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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[MARK ONE]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-4300
APACHE CORPORATION
A DELAWARE IRS EMPLOYER
CORPORATION NO. 41-0747868
ONE POST OAK CENTRAL
2000 POST OAK BOULEVARD, SUITE 100
HOUSTON, TEXAS 77056-4400
TELEPHONE NUMBER (713) 296-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.25 Par Value New York Stock Exchange
Chicago Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
9.25% Notes due 2002 New York Stock Exchange
</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 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. / /
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Aggregate market value of the voting stock held by non-affiliates
of registrant as of February 28, 1995 $1,536,184,325
Number of shares of registrant's common stock outstanding
as of February 28, 1995 61,447,373
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of registrant's proxy statement relating to registrant's 1995
annual meeting of shareholders have been incorporated by reference into Part
III hereof.
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TABLE OF CONTENTS
DESCRIPTION
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ITEM PAGE
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PART I
1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . 13
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . 25
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . 26
11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . 26
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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All defined terms under Rule 4-10(a) of Regulation S-X shall have
their statutorily-prescribed meanings when used in this report. Quantities of
natural gas are expressed in this report in terms of thousand cubic feet (Mcf),
million cubic feet (MMcf) or billion cubic feet (Bcf). Oil is quantified in
terms of barrels (bbls), thousands of barrels (Mbbls) and millions of barrels
(MMbbls). Natural gas is compared to oil in terms of barrels of oil equivalent
(boe) or million barrels of oil equivalent (MMboe). Oil and natural gas liquids
are compared with natural gas in terms of million cubic feet equivalent (MMcfe)
and billion cubic feet equivalent (Bcfe). One barrel of oil is the energy
equivalent of six Mcf of natural gas. Daily oil and gas production is expressed
in terms of barrels of oil per day (bopd) and thousands of cubic feet of gas
per day (Mcfd), respectively. Gas sales volumes may be expressed in terms of
one million British thermal units (MMBtu), which is approximately equal to one
Mcf. With respect to information relating to the Company's working interest in
wells or acreage, "net" oil and gas wells or acreage is determined by
multiplying gross wells or acreage by the Company's working interest therein.
Unless otherwise specified, all references to wells and acres are gross.
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PART I
ITEM 1. BUSINESS
GENERAL
Apache Corporation (Apache or the Company), a Delaware corporation formed in
1954, is an independent energy company that explores for, develops, produces,
gathers, processes and markets natural gas and crude oil. Domestically,
Apache's exploration and production interests are spread over 15 states,
focusing on the Gulf of Mexico, the Anadarko Basin of Oklahoma, the Permian
Basin of West Texas and New Mexico, the Gulf Coast and the Rocky Mountain
regions. Internationally, Apache has production interests in Australia and is
currently focusing its international exploration efforts offshore Western
Australia, along the Pacific Rim and in Africa. Apache's common stock has been
listed on the New York Stock Exchange since 1969, and on the Chicago Stock
Exchange since 1960.
Apache holds interests in many of its domestic and international properties
through operating subsidiaries, such as MW Petroleum Corporation (MW), Apache
Energy Resources Corporation (AERC, formerly known as Hadson Energy Resources
Corporation), Apache Energy Limited (AEL, formerly known as Hadson Energy
Limited), Apache International, Inc. and Apache Overseas, Inc. Properties
referred to in this document may be held by those subsidiaries. Apache treats
all operations as one segment of business.
1994 RESULTS
In 1994, Apache had net income of $42.8 million, or $.70 per share, on total
revenues of $545.6 million. Net cash provided by operating activities during
1994 was $335.6 million.
The year represents Apache's seventeenth consecutive year of production
growth and seventh consecutive year of oil and gas reserves growth. Apache's
average daily production was approximately 36 Mbbls of oil and 427 MMcf of
natural gas for the year. The Company's estimated proved reserves at December
31, 1994, were 269 MMboe, of which approximately 63 percent was natural gas.
Apache's growth in reserves during the year reflects the replacement of 197
percent of the Company's 1994 production. Approximately 46 percent of the newly
added reserves were acquired through Apache's ongoing acquisition efforts. The
remainder was attributable to Apache's active drilling and workover program,
which yielded 243 new producing domestic wells out of 299 attempts, and
involved 390 domestic workover and recompletion projects during the year.
At December 31, 1994, Apache had interests in approximately 3,677 net oil
and gas wells and 781,336 net developed acres of oil and gas properties. In
addition, the Company had interests in 603,802 net undeveloped acres under
domestic leases and 4,239,290 net undeveloped acres under international
exploration and production rights.
APACHE'S GROWTH STRATEGY
Apache's growth strategy is to increase production, reserves and cash flow
through a combination of acquisitions, moderate-risk drilling and development
of its inventory of existing projects. The Company also emphasizes reducing
operating costs per unit produced and selling marginal and non-strategic
properties in order to increase its profit margins.
For Apache, property acquisition is only one phase in a continuing cycle of
business growth. Apache's aim is to follow each acquisition cycle with a cycle
of reserve enhancement, property consolidation and cash flow acceleration,
facilitating asset growth and debt reduction. This approach requires
well-planned and carefully executed property development and a commitment to a
selective program of ongoing property dispositions. It motivates Apache to
target acquisitions that have ascertainable additional reserve potential and to
apply an active drilling, workover and recompletion program to realize the
potential of the acquired undeveloped and partially developed properties.
Apache prefers to operate its properties so that it can best influence their
development, and the Company therefore operates properties accounting for over
75 percent of its production.
Pursuing its acquire-and-develop strategy, Apache increased its total proved
reserves more than 240 MMboe, or nearly eight-fold, in the last ten years. In
addition to its acquisition strategy, Apache continues to develop and exploit
its existing inventory of workover, recompletion and other development projects
to increase reserves and production. During 1994, Apache acquired $180 million
of additional properties and replaced over 106 percent of its domestic
production through its drilling, workover and recompletion program.
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Apache's international investments supplement its long-term growth strategy.
Although international exploration is recognized as higher-risk than most of
Apache's domestic activities, it offers potential for greater rewards and
significant reserve additions. Apache directed its international efforts in
1994 towards the exploration and development of properties in Western
Australia, China, Indonesia, Egypt, The Congo and the Ivory Coast of Western
Africa, where it believes that reserve additions may be made through
higher-risk exploration and through improved production practices and recovery
techniques.
RECENT ACQUISITIONS AND DISPOSITIONS
1994 ACQUISITIONS. On December 30, 1994, Apache purchased substantially all
of the U.S. oil and gas properties of Crystal Oil Company (Crystal) for
approximately $95.8 million. The producing properties acquired from Crystal are
located primarily along the Arkansas-Louisiana border and in southern
Louisiana, and daily production at the time of acquisition was approximately 20
MMcf of gas and 2,700 bbls of oil. The acquisition also included approximately
32,000 net undeveloped mineral acres in southern Louisiana. Apache acquired an
average 80-percent working interest in the properties overall, including a
97-percent working interest in two fields that account for approximately 60
percent of the value.
During 1994, Apache also acquired approximately 15 MMboe of proved reserves
through 87 smaller, tactical acquisitions for an aggregate consideration of
$84.2 million. Apache also sold $5.9 million of its non-strategic properties
during 1994.
TRANSACTIONS IN EARLY 1995. On March 1, 1995, Apache purchased certain oil
and gas properties from Texaco Exploration and Production Inc. (Texaco) for an
adjusted purchase price of $571 million, effective January 1, 1995. The
transaction is subject to customary closing and post-closing adjustments, and
includes proved reserves at the effective date of approximately 113 million
barrels of energy equivalent, of which approximately 70 percent is oil. The
most recently reported average current daily production on the acquired
properties is approximately 20 Mbbls of oil and 85 MMcf of gas.
The Texaco properties are highly concentrated, with approximately two-thirds
of the reserves located in 54 fields, and are in producing regions where Apache
has existing operations -- the Permian Basin, the Gulf Coast of Texas and
Louisiana, western Oklahoma, eastern Texas, the Rocky Mountains and the Gulf of
Mexico. Apache will operate approximately two-thirds of the production and
acquire an average working interest of 70 percent in the operated properties.
The total acquisition includes approximately 500,000 net mineral acres, as
well as a substantial quantity of seismic data.
On December 21, 1994, Apache entered into a merger agreement with DEKALB
Energy Company (DEKALB), under which the shareholders of DEKALB will receive,
in the aggregate, between 8.0 and 8.9 million shares of Apache common stock
and DEKALB will become a wholly-owned subsidiary of Apache. The transaction
will be accounted for using the pooling of interests method of accounting.
Apache and DEKALB estimate that the cost required to complete the transaction
will total between $8 and $10 million.
DEKALB's reported oil and gas reserves, located almost entirely in
Canada, were estimated to be approximately 364 Bcfe, and included approximately
300 Bcf of natural gas and 11 MMbbls of hydrocarbon liquids. DEKALB also has
approximately 150,000 net undeveloped mineral acres, and has ownership
interests in 14 gas processing plants, six of which it operates. Upon
completion, the DEKALB merger will provide Apache with a substantial presence
in North America's largest natural gas basin, together with the infrastructure,
including skilled professionals, to conduct Canadian operations, and properties
with significant further development potential.
The merger has been approved by the board of directors of Apache and DEKALB,
and holders of a majority of DEKALB's voting stock have agreed to vote their
shares to approve the merger. Consummation of the DEKALB merger is subject to
the satisfaction of certain conditions including the receipt of necessary
regulatory approvals and certain other consents, and is currently expected to
be completed in the second quarter of 1995.
In early 1995, Apache announced plans to accelerate the disposition of
approximately $200 million of lower margin and non-strategic properties,
including sales of a substantial portion of its Rocky Mountain properties and
non-strategic assets in its other regions.
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1993 ACQUISITIONS. In 1993, Apache entered into two agreements to purchase a
combined 104 Bcfe of proved reserves in the Gulf of Mexico from Hall-Houston
Oil Company (Hall-Houston) for an aggregate consideration of $113.7 million. In
June 1993, Apache closed the first of the two transactions, paying $29.3
million for Hall-Houston's interest in Mustang Island Blocks 787 and 805.
Apache acquired substantially all of Hall-Houston's other producing properties
in the Gulf of Mexico for an additional $84.4 million in the second transaction
which closed on August 31, 1993. With the Hall-Houston acquisitions, Apache
more than doubled its existing interest in offshore gas production, acquiring
interests in 63 producing fields and 12 fields under development or awaiting
pipeline connections.
Apache acquired Hadson Energy Resources Corporation (now AERC) through a
series of private transactions and a subsequent merger on November 12, 1993.
The aggregate consideration paid for the acquisition was approximately $98
million, including the issuance of 307,977 shares of Apache common stock.
Apache acquired AERC and its subsidiaries subject to approximately $67.6
million of net liabilities at the time of the merger. Through the acquisition
of AERC, Apache added proved reserves of 66 Bcfe domestically and 64 Bcfe in
Australia. AERC's reserves fit well with Apache's existing interests in
Oklahoma and the Carnarvon Basin offshore Western Australia. Domestically,
nearly two-thirds of the value of AERC's properties are concentrated in
Oklahoma, where Apache was already the largest independent gas producer. AERC's
operations in Western Australia, including the Harriet complex of oil and
natural gas fields, provide Apache with the reserves and infrastructure
required for the commercial development of certain other Australian interests.
During 1993, Apache also acquired 11 MMboe of proved reserves through 71
smaller, tactical acquisitions for an aggregate consideration of $76.5
million. Apache also sold $3.3 million of its non- strategic properties during
1993.
EXPLORATION AND PRODUCTION
The Company's domestic exploration and production activities are divided
into five operating regions, the Gulf of Mexico, Midcontinent, Permian Basin,
Gulf Coast and Rocky Mountain regions. Approximately 96 percent of the
Company's proved reserves are located in these five domestic operating regions.
Internationally, the Company conducts its Australian exploration and production
and Indonesian exploration through its Australian region. Apache's other
international interests are directed by the Company and its subsidiaries
through the Company's principal offices located in Houston, Texas.
GULF OF MEXICO. As a result of Apache's acquisitions of Matagorda Island
Blocks 681 and 682 in late 1992 and the Hall-Houston acquisition in 1993, the
Gulf of Mexico became Apache's largest producing region. Due to the growth
resulting from these acquisitions, Apache divided its former Gulf Coast region
into two regions: Gulf of Mexico and Gulf Coast. The Gulf of Mexico region
encompasses all of Apache's interests in properties offshore Texas, Louisiana
and Alabama. By year-end 1994, Apache increased its production in the Gulf of
Mexico to approximately 203 MMcf of gas per day.
At December 31, 1994, the Gulf of Mexico region encompassed 282,302 net
acres, located in both state and federal waters, and accounted for 48.1 MMboe,
or 18 percent, of the Company's year-end 1994 reserves. Apache participated in
28 wells which were drilled in the region during the year, 21 of which were
completed as producers. The Company performed 36 workover and recompletion
operations in the region during 1994.
MIDCONTINENT. Apache's Midcontinent region is known for its sizable position
in the Anadarko Basin. Apache has drilled and operated in the Anadarko Basin
for over three decades, developing an extensive database of geologic
information and a substantial acreage position. In 1993, Apache enhanced its
position through the acquisition of AERC with its significant acreage and
producing interests in the Anadarko Basin.
At December 31, 1994, Apache held an interest in 271,770 net acres in the
region, which accounted for approximately 75.7 MMboe, or 28 percent, of
Apache's total proved reserves. Apache participated in 103 wells which were
drilled in the Midcontinent region during the year, 90 of which were completed
as producing wells. The Company performed 36 workover and recompletion
operations in the region during 1994.
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PERMIAN BASIN. The Permian Basin of West Texas and New Mexico remained an
important region to Apache in 1994, generating 17 percent of the Company's
production revenues for the year. As of December 31, 1994, Apache held an
interest in 103,247 net acres in the region, which accounted for 57.6 MMboe, or
21 percent, of the Company's total proved reserves. Apache's operations in the
Permian Basin focused primarily on workovers and recompletions, which totaled
51 for the year. Compared with 1993, Apache nearly doubled its drilling
activity in the region during 1994, with 32 of the 38 wells drilled in the
region completed as producers.
GULF COAST. The Gulf Coast region encompasses the Texas and Louisiana
coasts, central Texas, Mississippi and Alabama. In 1994, the region was one of
the most prominent in the Company in the number of workover and recompletion
projects completed and the number of wells drilled. Apache participated in 85
wells drilled in the Gulf Coast region during the year, 74 of which were
completed as producers, including 30 Austin Chalk wells in central Texas, all
of which were productive. The Company performed 173 workover and recompletion
operations during 1994 in the Gulf Coast region. As of December 31, 1994, the
region encompassed approximately 194,107 net acres, and accounted for 43 MMboe,
or 16 percent, of the Company's year-end 1994 total proved reserves.
ROCKY MOUNTAIN. In the Rocky Mountain region, Apache emphasized oil
enhancement opportunities during 1994, conducting 94 development projects. At
year-end, Apache held an interest in 481,162 net acres in the region, which
accounted for approximately 34.2 MMboe, or 13 percent, of the Company's total
proved reserves. Apache participated in 45 wells in the region during the year,
26 of which were productive. Apache has announced the Company's intention to
sell in 1995 substantially all of its Rocky Mountain properties in connection
with its property rationalization program, which emphasizes the disposition of
lower margin properties. The Company currently intends to close its Rocky
Mountain regional office, located in Denver, Colorado, and redeploy those
employees to provide support for its Gulf Coast and Permian Basin operations
and the Company's operations in Canada following the DEKALB merger.
AUSTRALIA. The state of Western Australia has become an important region for
Apache following the completion of the AERC acquisition. In the fourth quarter
of 1993, Apache consolidated the operation of its Australian properties with
AERC's Australian subsidiary, AEL, headquartered in Perth, Western Australia.
During 1994, AEL participated in two successful horizontal development wells in
the Harriet field offshore Western Australia and also participated in nine
exploratory wells. Average oil production in the region increased by 70 percent
from 1993 to approximately 3,200 bbls per day for 1994, primarily as a result
of the addition of the AERC properties in the second half of 1993.
As of December 31, 1994, Apache held 3,373,150 net developed and undeveloped
acres in Western Australia. Australian reserves accounted for 10.8 MMboe, or
four percent, of the Company's total proved reserves at year end. Through AEL
and its subsidiaries, Apache also owns a 22.5-percent interest in and operates
the Harriet Gas Gathering Project, a gas processing and compression facility
with a throughput capacity of 80 MMcfd, and a 60-mile, 12-inch offshore
pipeline with a throughput capacity of 175 MMcfd. The facilities are located in
close proximity to AEL's producing properties offshore in the Carnarvon Basin.
During 1994, AEL produced 2.9 bcf of natural gas. Through AEL, Apache acts as
operator for most of its properties in Western Australia.
In early 1993, Apache took over as operator and increased its interest in
the Java Sea IV block offshore Indonesia and the Padang Panjang block on the
island of Sumatra, Indonesia. In early 1994, operations for Indonesia were
consolidated under the direction of AEL out of its offices in Perth, Western
Australia. In 1994, two exploratory wells were drilled in Indonesia, one of
which was a discovery.
OTHER INTERNATIONAL OPERATIONS. Outside of Australia, Apache's international
interests currently consist only of exploration interests. In 1994, Apache
Overseas, Inc., Apache International, Inc. and their subsidiaries (excluding
Australia and Indonesia as referred to above) drilled three gross exploratory
wells - one each in Egypt, China and The Congo, resulting in two discoveries.
One discovery well was in Zhao Dong block in the Bohai Bay, offshore the
People's Republic of China, where Apache has a 33-percent interest in an area
containing approximately 48,677 undeveloped acres (16,225 acres net to Apache).
The well tested at a rate of over 2,000 bbls per day and was confirmed by an
appraisal well which tested at over 3,500 bbls per day. Future plans call for
at least one additional appraisal well which, if successful, would lead to
field development of the block.
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Apache holds a 25-percent interest in the two-million acre Qarun block in
the western desert of Egypt which is operated by Phoenix Resource Companies of
Qarun. In 1994, Apache participated in an apparent discovery well in the Qarun
block which was plugged and abandoned when well bore problems developed. Plans
call for an appraisal well on the same structure. In February 1995, Apache and
its partners announced the discovery of a second field in the Qarun block
approximately two kilometers from its first apparent discovery. The second well
tested at rates up to 1,370 bopd.
In the Congo, an Apache subsidiary participated in a discovery well that
tested at a rate over 2,000 bbls per day. Through its subsidiary, Apache holds
a 20-percent working interest in the well. An appraisal well and an additional
exploratory well are planned for 1995.
OIL AND NATURAL GAS MARKETING
During 1994, Apache sold approximately 89 percent of its domestic natural
gas on the spot market through Natural Gas Clearinghouse (NGC) or through
market responsive contracts with other parties; the remaining 11 percent was
sold into long-term, premium-priced contracts. Sales to NGC accounted for 40
percent of the Company's oil and gas revenues in 1994. Apache and NGC have
agreed that NGC will market substantially all of Apache's domestic spot market
gas production under terms of their agreement which is effective through
September 1995. The Company believes that if the NGC contract were terminated,
it would not have a material adverse effect on the Company due to the existence
of alternative marketing arrangements and purchasers.
In December 1994, the Company signed a long-term gas contract under
which Apache received an advance payment of $67.4 million. Apache will supply
the purchaser with approximately 43 Bcf of gas over six years, with volumes
averaging 20 MMcfd. Initial deliveries began in January 1995. Apache also
signed a long-term gas supply agreement with a cogeneration company in August
1994, under which Apache will supply a minimum of 51.1 Bcf over ten years for
use in electric power generation from its cogeneration facility located in
Northeast Texas. Deliveries of approximately 20 MMcfd are scheduled to begin in
early 1997.
Apache assumed its own domestic crude oil marketing operations in 1992. Most
of Apache's crude oil production is sold through lease-level marketing to
refiners, traders and transporters, generally under 30-day contracts that
renew automatically until canceled.
In Australia, approximately 22 Bcf of AEL's proved gas reserves are
dedicated to the Gas Corporation of Western Australia, a corporation owned by
the government of Western Australia, doing business as AlintaGas (formerly
SECWA), under a long-term contract with a remaining period of 7 1/2 years. The
agreement contains take-or-pay provisions that require AlintaGas to purchase a
minimum of 35 MMcfd (approximately eight MMcfd net to AEL) through the
remainder of the contract term at a stated minimum price that escalates with
the Western Australia consumer price index. Payments received under this
contract are in Australian dollars. If for any reason the AlintaGas contract was
canceled, AEL might not be able to find other markets for its gas produced from
the Harriet field.
AEL markets all oil and natural gas liquids produced from its interests in
the Harriet field through a contract with Marubeni International Petroleum
(Singapore) Pte Limited (Marubeni), which was extended in 1994. Pricing under
the contract in 1994 represented a fixed premium to the average of the quoted
spot market prices of Tapis and Dubai crude oil, with payment made in U.S.
dollars. Production sold under this contract in 1994 realized an average price
of $18.23 per barrel (exclusive of the impact of hedging activities). In 1995,
pricing under this contract will represent a fixed premium of the quoted spot
market price of Tapis crude oil. The Company believes that if this contract
were terminated, it would not have a material adverse effect on the Company due
to the demand for Australian crude oil and the existence of alternative
purchasers.
