FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
33(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 0-10156
CAIRN ENERGY USA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2169839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8115 PRESTON ROAD, SUITE 500
DALLAS, TEXAS 75225
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 369-0316
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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.
As of February 28, 1997, 17,564,561 shares of common stock of the
registrant were issued and outstanding. The aggregate market value of the voting
stock held by non-affiliates of the registrant as of February 28, 1997, was
$145.5 million, based upon the closing sales price of the registrant's common
stock on such date of $ 9 3/4 per share on the NASDAQ National Market as
reported by The Wall Street Journal. For purposes of this computation, all
executive officers, directors and 10% stockholders are deemed to be affiliates.
Such a determination should not be deemed an admission that such executive
officers, directors or 10% stockholders are affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Cairn Energy USA, Inc., a Delaware corporation (the "Company"), hereby
amends, as set forth herein, the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 5, 1997 (the "Company's Form
10-K").
CORPDAL:64841.7 15467-00006
<PAGE>
The item numbers and responses thereto are in accordance with the
requirements of Form 10-K. All capitalized terms used and not otherwise defined
herein shall have respective meanings specified in the Company's Form 10-K.
The Company hereby amends and restates in its entirety each of the
following items of the Company's Form 10-K.
PART III
Item 10. Directors and Executive Officer of the Registrant
Identification of Directors and Executive Officers
The Company's Board of Directors currently consists of six (6)
directors. All of the executive officers of the Company are full-time employees
of the Company. The following is a brief description of the principal
occupations and other employment during the past five (5) years of the directors
and executive officers of the Company:
Michael R. Gilbert, age 47, has served as the President, Chief
Executive Officer and a director of the Company since February 27, 1992. Mr.
Gilbert was the President and a Director of Cairn Energy USA, Inc. ("Cairn
USA"), an oil and gas exploration and development corporation, from Cairn USA's
inception in March 1989 until it merged (the "Merger") into the Company. From
1982 to 1989, Mr. Gilbert served as Executive Vice President of Canyon Oil and
Gas Company, an oil and gas acquisition company and a subsidiary of Slawson
Companies, Inc., an oil and gas company ("Slawson").
J. Munro M. Sutherland, age 42, served as Senior Vice President, Chief
Financial Officer and Treasurer of the Company from November 1993 to March 1997.
Subsequent to March 17, 1997, Mr. Sutherland was no longer employed by the
Company but continues to serve as a Director of the Company. Mr. Sutherland has
served as a Director of the Company since June 1993. From 1988 to October 1993,
Mr. Sutherland was the Finance Director of Cairn Energy PLC, formerly the
Company's majority stockholder and an independent oil and gas exploration and
production company ("Cairn PLC").
Jack O. Nutter, II, age 45, has served as a director of the Company
since December 1987. Since 1991, Mr. Nutter has also served as President of
Nutter & Harris, a governmental relations and business consulting firm. From
1981 to 1987, Mr. Nutter acted as general counsel for Slawson. From 1983 to
1986, Mr. Nutter also served as President of Canyon Oil & Gas Company, an oil
and gas acquisition company and a subsidiary of Slawson. Mr. Nutter has provided
consulting services to the Company. See "Certain Relationships and Related
Transactions".
R. Daniel Robins, age 46, has served as a director of the Company since
February 1992. Since October 1996, Mr. Robins has served as Vice President of
ERI Supply & Logistics, a division of ERI Services, Inc., an integrated oil and
gas production and pipeline company. From August 1994 until October 1994, Mr.
Robins served as Vice President of Marketing of The Coastal Corporation, an
integrated oil and gas company. From 1991 to August 1994, Mr. Robins was the
President of Prairie States Oil & Gas, Inc., a natural gas marketing company.
Mr. Robins also serves as a paid gas marketing consultant to the Company and
receives approximately ten percent (10%) of his annual compensation in
consulting fees from the Company. See "Certain Relationships and Related
Transactions".
John C. Halsted, age 32, has served as a director of the Company since
October 1994. Since 1993, Mr. Halsted has served as a Vice President of Harvard
Private Capital Group, Inc. From 1991 to 1993, Mr. Halsted was an associate of
Simmons & Company International, an investment banking firm. Mr. Halsted
received an M.B.A. from Harvard University in 1991.
