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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-7792
POGO PRODUCING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 74-1659398
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5 GREENWAY PLAZA, P.O. BOX 2504
HOUSTON, TEXAS 77252-2504
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
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<S> <C>
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
8% Convertible Subordinated New York Stock Exchange
Debentures due December 31, 2005
5 1/2% Convertible Subordinated New York Stock Exchange
Notes due March 15, 2004
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of
the registrant (treating all executive officers and directors of the registrant,
for this purpose, as if they may be affiliates of the registrant) was
approximately $635,718,000 as of March 3, 1995 (based on $19.375 per share, the
last sale price of the Common Stock as reported on the New York Stock Exchange
Composite Tape on such date).
32,811,261 shares of the registrant's Common Stock were outstanding as of
March 3, 1995.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement respecting the annual
meeting of shareholders to be held on April 25, 1995 (to be filed not later than
120 days after December 31, 1994) are incorporated by reference in Part III of
this Form 10-K.
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PART I
ITEM 1. BUSINESS.
Pogo Producing Company (the "Company"), incorporated in 1970, is engaged in
oil and gas exploration, development and production activities on its properties
located offshore in the Gulf of Mexico and onshore in the United States. The
Company is also engaged in exploration of its license concession in the Gulf of
Thailand, and has proposed to its joint venture partners a development program
in connection with its oil and gas discoveries on that concession. The Company
has interests in 73 lease blocks offshore Louisiana and Texas, approximately
125,000 gross acres onshore in the United States and approximately 2,635,000
gross acres offshore in the Kingdom of Thailand.
DOMESTIC OFFSHORE OPERATIONS
Historically, the Company's interests have been concentrated in the Gulf of
Mexico, where approximately 81% of the Company's domestic proved reserves and
63% of its total proved reserves are now located. During 1994, approximately 82%
of the Company's natural gas equivalent production was from its domestic
offshore properties, contributing approximately 82% of consolidated oil and gas
revenues. Five offshore producing areas, Eugene Island, Main Pass, South Marsh
Island, South Pass and East Cameron, account for approximately 50% of the
Company's net proved natural gas reserves and approximately 56% of the Company's
proved crude oil, condensate and natural gas liquids reserves. Eugene Island is
the Company's largest producing area with 1994 average net revenue production
(net to the Company's interest and net of royalty burdens) of approximately 81
million cubic feet ("MMcf") per day of natural gas and 5,300 barrels ("Bbls")
per day of oil, condensate and natural gas liquids. The table in Item 2 of this
Annual Report on Form 10-K for the year ended December 31, 1994 (this "Annual
Report") summarizes the Company's offshore leasehold interests, drilling
activity, and platforms set or announced as of December 31, 1994.
Lease Acquisitions
The Company has participated with other companies in bidding on and
acquiring interests in federal leases offshore in the Gulf of Mexico since
December 1970. As a result of such sales and subsequent activities, the Company
owns interests in 67 federal leases offshore Louisiana and Texas. Federal leases
generally have primary terms of five years, subject to extension by development
and production operations. The Company also owns interests in six leases in
state waters offshore Louisiana.
As part of its strategy, the Company intends to continue an active lease
evaluation program in the Gulf of Mexico in order to identify exploration and
exploitation opportunities. During 1994, the Company was successful in acquiring
interests in three lease blocks, Vermilion 335, High Island A-451 and Galveston
Block A-215, through federal Outer Continental Shelf oil and gas lease sales.
The Department of the Interior has announced its intention to hold two lease
sales during 1995 covering federal acreage in the Central and Western portions
of the Gulf of Mexico; and it is anticipated that various states will also hold
sales covering offshore state acreage from time to time. As in the case of prior
sales, the extent to which the Company participates in future bidding will
depend on the availability of funds and its estimates of hydrocarbon deposits,
operating expenses and future revenues which reasonably may be expected from
available lease blocks. Such estimates typically take into account, among other
things, estimates of future hydrocarbon prices, federal regulations, and
taxation policies applicable to the petroleum industry.
It is also the Company's objective to acquire certain producing properties
where additional low-risk drilling or improved production methods by the Company
can provide attractive rates of return. During 1994, the Company purchased
additional working interests in portions of eight federal lease blocks in the
South Pass, Mississippi Canyon, Main Pass and High Island areas of the Gulf of
Mexico. In addition, the Company participated in the drilling of two wells in
the South Marsh Island area which earned the Company working interests in two
lease blocks, South Marsh Island Blocks 141 and 161.
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Exploration and Development
The scope of exploration and development programs relating to the Company's
offshore interests is affected by prices for oil and gas, and by federal, state
and local legislation, regulations and ordinances applicable to the petroleum
industry. The Company's domestic offshore capital and exploration expenditures
for 1994 were approximately $48,700,000 (excluding approximately $32,600,000 of
net property acquisitions), or 20% higher than the Company's domestic offshore
capital and exploration expenditures of approximately $40,600,000 for 1993 and
453% higher than the Company's domestic offshore capital and exploration
expenditures of approximately $8,800,000 (excluding approximately $7,950,000 of
net property acquisitions) for 1992. Development and production related projects
represented 93% of the Company's 1994 domestic offshore capital and exploration
expenditures. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Leases acquired by the Company and other participants in its bidding groups
are customarily committed, on a block-by-block basis, to separate operating
agreements under which the appointed operator supervises exploration and
development operations for the account and at the expense of the group. These
agreements usually contain terms and conditions which have become relatively
standardized in the industry. Major decisions regarding development and
operations typically require the consent of at least a majority (in working
interest) of the participants. Because the Company generally has a meaningful
working interest position, the Company believes it can influence decisions
regarding development and operations on most of the leases in which it has a
working interest even though it may not be the operator of a particular lease.
The Company is currently the operator on all or a portion of 21 of the 73
offshore leases in which it has an interest.
Platforms are installed on an offshore lease block when, in the judgment of
the lease interest owners, the necessary capital expenditures are justified. A
decision to install a platform generally is made after the drilling of one or
more exploratory wells with contracted drilling equipment. Platforms are used to
accommodate both development drilling and additional exploratory drilling. In
recent years, the gross cost of production platforms to the joint ventures in
which the Company has varying net interests has typically averaged approximately
$9,100,000 per platform. Platform costs vary and more expensive platforms could
be required in the future depending on, among other factors, the number of
slots, water depth, currents, and sea floor conditions. During 1994, the Company
completed the installation of an additional platform on Eugene Island Block 295,
installed three platforms in a new field on Ship Shoal Blocks 240/256, and
installed a platform on Main Pass Block 123. See "Properties -- Principal
Properties."
In 1989, the Company entered into a limited partnership agreement as
general partner of Pogo Gulf Coast, Ltd., a Texas limited partnership ("Pogo
Gulf Coast"), in which the Company agreed to be responsible for investing as
much as $60,000,000 on behalf of Pogo Gulf Coast for acquisition and exploration
in state and federal waters in the Gulf of Mexico. As of December 31, 1994, Pogo
Gulf Coast had interests in 16 federal offshore leases, and had invested a total
of approximately $55,500,000 for exploration and development of the properties
owned since the partnership began. The Company owns 40% of any interest in
properties acquired by the limited partnership. Unless otherwise noted, the
statistical data reported in this Annual Report reflect only the Company's share
of Pogo Gulf Coast's holdings.
DOMESTIC ONSHORE OPERATIONS
The Company has onshore division staffs in Houston and Midland, Texas. Its
onshore activities are concentrated in known oil and gas provinces, principally
the Permian Basin of southeastern New Mexico and West Texas and the onshore Gulf
Coast area. The Company's primary drilling objective in southeastern New Mexico
is the Brushy Canyon (Delaware) formation which produces oil from depths of
6,000 to 9,000 feet. Since the Company began exploring in the Brushy Canyon
(Delaware) formation in October 1989, it has participated in the drilling of 209
wells through December 31, 1994, including 58 wells in 1994. During the fourth
quarter of 1994, the Company's net revenue interest portion of daily liquid
hydrocarbon production in New Mexico averaged approximately 3,950 Bbls which
represented approximately 30% of the Company's total average daily production of
oil, condensate and liquid plant products during the fourth quarter of 1994.
2
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The Company generally conducts its onshore activities through joint
ventures and other interest-sharing arrangements with major and independent oil
companies. The Company operates many of its own onshore properties using
independent contractors.
The Company's domestic onshore capital and exploration expenditures were
approximately $32,000,000 for 1994, or 7% higher than the Company's domestic
onshore capital and exploration expenditures of approximately $29,800,000 for
1993 and 81% higher than the Company's domestic onshore capital and exploration
expenditures of approximately $17,650,000 (excluding approximately $950,000 of
net property acquisitions) for 1992. Development and production related projects
represented 74% of the Company's 1994 domestic onshore capital and exploration
expenditures. As of December 31, 1994, the Company held leases on 79,768 net
acres onshore in the United States. Onshore reserves as of December 31, 1994,
accounted for approximately 19% of the Company's domestic proved reserves and
approximately 14% of its total proved reserves. During 1994, approximately 18%
of the Company's natural gas equivalent production was from its domestic onshore
properties, contributing approximately 18% of consolidated oil and gas revenues.
INTERNATIONAL OPERATIONS
The Company has conducted international exploration activities since the
late 1970's in numerous oil and gas areas throughout the world. The Company
pursues a strategy of evaluating potentially high return prospects in areas of
the world with a stable political and financial climate such as certain European
and ASEAN ("Association of Southeast Asian Nations") countries. The Company's
international capital and exploration expenditures were approximately $6,350,000
for 1994, or 6% higher than the Company's international capital and exploration
expenditures of approximately $6,000,000 for 1993 and 144% higher than the
Company's international capital and exploration expenditures of approximately
$2,600,000 for 1992. Substantially all of the Company's international capital
and exploration expenditures for 1994 were related to the Company's license in
the Kingdom of Thailand. However, the Company continues to evaluate other
international opportunities that are consistent with the Company's international
exploration strategy.
In August 1991, the Company, through its wholly owned subsidiary Thaipo
Limited, together with its joint venture partners, was awarded a license from
the Kingdom of Thailand to explore for and produce oil and gas on Block B8/32, a
2.6 million acre tract in the Gulf of Thailand. Following an initial evaluation
of the Thailand concession area, the Company and its joint venture partners have
drilled eight wells on a seismic structure on a portion of the concession named
Tantawan. In October 1992, the Tantawan No. 1 well was drilled. During 1993, the
Company and its joint venture partners shot, processed and evaluated
approximately 9,000 square kilometers of new 3-D seismic data over and around
the Tantawan No. 1 well. In late 1993, the Company drilled the Tantawan No. 2
and the Tantawan No. 3 wells on the Tantawan structure. In early 1994, an
additional two wells, the Tantawan No. 4 and the Tantawan No. 5 delineation
wells, were successfully drilled on the Tantawan area seismic structure. This
success was repeated in late 1994 with the drilling of three more delineation
wells on the Tantawan area seismic structure.
In March 1995, the Company reached an agreement with its partners in the
concession under which the Company currently anticipates that its working
interest in the Tantawan portion of the concession will increase from
approximately 31.7% to approximately 46.3%, upon approval of appropriate
governmental authorities in Thailand. The Company will also assume the duties of
operator on the Tantawan portion of the concession, which covers approximately
76,000 acres of the Block B8/32 license concession. Development activities on
the Tantawan portion of the concession are currently expected to commence in the
first half of 1995. Contingent upon availability of transportation and other
factors, the development program could lead to commencement of initial
production from reservoirs located on the Tantawan structure within 18 to 24
months. See "-- Miscellaneous; Sales;" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
At December 31, 1994, the Company's Thailand concession accounted for
approximately 23% of the Company's total estimated net proved reserves of
natural gas and approximately 23% of its total estimated net proved reserves of
oil, condensate and natural gas liquids. If the anticipated increase in the
Company's working interest in the Tantawan portion of the concession had been
effective at that date, those percentages would have been approximately 30%. All
such proved reserves in Thailand are located on the Tantawan portion of the
concession and are currently classified as proved undeveloped.
3
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In addition to its continuing efforts on the Tantawan structure, the
Company and its joint venture partners have shot, processed and are currently
evaluating 10,500 square kilometers of new 3-D seismic data on a different
portion of Block B8/32. The Company and its partners currently plan to drill at
least four more wells on the non-Tantawan portion of the Thailand concession
during 1995. The Company's working interest in the non-Tantawan portion of the
concession, which is operated by one of its partners, remains at approximately
31.7%.
Any production resulting from the concession will be subject to a royalty
ranging from 5% to 15% of oil and gas sales, plus certain fixed dollar amounts
payable at specified cumulative production levels. Revenue from production in
Thailand will also be subject to income taxes and other governmental charges. As
set forth in the August 1991 concession, the exploratory term of the concession
is for a period of up to six years; provided, however, that after the expiration
of four years, a portion of the acreage in Block B8/32 must be relinquished by
the Company and its joint venture partners and removed from the concession
license. The Company must identify and release this acreage no later than August
1, 1995. During the concession's exploratory period, the Company and its joint
venture partners have certain work commitments involving the drilling of
exploratory wells or the expenditure of certain sums of money on exploration
activities. The Company and its joint venture partners have satisfied all of
these obligations. Following the commencement of production, the initial
production period of the concession is 20 years, subject to extension. See also
"-- Miscellaneous; Sales."
MISCELLANEOUS
Other Assets
The Company and a subsidiary, Pogo Offshore Pipeline Co., own minority
interests in three pipelines through which offshore oil production is
transported ashore. In addition, the Company owns an approximately 21% interest
in a cryogenic gas processing plant near Erath, Louisiana, which entitles it to
process up to 189 MMcf of gas per day. Currently, the plant is not operating at
full capacity.
Sales
The marketing of offshore oil and gas production is subject to the
availability of pipelines and other transportation, processing and refining
facilities as well as the existence of adequate markets. As a result, even if
hydrocarbons are discovered in commercial quantities, a substantial period of
time may elapse before commercial production commences. If pipeline facilities
in an area are insufficient, the Company may have to await the construction or
expansion of pipeline capacity before production from that area can be marketed.
The Company's domestic offshore properties are generally located in areas where
a pipeline infrastructure is well developed and there is adequate availability
in such pipelines to handle the Company's current and projected future
production. The Company's concession in Thailand is traversed by a major natural
gas pipeline that comes within approximately 25 miles of the Tantawan structure.
This pipeline is currently running at or near capacity. However, construction of
a second, parallel natural gas pipeline owned by an entity controlled by the
government of the Kingdom of Thailand has recently commenced, with completion
expected to occur during 1996. The Company is currently negotiating
transportation and sale arrangements with the Petroleum Authority of Thailand
for oil and gas expected to be produced from the Tantawan structure.
The marketing of onshore oil and gas production is also subject to the
availability of pipelines, crude oil hauling and other transportation,
processing and refining facilities as well as the existence of adequate markets.
Generally, the Company's onshore domestic oil and gas production is located in
areas where commercial production of economic discoveries can be rapidly
effectuated.
Most of the Company's natural gas sales are currently made in the "spot
market" for no more than one month at a time at then currently available prices.
Prices on the spot market fluctuate with demand. Crude oil and condensate
production is also generally sold one month at a time at the currently available
prices. Other than any futures contracts referred to in "-- Miscellaneous;
Competition and Market Conditions," the Company has no existing contracts that
require the delivery of fixed quantities of oil or natural gas other than
4
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on a best efforts basis. See also "Financial Statements and Supplementary
Data -- Note 4 to Notes to Consolidated Financial Statements and -- Unaudited
Supplementary Financial Data."
Competition and Market Conditions
The Company experiences competition from other oil and gas companies in all
phases of its operations, as well as competition from other energy related
industries. The Company's profitability and cash flow are highly dependent upon
the prices of oil and natural gas, which historically have been seasonal,
cyclical and volatile. In general, prices of oil and gas are dependent upon
numerous factors beyond the control of the Company, including various weather,
economic, political and regulatory conditions. In the past, when natural gas
prices in the United States were lower than they are currently, the Company at
times elected to curtail certain quantities of its production. For example, in
the fourth quarter of 1994, the Company curtailed a small portion of its daily
natural gas production. As of February 1, 1995, the Company was not curtailing
any of its natural gas production as a result of low natural gas prices. Should
natural gas prices fall in the future, the Company may again elect to curtail
certain quantities of its natural gas production. Any significant decline in oil
or gas prices could have a material adverse effect on the Company's operations
and financial condition and could, under certain circumstances, result in a
reduction in funds available under the Company's bank credit facility. Because
it is impossible to predict future oil and gas price movements with any
certainty, the Company from time to time enters into contracts on a portion of
its production to hedge against the volatility in oil and gas prices. Such
hedging transactions, historically, have not exceeded 50% of the Company's total
oil and gas production on an energy equivalent basis for any given period. While
intended to limit the negative effect of price declines, such transactions could
effectively limit the Company's participation in price increases for the covered
period, which increases could be significant. The Company has entered into a
crude oil swap agreement with another party in which it had swapped the floating
market price it receives from purchasers of its crude oil for a fixed price of
$17.08 per barrel on 1,000 Bbls per day of the Company's production for a period
ending April 30, 1995. In addition, as of January 1, 1995, the Company had
entered into futures contracts with various parties on a portion of its daily
natural gas production through September 30, 1995 (commencing with contracts
totaling approximately 37 MMcf per day in January and decreasing on a quarterly
basis to approximately 15 MMcf per day) at varying prices ranging from
approximately $1.92 to $1.83 per thousand cubic feet ("Mcf"). When the Company
does engage in such hedging activities, it may satisfy its obligations with its
own production or by the purchase (or sale) of third party production. The
Company may also cancel all delivery obligations by offsetting such obligations
with equivalent agreements, thereby effecting a purely cash transaction.
Operating and Uninsured Risks
The Company's operations are subject to risks inherent in the exploration
for and production of oil and natural gas, such as blowouts, cratering,
explosions, uncontrollable flows of oil, natural gas or well fluids, fires,
pollution and other environmental risks. Offshore oil and gas operations are
subject to the additional hazards of marine and helicopter operations, such as
capsizing, collision and adverse weather and sea conditions. These hazards could
result in substantial losses to the Company due to injury or loss of life,
severe damage to and destruction of property and equipment, pollution and other
environmental damage and suspension of operations. The Company carries insurance
which it believes is in accordance with customary industry practices, but is not
fully insured against all risks incident to its business.
Drilling activities are subject to numerous risks, including the risk that
no commercially productive hydrocarbon reserves will be encountered. The cost of
drilling, completing and operating wells and of installing production facilities
and pipelines is often uncertain. The Company's drilling operations may be
curtailed, delayed or canceled as a result of numerous factors, including
weather conditions, compliance with governmental requirements and shortages or
delays in the delivery of equipment. The availability of a ready market for the
Company's natural gas production depends on a number of factors, including the
demand for and supply of natural gas, the proximity of natural gas reserves to
pipelines, the capacity of such pipelines and government regulations.
5
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Risks of Foreign Operations
Ownership of property interests and production operations in Thailand and
other areas outside the United States are subject to the various risks inherent
in foreign operations. These risks include, among others, currency restrictions
and exchange rate fluctuations, loss of revenue, property and equipment as a
result of hazards such as expropriation, nationalization, war, insurrection and
other political risks, risks of increases in taxes and governmental royalties,
renegotiation of contracts with governmental entities, as well as changes in
laws and policies governing operations of foreign-based companies. The Company
seeks to manage these risks by concentrating its international exploration
efforts in areas where the Company believes that the existing government is
stable and favorably disposed towards United States exploration and production
companies. The Company believes that the Kingdom of Thailand currently presents
favorable conditions in which to conduct international operations.
EXPLORATION AND PRODUCTION DATA
In the following data "gross" refers to the total acres or wells in which
the Company has an interest and "net" refers to gross acres or wells multiplied
by the percentage working interest owned by the Company.
Acreage
The following table shows the Company's interest in developed and
undeveloped oil and gas acreage as of December 31, 1994:
<TABLE>
<CAPTION>
DEVELOPED
ACREAGE(A) UNDEVELOPED ACREAGE(B)
------------------- ----------------------
GROSS NET GROSS NET
------- ------- ---------- --------
<S> <C> <C> <C> <C>
ONSHORE
Arkansas................................. -- -- 118 20
Colorado................................. 80 32 7,883 7,883
Louisiana................................ 869 209 537 537
New Mexico............................... 16,898 7,835 53,832 37,205
Oklahoma................................. 3,200 333 -- --
Texas.................................... 11,197 4,459 30,783 21,220
Wyoming.................................. -- -- 120 35
------- ------- ---------- --------
Total Onshore.................... 32,244 12,868 93,273 66,900
======= ====== ======== =======
OFFSHORE
Louisiana (State)........................ 7,804 2,964 -- --
Louisiana (Federal)(c)................... 176,067 58,670 59,989 13,989
Texas (Federal).......................... 46,080 10,860 17,280 6,912
------- ------- ---------- --------
Total Offshore................... 229,951 72,494 77,269 20,901
------- ------- ---------- --------
TOTAL DOMESTIC............................. 262,195 85,362 170,542 87,801
------- ------- ---------- --------
INTERNATIONAL
Thailand (Offshore)...................... -- -- 2,635,116 834,541
------- ------- ---------- --------
TOTAL COMPANY.............................. 262,195 85,362 2,805,658 922,342
======= ====== ======== =======
</TABLE>
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(a) "Developed acreage" consists of lease acres spaced or assignable to
production on which wells have been drilled or completed to a point that
would permit production of commercial quantities of oil and natural gas.
(b) Approximately 16% of the Company's total offshore net undeveloped acreage is
under leases that have terms expiring in 1995, if not held by production,
and another approximately 29% of offshore net undeveloped acreage will
expire in 1996 if not also held by production. Approximately 19% of onshore
net undeveloped acreage is under leases that have terms expiring in 1995,
if not held by production, and another approximately 15% of onshore net
undeveloped acreage will expire in 1996 if not also held by production.
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(c) The Company also owns overriding royalty interests in one federal lease
offshore Louisiana totaling 5,000 gross and 1,250 net acres.
Productive Wells and Drilling Activity
The following table shows the Company's interest in productive oil and
natural gas wells as of December 31, 1994. Productive wells are producing wells
plus wells "capable of production" (e.g., natural gas wells waiting for pipeline
connections or necessary governmental certification to commence deliveries and
oil wells waiting to be connected to production facilities).
<TABLE>
<CAPTION>
NATURAL GAS
OIL WELLS(A) WELLS(A)
--------------- --------------
GROSS NET GROSS NET
----- ----- ----- ----
<S> <C> <C> <C> <C>
Offshore United States................................ 185 45.6 166 51.7
Onshore United States................................. 210 120.0 67 25.7
----- ----- ----- ----
Total....................................... 395 165.6 233 77.4
==== ===== ==== ====
</TABLE>
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(a) One or more completions in the same bore hole are counted as one well. The
data in the above table includes 30 gross (7.4 net) oil wells and 16 gross
(5.7 net) natural gas wells with multiple completions.
The following table shows the number of successful gross and net
exploratory and development wells in which the Company has participated and the
number of gross and net wells abandoned as dry holes during the periods
indicated. An onshore well is considered successful upon the installation of
permanent equipment for the production of hydrocarbons. Successful offshore
wells consist of exploratory or development wells that have been completed or
are "suspended" pending completion (which has been determined to be feasible and
economic) and exploratory test wells that were not intended to be completed and
that encountered commercially producible hydrocarbons. A well is considered a
dry hole upon reporting of permanent abandonment to the appropriate agency.
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- ------------------
SUCCESSFUL DRY SUCCESSFUL DRY SUCCESSFUL DRY
---------- ---- ---------- ---- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
GROSS WELLS:
Offshore United States
Exploratory.................. 2.0 -- 5.0 1.0 -- 2.0
Development.................. 25.0 2.0 15.0 -- 5.0 --
Onshore United States
Exploratory.................. 3.0 6.0 3.0 4.0 4.0 2.0
Development.................. 51.0 3.0 61.0 1.0 34.0 --
Offshore Kingdom of Thailand
Exploratory.................. 5.0 -- 2.0 2.0 1.0 --
----- ---- ----- ---- ----- ---
Total................ 86.0 11.0 86.0 8.0 44.0 4.0
======= ==== ======= ==== ======= ===
NET WELLS:
Offshore United States
Exploratory.................. 0.6 -- 1.7 0.1 -- 0.7
Development.................. 8.4 1.4 7.7 -- 1.5 --
Onshore United States
Exploratory.................. 2.8 3.6 2.0 3.2 2.8 0.9
Development.................. 29.9 0.9 33.1 0.4 23.2 --
Offshore Kingdom of Thailand
Exploratory.................. 1.6 -- 0.6 0.6 0.3 --
----- ---- ----- ---- ----- ---
Total................ 43.3 5.9 45.1 4.3 27.8 1.6
======= ==== ======= ==== ======= ===
</TABLE>
As of December 31, 1994, the Company was participating in the drilling of 4
gross (1.7 net) offshore domestic wells and 5 gross (1.8 net) onshore wells.
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Production and Sales
The following table summarizes the Company's average daily production, net
of all royalties, overriding royalties and other outstanding interests, for the
periods indicated. Natural gas production refers only to marketable production
of natural gas on an "as sold" basis.
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- --------
<S> <C> <C> <C>
Production Sales:
Natural Gas (Mcf per day)............................ 144,800 91,700 105,200
======= ====== =======
Crude Oil and Condensate (Bbls per day).............. 11,100 9,851 8,699
======= ====== =======
Natural Gas Liquids (Bbls per day):
Leasehold Ownership.................................. 2,075 1,538 1,037
Plant Ownership...................................... 147 140 144
-------- ------- --------
Total........................................ 2,222 1,678 1,181
======= ====== =======
</TABLE>
The following table shows the average sales prices received by the Company
for its production and the average production (lifting) costs per unit of
production during the periods indicated. See "-- Miscellaneous; Competition and
Market Conditions and Sales."
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Sales Prices:
Natural Gas (per Mcf).................................. $ 1.88 $ 1.98 $ 1.75
Crude Oil and Condensate (per Bbl)..................... $ 16.08 $ 17.81 $ 20.17
Natural Gas Liquids (per Bbl).......................... $ 11.33 $ 11.90 $ 13.50
Production (lifting) Costs(a)
Natural Gas, Crude Oil, Condensate and Natural Gas
Liquids (per equivalent Mcf of Natural Gas)......... $ 0.36 $ 0.45 $ 0.43
</TABLE>
- ---------------
(a) Production costs were converted to common units of measure on the basis of
relative energy content. Such production costs exclude all depletion and
amortization associated with property and equipment.
8
<PAGE> 10
Reserves
The following table sets forth information as to the Company's net proved
developed and proved undeveloped reserves as of December 31, 1994, 1993, and
1992, and the present value as of such dates (based on an annual discount rate
of 10%) of the estimated future net revenues from the production and sale of
those reserves, as estimated by Ryder Scott Company Petroleum Engineers,
Houston, Texas ("Ryder Scott") in accordance with criteria prescribed by the
Securities and Exchange Commission (the "Commission"). The summary report of
Ryder Scott on the reserve estimates, which includes definitions and
assumptions, is set forth as an exhibit to this Annual Report and definitions,
assumptions and descriptions of methodology following the tables are based upon
the Ryder Scott report.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Total Proved Reserves:
Oil, condensate, and natural gas liquids
(thousands of Bbls) --
Located in the United States.................. 26,188 22,843 19,979
Located in the Kingdom of Thailand............ 7,674 5,425 2,577
--------- --------- ---------
Total Company............................ 33,862 28,268 22,556
========= ========= =========
Natural Gas (MMcf)
Located in the United States.................. 186,151 199,392 196,400
Located in the Kingdom of Thailand............ 56,739 33,474 10,668
--------- --------- ---------
Total Company............................ 242,890 232,866 207,068
========= ========= =========
Present value of estimated future net revenues,
before income taxes (in thousands)
Located in the United States.................. $ 330,868 $ 386,674 $ 390,893
Located in the Kingdom of Thailand............ 52,112 17,166 $ 14,208
--------- --------- ---------
Total Company............................ $ 382,980 $ 403,840 $ 405,101
========= ========= =========
Proved Developed Reserves (all located in the
United States):
Oil, condensate, and natural gas liquids
(thousands of Bbls)........................... 24,670 20,976 18,798
Natural Gas (MMcf)............................... 178,518 183,139 175,523
Present value of estimated future net revenues,
before income taxes (in thousands)............ $ 321,514 $ 375,287 $ 378,300
</TABLE>
Natural gas liquids comprise approximately 13% of the Company's total
proved liquids reserves and approximately 17% of the Company's proved developed
liquids reserves. All hydrocarbon liquid reserves are expressed in standard 42
gallon Bbls. All gas volumes and gas sales are expressed in MMcf at the pressure
and temperature bases of the area where the gas reserves are located.
Proved reserves of crude oil, condensate, natural gas, and natural gas
liquids are estimated quantities that geological and engineering data
demonstrate with reasonable certainty to be recoverable in the future from known
reservoirs under existing conditions. Reservoirs are considered proved if
economic producibility is supported by actual production or formation tests. In
certain instances, proved reserves are assigned on the basis of a combination of
core analysis and electrical and other type logs which indicate the reservoirs
are analogous to reservoirs in the same field which are producing or have
demonstrated the ability to produce on a formation test. The area of a reservoir
considered proved includes (i) that portion delineated by drilling and defined
by fluid contacts, if any, and (ii) the adjoining portions not yet drilled that
can be reasonably judged as economically productive on the basis of available
geological and engineering data. In the absence of data on fluid contacts, the
lowest known structural occurrence of hydrocarbons controls the lower proved
limit of the reservoir. Proved reserves are estimates of hydrocarbons to be
recovered from a given date forward. They may
9
<PAGE> 11
be revised as hydrocarbons are produced and additional data becomes available.
Proved natural gas reserves are comprised of nonassociated, associated and
dissolved gas. An appropriate reduction in gas reserves has been made for the
expected removal of liquids, for lease and plant fuel and the exclusion of
non-hydrocarbon gases if they occur in significant quantities and are removed
prior to sale. Reserves that can be produced economically through the
application of established improved recovery techniques are included in the
proved classification when these qualifications are met: (i) successful testing
by a pilot project or the operation of an installed program in the reservoir
provides support for the engineering analysis on which the project or program
was based, and (ii) it is reasonably certain the project will proceed. Improved
recovery includes all methods for supplementing natural reservoir forces and
energy, or otherwise increasing ultimate recovery from a reservoir, including,
(a) pressure maintenance, (b) cycling, and (c) secondary recovery in its
original sense. Improved recovery also includes the enhanced recovery methods of
thermal, chemical flooding, and the use of miscible and immiscible displacement
fluids. Estimates of proved reserves do not include crude oil, condensate,
natural gas, or natural gas liquids being held in underground storage. Depending
on the status of development, these proved reserves are further subdivided into:
(i) "developed reserves" which are those proved reserves reasonably
expected to be recovered through existing wells with existing equipment and
operating methods, including (a) "developed producing reserves" which are
those proved developed reserves reasonably expected to be produced from
existing completion intervals now open for production in existing wells,
and (b) "developed non-producing reserves" which are those proved developed
reserves which exist behind casing of existing wells which are reasonably
expected to be produced through these wells in the predictable future where
the cost of making such hydrocarbons available for production should be
relatively small compared to the cost of new wells; and
(ii) "undeveloped reserves" which are those proved reserves reasonably
expected to be recovered from new wells on undrilled acreage, from existing
wells where a relatively large expenditure is required and from acreage for
which an application of fluid injection or other improved recovery
technique is contemplated where the technique has been proved effective by
actual tests in the area in the same reservoir. Reserves from undrilled
acreage are limited to those drilling units offsetting productive units
that are reasonably certain of production when drilled. Proved reserves for
other undrilled units are included only where it can be demonstrated with
reasonable certainty that there is continuity of production from the
existing productive formation.
The Company has interests in certain tracts which may have substantial
additional hydrocarbon quantities which cannot be classified as proved and are
not included herein. The Company has active exploratory and development drilling
programs which in all likelihood will result in the reclassification of
significant additional quantities to the proved category.
In computing future revenues from gas reserves attributable to the
Company's interests, prices in effect at December 31, 1994 were used, including
current market prices, contract prices and fixed and determinable price
escalations where applicable. In accordance with Commission guidelines, the
future gas prices that were used make no allowances for seasonal variations in
gas prices which are likely to cause future yearly average gas prices to be
somewhat lower than December gas prices. For gas sold under contract, the
contract gas price including fixed and determinable escalations, exclusive of
inflation adjustments, was used until the contract expires and then was adjusted
to the current market price for the area and held at this adjusted price to
depletion of the reserves. In computing future revenues from liquids
attributable to the Company's interest, prices in effect at December 31, 1994
were used and these prices were held constant to depletion of the properties.
With respect to the Company's Thailand properties, production was assumed to
commence in 1997, at sales prices that were estimated by the Company based in
part on reported sales prices for production from other producers in the area.
The estimates of future net revenue from the Company's domestic and
Thailand properties are based on existing law where the properties are located
and are calculated in accordance with Commission guidelines. Operating costs for
the leases and wells include only those costs directly applicable to the leases
or wells. When applicable, the operating costs include a portion of general and
administrative costs allocated directly to
10
<PAGE> 12
the leases and wells under terms of operating agreements. Development costs are
based on authorization for expenditure for the proposed work or actual costs for
similar projects. The current operating and development costs were held constant
throughout the life of the properties. For properties located onshore, the
estimates of future net revenues and the present value thereof do not consider
the salvage value of the lease equipment or the abandonment cost of the lease
since both are relatively insignificant and tend to offset each other. The
estimated net cost of abandonment after salvage was considered for offshore
properties where such costs net of salvage are significant.
