Company, a Subsidiary or a
Related Employer for the initial year and thereafter shall be based
upon the calendar year.
(ii) For Plan Years before 1990, Years of Service for purposes
of eligibility are measured based upon the Employee's employment or
reemployment date and anniversaries thereof in lieu of the calendar
year. The amendment adopting the calendar year provision for years
after 1989 with respect to eligibility was dated February 6, 1990.
With respect to the period of time beginning on January 1, 1990 and
ending on February 6, 1990, an Employee shall receive the greater
of the Years of Service calculated using the provisions in effect
prior to 1990 and the provisions which became effective January 1,
1990 for purposes of determining eligibility to join the Plan.
(b) Vesting. For purposes of determining the vesting of a
Participant under the Plan, Years of Service means an aggregated period
of time commencing with an Employee's first day of employment or
reemployment and ending on the first day of a Period of Severance. An
Employee shall also receive credit for any Period of Severance of less
than twelve consecutive months. Fractional periods of less than a year
shall be expressed in terms of days. Notwithstanding the foregoing
provisions of this Section, if an Employee separates from the service of
the Company, a Subsidiary or a Related Employer for any reason other
than a quit, retirement or discharge (such as
9
<PAGE>
vacation, holiday, sickness, disability, leave of absence or layoff) and
subsequently quits, retires or is discharged, he will not receive more
than one Year of Service after he first separates from service.
Provided, however, that an Employee or former Employee may receive more
than one Year of Service if such person is credited with Hours of
Service pursuant to provisions relating to Hours of Service while a
person is disabled.
(c) Retirement Income. (i) For purposes of determining a
Participant's Retirement Income pursuant to Article V of the Plan,
Years of Service shall be measured in completed months based on
Plan Years, commencing with the day of the Plan Year during which
an Employee is initially employed, or is reemployed after a Break
in Service, and ending on the day of the Plan Year in which a Break
in Service commences.
(ii) For purposes of determining a Participant's Retirement
Income pursuant to Article V, a Participant's Years of Service
shall only include Plan Years in which he completes at least 1,000
Hours of Service as a Participant. For this purpose, a Participant
who was required to complete a Year of Service to be eligible to
participate in the Plan shall receive credit for the portion of
such Year of Service that such Participant was an Employee.
However, no Retirement Income is due to an Employee who has not met
the eligibility requirements to become a Participant. If a
Participant has fewer than 1,000 Hours of Service in his first or
last Year of Service, or both, his Years of Service for purposes of
determining his Retirement Income shall be combined and computed to
the nearest whole month to reflect the number of months in his
first and last Years of Service in which he completes Hours of
Service as a Participant.
(iii) For purposes of determining eligibility to participate
and Retirement Income under the Plan, Years of Service shall only
include Plan Years, or periods commencing on his date of employment
or reemployment, in which an Employee completes at least 1,000
Hours of Service with the Company, any Subsidiary and any Related
Employer.
(iv) Years of Service for purposes of determining a
Participant's Retirement Income shall not include any complete
calendar month during which the Employee was not credited with an
Hour of Service.
(v) Years of Service for purposes of determining a
Participant's Retirement Income shall not include any period of an
Employee's employment with the Company, a Subsidiary or Related
Employer prior to January 1, 1976 during a period of time when his
customary employment was for less than five months per year or for
less than 20 hours per week.
(vi) For purposes of determining a Participant's Retirement
Income under this Plan, including the reemployment provisions of
the Plan, Years of Service shall not include any period of a
Participant's employment prior to the date as of which the accrued
benefit of such Participant was transferred from this Plan to a
qualified pension plan maintained by an entity which is not an
Employer, a Subsidiary or a Related Employer. Provided, however,
that such Years of Service shall include such period if such
Participant is reemployed and such accrued benefit is transferred
back to this Plan.
(d) All Purposes. (i) Years of Service shall include any period
in which an Employee is absent to serve in the armed forces of the
United States under circumstances whereby he is entitled to reemployment
rights under applicable law, if he returns or offers to return to work
prior to the expiration of such reemployment rights; provided that
during such period of absence, hours shall be deemed to have been worked
and paid for at the usual and customary rate for the Employee preceding
the absence.
10
<PAGE>
(ii) Years of Service shall not include any period of an
Employee's employment for an organization prior to the date that it
became a Subsidiary or Related Employer and any period of an
Employee's employment for an organization whose business and assets
are acquired by the Company, a Subsidiary or Related Employer
shall, unless specific provision to the contrary is included in the
Plan.
(iii) If an Employee who has had a Break in Service is
reemployed by the Company, a Subsidiary or Related Employer, his
Years of Service shall include the Years of Service to his credit
at the time the Break in Service began, unless he had no vested
interest in his Accrued Benefit prior to such Break in Service and
the length of the Break in Service equals or exceeds the greater of
five Years of Service or the Years of Service to his credit at the
time such Break in Service began. Provided, however, that Years of
Service for periods of time before 1976 shall be added to Years of
Service after 1975 only for persons who were active employees or on
approved leave of absence as of January 1, 1976. For persons with
Years of Service under the ANR Plan, the preceding sentence shall
be applied by substituting 1975, 1974, and January 1, 1975 for
1976, 1975 and January 1, 1976, respectively.
(iv) Years of Service shall include a period of time for which
an Employee or former Employee is credited with an Hour of Service.
(v) Years of Service credited for a period of time during
which an Employee is absent from service for any reason other than
disability, jury duty or military leave may not exceed six months.
This limitation applies only for purposes of determining
eligibility to participate in the Plan and Retirement Income since
vesting is determined based on the elapsed time method.
ARTICLE II
----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
2.1 Employee. An Employee shall become a Participant on the later to
--------
occur of (a) January 1, 1989, or (b) the completion of one Year of Service
regardless of his age as of his initial date of employment with the Company, a
Subsidiary or a Related Employer.
2.2 Prior Plans. Each person who met the eligibility requirements and
-----------
was considered a participant pursuant to provisions of the Coastal Plan, the ANR
Plan or the Refinery Plan as of December 31, 1988, became a Participant in the
Plan as of January 1, 1989.
ARTICLE III
-----------
COMPANY CONTRIBUTIONS
---------------------
3.1 Company Contributions. During the continuance of the Plan the
---------------------
Company intends from time to time to pay to the Trustee, to be held or applied
under the Trust Agreement, such sums of money that, together with earnings of
the Trust Fund, will be sufficient to provide the benefits specified by the
Plan. The Company shall pay to the Trustee its contribution hereunder with
respect to a particular Plan Year within the period of time prescribed by law
for the filing of the Company's federal income tax return for such Year,
including extensions thereof duly granted. All Company contributions made under
the Plan are conditioned upon the qualification of the Plan under Section 401(a)
of the Code and upon deductibility of the contribution under Section 404 of the
Code.
3.2 Forfeitures. Any forfeiture under the Plan shall be applied to
-----------
reduce Company contributions and not to increase the benefits any Participant
would otherwise receive under the Plan.
11
<PAGE>
3.3 Irrevocability. The Company shall have no right, title, or
--------------
interest in or to the contributions made to the Trustee, and no part of the
Trust Fund shall ever revert or be repaid to the Company, either directly or
indirectly, except for such part of the Trust Fund, if any, that remains under
the Trust after the satisfaction of all liabilities to persons entitled to
benefits under the Plan. However, without regard to the foregoing provisions of
this Section 3.3:
(a) If a contribution under the Plan is conditioned on initial
qualification of the Plan under Section 401(a) of the Code, and the Plan
receives an adverse determination with respect to its initial
qualification, the Trustee shall, upon written request of the Company,
return to the Company the amount of such contribution (increased by
earnings attributable thereto and reduced by losses attributable
thereto) within one calendar year after the date that qualification of
the Plan is denied, provided that the application for the determination
is made by the time prescribed by law for filing the Company's return
for the taxable year in which the Plan is adopted, or such later date as
the Secretary of Treasury may prescribe;
(b) If a contribution is conditioned upon the deductibility of the
contribution under Section 404 of the Code, then, to the extent the
deduction is disallowed, the Trustee shall upon written request of the
Company return the contribution (to the extent disallowed) to the
Company within one year after the date the deduction is disallowed;
(c) If a contribution or any portion thereof is made by the
Company by a mistake of fact, the Trustee shall, upon written request of
the Company, return the contribution or such portion to the Company
within one year after the date of payment to the Trustee; and
(d) Earnings attributable to amounts to be returned to the Company
pursuant to subsection (b) or (c) above shall not be returned, and
losses attributable to amounts to be returned pursuant to subsection (b)
or (c) shall reduce the amount to be so returned.
3.4 Contributions Conditioned on Qualification and Deductibility. For
------------------------------------------------------------
purposes of the Plan, including Section 3.3 of this Article III, contributions
made prior to initial qualification of the Plan under 401(a) are conditioned on
such initial qualification and all other contributions under the Plan are
conditioned on deductibility under Section 404 of the Code. Any such
contribution under the Plan shall be returned to the Company if the Plan
receives an adverse determination with respect to its initial qualification or,
if a deduction under Section 404 of the Code is disallowed, to the extent of
such disallowance. The Company shall request the return of such contributions.
ARTICLE IV
----------
PARTICIPANT CONTRIBUTIONS
-------------------------
4.1 Participant Contributions. Participant contributions are not
-------------------------
permitted under the plan.
4.2 Participant Contributions - Prior and Merged Plans.
--------------------------------------------------
(a) Participant contributions made to the Plan under provisions of
predecessor and merged plans shall remain in the Plan subject to
withdrawal and benefit payment provisions in effect for any such
contributions in effect as of December 31, 1988 under the Plan.
(b) Plan assets attributable to Participant contributions shall
provide additional Retirement Income to the Participant in the same form
as the Retirement Income to be paid to the Participant under Article VI
hereof. The additional Retirement Income shall be paid at the same time
as the Retirement Income paid under Article V. However, if the
provisions of the plan pursuant to which such Participant contributions
were made specified the form or timing of payment of Retirement Income
attributable to such Participant contributions, such payment provisions
shall control to the extent that such requirements do not conflict with
Plan requirements required by ERISA and the Code.
12
<PAGE>
(c) The Accrued Benefit of a Participant with respect to Retirement
Income attributable to Participant contributions shall not increase due
to Hours of Service, Years of Service, Compensation, Basic Compensation,
or Final Average Earnings attributable to periods of time after December
31, 1988.
4.3 Accrued Benefit Derived from Employee Contributions
---------------------------------------------------
(a) The Accrued Benefit of a Participant derived from Mandatory
Contributions (as defined in this Section) of such Participant as of any
applicable date is the amount equal to the Participant's Accumulated
Contributions (as defined in this Section) expressed as an annual
benefit commencing at Normal Retirement Age, using an interest rate
which would be used under the Plan under Section 417(e)(3) of the Code
as of the determination date.
(b) Mandatory Contributions, as used herein, means amounts
contributed to the Plan by the Participant which were required as a
condition of employment, as a condition of participation in the Plan or
as a condition of obtaining benefits under the Plan attributable to
employer contributions. The Plan includes superseded plans.
(c) Accumulated Contributions, as used herein, means the total of:
(i) All Mandatory Contributions made by the Participant;
(ii) Interest, if any, under the Plan to the end of 1988; and
(iii) Interest on the sum of the amounts determined under
clauses (A) and (B) compounded annually:
(A) at a rate of 120 percent of the Federal mid-term rate
(as in effect under Section 1274 of the Code for the first
month of a Plan Year) for the period beginning with the year
1989 and ending with the date on which the determination is
being made, and
(B) at the interest rate which would be used under the
Plan under Section 417(e)(3) of the Code (as of the
determination date) for the period beginning with the
determination date and ending on the date on which the
Participant attains Normal Retirement Age.
(d) This Section shall supersede provisions to the contrary in
Supplements to the Plan.
ARTICLE V
---------
BENEFITS
--------
5.1 Normal Retirement Benefit.
-------------------------
(a) Basic Benefit Formula. A Participant who is 100% vested and
who retires on his Normal Retirement Date shall be entitled to the
Actuarial Equivalent of a Retirement Income for the life of the
Participant with payments commencing on his Normal Retirement Date, in
an annual amount equal to the greater of the amount computed under
Formula One or Formula Two.
(i) The amount computed under Formula One equals the product of
the vested percentage as determined under provisions of the Plan of
the Participant multiplied by the remainder of (A) minus (B), where
(A) equals two percent of the Final Average Earnings of the
Participant multiplied by the number of Years of Service of the
Participant to a maximum
13
<PAGE>
of thirty years and (B) equals one and one-half percent of the
Primary Social Security Amount to which the Participant is entitled
multiplied by the number of Years of Service of the Participant to
a maximum of thirty-three and one-third years.
(ii) The amount computed under Formula Two equals the product
of the Vested Percentage of the Participant multiplied by the
product of forty-eight dollars multiplied by the number of Years of
Service of the Participant.
(b) Social Security. Primary Social Security Amount means the
estimated annual primary insurance amount that may be payable to a
Participant commencing at the Normal Retirement Age of the Participant
under provisions of the Federal Social Security Act regardless of
whether the Participant applies for or actually receives such benefit.
Primary Social Security Amount shall be determined as follows:
(i) The estimated insurance amount shall be based on the
Social Security Act as in effect on December 31 coincident with or
immediately preceding the date the Participant terminates
employment with the Company, Subsidiaries and Related Employers.
(ii) In the case of a Participant whose employment terminates
prior to his attainment of Normal Retirement Age, the estimated
insurance amount will be based on the assumption that the
Participant will continue to receive (for the period from his
termination of employment until he attains his Normal Retirement
Age) compensation that would be treated as wages for purposes of
the Social Security Act at the same rate as he was receiving on the
date of his termination of employment.
(iii) Any change (by amendment to the Social Security Act or
by application of the provisions of the Act) occurring after the
termination of the Participant's employment with the Company,
Subsidiaries and Related Employers, shall not be taken into account
in determining the Primary Social Security Amount.
(iv) In determining the Primary Social Security Amount of a
Participant, the earnings history of the Participant with the
Company, Subsidiaries and Related Employers shall be used for all
Years of Service and it will be assumed that the Participant's
wages had increased each calendar year at the same rate as the
average of total wages (as specified in Section 215(b)-(3)(A)(11)
of the Social Security Act) for other periods prior to the most
recent termination of employment with the Company, Subsidiaries and
Related Employers.
(c) Benefit Adjustment for Termination of Employment Before
Attainment of Normal Retirement Age. The Retirement Income of a
Participant who terminates employment with the Company, Subsidiaries and
Related Employers before attainment of his Normal Retirement Age shall
have his Retirement Income adjusted as provided herein.
Retirement Income shall be calculated by substituting Years of
Service up to the maximum number of Years of Service specified in the
applicable benefit formula which the Participant would have attained had
he continued to earn uninterrupted Years of Service until his Normal
Retirement Age in lieu of his actual Years of Service and then
multiplying such Retirement Income amount by a fraction described in the
next sentence. The numerator of the fraction is the actual Years of
Service of the Participant at his date of termination of employment and
the denominator of the fraction is the Years of Service which the
Participant would have attained had he continued to earn uninterrupted
Years of Service until his Normal Retirement Age.
(d) Preretirement Survivor Annuity Benefit Reduction. The
Retirement Income of a Participant shall be reduced pursuant to the
Preretirement Survivor Annuity coverage provisions of Section 5.5.
14
<PAGE>
(e) Benefit adjustment due to periods of employment with the
Company, a Subsidiary or a Related Employer during which the Participant
did not qualify as an Employee including periods of time when the
Participant was eligible to participate in another pension plan
maintained by the Company, a Subsidiary or a Related Employer.
The Retirement Income of a Participant with Years of Service
before 1993 shall be determined with respect to Years of Service before
1993 using the assumptions stated in items (i), (ii) and (iii) of this
Section 5.1 (e). Years of Service after 1992 shall not be included in
the calculation of Retirement Income pursuant to the assumptions stated
in items (i), (ii) and (iii) of this Section 5.1 (e).
(i) The Retirement Income of such Participant shall be
calculated based upon the assumption that he qualified as an
Employee during the entire period of employment for the Company,
Subsidiaries and Related Employers and then such Retirement Income
amount shall be multiplied by a fraction described in Subsection
(ii) of this Section to determine the Retirement Income to which
such Participant is entitled.
(ii) The numerator of the fraction is the number of Years of
Service which the Participant accrued while qualified as an
Employee under the Plan. The denominator of the fraction is the
number of Years of Service calculated based on the assumption that
the Participant qualified as an Employee during the entire period
of employment with the Company, Subsidiaries and Related Employers.
(iii) There shall be no duplication of benefits between this
Plan and any other qualified pension plans maintained by the
Company, a Subsidiary or Related Employer based on the same periods
of employment, and any benefit payable under this Plan shall be
inclusive of or reduced by the actuarially equivalent benefit which
(A) is payable on behalf of such Participant under any other
qualified pension plan toward the cost of which the Company, a
Subsidiary or Related Employer has contributed for persons in their
employment who do not qualify as Employees as defined in this Plan
and (B) is based on a period of employment that the benefit payable
to such Participant under this Plan is also based.
(f) Minimum Benefit as of March 31, 1990. The Retirement Income
of a Participant shall not be less than the Retirement Income of such
Participant calculated as of March 31, 1990, pursuant to Plan provisions
as of such date but based upon the five year certain and life thereafter
form in lieu of the life only form in the Basic Benefit Formula
described in subsection (a) of this Section 5.1 as of March 31, 1990.
(g) Years of service with two or more Controlled Groups.
(i) The Retirement Income of a Participant which is
attributable to Years of Service with members of two or more
Controlled Groups (see Section 6.10) shall be determined with
respect to each such Controlled Group using the method described in
this subsection.
(ii) The Accrued Benefit used to determine Retirement Income
with respect to the first Controlled Group with respect to which
the Participant is credited with Years of Service shall be
determined pursuant to Plan provisions based on Years of Service
and Final Average Earnings with respect only to members of such
first Controlled Group. The Retirement Income based on such Accrued
Benefit shall be payable from the assets of such first Controlled
Group.
(iii) The Accrued Benefit used to determine Retirement Income
with respect to the second Controlled Group with respect to which
the Participant is credited with Years of Service shall be
determined pursuant to Plan provisions based on Years of Service
and Final
15
<PAGE>
Average Earnings with respect to members of both the first and
second Controlled Groups reduced by the value of the Accrued
Benefit determined with respect to the first Controlled Group. The
Retirement Income based on such Accrued Benefit shall be payable
from the assets of such second Controlled Group.
(iv) The Retirement Income of a Participant with respect to
additional Controlled Groups shall be determined using the same
method as described in this subsection. There shall be no
duplication of benefits with respect to the various Controlled
Groups.
5.2 Postponed Retirement Benefit. A Participant who wishes to do so
----------------------------
may continue as an Employee after his Normal Retirement Date. In such event,
his Postponed Retirement Date shall be the first day of the month next following
the date on which he actually retires from employment. A Participant who
retires on a Postponed Retirement Date shall be entitled to a Retirement Income
payable as provided in Article VI of the Plan, commencing on his Postponed
Retirement Date, in an amount equal to the amount determined under Section 5.1
of the Plan. A Participant who continues as an Employee after his Normal
Retirement Date may defer receipt of Retirement Income upon termination of
employment. Such deferral shall not extend beyond the age for required
distribution of Retirement Income pursuant to Plan provisions. Such Participant
shall be subject to the Plan provisions relating to vested terminated
Participants including reduction in Retirement Income under the Preretirement
Survivor Annuity provisions. In addition, the Retirement Income of such
Participant shall be actuarially adjusted to reflect the period of such deferral
of Retirement Income.
5.3 Early Retirement Benefit.
------------------------
(a) A Participant who has completed at least five Years of Service
may retire or terminate at any time on or after his fifty-fifth
birthday. In such event, his Early Retirement Date shall be the first
day of the month next following the date on which he retires or
terminates from employment with the Company provided that he has
completed at least five Years of Service and has attained fifty-five
years of age prior to such retirement or termination of employment. A
Participant who retires or terminates on an Early Retirement Date shall
be entitled to a Retirement Income determined pursuant to Section 5.1
payable as provided in Article VI of the Plan, commencing on his Normal
Retirement Date. A Participant who retires on an Early Retirement Date
may elect, by giving prior written notice to the Administrator, to have
his Retirement Income commence prior to his Normal Retirement Date and
as of his Early Retirement Date. In that event, he shall be entitled to
receive a Retirement Income in an amount equal to his Retirement Income
on his Normal Retirement Date reduced by one-third of one percent
thereof for each full calendar month in excess of thirty-six by which
the commencement of payments precedes his Normal Retirement Date.
(b) A Participant who has completed five Years of Service,
terminates on an Early Retirement Date, and does not elect to receive
Retirement Income as of his Early Retirement Date shall be eligible to
receive Retirement Income prior to his Normal Retirement Date by giving
prior written notice to the Administrator. The amount of such
Retirement Income shall be determined pursuant to the provisions of
Section 5.4 relating to Retirement Income of a terminated vested
Participant. Provided, however, that the Retirement Income of such
Participant shall not be less than the amount such Participant would
have received had he elected to receive Retirement Income as of his
Early Retirement Date.
16
<PAGE>
5.4 Termination of Vested Participant.
---------------------------------
(a) A Participant shall be entitled to a nonforfeitable right of a
percentage of his Accrued Benefits as follows:
<TABLE>
<CAPTION>
Years Nonforfeitable
of (Vested) Forfeitable
Service Percentage Percentage
------------ ---------------- --------------
<S> <C> <C>
Fewer than five years 0% 100%
Five years 100% 0%
</TABLE>
(b) A Participant who ceases to be an Employee shall be entitled to
receive Retirement Income payable pursuant to provisions of the Plan
equal to the nonforfeitable percentage of his Accrued Benefit on the date
of his termination of employment determined as set forth in paragraph (a)
next above. Any Accrued Benefit not payable to a Participant pursuant to
this Section 5.4 shall be deemed a forfeiture and shall be used to reduce
Company, Subsidiary or a Related Employer contributions to the Plan.
(c) The Retirement Income of a terminated Participant determined
pursuant to this Section shall be payable commencing as of his Normal
Retirement Date, as set forth in Article VI of the Plan, in an amount
equal to the nonforfeitable percentage of his Accrued Benefit. A
terminated Participant may elect, by giving prior written notice to the
Administrator, to have his Retirement Income commence prior to his
Normal Retirement Date on the first day of any month coincident with or
following his fifty-fifth birthday. In that event he shall be entitled
to receive a Retirement Income in an amount equal to his Retirement
Income on his Normal Retirement Date, actuarially reduced to reflect the
earlier starting date thereof.
(d) A vested Participant who receives credit for Years of Service
under the Plan for periods of time before April 1, 1990, shall be
eligible to receive Retirement Income commencing before Normal
Retirement Age in an amount equal to the greater of (i) the Retirement
Income calculated pursuant to provisions of subsections (a), (b) and (c)
of this Section 5.4, or (ii) the Retirement Income calculated using
Years of Service and Final Average Earnings as of March 31, 1990, and
reduced by one-third of one percent thereof for each full calendar month
in excess of thirty-six by which the commencement of payments precedes
his Normal Retirement Date.
5.5 Death Benefits.
--------------
(a)(i) If a Participant is vested in any portion of his Accrued
Benefit and has a Spouse, then a "Preretirement Survivor Annuity" shall
be provided to the surviving Spouse of the Participant if he dies while
in the employment of the Company or after termination of his employment
but before his Annuity Starting Date (as defined in paragraph (d)
below). If the Participant dies before attaining age fifty-five, the
Preretirement Survivor Annuity payable to his surviving Spouse shall be
a survivor annuity payable to the Spouse under which the payments to the
spouse are equal to the amount that would have been payable to the
Spouse as a survivor annuity if the Participant had terminated
employment with the Company on the date he died, attained age fifty-
five, retired with an immediate 50% Joint and Survivor Annuity (as
described in Section 6.1(a)) with the Spouse as contingent annuitant,
and died the next day. In the case of a Participant who dies after
terminating his employment with the Company, the preceding sentence
shall be applied without regard to the requirement that the Participant
be treated as though he had terminated employment with the Company on
the day he died. If the Participant dies after attaining age fifty-
five, then the Preretirement Survivor Annuity payable to his surviving
Spouse shall be a survivor annuity for the life of the Spouse under
which the payments to the Spouse are equal to the amount that would have
been payable to the Spouse as a survivor annuity if the Participant had
elected to begin receiving Retirement Income with an immediate 50% Joint
and Survivor Annuity with the Spouse as contingent annuitant on the day
17
<PAGE>
before his death. The Preretirement Survivor Annuity shall be reduced
to reflect the early commencement of payment of Retirement income as
provided in Sections 5.3 and 5.4. The Preretirement Survivor Annuity
shall be payable to the surviving Spouse in equal monthly installments
commencing on the later to occur of (i) the first day of the month
following the date of death of the Participant and (ii) the first day of
the month in which the Participant would have attained age fifty-five,
and shall terminate on the first day of the month in which the surviving
Spouse dies. The surviving Spouse may elect to defer the commencement
of payment of the Preretirement Survivor Annuity to a date not later
than the Participant's Normal Retirement Date and if such deferral is
elected the amount of payments shall be increased to reflect such
deferral as if the Participant had so deferred the commencement of
Retirement Income payments.
(ii) If a Participant who had completed twenty-five Years of
Service dies prior to attainment of fifty-five years of age and a
Preretirement Survivor Annuity is payable with respect to such
Participant, then such payments may begin, at the option of the Spouse,
as of the first day of any month following the date of death of the
Participant. If such payments begin before the date such Participant
would have attained fifty-five years of age, the amount of the payment
shall be determined as provided in the Plan for payment beginning as of
the first of the month after such Participant would have attained fifty-
five years of age and then such payment amount shall be actuarially
reduced to reflect the earlier date for beginning payments. Provided,
however, that this subsection (a)(ii) shall apply only to the Accrued
Benefit of such deceased Participant accrued as of December 31, 1992.
This option is not available for Accrued Benefit attributable to periods
of time after December 31, 1992.
(b) A Participant may elect at any time during the Election Period
(as defined in paragraph (d) below) to waive the Preretirement Survivor
Annuity and to revoke any such election at any time during the Election
Period. An election by a Participant to waive the Preretirement
Survivor Annuity shall not take effect unless the Participant's Spouse
consents in writing to such election, such consent acknowledges the
effect of such an election and the consent is witnessed by a
representative of the Plan or a notary public, unless the Participant
establishes to the satisfaction of the Administrator that such consent
may not be obtained because there is no Spouse, the Spouse cannot be
located or because of such other circumstances as the Secretary of the
Treasury may by regulations prescribe. The consent by a Spouse shall be
effective only with respect to that Spouse.
(c) The Administrator shall provide each Participant with a
written explanation with respect to the Preretirement Survivor Annuity
within the period beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age 35.
If the Participant enters the Plan after the first day of the Plan Year
in which he attains age 32, the Administrator shall provide him with the
explanation no later than the date 12 months after the date he enters
the Plan. If the employment of a Participant with the Company
terminates prior to the date he attains age 35, he must receive such
written explanation during the period beginning 12 months before the
date of termination of employment and ending on the date 12 months after
the date of termination of employment. If the Participant thereafter
returns to employment with the Company, he must again receive the
explanation within the twelve month period commencing on the date he
returns to employment. The explanation shall include (i) the terms and
conditions of the Preretirement Survivor Annuity, (ii) the Participant's
right to make, and the effect of, the revocation of an election to waive
the Preretirement Survivor Annuity, (iii) the rights of the
Participant's Spouse in connection therewith, and (iv) the right to
make, and the effect of, the revocation of an election to waive the
Preretirement Survivor Annuity.
(d) For purposes of this Section, the term "Election Period" means
the period that begins on the first day of the Plan Year in which the
Participant attains age thirty-five and ends on the date of the
Participant's death. In the case of a Participant whose employment with
the Company terminates, the applicable Election Period with respect to
benefits accrued before the date of termina-tion from employment shall
not begin later than the date of termination. The term "Annuity
Starting Date" means (i) the first day of the first period for which an
amount is payable as an annuity under
18
<PAGE>
the Plan, or (ii) in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred that entitle
the Participant to that benefit under the Plan.
(e) If a Participant does not elect to waive the Preretirement
Survivor Annuity in accordance with this Section, then for each month
during which the Preretirement Survivor Annuity is effective, the
Participant's benefits under the Plan (including benefits payable to the
surviving Spouse pursuant to this Section 5.5) shall be reduced for each
full month of coverage during the periods of time described in the
following provisions under the 50% Survivor Annuity provisions by an
amount as stated:
(i) For periods of coverage after 1988:
(A) one-twelfth of two and one half percent for each month
after the month in which the Participant attains seventy-five
years of age;
(B) one-twelfth of two and one-tenth percent for each
month during the period beginning after the month in which the
Participant attains seventy years of age and ending with the
month during which the Participant attains the age of seventy-
five years;
(C) one-tenth of one percent for each month during the
period beginning after the month in which the Participant
attains sixty-five years of age and ending with the month
during which the Participant attains the age of seventy years;
(D) one-twenty-fourth of one percent for each month during
the period beginning after the month in which the Participant
attains sixty years of age and ending with the month during
which the Participant attains the age of sixty-five years of
age;
(E) one-thirtieth of one percent for each month during the
period beginning after the month in which the Participant
attains fifty-five years of age and ending with the month
during which the Participant attains the age of sixty years;
(F) one-fortieth of one percent for each month during the
period beginning after the month in which the Participant
attains fifty years of age and ending with the month during
which the Participant attains the age of fifty-five years;
(G) one-sixtieth of one percent for each month during the
period beginning after the month in which the Participant
attains forty-five years of age and ending with the month
during which the Participant attains the age of fifty years;
(H) one-one hundred twentieth of one percent for each
month during the period beginning after the month in which the
Participant attains forty years of age and ending with the
month during which the Participant attains the age of forty-
five years; and
(I) no reduction for the month during which the
Participant attains the age of forty years and each month prior
thereto.
(ii) For periods of coverage after March, 1985 and before 1989:
(A) one-twenty-fourth of one percent for each month after
the month in which the Participant attains sixty years of age;
19
<PAGE>
(B) one-thirtieth of one percent for each month during the
period beginning after the month in which the Participant
attains fifty-five years of age and ending with the month
during which the Participant attains the age of sixty years;
(C) one-fortieth of one percent for each month during the
period beginning after the month in which the Participant
attains fifty years of age and ending with the month during
which the Participant attains the age of fifty-five years;
(D) one-sixtieth of one percent for each month during the
period beginning after the month in which the Participant
attains forty-five years of age and ending with the month
during which the Participant attains the age of fifty years;
(E) one-one hundred twentieth of one percent for each
month during the period beginning after the month in which the
Participant attains forty years of age and ending with the
month during which the Participant attains the age of forty-
five years; and
(F) no reduction for the month during which the
Participant attains the age of forty years and each month prior
thereto.
(iii) For periods of coverage after July, 1984, and before
April, 1985, there shall be no reduction.
(iv) For periods of coverage after September, 1983 and before
August, 1984:
(A) one-twenty-fourth of one percent for each month after
the month in which the Participant attains fifty-five years of
age, and
(B) one-thirtieth of one percent for each month during the
period beginning after the month in which the Participant
attains fifty years of age and ending with the month during
which the Participant attains the age of fifty-five years, and
(C) one-fortieth of one percent for the month during which
the Participant attains the age of fifty years of age and for
each month prior thereto.
(v) For periods of coverage before October, 1983, one-twenty-
fourth of one percent for each full month of coverage.
