<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Amendment No. 1 to
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
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: 0-4597
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
State of incorporation: New York I.R.S. Employer Identification No. 25-0484900
1600 Broadway
Suite 2200
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-812-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
Common Stock, Par Value $.10 Per Share
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.
[x] Yes [ ] 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 the 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 voting stock held by non-affiliates of
the registrant was approximately $395,761,693 as of March 31, 1998 (based
on the last reported sale price of such stock on the New York Stock Exchange
Composite Tape).
There were 37,320,226 shares of the registrant's Common Stock, Par Value
$.10 Per Share outstanding as of March 31, 1998.
Documents incorporated by reference: None.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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PART III
Item 10. Directors and Executive Officers of the Registrant 3
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management 14
Item 13. Certain Relationships and Related Transactions 18
</TABLE>
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
DIRECTORS OF FOREST
The Company's By-laws currently provide that the Board of Directors shall
be divided into four classes as nearly equal in number as possible whose terms
of office expire at different times in annual succession. Currently the number
of directors is fixed at 11.
Each class of directors is elected for a term expiring at the Annual
Meeting to be held four years after the date of their election. The Class I
Directors with the exception of Philip F. Anschutz were elected at the 1995
Annual Meeting. The Class II Directors were elected at the 1996 Annual Meeting.
The Class III Directors were elected at the 1997 Annual Meeting. Philip F.
Anschutz, Craig D. Slater and Drake S. Tempest were appointed to their
respective classes in July 1995. Cortlandt S. Dietler was appointed as a Class
IV Director in October 1996.
Certain information concerning such directors, is set forth below:
3
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
- ---------------------- -------------------- -------------------------------- ----------------
<C> <C> <S> <C>
CLASS IV DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1998
Craig D. Slater 41 - 3 President of Anschutz Investment Company since 1995
August 1997. Vice President of Acquisitions and
Investments of both The Anschutz Corporation
and Anschutz Company, the corporate parent of
Anschutz, since 1995. Corporate Secretary of
The Anschutz Corporation and Anschutz Company
from 1991 to 1996, and other positions with The
Anschutz Corporation and Anschutz Company from
1988 to 1995. Director of Qwest Communications
International Inc. since February 1997 and Director
of Qwest Communications Corporation since
November 1996. Director of Internet Communications
Corporation since September 1996. Member of the
Executive Committee.
Cortlandt S. Dietler 76 - 1 Chairman and Chief Executive Officer of Trans- 1996
Montaigne Oil Company since April 1995. Prior
thereto founder, Chairman and Chief Executive
Officer of Associated Natural Gas Corporation prior
to its 1994 merger with Panhandle Eastern Corporation.
Advisory Director of PanEnergy Corporation.
Director of Hallador Petroleum Company, Key
Production Company, Inc. and Grease Monkey
Holding Corporation. Member of the Compensation
Committee
CLASS I DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 1999
William L. Dorn 49 - 26 Chairman of the Board and Chairman of the 1982
Executive Committee. Chief Executive Officer
until December 1995. President until November
1993. Chairman of the Nominating Committee.
Chairman of the Board of Directors of Saxon
Petroleum Inc.
James H. Lee 49 - 7 Managing Partner, Lee, Hite & Wisda Ltd., 1991
a private oil and gas consulting firm. Member
of the Executive Committee. Chairman of the
Audit Committee.
</TABLE>
4
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
- ---------------------- -------------------- -------------------------------- ----------------
<C> <C> <S> <C>
Philip F. Anschutz 58 - 3 Director and Chairman of the Board of 1995
The Anschutz Corporation, and Anschutz
Company, the corporate parent of Anschutz, for
more than five years, and President of The Anschutz
Corporation and Anschutz Company until December
1996. Director and Chairman of the Board of Qwest
Communications International Inc. since February
1997 and Director and Chairman of the Board of
Qwest Communications Corporation from November
1993 until September 1997. Director and Vice
Chairman of Union Pacific Corporation since September
1996. Director and Chairman of Southern Pacific Rail
Corporation ("SPRC") from 1988 to September 1996, and
President and Chief Executive Officer of SPRC from 1988
to 1993. Member of the Nominating Committee.
CLASS II DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 2000
Robert S. Boswell 48 - 12 President since November 1993 and Chief 1985
Executive Officer since December 1995, Vice
President until November 1993. Chief Financial
Officer until December 1995. Member of the
Executive Committee. Director of C.E. Franklin
Ltd. and Saxon Petroleum Inc.
Drake S. Tempest 44 - 3 Partner in the law firm of O'Melveny & Myers LLP 1995
since 1991. Member of the Compensation Committee.
William L. Britton 63 - 2 Partner in the law firm of Bennett Jones Verchre. 1996
Director of Akita Drilling Ltd., ATCO Ltd.,
Canadian Western Natural Gas Ltd., Canadian
Utilities Limited, CanUtilities Holdings Ltd. and
Northwestern Utilities Limited. Member of the
Audit Committee.
CLASS III DIRECTORS - TERMS EXPIRING AT THE ANNUAL SHAREHOLDERS' MEETING IN 2001
Jordan L. Haines 70 -2 Chairman of the Board of Fourth Financial 1996
Corporation, a Kansas based bank holding company,
and its subsidiary Bank IV Wichita, N.A. from
1983 until his retirement in 1991. Director of Qwest
Communications International Inc. and a Director of
KN Energy, Inc. Member of the Audit Committee.