OIL AND NATURAL GAS PRICES
Natural gas prices remained volatile in 1994 with Apache's average gas
prices during the year ranging from $1.48 per Mcf in October to $2.15 per Mcf
in February. Fluctuations are largely due to natural gas supply and demand
perceptions. Apache's average realized gas price of $1.81 per Mcf for 1994
declined 11 percent from the prior-year average of $2.03 per Mcf. Apache's 1993
average realized natural gas price increased 15 percent above the 1992
average of $1.76 per Mcf.
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Due to the escalating price contract with AlintaGas, AEL's natural gas
production in Western Australia is not subject to the same degree of price
volatility as is its domestic gas production, however, natural gas sales under
the AlintaGas contract represented only about two percent of the Company's total
natural gas sales at year end. In 1994, the price received for production under
the contract averaged $1.94 per Mcf. Total Australian gas sales in 1994,
including sales under the AlintaGas contract and spot sales to other parties,
averaged $1.90 per Mcf, six percent above the 1993 average of $1.79 per Mcf.
Oil prices remained vulnerable due to unpredictable political and economic
forces during 1994, but partially recovered from the five-year low that Apache
experienced in the fourth quarter of 1993. Management believes that, absent a
comprehensive U.S. energy policy, oil prices will continue to fluctuate in
response to changes in the policies of the Organization of Petroleum Exporting
Countries (OPEC), events in the Middle East and other factors associated with
the world political environment. As a result of the many uncertainties
associated with levels of production maintained by OPEC and other oil producing
countries, the availabilities of world-wide energy supplies and the competitive
relationships and consumer perceptions of various energy sources, management is
unable to predict what changes will occur in crude oil and natural gas prices.
Apache's worldwide crude oil price averaged $15.66 per barrel in 1994, seven
percent lower than the average price of $16.78 per barrel in 1993, and 14
percent lower than the average price of $18.16 per barrel in 1992. Apache's
average crude oil price for its Australian production, including production
sold under the Marubeni contract, was $17.95 per barrel in 1994, seven percent
lower than the average price in 1993.
Terms of the acquisition of MW from Amoco Production Company (Amoco)
included an oil and gas price sharing provision under which certain price
sharing payments may be payable to Amoco. Pursuant to this provision, to the
extent that oil prices exceed specified reference prices that rise to $33.12
per barrel over the eight-year period ending June 30, 1999, and to the extent
that gas prices exceed specified reference prices that rise to $2.68 per Mcf
over the five-year period ending June 30, 1996, Apache will share the excess
price realization with Amoco on a portion of the MW production.
From time to time, Apache buys or sells contracts to hedge a limited portion
of its future oil and gas production against exposure to spot market price
changes. (See Note 8 to the Company's financial statements under Item 8 below.)
The Company's business has been and will continue to be affected by future
worldwide changes in oil and gas prices and the relationship between the prices
of oil and gas. No assurance can be given as to the trend in, or level of,
future oil and gas prices.
RESERVE VALUE CEILING TEST
Under the Securities and Exchange Commission's full cost accounting rules,
the Company reviews the carrying value of its oil and gas properties each
quarter on a country-by-country basis. Under full cost accounting rules,
capitalized costs of oil and gas properties may not exceed the present value of
estimated future net revenues from proved reserves, discounted at 10 percent,
plus the lower of cost or fair market value of unproved properties, as adjusted
for related tax effects and deferred tax reserves. Application of this rule
generally requires pricing future production at the unescalated oil and gas
prices in effect at the end of each fiscal quarter and requires a write-down if
the "ceiling" is exceeded, even if prices declined for only a short period of
time. If a write-down is required, the one-time charge to earnings would not
impact cash flow from operating activities. The Company had no write-downs due
to ceiling test limitations during 1994, but a further weakening of oil and gas
prices from year-end levels would likely result in a write-down of oil and gas
properties during 1995.
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
The Company's exploration, production and marketing operations are regulated
extensively at the federal, state and local levels, as well as by other
countries in which the Company does business. Oil and gas exploration,
development and production activities are subject to various laws and
regulations governing a wide variety of matters. For example,
hydrocarbon-producing states have statutes or regulations addressing
conservation practices and the protection of correlative rights, and such
regulations may affect Apache's operations and limit the quantity of
hydrocarbons Apache may produce and sell. Other regulated matters include
marketing, pricing, transportation, and valuation of royalty payments.
6
<PAGE> 9
At the federal level, the Federal Energy Regulatory Commission (FERC)
regulates interstate transportation of natural gas under the Natural Gas Act
and regulates the maximum selling prices of certain categories of gas sold in
"first sales" in interstate and intrastate commerce under the Natural Gas
Policy Act (NGPA). Effective January 1, 1993, the Natural Gas Wellhead
Decontrol Act deregulated natural gas prices for all "first sales" of natural
gas, which includes all sales by Apache of its own production. As a result, all
sales of the Company's domestically produced natural gas may be sold at market
prices, unless otherwise committed by contract.
Apache's gas sales are affected by regulation of intrastate and interstate
gas transportation. In an attempt to promote competition, the FERC has issued a
series of orders which have altered significantly the marketing and
transportation of natural gas. The effect of these orders has been to enable
the Company to market its natural gas production to purchasers other than the
interstate pipelines located in the vicinity of its producing properties. The
Company believes that these changes have generally improved the Company's
access to transportation and have enhanced the marketability of its natural gas
production. To date, Apache has not experienced any material adverse effect on
gas marketing as a result of these FERC orders; however, the Company cannot
predict what new regulations may be adopted by the FERC and other regulatory
authorities, or what effect subsequent regulations may have on its future gas
marketing.
ENVIRONMENTAL MATTERS
Apache, as an owner or lessee and operator of oil and gas properties, is
subject to various federal, state, local and foreign country laws and
regulations relating to discharge of materials into, and protection of, the
environment. These laws and regulations may, among other things, impose
liability on the lessee under an oil and gas lease for the cost of pollution
clean-up resulting from operations, subject the lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas and impose restrictions on the injection of liquids into subsurface
aquifers that may contaminate groundwater.
Apache maintains insurance coverage which it believes are customary in the
industry, although it is not fully insured against all environmental risks. The
Company is not aware of any environmental claims existing as of December 31,
1994, which would have a material impact upon the Company's financial position
or results of operations.
Apache has made and will continue to make expenditures in its efforts to
comply with these requirements, which it believes are necessary business costs
in the oil and gas industry. Apache has established policies for continuing
compliance with environmental laws and regulations, including regulations
applicable to its operations in Australia and other countries. Apache has also
established operational procedures designed to limit the environmental impact
of its field facilities. The costs incurred by these policies and procedures
are inextricably connected to normal operating expenses such that the Company
is unable to separate the expenses related to environmental matters; however,
the Company does not believe any such additional expenses are material to its
financial position or results of operations.
Although environmental requirements do have a substantial impact upon the
energy industry, generally these requirements do not appear to affect Apache
any differently, or to any greater or lesser extent, than other companies in
the industry. Apache does not believe that compliance with federal, state,
local or foreign country provisions regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment,
will have a material adverse effect upon the capital expenditures, earnings or
competitive position of the Company or its subsidiaries, but there is no
assurance that changes in or additions to laws or regulations regarding the
protection of the environment will not have such an impact.
COMPETITION
The oil and gas industry is highly competitive. Because oil and gas are
fungible commodities, the principal form of competition with respect to product
sales is price competition. Apache strives to maintain the lowest finding and
production costs possible to maximize profits.
As an independent oil and gas company, Apache frequently competes for
reserve acquisitions, exploration leases, licenses, concessions and marketing
agreements against companies with substantially larger financial and other
resources than Apache possesses. Moreover, many competitors have established
strategic long-term positions and maintain strong governmental relationships in
countries in which the Company may seek new entry. Apache expects this high
degree of competition to continue.
7
<PAGE> 10
EMPLOYEES
On December 31, 1994, Apache had 1,086 full-time employees.
OFFICES
Apache's principal executive offices are located at One Post Oak Central,
2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. During 1994, the
Company maintained regional exploration and production offices in Tulsa,
Oklahoma; Houston, Texas; Denver, Colorado; and Perth, Western Australia. In
1995, the Company intends to close its Denver, Colorado office and open a new
office in Calgary, Alberta to oversee exploration and production activities in
Canada following the DEKALB merger.
8
<PAGE> 11
ITEM 2. PROPERTIES
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
ACREAGE
The developed and undeveloped acreage, including both domestic leases and
international production and exploration rights that Apache held as of December
31, 1994, are as follows:
<TABLE>
<CAPTION>
UNDEVELOPED ACREAGE DEVELOPED ACREAGE
----------------------- --------------------
GROSS NET GROSS NET
ACRES ACRES ACRES ACRES
---------- -------- -------- -------
<S> <C> <C> <C> <C>
GULF OF MEXICO
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 54,749 13,432
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . 113,933 51,755 240,371 99,056
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 96,543 58,805 130,889 59,254
--------- ------- --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 210,476 110,560 426,009 171,742
--------- ------- --------- -------
MIDCONTINENT
Arkansas . . . . . . . . . . . . . . . . . . . . . . . . 833 637 3,900 1,824
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . 40 40 -- --
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . 11,905 6,427 82,360 37,668
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . 40,657 15,555 445,935 166,976
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 4,939 3,679 74,382 38,964
--------- ------- --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 58,374 26,338 606,577 245,432
--------- ------- --------- -------
PERMIAN BASIN
New Mexico . . . . . . . . . . . . . . . . . . . . . . . 4,801 2,026 62,613 19,036
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 73,548 37,206 67,650 44,979
--------- ------- --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 78,349 39,232 130,263 64,015
--------- ------- --------- -------
GULF COAST
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . 1,153 678 483 204
Florida . . . . . . . . . . . . . . . . . . . . . . . . . 162 14 -- --
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . 5,686 4,678 67,090 26,961
Mississippi . . . . . . . . . . . . . . . . . . . . . . . 2,042 781 12,944 3,686
New Mexico . . . . . . . . . . . . . . . . . . . . . . . -- -- 7,698 3,676
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 48,620 27,103 181,314 126,326
--------- ------- --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 57,663 33,254 269,529 160,853
--------- ------- --------- -------
ROCKY MOUNTAIN
Colorado . . . . . . . . . . . . . . . . . . . . . . . . 57,845 34,035 3,001 2,412
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . 6,190 2,047 160 --
Michigan . . . . . . . . . . . . . . . . . . . . . . . . -- -- 40 6
Montana . . . . . . . . . . . . . . . . . . . . . . . . . 27,862 10,177 10,952 7,444
Nebraska . . . . . . . . . . . . . . . . . . . . . . . . 658 329 80 10
Nevada . . . . . . . . . . . . . . . . . . . . . . . . . 149,493 65,674 1,880 881
New Mexico . . . . . . . . . . . . . . . . . . . . . . . 10,975 10,421 39,290 27,999
North Dakota . . . . . . . . . . . . . . . . . . . . . . 48,950 20,214 43,371 23,318
South Dakota . . . . . . . . . . . . . . . . . . . . . . 720 146 3,640 2,835
Utah . . . . . . . . . . . . . . . . . . . . . . . . . . 200 200 1,680 1,034
Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . 461,137 251,175 35,516 20,805
--------- ------- --------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 764,030 394,418 139,610 86,744
--------- ------- --------- -------
TOTAL DOMESTIC . . . . . . . . . . . . . . . . . . . . . . . . 1,168,892 603,802 1,571,988 728,786
--------- ------- --------- -------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
UNDEVELOPED ACREAGE DEVELOPED ACREAGE
----------------------- ----------------------
GROSS NET GROSS NET
ACRES ACRES ACRES ACRES
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
INTERNATIONAL
Australia . . . . . . . . . . . . . . . . . . . . . . . 6,833,430 3,320,600 280,460 52,550
China . . . . . . . . . . . . . . . . . . . . . . . . . 48,677 16,225 -- --
The Congo . . . . . . . . . . . . . . . . . . . . . . . 236,228 47,245 -- --
Egypt . . . . . . . . . . . . . . . . . . . . . . . . . 1,927,380 481,845 -- --
Indonesia . . . . . . . . . . . . . . . . . . . . . . . 722,290 280,890 -- --
Ivory Coast . . . . . . . . . . . . . . . . . . . . . . 269,338 92,485 -- --
---------- --------- ---------- -------
TOTAL INTERNATIONAL . . . . . . . . . . . . . . . . . . 10,037,343 4,239,290 280,460 52,550
---------- --------- ---------- -------
TOTAL COMPANY . . . . . . . . . . . . . . . . . . . . . 11,206,235 4,843,092 1, 852,448 781,336
========== ========= ========== =======
</TABLE>
PRODUCTIVE OIL AND GAS WELLS
The number of productive oil and gas wells, operated and non-operated, in
which Apache had an interest as of December 31, 1994, is set forth below.
<TABLE>
<CAPTION>
GAS OIL
------------------- -----------------
GROSS NET GROSS NET
----- --- ----- ---
<S> <C> <C> <C> <C>
Gulf of Mexico . . . . . . . . . . . . . . . . . . . . . . 440 122 40 4
Midcontinent . . . . . . . . . . . . . . . . . . . . . . . 1,580 515 344 139
Permian Basin . . . . . . . . . . . . . . . . . . . . . . . 452 100 2,195 813
Gulf Coast . . . . . . . . . . . . . . . . . . . . . . . . 568 382 1,441 1,034
Rocky Mountain . . . . . . . . . . . . . . . . . . . . . . 232 142 772 420
International . . . . . . . . . . . . . . . . . . . . . . . 3 1 27 5
----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,275 1,262 4,819 2,415
===== ===== ===== =====
</TABLE>
GROSS WELLS DRILLED
The following table sets forth the number of gross exploratory and gross
development wells drilled in the last three fiscal years in which the Company
participated. The number of wells drilled refers to the number of wells
commenced at any time during the respective fiscal year. "Productive" wells are
either producing wells or wells capable of commercial production. At December
31, 1994, the Company was participating in 29 domestic wells and one
international well in the process of drilling.
<TABLE>
<CAPTION>
EXPLORATORY DEVELOPMENTAL
------------------------ ----------------------
PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
---------- --- ----- ---------- --- -----
<S> <C> <C> <C> <C> <C> <C>
1994
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 20 17 37 223 39 262
International . . . . . . . . . . . . . . . . . . . . . . . 7 8 15 2 -- 2
--- --- --- --- --- ---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 27 25 52 225 39 264
=== === === === === ===
1993
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 12 19 31 198 37 235
International . . . . . . . . . . . . . . . . . . . . . . . 3 5 8 -- -- --
--- --- --- --- --- ---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 24 39 198 37 235
=== === === === === ===
1992
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 10 32 42 145 16 161
International . . . . . . . . . . . . . . . . . . . . . . . -- 6 6 -- -- --
--- --- --- --- --- ---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 38 48 145 16 161
=== === === === === ===
</TABLE>
10
<PAGE> 13
NET WELLS DRILLED
The following table sets forth, for each of the last three fiscal years, the
number of net exploratory and net developmental wells drilled by Apache.
<TABLE>
<CAPTION>
EXPLORATORY DEVELOPMENTAL
----------------------- -----------------------
PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
---------- --- ----- ---------- --- -----
<S> <C> <C> <C> <C> <C> <C>
1994
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 10.7 10.4 21.1 100.1 27.0 127.1
International . . . . . . . . . . . . . . . . . . . . . . . 2.3 2.4 4.7 .4 -- .4
----- ----- ----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 13.0 12.8 25.8 100.5 27.0 127.5
===== ===== ===== ===== ===== =====
1993
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 10.4 14.6 90.4 22.2 112.6
International . . . . . . . . . . . . . . . . . . . . . . . 0.6 1.3 1.9 -- -- --
----- ----- ----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 11.7 16.5 90.4 22.2 112.6
===== ===== ===== ===== ===== =====
1992
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 16.6 19.8 60.1 8.0 68.1
International . . . . . . . . . . . . . . . . . . . . . . . -- 1.1 1.1 -- -- --
----- ----- ----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 17.7 20.9 60.1 8.0 68.1
===== ===== ===== ===== ===== =====
</TABLE>
Production and Pricing Data
The following table describes, for each of the last three fiscal years,
oil, natural gas liquids (NGLs) and gas production for the Company, average
production costs and average sales prices.
<TABLE>
<CAPTION>
Production Average Sales Price
----------------------------- Average -----------------------------------
Year Ended Oil NGLs Gas Production Oil NGLs Gas
December 31, (Mbbls) (Mbbls) (MMcf) Cost per boe (per bbl) (per bbl) (per Mcf)
- ------------ ------- ------- ------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 . . . . . . . . . . . . . . 13,084 493 155,905 $3.48 $15.66 $12.39 $1.81
1993 . . . . . . . . . . . . . . 12,294 486 110,622 4.10 16.78 12.35 2.03
1992 . . . . . . . . . . . . . . 12,056 533 95,982 4.38 18.16 12.34 1.76
</TABLE>
ESTIMATED RESERVES AND RESERVE VALUE INFORMATION
The following information relating to estimated reserve quantities,
reserve values and discounted future net revenues is derived from, and
qualified in its entirety by reference to, the more complete reserve and
revenue information and assumptions included in the Company's financial
statements under Item 8 below. The Company's estimates of proved reserve
quantities of its domestic properties and certain international properties have
been subject to review by Ryder Scott Company Petroleum Engineers. There are
numerous uncertainties inherent in estimating quantities of proved reserves and
projecting future rates of production and timing of development expenditures.
The following reserve information represents estimates only and should not be
construed as being exact. See Supplemental Oil and Gas Disclosures under Item 8
below.
11
<PAGE> 14
The following table sets forth the Company's estimated proved developed
and undeveloped reserves as of December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Oil, NGLs and
Natural Gas Condensate
1994 (Bcf) (MMbbls)
---- ----------- --------------
<S> <C> <C>
Developed . . . . . . . . . . . . . . . . . . . . . . . . 910.3 89.4
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . 106.0 10.5
------- ----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,016.3 99.9
======= ====
1993
----
Developed . . . . . . . . . . . . . . . . . . . . . . . . 720.7 79.4
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . 127.5 10.3
------ ----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 848.2 89.7
====== ====
1992
----
Developed . . . . . . . . . . . . . . . . . . . . . . . . . 585.4 73.1
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . 57.9 7.6
------ ----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 643.3 80.7
====== ====
</TABLE>
The following table sets forth the estimated future value of all proved
reserves of the Company, and proved developed reserves of the Company, as of
December 31, 1994, 1993 and 1992. Future reserve values are based on year-end
prices except in those instances where the sale of gas and oil is covered by
contract terms providing for determinable escalations. Operating costs,
production and ad valorem taxes, and future development costs are based on
current costs with no escalations.
<TABLE>
<CAPTION>
Present Value of Estimated
Future Net Revenues
Estimated Future Before Income Taxes
Net Revenues (Discounted at 10 Percent)
------------------------ ------------------------------
Proved Proved
Proved Developed Proved Developed
--------- ----------- ---------- --------------
(In thousands)
<S> <C> <C> <C> <C>
December 31,
1994 . . . . . . . . . . . . . . . . . . $2,201,585 $2,016,523 $1,396,844 $ 1,311,591
1993 . . . . . . . . . . . . . . . . . . 2,074,505 1,783,187 1,359,117 1,189,268
1992 . . . . . . . . . . . . . . . . . . 1,747,113 1,581,853 1,062,558 987,497
</TABLE>
At December 31, 1994, estimated future net revenues expected to be
received from all proved reserves of the Company, and from proved developed
reserves of the Company, were as follows:
<TABLE>
<CAPTION>
Proved
Proved Developed
---------- -----------
(In thousands)
<S> <C> <C>
December 31,
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 325,137 $ 354,516
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296,704 277,788
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,404 218,053
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . 1,335,340 1,166,166
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,201,585 $2,016,523
========== ==========
</TABLE>
The Company believes that no major discovery or other favorable or adverse
event has occurred since December 31, 1994, which would cause a significant
change in the estimated proved reserves reported herein. The estimates above
are based on year-end pricing in accordance with the Securities and Exchange
Commission (SEC) guidelines and do not reflect current prices. Since January 1,
1994, no oil or gas reserve information has been filed with, or included in any
report to, any U.S. authority or agency other than the SEC and the Energy
Information Administration (EIA). The basis of reporting reserves to the EIA
for the Company's reserves is identical to that set forth in the foregoing
table.
12
<PAGE> 15
TITLE TO INTERESTS
The Company believes that its title to the various interests set forth
above is satisfactory and consistent with the standards generally accepted in
the oil and gas industry, subject only to immaterial exceptions which do not
detract substantially from the value of the interests or materially interfere
with their use in the Company's operations. The interests owned by the Company
may be subject to one or more royalty, overriding royalty and other outstanding
interests customary in the industry. The interests may additionally be subject
to burdens such as net profits interests, liens incident to operating
agreements and current taxes, development obligations under oil and gas leases
and other encumbrances, easements and restrictions, none of which detract
substantially from the value of the interests or materially interfere with
their use in the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
The information set forth under the caption "Litigation" in Note 9 to the
Company's financial statements under Item 8 below is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders during the fourth
quarter of 1994.