(f) If a Participant shall die on or after the first to occur of
his attainment of Normal Retirement Age or the date of commencement of
Retirement Income to him under the Plan, then except as otherwise
provided in Section 5.6, payment shall be made to his surviving Spouse
or Beneficiary in accordance with the form of payment elected by the
Participant pursuant to Article VI (with the consent of the surviving
Spouse if applicable), or if no such election is then in effect, to his
surviving Spouse, if any, in the form of the survivor portion of a 50%
Joint and Survivor Annuity pursuant to the terms of Section 6.1(a).
(g) The Preretirement Survivor Annuity coverage provisions are
applicable to a Participant if he is credited with one Hour of Service
or one hour of paid leave after August 22, 1984. A Participant who was
not credited with an Hour of Service or an hour of paid leave after
August 22, 1984, but who was credited with at least one Hour of Service
after 1975 and before August 23, 1984, has at least ten Years of
Service, had a nonforfeitable right to all or a portion of his accrued
benefit derived from Company contributions, had not begun to receive
Retirement Income as of August 23, 1984, and is alive, may elect
Preretirement Survivor Annuity coverage at any time prior to the time he
begins to receive Retirement Income.
20
<PAGE>
A Participant who was not credited with an Hour of Service
after 1975 or with one hour of paid leave after August 22, 1984 but who
was credited with at least one Hour of Service after September 1, 1974
and before 1976, had not begun to receive Retirement Income as of August
23, 1984, and is alive may elect at any time prior to the time he begins
to receive Retirement Income, to have the provisions of the Plan in
effect on August 22, 1984 apply with respect to the Qualified Joint and
Survivor Annuity and the 50% Survivor Annuity.
Any other Participant is entitled to such survivor annuity
coverage as provided by applicable prior provisions of the Plan.
(h) As of December 31, 1985, all of the Participating Employers
(as defined in the ANR Supplement to this Plan) in the Pre-1986 ANR Plan
(as defined in the ANR Supplement to this Plan) provided a death benefit
to the qualified surviving spouse of an active employee who died. This
death benefit was provided to the qualified spouse of a Disabled Former
Employee who became totally and permanently disabled after October 31,
1979 and who, on his date of death, was covered by the comprehensive
benefits program maintained by the Company, a Related Employer or a
Subsidiary. This death benefit was provided to the qualified spouse of
a person who retired pursuant to Section 7.4 or 7.5 of the Pre-1986 ANR
Plan, from the date of such retirement until such person attained sixty-
five years of age. This death benefit program continued in effect after
1985 but only for employees who were continuously eligible to
participate in the program and who were continuously covered under the
program on and after December 31, 1985.
The reduction of Retirement Income for Preretirement Survivor
Annuity coverage under the Plan, including the ANR Supplement, shall
only apply to the amount of Retirement Income which exceeds the benefit
payable to the surviving spouse under the death benefit program
described in this subsection for the period of time the coverage was
provided under such death benefit program.
5.6 Elective Deferral. In lieu of the commencement date that would
-----------------
otherwise apply under Sections 5.1, 5.2, 5.3 or 5.4 hereof, and subject to the
limitations set forth in Section 6.7, a Participant who terminates his
employment with the Company on or before a Retirement Date may defer
commencement of his Retirement Income payments to a date (his Deferred
Commencement Date) subsequent to his Normal Retirement Date.
5.7 Suspension of Benefits.
----------------------
(a) If a Participant received Retirement Income payments under the
Plan following a termination of his employment with the Company prior to
his Normal Retirement Date and later resumes his employment with the
Company prior to his Normal Retirement Date, no Retirement Income
payments shall be paid during such later period of employment and up to
his Normal Retirement Date. Any benefits payable under the Plan to or
on behalf of the Participant at the time of his subsequent date of
termination of employment shall be reduced by the Actuarial Equivalent
of any benefits paid to him after his earlier termination and prior to
his Normal Retirement Date unless the Participant repays such benefits
in full to the Trust within two years after his date of reemployment.
(b) If (i) a Participant whose employment terminates is reemployed
by the Company after his Normal Retirement Date, or is reemployed by the
Company prior to his Normal Retirement Date and continues in employment
beyond his Normal Retirement Date, or (ii) a Participant continues in
employment with the Company after his Normal Retirement Date without a
prior termination, the following provisions of this Section 5.7 shall
become applicable to him as of his Normal Retirement Date or, if later,
his date of reemployment.
(c) For purposes of this Section, the following definitions shall
apply:
21
<PAGE>
(i) "Postretirement Date Service" means each calendar month of
employment of a Participant after his Normal Retirement Date and
subsequent to the time that:
(A) payment of Retirement Income commenced to the
Participant if he returned to employment with the Company, or
(B) payment of Retirement Income would have commenced to
him if he had not remained in employment with the Company,
if in either case the Participant completes forty or more Hours of
Service in such calendar month. The determination of the
Administrator with respect to whether an Employee is performing
Postretirement Date Service shall be based on a reasonable and good
faith evaluation of the facts, and shall be conclusive and binding.
(ii) "Suspendable Amount" means:
(A) in the case of Retirement Income payable periodically
on a monthly basis for as long as a life (or lives) continues,
the monthly Retirement Income otherwise payable in a calendar
month in which the Participant is engaged in Postretirement
Date Service;
(B) in the case of Retirement Income payable other than in
the form described in clause (A) above, the lesser of (1) the
amount of Retirement Income that would have been payable to the
Participant if he had been receiving monthly benefits under the
Plan since actual retirement based on a single life annuity
commencing at his actual retirement date; or (2) the actual
amount paid or scheduled to be paid to the Participant for such
month. Payments that are scheduled to be paid less frequently
than monthly may be converted to monthly payments for purposes
of clause (2).
(d) Payment shall be permanently withheld of a portion of a
Participant's Retirement Income, not in excess of the Suspendable
Amount, for each calendar month during which the Participant is employed
in Postretirement Date Service.
(e) If payments have been suspended pursuant to paragraph (d) next
above, such payments shall resume no later than the first day of the
third calendar month after the calendar month in which the Participant
ceases to be employed in Postretirement Date Service; provided, however,
that no payments shall resume until the Participant has complied with
the requirements set forth in paragraph (i) below. The initial payment
upon resumption shall include the payment scheduled to occur in the
calendar month when payments resume and any amounts withheld during the
period between the cessation of Postretirement Date Service and the
resumption of payment, less any amounts that are subject to offset
pursuant to paragraph (f) below.
(f) Retirement Income payments made subsequent to Postretirement
Date Service shall be reduced (i) by the Actuarial Equivalent of any
benefits paid to the Participant prior to the time he is reemployed by
the Company after his Normal Retirement Date (such reduction will occur
only if such benefits are not repaid in full to the Trust within two
years after his date of reemployment); and (ii) by the amount of any
payments previously made during those calendar months in which the
Participant was engaged in Postretirement Date Service; provided,
however, that such reduction under (ii) shall not exceed, in any one
month, twenty-five percent of that month's total Retirement Income
payment (excluding amounts described in paragraph (d) above) that would
have been due but for the offset.
(g) Any Participant whose payments of Retirement Income are
suspended pursuant to paragraph (d) of this Section, shall be notified
(by personal delivery or certified or registered mail) during the first
calendar month in which payments are withheld, that his Retirement
Income is
22
<PAGE>
suspended. Such notification shall include: (i) a description of the
specific reasons for the suspension of payments; (ii) a general
description of the Plan provisions relating to the suspension; (iii) a
copy of the provisions; (iv) a statement to the effect that applicable
Department of Labor regulations may be found at Section 2530.203-3 of
Title 29 of the Code of Federal Regulations, (v) the procedure for
appealing the suspension, which procedure shall be governed by Section
7.5; and (vi) the procedure for filing a benefits resumption
notification pursuant to paragraph (i) below. If payments subsequent to
the suspension are to be reduced by an offset pursuant to paragraph (f)
above, the notification shall specifically identify the periods of
employment with the Company for which the amounts to be offset were
paid, the Suspendable Amounts subject to offset, and the manner in which
the Plan intends to offset such Suspendable Amounts.
(h) If the Summary Plan Description ("SPD") for the Plan contains
information that is substantially the same as information required
pursuant to paragraph (g), the notification required by paragraph (g)
may refer the Participant to the relevant pages of the SPD. If the
notification refers to the SPD, the notification shall also inform the
Participant how to obtain a copy of the SPD, or relevant pages thereof,
and any request for the referenced information shall be honored within
thirty days of the receipt by the Administrator of such request.
(i) Payments shall not resume as set forth in paragraph (e) above
until a Participant performing Postretirement Date Service notifies the
Administrator in writing of the cessation of such Service and supplies
the Administrator with such proof of the cessation as the Administrator
may reasonably require.
(j) A Participant may request, pursuant to the procedure contained
in Section 7.5, a determination whether specific contemplated employment
will constitute Postretirement Date Service.
5.7A Alternative to Receive Retirement Income During Reemployment. In
------------------------------------------------------------
lieu of having his Retirement Income payments discontinued and his benefit
payable upon his subsequent retirement or termination determined in accordance
with the preceding provisions, any such Participant who is receiving Retirement
Income payments under the Plan and who reenters the active employment of the
Company may, upon such reentry, elect in writing and filed with the
Administrator to continue to receive his Retirement Income payments after his
reemployment in the same manner as though he had not reentered the employment of
the Company and in such event he shall be treated as a new Employee with respect
to such period of reemployment except that (i) he shall become a Participant in
the Plan on the date of his reemployment, (ii) his Years of Service for vesting
purposes shall include the Years of Service for vesting purposes which he had
accrued prior to such reemployment, and (iii) the benefit which he accrued after
the date of his reemployment which is payable to such Participant or his
Beneficiary upon his subsequent retirement or termination of employment shall be
limited to the amount which can be provided on an Actuarially Equivalent basis
by the monthly Retirement Income, if any, which he accrues subsequent to such
reemployment based upon his Years of Service for purposes of determining
Retirement Income and Final Average Earnings determined in the same manner as
though he were a new Employee; provided further, however, that such income which
such a Participant accrues subsequent to his reemployment shall not cause the
Actuarial Equivalent of the total income payments to the Participant or his
Beneficiary under the Plan to exceed the amount which would have been payable if
he had not elected to continue to receive his Retirement Income after his
reemployment.
5.8 Maximum Benefit.
---------------
(a) Notwithstanding any other provision of this Plan, in no event
may a Participant's annual Retirement Income attributable to Company
contributions exceed the equivalent, determined in accordance with
paragraph (f) of this Section and with rules determined by the
Commissioner of Internal Revenue pursuant to Code Section 415, of a
straight life annuity payment equal to the lesser of:
(i) $90,000, or such other amount as may be set forth in
Section 415 of the Code or determined by Treasury regulations
issued pursuant to Section 415(d) of the Code; or
23
<PAGE>
(ii) one hundred percent of the Participant's average annual
Compensation over the three consecutive calendar years of
employment (or lesser if the Participant does not have three
consecutive years) during which he had the greatest aggregate
Compensation from the Company, increased to reflect cost of living
adjustments determined by Treasury regulations issued pursuant to
Section 415(d) of the Code; and
(iii) if the Participant has been a Participant in the Plan for
fewer than ten Plan Years, as determined pursuant to Section
1.28(b), the amount determined under paragraph (i) of this Section
5.8 multiplied by a fraction, the numerator of which is the
Participant's number of Plan Years (or part thereof) of
participation in the Plan, as determined pursuant to Section
1.28(b), and the denominator of which is ten, provided, however,
that such product shall not be less than one-tenth of the amount
determined under the foregoing provisions of this Section 5.8; and
(iv) if the Participant has been employed by the Company for
fewer than 10 years, the amount determined under the provisions of
paragraph (ii) of this section 5.8 multiplied by a fraction, the
numerator of which is the number of years (or part thereof) during
which the Participant has been employed by the Company, and the
denominator of which is ten (10), provided that such product shall
not be less than one-tenth of the amount determined under the
foregoing provisions of this section 5.8.
(b) The maximum benefit permitted under paragraph (a) of this
Section shall be in the form of a straight life annuity (with no
ancillary benefits) under a plan to which employees do not contribute
and under which no rollover contributions are made.
(c) Notwithstanding the foregoing provisions of this Section 5.8,
a Retirement Income payable with respect to the Plan shall not be deemed
to exceed the limitation of this Section 5.8 in a Plan Year if the
Retirement Income derived from Company contributions payable with
respect to the Participant under this Plan and all other defined benefit
plans of the Company does not in the aggregate exceed $10,000 for such
Plan Year. If the Participant has fewer than ten Years of Service, the
$10,000 amount referred to in the previous sentence of this subsection
(c) shall be multiplied by a fraction, the numerator of which is the
Participant's number of Years of Service and the denominator of which is
ten, provided, however, that the resulting product shall not be less
than one-tenth of the amount determined under this subsection (c). The
provisions of this paragraph (c) shall not apply with respect to any
Participant if the Company has at any time maintained a defined
contribution plan in which the Participant participated.
(d) Voluntary Contributions will be treated as a separate defined
contribution plan maintained by the Company that is subject to the
limitations on contributions and other additions described in Treasury
Regulation Section 1.415-6.
(e) If the $90,000 amount contained in paragraph (a)(i) of this
Section is increased pursuant to Treasury regulations issued under
Section 415(d) of the Code, such increase shall be effective as of
January 1 of the calendar year for which such Treasury regulations were
effective and shall apply with respect to Limitation Years ending with
or within that calendar year.
(f) For purposes of this Section 5.8:
(i) If the Retirement Income under the Plan is payable in any
form other than a straight life annuity, the determination whether
the limitation described in paragraph (a) of this Section has been
satisfied shall be made, in accordance with regulations prescribed
by the Secretary of the Treasury, by adjusting such benefit so that
it is equivalent to the benefit described in paragraph (a) of this
Section. For purposes of this paragraph (f)(i), any ancillary
benefit that is not directly related to Retirement Income benefits
shall not be taken into account and that portion of any joint and
survivor annuity that constitutes a qualified joint
24
<PAGE>
and survivor annuity (as defined in Section 417(b) of the Code)
shall not be taken into account.
(ii) If the Retirement Income under the Plan begins before the
Social Security Retirement Age, the determination whether the
$90,000 limitation set forth in subsection (a) has been satisfied
shall be made, in the case of Retirement Income commencing on or
after age 62, in accordance with regulations prescribed by the
Secretary of the Treasury, by adjusting such Income so that it is
equivalent to a benefit beginning at the Social Security Retirement
Age. In the case of a Retirement Income commencing prior to age
62, such determination shall be made (A) by reducing such
Retirement Income for the period between the Social Security
Retirement Age and age 62 in accordance with the procedure
described in the preceding sentence and (B) by further reducing
such Retirement Income to its Actuarial Equivalent for the period
between age 62 and the date payment commences. Reductions under
this paragraph shall be made in such manner as the Secretary of the
Treasury may prescribe that is consistent with old-age insurance
benefits commencing before the Social Security Retirement Age under
the Social Security Act.
(iii) If payment of Retirement Income under the Plan begins
after the Social Security Retirement Age, the determination as to
whether the $90,000 limitation set forth in subsection (a) has been
satisfied shall be made, in accordance with regulations prescribed
by the Secretary of the Treasury, by adjusting such benefit so that
it is equivalent to such a benefit beginning at the Social Security
Retirement Age.
(iv) (1) For purposes of adjusting any benefit under paragraph
(f)(i) of this Section, the interest rate assumption shall be
the greater of five percent or the rate specified in Section
1.2 of the Plan.
(2) For purposes of adjusting any benefit under paragraph
(f)(ii) of this Section, the interest rate assumption shall be
the greater of five percent or the rate used pursuant to
Section 5.3 of the Plan.
(3) For purposes of adjusting any benefit under paragraph
(f)(iii) of this Section, the interest rate assumption shall be
the lesser of five percent or the rate specified in Section 1.2
of the Plan.
(g) If any Participant under this Plan is also a Participant in a
defined contribution plan or plans (as defined in Section 415 of the
Code) maintained by the Company, the sum of the defined benefit plan
fraction (as defined in Code Section 415(e)(2)) and the defined
contribution plan fraction (as defined in Code Section 415(e)(3)) for
any Limitation Year with respect to such Participant shall not exceed
one. If such sum exceeds one and the annual additions (as defined in
Code Section 415(c)(2)) for such Participant to such defined
contribution plan or plans are not reduced to obtain compliance with
Code Section 415(e), then the Participant's Retirement Income under this
Plan shall be reduced to obtain such compliance.
(h) (i) The total annual benefit payable under all qualified
defined benefit plans maintained by the Company shall not exceed
the limits under Section 415 of the Code as set forth in paragraph
(a) of this Section.
(ii) For purposes of the limitations imposed by this Section
5.8, a defined benefit plan or defined contribution plan shall be
treated as maintained by the Company if the plan is maintained by
any employer that is, along with the Company, a member of a
controlled group of corporations or under common control with the
Company (as defined in Sections 414(b) and (c) of the Code, as
modified by Section 415(h) thereof) or a member of an affiliated
service group (as defined in Section 414(m) of the Code).
25
<PAGE>
(i) For purposes of this Section 5.8, the term "Limitation Year"
means the period to be used in determining the Plan's compliance with
Code Section 415 and the regulations thereunder. The Company shall take
all actions to ensure that the Limitation Year is the same period as the
Plan Year.
(j) For purposes of this Section and Section 13.6, "compensation"
means wages, salaries, fees for professional services and other amounts
received for personal services actually rendered in the course of
employment with the Company (including, but not limited to commissions
paid salesmen, compensation for services on the basis of a percentage of
profits, tips and bonuses); shall include all compensation actually paid
or made available to a Participant for an entire Limitation Year; and
shall not include any other items or amounts paid to or for the benefit
of a Participant.
(k) For purposes of this Section, the term "Social Security
Retirement Age" means the age used as the retirement age for a
Participant under Section 216(l) of the Social Security Act, except that
such section shall be applied (i) without regard to the age increase
factor, and (ii) as if the early retirement age under Section 216(1)(2)
of that Act were sixty-two.
(l) Any reduction in Retirement Income made pursuant to provisions
of this Section 5.8 shall not be increased in subsequent years to the
extent allowed by changes in the limitation provisions of Section 415 of
the Code including increases in the maximum dollar limitations permitted
in such future years.
ARTICLE VI
----------
NORMAL AND OPTIONAL FORMS OF RETIREMENT INCOME
----------------------------------------------
6.1 Normal Form of Payment.
----------------------
(a) If a Participant does not make a timely election not to
receive payments pursuant to this Section and to receive payments
pursuant to one of the optional forms of payment described below, and
has a Spouse at the time payments under the Plan commence, the
Retirement Income payable to the Participant shall be payable as a "50%
Joint and Survivor Annuity". A 50% Joint and Survivor Annuity means an
annuity payable to the Participant for his life, with a survivor annuity
payable to his Spouse for the life of such Spouse in an amount equal to
fifty percent of the amount payable during the life of the Participant.
A 50% Joint and Survivor Annuity is the Actuarial Equivalent of the
Retirement Income determined pursuant to Section 5.1 payable as set
forth therein. An election by a Participant not to receive payments
pursuant to this Section shall be effective only if the Participant's
Spouse has consented to such election as provided in Section 6.2(d).
(b) If a Participant does not make a timely election not to
receive payments pursuant to this Section and to receive payments
pursuant to one of the optional forms of benefits described below and
does not have a Spouse at the time payments under the Plan commence, the
Retirement Income payable to the Participant shall be payable in an
amount determined in Section 5.1, as an annuity for the Participant's
life ending on the first day of the month during which his death occurs.
6.2 Election of the Form of Benefits.
--------------------------------
(a) Within a reasonable time prior to the commencement of
Retirement Income payments to a Participant, the Administrator shall
give the Participant a written notice, in nontechnical terms, of his
right to elect not to receive his Retirement Income pursuant to Section
6.1 and of his right to make an election of an optional form of payment
of his Retirement Income pursuant to Section 6.3. Such notice shall
include a description of (i) the terms and conditions of the normal form
of benefit under Section 6.1, (ii) the Participant's right to make and
the effect of an election to waive that form, (iii) the rights of the
Participant's Spouse not to consent to such an election, (iv) the right
to make, and the effect of, a revocation of such an election, (v) the
optional forms of payment available under
26
<PAGE>
Section 6.3 and the Participant's right to designate a Beneficiary in
connection therewith, and (vi) the Participant's right to request
additional information from the Administrator respecting the estimated
financial effect upon the Participant's Retirement Income (in terms of
dollars and cents per annuity payment) of electing to receive payment in
one of the optional forms provided in Section 6.3.
(b) The elections provided in Sections 6.1 and 6.3 may be made by
the Participant by giving a written notice of election to the
Administrator at any time during the Election Period consisting of the
ninety day period ending on the Participant's Annuity Starting Date (as
defined in Section 5.5(d)). Any election provided in Sections 6.1 and
6.3 may be modified or revoked during the Election Period and shall be
automatically revoked if the Participant dies before commencement of
payment of his Retirement Income to him. A Participant may elect a
different option under this Section only if he meets the requirements of
this paragraph and paragraph (d).
The election of form of benefits and of the Beneficiary to
receive benefits under a survivor annuity form of benefit may not be
changed after the Election Period. However, the Participant may change
the Beneficiary designated to receive period certain payments under a
form of benefit containing a period certain payment after the end of the
Election Period.
(c) If a Participant makes a request for additional information
pursuant to paragraph (a)(vi) on or before the last day of the Election
Period, the Election Period shall be extended to the extent necessary to
include at least the ninety calendar days immediately following the day
the additional requested information is personally delivered or mailed
to the Participant.
(d) Any election by a Participant not to receive benefits in
either (i) the normal form set forth in Section 6.1(a) or (ii) a fifty
percent or greater Joint and Survivor Annuity payable to the Spouse
shall not take effect unless such Participant's Spouse consents in
writing to such election, such consent acknowledges the effect of such
election and the identity of any non-Spouse Beneficiary, including any
class of Beneficiaries and any contingent Beneficiaries, designated in
connection with the election of an optional form of payment pursuant to
Section 6.3, and such consent is witnessed by a representative of the
Plan or a notary public, unless the Participant establishes to the
satisfaction of the Administrator that such consent may not be obtained
because there is no Spouse, the Spouse cannot be located, or because of
such other circumstances as the Secretary of the Treasury may by
regulations prescribe. Any consent by a Spouse, or establishment that
the consent of a Spouse may not be obtained, shall be effective only
with respect to that Spouse.
A Participant may not subsequently change the form of payment
elected pursuant to Section 6.3 or the designation of his Beneficiary
unless his Spouse consents to the new election or designation in
accordance with the requirements set forth in the preceding sentence, or
unless the Spouse's consent permits the Participant to change the form
of payment elected or the designation of his Beneficiary without the
Spouse's further consent.
(e) If a Participant is treated as having a Spouse under the
second sentence of Section 1.22, after the date that the Participant and
such Spouse have been married for a continuous period of at least one
year, then the Participant shall be subject to the provisions of Section
6.1(a) of the Plan and, unless a valid election pursuant to Section 6.1
was filed by the Participant (and consented to by such Spouse), the
Participant's Retirement Income shall be payable thereafter in the form
of a 50% Joint and Survivor Annuity in an amount based on the
Participant's Accrued Benefit on the date that such Retirement Income
payments commenced, reduced by the Actuarial Equivalent of the benefits
paid to or with respect to such Participant between such date and the
date on which Retirement Income payments commence in the form of a 50%
Joint and Survivor Annuity. The provisions of this paragraph (e) shall
only apply if Retirement Income commences being paid to such Participant
other than in the form of a 50% or greater Joint and Survivor Annuity.
6.3 Optional Forms of Payment. Each of the optional forms of payment
-------------------------
described under this Section shall be the Actuarial Equivalent of the Retirement
Income otherwise payable to the Participant under the
27
<PAGE>
provisions of Section 6.1 of the Plan. Subject to Section 6.2, in lieu of the
normal form of Retirement Income set forth in Section 6.1, a Participant may
elect any of the following forms of payment of benefits under the Plan:
(a) Five or Ten-Year Certain Annuity. A participant may receive
--------------------------------
an annuity payable monthly during his lifetime and, if he dies within a
period of five or ten years, as selected by the Participant, after the
commencement of payments, the same amount shall be payable monthly for
the remainder of such five or ten-year period to his Beneficiary or
Beneficiaries.
(b) Straight Life Annuity. A Participant may receive an annuity
---------------------
payable monthly during his life, ending on the first day of the month
during which his death occurs.
(c) Joint and Survivor Annuity. A Participant may receive an
--------------------------
annuity payable to the Participant for his life with a survivor annuity
payable to his Spouse or such other Beneficiary selected in the manner
set forth in Section 1.3, for the life of such Spouse or Beneficiary, in
an amount equal to fifty or one hundred percent, as selected by the
Participant, of the amount payable during the life of the Participant.
6.4 Administrative Powers Relating to Payments.
------------------------------------------
(a) If any person eligible to receive payments under the
provisions of this Plan is under a legal disability or, by reason of
illness or mental or physical disability, is, in the opinion of the
Administrator, unable to properly administer payments made pursuant to
the Plan, the Trustee shall make such payments in such of the following
ways as the Administrator shall direct:
(i) Directly to the person eligible to receive the payments;
(ii) To the legal representative of such person eligible to
receive payments; or
(iii) To some relative by blood or marriage, or friend, for the
benefit of such person eligible to receive payments.
(b) Any payment made pursuant to this Section shall be in complete
discharge of the obligation therefore under the Plan.
6.5 General Limitation. Except as set forth in Section 6.1(a) and
------------------
anything else in this Article to the contrary notwithstanding, no method of
distribution (other than a 50% to 100% Joint and Survivor Annuity payable to the
Spouse) may be made under this Article which would result in the Actuarial
Equivalent of a Spouse's or Beneficiary's interest exceeding fifty percent of
the Actuarial Equivalent of the Participant's full Retirement Income, both
equivalents being determined as of the Participant's Retirement Date.
6.6 Small Amounts.
-------------
(a) If the lump-sum Actuarial Equivalent of the monthly Retirement
Income attributable to Company contributions and Participant
contributions payable under the Plan to any Participant who has incurred
a Break in Service, or to the Spouse or Beneficiary of a deceased
Participant, is less than $3,500 the Company shall direct that the
Actuarial Equivalent of that monthly Retirement Income otherwise payable
be paid in a lump sum, in full satisfaction of all rights of the
Participant, his Spouse and his Beneficiary to receive any benefits
under the Plan. Such lump sum payment shall be paid within a reasonable
time after the end of the Plan Year in which the Participant incurs a
Break in Service or dies, whichever is applicable. No distribution may
be made under this Section after payment of a Participant's Retirement
Income has commenced unless the Participant and his Spouse, if any (or
where the Participant has died, his Spouse), consent in writing to the
distribution.
(b) If the distributee of any eligible rollover distribution (as
defined in Code Section 402(f)(2)(A)) elects to have such distribution
paid directly to an eligible retirement plan (as defined
28
<PAGE>
in Code Section 402(c)(8)(B) except that a qualified trust shall be
considered an eligible retirement plan only if it is a defined
contribution plan, the terms of which permit the acceptance of rollover
contributions) and specifies the eligible retirement plan (as defined
herein) to which such distribution is to be paid (in such form and at
such time as the Administrator may prescribe), such distribution shall
be made in the form of a direct transfer to the eligible retirement plan
(as defined herein) so specified. The distribution shall be eligible for
the direct transfer described herein only to the extent that the
eligible rollover distribution (as defined herein) would be includible
in gross income if not transferred in a direct transfer described herein
(determined without regard to Code Sections 402(c) and 403(a)(4)). The
Administrator shall determine whether or not to make a requested direct
transfer based upon applicable provisions of the Code including Section
401(a)(31) of the Code and Treasury Regulations issued pursuant thereto.
In addition, the Administrator may establish guidelines consistent with
the Code and Treasury Regulations for use in determination as to whether
or not to make a requested direct transfer to another plan.
(c) A Participant who is not vested in a Retirement Income benefit
under the Plan upon termination of employment has no benefit under the
Plan. However, such Participant is deemed to receive a distribution
from the Plan equal to the value of his Retirement Income (which is zero
dollars) upon such termination of employment. If such Participant
subsequently becomes eligible for additional vesting under the Plan, the
value of the Retirement Income (which is zero dollars) deemed previously
distributed to such person shall be deemed to have been repaid with
interest at the rate determined for purposes of Code Section
411(c)(2)(C) to the Plan by such person. Such deemed repayment must
occur prior to the time such person incurs five one year Breaks in
Service periods.
6.7 Commencement of Benefits.
------------------------
(a) The payment of benefits under the Plan to, or with respect to,
a Participant shall, subject to the provisions of Section 5.6, be made
or commenced not later than sixty days after the last day of the Plan
Year in which the last of the following occurs: (i) the Participant's
sixty-fifth birthday; (ii) the date on which the employment of the
Participant terminates; or (iii) the tenth anniversary of the
commencement of the Participant's employment with the Company.
Notwithstanding the foregoing, no distribution of a Retirement
Income with an Actuarial Equivalent in excess of $3,500 shall be made or
commenced to the Participant prior to the date Participant attains age
65 without the Participant's written consent. No such consent shall be
valid unless the Participant receives a general description of the
material features, and an explanation of the relative values, of the
optional forms of benefit available under the Plan. In addition, the
Participant must be informed of his right to defer receipt of the
distribution. The Administrator shall deliver the aforementioned
written notice to the Participant during a period commencing no less
than 30 days and no more than 90 days before the Participant's date of
commencement of benefits. The written consent of the participant to the
distribution shall not be made before the participant receives the
notice and shall not be made more than 90 days before his date of
commencement of benefits.
(b) Notwithstanding anything to the contrary contained elsewhere
in the Plan:
(i) The payment of benefits under the Plan to any Participant
will:
(A) be distributed to him not later than the Required
Distribution Date (as defined in paragraph (b)(iii)), or
(B) be distributed to him commencing not later than the
Required Distribution Date in accordance with regulations
prescribed by the Secretary of the Treasury (I) over the life
of the Participant or over the lives of the Participant and his
Beneficiary, or (II) over a period not extending beyond the
life expectancy of the Participant or the life expectancy of
the Participant and his Beneficiary.
29
<PAGE>
(ii) (A) If the Participant dies after distribution to him has
commenced pursuant to paragraph (b)(i)(B), but before his
entire interest in the Plan has been distributed to him, then
the remaining portion of that interest will be distributed at
least as rapidly as under the method of distribution being used
under paragraph (b)(i)(B) at the date of his death.
(B) If the Participant dies before distribution to him has
commenced pursuant to paragraph (b)(i)(B), then, except as
provided in paragraphs (b)(ii)(C) and (b)(ii)(D), his entire
interest in the Plan will be distributed within five years
after his death.
(C) Notwithstanding the provisions of paragraph
(b)(ii)(B), if the Participant dies before distribution to him
has commenced pursuant to paragraph (b)(i)(B) and if any
portion of his interest in the Plan is payable (I) to or for
the benefit of a Beneficiary, (II) in accordance with
regulations prescribed by the Secretary of the Treasury over
the life of the Beneficiary or over a period not extending
beyond the life expectancy of the Beneficiary, and (III)
beginning not later than one year after the date of the
Participant's death or such later date as the Secretary of the
Treasury may prescribe by regulations, then the portion of his
interest referred to in this paragraph (b)(ii)(C) shall be
treated as distributed on the date on which such distributions
begin.