</TABLE>
5
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION,
AGE AND POSITIONS WITH COMPANY
YEARS OF SERVICE AND BUSINESS EXPERIENCE DIRECTOR
NAME WITH COMPANY DURING LAST FIVE YEARS SINCE
- ---------------------- -------------------- -------------------------------- ----------------
<C> <C> <S> <C>
J. J. Simmons, III 73 - 1 President of The Simmons Company, a consulting 1997
firm. Mr. Simmons was Vice Chairman of the
Surface Transportation Board from 1995 to 1996
and prior thereto Commissioner - Vice Chairman
of the U.S. Interstate Commerce Commission.
Michael B. Yanney 64 - 6 Chairman and Chief Executive Officer of the 1992
America First Companies, L.L.C. Director
of Burlington Northern Santa Fe Corporation
and Mid-America Apartment Communities, Inc.
Chairman of the Compensation Committee.
Member of the Nominating Committee.
</TABLE>
6
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Refer to Item 4A. for the Executive Officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it and
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
January 1, 1997 to February 15, 1998, its officers, directors, and greater than
10% beneficial owners complied with all applicable filing requirements, except
that Michael B. Yanney was late in filing one monthly report relating to one
transaction.
7
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (collectively, the "Named Executive Officers"),
based on salary and bonus earned in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ----------------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND BONUS COMPENSATION STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($) ($)(1) AWARDS($)(2) OPTIONS(#) ($)(3)
- ------------------------- ---- --------- ---------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William L. Dorn, 1997 $306,261 $ 32,500 $ -0- $32,500 -0- $17,935
Chairman of the Board 1996 300,012 100,000 -0- -0- 175,000 17,434
1995 300,012 41,415 1,873 -0- -0- 17,328
Robert S. Boswell, 1997 303,402 57,500 -0- 57,500 -0- 17,535
President and Chief 1996 287,868 177,000 -0- 24,500 250,000 16,605
Executive Officer 1995 284,004 41,321 1,699 -0- -0- 16,310
David H. Keyte, 1997 206,253 37,500 -0- 37,500 -0- 10,313
Executive Vice President 1996 200,004 62,500 -0- 46,403 127,000 10,000
and Chief Financial Officer 1995 165,000 32,113 21,619 -0- -0- 8,250
Forest D. Dorn, 1997 171,670 25,000 -0- 25,000 40,000 9,950
Senior Vice President - 1996 170,004 35,000 -0- 25,982 90,000 9,468
Gulf Coast Region 1995 163,800 20,889 23,977 -0- -0- 9,264
V. Bruce Thompson, 1997 169,888 20,000 -0- 20,000 30,000 8,495
Senior Vice President and 1996 168,864 37,500 26,725 27,844 40,000 8,443
General Counsel 1995 165,000 16,292 -0- -0- -0- 8,250
</TABLE>
(1) The 1996 and 1997 totals do not include perquisites and other personal
benefits because the value of these items did not exceed the lesser of
$50,000 or 10% of reported salary and bonus of any of the Named Executive
Officers, except for V. Bruce Thompson. The 1996 total includes the gift
to Mr. Thompson of a Company-owned automobile valued at $25,751.
(2) The following Named Executive Officers received conditional grants of
restricted stock in the following respective share amounts: William L.
Dorn - 200,000; Robert S. Boswell - 400,000; David H. Keyte - 250,000. The
restricted stock was awarded on November 7, 1997, and is subject to a
sliding scale condition and a two-year restriction on transferability. The
condition is that the recipient receives shares only if prior to January 1,
1999 the highest average closing price of the Company's Common Stock during
any 20 consecutive-trading-day period as reported on the New York Stock
Exchange is at least $22.00 per share. The following are the incremental
share awards achieved at various price levels (See "Report of the
Compensation Committee on Executive Compensation - Short-Term Incentives"):
8
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<TABLE>
<CAPTION>
Number of Shares Awarded
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Stock Price Level William L. Dorn Robert S. Boswell David H. Keyte
----------------- --------------- ----------------- --------------
<S> <C> <C> <C>
$22 60,000 100,000 70,000
23 66,000 110,000 77,000
24 73,000 122,000 85,000
25 82,000 137,000 96,000
26 93,000 155,000 108,000
27 106,000 176,000 123,000
28 131,000 218,000 153,000
29 176,000 293,000 205,000
30 or greater 200,000 400,000 250,000
</TABLE>
(3) The 1997 totals include (i) the Company's matching contribution to the
Retirement Savings Plan in the following amounts: William L. Dorn $8,000;
Robert S. Boswell - $8,000; David H. Keyte - $6,786; Forest D. Dorn -
$8,000; V. Bruce Thompson - $7,917, and (ii) the Company's matching
contribution pursuant to deferred compensation agreements in the following
amounts: William L. Dorn - $7,313; Robert S. Boswell - $7,170; David H.
Keyte - $3,527; Forest D. Dorn - $584; V. Bruce Thompson - $578. The 1997
totals also include the following amounts attributable to the term life
portion of premiums paid by the Company pursuant to a split dollar
insurance arrangement: William L. Dorn - $2,622; Robert S. Boswell - $2,365
and Forest D. Dorn - $1,366. The remainder of the premium is not included
and does not benefit the Named Executive Officers, because the Company has
the right to the cash surrender value of the policy.