Robert P. Murphy, age 38, has served as a director of the Company since
May 1996. Mr. Murphy joined the Company in 1990 as an exploration geologist and
became the Company's Vice President -- Exploration in March 1993. From 1984 to
1990, Mr. Murphy served as an exploration geologist for Enserch Exploration, an
oil and gas company. Mr. Murphy holds a M.S. in geology from The University of
Texas at Dallas.
Each director holds office until the following year's annual meeting of
stockholders or until his respective successor is elected and shall have
qualified. Each executive officers is appointed until the meeting of the Board
of Directors immediately following the annual meeting of stockholders subsequent
to his election or until his respective successor is selected and shall have
qualified, subject to the removal provisions of the Bylaws.
None of the directors or executive officers of the Company is related
by blood, marriage, or adoption to any other director or executive officer of
the Company.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that certain of the Company's officers and all
directors and persons who own more than 10% of a registered class of the
Company's equity securities, file reports of ownership and changes of ownership
with the Securities and Exchange Commission ("SEC"). These officers, directors
and greater than 10% stockholders of the Company are required by SEC regulations
to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on a review of the copies of such reports received, the
Company believes that for 1996 all officers, directors and greater than 10%
beneficial owners complied with applicable filing requirements.
Item 11. Executive Compensation
DIRECTOR COMPENSATION
The members of the Company's board of directors and committees of the
board of directors who were not employees of the Company received $2,000 per
regular or special board meeting attended and $1,000 for each committee meeting
attended.
1993 DIRECTORS STOCK OPTION PLAN
The Company has in effect the 1993 Directors Stock Option Plan. The
purpose of the 1993 Directors Stock Option Plan is to attract and retain
directors of the Company and to extend to them the opportunity to acquire a
proprietary interest in the Company so that they will apply their best efforts
for the benefit of the Company. The 1993 Directors Stock Option Plan authorizes
the granting of nonstatutory stock options to directors of the Company (a
"Nonemployee Director") who are not and have not been (i) an employee of the
Company or (ii) an employee, officer or director of Cairn PLC or an affiliate
thereof or Phemus Corporation ("Phemus") or an affiliate thereof. The 1993
Directors Stock Option Plan was amended, effective as of May 24, 1995, in order
to exclude any person who is an employee, officer or director of Cairn PLC or an
affiliate thereof or Phemus or an affiliate thereof from the class of persons
eligible to receive options thereunder and to establish a separate plan for such
persons. Such amendment was requested by Phemus to allow directors of the
Company who served in such capacity as a representative of a principal
stockholder to participate in a stock option plan that would permit the
assignment of options granted thereunder to such principal stockholder. See
"--Separate Phemus Stock Option Plan" and "--Separate PLC Stock Option Plan." At
the beginning of each term, each Nonemployee Director automatically receives a
nonstatutory option to purchase 10,000 shares of Common Stock at an exercise
price equal to the last reported sales price per share of the Common Stock on
the last business day prior to the option's date of grant. Each option is fully
exercisable six months after the date of its grant and expires five years after
the date of its grant. A total of 270,000 shares of Common Stock have been
reserved for issuance upon the exercise of options granted under the 1993
Directors Stock Option Plan. Options to purchase 130,000 such shares have been
granted.