(D) Notwithstanding the provisions of paragraphs
(b)(ii)(B) and (b)(ii)(C), if the Beneficiary referred to in
paragraph (b)(ii)(C) is the Spouse of the Participant, then:
(I) the date on which the distributions are required
to begin under paragraph (b)(ii)(C)(III) shall not be
earlier than the date on which the Participant would have
attained age 70-1/2, and
(II) if the Spouse dies before the distributions to
that Spouse begin, then this paragraph (b)(ii)(D) shall be
applied as if the Spouse were the Participant.
(iii) For purposes of this subsection (b), the Required
Distribution Date means April 1 of the calendar year following the
calendar year in which the Participant attains age 70 1/2 provided,
however, that if the Participant attains age 70 1/2 in calendar
year 1988, the Required Distribution Date means April 1, 1990, and
further provided that if the Participant attains age 70 1/2 prior
to January 1, 1988, the Required Distribution Date means the April
1 following the later of the calendar year in which the
Participant: (A) attains age 70 1/2, or (B) terminates service with
the Company, unless he is a 5% owner (as defined in Section 416 of
the Code) of the Company with respect to the Plan Year ending in
the calendar year in which he attains age 70 1/2, in which case
clause (B) shall not apply.
(iv) For purposes of this subsection (b), the life expectancy
of a Participant and his Spouse may be redetermined, but not more
frequently than annually. This paragraph (iv) shall not apply in
the case of a life annuity.
6.8 No Guaranty of Benefits. The benefits provided under the Plan
-----------------------
shall be paid solely from the assets of the Trust Fund including Insurance
contracts. Except to the extent provided by ERISA, nothing contained in the
Plan or the Trust Agreement shall constitute a guaranty by the Company or the
Trustee that the assets of the Trust Fund will be sufficient to pay any benefit
to any person.
30
<PAGE>
6.9 Medium of Payments. Any payment made to any person pursuant to the
------------------
terms of the Plan may be made by check or in cash. If acceptable to the
Administrator and the payee, payment may be made by other means.
6.10 Assets for Benefit Payment.
--------------------------
(a) All assets of the Plan, except insurance contracts, may be
commingled for investment. However, beginning with Plan Year 1990, the
Administrator shall maintain separate accounting of assets, including
insurance contracts, with respect to each Controlled Group which
includes entities which have adopted the Plan. A "Controlled Group" is
a controlled group of corporations and/or trades or businesses as
defined in Sections 414(b) and (c) of the Code. A Controlled Group
shall also include any Subsidiary to the extent so provided in a
Supplement included in the Plan.
(b) Retirement Income accrued by a Participant while employed by a
member of a Controlled Group shall be paid from the assets of such
Controlled Group except as provided in Section 8.2.
(c) All assets of each Controlled Group are available to pay
Retirement Income with respect only to Participants of such Controlled
Group. This subsection (c) is effective as of January 1, 1991.
(d) All amounts held in the Plan allocable to a particular member
of a Controlled Group are available to pay Retirement Income with
respect to all Participant benefits accrued with respect to any member
of such Controlled Group.
6.11 Funding Through Insurance Contracts. Upon direction of the
-----------------------------------
Administrator with specific prior authorization in writing from the Company, the
Trustee shall purchase from a legal reserve life insurance company a retirement
annuity or other form of life insurance contract which, as far as possible,
provided benefits equal to (or actuarially equivalent to) those provided in the
Plan for such Participant or Beneficiary, but provides no optional form of
Retirement Income which would not be permitted under the Plan. Such contract
shall thereafter govern the payment of the amount of benefit, if any,
represented by such contract, which is payable under the Plan upon the
Participant's retirement or termination of employment, and the liability of the
Trust Fund and of the Plan will cease and terminate with respect to such
benefits.
Any such policy or contract issued prior to the termination of the
Plan shall provide that the Trustee shall retain all rights of ownership at all
times except the right, unless such policy or contract provides otherwise, to
designate the Beneficiary to receive any benefits payable upon the death of the
Participant and shall further provide that all dividends or experience rating
credits shall be paid to the Trustee and applied to reduce future Company
contributions to the Plan.
Any annuity contract distributed by the Trustee to a Participant or
Beneficiary hereunder shall contain a provision to the effect that the contract
may not be sold, assigned, discounted or pledged as collateral for a loan or as
security for the performance of an obligation or for any other purpose, to any
person other than the issuer thereof.
ARTICLE VII
-----------
PLAN ADMINISTRATION
-------------------
7.1 Company Responsibility. Coastal shall be responsible for and shall
----------------------
control and manage the operation and administration of the Plan. It shall be the
"Plan Administrator" and "Named Fiduciary" for purposes of ERISA and shall be
subject to service of process on behalf of the Plan. The Board may, in its
discretion, appoint a Committee of one or more persons, to be known as the "Plan
Administrative Committee" to act as the agent of the Company in performing some
or all of these duties. If the Board chooses not to appoint such a Committee,
all
31
<PAGE>
references in the Plan to the "Committee" (except for such references in this
Section 7.1) shall mean the Board. The members of the Committee shall serve at
the pleasure of the Board; they may be officers, directors, or Employees of the
Company or any other individuals. Any member may resign by delivering his
written resignation to the Board and to the Committee. Vacancies in the
Committee arising by resignation, death, removal or otherwise, shall be filled
by the Board. The Company shall advise the Trustee in writing of the names of
the members of the Committee and of changes in membership from time to time.
7.2 Powers and Duties of Committee. The Committee shall perform the
------------------------------
duties, if any, assigned to it by the Board of Directors. The regularly kept
records of the Company shall be conclusive and binding upon all persons with
respect to an Employee's Hours of Service, date and length of employment, time
and amount of Compensation and the manner of payment thereof, type and length of
any absence from work and all other matters contained therein relating to
Employees. All rules and determinations of the Committee shall be uniformly and
consistently applied to all persons in similar circumstances.
7.3 Organization and Operation of Committee.
---------------------------------------
(a) The Committee shall act by majority vote of its members at the
time in office, and such action may be taken either by a vote at a
meeting or in writing without a meeting. The signatures of a majority
of the members will be sufficient to authorize Committee action. A
Committee member shall not participate in discussions of or vote upon
matters pertaining to his own participation in the Plan.
(b) The Committee may authorize any of its members or any other
person to execute any document or documents on behalf of the Committee,
in which event the Committee shall notify the Trustee in writing of such
action and the name or names of such member or person. The Trustee
thereafter shall accept and rely upon any document executed by such
members or persons as representing action by the Committee, until the
Committee shall file with the Trustee a written revocation of such
designation.
(c) The Committee may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs and, with the consent of
the President of the Company, may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in
connection with the administration of this Plan. The Committee shall be
entitled to rely conclusively upon, and shall be fully protected in any
action taken by it in good faith in relying upon, any opinions or
reports that shall be furnished to it by any such accountant, counsel,
specialist or other person.
7.4 Records and Reports of Committee. The Committee shall keep a
--------------------------------
record of all its proceedings and acts and shall keep all such books of account,
records, and other information as may be necessary for proper administration of
the Plan. The Committee shall notify the Company of any action taken by the
Committee and, when required, shall notify the Trustee and any other interested
person or persons.
7.5 Claims Procedure. Claims for benefits under the Plan shall be made
----------------
in writing to the Administrator. If the Administrator wholly or partially
denies a claim for benefits, the Administrator shall, within a reasonable period
of time, but no later than ninety days after receiving the claim, notify the
claimant in writing of the denial of the claim. If the Administrator fails to
notify the claimant in writing of a decision with respect to the claim within
ninety days after the Administrator receives it, the claim shall be deemed
denied. A notice of denial shall be written in a manner calculated to be
understood by the claimant, and shall contain (a) the specific reason or reasons
for denial of the claim, (b) a specific reference to the pertinent Plan
provisions upon which the denial is based, (c) a description of any additional
material or information necessary for the claimant to perfect the claim,
together with an explanation of why such material or information is necessary,
and (d) an explanation of the Plan's review procedure. Within sixty days of the
receipt by the claimant of the written notice of denial of the claim, or within
sixty (60) days after the claim is deemed denied as set forth above, if
applicable, the claimant may file a written request with the Administrator that
it conduct a full and fair review of the denial of the claimant's claim for
benefits, including the conducting of a hearing, if the Administrator deems one
necessary. In connection with the claimant's appeal of the denial of his
benefit, the claimant may review pertinent documents and may submit issues
32
<PAGE>
and comments in writing. The Administrator shall render a decision on the claim
appeal promptly, but not later than sixty days after receiving the claimant's
request for review, unless special circumstances (such as the need to hold a
hearing) require an extension of time for processing, in which case the sixty-
day period may be extended to 120 days. The Administrator shall notify the
claimant in writing of any such extension. The decision upon review shall (i)
include specific reasons for the decision, (ii) be written in a manner
calculated to be understood by the claimant and (iii) contain specific
references to the pertinent Plan provisions upon which the decision is based.
7.6 Compensation and Expenses of Committee. The members of the
--------------------------------------
Committee shall serve without compensation for services as such, but all
reasonable expenses incurred by the Committee incident to the administration for
the Plan (including reasonable expenses of litigation involving the Plan and
reasonable fees and expenses of its attorneys and agents) shall be borne by, and
paid out of the Plan assets, except to the extent the Administrator elects to
have such expenses paid directly by the Company.
7.7 Indemnity of Committee Members. The Company shall indemnify and
------------------------------
defend each member of the Committee and each of its other employees against any
and all claims, loss, damages, expenses (including reasonable attorney's fees),
and liability arising in connection with the administration of the Plan, except
when the same is judicially determined to be due to the gross negligence or
willful misconduct of such member or other employee.
7.8 Standard of Judicial Review. The Administrator has full and
---------------------------
absolute discretion in the exercise of each and every aspect of its authority
under the Plan, including without limitation, the authority to determine any
person's right to benefits under the Plan, the correct amount and form of any
such benefits, the authority to decide any appeal, the authority to review and
correct any prior actions and all of the rights, powers, and authorities
specified in the Plan. Notwithstanding any provision of law or any explicit or
implicit provision of this document, any action taken, or ruling or decision
made, by the Administrator in the exercise of any of its powers and authorities
under the Plan shall be final and conclusive as to all parties including without
limitation all Participants and Beneficiaries, regardless of whether the
Administrator may have an actual or potential conflict of interest with respect
to the subject matter of such action, ruling, or decision. No such final
action, ruling, or decision of the Administrator shall be subject to de novo
review in any judicial proceeding; and no such final action, ruling, or decision
of the Administrator may be set aside unless it is held to have been an abuse of
discretion or arbitrary and capricious by a final judgement of a court having
jurisdiction with respect to the issue."
ARTICLE VIII
------------
THE TRUSTEE
-----------
8.1 Trustee. The duties and responsibilities of the Trustee are
-------
contained in the Trust.
8.2 Payment of Benefits. In lieu of the payment of Retirement Income
-------------------
or other benefits with respect to a Participant from the Trust Fund of more than
one Controlled Group (as defined in Section 6.10) or from the trust fund of more
than one qualified pension Plan of the Company, Subsidiaries and Related
Companies, the Administrator or other administrators of the plans, may, by
mutual agreement, provide for payment of the entire monthly income or other
benefit from one trust fund with appropriate reimbursement to the trustee of the
trust fund from which the benefits are to be paid by transfer of funds equal to
the single-sum value of the benefits payable under the other plan (or plans) to
the trust fund from which benefits actually will be paid.
ARTICLE IX
----------
PROVISION TO PREVENT DISCRIMINATION
-----------------------------------
9.1 Purpose. To prevent discrimination in favor of Highly Compensated
-------
Participants, the provisions of this Article IX shall be applicable
notwithstanding anything elsewhere contained in the Plan to the contrary.
33
<PAGE>
9.2 Definitions. In this Article, the following terms shall have the
-----------
meaning stated below:
(a) "Accrued Benefit" shall have the meaning set forth in Section
1.1.
(b) "Actuarial Equivalent" shall have the meaning set forth in
Section 1.2.
(c) "Benefit" shall include among other benefits under the Plan,
loans in excess of the amounts set forth in Section 72(p)(2)(A) of the
Code, any periodic income, any withdrawal values payable to a living
Employee, and any death benefits under the Plan not provided for by
insurance on the Employee's life.
(d) "Current Liabilities" shall have the meaning set forth in
Section 412(l)(7) of the Code.
(e) "Compensation" shall have the meaning set forth in Section
1.9.
(f) "Highly Compensated Participant" shall have the meaning set
forth in Section 1.13.
(g) "Social Security Supplement" shall have the meaning set forth
in Internal Revenue Service Regulation (S) 1.411(a)-7(c)(4)(ii).
9.3 Limitations.
-----------
(a) In the event of termination of the Plan, the Benefit of any
Highly Compensated Participant (and any former Highly Compensated
Participant) is limited to a Benefit that is nondiscriminatory under
Section 401(a)(4) of the Code.
(b) The annual payments under the Plan to any Employee described
in Section 9.4 are restricted to an amount in each taxable year of the
Employee equal to the payments that would be made on behalf of the
Employee under:
(1) A straight life annuity that is the Actuarial Equivalent
of the Accrued Benefit and other Benefits to which the Employee is
entitled under the Plan (other than a Social Security Supplement),
and
(2) The amount of the payments that the Employee is entitled
to receive under a Social Security Supplement.
(c) The restrictions in paragraph (b) above do not apply, if any
of the following requirements is satisfied:
(1) After payment to an Employee described in Section 9.4 of
all Benefits payable to the Employee, the value of Plan assets
equals or exceeds 110% of the value of Current Liabilities,
(2) The value of Benefits payable to an Employee described in
Section 9.4 is less than 1% of the value of the Current Liabilities
before distribution, or
(3) The value of the Benefits payable to an Employee described
in Section 9.4 does not exceed the amount described in Section
411(a)(11)(A) of the Code.
9.4 Employees Whose Benefits are Restricted. The Employees whose
---------------------------------------
Benefits are restricted on distribution include all Highly Compensated
Participants and former Highly Compensated Participants. In any one year, the
total number of Employees whose Benefits are subject to restriction under this
Article is limited to a group of not less than 25 Highly Compensated
Participants and former Highly Compensated Participants. If the group of
34
<PAGE>
affected Employees is so limited, the group must consist of those Highly
Compensated Participants and former Highly Compensated Participants with the
greatest Compensation in the current or in any prior year.
9.5 Determination Date for Assets and Liabilities. For purposes of this
---------------------------------------------
Article, the value of Plan assets and the value of Current Liabilities must be
determined as of the same date."
ARTICLE X
---------
ROLLOVER CONTRIBUTIONS
----------------------
10.1 Rollovers and Transfers from Other Plans. An Employee who has
----------------------------------------
received a distribution of his interest in a retirement plan of a former
employer under circumstances meeting the definitions of Section 402(a)(5)(E)(i)
of the Code relating to qualified total distributions from qualified retirement
plans may not deposit all or any portion (as directed by the Employee) of such
distribution as a "rollover contribution" to this Plan. This Plan does not
provide for such transfers.
ARTICLE XI
----------
AMENDMENT AND TERMINATION
-------------------------
11.1 Amendment. Coastal shall have the right to amend the Plan at any
---------
time and from time to time by resolution of the Board and all Employees and
persons claiming any interest hereunder shall be bound thereby; provided,
however, that no amendment shall have the effect of: (a) directly or indirectly
divesting the interest of any Participant in any amount that he would have been
entitled to receive had he terminated his employment with the Company
immediately prior to the effective date of such amendment or the interest of any
Beneficiary as such interest existed immediately prior to the effective date of
such amendment; (b) directly or indirectly affecting the schedule set forth in
Section 5.4 used to determine the vested interest of a Participant on the
effective date of the amendment unless the conditions of Section 411(a)(10) of
the Code are satisfied; (c) vesting in the Company any right, title or interest
in or to any Plan assets; (d) causing or effecting discrimination in favor of
officers, shareholders, or highly compensated Employees; or (e) causing any part
of the assets of the Trust Fund to be used for any purpose other than for the
exclusive benefit of the Participants and their Beneficiaries.
Section 12.14 contains additional requirements with respect to Plan
amendments.
11.2 Involuntary Termination of Plan. The Plan shall automatically
-------------------------------
terminate if Coastal is legally adjudicated a bankrupt, makes a general
assignment for the benefit of creditors, or is dissolved. In the event of the
merger or consolidation of Coastal with or into any other corporation, or if
substantially all of the assets of Coastal shall be transferred to another
corporation, the successor corporation resulting from the consolidation or
merger, or transfer of such assets, as the case may be, shall have the right to
adopt and continue the Plan and succeed to the position of Coastal hereunder.
If, however, the Plan is not so adopted within ninety days after the effective
date of such consolidation, merger or sale, the Plan shall automatically be
deemed terminated as of the effective day of such transaction. Nothing in this
Plan shall prevent the dissolution, liquidation, consolidation or merger of
Coastal, or the sale or transfer of all or substantially all of its assets.
11.3 Voluntary Termination of or Permanent Discontinuance of
-------------------------------------------------------
Contributions to the Plan. The Company expects the Plan to be permanent, but
- -------------------------
because future conditions affecting the Company cannot be anticipated, the
Company shall have the right to terminate the Plan in whole or in part, or
permanently to discontinue contributions to the Plan, at any time by resolution
of the Board and by giving written notice of such termination or permanent
discontinuance to the Trustee. Such resolution shall specify the effective date
of termination or permanent discontinuance, which shall not be earlier than the
first day of the Plan Year that includes the date of the resolution.
35
<PAGE>
11.4 Effect of Termination or Discontinuance of Contributions. If the
--------------------------------------------------------
Plan shall terminate or partially terminate (as determined by the Secretary of
the Treasury) the benefits then accrued for each Participant affected by such
termination will be fully vested in him, provided, however, such benefits will
be payable only out of the Trust Fund or by the Pension Benefit Guaranty
Corporation, in accordance with ERISA, and no Participant or other person shall
have any recourse against the Employer if the Trust Fund and the amounts paid by
the Pension Benefit Guaranty Corporation shall not be sufficient to provide such
benefits in full. No further contributions will be made by the Company with
respect to each such Participant under the Plan except to the extent that
additional contributions may be required under ERISA. The Company shall give
due notice to the Pension Benefit Guaranty Corporation, if applicable, and shall
comply with its procedures and lawful orders. As soon as it may do so, the
Company thereupon shall cause all amounts held in the Trust Fund to be allocated
and distributed in the manner and order set forth in Section 11.5 below.
11.5 Distribution of Funds Upon Termination.
--------------------------------------
(a) If the Plan shall be terminated or partially terminated, the
then present value of benefits vested in each affected Participant in
accordance with Article IV shall be determined as of the Plan
termination date and the assets of the Trust Fund shall be allocated to
the extent that they shall be sufficient, after providing for expenses
of administration, in the order of precedence set forth below:
(i) There shall first be set aside each Participant's and
former Participant's Voluntary Contribution Account and Transfer
Account.
(ii) There shall next be set aside an amount that will provide
Retirement Income for Participants and their respective Spouses or
Beneficiaries who were receiving benefits or who were eligible to
receive benefits at least three years prior to termination of the
Plan, which Retirement Income shall be based on Plan provisions in
effect during the five-year period prior to the date of the Plan's
termination under which such benefits would have been least.
(iii) There shall next be set aside an amount that will provide
all other insured benefits as provided for under Title IV, Section
4044 of ERISA.
(iv) There shall next be set aside an amount that will provide
all other nonforfeitable benefits, as determined under Article IV,
under the provisions of the Plan on the termination date, but that
are not insured under ERISA.
(v) Finally, there shall be set aside an amount that will
provide all other Accrued Benefits for Participants who did not
have nonforfeitable interests in accordance with Article IV as of
the date of Plan termination.
(b) If the assets of the Trust Fund as of the date the Plan is
terminated are not sufficient to provide in whole the amounts required
within the classes described in paragraph (a), such assets shall be
allocated pro rata within the class in which the amounts first cannot be
provided in full.
(c) Allocation in any of the categories listed in paragraph (a)
shall be adjusted for any allocation already made to the same
Participant under a prior category. Allocation of assets may be
modified by the Internal Revenue Service to meet nondiscrimination
requirements. After all expenses of administration have been provided
for, and all liabilities of the Plan to Participants employed by the
Company, former Participants and their respective Spouses and
Beneficiaries have been satisfied, the Company shall be entitled to any
remaining balance of such assets.
11.6 Method of Payment. Provided no discrimination in value results,
-----------------
the Company may direct that the amounts allocated to any or all persons under
the foregoing provisions of this Article XI to be paid in the form of annuity
contracts. Subject to the provisions of Section 6.6 and final and temporary
Pension Benefit Guaranty
36
<PAGE>
Corporation Regulations Section 2617.4(b), payment shall be made in the form of
an annuity purchased by the Trustee. In no event shall the Company receive at
any time amounts from the funds held under the Trust except such amounts that
may remain after satisfaction of all liabilities under the Plan and that arise
out of variations in actual experience from expected actuarial experience.
11.7 Notice of Amendment, Termination or Partial Termination. Affected
-------------------------------------------------------
Participants will be notified of an amendment, termination or partial
termination of the Plan as required by the applicable provisions of ERISA.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.1 Duty To Furnish Information and Documents. Participants, surviving
-----------------------------------------
Spouses and Beneficiaries must furnish to the Administrator and the Trustee such
evidence or information as the Administrator considers necessary or desirable
for the purpose of administering the Plan, and the provisions of the Plan for
each person are upon the condition that he will furnish promptly full, true, and
complete evidence and information requested by the Administrator. All parties
to, or claiming any interest under, the Plan hereby agree to perform any and all
acts, and to execute any and all documents and papers, necessary or desirable
for carrying out the Plan and the Trust.
12.2 Committee's Annual Statements and Available Information. The
-------------------------------------------------------
Company shall advise Employees of the eligibility requirements and benefits
under the Plan. As soon as feasible after making the annual valuations and
allocations provided for in the Plan, and at such other times as the
Administrator may determine, the Administrator may provide each Participant, and
each former Participant, Spouse and Beneficiary entitled to a benefit under the
Plan, with a statement reflecting the current status of his benefits. No
Participant, except as necessary to administer the Plan, shall have the right to
inspect the records relating to any other Participant. The Administrator shall
make available for inspection at reasonable times by Participants, Spouses and
Beneficiaries copies of the Plan, any amendments thereto, the Plan summary, and
all reports of Plan and Trust operations required by law.
12.3 No Enlargement of Employment Rights. Nothing contained in the Plan
-----------------------------------
shall be construed as a contract of employment between the Company and any
person, nor shall the Plan be deemed to give any person the right to be retained
in the employ of the Company or to limit the right of the Company to employ or
discharge any person with or without cause, or to discipline any Employee.
12.4 Applicable Law. All questions pertaining to the validity,
--------------
construction and administration of the Plan shall be determined in conformity
with the laws of Texas to the extent that such laws are not preempted by ERISA
and valid regulations published thereunder.
12.5 Unclaimed Funds. Each Participant shall keep the Administrator
---------------
informed of his current address and the current address of his Spouse, or
Beneficiaries. Neither the Company, the Administrator, the Committee nor the
Trustee shall be obligated to search for the whereabouts of any person. If the
location of a Participant is not made known to the Administrator within three
years after the date on which distribution of the Participant's benefits may
first be made, distribution may be made as though the Participant had died at
the end of the three-year period. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual death of
a Participant, the Administrator is unable to locate any individual who would
receive a distribution under the Plan upon the death of the Participant pursuant
to Article V of the Plan, any benefit payable under the Plan to such individual
shall be held by the Trust or paid from the Trust in accordance with applicable
state law.
12.6 Merger or Consolidation of Plan. Any merger or consolidation of
-------------------------------
the Plan with another plan, or transfer of Plan assets or liabilities to any
other plan, shall be effected in accordance with such regulations, if any, as
may be issued pursuant to Section 208 of ERISA and Section 401(a)(12) of the
Code, in such a manner that each Participant in the Plan would receive, if the
merged, consolidated or transferee plan were terminated immediately
37
<PAGE>
following such event, a benefit that is equal to or greater than the benefit he
would have been entitled to receive if the Plan had terminated immediately
before such event.
12.7 Interest Nontransferable.
------------------------
(a) Except as provided in this Section, no interest of any person
or entity in, or right to receive distributions from, the Trust Fund
shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind;
nor may such interest or right to receive distributions be taken, either
voluntarily or involuntarily, for the satisfaction of the debts of, or
other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in
bankruptcy proceedings. Notwithstanding the preceding provisions of this
Section, all or any part of the Accrued Benefit of a Participant shall
be subject to and payable in accordance with the applicable requirements
of any Qualified Domestic Relations Order, as that term is defined in
Section 414(p) of the Code, and the Administrator shall direct the
Trustee to provide for payment in accordance with such Order and Section
and any regulations promulgated under such Section. All such payments
pursuant to Qualified Domestic Relations Orders shall be subject to
reasonable rules and regulations promulgated by the Administrator;
provided that such rules and regulations are consistent with Section
414(p) of the Code. If prior to the commencement of payment to a
Participant of his Retirement Income, any amount of his Accrued Benefit
is paid to an alternate payee or payees pursuant to a Qualified Domestic
Relations Order, the amount of his Accrued Benefit shall be reduced by
the Actuarial Equivalent of any such payment.
(b) Notwithstanding any Plan provision to the contrary, an
alternate payee pursuant to a Qualified Domestic Relations Order shall
not receive any portion of an increase in benefits due to early
retirement to which the Participant is or may be entitled. Any benefit
received by such an alternate payee shall be Actuarial Equivalent of the
portion of the benefit to which such alternate payee is entitled at
Normal Retirement Age of the Participant reduced on an actuarial basis
to reflect the payment at an earlier date should such alternate payee
elect to receive benefits before the Normal Retirement Date of the
Participant.
12.8 Prudent Man Rule. Notwithstanding any other provision of the Plan
----------------
and Trust, the Trustee, the Committee, the Administrator and the Company shall
exercise their powers and discharge their duties under the Plan and Trust for
the exclusive purpose of providing benefits to Employees and their Spouses and
Beneficiaries, and shall act with the care, skill, prudence and diligence under
the circumstances that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims. Subject to the terms of the preceding sentence, the Trustee
shall diversify investments of the Trust Fund so as to minimize the risk of
large losses, unless under the circumstances it is clearly prudent not to do so.
12.9 Limitations on Liability. Notwithstanding any of the preceding
------------------------
provisions of the Plan, none of the Trustee, the Administrator, the Company, the
Committee and each individual acting as an employee or agent of any of them
shall be liable to any Participant, former Participant, Spouse or Beneficiary
for any claim, loss, liability or expense incurred in connection with the Plan,
except when the same shall have been judicially determined to be due to the
gross negligence or willful misconduct of such person.
12.10 Headings. The headings in this Plan are inserted for convenience
--------
of reference only and are not to be considered in construction of the provisions
hereof.
12.11 Gender and Number. Except when otherwise required by the
-----------------
context, any masculine terminology in this document shall include the feminine,
and any singular terminology shall include the plural.
12.12 ERISA and Approval Under Code. The Plan and Trust are intended
-----------------------------
to qualify as a Plan and Trust meeting the requirements of Sections 401(a) and
501(a) of the Code, as now in effect or hereafter amended, so that the income of
the Trust Fund may be exempt from taxation under Section 501(a) of the Code and
contributions of the Company under the Plan may be deductible for federal income
tax purposes under Section 404
38
<PAGE>
of the Code. Any modification or amendment of the Plan or Trust may be made
retroactively, as necessary or appropriate, to establish and maintain such
qualification and to meet any requirement of the Code or ERISA.
12.13 Extension of Plan to Related Employers.
--------------------------------------
(a) With the approval of Coastal, any Related Employer or
Subsidiary may adopt the Plan and qualify its employees to become
Participants hereunder by taking action to adopt the Plan.
(b) The Plan will terminate with respect to any Related Employer
or Subsidiary that has adopted the Plan pursuant to this Section if the
Related Employer or Subsidiary ceases to be a Related Employer or
Subsidiary, revokes its adoption of the Plan by appropriate action,
permanently discontinues its contributions for its Employees, or if the
Plan terminates with respect to such Related Employer or Subsidiary
pursuant to Section 11.2 or 11.4. If the Plan is terminated or
contributions are discontinued with respect to any Related Employer or
Subsidiary, the provisions of Section 11.6 shall apply to the interest
in the Plan of the Employees of such Related Employer or Subsidiary, and
their Beneficiaries and Spouses.
(c) Coastal shall act as the agent for each Related Employer and
Subsidiary that adopts the Plan for all purposes of administration
thereof.
12.14 Amendment Procedure. Amendments and supplements to the Plan by
-------------------
Coastal shall be binding on each Related Employer and Subsidiary to the extent
that each such Related Employer or Subsidiary does not reject such amendment or
supplement within ninety days after adoption by the Company. Each Related
Employer and Subsidiary may modify the provisions of the Plan as it pertains
only to its own employees by the adoption, by formal action on its part, of a
supplement to the Plan specifying such modifications which shall pertain only to
its employees. The Board of Directors of Coastal may in its absolute discretion
terminate any participation of a Related Employer or Subsidiary at any time.
Any supplement adopted by a Related Employer or a Subsidiary which modifies
provisions of the Plan with respect to employees of such Related Employer or
Subsidiary shall be effective only if approved by the Board of Directors of
Coastal.
12.15 Expenses of Administration. The Company, Related Employers and
--------------------------
Subsidiaries may pay all expenses incurred in the establishment and
administrations of the Plan, including expenses and fees of the Trustee, but
they shall not be obligated to do so. Any such expenses not so paid shall be
paid from the Trust Fund to the extent permitted by applicable laws including
ERISA.
ARTICLE XIII
------------
TOP-HEAVY PROVISIONS
--------------------
13.1 Top-Heavy Status. Except as provided in Sections 13.5(b) and (c),
----------------
the provisions of this Article shall not apply to the Plan with respect to any
Plan Year for which the Plan is not Top Heavy. If the Plan is or becomes Top
Heavy in any Plan Year, the provisions of this Article XIII will supersede any
conflicting provisions elsewhere in the Plan.
13.2 Definitions. For purposes of this Article XIII, the following
-----------
words and phrases shall have the meanings stated below unless a different
meaning is plainly required by the context:
(a) "Determination Date" means, with respect to any Plan Year: (i)
the last day of the preceding Plan Year, or (ii) in the case of the
first Plan Year of the Plan, the last day of such Plan Year.
(b) "Key Employee" means an Employee meeting the definition of
"key employee" contained in Section 416(i)(1) of the Code and the
Treasury Regulations interpreting that Section. For
39
<PAGE>
purposes of determining whether an Employee is a Key Employee, the
definition of compensation set forth in Section 5.8(j) shall apply.
(c) "Non-Key Employee" means any Employee who is not a Key
Employee.
(d) "Valuation Date" means, with respect to a particular
Determination Date, the most recent valuation date occurring within a
twelve-month period ending on the applicable Determination Date and used
for computing Plan costs for purposes of the minimum funding
requirements of the Code.
13.3 Determination of Top-Heavy Status.
---------------------------------
(a) The Plan will be "Top Heavy" with respect to any Plan Year if,
as of the Determination Date applicable to such Year, the ratio of the
present value of the Accrued Benefits under the Plan for Key Employees
(determined as of the Valuation Date applicable to such Determination
Date) to the present value of the Accrued Benefits under the Plan for
all Employees (determined as of such Valuation Date) exceeds 60%. For
purposes of computing such ratio, and for all other purposes of applying
and interpreting this paragraph (a): (i) the present value of the
cumulative accrued benefits for any Employee shall be increased by the
aggregate distributions made with respect to such Employee under the
Plan during the five-year period ending on any Determination Date; (ii)
benefits provided under all plans that are aggregated pursuant to (b) of
this Section must be considered; and (iii) the provisions of Section 416
of the Code and all Treasury Regulations interpreting said Section shall
be applied. If any Employee has not performed services for the Company
or any Related Employer at any time during the five-year period ending
on any Determination Date, the Accrued Benefit of such Employee shall
not be taken into consideration for purposes of determining whether the
Plan is Top-Heavy with respect to the Plan Year to which the
Determination Date applies.