13
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Apache's common stock, par value $1.25 per share, is traded on the New
York Stock Exchange and the Chicago Stock Exchange under the symbol APA. The
table below provides certain information regarding Apache common stock for 1994
and 1993. Prices shown are from the New York Stock Exchange Composite
Transactions Reporting System.
<TABLE>
<CAPTION>
1994 1993
---------------------------- -----------------------------
PRICE RANGE PRICE RANGE
-------------- DIVIDENDS -------------- DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . . . . . . . . . . $26 7/8 $22 1/2 $ 0.07 $26 1/4 $17 5/8 $ 0.07
Second Quarter . . . . . . . . . . . . . 29 22 1/4 0.07 30 1/4 24 3/8 0.07
Third Quarter . . . . . . . . . . . . . . 29 1/4 23 0.07 33 1/2 26 3/8 0.07
Fourth Quarter . . . . . . . . . . . . . 28 7/8 23 5/8 0.07 31 1/4 20 3/8 0.07
</TABLE>
The closing price per share of Apache common stock, as reported on the New
York Stock Exchange Composite Transactions Reporting System for February 28,
1995, was $25.00. At December 31, 1994, there were 61,440,004 shares of Apache
common stock outstanding, held by approximately 10,400 shareholders of record
and 30,000 beneficial owners.
Each share of Apache common stock also represents one common stock
purchase right which, under certain circumstances, would entitle the holder to
acquire additional shares of common stock. See Note 6 to the Company's
financial statements under Item 8 below.
The Company has paid cash dividends on its common stock for 112
consecutive quarters and intends to continue the payment of dividends at
current levels, although future dividend payments will depend upon the
Company's level of earnings, financial requirements and other relevant factors.
14
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company and
its consolidated subsidiaries for each of the years in the five-year period
ended December 31, 1994, which information has been derived from the Company's
audited financial statements. This information should be read in connection
with and is qualified in its entirety by the more detailed information and
financial statements under Item 8 below.
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
---------------------------------------------------------------------
1994 1993* 1992 1991** 1990
----------- ----------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues $ 545,621 $ 466,638 $ 454,300 $ 356,930 $ 273,410
Net income 42,837 37,334 47,776 34,615 40,297
Net income per common share .70 .70 1.02 .76 .90
Cash dividends per common share .28 .28 .28 .28 .28
BALANCE SHEET DATA
Working capital (deficit) $ (12,891) $ (62,450) $ (43,775) $ (55,023) $ 15,678
Total assets 1,879,022 1,592,407 1,218,704 1,209,291 829,634
Long-term debt 657,486 453,009 454,373 490,988 194,781
Shareholders' equity 816,180 785,854 475,209 439,941 386,780
Common shares outstanding at
end of year 61,440 61,085 46,936 46,855 44,694
</TABLE>
*Includes financial data for AERC after June 30, 1993, and for Hall-Houston
after July 31, 1993. See Note 1 to the Company's financial statements under
Item 8 below.
**Includes financial data for MW after June 30, 1991.
Reference is made to Item 7, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," for a discussion of significant
acquisitions and to the Summary of Significant Accounting Policies and Note 1
to the Company's financial statements under Item 8 below.
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Apache's financial performance during 1994 is best understood in light
of the following factors:
PRODUCTION INCREASES; COMMODITY PRICES -- The current year's
performance was affected by substantial increases in natural gas production
partially offset by lower average oil and natural gas prices for the year.
Apache's natural gas production increased by 41 percent over the prior year,
attributable principally to developmental drilling, recompletions and
acquisitions completed in 1993. These gains were partially offset as Apache's
average realized natural gas price declined 11 percent from the prior year.
Apache's oil production increased by six percent over the prior year. Although
oil prices improved from the five-year low experienced in the fourth quarter of
1993, Apache's average realized oil price in 1994 was seven percent lower than
in 1993.
ACQUISITIONS-- Apache continued to acquire properties in 1994,
acquiring $180 million of oil and gas properties in the current year following
its mid-1993 acquisition of Hadson Energy Resources Corporation (now known as
Apache Energy Resources Corporation or AERC) and substantially all of the
producing properties of Hall-Houston Oil Company (Hall-Houston) in the Gulf of
Mexico for an aggregate of $211.7 million. The Company's 1994 performance
reflects a full 12 months of ownership of AERC and the Hall-Houston properties;
however, over half of the 1994 acquisitions were booked in the fourth quarter,
too late to have a significant impact on the Company's 1994 performance.
Acquisitions which closed in 1993 and 1994 accounted for approximately 40
percent of the overall increase in gas production from a year ago.
INCREASE IN AVERAGE COMMON SHARES OUTSTANDING -- The weighted average
number of shares of Apache common stock outstanding in 1994 increased by 7.8
million shares (15 percent) over 1993, primarily as a result of the issuance of
5.8 million shares in connection with a public stock offering in March 1993 and
the issuance of 7.8 million shares in connection with the conversion of $150
million of subordinated debentures in September 1993. Proceeds from these
transactions reduced outstanding debt by $281.8 million.
RESULTS OF OPERATIONS
NET INCOME AND REVENUES
The Company reported net income for the year of $42.8 million, a
15-percent increase from 1993 earnings of $37.3 million. Net income of $.70 per
share was unchanged from 1993, as the increase in 1994 net income was offset by
the increase in the weighted average number of shares of Apache common stock
outstanding. Significant factors contributing to the higher earnings were
increased oil production and substantially increased natural gas production
partially offset by decreases in oil and natural gas prices. Volume and price
information concerning the Company's 1994 and 1993 oil and gas production is
summarized in the following table:
<TABLE>
<CAPTION>
Selected Oil and Gas Increase
Operating Statistics 1994 1993 (Decrease)
- --------------------- ------- ------ ----------
<S> <C> <C> <C>
Gas volume - Mcf per day:
Domestic . . . . . . . . . . . . . . . . . . . . . 419,161 299,486 40%
International . . . . . . . . . . . . . . . . . . 7,975 3,589 122%
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 427,136 303,075 41%
======= =======
Average Gas Price - Per Mcf . . . . . . . . . . . . $ 1.81 $ 2.03 (11)%
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
Selected Oil and Gas Increase
Operating Statistics 1994 1993 (Decrease)
- --------------------- -------- ------- ----------
<S> <C> <C> <C>
Oil volume - Barrels per day:
Domestic . . . . . . . . . . . . . . . . . . . . . 32,669 31,809 3%
International . . . . . . . . . . . . . . . . . . 3,177 1,874 70%
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 35,846 33,683 6%
======= =======
Average Oil Price - Per barrel . . . . . . . . . . $ 15.66 $ 16.78 (7)%
Natural Gas Liquids (NGL) -
Barrels per day: . . . . . . . . . . . . . . . . 1,352 1,331 2%
Average NGL Price - Per barrel . . . . . . . . . . $ 12.39 $ 12.35 --
</TABLE>
Revenues for 1994 totaled $545.6 million, or 17 percent higher than a year
ago. Oil and gas revenues in 1994 totaled $493.5 million, an increase of 13
percent over production revenues of $437.3 million in 1993. Production
revenues were influenced by record natural gas production, declining natural
gas prices, increased oil production and lower average oil prices for the year.
In addition, Apache's gathering, processing and marketing revenues increased 71
percent to $44.3 million in 1994 from $25.9 million in 1993. Revenues from
international operations increased 70 percent to $26.3 million with a full
twelve months of Australian production from the AERC acquisition.
Natural gas sales contributed $282.5 million to revenues, up 26 percent
from 1993, the result of higher annual production partially offset by lower
prices during 1994. Gas production for the year averaged 427 MMcf per day, up
41 percent from 1993, positively affecting gas sales by $92.1 million. This
increase is principally the result of production increases from developmental
drilling and the contribution from 12 months of operations from properties
acquired in 1993, the most significant of which were the offshore properties
acquired from Hall-Houston and the properties acquired in the merger with AERC.
Acquisitions added approximately 49 MMcfd of production increases for the year,
whereas developmental drilling and recompletions accounted for nearly 75 MMcfd.
Apache's average realized price for its natural gas was $1.81 per Mcf
during 1994, 11 percent lower than the average price of $2.03 per Mcf during
1993, which negatively affected gas sales by $34.6 million. During 1994,
Apache's average realized gas prices ranged from $1.48 per Mcf in October to
$2.15 per Mcf in February. Gas prices remained depressed during the second
half of 1994 due to warmer than usual weather in the northeastern United States
and higher volumes of gas held in inventory by utilities and gas storage
facilities. Hedging activities increased Apache's 1994 gas price by $.01 per Mcf
($1.6 million in sales) compared to $.05 per Mcf decrease ($5.4 million in
sales) in 1993. The 1994 hedging was in the form of floating for fixed price
swap agreements, with hedged volumes ranging from 10,000 MMBtud to 40,000
MMBtud. Hedging activities in 1993 included a $3.8 million net loss from swap
agreements and a $1.6 million payment to Amoco Production Company (Amoco) under
the terms of the price support hedging agreement described in Footnote 8 to the
Company's financial statements. With natural gas spot prices rising
significantly during the second and third quarters of 1993, the 1993 hedging
activities in effect mitigated the upside potential of improving prices.
The impact of increased oil production was offset by lower oil prices in
1994. Oil production contributed $204.9 million to revenues during 1994, less
than one percent below Apache's oil sales in 1993. Average daily oil
production of approximately 35.8 Mbbls of oil increased six percent over the
prior year, positively affecting oil sales by $13.3 million, as acquisitions
offset the effects of natural depletion. Oil sales represented 42 percent of
total oil and gas sales in 1994 compared to 47 percent of total oil and gas
sales in 1993.
17
<PAGE> 20
The Company's average realized oil price of $15.66 per barrel declined
seven percent from 1993, negatively affecting oil sales by $14.7 million.
Apache's average realized oil prices in 1994 ranged from $12.65 per barrel in
March to $17.77 per barrel in July. Hedging activities increased Apache's
average realized oil price by $.20 per barrel ($2.6 million in sales) as
compared to a $.39 per barrel increase ($4.8 million in sales) in 1993. The
1994 hedges were in the form of floating for fixed price swap agreements with
respect to the sale of oil, whereas 1993 sales hedges were due to the price
support hedging agreement with Amoco.
Revenues from the sale of natural gas liquids increased one percent from
1993, to $6.1 million in 1994. The higher revenue reflects slightly increased
volumes incidental to Apache's increased gas production.
Revenues from gas gathering, processing and marketing were $44.3 million
in 1994, up 71 percent from 1993. The revenue increase primarily reflects
additional volumes sold under crude oil and natural gas contracts, an activity
that generally creates relatively low margins. Gross margins from gathering,
processing and marketing were $6.4 million in 1994, an increase of 32 percent
from 1993.
Other revenues increased to $7.4 million in 1994, up from $2.8 million in
1993. Non-recurring revenues in 1994 included $4 million from the favorable
resolution of take-or-pay contract issues and $2.2 million in gains from the
sale of stock held for investment.
COSTS AND EXPENSES
Operating costs per equivalent unit of production declined 14 percent in
1994, as a 27-percent increase in production volumes more than offset an
eight-percent increase in operating costs. Aggregate operating costs
increased from $128.1 million in 1993 to $137.8 million in 1994. Operating
costs include lifting costs, workover expense, and applicable domestic or
foreign production taxes. On an equivalent unit of production basis, operating
costs in 1994 declined to $3.48 per boe, down from $4.10 per boe in 1993.
Apache's declining costs per boe reflect increasing natural gas production and
lower production costs associated with the operation of gas-bearing properties
as compared with oil-bearing properties. The decline in unit cost reflects the
Company's continued cost saving efforts and the addition of offshore properties
which are not subject to production taxes and traditionally have lower unit
lifting costs.
Depreciation, depletion and amortization (DD&A) expense rose 32 percent
year-over-year to $232.6 million due to increased domestic sales of oil and
natural gas and a higher domestic amortization rate expressed as a percentage
of sales. Apache's domestic amortization rate of 45.5 percent of sales for 1994
increased from 38.7 percent in 1993. The increase in DD&A as a percentage of
sales is a result of lower natural gas and oil prices during 1994 and a higher
average finding cost in 1993 compared to recent years. Recurring international
DD&A increased as a result of substantially increased Australian production.
Although Apache increased its international exploration activity in 1994,
international impairments declined to $7.3 million in 1994 from $23.2 million
in 1993, reflecting the Company's successful international exploration efforts
in China, Egypt, The Congo and Indonesia during 1994.
Administrative, selling and other costs increased $1.7 million in 1994, or
five percent from 1993. Administrative, selling and other costs, on an
equivalent unit of production basis, declined 17 percent from the prior year to
$.88 per boe in 1994 from $1.06 per boe in 1993, reflecting the increase in
production over the prior year and results of the Company's sustained efforts
to contain costs. The Company integrated AERC and the Hall-Houston properties
with minimal increases in administrative staff.
18
<PAGE> 21
Net financing costs of $30.7 million were 14 percent higher than 1993.
This was primarily as a result of increasing interest rates and increased debt
in 1994 related to the AERC and Hall-Houston acquisitions which were funded in
the second half of 1993. By year end, effective interest rates on Apache's
floating rate debt, which includes all advances under its bank credit facility,
increased approximately 59 percent over year-end 1993 as market rates increased
at six different times during the year. Apache's average effective interest
rate during 1994 increased to 6.65 percent from 4.96 percent during 1993. On an
equivalent unit of production basis, net financing costs declined to $.78 per
boe in 1994 from $.86 per boe in 1993, as increased production offset the
rising cost of financing. On December 31, 1994, Apache's outstanding debt
balance was $658 million, an increase of 42 percent from $462 million on
December 31, 1993.
PRIOR-YEAR COMPARATIVE INFORMATION
The Company reported net income for 1993 of $37.3 million, or $.70 per
share, a 22-percent decrease from 1992 earnings of $47.8 million, or $1.02 per
share. Significant factors contributing to the lower earnings were after-tax
charges to earnings of $7.8 million, or $.15 per share, taken in the third
quarter related to international impairments and changes in tax laws, the
decline in the Company's realized oil prices during 1993, and the $18.5 million
after-tax gain recognized during 1992 on the sale of the Company's interest in
Natural Gas Clearinghouse (NGC). Excluding only the gain on the 1992 NGC sale,
the Company's 1993 earnings increased 28 percent over 1992.
Volume and price information concerning the Company's 1993 and 1992 oil
and gas production is summarized in the following table:
<TABLE>
<CAPTION>
Selected Oil and Gas Increase
Operating Statistics 1993 1992 (Decrease)
- --------------------- -------- ------- ----------
<S> <C> <C> <C>
Gas volume - Mcf per day:
Domestic . . . . . . . . . . . . . . . . . . . . . 299,486 262,245 14%
Foreign . . . . . . . . . . . . . . . . . . . . . 3,589 -- --
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 303,075 262,245 16%
======= =======
Average Gas Price - Per Mcf . . . . . . . . . . . . $ 2.03 $ 1.76 15%
Oil volume - Barrels per day:
Domestic . . . . . . . . . . . . . . . . . . . . . 31,809 31,874 --
Foreign . . . . . . . . . . . . . . . . . . . . . 1,874 1,066 76%
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . 33,683 32,940 2%
======= ======
Average Oil Price - Per Barrel . . . . . . . . . . $ 16.78 $ 18.16 (8)%
Natural Gas Liquids (NGL) -
Barrels per day . . . . . . . . . . . . . . . . . 1,331 1,458 (9)%
Average NGL Price - Per barrel . . . . . . . . . . $ 12.35 $ 12.34 --
</TABLE>
Revenues for 1993 totaled $466.6 million, a three-percent increase over
the Company's 1992 revenues. Production revenues in 1993 totaled $437.3
million compared to $394.6 million in 1992. Oil and gas revenues were
influenced by improved gas prices over 1992, declining second-half oil prices,
and the acquisition of AERC and the Hall-Houston properties in the second half
of the year. Revenues from international operations increased 93 percent in
1993, to $15.5 million, with six months of Australian production from the 1993
AERC acquisition.
19
<PAGE> 22
Natural gas sales in 1993 contributed $225 million to revenues, up 33
percent from 1992, the result of sustained higher prices and higher production
during 1993. During 1992, Apache's average realized gas price ranged from $1.17
per Mcf in February, the lowest price in 13 years, to a high of $2.40 per Mcf
in October. Apache's average realized price for 1992 was $1.76 per Mcf. In
1993, prices remained in the higher range established in the latter half of
1992. Apache's average realized price for 1993 was $2.03 per Mcf, up 15 percent
over the 1992 average, positively affecting 1993 gas sales by $30.4 million.
Hedging activities decreased gas sales by $5.4 million ($.05 per Mcf) in 1993 as
compared to a $2.5 million decrease in 1992. Both years included losses on swap
agreements and price sharing obligations with Amoco.
The impact of higher gas prices was augmented by higher gas production in
1993 as compared with 1992. Gas production for the year averaged 303.1 MMcf
per day, up 16 percent from 1992, positively affecting gas sales by $25.8
million. This increase is principally the result of production from newly
acquired properties, the most significant of which were the offshore properties
acquired from Hall-Houston, the additional 93-percent working interest in
Matagorda Island Blocks 681 and 682 acquired in 1992, and the properties
acquired in the merger with AERC. Combined, these three acquisitions comprised
332 Bcfe of proved reserves at year end 1993 and contributed 68 MMcf of gas per
day to Apache's 1993 average daily production.
The impact of increased oil production in 1993 was offset by lower oil
prices. Oil production contributed $206.3 million to revenues during 1993, six
percent below Apache's record $218.9 million in oil sales in 1992. Average
daily oil production of approximately 33.7 Mbbls of oil increased two percent
over the prior year, positively affecting oil sales by $4.3 million, as
acquisitions, continuing workover and recompletion operations, and new drilling
in the Permian Basin and Austin Chalk trend offset the effects of natural
depletion.
The Company's average realized oil price of $16.78 per barrel declined
eight percent from 1992, negatively affecting oil sales by $16.9 million.
Hedging activities boosted Apache's average realized oil price in 1993 by $.39
per barrel ($4.8 million in sales) as compared to a $.44 per barrel increase
($5.3 million in sales) in 1992. These were due to Amoco price support hedging
activities.
Revenues from the sale of natural gas liquids and sulfur in 1993 declined
12 percent from 1992 to $6.0 million, a result of lower prices for natural gas
liquids and the sale of the Whitney Canyon gas processing plant in 1992. The
sale of natural gas liquids declined from 1.5 Mbbls per day in 1992 to 1.3
Mbbls per day in 1993.
Revenues from gas gathering, processing and marketing were $25.9 million
in 1993, down 10 percent from 1992. The decline primarily reflects the sale of
Apache's interest in a gas gathering system in western Oklahoma in March 1993.
As a result, gross margins from gathering, processing and marketing were $4.9
million in 1993, a decline of 32 percent from 1992.
Operating costs were up two percent in 1993 to $128.1 million, as a
decline in operating costs per barrel of oil equivalent was offset by the
impact of increased production. Operating costs include lifting costs, workover
expense, and applicable domestic or foreign production taxes. On an equivalent
unit of production basis, operating costs declined six percent in 1993 to $4.10
per boe, down from $4.38 per boe in 1992. Apache's declining costs per boe
reflect increasing natural gas production and lower production costs associated
with operating gas-bearing properties as compared to oil-bearing properties.
Apache's operating costs were also reduced by refunds of well-control insurance
totaling $.7 million and production tax refunds totaling $1.8 million during
1993.
DD&A expense rose 12 percent year-over-year to $176.3 million due to
increased sales of natural gas and increased Australian production. Although
Apache's domestic amortization rate of 38.7 percent of sales for 1993 was down
slightly from 1992, declining oil prices and the higher costs associated with
newly acquired offshore properties, which reflect shorter reserve lives and
faster expected payouts, combined to increase Apache's domestic amortization
rate in the second half of 1993. Recurring international DD&A increased as a
result of substantially increased Australian production.
20
<PAGE> 23
International impairments, which rose to $23.2 million in 1993 from $12
million in 1992, included $6.7 million of the Company's investment in West
Africa which the Company wrote-off in the third quarter of 1993 when it
recognized a reduced probability of establishing commercial operations on two
of Apache's concessions. The 1993 impairments also included provisions for
Apache's investment in the Java Sea (Indonesia) and Nanteau (France).
Administrative, selling and other costs were down five percent from those
incurred in 1992, despite the Company's acquisitions during 1993. The reduction
reflects the Company's sustained efforts to contain costs, the non-recurring
administrative costs incurred in the 1992 corporate relocation to Houston, and
the integration of MW. In 1993, Apache successfully assimilated the AERC and
Hall-Houston properties with minimal additions to its administrative staff.
Administrative cost reductions were partially offset, however, by expenses
associated with an employee benefit plan based on Apache common stock, which
increased in price by approximately 25 percent from year-end 1992 to year-end
1993.