SEPARATE PHEMUS STOCK OPTION PLAN
The Company has in effect the Cairn Energy USA, Inc. Separate Phemus
Stock Option Plan (the "Separate Phemus Stock Option Plan"). The purpose of the
Separate Phemus Stock Option Plan is to provide an incentive for certain
non-employee directors of the Company who are not entitled to receive any
options under the 1993 Directors Stock Option Plan to serve as directors of the
Company and to extend to them the opportunity to acquire a proprietary interest
in the Company so that they will apply their best efforts for the benefit of the
Company. The Separate Phemus Stock Option Plan authorizes the granting of
nonstatutory stock options to directors of the Company (i) who are not and have
not been employees of the Company or any affiliated corporations, (ii) who are
not entitled to receive any options under the 1993 Directors Stock Option Plan,
and (iii) who are an employee, officer, director or affiliate of Phemus (an
"Eligible Phemus Director"). At the beginning of each term and, solely with
respect to the first year for which the Separate Phemus Stock Option Plan is
adopted, on the date of such adoption, each Eligible Phemus Director
automatically receives a nonstatutory option to purchase 10,000 shares of Common
Stock at an exercise price equal to the last reported sales price per share of
the Common Stock on the last business day prior to the option's date of grant
except that the Separate Phemus Stock Option Plan provides that the exercise
price with respect to options granted on the date of the adoption of the
Separate Phemus Stock Option Plan would be the same exercise price as set for
options granted on May 4, 1995 Directors Stock Option Plan. Options are
transferable by the holder thereof to Phemus or an affiliate thereof. Each
option is fully exercisable six months after the date of its grant and expires
five years after the date of its grant. The Separate Phemus Stock Option Plan
does not qualify for the exemption from the operation of Section 16(b) of the
Exchange Act provided by Rule 16b-3. A total of 30,000 shares of Common Stock
were reserved for issuance under the Separate Phemus Stock Option Plan. Options
to purchase 20,000 such shares have been granted to Mr. Halsted. Subsequent to
such grants, Mr. Halsted transferred such options to Phemus.
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<PAGE>
COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS
The following table sets forth certain information for 1996, 1995 and
1994 with respect to compensation earned by the named Executive Officers:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Annual Compensation Awards
------------------------------------------------ ----------------
Other
Annual
Name and Compen- All other
Principal Position Year Salary Bonus sation Options Compensation
-------------------- ------ -------- -------- -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Gilbert, 1996 $186,200 $ 0 (5) 75,000 $21,519 (6)
President and Chief
Executive Officer
1995 174,100 70,000 (2) (5) 80,000 19,501 (6)
1994 138,100 50,000 (3) (5) 70,000 18,480 (6)
J. Munro M. Sutherland 1996 128,531 0 (5) 25,000 14,736 (6)
Senior Vice-President-Chief
Financial Officer(1)
1995 130,700 25,000 (2) (5) 50,000 13,585 (6)
1994 115,600 25,000 (3) (5) 40,000 14,875 (7)
Robert P. Murphy 1996 136,100 0 (5) 50,000 19,080 (6)
Vice-President - Exploration
1995 116,904 52,000 (2) (5) 70,000 18,402 (6)
1994 87,010 82,609 (3)(4) (5) 60,000 12,095 (6)
<FN>
(1) Subsequent to March 17, 1997, Mr. Sutherland was no longer employed by the
Company.
(2) Mr. Gilbert and Mr. Sutherland were paid such bonuses in the first quarter
of 1996. Mr. Murphy was paid $12,000 of such bonus in the second quarter of
1995 and 40,000 of such bonus in the first quarter of 1996.
(3) Mr. Gilbert and Mr. Sutherland were paid such bonuses in the fourth quarter
of 1994. Mr. Murphy was paid $10,000 of such bonus in the fourth quarter of
1994.
(4) Mr. Murphy was awarded $72,609 pursuant to the Company's Incentive Bonus
Plan for the net additions to the Company's reserves in 1994. No awards
were made under the Company's Incentive Bonus Plan in 1995 and 1996. The
awards are payable in three equal annual payments. Mr. Gilbert and Mr.
Sutherland do not participate in the Incentive Bonus Plan pursuant to their
employment agreements with the Company.
(5) Each executive officer received certain personal benefits in addition to
salary, bonus and the Company's contributions under the Company's 401(k)
plan. The aggregate amounts of such personal benefits, however, did not
exceed the lesser of $50,000 or 10% of the total of the annual salary and
bonus reported for such executive officer.
(6) Represents the Company's annual contribution to such executive officer's
account under the Company's 401(k) plan.