(b) For purposes of determining whether the Plan is Top Heavy, all
qualified retirement plans maintained by the Company and each Related
Employer shall be aggregated to the extent that such aggregation is
required under the applicable provisions of Section 416 of the Code and
the Treasury Regulations interpreting that Section. All other qualified
retirement plans maintained by the Company and each Related Employer
shall be aggregated only to the extent permitted by Section 416 of the
Code and such Treasury Regulations and elected by the Company.
(c) For purposes of determining whether the Plan is Top Heavy the
Accrued Benefit of a Participant shall not include (i) the amount of a
rollover contribution (or similar transfer) initiated by the Participant
and derived from a plan not maintained by the Company or any Related
Employer, or (ii) a distribution made with respect to an Employee that
is a tax-free rollover contribution (or similar transfer) that is either
not initiated by the Employee or that is made to a plan maintained by
the Company or any Related Employer.
(d) Solely for purposes of determining whether the Plan is Top
Heavy, the Accrued Benefit of any Non-Key Employee shall be determined
(i) under the method, if any, that uniformly applies for accrual
purposes under all plans of the Company or any Related Employer, or (ii)
if there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional accrual
rule of Section 411(b)(1)(C) of the Code.
13.4 Actuarial Assumptions. For purposes of determining whether the
---------------------
Plan is Top Heavy, the actuarial assumptions provided in Section 1.2 of the Plan
shall be used.
40
<PAGE>
13.5 Vesting.
--------
(a) If the Plan becomes Top Heavy, the vested interest of a
Participant in the portion of his Accrued Benefit referred to in
paragraph (b) below shall not be less than the amount determined in
accordance with the following formula in lieu of the formula set forth
in Section 5.4
<TABLE>
<CAPTION>
Years of Vested Forfeitable
Service Percentage Percentage
- ------------------------- ----------------- ----------------
<S> <C> <C>
Fewer than 2 years 0% 100%
2 years 20% 80%
3 years 40% 60%
4 years 60% 40%
5 years 80% 20%
6 or more years 100% 0%
</TABLE>
For purposes of the above schedule, Years of Service shall include
all Years of Service required to be counted under Section 411(a) of the
Code, disregarding all Years of Service permitted to be disregarded
under Section 411(a)(4) of the Code.
(b) The vesting schedule set forth in paragraph (a) next above
shall apply to all Accrued Benefits that have accrued while the Plan is
Top Heavy and during the period of time before the Plan becomes Top
Heavy. This vesting schedule shall not apply to the Accrued Benefit of
any Employee who does not have an Hour of Service after the Plan becomes
Top Heavy.
(c) If the Plan becomes Top Heavy and subsequently ceases to be
Top Heavy, the vesting schedule set forth in paragraph (a) of this
Section shall automatically cease to apply and the vesting schedule set
forth in Section 5.4 shall automatically apply with respect to all
Accrued Benefits that accrue to a Participant for all Plan Years after
the Plan Year with respect to which the Plan was last Top Heavy. For
purposes of this paragraph (c), this change in vesting schedules shall
only be valid to the extent that the conditions of Section 11.1 of the
Plan and Section 411(a)(10) of the Code are satisfied.
13.6 Minimum Benefit.
---------------
(a) If the Plan shall be Top Heavy the Accrued Benefit at any time
for each Non-Key Employee described in paragraph (c) of this Section
shall be the actuarial equivalent (based on the assumptions set forth in
Section 13.4) of a single life annuity payable over the life of the Non-
Key Employee, commencing on his sixty-fifth birthday, equal to a
percentage of such Employee's average compensation (as defined in
Section 5.8(j)) for the five consecutive Plan Years when the Employee
had the highest aggregate amount of such compensation from the Company
and all Related Employers. Such percentage shall equal the lesser of
(i) two percent multiplied by such Employee's Years of Service (as
computed pursuant to paragraph (b) of this Section), or (ii) twenty
percent. The minimum benefit payable pursuant to this Section 13.6 will
be determined without regard to any contributions for any Employee under
the Federal Social Security Act. Notwithstanding the provisions of
Section 5.7, if the Retirement Income of a Non-Key Employee does not
commence until after his sixty-fifth birthday, or is suspended for any
period after his sixty-fifth birthday pursuant to Section 5.7, the
amount of the Retirement Income required under this Section upon
commencement or recommence-ment of Retirement Income payments to such
Non-Key Employee after his sixty-fifth birthday shall be adjusted so
that it is equal to the Actuarial Equivalent of the Retirement Income
required by this Section at his sixty-fifth birthday less the Actuarial
Equivalent of any Retirement Income payments previously made to the
Employee.
41
<PAGE>
(b) For purposes of this Section 13.6, any Year of Service may be
disregarded (i) if the Plan was not Top Heavy for any Plan Year ending
during such Year of Service, and (ii) if the Year of Service was
completed in a Plan Year beginning before January 1, 1984.
(c) Each Non-Key Employee who completes at least 1,000 Hours of
Service in a Plan Year shall accrue the minimum Accrued Benefit
described in paragraph (a) of this Section for such Year. A Non-Key
Employee shall not fail to accrue such benefit merely because the
Employee was not employed on a specific date or because he failed to
earn a minimum amount of compensation for that Plan Year. Compensation,
for purposes of this Article, is defined in Section 13.7.
(d) For purposes of paragraph (c) of this Section, compensation in
Plan Years ending before January 1, 1984 and compensation in Plan Years
after the close of the last Plan Year in which the Plan is Top Heavy
shall be disregarded.
13.7 Compensation. For any Plan Year in which the Plan is Top Heavy,
------------
annual Compensation for purposes of this Article shall have the meaning set
forth in Section 414(q)(7) of the Code.
13.8 Collective Bargaining Agreements. The requirements of Sections
--------------------------------
13.5 and 13.6 shall not apply with respect to any Employee included in a unit of
employees covered by a collective bargaining agreement between employee
representatives and the Company, Subsidiary or a Related Employer if retirement
benefits were the subject of good faith bargaining between employee
representatives and the Company, a Subsidiary or a Related Employer.
13.9 Maximum Allocation. For purposes of determining whether the Plan
------------------
would be Top Heavy if "90%" were substituted for "60%" each place it appears in
paragraphs (1)(A) and (2)(B) of Section 416(g) of the Code, as required by
Section 416(h) of the Code, all of the preceding provisions of this Article XIII
shall be applicable except that the phrase "90%" shall be substituted for the
phrase "60%" where it appears in paragraph (a) of Section 13.3. If, pursuant to
the preceding sentence, it is determined that the Plan would be Top Heavy if
"90%" were so substituted for "60%", then for purposes of applying Sections
415(e) and 416(h) of the Code and Section 5.8 of the Plan to the maximum benefit
permitted for any Participant, "1.0" shall be substituted for "1.25" in each
applicable place in paragraphs (2)(B) and (3)(B) of Section 415(e) of the Code.
13.10 Safe-Harbor Rule. Each Non-Key Employee covered under both a
----------------
Top-Heavy defined benefit plan and a Top-Heavy defined contribution plan
maintained by the Company or any Related Employer must receive the defined
benefit minimum (as defined in Section 416(c)(1) of the Code) under the
provisions of the defined benefit plan.
42
<PAGE>
IS-a
FIRST SUPPLEMENT
----------------
COASTAL PLAN - July, 1986
-------------------------
This provision applies to persons who were Participants in the Pension
Plan for Employees of The Coastal Corporation for periods of time before July 1,
1986. The term "Actuarially Equivalent" is modified to provide that an
equivalent benefit computed as of any date after June 30, 1986, using an eight
percent rate of interest shall not be less than the equivalent of such benefit
computed (1) using an interest rate of five and one-half percent and (2) based
upon the benefit of such Participant accrued prior to July 1, 1986.
COASTAL STATES PLAN - December, 1975
------------------------------------
These Provisions Apply to Participants in the Pension Plan for Hourly-
Wage or Salaried Employees of Coastal States Gas Corporation as of December 31,
-----------------------------------------------------------------------
1975.
- ----
(A) APPLICABILITY OF FIRST SUPPLEMENT
---------------------------------
(1) This First Supplement to Pension Plan for Employees of Coastal States
Gas Corporation (herein referred to as the `First Supplement') forms a
part of the Pension Plan for Employees of Coastal States Gas Corporation
(herein referred to as the `Plan') as in effect on and after January 1,
1976. The provisions of this First Supplement shall apply only to those
Participants who became Participants in the Plan as of January 1, 1976,
whose last employment commencement dates are prior to January 1, 1976
and who were Participants in the Pension Plan for Hourly-Wage Employees
of Coastal States Gas Corporation or the Pension Plan for Salaried
Employees of Coastal States Gas Corporation as of December 31, 1975
(such retirement plans as in effect on December 31, 1975, insofar as
they applied to Employees who became Participants in the Plan as of
January 1, 1976, are herein referred to collectively as the `Superseded
Plan').
(2) All terms used in this First Supplement shall have the meanings assigned
to them in the provisions of the Plan unless otherwise qualified by the
context. As between the Plan and this First Supplement there shall be
no duplication of benefits, and the benefits payable under the Plan
shall be inclusive of the Actuarially Equivalent benefits, if any, which
are payable to the same Employee under this First Supplement, as
hereinafter described, unless otherwise qualified by the context.
(3) With respect to former employees of Rio Grande Valley Gas Company and
with respect to Employees of Coastal States Gas Producing Company,
Colorado Interstate Gas Company, CIC Industries, Inc., and Union
Petroleum Corporation, and their subsidiaries, the following will apply
with respect to the period of their service as defined herein prior to
the date that the Company acquired the majority voting interest in said
companies:
(a) the total period of such Service will be included as Credited
Service if they were participants in the qualified pension plans of
the respective companies from the dates that they first became
eligible to participate thereunder;
(b) only that portion of such Service which they accrued while
participants in the qualified pension plans of the respective
companies will be included as Credited Service if they did not
participate in such plans when they first became eligible;
(c) none of the period of such Service will be included as Credited
Service if they were not participants in the qualified pension plans
of the respective companies; and
(d) notwithstanding the above, none of the period of such Service will
be included as Credited Service if they have the right to, and they
withdraw, their own contributions and credited interest prior to
their retirement or termination of Service. However, see Section
(H) of the
43
<PAGE>
First Supplement and Section (D) of the Second Supplement with
respect to rules regarding forfeiture of employer-derived benefits
resulting from withdrawals of participant's contributions.
(B) MINIMUM BENEFITS FOR FORMER PARTICIPANTS IN THE PENSION PLAN AND TRUST FOR
--------------------------------------------------------------------------
HOURLY-WAGE EMPLOYEES OF COASTAL STATES GAS PRODUCING COMPANY OR THE PENSION
----------------------------------------------------------------------------
PLAN AND TRUST FOR SALARIED EMPLOYEES OF COASTAL STATES GAS PRODUCING
---------------------------------------------------------------------
COMPANY AS OF JUNE 30, 1973
---------------------------
The following provisions of this Section (B) of the First Supplement shall
apply only to those Participants to whom the provisions of this First
Supplement apply whose last dates of commencement of employment are prior to
July 1, 1973 and who were covered under the terms of the Pension Plan and
Trust for Hourly-Wage Employees of Coastal States Gas Producing Company or
the Pension Plan and Trust for Salaried Employees of Coastal States Gas
Producing Company as of June 30, 1973.
(1) Minimum Normal Retirement Income: Subject to the provisions of the
--------------------------------
Plan, the monthly amount of Retirement Income, determined under the Plan
and payable in the manner described in the Plan, which is payable to a
Participant with respect to whom the provisions of this Section (B) of
the First Supplement are applicable, upon his normal retirement at any
time on or after the effective date of the Plan, shall not be less than
the Actuarial Equivalent of that amount of income which he would have
received under the terms of the Pension Plan and Trust for Hourly-Wage
Employees of Coastal States Gas Producing Company as in effect on June
30, 1973 or the Pension Plan and Trust for Salaried Employees of Coastal
States Gas Producing Company as in effect on June 30, 1973, whichever
plan is applicable, if such applicable plan had been continued without
change. Such monthly Retirement Income shall also be applied under the
Plan to determine the minimum deferred Retirement Income commencing at
Normal Retirement Date which such a Participant has accrued under the
Plan as of any given date.
(2) Minimum Early Retirement Income. In the event of the early retirement,
-------------------------------
in accordance with the provisions of the Plan, of a Participant who has
both attained the age of 55 years and completed 15 years of Credited
Service as of his early retirement date, and with respect to whom the
provisions of this Section (B) of the First Supplement are applicable,
the monthly amount of Retirement Income, determined under the Plan and
payable in the manner described in the Plan, shall not be less than the
Actuarial Equivalent of the monthly amount which he would have received
under the terms of the Pension Plan and Trust for Hourly-Wage Employees
of Coastal States Gas Producing Company as in effect on June 30, 1973 or
the Pension Plan and Trust for Salaried Employees of Coastal States Gas
Producing Company as in effect on June 30, 1973, whichever plan is
applicable, if such applicable plan had been continued without change.
(C) SPECIAL PROVISIONS APPLICABLE TO FORMER EMPLOYEES OF RIO GRANDE VALLEY GAS
--------------------------------------------------------------------------
COMPANY
-------
The following provisions of this Section (C) of the First Supplement shall
apply only to Participants, to whom the provisions of Section (B) of this
First Supplement are applicable, who were former employees of Rio Grande
Valley Gas Company. Said participants are herein referred to as "Rio
Employees", said Rio Grande Valley Company is herein referred to as "Rio",
and the retirement plan maintained by Rio on behalf of its employees is
herein referred to as the "Rio Plan".
(1) Credited Service: Credited Service with respect to the Rio Employees,
----------------
who were Participants in the Rio Plan from the date they first became
eligible, shall include the period of continuous prior service from
their dates of employment with Rio. However, with respect to those Rio
employees who were participants in the Rio Plan as of December 31, 1968,
but who did not participate in the Rio Plan when they first became
eligible, Credit Service prior to July 1, 1968 shall include only their
period of prior participation in the Rio Plan. With respect to the Rio
employees, who were not participants in the Rio Plan or participants who
withdraw their contributions and credited interest prior to
44
<PAGE>
retirement, their Credit Service shall commence on July 1, 1968, when
they became Employees of the Employer, and shall not include any prior
service with Rio.
(2) Minimum Retirement Benefits under Rio Plan: The Rio employees, who were
------------------------------------------
Participants in the Rio Plan as of December 31, 1968, shall be entitled
to the retirement benefits provided under the Plan and Section (B) of
this First Supplement, but, subject to the provisions of the Plan, such
benefits shall not be less than the Actuarially Equivalent monthly
Retirement Income which they would have received under the provisions of
the Rio Plan, as of their respective dates of retirement, reduced by the
monthly Retirement Income which would have been provided on an
Actuarially Equivalent basis by the Participant's future contributions
after December 31, 1968 with credited interest at the rate of 3% per
annum, compounded annually, as if the Rio Plan had been continued with
out change. If a Rio employee has attained the age of 55 years but has
not completed 10 years of Credited Service, he may retire early from the
service of the Employer, and he will be entitled to a benefit payable in
accordance with the provisions of the Plan in an amount equal to the
Actuarial Equivalent of the monthly Retirement Income which he would
have received under the provisions of the Rio Plan as of the date of his
retirement, reduced by the monthly Retirement Income which would have
been provided on an Actuarially Equivalent basis by the Participant's
future contributions after December 31, 1968 with credited interest at
the rate of 3% per annum, compounded annually, if the Rio Plan had been
continued without change.
(3) Minimum Termination Benefits under Rio Plan: A Rio employee, who was a
-------------------------------------------
participant in the Rio Plan, shall be entitled to terminate from said
Rio Plan at any time prior to retirement and withdraw an amount equal to
his contributions to said Rio Plan through December 31, 1968 with
interest thereon at the rate of 3% per annum, compounded annually, to
the date of withdrawal, but in such an event his Credited Service shall
be reduced as provided in Section (C)(1) above. If a Rio employee, who
was a Participant in the Rio Plan, has completed 15 years of Credited
Service and should terminate his service with the Employer for any
reason after having attained the age of 50 years, he may elect to have
his contributions remain under the Plan and become entitled to the
monthly Retirement Income which he would have received on normal or
early retirement under the provisions of the Rio Plan, as the case may
be, reduced by the monthly Retirement Income which would have been
provided on an Actuarially Equivalent basis by the Participant's future
contributions after December 31, 1968 with credited interest at the rate
of 3% per annum, compounded annually, if the Rio Plan had been continued
without change.
(4) Death Benefits under Rio Plan: In the event that a Rio employee, who
-----------------------------
was a Participant in the Rio Plan, should die prior to retirement and no
payments are due to a joint annuitant or provisional payee, his
Beneficiaries shall be entitled to receive the total amount of his
contributions plus credited interest at the rate of 3% per annum,
compounded annually, to his date of death or Normal Retirement Date,
whichever is earlier. In the event that a Rio Employee, who was a
Participant in the Rio Plan, should die after retirement but before he
and his joint annuitants or provisional payees, if applicable, have
received total retirement benefits at least equal to the total amount of
his contributions to the Rio Plan plus credited interest at the rate of
3% per annum, compounded annually, to the date of commencement of his
Retirement Income payments, his Beneficiaries shall be entitled to
receive the balance of such contributions and credited interest.
(D) MINIMUM BENEFITS FOR FORMER PARTICIPANTS IN THE COLORADO INTERSTATE
-------------------------------------------------------------------
CORPORATION RETIREMENT INCOME PLAN AS OF JUNE 30, 1973
------------------------------------------------------
The following provisions of this Section (D) of the First Supplement shall
apply only to those Participants to whom the provisions of this First
Supplement are applicable whose last dates of commencement of employment are
prior to July 1, 1973 and who were covered under the terms of the Colorado
Interstate Corporation Retirement Income Plan as of June 30, 1973. The
amount of Retirement Income, if any, payable under the plan on behalf of any
Participant with respect to whom the provisions of this Section (D) of the
First Supplement are applicable shall be reduced by the Actuarial Equivalent
of the "Affiliated Plan Accrued
45
<PAGE>
Retirement Income Credit" (as defined in the Colorado Interstate Corporation
Retirement Income Plan), if any, which is payable on behalf of such
Participant.
(1) Minimum Normal Retirement Income: Subject to the provisions of the
--------------------------------
Plan, the monthly amount of Retirement Income, determined under the Plan
and payable in the manner described in the plan, which is payable to a
Participant with respect to whom the provisions of this Section (D) for
the First Supplement are applicable, upon his normal retirement any time
on or after the effective date of the Plan, shall not be less than the
Actuarial Equivalent of that amount which he would have received under
the terms of the Colorado Interstate Corporation Retirement Income Plan
as in effect on June 30, 1973, if such Plan had been continued without
change. Such monthly Retirement Income shall also be applied under the
Plan to determine the minimum deferred Retirement Income at Normal
Retirement Date which such a Participant has accrued under the Plan as
of any given date. If a Participant, who is classified as a Pilot
Employee, should retire from the service of the Employer when he attains
the age of 60 years and before his initial vesting date, he shall,
subject to the provisions of the Plan, be entitled to the normal
retirement benefit which would have been payable on his behalf under the
terms of the Colorado Interstate Corporation Retirement Income Plan as
in effect on June 30, 1973, if such plan had been continued without
change. If a Participant, who is classified as a Pilot Employee, should
retire from the service of the Employer when he attains the age of 60
years and on or after this initial vesting date, he shall be entitled,
subject to the provisions of the Plan, to a benefit payable in
accordance with the provisions of the Plan which shall not be less than
the Actuarial Equivalent of the normal retirement benefit which would
have been payable under the terms of the Colorado Interstate Corporation
Income Plan as in effect on June 30, 1973, if such plan had been
continued without change.
(2) Minimum Early Retirement Income: In the event of the early retirement,
-------------------------------
in accordance with the provisions of the Plan, of a Participant, who has
both attained the age of 55 years and completed 10 years of Credited
Service as of his early retirement date and with respect to whom the
provisions of this Section (D) of the First Supplement are applicable,
such Participant shall be entitled to the monthly Retirement Income
computed and payable in accordance with the provisions of the Plan;
provided, however, that, subject to the provisions of the Plan, such
monthly amount of Retirement Income, which is payable under the Plan
shall not be less than the Actuarial Equivalent of the monthly amount
which he would have received under the terms of the Colorado Interstate
Corporation Retirement Income Plan as in effect on June 30, 1973 if such
plan had been continued without change. A Participant, with respect to
whom the provisions of this Section (D) of the First Supplement are
applicable, who has attained the age of 55 years but who has not
completed 10 years of Credited Service may elect early retirement and,
subject to the provisions of the Plan, will be entitled to a benefit
payable in accordance with the provisions of the Plan which is the
Actuarial Equivalent of the monthly Retirement Income which would have
been payable on his behalf under the provisions of the Colorado
Interstate Corporation Retirement Income Plan as in effect on June 30,
1973, if such Plan had continued without change. A Participant who has
been classified as a Pilot Employee under such Plan, and with respect to
whom the provisions of this Section (D) of the First Supplement are
applicable, may elect to retire after attaining the age of 50 years and
will be entitled to a benefit payable in accordance with the provisions
of the Plan which is the Actuarial Equivalent of the monthly Retirement
Income which would have been payable under the provisions of such Plan
as in effect on June 30, 1973, if such Plan had been continued without
change.
(3) Vested Benefits Upon Termination of Service: In the event of the
-------------------------------------------
termination of service, in accordance with the provisions of the Plan,
of a Participant with respect to whom the provisions of this Section (D)
of the First Supplement are applicable, on or after the date as of which
he has both attained the age of 40 years and completed 10 years of
Credited Service, he shall be entitled to a benefit, payable in
accordance with the provisions of the Plan, which is at least equal to
the Actuarially Equivalent benefit which he would have received under
the terms of the Colorado Interstate Corporation Retirement Income Plan
as in effect on June 30, 1973 if such Plan had been continued without
change. A participant with respect to whom the provisions of this
Section (D) of the First Supplement are applicable, who had completed at
least 5 years of credited service as of
46
<PAGE>
June 30, 1973 (as defined in the Colorado Interstate Corporation
Retirement Income Plan), but whose date of termination of service under
the provisions of the Plan is prior to his initial vesting date, will be
entitled to only such benefits as he would have received under the
provisions of the Colorado Interstate Corporation Retirement Income Plan
as in effect on June 30, 1973, if such Plan had been continued without
change.
(4) Spouse's Benefit:
----------------
(a) In the event of the termination of service of a Participant, with
respect to whom the provisions of this Section (D) of the First
Supplement are applicable, by reason of his death prior to his
Normal Retirement Date and on or after the date as of which he has
completed 10 years of Credited Service, and provided that all other
requirements specified in the Colorado Interstate Corporation
Retirement Income Plan as in effect on June 30, 1973 to qualify for
a Spouse's Benefit have been met on the date of the Participant's
death, the widow or widower of such participant shall be entitled to
the Spouse's Benefit which would be payable upon the Participant's
death in accordance with the terms of the Colorado Interstate
Corporation Retirement Income Plan as in effect on June 30, 1973,
but the amount of Retirement Income payable to such widow or widower
shall be equal to that amount which would have been payable on
behalf of the Participant under the terms of the Colorado Interstate
Corporation Retirement Income Plan as in effect on June 30, 1973 if
his death had occurred on June 30, 1973 and assuming that all
requirements to qualify for such benefits had been met on June 30,
1973.
(b) A participant with respect to whom the provisions of this Section
(D) of the First Supplement are applicable may elect the Qualified
Joint and Survivor Annuity (With Preretirement Death Benefits), but
the benefit payable thereunder shall be inclusive of the benefit
provided under Section (D)(4)(a) above. Notwithstanding the
provisions of the Plan, the reduction applicable under the qualified
joint and survivor annuity for each complete month prior to the
Participant's Normal Retirement Date that the preretirement death
benefit coverage specified under the Plan has been in effect for a
participant with respect to whom the provisions of this Section (D)
of the First Supplement are applicable shall be (a) determined in
accordance with Plan provisions and the result shall be multiplied
by (b) the fraction in which the numerator is the excess of the
largest benefit provided the Participant's spouse under the
qualified joint and survivor annuity over the benefit provided under
Section (D)(4)(a) above and the denominator is the largest benefit
provided the Participant's spouse under the qualified joint and
survivor annuity.
(E) MINIMUM BENEFITS FOR FORMER PARTICIPANTS IN THE CIC INDUSTRIES, INC.
--------------------------------------------------------------------
RETIREMENT PLAN AS OF JUNE 30, 1973
-----------------------------------
The following provisions of this Section (E) of the First Supplement shall
apply only to those Participants to whom the provisions of this First
Supplement are applicable whose last dates of commencement of employment are
prior to July 1, 1973 and who were covered under the terms of the CIC
Industries, Inc. Retirement Plan as of June 30, 1973.
(1) Minimum Normal Retirement Income: Subject to the provisions of the
--------------------------------
Plan, the monthly amount of Retirement Income, determined under the Plan
and payable in the manner described in the Plan, which is payable to a
Participant, with respect to whom the provisions of this Section (E) of
the First Supplement are applicable, upon his normal retirement at any
time on or after the effective date of the Plan shall not be less than
the Actuarial Equivalent of that amount which he would have received
under the terms of the CIC Industries, Inc. Retirement Plan as in effect
on June 30, 1973, if such Plan had been continued without change. Such
monthly retirement income shall also be applied under the Plan to
determine the minimum deferred Retirement Income at Normal Retirement
Date which such a Participant has accrued under the Plan as of any given
date.
47
<PAGE>
(2) Minimum Early Retirement Income: In the event of early retirement, in
-------------------------------
accordance with the provisions of the Plan, of a Participant, who has
both attained the age of 55 years and completed 10 years of Credited
Service as of his early retirement date and with respect to whom the
provisions of this Section (E) of the First Supplement are applicable,
such Participant shall be entitled to the monthly Retirement Income
computed and payable in accordance with the provisions of the Plan;
provided, however, that, subject to the provisions of the Plan, such
monthly amount of Retirement Income which is payable under the Plan to
such a Participant shall not be less than the Actuarial Equivalent of
the monthly amount which he would have received under the terms of the
CIC Industries, Inc. Retirement Plan as in effect on June 30, 1973, if
such plan had been continued without change. A Participant, with
respect to whom the provisions of this Section (E) of the First
Supplement are applicable, who has attained the age of 55 years but who
has not completed 10 years of Credited Service may elect early
retirement and, subject to the provisions of the Plan, will be entitled
to a benefit payable in accordance with the provisions of the Plan which
is the Actuarial Equivalent of the monthly Retirement Income which would
have been payable under the provisions of the CIC Industries, Inc.
Retirement Plan as in effect on June 30, 1973, if such Plan had been
continued without change.
(3) Vested Benefits Upon Termination of Service: In the event of the
-------------------------------------------
termination of service, in accordance with the provisions of the Plan,
of a Participant, with respect to whom the provisions of this Section
(E) of the First Supplement are applicable, on or after the date as of
which he has both attained the age of 40 years and completed 10 years of
Credited Service, he shall be entitled to a benefit, payable in
accordance with the provisions of the Plan, which is at least equal to
the Actuarially Equivalent benefit which he would have received under
the terms of the CIC Industries, Inc. Retirement Plan as in effect on
June 30, 1973, if such Plan had been continued without change. A
Participant, with respect to whom the provisions of this Section (E) of
the First Supplement are applicable, who had completed at least 10 years
of Credited Service as of June 30, 1973 (as defined in the CIC
Industries, Inc. Retirement Plan), but whose date of termination is
prior to his initial vesting date will be entitled to only such benefits
as he would have received under the provisions of the CIC Industries,
Inc. Retirement Plan as in effect on June 30, 1973, if such Plan had
been continued without change.
(4) Participant's Contributions: Anything in the Plan or this First
---------------------------
Supplement to the contrary notwithstanding, the total benefits payable
under the Plan or this First Supplement to, or on behalf of, a
Participant, with respect to whom the provisions of this Section (E) of
the First Supplement are applicable, shall not be less than an amount
which is the Actuarial Equivalent of the Participant's contributions
with interest as determined under the provisions of the CIC Industries,
Inc. Retirement Plan as in effect on June 30, 1973. Any Participant,
with respect to whom the provisions of this Section (E) of the First
Supplement are applicable, may elect upon his retirement or termination
of service to withdraw his contributions with interest in a lump sum as
provided under the terms of the CIC Industries, Inc. Retirement Plan as
in effect on June 30, 1973. In such event, he shall be entitled to the
greater of (a) the benefits provided under the provisions of the Plan
based on his Credited Service accrued after December 31, 1970 and (b)
those reduced benefits which would have been payable on his behalf under
the terms of the CIC Industries Inc. Retirement Plan as in effect on
June 30, 1973, if such Plan had been continued without change.
(5) Benefits to be Reduced by Value of Previously Purchased Annuity or
------------------------------------------------------------------
Annuities:
---------
(a) At the time of commencement of payment of any benefit under the Plan
on behalf of a Participant with respect to whom the provisions of
this Section (E) of the First Supplement are applicable, the benefit
payable under the Plan shall be reduced on an Actuarially Equivalent
basis by any paid-up annuity or annuities purchased on behalf of the
Participant under Group Annuity Contract No. GA-412, effective July
1, 1954, entered into by Colorado Oil and Gas Corporation and The
Prudential Insurance Company of America as said group annuity
contract has been and may be amended or under the terms of Deposit
Administration Contract No. A-532841-G, effective April 1, 1949,
entered into by the trustees of the Derby Retirement Plan
48
<PAGE>
and Minnesota Mutual Life Insurance Company as said deposit
administration contract has been and may be amended, which such
Participant has received and/or is entitled to receive under the
provisions of such group annuity contract or such deposit
administration contract. Such reduction will be made irrespective
of whether or not the Participant, by his action, has reduced in any
way the benefits accrued to him under said annuity contract or said
deposit administration contract.
(b) The provisions of the aforementioned group annuity contract or
deposit administration contract, as the case may be, and not the
provisions of the Plan, will govern any question dealing with
conditions under which benefits provided under such applicable
contract are to be paid.
(F) MINIMUM BENEFITS FOR FORMER PARTICIPANTS IN THE RETIREMENT PLAN FOR
-------------------------------------------------------------------
EMPLOYEES OF UNION PETROLEUM CORPORATION AS OF JUNE 30, 1973
------------------------------------------------------------
The following provisions of this Section (F) of the First Supplement shall
apply only to those Participants to whom the provisions of this First
Supplement are applicable whose last dates of commencement of employment are
prior to July 1, 1973 and who were covered under the terms of the Retirement
Plan for Employees of Union Petroleum Corporation as of June 30, 1973.