Net financing costs declined 17 percent in 1993 despite the use of bank
debt to fund the AERC and Hall-Houston acquisitions. The decline is primarily
attributable to a decline of approximately 100 basis points in Apache's
effective interest in 1993 as compared with 1992, reflecting a general decline
in interest rates and the conversion of Apache's 7 1/2-percent convertible
subordinated debentures due 2000 into shares of Apache common stock in
September 1993. Interest expense also declined as a result of Apache's
repayment of bank debt from a portion of the $131.8 million in net proceeds of
its public offering of common stock in March 1993, the successful conversion of
approximately $150 million of its 7 1/2-percent convertible subordinated
debentures due 2000 and through the redemption of $7 million of 9-percent
convertible subordinated debentures due 2001. Debt reductions attributable to
the public offering and debt conversion in 1993 were offset by debt incurred in
connection with acquisitions. On December 31, 1993, Apache's outstanding debt
balance was $462 million, an increase of one percent from $455.5 million on
December 31, 1992.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
CAPITAL COMMITMENTS
Apache's primary needs for cash are for exploration, development and
acquisition of oil and gas properties, repayment of principal and interest on
outstanding debt, and payment of dividends. The Company generally funds its
exploration and development activities through internally generated cash flows.
Apache budgets its capital expenditures based upon projected cash flows and
routinely adjusts its capital expenditures in response to changes in oil and
gas prices and corresponding changes in cash flow.
Expenditures for exploration and development increased to $302.5 million
in 1994 from $218.9 million in 1993. Domestically, Apache completed 243
producing wells out of 299 gross wells drilled during the year compared with
266 gross wells drilled in 1993, of which 210 were completed as producers.
Internationally, the Company had discoveries on nine of 17 wells drilled in
1994, while completing three of eight wells as producers in 1993. Domestic
expenditures for exploration and development in 1995, including workover and
recompletion operations, are expected to decline to approximately $170 million
as additional funds are used to reduce debt. The Company will step-up its
international activities in 1995 with exploration and development expenditures
expected to rise to approximately $45 million, up from $32 million in 1994.
Cash expenditures for acquisitions during 1994 were $180 million, compared
to $260.9 million in 1993. The most significant acquisition that Apache closed
during 1994 was the purchase of substantially all of the U.S. oil and gas
properties of Crystal Oil Company for $95.8 million. Apache also acquired
approximately $84.2 million of other oil and gas properties through a number of
different transactions during 1994. Funds for the 1994 acquisitions were
obtained principally from borrowings under the Company's revolving bank credit
facility.
21
<PAGE> 24
During the fourth quarter of 1994, Apache entered into a merger agreement
with DEKALB Energy Company (DEKALB), with DEKALB to survive as a wholly-owned
subsidiary of Apache and DEKALB shares to be converted into the right to
receive shares of Apache common stock. The Company contemplates that between
8.0 and 8.9 million shares of Apache common stock will be issued in
connection with the merger.
On March 1, 1995, Apache purchased certain oil and gas properties from
Texaco Exploration and Production Inc. (Texaco) for approximately $571 million
in cash, subject to adjustment. Apache delivered a $25 million deposit,
representing a portion of the purchase price, upon execution of the purchase
and sale agreement with Texaco in December 1994, and delivered the balance in
cash at closing. Funds for the Texaco transaction were obtained from several
sources, including increased borrowing capacity under the Company's bank credit
facility and proceeds of Apache's $172.5 million 6-percent Convertible
Subordinated Debentures due 2002 (6-percent debentures), which were issued on
January 4, 1995. On March 1, 1995, lenders increased the Apache revolving
credit facility to $1 billion, subject to borrowing base availability.
The Company aggressively pursues acquisition opportunities as part of its
reserve growth strategy. The amount and timing of future funding requirements
for acquisitions are dependent upon several factors, including the market for
oil and gas properties, and cannot be predicted for the upcoming year.
The aggregate cost of acquisitions in 1993, including the value of the
shares issued and liabilities added through the merger of AERC, totaled $324.6
million. Apache's most significant transactions during 1993 were its
acquisitions of oil and gas properties from Hall-Houston for $113.7 million in
cash and the acquisition of AERC for approximately $98 million in cash and the
issuance of 307,977 shares of Apache common stock. Apache also acquired more
than $76.5 million of other properties during 1993, primarily representing
purchases of additional working interests in properties in which Apache already
held an interest, including the purchase of Key Production Company's interest
in certain properties held by Apache Operating Partnership L.P. prior to its
dissolution during the first quarter of 1993.
Other capital expenditures for 1993 include the purchase of NGC's interest
in a gas gathering system in western Oklahoma which was sold in March 1993, in
a transaction described under "Capital Resources and Liquidity" below.
At December 31, 1994, Apache had outstanding $454 million under its
revolving bank credit facility, $25.8 million in additional bank debt
consolidated through the AEL banker's acceptance facility, and an aggregate of
$177.8 million in principal amount of other long-term debt, comprised
principally of notes and debentures maturing in the years 1997 through 2002.
The Company's overall debt at December 31, 1994, had increased $195.6 million
from December 31, 1993, partly the result of borrowing to fund acquisitions
and the purchase of approximately $15 million of AERC shares tendered to
the Company in the first quarter of 1994. Apache made cash payments on
long-term debt totaling $28.7 million in 1994, of which $9 million was
scheduled under the Company's debt obligations and the remaining amount was
paid due to the termination of AERC's bank credit facility. Interest payments
on the Company's outstanding debt obligations during 1995 are projected (using
weighted average balances for floating rate obligations) to be approximately
$89 million, while scheduled principal payments for 1995 currently total $.1
million.
Dividends paid during 1994 totaled $17.1 million, up 15 percent from 1993,
primarily due to the issuance of approximately 5.8 million shares in connection
with the Company's March 1993 common stock offering, and the issuance of
approximately 7.8 million shares in September 1993 upon the conversion of its
subordinated debentures. The Company's dividend policy currently provides for
the payment of regular quarterly dividends at the rate of $.28 per share
annually. Although no change in the dividend policy is contemplated for 1995,
the declaration and amount of future dividends is dependent upon the Company's
cash requirements, applicable debt covenants and other factors deemed relevant
by the Board of Directors.
22
<PAGE> 25
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary capital resources are net cash provided by operating
activities, proceeds from financing activities and proceeds from sales of
non-strategic assets.
Net cash provided by operating activities during 1994 was $335.6 million,
up $110.5 million from 1993. The 49-percent improvement in cash flows
primarily reflects increased natural gas production and a $67.4 million advance
on future gas deliveries related to the Company's sale of approximately 43.8
Bcf of natural gas for delivery over a six-year period. (See Note 5 to the
Company's financial statements). Eliminating the effects of forward sale
transactions, net cash provided by operating activities increased by 19 percent
over 1993, reflecting the results of increased production partially offset by
lower oil and gas prices.
The Company anticipates that it will engage in additional forward sale
transactions in the future if sales can be made under terms and conditions that
are favorable to the Company in light of market conditions. Future cash flows
will be influenced by product prices and production volumes and are not
presently ascertainable.
On January 4, 1995, Apache completed the issuance of $172.5 million
principal amount of its 6-percent debentures to reduce bank debt, provide
funding for acquisitions and general corporate purposes. The debentures are
convertible at the option of the holder into Apache common stock at a
conversion price of $30.68 per share.
On March 1, 1995, in connection with the acquisition of certain oil and
gas properties from Texaco, lenders increased the size of Apache's revolving
credit facility from $700 million to $1 billion, subject to borrowing base
availability. The borrowing base is the estimated loan value of the Company's
oil and gas reserves, not including reserves outside the United States and
subject to certain other exclusions, based upon forecast rates of production,
as periodically redetermined by the lenders. Upon closing the Texaco
transaction on March 1, 1995, Apache had approximately $840 million in loans
outstanding under the facility with approximately $60 million remaining
available. (See Note 3 to the Company's financial statements under Item 8
below.)
Under terms of the credit agreement, as amended March 1, 1995, the
Company must (i) maintain a minimum tangible net worth of $650 million, which
is adjusted quarterly for subsequent earnings and securities transactions, and
(ii) maintain a ratio (A) earnings before interest, taxes, depreciation,
depletion and amortization to (B) consolidated interest expense, of not less
than 3.7:1. Restrictive covenants under the facility include certain
limitations on indebtedness and contingent obligations, as well as certain
restrictions on liens and investments in international subsidiaries. The
Company has complied with its financial ratios and restrictive covenants at all
times since the inception of the revolving credit facility in July 1991. The
facility matures on March 1, 2000, and may be extended in one-year increments
with the lenders' consent.
In May 1994, Apache terminated AERC's bank credit facility and
converted the banker's acceptance facility of Apache Energy Limited (AEL), a
wholly-owned Australian subsidiary of AERC, from a reducing term credit
facility to a revolving credit facility with a commitment of $30 million,
subject to financial covenants and borrowing base availability. The AEL
facility provides for advances discounted at a varying rate over the discount
rate prevailing in the Canadian banker's acceptance market. Under the terms
of AEL's revolving credit facility, AEL must maintain certain minimum financial
ratios, including a current ratio (including funds available under the AEL
credit facility) of 1.0 to 1.0, a ratio of consolidated cash flow to debt
service of 1.1 to 1.0, and a ratio of consolidated cash flow to consolidated
interest expense of 3.0 to 1.0. In addition, AEL must maintain a minimum
tangible net worth of $30 million, which is adjusted quarterly for subsequent
earnings, and satisfy restrictive covenants similar to those under
Apache's revolving credit facility. At year end, the borrowing base was $30
million of which $25.8 million was outstanding, and AEL was in compliance with
the financial ratios and restrictive covenants under the facility. Apache and
its subsidiaries (other than AEL and its subsidiaries) have not guaranteed the
AEL credit facility.
In March 1993, Apache and NGC completed the sale of their respective
interests in a gathering system in western Oklahoma. Apache received gross cash
proceeds of approximately $32.2 million in the transaction, of which $16.4
million was attributable to NGC's interest in the system.
23
<PAGE> 26
Also in March 1993, Apache completed the public offering of approximately
5.8 million shares of Apache common stock for net proceeds of $131.8 million.
Net proceeds of the offering were used to repay outstanding debt under Apache's
revolving bank credit facility. In September 1993, Apache completed the
conversion of its 7 1/2-percent convertible subordinated debentures due 2000,
resulting in the issuance of approximately 7.8 million shares of Apache common
stock. Primarily as a result of the conversion and Apache's March 1993 equity
offering, Apache's debt as a percentage of capital declined to 37 percent at
December 31, 1993.
In May 1992, Apache issued 9.25-percent notes due 2002 in the principal
amount of $100 million. Proceeds from the offering were used to reduce bank
debt, pay off its 9 1/2-percent convertible debentures due 1996 and for general
corporate purposes. In December 1992, the Company privately placed 3.93-percent
convertible notes due 1997 in the principal amount of $75 million. The
3.93-percent notes are not redeemable before maturity and are convertible into
Apache common stock at the option of the holders at any time prior to maturity
at a conversion price of $27.00 per share. Proceeds from the sale of the
3.93-percent notes were used to repay bank debt.
The Company had $15.1 million in cash and cash equivalents on hand at
December 31, 1994, down from $17.1 million at the end of 1993. The Company's
ratio of current assets to current liabilities at year end of .9:1 improved
from a ratio of .7:1 from year-end 1993.
Management believes that cash on hand at year end, net cash generated from
operations, proceeds from the sale of the 6-percent debentures, and increased
borrowing capacity under its revolving bank credit facility will be adequate to
satisfy the Company's financial obligations, including its purchase obligation
with respect to the Texaco properties (see "Capital Commitments"), and to meet
future liquidity needs for at least the next two fiscal years.
FUTURE TRENDS
The closing of the acquisition of the Texaco properties and the DEKALB
merger mark the completion of a major acquisition cycle which will be followed
by property consolidation and rationalization. Apache is committed to reducing
its debt to capitalization ratio through the selective disposition of marginal
and non-strategic properties and through property development focused on cash
flow and debt reduction. In that regard, Apache announced on February 15, 1995,
the Company's plan to sell substantially all of the oil and gas properties in
its Rocky Mountain region, which includes many lower margin properties. The
Company anticipates that divestiture of the Rocky Mountain properties, together
with disposal of non-strategic assets in other operating regions, will result
in total proceeds of approximately $200 million. While total capital
expenditures will be higher in 1995 due to the acquisition of properties from
Texaco, domestic exploration and development costs will be reduced from their
1994 levels as a result of low product prices and the commitment to reduce
debt. Property dispositions and reduced domestic exploration outlays in 1995
will likely result in lower production and reserves from the level achieved
upon completion of the Texaco and DEKALB transactions. The following factors
may also impact Apache's operating results and financial condition in the
future.
CONTINUING VOLATILITY OF PRODUCT PRICES
In 1994, spot market natural gas prices remained volatile and continued to
behave unpredictably. Spot market oil prices, which are especially vulnerable
to complex and unpredictable political and economic forces, also remained
volatile in 1994, as Apache's average realized price fluctuated from $12.65 per
barrel in March to $17.77 per barrel in July. Management believes that, absent
a comprehensive U.S. energy policy, oil prices will continue to fluctuate in
response to changes in the policies of the Organization of Petroleum Exporting
Countries (OPEC), events in the Middle East and events in certain non-OPEC
countries. Management also believes that gas prices will remain volatile and
may fluctuate due to supply and demand perceptions.
24
<PAGE> 27
MARKETING AND HEDGING
In August 1994, Apache named a vice president of marketing to a newly
created position to oversee the marketing and sale of the Company's gas
production. The Company expects to take a more active roll in the marketing of
Apache's production in 1995. Also during 1994, Apache undertook a comprehensive
review of its risk management policies and procedures, with emphasis on
commodity hedging. At December 31, 1994, Apache had two open swap agreements
hedging a total of 30,000 MMBtud of natural gas. (See Note 8 to the Company's
financial statements.) The Company is likely to increase the use of commodity
derivatives contracts to either fix or support oil and gas prices at targeted
levels, or to minimize the impact of price fluctuations.
CEILING TEST FOR FULL COST COMPANIES
Oil and gas producers that conduct their financial reporting under the
full cost accounting rules are subject to Securities and Exchange Commission
(SEC) rules that require quarterly "ceiling test" calculations. This test
requires a write-down when the capitalized cost of oil and gas properties
exceeds the present value of proved reserves, plus the lower of cost or market
value for unproved properties. (See Supplemental Oil and Gas Disclosures to the
Company's financial statements). The test is applied at the end of each fiscal
quarter on a country-by-country basis, and requires a write-down if the
"ceiling" is exceeded, even if prices decline only for a short period of time.
Many full cost companies, including Apache, are concerned about the impact of
prolonged unfavorable gas prices on their ceiling test calculations. A further
deterioration of gas or oil prices from year-end levels would likely result in
the Company recording a non-cash charge to earnings related to its oil and gas
properties in the first quarter of 1995. SEC rules permit the exclusion of
capitalized costs and present value of recently acquired properties in
performing ceiling test calculations. Pursuant to these rules, Apache has
requested waivers and the SEC has granted one-year waivers with respect to the
properties acquired from Texaco and Crystal. If the ceiling is exceeded on all
domestic properties, Apache will be required to perform an additional ceiling
test excluding the Texaco and Crystal properties and record a write-down of
carrying value if the ceiling is still exceeded.
ENVIRONMENTAL REGULATION
The Company operates under numerous state and federal laws regulating the
discharge of materials into, and the protection of, the environment. In the
ordinary course of business, Apache conducts an ongoing review of the effects
of these various environmental laws on its business and operations. The
estimated cost of continued compliance with current environmental laws, based
upon the information currently available, is not material to the Company's
financial position or results of operations. It is impossible to determine
whether and to what extent Apache's future performance may be affected by
environmental laws; however, management does not believe that such laws will
have a material adverse effect on the Company's financial position or results
of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required
to be filed under this item are presented on pages F-1 through F-28 of this
Form 10-K, and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
25
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Information About Nominees
for Election as Directors," "Continuing Directors," "Executive Officers of the
Company," and "Voting Securities and Principal Holders" in the Company's proxy
statement relating to the Company's 1995 annual meeting of shareholders (the
"Proxy Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table,"
"Option/SAR Grants Table," "Option/SAR Exercises and Year-End Value Table,"
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements," and "Director Compensation" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Securities and
Principal Holders" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Business
Relationships and Transactions" in the Proxy Statement is incorporated herein
by reference.
26
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS INCLUDED IN THIS REPORT:
1. FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of independent public accountants . . . . . . . . . . . . . . . . . . . . . F-1
Report of management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of consolidated income for each of the three years in the period ended
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statement of consolidated cash flows for each of the three years in the period
ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated balance sheet as of December 31, 1994 and 1993 . . . . . . . . . . . F-5
Statement of consolidated shareholders' equity for each of the three years in
the period ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . F-7
Summary of significant accounting policies . . . . . . . . . . . . . . . . . . . . F-8
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . F-10
Supplemental oil and gas disclosures . . . . . . . . . . . . . . . . . . . . . . . F-22
Supplemental quarterly financial data . . . . . . . . . . . . . . . . . . . . . . F-28
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
Financial statement schedules have been omitted because they are
either not required, not applicable or the information required to be
presented is included in the Company's financial statements and
related notes.
27
<PAGE> 30
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 -- Stock Purchase Agreement, dated July 1, 1991, between Registrant and Amoco Production
Company (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on
Form 8-K, dated July 1, 1991, SEC File No. 1-4300, filed July 19, 1991).
2.2 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as seller, and
Registrant, as buyer, dated as of June 2, 1993 (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K, dated August 31, 1993, SEC File No.
1-4300, filed September 7, 1993).
2.3 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as seller, and
Registrant, as buyer, dated as of August 13, 1993 (incorporated by reference to
Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated August 31, 1993, SEC
File No. 1-4300, filed September 7, 1993).
2.4 -- Form of Acquisition Agreement between Registrant, HERC Acquisition Corporation and
Hadson Energy Resources Corporation, dated August 26, 1993, and amended September 28,
1993 (incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement
on Form S-4, Registration No. 33-67954, filed September 29, 1993).
2.5 -- Purchase and Sale Agreement by and between Texaco Exploration and Production Inc., as
seller, and Registrant, as buyer, dated December 22, 1994 (incorporated by reference
to Exhibit 99.3 to Registrant's Current Report on Form 8-K, dated November 29, 1994,
SEC File No. 1-4300, filed December 29, 1994).
2.6 -- Agreement and Plan of Merger among Registrant, XPX Acquisitions, Inc. and DEKALB
Energy Company, dated December 21, 1994 (incorporated by reference to Exhibit 2.1 to
Registrant's Registration Statement on Form S-4, Registration No. 33-57321, filed
January 17, 1995).
2.7 -- Matagorda Island 681 Field Purchase and Sale Agreement with Option to Exchange, dated
November 24, 1992, between Shell Offshore Inc., SOI Royalties Inc., and Registrant
(incorporated by reference to Exhibit 10.7 to Apache Offshore Investment Partnership's
Annual Report on Form 10-K for year ended December 31, 1992, SEC File No. 0-13546).
3.1 -- Restated Certificate of Incorporation of Registrant, dated December 1, 1993, as filed
with the Secretary of State of Delaware on December 16, 1993 (incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on Form 10-K for year ended
December 31, 1993, SEC File No. 1-4300).
3.2 -- Bylaws of Registrant, dated as of December 9, 1992 (incorporated by reference to
Exhibit 3.3 to Registrant's Annual Report on Form 10-K for year ended December 31,
1992, SEC File No. 1-4300).
4.1 -- Form of common stock certificate (incorporated by reference to Exhibit 4.4 to
Amendment No. 1 to Registrant's Registration Statement on Form S-3, Registration No.
33-5097, filed May 16, 1986).
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.2 -- Rights Agreement, dated as of January 10, 1986, between Registrant and First Trust
Company, Inc., rights agent, relating to the declaration of Rights to Registrant's
common stockholders of record on January 24, 1986 (incorporated by reference to
Exhibit 4.9 to Registrant's Annual Report on Form 10-K for year ended December 31,
1985, SEC File No. 1-4300).
10.1 -- Second Amended and Restated Credit Agreement, dated April 30, 1994, among Registrant,
the lenders named therein, and The First National Bank of Chicago and Chemical Bank,
as agents (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for quarter ended June 30, 1994, SEC File No. 1-4300).
*10.2 -- Third Amended and Restated Credit Agreement, dated March 1, 1995, among Registrant,
the lenders named therein, and The First National Bank of Chicago, as Administrative
Agent and Arranger, and Chemical Bank, as Co-Agent and Arranger.
10.3 -- Fiscal Agency Agreement, dated as of January 4, 1995, between Registrant and Chemical
Bank, as fiscal agent (incorporated by reference to Exhibit 99.2 to Registrant's
Current Report on Form 8-K, dated December 6, 1994, SEC File No. 1-4300, filed January
11, 1995.)
+10.4 -- 1982 Employee Stock Option Plan, as updated in January 1987 to conform to the Tax
Reform Act of 1986 (incorporated by reference to Exhibit 10.7 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.5 -- Apache Corporation Corporate Administrative Group Incentive Plan, effective as of
January 1, 1989 (incorporated by reference to Exhibit 10.8 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.6 -- First Amendment to Apache Corporation Corporate Administrative Group Incentive Plan,
effective January 1, 1990 (incorporated by reference to Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for year ended December 31, 1993, SEC File No. 1-4300).
* +10.7 -- Apache Corporation Retirement/401(k) Savings Plan, dated December 22, 1994, effective
January 1, 1995.