No deduction was made for indirect costs such as general and administrative
and overhead expenses, loan repayments, interest expenses, and exploration and
development prepayments. The accumulated gas production imbalances have been
taken into account.
Production data used to arrive at the estimates set forth above includes
estimated production for the last few months of 1994.
The future production rates from reservoirs now on production may be more
or less than estimated because of, among other reasons, mechanical breakdowns
and changes in market demand or allowables set by regulatory bodies. Properties
which are not currently producing may start producing earlier or later than
anticipated in the estimates of future production rates.
The future prices received by the Company for the sales of its production
may be higher or lower than the prices used in calculating the estimates of
future net revenues and the present value thereof as set forth herein, and the
operating costs and other costs relating to such production may also increase or
decrease from existing levels; however, such possible changes in prices and
costs were, in accordance with rules adopted by the Commission, omitted from
consideration in arriving at such estimates.
There are numerous uncertainties in estimating the quantity of proved
reserves and in projecting the future rates of production and timing of
development expenditures. Oil and gas reserve engineering must be recognized as
a subjective process of estimating underground accumulations of oil and gas that
cannot be measured in an exact way, and estimates of other engineers might
differ materially from those of Ryder Scott, the Company's reserve engineers.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate may
justify revision of such estimate. Accordingly, reserve estimates are often
different from the quantities of oil and gas that are ultimately recovered.
The Company is periodically required to file estimates of its oil and gas
reserve data with various governmental regulatory authorities and agencies,
including the Federal Energy Regulatory Commission ("FERC") and the Federal
Trade Commission. In addition, estimates are from time to time furnished to
governmental agencies in connection with specific matters pending before such
agencies. The basis for reporting reserves to these agencies, in some cases, is
not comparable to that furnished above because of the nature of the various
reports required. The major differences include differences in the time as of
which such estimates are made, differences in the definition of reserves,
requirements to report in some instances on a gross, net or total operator basis
and requirements to report in terms of smaller geographical units. No estimates
by the Company of its total proved net oil and gas reserves, however, were filed
with or included in reports to any federal authority or agency other than the
Commission during 1994.
GOVERNMENT REGULATION
The Company's operations are affected from time to time in varying degrees
by political developments and federal and state laws and regulations. Rates of
production of oil and gas have for many years been subject to federal and state
conservation laws and regulations, and the petroleum industry has been subject
to federal and state tax laws dealing specifically with it.
Federal Income Tax
The Company's operations are significantly affected by certain provisions
of the federal income tax laws applicable to the petroleum industry. The
principal provisions affecting the Company are those that permit the
11
<PAGE> 13
Company, subject to certain limitations, to deduct as incurred, rather than to
capitalize and amortize, its domestic "intangible drilling and development
costs" and to claim depletion on a portion of its domestic oil and gas
properties based on 15% of its oil and gas gross income from such properties (up
to an aggregate of 1,000 Bbls per day of domestic crude oil and/or equivalent
units of domestic natural gas) even though the Company has little or no basis in
such properties. Under certain circumstances, however, a portion of such
intangible drilling and development costs and the percentage depletion allowed
in excess of basis will be tax preference items that will be taken into account
in computing the Company's alternative minimum tax. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Environmental Matters
Offshore oil and gas operations are subject to extensive federal regulation
and, with respect to federal leases, to interruption or termination by
governmental authorities on account of environmental and other considerations
including the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") also known as the "Superfund Law." Regulations of the Department
of the Interior currently impose absolute liability upon the lessee under a
federal lease for the costs of clean-up of pollution resulting from a lessee's
operations, and such lessee may also be subject to possible legal liability for
pollution damages. The Company maintains insurance against costs of clean-up
operations, but is not fully insured against all such risks. A serious incident
of pollution may, as it has in the past, also result in the Department of the
Interior requiring lessees under federal leases to suspend or cease operation in
the affected area.
The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder impose
a variety of regulations on "responsible parties" (which include owners and
operators of offshore facilities) related to the prevention of oil spills and
liability for damages resulting from such spills in United States waters. In
addition it imposes ongoing requirements on responsible parties, including proof
of financial responsibility to cover at least some costs in a potential spill.
On August 25, 1993, the Mineral Management Service (the "MMS") published an
advance notice of its intention to adopt a rule under OPA that would require
owners and operators of offshore oil and gas facilities to establish
$150,000,000 in financial responsibility. Under the proposed rule, financial
responsibility could be established through insurance, guaranty, indemnity,
surety bond, letter of credit, qualification as a self-insurer or a combination
thereof. There is substantial uncertainty as to whether insurance companies or
underwriters will be willing to provide coverage under OPA because the statute
provides for direct lawsuits against insurers who provide financial
responsibility coverage, and most insurers have strongly protested this
requirement. The financial tests or other criteria that will be used to judge
self-insurance are also uncertain. Recently, parties in congress and industry
have been raising substantial objections to the rules as proposed by the MMS.
Various proposals have been made to resolve the objections of industry while
satisfying environmental concerns. The Company cannot predict the final form of
the financial responsibility rule that will be adopted by the MMS, but such rule
has the potential to result in the imposition of substantial additional annual
costs on the Company or otherwise materially adversely affect the Company. The
impact of the rule, however, should not be any more adverse to the Company than
it will be to other similarly situated owners or operators in the Gulf of
Mexico.
The operators of the Company's properties have numerous applications
pending before the Environmental Protection Agency (the "EPA") for National
Pollution Discharge Elimination System water discharge permits with respect to
offshore drilling and production operations. The issue generally involved is
whether effluent discharges from each facility or installation comply with the
applicable federal regulations. See "Legal Proceedings" for a discussion of
other environmental matters.
The Company's onshore operations are subject to numerous United States
federal, state, and local laws and regulations controlling the discharge of
materials into the environment or otherwise relating to the protection of the
environment including CERCLA. Such regulations, among other things, impose
absolute liability on the lessee under a lease for the cost of clean-up of
pollution resulting from a lessee's operations, subject the lessee to liability
for pollution damages, may require suspension or cessation of operations in
affected areas, and impose restrictions on the injection of liquids into
subsurface aquifers that may contaminate groundwater. In addition, the recent
trend toward stricter standards in environmental legislation
12
<PAGE> 14
and regulation may continue. For instance, production wastes as "hazardous
wastes" which would make the reclassified exploration and production wastes
subject to more stringent handling, disposal and clean-up requirements. If such
legislation were to be enacted, it could have a significant impact on the
operating costs of the Company, as well as the oil and gas industry in general.
State initiatives to further regulate the disposal of oil and gas wastes are
also pending in certain states, and these initiatives could have a similar
impact on the Company.
The Company is asked to comment on the costs it incurred during the prior
year on capital expenditures for environmental control facilities and the amount
it anticipates incurring during the coming year. The Company believes that, in
the course of conducting its oil and gas operations, many of the costs
attributable to environmental control facilities would have been incurred absent
environmental regulations as prudent, safe oil field practice. During 1994, the
Company incurred capital expenditures of approximately $2,360,000 for
environmental control facilities, including the completion of four salt water
disposal facilities in New Mexico. The Company currently has budgeted
approximately $1,300,000 for environmental control facilities, including three
salt water disposal facilities during 1995.
Other Laws and Regulations
Various laws and regulations often require permits for drilling wells and
also cover spacing of wells, the prevention of waste of oil and gas including
maintenance of certain gas/oil ratios, rates of production and other matters.
The effect of these laws and regulations, as well as other regulations that
could be promulgated by the jurisdictions in which the Company has production,
could be to limit allowable production from the Company's properties and thereby
to limit its revenues.
Other Regulations and Legislative Proposals
Prior to January 1, 1993 various aspects of the Company's natural gas
operations were subject to regulations by the FERC under the Natural Gas Act of
1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA") with
respect to "first sales" of natural gas including price controls and certificate
and abandonment authority regulations. However, as a result of the enactment of
the Natural Gas Decontrol Act of 1989, the remaining "first sales" restrictions
imposed by the NGA and the NGPA terminated on January 1, 1993.
Commencing in late 1985, the FERC has issued a series of orders that have
had a major impact on natural gas pipeline operations, services and rates and
thus have significantly altered the marketing and price of natural gas. Order
636, issued in April 1992, requires each pipeline company, among other things,
to "unbundle" its traditional wholesale services and create and make available
on an open and nondiscriminatory basis numerous constituent services (such as
gathering services, storage services, firm and interruptible transportation
services, and stand-by sales services) and to adopt a new rate making
methodology to determine appropriate rates for those services. To the extent the
pipeline company or its sales affiliate makes gas sales as a merchant in the
future, it will do so in direct competition with all other sellers pursuant to
private contracts; however, pipeline companies and their affiliates are not
required to remain "merchants" of gas, and some of the interstate pipelines
companies have or will become "transporters only." In subsequent orders, the
FERC largely affirmed Order 636 and denied a stay of the implementation of the
new rules pending judicial review. In addition, the FERC has generally accepted
rate filings implementing Order 636 on essentially every interstate pipeline as
of the end of 1994. Order 636, as well as the FERC orders approving the
individual pipeline rate filings implementing Order 636, are the subject of
numerous appeals to the United States Courts of Appeals. The Company cannot
predict whether the latest orders will be affirmed on appeal or what the effects
will be on its business.
EMPLOYEES
As of December 31, 1994, the Company had 108 employees. None of the
Company's employees are presently represented by a union for collective
bargaining purposes. The Company considers its relations with its employees to
be excellent.
13
<PAGE> 15
ITEM 2. PROPERTIES.
The information appearing in Item 1 of this Annual Report is incorporated
herein by reference.
PRINCIPAL PROPERTIES
As of January 1, 1995, approximately 81% of the Company's domestic proved
oil and gas equivalent reserves and approximately 63% of the Company's total
proved oil and gas equivalent reserves were located on properties in the Gulf of
Mexico. Six significant producing areas, of which five are located in the Gulf
of Mexico and the sixth is located in New Mexico, accounted for approximately
56% of the estimated proved natural gas reserves and approximately 72% of the
estimated oil, condensate and natural gas liquids reserves of the Company as of
January 1, 1995. These producing areas accounted for approximately 83% of
natural gas production and 94% of oil, condensate and natural gas liquids
production for 1994. Net proved reserves, as estimated by Ryder Scott, and
average net daily production data for the six significant producing areas are
shown in the following table. No other major producing area accounted for more
than 5% of the estimated discounted future net revenues attributable to the
Company's estimated proved reserves as of January 1, 1995. However, the
Company's Thailand concession, which is currently not a producing property,
accounts for approximately 23% of the Company's total estimated net proved
reserves of natural gas, approximately 23% of the Company's total estimated net
proved reserves of oil, condensate and natural gas liquids and approximately 23%
of the Company's total net proved oil and gas equivalent reserves.
SIGNIFICANT PRODUCING AREAS
<TABLE>
<CAPTION>
NET PROVED RESERVES 1994 AVERAGE NET
AS OF JANUARY 1, 1995 DAILY PRODUCTION
------------------------------ ----------------------------- DISCOUNTED
FUTURE
NATURAL GAS LIQUIDS(A) NATURAL GAS LIQUIDS(A) NET
------------- -------------- ------------- ------------- REVENUES(B)
(MMCF) % (MBBLS) % (MCF) % (BBLS) % %
------ ---- ------- ---- ------ ---- ------ ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OFFSHORE
Eugene Island............... 67,910 28.0% 9,416 27.8% 80,592 55.7% 5,269 39.6% 36.2%
Main Pass................... 14,932 6.1 5,264 15.5 5,225 3.6 1,367 10.3 11.4
South Marsh Island.......... 7,939 3.3 2,639 7.8 3,340 2.3 1,439 10.8 6.6
South Pass.................. 12,510 5.2 1,435 4.2 6,290 4.3 372 2.8 4.7
East Cameron................ 17,494 7.2 132 0.4 13,537 9.4 102 0.8 4.0
ONSHORE
New Mexico Lea/Eddy
Counties.................. 14,621 6.0 5,410 16.0 9,638 6.7 3,935 29.5 11.6
</TABLE>
- ---------------
(a) "Liquids," includes oil, condensate and natural gas liquids.
(b) Before income taxes, discounted at 10%.
Set forth below are descriptions of certain of the Company's significant
producing areas. Unless otherwise specifically identified, the information set
forth in such descriptions, including the number of wells, platforms and blocks,
is presented on a gross, rather than a net to the Company basis.
Eugene Island
The Company's most significant reserves and production are located in the
Eugene Island area off the Louisiana coast in the Gulf of Mexico. The Eugene
Island area has been an important part of the Company's operations since the
first lease in that area was purchased in 1970 and production began in 1973. The
Company currently holds interests in 13 blocks in the Eugene Island area. These
blocks comprise eight fields containing 94 oil and gas wells producing from
multiple reservoirs and horizons.
The Eugene Island Block 330 field is the Company's most significant asset,
with 28 productive Pleistocene horizons between 4,000 and 8,000 feet, containing
multiple reservoirs. The field, located in 245 feet of water, contains three
drilling and production platforms in which the Company holds a 35% working
14
<PAGE> 16
interest, as well as an additional platform in which the Company holds a 30%
working interest. There are currently 17 wells producing primarily natural gas
and 36 wells producing primarily oil on the block. In 1994, a successful
drilling program off of the field's "D" platform resulted in the completion of
three oil wells and one high volume horizontal gas well. Since initial
production in 1973, the Eugene Island Block 330 field has produced approximately
641 billion cubic feet ("Bcf ") of natural gas and 127 million barrels
("MMBbls") of oil and condensate (173 Bcf and 37 MMBbls attributable to the
Company's net revenue interest). Reserves have been added to this field
consistently since production commenced. These increases have been derived from
new exploratory horizons, infill drilling, field expansions and higher than
anticipated recovery efficiencies.
Another significant field to the Company is the Eugene Island Block 295
field. On production since February 1973, this block has recorded gross
production of over 416 Bcf of natural gas and over 3.0 MMBbls of oil and
condensate during its twenty two-year life. In August 1993, the Company effected
an exchange of working interests in Eugene Island Block 295 with another working
interest owner in such block. Pursuant to this exchange, the Company increased
its working interest in Eugene Island Block 295 to 100% on 3,125 acres above
3,000 feet, to 20% on 1,875 acres above 3,000 feet and to 20% on all of the
block below 3,000 feet. During the fourth quarter of 1993, the Company
successfully drilled and completed five horizontal wells to exploit the natural
gas potential located in certain shallow reservoirs on this block in an area
where it has a 100% working interest. A platform was set and production
commenced from these wells in late February 1994. In September 1994, an
additional horizontal well was also drilled from this platform. Production from
this field is largely responsible for the substantial increase in the Company's
average daily production of natural gas from the Eugene Island area for 1994,
compared to 1993.
The Eugene Island Block 212 field consists of Eugene Island Blocks 211 and
212 and Ship Shoal Block 175. The field contains eight productive horizons which
have four oil wells and two natural gas wells producing from a platform set in
1985. The Company and its partners completed a successful three well workover
and recompletion program in this field during the fourth quarter of 1994.
Main Pass
The Company's nine blocks in the Main Pass area are located near the mouth
of the Mississippi River in the Gulf of Mexico and include leases purchased from
1974 to 1992. The primary drilling objectives in these fields are Pliocene and
Miocene sandstone reservoirs with productive formation depths from 5,000 to
12,000 feet. The Company's interests in the Main Pass area include 42 producing
oil and gas wells producing from six platforms.
A field including Main Pass Blocks 72, 73 and 72/74 was unitized in 1982
with the Company's working interest at 14%. In late 1994, the Company increased
its working interest in this field to 35% by purchasing another working interest
owner's interests in the field. This field contains 23 producing oil wells and 8
producing natural gas wells from three platforms operated by one of the
Company's joint venture partners. The field is located in 125 feet of water with
38 mapped horizons adjacent to and surrounding a salt dome. These horizons
contain over 150 separate reservoirs between 5,000 and 12,000 feet. A successful
10 well workover program in this field was completed in 1994. In addition, the
first three wells of a four well development program were drilled in 1994. The
Company currently plans to continue its workover program and drill six
additional wells in this field during 1995 based in part on the analysis of a
proprietary 3-D seismic survey over the field that the Company acquired rights
to in 1994.
Main Pass Block 123 was acquired in the federal lease sale of 1990. Pogo
Gulf Coast, for which the Company is the general partner, has a 75% working
interest and is the operator on the block. Along with its non-operating joint
venture partner, Pogo Gulf Coast drilled two discovery wells on the block in
1993. Subsequently, Pogo Gulf Coast drilled two additional wells on this block
in 1994. Installation of a platform and construction of a pipeline from the
platform to an existing main pipeline was completed in January 1995. Platform
start-up was completed and full production from this field commenced in February
1995.
15
<PAGE> 17
South Marsh Island
The Company currently owns interests in portions of seven blocks in the
South Marsh Island area, located offshore Louisiana. Three of the leases were
acquired in 1974, a fourth in 1980, a fifth in 1992 and portions of two more
leases were acquired in 1994 through farmins. Three blocks contain a total of
five drilling and production platforms. These platforms currently have 44 oil
and gas wells producing from Pleistocene age sandstone reservoirs located at
depths from 5,000 to 10,000 feet.
The South Marsh Island Block 128 field, in which the Company owns a 16%
working interest, comprises South Marsh Island Blocks 125, 127, 128 and 141.
This field primarily produces oil, with 32 oil wells and eight natural gas wells
producing from 20 separate reservoirs. In 1994, a five well drilling program in
this field was completed which resulted in increased oil and gas deliverability
and reserves. Additional drilling is currently planned for 1995. The wells that
were drilled in 1994 and those planned for 1995 have been based on the ongoing
analysis of a 3-D seismic survey in conjunction with a detailed reservoir study
of the field.
The Company also owns a 25% working interest in the South Marsh Island
Block 160 field which is producing from three oil wells at a depth of
approximately 9,700 feet. A single platform was set on this block in 1983. A
two-well drilling program in this field resulting from analysis of a 3-D seismic
survey covering the field was completed in the fourth quarter of 1994.
South Pass
The Company acquired its first South Pass area leasehold interest in
September 1972. The Company currently owns interests in portions of six blocks
in this area on which four production platforms have been set that produce oil
and gas from 27 wells which have been completed principally in Pleistocene,
Pliocene and Miocene reservoirs at depths ranging from approximately 4,000 to
14,800 feet.
The Company's most significant field in the South Pass area is located on
South Pass Blocks 49 and 50. The Company increased its working interest in South
Pass Bock 49 from 6% to 20% late in 1994. In addition, in late 1993, the Company
successfully completed the drilling of a highly deviated well into two
reservoirs on South Pass Block 50, in which the Company holds a 50% working
interest, from a platform located on South Pass Block 49 that substantially
increased the Company's production from this area.
East Cameron
Production commenced from the Company's first East Cameron area leasehold
interest in February 1973. Presently, the Company has interests in 3 offshore
blocks in this area which contain two fields and 13 producing gas wells.
During 1992, the Company and its partners conducted a 3-D seismic survey of
the East Cameron Block 334/335 field area where the Company has a 42% working
interest. Analysis of this 3-D seismic survey resulted in the drilling of four
successful development wells. As of February 1, 1995, an exploratory well was
also being drilled on East Cameron Block 334.
New Mexico
The Company considers southeastern New Mexico to be an area of significant
growth in both production and reserves as a result of recent exploration and
development activities. The Company believes that during the past four years it
has been one of the most active companies drilling for oil and natural gas in
the southeastern New Mexico (Lea and Eddy Counties) portion of the Permian Basin
where the Company has interests in over 70,000 gross acres. The Company's
primary drilling objective for crude oil is the Brushy Canyon (Delaware)
formation. Fields in the Brushy Canyon (Delaware) formation in the southeastern
New Mexico portion of the Permian Basin are generally characterized by
production from relatively shallow depths (6,000 to 9,000 feet), multiple
producing zones in most wells and relatively high initial rates of production
(frequently equaling the top field allowables which range from of 142 Bbls to
230 Bbls per day, depending on the depth of production from the field). The
Company has achieved rapid cost recovery with respect to its New Mexico wells
drilled to date because of relatively low capital costs and high initial rates
of production.
16
<PAGE> 18
Since the Company began exploring in the Brushy Canyon (Delaware) formation
in October 1989, it has participated in the drilling of 209 wells through
December 31, 1994, including, among others, 84 wells in the Sand Dunes field
where the Company's working interest ranges from 4% to 89%, 27 wells in the East
Loving field where the Company's working interest ranges from 33% to 98%, 45
wells in the Livingston Ridge field where the Company's working interest ranges
from 25% to 100%; and 29 wells in the Red Tank field where the Company's working
interest ranges from 89% to 100%. The oil fields in this area are generally
developed on a 40 acre spacing pattern. The Company anticipates drilling many
additional locations in these and other fields in southeastern New Mexico during
1995 and in future years.
DOMESTIC OFFSHORE PROPERTIES
The following is a listing of the Company's domestic offshore properties as
of December 31, 1994.
<TABLE>
<CAPTION>
POGO EXPLORATORY DEVELOPMENT DATE OR
WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED
INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF
BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFSHORE TEXAS -- FEDERAL
Matagorda Island
A-4 27.0 3 1 2 8-83 10-1-83 9-89
- ---------------------------------------------------------------------------------------------------------------------
670 30.7 1 1 2 8-83 10-1-83 10-89
- ---------------------------------------------------------------------------------------------------------------------
Brazos
A-104 10.8 1 1 8-89 10-1-89 6-90
- ---------------------------------------------------------------------------------------------------------------------
Galveston
A-215 50.0 1 8-94 12-1-94
- ---------------------------------------------------------------------------------------------------------------------
325 20.0 8-91 11-1-91
- ---------------------------------------------------------------------------------------------------------------------
High Island/South Addition
A-515 25.0 2 1 11-79 1-1-80 11-84
- ---------------------------------------------------------------------------------------------------------------------
High Island/East Addition/South Extension
A-323 1.8 4 1 17 6-73 8-1-73 6-78
- ---------------------------------------------------------------------------------------------------------------------
A-325 9.9 7 2 9 6-73 8-1-73 8-81
- ---------------------------------------------------------------------------------------------------------------------
A-355 33.3 1 1 5 5-74 7-1-74 7-80
- ---------------------------------------------------------------------------------------------------------------------
A-356 50.0 1 1 4 5-74 7-1-74 7-80
- ---------------------------------------------------------------------------------------------------------------------
A-451 50.0 1 1 8-94 12-1-94 1996
- ---------------------------------------------------------------------------------------------------------------------
TOTAL TEXAS 22 10 39
- ---------------------------------------------------------------------------------------------------------------------
OFFSHORE LOUISIANA -- FEDERAL
West Cameron
63 20.0 3-91 5-1-91
- ---------------------------------------------------------------------------------------------------------------------
97 20.0 1 3-90 5-1-90
- ---------------------------------------------------------------------------------------------------------------------
196 [A] 3 1 2 5-83 7-1-83 12-90
- ---------------------------------------------------------------------------------------------------------------------
202 39.3 3 1 2 11-82 1-1-83 8-85
- ---------------------------------------------------------------------------------------------------------------------
252 80.0 1 Share 253 Platform 2 11-82 1-1-83 8-84
- ---------------------------------------------------------------------------------------------------------------------
253 80.0 1 1 6 6-77 8-1-77 7-84
- ---------------------------------------------------------------------------------------------------------------------
310 20.0 3-91 7-1-91
- ---------------------------------------------------------------------------------------------------------------------
352 15.0 1 1 9 10-74 12-1-74 8-79
- ---------------------------------------------------------------------------------------------------------------------
385 20.0 3-90 6-1-90
- ---------------------------------------------------------------------------------------------------------------------
532 4.0 5 Share 533 Platform 3 12-72 2-1-73 9-76
- ---------------------------------------------------------------------------------------------------------------------
533 4.0 2[B] 2 7 12-72 2-1-73 9-76
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(footnotes at end of table)
17
<PAGE> 19
<TABLE>
<CAPTION>
POGO EXPLORATORY DEVELOPMENT DATE OR
WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED
INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF
BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
609 16.0 1 1 7 10-74 12-1-74 7.78
- ---------------------------------------------------------------------------------------------------------------------
East Cameron
270 30.0 3 2 30 12-70 1-1-71 1-73
- ---------------------------------------------------------------------------------------------------------------------
334 42.0 5[B] 1 11 12-70 2-1-71 8-77
- ---------------------------------------------------------------------------------------------------------------------
335 42.0 3 2 27 6-73 8-1-73 8-77
- ---------------------------------------------------------------------------------------------------------------------
Vermilion
175 70.0 1 1 5-91 9-1-85 12-91
- ---------------------------------------------------------------------------------------------------------------------
335 37.5 3-94 5-1-94
- ---------------------------------------------------------------------------------------------------------------------
South March Island
125 16.0 3 1 8 10-74 12-1-74 7-77
- ---------------------------------------------------------------------------------------------------------------------
127 16.0 Share 128 Platform 3 10-74 12-1-74 7-77
- ---------------------------------------------------------------------------------------------------------------------
128 16.0 6 3 62 3-74 5-1-74 7-77
- ---------------------------------------------------------------------------------------------------------------------
+141 16.0[C] Share 128 Platform 2 3-94 12-1-74 3-94
- ---------------------------------------------------------------------------------------------------------------------
160 25.0 2 1 5 9-80 11-1-80 2-84
- ---------------------------------------------------------------------------------------------------------------------
+161 25.0[C] Share 160 Platform 1 5-94 9-1-81 12-94
- ---------------------------------------------------------------------------------------------------------------------
188 25.0 5-92 9-1-92
Eugene Island
- ---------------------------------------------------------------------------------------------------------------------
101 20.0 3-91 5-1-91
- ---------------------------------------------------------------------------------------------------------------------
102 20.0 3-91 5-1-91
- ---------------------------------------------------------------------------------------------------------------------
211 33.3 Share 212 Platform 3 5-83 7-1-83 1-87
- ---------------------------------------------------------------------------------------------------------------------
212 33.3 1 1 3 5-83 7-1-83 1-87
- ---------------------------------------------------------------------------------------------------------------------
256 69.2 5 1 7 12-70 2-1-71 10-79
- ---------------------------------------------------------------------------------------------------------------------
261 66.7 2 1 17 10-74 12-1-74 10-79
- ---------------------------------------------------------------------------------------------------------------------
295* 20.0/100.0 7[B] 2 30 12-70 2-1-71 2-73
- ---------------------------------------------------------------------------------------------------------------------
312 4.0 5 Share 333 Platform 8 3-74 5-1-74 7-77
- ---------------------------------------------------------------------------------------------------------------------
318 20.0 1 3-91 6-1-91
- ---------------------------------------------------------------------------------------------------------------------
330 35.0[D] 10[B] 4 94 12-70 1-1-71 4-73
- ---------------------------------------------------------------------------------------------------------------------
333 4.0 3 2 22 12-72 2-1-73 7-77
- ---------------------------------------------------------------------------------------------------------------------
337 37.5 3 1 8 2-76 3-1-76 6-85
- ---------------------------------------------------------------------------------------------------------------------
Ship Shoal
175 33.3 Share EI 212 Platform 2 5-83 7-1-83 7-88
- ---------------------------------------------------------------------------------------------------------------------
240 30.0 2 2 3-89 6-1-89 12-94
- ---------------------------------------------------------------------------------------------------------------------
256 30.0 1 1 3-90 5-1-90 12-94
- ---------------------------------------------------------------------------------------------------------------------
South Timbalier
198 25.0 2 1 4 5-85 9-1-85 8-90
- ---------------------------------------------------------------------------------------------------------------------
+214 25.0[C] 1 Share 198 Platform 1 5-85 9-1-85 8-90
- ---------------------------------------------------------------------------------------------------------------------
West Delta
59 20.0 3-90 6-1-90
- ---------------------------------------------------------------------------------------------------------------------
South Pass
+33 15.9[C] Share 49 Platform 2 10-74 12-1-74 2-83
- ---------------------------------------------------------------------------------------------------------------------
49 15.9[G] 5[B] 1 19 9-72 11-1-72 10-80
- ---------------------------------------------------------------------------------------------------------------------
50 50.0 1 Share 49 Platform 7-93 8-1-88 12-93
- ---------------------------------------------------------------------------------------------------------------------
+57 12.0 Share 57/58 Platform 3 11-76 1-1-77 11-82
- ---------------------------------------------------------------------------------------------------------------------
+78 9.0 5 1 12 9-72 10-1-72 4-81
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(footnotes at end of table)
18
<PAGE> 20
<TABLE>
<CAPTION>
POGO EXPLORATORY DEVELOPMENT DATE OR
WORKING WELLS PLATFORMS WELLS LEASE ANTICIPATED
INTEREST DRILLED OR SET OR DRILLED OR DATE EFFECTIVE DATE OF
BLOCK % DRILLING ANNOUNCED DRILLING ACQUIRED DATE PRODUCTION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mississippi Canyon
63 20.0 2 1 5 5-75 7-1-75 6-84
- ---------------------------------------------------------------------------------------------------------------------
Main Pass
+30 25.0[E] 2 1 8[F] 10-81 12-1-81 12-87
- ---------------------------------------------------------------------------------------------------------------------
37 25.0 4 1 5 7-79 10-1-79 7-82
- ---------------------------------------------------------------------------------------------------------------------
61 24.0 1 3-90 7-1-90
- ---------------------------------------------------------------------------------------------------------------------
+72 35.3 1 Share 73 Platform 2 5-75 7-1-75 8-79
- ---------------------------------------------------------------------------------------------------------------------
+72/74 35.3 4 2 46 11-76 1-1-77 8-79
- ---------------------------------------------------------------------------------------------------------------------
73 35.3 4 1 16 10-74 12-1-74 8-79
- ---------------------------------------------------------------------------------------------------------------------
123 30.0 2 1 2 3-90 5-1-90 1-95
- ---------------------------------------------------------------------------------------------------------------------
131 33.33 5-92 9-1-92
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LOUISIANA 115 43 506
- ---------------------------------------------------------------------------------------------------------------------
STATE LEASES
Offshore Louisiana
South Pass
+57/58 12.0 3 1 13 5-74 5-13-74 7-82
- --------------------------------------------------------------------------------------------------------------------
Main Pass
31 50.0 1 1 1 3-85 3-18-85 2-90
- ---------------------------------------------------------------------------------------------------------------------
Breton Sound
2 100.0 2[F] 1 1 4-80 9-15-80 8-87
- ---------------------------------------------------------------------------------------------------------------------
23 82.5 1 1 9-78 9-18-78 7-84
- ---------------------------------------------------------------------------------------------------------------------
24 22.5 1 1 1 9-78 9-18-78 7-84
- ---------------------------------------------------------------------------------------------------------------------
North Lighthouse Point
S/L 340 50.0 1 3 5-84 5-1-84 10-84
- ---------------------------------------------------------------------------------------------------------------------
TOTAL STATE LEASES 9 5 19
- ---------------------------------------------------------------------------------------------------------------------
TOTAL DOMESTIC OFFSHORE 146 58 564
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
[A] Block farmed out -- Overriding Royalty Interest only
[B] Includes offset contribution well
[C] Block farmed in
[D] Pogo owns 35% in "A", "B", and "C" platform area and 30% in platform "D"
area
[E] Portion of block farmed out
[F] Includes one farmout well
[G] Pogo owns 20% in a non-unit area
* Pogo owns 20% in rights below 3,000 feet and 100% in rights at 3,000 feet
and above in certain portions of the block
[+] Represents portion of block
ITEM 3. LEGAL PROCEEDINGS.
In 1989, a large number of exploration and production companies, including
the Company, were circularized with Special Notice Letters in accordance with
CERCLA from the EPA regarding a particular waste disposal site in Louisiana
known as the "Gulf Coast Vacuum Site" utilized by a trucking company. The EPA
subsequently developed a list based on its investigation showing the Company
bearing an approximate 1% responsibility for this site based on the trucking
company's shipping records. The Company utilized the trucking company to dispose
of salt water produced from a well in which the Company had an interest. The
Company, however, believes that none of this salt water was delivered to the
Gulf Coast Vacuum Site. In any
19
<PAGE> 21
event, the Company believes that the trucking company shipped only oilfield
waste for the Company which is exempt pursuant to CERCLA and, further, that such
shipments, if any, were sent to a properly permitted waste disposal site. The
Company has learned that the EPA has recently entered a consent decree, the
details of which have not been made fully public, with certain parties that are
believed to be responsible for a majority of the disposal occurring at the site.
The Company is a party to various other legal proceedings consisting of
routine litigation incidental to its businesses, but believes that any potential
liabilities resulting from these proceedings are adequately covered by insurance
or are otherwise immaterial at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable.
ITEM S-K 401(B). EXECUTIVE OFFICERS OF REGISTRANT.