(1) Credited Service: For the purposes of the Plan and this Section (F) of
----------------
the First Supplement, Credited Service with respect to Participants,
with respect to whom the provisions of this Section (F) of the First
Supplement are applicable, who were Participants in the Retirement Plan
of Union Petroleum Corporation from the date they first became eligible,
shall include the period of continuous prior service from their dates of
employment with Union Petroleum Corporation. However, with respect to
those Participants with respect to whom provisions of this Section (F)
of the First Supplement are applicable, who were Participants in the
Retirement Plan of Union Petroleum Corporation as of June 30, 1973, but
who did not participate in such Retirement Plan when they first became
eligible, Credited Service prior to July 1, 1973 shall include only
their period of prior participation in the Retirement Plan of Union
Petroleum Corporation. With respect to the Participants with respect to
whom the provisions of this Section (F) of the First Supplement are
applicable, who were not Participants in the Retirement Plan of Union
Petroleum Corporation or Participants who withdraw their contributions
and credited interest prior to retirement, Credited Service shall
commence on April 19, 1973, when the Employer became a Subsidiary.
(2) Minimum Early Retirement Benefits: If a Participant, with respect to
---------------------------------
whom the provisions of this Section (F) of the First Supplement are
applicable, who participated in the Retirement Plan of Union Petroleum
Corporation as of June 30, 1973, has attained the age of 55 years but
has not completed 10 years of Credited Service, he may retire early from
the service of the Employer, and he will be entitled, subject to the
provisions of the Plan, to the benefit payable in accordance with the
provisions of the Plan which is the Actuarial Equivalent of the monthly
Retirement Income which he would have received under the provisions of
the Retirement Plan of Union Petroleum Corporation of the date of his
retirement, reduced by the monthly Retirement Income which would have
been provided on an Actuarially Equivalent basis by the Participant's
future contributions after June 30, 1973 with credited interest at the
rate of 3-1/2% per annum, compounded annually, if the Retirement Plan of
Union Petroleum Corporation had been continued without change.
(3) Minimum Termination Benefits: A Participant, with respect to whom the
----------------------------
provisions of this Section (F) of the First Supplement are applicable,
who was a Participant in the Retirement Plan of Union Petroleum
Corporation, shall be entitled, at any time prior to retirement, to
withdraw an amount equal to his contributions to said Retirement Plan
through June 30, 1973 with interest thereon at the rate of 3-1/2% per
annum, compounded annually, to date of withdrawal, but in such an event
his Credited Service shall be reduced as provided in Section (F)(1)
above.
(4) Minimum Death Benefits: In the event that a Participant, with respect
----------------------
to whom the provisions of this Section (F) of the First Supplement are
applicable, who was a Participant in the Retirement Plan of
49
<PAGE>
Union Petroleum Corporation, should die prior to retirement and no
payments are due to a joint annuitant or provisional payee, his
Beneficiaries shall be entitled to receive the total amount of his
contributions plus credited interest at the rate of 3-1/2% per annum,
compounded annually, to his date of death or Normal Retirement Date,
whichever is earlier. In the event that a Participant, with respect to
whom the provisions of this Section (F) of the First Supplement are
applicable, who was a Participant in the Retirement Plan of Union
Petroleum Corporation, should die after retirement but before he and his
joint annuitants or provisional payees, if applicable, have received
total retirement benefits at least equal to the total amount of his
contributions to the Retirement Plan of Union Petroleum Corporation plus
credited interest at the rate of 3-1/2% per annum, compounded annually,
to the date of commencement of his Retirement Income payments, his
Beneficiaries shall be entitled to receive the balance of such
contributions and credited interest.
(G) SPECIAL PROVISIONS APPLICABLE TO PARTICIPANT'S CONTRIBUTIONS, IF ANY, TO THE
----------------------------------------------------------------------------
SUPERSEDED PLAN WITH INTEREST
-----------------------------
The following provisions will apply with respect to benefits payable under
the Plan and this First Supplement to those participants to whom the
provisions of this First Supplement are applicable who made Participant
contributions prior to the effective date of the Plan under the provisions
of any superseded plan and who have not withdrawn such contributions or
received benefits equal thereto:
(1) the Actuarially Equivalent single-sum value of the benefits payable
under the Plan and this First Supplement to, or on behalf of, such
Participant shall not be less than an amount equal to the Participant's
contributions, if any to the superseded plan with interest;
(2) the monthly amount of Retirement Income, which is payable for five years
certain and life thereafter commencing at Normal Retirement Date, to a
Participant who retires on or after his Normal Retirement Date or the
amount of the deferred Retirement Income commencing at Normal Retirement
Date, which is payable for five years certain and life thereafter
commencing at Normal Retirement Date, which is used to compute the
benefits, if any, payable to a Participant who retires or whose service
is terminated prior to his Normal Retirement Date, whichever is
applicable, shall not be less than an amount equal to 9.8% of the
Participant's contributions if any, to the superseded plan with interest
to this Normal Retirement Date divided by 12;
(3) in the event of termination of the Plan, before any assets are allocated
under the Plan, each such Participant shall be entitled to an allocation
equal to (a) his Participant's contributions, if any, under the
superseded plan with interest to the date of termination of the Plan or,
if earlier, to the date that the Participant's payments under the Plan
commenced over (b) the amount, if any, of any benefits previously
received by or on behalf of such Participant; provided, however, that if
the asset value as defined in the Plan be less than the aggregate of
such amounts, such amounts to which such Participants are entitled under
this section shall be proportionately reduced so that the aggregate of
such reduced amounts be equal to the asset value; and provided, further,
that any allocations on behalf of any such Participant under the Plan
shall be inclusive of any allocations on his behalf under this
subsection;
(4) in the event of the death of the last person otherwise entitled to
benefits payable on behalf of a Participant under the Plan and this
First Supplement, after all payments otherwise due have been made, there
shall be payable to his Beneficiary (determined in accordance with the
provisions of the Plan) an amount equal to the excess, if any, of the
Participant's contributions, if any, to the superseded plan with
interest over the aggregate of payments which have been made to the
Participant and his Beneficiaries and joint pensioners;
(5) for the purposes of this Section (G), a "Participant's Contributions, if
any, under the superseded plan with interest" shall be equal to the sum
of;
50
<PAGE>
(a) the Participant's contributions, if any, under the superseded plan
prior to the effective date of the Plan and credited to this account
on the effective date of the Plan, together with the interest, if
any, accrued thereto to the effective date of the Plan, where such
accrued interest, if any, to the effective date of the Plan shall be
determined under the provisions of the superseded plan as in effect
immediately preceding the effective date of the Plan; and
(b) the amount of interest after the effective date of the Plan on such
value in (a) above, where such interest shall be compounded annually
from the effective date of the Plan to the date as of which the
Participant's payments under the Plan actually commence or, if
earlier, to the date of termination of the Plan and shall be at the
rate of 5% per annum.
(H) SPECIAL PROVISION APPLICABLE TO THE WITHDRAWAL OF CERTAIN EMPLOYEE
------------------------------------------------------------------
CONTRIBUTIONS TO SUPERSEDED PLANS
---------------------------------
(1) This provision applies to any eligible Employee who, prior to his
retirement or other termination from service, withdraws from any
superseded plan all or any part of the Participant's contributions made
prior to September 2, 1974 plus interest thereon. Notwithstanding any
other provision to the contrary, forfeiture of such Participant's rights
to the employer-derived benefits which accrued prior to September 2,
1974 shall not exceed an amount which bears the same ratio to the
accrued benefit (determined as of September 1, 1974) attributable to the
employer's contributions as the amounts withdrawn bear to the total
amount of Employee contributions made to the Plan as of September 1,
1974, plus interest attributable to such contributions.
(2) With respect to those Employees referred to in (1), above, no part of a
Participant's accrued benefit derived from employer contributions which
are accrued after September 1, 1974 shall be forfeitable solely because
such Participant voluntarily withdraws his contributions after becoming
a 50 percent vested Participant.
(3) Any Employee referred to in (1), above, who withdraws his contributions
to a superseded plan at a time after September 1, 1974 when he is less
than 50 percent vested in his employer-derived accrued benefits shall be
entitled to restoration of any such employer-derived benefits which were
forfeited because of the withdrawal, provided the Employee must repay
the full amount of the withdrawal plus interest computed on the amount
of the withdrawal from the date of withdrawal to the date of repayment,
compounded annually, at the rate of 5 percent. This restoration
provision shall not apply to an Employee who has no vested interest in
his employer-derived accrued benefits, and whose accrued benefit is
disregarded due to a Break in Service.
(I) ELECTION OF OPTIONS AND DESIGNATION OF BENEFICIARIES
----------------------------------------------------
If a Participant has elected an optional form of payment and/or has
designated a Beneficiary (or Beneficiaries) prior to the effective date of
the Plan and such election and/or designation is in force immediately prior
to the effective date of the Plan under the terms of the superseded plan,
such election and/or designation shall continue in effect with respect to
benefits payable under the Plan until a new election of an optional form of
payment is made in accordance with the provisions of the Plan and/or a new
designation of Beneficiary (or Beneficiaries) is made in accordance with the
provisions of the Plan.
(J) RIGHT TO AMEND OR TERMINATE FIRST SUPPLEMENT
--------------------------------------------
The provisions of the Plan with respect to amendment and termination of the
Plan shall apply with equal force to this First Supplement.
51
<PAGE>
SECOND SUPPLEMENT
-----------------
COASTAL PLAN - July, 1986
-------------------------
This provision applies to persons who were Participants in the Pension
Plan for Employees of The Coastal Corporation for periods of time before July 1,
1986. The term "Actuarially Equivalent" is modified to provide that an
equivalent benefit computed as of any date after June 30, 1986, using an eight
percent rate of interest shall not be less than the equivalent of such benefits
computed (1) using an interest rate of five and one-half percent and (2) based
upon the benefit of such Participant accrued prior to July 1, 1986.
COASTAL STATES PLAN - July, 1977
--------------------------------
These Provisions Apply to Participants in the Retirement Plan
for Employees of Belcher Oil Company as of June 30, 1977
--------------------------------------------------------
(A) APPLICABILITY OF SECOND SUPPLEMENT
----------------------------------
(1) This Second Supplement to the Pension Plan for Exempt Employees of
Coastal States Gas Corporation (hereinafter referred to as the "Second
Supplement") forms a part of the Pension Plan for Exempt Employees of
Coastal States Gas Corporation (hereinafter referred to as the "Plan")
as in effect on and after July 1, 1977. The provisions of this Second
Supplement shall apply only to those Employees of Belcher Oil Company
and its subsidiaries, who became Participants in the plan as of July 1,
1977 and who were Participants in the Retirement Plan for Employees of
Belcher Oil Company as of June 30, 1977 (hereinafter referred to as the
"Superseded Plan").
(2) All terms used in this Second Supplement shall have the meanings
assigned to them in the provisions of the Plan, unless otherwise
qualified by the context. As between the Plan and this Second
Supplement, there shall be no duplication of benefits, the benefits
payable under the Plan shall be inclusive of the Actuarially Equivalent
benefits, if any, which are payable to the same Employee under this
Second Supplement, as hereinafter described, unless otherwise qualified
by the context.
(3) With respect to Employees of Belcher Oil Company and its subsidiaries,
the following will apply with respect to the period of their service as
defined herein prior to the date that the Company acquired the majority
voting interest in said companies:
(a) the total period of such Service will be included as Credited
Service if they were Participants in the qualified pension plans of
the respective companies from the dates that they first became
eligible to participate thereunder;
(b) only that portion of such Service which they accrued while
participants in the qualified pension plans of the respective
companies will be included as Credited Service if they did not
participate in such plans when they first became eligible;
(c) none of the period of such Service will be included as Credited
Service if they were not participants in the qualified pension plans
of the respective companies; and
(d) notwithstanding the above, none of the period of such Service will
be included as Credited Service if they have the right to, and they
withdraw, their own contributions and credited interest prior to
their retirement or termination of Service. However, see Section
(H) of the First Supplement and Section (D) of the Second Supplement
with respect to rules regarding forfeiture of employer-derived
benefits resulting from withdrawals of Participant's contributions.
52
<PAGE>
(B) MINIMUM BENEFITS
----------------
(1) Credited Service. For the purposes of the Plan and this Second
----------------
Supplement, the Credited Service of the participants in the Superseded
Plan, with respect to whom the provisions of this Second Supplement are
applicable, shall include the period of service which they had accrued
under the provisions of the Superseded Plan as of June 30, 1977.
(2) Minimum Normal Retirement Income. Subject to the provisions of the
--------------------------------
Plan, the monthly amount of Retirement Income determined under the Plan
and payable in the manner described in the Plan, which is payable to a
Participant, with respect to whom the provisions of this Second
Supplement are applicable, on his normal retirement at any time on or
after the effective date of this Second Supplement, shall not be less
than the Actuarial Equivalent of that amount of income which he would
have received under the terms of the Superseded Plan, as if such
Superseded Plan had been continued without change and assuming that the
Basic Compensation of the Participant (excluding any overtime
compensation) had remained at the same amount to which he was entitled
as of June 30, 1977. Such monthly Retirement Income shall also be
applied under the Plan to determine the minimum deferred monthly
Retirement Income commencing at Normal Retirement Date, which such a
Participant has accrued under the Plan as of any given date.
(3) Minimum Early Retirement Income. In the event of the early retirement,
-------------------------------
in accordance with the provisions of the Plan, of a Participant, who has
both attained the age 55 years and completed ten (10) years of Credited
Service as of his early retirement date and with respect to whom the
provisions of this Second Supplement are applicable, such Participant
shall be entitled to the monthly Retirement Income computed and payable
in accordance with the provisions of the Plan; provided, however, that
subject to the provisions of the Plan, such monthly amount of Retirement
Income, which is payable under the Plan to such a Participant, shall not
be less than the Actuarial Equivalent of the monthly amount which he
would have received under the terms of the Superseded Plan, as if such
Superseded Plan had been continued without change and assuming that the
Basic Compensation of the participant (excluding any overtime
compensation) had remained at the same amount to which he was entitled
as of June 30, 1977.
(4) Vested Benefits on Termination of Service. In the event of the
-----------------------------------------
termination of service, in accordance with the provisions of the Plan,
of a Participant, with respect to whom the provisions of this Second
Supplement are applicable, on or after the date as of which he has
completed ten (10) years of Credited Service, he shall be entitled to a
benefit, payable in accordance with the provisions of the Plan, which is
at least equal to the Actuarially Equivalent benefit which he would have
received under the terms of the Superseded Plan, as if such Superseded
Plan had been continued without change and assuming that the Basic
Compensation of the Participant (excluding any overtime compensation)
had remained at the same amount to which he was entitled as of June 30,
1977. A Participant, with respect to whom the provisions of this Second
Supplement are applicable, who terminates his employment prior to his
initial vesting date, as defined in the Plan, shall be entitled to only
such benefits as he would have received under the provisions of the
Superseded Plan, as if such Superseded Plan had been continued without
change and assuming that the Basic Compensation of the Participant
(excluding any overtime compensation) had remained at the same amount to
which he was entitled as of June 30, 1977.
(5) Participant's Contributions. The total amount of benefits payable under
---------------------------
the Plan or this Second Supplement to, or on behalf of, a Participant,
with respect to whom the provisions of this Second Supplement are
applicable, shall not be less than an amount which is the Actuarial
Equivalent of the Participant's contributions with interest as
determined under the provisions of the Superseded Plan. In the event
such Participant should die prior to his retirement and no payments are
due to a joint annuitant or provisional payee, his Beneficiaries shall
be entitled to receive the total amount of his contributions, if any,
under the Superseded Plan with interest. In the event that such
Participant should die after his retirement, but before he and his joint
annuitants or provisional payees, if applicable, have received total
retirement benefits at least equal to the total amount of his
contributions
53
<PAGE>
under the Superseded Plan with interest, his Beneficiaries shall be
entitled to receive the balance of such contributions and interest.
(C) SPECIAL PROVISIONS
------------------
The following provisions will apply with respect to benefits payable under
the Plan and this Second Supplement to those Participants, to whom the
provisions of this Second Supplement are applicable, who made contributions
prior to the effective date of this Second Supplement under the provisions of
the Superseded Plan and who have not withdrawn such contributions or received
benefits equal thereto:
(1) the Actuarially Equivalent single-sum value of the benefits payable
under the Plan and this Second Supplement to, or on behalf of, such
Participant shall not be less than an amount equal to the Participant's
contributions, if any, to the Superseded Plan with interest;
(2) the monthly amount of Retirement Income, which is payable for five years
certain and life thereafter commencing at Normal Retirement Date, to a
Participant who retires on or after his Normal Retirement Date or the
amount of the deferred monthly Retirement Income commencing at Normal
Retirement Date, which is payable for five years certain and life
thereafter commencing at Normal Retirement Date, which is used to
compute the benefits, if any, payable to a Participant who retires or
whose service is terminated prior to his Normal Retirement Date,
whichever is applicable, shall not be less than an amount equal to 9.8%
of the Participant's contributions, if any, to the Superseded Plan with
interest to his Normal Retirement Date divided by 12;
(3) in the event of termination of the Plan, before any assets are allocated
under the Plan, each such Participant shall be entitled to an allocation
equal to (a) this Participant's contributions, if any, under the
Superseded Plan with interest to the date of termination of the Plan or,
if earlier, to the date that the Participant's payments under the Plan
commenced over (b) the amount, if any, of any benefits previously
received by or on behalf of such Participant; provided, however, that if
the asset value as defined in the Plan be less than the aggregate of
such amounts, such amounts to which such Participants are entitled under
this section shall be proportionately reduced so that the aggregate of
such reduced amounts be equal to the asset value; and provided, further,
that any allocations on behalf of any such Participant under the Plan
shall be inclusive of any allocations on his behalf under this
subsection;
(4) for the purposes of Sections (B) and (C) of this Second Supplement, a
"Participant's Contributions, if any, under the Superseded Plan with
interest" shall be equal to the sum of:
(i) the Participant's contributions, if any, under the Superseded Plan
prior to the effective date of this Second Supplement and credited
to his account on the effective date of this Second Supplement; and
(ii) the amount of interest on the contributions, at the rate of five
percent (5%) per annum, compounded annually, from the effective date
of the Superseded Plan (June 30, 1975) to the date as of which the
Participant's payments under the Plan actually commenced, or if
earlier, to the date of termination of the Plan.
(5) for purposes of the Plan and this Second Supplement, the Benefit Service
of the Participants after June 30, 1977 will be determined in the same
manner as Credited Service under the Plan.
(D) SPECIAL PROVISION APPLICABLE TO THE WITHDRAWAL OF CERTAIN EMPLOYEE
------------------------------------------------------------------
CONTRIBUTIONS TO SUPERSEDED PLANS
---------------------------------
(1) This provision applies to any eligible Employee who, prior to his
retirement or other termination from service, withdraws from any
superseded Plan all or any part of the Participant's contributions made
prior to September 2, 1974 plus interest thereon. Forfeiture of such
Participant's rights to the
54
<PAGE>
employer-derived benefits which accrued prior to September 2, 1974 shall
not exceed an amount which bears the same ratio to the accrued benefit
(determined as of September 1, 1974) attributable to the employer's
contributions as the amounts withdrawn bear to the total amount of
Employee contributions made to the Plan as of September 1, 1974 plus
interest attributable to such contributions.
(2) With respect to those Employees referred to in (1), above, no part of a
Participant's accrued benefit derived from employer contributions which
are accrued after September 1, 1974 shall be forfeitable solely because
such Participant voluntarily withdraws his contributions after becoming
a 50 percent vested participant.
(3) Any Employee referred to in (1), above, who withdraws his contributions
to a superseded plan at a time after September 1, 1974, when he is less
than 50 percent vested in his employer-derived accrued benefits shall be
entitled to restoration of any such employer-derived benefits which were
forfeited because of such withdrawal, provided the Employee must repay
the full amount of the withdrawal plus interest computed on the amount
of the withdrawal from the date of withdrawal to the date of repayment,
compounded annually, at the rate of 5 percent. This restoration
provision shall not apply to an Employee who has no vested interest in
his employer-derived accrued benefits, and whose accrued benefit is
disregarded due to a Break in Service.
(E) ELECTION OF OPTIONS AND DESIGNATION OF BENEFICIARIES
----------------------------------------------------
If a Participant has elected an optional form of payment and/or has
designated a Beneficiary (or Beneficiaries) prior to the effective date of
the Second Amendment to the Plan and such election and/or designation is in
force immediately prior to the effective date of said amendment under the
terms of the Superseded Plan, such election and/or designation shall
continue in effect with respect to benefits payable under the Plan until a
new election of an optional form of payment is made in accordance with the
provisions of the Plan and/or a new designation of Beneficiary (or
Beneficiaries) is made in accordance with the provisions of the Plan.
(F) RIGHT TO AMEND OR TERMINATE SECOND SUPPLEMENT
---------------------------------------------
The provisions of the Plan, with respect to the amendment or termination of
the Plan shall apply with equal force and effect to this Second Supplement.
55
<PAGE>
THIRD SUPPLEMENT
----------------
ANR SUPPLEMENT
--------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 - Introduction.................................. 59
ARTICLE 2 - Definitions 59
Section 2.1 Accumulated Contributions..................... 59
Section 2.2 Accrued Benefit............................... 59
Section 2.3 Active Participant............................ 60
Section 2.4 Actuarial Equivalent.......................... 60
Section 2.5 Anniversary Date.............................. 60
Section 2.6 Annuity....................................... 60
Section 2.7 Annuity Starting Date......................... 60
Section 2.8 Base Monthly Earnings......................... 60
Section 2.9 Break in Service Year......................... 60
Section 2.10 Contributing Participant...................... 60
Section 2.11 Contributory Service.......................... 60
Section 2.12 Eligible Employee............................. 61
Section 2.13 Excess Monthly Earnings....................... 61
Section 2.14 Final Average Monthly Earnings................ 61
Section 2.15 Hour of Employment............................ 61
Section 2.16 Military Service.............................. 61
Section 2.17 Normal Retirement Age......................... 61
Section 2.18 Normal Retirement Date........................ 61
Section 2.19 Participant................................... 61
Section 2.20 Participating Employer........................ 61
Section 2.21 Pre-1986 ANR Plan............................. 61
Section 2.22 Primary Monthly Earnings...................... 61
Section 2.23 Primary Monthly Earnings Rate at June 30, 1962 61
Section 2.24 Regulations................................... 62
Section 2.25 Retired Participant........................... 62
Section 2.26 Social Security Disability Benefit............ 62
Section 2.27 Social Security Monthly Benefit............... 62
Section 2.28 Superseded Base Plans......................... 62
Section 2.29 Superseded Insured Plans...................... 62
Section 2.30 Superseded Supplemental Plans................. 62
Section 2.31 System Company................................ 62
Section 2.32 Total Monthly Earnings........................ 63
Section 2.33 Transferred Participant....................... 63
Section 2.34 Vested Former Participant..................... 63
Section 2.35 Years of Credited Service..................... 63
Section 2.36 Years of Prior Service........................ 63
Section 2.37 Years of Service.............................. 63
ARTICLE 3 - Effective Date..................................... 64
ARTICLE 4 - [None]............................................. 64
</TABLE>
56
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 5 - Participation......................................... 64
Section 5.1 Participation Requirements....................... 64
Section 5.2 Termination of Participation..................... 65
ARTICLE 6 - Contributions......................................... 65
Section 6.1 Contributions by Participants.................... 65
ARTICLE 7 - Retirement............................................ 65
Section 7.1 Normal Retirement................................ 65
Section 7.2 [None]........................................... 65
Section 7.3 Early Retirement................................. 65
Section 7.4 Non-occupational Disability Retirement........... 66
Section 7.5 Occupational Disability Retirement............... 66
ARTICLE 8 - Retirement Annuities.................................. 67
Section 8.1 Retirement after 1985............................ 67
Section 8.2 Retirement Prior to January 1, 1980.............. 68
Section 8.3 Retirement after 1979 and before 1986............ 68
Section 8.4 Cost-of-Living Adjustments....................... 71
Section 8.5 Optional Forms of Benefit........................ 72
Section 8.6 Automatic Joint and Survivor Election............ 77
Section 8.7 [None]........................................... 78
Section 8.8 [None]........................................... 78
Section 8.9 [None]........................................... 78
Section 8.10 Reduction in Benefits for Prior Payments......... 78
Section 8.11 Limitation on Payments to Contributing
Participants..................................... 78
Section 8.12 Special Rules Applicable to the Benefits of
Participants who Become Employed by, or who have
Been Employed by, a System Company which is not a
Participating Employer........................... 78
ARTICLE 9 - None.................................................. 79
ARTICLE 10 - Surviving Spouse Annuities............................ 79
Section 10.1 Benefits for Surviving Spouse and Dependent
Children.......................................... 79
</TABLE>
57
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 11 - Payments on Termination of Employment or Death of a Participant or
Withdrawal of a Participating Employer from the Plan 81
Section 11.1 Termination of Participation other than by Death or Retirement 81
Section 11.2 Distribution Upon Death of Contributing Participant........... 82
Section 11.3 [None]........................................................ 82
Section 11.4 Benefits in Event Participant's Employer Withdraws from Pan... 82
ARTICLE 12 - Payment of Benefits................................................ 82
Section 12.1 Time and Manner of Payment of Annuities....................... 82
Section 12.2 Payment of Participant's Contributions........................ 82
ARTICLE 13 - 50% Survivor Annuity............................................... 83
Section 13.1 Coverage...................................................... 83
Section 13.2 Time Period................................................... 83
Section 13.3 50% Survivor Annuity.......................................... 83
</TABLE>
58
<PAGE>
ANR SUPPLEMENT
--------------
ARTICLE 1
---------
INTRODUCTION
------------
This Supplement is referred to as the "ANR Supplement". This Supplement
includes provisions applicable to persons who were Participants or Employees
with respect to the American Natural Resources System Companies Employees'
Retirement Plan prior to December 1, 1986. Persons who became Participants or
Employees with respect to the American Natural Resources System Companies
Employees' Retirement Plan after November 30, 1986, are subject to the general
provisions of the Plan and are not subject to the provisions of this ANR
Supplement.
The provisions of Plan Section 1.2B relating to maximum compensation
shall apply to this Supplement notwithstanding anything to the contrary in this
Supplement.
For purposes of Plan Section 1.28(d), this is a specific provision in
the Plan which provides that the determination of Years of Service shall include
any period of an Employee's employment with American Natural Resources Company,
with any other organization during the period such other organization was a
member of the same Controlled Group (as defined in Plan Section 6.10) as
American Natural Resources Company and with any other organization during the
period of time with respect to which such other organization had properly
adopted and participated in the American Natural Resources System Companies
Employees' Retirement Income Plan (the "ANR Plan"). In addition, Years of
Service pursuant to provisions of the ANR Plan for periods of time before
January 1, 1989, shall be included in Years of Service under Plan Section 1.28.
With respect to a Participant, as defined in this Supplement, the
nonforfeitable percentage of the Accrued Benefit as defined in and for purposes
of the Pension Plan for Employees of The Coastal Corporation or the American
Natural Resources System Companies Employees' Retirement Plan with respect to
periods of time after December 31, 1985, and before January 1, 1989, shall not
be less than the nonforfeitable percentage of such Accrued Benefit determined
pursuant to provisions of the Pre-1986 ANR Plan (as defined in Section 2.21 of
this ANR Supplement) applied to periods of time through December 31, 1988.
ARTICLE 2
---------
DEFINITIONS
-----------
Terms used in this Supplement which are defined in the Plan of which
this Supplement is a part are used with the same meaning in this Supplement
unless such terms are defined differently for purposes of this Supplement.
Terms defined in this Supplement apply only to the Supplement and not to
the Plan.
References in this ANR Supplement to article numbers and section numbers
mean such article or section in this ANR Supplement unless otherwise stated.
2.1 Accumulated Contributions. The sum of (a) a Participant's contributions
-------------------------
during his Years of Prior Service which were paid to the Trustee subsequent to
January 1, 1960, plus interest compounded annually at the rate of two and one-
half percent (2-1/2%) from the first day of January following payment thereof
through December 31, 1975, (b) his contributions which were paid under the
Superseded Base Plans for any period constituting Years of Prior Service under
the Plan, plus interest at the rate provided in the Superseded Base Plans
through December 31, 1975 and (c) interest on the sum of (a) and (b) compounded
annually at the rate specified by the Administrator, in accordance with
regulations, from January 1, 1976 to the date of reference.
2.2 Accrued Benefit. A Participant's accrued benefit at a time of reference
---------------
is the annuity computed under Section 8.3(a) which would be payable to such
Participant at his Normal Retirement Date if he continued to be a
59
<PAGE>
Participant until such date (determined under the terms of the Pre-1986 ANR Plan
at such time of reference but assuming that his Final Average Monthly Earnings
at his Normal Retirement Date will be equal to his Final Average Monthly
Earnings at such time of reference) multiplied by a fraction, the numerator of
which is his Years of Credited Service at such time of reference and the
denominator of which is the Years of Credited Service which he would have if he
continued to be a Participant until his Normal Retirement Date. In determining
a Participant's Accrued Benefit, his Social Security monthly benefit shall be
determined under the law as in effect at such time of reference but with the
assumption that his Total Monthly Earnings remain unchanged until his Normal
Retirement Date. The Accrued Benefit computed with respect to a person with
Service after 1985 shall be reduced in accordance with Plan provisions relating
to persons with Service before 1986 and after 1985.
2.3 Active Participant. A Participant who currently qualifies as an
------------------
Eligible Employee and who is currently employed by a Participating Employer.
2.4 Actuarial Equivalent. A payment or series of payments having the same
--------------------
value as the payment or series of payments replaced, when computed using the UP
1984 mortality table with a 6% interest assumption.
2.5 Anniversary Date. With respect to each Employee the anniversary each
----------------
year of the Employee's date of employment.
2.6 Annuity. A series of equal monthly payments continuing for the lifetime
-------
of the payee, except that, in the case of a Supplement payable pursuant to
Section 8.3(b) or an Annuity payable pursuant to Section 8.3(c) or Section
8.3(d), such payments shall be subject to adjustment, reduction or termination
in accordance with such sections.
2.7 Annuity Starting Date. The first day on which an Annuity is payable.
---------------------
2.8 Base Monthly Earnings. A Participant's Total Monthly Earnings not in
---------------------
excess of four hundred dollars ($400).
2.9 Break in Service Year. A 12-month period beginning on an Employee's
---------------------
Anniversary Date during which the Employee has not completed more than 500 Hours
of Employment. Notwithstanding the foregoing, the following periods shall be
deemed not to be Break in Service Years:
(a) If a Participant shall retire pursuant to Section 7.4 or 7.5, shall
thereafter cease to be totally and permanently disabled and shall return
to the employ of a Participating Employer, the period between his
disability retirement date and the date as of which he ceases to be
totally and permanently disabled.
(b) If after October 31, 1979 a Participant shall commence receiving
benefits under a long-term disability benefit program maintained by a
Participating Employer and shall thereafter cease to receive benefits
under such program, the period during which he was receiving benefits
under such program.
If a non-vested Employee incurs a Break in Service Year, his Years of
Credited Service and Years of Service completed prior to such Break in Service
Year shall be disregarded unless the total number of Break in Service Years does
not equal or exceed the greater of 5, and the aggregate number of Years of
Service completed by the Employee prior to such Break in Service Year.
2.10 Contributing Participant. A Participant or Retired Participant who
------------------------
made contributions to the Pre-1986 ANR Plan or to either of the Superseded Base
Plans.
2.11 Contributory Service. A Participant's Years of Prior Service
--------------------
subsequent to January 1, 1960, and prior to July 1, 1963 minus (a) any period
included therein during which he was not an Eligible Employee, as defined in
subdivision (5) of Article II of the Plan as in effect on December 31, 1974, and
(b) any period included therein solely by reason of his employment by a System
Company which was not a Participating Employer or by an associate company.
60
<PAGE>
2.12 Eligible Employee. A person currently employed by or receiving
-----------------
severance allowance from a System company but excluding; (i) any person who is
participating in a retirement plan which has been established by a System
Company pursuant to an agreement with a labor union; (ii) and any person
employed in the Road Equipment Division of American Natural Resources Company;
and (iii) any person who is deemed to be an employee of System Company solely by
reason of the provisions of Section 414 (n) of the Code.