STOCK OPTION GRANTS DURING 1997
The following table provides details regarding stock options granted
to the Named Executive Officers in 1997. In addition, in accordance with rules
of the Securities and Exchange Commission (the "SEC"), there are shown the
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
term of the option. The Company does not have any outstanding SARs.
9
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STOCK OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM (3)
UNDERLYING OPTIONS EMPLOYEES EXERCISE EXPIRATION ---------------------
NAME GRANTED (#)(1) IN 1997(2) PRICE ($/Sh) DATE 5% ($) 10% ($)
- ---- -------------- -------------- --------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Forest D. Dorn 40,000 9.2 $17.50 November 11, 2007 $440,226 $1,115,620
V. Bruce Thompson 30,000 6.9 17.50 November 11, 2007 330,170 836,715
</TABLE>
(1) The options are subject to a four-year vesting schedule with 20% being
exercisable at December 31, 1997. An additional 20% becomes exercisable on
each succeeding anniversary of the date of grant.
(2) The percentage for each year is the amount granted to each of the Named
Executive Officers as a percent of the total of each issuance granted to
all employees.
(3) These amounts represent certain assumed rates of appreciation based on
actual option term and annual compounding from the date of grant. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved. These numbers do not take into account
provisions of the options providing for termination of the option following
termination of employment, non-transferability or vesting.
STOCK OPTION EXERCISES AND YEAR-END STOCK OPTION VALUES
The following table shows options exercised and value realized, and the
number of shares covered by both exercisable and non-exercisable stock options
as of December 31, 1997 and their values at such date.
AGGREGATED OPTION EXERCISES IN 1997 AND
OUTSTANDING STOCK OPTION VALUES AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised In-the-Money
Shares Acquired Value Unexercised Options Options at 12/31/97
on Exercise (#) Realized ($) at 12/31/97 (#) ($)
--------------- ----------- ------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Dorn -0- -0- 70,000 105,000 $285,000 $427,500
Robert S. Boswell -0- -0- 100,000 150,000 360,000 540,000
David H. Keyte 2,500 $17,500 48,300 76,200 176,575 284,550
Forest D. Dorn -0- -0- 36,000 86,000 92,000 201,000
V. Bruce Thompson -0- -0- 22,000 48,000 62,000 93,000
</TABLE>
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10
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PENSION PLAN
The Company's Pension Plan is a qualified, non-contributory defined benefit
plan. On May 8, 1991, the Board of Directors suspended benefit accruals under
the Pension Plan effective as of May 31, 1991.
The following table shows the estimated maximum annual benefits payable
upon retirement at age 65 as a straight life annuity to participants in the
Pension Plan for the indicated levels of average annual compensation and various
periods of service, assuming no future changes in such plan:
<TABLE>
<CAPTION>
ESTIMATED MAXIMUM ANNUAL
PENSION BENEFITS (2)
---------------------------
YEARS OF SERVICE
---------------------------
REMUNERATION (1) 10 20 30
---------------- ------- ------- -------
<S> <C> <C> <C>
$100,000. . . . . . . . . . . . . . $36,846 48,060 53,400
200,000. . . . . . . . . . . . . . 73,692 96,120 106,800
300,000. . . . . . . . . . . . . . 79,282 103,412 114,902
400,000. . . . . . . . . . . . . . 79,282 103,412 114,902
</TABLE>
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(1) For each Named Executive Officer, the level of compensation used to
determine benefits payable under the Pension Plan is such officer's base
salary for 1991.
(2) Normal retirement benefits attributable to the Company's contributions are
limited under certain provisions of the Code to $130,000 in 1998, as
increased annually thereafter for cost of living adjustments.
The amount of the Company's contribution, payment or accrual in respect to
any specified person in the Pension Plan is not and cannot readily be separately
or individually calculated by the Pension Plan actuaries. Annual benefits at
normal retirement are approximately 24% of average annual earnings (excluding
bonuses) for any consecutive 60-month period which produces the highest amount,
in the last 15 years prior to retirement, up to May 31, 1991, when benefit
accruals ceased plus 21% of such earnings prorated over 20 years of credited
service, and 1/2 of 1% of such earnings for each year of credited service in
excess of 20, subject to certain adjustments for lack of plan participation.
There is no Social Security offset. Such benefits are payable for life with a 10
year certain period, or the actuarial equivalent of such benefit.
Because benefit accruals under the Pension Plan were suspended effective
May 31, 1991, the years of credited service for the Named Executive Officers are
as follows: William L. Dorn - 20; Robert S. Boswell - 2; David H. Keyte - 4;
Forest D. Dorn - 14; and V. Bruce Thompson - 0. The estimated annual accrued
benefit payable, based on a life annuity benefit, upon normal retirement for
each of such persons is: William L. Dorn - $50,429; Robert S. Boswell - $4,616;
David H. Keyte - $5,097; and Forest D. Dorn - $17,823. V. Bruce Thompson has no
benefit under this plan because his employment commenced after benefit accruals
were suspended.