+10.8 -- Non-Qualified Retirement/Savings Plan of Apache Corporation, dated November 16, 1989
(incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.9 -- Apache International, Inc. Common Stock Award Plan, dated February 12, 1990
(incorporated by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.10 -- Apache Corporation 1990 Phantom Stock Appreciation Plan, dated as of September 28,
1990 (incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form
10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.11 -- Apache Corporation 1990 Stock Incentive Plan, dated as of September 28, 1990
(incorporated by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1990, SEC File No. 1-4300).
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
+10.12 -- Amendment No. 1 to the Apache Corporation 1990 Stock Incentive Plan, dated as of July
17, 1992 (incorporated by reference to Exhibit 4.4 to Registrant's Registration
Statement on Form S-8, Registration No. 33-53442, filed October 19, 1992).
*+10.13 -- Apache Corporation 1995 Stock Option Plan, adopted February 9, 1995.
+10.14 -- Apache Corporation Income Continuance Plan, as amended and restated February 24, 1988
(incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1990, SEC File No. 1-4300).
*+10.15 -- Apache Corporation Directors' Deferred Compensation Plan, as amended and restated
September 14, 1994.
+10.16 -- Apache Corporation Phantom Stock Appreciation Plan for Directors, effective as of May
4, 1989 (incorporated by reference to Exhibit 10.22 to Registrant's Annual Report on
Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.17 -- Apache Corporation Outside Directors' Retirement Plan, effective December 15, 1992
(incorporated by reference to Exhibit 10.25 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1992, SEC File No. 1-4300).
+10.18 -- Apache Corporation Equity Compensation Plan for Non-Employee Directors, adopted
February 9, 1994, and form of Restricted Stock Award Agreement (incorporated by
reference to Exhibit 10.26 to Registrant's Annual Report on Form 10-K for year ended
December 31, 1993, SEC File No. 1-4300).
+10.19 -- Amended and Restated Employment Agreement, dated December 5, 1990, between Registrant
and Raymond Plank (incorporated by reference to Exhibit 10.9 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.20 -- Amended and Restated Employment Agreement, dated December 20, 1990, between Registrant
and John A. Kocur (incorporated by reference to Exhibit 10.10 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.21 -- Employment Agreement, dated March 20, 1991, between Registrant and William J. Johnson
(incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1992, SEC File No. 1-4300).
+10.22 -- Employment Agreement, dated June 6, 1988, between Registrant and G. Steven Farris
(incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.23 -- Consulting Agreement, dated November 1, 1993, between Registrant and John A. Kocur
(incorporated by reference to Exhibit 10.30 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1993, SEC File No. 1-4300).
*+10.24 -- Consulting Agreement, effective April 28, 1994, between Registrant and William J.
Johnson.
*+10.25 -- Consulting Agreement, effective January 1, 1995, between Registrant and John L. Moran.
*11.1 -- Statement regarding computation of earnings per share of Registrant's common stock for
the year ended December 31, 1994.
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
*21.1 -- Subsidiaries of Registrant.
*23.1 -- Consent of Arthur Andersen LLP.
*23.2 -- Consent of Ryder Scott Company Petroleum Engineers.
*27.1 -- Financial Data Schedule.
</TABLE>
____________________
* Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be
filed herewith pursuant to Item 14 hereof.
Note: Debt instruments of the Registrant defining the rights of long-term
debt holders in principal amounts not exceeding 10 percent of the
Registrant's consolidated assets have been omitted and will be
provided to the Commission upon request.
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the fiscal quarter
ended December 31, 1994:
November 29, 1994 - Item 5. Other Events - Registrant entered into a
memorandum of understanding, and subsequently into a purchase and sale
agreement with Texaco Exploration and Production Inc., under which
Registrant will acquire Texaco's interest in over 300 oil and gas
fields for approximately $600 million, subject to certain adjustments.
December 6, 1994 - Item 5. Other Events - Registrant issued $172.5
million principal amount of 6 percent Convertible Subordinated
Debentures due 2002, which are convertible into the Registrant's
common stock at a conversion price of $30.68 per share.
December 21, 1994 - Item 5. Other Events - Registrant entered into an
agreement and plan of merger with DEKALB Energy Company pursuant to
which (i) each outstanding share of DEKALB stock will be converted
into the right to receive between .85 and .90 shares of the
Registrant's common stock, and (ii) DEKALB will become a wholly-owned
subsidiary of the Registrant.
31
<PAGE> 34
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.
APACHE CORPORATION
Date: March 6, 1995 By: /s/ Raymond Plank
Raymond Plank,
Chairman and Chief Executive Officer
POWER OF ATTORNEY
The officers and directors of Apache Corporation, whose signatures appear
below, hereby constitute and appoint Raymond Plank, G. Steven Farris, Z. S.
Kobiashvili and Mark A. Jackson, and each of them (with full power to each of
them to act alone), the true and lawful attorney-in-fact to sign and execute,
on behalf of the undersigned, any amendment(s) to this report and each of the
undersigned does hereby ratify and confirm all that said attorneys shall do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.*
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Raymond Plank Chairman and Chief Executive
Raymond Plank Officer (Principal Executive
Officer) March 6, 1995
/s/ Mark A. Jackson Vice President, Finance March 6, 1995
Mark A. Jackson
/s/ R. Kent Samuel Controller and Chief
R. Kent Samuel Accounting Officer March 6, 1995
</TABLE>
* Apache Corporation does not have a Principal Financial Officer.
<PAGE> 35
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Frederick M. Bohen Director
Frederick M. Bohen March 6, 1995
/s/ Virgil B. Day Director
Virgil B. Day March 6, 1995
/s/ G. Steven Farris Director
G. Steven Farris March 6, 1995
/s/ Randolph M. Ferlic Director
Randolph M. Ferlic March 6, 1995
/s/ Eugene C. Fiedorek Director
Eugene C. Fiedorek March 6, 1995
/s/ W. Brooks Fields Director
W. Brooks Fields March 6, 1995
/s/ Robert V. Gisselbeck Director
Robert V. Gisselbeck March 6, 1995
/s/ Stanley K. Hathaway Director
Stanley K. Hathaway March 6, 1995
/s/ John A. Kocur Director
John A. Kocur March 6, 1995
/s/ Jay A. Precourt Director
Jay A. Precourt March 6, 1995
/s/ Joseph A. Rice Director
Joseph A. Rice March 6, 1995
</TABLE>
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of Apache Corporation:
We have audited the accompanying consolidated balance sheet of Apache
Corporation (a Delaware corporation) and Subsidiaries as of December 31, 1994
and 1993, and the related statements of consolidated 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 the Company'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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Apache
Corporation 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
March 1, 1995
F-1
<PAGE> 37
REPORT OF MANAGEMENT
The financial statements and related financial information of Apache
Corporation and Subsidiaries were prepared by and are the responsibility of
management. The statements have been prepared in conformity with generally
accepted accounting principles and include amounts that are based on
management's best estimates and judgments.
Management maintains and places reliance on systems of internal control
designed to provide reasonable assurance, weighing the costs with the benefits
sought, that all transactions are properly recorded in the Company's books and
records, that policies and procedures are adhered to and that assets are
safeguarded. The systems of internal controls are supported by written policies
and guidelines, internal audits and the selection and training of qualified
personnel.
The consolidated financial statements have been audited by Arthur Andersen
LLP, independent public accountants. Their audits included developing an
overall understanding of the Company's accounting systems, procedures and
internal controls and conducting tests and other auditing procedures sufficient
to support their opinion on the fairness of the consolidated financial
statements.
The Board of Directors exercises its oversight responsibility for the
financial statements through its Audit Committee, composed solely of directors
who are not employed by Apache. The Audit Committee meets periodically with
management, internal auditors and the independent public accountants to ensure
that they are successfully completing designated responsibilities. The internal
auditors and independent public accountants have open access to the Audit
Committee to discuss auditing and financial reporting issues.
Raymond Plank
Chairman of the Board
and Chief Executive Officer
Mark A. Jackson
Vice President, Finance
R. Kent Samuel
Controller and Chief Accounting Officer
F-2
<PAGE> 38
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
REVENUES:
Oil and gas production revenues . . . . . . . . . . . . . . . . . $ 493,500 $ 437,342 $ 394,552
Gathering, processing and marketing revenues . . . . . . . . . . . 44,287 25,862 28,594
Equity in income of affiliates . . . . . . . . . . . . . . . . . . 459 624 2,695
Gain on sale of investment in affiliate . . . . . . . . . . . . . -- -- 28,345
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 7,375 2,810 114
---------- ---------- ----------
545,621 466,638 454,300
---------- ---------- ----------
OPERATING EXPENSES:
Depreciation, depletion and amortization . . . . . . . . . . . . . 232,612 176,335 157,508
International impairments . . . . . . . . . . . . . . . . . . . . 7,300 23,200 12,000
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . 137,820 128,113 125,337
Gathering, processing and marketing costs . . . . . . . . . . . . 37,866 21,010 21,452
Administrative, selling and other . . . . . . . . . . . . . . . . 34,870 33,193 35,010
Financing costs:
Interest expense . . . . . . . . . . . . . . . . . . . . . . 32,066 28,102 35,314
Amortization of deferred loan costs . . . . . . . . . . . . . 3,922 3,896 3,888
Capitalized interest . . . . . . . . . . . . . . . . . . . . (4,889) (4,764) (6,035)
Interest income . . . . . . . . . . . . . . . . . . . . . . . (403) (352) (652)
---------- ---------- ----------
481,164 408,733 383,822
---------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 64,457 57,905 70,478
Provision for income taxes . . . . . . . . . . . . . . . . . . . . 21,620 20,571 22,702
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,837 $ 37,334 $ 47,776
========== ========== ==========
NET INCOME PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . $ .70 $ .70 $ 1.02
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . 61,317 53,534 46,904
========== ========== ==========
</TABLE>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-3
<PAGE> 39
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,837 $ 37,334 $ 47,776
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization . . . . . . . . . . 232,612 176,335 157,508
International impairments . . . . . . . . . . . . . . . . . . 7,300 23,200 12,000
Amortization of deferred loan costs . . . . . . . . . . . . . 3,922 3,896 3,888
Provision for deferred income taxes . . . . . . . . . . . . . 25,370 20,571 14,034
----------- ----------- -----------
312,041 261,336 235,206
Gain on sale of investment in affiliate . . . . . . . . . . . . . -- -- (28,345)
Cash distributions in excess of (less than) earnings of affiliates (459) (662) 2,650
Gain on sale of stock held for investment . . . . . . . . . . . . (2,178) -- --
Changes in operating assets and liabilities, net of effects of
acquisitions:
(Increase) decrease in receivables . . . . . . . . . . . . . (9,961) (9,590) 356
(Increase) decrease in advances to oil and
gas ventures and other . . . . . . . . . . . . . . . . . (2,281) 137 (3,598)
Increase in deferred charges and other . . . . . . . . . . . (3,238) (3,904) (1,415)
Increase (decrease) in payables . . . . . . . . . . . . . . . (14,905) (4,152) 2,187
Increase (decrease) in accrued operating costs . . . . . . . 541 (8,177) (8,660)
Increase in advance from gas purchaser . . . . . . . . . . . 67,376 -- --
Decrease in deferred credits and
noncurrent liabilities . . . . . . . . . . . . . . . . . (11,338) (9,915) (3,983)
----------- ----------- -----------
Net cash provided by operating activities . . . . 335,598 225,073 194,398
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures . . . . . . . . . . . . . (302,530) (218,930) (136,691)
Acquisition of oil and gas properties . . . . . . . . . . . . . . (179,972) (190,181) (62,955)
Noncash portion of net oil and gas property additions . . . . . . 7,595 7,104 2,434
Purchase of AERC stock, net of cash acquired . . . . . . . . . . . (13,885) (70,692) --
Purchase of stock held for investment . . . . . . . . . . . . . . (5,051) -- --
Proceeds from sale of oil and gas properties . . . . . . . . . . . 5,854 3,255 37,167
Prepaid acquisition cost . . . . . . . . . . . . . . . . . . . . . (25,377) -- --
Proceeds from sale of stock held for investment . . . . . . . . . 6,640 -- --
Proceeds from sale of gas gathering system . . . . . . . . . . . . -- 32,201 --
Proceeds from sale of investment in affiliate . . . . . . . . . . -- -- 50,700
Other capital expenditures, net . . . . . . . . . . . . . . . . . (11,306) (30,471) (7,495)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,716) 1,145 (1,173)
----------- ----------- -----------
Net cash used by investing activities . . . . . . . . . (519,748) (466,569) (118,013)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . 224,279 275,424 266,378
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . (28,719) (162,000) (306,565)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (17,131) (14,919) (13,130)
Proceeds from issuance of common stock . . . . . . . . . . . . . . 4,599 134,223 630
Payments to acquire treasury stock . . . . . . . . . . . . . . . . (4) (25) (3)
Costs of debt and equity transactions . . . . . . . . . . . . . . (875) (270) (3,971)
----------- ----------- -----------
Net cash provided (used) by financing activities . . . . 182,149 232,433 (56,661)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . (2,001) (9,063) 19,724
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . 17,064 26,127 6,403
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . $ 15,063 $ 17,064 $ 26,127
=========== =========== ===========
</TABLE>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-4
<PAGE> 40
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 15,063 $ 17,064
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 101,801 91,840
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 8,868 7,152
Advances to oil and gas ventures and other . . . . . . . . . . . 9,165 6,884
------------ ------------
134,897 122,940
------------ ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties . . . . . . . . . . . . . . . . . . . . . 2,953,121 2,516,801
Unproved properties and properties under development,
not being amortized . . . . . . . . . . . . . . . . . 145,925 105,597
Gas gathering, transmission and processing facilities . . . . . 25,809 25,809
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,121 36,938
------------ ------------
3,171,976 2,685,145
Less: Accumulated depreciation, depletion and amortization . . . (1,486,543) (1,248,685)
------------ ------------
1,685,433 1,436,460
------------ ------------
OTHER ASSETS:
Deferred charges and other . . . . . . . . . . . . . . . . . . . 58,692 33,007
------------ ------------
$ 1,879,022 $ 1,592,407
============ ===========
</TABLE>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-5
<PAGE> 41
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . $ 100 $ 9,017
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 87,674 118,447
Accrued operating expense . . . . . . . . . . . . . . . . . . . 14,772 17,371
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . -- 6,048
Accrued exploration and development . . . . . . . . . . . . . . 22,678 15,083
Accrued compensation and benefits . . . . . . . . . . . . . . . 10,384 9,170
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 12,180 10,254
------------ -----------
147,788 185,390
------------ -----------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . 657,486 453,009
------------ -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 156,180 128,554
Advance from gas purchaser . . . . . . . . . . . . . . . . . . . 67,376 --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,012 39,600
------------ -----------
257,568 168,154
------------ -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000 shares authorized,
62,558,979 and 62,334,241 shares issued, respectively . . . 78,199 77,918
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 543,583 540,155
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 207,850 182,195
Treasury stock, at cost, 1,118,975 and 1,248,827 shares,
respectively . . . . . . . . . . . . . . . . . . . . . . . (13,452) (14,414)
------------ -----------
816,180 785,854
------------ -----------
$ 1,879,022 $ 1,592,407
============ ===========
</TABLE>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-6
<PAGE> 42
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Paid-In Retained Treasury Shareholders'
Stock Capital Earnings Stock Equity
----- ------- -------- ----- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 . . . . . . . . $ 60,303 $ 268,966 $ 126,122 $ (15,450) $ 439,941
Net income . . . . . . . . . . . . . . -- -- 47,776 -- 47,776
Dividends ($.28 per common share) . . -- -- (13,135) -- (13,135)
Common shares issued . . . . . . . . . 77 382 -- -- 459
Treasury shares issued . . . . . . . . -- (52) -- 223 171
Treasury shares purchased . . . . . . -- -- -- (3) (3)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1992 . . . . . . . . 60,380 269,296 160,763 (15,230) 475,209
Net income . . . . . . . . . . . . . . -- -- 37,334 -- 37,334
Dividends ($.28 per common share) . . -- -- (15,902) -- (15,902)
Common shares issued . . . . . . . . . 17,538 270,859 -- -- 288,397
Treasury shares issued . . . . . . . . -- -- -- 841 841
Treasury shares purchased . . . . . . -- -- -- (25) (25)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1993 . . . . . . . . 77,918 540,155 182,195 (14,414) 785,854
Net income . . . . . . . . . . . . . . -- -- 42,837 -- 42,837
Dividends ($.28 per common share) . . -- -- (17,182) -- (17,182)
Common shares issued . . . . . . . . . 281 3,428 -- -- 3,709
Treasury shares issued . . . . . . . . -- -- -- 966 966
Treasury shares purchased . . . . . . -- -- -- (4) (4)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1994 . . . . . . . . $ 78,199 $ 543,583 $ 207,850 $(13,452) $ 816,180
========= ========= ========= ========= =========
</TABLE>
The accompanying summary of significant accounting policies and notes
to consolidated financial statements are integral parts of this statement.
F-7
<PAGE> 43
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Apache Corporation (Apache or the Company) and its subsidiaries after
elimination of intercompany balances and transactions. The Company's interests
in oil and gas ventures and partnerships are proportionately consolidated.
Investments in incorporated affiliates in which Apache owns between a
20-percent and 50-percent interest are accounted for using the equity method.
INVENTORIES
Inventories consist principally of tubular goods and production equipment
stated at the lower of weighted average cost or market.
PROPERTY AND EQUIPMENT
The Company uses the full cost method of accounting for its investment in
oil and gas properties. Under this method, the Company capitalizes all
acquisition, exploration and development costs incurred for the purpose of
finding oil and gas reserves, including salaries, benefits and other internal
costs directly attributable to these activities. Apache capitalized $30.9
million, $25.4 million and $24 million of internal costs in 1994, 1993 and
1992, respectively. Costs associated with production and general corporate
activities are expensed in the period incurred. Internal costs attributable to
the management of the Company's producing properties, before recoveries from
industry partners, totaled $12.2 million, $10.2 million and $10 million in
1994, 1993 and 1992, respectively, and are included in operating costs on the
Company's Statement of Consolidated Income. Interest costs related to
development projects in progress for an extended period are also capitalized to
oil and gas properties. Unless significant reserves are involved, proceeds from
the sale of oil and gas properties are accounted for as reductions to
capitalized costs and gains or losses are not recognized.
Apache computes the provision for depreciation, depletion and amortization
(DD&A) of oil and gas properties on a quarterly basis using the future gross
revenue method. The quarterly provision is calculated on a country-by-country
basis by multiplying the quarter's oil and gas revenues by an overall rate
which is determined by dividing the unamortized cost of proved oil and gas
properties by the total estimated future oil and gas revenues from proved
reserves. The amortizable base includes estimated future development cost and
dismantlement, restoration and abandonment costs, net of estimated salvage
values. These future costs are generally estimated by engineers employed by
Apache.
Apache limits, on a country-by-country basis, the capitalized costs of
proved oil and gas properties, net of accumulated DD&A, to the estimated future
net cash flows from proved oil and gas reserves, net of related tax effects,
discounted at 10 percent. If capitalized costs exceed this limit, the excess is
charged to DD&A expense. The Company has not recorded any write downs of
capitalized costs in any of the periods presented.
The costs of certain unevaluated domestic and foreign leasehold acreage and
wells in the process of being drilled are not being amortized. Costs not being
amortized are periodically assessed for possible impairments or reductions in
value. If a reduction in value has occurred, costs being amortized are
increased or a charge is made against earnings for those international
operations where a reserve base is not yet established.
Buildings, equipment, gas gathering, transmission and processing facilities
are depreciated on a straight-line basis over the estimated useful lives of the
assets which range from three to 20 years. Accumulated depreciation for these
assets totaled $23.7 million and $17.2 million at December 31, 1994 and 1993,
respectively.
ACCOUNTS PAYABLE
Included in accounts payable at December 31, 1994 and 1993, are liabilities
of approximately $30.3 million and $38.6 million, respectively, representing
the amount by which checks issued but not presented to the Company's banks for
collection exceeded balances in applicable bank accounts.
F-8
<PAGE> 44
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION
Apache uses the sales method of accounting for natural gas revenues. Under
this method, revenues are recognized based on actual volumes of gas sold to
purchasers. The volumes of gas sold may differ from the volumes to which Apache
is entitled based on its interests in the properties. Differences between
volumes sold and volumes based on entitlements create gas imbalances which are
generally reflected as adjustments to reported gas reserves and future cash
flows. Adjustments for gas imbalances totaled less than one percent of Apache's
proved gas reserves at December 31, 1994. Revenue is deferred and a liability
is recorded for those properties where the estimated remaining reserves will
not be sufficient to enable the underproduced owner to recoup their entitled
share through production.
HEDGING ACTIVITIES
The Company periodically enters into commodity derivative contracts in
order to either fix or support oil and gas prices at targeted levels and to
minimize the impact of price fluctuations. Apache uses swaps, puts or
fixed-price contracts to hedge its commodity prices. Gains or losses on these
hedging activities are recognized in oil and gas production revenues when the
hedged production occurs. Estimates of future liabilities and receivables
applicable to oil and gas commodity hedges are reflected in future cash flows
from proved reserves in the supplemental oil and gas disclosures, with such
estimates based on prices in effect as of the date of the reserve report.