2.13 Excess Monthly Earnings. A Participant's Total Monthly Earnings in
-----------------------
excess of four hundred dollars ($400).
2.14 Final Average Monthly Earnings. A Participant's average Primary
------------------------------
Monthly Earnings for the period of sixty (60) successive calendar months which
ends prior to his Normal Retirement Date, which is included within his last ten
Years of Credited Service (as defined in this Article but determined by (a)
excluding, for persons not credited with an Hour of Employment after 1987, Years
of Credited Service completed in any 12-month period which begins after the
Employee's Normal Retirement Date and (b) including Years of Credited Service
completed prior to attaining age 22), and which affords the highest such
average, or, if for his total Years of Credited Service (as defined in this
Article but determined by (a) excluding, for persons not credited with an Hour
of Employment after 1987, Years of Credited Service completed in any 12-month
period which begins after the Employee's Normal Retirement Date and (b)
including Years of Credited Service completed prior to attaining age 22) are
less than five (5) years, for his total such Years of Credited Service.
2.15 "Hour of Employment" Means Hour of Service as defined in the Plan.
------------------
2.16 Military Service. Service (a) on active duty, in time of national or
----------------
local emergency, in the armed forces of the United States or of any State
thereof, or (b) in the armed forces of the United States or of any State
thereof, under any compulsory service law, or (c) in the armed forces of the
United States or any of its allies in time of war in which the United States is
engaged.
2.17 Normal Retirement Age. A Participant's sixty-fifth birthday.
---------------------
2.18 Normal Retirement Date. The first day of a month coincident with or
----------------------
next following a Participant's attainment of Normal Retirement age.
2.19 Participant. An Eligible Employee or former Eligible Employee who has
-----------
satisfied the requirements set forth in Article 5.
2.20 Participating Employer. A System Company which has adopted the Pre-
----------------------
1986 ANR Plan.
2.21 "Pre-1986 ANR Plan" mean the American Natural Resources System
-----------------
Companies Employees' Retirement Plan as in effect at the end of 1985 unless
otherwise stated or required by the context.
2.22 Primary Monthly Earnings. A Participant's earnings from a
------------------------
Participating Employer or a System Company for any month computed at his basic
hourly, weekly, monthly or annual rate, excluding payments for overtime or other
premium pay but including shift differential and sales commission earned during
such month; provided that the Primary Monthly Earnings of a Participant for any
period of time included in his Years of Credited Service during which he was not
at work or was at work only on a part time basis shall be computed on a full
time basis at his basic hourly, weekly, monthly or annual rate in effect
immediately prior to the date when he ceased working on a full time basis, plus,
in the case of a Participant compensated partly on a commission or shift
differential basis, his average monthly commissions or shift differential for
the preceding twelve months. Premium pay, as included herein, includes bonus
pay.
2.23 Primary Monthly Earnings Rate at June 30, 1962. A Participant's
----------------------------------------------
monthly earnings computed at his basic hourly, weekly, monthly or annual rate in
effect at June 30, 1962, plus one-twelfth (1/12) of his total shift differential
and/or sales commissions, if any, earned during the twelve months ended June 30,
1962.
61
<PAGE>
2.24 Regulations. Regulations issued by the Department of Labor construing
-----------
Title I of the Employee Retirement Income Security Act of 1974 ("ERISA") or by
the Internal Revenue Service construing the Internal Revenue Code of 1986, as
amended (the "Code").
2.25 Retired Participant. A former Participant who has retired pursuant to
-------------------
Article 7.
2.26 Social Security Disability Benefit. The monthly amount available for
----------------------------------
the benefit of a Participant under the disability benefit provisions of the
Federal Social Security Act, or under any similar future Federal Act or Acts, as
in effect at the retirement date of the Participant, determined as if he is
entitled to such benefits and disregarding non-entitlement for failure to apply,
noneligibility in the case of nonresident alien Participants, or for any other
reason. The Social Security Disability Benefit shall be deemed not to exceed
one-hundred twenty-four dollars ($124.00) in any case.
2.27 Social Security Monthly Benefit.
-------------------------------
(a) Forty percent (40%) of the monthly amount estimated to be available
for the benefit of a participant at age sixty-five (65) (excluding payments
for a spouse and dependents) under the old age benefit provisions of the
Federal Social Security Act, or under any similar future Federal act or acts
multiplied by a fraction the numerator of which is the number of his years
of Credited Service, determined at his early retirement or termination of
employment as the case may be, not in excess of 22-1/2 years and the
denominator of which is 22-1/2.
(b) In the case of a participant who retires under Section 7.1 on or
after his normal retirement date, the amount of the Social Security monthly
benefit required for the purpose of calculating the amount of his annuity
shall be determined based on the law as in effect at his normal retirement
date.
(c) In the case of a participant who retires under Section 7.3 or who
is eligible for an annuity pursuant to the provisions of Article 11, the
amount of the Social Security monthly benefit required for the purpose of
calculating the amount of his annuity shall be determined based on the law
as in effect at his early retirement date or termination of employment, as
the case may be, assuming that the participant will have no wages after such
early retirement date or termination of employment as the case may be. The
amount of a Participant's Social Security monthly benefit shall not be
adjusted for any difference between the amount determined pursuant to the
preceding sentences of this subdivision and the actual amount of Social
Security benefit to which he ultimately becomes entitled because of failure
to apply, continuance at work, ineligibility in the case of nonresident
alien participants, or for any other reason.
(d) The amount of a Participant's Social Security monthly benefit shall
be determined pursuant to the above on the basis of estimated earnings
history, assuming annual wage increases equal to the actual change in
average wages from year to year as determined by the Social Security
Administration. A participant may elect to have the Social Security monthly
benefit determined using actual salary history. Such an election must be
made on or before the Participant's date of termination of employment.
Salary history for years during which the participant was not employed by a
System company is to be furnished to the Committee by the participant. This
information can be obtained from the Social Security Administration.
2.28 Superseded Base Plans. The retirement plans evidenced by Sun Life
---------------------
Assurance Company of Canada Group Annuity Contracts 3028-G and 4638-G, as
amended.
2.29 Superseded Insured Plans. The retirement plans evidenced by Sun Life
------------------------
Assurance Company of Canada Group Annuity Contracts 3028-G, 4638-G, 5233-G and
5491-G, as amended.
2.30 Superseded Supplemental Plans. The retirement plans evidenced by Sun
-----------------------------
Life Assurance Company of Canada Group Annuity Contracts 5233-G and 5491-G, as
amended.
2.31 System Company. American Natural Resources Company and any other
--------------
corporation at least fifty percent (50%) of the shares of which at the time
outstanding having ordinary voting power for the election of
62
<PAGE>
directors is owned or controlled directly or indirectly by American Natural
Resources Company, and any other employing entity which is a Participating
Employer. The term System Company also includes Coastal and Sub-sidiaries for
periods after the date in 1985 on which American Natural Resources became a
Subsidiary.
2.32 Total Monthly Earnings. A Participant's total earnings from a
----------------------
Participating Employer for any month.
2.33 Transferred Participant. A former Active Participant who is currently
-----------------------
employed by a System Company other than a Participating Employer, or who is
currently employed by a Participating Employer but does not currently qualify as
an Eligible Employee.
2.34 Vested Former Participant. A former Participant who, upon termination
-------------------------
of his employment, has become entitled to and has elected to receive a deferred
Annuity under the provisions of Article 11.
2.35 Years of Credited Service. Subject to the Break in Service definition
-------------------------
of this Article, the sum of:
(a) An Employee's Years of Prior Service.
(b) Each 12-month period, beginning after December 31, 1974 on an
Employee's Anniversary Date and, for persons not credited with an Hour of
Employment after 1987, ending on or prior to the Employee's Normal
Retirement Date, during which the Employee shall have completed 2,080 or
more Hours of Employment with one or more Participating Employers.
(c) A proportional Year of Credited Service for (i) any such 12-month
period in which an Employee completes 1,000 or more Hours of Employment, but
less than 2,080 Hours of Employment, (ii) any period of less than 12 months
between December 31, 1974 and an Employee's first Anniversary Date
thereafter, (iii) any period of less than 12 months between an Employee's
Anniversary Date which imme-diately precedes his Normal Retirement Date and
his Normal Retirement Date, or (iv) any period of employment which is prior
to an Employee's Normal Retirement Date and is less than 12 months for which
the Employee is not credited with a proportional fraction of a Year of
Credited Service pursuant to (i), (ii) or (iii) above, such proportional
Year of Credited Service to be determined under uniform rules adopted by the
Committee in accordance with regulations.
The initial calendar month of employment of a Participant shall be
counted as a full month if such Participant began employment before the
sixteenth day of such month. The final calendar month of employment of a
Participant shall be counted as a full month if such Participant is credited
with an Hour of Employment during such month.
2.36 Years of Prior Service. The number of years, computed to the nearest
----------------------
one-twelfth (1/12) of a year, of the last period of continuous employment prior
to January 1, 1975, of any Employee who was an Employee on such date which would
have been included, if such Employee had been a Participant on such date, in
such Employee's continuous service as of December 31, 1974 as defined in
subdivision (15) of Article II of the Plan as in effect on December 31, 1974.
With respect to any Participant who was a Participant in the Plan on January 1,
1975, had attained his Normal Retirement Date prior to January 1, 1975, and
pursuant to Section 2 of Article VII of the Plan as in effect on December 31,
1974 had continued in service beyond such Normal Retirement Date, such
Participant's Years of Prior Service shall include the period beginning on such
Participant's Normal Retirement Date and ending on December 31, 1974.
2.37 Years of Service. Subject to the Break in Service rules of this
----------------
Article, the sum of:
(a) An Employee's Years of Prior Service.
(b) Each 12-month period, beginning after December 31, 1974 on an
Employee's Anniversary Date, during which the Employee shall have completed
1,000 or more Hours of Employment with one or more Participating Employers
or System Companies. For purposes of this Section 2.37 only, Hours of
63
<PAGE>
Employment shall be computed as if Great Plains Gasification Associates were
a Participating Employer or a System Company.
(c) A proportional Year of Service for any period of less than 12
months between December 31, 1974 and an employee's first Anniversary Date
thereafter, such proportional Year of Service to be determined under uniform
rules adopted by the Administrator in accordance with regulations, but
excluding any Years of Service completed before an Employee attains age 18.
Such proportional Year of Service shall be computed using the method
described in Section 2.35(c) for computation of a proportional Year of
Credited Service.
(d) For purposes of vesting only, a Participant shall receive credit
for Years of Service equal to the greater of (i) the period of service that
would be credited to such Participant under the elapsed time method for
Service during the entire computation period in which January 1, 1986,
occurred, or (ii) the Service taken into account under the computation
method in effect under the American Natural Resources System Companies
Employees' Retirement Plan prior to 1986. The Years of Service for vesting
as provided in this subsection (e) shall be in lieu of, and not in addition
to, Years of Service otherwise calculated under the Plan.
ARTICLE 3
---------
EFFECTIVE DATE
--------------
The effective date of the Pre-1986 ANR Plan shall be January 1, 1960 or such
other date as was established by resolution of the Board of Directors of a
particular Participating Employer at the time of adoption of the Plan by such
Participating Employer.
ARTICLE 4
---------
[None]
ARTICLE 5
---------
PARTICIPATION
-------------
Section 5.1 Participation Requirements.
----------- --------------------------
(a) General. Each Eligible Employee who was employed by a
-------
Participating Employer became a Participant as of the first day of the month
coincident with or next following the later of his 18th birthday or
satisfaction of the eligibility Service requirement.
An Eligible Employee has satisfied the eligibility Service
requirement if, on his Anniversary Date, he had completed, in the preceding
12-month period, 1,000 or more Hours of Employment.
(b) Change of Employment Status; Reemployment of Terminated Employees.
-----------------------------------------------------------------
If an Employee became an Eligible Employee because of a change in his
employment status, he became a Participant as of the date of such change if
he had attained age 18 and had satisfied the eligibility service
requirement; otherwise he became a Participant as of the first day of the
month coincident with or next following his satisfaction of such age and
service requirements. If a former Participant who was not eligible to
receive an annuity or a person who was previously an Eligible Employee, but
whose employment was terminated after he had satisfied the eligibility
service requirement and prior to his becoming a Participant, was employed by
an employer and pursuant to the Break in Service of the Pre-1986 ANR Plan in
effect at such time his Years of Credited Service are disregarded, then such
former Participant or person became a Participant as of the
64
<PAGE>
first day of the month coincident with or next following the latest of his
18th birthday, his satisfaction of the eligibility service requirement or
his becoming an Eligible Employee. If such former Participant's or person's
Years of Credited Service were not disregarded and such former Participant
or person had attained age 18 and was an Eligible Employee, he was deemed to
have become a Participant as of his date of employment; otherwise he became
a Participant as of the later of his becoming an Eligible Employee or the
first day of the month coincident with or next following his attainment of
age 18.
Section 5.2 Termination of Participation. No Participant shall be
----------- ----------------------------
permitted to terminate his participation in the Plan or to withdraw any of his
contributions thereunder so long as he continues in the employ of a System
Company.
ARTICLE 6
---------
CONTRIBUTIONS
-------------
Section 6.1 Contributions by Participants. Contributions by Participants
-----------
are not required or permitted.
ARTICLE 7
---------
RETIREMENT
----------
Section 7.1 Normal Retirement.
----------- -----------------
(a) Except as otherwise provided in the second paragraph of this
section and in Section 7.2, a Participant who had attained Normal Retirement
Age, may have, by giving 120 days written notice to the Administrator,
retire on his Normal Retirement Date or on the first day of any month
subsequent to his Normal Retirement Date.
(b) A Participant who became totally and permanently disabled after
October 31, 1979 and prior to his Normal Retirement Date and who received
benefits under a long-term disability benefit program maintained by a
Participating Employer, other than a disability pension pursuant to Section
7.4 or Section 7.5 of the Pre-1986 ANR Plan, shall be deemed to retire on
the later of (i) his Normal Retirement Date unless he shall elect to be
deemed retired on an earlier date pursuant to Section 7.3, and (ii) the date
he is no longer eligible to receive or waives his rights to receive such
long-term disability benefits.
Section 7.2 [None]
-----------
Section 7.3 Early Retirement. A Participant who has attained age fifty-
----------- ----------------
five (55) may, by giving 120 days written notice to the Administrator, retire as
of the first day of any month preceding his Normal Retirement Date if, at the
time of such retirement, the Participant has a nonforfeitable right to a benefit
from the Plan and sum of his attained age (determined by reference to his last
birthday) and the number of his full Years of Credited Service is at least
seventy (70). The requirement that attained age and Years of Service must equal
at least seventy is deleted as of January 1, 1986. However, the Participant
must have earned a nonforfeitable benefit under the Plan before any benefit is
payable under the Plan. The amount of Retirement Income payable to such person
shall be determined under the early retirement provisions and not provisions
applicable to Vested Former Participants.
A Participant who becomes totally and permanently disabled after October 31,
1979 and prior to his Normal Retirement Date, who is receiving benefits under a
long-term disability benefit program maintained by a Participating Employer,
other than a disability pension pursuant to Section 7.4 or Section 7.5 of the
Pre-1986 ANR Plan, and who has attained age fifty-five (55) may, by giving 120
days written notice to the Administrator, elect to cease being credited with
Years of Credited Service and to be deemed to have retired as of the first day
of any month preceding his Normal Retirement Date if, at the time of such
retirement, the sum of his attained age (determined by reference
65
<PAGE>
to his last birthday) and the number of his full Years of Credited Service is at
least seventy (70) and he is no longer eligible to receive or waives his rights
to receive such long-term disability benefits. The requirement that attained
age and Years of Service must equal at least seventy is deleted as of January 1,
1986. The amount of Retirement Income payable to such person shall be
determined under the early retirement provisions and not provisions applicable
to Vested Former Participants.
Section 7.4 Non-occupational Disability Retirement. A Participant who
----------- --------------------------------------
has completed ten Years of Service, who has not attained age sixty-five and who
is totally and permanently disabled due to a non-occupationally caused accident
or illness, other than a Participant who (a) becomes totally and permanently
disabled after October 31, 1979, and (b) is covered by the comprehensive
benefits program maintained by his employer (whether or not he is covered under
the long-term disability benefit portion of such program), shall be retired
under this section. The determination of whether or not a Participant is
totally and permanently disabled shall be made by the Administrator, provided
that in the event the Administrator determines the Participant is not totally
and permanently disabled, the Participant may, within five (5) days after
receipt of notice of such determination, give the Administrator written notice
of his disagreement with such determination, and in such event the Participant
shall be examined by a hospital mutually acceptable to the Participant and the
Administrator, and the findings and determination of such hospital shall be
binding on the Participant and the Administrator. If a Participant is
determined to be totally and permanently disabled under this section, he shall
be retired as of the later of (a) the first day of the month following the month
in which such determination is made, and (b) the first day of the sixth month
following the last day the Participant performed services for his Participating
Employer prior to his non-occupationally caused accident or illness, provided
that such Participant may retire at any earlier date under other Plan
provisions.
Section 7.5 Occupational Disability Retirement. A Participant who has
----------- ----------------------------------
not attained age sixty-five and who is totally and permanently disabled due to
an occupational injury or a disease arising out of and in the course of
employment with a Participating Employer, compensable under any Worker's
Compensation Act or similar act, other than a Participant who (a) becomes
totally and permanently disabled after October 31, 1979, and (b) is covered by
the comprehensive benefits program maintained by his employer (whether or not he
is covered under the long-term disability benefit portion of such program),
shall be retired under this section. The determination of whether or not a
Participant is totally and permanently disabled shall be made by the
Administrator, provided that in the event the Administrator determines the
Participant is not totally and permanently disabled, the Participant may, within
five (5) days after receipt of notice of such determination, give the
Administrator written notice of his disagreement with such determination, and in
such event the Participant shall be examined by a hospital mutually acceptable
to the Participant and the Administrator, and the findings and determination of
such hospital shall be binding on the Participant and the Administrator. If a
Participant is determined to be totally and permanently disabled under this
section, he shall be retired as of the later of (a) the first day of the month
following the month in which such determination is made, and (b) the first day
of the month following the last month for which he receives a payment from his
Participating Employer as a supplement to payments made under such Worker's
Compensation Act or similar act; provided that such Participant may retire at
any earlier time.
ARTICLE 8
---------
RETIREMENT ANNUITIES
--------------------
Section 8.1 Retirement after 1985.
----------- ---------------------
(a) The amount of benefit payable under the provisions of the Plan for
a Participant with Service under the Plan both before 1986 and after 1985
shall be computed in accordance with the method described in this Section.
(b) The benefit shall be computed using the formulas and other
provisions applicable to (i) Participants who retired between 1979 and 1986
and (ii) Participants with Credited Service after 1985. Computations shall
be made as if each formula applied to the full period of Service using the
respective definitions applicable to each formula in performing the
computations.
66
<PAGE>
(c) In computing the amount of benefit, variances related to benefit option,
time of payment, and other provisions which affect the amount due the
Participant, each of the formulas shall be computed as if such formula and
other provisions were the only formula and other provisions to be applied to
the Participant. However, the amount of benefit payable to the participant
shall be a percentage of the benefit computed under each formula. The
percentage with respect to the formula applicable to Participants retiring
between 1979 and 1986 shall be the percentage derived by dividing the Years
of Credited Service (as defined for the formula) of the Participant before
1986 by the total Years of Credited Service for periods both before 1986 and
after 1985 used in such formula. The percentage with respect to the formula
relating to Participants with Credited Service after 1985 shall be the
percentage derived by dividing the years of Credited Service (as defined for
the formula) after 1985 by the total years of Credited Service for periods
both before 1986 and after 1985 used in such formula.
(d) The total amount of benefit payable to the Participant based upon
the use of both formulas may not exceed the benefit payable if the
Participant had received a benefit based on the formula which provides the
greatest benefit.
(e) The total benefit with respect to a Participant with Credited
Service prior to December 1, 1986 shall not be less than the amount of such
benefit computed based only upon the Credited Service of such Participant
through December 1, 1986, using only the formula and other provisions
applicable to Participants who retired between 1979 and 1986.
(f) Any cost of living adjustment provided with respect to a
Participant shall be computed with respect to the Accrued Benefit computed
as of December 31, 1985, using the formula applicable to Participants who
retired between 1979 and 1986. No cost of living adjustment shall be
provided with respect to the portion of a benefit computed using the formula
applicable to a Participant for Credited Service after 1985.
(g) The formulas and other provisions used to determine the benefit
payable under the Plan for Service after 1985 are contained in the Plan and
not in this Supplement. Except as specified in this ANR Supplement, the
provisions of the Plan applicable to Participants not subject to provisions
of this or other Supplements shall apply and shall be modified as specified
in this ANR Supplement for Participants to whom this Supplement applies.
Section 8.2 Retirement Prior to January 1, 1980. Each Retired
----------- -----------------------------------
Participant whose retirement date occurred prior to January 1, 1980 shall, after
such date, continue to be entitled to receive an Annuity in the amount computed
at the date of his retirement. Each contingent annuitant of a Retired
Participant whose retirement date occurred prior to January 1, 1975 and who
elected an optional form of Annuity pursuant to rules prescribed by the
Administrator in accordance with Section 10 of Article VIII of the Plan as in
effect on December 31, 1974 shall, after January 1, 1975, continue to be
entitled to receive an Annuity, commencing after the death of such Retired
Participant, in the amount determined under such rules in effect on the date of
such election. The Annuities referred to in this section may be increased from
time to time to the extent provided in Section 8.4.
Section 8.3 Retirement after 1979 and before 1986. Subject to the
----------- -------------------------------------
provisions of Section 8.6, each Participant whose retirement date shall occur
after 1979 and before 1986 shall be entitled to receive an Annuity, commencing
on his retirement date, in an amount determined as provided in the following
subsections of this section.
(a) Normal Retirement. Each Participant who has earned a
-----------------
nonforfeitable right to a benefit from the Plan and who shall retire on or
after his sixty-fifth (65th) birthday shall be entitled to receive an
Annuity, commencing on his retirement date, in an amount equal to the excess
of the sum of the amounts specified in clauses (i) and (ii) below over the
sum of amounts specified in clauses (iii) and (iv) below:
(i) two percent (2%) of his Final Average Monthly Earnings
multiplied by his Years of Credited Service up to but not exceeding a
total of 22-1/2 years;
67
<PAGE>
(ii) three-tenths of one percent (.3%) of his Final Average Monthly
Earnings multiplied by his Years of Credited Service;
(iii) his Social Security Monthly Benefit;
(iv) the amount of monthly Annuity, if any, payable in the normal
form, which he is entitled to receive under any other retirement plan of
a Participating Employer, a System Company or Michigan Consolidated Gas
Company or an affiliate of the latter (other than American Natural
Resources System Deferred Salary Supplemental Retirement Plan) if the
Participant's period of employment with respect to which such monthly
Annuity is payable is included in, and ended prior to, such
Participant's Years of Credited Service under this Pre-1986 ANR Plan.
Notwithstanding any provision of the Pre-1986 ANR Plan to the contrary, the
annuity payable with respect to any such Participant who was an Active
Participant on October 31, 1979, or who became a Transferred Participant on or
before such date, shall be not less than the Annuity which would have been
payable to such Participant at his Normal Retirement Date determined under the
terms of the Plan as in effect on October 31, 1979 by (i) determining his Social
Security monthly benefit on the basis of the law as in effect on October 31,
1979 upon the assumption that his wages for purposes of such determination will
continue at the same rate as in effect prior to such date and (ii) assuming
that:
(A) he continues to be an Active Participant or a Transferred
Participant, as the case may be, until his Normal Retirement Date,
(B) his Final Average Monthly Earnings at his Normal Retirement
Date will be equal to the greater of (1) his Final Average Monthly
Earnings at his Normal Retirement Date assuming his highest Primary
Monthly Earnings during the period beginning October 31, 1979 and
ending January 1, 1980 remain the same until his Normal Retirement
Date and (2) his Final Average Monthly Earnings determined as if the
earlier of January 1, 1980 and his actual retirement date were his
Normal Retirement Date, and
(C) his Total Monthly Earnings as at the earlier of January 1,
1980 and his actual retirement date remain unchanged until his
Normal Retirement Date.
(b) Early Retirement. Each Participant who shall retire prior to his
----------------
Normal Retirement Date pursuant to Section 7.3 shall be entitled to receive
a deferred Annuity, commencing on his Normal Retirement Date, in an amount
equal to the greater of the amount computed under subsection (a) of this
section or the Participant's Accrued Benefit, or, if such Participant shall
be giving 120 days written notice to the Administrator, elect an Annuity
commencing on an earlier date, an Annuity equal to the product of (i) the
greater of the amount computed under subsection (a) or the Participant's
Accrued Benefit and (ii) a percentage determined under the following table
on the basis of the number of months by which such commencement date
precedes his Normal Retirement Date:
<TABLE>
<CAPTION>
Months by Which Commencement Date
Precedes Normal Retirement Date Percentage
--------------------------------- ----------
<C> <C>
12 100%
24 100%
36 100%
48 94%
60 88%
72 82%
84 76%
96 70%
108 64%
120 58%
</TABLE>
68
<PAGE>
The percentage for a number of months in excess of 36 not shown shall be
determined by interpolation at the rate of five-tenths of one percent
(.5%) per month.
Notwithstanding the foregoing, if at the time of a Participant's retirement
(i) he shall have completed thirty (30) Years of Credited Service, and (ii) he
shall have attained age fifty-five (55) the Annuity payable under this section
to a Participant for any month prior to the month in which he shall have
attained age sixty-two (62) shall be increased by an amount (hereinafter called
a "Supplement") which, when added to the amount otherwise payable under this
section (determined without any reduction by reason of such Participant's
election of an optional form of Annuity under Section 8.5) will equal:
(i) $750 in the case of a Participant who retires after December 31,
1980 and prior to January 1, 1982; and
(ii) $800 in the case of a Participant who retires after December
31, 1981.
(c) Disability Retirement; Active Participants. Each Active
------------------------------------------
Participant who shall be retired pursuant to Section 7.4 or 7.5, shall be
entitled to receive an Annuity, commencing on his retirement date, in an
amount equal to the greater of the amounts provided in the following
paragraphs (i) and (ii):
(i) the total of:
(A) 3-1/2% of the sum of
(1) his aggregate contributions under the Plan for
his Years of Prior Service subsequent to the effective date and
prior to July 1, 1962 and
(2) his aggregate contributions under the Superseded
Base Plans for any period prior to the effective date
constituting Years of Prior Service under the Plan;
(B) .09625% of his aggregate Base Monthly Earnings for his
Years of Credited Service subsequent to June 30, 1962 and prior to
his retirement date during which he was an Active Participant;
(C) .14% of his aggregate Excess Monthly Earnings for his
Years of Credited Service subsequent to June 30, 1962 and prior to
his retirement date during which he was an Active Participant;
(D) $2.10 multiplied by the number of his Years of
Credited Service subsequent to the effective date of the applicable
Superseded Base Plan; and
(E) seventy dollars ($70) for each month for which he does
not qualify for a Social Security benefit.
(ii) the excess of the sum of the amounts specified in clauses (A)
and (B) below over the sum of the amounts specified in clauses (C) and
(D) below:
(A) two percent (2%) of his Final Average Monthly Earnings
multiplied by his Years of Credited Service up to but not exceeding
a total of 22-1/2 years;
69
<PAGE>
(B) three-tenths of one percent (.3%) of his Final Average
Monthly Earnings multiplied by his Years of Credited Service;
(C) sixty-four percent (64%) of his Social Security
disability benefit if he qualifies therefor, with no deduction made
under this clause for any month during which he does not qualify for
a Social Security disability benefit;
(D) the amount of monthly Annuity, if any, payable in the
normal form, which he is entitled to receive under any other
retirement plan of a Participating Employer, a System Company or
Michigan Consolidated Gas Company or an affiliate of the latter if
the period of the Participant's employment with respect to which
such monthly amount is payable is included in, and ended prior to,
such Participant's Years of Credited Service under this Pre-1986 ANR
Plan.
In the case of an Active Participant who shall be retired under Section
7.5, the Annuity payable under this section shall in no event be less than
the lesser of 20% of his average Total Monthly Earnings during (i) the five
years immediately preceding the date of his disability, or, (ii) the five
year period ending December 31, 1985. If such period is less than five
years, the average Total Monthly Earnings for the total of such period.
Annuities payable under this section shall terminate with the payment for
the first to occur of the following months: (i) the month in which the
Retired Participant shall cease to be totally and permanently disabled, (ii)
the month of the Retired Participant's death, or (iii) the month preceding
the Retired Participant's Normal Retirement Date. When a Retired
Participant receiving an Annuity under this section attains his Normal
Retirement Date, he shall be entitled to receive, in lieu of such Annuity,
an annuity computed under subsection (a). If a Retired Participant
receiving an Annuity under this section shall cease to be totally and
permanently disabled prior to his Normal Retirement Date and shall not
return to the employ of a System Company, his right to receive an Annuity
under subsection (b) shall be determined as if he had retired as of the
first day of the month following the month in which he ceases to be totally
and permanently disabled, but no period subsequent to the date of his
retirement because of total and permanent disability shall be treated as
part of his Years of Service and Years of Credited Service for purposes of
determining the amount of any such Annuity. A Participant who has been
retired pursuant to Section 7.4 or 7.5 who ceases to be totally and
permanently disabled shall so notify the Administrator. A Participant who
has been retired pursuant to such sections shall be required to submit proof
of his continuing total and permanent disability as requested by the
Administrator not more frequently than annually, and, in the event of his
failure to comply with any such request within sixty (60) days after the
date of mailing of such request to his address on file with the
Administrator, the Administrator may cause any further payments to be
suspended until the requested proof shall have been furnished. If any
disagreement shall arise as to whether the Retired Participant continues to
be totally and permanently disabled, such disagreement shall be resolved in
the manner provided in Sections 7.4 and 7.5 in case of disagreement on the
initial determination of disability.
(d) Disability Retirement; Transferred Participants. Each Transferred
-----------------------------------------------
Participant who is retired under Section 7.4 or 7.5, regardless of whether
or not he qualifies for a Social Security disability benefit, shall be
entitled to receive an Annuity, commencing on his retirement date, in an
amount computed under paragraph (i) of subsection (c) of this section except
that clauses (D) and (E) thereof shall not apply. Such Annuity shall be
subject to the same conditions and limitations as an Annuity payable under
subsection (c) of this section.
(e) Disability Retirement; Application for Social Security Benefits.
---------------------------------------------------------------
Any Participant retiring under Section 7.4 or 7.5 shall make application for
a Social Security disability benefit prior to or coincident with his
retirement date, and it shall be assumed for purposes of determining the
amount of annuity initially payable under subsection (c) that such
Participant qualifies for a Social Security disability benefit. If his
application is rejected, appropriate adjustments shall be made retroactively
in the amount of such Annuity. A Participant whose application for a Social
Security disability benefit is rejected shall, if requested by the
Administrator, again make application for such a benefit. The Administrator
shall request such a reapplication
70
<PAGE>
no more often than once during each twelve-month period following the
Participant's retirement date. If the Participant qualifies retroactively
for a Social Security disability benefit, appropriate adjustments shall be
made retroactively in the amount of his Annuity. The Participant shall
furnish to the Administrator proof of filing of application or reapplication
for a Social Security disability benefit as required hereunder and shall
submit to the Administrator the findings and determination with respect to
his application or reapplication. Failure to supply such proof of filing
within ninety (90) days of the Participant's date of retirement or, if the
Administrator requests a reapplication, within ninety (90) days of such
request shall result in a reduction in the amount of the Retired
Participant's Annuity, as of the first day of the month following the end of
such ninety (90) day period, to that to which he would be entitled under
subsection (c) of this section if he, in fact, were receiving the Social
Security disability benefit to which he would be entitled if he qualified
therefor. Any Participant receiving an annuity under subsection (c) who
applies for and receives a Social Security benefit other than a disability
benefit prior to age sixty-five (65) shall be deemed, for purposes of
determining the amount of his Annuity under subsection (c) to be receiving
the Social Security disability benefit for which he might otherwise have
qualified.