11
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Certain participants in the Pension Plan have been prevented by the limits
of the Code from receiving the full amount of pension benefits to which they
would otherwise have been entitled. Such persons have had benefits credited to
them under a Supplemental Retirement Plan, which together with the benefits
payable under the Pension Plan, equaled the benefit to which they would have
been entitled under the Pension Plan but for such Code limits. The Supplemental
Retirement Plans for each participant were unfunded, non-qualified,
non-contributory benefit plans. Benefits payable vest to the same extent as the
Pension Plan benefits and are unsecured general obligations of the Company.
Benefit accruals under these plans were suspended effective May 31, 1991 in
conjunction with the suspension of benefit accruals under the Pension Plan. The
additional annual accrued benefit payable, based on a life annuity benefit, upon
normal retirement for each of such persons is: William L. Dorn - $3,788; Robert
S. Boswell - $463.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL HOLDERS OF SECURITIES
The Company currently has one class of voting securities outstanding. On
April 30, 1998, there were 37,320,644 shares of Common Stock outstanding, with
each such share being entitled to one vote.
As of April 30, 1998, to the knowledge of the Board of Directors the only
shareholders who owned beneficially more than 5% of the outstanding shares of
Common Stock were:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- ---------------- ------------------ -------------------- --------
<S> <C> <C> <C>
Common Stock (1) The Anschutz Corporation 17,086,475(2) 39.5%
2400 Qwest Tower
555 17th Street
Denver, Colorado 80202
Joint Energy Development 3,680,000(3) 9.8%
Investments Limited Partnership
P. O. Box 1188
Houston, Texas 77251-1188
Crabbe Huson Group 3,330,300 8.9%
121 S.W. Morrison, Suite 1400
Portland, Oregon 97204
Heartland Advisors, Inc. 2,302,900 6.1%
790 North Milwaukee St.
Milwaukee, WI 53202
</TABLE>
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(1) Based on Schedules 13D and 13G and amendments thereto filed with the SEC
and the Company by the reporting person through April 30, 1998 and the
amount of Common Stock outstanding on April 30, 1998.
(2) The shares indicated as beneficially owned by Anschutz include 5,950,000
shares to be issued pursuant to the 1998 Anschutz Transaction, and 1,587
shares owned by Philip F. Anschutz.
(3) Joint Energy Development Investments Limited Partnership ("JEDI") has
agreed to not transfer 840,000 of its shares, except in limited
circumstances, until after July 31, 1999.
12
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of April 30, 1998, the number of shares of
the Company's Common Stock beneficially owned by each director and nominee, each
of the executive officers named in the Summary Compensation Table set forth
under the caption "Executive Compensation" below, and all directors and
executive officers as a group. Unless otherwise indicated, each of the persons
has sole voting power and sole investment power with respect to the shares
beneficially owned by such person.
13
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<TABLE>
<CAPTION>
COMMON STOCK (1)
-------------------------------
NAME OF INDIVIDUAL OR NUMBER OF PERCENT
NUMBER IN GROUP SHARES OF CLASS(2)
--------------------- --------- -----------
<S> <C> <C>
Philip F. Anschutz. . . . . . . . . 17,086,475(3) 39.5%
Robert S. Boswell . . . . . . . . . 136,684(4) *
William L. Britton. . . . . . . . . 2,753 *
Cortlandt S. Dietler. . . . . . . . 3,253 *
William L. Dorn . . . . . . . . . . 142,533(5) *
Forest D. Dorn. . . . . . . . . . . 64,065(6) *
Jordan L. Haines. . . . . . . . . . 1,753 *
David H. Keyte. . . . . . . . . . . 68,182(7) *
James H. Lee. . . . . . . . . . . . 4,748 *
J. J. Simmons III . . . . . . . . . 376 *
Craig D. Slater . . . . . . . . . . 8,087 *
Drake S. Tempest. . . . . . . . . . 4,087 *
V. Bruce Thompson . . . . . . . . . 28,882(8) *
Michael B. Yanney . . . . . . . . . 12,587(9) *
All directors and executive officers
as a group (19 persons,including
the 14 named above)............... 17,634,878(10) 40.3%
</TABLE>
- -----------
* The percentage of shares beneficially owned does not exceed one percent of
the outstanding shares of the class.
(1) Amounts reported also include shares held for the benefit of certain
directors and executive officers by the trustee of the Company's Retirement
Savings Plan Trust as of December 31, 1997.
(2) Based on the number of shares outstanding as of April 30, 1998.
(3) The shares indicated as owned by Philip F. Anschutz are owned of record by
Anschutz, of which Mr. Anschutz is the Chairman of the Board and a
Director. Mr. Anschutz may be deemed to beneficially own such shares based
on his affiliation with Anschutz. The shares indicated as beneficially
owned by Philip F. Anschutz include 5,950,000 shares to be issued pursuant
to the 1998 Anschutz Transaction, and 1,587 shares owned by Philip F.
Anschutz. See "Item 13. Certain Relationships and Related Transactions--
1998 Anschutz Transaction."
(4) Includes 120,000 shares that Robert S. Boswell has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan, and
4,133 shares (net of shares surrendered for tax withholding) of restricted
stock also awarded under the Stock Incentive Plan. Does not include 45
shares held by Robert S. Boswell's wife or 566 shares held by his children,
of which shares Mr. Boswell disclaims beneficial ownership.