Executive officers of the Company are appointed annually to serve for the
ensuing year or until their successors have been elected or appointed. The
executive officers of the Company, their age as of February 1, 1995, and the
year each was elected to his present position are as follows:
<TABLE>
<CAPTION>
YEAR
EXECUTIVE OFFICER EXECUTIVE OFFICE AGE ELECTED
----------------- ---------------- --- -------
<S> <C> <C> <C>
Paul G. Van Wagenen.................. Chairman of the Board,
President and Chief Executive
Officer 49 1991
Kenneth R. Good...................... Senior Vice President --
Land and Budgets 57 1991
D. Stephen Slack..................... Senior Vice President, Chief
Financial Officer and
Treasurer 45 1988
Stuart P. Burbach.................... Vice President and
Offshore Division Manager 42 1991
Jerry A. Cooper...................... Vice President and
Western Division Manager 46 1990
Harvey L. Gold....................... Vice President -- Engineering 59 1988
Thomas E. Hart....................... Vice President and Controller 52 1988
R. Phillip Laney..................... Vice President and
International Division
Manager 54 1991
John O. McCoy, Jr.................... Vice President and
Chief Administrative Officer 43 1989
J. D. McGregor....................... Vice President -- Sales 50 1988
Sammie M. Shaw....................... Vice President -- Operations 63 1992
Ronald B. Manning.................... Corporate Secretary and
Associate General Counsel 41 1990
</TABLE>
Prior to assuming their present positions with the Company, the business
experience of each executive officer for more than the last five years was as
follows: Mr. Van Wagenen was President and Chief Operating Officer of the
Company since 1990, Senior Vice President and General Counsel of the Company
since 1986, Vice President and General Counsel of the Company since 1982, and
General Counsel of the Company since 1979; Mr. Good was Vice President -- Land
of the Company since 1988 and Chief Landman of the Company since 1977; Mr. Slack
was Regional Manager of Chemical Bank of New York's Southwest Energy and
Minerals Division since 1982; Mr. Burbach was Vice President of Norfolk Holding
Inc. since 1986 and Exploration Manager for Tricentrol Ltd. Canada and
Tricentrol U.S. since 1981; Mr. Cooper was a Division Landman for the Company
since 1983 and a Landman for the Company since 1979; Mr. Gold was Manager of
Reservoir Engineering for the Company since 1977; Mr. Hart was Controller for
the Company since 1977; Mr. Laney was International Exploration Manager for the
Company since 1983 and Exploration Coordinator
20
<PAGE> 22
for the Gulf Coast Division of the Company since 1977; Mr. McCoy was Director of
Personnel and Administration for the Company since 1978; Mr. McGregor was
Manager of Hydrocarbon Sales and Contracts for the Company since 1981; Mr. Shaw
was Operations Manager for the Company since 1981; Mr. Manning was an Associate
General Counsel for the Company since 1989 and prior thereto was an attorney
with the Federal Bureau of Investigation, and Chevron U.S.A., and Assistant to
the General Counsel of Primary Fuels, Inc.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The following table shows the range of low and high sales prices of the
Company's Common Stock (the "Common Stock") on the New York Stock Exchange
composite tape where the Company's common stock trades under the symbol PPP. The
Company's common stock is also listed on the Pacific Stock Exchange.
In 1994, the Company paid $0.06 per share in dividends on its Common Stock
since it commenced paying dividends in August 1994. In this regard, the Company
reinstated the practice of declaring a quarterly cash dividend commencing in the
third quarter of 1994. However, the declaration and payment of future dividends
will depend upon, among other things, the Company's future earnings and
financial condition, liquidity and capital requirements, the general economic
and regulatory climate and other factors deemed relevant by the Company's Board
of Directors.
Pursuant to the Company's revolving credit agreement with its banks under
which the Company has borrowed funds, the Company may not, subject to certain
exceptions, pay any dividends on its capital stock or make any other
distributions on shares of its capital stock (other than dividends or
distributions payable solely in shares of such capital stock) or apply any
funds, property or assets to the purchase, redemption, sinking fund or other
retirement of its capital stock, if the aggregate amount of all such dividends,
purchases, and redemptions would exceed an amount determined based on the
consolidated income of the Company and its consolidated subsidiaries from and
after a specified date plus the proceeds of the issuance of capital stock after
the same specified date or if the net worth of the Company is negative. As of
December 31, 1994, $64,037,000 was available for dividends under this
limitation.
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
1993
1st Quarter.......................................................... 9 3/ 17 1/4
2nd Quarter.......................................................... 16 1/8 21
3rd Quarter.......................................................... 13 5/8 19 1/8
4th Quarter.......................................................... 14 3/8 19 3/4
1994
1st Quarter.......................................................... 15 5/8 21 1/2
2nd Quarter.......................................................... 15 5/8 24 1/4
3rd Quarter.......................................................... 19 5/8 23 5/8
4th Quarter.......................................................... 16 1/8 23 1/8
</TABLE>
As of March 3, 1995, there were 3,815 holders of record of the Company's
Common Stock.
21
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA
(Expressed in thousands, except per share data)
Revenues:
Crude oil and condensate........................ $ 65,141 $ 64,042 $ 64,224 $ 54,420 $ 54,018
Natural gas..................................... 99,093 66,173 67,366 63,225 74,111
Natural gas liquids............................. 9,189 7,288 5,833 3,442 3,496
Other, net...................................... 133 (950) 1,705 3,338 794
-------- -------- -------- -------- --------
Oil and gas revenues............................ 173,556 136,553 139,128 124,425 132,419
Interest on tax refunds......................... -- 2,322 -- -- 22,499
Gains (losses) on sales......................... 52 679 1,702 44 (98)
-------- -------- -------- -------- --------
Total.................................... $173,608 $139,554 $140,830 $124,469 $154,820
========= ========= ========= ========= =========
Income before extraordinary item.................. $ 27,374 $ 25,061 $ 18,495 $ 10,322 $ 44,036
Extraordinary gains (losses)...................... (307) -- -- 1,336 --
-------- -------- -------- -------- --------
Net income........................................ $ 27,067 $ 25,061 $ 18,495 $ 11,658 $ 44,036
========= ========= ========= ========= =========
Per share data:
Primary and fully diluted earnings:
Before extraordinary item..................... $ 0.82 $ 0.76 $ 0.66 $ 0.37 $ 1.69
Extraordinary item............................ (0.01) -- -- 0.05 --
-------- -------- -------- -------- --------
Net income.................................... $ 0.81 $ 0.76 $ 0.66 $ 0.42 $ 1.69
========= ========= ========= ========= =========
Price range of common stock:
High.......................................... $ 24.25 $ 21.00 $ 13.88 $ 8.25 $ 10.13
Low........................................... $ 15.63 $ 9.75 $ 5.13 $ 4.63 $ 5.75
Weighted average number of common and common
equivalent shares outstanding................... 33,352 32,860 27,929 27,611 26,029
Long-term debt at year end........................ $149,249 $130,539 $129,260 $184,260 $217,000
Production payment obligation at year end......... $ -- $ -- $ 24,854 $ 45,475 $ 46,893
Shareholders' equity (deficit) at year end........ $ 64,037 $ 33,803 $ 5,648 $(56,636) $(68,429)
Total assets at year end.......................... $298,826 $239,774 $206,347 $213,772 $244,226
PRODUCTION (SALES) DATA
Net daily average and weighted average price:
Natural gas (Mcf per day)..................... 144,800 91,700 105,200 104,200 107,300
Price (per Mcf)............................. $ 1.88 $ 1.98 $ 1.75 $ 1.66 $ 1.89
Crude oil-condensate (Bbl. per day)........... 11,100 9,851 8,699 7,108 6,209
Price (per Bbl.)............................ $ 16.08 $ 17.81 $ 20.17 $ 20.98 $ 23.84
Natural gas liquids (Bbl. per day)
Leasehold ownership......................... 2,075 1,538 1,037 609 593
Plant ownership............................. 147 140 144 54 104
Price (per Bbl.)............................ $ 11.33 $ 11.90 $ 13.50 $ 14.21 $ 13.75
CAPITAL EXPENDITURES (Expressed in thousands)
Oil and gas:
Domestic Offshore --
Exploration................................... $ 2,800 $ 4,600 $ 1,700 $ 1,600 $ 2,900
Development................................... 44,100 33,700 5,500 23,600 24,900
Purchase of reserves.......................... 32,600 -- 8,900 5,100 --
Domestic Onshore --
Exploration................................... 6,800 5,200 4,900 4,700 2,300
Development................................... 23,700 24,300 15,600 13,900 8,100
International Exploration....................... 5,100 4,600 1,400 -- --
-------- -------- -------- -------- --------
Total oil and gas........................ 115,100 72,400 38,000 48,900 38,200
Other............................................. 1,200 200 600 2,400 --
-------- -------- -------- -------- --------
Total.................................... $116,300 $ 72,600 $ 38,600 $ 51,300 $ 38,200
========= ========= ========= ========= =========
</TABLE>
22
<PAGE> 24
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The Company reported net income for 1994 of $27,067,000 or $0.81 per share
(on both a primary and fully diluted basis) compared to net income for 1993 of
$25,061,000 or $0.76 per share (on both a primary and fully diluted basis) and
net income for 1992 of $18,495,000 or $0.66 per share (on both a primary and
fully diluted basis). Included in net income for 1994 is an extraordinary loss
of $307,000 (net of taxes) or $0.01 per share in connection with the retirement
of the Company's 10.25% Convertible Subordinated Notes, due 1999 (the "10.25%
Notes") on April 18, 1994. Earnings per common share are based on the weighted
average number of common and common equivalent shares outstanding for 1994 of
33,352,000 compared to 32,860,000 for 1993 and 27,929,000 for 1992. The
increases in the weighted average number of common and common equivalent shares
outstanding for 1993 resulted primarily from the issuance of 4,500,000 shares of
common stock in December 1992 as set forth in the Consolidated Statements of
Shareholders' Equity included in "Item 8. Financial Statements and Supplementary
Data." The increases in the weighted average number of common and common
equivalent shares outstanding for 1994 resulted from the issuance of shares of
common stock upon the exercise of stock options pursuant to the Company's stock
option plans. Earnings per common share computations on a fully diluted basis
would reflect additional common shares issuable upon the assumed conversion of
the Company's 5 1/2% Convertible Subordinated Notes, due 2004 (the "5 1/2%
Notes") (the only convertible securities of the Company that were dilutive
during the applicable periods) and the elimination of related interest
requirements, as adjusted for applicable federal income taxes. However, the
dilution resulting from the assumed conversion of the 5 1/2% Notes was not
sufficient to change reported earnings per share.
The Company's total revenues for 1994 were $173,608,000, an increase of
approximately 24% from total revenues of $139,554,000 for 1993, and an increase
of approximately 23% from total revenues of $140,830,000 for 1992. The increase
in the Company's total revenues for 1994, compared to 1993 and 1992, resulted
primarily from increased natural gas, crude oil, condensate and natural gas
liquid ("NGL") production volumes. Partially offsetting volume increases were
substantial decreases in the prices that the Company received for its crude oil
and condensate production volumes. In addition, the Company's total revenues for
1993 and 1992 were positively affected by revenues from settlement of an issue
with the Internal Revenue Service and gains related to the sale of non-strategic
properties.
The Company's oil and gas revenues for 1994 were $173,556,000, an increase
of approximately 27% from oil and gas revenues of $136,553,000 for 1993, and an
increase of approximately 25% from oil and gas revenues of $139,128,000 for
1992. The following table reflects an analysis of variances in the Company's oil
and gas revenues between 1994 and the previous two years:
<TABLE>
<CAPTION>
1994 COMPARED TO
--------------------
1993 1992
------- --------
(IN THOUSANDS)
<S> <C> <C>
Increase (decrease) in oil and gas revenues resulting from
variances in:
Natural Gas
Price...................................................... $(3,380) $ 4,850
Production................................................. 36,300 26,877
------- --------
32,920 31,727
------- --------
Crude oil and condensate
Price...................................................... (6,228) (13,029)
Production................................................. 7,327 13,946
------- --------
1,099 917
------- --------
Natural gas liquids
Price...................................................... (350) (937)
Production................................................. 2,251 4,293
------- --------
1,901 3,356
------- --------
Other, net.................................................... 1,083 (1,572)
------- --------
Increase in oil and gas revenues................................ $37,003 $ 34,428
======= ========
</TABLE>
23
<PAGE> 25
Average natural gas prices received by the Company for the two years prior
to 1994 were volatile and marked by non-seasonal as well as seasonal variations.
The average price per Mcf that the Company received for its natural gas
production increased during 1993, compared to 1992, averaging $1.75 per Mcf for
1992 and $1.98 per Mcf for 1993. Prices increased throughout 1993, partially as
a result of severe late winter weather that drew down natural gas storage
supplies which, coupled with relatively high crude oil prices that inhibited
fuel switching from natural gas to residual heating oil at that time, created a
substantial demand in the spring and the summer to replenish depleted storage
facilities and to supply natural gas for the industrial and electric generation
markets. Notwithstanding severe winter weather during January and February of
1994 that led to record low natural gas storage levels in March, rapid injection
of natural gas into storage coupled with a mild summer contributed to a
substantial decline in natural gas prices during the second half of 1994
resulting in the Company receiving an average price of $1.88 per Mcf for its
natural gas production during 1994 which, while it was 5% less than the average
price that the Company received in 1993, was still an increase of 7% over the
average price that the Company received in 1992. See "Business -- Miscellaneous;
Competition and Market Conditions." Natural gas production for 1994 averaged
144.8 MMcf per day, an increase of approximately 58% from average production of
91.7 MMcf per day in 1993, and an increase of approximately 38% from average
production of 105.2 MMcf per day for 1992. The increase in the Company's average
natural gas production for 1994, compared to 1993 and 1992, was related
primarily to natural gas production from the Company's Eugene Island Block
295"B" platform from which production commenced in late February 1994, and the
continued success of the Company's ongoing active offshore and onshore drilling
and workover programs, which was partially offset by a natural decline in
deliverability from some of the Company's more mature properties.
As of January 1, 1995, the Company had entered into futures contracts with
various parties on a portion of its daily natural gas production through
September 30, 1995 (commencing with contracts totaling approximately 37 MMcf per
day in January and decreasing on a quarterly basis to approximately 15 MMcf per
day) at varying prices ranging from approximately $1.92 to $1.83 per Mcf.
Crude oil and condensate prices received by the Company averaged $16.08 per
barrel in 1994 compared to $17.81 per barrel in 1993 and $20.17 per barrel in
1992. Crude oil and condensate prices were relatively stable during 1992 and the
first six months of 1993. However, commencing in July 1993, the average price
per barrel that the Company received for its production began dropping until, by
December 1993, the average price per barrel for crude oil and condensate that
the Company received for its production during that month averaged only $13.39
per barrel. However, the average price per barrel that the Company received for
its crude oil and condensate production began recovering in June 1994 and showed
gradual improvement throughout the remainder of the year. For the month of
December 1994, the average price per barrel that the Company received for its
crude oil and condensate production was $16.44. Crude oil and condensate
production for 1994 averaged 11,100 Bbls per day, an increase of approximately
13% from 9,851 Bbls per day for 1993, and an increase of approximately 28% from
8,699 Bbls per day for 1992. The increase in the Company's crude oil and
condensate production for 1994, compared to 1993 and 1992, resulted primarily
from ongoing development programs principally in the Main Pass, Eugene Island
and South Pass areas, together with the acquisition by the Company of additional
working interests in certain leases in the Main Pass area. See "Properties --
Principal Properties" and "Business -- Domestic Offshore Operations; Lease
Acquisitions."
As of February 1, 1995, the Company had entered into a crude oil swap
agreement with another party in which it had swapped the floating market price
it receives from purchasers of its crude oil for a fixed price of $17.08 per
barrel on 1,000 Bbls per day of the Company's production for a period ending
April 30, 1995. See "Business -- Miscellaneous; Sales."
Liquid products are often extracted from natural gas streams and sold
separately as NGL. The Company's NGL production averaged 2,222 Bbls per day for
1994, an increase of approximately 32% from an average of 1,678 Bbls per day for
1993 and an increase of approximately 88% from an average of 1,181 Bbls per day
for 1992. The increase in the Company's NGL production during 1994, compared to
1993 and 1992, resulted primarily from extracting liquids from several new high
Btu content wells and increased production generally.
24
<PAGE> 26
The Company's total liquids production during 1994, including crude oil,
condensate and NGL, averaged 13,322 Bbls per day, an increase of approximately
16% from an average total liquids production of 11,529 Bbls per day for 1993,
and an increase of approximately 35% from an average total liquids production of
9,880 Bbls per day for 1992.
The Company's oil and gas revenues for 1994, 1993 and 1992 also reflect
adjustments for various miscellaneous items. For 1993 and 1992, the Company made
adjustments to its net income to reflect the settlement of certain litigation
with the State of Louisiana regarding past royalty disputes pertaining to the
Company's offshore state leases. For 1993, additional adjustments were also made
to reflect an agreement with the MMS to allow the Company to offset FERC Order
93A payments previously made by the Company on behalf of the MMS against FERC
Order 94A obligations due from the Company and the resulting overaccrual of
related interest expenses.
Lease operating expenses for 1994 were $29,768,000, an increase of
approximately 12% from lease operating expenses of $26,633,000 for 1993, and an
increase of approximately 15% from lease operating expenses of $25,842,000 for
1992. The increase in lease operating expenses for 1994, compared to 1993 and
1992, resulted primarily from increased operating activity on existing
properties, including increased operating costs related to additional properties
brought on production in 1994. However, primarily as a result of increased
production of natural gas, crude oil, condensate and NGLs by the Company during
1994, compared to 1993 and 1992, the Company's lease operating expenses were
only $0.36 per equivalent Mcf for 1994, a decrease of 20% from lease operating
expenses of $0.45 per equivalent Mcf for 1993, and a decline of approximately
16% from lease operating expenses of $0.43 per equivalent Mcf for 1992.
General and administrative expenses for 1994 were $15,984,000, an increase
of approximately 10% from general and administrative expenses of $14,550,000 for
1993, and an increase of approximately 22% from general and administrative
expenses of $13,129,000 for 1992. The increase in general and administrative
expenses for 1994, compared to 1993 and 1992, was related to, among other
things, an increase in the number of Company employees resulting from the
Company's increased exploration and production related activities and to normal
salary and concomitant benefit expense adjustments.
Exploration expenses consist primarily of delay rentals and geological and
geophysical costs which are expensed as incurred. Exploration expenses for 1994
were $5,257,000, an increase of approximately 114% from exploration expenses of
$2,455,000 for 1993, and an increase of approximately 69% from exploration
expenses of $3,102,000 for 1992. The increase in exploration expenses for 1994,
compared to 1993 and 1992, resulted primarily from increased geophysical
activity by the Company, including the costs of conducting and processing
several proprietary 3-D seismic surveys on Company leases in South Texas, West
Texas and the Gulf of Thailand, together with the cost of acquiring several
non-proprietary 3-D seismic surveys in the Gulf of Mexico.
Dry hole and impairment expenses relate to costs of unsuccessful wells
drilled along with impairments to the associated unproved property costs and
impairments to previously proved property costs as a result of decreases in
expected reserves. The Company's dry hole and impairment expenses for 1994 were
$7,088,000, an increase of approximately 51% from dry hole and impairment costs
of $4,690,000 for 1993, but a decrease of approximately 24% from dry hole and
impairment costs of $9,314,000 for 1992.
The Company accounts for its oil and gas activities using the successful
efforts method of accounting. Under the successful efforts method, lease
acquisition costs and all development costs are capitalized. Unproved properties
are reviewed quarterly to determine if there has been impairment of the carrying
value, with any such impairment charged to expense in the period. Exploratory
drilling costs are capitalized until the results are determined. If proved
reserves are not discovered, the exploratory drilling costs are expensed. Other
exploratory costs are expensed as incurred.
The provision for depreciation, depletion and amortization ("DD&A") is
based on the capitalized costs mentioned in the preceding paragraph plus future
costs to abandon offshore wells and platforms and is determined on a
field-by-field basis using the units of production method. The Company's DD&A
expense for 1994 was $63,308,000, an increase of approximately 56% from DD&A
expenses of $40,693,000 for 1993, and
25
<PAGE> 27
an increase of approximately 50% from DD&A expenses of $42,302,000 for 1992. The
increases in the Company's DD&A expenses for 1994, compared to 1993 and 1992,
resulted primarily from increased volumes produced (largely related to the
increased natural gas production discussed above) and, to a lesser extent, an
increase in the composite DD&A rate. The composite DD&A rate for all of the
Company's producing fields for 1994 was $0.77 per equivalent Mcf ($4.59 per
equivalent barrel), an increase of approximately 12% from a composite DD&A rate
of $0.69 per equivalent Mcf ($4.11 per equivalent barrel) for 1993, and an
increase of 10% from a composite DD&A rate of $0.70 per equivalent Mcf ($4.17
per equivalent barrel) for 1992. The Company produced 82,008,000 equivalent Mcf
(13,668,000 equivalent barrels) in 1994, an increase of approximately 40% from
the 58,718,000 equivalent Mcf (9,786 equivalent barrels) produced in 1993, and
an increase of approximately 36% from the 60,189,000 equivalent Mcf (10,032,000
equivalent barrels) produced in 1992. See "Financial Statements and
Supplementary Data -- Note 1 of Notes to Consolidated Financial Statements ."
Interest charges for 1994 were $10,104,000, a decrease of approximately 8%
from interest charges of $10,956,000 for 1993, and a decrease of approximately
47% from interest charges of $19,036,000 for 1992. The decrease in interest
charges for 1994, compared to 1993 and 1992, was related primarily to decreased
debt issue amortization expenses, lower average interest rate levels on the debt
outstanding (as a result of refinancing certain debt discussed in "-- Liquidity
and Capital Resources" below), and, as compared to 1992, a decrease in the
amount of debt outstanding. These decreases in interest charges for 1994,
compared to 1993 and 1992, were partially offset by increased commitment fees
resulting from increased availability under the Company's bank revolving credit
facility and, as compared to 1993, an increase in debt outstanding. See
"Financial Statements and Supplementary Data -- Note 3 of Notes to Consolidated
Financial Statement."
Income tax expense for 1994 was $15,517,000, an increase of approximately
4% from income tax expense of $14,981,000 for 1993, and an increase of
approximately 52% from income tax expense of $10,192,000 for 1992. The increases
in income tax expense are related to increases in profitability and to the
effective tax rates of 36.2% in 1994, 37.5% in 1993 and 35.5% in 1992. The
variances in the effective tax rates are primarily related to the expenses
incurred by the Company's subsidiary in Thailand which are not included in the
Company's consolidated U.S. federal income tax returns.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Consolidated Statement of Cash Flows for the year ended
December 31, 1994, reflects net cash provided by operating activities of
$99,273,000. In addition to the net cash provided by operating activities, the
Company also received $3,687,000 from the exercise of stock options. Other
significant cash receipts and disbursements during 1994 included the following.
The Company issued and sold $86,250,000 of 5 1/2% Notes in March 1994, and had
net borrowings of $7,000,000 under uncommitted money market credit lines with
certain banks. The Company invested $85,375,000 of such cash flow in capital
projects during 1994, purchased certain proved reserves for $32,578,000, prepaid
the remaining outstanding principal and prepayment fee on its 10.25% Notes
($24,472,000), made net payments of $53,000,000 on the Company's revolving
credit facility, paid $2,446,000 of issuance expenses in connection with its
offering of the 5 1/2% Notes and paid $1,966,000 ($0.06 per share) in dividends
to holders of the Company's common stock. Of the $85,375,000 invested in capital
projects, $22,955,000 was applicable to 1993 projects and $62,420,000 was
applicable to 1994 capital projects. The Company's total debt at December 31,
1994, was $150,531,000, an increase of approximately 12% from total debt of
$134,539,000 at December 31, 1993. The increase in the Company's total debt
resulted primarily from the purchase of certain proved reserves in the fourth
quarter of 1994. As of December 31, 1994, the Company had $2,922,000 in cash and
cash investments.
The Company's capital and exploration budget for 1995, which does not
include any amounts which may be expended for the purchase of proved reserves or
any interest which may be capitalized resulting from projects in progress, was
established by the Company's Board of Directors in January 1995, at
$100,000,000, an increase of approximately 13% from the Company's capital and
exploration expenditures (excluding purchased reserves and interest capitalized)
of $88,300,000 for 1994, an increase of approximately 34% over capital and
exploration expenditures (excluding capitalized interest) of $74,600,000 for
1993, and an increase of approximately 209% over capital and exploration
expenditures (excluding purchased reserves and interest capitalized) of
approximately $32,400,000 for 1992.
26
<PAGE> 28
In addition to anticipated capital and exploration expenses, other material
1995 cash requirements that the Company currently anticipates include ongoing
operating, general and administrative, income tax, and interest expense, sinking
fund payments and the payment of dividends on its common stock, including a
$0.03 per share dividend on its common stock to be paid February 28, 1995, to
stockholders of record on February 10, 1995. The Company currently anticipates
that cash provided by operating activities and funds available under its Credit
Agreement and uncommitted money market credit lines will be sufficient to fund
the Company's ongoing expenses, its 1995 capital and exploration budget and
anticipated future dividend payments. In this regard, the Company reinstated the
practice of declaring a quarterly dividend commencing in the third quarter of
1994. However, the declaration and payment of future dividends will depend upon,
among other things, the Company's future earnings and financial condition,
liquidity and capital requirements, the general economic and regulatory climate
and other factors deemed relevant by the Company's Board of Directors.
The Company's amended bank credit agreement (the "Credit Agreement")
currently provides for a $100,000,000 revolving/term credit facility which will
be fully revolving until June 29, 1996, after which the balance will be due in
eight quarterly term loan installments, commencing July 31, 1996. The amount
that may be borrowed under the Credit Agreement may not exceed a borrowing base,
determined semiannually by the lenders in accordance with the Credit Agreement
based on the discounted present value of certain of the Company's oil and gas
reserves. The borrowing base currently exceeds $100,000,000. The Credit
Agreement is governed by various financial and other covenants, including
requirements to maintain positive working capital (excluding current maturities
of debt), a fixed charge coverage ratio, and limitations on the prepayment
(without refinancing) of subordinated debt, the payment of dividends, mergers
and consolidations, and asset dispositions. See "Market for the Registrant's
Common Stock and Related Security Holder Matters." Upon the occurrence or
declaration of certain events, the banks would be entitled to a security
interest in the borrowing base properties, which include most of the Company's
domestic properties. Borrowings under the Credit Agreement currently bear
interest at a Base (Prime) rate, a certificate of deposit rate plus 1 5/8%, or
LIBOR plus 1 1/2%, at the Company's option. A commitment fee of 1/2 of 1% per
annum of the unborrowed amount under the Credit Agreement is also due.
The Company has also entered into separate letter agreements with two banks
under which each bank may provide a $10,000,000 uncommitted money market line of
credit. The two lines of credit are on an as available or offered basis and
neither bank has an obligation to make any advances under its respective line of
credit. Although loans made under these letter agreements are for a maximum term
of 30 days, they are reflected as long-term debt on the Company's balance sheet
because the Company currently has the ability and intends to reborrow such
amounts under its Credit Agreement. Both letter agreements permit either party
to terminate such letter agreement at any time. Under its Credit Agreement, the
Company is currently limited to incurring a maximum of $10,000,000 of additional
senior debt, which would include debt incurred under these lines of credit. As
of December 31, 1994, indebtedness in the principal amount of $21,000,000 was
outstanding under the Credit Agreement and the two letter agreements.
The outstanding principal amount of 5 1/2% Notes was $86,250,000 as of
December 31, 1994. The 5 1/2% Notes are convertible into Common Stock at $22.188
per share subject to adjustment upon the occurrence of certain events. The
5 1/2% Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after March 15, 1998, at a redemption price of 103.3% of
their principal amount and decreasing percentages thereafter. No sinking fund
payments are required on the 5 1/2% Notes. The 5 1/2% Notes are redeemable at
the option of the holder, upon the occurrence of a repurchase event (a change of
control as defined in the indenture governing the 5 1/2% Notes), at 100% of the
principal amount.
The outstanding principal amount of the 8% Convertible Subordinated
Debentures, due 2005 (the "8% Debentures") was $43,281,000 as of December 31,
1994. The 8% Debentures are convertible into Common Stock at $39.50 per share,
subject to adjustment in certain circumstances, including stock splits. The 8%
Debentures are redeemable at the option of the Company at 102.4% of their
principal amount through December 30, 1995, and decreasing percentages
thereafter, and are subject to mandatory annual sinking fund requirements of
$3,000,000, due each December, with a final maturity of December 31, 2005. The
sinking fund requirements for the 8% Debentures will be sufficient to retire all
but $15,000,000 of the issue prior to
27
<PAGE> 29
maturity. The Company currently has purchased $1,718,000 face amount of 8%
Debentures which it may tender in satisfaction of future sinking fund
requirements. See "Financial Statements and Supplementary Data -- Note 3 to
Notes to Consolidated Financial Statements."
OTHER MATTERS
Publicly held companies are asked to comment on the effects of inflation on
their business. Currently annual inflation in terms of the decrease in the
general purchasing power of the dollar is running much below the general annual
inflation rates experienced in the past. While the Company, like other
companies, continues to be affected by fluctuations in the purchasing power of
the dollar, such effect is not currently considered significant.
28
<PAGE> 30
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994
POGO PRODUCING COMPANY AND SUBSIDIARIES
HOUSTON, TEXAS
29
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Pogo Producing Company:
We have audited the accompanying consolidated balance sheets of Pogo
Producing Company (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of Pogo's
management. Our responsibility is to express an opinion on these financial
statements 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Pogo Producing Company and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 3, 1995
30
<PAGE> 32
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Oil and gas.............................................. $173,556 $136,553 $139,128
Interest on tax refund................................... -- 2,322 --
Gains on sales........................................... 52 679 1,702
-------- -------- --------
Total............................................ 173,608 139,554 140,830
-------- -------- --------
Operating Costs and Expenses:
Lease operating.......................................... 29,768 26,633 25,842
General and administrative............................... 15,984 14,550 13,129
Exploration.............................................. 5,257 2,455 3,102
Dry hole and impairment.................................. 7,088 4,690 9,314
Depreciation, depletion and amortization................. 63,308 40,693 42,302
-------- -------- --------
Total............................................ 121,405 89,021 93,689
-------- -------- --------
Operating Income........................................... 52,203 50,533 47,141
Interest:
Charges.................................................. (10,104) (10,956) (19,036)
Income................................................... 53 14 191
Capitalized.............................................. 739 451 391
-------- -------- --------
Income Before Taxes and Extraordinary Item................. 42,891 40,042 28,687
-------- -------- --------
Income Tax Expense......................................... (15,517) (14,981) (10,192)
-------- -------- --------
Income Before Extraordinary Item........................... 27,374 25,061 18,495
Extraordinary Loss on Early Extinguishment of Debt, net of
tax...................................................... (307) -- --
-------- -------- --------
Net Income................................................. $ 27,067 $ 25,061 $ 18,495
======== ======== ========
Primary and Fully Diluted Earnings per Common Share:
Before extraordinary item................................ $ 0.82 $ 0.76 $ 0.66
Extraordinary item....................................... (0.01) -- --
-------- -------- --------
Net income............................................... $ 0.81 $ 0.76 $ 0.66
======== ======== ========
Dividends per Common Share................................. $ 0.06 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
hereof.
31
<PAGE> 33
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- --------
(EXPRESSED IN
THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash investments............................................. $ 2,922 $ 6,713
Accounts receivable................................................... 28,915 18,480
Other receivables..................................................... 14,717 10,123
Federal income taxes and interest receivable.......................... -- 3,320
Inventories........................................................... 2,422 1,105
Other................................................................. 745 727
-------- --------
Total current assets.......................................... 49,721 40,468
-------- --------
Property and Equipment:
Oil and gas, on the basis of successful efforts accounting
Proved properties being amortized.................................. 913,865 817,218
Unproved properties and properties under development, not being
amortized......................................................... 6,890 6,465
Other, at cost........................................................ 8,268 6,961
-------- --------
929,023 830,644
Less -- accumulated depreciation, depletion, and amortization,
including
$5,040 and $4,452 respectively, applicable to other property....... 691,110 638,658
-------- --------
237,913 191,986
-------- --------
Other................................................................... 11,192 7,320
-------- --------
$298,826 $239,774
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................................... $ 8,065 $ 8,307
Other payables........................................................ 26,497 22,955
Current portion of long-term debt..................................... 1,282 4,000
Accrued interest payable.............................................. 1,583 1,202
Accrued payroll and related benefits.................................. 1,237 1,005
Other................................................................. 40 122
-------- --------
Total current liabilities..................................... 38,704 37,591
Long-Term Debt.......................................................... 149,249 130,539
Deferred Federal Income Tax............................................. 36,487 29,724
Deferred Credits........................................................ 10,349 8,117
-------- --------
Total liabilities............................................. 234,789 205,971
-------- --------
Shareholders' Equity:
Preferred stock, $1 par; 2,000,000 shares authorized.................. -- --
Common stock, $1 par; 43,333,333 shares authorized, 32,825,836 and
32,449,197 shares issued, respectively............................. 32,826 32,449
Additional capital.................................................... 130,675 125,919
Retained earnings (deficit)........................................... (99,140) (124,241)
Treasury stock, at cost............................................... (324) (324)
-------- --------
Total shareholders' equity.................................... 64,037 33,803
-------- --------
$298,826 $239,774
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
hereof.