(7) Represents the Company's contribution to Mr. Sutherland's pension plan.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
------------------------------------------------------ ------------------------------
% of Total
Options
Number Granted to Exercise or
of Options Employees in Base Price Expiration
Name Granted Fiscal Year ($Share) (1) Date 5% (2) 10% (2)
--------------------- --------- ------------- -------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Gilbert 75,000(3)(4) 37.50% $10.375 10/30/01 $489,441 $1,240,331
J. Munro M. Sutherland 25,000(5) 12.50% $10.375 10/30/01 163,147 413,444
Robert P. Murphy 50,000(4)(6) 25.00% $10.375 10/30/01 326,294 826,888
<FN>
(1) All of these stock options were granted under the Company's 1993 Stock
Option Plan, as amended (the "1993 Stock Option Plan"), with an exercise
price of the "fair market value" of a share of Common Stock on the last
business day prior to the date of grant. Pursuant to the Company's 1993
Stock Option Plan with respect to the grant of a stock option, the "fair
market value" of a share of Common Stock is the last reported sales price
per share of the Common Stock on the last business day prior to the date of
grant of such option on the Nasdaq National Market tier of The Nasdaq Stock
Market as reported by The Wall Street Journal.
(2) These dollar amounts represent the value of the option assuming certain
rates of appreciation from the market price of the Common Stock at the date
of grant. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Common Stock and overall market conditions.
There can be no assurance that the amounts reflected in this column will be
achieved.
(3) These options are represented by incentive stock options (ISOs") that may
receive favorable tax treatment under the Internal Revenue Code of 1986, as
amended (the "Code"), and nonstatutory stock options ("NSSOs") that do not
receive favorable tax treatment under the Code. The ISOs represented by
these stock options are exercisable in the aggregate for 19,276 shares of
Common Stock of which 9,638 shares will vest on October 30, 2000. The NSSOs
represented by these options are exercisable the aggregate for 55,724
shares of Common Stock of which 18,750 shares will vest on October 30,
1997, 18,750 shares will vest on October 30, 1998, 9,112 shares will vest
on October 30, 1999 and the remaining 9,112 shares will vest on October 30,
2000.
(4) Each of these options becomes exercisable in full upon a change-in-control
of the Company and a subsequent termination of the named officer's
employment agreement with the Company within 24 months of such
change-in-control either by the Company without "due cause" or by the named
officer pursuant to such employment agreement.
(5) These options expired on March 17, 1997 pursuant to the Sutherland
Employment Agreement. See Employment Agreements.
(6) These options are represented by both ISOs and NSSOs. The ISOs represented
by these stock options are exercisable in the aggregate for 19,276 shares
of Common Stock of which 9,638 shares will vest on October 30, 1999, and
9,638 shares will vest on October 30, 2000. The NSSOs represented by these
options are exercisable in the aggregate for 30,724 shares of Common Stock
of which 12,500 shares will vest on October 30, 1997, 12,500 shares will
vest on October 30, 1998, 2,862 shares will vest on October 30, 1999 and
the remaining 2,862 shares will vest on October 30, 2000.
</FN>
</TABLE>
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5
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR VALUES AT DECEMBER 31, 1996
Value of (1)
Number of In-the-Money
Options Options
at Fiscal at Fiscal
Shares Year-End Year-End
Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise Realized Unexercisable (U) Unexercisable (U)
- -------------------------- ------------- ---------- ------------------- -------------------
<S> <C> <C> <C> <C>
Michael R. Gilbert 0 $0 186,667 (E) $646,250 (E)
158,333 (U) 138,750 (U)
J. Munro M. Sutherland 0 $0 84,667 (E) 252,750 (E)
70,333 (U) (2) 51,000 (U) (2)
Robert P. Murphy 0 $0 138,334 (E) 453,125 (E)
111,666 (U) 69,375 (U)
<FN>
(1) Based on a year-end 1996 Common Stock price of $10.00 per share.
(2) These options expired on March 17, 1997 pursuant to the Sutherland Employment Agreement. See "Employment
Agreements."
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Michael
R. Gilbert, President and Chief Executive Officer of the Company and Robert P.
Murphy, Vice President -- Exploration and director of the Company.
Mr. Gilbert's employment agreement expires on December 31, 1997 and
provides for a base salary of $165,000 in 1995, $185,000 in 1996 and $200,000 in
1997. Mr. Murphy's employment agreement expires on December 31, 1997 and
provides for a base salary of $105,000 in 1995, $135,000 in 1996 and $135,000 in
1997. Each employment agreement specifies that the services are to be rendered
in Dallas, Texas and provides the executive with certain benefits, such as
health, life and disability insurance and a car allowance, among other things.