(f) Minimum Normal, Deferred and Early Retirement Benefits. The
------------------------------------------------------
Annuity to which a Participant is entitled under Section 8.3(a) or Section
8.3(b) shall in no event be less than the hypothetical Annuity which he
would have been entitled to receive had he retired under Section 7.3 at any
time prior to his actual date of retirement and elected to have such
hypothetical Annuity commence on his hypothetical early retirement date.
Section 8.4 Cost-of-Living Adjustments. Wherever used in this section, the
----------- --------------------------
following terms shall have the meanings stated below:
(a) Index. The Consumer Price Index of the United States Department of
-----
Labor, Bureau of Labor Statistics, U.S. Average, All Items, 1967 = 100,
adjusted in such manner as shall be statistically appropriate to reflect any
change in the base period of the Index or other change requiring such
adjustment occurring after June 1, 1971.
(b) Adjustment Date. September 1, 1971 and each succeeding September
---------------
1.
(c) Current Index. The Index for the month of June immediately
-------------
preceding any Adjustment Date subsequent to September 1, 1971.
(d) Eligible Person. A Retired Participant or the surviving spouse of
---------------
such Retired Participant if such spouse was a contingent annuitant under any
optional form of Annuity elected by the Retired Participant. Effective
January 1, 1976, the term Eligible Employee shall include a Vested Former
Participant who terminates employment after December 31, 1975 or the
surviving spouse of such a Vested Former Participant if such spouse was a
contingent annuitant under any optional form of Annuity elected by the
vested Participant. The term Eligible Person shall not include any Retired
Participant or Vested Former Participant whose date of employment by a
Participating Employer is after December 31, 1983 or the surviving spouse of
any such Retired Participant or Vested Former Participant.
(e) Initial Benefit Amount. The amount of Annuity, including any
----------------------
Supplement under Section 8.3(b), to which an Eligible Person is entitled
under the Plan without regard to any adjustment made by reason of this
section.
(f) Retirement Index. For a Participant who retired prior to September
----------------
1, 1971, the Index for June, 1972; for a Participant who retired subsequent
to August 31, 1971, the Index for the third month immediately preceding his
retirement date.
71
<PAGE>
(g) Index Adjustment Amount. The amount determined by
-----------------------
(i) dividing the excess, if any, of the Current Index over the
Retired Participant's or Vested Former Participant's Retirement Index by
such Retirement Index,
(ii) multiplying the percentage determined in (i) by the Retired
Participant's or Vested Former Participant's initial benefit amount, and
(iii) subtracting from the amount determined in (ii) the total of
all amounts applied after September 1, 1971 to increase the benefit
amount payable to an Eligible Person with respect to such Retired
Participant or Vested Former Participant under this section; provided,
however, that such remaining amount shall not be more than 3% of the
Retired Participant's or Vested Former Participant's initial benefit
amount or less than zero.
(h) Retirement Date. A Retired Participant's Normal Retirement Date,
---------------
earlier retirement date (including disability retirement) if he retired
prior to his Normal Retirement Date, his actual date of retirement if he
retired subsequent to his Normal Retirement Date, or the first day of the
month coincident with or next following a Vested Former Participant's fifty-
fifth (55th) birthday if such Participant's employment was terminated after
he completed (i) ten (10) Years of Service if employment terminated before
1989 or (ii) five Years of Service if such Participant is credited with one
Hour of Employment after 1988, but (iii) prior to attaining age fifty-five
(55).
As of September 1, 1974 the Annuity payable to an Eligible Person with
respect to a Participant who retired prior to June 1, 1974 (determined
without regard to this paragraph and the next succeeding paragraph but
taking into account all prior increases under this section) shall be
increased by .3% for each full month by which such Participant's Retirement
Date precedes June 1, 1974, provided that such increase shall not exceed a
maximum of 7.2%.
As of September 1, 1974 and as of each subsequent Adjustment Date the
Annuity of each Eligible Person whose Index Adjustment Amount of such date
shall exceed 3/4 of 1% of the Participant's initial benefit amount shall be
increased by his Index Adjustment Amount, provided, however, that if the
Retirement Date of the Participant with respect to which such Annuity is
payable occurred subsequent to the previous Adjustment Date, such increase
shall be reduced by multiplying such increase by the nearest number of full
months from such Retirement Date to the subsequent Adjustment Date and
dividing the product by 12.
The minimum monthly Annuity payable commencing with the first adjustment
date to each Eligible Person shall be, after application of the foregoing
cost-of-living adjustments, equal to $3.00 times his number of full years of
Participation in the Plan and the Superseded Base Plans. Such minimum
Annuity is subject to the reductions as provided in the Plan for early
retirement and as provided under the rules adopted by the Administrator for
election of an optional form of Annuity.
Notwithstanding the foregoing, if the Plan is terminated by any
Participating Employer, the Annuities to be paid to Participants or Retired
Participants employed by such employer, or to their surviving spouses, shall
not, after the date of such termination, be increased pursuant to this
section.
(i) The Cost-of-Living Adjustments provided by this Section shall apply
only to the Accrued Benefit as of December 31, 1985, and shall not apply to
any portion of the Accrued Benefit under the Plan with respect to Service
after 1985.
Section 8.5 Optional Forms of Benefit. (a) A Participant may elect any
----------- -------------------------
one of the optional forms of Annuity set forth below; provided, however,
that no optional form of Annuity may be elected with respect to any
Supplement payable pursuant to Section 8.3(b). Such election shall be
subject to such exceptions as the Administrator may determine to be
reasonably required to conform to restrictions contained in the Super-
72
<PAGE>
seded Insured Plans and such election shall be is made prior to commencement
of Retirement Income payments, except that no such election shall be
effective as to a Participant who is retired pursuant to Section 7.4 or 7.5
because of total and permanent disability until such Participant attains his
Normal Retirement Date. Unless a Participant elects, prior to January 1,
1984, the contingent annuitant described in items iii, iv and v below shall
be the Participant's spouse. A Vested Former Participant whose employment
terminated prior to January 1, 1976, may not elect an optional form of
Annuity.
Optional Annuity Forms
----------------------
(i) The monthly Annuity set forth in Section 8.3.
(ii) A reduced monthly Annuity payable to the Participant during the
Participant's lifetime and, thereafter, in the event of the
Participant's death within the 10-year period which begins on the
Participant's Annuity starting date, in the same reduced monthly amount
to the Beneficiary designated by the Participant for the balance of such
10-year period. The amount of the reduced monthly Annuity shall be
determined under the following table on the basis of the Participant's
age at his Annuity starting date.
<TABLE>
<CAPTION>
Percentage Reduced
Participant's Age Monthly Annuity
----------------- ------------------
<S> <C>
55 96.9%
56 96.5
57 96.2
58 95.8
59 95.3
60 94.7
61 94.1
62 93.4
63 92.6
64 91.7
65 90.7
66 89.5
67 88.3
68 87.0
69 or over 85.6
</TABLE>
(iii) A reduced monthly Annuity payable to the Participant during
the Participant's lifetime and, thereafter, to a contingent annuitant
designated by the Participant during the remaining lifetime of such
contingent annuitant in an amount which is either (A) 100%, (B) 66-2/3%
or (C) 50%, as designated by the Participant, of such reduced monthly
Annuity. If both the Participant and the Participant's contingent
annuitant die within the 10-year period which begins on the
Participant's Annuity starting date, then payments on the basis of the
above percentage designated by the Participant shall be made to the
beneficiary designated by the Participant for the balance of such 10-
year period. The amount of the reduced monthly Annuity shall be
determined under the following tables on the basis of (A) the
Participant's age at the annuity starting date, (B) the number of years
difference between the Participant's age and the contingent annuitant's
age and (C) the percentage continuation to the contingent annuitant;
provided, however, that the Annuity payable in respect of any
Participant under the provisions of this paragraph shall not be less
than the Annuity payable in respect of such Participant had such
Participant retired on December 31, 1974 after having elected the same
optional form of Annuity with the same contingent annuitant.
73
<PAGE>
Percentage Reduced Monthly Annuity
Payable to a Participant (other than
an optional form payable under the
provisions of Section 8.6 or payable
to a Vested Former Participant
eligible to receive an Annuity
pursuant to the provisions of Article 11)
-----------------------------------------
<TABLE>
<CAPTION>
Percentage Continuation to
Contingent Annuitant
------------------------------
<S> <C> <C> <C>
Participant's age is within five (5) years of the 100% 66-2/3% 50%
--- ------ ---
contingent annuitant's age and Participant's age is:
55 69% 77% 82%
56 69 77 82
57 69 77 82
58 69 77 82
59 69 77 82
60 69 77 82
61 69 77 82
62 69 77 82
63 71 79 84
64 74 82 87
65 or later 77 85 90
For each year in excess of 5 years that Participant is older than
the contingent annuitant, the above factors will be decreased by: 1.0% 0.9% 0.8%
Subject to the limitation that the above factors may not exceed 100%, for
each year in excess of 5 years that Participant is younger than the
contingent annuitant, the above factors will be increased by: 1.0% 0.9% 0.8%
</TABLE>
74
<PAGE>
Percentage Reduced Monthly Annuity Payable
Under the Provisions of Section 8.6 or Payable
to a Vested Former Participant Eligible to Receive
an Annuity Pursuant to the Provisions of
Article 11
<TABLE>
<CAPTION>
Percentage Continuation to
Contingent Annuitant
--------------------------
<S> <C> <C> <C>
Participant's age is within five (5) years of the 100% 66-2/3% 50%
--- ------ ---
contingent annuitant's age: 69% 77% 82%
For each year in excess of 5 years that Participant is older than the
contingent annuitant, the above factors will be decreased by: 1.0% 0.9% 0.8%
Subject to the limitation that the above factors may not exceed 100%,
for each year in excess of 5 years that Participant is younger than the
contingent annuitant, the above factors will be increased by: 1.0% 0.9% 0.8%
</TABLE>
(iv) A reduced monthly Annuity payable to the Participant during the
Participant's lifetime and, thereafter, to a contingent annuitant
designated by the Participant in an amount which is (A) if the
Participant dies within the 10-year period which begins on the
Participant's Annuity starting date, equal to the reduced monthly
Annuity being paid to the Participant immediately preceding the
Participant's death adjusted in accordance with Section 8.4 of the Plan
for the balance of such 10-year period and, after the end of such 10-
year period, during the remaining lifetime of such contingent annuitant
equal to (1) 100%, (2) 66 2/3% or (3) 50%, as designated by the
Participant, of such reduced monthly Annuity or, (B) if the Participant
dies after the end of the 10-year period which begins on the
Participant's Annuity starting date, during the remaining lifetime of
such contingent annuitant, equal to whichever of the above percentages
of such reduced monthly Annuity has been designated by the Participant
for the remaining lifetime of such contingent annuitant. If during the
10-year period, which begins on the Participant's Annuity starting date,
both the Participant and the contingent annuitant die, a monthly Annuity
with payments equal to those being made to the Participant or the
Participant's contingent annuitant immediately preceding the death of
the survivor adjusted in accordance with Section 8.4 of the Plan shall
be made for the balance of such 10-year period to the Beneficiary
designated by the Participant.
The amount of the reduced monthly Annuity shall be determined under the
following tables on the basis of (A) the Participant's age at the Annuity
starting date, (B) the number of years difference between the Participant's
age and the contingent annuitant's age, and (C) the percentage contribution to
the contingent annuitant; provided, however, that the Annuity payable in respect
of any Participant under the provisions of this paragraph shall not be less than
the Annuity payable in respect of such Participant had such Participant retired
on December 31, 1974 after having elected the same optional form of Annuity with
the same contingent annuitant.
75
<PAGE>
Percentage Reduced Monthly Annuity
Payable to a Participant (other than
an optional form payable under the
provisions of Section 8.6 or payable
to a vested former Participant
eligible to receive an Annuity
pursuant to the provisions of Article 11)
-----------------------------------------
<TABLE>
<CAPTION>
Percentage Continuation to
Contingent Annuitant
-----------------------------
<S> <C> <C> <C>
Participant's age is within five (5) years of the contingent 100% 66-2/3% 50%
--- ------ ---
annuitant's age and Participant's age is:
55 69% 76% 80%
56 69 76 80
57 69 76 80
58 69 76 80
59 69 76 80
60 69 76 80
61 69 76 80
62 69 76 80
63 71 79 82
64 74 81 84
65 or later 77 83 86
For each year in excess of 5 years that Participant is older than the
contingent annuitant, the above factors will be decreased by: 1.0% 0.9% 0.8%
Subject to the limitation that the above factors may not exceed 100%,
for each year in excess of 5 years that Participant is younger than the
contingent annuitant, the above factors will be increased by: 1.0% 0.9% 0.8%
</TABLE>
76
<PAGE>
Percentage Reduced Monthly Annuity Payable
under the Provisions of Section 8.6 or Payable
to a Vested Former Participant Eligible to Receive
an Annuity Pursuant to the Provisions of Article 11
---------------------------------------------------
<TABLE>
<CAPTION>
Percentage Continuation to
Contingent Annuitant
---------------------------
<S> <C> <C> <C>
Participant's age is within five (5) 100% 66-2/3% 50%
--- ------ ---
years of the contingent annuitant's age: 69% 76% 80%
For each year in excess of 5 years that
Participant is older than the contingent
annuitant, the above factors will be
decreased by: 1.0% 0.9% 0.8%
Subject to the limitation that the above
factors may not exceed 100%, for each year
in excess of 5 years that Participant is
younger than the contingent annuitant, the
above factors will be increased by: 1.0% 0.9% 0.8%
</TABLE>
(v) Any combination of the above optional Annuity forms.
For purposes of using the above tables the Participant's age and the
Participant's contingent annuitant's age shall be determined by reference to
their nearest birthday as of the Participant's Annuity starting date.
Notwithstanding any provisions hereof to the contrary, if a Participant
elects Option ii, iii and iv, the Participant's contingent annuitant is other
than the Participant's spouse and the value of the Participant's Annuity under
any such option is not more than 50% of the value of the Annuity he would have
been entitled to receive had he elected Option i, the Annuity payable to the
Participant shall be increased and the Annuity payable to the contingent
annuitant shall be decreased in order that the value of the Participant's
Annuity under the option shall be more than 50% of the value of the Annuity
which would have been payable to the Participant had he elected Option i.
If a Vested Former Participant who has attained age fifty-five (55), or a
Participant who retired prior to his Normal Retirement Date, and who has not
elected to have his benefits commence prior to his Normal Retirement Date dies
before payment of such benefits has commenced and prior to his death he either
had not rejected the automatic joint and survivor election set forth in Section
8.6 or had elected Option ii, iii and iv, payments shall commence under such
option to the Participant's contingent annuitant as of the first day of the
month in which the deceased Participant would have commenced to receive benefits
if he had lived. Only those benefits set forth in Section 11.2 shall be paid
upon the death of a Vested Former Participant prior to attaining age fifty-five
(55).
Section 8.6. Automatic Joint and Survivor Election. Notwithstanding the
----------- -------------------------------------
provisions of Section 8.5, a Participant who retires on or after January 1, 1976
pursuant to Section 7.1 or Section 7.3, a Participant who retires at any time
pursuant to Section 7.4 or Section 7.5 and attains his Normal Retirement Date
after January 1, 1976, or a Participant whose employment terminates on or after
January 1, 1976 and who is eligible for an Annuity pursuant to the provisions of
Article 11 shall automatically be deemed to have elected Option iii(C) set forth
in Section 8.5 with the Participant's spouse as contingent annuitant unless such
Participant shall specifically reject such automatic election pursuant to the
provisions of the Plan except that such an automatic election shall not be
effective as to a Participant who is retired pursuant to Section 7.4 or 7.5
because of total and permanent disability until such Participant attains his
Normal Retirement Date. An election by Participant at any time of any optional
form of Annuity set forth in Section 8.5 shall be deemed to be a specific
written rejection of the automatic election provided in this section.
77
<PAGE>
If, pursuant to Section 7.1, a Participant retires after his Normal
Retirement Date, the automatic election provided by this section, unless
specifically rejected, shall be operative during the period between his Normal
Retirement Date and his actual date of retirement so that, if the Participant
predeceases his spouse, the latter shall receive, commencing with the first day
of the month next following the Participant's death, the survivorship benefits
which would have been payable had the Participant retired immediately prior to
his death, provided, however, that such benefits shall be offset by the amount
payable in such event under Article 10.
Sections 8.7, 8.8 and 8.9 [None]
-------------------------
Section 8.10 Reduction in Benefits for Prior Payments. Any Annuity or
------------ ----------------------------------------
other benefit otherwise payable under this Article or Article 11 shall be
reduced by the Actuarial Equivalent of any benefit previously paid to the
Participant, or to which the Participant previously became entitled, under any
plan of any predecessor company with respect to a period of employment which is
taken into account in measuring such Annuity or other benefit otherwise payable.
Section 8.11 Limitation on Payments to Contributing Participants.
------------ ---------------------------------------------------
Anything herein to the contrary notwithstanding, any Annuity payable under this
Article or under Section 11.1 to a Contributing Participant who made
contributions to either of the Superseded Base Plans shall be limited to the
portion of such Annuity payable as a paid-up Annuity under one or more of the
Superseded Insured Plans until such contributing Participant shall by written
instrument delivered to the Administrator in form approved by it have
irrevocably designated the Trustee as the beneficiary to receive any benefits
which shall become payable under the Superseded Base Plans on account of the
death of such Participant after commencement of Annuity payments to him. This
section shall not apply to Contributing Participants who shall have commenced to
receive an Annuity before this section shall have become effective.
Section 8.12 Special Rules Applicable to the Benefits of Participants who
------------ ------------------------------------------------------------
Become Employed by, or who have Been Employed by, a System Company which is not
- -------------------------------------------------------------------------------
a Participating Employer. If, before 1986, an Employee shall be transferred
- ------------------------
from a Participating Employer to a corporation which is a System Company but is
not a Participating Employer, becomes a participant in a retirement plan
established by such corporation, other than a plan established pursuant to an
agreement with a labor union, and the terms of such retirement plan provide,
with respect to a person who has participated in, or upon satisfying the
requirements set forth in Article 5 would have become a Participant in, this
Plan,
(i) that such person's service for purposes of determining the
amount of his benefit under such retirement plan and determining
whether, and when, he will be entitled to receive a benefit from such
retirement plan shall include any period of employment with a
Participating Employer to the same extent such period would have been
included had it been employment by such corporation,
(ii) that such person's accrued benefit under such retirement plan
immediately after such transfer shall be not less than his Accrued
Benefit under this Plan at the time of the transfer, less the portion,
if any, of such Accrued Benefit which is attributable to his
contributions to this Plan, and
(iii) that, if such person's employment with such corporation is
terminated, other than by a transfer to another System Company, before
he is fully vested in his Accrued Benefit under such retirement plan,
such person shall be entitled to receive from such retirement plan an
amount at least equal to his Accrued Benefit under this Plan at the time
of his transfer to such corporation, less the portion, if any, of such
Accrued Benefit which is attributable to his contributions to this Plan,
if his Years of Service under this Plan plus any period of employment
with such corporation which would have been Years of Service under this
Plan had it been employment with a Participating Employer would equal
ten years, then, notwithstanding any provision of this Supplement to the
contrary, such Employee shall not be entitled to receive an Annuity or
any other distribution or payment from this Supplement except the amount
to which he would have been entitled under subdivision (b) of Section
11.1 had his employment terminated under the circumstances therein
described.
78
<PAGE>
If, before 1986, an Eligible Employee has been transferred from a System
Company other than a Participating Employer to a Participating Employer and
immediately prior to such transfer he participated in, or upon satisfying any
age and service requirements would have become a Participant in, a retirement
plan established by such System Company, other than a plan established pursuant
to an agreement with a labor union, then, notwithstanding any provision of this
Supplement to the contrary,
(1) upon becoming an Eligible Employee any period of employment with
such System Company, including any period of employment prior to the
date such company became a System Company, shall be taken into account
for purposes of determining such Employee's Years of Service and Years
of Credited Service to the same extent it would have been had such
period of employment been employment by a Participating Employer,
(2) such Employee's annuity determined under Section 8.3(a)
immediately after such transfer shall be not less than his Accrued
Benefit under such retirement plan at the time of the transfer, less the
portion, if any, of such Accrued Benefit which under the terms of such
plan must be paid from such plan, and
(3) if such Employee's employment is terminated, other than by a
transfer to another System Company, before he has completed ten Years of
Service, such Employee will be entitled to receive from this Plan, at
the time and in the manner set forth in the retirement plan of his prior
employer, an amount equal to the vested portion of his accrued benefit
under such plan immediately prior to his transfer to a Participating
Employer, taking into account in determining such vested portion any
period of employment with any System Company to the same extent it would
have been had such period of employment been employment by his prior
employer.
ARTICLE 9
---------
[None]
ARTICLE 10
----------
SURVIVING SPOUSE ANNUITIES
--------------------------
Section 10.1 Benefits for Surviving Spouse and Dependent Children.
------------ ----------------------------------------------------
(a) As of December 31, 1985, all of the Participating Employers in the
Pre-1986 ANR Plan were parties to group insurance contracts under which
annuities are paid to the surviving spouses of deceased employees, the
surviving spouses of deceased former employees who became totally and
permanently disabled after October 31, 1979 and on the date of their death
were receiving benefits under a long-term disability program maintained by a
Participating Employer, and the surviving spouses of deceased former
employees who retired pursuant to Section 7.4 or 7.5 because of total and
permanent disability, covered under such contracts in the amounts and
subject to the terms and conditions stated in such contracts.
(b) The Annuities payable pursuant to this Section 10 are provided
under the terms of Group Contract GA 81776 effective March 1, 1986, issued
by the Principal Mutual Life Insurance Company. Such Group Contract
replaced Group Contract GA 2979 effective January 15, 1959, issued by
Bankers Life Company. Annuities provided by this Section 10 are payable
only in accordance with the terms of previously referenced Group Contracts.
In general, such Annuities are payable to the surviving spouses of persons
who die while actively employed by an adopting employer and who were
Eligible Employees as of December 31, 1985, and who had attained the age of
fifty years prior to April 1, 1986. In addition, spouses of certain
disabled persons described in the first paragraph of this Section 10 may
receive Annuities.
79
<PAGE>
(c) The amount of the Annuity is determined by the terms of the
previously referenced Group Contracts, provided, however, that such benefit
shall be calculated using the compensation of such Eligible Employee which
would have been used if such Eligible Employee would have died on December
31, 1985. Changes in compensation after 1985 shall not be used in
calculation of the Annuities payable pursuant to this Section 10.
(d) In general, subject to the provisions of the previously referenced
Group Contract and other provisions of this Section 10, the amount of each
monthly Annuity payment shall be equal to which ever of the following
applies.
(i) If the Eligible Employee did not make a proper irrevocable
rejection of this option, the amount shall be the sum of (A) and (B)
where
(A) is twenty percent of the Eligible Employees' Base Monthly
Earnings, plus
(B) five percent of the Eligible Employees' Base Monthly
Earnings to each dependent child, to a maximum of four children,
payable to the attainment of age twenty-one for each dependent
child.
(ii) If the Eligible Employee did make a proper irrevocable
rejection of the option described in preceding item (i), the amount
shall be forty percent of the total amount of the normal monthly income
payment on a single life Annuity basis such Eligible Employee would have
been entitled to receive under the Pre - 1986 ANR Plan as in effect on
December 31, 1985, upon attainment of age sixty-five by such Eligible
Employee assuming that his employment and salary as of December 31,
1985, were to continue until his attainment of age sixty-five.
(e) Base Monthly Earnings as defined in the Pre - 1986 ANR Plan and
used for purposes of determining benefits under this Section 10 means an
Eligible Employees' Total Monthly Earnings not in excess of four hundred
dollars.
(f) The previously referenced Group Contracts also provide that, in
general, if an Eligible Employee and his eligible spouse die simultaneously,
the twenty percent payable to dependent children under preceding item (1)
shall be doubled.
(g) Dependent children as used in this Section 10 are defined in the
previously referenced Group Contracts.
(h) The Annuities payable under this Section 10 are minimum benefits
which are in lieu of, and not in addition to, benefits otherwise payable
under the provisions of the Pension Plan for Employees of The Coastal
Corporation including Supplements ("Coastal Plan"). There shall be no
duplication of benefits under this Section 10 and other provisions of the
Coastal Plan including this ANR Supplement.
(i) The benefits provided by this Article 10 are ancillary death
benefits and are payable only if death of a Participant occurs while the
Participant is a disabled former employee described in Section 10.1(a) or an
Active Participant with respect to a Participating Employer or is an
employee of a Related Employer or Subsidiary. Termination of employment or
retirement so that an Active Participant is not actively employed by a
Participating Employer, Related Employer or Subsidiary ends eligibility for
benefits under this Article 10 except as specified for disabled persons in
Section 10.1(a).
80
<PAGE>
ARTICLE 11
----------
PAYMENTS ON TERMINATION OF EMPLOYMENT OR DEATH OF A PARTICIPANT
---------------------------------------------------------------
OR WITHDRAWAL OF A PARTICIPATING EMPLOYER FROM THE PLAN
-------------------------------------------------------
Section 11.1 Termination of Participation other than by Death or
------------ ---------------------------------------------------
Retirement. A Participant who ceases to be a Participant upon termination of
- ----------
his employment for any reason other than death or retirement pursuant to Article
7 shall have the following rights:
(a) If such Participant shall have completed (i) ten Years of Service
at the date of such termination of employment if employment terminated
before 1989, or (ii) five Years of Service if such Participant is credited
with one Hour of Employment after 1988, he shall be entitled to receive
either,
(i) a deferred Annuity commencing at his Normal Retirement Date in
an amount equal to the greater of the amount computed under subsection
(a) of Section 8.3 of this Supplement or the Participant's Accrued
Benefit as of the date of his termination of employment, or
(ii) an Annuity commencing at such earlier date following attainment
of age fifty-five as such terminated Participant may elect by filing
written notice with the Administrator at least 120 days prior to such
date in an amount equal to the greater of the amount computed under
Subsection (a) of Section 8.3(a) of this Supplement or the Participant's
Accrued Benefit as of the date of his termination of employment
actuarially reduced to reflect the earlier commencement date, provided,
however, that if such Participant was a Contributing Participant, he may
elect at any time prior to the commencement of such deferred Annuity to
receive a lump sum cash distribution, payable from the sources specified
in Article 12, in an amount equal to his Accumulated Contributions as of
the first day of the month preceding the date on which such distribution
is made. If a Participant elects to receive such a lump sum cash
distribution, the Annuity otherwise payable under subparagraph (i) or
(ii) of this paragraph shall be reduced by the Actuarial Equivalent of
such lump sum cash distribution.
(b) If such Participant shall not have completed (i) ten Years of
Service at the date of such termination of employment if employment
terminated before 1989, or (ii) five Years of Service if such Participant is
credited with one Hour of Employment after 1988, he shall not be entitled to
receive any Annuity or any other distribution or payment under the Plan
unless he is a Contributing Participant, in which case he may elect to
receive either:
(A) a lump sum cash distribution, payable from the sources
specified in Article 12, in an amount equal to his Accumulated
Contributions as of the first day of the month preceding the date on
which such distribution is made, or
(B) a deferred Annuity, commencing at his Normal Retirement Date
in an amount Actuarially Equivalent to his Accumulated Contributions
as of the first day of the month preceding the date of his
termination of employment.
In the event a Participant who shall have retired pursuant to Section 7.4 or
7.5 shall have subsequently ceased to be totally and permanently disabled prior
to his Normal Retirement Date and shall not have returned to the employ of a
System Company, he shall be entitled to receive an amount, if any, determined
under paragraph (a) or (b) of this section as though his employment had
terminated on the date of his retirement; provided, however, that no such
Participant shall be entitled to receive an amount under this section and under
Section 8.3(b). In the event a Participant who shall have become totally and
permanently disabled after October 31, 1979 and commenced receiving benefits
under a long-term disability benefit program maintained by a Participating
Employer shall thereafter cease to receive benefits under such program and shall
not have returned to the employ of a System Company, he shall be entitled to
receive an amount, if any, determined under paragraph (a) or (b) of this section
as though his employment had terminated on the date he ceased receiving benefits
under such program; provided, however, that no such Participant shall be
entitled to receive an amount under this section and under Section 8.3(b).
81
<PAGE>
Section 11.2 Distribution Upon Death of Contributing Participant. Upon
------------ ---------------------------------------------------
the death of a Contributing Participant prior to receipt by him of an Annuity or
other payment under Section 8.3, Section 8.12 or Section 11.1, his Beneficiary
(or in the absence of such designation, the person or persons specified in the
Plan), shall be entitled to receive a lump sum cash distribution, payable from
the sources specified in Article 12, in an amount equal to the "refundable sum"
computed as hereinafter provided. Upon the death of a Contributing Participant
after receipt by him of one or more Annuity or other payments under Section 8.3
or Section 11.1 but prior to receipt of such payments equal in the aggregate to
the "refundable sum," his Beneficiary (or in the absence of such designation,
the person or persons specified in the Plan) shall be entitled to receive a lump
sum distribution, payable from the sources specified in Article 12, in an amount
equal to the excess of the "refundable sum" over the aggregate of the Annuity or
other payments received pursuant to Section 8.3 or Section 11.1 to the date of
his death, provided that the foregoing provisions of this sentence shall not
apply in the case of a Retired Participant who had been receiving, with respect
both to the portion of his Annuity, if any, which is payable under the
Superseded Base Plans and the portion of his Annuity which is payable from the
Trust Fund, an optional form of Annuity under which Annuity payments are to be
made to a contingent annuitant after his death; and further provided that, in
the event the Retired Participant had been receiving an optional form of Annuity
with respect to his total amount of Annuity as determined under Section 8.3(a)
under which payments are to be continued to a contingent annuitant, with the
portion thereof to be paid under the Superseded Base Plans to be payable in the
normal form of Annuity provided for thereunder, any lump sum settlement paid
under the Superseded Base Plans shall be deducted from future payments to the
contingent annuitant from the Trust Fund, such aggregate reduction so effected
equals the amount of such lump sum settlement, at which time future annuity
payments from the Trust Fund shall be in the amount payable to the contingent
annuitant prior to giving effect to such reduction. The "refundable sum" shall
be an amount equal to the Participant's Accumulated Contributions as of the
first day of the month preceding the date of the Participant's death.
Section 11.3 [None]
------------
Section 11.4 Benefits in Event Participant's Employer Withdraws from
------------ -------------------------------------------------------
Plan. In the event of the withdrawal from the Plan by any Participating
Employer, the provisions of Section 11.1 shall not apply to any Participant in
the employment of such Participating Employer on the date of such withdrawal,
and each such Participant, other than those in the employment of Michigan
Consolidated Gas Company at the time of its withdrawal, or in the employment of
ANG Coal Gasification Company at the time of its sale, shall, be entitled to
receive a deferred Annuity, commencing at his Normal Retirement Date, in an
amount computed under the formula prescribed in Section 8.3(a) but giving effect
only to the Years of Service of such Participant to the date of such withdrawal.