32
<PAGE> 34
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- -------- --------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers...................................... $ 165,549 $141,012 $135,877
Federal income taxes and interest received........................ 3,364 -- --
Operating, exploration, and general and administrative expenses
paid............................................................ (50,894) (45,051) (41,360)
Interest paid..................................................... (9,620) (10,912) (21,262)
Payment of royalties and related interest on FERC Order 94-A
refunds......................................................... -- -- (4,872)
Federal income taxes paid......................................... (7,500) (2,800) (1,500)
Settlement of natural gas transportation and exchange imbalance... (2,168) -- --
Other............................................................. 542 895 828
--------- -------- --------
Net cash provided by operating activities.................. 99,273 83,144 67,711
--------- -------- --------
Cash flows from investing activities:
Capital expenditures.............................................. (85,375) (62,353) (30,304)
Purchase of proved reserves....................................... (32,578) -- (8,924)
Proceeds from the sale of property and tubular stock.............. 52 2,713 4,017
--------- -------- --------
Net cash used in investing activities...................... (117,901) (59,640) (35,211)
--------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of new debt................................ 86,250 -- --
Net borrowings under uncommitted lines of credit with banks....... 7,000 -- --
Proceeds from exercise of stock options........................... 3,687 2,026 703
Net borrowings (payments) under revolving credit agreements....... (53,000) 8,000 (1,000)
Principal payments of other long-term debt obligations............ (24,472) (7,000) (54,000)
Principal payments of production payment obligation............... -- (24,854) (20,621)
Proceeds from issuance of common stock............................ -- -- 43,313
Debt issue expenses paid.......................................... (2,446) -- (1,100)
Payment of cash dividends on common stock......................... (1,966) -- --
Purchase of 8% debentures due 2005................................ (216) -- --
--------- -------- --------
Net cash provided by (used in) financing activities........ 14,837 (21,828) (32,705)
--------- -------- --------
Net increase (decrease) in cash and cash investments................ (3,791) 1,676 (205)
Cash and cash investments at the beginning of the year.............. 6,713 5,037 5,242
--------- -------- --------
Cash and cash investments at the end of the year.................... $ 2,922 $ 6,713 $ 5,037
========== ========= =========
Reconciliation of net income to net cash provided by operating
activities:
Net income........................................................ $ 27,067 $ 25,061 $ 18,495
Adjustments to reconcile net income to net cash provided by
operating activities............................................
Extraordinary loss on early extinguishment of debt, net of
tax........................................................... 307 -- --
Gains on sales.................................................. (52) (679) (1,702)
Depreciation, depletion and amortization........................ 63,308 40,693 42,302
Dry hole and impairment......................................... 7,088 4,690 9,314
Interest capitalized............................................ (739) (451) (391)
Increase in deferred federal income taxes....................... 8,374 13,356 8,669
Change in assets and liabilities:
(Increase) decrease in accounts receivable.................... (10,435) 4,172 (1,191)
(Increase) decrease in federal income taxes and interest
receivable................................................. 3,320 (3,320) --
Increase in other current assets.............................. (18) (360) (27)
(Increase) decrease in other assets........................... (1,426) 838 (3,515)
Increase (decrease) in accounts payable....................... (242) (1,592) 733
Increase (decrease) in accrued interest payable............... 381 80 (2,480)
Increase (decrease) in accrued payroll and related benefits... 232 63 (244)
Decrease in other current liabilities......................... (124) (20) (9)
Increase (decrease) in deferred credits....................... 2,232 613 (2,243)
--------- -------- --------
Net cash provided by operating activities........................... $ 99,273 $ 83,144 $ 67,711
========== ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
hereof.
33
<PAGE> 35
POGO PRODUCING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED SHAREHOLDERS'
SHARES COMMON ADDITIONAL EARNINGS TREASURY EQUITY
OUTSTANDING STOCK CAPITAL (DEFICIT) STOCK (DEFICIT)
--------- -------- ---------- --------- -------- -------------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991..... 27,456,822 $ 27,457 $ 83,704 $(167,797) $ -- $ (56,636)
Net income....................... -- -- -- 18,495 -- 18,495
Issuance of common stock......... 4,500,000 4,500 38,368 -- -- 42,868
Exercise of stock options........ 147,042 147 774 -- -- 921
--------- -------- ---------- --------- -------- ---------
BALANCE AT DECEMBER 31, 1992..... 32,103,864 32,104 122,846 (149,302) -- 5,648
Net income....................... -- -- -- 25,061 -- 25,061
Exercise of stock options........ 345,308 345 3,072 -- -- 3,417
Acquisition of treasury stock, at
cost........................... (15,575) -- -- -- (324) (324)
Conversion of debenture.......... 25 -- 1 -- -- 1
--------- -------- ---------- --------- -------- ---------
BALANCE AT DECEMBER 31, 1993..... 32,433,622 32,449 125,919 (124,241) (324) 33,803
Net income....................... -- -- -- 27,067 -- 27,067
Exercise of stock options........ 376,639 377 4,756 -- -- 5,133
Dividends ($0.06 per common
share)......................... -- -- -- (1,966) -- (1,966)
---------- -------- ---------- --------- -------- ---------
BALANCE AT DECEMBER 31, 1994..... 32,810,261 $ 32,826 $ 130,675 $ (99,140) $ (324) $ 64,037
========== ======== ========= ========= ====== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
hereof.
34
<PAGE> 36
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation --
The consolidated financial statements include the accounts of Pogo
Producing Company and its wholly-owned subsidiaries (the "Company"), after
elimination of all significant intercompany transactions.
Inventories --
Inventories consist primarily of tubular goods used in the Company's
operations and are stated at the lower of average cost or market value.
Interest Capitalized --
Interest costs related to financing major oil and gas projects in progress
are capitalized until the projects are evaluated.
Earnings per Share --
Earnings per common and common equivalent share (primary earnings per
share) are based on the weighted average number of shares of Common Stock and
common equivalent shares outstanding during the periods. The dilutive effect of
stock options was considered in the earnings per share reported for the periods.
The 8% Debentures are common stock equivalents and were anti-dilutive in all
periods. Earnings per common and common equivalent share assuming full dilution
(fully diluted earnings per share) considered the 10.25% Notes (retired on April
18, 1994) which were anti-dilutive in all periods in which they were outstanding
and the 5 1/2% Notes (issued on March 16, 1994) which were dilutive for the
portion of 1994 in which they were outstanding, but such dilution was not
sufficient to change reported earnings per share. Earnings per share are based
on the following:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Earnings applicable to Common Stock:
Primary --
Income before extraordinary loss................... $27,374 $25,061 $18,495
Extraordinary loss................................. (307) -- --
------- ------- -------
Net income......................................... $27,067 $25,061 $18,495
======= ======= =======
Fully diluted --
Income before extraordinary loss................... $29,755 $25,061 $18,495
Extraordinary loss................................. (307) -- --
------- ------- -------
Net income......................................... $29,448 $25,061 $18,495
======= ======= =======
Weighted average number of Common Stock and common
equivalent shares outstanding:
Primary............................................ 33,352 32,860 27,929
Fully diluted...................................... 36,451 32,894 28,073
</TABLE>
Production Imbalances --
Owners of an oil and gas property often take more or less production from a
property than entitled to based on their ownership percentages in the property.
This results in a condition known in the industry as a production imbalance. The
Company follows the "take" (cash) method of accounting for production
imbalances. Under this method, the Company recognizes revenues on production as
it is taken and delivered to its purchasers. The Company's crude oil imbalances
are not significant. At December 31, 1994, the
35
<PAGE> 37
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company had taken approximately 4,873 MMcf of natural gas less than it was
entitled to based on its interest in certain properties, and approximately 1,994
MMcf more than its entitlement in certain other properties placing the Company
at year end in a net under-delivered position of approximately 2,879 MMcf of
natural gas based on its working interest ownership in the properties.
Oil and Gas Activities and Depreciation, Depletion, and Amortization --
The Company follows the successful efforts method of accounting for its oil
and gas activities. Under the successful efforts method, lease acquisition costs
and all development costs are capitalized. Unproved properties are reviewed
quarterly to determine if there has been impairment of the carrying value, with
any such impairment charged to expense in the period. Exploratory drilling costs
are capitalized until the results are determined. If proved reserves are not
discovered, the exploratory drilling costs are expensed. Other exploratory costs
are expensed as incurred. The provision for depreciation, depletion and
amortization is based on the capitalized costs mentioned above plus future costs
to abandon offshore wells and platforms and is determined on a field-by-field
basis using the units of production method.
Other properties are depreciated using a straight-line method in amounts
which in the opinion of management are adequate to allocate the cost of the
properties over their estimated useful lives.
Consolidated Statements of Cash Flows --
For the purpose of cash flows, the Company considers all highly liquid
investments with a maturity date of three months or less to be cash equivalents.
Significant transactions may occur which do not directly affect cash balances
and as such will not be disclosed in the Consolidated Statements of Cash Flows.
Certain such noncash transactions are disclosed in the Consolidated Statements
of Shareholders' Equity relating to the acquisition of treasury stock in 1993 in
exchange for stock options exercised and the conversion in 1993 of a debenture
into Common Stock. In addition, the Company in 1993, exchanged its working
interest in thirteen Gulf of Mexico oil and gas properties for an increased
working interest in five other Gulf of Mexico oil and gas properties in a
noncash "like kind" exchange. The oil and gas property and accumulated
depreciation, depletion and amortization accounts as reflected in the
Consolidated Balance Sheets have been adjusted to reflect the appropriate
amounts to record the working interests acquired and disposed of. The oil and
gas reserves acquired and disposed of are reflected as purchases and sales in
the "Estimates of Proved Reserves" roll forward included in the "Unaudited
Supplementary Financial Data" included elsewhere herein.
Commitments and Contingencies --
The Company's office rent expense was $819,000, $868,000, and $808,000 in
1994, 1993, and 1992, respectively. The Company has lease commitments for office
space of $822,000 in 1995, $1,039,000 in 1996 and 1997, $1,007,000 in 1998, and
$962,000 in 1999.
(2) INCOME TAXES
The components of income (loss) before income taxes for each of the three
years in the period ended December 31, 1994, are as follows (expressed in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States........................................... $44,931 $43,749 $29,872
Foreign................................................. (2,040) (3,707) (1,185)
------- ------- -------
Total......................................... $42,891 $40,042 $28,687
======= ======= =======
</TABLE>
36
<PAGE> 38
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of federal income tax expense (benefit) for each of the
three years in the period ended December 31, 1994, are as follows (expressed in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States, current.................................. $ 7,500 $ 2,800 $ 1,500
United States, deferred(a).............................. 8,374 12,360 8,672
Foreign, current........................................ (357) (179) 20
------- ------- -------
Total......................................... $15,517 $14,981 $10,192
======= ======= =======
</TABLE>
- ---------------
(a) Excludes $165,000 of deferred tax benefits on a $472,000 extraordinary loss
in 1994.
Total federal income tax expense (benefit) for each of the three years in
the period ended December 31, 1994, differs from the amounts computed by
applying the statutory federal income tax rate to income before taxes as
follows: (expressed as a percent of pretax income):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate............................ 35.0% 35.0% 34.0%
Increases (reductions) resulting from:
Statutory depletion in excess of tax basis................. (0.1) (0.4) (0.1)
Foreign taxes.............................................. 0.9 2.9 1.4
Other...................................................... 0.4 -- 0.2
---- ---- ----
36.2% 37.5% 35.5%
==== ==== ====
</TABLE>
The deferred federal income tax provision is the result of the difference
between deferred tax liabilities determined at each balance sheet date. The
deferred tax liabilities are determined by applying current tax laws to
temporary differences in the recognition of revenue and expense for tax and
financial purposes. The principal components of the Company's deferred income
tax liability include the following at December 31, 1994 and 1993 (expressed in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Temporary differences arise primarily from the following --
Intangible drilling costs, capitalized and amortized for
financial statement purposes and deducted for income tax
purposes.................................................. $132,500 $112,135
Differences in depletion and depreciation rates used for
tangible assets for financial and income tax purposes..... (78,457) (56,136)
Charges to property and equipment, expensed for financial
statement purposes, and capitalized and amortized for
income tax purposes....................................... (35,266) (38,243)
Interest charges, capitalized and amortized for financial
statement purposes and deducted for income tax purposes... 17,710 16,800
Income tax carryforward credits.............................. -- (4,832)
-------- --------
Deferred tax liability....................................... $ 36,487 $ 29,724
======== ========
</TABLE>
37
<PAGE> 39
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) LONG-TERM DEBT
Long-term debt and the amount due within one year at December 31, 1994 and
1993, consists of the following (dollars expressed in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Senior debt --
Bank revolving credit agreements debt:
Prime rate based loans, borrowings at December 31, 1993 at
an interest rate of 5.75%............................... $ -- $ 27,000
LIBO Rate based loans, borrowings at December 31, 1994 and
1993 at average interest rates of 7.63% and 5.20%,
respectively............................................ 14,000 40,000
-------- --------
Total bank revolving credit agreement debt........... 14,000 67,000
Uncommitted credit lines with banks, borrowings at December
31, 1994 at an average interest rate of 7.21%............. 7,000 --
-------- --------
Total senior debt.............................................. 21,000 67,000
-------- --------
Subordinated debt --
5 1/2% Convertible subordinated notes, due 2004.............. 86,250 --
8% Convertible subordinated debentures, due 2005, $1,282
sinking fund requirement in 1995 and a $3,000 annual
sinking fund requirement thereafter....................... 43,281 43,539
10.25% Convertible subordinated notes, due 1999, and retired
on April 18, 1994......................................... -- 24,000
-------- --------
Total subordinated debt........................................ 129,531 67,539
-------- --------
Total debt..................................................... 150,531 134,539
-------- --------
Amount due within one year --
Current portion of long-term debt, consisting of sinking fund
requirements on:
8% Debentures............................................. (1,282) --
10.25% Notes.............................................. -- (4,000)
-------- --------
Long-term debt................................................. $149,249 $130,539
======== ========
</TABLE>
The bank revolving credit agreement entered into in December, 1993, extends
to the Company a $100,000,000 revolving/term credit facility which will be fully
revolving until June 29, 1996 and will convert to a term loan with eight
quarterly installments commencing July 31, 1996. The amount that may be borrowed
under the facility may not exceed a borrowing base, determined semiannually by
the lenders based on the discounted present value of the Company's oil and gas
reserves and the provisions of the agreement. The borrowing base currently
exceeds $100,000,000. The agreement provides that total debt and total debt for
borrowed money, as defined, may not exceed $230,000,000 and $200,000,000,
respectively. The facility is governed by various financial covenants including
the maintenance of positive working capital (excluding current maturities of
debt), a fixed charge ratio, as defined, of 1.7 or greater, a $10,000,000 limit
on other senior debt, and a $10,000,000 limit on prepayment (without
refinancing) of subordinated debt in any one year and $20,000,000 in total
through July 31, 1996. Upon the occurrence of an event of default or certain
other specified events, the banks would be entitled to a security interest in
the borrowing base properties, which constitute substantially all of the
Company's domestic oil and gas properties. Borrowings under the facility bear
interest at a Base (Prime) rate, certificate of deposit rate plus 1 5/8%, or
LIBOR plus 1 1/2%, at the Company's option. A commitment fee of 1/2 of 1% per
annum of the unborrowed amount under the facility is
38
<PAGE> 40
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
also due. The Company incurred commitment fees of $409,000 in 1994, $149,000 in
1993, and $80,000 in 1992 under this and a prior revolving credit agreement.
The Company has entered into separate letter agreements with two banks
under which each bank may provide a $10,000,000 uncommitted line of credit. The
two $10,000,000 lines of credit are on an as available or offered basis and the
banks have no obligations to make any advances under the lines. Loans made under
the agreements are for a maximum term of 30 days and are reflected as long-term
as the Company has the intent and ability to reborrow such amounts under its
bank revolving credit agreement discussed above. The agreements may be
terminated at any time by the Company or either bank.
The 5 1/2% convertible subordinated notes, due 2004 (the "5 1/2% Notes")
are convertible into Common Stock at $22.188 per share subject to adjustment
upon the occurrence of certain events. The 5 1/2% Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after March
15, 1998, at a redemption price of 103.3% and decreasing percentages thereafter.
No sinking fund is provided. The 5 1/2% Notes are redeemable at the option of
the holder, upon the occurrence of a repurchase event (a change in control, as
defined), at 100% of the principal amount.
The 8% convertible subordinated debentures, due 2005 (the "8% Debentures")
are convertible into Common Stock at $39.50 per share subject to adjustments
under certain circumstances, including stock splits. The 8% Debentures are
redeemable at the option of the Company at 102.4% through December 30, 1995, and
decreasing percentages thereafter, and are subject to mandatory annual sinking
fund requirements of $3,000,000 which commenced December 31, 1990. Such
requirements will be sufficient to retire all but $15,000,000 of the issue prior
to maturity. As of December 31, 1994, the Company has purchased $13,998,000
principal amount of the bonds at less than face value resulting in both ordinary
and extraordinary gains. The Company has tendered $12,000,000 principal amount
of the bonds to the trustee in satisfaction of sinking fund requirements and
$280,000 principal amount of the bonds have been called by the trustee. The
Company currently has $1,718,000 principal amount of bonds purchased in excess
of current sinking fund requirements which may be tendered in satisfaction of
future sinking fund requirements.
Current maturities and sinking fund requirements during the next five years
in connection with the above long-term debt are $1,282,000 in 1995, $9,300,000
in 1996, $13,500,000 in 1997, $7,200,000 in 1998 and $3,000,000 in 1999.
Included in the current maturities reflected above are $6,300,000 in 1996,
$10,500,000 in 1997, and $4,200,000 in 1998 relative to bank debt. The Company
has established a history of refinancing its bank debt before scheduled
maturities and expects to do so again before the amortization of bank debt
commences in 1996.
(4) SALES TO MAJOR CUSTOMERS
The Company is an oil and gas exploration and production company that
generally sells its oil and gas to numerous customers on a month-to-month basis.
Sales to the following customers exceeded 10 percent of revenues during the
years indicated (expressed in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Enron Corp. and its affiliate EOTT Energy Partners
L.P. ................................................. $27,630 $16,437 $ --
Coastal Gas Marketing Company (an affiliate of The
Coastal Corporation).................................. $27,609 $ 4,682 $ 3,830
Scurlock Permian Corp. (a subsidiary of Ashland Inc.)... $21,134 $38,510 $39,729
</TABLE>
39
<PAGE> 41
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) CREDIT RISK
Substantially all the Company's accounts receivable at December 31, 1994,
result from oil and gas sales and joint interest billings to other companies in
the oil and gas industry. This concentration of customers and joint interest
owners may impact the Company's overall credit risk, either positively or
negatively, in that these entities may be similarly affected by industry-wide
changes in economic or other conditions. Such receivables are generally not
collateralized. Historically, credit losses incurred by the Company on
receivables generally have not been material. No known material credit losses
were experienced during 1994.
(6) EMPLOYEE BENEFITS
A total of 3,476,430 shares of Common Stock are reserved for issuance to
key employees and non-employee directors under the Company's stock option plans.
The stock option plans authorize the granting of options at prices equivalent to
the market value at the date of grant. Options generally become exercisable in
three annual installments commencing one year after the date granted and, if not
exercised, expire 10 years from the date of grant. At January 1, 1994, 1,490,676
shares were issuable under stock options outstanding. Options for 291,000 shares
were granted during 1994 at prices ranging from $19.13 to $22.25 per share.
During 1994, 376,639 options were exercised at prices ranging from $4.38 to
$17.44 per share and options to purchase 17,500 shares at a price of $16.25 were
cancelled. At December 31, 1994, options to purchase 1,387,537 shares were
outstanding (902,455 were exercisable) at prices ranging from $4.38 to $22.25.
The Company has a tax-advantaged savings plan in which all salaried
employees may participate. Under such plan, a participating employee may
allocate up to 10% of his salary, and the Company makes matching contributions
of up to 6% thereof. Funds contributed by the employee and the matching funds
contributed by the Company are held in trust by a bank trustee in six separate
funds. Amounts contributed by the employee and earnings and accretions thereon
may be used to purchase shares of Common Stock, invest in a money market fund or
invest in four stock, bond, or blended stock and bond mutual funds according to
instructions from the employee. Matching funds contributed to the savings plan
by the Company are invested only in Common Stock. The Company contributed
$375,000 to the savings plan in 1994, $125,000 in 1993, and $288,000 in 1992.
40
<PAGE> 42
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A trusteed retirement plan has been adopted by the Company for its salaried
employees. The benefits are based on years of service and the employee's average
compensation for five consecutive years within the final ten years of service
which produce the highest average compensation. The Company makes annual
contributions to the plan in the amount of retirement plan cost accrued or the
maximum amount which can be deducted for federal income tax purposes. The
following table sets forth the plan's funded status (in thousands of dollars) as
of December 31, 1994, 1993, and 1992.
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Actuarial present value (discounted at 8 1/2, 7 1/2, and
8 1/4%, respectively) of benefit obligations:
Accumulated benefit obligations --
Vested............................................. $ 3,940 $ 4,019 $ 3,120
Non-vested......................................... 820 717 701
------- ------- -------
Total accumulated benefit obligations.............. 4,760 4,736 3,821
Projected salary increases (escalated at 6%) and other
changes............................................ 1,434 1,500 2,653
------- ------- -------
Projected benefit obligations for service rendered to
date............................................... 6,194 6,236 6,474
Plan assets at fair value, primarily listed securities
with an expected long-term rate of return of 8 1/2%... 13,988 13,481 13,830
------- ------- -------
Plan assets in excess of projected benefit
obligations........................................... 7,794 7,245 7,356
Unrecognized:
Net overfunding being recognized over 15 years........ (646) (750) (853)
Net gain arising from the difference between actual
experience and that assumed........................ (3,443) (3,209) (3,956)
Prior service cost.................................... (430) (473) (41)
------- ------- -------
Accrued retirement plan asset........................... $ 3,275 $ 2,813 $ 2,506
======= ======= =======
Retirement plan cost (benefit) for 1994, 1993, and 1992
included the following components:
Service cost, benefits accruing each year with
proration for future salary increases............ $ 499 $ 611 $ 514
Interest cost on projected benefit obligations..... 476 524 451
Actual return on plan assets....................... (1,139) (1,164) (1,141)
Net amortization and deferral...................... (298) (278) (360)
------- ------- -------
Accrued retirement plan cost (benefit)............. $ (462) $ (307) $ (536)
======= ======= =======
</TABLE>
Effective January 1, 1992, the Company adopted the provisions of the
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company currently provides
full medical benefits to its retired employees and dependents. For current
employees, the Company assumes all or a portion of postretirement medical and
term life insurance costs based on the employee's age and length of service with
the Company. The postretirement medical plan has no assets and is currently
funded by the Company on a pay-as-you-go basis.
41
<PAGE> 43
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is an analysis (in thousands of dollars) of the annual
expense and activity in the deferred cost and benefits obligation accounts for
1992, 1993 and 1994. The computation assumes that future increases in medical
costs will trend down from 13% to 7% per year over the next 12 years for
purposes of estimating future costs. The medical cost trend rate assumption has
a significant effect on the amounts reported. Increasing the assumed medical
cost trend rate by one percent in each year would increase the aggregate of
service and interest cost components of net periodic postretirement benefit cost
for 1994 by $196,000 and the accumulated postretirement benefit obligation as of
December 31, 1994, by $897,000.
<TABLE>
<CAPTION>
ANNUAL DEFERRED BENEFIT
EXPENSE COSTS OBLIGATION
------- -------- ----------
<S> <C> <C> <C>
Transition obligation at January 1, 1992................. $4,263 $ (4,263)
Amortization of transition costs over 14 years
representing the average remaining service period of
eligible employees..................................... $ 305 (305) 305
Service cost, including interest......................... 303
Interest cost on transition obligation................... 362
-------
1992 expense............................................. $ 970 (970)
======
Current benefits paid.................................... 170
-------- ----------
Balance at December 31, 1992............................. 3,958 (4,758)
Amortization of transition costs over 14 years........... $ 305 (305) 305
Service cost, including interest......................... 368
Interest cost on transition obligation................... 407
-------
1993 expense............................................. $1,080 (1,080)
======
Current benefits paid.................................... 246
Unrecognized net loss.................................... (1,400)
-------- ----------
Balance at December 31, 1993............................. 3,653 (6,687)
Amortization of transition costs over 14 years........... $ 304 (304) 304
Amortization of net loss from earlier periods............ 57 57
Service cost, including interest......................... 395
Interest cost on transition obligation................... 494
-------
1994 expense............................................. $1,250 (1,250)
======
Current benefits paid.................................... 126
Unrecognized net gain.................................... 1,963
--------
Balance at December 31, 1994............................. $3,349
======
Plan assets at fair value................................ --
----------
Funded status at December 31, 1994 (discounted at
8 1/2%)................................................ $ (5,487)
========
</TABLE>
The accumulated postretirement benefit obligation (in thousands of dollars)
at December 31, 1994 is attributable to the following groups:
<TABLE>
<S> <C>
Retirees and beneficiaries................................................. $ 2,234
Dependents of retirees..................................................... 1,014
Fully eligible active employees............................................ 833
Active employees, not fully eligible....................................... 1,406
-------
$ 5,487
=======
</TABLE>
42
<PAGE> 44
POGO PRODUCING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.
Cash and Cash Investments
Fair value is carrying value as no cash equivalents or cash investments are
included in the balances as of December 31, 1994 and 1993.
Debt
<TABLE>
<CAPTION>
INSTRUMENT BASIS OF FAIR VALUE ESTIMATE
---------- ----------------------------
<S> <C>
Bank revolving credit agreement Fair value is carrying value as of December 31,
1994 and 1993, based on 1993 negotiations with the
lenders and the market value interest rates.
Uncommitted credit lines with banks Fair value is carrying value as of December 31,
1994 based on recent negotiations with the lenders
and the market value interest rates.
5 1/2% Notes Fair value is 94% of carrying value as of December
31, 1994 based on the quoted market price for this
publicly traded debt.
8% Debentures Fair value is 98.75% and 99.5%, of carrying value
as of December 31, 1994 and 1993, respectively,
based on the quoted market prices for this
publicly traded debt.
10.25% Notes Fair value is 103.7% of carrying value at December
31, 1993 based on the redemption premium.
</TABLE>
The carrying value and estimated fair value of the Company's financial
instruments at December 31, 1994 and 1993 (in thousands of dollars) are as
follows:
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash investments.................. $ 2,922 $ 2,922 $ 6,713 $ 6,713
Debt:
Bank revolving credit agreement.......... (14,000) (14,000) (67,000) (67,000)
Uncommitted credit lines with banks...... (7,000) (7,000) -- --
5 1/2% Notes............................. (86,250) (81,075) -- --
8% Debentures............................ (43,281) (42,740) (43,539) (43,321)
10.25% Notes............................. -- -- (24,000) (24,888)
</TABLE>
43
<PAGE> 45
UNAUDITED SUPPLEMENTARY FINANCIAL DATA
OIL AND GAS PRODUCING ACTIVITIES
The results of operations from oil and gas producing activities excludes
non-oil and gas revenues, general and administrative expenses, interest charges,
interest income and interest capitalized. United States income tax expense was
determined by applying the statutory rates to pretax operating results with
adjustments for permanent differences. Kingdom of Thailand tax expense was
determined by applying the statutory tax rate to Thailand taxable income.
<TABLE>
<CAPTION>
UNITED KINGDOM OF
TOTAL STATES THAILAND
-------- -------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
1994
-----------------------------------
Oil and gas revenues................................ $173,556 $173,518 $ 38
Lease operating expense............................. (29,768) (29,768) --
Exploration expense................................. (5,257) (3,931) (1,326)
Dry hole and impairment expense..................... (7,088) (7,088) --
Depreciation, depletion and amortization expense.... (62,723) (62,690) (33)
-------- -------- ----------
Pretax operating results............................ 68,720 70,041 (1,321)
Income tax (expense) benefit........................ (24,262) (24,619) 357
-------- -------- ----------
Operating results................................... $ 44,458 $ 45,422 $ (964)
======== ======== ========
1993
-----------------------------------
Oil and gas revenues................................ $136,553 $136,525 $ 28
Lease operating expense............................. (26,633) (26,633) --
Exploration expense................................. (2,455) (1,060) (1,395)
Dry hole and impairment expense..................... (4,690) (2,737) (1,953)
Depreciation, depletion and amortization expense.... (40,224) (40,193) (31)
-------- -------- ----------
Pretax operating results............................ 62,551 65,902 (3,351)
Income tax (expense) benefit........................ (22,712) (22,891) 179
-------- -------- ----------
Operating results................................... $ 39,839 $ 43,011 $ (3,172)
======== ======== ========
1992
-----------------------------------
Oil and gas revenues................................ $139,128 $139,128 $ --
Lease operating expense............................. (25,842) (25,842) --
Exploration expense................................. (3,102) (1,876) (1,226)
Dry hole and impairment expense..................... (9,314) (9,314) --
Depreciation, depletion and amortization expense.... (41,849) (41,834) (15)
-------- -------- ----------
Pretax operating results............................ 59,021 60,262 (1,241)
Income tax expense.................................. (20,510) (20,490) (20)
-------- -------- ----------
Operating results................................... $ 38,511 $ 39,772 $ (1,261)
======== ======== ========
</TABLE>
44
<PAGE> 46
UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED)
The following table sets forth the Company's capitalized costs (expressed
in thousands) incurred for oil and gas producing activities during the years
indicated.
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Capitalized costs incurred:
Property acquisition (United States)............... $ 36,354 $ 1,520 $11,578
Exploration --
United States................................... 5,803 8,267 3,865
Kingdom of Thailand............................. 5,022 4,583 1,412
Development (United States)........................ 67,143 57,648 20,717
Interest capitalized (United States)............... 739 451 391
-------- ------- -------
$115,061 $72,469 $37,963
======== ======= =======
Provision for depreciation, depletion and
amortization:
United States...................................... $ 62,690 $40,193 $41,834
Kingdom of Thailand................................ 33 31 15
-------- ------- -------
$ 62,723 $40,224 $41,849
======== ======= =======
</TABLE>
The following information regarding estimates of the Company's proved oil
and gas reserves, which are located offshore in United States waters of the Gulf
of Mexico, onshore in the United States and offshore in the Kingdom of Thailand
is based on reports prepared by Ryder Scott Company Petroleum Engineers. Their
summary report dated February 3, 1995 is set forth as an exhibit to this Form
10-K and includes definitions and assumptions that served as the basis for the
discussions under the caption "Item 1, Business -- Exploration and Production
Data -- Reserves." Such definitions and assumptions should be referred to in
connection with the following information.
ESTIMATES OF PROVED RESERVES
<TABLE>
<CAPTION>
OIL,
CONDENSATE AND
NATURAL GAS
LIQUIDS NATURAL GAS
(BBLS.) (MMCF)
-------------- -----------
<S> <C> <C>
Proved reserves (located in the United States) as of
December 31, 1991........................................ 18,818,091 202,735
Revisions of previous estimates.......................... 1,721,385 20,284
Extensions, discoveries, and other additions (including
2,576,907 barrels and 10,668 MMcf located in the
Kingdom of Thailand).................................. 5,486,273 19,126
Purchase of properties................................... 335,750 10,237
Sales of properties...................................... (194,606) (4,733)
Estimated 1992 production................................ (3,611,105) (40,581)
-------------- -----------
Proved reserves (located in the United States except for
2,576,907 barrels and 10,668 MMcf located in the Kingdom
of Thailand) as of December 31, 1992..................... 22,555,788 207,068
Revisions of previous estimates.......................... 342,022 1,148
Extensions, discoveries, and other additions (including
2,847,906 barrels and 22,806 MMcf located in the
Kingdom of Thailand).................................. 9,764,408 55,626
Purchase of properties................................... 182,610 13,192
Sales of properties...................................... (356,514) (11,849)
Estimated 1993 production................................ (4,219,873) (32,319)
-------------- -----------
</TABLE>
45
<PAGE> 47
UNAUDITED SUPPLEMENTARY FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
OIL,
CONDENSATE AND
NATURAL GAS
LIQUIDS NATURAL GAS
(BBLS.) (MMCF)
-------------- -----------
<S> <C> <C>
Proved reserves (located in the United States except for
5,424,813 barrels and 33,474 MMcf located in the Kingdom
of Thailand) as of December 31, 1993..................... 28,268,441 232,866
Revisions of previous estimates.......................... 1,286,984 (2,558)
Extensions, discoveries, and other additions (including
2,249,559 barrels and 23,265 MMcf located in the
Kingdom of Thailand).................................. 6,565,442 49,517
Purchase of properties................................... 2,686,919 15,792
Sales of properties...................................... (497) (109)
Estimated 1994 production................................ (4,945,677) (52,618)
-------------- -----------
Proved reserves (located in the United States except for
7,674,372 barrels and 56,739 MMcf located in the Kingdom
of Thailand) as of December 31, 1994..................... 33,861,612 242,890
=========== =========
Proved developed reserves (located in the United States) as
of:
December 31, 1991........................................ 17,549,830 188,090
December 31, 1992........................................ 18,798,149 175,523
December 31, 1993........................................ 20,976,194 183,139
December 31, 1994........................................ 24,669,755 178,518
</TABLE>
46
<PAGE> 48
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED
<TABLE>
<CAPTION>
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
1994
------------------------------------
Future gross revenues...................................... $ 985,888 $ 720,086 $265,802
Future production costs:
Lease operating expense.................................. (253,140) (192,834) (60,306)
Future development and abandonment costs................... (180,839) (86,684) (94,155)
--------- --------- ----------
Future net cash flows before income taxes.................. 551,909 440,568 111,341
Discount at 10% per annum.................................. (168,929) (109,700) (59,229)
--------- --------- ----------
Discounted future net cash flow before income taxes........ 382,980 330,868 52,112
Future income taxes, net of discount at 10% per annum...... (92,911) (73,602) (19,309)
--------- --------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves.................. $ 290,069 $ 257,266 $ 32,803
========= ========= ========
1993
------------------------------------
Future gross revenues...................................... $ 869,783 $ 744,201 $125,582
Future production costs:
Lease operating expense.................................. (186,464) (158,934) (27,530)
Future development and abandonment costs................... (133,258) (79,735) (53,523)
--------- --------- ----------
Future net cash flows before income taxes.................. 550,061 505,532 44,529
Discount at 10% per annum.................................. (146,221) (118,858) (27,363)
--------- --------- ----------
Discounted future net cash flow before income taxes........ 403,840 386,674 17,166
Future income taxes, net of discount at 10% per annum...... (103,580) (98,788) (4,792)
--------- --------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves.................. $ 300,260 $ 287,886 $ 12,374
========= ========= ========
1992
------------------------------------
Future gross revenues...................................... $ 856,238 $ 791,865 $ 64,373
Future production costs:
Lease operating expense.................................. (179,721) (173,355) (6,366)
Future development and abandonment costs................... (105,843) (80,887) (24,956)
--------- --------- ----------
Future net cash flows before income taxes.................. 570,674 537,623 33,051
Discount at 10% per annum.................................. (165,573) (146,730) (18,843)
--------- --------- ----------
Discounted future net cash flow before income taxes........ 405,101 390,893 14,208
Future income taxes, net of discount at 10% per annum...... (97,444) (91,848) (5,596)
--------- --------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves.................. $ 307,657 $ 299,045 $ 8,612
========= ========= ========
</TABLE>
The standardized measure of discounted future net cash flows from the
production of proved reserves is developed as follows:
1. Estimates are made of quantities of proved reserves and the future
periods in which they are expected to be produced based on year end
economic conditions.