The board of directors may also (but is not required to) supplement the
executive's base salary with a bonus in an amount, if any, that the board of
directors shall determine in its discretion.
If the Company terminates any of these employment agreements for "due
cause," death or disability, the terminated executive would be entitled to all
compensation due him up to the date of his termination. If the Company
terminates any of these employment agreements without "due cause" or if an
executive terminates his employment agreement upon the occurrence of certain
specified events ("the Permitted Termination Events"), that executive would be
entitled to all compensation due him under the full term of the employment
agreement plus a severance payment (the "Severance Payment") in an amount equal
to one year's base salary at the date of termination.
Each executive may terminate his employment agreement if any one or
more of the following Permitted Termination Events occurs: (i) if there is a
material adverse alteration or diminution of the executive's position, duties,
responsibilities, reporting relationship, authority or status from those in
effect when the employment agreement was executed; (ii) if the executive is
required to perform a substantial portion of his service to the Company outside
the Dallas/Fort Worth metropolitan area; or (iii) if the Company breaches his
employment agreement.
If there is a change in control of the Company, and if, within the 24
months following that change in control, any of the employment agreements is
terminated, either by the Company without "due cause" or by the executive upon
the occurrence of a Permitted Termination Event, the terminated executive would
be entitled to all compensation due him under his employment agreement, the
Severance Payment, if any, and an additional payment in the amount of one year's
base salary. Any severance payments resulting from termination following a
change in control are limited so that the terminated executive does not incur an
excise tax and so that the Company receives a deduction under the Code for the
termination payment. Each employment agreement limits the aggregate amount of
all payments to a terminated executive to three times such executive's base
salary on the date of termination.
Mr. Murphy's employment agreement also provides that if he terminates
his employment other than pursuant to his employment agreement or if the Company
terminates his employment for due cause or following a Permitted Termination
Event, Mr. Murphy would be restricted for one year from the date of such
termination from participating, whether as an employee or otherwise, in the
acquisition of any property or interest within the boundaries of a prospect or
proposal that the Company generates prior to such termination.
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<PAGE>
Mr. Gilbert's employment agreements excludes him from participating in
the Incentive Bonus Program.
The Company had entered into an employment agreement (the "Sutherland
Employment Agreement") with J. Munro M. Sutherland, the former Senior Vice
President-Chief Financial Officer of the Company. The Sutherland Employment
Agreement expired on December 31, 1997, and provided for a base salary of
$135,000 in 1996 and $140,000 in 1997. The Sutherland Employment Agreement
provided Mr. Sutherland with certain benefits, such as health, life and
disability insurance and a car allowance, among other things. The Sutherland
Employment Agreement contained similar termination and severance provisions as
are set forth in the employment agreements with Mr. Gilbert and Mr. Murphy.
On March 17, 1997, Mr. Sutherland's employment was terminated by the
Company pursuant to the Sutherland Employment Agreement without due cause (as
due cause is defined in the Sutherland Employment Agreement). In connection with
the termination of Mr. Sutherland's employment with the Company and pursuant to
the Sutherland Employment Agreement, Mr. Sutherland received a cash payment on
March 18, 1997 in an amount equal to the sum of (a) Mr. Sutherland's deferred
compensation ($57,501), (b) Mr. Sutherland's remaining amount of base
compensation through December 31, 1997 ($111,774.20), (c) severance compensation
equal to one times Mr. Sutherland's base compensation ($140,000); and (d) Mr.
Sutherland's car allowance and cost of liability insurance through December 31,
1997 ($4,725.81 and $1,667.42 respectively). In addition, pursuant to the
Sutherland Employment Agreement, Mr. Sutherland continues to receive health,
life and disability coverage through December 31, 1997.
In addition, Mr. Sutherland continued to own his vested stock options
(84,667 shares). His unvested options (i.e., those that were not currently
exercisable on March 17, 1997) (70,333 shares) expired on March 17, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of SEC Regulation S-K. No executive
officer of the Company served as a director or on the compensation committee of
another entity.