(5) Includes 90,000 shares that William L. Dorn has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan,
and 1,495 shares (net of shares surrendered for tax withholding) of
restricted stock also awarded under the Stock Incentive Plan. Also
includes (i) 5,160 shares held of record by William L. Dorn as co-trustee
of a trust for the benefit of himself and his three siblings, and (ii)
14,840 shares held of record by William L. Dorn as trustee of trusts for
the benefit of related parties, of which shares Mr. Dorn disclaims
beneficial ownership. Does not include 2,998 shares held by William L.
Dorn's wife or 7,199 shares held by his children, of which shares Mr. Dorn
disclaims beneficial ownership.
(6) Includes 44,000 shares that Forest D. Dorn has the vested right to purchase
pursuant to options granted under the Stock Incentive Plan, and 2,678
shares (net of shares surrendered for tax withholding) of restricted stock
also awarded under the Stock Incentive Plan. Also includes (i) 5,160
shares held of record by Forest D. Dorn as co-trustee of a trust for the
benefit of himself and his three siblings, and (ii) 33 shares held of
14
<PAGE>
record by Forest D. Dorn as custodian for the benefit of one of his minor
children, of which shares Mr. Dorn disclaims beneficial ownership. Does
not include 1,725 shares held by Forest D. Dorn's wife or 5,192 shares held
by his children, of which shares Mr. Dorn disclaims beneficial ownership.
(7) Includes 59,700 shares that David H. Keyte has the vested right to purchase
pursuant to options granted under the Stock Incentive Plan, and 4,517
shares (net of shares surrendered for tax withholding) of restricted stock
also awarded under the Stock Incentive Plan. Does not include 1,000 shares
held by one of his children, of which shares Mr. Keyte disclaims beneficial
ownership.
(8) Includes 26,000 shares that V. Bruce Thompson has the vested right to
purchase pursuant to options granted under the Stock Incentive Plan, and
2,558 shares (net of shares surrendered for tax withholding) of restricted
stock also awarded under the Stock Incentive Plan.
(9) Includes 10,000 shares held of record by America First Companies, L.L.C.,
of which Michael B. Yanney is a 50% member. Does not include 3,400 shares
held by Michael B. Yanney's wife in her retirement savings trust, of which
shares Mr. Yanney disclaims beneficial ownership.
(10) Includes 64,000 shares held by various executive officers (other than those
named in the table) who have the vested right to purchase such shares
pursuant to options granted under the Stock Incentive Plan, and 3,505
shares (net of shares surrendered for tax withholding) of restricted stock
awarded to various executive officers under the Stock Incentive Plan.
15
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1998 ANSCHUTZ TRANSACTION
At the Company's 1998 Annual Meeting (currently scheduled for June 16,
1998), the Company's shareholders will be asked to approve a transaction (the
"1998 Anschutz Transaction") between the Company and The Anschutz Corporation
("Anschutz") contemplated by a Purchase and Sale Agreement between the Company
and Anschutz dated April 6, 1998 (the "1998 Anschutz Agreement"). The 1998
Anschutz Agreement was filed by the Company as an exhibit to its Current Report
on Form 8-K dated April 8, 1998.
Pursuant to the 1998 Anschutz Transaction, the Company will issue to
Anschutz 5,950,000 shares of Common Stock in exchange for certain oil and gas
assets.
The principal oil and gas asset to be acquired is an interest in the
Anschutz Ranch East Unit in Utah and Wyoming. In addition, the Company will
acquire all of Anschutz' Canadian oil and gas assets, primarily comprised of
approximately 170,000 net acres of undeveloped land. The Company will also
acquire certain of Anschutz' international oil and gas assets comprised of 13
international projects encompassing approximately 11,000,000 net acres of
undeveloped land.
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The 1998 Anschutz Agreement contemplates the acquisition by the Company of
certain oil and gas properties from Anschutz. The properties will, with one
exception, be acquired by the merger of the Anschutz subsidiaries that own such
properties with newly-created subsidiaries of the Company. The transaction will
be accounted for by the Company as a purchase. The 1998 Anschutz Agreement is
effective as of January 1, 1998. Anschutz Ranch East Corporation ("AREC"),
which owns the interests in the Anschutz Ranch East Unit, will receive a
$31,000,000 capital contribution from Anschutz prior to its merger with a Forest
subsidiary. The Company presently intends to use the capital contribution,
together with a portion of the cash held by AREC to repay in full certain
nonrecourse debt of AREC.
Therefore, based on the number of shares outstanding on April 30, 1998,
pursuant to the 1998 Anschutz Transaction, Anschutz will increase its ownership
from 30.7% to approximately 39.5% of the Common Stock. Anschutz is subject to a
40% ownership limitation that terminates on July 27, 2000 and is not applicable
to acquisitions of shares approved by the Board of Directors, including a
majority of independent directors, acquisitions following certain business
combinations or tender offers, or acquisitions made after a third party acquires
a greater number of shares than that held by Anschutz and its affiliates, or
subject to acquisition by them. The shares issued pursuant to the 1998 Anschutz
Transaction will also be subject to the 40% ownership limitation.
PRIOR ANSCHUTZ TRANSACTIONS
During 1995 and 1996, the Company consummated transactions with Anschutz
and Joint Energy Development Investments Limited Partnership ("JEDI"), a
Delaware limited partnership the general partner of which is an affiliate of
Enron Corp.