2. The estimated future gross revenues from proved reserves are priced
on the basis of year end prices, except in those instances where fixed and
determinable natural gas price escalations are covered by contracts.
47
<PAGE> 49
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED --
(CONTINUED)
3. The future gross revenue streams are reduced by estimated future
costs to develop and to produce the proved reserves, as well as certain
abandonment costs based on year end cost estimates, and the estimated
effect of future income taxes. These cost estimates are subject to some
uncertainty, particularly those estimates relating to the Company's
properties located in the Kingdom of Thailand.
The standardized measure of discounted future net cash flows does not
purport to present the fair market value of the Company's oil and gas reserves.
An estimate of fair value would also take into account, among other things, the
recovery of reserves in excess of proved reserves, anticipated future changes in
prices and costs, a discount factor more representative of the time value of
money and the risks inherent in reserve estimates.
The following are the principal sources of change in the standardized
measure of discounted future net cash flows. All amounts are related to changes
in reserves located in the United States unless otherwise noted.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance.......................................... $ 300,260 $ 287,886 $ 12,374
Revisions to prior years' proved reserves:
Net changes in prices and production costs............... (30,813) (44,948) 14,135
Net changes due to revisions in quantity estimates....... 5,947 5,947 --
Net changes in estimates of future development costs..... (45,370) (47,880) 2,510
Accretion of discount.................................... 40,384 38,667 1,717
Changes in production rate............................... 1,162 (9,574) 10,736
Other.................................................... 5,326 5,421 (95)
--------- --------- ----------
Total revisions.................................. (23,364) (52,367) 29,003
New field discoveries and extensions, net of future
production and development costs......................... 59,047 53,104 5,943
Purchases of properties.................................... 22,973 22,973 --
Sales of properties........................................ (4,114) (4,114) --
Sales of oil and gas produced, net of production costs..... (143,655) (143,655) --
Previously estimated development costs incurred............ 68,252 68,252 --
Net change in income taxes................................. 10,670 25,187 (14,517)
--------- --------- ----------
Net change in standardized measure of discounted
future net cash flows.......................... (10,191) (30,620) 20,429
--------- --------- ----------
Ending balance............................................. $ 290,069 $ 257,266 $ 32,803
========= ========= ========
</TABLE>
48
<PAGE> 50
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS RELATED TO PROVED OIL AND GAS RESERVES -- UNAUDITED --
(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance.......................................... $ 307,657 $ 299,045 $ 8,612
Revisions to prior years' proved reserves:
Net changes in prices and production costs............... (41,775) (34,842) (6,933)
Net changes due to revisions in quantity estimates....... 4,066 4,066 --
Net changes in estimates of future development costs..... 662 (871) 1,533
Accretion of discount.................................... 40,510 39,089 1,421
Changes in production rate............................... 5,134 6,728 (1,594)
Other.................................................... 2,278 3,935 (1,657)
--------- --------- ----------
Total revisions.................................. 10,875 18,105 (7,230)
New field discoveries and extensions, net of future
production and development costs......................... 39,247 29,059 10,188
Purchases of properties.................................... 22,516 22,516 --
Sales of properties........................................ (19,633) (19,633) --
Sales of oil and gas produced, net of production costs..... (110,870) (110,870) --
Previously estimated development costs incurred............ 56,604 56,604 --
Net change in income taxes................................. (6,136) (6,940) 804
--------- --------- ----------
Net change in standardized measure of discounted
future net cash flows.......................... (7,397) (11,159) 3,762
--------- --------- ----------
Ending balance............................................. $ 300,260 $ 287,886 $ 12,374
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
------------------------------------
TOTAL UNITED KINGDOM OF
COMPANY STATES THAILAND
--------- --------- ----------
(EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance.......................................... $ 273,331 $ 273,331 $ --
Revisions to prior years' proved reserves:
Net changes in prices and production costs............... 38,348 38,348 --
Net changes due to revisions in quantity estimates....... 42,829 42,829 --
Net changes in estimates of future development costs..... (21,015) (21,015) --
Accretion of discount.................................... 34,975 34,975 --
Changes in production rate............................... (5,733) (5,733) --
Other.................................................... 6,607 6,607 --
--------- --------- ----------
Total revisions.................................. 96,011 96,011 --
New field discoveries and extensions, net of future
production and development costs......................... 43,760 29,552 14,208
Purchases of properties.................................... 13,870 13,870 --
Sales of properties........................................ (7,430) (7,430) --
Sales of oil and gas produced, net of production costs..... (111,581) (111,581) --
Previously estimated development costs incurred............ 20,717 20,717 --
Net change in income taxes................................. (21,021) (15,425) (5,596)
--------- --------- ----------
Net change in standardized measure of discounted
future net cash flows.......................... 34,326 25,714 8,612
--------- --------- ----------
Ending balance............................................. $ 307,657 $ 299,045 $ 8,612
========= ========= ========
</TABLE>
49
<PAGE> 51
QUARTERLY RESULTS -- UNAUDITED
Summaries of the Company's results of operations by quarter for the years
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1994
Revenues...................................... $ 37,892 $49,734 $ 46,452 $ 39,530
Gross profit(a)............................... $ 17,355 $21,782 $ 17,762 $ 11,288
Income before extraordinary loss.............. $ 7,278 $ 9,903 $ 7,433 $ 2,760
Extraordinary loss on early extinguishment of
debt........................................ -- $ (307) -- --
Net income.................................... $ 7,278 $ 9,596 $ 7,433 $ 2,760
Earnings per share:
Primary --
Income before extraordinary loss......... $ 0.22 $ 0.30 $ 0.22 $ 0.08
Extraordinary loss....................... -- $ (0.01) -- --
Net income............................... $ 0.22 $ 0.29 $ 0.22 $ 0.08
Fully diluted --
Income before extraordinary loss......... $ 0.22 $ 0.29 $ 0.22 $ 0.08
Extraordinary loss....................... -- $ (0.01) -- --
Net income............................... $ 0.22 $ 0.28 $ 0.22 $ 0.08
1993
Revenues...................................... $ 34,681 $34,533 $ 37,210 $ 33,130
Gross profit(a)............................... $ 17,331 $15,391 $ 17,903 $ 14,458
Net income.................................... $ 7,160 $ 5,596 $ 7,161 $ 5,144
Earnings per share
(primary and fully diluted)................. $ 0.22 $ 0.17 $ 0.22 $ 0.16
</TABLE>
- ---------------
(a) Represents revenues less lease operating, exploration, dry hole and
impairment, and depreciation depletion and amortization expenses.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
Not applicable.
50
<PAGE> 52
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding nominees and continuing directors in the
Company's definitive Proxy Statement for its annual meeting to be held on April
25, 1995, to be filed within 120 days of December 31, 1994 pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
Company's "1995 Proxy Statement"), is incorporated herein by reference. See also
Item S-K 401(b) appearing in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information regarding executive compensation in the Company's 1995
Proxy Statement, other than the information regarding the Compensation Committee
Report on Executive Compensation, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information regarding ownership of the Company securities by management
and certain other beneficial owners in the Company's 1995 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information regarding certain relationships and related transactions
with management in the Company's 1995 Proxy Statement is incorporated herein by
reference.
51
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, FINANCIAL STATEMENT
SCHEDULES AND EXHIBITS
1. Financial Statements and Supplementary Data:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants...................... 30
Consolidated statements of income............................. 31
Consolidated balance sheets................................... 32
Consolidated statements of cash flows......................... 33
Consolidated statements of shareholders' equity............... 34
Notes to consolidated financial statements.................... 35
</TABLE>
2. Financial Statement Schedules:
All Financial Statement Schedules have been omitted because they are
not required, are not applicable or the information required has been
included elsewhere herein.
3. Exhibits:
<TABLE>
<S> <C> <C>
* 3(a) -- Restated Certificate of Incorporation of Pogo Producing Company.
(Exhibit 3(a), Annual Report on Form 10-K for the year ended
December 31, 1987, File No. 0-5468).
* 3(a)(i) -- Certificate of Designation, Preferences and Rights of Preferred
Stock of Pogo Producing Company, dated March 25, 1987. (Exhibit
3(a)(1), Annual Report on Form 10-K for the year ended December
31, 1987, File No. 0-5468).
* 3(b) -- Bylaws of Pogo Producing Company, as amended and restated through
July 24, 1990. (Exhibit 3(a), Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990, File No. 0-5468).
* 4(a)(i) -- Credit Agreement dated as of September 23, 1992, among Pogo
Producing Company, the lenders party thereto, Bank of Montreal as
Agent, and Banque Paribas as Co-Agent. (Exhibit 10(a), Quarterly
Report on Form 10-Q for the quarter ended September 30, 1992, File
No. 1-7792).
* 4(a)(ii) -- First Amendment dated as of September 30, 1992 to Credit Agreement
dated as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent. (Exhibit 4(a)(ii), Annual Report of Form 10-K
for the year ended December 31, 1993, File No. 1-7792).
* 4(a)(iii) -- Second Amendment dated as of December 31, 1993 to Credit Agreement
dated as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent. (Exhibit 4(a)(iii), Annual Report of Form
10-K for the year ended December 31, 1993, File No. 1-7792).
4(a)(iv) -- Third Amendment dated as of June 1, 1994 to Credit Agreement dated
as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent.
* 4(b) -- Indenture dated as of October 15, 1980 to Chemical Bank, as
Trustee. (Exhibit 4, File No. 2-69428).
</TABLE>
52
<PAGE> 54
<TABLE>
<S> <C> <C>
4(c) -- Indenture dated as of March 23, 1994 to Shawmut Bank Connecticut,
National Association, as Trustee.
* 4(d) -- Rights Agreement dated as of April 26, 1994 between Pogo Producing
Company and Harris Trust Company of New York, as Rights Agent.
(Exhibit 4, Current Report on Form 8-K filed April 26, 1994, File
No. 1-7792).
* 4(e) -- Certificate of Designations of Series A Junior Participating
Preferred Stock of Pogo Producing Company dated April 26, 1994.
(Exhibit 4(d), Registration Statement on Form S-8 filed August 9,
1994, File No. 33-54969).
Pogo Producing Company agrees to furnish to the Commission upon
request a copy of any agreement defining the rights of holders of
long-term debt of Pogo Producing Company and all its subsidiaries
for which consolidated or unconsolidated financial statements are
required to be filed under which the total amount of securities
authorized does not exceed 10% of the total assets of Pogo
Producing Company and its subsidiaries on a consolidated basis.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (comprising Exhib-
its 10(a) through 10(f)(14)(ii), inclusive)
*10(a) -- 1977 Stock Option Plan of Pogo Producing Company, as amended as of
September 28, 1981 and July 24, 1984. (Exhibit 10(a), Annual
Report on Form 10-K for the year ended December 31, 1984, File No.
0-5468).
*10(a)(1) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (with stock appreciation rights and without
employment restrictions). (Exhibit 10(a)(1), Annual Report on From
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(2) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (with stock option appreciation rights and without
employment restrictions), (Exhibit 10(a)(2), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(3) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (without stock appreciation rights and with
employment restrictions). (Exhibit 10(a)(3), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(4) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (without stock option appreciation rights and with
employment restrictions). (Exhibit 10(a)(4), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(5) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (with stock appreciation rights and with
employment restrictions). (Exhibit 10(a)(5), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(6) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (with stock option appreciation rights and with
employment restrictions). (Exhibit 10(a)(6), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(7) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (without stock appreciation rights and without
employment restrictions). (Exhibit 10(a)(7), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
</TABLE>
53
<PAGE> 55
<TABLE>
<S> <C> <C>
*10(a)(8) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (without stock option appreciation rights and without
employment restrictions). (Exhibit 10(a)(8), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(b) -- 1981 Stock Option Plan of Pogo Producing Company, as amended as of
July 24, 1984. (Exhibit 10(b), Annual Report on Form 10-K for the
year ended December 31, 1984, File No. 0-5468).
*10(b)(1) -- Form of Stock Option Agreement under 1981 Nonqualified Stock
Option Plan (with stock appreciation rights). Exhibit 10(b)(1),
Annual Report on Form 10-K for the year ended December 31, 1981,
File No. 0-5468).
*10(b)(2) -- Form of Stock Option Agreement under 1981 Nonqualified Stock
Option Plan (without stock appreciation rights). Exhibit 10(b)(2),
Annual Report on Form 10-K for the year ended December 31, 1981,
File No. 0-5468).
*10(c) -- 1981 Incentive and Nonqualified Stock Option Plan of Pogo
Producing Company, as amended as of July 24, 1984. (Exhibit 10(c),
Annual Report on Form 10-K for the year ended December 31, 1984,
File No. 0-5468).
*10(c)(1) -- Form of Stock Option Agreement under 1981 Incentive Stock Option
Plan. (Exhibit 10(c)(1), Annual Report of Form 10-K for the year
ended December 31, 1981, File No. 0-5468).
*10(d) -- 1989 Incentive and Nonqualified Stock Option Plan of Pogo
Producing Company, as amended and restated effective January 25,
1994. (Exhibit 99, Definitive Proxy Statement on Schedule 14A,
filed March 22, 1994, File No. 1-7792).
*10(d)(1) -- Form of Stock Option Agreement under 1989 Incentive and
Nonqualified Stock Option Plan, as amended and restated effective
January 22, 1991. (Exhibit 10(d)(1), Annual Report on Form 10-K
for the year ended December 31, 1991, File No. 0-5468).
*10(d)(2) -- Form of Director Stock Option Agreement under 1989 Incentive and
Nonqualified Stock Option Plan as amended and restated effective
January 22, 1991. (Exhibit 10(d)(2), Annual Report on Form 10-K
for the year ended December 31, 1991, File No. 0-5468).
*10(e) -- Form of Letter Agreement respecting treatment of options upon
change in control. (Exhibit 19(f), Quarterly Report on Form 10-Q
for the quarter ended June 30, 1982. File No. 0-5468).
*10(f)(1) -- Employment Agreement by and between Pogo Producing Company and
Stuart P. Burbach, dated February 1, 1992. (Exhibit 19(a)(1),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(2)(i) -- Extension Agreement to Continue Employment Agreement between
Stuart P. Burbach and Pogo Producing Company, dated as of February
1, 1993. (Exhibit 10(f)(2), Annual Report on Form 10-K for the
year ended December 31, 1992, File No. 1-7792).
*10(f)(2)(ii) -- Extension Agreement to Continue Employment Agreement between
Stuart P. Burbach and Pogo Producing Company, dated as of February
1, 1994. (Exhibit 10(f)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
</TABLE>
54
<PAGE> 56
<TABLE>
<S> <C> <C>
10(f)(2)(iii) -- Extension Agreement to Continue Employment Agreement between
Stuart B. Burbach and Pogo Producing Company, dated as of February
1, 1995.
*10(f)(3) -- Employment Agreement by and between Pogo Producing Company and
Jerry A. Cooper, dated February 1, 1992. (Exhibit 19(a)(2),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(4)(i) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(4), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(4)(ii) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(4)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(4)(iii) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(5) -- Employment Agreement by and between Pogo Producing Company and
Kenneth R. Good, dated February 1, 1992. (Exhibit 19(a)(3),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(6)(i) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(6), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(6)(ii) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(6)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(6)(iii) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(7) -- Employment Agreement by and between Pogo Producing Company and R.
Phillip Laney, dated February 1, 1992. (Exhibit 19(a)(4),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(8)(i) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(8), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(8)(ii) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(8)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(8)(iii) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(9) -- Employment Agreement by and between Pogo Producing Company and
John O. McCoy, Jr., dated February 1, 1992. (Exhibit 19(a)(5),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
</TABLE>
55
<PAGE> 57
<TABLE>
<S> <C> <C>
*10(f)(10)(i) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(10), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(10)(ii) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(10)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(10)(iii) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(11) -- Employment Agreement by and between Pogo Producing Company and D.
Stephen Slack, dated February 1, 1992. (Exhibit 19(a)(6),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(12)(i) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(12), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(12)(ii) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(12)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(12)(iii) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(13) -- Employment Agreement by and between Pogo Producing Company and
Paul G. Van Wagenen, dated February 1, 1992. (Exhibit 19(a)(7),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(14)(i) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(14), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(14)(ii) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(14)(ii), Annual Report on Form 10-K for the
year ended December 31, 1992, File No. 1-7792).
10(f)(14)(iii) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1995.
*10(g) -- Undertaking by Pogo Producing Company dated as of August 8, 1977.
(Exhibit 10(e), Annual Report on Form 10-K for the year ended
December 31, 1980, File No. 0-5468).
*10(h) -- Limited partnership agreement of Pogo Gulf Coast, Ltd. (Exhibit
19, Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, File No. 0-5468).
21 -- List of Subsidiaries of Pogo Producing Company.
23(a) -- Consent of Independent Public Accountants.
</TABLE>
56
<PAGE> 58
<TABLE>
<S> <C> <C>
23(b) -- Consent of Independent Petroleum Engineers.
24 -- Powers of Attorney from each Director of Pogo Producing Company
whose signature is affixed to this Form 10-K for the year ended
December 31, 1994.
27 -- Financial Data Schedule.
28 -- Summary of Reserve Report of Ryder Scott Company Petroleum
Engineers dated February 3, 1995 relating to oil and gas reserves
of Pogo Producing Company.
</TABLE>
- ---------------
* Asterisk indicates exhibits incorporated by reference as shown.
(B) REPORTS ON FORM 8-K
None
57
<PAGE> 59
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.
POGO PRODUCING COMPANY
(Registrant)
By: /s/ PAUL G. VAN WAGENEN
------------------------------------
Paul G. Van Wagenen
Chairman of the Board, President
and Chief Executive Officer
Date: March 7, 1995
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 indicated on March 7, 1995.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------ -----------------------------
<C> <S>
/s/ PAUL G. VAN WAGENEN Principal Executive
- ------------------------------------------ Officer and Director
Paul G. Van Wagenen
Chairman of the Board, President
and Chief Executive Officer
/s/ D. STEPHEN SLACK Principal Financial
- ------------------------------------------ Officer and Director
D. Stephen Slack
Senior Vice President, Chief
Financial Officer and Treasurer
/s/ THOMAS E. HART Principal Accounting Officer
- ------------------------------------------
Thomas E. Hart
Vice President and
Controller
TOBIN ARMSTRONG* Director
- ------------------------------------------
Tobin Armstrong
JACK S. BLANTON* Director
- ------------------------------------------
Jack S. Blanton
W. M. BRUMLEY, JR.* Director
- ------------------------------------------
W. M. Brumley, Jr.
JOHN B. CARTER, JR.* Director
- ------------------------------------------
John B. Carter, Jr.
WILLIAM L. FISHER* Director
- ------------------------------------------
William L. Fisher
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
WILLIAM E. GIPSON* Director
- ------------------------------------------
William E. Gipson
GERRIT W. GONG* Director
- ------------------------------------------
Gerrit W. Gong
J. STUART HUNT* Director
- ------------------------------------------
J. Stuart Hunt
FREDERICK A. KLINGENSTEIN* Director
- ------------------------------------------
Frederick A. Klingenstein
NICHOLAS R. PETRY* Director
- ------------------------------------------
Nicholas R. Petry
JACK A. VICKERS* Director
- ------------------------------------------
Jack A. Vickers
*By: /s/ THOMAS E.HART
- ------------------------------------------
Thomas E. Hart
Attorney-in-Fact
</TABLE>
59
<PAGE> 61
INDEX TO EXHIBITS
<TABLE>
EXHIBIT
NO.
<S> <C> <C>
* 3(a) -- Restated Certificate of Incorporation of Pogo Producing Company.
(Exhibit 3(a), Annual Report on Form 10-K for the year ended
December 31, 1987, File No. 0-5468).
* 3(a)(i) -- Certificate of Designation, Preferences and Rights of Preferred
Stock of Pogo Producing Company, dated March 25, 1987. (Exhibit
3(a)(1), Annual Report on Form 10-K for the year ended December
31, 1987, File No. 0-5468).
* 3(b) -- Bylaws of Pogo Producing Company, as amended and restated through
July 24, 1990. (Exhibit 3(a), Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990, File No. 0-5468).
* 4(a)(i) -- Credit Agreement dated as of September 23, 1992, among Pogo
Producing Company, the lenders party thereto, Bank of Montreal as
Agent, and Banque Paribas as Co-Agent. (Exhibit 10(a), Quarterly
Report on Form 10-Q for the quarter ended September 30, 1992, File
No. 1-7792).
* 4(a)(ii) -- First Amendment dated as of September 30, 1992 to Credit Agreement
dated as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent. (Exhibit 4(a)(ii), Annual Report of Form 10-K
for the year ended December 31, 1993, File No. 1-7792).
* 4(a)(iii) -- Second Amendment dated as of December 31, 1993 to Credit Agreement
dated as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent. (Exhibit 4(a)(iii), Annual Report of Form
10-K for the year ended December 31, 1993, File No. 1-7792).
4(a)(iv) -- Third Amendment dated as of June 1, 1994 to Credit Agreement dated
as of September 23, 1992, among Pogo Producing Company, the
lenders party thereto, Bank of Montreal as Agent, and Banque
Paribas as Co-Agent.
* 4(b) -- Indenture dated as of October 15, 1980 to Chemical Bank, as
Trustee. (Exhibit 4, File No. 2-69428).
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C>
4(c) -- Indenture dated as of March 23, 1994 to Shawmut Bank Connecticut,
National Association, as Trustee.
* 4(d) -- Rights Agreement dated as of April 26, 1994 between Pogo Producing
Company and Harris Trust Company of New York, as Rights Agent.
(Exhibit 4, Current Report on Form 8-K filed April 26, 1994, File
No. 1-7792).
* 4(e) -- Certificate of Designations of Series A Junior Participating
Preferred Stock of Pogo Producing Company dated April 26, 1994.
(Exhibit 4(d), Registration Statement on Form S-8 filed August 9,
1994, File No. 33-54969).
Pogo Producing Company agrees to furnish to the Commission upon
request a copy of any agreement defining the rights of holders of
long-term debt of Pogo Producing Company and all its subsidiaries
for which consolidated or unconsolidated financial statements are
required to be filed under which the total amount of securities
authorized does not exceed 10% of the total assets of Pogo
Producing Company and its subsidiaries on a consolidated basis.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS (comprising Exhib-
its 10(a) through 10(f)(14)(ii), inclusive)
*10(a) -- 1977 Stock Option Plan of Pogo Producing Company, as amended as of
September 28, 1981 and July 24, 1984. (Exhibit 10(a), Annual
Report on Form 10-K for the year ended December 31, 1984, File No.
0-5468).
*10(a)(1) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (with stock appreciation rights and without
employment restrictions). (Exhibit 10(a)(1), Annual Report on From
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(2) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (with stock option appreciation rights and without
employment restrictions), (Exhibit 10(a)(2), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(3) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (without stock appreciation rights and with
employment restrictions). (Exhibit 10(a)(3), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(4) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (without stock option appreciation rights and with
employment restrictions). (Exhibit 10(a)(4), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(5) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (with stock appreciation rights and with
employment restrictions). (Exhibit 10(a)(5), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(6) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (with stock option appreciation rights and with
employment restrictions). (Exhibit 10(a)(6), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(a)(7) -- Form of Amended Nonqualified Stock Option Agreement under 1977
Stock Option Plan (without stock appreciation rights and without
employment restrictions). (Exhibit 10(a)(7), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
</TABLE>
<PAGE> 63
<TABLE>
<S> <C> <C>
*10(a)(8) -- Form of Amended Incentive Stock Option Agreement under 1977 Stock
Option Plan (without stock option appreciation rights and without
employment restrictions). (Exhibit 10(a)(8), Annual Report on Form
10-K for the year ended December 31, 1981, File No. 0-5468).
*10(b) -- 1981 Stock Option Plan of Pogo Producing Company, as amended as of
July 24, 1984. (Exhibit 10(b), Annual Report on Form 10-K for the
year ended December 31, 1984, File No. 0-5468).
*10(b)(1) -- Form of Stock Option Agreement under 1981 Nonqualified Stock
Option Plan (with stock appreciation rights). Exhibit 10(b)(1),
Annual Report on Form 10-K for the year ended December 31, 1981,
File No. 0-5468).
*10(b)(2) -- Form of Stock Option Agreement under 1981 Nonqualified Stock
Option Plan (without stock appreciation rights). Exhibit 10(b)(2),
Annual Report on Form 10-K for the year ended December 31, 1981,
File No. 0-5468).
*10(c) -- 1981 Incentive and Nonqualified Stock Option Plan of Pogo
Producing Company, as amended as of July 24, 1984. (Exhibit 10(c),
Annual Report on Form 10-K for the year ended December 31, 1984,
File No. 0-5468).
*10(c)(1) -- Form of Stock Option Agreement under 1981 Incentive Stock Option
Plan. (Exhibit 10(c)(1), Annual Report of Form 10-K for the year
ended December 31, 1981, File No. 0-5468).
*10(d) -- 1989 Incentive and Nonqualified Stock Option Plan of Pogo
Producing Company, as amended and restated effective January 25,
1994. (Exhibit 99, Definitive Proxy Statement on Schedule 14A,
filed March 22, 1994, File No. 1-7792).
*10(d)(1) -- Form of Stock Option Agreement under 1989 Incentive and
Nonqualified Stock Option Plan, as amended and restated effective
January 22, 1991. (Exhibit 10(d)(1), Annual Report on Form 10-K
for the year ended December 31, 1991, File No. 0-5468).
*10(d)(2) -- Form of Director Stock Option Agreement under 1989 Incentive and
Nonqualified Stock Option Plan as amended and restated effective
January 22, 1991. (Exhibit 10(d)(2), Annual Report on Form 10-K
for the year ended December 31, 1991, File No. 0-5468).
*10(e) -- Form of Letter Agreement respecting treatment of options upon
change in control. (Exhibit 19(f), Quarterly Report on Form 10-Q
for the quarter ended June 30, 1982. File No. 0-5468).
*10(f)(1) -- Employment Agreement by and between Pogo Producing Company and
Stuart P. Burbach, dated February 1, 1992. (Exhibit 19(a)(1),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(2)(i) -- Extension Agreement to Continue Employment Agreement between
Stuart P. Burbach and Pogo Producing Company, dated as of February
1, 1993. (Exhibit 10(f)(2), Annual Report on Form 10-K for the
year ended December 31, 1992, File No. 1-7792).
*10(f)(2)(ii) -- Extension Agreement to Continue Employment Agreement between
Stuart P. Burbach and Pogo Producing Company, dated as of February
1, 1994. (Exhibit 10(f)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
</TABLE>
<PAGE> 64
<TABLE>
<S> <C> <C>
10(f)(2)(iii) -- Extension Agreement to Continue Employment Agreement between
Stuart B. Burbach and Pogo Producing Company, dated as of February
1, 1995.
*10(f)(3) -- Employment Agreement by and between Pogo Producing Company and
Jerry A. Cooper, dated February 1, 1992. (Exhibit 19(a)(2),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(4)(i) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(4), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(4)(ii) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(4)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(4)(iii) -- Extension Agreement to Continue Employment Agreement between Jerry
A. Cooper and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(5) -- Employment Agreement by and between Pogo Producing Company and
Kenneth R. Good, dated February 1, 1992. (Exhibit 19(a)(3),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(6)(i) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(6), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(6)(ii) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(6)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(6)(iii) -- Extension Agreement to Continue Employment Agreement between Ken-
neth R. Good and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(7) -- Employment Agreement by and between Pogo Producing Company and R.
Phillip Laney, dated February 1, 1992. (Exhibit 19(a)(4),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(8)(i) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(8), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(8)(ii) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(8)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(8)(iii) -- Extension Agreement to Continue Employment Agreement between R.
Phillip Laney and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(9) -- Employment Agreement by and between Pogo Producing Company and
John O. McCoy, Jr., dated February 1, 1992. (Exhibit 19(a)(5),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
</TABLE>
<PAGE> 65
<TABLE>
<S> <C> <C>
*10(f)(10)(i) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(10), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(10)(ii) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(10)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(10)(iii) -- Extension Agreement to Continue Employment Agreement between John
O. McCoy, Jr. and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(11) -- Employment Agreement by and between Pogo Producing Company and D.
Stephen Slack, dated February 1, 1992. (Exhibit 19(a)(6),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(12)(i) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(12), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(12)(ii) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(12)(ii), Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 1-7792).
10(f)(12)(iii) -- Extension Agreement to Continue Employment Agreement between D.
Stephen Slack and Pogo Producing Company, dated as of February 1,
1995.
*10(f)(13) -- Employment Agreement by and between Pogo Producing Company and
Paul G. Van Wagenen, dated February 1, 1992. (Exhibit 19(a)(7),
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992,
File No. 1-7792).
*10(f)(14)(i) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1993. (Exhibit 10(f)(14), Annual Report on Form 10-K for the year
ended December 31, 1992, File No. 1-7792).
*10(f)(14)(ii) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1994. (Exhibit 10(f)(14)(ii), Annual Report on Form 10-K for the
year ended December 31, 1992, File No. 1-7792).
10(f)(14)(iii) -- Extension Agreement to Continue Employment Agreement between Paul
G. Van Wagenen and Pogo Producing Company, dated as of February 1,
1995.
*10(g) -- Undertaking by Pogo Producing Company dated as of August 8, 1977.
(Exhibit 10(e), Annual Report on Form 10-K for the year ended
December 31, 1980, File No. 0-5468).
*10(h) -- Limited partnership agreement of Pogo Gulf Coast, Ltd. (Exhibit
19, Quarterly Report on Form 10-Q for the quarter ended June 30,
1989, File No. 0-5468).
21 -- List of Subsidiaries of Pogo Producing Company.
23(a) -- Consent of Independent Public Accountants.
</TABLE>
<PAGE> 66
<TABLE>
<S> <C> <C>
23(b) -- Consent of Independent Petroleum Engineers.
24 -- Powers of Attorney from each Director of Pogo Producing Company
whose signature is affixed to this Form 10-K for the year ended
December 31, 1994.
27 -- Financial Data Schedule.
28 -- Summary of Reserve Report of Ryder Scott Company Petroleum
Engineers dated February 3, 1995 relating to oil and gas reserves
of Pogo Producing Company.
</TABLE>
- ---------------
* Asterisk indicates exhibits incorporated by reference as shown.
<PAGE> 1
Exhibit 4.A.IV
___________________________________________________
POGO PRODUCING COMPANY
_______________________
Third Amendment
Dated as of June 1, 1994
to
Credit Agreement
Dated as of September 23, 1992
______________________________
__________________________________________________
<PAGE> 2
THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of June 1, 1994 (the
"Amendment"), between Pogo Producing Company, a Delaware Corporation (the
"Borrower"), the various financial institutions which are or may become parties
to the Credit Agreement, as amended hereby (collectively, the "Lenders"), Bank
of Montreal, acting through its Chicago, Illinois branch, (the "Bank"), as
agent (the "Agent") for the Lenders and Banque Paribas, acting through its
Houston Agency, as co-agent (the "Co-Agent"), for the Lenders,
W I T N E S S E T H
WHEREAS the Borrower, the Lenders, the Agent and the Co-Agent are parties
to a certain Credit Agreement dated as of September 23, 1992, as amended by the
First Amendment to Credit Agreement dated as of September 30, 1992 and the
Second Amendment to Credit Agreement dated as of December 31, 1993, (as amended
thereby, and as the same may have been further amended or modified by the
parties, the "Credit Agreement"); and
WHEREAS the Borrower desires to amend certain provisions of the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Amendment. The following definition as set forth in the Credit
Agreement is amended in its entirety as set forth below and such definition, as
so amended, is hereby incorporated by reference into the Credit Agreement, as
amended by this Amendment:
"Applicable Margin" means, at any time that the Borrower's Implied Senior
Debt Rating is equal to any rating set forth below, the percentages per
annum set forth opposite such Implied Senior Debt Rating for CD Rate Loans
and LIBO Rate Loans; provided, that if the Borrower's Implied Senior Debt
Rating shall change at any time, the Applicable Margin set forth below
shall become effective on the immediately next Quarterly Payment Date:
<TABLE>
<CAPTION>
Minimum Implied Senior Debt Rating from
Standard & Poors (or an equivalent rating from CD Rate LIBO Rate
Moodys or another approved rating agency) Loans Loans
- ----------------------------------------------- ------- ---------
<S> <C> <C>
B+ or lower 1 7/8% 1 3/4%
BB- 1 5/8% 1 1/2%
BB 1 3/8% 1 1/4%
BB+ 1 1/8% 1 %
BBB- or higher 7/8% 3/4%
</TABLE>
2
<PAGE> 3
1.2 Use of Defined Terms. Unless otherwise defined herein or the
context otherwise requires, or except as the definition may be amended by this
Amendment, terms used in this Amendment, including its preamble and recitals,
shall have the meanings provided in the Credit Agreement, as hereby amended.