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<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of April 11, 1997 ("Effective Date") by
(i) each person known to the Company to own beneficially more than 5% of the
outstanding Common Stock; (ii) each director of the Company; (iii) the Company's
chief executive officer and each executive officer of the Company who earned in
excess of $100,000 in salary and bonus in 1996 (collectively, the "named
Executive Officers"); and (iv) all directors, and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
SHARES PERCENT OF CLASS
NAME OF STOCKHOLDER OR GROUP BENEFICIALLY OWNED (1) BENEFICIALLY OWNED
- ---------------------------- ---------------------------- -------------------
<S> <C> <C> <C>
Phemus Corporation (2)......................................... 2,599,500 14.80%
Michael R. Gilbert............................................. 235,671 (3) 1.34%
J. Munro M. Sutherland......................................... 117,544 (4) *
Robert P. Murphy............................................... 173,207 (5) *
R. Daniel Robins............................................... 30,500 (6) *
Jack O. Nutter, II............................................. 45,000 (7) *
John C. Halsted ............................................... 0 *
All directors and executive officers as a group/8 persons...... 615,791 (8) 3.51%
<FN>
* Less than 1%.
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all such shares. Unless otherwise
indicated, the number of shares and percentage of ownership of Common
Stock for each of the named stockholders and all directors, director
nominees and executive officers as a group assumes that shares of
Common Stock that the stockholder or directors, director nominees and
executive officers as a group may acquire within sixty days of the
Effective Date are outstanding.
(2) The business address of Phemus Corporation is 600 Atlantic Avenue,
Boston, Massachusetts 02210-2203. Includes 20,000 shares issued
pursuant to the exercise of stock options exercisable within sixty (60)
days of the Effective Date.
(3) Includes 228,334 shares issuable pursuant to the exercise of stock
options exercisable within sixty days of the Effective Date and 1,937
shares allocated to Mr. Gilbert's account under the Company's 401(k)
Profit Sharing Plan.
(4) Includes 101,334 shares issuable pursuant to the exercise of stock
options exercisable within sixty days of the Effective Date and 1,210
shares allocated to Mr. Sutherland's account under the Company's 401(k)
Profit Sharing Plan.
(5) Includes 169,167 shares issuable pursuant to the exercise of stock
options exercisable within sixty days of the Effective Date and 1,640
shares allocated to Mr. Murphy's account under the Company's 401(k)
Profit Sharing Plan.
(6) Includes 30,000 shares issuable pursuant to the exercise of stock
options exercisable within sixty days of the
Effective Date.
(7) Includes 40,000 shares issuable pursuant to the exercise of stock
options exercisable within sixty days of the
Effective Date.
(8) Includes 300 shares of which an executive officer shares voting and
dispositive power with her mother. Includes the 568,835 shares issuable
pursuant to the exercise of stock options exercisable within sixty days
of the Effective Date that are referenced in footnotes (3), (4), (5),
(6), and (7) and the 4,787 shares allocated to executive officer
accounts under the Company's 401(k) Profit Sharing Plan referenced in
footnotes (3), (4) and (5).
</FN>
</TABLE>
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<PAGE>
Item 13. Certain Relationships and Related Transactions
CONSULTING FEES
Mr. R. Daniel Robins served as a consultant to the Company during 1996.
The Company paid Mr. Robins in 1996 an aggregate of $25,200 in consulting fees.
Mr. Jack O. Nutter, II served as a consultant to the Company in 1996.
During 1996, the Company paid Nutter & Harris, a consulting firm of which Mr.
Nutter is president, an aggregate of $18,250 in consulting fees.