Pursuant to a purchase agreement between the Company and Anschutz (the
"1995 Anschutz Agreement"), Anschutz purchased 3,760,000 shares of the Company's
Common Stock and shares of preferred stock which were convertible into 1,240,000
additional shares of Common Stock for a total consideration of $45,000,000. In
addition,
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Anschutz received a warrant that entitled it to purchase 3,888,888 shares of the
Company's Common Stock for $10.50 per share (the "Anschutz Warrant"). The
Anschutz Warrant was scheduled to expire July 27, 1998.
Concurrent with the Anschutz investment, Forest and JEDI restructured
JEDI's existing loan which had a principal balance of approximately $62,368,000.
As a part of the restructuring, the existing JEDI loan balance was divided into
two tranches: a $40,000,000 tranche, which bore interest at the rate of 12.5%
per annum and was due and payable in full on December 31, 2000; and a tranche of
approximately $22,400,000, which did not bear interest and was due and payable
in full on December 31, 2002. JEDI also relinquished the net profits interest
that it held in certain properties of the Company. In consideration, JEDI
received a warrant (the "JEDI Warrant") that entitled it to purchase 2,250,000
shares of the Company's Common Stock for $10.00 per share.
Also concurrent with the Anschutz investment, JEDI granted an option to
Anschutz (the "Anschutz Option"), pursuant to which Anschutz was entitled to
purchase from JEDI up to 2,250,000 shares of the Company's Common Stock at a
purchase price per share equal to the lesser of (a) $10.00 plus 18% per annum
from July 27, 1995 to the date of exercise of the option, or (b) $15.50. The
Anschutz Option was scheduled to terminate on July 27, 1998. JEDI was to
satisfy its obligations under the Anschutz Option by exercising the JEDI
Warrant. The Company also agreed to use the proceeds from the exercise of the
Anschutz Warrant to pay principal and interest on the $40,000,000 tranche of the
JEDI loan.
In December 1995, JEDI exchanged the $22,400,000 tranche and the JEDI
Warrant for 1,680,000 shares of Common Stock (the "1995 JEDI Exchange").
Pursuant to the 1995 JEDI Exchange, the Company assumed JEDI's obligations under
the Anschutz Option. Under the Anschutz Option, the Company was then obligated
to issue shares directly to Anschutz that previously would have been issued to
JEDI pursuant to the JEDI Warrant. On August 1, 1996, Anschutz exercised the
Anschutz Option to purchase 2,250,000 shares of Common Stock for $26,200,000 or
approximately $11.64 per share.
On November 5, 1996, the Company exchanged 2,000,000 shares of Common Stock
plus approximately $13,500,000 cash to extinguish approximately $43,000,000
tranche then owed to JEDI. In connection with this transaction, Anschutz
acquired 1,628,888 shares of Common Stock by exercising a portion of the
Anschutz Warrant to purchase 388,888 shares of Common Stock at $10.50 per share
and by converting 620,000 shares of Forest's Second Series Preferred Stock into
1,240,000 shares of Common Stock. The term of the remaining Anschutz Warrant
was extended to July 27, 1999.
On August 28, 1997, Anschutz purchased 3,500,000 shares of Common Stock
through the exercise of the Anschutz Warrant at an exercise price of $8.60 per
share resulting in cash proceeds to the Company of $30,100,000. The reduction
in exercise price offered to Anschutz reflected an approximate 10% present value
discount computed to the warrant's expiration date of July 27, 1999.
In 1997, the Company farmed out to an affiliate of Anschutz a 50% interest
in a prospect in the Gulf of Mexico. Pursuant to the farmout, and to earn such
interest, Anschutz agreed to pay 50% of the Company's costs already incurred
relating to the prospect and 66.67% of the dry hole drilling costs of an
exploratory well on the prospect, such costs being limited to the lesser of the
first $8,000,000 of gross dry hole costs or actual costs, any remaining costs
will be split evenly. Anschutz participated in the prospect upon the same terms
as other unrelated industry participants. The well on this prospect is
currently drilling.
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The Company engaged Morgan Stanley & Co. Incorporated ("Morgan
Stanley") as its financial advisor for the 1998 Anschutz Transaction. Morgan
Stanley rendered an opinion that, based upon and subject to the factors and
assumptions stated therein, the consideration to be paid by Forest pursuant
to the 1998 Anschutz Transaction was fair to Forest
from a financial point of view.
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OTHER TRANSACTIONS. The Company engaged the law firm of Bennett, Jones
Verchre for legal services in 1997. William L. Britton, a Director of the
Company, is a partner in such firm.
During 1997, the Company participated with a 37.5% working interest in the
drilling of an exploratory prospect in south Texas pursuant to an agreement with
Triana Exploration Company ("Triana"). The initial well resulted in a
successful completion in the Slick Sand. Triana is a joint venture managed by
Lee, Hite & Wisda Ltd. ("LHW"), and in which LHW has an economic interest.
James H. Lee, a director of the Company, is the managing partner of LHW. The
Company reimbursed Triana for the acreage rental costs and technical data
including seismic and administrative costs in the amount of $183,750. In
addition, Triana is carried for a 15% working interest at payout. The Company
participated in the prospect upon the same terms as other unrelated industry
participants. For further information with respect to other transactions with
management and others see "Certain Relationships and Related Transactions".