The Company also purchases interest rate caps and enters into interest rate
swap transactions in its management of interest rate exposure. Interest rate
swap agreements generally involve the exchange of fixed and floating interest
payment obligations without the exchange of the underlying principal amounts.
Gains or losses on these activities are recognized in interest expense in the
period hedged by the agreements.
INCOME TAXES
The Company provides deferred income taxes for all temporary differences
between financial and income tax reporting. Effective January 1, 1993, the
Company implemented the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the liability
method specified by SFAS No. 109, deferred taxes are determined based on the
estimated future tax effect of differences between the financial statement and
tax bases of assets and liabilities given the provisions of enacted tax laws.
The adoption of SFAS No. 109 did not have a material effect on the accompanying
financial statements.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is considered the functional currency for each of the
Company's international operations. Translation gains or losses are recognized
in current net income and were not material in any of the periods presented.
INCOME PER COMMON SHARE
Income per common share amounts are based on the weighted average number of
common shares outstanding. The effects of common equivalent shares, which would
include shares from the assumed conversion of the 3.93-percent notes, were
immaterial or were not dilutive for each of the periods presented. Furthermore,
fully diluted income per share, assuming conversion of certain of the
convertible debentures, was not significantly different than primary income per
share for all periods presented.
STATEMENT OF CONSOLIDATED CASH FLOWS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. These
investments are carried at cost which approximates market.
F-9
<PAGE> 45
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS AND DIVESTITURES
Completed Transactions
In December 1994, Apache purchased substantially all of the U.S. oil and
gas properties of Crystal Oil Company (Crystal) for approximately $95.8
million. The producing oil and gas properties acquired from Crystal are
located primarily along the Arkansas-Louisiana border and southern Louisiana.
The acquisition also included approximately 32,000 net undeveloped mineral
acres in southern Louisiana.
In 1993, Apache purchased the stock of Hadson Energy Resources Corporation,
(now known as Apache Energy Resources Corporation, AERC) for approximately
$98 million through a series of privately negotiated transactions and a merger
offer approved by a majority of AERC stockholders. In July 1993, Apache
completed the purchase of 4.2 million shares of AERC's outstanding common
stock, or approximately 68 percent of the AERC common stock then outstanding,
for $59.2 million. The Company agreed to pay an additional $1.00 per share
($4.2 million) to the selling stockholders if the Company increased its
ownership in AERC to 80 percent or more. Pursuant to the merger agreement
approved by AERC stockholders on November 12, 1993, AERC stockholders other
than Apache could elect to receive, for each share of AERC common stock, either
$15 in cash or .574 share of Apache common stock. Apache issued 307,977 shares
of Apache common stock valued at $7.9 million and paid a total of $76.1 million
to former stockholders of AERC as consideration for the merger. At December 31,
1993, Apache reflected a liability of $13.9 million accrued for AERC shares
which had not yet been surrendered to Apache. During 1994, Apache completed the
purchase of the remaining AERC shares.
Also in 1993, Apache entered into two agreements to purchase 104 Bcfe of
proved reserves from Hall-Houston Oil Company (Hall-Houston) for an aggregate
consideration of $113.7 million. In June 1993, Apache closed the first of the
two transactions, paying $29.3 million for Hall-Houston's interest in Mustang
Island Blocks 787 and 805. The second transaction, encompassing substantially
all of Hall-Houston's producing properties in the Gulf of Mexico for an
additional $84.4 million, was completed in August 1993. The acquisitions
included interests in 63 producing fields and 12 fields under development or
awaiting pipeline connections.
Effective November 1, 1992, Apache completed the acquisition of Shell
Offshore Inc.'s 93-percent working interest in Matagorda Island Blocks 681 and
682 in the Gulf of Mexico. Apache paid $57.4 million for properties, which
included 14 miles of gathering lines and approximately 11,500 net acres of
leases.
All of the above acquisitions have been accounted for using the purchase
method of accounting and have been included in the financial statements of
Apache since the dates of acquisition.
Effective May 1, 1992, Apache sold its 31.67-percent general partnership
interest in Natural Gas Clearinghouse (NGC) for $50.7 million. The Company
recognized a gain on the sale of approximately $28.3 million or $18.5 million
after tax.
The following unaudited pro forma summary of the Company's consolidated
results of operations in 1993 was prepared as if the Hall-Houston and AERC
acquisitions occurred as of January 1, 1993. The pro forma data for 1992
assumes that the Hall-Houston and AERC acquisitions and the NGC sale occurred
as of or prior to January 1, 1992. The pro forma data is based on numerous
assumptions and is not necessarily indicative of future operations.
F-10
<PAGE> 46
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------
(Unaudited) 1993 1992
----------- -------- --------
(In thousands, except per
share data)
<S> <C> <C>
Oil and gas production revenues . . . . . . . . . . . . $ 481,754 $ 472,914
Total revenues . . . . . . . . . . . . . . . . . . . . . 515,071 507,502
Net income . . . . . . . . . . . . . . . . . . . . . . . 36,970 27,016
Income per share . . . . . . . . . . . . . . . . . . . . $ .69 $ .57
Weighted average shares outstanding . . . . . . . . . . 53,812 47,212
</TABLE>
1995 Acquisition
On March 1, 1995, Apache purchased certain oil and gas properties from
Texaco Exploration and Production Inc. (Texaco) for an adjusted purchase price
of $571 million, effective January 1, 1995. The transaction is subject to
customary closing and post-closing adjustments. Apache delivered a $25 million
deposit, representing a portion of the purchase price, upon execution of the
purchase and sale agreement with Texaco in December 1994, and delivered the
balance in cash at closing. Funds for the Texaco transaction were obtained from
several sources, including increased borrowing capacity under the Company's
bank credit facility and proceeds of Apache's $172.5 million 6-percent
Convertible Subordinated Debentures due 2002, which were issued on January 4,
1995. (See Note 3.)
Planned Transactions
On December 21, 1994, Apache entered into a merger agreement with DEKALB
Energy Company (DEKALB), under which shareholders of DEKALB will receive, in
the aggregate, between eight and 8.9 million shares of Apache common stock and
DEKALB will become a wholly-owned subsidiary of Apache. The transaction will
be accounted for using the pooling of interests method and is expected to be
completed in April 1995. Apache and DEKALB estimate that the cost required to
complete the transaction will total between $8 and $10 million.
On February 15, 1995, Apache announced plans to sell non-core oil and gas
properties in the Company's Rocky Mountain region and close its Denver,
Colorado office. The Company anticipates that divestiture of selected Rocky
Mountain properties, together with the disposition of non-strategic assets in
its other operating regions, will result in total proceeds of approximately
$200 million.
2. INVESTMENTS IN EQUITY SECURITIES
Apache has certain investments in equity securities which are classified as
available for sale pursuant to SFAS No. 115. At December 31, 1994, the
aggregate cost basis totaled $7.2 million and the related aggregate fair value
approximated cost.
During 1994, the Company realized gross gains totaling $2.2 million from
the sale of available-for-sale securities. Apache utilizes the average cost
method in computing realized gains or losses, which are included in other
revenues on the accompanying Statement of Consolidated Income.
F-11
<PAGE> 47
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1993, Apache owned approximately 20 percent of the
outstanding shares of Key Production Company, Inc. (Key). In the fourth
quarter of 1994, Apache reduced its ownership interest in Key to approximately
10 percent and discontinued reporting equity earnings from the former
affiliate. Equity earnings attributable to Key, and an equity investment in
NGC during part of 1992 (See Note 1), is presented below:
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1994 1993 1992
------- -------- -------
(In thousands)
<S> <C> <C> <C>
Income from affiliates:
Key Production Company . . . . . . . . . . . . . . . . . . . . . . . $ 459 $ 624 $ 4
Natural Gas Clearinghouse . . . . . . . . . . . . . . . . . . . . . -- -- 2,691
------ ------- -------
$ 459 $ 624 $2,695
====== ======= ======
</TABLE>
3. DEBT
LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1994 1993
--------- ----------
(In thousands)
<S> <C> <C>
Senior debt:
Apache revolving bank facility . . . . . . . . . . . . . . . . . . . . . . $ 454,000 $ 240,000
9.25-percent notes due 2002, net of discount . . . . . . . . . . . . . . . 99,713 99,688
3.93-percent convertible notes due 1997 . . . . . . . . . . . . . . . . . . 75,000 75,000
---------- ----------
628,713 414,688
---------- ----------
Other obligations:
AEL acceptance facility . . . . . . . . . . . . . . . . . . . . . . . . . . 25,800 22,000
AERC bank facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 19,550
Share of offshore partnership financing . . . . . . . . . . . . . . . . . . 2,973 4,636
Other notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 1,152
---------- ----------
28,873 47,338
---------- ----------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657,586 462,026
Less: Current maturities . . . . . . . . . . . . . . . . . . . . . . . . . (100) (9,017)
---------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 657,486 $ 453,009
========== ==========
</TABLE>
At December 31, 1994, Apache had a $700 million revolving bank facility
funded by a group of banks. The maximum amount available was subject to
periodic redetermination of a borrowing base, determined solely at the
discretion of the banks, predicated upon the Company's oil and gas reserve
values and forecast rate of production. As of December 31, 1994, the borrowing
base was $560 million and the principal amount outstanding was $454 million.
The bank facility was scheduled to mature on April 30, 1998, and the agreement
provided for perpetual one-year extensions as requested year-by-year by the
Company and subject to the approval of the banks. Interest on amounts borrowed
was charged at the First National Bank of Chicago's base rate or at London
Interbank Offered Rates (LIBOR) plus a margin determined by the Company's
public senior debt rating and its ratio of debt to total capital. At December
31, 1994, the margin was .375 percent. Facility and commitment fees were also
determined similar to borrowing fees. The Company paid a facility fee of .25
percent on the available portion of the commitment and .125 percent of the
unavailable portion of the commitment.
F-12
<PAGE> 48
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On March 1, 1995, the Company's revolving bank facility agreement was
amended and restated, increasing the facility to $1 billion. The Company's
borrowing base, including the value of the Texaco properties, was initially set
at $765 million. The facility expires on March 1, 2000, and may be extended in
one-year increments with the lender's consent. In addition to the borrowing
base predicated on the Company's oil and gas reserve value, the bank facility
provides a non-conforming borrowing base as defined in the agreement. The
initial non-conforming borrowing base of $135 million is available until May
10, 1996, and at reduced amounts through November 4, 1996. Financial covenants
of the amended agreement are similar to those existing at December 31, 1994,
and are described below. Based on the Company's ratio of debt to total capital
at March 1, 1995, the interest rate margin over LIBOR increased from .375
percent to 1.125 percent. At the March 1, 1995 debt level, the Company will pay
a facility fee of .375 percent of the available portion of the commitment and
.1875 percent of the unavailable portion of the commitment.
The 9.25-percent notes totaling $100 million were issued in May 1992 and
will mature in June 2002. The notes are not redeemable prior to maturity.
In December 1992, Apache issued the 3.93-percent convertible notes.
These notes mature in November 1997, and are not redeemable prior to maturity.
They are convertible into Apache common stock at $27 per share, subject to
adjustment under certain circumstances.
The indentures for the two note issues impose substantially similar
obligations on the Company including limits on the Company's ability to incur
debt secured by certain liens and on its ability to enter into certain sale and
leaseback transactions. Upon certain changes in control of the Company, both
issues are subject to mandatory repurchase (or conversion at the option of the
noteholders in the case of the 3.93-percent notes).
Financial covenants of the bank facility and the 3.93-percent notes require
the Company to maintain a minimum consolidated tangible net worth ($576 million
as of December 31, 1994 and $650 million as amended on March 1, 1995), which
will be adjusted quarterly for subsequent earnings and equity transactions,
and to maintain a ratio of (i) earnings before interest expense, state and
federal taxes and depreciation, depletion and amortization to (ii) consolidated
interest expense of not less than 3.7:1 for the banks and 3.5:1 for the lenders
under the 3.93-percent notes. The Company was in compliance with all financial
covenants at December 31, 1994.
In conjunction with the AERC acquisition, Apache assumed two bank credit
agreements outstanding at the time it acquired a majority interest in AERC.
During 1994, Apache terminated a bank credit facility held in the name of AERC
and amended and restated the debt agreement of AERC's wholly-owned subsidiary,
Apache Energy Limited (AEL, formerly known as Hadson Energy Limited). The AEL
Acceptance Facility is a separate credit facility provided by Bank of Montreal
which provided funding for the construction of an offshore gas gathering
project. The borrowing base is $30 million, of which $25.8 million was
outstanding at December 31, 1994. The AEL credit facility is not guaranteed by
Apache.
An $18 million banking facility made by Apache on behalf of Apache Offshore
Investment Partnership had $11.1 million outstanding at December 31, 1994, of
which Apache's share was $3 million. Availability under this facility is
reduced quarterly by $1.5 million beginning in October 1995.
On January 4, 1995, Apache completed the issue of $172.5 million of
6-percent Convertible Subordinated Debentures due 2002 (6-percent debentures).
The debentures are convertible at the option of the holder into Apache common
stock at a conversion price of $30.68 per share.
As of December 31, 1994 and 1993, the Company had approximately $12 million
and $14 million, respectively, of unamortized costs associated with its various
debt obligations. These costs are reflected as deferred charges and other in
the accompanying Consolidated Balance Sheet and are being amortized over the
life of the related debt.
See Note 8 for disclosure concerning the fair value of debt instruments.
F-13
<PAGE> 49
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AGGREGATE MATURITIES OF DEBT (in thousands)
Proforma at
December 31, March 1,
1994 1995*
------------ ----------
<S> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . $ 100 $ 100
1996 . . . . . . . . . . . . . . . . . . . . . . . . 160 75,160
1997 . . . . . . . . . . . . . . . . . . . . . . . . 76,607 76,607
1998 . . . . . . . . . . . . . . . . . . . . . . . . 455,205 1,205
1999 . . . . . . . . . . . . . . . . . . . . . . . . 25,800 25,800
Thereafter . . . . . . . . . . . . . . . . . . . . . 99,714 1,037,214
-------- ----------
$657,586 $1,216,086
======== ==========
</TABLE>
*Pro forma data reflects the issuance of $172.5 million of 6 percent
debentures as described above and $840 million outstanding under the revolving
bank facility on March 1, 1995.
4. INCOME TAXES
As discussed in the Summary of Significant Accounting Policies, effective
January 1, 1993, the Company adopted SFAS No. 109 "Accounting for Income
Taxes." The cumulative effect of adopting this statement was not material to
the accompanying financial statements.
The total provision for income taxes consists of the following:
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1994 1993 1992
---------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Current taxes:
Federal. . . . . . . . . . . . . . . . . . . $ (3,750) $ -- $ 8,949
State. . . . . . . . . . . . . . . . . . . . -- -- 856
Foreign. . . . . . . . . . . . . . . . . . . -- -- 110
Deferred taxes . . . . . . . . . . . . . . . . . 25,370 20,571 14,034
---------- ----------- -----------
$ 21,620 $ 20,571 $ 23,949
========== =========== ===========
</TABLE>
The 1993 provision for income taxes includes a $3.5 million charge for the
change in federal statutory rates from 34 percent to 35 percent enacted under
the Omnibus Budget Reconciliation Act of 1993 (OBRA).
The 1992 provision for income taxes includes approximately $1.2 million
for Apache's tax provision related to its share of NGC's partnership income.
This provision was reflected as a reduction of equity in income of affiliates
in the Statement of Consolidated Income.
A reconciliation of the federal statutory income tax rates to the effective
rate is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------
1994 1993 1992
-------- --------- ---------
<S> <C> <C> <C>
Statutory income tax rate . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
State income tax, less federal benefit . . . . . . . . . . . . . 1.9 1.9 2.0
Reversal of prior period timing differences at rates in
excess of current statutory rates . . . . . . . . . . . . . . -- -- (1.8)
Utilization of federal income tax credits . . . . . . . . . . . (2.4) (3.7) --
Increase in corporate income tax rate provided for in OBRA . . . -- 6.0 --
All other, net . . . . . . . . . . . . . . . . . . . . . . . . . (1.0) (3.3) (.8)
----- ----- -----
33.5% 35.9% 33.4%
===== ===== =====
</TABLE>
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities using the provisions of enacted tax laws.
F-14
<PAGE> 50
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
The net deferred tax liability as of December 31, 1994, is comprised of the
following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ---------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Accrued expenses . . . . . . . . . . . . . . . . . . . $ (2,984) $ (8,696)
Deferred income . . . . . . . . . . . . . . . . . . . (30,343) (3,287)
Deferred compensation . . . . . . . . . . . . . . . . (1,927) (2,380)
Net operating loss carryforwards . . . . . . . . . . . (22,443) (18,392)
Alternative minimum tax credits . . . . . . . . . . . (20,792) (20,734)
Other . . . . . . . . . . . . . . . . . . . . . . . . (7,706) (4,238)
---------- ---------
Total deferred tax assets . . . . . . . . . . . . (86,195) (57,727)
---------- ---------
Deferred tax liabilities:
Depreciation, depletion and amortization . . . . . . . 234,441 181,981
Other . . . . . . . . . . . . . . . . . . . . . . . . 7,934 4,300
---------- ---------
Total deferred tax liabilities . . . . . . . . . 242,375 186,281
---------- ---------
Deferred income tax (asset) liability . . . . . . . . . . . . $ 156,180 $ 128,554
========== =========
</TABLE>
No valuation allowance has been recorded against deferred tax assets at
December 31, 1994.
U.S. deferred taxes have not been provided on foreign earnings totaling $25
million which are permanently reinvested abroad. Presently, limited foreign
tax credits are available to reduce the U.S. taxes on such amounts if
repatriated.
At December 31, 1994, the Company has U.S. federal net operating loss
carryforwards of $27 million and statutory depletion carryforwards of $6.6
million available to reduce future U.S. federal taxable income. The net
operating loss carryforwards will expire unless otherwise utilized, beginning
in 1995. The statutory depletion may be carried forward indefinitely. The
Company has alternative minimum tax (AMT) credit carryforwards of $20.8
million. AMT credits can be carried forward indefinitely and may only be used
to reduce regular tax liabilities in excess of AMT liabilities. The Company
also has foreign net operating loss carryforwards of $22.2 million and foreign
capital loss carryforwards of $8.4 million which may be carried forward
indefinitely and may be utilized to reduce future foreign taxable income.
5. ADVANCE FROM GAS PURCHASER
In December 1994, Apache received $67.4 million from a purchaser as an
advance payment for future natural gas deliveries of 20,000 MMBtu per day over
a six-year period commencing January 1995. As a condition of the arrangement
with the purchaser, Apache entered into a gas price swap contract with a third
party under which Apache became a fixed price payor at identical volumes and at
prices starting at $1.81 per MMBtu and escalating at $.10 per MMBtu per year
through the year 2000. In addition, the purchaser will pay to Apache a monthly
fee of $.05 per MMBtu on the contracted volumes. The net result of these
related transactions is that gas delivered to the purchaser will be reported as
revenue at prevailing spot prices in the future with Apache realizing a small
premium associated with the monthly fee to be paid by the purchaser.
The payment has been classified as an advance on the December 31, 1994
balance sheet and will be reduced as gas is delivered to the purchaser under
the terms of the contract. Gas volumes delivered to the purchaser will be
reported as revenues at prices used to calculate the amount advanced, before
inputed interest, minus or plus amounts paid or received by Apache applicable
to the price swap agreement. Interest expense will be recorded based on a
9 1/2-percent rate.
F-15
<PAGE> 51
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
6. CAPITAL STOCK
COMMON STOCK OUTSTANDING
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year . . . . . . . . . . . . . 61,085,414 46,936,240 46,854,794
Treasury shares issued (acquired), net . . . . . . . 129,852 119,087 19,791
Shares issued:
Public offering . . . . . . . . . . . . . . . . -- 5,795,000 --
Acquisition of AERC . . . . . . . . . . . . . . 2,974 305,003 --
Conversion of 7 1/2-percent debentures . . . . . -- 7,816,453 --
Dividend reinvestment plan . . . . . . . . . . . 13,789 -- --
Stock options . . . . . . . . . . . . . . . . . 207,975 113,631 61,655
---------- ---------- ----------
Balance, end of year . . . . . . . . . . . . . . . . 61,440,004 61,085,414 46,936,240
========== ========== ==========
</TABLE>
Public Offering -- In March 1993, Apache completed the public offering of
approximately 5.8 million shares of Apache common stock for net proceeds of
$131.8 million.
Stock Option Plans -- At December 31, 1994, common shares totaling
1,766,925 were reserved for issuance under stock option plans for officers and
key employees. The outstanding options expire at various dates through 2004 and
are exercisable at prices ranging from $8.625 to $26.875 with an aggregate
exercise price of $21 million. The following table summarizes the changes in
stock options for the year and the number of common shares available for grant
at year end:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding, beginning of year . . . . . . . . . . . 909,875 846,550 666,650
Exercised ($7.313 to $26.625) . . . . . . . . . . . (207,975) (115,200) (94,050)
Granted ($13.875 to $26.875) . . . . . . . . . . . . 376,200 264,600 326,700
Canceled or expired ($8.625 to $26.875) . . . . . . (125,800) (86,075) (52,750)
---------- ---------- ----------
Outstanding, end of year . . . . . . . . . . . . . . 952,300 909,875 846,550
========== ========== ==========
Available for grant, end of year . . . . . . . . . . 814,625 1,121,775 1,300,300
========== ========== ==========
</TABLE>
Rights to Purchase Common Stock -- In 1986, the Company declared a
dividend of one right to purchase one share of common stock at $50 per share
(subject to adjustment) on each outstanding share of common stock (the Rights).