2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Partial Amendment of Section 3.3.1(a) of the Credit Agreement.
Section 3.3.1(a) of the Credit Agreement is hereby amended and partially
replaced by:
(a) adding the following phrase at the end of such section immediately
following the phrase "plus a margin of 1/4%": "if the Borrower's Implied
Senior Debt Rating is B+ or lower, or equal to the Prime Rate from time to
time in effect if the Borrower's Implied Senior Debt Rating is BB- or
higher; provided, that if the Borrower's Implied Senior Debt Rating shall
change at any time and such change would affect the margin charged on a
Prime Rate Loan, the new margin, as set forth above, shall become
effective on the immediately next Quarterly Payment Date".
2.2 Partial Amendment of Section 3.4.1 of the Credit Agreement. Section
3.4.1 of the Credit Agreement is hereby amended and partially replaced by:
(a) adding the following phrase at the end of the first sentence of such
section immediately preceding the parenthetical "(such fees, the
"Commitment Fees")": "if the Borrower's Implied Senior Debt Rating is BB-
or lower, or a commitment fee at the rate of 3/8 of 1% per annum on such
Lender's Percentage of the sum of the average daily unused portion of the
Revolving Loan Commitment Amount if the Borrower's Implied Senior Debt
Rating is BB or higher"; and
(b) adding the following phrase at the end of the first sentence of such
section immediately following the parenthetical "(such fees, the
"Commitment Fees")": "provided, that if the Borrower's Implied Senior
Debt Rating shall change at any time and such change would result in a
different Commitment Fee, the new Commitment Fee shall become effective on
the immediately next Quarterly Payment Date."
3. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders and the Agent to enter into this Amendment,
the Borrower hereby reaffirms, as of the date hereof, its representations and
warranties contained in Article VI
3
<PAGE> 4
of the Credit Agreement (except to the extent any such representation and
warranty relates solely to an earlier date) and additionally represents and
warrants as follows:
3.1 Organization. The Borrower and each of its corporate Subsidiaries is
a corporation validly organized and existing and in good standing under the
laws of the state, or country, of its incorporation, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification,
except where failure to qualify would not have a material adverse effect on the
business or financial condition of the Borrower and its Subsidiaries taken as a
whole or the Borrower's ability to perform the Loan Documents, including the
Credit Agreement as such may be amended hereby, or this Amendment. Each of the
Borrower's Subsidiaries which is organized as a partnership is validly
organized and existing and in good standing under the laws of the state of its
formation, and is duly qualified to do business and is in good standing as a
foreign partnership where the nature of its business requires such
qualification, except where failure to qualify would not have a material
adverse effect on the business or financial condition of the Borrower, or the
Borrower and its Subsidiaries taken as a whole or the Borrower's ability to
perform under the Loan Documents, including the Credit Agreement as such may be
amended hereby, or this Amendment. The Borrower and each of its Subsidiaries
has full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under the
Credit Agreement, as amended hereby, each other Loan Document and this
Amendment and to own and hold under lease its property and to conduct its
business substantially as currently conducted by it.
3.2 Due Authorization, Non-Contravention. The execution, delivery and
performance by the Borrower of this Amendment and the consummation of the
transactions contemplated hereby and by the Credit Agreement as so amended, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not
(a) contravene the Borrower's Organic Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Borrower
or any Subsidiary; or
(c) result in, or require the creation or imposition of, any Lien
on any properties of the Borrower or its Subsidiaries.
3.3 Governmental Approval. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution,
4
<PAGE> 5
delivery or performance by the Borrower of this Amendment.
3.4 Validity, etc. This Amendment and the Credit Agreement as amended
hereby constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms except as such
enforceability is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar law relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
including concepts of materiality, reasonableness, good faith and fair dealing.
4. EFFECT OF AMENDMENT.
This Amendment shall be deemed to be an amendment to the Credit
Agreement, and the Credit Agreement, as amended hereby, is hereby ratified,
approved and confirmed in each and every respect. All references to the Credit
Agreement in any other document, instrument, agreement or writing shall
hereafter be deemed to refer to the Credit Agreement as amended hereby.
5. GOVERNING LAW, SEVERABILITY, ETC.
THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS. Whenever possible each provision of
this Amendment shall be interpreted in such manner as to be effective and valid
under applicable laws, but if any provision of this Amendment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Amendment.
THIS WRITTEN AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED BY THIS
AMENDMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6. MISCELLANEOUS.
6.1 Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
6.2 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.3 Effectiveness. This Amendment shall become effective from and
after the date hereof when counterparts hereof executed on
5
<PAGE> 6
behalf of the Borrower and each Lender (or notice thereof satisfactory to the
Agent) shall have been received by the Agent and notice thereof shall have been
given by the Agent to the Borrower and each Lender. All modifications to the
Credit Agreement effected by this Amendment, including changes in the
calculation of interest rates and Commitment Fees, if any, will be given
retroactive effect to the date of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
POGO PRODUCING COMPANY
By: /s/ D. STEPHEN SLACK
Name: D. Stephen Slack,
Title: Senior Vice
President, Finance
BANK OF MONTREAL,
acting through its U.S.
branches and agencies,
including initially
its Chicago Illinois
branch, as Agent
By: /s/ MARK M. GREEN
Name: Mark M. Green
Title: Director, U.S.
Corporate Banking
BANQUE PARIBAS
acting through its Houston
Agency, as Co-Agent
By: /s/ BARTON D. SCHOUEST
Name: Barton D. Schouest
Title: Vice President
By: /s/ TIMOTHY A DONNON
Name: Timothy A. Donnon
Title: Regional GeneralManager
BANK OF MONTREAL
By: /s/ MARK M. GREEN
Name: Mark M. Green
Title: Director, U.S.
Corporate Banking
6
<PAGE> 7
BANQUE PARIBAS
By: /s/ BARTON D. SCHOUEST
Name: Barton D. Schouest
Title: Vice President
By: /s/ TIMOTHY A DONNON
Name: Timothy A. Donnon
Title: Regional GeneralManager
NBD BANK, N.A.
By: /s/ J. L. CALDWELL
Name: James L. Caldwell IV
Title: First Vice President
THE FIRST NATIONAL BANK OF
BOSTON
By: /s/ H. LOUIS BAILEY
Name: H. Louis Bailey
Title: V.P.
7
<PAGE> 1
Exhibit 4(c)
POGO PRODUCING COMPANY
TO
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
Trustee
___________________
INDENTURE
Dated as of March 23, 1994
___________________
5 1/2% Convertible Subordinated Notes due 2004
___________________________________________
<PAGE> 2
Pogo Producing Company
Reconciliation and tie between Trust Indenture
Act of 1939 and Indenture, dated as of March 23, 1994
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . 609
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 608
. . . . . . . . . . . . . . . . . . . . . . . . . . 610
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 701
. . . . . . . . . . . . . . . . . . . . . . . . . . 702
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 702
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 703
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . 102
1005
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . 102
1005
</TABLE>
- 1 -
<PAGE> 3
<TABLE>
<S> <C>
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 514
316(a) (last sentence) . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 104
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 107
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
____________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
- 2 -
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Price . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request or Company Order . . . . . . . . . . . . . 3
Consolidated Net Tangible Assets . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . . . . . 3
Corporation . . . . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . . . . . . . 4
Issue Date . . . . . . . . . . . . . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . 4
Officers' Certificate . . . . . . . . . . . . . . . . . . 4
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 5
Person . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Predecessor Security . . . . . . . . . . . . . . . . . . . 5
Redemption Price . . . . . . . . . . . . . . . . . . . . . 5
Regular Record Date . . . . . . . . . . . . . . . . . . . 5
Repurchase Date . . . . . . . . . . . . . . . . . . . . . 6
Repurchase Event . . . . . . . . . . . . . . . . . . . . . 6
Repurchase Price . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
- i -
<PAGE> 5
<TABLE>
<S> <C>
Responsible Officer . . . . . . . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . . . . . . . 6
Security . . . . . . . . . . . . . . . . . . . . . . . . . 6
Security Register and Security Registrar . . . . . . . . . 6
Senior Indebtedness . . . . . . . . . . . . . . . . . . . 6
Special Record Date . . . . . . . . . . . . . . . . . . . 7
Stated Maturity . . . . . . . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . 7
Trading Day . . . . . . . . . . . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act . . . . . . . . . . . . . . . . . . . 7
Vice President . . . . . . . . . . . . . . . . . . . . . . 7
Section 102. Compliance Certificates and Opinions . . . . . . . . . . . 7
Section 103. Form of Documents Delivered to Trustee . . . . . . . . . . 8
Section 104. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . 9
Section 105. Notices, Etc., to Trustee and Company . . . . . . . . . . 9
Section 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . 10
Section 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . 10
Section 108. Effect of Headings and Table of Contents . . . . . . . . . 10
Section 109. Successors and Assigns . . . . . . . . . . . . . . . . . . 11
Section 110. Separability Clause. . . . . . . . . . . . . . . . . . . . 11
Section 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . 11
Section 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 11
Section 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . 11
Section 114. Rules by Trustee, Paying Agent and Registrar . . . . . . . 11
ARTICLE TWO
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . 12
Section 202. Form of Face of Security . . . . . . . . . . . . . . . . . 12
Section 203. Form of Reverse of Security. . . . . . . . . . . . . . . . 13
Section 204. Form of Trustee's Certificate of Authentication . . . . . 18
Section 205. Form of Election to Convert. . . . . . . . . . . . . . . . 18
Section 206. Form of Assignment . . . . . . . . . . . . . . . . . . . . 19
ARTICLE THREE
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . 19
Section 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . 20
Section 303. Execution, Authentication, Delivery and Dating . . . . . . 20
</TABLE>
- ii -
<PAGE> 6
<TABLE>
<S> <C>
Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . 21
Section 305. Registration, Registration of Transfer and Exchange . . . 21
Section 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . 22
Section 307. Payment of Interest; Interest Rights Preserved . . . . . . 23
Section 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . 25
Section 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . 25
Section 310. Computation of Interest. . . . . . . . . . . . . . . . . . 25
ARTICLE FOUR
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . 26
Section 401. Satisfaction and Discharge of Indenture . . . . . . . . . 26
Section 402. Application of Trust Money . . . . . . . . . . . . . . . . 27
Section 403. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE FIVE
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 501. Events of Default. . . . . . . . . . . . . . . . . . . . . 28
Section 502. Acceleration of Maturity; Rescission and Annulment . . . . 30
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee . . . . . . . . . . . . . . . . . . . . . . 31
Section 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . 31
Section 505. Trustee May Enforce Claims Without Possession of
Securities . . . . . . . . . . . . . . . . . . . . . . 32
Section 506. Application of Money Collected . . . . . . . . . . . . . . 32
Section 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 33
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert . . . . . . . . . 34
Section 509. Restoration of Rights and Remedies . . . . . . . . . . . . 34
Section 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . 34
Section 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . 34
Section 512. Control by Holders . . . . . . . . . . . . . . . . . . . . 35
Section 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 35
Section 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 36
Section 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . 36
ARTICLE SIX
THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 601. Certain Duties and Responsibilities . . . . . . . . . . . 36
Section 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
- iii -
<PAGE> 7
<TABLE>
<S> <C>
Section 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . 37
Section 604. Not Responsible for Recitals or Issuance of Securities . . 38
Section 605. May Hold Securities. . . . . . . . . . . . . . . . . . . . 38
Section 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . 38
Section 607. Compensation and Reimbursement . . . . . . . . . . . . . . 38
Section 608. Disqualification; Conflicting Interests . . . . . . . . . 39
Section 609. Corporate Trustee Required; Eligibility . . . . . . . . . 39
Section 610. Resignation and Removal; Appointment of Successor. . . . . 40
Section 611. Acceptance of Appointment by Successor . . . . . . . . . . 41
Section 612. Merger, Conversion, Consolidation or Succession to
Business . . . . . . . . . . . . . . . . . . . . . . . 41
Section 613. Preferential Collection of Claims Against Company . . . . 42
Section 614. Appointment of Authenticating Agent . . . . . . . . . . . 42
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . 44
Section 701. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . . 44
Section 702. Preservation of Information; Communications To Holders . . 44
Section 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . 44
Section 704. Reports by Company . . . . . . . . . . . . . . . . . . . . 45
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . 45
Section 801. Company May Consolidate, Etc., Only on Certain Terms . . . 45
Section 802. Successor Legal Entity Substituted . . . . . . . . . . . . 46
ARTICLE NINE
SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 901. Supplemental Indentures Without Consent of Holders . . . . 46
Section 902. Supplemental Indentures With Consent of Holders . . . . . 47
Section 903. Execution of Supplemental Indentures . . . . . . . . . . . 48
Section 904. Effect of Supplemental Indentures . . . . . . . . . . . . 48
Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . 48
Section 906. Reference in Securities to Supplemental Indentures . . . . 48
ARTICLE TEN
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
- iv -
<PAGE> 8
<TABLE>
<S> <C>
Section 1001. Payment of Principal, Premium and Interest . . . . . . . 49
Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . 49
Section 1003. Money for Security Payments to Be Held in Trust . . . . . 49
Section 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 1005. Statement by Officers as to Default . . . . . . . . . . . 51
Section 1006. Waiver of Certain Covenants . . . . . . . . . . . . . . . 51
ARTICLE ELEVEN
REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . 52
Section 1102. Applicability of Article. . . . . . . . . . . . . . . . . 52
Section 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . 52
Section 1104. Selection by Trustee of Securities to Be Redeemed . . . . 52
Section 1105. Notice of Redemption. . . . . . . . . . . . . . . . . . . 53
Section 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . 53
Section 1107. Securities Payable on Redemption Date . . . . . . . . . . 54
Section 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . 54
ARTICLE TWELVE
RIGHT TO REQUIRE REPURCHASE. . . . . . . . . . . . . . . . . . . . . . . 55
Section 1201. Right to Require Repurchase.. . . . . . . . . . . . . . . 55
Section 1202. Notice; Method of Exercising Repurchase Right . . . . . . 55
Section 1203. Deposit of Repurchase Price . . . . . . . . . . . . . . . 56
Section 1204. Securities Not Repurchased on Repurchase Date . . . . . . 56
Section 1205. Securities Repurchased in Part. . . . . . . . . . . . . . 56
Section 1206. "Change in Control" and "Repurchase Event" Defined . . . 57
ARTICLE THIRTEEN
CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 1301. Right of Conversion . . . . . . . . . . . . . . . . . . . 58
Section 1302. Issuance of Common Stock; Time of Conversion. . . . . . . 59
Section 1303. No Adjustments in Respect of Interest or Dividends. . . . 60
Section 1304. Adjustment of Conversion Price. . . . . . . . . . . . . . 60
Section 1305. No Fractional Shares. . . . . . . . . . . . . . . . . . . 64
Section 1306. Reclassification, Consolidation, Merger or Sale of
Assets. . . . . . . . . . . . . . . . . . . . . . . . 64
Section 1307. Prior Notice of Certain Events. . . . . . . . . . . . . . 66
Section 1308. Shares to be Reserved; Accounting Treatment of
Consideration . . . . . . . . . . . . . . . . . . . . 66
Section 1309. Registration and Listing of Shares . . . . . . . . . . . 67
</TABLE>
- v -
<PAGE> 9
<TABLE>
<S> <C>
Section 1310. Taxes and Charges . . . . . . . . . . . . . . . . . . . . 67
Section 1311. Trustee and Conversion Agents Not Liable . . . . . . . . 68
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 68
Section 1401. Securities Subordinate to Senior Indebtedness . . . . . . 68
Section 1402. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . 68
Section 1403. Prior Payment to Senior Indebtedness Upon Acceleration of
Securities . . . . . . . . . . . . . . . . . . . . . . 70
Section 1404. No Payment When Senior Indebtedness in Default. . . . . . 70
Section 1405. Acknowledgment of Reliance. . . . . . . . . . . . . . . . 71
Section 1406. Subrogation to Rights of Holders of Senior Indebtedness . 71
Section 1407. Provisions Solely to Define Relative Rights . . . . . . . 71
Section 1408. Trustee to Effectuate Subordination . . . . . . . . . . . 72
Section 1409. No Waiver of Subordination Provisions. . . . . . . . . . 72
Section 1410. Notice to Trustee . . . . . . . . . . . . . . . . . . . . 72
Section 1411. Reliance on Judicial Order or Certificate of Liquidating
Agent . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 1412. Trustee Not Fiduciary for Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . 74
Section 1413. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights . . . . . . . . . . . 74
Section 1414. Article Applicable to Paying Agents . . . . . . . . . . . 74
Section 1415. Certain Conversions Deemed Payment . . . . . . . . . . . 74
</TABLE>
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<PAGE> 10
INDENTURE, dated as of March 23, 1994, between POGO PRODUCING
COMPANY, a corporation duly organized and validly existing under the laws of
the State of Delaware (herein called the "Company"), having its principal
office at 5 Greenway Plaza, Suite 2700, Houston, Texas 77046, and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, a national banking association, as Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
5 1/2% Convertible Subordinated Notes due 2004 (herein called the "Securities")
of substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or defined by
Commission rule under the Trust Indenture Act, have the meanings assigned
to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
<PAGE> 11
(4) the words "Article" and "Section" refer to an Article and
Section, respectively, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Twelve, are defined in
that Article.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York,
Hartford, Connecticut or Houston, Texas are authorized or obligated by law or
executive order to close.
"Closing Price" for any Trading Day means the last reported sale
price (or, if none on any day, the mean between the bid and asked quotations on
such day) of the securities in question for such date, in either case on the
New York Stock Exchange or, if the securities are not listed or admitted to
trading on such exchange, on the principal national securities exchange on
which such securities are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the National
Association of Securities Dealers Automated Quotations National Market System,
or if the securities are not listed or admitted to trading on any national
securities exchange or quoted
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<PAGE> 12
on such National Market System, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected by the Company for such purpose.
"Common Stock" initially means the class designated as Common
Stock, par value $1.00 per share, of the Company as of the date hereof.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934,
or, if at any time after the execution of this instrument such Commission is
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person, and in each case shall include any
other obligor upon the Securities.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means the total of all assets
included in a consolidated balance sheet of the Company and its Subsidiaries,
prepared in accordance with generally accepted accounting principles (and as of
a date not more than 90 days prior to the date as of which Consolidated Net
Tangible Assets are to be determined), less the sum of the following items each
as included in such balance sheet:
(i) all current liabilities;
(ii) all depreciation, depletion, valuation and other reserves;
(iii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles; and
(iv) minority interests in the equity of Subsidiaries.
"Corporate Trust Office" means the principal office of the Trustee
at 777 Main Street, Hartford, Connecticut 06115, at which its corporate trust
business shall be administered.
"Corporation" means a corporation, partnership, association,
company, joint-stock company or business trust.
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<PAGE> 13
"Defaulted Interest" has the meaning specified in Section
307.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Issue Date" means March 23, 1994.
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the
principal executive officer and the principal financial officer or principal
accounting officer, of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities in accordance with the terms of this
Indenture; provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
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<PAGE> 14
(iii) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on behalf
of the Company.
"Person" means any individual, Corporation or government or any
agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Purchase Agreement" has the meaning specified in Section 301.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the 1st of March or 1st of September (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Repurchase Date" has the meaning specified in Section 1201.
- 5 -
<PAGE> 15
"Repurchase Event" has the meaning specified in Section 1206.
"Repurchase Price" has the meaning specified in Section 1201.
"Responsible Officer", when used with respect to the Trustee,
means any person in the Corporate Trust Administration Department of the
Trustee familiar with corporate trust matters.
"Securities" has the meaning set forth in the recitals of this
Indenture.
"Security" means any of the Securities.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of, premium, if any, and
unpaid interest (including, without limitation, any interest accruing
subsequent to the commencement of a case or other proceeding under any
bankruptcy or other similar law with respect to the Company) on, and other
obligations in respect of, the following, whether outstanding at the date
hereof or thereafter incurred or created: (a) indebtedness of the Company for
money borrowed (including purchase-money obligations) evidenced by notes or
other written obligations, (b) indebtedness of the Company evidenced by notes,
debentures, bonds or other securities issued under the provisions of an
indenture or similar instrument, (c) indebtedness secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held
by the Company subject to such mortgage, pledge or encumbrance, whether or not
indebtedness secured thereby shall have been assumed by the Company, (d)
obligations of the Company as lessee under capitalized leases and under leases
of property made as part of any sale and leaseback transactions, (e)
obligations of the Company in respect of letters of credit issued for its
account and "swaps" of interest rates, commodity prices or foreign currencies
(and other interest rate, commodity price or foreign currency hedging
agreements) to which the Company is a party, (f) indebtedness of others of any
of the kinds described in the preceding clauses (a) through (e) assumed or
guaranteed by the Company and (g) renewals, extensions and refundings of, and
indebtedness and obligations of a successor Person issued in exchange for or in
replacement of, indebtedness or obligations of the kinds described in the
preceding clauses (a) through (f); provided, however, that the following shall
not constitute Senior Indebtedness: (i) any indebtedness or obligation which
by its terms refers explicitly to the Securities and states that such
indebtedness or obligation shall not be senior in right of payment thereto,
(ii) any indebtedness or obligation of the Company in respect of the Securities
and (iii) any indebtedness or obligation of the Company to any Subsidiary.
Notwithstanding the foregoing, all indebtedness and obligations of the Company
in respect of each of the following shall rank equally with the Securities and
shall not constitute "Senior Indebtedness" hereunder: (x) the 8% Convertible
Subordinated Debentures due 2005 and (y) the 10.25% Convertible Subordinated
Notes due 1999.
- 6 -
<PAGE> 16
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a Corporation more than 50% of the outstanding
voting stock or other voting or managing ownership interest of which is owned,
directly or indirectly, by the Company or by one or more other Subsidiaries, or
by the Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock which ordinarily has voting power for
the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"Trading Day", with respect to any stock exchange or securities
market, means any Monday, Tuesday, Wednesday, Thursday or Friday on which such
stock exchange or securities market is open for business.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed, except as provided
in Section 905; provided, however, that in the event the Trust Indenture Act is
amended after such date, Trust Indenture Act means, to the extent required by
any such amendment, the Trust Indenture Act as so amended.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
- 7 -
<PAGE> 17
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such certificate
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Company stating that the information with respect to such factual
matters is in the possession of the Company, unless such counsel knows that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver
- 8 -
<PAGE> 18
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
Section 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing to or with the Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration
Department, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing
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<PAGE> 19
and mailed, first-class postage prepaid, to the Company addressed to it at
the address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing to
the Trustee by the Company. If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not received by the
addressee.
Section 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Security Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. If
the Company mails a notice or communication to the Holders, it shall mail a
copy to the Trustee and each Registrar, Paying Agent or co-registrar. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Indenture by
any of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
- 10 -
<PAGE> 20
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Senior Indebtedness and the Holders of
Securities, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law.
Section 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or
Stated Maturity of any Security or the last date on which a Holder has the
right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) or conversion of the
Securities need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such
last day for conversion, provided that no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be.
Section 114. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting
of Holders. The Registrar and Paying Agent may make reasonable rules for their
functions.
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<PAGE> 21
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Securities and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Section 202. Form of Face of Security.
POGO PRODUCING COMPANY
5 1/2% Convertible Subordinated
Note due 2004
No. _________________ $______________
POGO PRODUCING COMPANY, a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________, or registered assigns,
the principal sum of ________________________ ___________________ Dollars on
March 15, 2004, and to pay interest thereon from March 23, 1994 or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on March 15 and September 15, in each year,
commencing September 15, 1994, at the rate of 5 1/2% per annum until the
principal hereof is paid or made available for payment. Interest on the
Securities shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 1st or September 1st (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date. Any such
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<PAGE> 22
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in New York, New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. The Company, however, may pay
principal and interest by check payable in such money. At the option of the
Company, payment of interest may be made by check mailed on or before the due
date to the address of the Person entitled thereto as such address shall appear
in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place. The Indenture
includes limitations on the right of the Holder to institute a proceeding,
judicial or otherwise, with respect to the Indenture, for the appointment of a
receiver or trustee, or for any other remedy under the Indenture.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated:
POGO PRODUCING COMPANY
By:___________________________
Attest:
______________________________
Section 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of
the Company
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<PAGE> 23
designated as its 5 1/2% Convertible Subordinated Notes due 2004 (herein called
the "Securities"), limited in aggregate principal amount to $75,000,000
(subject to increase to up to $86,250,000 aggregate principal amount), issued
and to be issued under an Indenture, dated as of March 23, 1994 (herein called
the "Indenture"), between the Company and Shawmut Bank Connecticut, National
Association, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Indebtedness and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
Subject to the provisions of the Indenture, the Holder hereof has
the right, at his option, at any time prior to maturity, to convert the
principal amount of this Security (or any portion of the principal amount
hereof which is an integral multiple of $1,000) into fully paid and
nonassessable shares of Common Stock of the Company at the conversion price of
$22.188 of principal amount of this Security per share of Common Stock, subject
to such adjustment, if any, of the conversion price and the securities or other
property issuable upon conversion as may be required by the provisions of the
Indenture (except that, in case this Security (or any portion hereof) shall be
called for redemption before maturity, such right shall terminate at the close
of business on the Business Day immediately preceding the Redemption Date for
this Security (or such portion hereof), unless in any such case the Company
shall default in payment due upon such redemption), but only upon surrender of
this Security for the purpose of such conversion to the Company at the
designated office or agency of the Company in New York, New York or any other
office or agency designated by the Company for such purpose pursuant to the
provisions of the Indenture, accompanied by written notice that the Holder
elects to convert this Security or any portion hereof and specifying the name
or names (with address or addresses) in which a certificate or certificates for
shares of Common Stock are to be issued and (if so required by the Company or
the Trustee) by a written instrument or instruments of transfer in form
satisfactory to the Company and the Trustee duly executed by the registered
Holder or his duly authorized legal representative and transfer tax stamps or
funds therefor, if required pursuant to the provisions of the Indenture and, in
case such surrender shall be made during the period from the close of business
on any Regular Record Date to the opening of business on the next succeeding
Interest Payment Date (unless this Security or the portion thereof being
converted has been called for redemption), also accompanied by payment in funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement with respect to payment in the
event of conversion after the close of business on a Regular Record Date, no
adjustment is to be made on conversion for interest accrued hereon or for
dividends on shares of Common Stock issued on conversion; provided, however,
that upon a call for redemption by the Company, accrued and unpaid interest to
the Redemption Date shall be payable with respect to Notes converted after the
redemption call and prior to the Redemption Date. No fractional shares are
issuable upon any conversion, but in lieu thereof the Company shall pay
therefor in cash
- 14 -
<PAGE> 24
as provided in the Indenture.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by first-class mail, postage prepaid, at any time on
or after March 15, 1998, as a whole or in part, at the election of the Company,
at the following Redemption Prices (expressed as percentages of the principal
amount): if redeemed during the 12-month period beginning March 15 of the
years indicated,
<TABLE>
<CAPTION>
Year Redemption Price Year Redemption Price
---- ---------------- ---- ----------------
<S> <C> <C> <C>
1998 . . . . . 103.30% 2001 . . . . . 101.65%
1999 . . . . . 102.75% 2002 . . . . . 101.10%
2000 . . . . . 102.20% 2003 . . . . . 100.55%
</TABLE>
; provided, however, that in the case of any such redemption, the Redemption
Price shall include accrued and unpaid interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or unconverted portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
Under certain circumstances involving a Change in Control (as
defined in the Indenture), the Company may be required to offer to purchase the
Securities at a purchase price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date.
The indebtedness evidenced by the Securities is, to the extent and
in the manner provided in the Indenture, expressly subordinate and subject in
right of payment to the prior payment in full of any Senior Indebtedness of the
Company or provision for such payment, whether outstanding at the date of the
Indenture or thereafter incurred, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this
Security, by his acceptance hereof, agrees to and shall be bound by such
provisions of the Indenture and authorizes and directs the Trustee in his
behalf to take such action as may be necessary or appropriate to effectuate
such subordination and appoints the Trustee his attorney-in-fact for any and
all such purposes.
If an Event of Default, as defined in the Indenture, shall occur
and be continuing, the principal of all the Securities may be declared due and
payable in the manner and with the effect provided in the Indenture.
- 15 -
<PAGE> 25
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of at least a majority in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and
of any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.
The Indenture provides that no Holder of any Security may enforce
any remedy under the Indenture except in the case of failure of the Trustee to
act after notice of default and after request by the Holders of 25% in
aggregate principal amount of the Outstanding Securities and the offer and, if
requested, provision to the Trustee of reasonable indemnity satisfactory to the
Trustee; provided, however, that such provision shall not prevent the Holder
hereof from enforcing payment of the principal of (and premium, if any) or
interest on this Security after the same shall have become due.
Initially, the Trustee will act as Paying Agent, Security
Registrar and as the agent where notices and demands to or upon the Company in
respect of the Notes may be served. The Company may appoint and change any
Paying Agent, Security Registrar or agent for notices without notice, other
than notice to the Trustee. The Company or one of its subsidiaries may act as
Paying Agent, Security Registrar or agent for notices.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, subject to the subordination
provisions, to pay the principal of (and premium, if any) and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of transfer
at the office or agency of the Company in New York, New York, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar and duly executed by the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
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<PAGE> 26
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
This Security and the rights of the Holder hereof shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Article Twelve of the Indenture, check the box: [ ]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Article Twelve of the Indenture, state the amount
(in integral multiples of $1,000): $___________
Date: ____________ Your Signature: ___________________
(Sign exactly as your
name appears on the
other side of this
Security)
Your Social Security or
Tax Identification Number: ____________________________________________________
Signature Guarantee: __________________________________________________________
Note: Signature(s) must be guaranteed by an eligible guarantor institution
which is a member of one of the following recognized signature
Guarantee Programs: (1) The
- 17 -
<PAGE> 27
Securities Transfer Agents Medallion Program (STAMP); (2) The New
York Stock Exchange Medallion Signature Program (MSP); or (3) The
Stock Exchange Medallion Program (SEMP).
Section 204. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By____________________________
Authorized Signatory
Section 205. Form of Election to Convert.
To Pogo Producing Company:
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into shares of Common Stock of Pogo Producing Company in accordance with the
terms of the Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If shares are to be issued in the name of a Person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Dated:
Portion of Security to be converted
($1,000 or an integral multiple thereof):
$_______________ ___________________________
Signature (for conversion only)
Please Print or Type Name and
Address, Including Zip Code,
and Social Security or Other
Identifying Number:
_________________________
_________________________
_________________________
- 18 -
<PAGE> 28
Section 206. Form of Assignment.
ASSIGNMENT
For value received ___________________________________________ hereby sell(s),
assign(s) and transfer(s) unto ____________________________________________,
______________________ [Please insert social security or other identifying
number of assignee], the within Security, hereby irrevocably constituting and
appointing ______________________________ attorney to transfer the said
Security on the books of the Company, with full power of substitution in the
premises.
Date: _____________________ ________________________________
Signature(s)
Note: The signature(s) to this
assignment must correspond
with the name as it appears
upon the face of the within
Security in every particular,
without alteration, or
enlargement or any change
whatever.
_________________________
Signature Guarantee
Note: Signature(s) must be guaranteed by an eligible guarantor institution
which is a member of one of the following recognized signature
Guarantee Programs: (1) The Securities Transfer Agents Medallion
Program (STAMP); (2) The New York Stock Exchange Medallion
Signature Program (MSP); or (3) The Stock Exchange Medallion
Program (SEMP).
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to the sum of (a)
$75,000,000 and (b) such aggregate principal amount (which may not exceed
$11,250,000 aggregate principal amount) of Securities, if any, as shall be
purchased by the "Underwriters" at the "Second Closing Time" (both as defined
in the Purchase Agreement) pursuant to and in accordance with the terms and
provisions of the Purchase Agreement, dated March 16, 1994, between the Company
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
- 19 -
<PAGE> 29
Goldman, Sachs & Co. and PaineWebber Incorporated, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906,
1108, 1205 or 1301.
The Securities shall be known and designated as the "5 1/2%
Convertible Subordinated Notes due 2004" of the Company. Their Stated Maturity
shall be March 15, 2004 and they shall bear interest at the rate of 5 1/2% per
annum, from March 23, 1994 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
semiannually on March 15 and September 15, commencing September 15, 1994, until
the principal thereof is paid or made available for payment.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company in New York,
New York, maintained for such purpose and at any other office or agency
maintained by the Company for such purpose; provided, however, that at the
option of the Company payment of interest may be made by check mailed on or
before the due date to the address of the Person entitled thereto as such
address shall appear in the Security Register.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to repurchase at the option of the
Holders as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Fourteen.
Section 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at the time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the
- 20 -
<PAGE> 30
authentication and delivery of such Securities or did not hold such offices
at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company
to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 1002, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
- 21 -
<PAGE> 31
Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate
principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration
of transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906, 1108, 1205 or
1301 not involving any transfer.
Neither the Company nor the Trustee nor any agent of either shall
be required (i) to issue, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Securities selected for redemption
under Section 1104 and ending at the close of business on the day of such
mailing or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security
- 22 -
<PAGE> 32
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
actual notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon a Company
Request the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the expenses of the Trustee) connected
therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
- 23 -
<PAGE> 33
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder at his address as
it appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name that Security (or one or more
- 24 -
<PAGE> 34
Predecessor Securities) is registered at the close of business on such Regular
Record Date. Upon a call for redemption by the Company, accrued and unpaid
interest to the Redemption Date shall be payable with respect to Securities
converted after the notice of redemption has been mailed and prior to the
Redemption Date. Except as otherwise expressly provided in this paragraph, in
the case of any Security which is converted, interest whose Stated Maturity is
after the date of conversion of such Security shall not be payable.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of and principal of (and
premium, if any) and (subject to Section 307) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled
by it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of as directed by a
Company Order. The Company shall, within 120 days of a request therefor by the
Trustee, deliver a Company Order directing the destruction of cancelled
Securities. If the Company fails to respond to such a request within such
120-day period, the Trustee may destroy any or all cancelled Securities, in
which case the Trustee shall deliver a certificate as to such destruction to
the Company.