RETIREMENT BENEFITS FOR FORMER EXECUTIVES AND DIRECTORS. In December 1990,
in consideration of their many years of service, the Company entered into
retirement agreements with the following seven executives and directors:
Clayton G. Dorn, David F. Dorn, Richard B. Dorn, John C. Dorn, Martha Dorn
Bird, Herbert J. Warner and William F. Higie, collectively the "Retirees",
pursuant to which the Retirees receive supplemental retirement payments in
addition to the amounts to which they are entitled under the Company's
retirement plan. In addition, the Retirees and their spouses are entitled to
lifetime coverage under the Company's group medical and dental plans, tax and
other financial services and payments by the Company in connection with certain
club membership dues. The Company has also agreed to maintain certain life
insurance policies in effect at December 1990 for the benefit of each of the
Retirees. All of the Retirees have subsequently resigned as directors. Pursuant
to the terms of the retirement agreements, the Retirees who cease to be a
director (or his spouse) will be paid $2,500 a month until December 2000.
The balance of the Company's obligation ($149,000) to Richard B. Dorn
under a revised retirement agreement was paid in May 1997. The retirement
agreements for the other six Retirees, one of whom, David F. Dorn, received
in 1991 the payments scheduled to be made in 1999 and 2000, provide for
supplemental retirement payments totaling approximately $970,000 per year in
1998 and approximately $770,000 per year in 1999 and 2000.
EXECUTIVE SEVERANCE AGREEMENTS. The Company has entered into executive
severance agreements (the "Executive Severance Agreements") with the
following executive officers, in addition to the Named Executive Officers:
Daniel L. McNamara, Joan C. Sonnen, Neal A. Stanley and Donald H. Stevens.
The Executive Severance Agreements provide for severance benefits for
termination without cause and for termination following a "change of control"
of the Company. The Executive Severance Agreements provide that if an
executive's employment is terminated either (a) by the Company for reasons
other than cause or other than as a consequence of death, disability, or
retirement, or (b) by the executive for reasons of diminution of
responsibilities, compensation, or benefits or, in the case of a change of
control, a significant change in the executive's principal place of
employment, the executive will receive certain payments and benefits. In
January 1998 the term of the Executive Severance Agreements was extended
automatically until January 2000.
In the case of termination of an executive's employment which does not
occur within two years of a change of control, these severance benefits include
(a) payment of the executive's base salary for a term of months equal to the
whole number of times that the executive's base salary can be divided by
$10,000, limited to 30 months (such amounts payable will be reduced by 50% if
the executive obtains new employment during the term of payment) and (b)
continued coverage of the executive and any of his or her dependents under the
Company's medical and dental benefit plans throughout the payment term without
any cost to the executive.
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If an executive's employment by the Company is terminated under the
circumstances described above within two years after the date upon which a
change of control occurs, the Company would be obligated to take the
following actions after the last day of the executive's employment:
(a) the Company will pay to the executive an amount equal to 2.5 times
the executive's base salary;
(b) the Company will permit the executive and those of his
dependents who are covered under the Company's medical and dental
benefit plans to be covered by such plans without any cost to the
executive for a two-year period of time;
(c) the Company will cause any and all outstanding options
to purchase stock of the Company held by the executive to become
immediately exercisable in full and cause the executive's accrued
benefits under any non-qualified deferred compensation plans to
become immediately non-forfeitable; and
(d) if any payment or distribution to the executive, whether
or not pursuant to such agreement, is subject to the federal
excise tax on "excess parachute payments," the Company will be
obligated to pay to the executive such additional amount as may be
necessary so that the executive realizes, after the payment of any
income or excise tax on such additional amount, an amount
sufficient to pay all such excise taxes.
The Executive Severance Agreements also provide that the Company will
pay legal fees and expenses incurred by an executive to enforce rights or
benefits under such agreement. Under the Executive Severance Agreements, a
"change of contol" of the Company would be deemed to occur if, (i) the
Company is not the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company); (ii) the Company sells,
leases or exchanges all or substantially all of its assets to any other
person or entity (other than a wholly-owned subsidiary of the Company); (iii)
the Company is dissolved and liquidated; (iv) any person or entity, including
a "group" as contemplated by Section 13(d)(3) of the Exchange Act (except
Anschutz) acquires or gains ownership or control (including, without
limitation, power to vote) of more than 40% of the outstanding shares of the
Company's voting stock (based upon voting power); or (v) as a result of or
in connection with a contested election of directors, the persons who were
directors of the Company before such election cease to constitute a majority
of the Board of Directors.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements
1. Independent Auditors' Report
2. Consolidated Balance Sheets - December 31, 1997 and 1996
3. Consolidated Statements of Operations - Years ended December
31, 1997, 1996 and 1995
4. Consolidated Statements of Shareholders' Equity - Years
ended December 31, 1997, 1996 and 1995
5. Consolidated Statements of Cash Flows - Years ended December
31, 1997, 1996 and 1995
6. Notes to Consolidated Financial Statements - Years ended
December 31, 1997, 1996 and 1995
(2) Financial Statement Schedules
All schedules have been omitted because the information is either
not required or is set forth in the financial statements or the
notes thereto.
(3) Exhibits - Forest shall, upon written request to Daniel L.
McNamara, Corporate Secretary of Forest, addressed to Forest Oil
Corporation, 1600 Broadway, Suite 2200, Denver, CO 80202, provide
copies of each of the following Exhibits:
Exhibit 3(i) Restated Certificate of Incorporation of Forest Oil
Corporation dated October 14, 1993, incorporated herein by reference to
Exhibit 3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended
September 30, 1993 (File No. 0-4597).