REGISTRATION RIGHTS RELATING TO COMMON STOCK
The Company has provided registration rights to Phemus (the "Phemus
Registration Rights Agreement") with respect to shares acquired from the Company
in the Smith Acquisition and from Cairn PLC under the Stock Purchase Agreement,
including the Escrow Shares and any Warrant Shares issued to Smith (the "Phemus
Registrable Securities"). Under the Phemus Registration Rights Agreement, Phemus
has the right to two demand registrations, provided that a registration is not
within six months after the effective date of a registration statement for an
underwritten public offering of Company securities and that the request covers
at least the lesser of (i) 20% of the Phemus Registrable Securities outstanding
as of the closing of the Smith Acquisition (which excludes the Escrow Shares and
the Warrant Shares), (ii) the number of Phemus Registrable Securities whose
aggregate offering price is expected to be at least $20,000,000, or (iii)
1,000,000 shares of the Common Stock. The Company is not obligated to effect any
Securities Act registration (a) during the 180 days following the effective date
of an underwritten public offering of securities for the account of the Company,
(b) if the Company is conducting or will be conducting within 90 days an
underwritten public offering of equity securities (or securities convertible
into equity securities) of its own account and has been advised in writing by
the managing underwriter that Phemus' requested registration would, in such
underwriter's opinion, materially and adversely affect such offering (in which
event the Company will have the right to defer such filing for a period of not
more than 120 days after receipt of the registration request), or (c) if the
board of directors determines that it would not be in the best interests of the
Company and its stockholders for such a registration to be filed at that time
(in which event the Company shall have the right to defer such filing for a
period of not more than 120 days after receipt of the registration request). The
Company may not defer the registration based on (b) or (c) above more than once
in any 12 month period.
The Phemus Registration Rights Agreement also provides that Phemus has
the right to request a registration of the Phemus Registrable Securities on Form
S-3 under the Securities Act at any time. The Company, however, is not obligated
to effect any such registration if (i) Form S-3 is not available to the Company,
(ii) the aggregate net offering proceeds (after deduction of underwriting
discounts and commissions) of the securities specified in such request is not at
least $2,000,000, (iii) the Company has already effected two registrations on
Form S-3 within the previous 12-month period, or (iv) if in the good faith
judgment of the board of directors it would not be in the best interests of the
Company and stockholders to effect such Form S-3 registration at such time, in
which even the Company would have the right to defer the filing of the Form S-3
registration for up to 120 days after receiving the Phemus registration request.
The Company may not decline to effect such a registration due to the
circumstances described in (iv) above more than once in any 12-month period.
Phemus has exercised one Form S-3 registration right under the Phemus
Registration Rights Agreement.
The Phemus Registration Rights Agreement provides that Phemus has
piggyback registration rights to include Phemus Registrable Securities in
certain Securities Act registrations filed by the Company.
The Company will pay for all expenses, other than underwriting
discounts and commissions, relating to the sale of securities by Phemus under
the Phemus Registration Rights Agreement. The Company will not be required,
however, to pay for any expenses of the registration of Phemus' Registrable
Securities on Form S-3 after Phemus has participated in four registrations.
Phemus may transfer its rights under the Phemus Registration Rights
Agreement (i) to an affiliate of Phemus or (ii) in connection with the sale or
other transfer to a holder holding, immediately after such transfer, at least
25% of the Phemus Registrable Securities outstanding as of October 10, 1994.
Notwithstanding the foregoing, holders of fewer than 25% of the Phemus
Registrable Securities outstanding as of October 10, 1994 will be permitted to
exercise the rights under the Phemus Registration Rights Agreement if they
appoint Phemus as their representative to accept notices on their behalf.
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The Phemus Registration Rights Agreement prohibits the Company from
granting registration rights to other persons that would permit such persons to
include their shares of Common Stock or other Company securities in any Phemus
demand registration, unless the inclusion of such other parties' securities will
not reduce the amount of Phemus Registrable Securities that would otherwise be
included in such registration, except with the consent of the holders of a
majority of the Phemus Registrable Securities then outstanding. In addition,
without such consent, the Company may not grant piggy-back registration rights
to other persons unless the agreements granting such rights provide that the
prospective rights holders may include their securities in a registration only
to the extent that inclusion will not reduce the amount of Phemus Registrable
Securities includable in the registration below an amount equal to the number of
Phemus Registrable Securities then outstanding multiplied by the quotient of (x)
the number of Phemus Registrable Securities then outstanding divided by (y) the
number of shares of Common Stock held by all those holders (including Phemus) of
the Common Stock seeking to include securities in the piggy-back registration.
CORPDAL:64841.7 15467-00006
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A to be
signed on its behalf by the undersigned thereunto duly authorized.
CAIRN ENERGY USA, INC.
(Registrant)
Date: April 30 , 1997 By:/s/Michael R. Gilbert
----------------------
Michael R. Gilbert, President
and Chief Executive Officer
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