Section 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
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<PAGE> 35
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
any surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
- 26 -
<PAGE> 36
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and
held by it or any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon Company Request.
Section 403. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money
deposited with respect to Securities of any series in accordance with Section
401 by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture
with respect to the Securities of such series and the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 401 until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 401; provided, however, that if
the Company has made any payment of principal of (or premium, if any) or
interest on any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Fourteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, whether or not such payment is prohibited by the
provisions of Article Fourteen, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity, whether or not such payment is prohibited
by the provisions of Article Fourteen; or
(3) default in the payment of the Repurchase Price in respect of any
Security on the Repurchase Date and continuance of such default for more
than 10 days thereafter in accordance with the provisions of Article
Twelve, whether or not such payment is prohibited by the provisions of
Article Fourteen; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty, a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) default under any bond, debenture, note or other evidence of
indebtedness for money borrowed or under any mortgage, indenture or other
instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Company or under
any guarantee of payment by the Company of indebtedness for money borrowed,
whether such indebtedness or guarantee now exists or shall hereafter be
created, which default extends beyond any period of grace provided with
respect thereto and which default relates to (a) the obligation to pay the
principal of or interest on any such
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indebtedness or guarantee or (b) an obligation other than the obligation to
pay the principal of or interest on any such indebtedness, if the effect of
such event of default is to cause the acceleration of a principal amount of
such indebtedness and such other indebtedness or guarantee shall not have
been paid within ten days after there has been given to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in aggregate principal amount of the Outstanding Securities a written
notice specifying such event of default and stating that such notice is a
"Notice of Default" hereunder; provided, however, that no default under
this Section 501(5) shall exist if all such defaults do not relate to such
indebtedness or such guarantees with an aggregate principal amount in
excess of 5% of Consolidated Net Tangible Assets; and provided further,
that if any such event of default has been cured or waived and any
acceleration with respect thereto rescinded, or if such other indebtedness
has been repaid or otherwise discharged, the Event of Default arising under
this Section 501(5) by virtue thereof shall not be deemed to have occurred
and any acceleration under this Section 501(5) pursuant to Section 502
hereof shall ipso facto be rescinded so long as such rescission does not
conflict with any judgment or decree;
(6) the entry by a court having jurisdiction in the premises of (a)
a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (b) a decree or order
adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable federal or
state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any
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such action.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities may declare the principal of all
the Securities and the interest accrued thereon to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders) and upon any such declaration such principal and interest shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter in this Article provided, the Holders of a
majority in aggregate principal amount of the Outstanding Securities, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee
a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced or liabilities incurred by the
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the nonpayment of the principal
of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the
rate borne by the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee, being advised
by counsel, shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
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and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities, subject to the provisions of Article Fourteen, and to file such
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding,
subject to the provisions of Article Fourteen, and
(ii) subject to the provisions of Article Fourteen, to collect and
receive any moneys or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered. In any such proceeding brought by the
Trustee, the Trustee shall be deemed to represent all Holders without the
necessity of joining any Holders as parties.
Section 506. Application of Money Collected.
Subject to Article Fourteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in the case of the distribution of such
money on account of principal (or premium, if
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any) or interest, upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all costs and expenses in connection with
the collection of such money and to the payment of all amounts due the
Trustee under Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
Section 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against the costs, expenses
and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer and, if requested, provision of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the
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Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional,
subject to the subordination provisions in Article Fourteen, to receive payment
of the principal of (and premium, if any) and (subject to Section 307) interest
on such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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Section 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct in writing the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee, provided
that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall determine that the action so directed would involve the Trustee
in personal liability or would be unduly prejudicial to Holders not joining
in such direction.
This Section 512 shall be in lieu of Section 316(a)(1)(A) of the
Trust Indenture Act and said Section 316(a)(1)(A) is hereby expressly excluded
from this Indenture, as permitted by the Trust Indenture Act.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon. This
Section 513 shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act
and said Section 316(a)(1)(B) is hereby expressly excluded from this Indenture,
as permitted by the Trust Indenture Act.
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Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding more than 10% in aggregate principal
amount of the Outstanding Securities, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Security on or after the respective Stated Maturities expressed
in such Security (or, in the case of redemption, on or after the Redemption
Date) or for the enforcement of the right to convert any Security in accordance
with Article Thirteen. This Section 514 shall be in lieu of Section 315(e) of
the Trust Indenture Act and said Section 315(e) is hereby expressly excluded
from this Indenture, as permitted by the Trust Indenture Act.
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided
by the Trust Indenture Act. Notwithstanding the foregoing, no provision of
this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not
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therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section.
Section 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder
as and to the extent provided by the Trust Indenture Act; provided, however,
that in the case of any default of the character specified in Section 501(4),
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, or of any supplemental indenture or of the Securities. The Trustee
shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
Section 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any
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provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee, its agents, employees, officers,
directors and shareholders for, and to hold each of them harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of, premium, if any, or interest on
particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 501(6) or (7) occurs, the expenses (including
the reasonable charges and expenses of its agents, attorneys and counsel) and
the compensation for services shall be preferred over the status of the Holders
in any reorganization or similar proceeding and are intended to constitute
expenses of administration under any reorganization, bankruptcy or similar law.
Section 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such, has
an office or agency in New York, New York, and has a combined capital and
surplus of at least $50,000,000 (or is a member or subsidiary of a bank holding
system with aggregate combined capital and surplus of at least $50,000,000).
If such corporation or other Person publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such
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corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. No obligor upon any Securities issued
under this Indenture or Person directly or indirectly controlling, controlled
by or under common control with such obligor shall serve as Trustee under this
Indenture.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
a majority in aggregate principal amount of the Outstanding Securities
specifying such removal, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such bona fide Holder described in (d)(1) above, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the
Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the
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Trustee hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which
shall be authorized to act on behalf of the Trustee to authenticate Securities
issued upon original issue and upon exchange, registration of transfer, partial
conversion or partial redemption or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any state thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 (or being a member or
subsidiary of a bank holding system with aggregate combined capital and surplus
of at least $50,000,000) and subject to supervision or examination by federal
or state authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party,
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or any corporation succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving 30 days'
written notice thereof to the Trustee and to the Company. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving 30 days'
written notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time such Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first- class mail, postage prepaid, to
all Holders as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
As Trustee
By ___________________________
As Authenticating Agent
By ___________________________
Authorized Signatory
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS
BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 702. Preservation of Information; Communications To Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
Section 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant
thereto. Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than May 15 of each year,
commencing with the May 15 first following
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the issuance of the Securities.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange and of any delisting thereof.
Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. In the event the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file with the
Trustee (a) within 60 days after the end of each of the Company's first three
fiscal quarters in each fiscal year, a report containing unaudited financial
statements with respect to such fiscal quarter and (b) within 105 days after
the end of the Company's fiscal year, a report containing audited financial
statements with respect to such fiscal year.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
Person or convey, transfer, lease or otherwise dispose of its properties and
assets substantially as an entirety to any Person, and the Company shall not
permit any Person to consolidate with or merge into the Company or convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer, lease or otherwise dispose of its properties
and assets substantially as an entirety to any Person, the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer or otherwise, or which leases, the
properties and assets of the Company substantially as an entirety shall be
a Corporation or other legal entity, shall be organized and validly
existing under the laws of the United States of America, any state thereof
or the District of Columbia and shall expressly assume, by an indenture
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supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of (and premium, if any) and interest on all the Securities and the
performance of every covenant of this Indenture on the part of the Company
to be performed or observed and shall have provided for conversion rights
in accordance with Section 1306;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer, lease or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
Section 802. Successor Legal Entity Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer, lease or other disposition
of the properties and assets of the Company substantially as an entirety in
accordance with Section 801, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer,
lease or other disposition is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities and may liquidate and dissolve.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the
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Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(3) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Section 1306; or
(4) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to make
any other provisions with respect to matters or questions arising under
this Indenture, provided such action pursuant to this clause (4) shall not
adversely affect the interests of the Holders in any material respect.
Section 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or adversely affect the right
to convert any Security as provided in Article Thirteen (except as
permitted by Section 901(3)), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 513 or
Section 1006, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the
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Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental Indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any indenture
supplemental hereto. If a record date is fixed, then those persons who were
Holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such supplemental Indenture or to
revoke any consent previously given, whether or not such persons continue to be
Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting any additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee
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in exchange for Outstanding Securities.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain in New York, New York an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange, where Securities
may be surrendered for conversion and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company initially designates the office of the Trustee at Shawmut Bank, c/o
First Chicago, 14 Wall Street, 8th Floor -- Window No. 2, New York, New York
10005, as its office or agency for these purposes. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside New York, New York) where the Securities may
be presented or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in New York, New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (and premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such
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sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit in immediately available funds with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent; and
(2) at any time during the continuance of any default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and premium,
if any) or interest on any Security and remaining unclaimed for two years (or
such shorter period as required by applicable abandonment law with respect to
the Holder entitled to payment thereof) after such principal (and premium, if
any) or interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, unless an
applicable abandonment statute designates another Person, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in a newspaper published in the English language, customarily published
on each Business Day and of general circulation in New York, New York, notice
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that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 1004. Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if a transaction that would result in the termination of the Company's
existence or any such right or franchise is permissible under Article Eight or
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holders.
Section 1005. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, in each case ending after the date
hereof, an Officers' Certificate, stating that a review of the activities of
the Company during the preceding fiscal year has been made under the
supervision of the signing officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such officer signing such
certificate, that to the best of his knowledge the Company is not in default in
the performance or observance of any of the terms, provisions and conditions
hereof or, if a default or Event of Default shall have occurred, describing all
such defaults or Events of Default of which he may have knowledge and that to
the best of his knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Securities are prohibited or if such event has occurred, a description of
the event.
Section 1006. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 1004, if before the time for such
compliance the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in full force
and effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on or after March 15, 1998, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to the Redemption Date.
Section 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities
to be redeemed and whether the Trustee is to give the notice of redemption.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed pursuant to
Section 1101, the particular Securities to be redeemed shall be selected not
more than 45 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities not previously called for redemption, by such method
(including pro rata or by lot) as the Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of portions (equal to
$1,000 or any integral multiple thereof) of the principal amount of Securities
of a denomination larger than $1,000.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed
(so far as may be) to be the portion selected for redemption. Securities which
have been converted during a selection of Securities to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such selection.
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The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amounts) of the particular Securities to be redeemed;
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date;
(5) the conversion price, the date on which the right to convert
the principal of the Securities to be redeemed will terminate and the
place or places where such Securities may be surrendered for conversion; and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at Company Request, by the
Trustee in the name and at the expense of the Company.
Section 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and
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hold in trust as provided in Section 1003) an amount of money in immediately
available funds sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date other than any Securities
called for redemption on that date which have been converted prior to the date
of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held
in trust for the redemption of such Security shall (subject to the right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
Section 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered.
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ARTICLE TWELVE
RIGHT TO REQUIRE REPURCHASE
Section 1201. Right to Require Repurchase.
In the event that there shall occur a Change in Control (as defined
in Section 1206) which constitutes a Repurchase Event (as defined in Section
1206), then each Holder shall have the right, at such Holder's option to
require the Company to purchase, and upon the exercise of such right, the
Company shall, subject to the provisions of Article Fourteen, purchase all or
any part of such Holder's Securities on a date (the "Repurchase Date") selected
by the Company that is not more than 75 days after the date the Company gives
notice of the Repurchase Event as contemplated in Section 1202(a) at a price
(the "Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date.
Section 1202. Notice; Method of Exercising Repurchase Right.
(a) On or before the 15th day after the Repurchase Event, the
Company, or at Company Request, the Trustee (in the name and at the expense of
the Company), shall give notice of the occurrence of the Repurchase Event and
of the repurchase right set forth herein arising as a result thereof by
first-class mail, postage prepaid, to each Holder of the Securities at such
Holder's address appearing in the Security Register. The Company shall also
deliver a copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the event constituting the Repurchase Event and the date
thereof,
(2) the Repurchase Date,
(3) the date by which the repurchase right must be exercised,
(4) the Repurchase Price, and
(5) the instructions a Holder must follow to exercise a
repurchase right.
No failure of the Company to give the foregoing notice shall limit
any Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Repurchase
Event.
(b) To exercise a repurchase right, a Holder shall deliver to the
Company
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(or an agent designated by the Company for such purpose in the notice referred
to in (a) above) and to the Trustee on or before the close of business on the
Business Day immediately preceding the Repurchase Date (i) written notice of
the Holder's exercise of such right, which notice shall set forth the name of
the Holder, the principal amount of the Security or Securities (or portion of a
Security) to be repurchased, and a statement that an election to exercise the
repurchased right is being made thereby, and (ii) the Security or Securities
with respect to which the repurchase right is being exercised, duly endorsed
for transfer to the Company. Such written notice shall be irrevocable. If the
Repurchase Date falls between any Regular Record Date and the next succeeding
Interest Payment Date, Securities to be repurchased must be accompanied by
payment from the Holder of an amount equal to the interest thereon which the
registered Holder thereof is to receive on such Interest Payment Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, then subject to Article Fourteen, the Company
shall on or promptly following the Repurchase Date pay or cause to be paid in
cash to the Holder thereof the Repurchase Price of the Security or Securities
as to which the repurchase right had been exercised. In the event that a
repurchase right is exercised with respect to less than the entire principal
amount of a surrendered Security, the Company shall execute and deliver to the
Trustee and the Trustee shall authenticate for issuance in the name of the
Holder a new Security or Securities in the aggregate principal amount of the
unrepurchased portion of such surrendered security.
Section 1203. Deposit of Repurchase Price.
On or prior to the Repurchase Date and subject to Article Fourteen,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money, in immediately available funds,
sufficient to pay the Repurchase Price of the Securities which are to be repaid
on or promptly following the Repurchase Date.
Section 1204. Securities Not Repurchased on Repurchase Date.
If any Security surrendered for repurchase shall not be paid by the
10th day following the Repurchase Date, the principal shall, until paid, bear
interest to the extent permitted by applicable law from the eleventh day
following the Repurchase Date at a rate per annum borne by such Security.
Section 1205. Securities Repurchased in Part.
Any Security which is to be repurchased only in part shall be
surrendered at any office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the
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Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the repurchased portion of the principal of
the Security so surrendered.
Section 1206. "Change in Control" and "Repurchase Event" Defined.
(a) For purposes of this Article, "Change in Control" means any of
the following events that occurs after the Issue Date of the Securities and so
long as any Securities are Outstanding:
(1) the Company's assets are sold or otherwise disposed of
substantially as an entirety to any Person or related group of
Persons in any one transaction or a series of related transactions;
(2) there shall be consummated any consolidation or merger of
the Company (A) in which the Company is not the continuing or
surviving corporation (other than a consolidation or merger with a
wholly-owned Subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same number of shares of common
stock of such Subsidiary) or (B) pursuant to which the Common Stock is
converted into cash, securities or other property, in each case other
than a consolidation or merger of the Company in which the holders of
the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock
of the continuing or surviving Corporation immediately after such
consolidation or merger; or
(3) any Person, or any Persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act
(a "Group") (other than the Company, any Subsidiary, any employee
stock purchase plan, stock option plan or other stock incentive plan
or program, retirement plan or automatic dividend reinvestment plan or
any substantially similar plan of the Company or any Subsidiary or any
Person holding securities of the Company for or pursuant to the terms
of any such employee benefit plan, which may file or become obligated
to file a report under or in response to Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) under the Exchange
Act), together with any Affiliates thereof, shall acquire beneficial
ownership (as defined in Rule 13d-3 of the Exchange Act) of at least
50% of the total voting power of all classes of capital stock of the
Company entitled to vote generally in the election of directors of the
Company.
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(b) A Change in Control as described in Section 1206(a) shall
constitute a "Repurchase Event" giving rise to a repurchase right on the part
of each Holder of a Security unless:
(1) the Current Market Price of the Common Stock on the date the
Change in Control shall have occurred is at least equal to 105% of the
conversion price in effect immediately preceding the time of such
Change in Control, or
(2) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in
Control to the holders of Common Stock consists of shares of common
stock that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted in the NASDAQ National Market
System, and as a result of such transaction the Securities become
convertible solely into such shares of common stock, or
(3) the consideration in the transaction giving rise to such
Change in Control to the holders of Common Stock consists of cash,
securities that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted in the NASDAQ National Market
System, or a combination of cash and such securities and the aggregate
fair market value of such consideration (which, in the case of each
such security, shall be equal to the average of the daily Closing
Prices of each such security during the 10 consecutive Trading Days
commencing with the sixth Trading Day following consummation of such
transaction) to be received by a holder of Common Stock with respect
to one share of Common Stock is at least 105% of the conversion price
in effect on the date immediately preceding the closing date of such
transaction.
For purposes of this definition, "Current Market Price" on any date
means the average daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 10 Trading Days before, and
ending not later than, the date in question.
ARTICLE THIRTEEN
CONVERSION OF SECURITIES
Section 1301. Right of Conversion.
The Holder of any Security or Securities shall have the right at any
time prior to maturity, at his option, to convert, subject to the terms and
provisions of this Article
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Thirteen, the principal of any such Security or Securities (or any portion of
the principal thereof which is $1,000 or an integral multiple of $1,000) into
fully paid and nonassessable shares of Common Stock of the Company at the
conversion price of $22.188 of principal amount of Securities per share of
Common Stock or, in case an adjustment therein has taken place pursuant to the
provisions of Section 1304, then at the price as so adjusted (except that with
respect to any Security or Securities, or any such portion, which shall be
called for redemption, such right shall terminate, except as provided in the
last paragraph of Section 1302, at the close of business on the Business Day
immediately preceding the Redemption Date for such Security or Securities or
portion unless the Company shall default in payment due upon redemption
thereof). Such right shall be exercised by the surrender of the Security or
Securities, the principal of which is so to be converted, to the Company at any
time during usual business hours at any office or agency to be maintained by it
in accordance with the provisions of Section 1002, accompanied by written
notice that the Holder elects to convert such Security or Securities or any
portion thereof and specifying the name or names (with address) in which a
certificate or certificates for Common Stock are to be issued and (if so
required by the Company or the Trustee) by a written instrument or instruments
of transfer in form satisfactory to the Company and the Trustee, duly executed
by the Holder or his attorney, duly authorized in writing and transfer tax
stamps or funds therefor, if required pursuant to Section 1310. For
convenience, the conversion of all or a portion, as the case may be, of the
principal of any Security into the Common Stock of the Company is hereinafter
sometimes referred to as the conversion of such Security. All Securities
surrendered for conversion shall, if surrendered to the Company or any
conversion agent, be delivered to the Trustee for cancellation and cancelled by
it or, if surrendered to the Trustee, shall be cancelled by it; and, subject to
the next succeeding sentence, no Securities shall be issued in lieu thereof.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in an aggregate principal amount equal
to the unconverted portion of the principal amount of such Security.
Section 1302. Issuance of Common Stock; Time of Conversion.
As promptly as practicable after the surrender, as herein provided,
of any Security or Securities for conversion, the Company shall deliver or
cause to be delivered at any office or agency to be maintained by it in
accordance with the provisions of Section 1002 to or upon the written order of
the Holder of the Security or Securities so surrendered a certificate or
certificates representing the number of fully paid and nonassessable shares of
Common Stock of the Company into which such Security or Securities (or portion
thereof) may be converted in accordance with the provisions of this Article
Thirteen. Subject to the following provisions of this paragraph and of Section
1304, such conversion shall be deemed to have been made immediately prior to
the close of business on the date that such Security or Securities shall have
been surrendered in satisfactory form for conversion, so that the rights of the
Holder as a Holder shall cease with respect to such Security or Securities (or
the portion thereof being converted) at such time, and the Person or Persons
entitled to
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receive the shares of Common Stock deliverable upon conversion of such Security
or Securities shall be treated for all purposes as having become the record
holder or holders of such shares of Common Stock at such time, and such
conversion shall be at the conversion price in effect at such time; provided,
however, that no such surrender on any date when the stock transfer books of
the Company shall be closed shall be effective to constitute the Person or
Persons entitled to receive the shares of Common Stock deliverable upon such
conversion as the record holder or holders of such shares of Common Stock on
such date, but such surrender shall be effective to constitute the Person or
Persons entitled to receive such shares of Common Stock 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, and such
conversion shall be deemed to have been made at, and shall be made at the
conversion rate in effect at, such time on such next succeeding day.
If the last day for the exercise of the conversion right shall not
be a Business Day, then such conversion right may be exercised on the next
succeeding Business Day.
Section 1303. No Adjustments in Respect of Interest or Dividends.
Securities surrendered for conversion during the period from the
close of business on any Regular Record Date to the opening of business on the
next succeeding Interest Payment Date shall (except in the case of Securities
or portions thereof which have been called for redemption) be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of Securities being surrendered for conversion.
Upon a call for redemption by the Company, accrued and unpaid interest to the
Redemption Date shall be payable with respect to Securities converted after the
redemption notice has been mailed and prior to the Redemption Date. Except as
provided in this Section 1303 and subject to the last paragraph of Section 307,
no payment or adjustment shall be made upon any conversion on account of any
interest accrued on the Securities surrendered for conversion or on account of
any dividends on the shares of Common Stock issued upon conversion.
Section 1304. Adjustment of Conversion Price.
The conversion price, and consequently the number of shares of
Common Stock into which a Security is convertible, shall be subject to
adjustment from time to time as follows:
(a) In case the Company shall (i) pay a dividend on Common Stock or
make a distribution on its Common Stock that is paid or made (1) in shares
of any class of capital stock of the Company or (2) in rights to purchase
any stock or other securities if such rights are not separable from the
Common Stock except upon the occurrence of a contingency, (ii) subdivide
its outstanding shares of Common Stock
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into a greater number of shares or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, then in each such case the
conversion price in effect immediately prior thereto shall be adjusted
retroactively as provided below so that the Holder of any Security
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock and other shares and rights to purchase
stock or other securities (or, in the event of the redemption of any such
shares or rights, any cash, property or securities paid in respect of such
redemption) which such Holder would have owned or have been entitled to
receive after the happening of any of the events described above had such
Security been converted immediately prior to the happening of such event.
An adjustment made pursuant to this Subsection (a) shall become effective
immediately after the record date in the case of a dividend or distribution
and shall become effective immediately after the effective date in the case
of a subdivision or combination.
(b) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them (for a period expiring within 45
days after the date fixed for determination mentioned below) to subscribe
for or purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in paragraph (d) of
this Section) of the Common Stock on the date fixed for the determination
of stockholders entitled to receive such rights or warrants, then the
conversion price in effect at the opening of business on the day following
the date fixed for such determination shall be decreased by multiplying
such conversion price by a fraction of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares of Common
Stock so offered for subscription or purchase, and the numerator shall be
the number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number
of shares of Common Stock so offered for subscription or purchase would
purchase at such current market price, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination; provided, however, in the event that all the
shares of Common Stock offered for subscription or purchase are not
delivered upon the exercise of such rights or warrants, upon the expiration
of such rights or warrants the conversion price shall be readjusted to the
conversion price which would have been in effect had the numerator and the
denominator of the foregoing fraction and the resulting adjustment been
made based upon the number of shares of Common Stock actually delivered
upon the exercise of such rights or warrants rather than upon the number of
shares of Common Stock offered for subscription or purchase. For the
purposes of this paragraph (b), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Company.
(c) In case the Company shall, by dividend or otherwise, distribute
to substantially all holders of its Common Stock evidences of its
indebtedness, cash
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(excluding quarterly cash dividends paid or to be paid on a regular basis),
other assets or rights or warrants to subscribe for or purchase any
securities (excluding those referred to in paragraphs (a) and (b) above),
then in each such case, the conversion price shall be adjusted
retroactively so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the close
of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the
denominator shall be the current market price per share (determined as
provided in paragraph (d) of this Section) of the Common Stock on the date
fixed for such determination and the numerator shall be such current market
price per share of the Common Stock less the amount of cash and the then
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution filed
with the Trustee) of the portion of the assets, rights, warrants or
evidences of indebtedness so distributed applicable to one share of Common
Stock, such adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and (c)
of this Section, the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the
30 consecutive trading days commencing with the 45th trading day before the
day in question. The closing price for each day shall be the last reported
sales price regular way or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices regular
way, in either case on the composite tape of the principal national
securities exchange upon which the Common Stock is listed or on the NASDAQ
National Market System (based on the aggregate dollar value of all
securities listed or admitted to trading) or, if the Common Stock is not
listed or admitted to trading on any national securities exchange or quoted
on the NASDAQ National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for
that purpose, or, if such prices are not available, the fair market value
set by, or in a manner established by, the Board of Directors of the
Company in good faith. "Trading day" shall mean a day on which the
national securities exchange or the NASDAQ National Market System used to
determine the closing price is open for the transaction of business or the
reporting of trades or, if the closing price is not so determined, a day on
which the New York Stock Exchange is open for the transaction of business.
(e) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that the Company may make any such
adjustment at its election; and provided, further, that any adjustments
which by reason of this paragraph (e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Article Thirteen shall be made to the nearest cent
or
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to the nearest one-hundredth of a share, as the case may be.
(f) Whenever the conversion price is adjusted as provided in any
provision of this Article Thirteen:
(i) the Company shall compute the adjusted conversion price in
accordance with paragraph (d) and shall prepare a certificate signed
by the principal financial officer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the facts
and calculations upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee and at each
office or agency maintained for the purpose of conversion of
Securities; and
(ii) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall
forthwith be required, and as soon as practicable after it is
required, such notice shall be mailed by the Company to all Holders at
their last addresses as they shall appear in the Security Register.
(g) In the event that at any time, as a result of any adjustment made
pursuant to this Article Thirteen, the Holder of any Security thereafter
surrendered for conversion shall become entitled to receive any shares of
the Company other than shares of Common Stock or to receive any other
securities, the number of such other shares or securities so receivable
upon conversion of any Security shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in this Article Thirteen with respect to the Common
Stock.
(h) The Company from time to time may, by Board Resolution delivered
to the Trustee, decrease the conversion price by any amount for any period
of time if the period is at least 20 days and if the decrease is
irrevocable during the period. Whenever the conversion price is so
decreased, the Company shall mail to the Holders a notice of the decrease
at least 15 days before the date the decreased conversion price takes
effect, and such notice shall state the decreased conversion price and the
period it will be in effect.
(i) The Company may make such decreases in the conversion price, in
addition to those required or allowed by this Article Thirteen, as shall be
determined by it, as evidenced by a Board Resolution delivered to the
Trustee, to be advisable in order to avoid or diminish any income tax to
holders of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock
or from any event treated as such for income tax purposes.
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(j) In any case in which this Section 1304 provides that an
adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event (i) issuing
to the holder of any Security converted after such record date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fraction pursuant to Section 1305.
Section 1305. No Fractional Shares.
No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon conversion of Securities. If more than one
Security shall be surrendered for conversion at one time by the same Holder,
the number of full shares issuable upon conversion thereof shall be computed on
the basis of the aggregate principal amount of the Securities (or specified
portions thereof) so surrendered. Instead of any fractional share of Common
Stock which would otherwise be issuable upon conversion of any Security or
Securities (or specified portions thereof), the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the closing price per share of Common Stock as quoted on the composite tape
of the principal national securities exchange upon which the Common Stock is
listed or the NASDAQ National Market System or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the NASDAQ National Market System or, if
the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on the NASDAQ National Market System, the average
of the closing bid and asked prices in the over-the-counter market as furnished
by any New York Stock Exchange member firm selected from time to time by the
Company for that purpose, or, if such prices are not available, the fair market
value set by, or in a manner established by, the Board of Directors of the
Company in good faith, all of the above to be determined as of the close of
business on the day of conversion.
Section 1306. Reclassification, Consolidation, Merger or Sale of Assets.
In case of any reclassification of the Common Stock, any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), any sale or
other disposition of the assets of the Company substantially as an entirety or
any compulsory share exchange pursuant to which share exchange the Common Stock
is converted into other securities, cash or other property, then the Holder of
each Security then outstanding shall have the right thereafter, during the
period such Security shall be convertible, pursuant to Section 1301, to convert
such Security only into the kind and amount of securities, cash and other
property receivable upon such reclassification, consolidation, merger, sale,
other disposition or share exchange by a holder of the number
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of shares of Common Stock of the Company into which such Security might have
been converted immediately prior to such reclassification, consolidation,
merger, sale, other disposition or share exchange assuming such holder of
Common Stock (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company, to which such sale
or other disposition was made or a party to such share exchange, as the case
may be ("constituent Person"), or an Affiliate of a constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, sale, other disposition or share exchange (provided
that if the kind or amount of securities, cash and other property receivable
upon such reclassification, consolidation, merger, sale, other disposition or
share exchange is not the same for each share of Common Stock held immediately
prior to such reclassification, consolidation, merger, sale, other disposition
or share exchange by others than a constituent Person or an Affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Article the kind and
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, sale, other disposition or share
exchange by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). The
Company or the Person formed by such consolidation or resulting from such
merger or which acquires such assets or which acquires the Company's shares, as
the case may be, shall execute and deliver to the Trustee a supplemental
indenture to establish such right. Such supplemental indenture shall provide
for adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article. The above provisions of this
Section shall similarly apply to successive reclassifications, consolidations,
mergers, sales, other dispositions or share exchanges.
Notice of the execution of such a supplemental indenture shall be
given by the Company to each Holder by mailing such notice to his last address
appearing on the Security Register.
Neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or securities or cash or property receivable by Holders of Securities
upon the conversion of their Securities after any such reclassification,
change, consolidation, merger, sale or other disposition or to any such
adjustment, but, subject to the provisions of Section 601, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, an Opinion of Counsel with respect thereto, which
the Company shall cause to be furnished to the Trustee upon request.
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Section 1307. Prior Notice of Certain Events.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock other than (1) a dividend payable in
shares of Common Stock or (2) a quarterly cash dividend paid or to be paid
on a regular basis or (ii) declare or authorize a redemption or repurchase
of in excess of 10% of the then outstanding shares of Common Stock; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or other disposition of the assets of the Company
substantially as an entirety or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or other
property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Trustee and to be mailed to
each Holder of Securities at his last address appearing on the Security
Register, as promptly as possible but in any event at least 15 days prior to
the applicable date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, other disposition, share
exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, other disposition, share exchange, dissolution,
liquidation or winding up.
Section 1308. Shares to be Reserved; Accounting Treatment of Consideration.
The Company covenants that it will at all times reserve and keep
available out of its authorized but unissued Common Stock, free from preemptive
rights solely for the
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purpose of issue upon conversion of Securities as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of all
outstanding Securities. The Company covenants that all shares of Common Stock
which shall be so issuable shall, when issued, be duly and validly issued and
fully paid and nonassessable.
The Company covenants that, upon conversion of Securities as herein
provided, there will be credited to the Common Stock capital account from the
consideration for which the shares of Common Stock issuable upon such
conversion are issued an amount per share of Common Stock so issued as
determined by the Board of Directors, which amount shall not be less than the
amount required by law and by the Company's certificate of incorporation, as
amended, as in effect on the date of such conversion. For the purposes of this
covenant the principal amount of the Securities converted, less any cash paid
in respect of fractional share interests upon such conversion, shall be deemed
to be the amount of consideration for which the shares of Common Stock issuable
upon such conversion are issued.
Section 1309. Registration and Listing of Shares.
The Company covenants that if any shares of Common Stock required to
be reserved for purposes of conversion of Securities hereunder require
registration with or approval of any governmental authority under any federal
or state law before such shares may be issued upon conversion, the Company will
in good faith and as expeditiously as possible endeavor to cause such shares to
be duly registered or approved, as the case may be. The Company further
covenants that so long as the Common Stock of the Company is listed on any
national securities exchange or on the NASDAQ National Market System, the
Company will, if permitted by the rules thereof, list and keep listed thereon,
upon official notice of issuance, all shares of Common Stock issuable upon
conversion of Securities.
Section 1310. Taxes and Charges.
The issuance of certificates for shares of Common Stock upon the
conversion of Securities shall be made without charge to the converting Holder
of Securities for such certificates or for any tax in respect of the issuance
of such certificates or the securities represented thereby, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the Holders of the Securities converted; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the Holder of the Security converted,
and the Company shall not be required to issue or deliver such certificates
unless or until the Person or Persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
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Section 1311. Trustee and Conversion Agents Not Liable.
Neither the Trustee nor any conversion agent shall at any time be
under any duty or responsibility to any Holder of Securities to determine
whether any facts exist which may require any adjustment of the conversion
rate, or with respect to the nature or extent of any such adjustment when made,
or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. Neither the Trustee nor
any conversion agent shall be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock or of any securities or
cash or other property which may at any time be issued or delivered upon the
conversion of any Security, or makes any representation with respect thereto.
Neither the Trustee nor any conversion agent shall be responsible for any
failure of the Company to make any cash payment or to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property upon the surrender of any Security for the purpose of conversion, or,
subject to Section 601, with any of the covenants of the Company contained in
this Article Thirteen.
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES
Section 1401. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security by
his acceptance thereof likewise covenants and agrees that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness represented
by the Securities and the payment of the principal of (and premium, if any) and
interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness.