The Rights are exercisable only if certain persons or groups acquire 20 percent
or more of the common stock or commence a tender offer for 30 percent or more
of the common stock. If the Company engages in certain business combinations or
a 20-percent stockholder engages in certain transactions with the Company, the
Rights become exercisable for Apache common stock or common stock of the
corporation acquiring the Company (as the case may be) at 50 percent of the
then-market price. Any Rights that are or were beneficially owned by a person
who has acquired 20 percent or more of the common stock and who engages in
certain transactions or realizes the benefits of certain transactions with the
Company will become void. The Company may redeem the Rights at a specified
price at any time until 10 business days after public announcement that a
person has acquired 20 percent or more of the outstanding shares of common
stock. The Rights will expire on January 31, 1996, unless earlier redeemed by
the Company. Unless the Rights have been previously redeemed, all shares of
common stock issued by the Company will include Rights.
Preferred Stock -- The Company has five million shares of no par
preferred stock authorized, of which none are outstanding.
F-16
<PAGE> 52
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
7. NON-CASH INVESTING AND FINANCING ACTIVITIES
A summary of non-cash investing and financing activities is presented below.
In 1993, Apache purchased Hadson Energy Resources Corporation (now AERC)
for approximately $98 million in cash and Apache common stock. The accompanying
financial statements included the following attributable to the acquisition:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Value of properties acquired, including gathering facilities . . . . . . . . . . $ 159,996
Common stock issued (305,003 shares) . . . . . . . . . . . . . . . . . . . . . . (7,777)
Liability for AERC shares not surrendered as of December 31, 1993 . . . . . . . (13,906)
Cash paid, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . (70,692)
---------
Net AERC liabilities added through consolidation . . . . . . . . . . . . . . . . $ 67,621
=========
</TABLE>
During the first quarter of 1994, the Company issued 2,974 shares of
Apache common stock and paid $13.9 million for AERC shares which had not been
surrendered by the end of 1993.
In September 1993, Apache called for the redemption of its 7 1/2-percent
convertible subordinated debentures due 2000. Following receipt of the notice
of redemption, nearly all holders of the debentures elected to convert the
principal amount of their debentures into shares of Apache common stock.
Holders of less than one-tenth of one percent of the debentures elected to
receive cash ($.1 million).
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Long-term debt converted into common stock . . . . . . . . . . . . . . . . . . $149,900
Unamortized debt issue costs charged to equity . . . . . . . . . . . . . . . . (2,686)
--------
Increase to shareholders' equity (common stock issued, 7.8 million shares) . . $147,214
========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest, net of amounts capitalized . . . . . . . . . . $26,291 $30,379 $27,373
Income taxes, net of refunds . . . . . . . . . . . . . . 6,260 (780) 19,642
</TABLE>
F-17
<PAGE> 53
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
8. FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISK
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
-------------------- ---------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents . . . . . . . . . $ 15,063 $ 15,063 $ 17,064 $ 17,064
Investment securities . . . . . . . . . . . 7,242 7,422 -- --
Long-term debt:
Bank debt . . . . . . . . . . . . . . . (479,800) (479,800) (281,550) (281,550)
9.25-percent notes due 2002 . . . . . . (99,714) (100,213) (99,688) (100,311)
3.93-percent convertible notes due 1997 (75,000) (79,928) (75,000) (87,323)
Unrecognized financial instruments:
Interest rate swap . . . . . . . . . . . -- (181) -- --
Commodity price swaps . . . . . . . . . -- (3,090) -- --
</TABLE>
The following methods and assumptions were used to estimate the fair value
of the financial instruments summarized in the above table. The carrying values
of trade receivables and trade payables included in the accompanying
Consolidated Balance Sheet approximated market value at December 31, 1994 and
1993.
Cash and Cash Equivalents -- The carrying amounts approximated fair value
due to the short maturity of these instruments.
Investment Securities -- The fair value of investments are based on quoted
market prices.
Debt -- The fair value of the 9.25-percent notes was based on the quoted
market price for that issue, while the fair value of the 3.93-percent notes was
estimated based on quotes obtained from private investment firms. The
difference between the carrying amount and the fair value of the Company's
other debt obligations was not significant.
Interest Rate Instruments -- The Company periodically enters into various
financial instruments to manage its interest rate exposure. At December 31,
1994, the Company had one outstanding interest rate swap agreement with a
notional principal amount totaling $14 million. The notional amount reduces by
$2 million quarterly through July 1996, with interest fixed at 8.15 percent.
The fair value of the open interest rate swap was the estimated amount that
the Company would pay to terminate the swap agreement, taking into account
current interest rates and the credit worthiness of the swap counterparties.
F-18
<PAGE> 54
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
Commodity Price Hedges -- The Company enters into certain commodity
derivative contracts to reduce the risk caused by fluctuations in the prices of
oil and natural gas. During the last three years, Apache has used swaps, puts
and fixed-price contracts to hedge its commodity prices. Apache's hedging
activities are primarily conducted with major investment and commercial banks
which the Company believes are minimal credit risks. The agreements call for
Apache to receive, or make, payments based upon the differential between a
fixed and a variable commodity price as specified in the contract.
At December 31, 1994, Apache had two open price swap contracts as discussed
below. Also at December 31, 1994, Apache's Consolidated Balance Sheet included
deferred credits totaling $.9 million for gains realized on the early
termination of commodity price hedges. The hedging gains will be amortized to
oil and gas production revenues over periods ranging from one to 38 months.
Apache entered into a swap agreement under which the Company will receive a
fixed price of $2.1825 per MMBtu and pay the floating price on 10,000 MMBtu per
day over a five-year period starting in January 1995. Based on the estimated
amount Apache would receive to terminate the swap agreement, the fair value of
this asset at December 31, 1994 was $3.3 million.
Apache also entered into a swap agreement, as discussed in Note 5, to
become a fixed price payor on 20,000 MMBtu per day over a six-year period
starting January 1995. The estimated amount Apache would have to pay to
terminate this contract at December 31, 1994 was $6.4 million.
In connection with the purchase of MW Petroleum Corporation in mid-1991,
the Company and Amoco Production Company (Amoco) entered into a hedging
agreement. Under the terms of this agreement, Apache would receive support
payments in the event oil prices fell below specified reference prices for any
year during the two-year period ended June 30, 1993, and Amoco will receive
payments in the event oil prices rose above specified reference prices for any
year during the eight-year period ending June 30, 1999, or in the event gas
prices exceeded specified reference prices for any year during the five-year
period ending June 30, 1996. In the event price sharing payments are due to
Amoco, the volumes listed below would be doubled until Amoco recovers its net
payments to Apache ($5.8 million through the contract year ended June 30, 1994)
plus interest.
The notional volumes and the reference prices specified in the Amoco price
support agreement are summarized below:
<TABLE>
<CAPTION>
Oil Gas
------------------ -------------
Year Ended June 30: MMbbl Price Bcf Price
------------------- ------ ----- --- -----
<S> <C> <C> <C> <C>
1995 . . . . . . . . . . . 2.8 $ 26.25 12.3 $ 2.45
1996 . . . . . . . . . . . 2.4 27.80 10.5 2.68
1997 . . . . . . . . . . . 2.0 29.48 -- --
1998 . . . . . . . . . . . 1.7 31.25 -- --
1999 . . . . . . . . . . . 1.4 33.12 -- --
</TABLE>
Based on the Company's projection of oil and gas prices for the years noted
above, Apache will not be liable to Amoco for future price sharing payments.
F-19
<PAGE> 55
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
Investment in Program Operations -- Prior to 1989, the Company organized
numerous oil and gas limited partnerships. At December 31, 1994, Apache was
contingently liable for $8.1 million of bank financing arranged by the Company
on behalf of the Apache Offshore Investment Partnership (See Note 3).
As compensation for its services as general partner and operator, the
Company shares in oil and gas revenues, receives a management fee in accordance
with formulas described in each limited partnership agreement, and is
reimbursed for administrative, exploration and production expenses incurred on
behalf of the partnerships. These reimbursements ($.5 million, $.6 million and
$4.8 million in the years 1994, 1993 and 1992, respectively) have been netted
against operating expenses in the accompanying financial statements.
Litigation -- The Company is involved in litigation and is subject to
governmental and regulatory controls arising in the ordinary course of
business. It is the opinion of the Company's management that all claims and
litigation involving the Company are not likely to have a material adverse
effect on its financial position or results of operations.
Environmental -- Apache, as an owner and operator of oil and gas
properties, is subject to various federal, state, local and foreign country
laws and regulations relating to discharge of materials into, and protection
of, the environment. These laws and regulations may, among other things, impose
liability on the lessee under an oil and gas lease for the cost of pollution
clean-up resulting from operations, subject the lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas and impose restrictions on the injection of liquids into subsurface
aquifers that may contaminate ground water. Apache maintains insurance coverage
which it believes are customary in the industry, although it is not fully
insured against all environmental risks. The Company is not aware of any
environmental claims existing as of December 31, 1994, which would have a
material impact on its financial position or results of operations.
International Commitments -- The Company, through its subsidiaries, has
acquired or has been conditionally or unconditionally granted exploration
rights in Australia, The Congo, Egypt, China, Indonesia and the Ivory Coast.
In order to comply with the contracts and agreements granting these rights, the
Company, through various wholly-owned subsidiaries, is committed to expend
approximately $50 million through 1997.
Retirement and Deferred Compensation Plans -- The Company provides a
retirement/401(k) savings plan and a non-qualified retirement/savings plan for
employees. These plans allow participating employees to elect to contribute up
to 10 percent of their salaries, with Apache making matching contributions up
to a maximum of six percent of each employee's salary. In addition, the Company
annually contributes a percentage of each participating employee's
compensation, as defined, to the plan. Vesting in the Company's contributions
occurs at the rate of 20 percent per year. Total expenses under these plans
were $5.2 million, $5 million and $4.2 million for 1994, 1993 and 1992,
respectively.
F-20
<PAGE> 56
APACHE CORPORATION SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --- (CONTINUED)
Lease Commitments -- The Company has leases for office space with varying
expiration dates through 2007. Net rental expense was $4.1 million, $4.6
million and $5.7 million for 1994, 1993 and 1992, respectively.
As of December 31, 1994, minimum rental commitments under long-term
operating leases are as follows:
<TABLE>
<CAPTION>
Net
Minimum
Rental Sublease Rental
Commitments Rentals Commitments
---------- ------- -----------
(In thousands)
<S> <C> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . $ 6,744 $ (1,355) $ 5,389
1996 . . . . . . . . . . . . . . . . . . . . . . . . 6,858 (1,396) 5,462
1997 . . . . . . . . . . . . . . . . . . . . . . . . 5,171 (582) 4,589
1998 . . . . . . . . . . . . . . . . . . . . . . . . 4,986 -- 4,986
1999 . . . . . . . . . . . . . . . . . . . . . . . . 5,433 -- 5,433
Thereafter . . . . . . . . . . . . . . . . . . . . . 37,150 -- 37,150
--------- -------- ---------
$ 66,342 $ (3,333) $ 63,009
========= ======== =========
</TABLE>
10. CUSTOMER INFORMATION
Major Purchasers -- NGC has been the principal purchaser of Apache's spot
market gas production since April 1990. Sales to NGC accounted for 40 percent,
36 percent and 27 percent of the Company's oil and gas revenues in 1994, 1993
and 1992, respectively. Sales to Amoco represented 11 percent and 27 percent
of the Company's 1993 and 1992 oil and gas revenues, respectively, and were
less than 10 percent for 1994.
Concentration of Credit Risk -- The Company's revenues are derived
principally from uncollateralized sales to customers in the oil and gas
industry; therefore, customers may be similarly affected by changes in economic
and other conditions within the industry. Apache has not experienced
significant credit losses on such sales. The Company believes that if the NGC
contract was terminated, it would not have a material adverse effect on the
Company due to the existence of alternative marketing arrangements and
purchasers.
The proved gas reserves in the Carnarvon Basin of Western Australia
acquired in the AERC acquisition are dedicated for sale to the Gas Corporation
of Western Australia, a corporation owned by the government of Western
Australia, doing business as AlintaGas (formerly SECWA), pursuant to a
long-term, take-or-pay contract. If the AlintaGas contract were terminated,
the Company might not be able to find other markets for the gas produced from
these fields. Although the Company considers such an occurrence highly
unlikely, the loss of the AlintaGas contract might force the Company to
write-down the carrying value of these fields.
F-21
<PAGE> 57
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
Oil and Gas Operations -- The following table sets forth revenue and
direct cost information relating to the Company's oil and gas exploration and
production activities. Apache has no long-term agreements to purchase oil or
gas production from foreign governments or authorities.
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1994 1993 1992
---- ---- ----
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Oil and gas revenues . . . . . . . . . . . . . . . . . . $ 467,161 $ 421,845 $ 386,533
--------- --------- ---------
Operating costs:
Depreciation, depletion and amortization . . . . . . 212,329 163,285 149,909
Lease operating . . . . . . . . . . . . . . . . . . 107,361 102,830 99,934
Production taxes . . . . . . . . . . . . . . . . . . 22,280 21,218 23,803
Income tax . . . . . . . . . . . . . . . . . . . . . 44,821 50,035 39,045
--------- --------- ---------
386,791 337,368 312,691
--------- --------- ---------
Results of operations . . . . . . . . . . . . . . . . . . $ 80,370 $ 84,477 $ 73,842
========= ========= =========
Amortization rate . . . . . . . . . . . . . . . . . . . . 45.5% 38.7% 38.8%
========= ========= =========
INTERNATIONAL
Oil and gas revenues . . . . . . . . . . . . . . . . . . $ 26,339 $ 15,497 $ 8,019
--------- --------- ---------
Operating costs:
Depreciation, depletion and amortization . . . . . . 11,754 7,214 3,883
Impairments . . . . . . . . . . . . . . . . . . . . 7,300 23,200 12,000
Lease operating . . . . . . . . . . . . . . . . . . 6,257 3,456 1,600
Production taxes . . . . . . . . . . . . . . . . . . 1,922 609 --
Income tax (benefit) . . . . . . . . . . . . . . . . (295) (6,264) (3,181)
--------- --------- ---------
26,938 28,215 14,302
--------- --------- ---------
Results of operations . . . . . . . . . . . . . . . . . . $ (599) $ (12,718) $ (6,283)
========= ========= =========
Amortization rate-recurring . . . . . . . . . . . . . . . 44.6% 46.6% 48.7%
========= ========= ==========
TOTAL
Oil and gas revenues . . . . . . . . . . . . . . . . . . $ 493,500 $ 437,342 $ 394,552
--------- --------- ---------
Operating costs:
Depreciation, depletion and amortization . . . . . . 224,083 170,499 153,792
Impairments . . . . . . . . . . . . . . . . . . . . 7,300 23,200 12,000
Lease operating . . . . . . . . . . . . . . . . . . 113,618 106,286 101,534
Production taxes . . . . . . . . . . . . . . . . . . 24,202 21,827 23,803
Income tax . . . . . . . . . . . . . . . . . . . . . 44,526 43,771 35,864
--------- --------- ---------
413,729 365,583 326,993
--------- --------- ---------
Results of operations . . . . . . . . . . . . . . . . . . $ 79,771 $ 71,759 $ 67,559
========= ========= =========
</TABLE>
F-22
<PAGE> 58
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Costs Not Being Amortized -- The following table sets forth a summary of
oil and gas property costs not being amortized at December 31, 1994, by the
year in which such costs were incurred.
<TABLE>
<CAPTION>
1991 and
Total 1994 1993 1992 Prior
--------- -------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Leasehold and seismic . . . . . . . . . . . . . . $ 102,466 $ 38,220 $ 28,828 $ 2,931 $ 32,487
Exploration and development . . . . . . . . . . . 9,206 9,206 -- -- --
International . . . . . . . . . . . . . . . . . . 34,253 22,856 11,397 -- --
--------- -------- --------- ------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 145,925 $ 70,282 $ 40,225 $ 2,931 $ 32,487
========= ======== ========= ======= =========
</TABLE>
Capitalized Costs Incurred -- The following table sets forth the
capitalized costs incurred in oil and gas producing activities.
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Acquisition of proved properties . . . . . . . . . . . . $ 179,972 $ 242,659 $ 62,955
Acquisition of unproved properties . . . . . . . . . . . 32,526 14,342 8,226
Exploration . . . . . . . . . . . . . . . . . . . . . . . 16,722 16,979 17,074
Development . . . . . . . . . . . . . . . . . . . . . . . 216,451 164,839 93,277
Capitalized interest . . . . . . . . . . . . . . . . . . 4,889 4,764 6,035
Property sales . . . . . . . . . . . . . . . . . . . . . (5,854) (3,255) (37,167)
---------- ---------- ----------
444,706 440,328 150,400
---------- ---------- ----------
INTERNATIONAL
Acquisition of proved properties . . . . . . . . . . . . -- 81,942 --
Exploration . . . . . . . . . . . . . . . . . . . . . . . 30,089 18,006 10,091
Development . . . . . . . . . . . . . . . . . . . . . . . 1,853 -- 1,988
---------- ---------- ----------
31,942 99,948 12,079
---------- ---------- ----------
TOTAL
Acquisition of proved properties . . . . . . . . . . . . 179,972 324,601 62,955
Acquisition of unproved properties . . . . . . . . . . . 32,526 14,342 8,226
Exploration . . . . . . . . . . . . . . . . . . . . . . . 46,811 34,985 27,165
Development . . . . . . . . . . . . . . . . . . . . . . . 218,304 164,839 95,265
Capitalized interest . . . . . . . . . . . . . . . . . . 4,889 4,764 6,035
Property sales . . . . . . . . . . . . . . . . . . . . . (5,854) (3,255) (37,167)
---------- ---------- ----------
$ 476,648 $ 540,276 $ 162,479
- ------------------ ========== ========== ==========
</TABLE>
Foreign acquisitions in 1993 included $16.8 million of unevaluated costs
added through the merger of AERC.
F-23
<PAGE> 59
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Capitalized Costs -- The following table sets forth the capitalized costs
and related accumulated depreciation, depletion and amortization, including
impairments, relating to the Company's oil and gas production, exploration and
development activities.
<TABLE>
<CAPTION>
December 31,
------------------------------------
1994 1993
---------- --------
(In thousands)
<S> <C> <C>
UNITED STATES
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,810,670 $ 2,390,644
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 111,672 86,992
------------ -------------
2,922,342 2,477,636
Accumulated depreciation, depletion and amortization . . . . . . . . . (1,383,556) (1,171,227)
------------ -------------
1,538,786 1,306,409
------------ -------------
INTERNATIONAL
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,451 126,157
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 34,253 18,605
------------ -------------
176,704 144,762
Accumulated depreciation, depletion and amortization . . . . . . . . . (79,270) (60,216)
------------ -------------
97,434 84,546
------------ -------------
TOTAL
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,953,121 2,516,801
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 145,925 105,597
------------ -------------
3,099,046 2,622,398
Accumulated depreciation, depletion and amortization . . . . . . . . . (1,462,826) (1,231,443)
------------ -------------
$ 1,636,220 $ 1,390,955
============ =============
</TABLE>
F-24
<PAGE> 60
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Oil and Gas Reserve Information -- Proved oil and gas reserve quantities
are based on estimates prepared by the Company's engineers in accordance with
guidelines established by the Securities and Exchange Commission (SEC). The
Company's estimates of proved reserve quantities of its domestic properties and
certain international properties are subject to review by Ryder Scott Company
Petroleum Engineers, independent petroleum engineers. International proved
reserves, for all periods presented below, are located in Australia.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and projecting future rates of production and timing of
development expenditures. The following reserve data represents estimates only
and should not be construed as being exact.