Exhibit 3(i)(a) Certificate of Amendment of the Restated Certificate of
Incorporation dated as of July 20, 1995, incorporated herein by reference to
Exhibit 3(i)(a) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(b) Certificate of Amendment of Restated Certificate of
Incorporation dated as of July 26, 1995, incorporated herein by reference to
Exhibit 3(i)(b) to Form 10-Q for Forest Oil Corporation for the quarter ended
June 30, 1995 (File No. 0-4597).
Exhibit 3(i)(c) Certificate of Amendment of the Restated Certificate of
Incorporation dated as of January 5, 1996, incorporated herein by reference
to Exhibit 3(i)(c) to Forest Oil Corporation's Registration Statement on Form
S-2 (File No. 33-64949).
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Exhibit 10.3 Form of non-qualified Executive Deferred Compensation
Agreement, incorporated herein by reference to Exhibit 10.3 to Form 10-Q for
Forest Oil Corporation for the years ended December 31, 1990 (File No.
0-4597).
Exhibit 10.4 Form of non-qualified Supplemental Executive Retirement
Plan, incorporated herein by reference to Exhibit 10.4 to Form 10-K for
Forest Oil Corporation for the year ended December 31, 1990 (File No. 0-4597).
Exhibit 10.5 Form of Executive Retirement Agreement, incorporated herein
by reference to Exhibit 10.5 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1990 (File No. 0-4597).
Exhibit 10.6 Forest Oil Corporation Stock Incentive Plan and Option
Agreement, incorporated herein by reference to Exhibit 4.1 to Form S-8 for
Forest Oil Corporation dated June 7, 1996 (File No. 0-4597).
Exhibit 10.7 Letter Agreement with Richard B. Dorn relating to a revision
to Exhibit 10.5, incorporated herein by reference to Exhibit 10.11 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1991 (File
No. 0-4597).
Exhibit 10.8 Form of Executive Severance Agreement, incorporated herein
by reference to Exhibit 10.9 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1993 (File No. 0-4597).
Exhibit 10.9 Shareholders Agreement dated as of July 27, 1995 between
Forest Oil Corporation and The Anschutz Corporation incorporated herein by
reference to Exhibit 99.7 to Form 8-K for Forest Oil Corporation dated
October 11, 1995 (File No. 0-4597).
Exhibit 10.10 Shareholders Agreement dated as of January 24, 1996 between
Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership, incorporated herein by reference to Exhibit 10.12 to Form 10-K
for Forest Oil Corporation for the year ended December 31, 1995 (File No.
0-4597).
*Exhibit 21 List of Subsidiaries of the Registrant.
*Exhibit 23 Consent of KPMG Peat Marwick LLP
*Exhibit 24 Powers of Attorney of the following Officers and Directors:
Philip F. Anschutz, Robert S. Boswell, William L. Britton, Cortlandt S.
Dietler, William L. Dorn, Jordan L. Haines, David H. Keyte, James H. Lee, J.
J. Simmons, III, Craig D. Slater, Joan C. Sonnen, Drake S. Tempest, Michael
B. Yanney.
*Exhibit 27.1 Financial Data Schedule - Fiscal Year 1997
*Exhibit 27.2 Fiancial Data Schedule - Q1, Q2, Q3 - 1997
*Exhibit 27.3 Fiancial Data Schedule - Q1, Q2, Q3 - 1996, and Fiscal Years
1996 and 1995
Exhibit 99.1 Purchase and Sales Agreement by and between Forest Oil
Corporation and the Anschutz Corporation dated April 6, 1998, incorporated
herein by reference to Exhibit 92.1 to Form 8-K for Forest Oil Corporation
dated April 8, 1998 (File No. 0-0597).
- --------------------
* Previously filed
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Forest during the last quarter of
1997.
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SIGNATURES
Pursuant to the requirements of Section 13 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.
FOREST OIL CORPORATION
(Registrant)
Date: June 5, 1998 By: /s/ Daniel L. McNamara
---------------------------
Daniel L. McNamara
Secretary
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 in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
------------ ------- ------
Robert S. Boswell* President and Chief Executive Officer June 5, 1998
(Robert S. Boswell) (Principal Executive Officer)
David H. Keyte* Executive Vice President and Chief June 5, 1998
(David H. Keyte) Financial Officer
(Principal Financial Officer)
Joan C. Sonnen* Controller June 5, 1998
(Joan C. Sonnen) (Principal Accounting Officer)
Philip F. Anschutz* Directors of the Registrant June 5, 1998
(Philip F. Anschutz)
Robert S. Boswell*
(Robert S. Boswell)
William L. Britton*
(William L. Britton)
Cortlandt S. Dietler*
(Cortlandt S. Dietler)
William L. Dorn*
(William L. Dorn)
Jordan L. Haines*
(Jordan L. Haines)
James H. Lee*
(James H. Lee)
J.J. Simmons, III*
(J.J. Simmons, III)
Craig D. Slater*
(Craig D. Slater)
Drake S. Tempest*
(Drake S. Tempest)
Michael B. Yanney*
(Michael B. Yanney)
*By /s/ Daniel L. McNamara June 5, 1998
---------------------------
Daniel L. McNamara
(as attorney-in-fact for
each of the persons
indicated)
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