ARTICLE 12
----------
PAYMENT OF BENEFITS
-------------------
Section 12.1 Time and Manner of Payment of Annuities. Payment of all
------------ ---------------------------------------
Annuities provided for in Section 8.3 shall be made by the Trustee from the
Trust Fund, at the direction of the Administrator, except that, in the case of
an Active Participant who retires and becomes entitled to receive a paid-up
Annuity under one or more of the Superseded Insured Plans, the amount of the
payment from the Trust Fund shall be reduced, so that the aggregate of such
payment and the Annuity payment or payments which such Retired Participant shall
be entitled to receive under such Superseded Insured Plans shall be equal to the
total Annuity he shall be entitled to receive under Section 8.3. No such
reduction shall be made in the case of a Transferred Participant except to the
extent, if any, that the amount of such paid-up Annuity or Annuities shall
exceed the amount of the total Annuity to which such Transferred Participant
shall be entitled under the plan in which he is an active participant
immediately prior to retirement.
Section 12.2 Payment of Participant's Contributions. Payment of that
------------ --------------------------------------
portion of any lump sum cash distribution provided for in Section 11.1 which
represents the amount of a Participant's contributions to the Plan during his
period of Contributory Service which were paid to the Trustee subsequent to the
effective date, plus interest, shall be made by the Trustee, at the direction of
the Administrator, from the Trust Fund and payment of the balance of such lump
sum cash distribution which represents such Participant's contributions paid
under the
82
<PAGE>
Superseded Base Plans for any period constituting Years of Prior Service under
the Plan shall be made in accordance with the provisions of such Superseded Base
Plans. Payment of any lump sum cash distributions provided for in Section 11.2
shall be made by the Trustee at the direction of the Administrator from the
Trust Fund, except to the extent of any portion of such lump sum cash
distribution which shall be made under the Superseded Base Plan in respect of a
Contributing Participant who shall not have designated the Trustee his
irrevocable Beneficiary under the Superseded Base Plan pursuant to Section 8.11.
ARTICLE 13
----------
50% SURVIVOR ANNUITY
--------------------
Section 13.1 Coverage. The provisions of this Article 13 apply to each
------------ --------
person who was a Participant in the American Natural Resources System Companies
Employees' Retirement Plan before January 1, 1989, with respect to periods of
time such person was a Participant in such Plan. The reduction in Retirement
Income for coverage under the 50% Survivor Annuity provisions of this Article 13
shall apply only to the amount of Retirement Income which exceeds the benefit
payable under the program for surviving spouses described in Section 5.5(h) of
the Plan.
Section 13.2 Time Period. The provisions of this Article 13 apply to
------------ -----------
periods of 50% Survivor Annuity coverage before April 1, 1990.
Section 13.3 50% Survivor Annuity
------------ --------------------
(a) The 50% Survivor Annuity provides Retirement Income to the
surviving spouse of a Participant who dies while covered by this provision.
The Retirement Income amount payable to the surviving spouse is the fifty
percent survivor benefit provided by the Qualified Joint and Survivor
Annuity which is the Actuarial Equivalent of the benefit computed pursuant
to the provisions of the Plan, including any reduction due to the 50%
Survivor Annuity coverage. Such Retirement Income shall be computed as of
the date of death of the Participant.
This benefit form is also referred to in the Plan as the Qualified Joint
and Survivor Annuity (With Preretirement Death Benefits).
(b) At such time as a Participant who has reached his Initial Vesting
Date has been married to his spouse throughout the preceding one year
period, 50% Survivor Annuity coverage shall automatically be provided for
such spouse unless the Participant and such spouse reject the coverage
pursuant to Plan provisions;
(c) Retirement Income is payable pursuant to the 50% Survivor Annuity
provision only to a spouse who has been married to the Participant
throughout the twelve month period immediately preceding the date of death
of the Participant.
(d) The Retirement Income amount computed under the Plan which exceeds
the benefit payable under the program for surviving spouse described in
Section 5.5(h) of the Plan, shall be reduced for each full month of coverage
during the periods of time described in the following provisions under the
50% Survivor Annuity provisions by an amount equal to:
(i) For periods of coverage after April, 1986 and before 1989:
(A) one-twenty fourth of one percent for each month after the
month in which the Participant attains sixty years of age;
83
<PAGE>
(B) one-thirtieth of one percent for each month during the
period beginning after the month in which the Participant attains
fifty-five years of age and ending with the month during which the
Participant attains the age of sixty years;
(C) one-fortieth of one percent for each month during the period
beginning after the month in which the Participant attains fifty
years of age and ending with the month during which the Participant
attains the age of fifty-five years;
(D) one-sixtieth of one percent for each month during the period
beginning after the month in which the Participant attains forty-
five years of age and ending with the month during which the
Participant attains the age of fifty years;
(E) one-one hundred twentieth of one percent for each month
during the period beginning after the month in which the Participant
attains forty years of age and ending with the month during which
the Participant attains the age of forty-five years; and
(F) no reduction for the month during which the Participant
attains the age of forty years and each month prior thereto.
(ii) For periods of coverage after 1988:
(A) one-twelfth of two and one-half percent for each month after
the month in which the Participant attains seventy-five years of
age;
(B) one-twelfth of two and one-half percent for each month
during the period beginning after the month in which the Participant
attains seventy years of age and ending with the month during which
the Participant attains the age of seventy-five years;
(C) one-tenth of one percent for each month during the period
beginning after the month in which the Participant attains sixty-
five years of age and ending with the month during which the
Participant attains the age of seventy years;
(D) one-twenty-fourth of one percent for each month during the
period beginning after the month in which the Participant attains
sixty years of age and ending with the month during which the
Participant attains sixty-five years of age;
(E) one-thirtieth of one percent for each month during the
period beginning after the month in which the Participant attains
fifty-five years of age and ending with the month during which the
Participant attains the age of sixty years;
(F) one-fortieth of one percent for each month during the period
beginning after the month in which the Participant attains fifty
years of age and ending with the month during which the Participant
attains the age of fifty-five years;
(G) one-sixtieth of one percent for each month during the period
beginning after the month in which the Participant attains forty-
five years of age and ending with the month during which the
Participant attains the age of fifty years;
(H) one-one hundred twentieth of one percent for each month
during the period beginning after the month in which the Participant
attains forty years of age and ending with the month during which
the Participant attains the age of forty-five years; and
(I) no reduction for the month during which the Participant
attains the age of forty years and each month prior thereto.
84
<PAGE>
(e) The Retirement Income amount computed under the Plan shall not be
reduced for periods of coverage before May, 1986 under the 50% Survivor
Annuity provisions.
(f) The 50% Survivor Annuity coverage is automatically cancelled as of
the date of death of the spouse of the Participant.
(g) If a Participant who has attained twenty-five years of Credited
Service dies prior to attainment of fifty-five years of age, the 50%
Survivor Annuity benefit payable on the first day of the month following the
death of the Participant shall be computed as a Qualified Joint and Survivor
Annuity reduced to age fifty-five and then such amount shall be reduced
further on an actuarial basis to the date of death. Provided, however, that
this subsection (g) shall apply only to the Accrued Benefit of such deceased
Participant accrued as of December 31, 1992. This option is not available
for Accrued Benefit attributable to periods of time after December 31, 1992.
If a Participant who has not attained twenty-five years of Credited
Service dies prior to attainment of age fifty-five years, the 50% Survivor
Annuity benefit is not payable until the Participant would have attained the
age of fifty-five years.
(h) The 50% Survivor Annuity coverage provisions are applicable to a
Participant if he is credited with one Hour of Service or one hour of paid
leave after August 22, 1984.
Any other Participant is entitled to such survivor annuity coverage as
provided by applicable prior provisions of the Plan.
FOURTH SUPPLEMENT
-----------------
REFINERY EMPLOYEES PLAN
PARTICIPATION BEFORE JULY 1, 1988
---------------------------------
ARTICLE I
---------
INTRODUCTION
------------
The benefit provisions of this Supplement shall apply in lieu of other
Plan provisions with respect to participation in The Coastal Corporation
Refinery Employees' Pension Plan (hereinafter the "Refinery Plan") for periods
of time before July 1, 1988.
ARTICLE II
----------
DERBY REFINING COMPANY
EL DORADO FACILITY
------------------
2.1 El Dorado. The provisions of this Article II apply only to
---------
Participants in the Refinery Plan who were Employees of Derby Refining Company
with Credited Service under the Refinery Plan after March 31, 1986 and before
July 1, 1988.
2.2 Benefits Preserved. Except as stated in this Article II,
------------------
notwithstanding any other provision of the Plan (Including Supplements) to the
contrary, the Retirement Income for a Participant with respect to Credited
Service (as defined in the Refinery Plan) for periods of time from April 1, 1986
through June 30, 1988 shall be calculated pursuant to the benefit formula and
calculation provisions of the Refinery Plan as in effect on June 30, 1988.
85
<PAGE>
Generally, the Refinery Plan formula provided a vested Participant with
Retirement Income at Normal Retirement Date in the amount of twenty dollars per
month for each year of Credited Service to a maximum of thirty years. The
benefit is payable in the five year certain and life form.
2.3 Change of Status. The Refinery Plan provided a method for
----------------
calculating benefits for persons who had a change in status with respect to the
Refinery Plan, but remained employed by a Related Employer. This provision
applies to Participants with Credited Service during the period from April 1,
1986 through June 30, 1988 and benefits of such Participants shall be calculated
using the prorata method described therein. Such method of calculating benefits
for persons who have a change of status is subject to future amendment in
accordance with Plan provisions relating to such amendments and any such
amendment shall apply to Participant described herein unless such amendment is
not applicable to such Participants.
2.4 Other Amendments. The Refinery Plan provisions may be amended in
----------------
any manner necessary to maintain the qualified status of the Plan and in any
other respect consistent with preservation of the benefit formula as described
in preceding Sections 2.2 and 2.3.
ARTICLE III
-----------
CANEY BRANCH
------------
3.1 Caney Branch. The provisions of this Article III apply only to
------------
Participants under the provisions of the Caney Branch Supplement to the Refinery
Plan as of June 30, 1987.
3.2 Benefit Preserved. Except as stated in this Article III,
-----------------
notwithstanding any other provision of the Plan (including Supplements) to the
contrary, the Retirement Income with respect to Credited Service under the
provisions of the Caney Branch Supplement to the Refinery Plan for periods of
time before June 30, 1987 shall be calculated pursuant to provisions of such
Caney Branch Supplement.
3.3 Change in Status. The Caney Branch Supplement to the Refinery Plan
----------------
provided a method for calculating benefits for persons who had a change of
status with respect to the Refinery Plan but remained employed by a Related
Employer. Such method of calculating benefits for persons who have a change of
status is subject to future amendment in accordance with Plan provisions
relating to such amendments and any such amendment shall apply to the
Participants described herein unless such amendment is not applicable to such
Participants.
3.4 Other Amendments. The Refinery Plan provisions may be amended in
----------------
any manner necessary to maintain the qualified status of the Plan and in any
other respect consistent with preservation of the benefit formula as described
in preceding Sections 3.2 and 3.3.
FIFTH SUPPLEMENT
----------------
JAYHAWK PIPELINE CORPORATION
----------------------------
Jayhawk Pipeline Corporation is a member of the same Controlled Group as
The Coastal Corporation for purposes of the Plan, including Section 6.10 of
Article VI, entitled "Assets for Benefit Payment".
SIXTH SUPPLEMENT
----------------
Great Lakes Gas Transmission Company is a member of the same Controlled
Group as The Coastal Corporation for purposes of the Plan, including Section
6.10 of Article VI, entitled "assets for Benefit Payment".
86
<PAGE>
SUFCO/UFCO SUPPLEMENT
---------------------
ARTICLE I
---------
INTRODUCTION
------------
This Supplement is referred to as the `SUFCo/UFCo Supplement' or the
`SUFCo Supplement'. This Supplement includes provisions applicable to persons
who were Participants with respect to the SUFCo Retirement Plan (hereinafter the
"SUFCo Plan") prior to January 1, 1992. In addition, this Supplement applies to
Employees (as defined in this Supplement) of Southern Utah Fuel Company and Utah
Fuel Company.
The purpose of this Supplement is to provide a separate benefit
structure within the Plan for Participants to whom this Supplement applies. The
separate benefit structure is generally a continuation of the provisions of the
SUFCo Plan as in effect before the merger of the SUFCo Plan into this Plan.
The provisions of the SUFCo/UFCo Supplement apply in lieu of
inconsistent or contrary provisions contained in the Plan (excluding this
Supplement) with respect to persons to whom this Supplement applies.
Each participant in the SUFCo Plan is entitled to a benefit under the
Plan which is at least equal to a benefit such participant would have been
entitled to as of December 31, 1992 if the SUFCo Plan had continued without
change through December 31, 1992.
ARTICLE II
----------
DEFINITIONS
-----------
Terms used in this Supplement which are defined in the Plan have the
same meaning in the Supplement unless such terms are defined differently for
purposes of this supplement. The definition of terms defined in this Supplement
apply only to this Supplement and not to other parts of the Plan.
2.1 `Actuarially Equivalent' is defined in the Plan and modified for
this Supplement to provide that an equivalent benefit computed using an eight
percent rate of interest shall not be less than the equivalent of such benefit
computed (1) using an interest rate of five and one-half percent and (2) based
upon the benefit of such Participant accrued prior to 1993.
2.2 `Employee' is defined in the Plan and is modified to apply only to
persons employed by SUFCo or UFCo except that the provisions of this Supplement
do not apply to a person employed by SUFCo or UFCo with respect to periods of
time during which such person is designated by the Board of Directors of SUFCo
or UFCo as ineligible to participate in the SUFCo Retirement Plan or under the
provisions of this Supplement.
2.3 `SUFCo' means Southern Utah Fuel Company, a Delaware company or any
successor corporation resulting from a merger or consolidation with SUFCo or a
transfer of substantially all of the assets of SUFCo if such successor or
transferee shall adopt and continue the Plan by appropriate corporate action
pursuant to provisions of the Plan.
2.4 `UFCo' means Utah Fuel Company, a Delaware company or any successor
corporation resulting from a merger or consolidation with UFCo or a transfer of
substantially all of the assets of UFCo if such successor or transferee shall
adopt and continue the Plan by appropriate corporate action pursuant to
provisions of the Plan.
87
<PAGE>
ARTICLE III
-----------
BENEFITS
--------
3.1 Normal Retirement Benefit.
--------------------------
(a) Basic Benefit Formula. A Participant who is 100% vested and who
retires on his Normal Retirement Date shall be entitled to the Actuarial
Equivalent of a Retirement Income payable for five years certain and life
thereafter with payments commencing on his Normal Retirement Date in a
monthly amount equal to the sum of:
(i) twenty dollars multiplied by the Participant's Years of Service
for years before 1989;
(ii) thirty dollars multiplied by the Participant's Years of Service
during 1989; and
(iii) thirty-five dollars multiplied by the Participant's Years of
Service after 1989.
A maximum of thirty Years of Service shall be used in the calculation of
the monthly Retirement Income of a Participant. For a Participant who is
credited with more than thirty Years of Service, the last thirty of such
Years of Service shall be used in the calculation of the monthly Retirement
Income of such Participant.
3.2 Benefit Adjustment.
-------------------
(a) The Retirement Income of a Participant who is credited with Years
of Service under the Plan for periods of time during which such Participant
was not credited with Years of Service under this Supplement shall be
adjusted using the proration method described in this Section. Credited
Service under the SUFCo Plan is included in Years of Service under this
Supplement.
(b) The Retirement Income of the Participant shall be calculated using
the benefit formula described in this Supplement modified to assume that all
Years of Service under the Plan including this Supplement were Years of
Service under this Supplement in lieu of using only Years of Service to
which the benefit formula under this Supplement would otherwise apply. The
Retirement Income amount so calculated shall then be multiplied by a
fraction, the numerator of which is the Years of Service of the Participant
to which this Supplement would apply in the absence of this Section relating
to Benefit Adjustment and the denominator of which is the total number of
Years of Service under the Plan including this Supplement.
(c) The Retirement Income of the Participant shall be calculated using
the benefit formula under the Plan (other than the benefit formula described
in this Supplement) modified to assume that all Years of Service under the
Plan including this Supplement were Years of Service under the Plan without
regard to this Supplement in lieu of using only Years of Service to which
such other benefit formula under the Plan would otherwise apply. The
Retirement Income so calculated shall be multiplied by a fraction, the
numerator of which is the Years of Service of the Participant to which this
Supplement would not apply in the absence of this Section relating to
Benefit Adjustment and the denominator of which is the total number of Years
of Service under the Plan including this Supplement.
(d) The Retirement Income of the Participant shall be the total of the
amounts determined pursuant to subsections (b) and (c) of this Section.
There shall be no duplication of benefits from the Plan with respect to
Years of Service taken into account in the Retirement Income calculations
described in this Section. The Retirement Income calculated pursuant to this
section shall be reduced by the Actuarial Equivalent of any Retirement
Income or other benefit which is paid or distributed pursuant to other
provisions of the Plan.
88
<PAGE>
ARTICLE IV
----------
TERMINATION
-----------
In the event of termination of the Coastal Plan within a period of five
years from the date of merger of the SUFCo Plan into the Coastal Plan, the
requirements of Section 414 (e) of the Code shall be satisfied pursuant to the
condition set forth in Treasury Regulations interpreting that Section,
specifically Regulation 1.414(e) - 1(h) in such a manner that all benefits that
would be provided by the SUFCo Plan on a termination basis just prior to the
merger of the SUFCo Plan into the Coastal Plan are payable in a priority
category higher than the highest priority category in Section 4044 of ERISA.
This provision shall not apply to a termination which occurs more than five
years after the merger of the SUFCo Plan into the Coastal Plan.
89
<PAGE>
EXHIBIT 11
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Millions of Dollars, Except Per Share Amounts, and Thousands of Shares)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
COMMON STOCK AND EQUIVALENTS:
- -----------------------------
Net earnings (loss) applicable to common stock and common
stock equivalents................................................. $ 104.5 $ (127.3) $ 8.2
======== ======== ========
Average number of common shares outstanding........................ 103,762 103,385 103,198
Class A common shares.............................................. 435 442 477
Common share equivalent:
$1.19 Cumulative Convertible Preferred, Series A*................. 241 - 259
Dilutive effect of outstanding stock options after application of
treasury stock method*............................................ 306 - 717
-------- -------- --------
Average common and common equivalent shares........................ 104,744 103,827 104,651
======== ======== ========
Net earnings (loss) per average common and common equivalent
shares outstanding:
Earnings (loss) before extraordinary item......................... $ 1.02 $ (1.23) $ .08
Extraordinary item................................................ (.02) - -
-------- -------- --------
Net earnings (loss)............................................... $ 1.00 $ (1.23) $ .08
======== ======== ========
ASSUMING FULL DILUTION:
- -----------------------
Net earnings (loss) applicable to common stock and common
stock equivalents................................................. $ 104.5 $ (127.3) $ 8.2
Dividends applicable to dilutive preferred stock:
Series B.......................................................... .2 - -
Series C.......................................................... .2 - -
-------- -------- --------
Adjusted net earnings (loss) assuming full dilution................ $ 104.9 $ (127.3) $ 8.2
======== ======== ========
Average number of common shares outstanding........................ 103,762 103,385 103,198
Class A common shares.............................................. 435 442 477
Common share equivalents:
Series A Preferred Stock*......................................... 241 - 259
Equivalent common shares from:
Series B and C Preferred Stock*................................... 590 - -
Dilutive effect of outstanding stock options after application of
treasury stock method*............................................ 326 - 734
-------- -------- --------
Fully diluted shares............................................... 105,354 103,827 104,668
======== ======== ========
Fully diluted earnings (loss) per share**:
Earnings (loss) before extraordinary item......................... $ 1.02 $ (1.23) $ .08
Extraordinary item................................................ (.02) - -
-------- -------- --------
Net earnings (loss)............................................... $ 1.00 $ (1.23) $ .08
======== ======== ========
</TABLE>
- -----------------
* Convertible securities and options are not considered in the calculations if
the effect of the conversion is anti-dilutive.
** Reporting not required by generally accepted accounting principles
because of small variance from earnings on average common and common
equivalent shares.
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COASTAL CORPORATION
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization
----------------
<S> <C>
ABCO Aviation, Inc................................. Delaware
ABCO Leasing, Inc.................................. Delaware
Coastal Capital Corporation........................ Delaware
Subsidiaries:
Coastal Finance Corporation...................... Delaware
Coastal Financial B.V............................ The Netherlands
Subsidiary:
Coastal Financial Antilles N.V................. Netherlands Antilles
Coastal Netherlands Financial B.V................ The Netherlands
Coastal Offshore Insurance Ltd................... Bermuda
Coastal Gas Services Company....................... Delaware
Subsidiaries:
ANR Gas Supply Company........................... Delaware
Coastal Gas Gathering and Processing Company..... Delaware
Coastal Gas Marketing Company.................... Delaware
Coastal Southern Pipeline Company................ Delaware
Coastal Holding Corporation........................ Delaware
Subsidiaries:
CIC Industries, Inc.............................. Delaware
Subsidiaries:
Coastal Chem, Inc.............................. Delaware
Coastal Crude Pipeline Corporation............. Delaware
Coastal Pipeline Company....................... Delaware
Coastal Refining & Marketing, Inc.............. Delaware
Subsidiaries:
Coastal Refined Products Corporation...... Delaware
Coastal States Crude Gathering Company.... Texas
Subsidiary:
Coastal Crude Transportation
Corporation.......................... Delaware
Jayhawk Pipeline Corporation (50%)........ Delaware
Coastal Transport Corporation.................. Delaware
Coastal Catalyst Technology, Inc................. Delaware
Coastal Cat Process Marketing, Inc............... Delaware
Coastal Eagle Point Oil Company.................. Delaware
Coastal Energy Corporation....................... Delaware
Coastal Mobile Refining Company.................. Delaware
Coastal West Ventures, Inc....................... Delaware
Coastal Limited Ventures, Inc...................... Texas
Coastal Mart, Inc.................................. Delaware
Coastal Midland, Inc............................... Delaware
Coastal Multi-Fuels, Inc........................... Delaware
Coastal Natural Gas Company........................ Delaware
Subsidiaries:
American Natural Resources Company............... Delaware
Subsidiaries:
ANR Coal Company............................... Delaware
Subsidiaries:
ANR Western Coal Development Company...... Delaware
Birmingham Coal Company................... West Virginia
Brooks Run Coal Company................... Delaware
Cat Run Coal Company...................... Delaware
Coastal Coal Sales, Inc................... Delaware
Enterprise Coal Company................... Kentucky
Greenbrier Coal Company................... Delaware
</TABLE>
1
<PAGE>
SUBSIDIARIES OF THE COASTAL CORPORATION
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization
----------------
<S> <C>
Kingwood Coal Company..................... Delaware
Virginia City Coal Company................ Delaware
Virginia Iron, Coal and Coke Company...... Delaware
ANR Credit Corporation......................... Delaware
ANR Development Corporation.................... Delaware
ANR Erie Pipeline Company...................... Delaware
ANR Finance B.V................................ The Netherlands
Subsidiary:
ANR Finance N.V........................... Netherlands Antilles
ANRFS Holdings, Inc............................ Delaware
Subsidiaries:
ANR Freight System, Inc................... Delaware
Transport USA, Inc........................ Pennsylvania
ANR Gasification Properties Company............ Delaware
ANR Intrastate Gas Company, Inc................ Delaware
ANR One Woodward Corp.......................... Delaware
ANR Pipeline Company........................... Delaware
Subsidiaries:
ANR Atlantic Pipeline Company............. Delaware
ANR Eastern Pipeline Company.............. Delaware
ANR Energy Conversion Company............. Michigan
ANR Iroquois, Inc......................... Delaware
ANR Mayflower Company..................... Delaware
ANR Southern Pipeline Company............. Delaware
American Natural Offshore Company......... Delaware
Subsidiaries:
Texas Offshore Pipeline System, Inc... Delaware
Unitex Offshore Transmission Company.. Delaware
ANR Production Company......................... Delaware
Subsidiary:
Coastal Shuttle Corporation............... Delaware
ANR Ren-Cen, Inc............................... Connecticut
ANR Storage Company............................ Michigan
Subsidiaries:
ANR Blue Lake Company..................... Delaware
ANR Cold Springs Company.................. Delaware
ANR Eaton Company......................... Michigan
ANR Jackson Company....................... Delaware
ANR Northeastern Gas Storage Company...... Delaware
ANR Western Storage Company............... Delaware
ANR Venture Eagle Point Company................ Delaware
ANR Venture Fulton Company..................... Delaware
ANR Venture Management Company................. Delaware
ANR Venture Springfield Company................ Delaware
Coastal Great Lakes, Inc....................... Delaware
Empire State Pipeline Company, Inc............. New York
CIC Stock Corporation............................ Delaware
Subsidiaries:
CIG Gas Storage Company........................ Delaware
CIG Western Pipeline Company................... Delaware
Coastal Western Pipeline Company............... Delaware
</TABLE>
2
<PAGE>
SUBSIDIARIES OF THE COASTAL CORPORATION
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization
----------------
<S> <C>
Colorado Solar-Tech, Inc....................... Delaware
Interstate Resource Management Company......... Delaware
Subsidiary:
Keyes Helium Company LLC (75%)............ Colorado
Young Gas Storage Company...................... Delaware
CIG-Canyon Compression Company................... Delaware
CIG Gas Supply Company........................... Delaware
CIG Overthrust, Inc.............................. Delaware
Colorado Interstate Gas Company.................. Delaware
Subsidiaries:
CIG Exploration, Inc........................... Delaware
Colorado Water Supply Company.................. Delaware
Subsidiary:
Colorado Interstate Production Company.... Delaware
Great Lakes Gas Transmission Company (50%)....... Delaware
Wyoming Gas Supply, Inc.......................... Delaware
Coastal Oil Chelsea, Inc........................... Texas
Coastal Oil & Gas Corporation...................... Delaware
Subsidiaries:
COGC Resale Company.............................. Delaware
CoastalDril, Inc................................. Delaware
Coastal Javelina, Inc............................ Delaware
Coastal Pan American Corporation................... Delaware
Subsidiaries:
Coastal Cape Horn Ltd............................ Cayman Islands
Subsidiary:
Coastal Austral Ltd. (50%)..................... Cayman Islands
Coastal Oil & Gas Argentina, S.A................. Argentina
Coastal Power Production Company................... Delaware
Subsidiary:
CP (TAMCO) Company............................... Delaware
Coastal Power Revere Company....................... Delaware
Coastal States Energy Company...................... Texas
Subsidiaries:
Coastal Development Company...................... Delaware
Cravat Coal Export Company, Inc.................. Virgin Islands
Sage Point Coal Company.......................... Delaware
Subsidiary:
Soldier Creek Coal Company..................... Delaware
Skyline Coal Company............................. Delaware
Southern Utah Fuel Company....................... Delaware
Unique Mining Systems, Inc....................... Delaware
Utah Fuel Company................................ Delaware
Coastal States Gas Transmission Company............ Delaware
Coastal States Management Corporation.............. Colorado
Subsidiaries:
ANR Media Company................................ Michigan
Coastal Travel Mart, Inc......................... Delaware
Coastal States Trading, Inc........................ Delaware
Coastal Technology, Inc............................ Delaware
Coastal Unilube, Inc............................... Tennessee
</TABLE>
3
<PAGE>
SUBSIDIARIES OF THE COASTAL CORPORATION
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization
----------------
<S> <C>
Coastal Unilube of Iowa L.C....................... Iowa
Cosbel Petroleum Corporation...................... Delaware
Subsidiaries:
Coastal Canada Energy Ltd....................... Ontario, Canada
Coastal Fuels Marketing, Inc.................... Florida
Subsidiaries:
Coastal Fuels of Puerto Rico, Inc............. Delaware
Coastal Offshore Fuels, Inc................... Liberia
Coastal Terminals, Inc........................ Florida
Coastal Tug and Barge, Inc.................... Florida
Coastal Oil New England, Inc.................... Massachusetts
Coastal Oil New York, Inc....................... Delaware
Coscol Petroleum Corporation...................... Delaware
Subsidiaries:
Coastal Securities Company Limited.............. Bermuda
Subsidiaries:
Andros Ltd.................................... Cayman Islands
Coastal Aruba Holding Company N.V............. Aruba
Subsidiaries:
Coastal Aruba Maintenance/Operations Company
N.V..................................... Aruba
Coastal Aruba Refining Company N.V....... Aruba
Subsidiaries:
Aruba Refinery Rehabilitation Company
N.V................................ Aruba
Subsidiary:
Local Aruba Refinery Rehabilitation
Company N.V.................... Aruba
Coastal Energy of Panama, Inc........ Panama
Coastal Petroleum N.V................ Aruba
Subsidiary:
Coastal Petroleum Argentina, S.A. Argentina
Subic Bay Petroleum Products Ltd. (50%).. Cayman Islands
Coastal Belcher Petroleum Pte. Ltd............ Singapore
Coastal (Bermuda) Petroleum Limited........... Bermuda
Subsidiary:
Same as Coastal Stock Company Limited
Coastal Management Services (Singapore) Pte.
Ltd......................................... Singapore
Coastal Petroleum (Far East) Pte Ltd.......... Singapore
Coastal (Rotterdam) B.V....................... The Netherlands
Subsidiary:
Coastal States Petroleum (Espana) S.A.... Spain
Coastal (Subic Bay) Petroleum, Inc............ Texas
Subsidiary:
Coastal Subic Bay Terminal, Inc.......... Philippines
Holborn Oil Trading Limited................... Bermuda
Coastal Stock Company Limited................... Bermuda
Subsidiary:
Coastal Europe Limited........................ England
Subsidiaries:
Coastal States Petroleum (U.K.) Limited.. England
Coastal States Tankers (U.K.) Limited.... England
Colbourne Insurance Company Limited...... England
Coastal Tankships U.S.A., Inc................... Delaware
</TABLE>
4
<PAGE>
SUBSIDIARIES OF THE COASTAL CORPORATION
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation or
Organization
----------------
<S> <C>
Coscol Marine Corporation........................ Texas
Golden Carriers Corporation...................... Liberia
Jade Carriers Corporation........................ Liberia
Texas Tank Ship Agency, Inc...................... Delaware
</TABLE>
The above subsidiaries, with the exception of Jayhawk Pipeline Corporation,
Coastal Austral Ltd. and Great Lakes Gas Transmission Company are included in
the Consolidated Financial Statements of The Coastal Corporation. The names of
certain subsidiaries have been omitted from the above listing because such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary. The voting stock of each corporation is
owned 100% by its immediate parent, unless otherwise indicated above, except
that Coastal Europe Limited is 49% owned by Coastal (Bermuda) Petroleum Limited;
Colbourne Insurance Company Limited is 23% owned by Coastal Capital Corporation
and Coastal Unilube of Iowa, L.C. is 50% owned by Coastal Natural Gas Company.
5
<PAGE>
Exhibit 23.1
CONSENT OF DELOITTE & TOUCHE
We consent to the incorporation by reference in Registration Statements No.
33-21095, 33-40263, 33-53952, 33-5214, 2-97766, 33-5218 and 33-42696 of The
Coastal Corporation on Forms S-8 and Registration Statement No. 33-48435 of The
Coastal Corporation on Form S-3 of our report dated February 3, 1994, appearing
in this Annual Report on Form 10-K of The Coastal Corporation for the year ended
December 31, 1993.
DELOITTE & TOUCHE
Houston, Texas
March 25, 1994