Section 1402. Payment Over of Proceeds Upon Dissolution, Etc.
Upon any distribution of assets of the Company in the event of (a)
any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such
event the holders of Senior Indebtedness shall be entitled to receive payment
in full of all amounts due or to become due on or in respect of all Senior
Indebtedness, or provision shall be made for such payment in money or money's
worth, before the Holders of the Securities are entitled to receive any payment
on account of principal of (or premium, if any) or interest on the Securities,
and
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to that end the holders of Senior Indebtedness shall be entitled to receive,
for application to the payment thereof, any payment or distribution of any
kind or character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason of the
payment of any other indebtedness of the Company being subordinated to the
payment of the Securities, which may be payable or deliverable in respect of
the Securities in any such case, proceeding, dissolution, liquidation or other
winding up or event. In furtherance of the foregoing, but not by way of
limitation thereof, in the event of any case or proceeding described in clause
(a) above with the result that the Company is excused from the obligation to
pay all or any part of the interest otherwise payable in respect of any Senior
Indebtedness during the period subsequent to the commencement of any such case
or proceeding, all or such part, as the case may be, of such interest shall be
payable out of, and to that extent shall diminish and be at the expense of,
reorganization dividends or other distributions in respect of the Notes.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall then have been made known to the Trustee,
or, as the case may be, such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinated at least to the extent provided in this
Article with respect to the Securities to the payment of all Senior
Indebtedness which may at the time be outstanding; provided, however, that (i)
such Senior Indebtedness is assumed by the new corporation, if any, resulting
from any such reorganization or readjustment, and (ii) the rights of the
holders of the Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or other
disposition of its properties and assets substantially as an entirety to
another Person upon the terms and conditions set forth in Article Eight shall
not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshalling of assets and
liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance or other
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<PAGE> 79
disposition such properties and assets substantially as an entirety, as the
case may be, shall, as a part of such consolidation, merger, conveyance or
other disposition, comply with the conditions set forth in Article Eight.
Section 1403. Prior Payment to Senior Indebtedness Upon Acceleration of
Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts due or to become
due on or in respect of all such Senior Indebtedness, or provision shall be
made for such payment in money or money's worth, before the Holders of the
Securities are entitled to receive any payment (including any payment which may
be payable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities) by the Company on account
of the principal of (or premium, if any) or interest on the Securities or on
account of the purchase or other acquisition of Securities.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Securities prohibited by
the foregoing provisions of this Section, and if such facts shall then have
been made known to the Trustee or, as the case may be, such Holder, then and in
such event such payment shall be paid over and delivered forthwith to the
Company for the benefit of the holders of Senior Indebtedness.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
Section 1404. No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any default in the
payment of principal (or premium, if any) or interest on any Senior
Indebtedness, or in the payment of any commitment or other fees in respect
thereof, or in the event that any event of default with respect to any Senior
Indebtedness shall have occurred and be continuing permitting the holders of
such Senior Indebtedness (or a trustee on behalf of the holders thereof) to
declare such Senior Indebtedness due and payable prior to the date on which it
would otherwise have become due and payable, unless and until such event of
default shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial proceeding shall be pending with respect to any such default in
payment or event of default; then no payment (including any payment which may
be payable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Securities) shall be made by the
Company on account of principal of (or premium, if any) or interest on the
Securities or on account of the purchase or other acquisition of Securities.
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In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall then have been
made known to the Trustee or, as the case may be, such Holder, then and in such
event such payment shall be paid over and delivered forthwith to the Company
for the benefit of the holders of Senior Indebtedness.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
Section 1405. Acknowledgment of Reliance.
Each Holder of Notes by his acceptance thereof acknowledges and
agrees that the subordination provisions included herein are, and are intended
to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before
or after the issuance of Notes, to acquire and/or continue to hold such Senior
Indebtedness, and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring
and/or continuing to hold such Senior Indebtedness.
Section 1406. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the Company or to the holders of Senior Indebtedness by Holders
of the Securities or the Trustee shall, as between the Company, its creditors
other than holders of Senior Indebtedness and the Holders of the Securities, be
deemed to be a payment or distribution by the Company to or on account of the
Securities.
Section 1407. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of Senior Indebtedness, on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among the Company, its
creditors and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, and which, subject to the rights under
this Article of the holders of Senior Indebtedness, is intended to rank equally
with all other general
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obligations of the Company, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or (b)
affect the relative rights against the Company of the Holders of the Securities
and creditors of the Company other than the holders of Senior Indebtedness, or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness to receive cash, property or securities otherwise payable
or deliverable to the Trustee or such Holder.
Section 1408. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
Section 1409. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act in good faith by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
Section 1410. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Failure to give such notice shall
not affect the subordination of the Securities to Senior Indebtedness.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the
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Trustee in respect of the Securities, unless and until a Responsible Officer of
the Trustee shall have received written notice thereof from the Company or a
holder of Senior Indebtedness or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 601, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received, at least
three Business Days prior to the date upon which by the terms hereof any such
money may become payable for any purpose (including without limitation, the
payment of the principal of, and premium, if any, or interest on any Security),
the notice with respect to such money provided for in this Section, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to
the purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness (or a trustee on behalf of any such holder). In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 1411. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section 601, and
the Holders of the Securities shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable
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thereon, the amount or amounts paid or distributed thereon and all other
facts pursuant thereto or to this Article.
Section 1412. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if
it shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article or otherwise.
Section 1413. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee or any predecessor Trustee under or pursuant to Section 607.
Section 1414. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1413 shall not apply to the Company or
any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
Section 1415. Certain Conversions Deemed Payment.
For the purposes of this Article only, (1) the issuance and delivery
of junior securities upon conversion of Securities in accordance with Article
Thirteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of
the principal of such Security. For the purposes of this Section, the term
"junior securities" means (a) shares of any stock of any class of the Company
and (b) securities of the Company which are subordinated in right of payment to
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the
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same extent as, or to a greater extent than, the Securities are so subordinated
as provided in this Article. Nothing contained in this Article or elsewhere in
this Indenture or in the Securities is intended to or shall impair, as among
the Company, its creditors, other than holders of Senior Indebtedness and the
Holders of the Securities, the right, which is absolute and unconditional, of
the Holder of any Security to convert such Security in accordance with Article
Thirteen.
* * * *
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
POGO PRODUCING COMPANY
By /s/ D. STEPHEN SLACK
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By /s/ P. DE LA CANAL
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<PAGE> 1
EXHIBIT 10(f)(2)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between Stuart P. Burbach ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
for an additional one-year period so as to terminate (unless further extended)
two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ STUART P. BURBACH
<PAGE> 1
EXHIBIT 10(f)(4)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between Jerry A. Cooper ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ JERRY A. COOPER
<PAGE> 1
EXHIBIT 10(f)(6)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between Kenneth R. Good ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ KENNETH R. GOOD
<PAGE> 1
EXHIBIT 10(f)(8)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between R. Phillip Laney ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ R. PHILLIP LANEY
<PAGE> 1
EXHIBIT 10(f)(10)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between John O. McCoy, Jr. ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ PAUL G. VAN WAGENEN
Chairman, President and Chief
Executive Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ JOHN O. MCCOY, JR.
<PAGE> 1
EXHIBIT 10(f)(12)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between D. Stephen Slack ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ D. STEPHEN SLACK
<PAGE> 1
EXHIBIT 10(f)(14)(iii)
EXTENSION AGREEMENT TO CONTINUE EMPLOYMENT AGREEMENT
between Paul G. Van Wagenen ("Executive") and
Pogo Producing Company, a Delaware corporation ("Company"),
dated as of February 1, 1995
WHEREAS, Executive and Company are parties to an "Employment
Agreement" bearing an original "Effective Date" of February 1, 1992, and an
"Extension Agreement" dated as of February 1, 1993; and an "Extension
Agreement" dated as of February 1, 1994; and
WHEREAS, February 1, 1995, (even date herewith) is hereby deemed to
be the "Renewal Date" in that Employment Agreement; and
WHEREAS, Executive and Company each wish to extend said Employment
Agreement for an additional one-year period so as to terminate (unless further
extended) two years thereafter, (to-wit January 31, 1997); and
WHEREAS, Company desires to retain the services of Executive for
the benefit of Company and its shareholders, and desires to induce Executive to
remain in its employ for that extended time period; and
WHEREAS, Executive has agreed to continue to serve as an employee
of Company for the period specified herein from and after the date of this
Extension Agreement; and
WHEREAS, Company and Executive desire to enter into this Extension
Agreement in order to formally secure for Company the benefit of the experience
and abilities of Executive, and to set forth the agreements and understandings
of Company and Executive; and
WHEREAS, Company has advised Executive that execution and
performance of this Extension Agreement by Company has been duly
<PAGE> 2
authorized and approved by all requisite corporate action on the part of the
Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and in consideration of the sum of
$10 paid by Company to Executive, receipt whereof is hereby acknowledged by
Executive, Executive and Company do hereby agree as follows:
1. The Employment Agreement between Executive and Company bearing
an "Effective Date" of February 1, 1992 and a "Renewal Date" which is deemed
herein to be February 1, 1995, is hereby extended for an additional one-year
period commencing February 1, 1996 and ending January 31, 1997, unless such
employment period is hereafter further extended for an additional period by
both Executive and Company.
2. All provisions of the Employment Agreement between Executive
and Company dated February 1, 1992, and as it may have been and herein is
amended, are continued in full force and effect without change as if the
Employment Agreement had been initially effective as of February 1, 1995.
POGO PRODUCING COMPANY
By:/s/ JOHN O. MCCOY, JR.
Vice President and Chief
Administrative Officer
ATTEST:
/s/ BETTY HANBY
EMPLOYEE:
/s/ PAUL G. VAN WAGENEN
<PAGE> 1
Exhibit 21
List of Subsidiaries
of
POGO PRODUCING COMPANY
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- ---------------
<S> <C>
1. Thaipo Limited Kingdom of Thailand
2. Pogo Offshore Pipeline Co. Delaware
3. Pogo Gulf Coast, Ltd. Texas Limited Partnership
(The Company is the general partner
and a 40% limited partner)
4. Pogo Petroles Compagnie, Inc. Delaware
5. Pogo Netherlands, Inc. Delaware
6. Pogo Thailand, Inc. Delaware
7. Pogo Turkey Inc. Delaware
8. Sampack Inc. Delaware
9. Pogo British Isles, Inc. Delaware
10. Pogo Hungary Oil and Gas Kft Republic of Hungary
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated February 3, 1995 included in this Annual
Report on Form 10-K, into Pogo Producing Company's previously filed
Registration Statement File Nos. 2-60725, 2-62690, 2-65374, 2-79500 and
33-54969.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
March 7, 1995
<PAGE> 1
EXHIBIT 23-(b)
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the use of
our name in the Annual Report on Form 10-K of Pogo Producing Company for the
year ended December 31, 1994. We further consent to the inclusion of our
estimate of reserves and present value of future net reserves in such Annual
Report.
/s/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 7, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
I, Tobin Armstrong, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN,
D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and
lawful attorney or attorneys with power to act with or without the others, and
with full power of substitution and resubstitution, to prepare, execute and
file, in my name, place and stead in my individual capacity and as a director
of the Company, such documents, reports and filings as may be necessary or
advisable under the Securities Exchange Act of 1934, as amended (the "Act"),
the Securities Act of 1933, as amended (the "Securities Act") or any other
federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th day
of January, 1995.
/s/ TOBIN ARMSTRONG
Tobin Armstrong
<PAGE> 2
POWER OF ATTORNEY
I, Jack S. Blanton, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN,
D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and
lawful attorney or attorneys with power to act with or without the others, and
with full power of substitution and resubstitution, to prepare, execute and
file, in my name, place and stead in my individual capacity and as a director
of the Company, such documents, reports and filings as may be necessary or
advisable under the Securities Exchange Act of 1934, as amended (the "Act"),
the Securities Act of 1933, as amended (the "Securities Act") or any other
federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th day
of January, 1995.
/s/ JACK S. BLANTON
Jack S. Blanton
<PAGE> 3
POWER OF ATTORNEY
I, W. M. Brumley, Jr., in my individual capacity and as a director
of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN
WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ W.M. BRUMLEY, JR.
W. M. Brumley, Jr.
<PAGE> 4
POWER OF ATTORNEY
I, John B. Carter, Jr., in my individual capacity and as a director
of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN
WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ JOHN B. CARTER, JR.
John B. Carter, Jr.
<PAGE> 5
POWER OF ATTORNEY
I, William L. Fisher, in my individual capacity and as a director
of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN
WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ WILLIAM L. FISHER
William L. Fisher
<PAGE> 6
POWER OF ATTORNEY
I, William E. Gipson, in my individual capacity and as a director
of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN
WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ WILLIAM E. GIPSON
William E. Gipson
<PAGE> 7
POWER OF ATTORNEY
I, Gerrit W. Gong, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN,
D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and
lawful attorney or attorneys with power to act with or without the others, and
with full power of substitution and resubstitution, to prepare, execute and
file, in my name, place and stead in my individual capacity and as a director
of the Company, such documents, reports and filings as may be necessary or
advisable under the Securities Exchange Act of 1934, as amended (the "Act"),
the Securities Act of 1933, as amended (the "Securities Act") or any other
federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ GERRIT W. GONG
Gerrit W. Gong
<PAGE> 8
POWER OF ATTORNEY
I, J. Stuart Hunt, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN,
D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and
lawful attorney or attorneys with power to act with or without the others, and
with full power of substitution and resubstitution, to prepare, execute and
file, in my name, place and stead in my individual capacity and as a director
of the Company, such documents, reports and filings as may be necessary or
advisable under the Securities Exchange Act of 1934, as amended (the "Act"),
the Securities Act of 1933, as amended (the "Securities Act") or any other
federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ J. STUART HUNT
J. Stuart Hunt
<PAGE> 9
POWER OF ATTORNEY
I, Frederick A. Klingenstein, in my individual capacity and as a
director of Pogo Producing Company (the "Company"), do hereby appoint PAUL G.
VAN WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally,
my true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ FREDERICK A. KLINGENSTEIN
Frederick A. Klingenstein
<PAGE> 10
POWER OF ATTORNEY
I, Nicholas R. Petry, in my individual capacity and as a director
of Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN
WAGENEN, D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to prepare,
execute and file, in my name, place and stead in my individual capacity and as
a director of the Company, such documents, reports and filings as may be
necessary or advisable under the Securities Exchange Act of 1934, as amended
(the "Act"), the Securities Act of 1933, as amended (the "Securities Act") or
any other federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ NICHOLAS R. PETRY
Nicholas R. Petry
<PAGE> 11
POWER OF ATTORNEY
I, Jack A. Vickers, in my individual capacity and as a director of
Pogo Producing Company (the "Company"), do hereby appoint PAUL G. VAN WAGENEN,
D. STEPHEN SLACK, and THOMAS E. HART, and each of them severally, my true and
lawful attorney or attorneys with power to act with or without the others, and
with full power of substitution and resubstitution, to prepare, execute and
file, in my name, place and stead in my individual capacity and as a director
of the Company, such documents, reports and filings as may be necessary or
advisable under the Securities Exchange Act of 1934, as amended (the "Act"),
the Securities Act of 1933, as amended (the "Securities Act") or any other
federal, state or local law regulating the Company including, without
limitation, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as prescribed by the Securities and Exchange Commission (the
"Commission") pursuant to the Act, and the rules and regulations promulgated
thereunder, with any and all exhibits and other documents relating thereto, any
and all amendments to said Annual Report and all instruments as said attorneys
or any of them shall deem necessary or incidental in connection therewith and
to file the same with the Commission.
Each of said attorneys shall have full power and authority to do
and perform in my name and on my behalf any act whatsoever to accomplish the
purpose and intent of the forgoing that said attorneys deem may be necessary or
desirable to be done in the premises as fully and to all intents and purposes
as I might or could do in person, and by my signature hereto, I hereby ratify
and approve any and all of such acts of said attorneys and each of them.
IN WITNESS WHEREOF, I have executed this instrument on this 24th
day of January, 1995.
/s/ JACK A. VICKERS
Jack A. Vickers
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Consolidated Financial Statements of Pogo Producing Company, including
the Consolidated Balance Sheets as of December 31, 1994 and the Consolidated
Statements of Income for the twelve months ended December 31, 1994, and is
qualified in its entirety by reference to such Consolidated financial
Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,922
<SECURITIES> 0
<RECEIVABLES> 43,632
<ALLOWANCES> 0<F1>
<INVENTORY> 2,422
<CURRENT-ASSETS> 49,721
<PP&E> 929,023
<DEPRECIATION> 691,110
<TOTAL-ASSETS> 298,826
<CURRENT-LIABILITIES> 38,704
<BONDS> 149,249
<COMMON> 32,826
0
0
<OTHER-SE> 31,211
<TOTAL-LIABILITY-AND-EQUITY> 298,826
<SALES> 173,556<F2>
<TOTAL-REVENUES> 173,608
<CGS> 29,768<F3>
<TOTAL-COSTS> 29,768<F3>
<OTHER-EXPENSES> 91,637<F4>
<LOSS-PROVISION> 0<F5>
<INTEREST-EXPENSE> 10,104
<INCOME-PRETAX> 42,891
<INCOME-TAX> 15,517
<INCOME-CONTINUING> 27,374
<DISCONTINUED> 0
<EXTRAORDINARY> (307)
<CHANGES> 0
<NET-INCOME> 27,067
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.81
<FN>
<F1>This amount is not disclosed on the face of the Consolidated Financial
Statements due to lack of materiality, but is included as a contra-asset in
Accounts Receivable.
<F2>Does not include Gains on Property Sales.
<F3>Includes Lease Operating Expense, but excludes General and Administrative,
Exploration, Dry Hole and Impairment and Depreciation, Depletion and
Amortization Expenses.
<F4>Includes General and Administrative, Exploration, Dry Hole and Impairment and
Depreciation, Depletion and Amortization Expenses.
<F5>This amount is not disclosed on the face of the Consolidated financial
Statements due to lack of materiality, but is included in Oil and Gas Revenues.
</FN>
</TABLE>
<PAGE> 1
(RYDER SCOTT COMPANY LETTERHEAD)
EXHIBIT 28
February 3, 1995
Pogo Producing Company
Post Office Box 2504
Houston, Texas 77252-2504
Gentlemen:
At your request we have prepared an estimate of the reserves, future
production, and income attributable to certain leasehold and royalty interests
of Pogo Producing Company and its wholly owned subsidiaries (the Company) as of
December 31, 1994. In accordance with the requirements of FASB 69, our
estimates of the Company's net proved reserves as of December 31, 1991, 1992,
1993, and 1994, as contained in this report and our previous reports, are
presented in attached Table No. 1 together with a tabulation of the components
of the differences in the estimates as of such dates. The Company's reserves
in the United States are located in the states of Colorado, Louisiana, New
Mexico, Oklahoma, Texas, and in state and federal waters offshore Louisiana and
Texas. The Company's foreign reserves are located offshore Thailand.
The estimated reserve volumes and future income amounts presented in
this report are related to hydrocarbon prices. December 1994 hydrocarbon
prices were used in the preparation of this report as required by Securities
and Exchange Commission (SEC) and Financial Accounting Standards Bulletin No.
69 (FASB 69) guidelines; however, actual future prices may vary significantly
from December 1994 prices. Therefore, volumes of reserves actually recovered
and amounts of income actually received may differ from the estimated
quantities presented in this report. Our estimates of the proved net reserves
attributable to the interests of the Company as of December 31, 1994 are shown
below:
<TABLE>
<CAPTION>
Proved Net Reserves
As of December 31, 1994
------------------------------------
Liquid, Barrels Gas, MMCF
--------------- ---------
<S> <C> <C>
Developed and Undeveloped
United States 26,187,240 186,151
Foreign 7,674,372 56,739
----------- --------
Total Worldwide 33,861,612 242,890
Developed
United States 24,669,755 178,518
Foreign 0 0
----------- --------
Total Worldwide 24,669,755 178,518
</TABLE>
The "Liquid" reserves shown above are comprised of crude oil,
condensate, and natural gas liquids. Natural gas liquids comprise 17 percent
of the Company's developed liquid reserves and 13 percent of the Company's
developed and undeveloped liquid reserves. All hydrocarbon liquid reserves are
expressed in standard 42 gallon barrels. All gas volumes are sales gas
expressed in MMCF at the pressure and temperature bases of the area where the
gas reserves are located.
<PAGE> 2
Pogo Producing Company
February 3, 1995
Page 2
The proved reserves presented in this report comply with the
SEC's Regulation S-X Part 210.4-10 Sec. (a) as clarified by subsequent
Commission Staff Accounting Bulletins, and are based on the following
definitions and criteria:
Proved reserves of crude oil, condensate, natural gas, and
natural gas liquids are estimated quantities that geological and
engineering data demonstrate with reasonable certainty to be
recoverable in the future from known reservoirs under existing
conditions. Reservoirs are considered proved if economic
producibility is supported by actual production or formation tests.
In certain instances, proved reserves are assigned on the basis of a
combination of core analysis and electrical and other type logs which
indicate the reservoirs are analogous to reservoirs in the same field
which are producing or have demonstrated the ability to produce on a
formation test. The area of a reservoir considered proved includes
(1) that portion delineated by drilling and defined by fluid contacts,
if any, and (2) the adjoining portions not yet drilled that can be
reasonably judged as economically productive on the basis of available
geological and engineering data. In the absence of data on fluid
contacts, the lowest known structural occurrence of hydrocarbons
controls the lower proved limit of the reservoir. Proved reserves are
estimates of hydrocarbons to be recovered from a given date forward.
They may be revised as hydrocarbons are produced and additional data
become available. Proved natural gas reserves are comprised of
non-associated, associated, and dissolved gas. An appropriate
reduction in gas reserves has been made for the expected removal of
natural gas liquids, for lease and plant fuel, and the exclusion of
non- hydrocarbon gases if they occur in significant quantities and are
removed prior to sale. Reserves that can be produced economically
through the application of improved recovery techniques are included
in the proved classification when these qualifications are met: (1)
successful testing by a pilot project or the operation of an installed
program in the reservoir provides support for the engineering analysis
on which the project or program was based, and (2) it is reasonably
certain the project will proceed. Improved recovery includes all
methods for supplementing natural reservoir forces and energy, or
otherwise increasing ultimate recovery from a reservoir, including (1)
pressure maintenance, (2) cycling, and (3) secondary recovery in its
original sense. Improved recovery also includes the enhanced recovery
methods of thermal, chemical flooding, and the use of miscible and
immiscible displacement fluids. Estimates of proved reserves do not
include crude oil, natural gas, or natural gas liquids being held in
underground storage. Depending on the status of development, these
proved reserves are further subdivided into:
(i) "developed reserves" which are those proved reserves
reasonably expected to be recovered through existing wells
with existing equipment and operating methods, including (a)
"developed producing reserves" which are those proved
developed reserves reasonably expected to be produced from
existing completion intervals now open for production in
existing wells, and (b) "developed non-producing reserves"
which are those proved developed reserves which exist behind
the casing of existing wells which are reasonably expected to
be produced through these wells in the predictable future
where the cost of making such hydrocarbons available for
production should be relatively small compared to the cost of
a new well; and
(ii) "undeveloped reserves" which are those proved reserves
reasonably expected to be recovered from new wells on
undrilled acreage, from existing wells where a relatively
large expenditure is required, and from acreage for which an
application of fluid injection or other improved recovery
technique is contemplated where the technique has been proved
effective by actual tests in the area in the same reservoir.
Reserves
<PAGE> 3
Pogo Producing Company
February 3, 1995
Page 3
from undrilled acreage are limited to those drilling units
offsetting productive units that are reasonably certain of
production when drilled. Proved reserves for other undrilled
units are included only where it can be demonstrated with
reasonable certainty that there is continuity of production
from the existing productive formation.
Because of the direct relationship between volumes of proved
undeveloped reserves and development plans, we include in the proved
undeveloped category only reserves assigned to undeveloped locations that we
have been assured will definitely be drilled and reserves assigned to the
undeveloped portions of secondary or tertiary projects which we have been
assured will definitely be developed.
The Company has interests in certain tracts which have
substantial additional hydrocarbon quantities which cannot be classified as
proved and consequently are not included herein. The Company has active
exploratory and development drilling programs which may result in the
reclassification of significant additional volumes to the proved category.
In accordance with the requirements of FASB 69, our estimates
of future cash inflows, future costs, and future net cash inflows before income
tax as of December 31, 1994 from this report and as of December 31, 1993 from
our previous report are presented below.
<TABLE>
<CAPTION>
As of December 31
-----------------------------------------
1994 1993
------------- -------------
<S> <C> <C>
Future Cash Inflows 985,887,955 $895,060,044
Future Costs
Production $253,140,202 $211,741,925
Development 180,838,861 133,257,042
------------- -------------
Total Costs $433,979,063 $344,998,967
Future Net Cash Inflows
Before Income Tax $551,908,892 $550,061,077
Present Value at 10%
Before Income Tax $382,979,729 $403,840,199
</TABLE>
Our estimates as of December 31, 1994 and 1993 of future cash
inflows, future costs, future net cash inflows before income tax, and present
value at 10 percent before income tax are shown individually for total
worldwide, total United States (onshore and offshore), and foreign areas in
Table No. 2 which is attached.
The future cash inflows are gross revenues before any
deductions. The production costs were based on current data and include
production taxes, ad valorem taxes, and certain other items such as
transportation costs in addition to the operating costs directly applicable to
the individual leases or wells. The development costs were based on current
data and include dismantlement and abandonment costs net of salvage for
properties where such costs are relatively significant.
The Company furnished us with gas prices in effect at December
31, 1994 and with its forecasts of future gas prices which take into account
SEC guidelines, current market prices, contract prices, and fixed and
determinable price escalations where applicable. In accordance with SEC
guidelines, the future gas prices used in this report make no allowances for
future gas price increases
<PAGE> 4
Pogo Producing Company
February 3, 1995
Page 4
which may occur as a result of inflation nor do they account for seasonal
variations in gas prices which may cause future yearly average gas prices to be
somewhat lower than December gas prices. For gas sold under contract, the
contract gas price including fixed and determinable escalations exclusive of
inflation adjustments, was used until the contract expires and then was
adjusted to the current market price for the area and held at this adjusted
price to depletion of the reserves.
The Company furnished us with liquid prices in effect at
December 31, 1994 and these prices were held constant to depletion of the
properties. In accordance with SEC guidelines, changes in liquid prices
subsequent to December 31, 1994 were not considered in this report.
The estimates of future net revenue from the Company's foreign
property are based on existing law. Operating costs for the leases and wells
in this report were based on the operating expense reports of the Company and
include only those costs directly applicable to the leases or wells. When
applicable, the operating costs include a portion of general and administrative
costs allocated directly to the leases and wells under terms of operating
agreements. Development costs were furnished to us by the Company and are
based on authorizations for expenditure for the proposed work or actual costs
for similar projects. The current operating and development costs were held
constant throughout the life of the properties. For properties located
onshore, this study did not consider the salvage value of the lease equipment
or the abandonment cost since both are relatively insignificant and tend to
offset each other. The estimated net cost of abandonment after salvage was
included for offshore properties where abandonment costs net of salvage are
significant. The estimates of the offshore net abandonment costs furnished by
the Company were accepted without independent verification. No deduction was
made for indirect costs such as general administration and overhead expenses,
loan repayments, interest expenses, and exploration and development
prepayments. The Company supplied data on accumulated gas production
imbalances which were taken into account in our estimates of future production
and income.
The estimates of reserves presented herein are based upon a
detailed study of the properties in which the Company owns an interest;
however, we have not made any field examination of the properties. No
consideration was given in this report to potential environmental liabilities
which may exist nor were any costs included for potential liability to restore
and clean up damages, if any, caused by past operating practices. The Company
has informed us that they have furnished us all of the accounts, records,
geological and engineering data and reports, and other data required for this
investigation. The ownership interests, prices, and other factual data
furnished by the Company were accepted without independent verification. The
estimates presented in this report are based on data available through December
1994.
The reserves included in this report are estimates only and
should not be construed as being exact quantities. They may or may not be
actually recovered, and if recovered, the revenues therefrom and the actual
costs related thereto could be more or less than the estimated amounts.
Moreover, estimates of reserves may increase or decrease as a result of future
operations.
In general, we estimate that future gas production rates will
continue to be the same as the average rate for the latest available 12 months
of actual production until such time that the well or wells are incapable of
producing at this rate. The well or wells were then projected to decline at
their decreasing delivery capacity rate. Our general policy on estimates of
future gas production rates is adjusted when necessary to reflect actual gas
market conditions in specific cases. The future production rates from wells
now on production may be more or less than estimated because of changes in
market demand or allowables set by regulatory bodies. Wells or locations which
are not currently producing may start producing earlier or later than
anticipated in our estimates of their future production rates.
<PAGE> 5
Pogo Producing Company
February 3, 1995
Page 5
While it may reasonably be anticipated that the future prices
received for the sale of production and the operating costs and other costs
relating to such production may also increase or decrease from existing levels,
such changes were, in accordance with rules adopted by the SEC, omitted from
consideration in making this evaluation.
Neither we nor any of our employees have any interest in the
subject properties and neither the employment to make this study nor the
compensation is contingent on our estimates of reserves and future cash inflows
for the subject properties.
Very truly yours,
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
/s/ FRED P. RICHOUX
Fred P. Richoux, P.E.
Group Vice President
FPR/sw
<PAGE> 6
TABLE NO. 1
POGO PRODUCING COMPANY
Proved Net Resere Data
<TABLE>
<CAPTION>
United States Foreign
Total Worldwide Total Onshore and Offshore Thailand Offshore
---------------------------------- ---------------------------------- --------------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Proved Liquid(1)
Reserves, Barrels
- ------------------
Developed and Undeveloped
Beginning of Year 28,268,441 22,555,788 18,818,091 22,843,628 19,978,881 18,818,091 5,424,813 2,576,907 0
Revisions 1,286,984 342,022 1,721,385 1,286,984 342,022 1,721,385 0 0 0
Extensions and
Discoveries 6,565,442 9,764,408 5,486,273 4,315,883 6,916,502 2,909,366 2,249,559 2,847,906 2,576,907
Improved Recovery 0 0 0 0 0 0 0 0 0
Estimated Production -4,945,677 -4,219,873 -3,611,105 -4,945,677 -4,219,873 -3,611,105 0 0 0
Purchase of
Reserves In-Place 2,686,919 182,610 335,750 2,686,919 182,610 335,750 0 0 0
Sales of Reserves
In-Place -497 -356,514 -194,606 -497 -356,514 -194,606 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
End of Year 33,861,612 28,268,441 22,555,788 26,187,240 22,843,628 19,978,881 7,674,372 5,424,813 2,576,907
Developed
Beginning of Year 20,976,194 18,798,149 17,549,830 20,976,194 18,798,149 17,549,830 0 0 0
End of Year 24,669,755 20,976,194 18,798,149 24,669,755 20,976,194 18,798,149 0 0 0
Net Proved Gas Reserves,
Millions of Cubic Feet
- ------------------------
Developed and Undeveloped
Beginning of Year 232,866 207,068 202,735 199,392 196,400 202,735 33,474 10,668 0
Revisions -2,558 1,148 20,284 -2,558 1,148 20,284 0 0 0
Extensions and
Discoveries 49,517 55,626 19,126 26,252 32,820 8,458 23,265 22,806 10,668
Improved Recovery 0 0 0 0 0 0 0 0 0
Estimated Production -52,618 -32,319 -40,581 -52,618 -32,319 -40,581 0 0 0
Purchase of Reserves
In-Place 15,792 13,192 10,237 15,792 13,192 10,237 0 0 0
Sales of Reserves
In-Place -109 -11,849 -4,733 -109 -11,849 -4,733 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
End of Year 242,890 232,866 207,068 186,151 199,392 196,400 56,739 33,474 10,668
Developed
Beginning of Year 183,139 175,523 188,090 183,139 175,523 188,090 0 0 0
End of Year 178,518 183,139 175,523 178,518 183,139 175,523 0 0 0
</TABLE>
_______________________________
(1) Liquid reserves shown above are comprised of crude oil, condensate
and natural gas liquids.
<PAGE> 7
TABLE NO. 2
POGO PRODUCING COMPANY
Cash Inflow and Cost Data (U.S. Dollars)
<TABLE>
<CAPTION>
United States
Total Worldwide Onshore and Offshore Thailand Offshore
As of December 31 As of December 31 As of December 31
---------------------------- ---------------------------- ----------------------------
1994 1993 1994 1993 1994 1993
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Future Cash Inflows(1) $985,887,955 $895,060,044 $720,085,779 $744,200,701 $265,802,176 $150,859,343
Future Costs
Production(2) $253,140,202 $211,741,925 $192,833,675 $158,934,102 $ 60,306,527 $ 52,807,823
Development(3) 180,838,861 133,257,042 86,683,951 79,734,742 94,154,910 53,522,300
------------ ------------ ------------ ------------ ------------ ------------
Total Costs $433,979,063 $344,998,967 $279,517,626 $238,668,844 $154,461,437 $106,330,123
Future Cash Inflows
Before Income Tax $551,908,892 $550,061,077 $440,568,153 $505,531,857 $111,340,739 $ 44,529,220
Present Value @ 10%
Before Income Tax $382,979,729 $403,840,199 $330,867,582 $386,673,722 $ 52,112,147 $ 17,166,477
</TABLE>
_______________________________
(1) Gross revenues before any deductions.
(2) Includes production taxes in the U.S.A., SRB taxes in Thailand, ad valorem
taxes and certain other items such as transportation charges.
(3) Includes future abandonment costs net of salvage for offshore properties
where such costs are relatively significant.