<TABLE>
<CAPTION>
OIL, CONDENSATE AND
NATURAL GAS LIQUIDS 1994 1993 1992
----------------------- ----------------------- ----------------------
United United United
States Int'l Total States Int'l Total States Int'l Total
------ ------- ------- ------- ------- ------ ------- ------ -----
(Thousands of barrels)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total proved reserves:
Beginning of year . . . . . . . . . 83,723 6,000 89,723 80,195 464 80,659 79,166 648 79,814
Extensions, discoveries and other
additions . . . . . . . . . . . . 9,669 349 10,018 10,885 -- 10,885 7,112 -- 7,112
Purchases of minerals in-place . . 9,232 -- 9,232 9,871 5,095 14,966 226 -- 226
Revisions of previous estimates . . 5,347 273 5,620 (3,215) 1,125 (2,090) 7,796 206 8,002
Production . . . . . . . . . . . . (12,418) (1,159) (13,577) (12,096) (684) (12,780) (12,199) (390) (12,589)
Sales of properties . . . . . . . . (1,108) -- (1,108) (1,917) -- (1,917) (1,906) -- (1,906)
------ ----- ------ ------- ----- ------- ------- ----- -------
End of year . . . . . . . . . . . . 94,445 5,463 99,908 83,723 6,000 89,723 80,195 464 80,659
====== ====== ====== ======= ====== ======= ======= ===== =======
Proved developed reserves:
Beginning of year . . . . . . . . . 74,288 5,113 79,401 72,596 464 73,060 68,573 648 69,221
End of year . . . . . . . . . . . . 84,085 5,322 89,407 74,288 5,113 79,401 72,596 464 73,060
</TABLE>
<TABLE>
<CAPTION>
NATURAL GAS 1994 1993 1992
--------------------------- -------------------------- -------------------------
United United United
States Int'l Total States Int'l Total States Int'l Total
-------- ------- ------- ------- ------ ----- ------ ----- ------
(Million cubic feet))
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total proved reserves:
Beginning of year . . . . . . . . . 814,859 33,360 848,219 643,299 -- 643,299 602,048 -- 602,048
Extensions, discoveries and other
additions . . . . . . . . . . . . 190,386 408 190,794 119,210 -- 119,210 68,650 -- 68,650
Purchases of minerals in-place . . 158,309 -- 158,309 174,115 33,343 207,458 68,685 -- 68,685
Revisions of previous estimates . . (21,937) 1,114 (20,823) (7,335) 1,327 (6,008) 34,042 -- 34,042
Production . . . . . . . . . . . . (152,994) (2,911) (155,905) (109,312) (1,310) (110,622) (95,982) -- (95,982)
Sales of properties . . . . . . . . (4,335) -- (4,335) (5,118) -- (5,118) (34,144) -- (34,144)
------- ----- -------- ------- ----- ------- ------- ---- ---------
End of year . . . . . . . . . . . . 984,288 31,971 1,016,259 814,859 33,360 848,219 643,299 -- 643,299
======== ======= ========= ======== ======= ======== ======== ==== ========
Proved developed reserves:
Beginning of year . . . . . . . . . 696,421 24,251 720,672 585,424 -- 585,424 549,742 -- 549,742
End of year . . . . . . . . . . . . 888,039 22,265 910,304 696,421 24,251 720,672 585,424 -- 585,424
</TABLE>
F-25
<PAGE> 61
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
Future Net Cash Flows -- Future revenues are based on year-end prices
except in those instances where the sale of natural gas is covered by contract
terms providing for determinable escalations. Operating costs, production and
ad valorem taxes and future development costs are based on current costs with
no escalation.
The following table sets forth unaudited information concerning future net
cash flows for oil and gas reserves, net of income tax expense. Income tax
expense has been computed using expected future tax rates and giving effect to
permanent differences and credits which, under current laws, relate to oil and
gas producing activities. This information does not purport to present the fair
market value of the Company's oil and gas assets, but does present a
standardized disclosure concerning possible future net cash flows that would
result under the assumptions used.
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Cash inflows . . . . . . . . . . . . . . . . . . . . . . $ 3,401,300 $ 3,062,525 $ 2,789,334
Production and development costs . . . . . . . . . . . . (1,294,801) (1,085,205) (1,045,549)
Income tax expense . . . . . . . . . . . . . . . . . . . (376,932) (362,353) (338,177)
----------- ----------- -----------
Net cash flows . . . . . . . . . . . . . . . . . . . . . 1,729,567 1,614,967 1,405,608
10-percent annual discount rate . . . . . . . . . . . . . (628,408) (550,887) (542,118)
----------- ----------- -----------
Discounted future net cash flows . . . . . . . . . . . . 1,101,159 1,064,080 863,490
----------- ----------- -----------
INTERNATIONAL
Cash inflows . . . . . . . . . . . . . . . . . . . . . . 163,303 154,466 9,231
Production and development costs . . . . . . . . . . . . (68,217) (57,281) (5,903)
Income tax expense . . . . . . . . . . . . . . . . . . . (27,910) (24,680) (588)
----------- ----------- -----------
Net cash flows . . . . . . . . . . . . . . . . . . . . . 67,176 72,505 2,740
10-percent annual discount rate . . . . . . . . . . . . . (15,366) (21,209) (26)
----------- ----------- -----------
Discounted future net cash flows . . . . . . . . . . . . 51,810 51,296 2,714
----------- ----------- -----------
TOTAL
Cash inflows . . . . . . . . . . . . . . . . . . . . . . 3,564,603 3,216,991 2,798,565
Production and development costs . . . . . . . . . . . . (1,363,018) (1,142,486) (1,051,452)
Income tax expense . . . . . . . . . . . . . . . . . . . (404,842) (387,033) (338,765)
----------- ----------- -----------
Net cash flows . . . . . . . . . . . . . . . . . . . . . 1,796,743 1,687,472 1,408,348
10-percent annual discount rate . . . . . . . . . . . . . (643,774) (572,096) (542,144)
----------- ----------- -----------
Discounted future net cash flows* . . . . . . . . . . . . $ 1,152,969 $ 1,115,376 $ 866,204
- ------------------ =========== =========== ===========
</TABLE>
* Estimated future net cash flows before income tax expense, discounted 10
percent, totaled approximately $1.40 billion, $1.36 billion and $1.06
billion as of December 31, 1994, 1993 and 1992, respectively.
F-26
<PAGE> 62
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
The following table sets forth the principal sources of change in the
discounted future net cash flows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------
1994 1993 1992
------- --------- -------
(In thousands)
<S> <C> <C> <C>
Sales, net of production costs . . . . . . . . . . . . . . $ (355,680) $ (309,229) $ (269,215)
Net change in prices and production costs . . . . . . . . . (113,871) (78,162) (23,318)
Discoveries and improved recovery, net of related costs . . 176,429 205,255 113,467
Change in future development costs . . . . . . . . . . . . 26,462 450 16,913
Revision of quantities . . . . . . . . . . . . . . . . . . 12,499 (29,360) 78,020
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . 163,511 347,860 99,228
Accretion of discount . . . . . . . . . . . . . . . . . . . 135,912 106,256 99,797
Change in income taxes . . . . . . . . . . . . . . . . . . (134) (47,387) (17,609)
Sales of properties . . . . . . . . . . . . . . . . . . . . (6,878) (3,500) (40,413)
Change in production rates and other . . . . . . . . . . . (657) 56,989 (9,869)
---------- ---------- ---------
$ 37,593 $ 249,172 $ 47,001
========== ========== =========
</TABLE>
Impact of Pricing -- The estimates of cash flows and reserve quantities
shown above are based on year-end oil and gas prices, except in those cases
where future gas sales are covered by contracts at specified prices. Estimates
of future liabilities and receivables applicable to oil and gas commodity
hedges are reflected in future cash flows from proved reserves with such
estimates based on prices in effect as of the date of the reserve report.
Fluctuations are largely due to supply and demand perceptions for natural gas
and volatility in oil prices.
Under SEC rules, companies that follow full cost accounting methods are
required to make quarterly "ceiling test" calculations. Under this test,
capitalized costs of oil and gas properties may not exceed the present value of
estimated future net revenues from proved reserves, discounted at 10 percent,
plus the lower of cost or fair market value of unproved properties, as adjusted
for related tax effects and deferred tax reserves. Application of these rules
during periods of relatively low oil and gas prices, even if of short-term
duration, may result in write-downs.
Many full cost companies, including Apache, are concerned about the
impact of prolonged unfavorable gas prices on their ceiling test calculations.
A further deterioration of gas or oil prices from year-end levels would likely
result in the Company recording a non-cash charge to earnings related to its
oil and gas properties in the first quarter of 1995. SEC rules permit the
exclusion of capitalized costs and present value of recently acquired
properties in performing ceiling test calculations. Pursuant to these rules,
Apache has requested waivers and the SEC has granted one-year waivers with
respect to the properties acquired from Texaco and Crystal. If the ceiling is
exceeded on all domestic properties, Apache will be required to perform an
additional ceiling test excluding the Texaco and Crystal properties and record
a write-down of carrying value if the ceiling is still exceeded.
F-27
<PAGE> 63
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Total
-------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
1994
Revenues . . . . . . . . . . . . . . . . $121,591 $134,947 $140,765 $148,318 $545,621
Expenses, net . . . . . . . . . . . . . . 112,184 124,751 130,191 135,658 502,784
-------- -------- -------- -------- --------
Net income . . . . . . . . . . . . . . . $ 9,407 $ 10,196 $ 10,574 $ 12,660 $ 42,837
======== ======== ======== ======== ========
Net income per common share . . . . . . . $ .15 $ .17 $ .17 $ .21 $ .70
======== ======== ======== ======== ========
1993
Revenues . . . . . . . . . . . . . . . . $108,592 $111,270 $122,013 $124,763 $466,638
Expenses, net . . . . . . . . . . . . . . 97,000 99,775 120,932 111,597 429,304
------- ------- -------- -------- --------
Net income . . . . . . . . . . . . . . . $ 11,592 $ 11,495 $ 1,081 $ 13,166 $ 37,334
======== ======== ======== ======== ========
Net income per common share . . . . . . . $ .24 $ .22 $ .02 $ .22 $ .70
======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 -- Stock Purchase Agreement, dated July 1, 1991, between Registrant and Amoco Production
Company (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on
Form 8-K, dated July 1, 1991, SEC File No. 1-4300, filed July 19, 1991).
2.2 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as seller, and
Registrant, as buyer, dated as of June 2, 1993 (incorporated by reference to Exhibit
10.1 to Registrant's Current Report on Form 8-K, dated August 31, 1993, SEC File No.
1-4300, filed September 7, 1993).
2.3 -- Purchase and Sale Agreement between Hall-Houston Oil Company, as seller, and
Registrant, as buyer, dated as of August 13, 1993 (incorporated by reference to
Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated August 31, 1993, SEC
File No. 1-4300, filed September 7, 1993).
2.4 -- Form of Acquisition Agreement between Registrant, HERC Acquisition Corporation and
Hadson Energy Resources Corporation, dated August 26, 1993, and amended September 28,
1993 (incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement
on Form S-4, Registration No. 33-67954, filed September 29, 1993).
2.5 -- Purchase and Sale Agreement by and between Texaco Exploration and Production Inc., as
seller, and Registrant, as buyer, dated December 22, 1994 (incorporated by reference
to Exhibit 99.3 to Registrant's Current Report on Form 8-K, dated November 29, 1994,
SEC File No. 1-4300, filed December 29, 1994).
2.6 -- Agreement and Plan of Merger among Registrant, XPX Acquisitions, Inc. and DEKALB
Energy Company, dated December 21, 1994 (incorporated by reference to Exhibit 2.1 to
Registrant's Registration Statement on Form S-4, Registration No. 33-57321, filed
January 17, 1995).
2.7 -- Matagorda Island 681 Field Purchase and Sale Agreement with Option to Exchange, dated
November 24, 1992, between Shell Offshore Inc., SOI Royalties Inc., and Registrant
(incorporated by reference to Exhibit 10.7 to Apache Offshore Investment Partnership's
Annual Report on Form 10-K for year ended December 31, 1992, SEC File No. 0-13546).
3.1 -- Restated Certificate of Incorporation of Registrant, dated December 1, 1993, as filed
with the Secretary of State of Delaware on December 16, 1993 (incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on Form 10-K for year ended
December 31, 1993, SEC File No. 1-4300).
3.2 -- Bylaws of Registrant, dated as of December 9, 1992 (incorporated by reference to
Exhibit 3.3 to Registrant's Annual Report on Form 10-K for year ended December 31,
1992, SEC File No. 1-4300).
4.1 -- Form of common stock certificate (incorporated by reference to Exhibit 4.4 to
Amendment No. 1 to Registrant's Registration Statement on Form S-3, Registration No.
33-5097, filed May 16, 1986).
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.2 -- Rights Agreement, dated as of January 10, 1986, between Registrant and First Trust
Company, Inc., rights agent, relating to the declaration of Rights to Registrant's
common stockholders of record on January 24, 1986 (incorporated by reference to
Exhibit 4.9 to Registrant's Annual Report on Form 10-K for year ended December 31,
1985, SEC File No. 1-4300).
10.1 -- Second Amended and Restated Credit Agreement, dated April 30, 1994, among Registrant,
the lenders named therein, and The First National Bank of Chicago and Chemical Bank,
as agents (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for quarter ended June 30, 1994, SEC File No. 1-4300).
*10.2 -- Third Amended and Restated Credit Agreement, dated March 1, 1995, among Registrant,
the lenders named therein, and The First National Bank of Chicago, as Administrative
Agent and Arranger, and Chemical Bank, as Co-Agent and Arranger.
10.3 -- Fiscal Agency Agreement, dated as of January 4, 1995, between Registrant and Chemical
Bank, as fiscal agent (incorporated by reference to Exhibit 99.2 to Registrant's
Current Report on Form 8-K, dated December 6, 1994, SEC File No. 1-4300, filed January
11, 1995.)
+10.4 -- 1982 Employee Stock Option Plan, as updated in January 1987 to conform to the Tax
Reform Act of 1986 (incorporated by reference to Exhibit 10.7 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.5 -- Apache Corporation Corporate Administrative Group Incentive Plan, effective as of
January 1, 1989 (incorporated by reference to Exhibit 10.8 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.6 -- First Amendment to Apache Corporation Corporate Administrative Group Incentive Plan,
effective January 1, 1990 (incorporated by reference to Exhibit 10.14 to Registrant's
Annual Report on Form 10-K for year ended December 31, 1993, SEC File No. 1-4300).
* +10.7 -- Apache Corporation Retirement/401(k) Savings Plan, dated December 22, 1994, effective
January 1, 1995.
+10.8 -- Non-Qualified Retirement/Savings Plan of Apache Corporation, dated November 16, 1989
(incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.9 -- Apache International, Inc. Common Stock Award Plan, dated February 12, 1990
(incorporated by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.10 -- Apache Corporation 1990 Phantom Stock Appreciation Plan, dated as of September 28,
1990 (incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form
10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.11 -- Apache Corporation 1990 Stock Incentive Plan, dated as of September 28, 1990
(incorporated by reference to Exhibit 10.18 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1990, SEC File No. 1-4300).
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
+10.12 -- Amendment No. 1 to the Apache Corporation 1990 Stock Incentive Plan, dated as of July
17, 1992 (incorporated by reference to Exhibit 4.4 to Registrant's Registration
Statement on Form S-8, Registration No. 33-53442, filed October 19, 1992).
*+10.13 -- Apache Corporation 1995 Stock Option Plan, adopted February 9, 1995.
+10.14 -- Apache Corporation Income Continuance Plan, as amended and restated February 24, 1988
(incorporated by reference to Exhibit 10.19 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1990, SEC File No. 1-4300).
*+10.15 -- Apache Corporation Directors' Deferred Compensation Plan, as amended and restated
September 14, 1994.
+10.16 -- Apache Corporation Phantom Stock Appreciation Plan for Directors, effective as of May
4, 1989 (incorporated by reference to Exhibit 10.22 to Registrant's Annual Report on
Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.17 -- Apache Corporation Outside Directors' Retirement Plan, effective December 15, 1992
(incorporated by reference to Exhibit 10.25 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1992, SEC File No. 1-4300).
+10.18 -- Apache Corporation Equity Compensation Plan for Non-Employee Directors, adopted
February 9, 1994, and form of Restricted Stock Award Agreement (incorporated by
reference to Exhibit 10.26 to Registrant's Annual Report on Form 10-K for year ended
December 31, 1993, SEC File No. 1-4300).
+10.19 -- Amended and Restated Employment Agreement, dated December 5, 1990, between Registrant
and Raymond Plank (incorporated by reference to Exhibit 10.9 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.20 -- Amended and Restated Employment Agreement, dated December 20, 1990, between Registrant
and John A. Kocur (incorporated by reference to Exhibit 10.10 to Registrant's Annual
Report on Form 10-K for year ended December 31, 1990, SEC File No. 1-4300).
+10.21 -- Employment Agreement, dated March 20, 1991, between Registrant and William J. Johnson
(incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1992, SEC File No. 1-4300).
+10.22 -- Employment Agreement, dated June 6, 1988, between Registrant and G. Steven Farris
(incorporated by reference to Exhibit 10.6 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1989, SEC File No. 1-4300).
+10.23 -- Consulting Agreement, dated November 1, 1993, between Registrant and John A. Kocur
(incorporated by reference to Exhibit 10.30 to Registrant's Annual Report on Form 10-K
for year ended December 31, 1993, SEC File No. 1-4300).
*+10.24 -- Consulting Agreement, effective April 28, 1994, between Registrant and William J.
Johnson.
*+10.25 -- Consulting Agreement, effective January 1, 1995, between Registrant and John L. Moran.
*11.1 -- Statement regarding computation of earnings per share of Registrant's common stock for
the year ended December 31, 1994.
*21.1 -- Subsidiaries of Registrant.
*23.1 -- Consent of Arthur Andersen LLP.
*23.2 -- Consent of Ryder Scott Company Petroleum Engineers.
*27.1 -- Financial Data Schedule.
</TABLE>
___________________
* Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be
filed herewith pursuant to Item 14 hereof.
<PAGE> 1
EXHIBIT 10.2
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of March 1, 1995
among
APACHE CORPORATION,
and
THE LENDERS NAMED HEREIN,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Arranger
and
CHEMICAL BANK,
as Co-Agent and Arranger
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS AND TERMS OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.3. Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
1.4. Accounting and Financial Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II THE FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1. The Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Description of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Facility Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Revolving Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(e) Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2. Extension of Termination Date and of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3. Borrowing Base and Aggregate Available Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Initial Borrowing Base; Scheduled Semi-Annual and Discretionary Determinations of the Borrowing
Base; Procedures for Determination of the Borrowing Base . . . . . . . . . . . . . . . . . . . . 22
(b) Determination of Borrowing Base at Request of Company . . . . . . . . . . . . . . . . . . . . . 23
(c) Criteria for Determination of the Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Redeterminations of Borrowing Base Upon Material Adverse Effect . . . . . . . . . . . . . . . . 23
(e) Redetermination of Borrowing Base Upon Material Changes . . . . . . . . . . . . . . . . . . . . 24
(f) Reduction of Aggregate Available Commitment Upon Sales of Certain Properties . . . . . . . . . . 24
(g) Title Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.4. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.5. Facility Fee; Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Agents' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE III BORROWING; SELECTING RATE OPTIONS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3. Method of Selecting Rate Options and Interest Periods for Revolving Loans . . . . . . . . . . . . . . . 26
3.4. Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Competitive Bid Quote Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Invitation for Competitive Bid Quotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) Submission and Contents of Competitive Bid Quotes . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Notice to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Acceptance and Notice by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Allocation by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.5. Minimum Amount of Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.6. Continuation and Conversion Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7. Telephonic Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.8. Rate after Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.9. Interest Payment Dates; Determination of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . 30
(a) Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Determination of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
i
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.10. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions . . . . . . . . . . . 31
3.11. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IV MANDATORY PAYMENTS; REDUCTIONS OF COMMITMENTS; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Mandatory Prepayment on Account of Excess of Outstandings Over Aggregate Available Commitment 32
(b) Mandatory Prepayment on Account of Sales of Certain Properties Included in the Borrowing Base 32
(c) [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Mandatory Prepayment on Account of Extraordinary Sales of Properties . . . . . . . . . . . . . 32
(e) Application of Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.3. Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.4. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.6. Voluntary Reductions of Commitments and the Non-conforming Borrowing Base . . . . . . . . . . . . . . 34
4.7. Voluntary and Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI CHANGE IN CIRCUMSTANCES; TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2. Availability of Rate Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3. Funding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4. Lending Installations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7. Lender Statements; Survival of Indemnity; Substitution of Lenders; Limitation on Claims by Lenders . 37
6.8. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1. Conditions of Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2. Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Corporate Existence and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3. No Conflict; Government Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7. Litigation and Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.10. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.11. Regulation-U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.12. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.13. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.14. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.15. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.16. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.17. Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.18. Post-Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.19. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.20. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.3. Notice of Default, Unmatured Default, Litigation and Material Adverse Effect . . . . . . . . . . . . 47
9.4. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.10. Operation of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.11. Delivery of Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.12. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.13. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.14. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.15. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE X FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.1. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.2. Ratio of EBITDDA to Consolidated Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.2. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.3. Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.4. Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.6. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.7. Restricted Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.8. Rental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.9. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.10. Negative Pledges, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.11. Regulation U Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.12. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.13. Hedging Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.14. Approval of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.1. Breach of Warranties and Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.2. Nonpayment of Notes, Fees and other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.3. Breach of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.4. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.5. Non-Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.6. Cross-Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.7. Voluntary Dissolution and Insolvency Proceedings and Actions . . . . . . . . . . . . . . . . . . . . 57
12.8. Involuntary Insolvency Proceedings or Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.9. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.10. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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12.11. Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.12. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.13. Other Defaults Under Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.14. Failure of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.15. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XIII ACCELERATION, WAIVERS, AMENDMENTS, REMEDIES; RELEASES . . . . . . . . . . . . . . . . . . . . . . . . 58
13.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.3. Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE XIV GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.1. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.2. Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.5. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.6. Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
14.7. Reimbursement of Costs and Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 60
(a) Reimbursement of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(b) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.8. Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.9. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.10. Nonliability of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.11. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.12. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.13. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE XV THE ADMINISTRATIVE AGENT, THE ARRANGERS
AND THE ENGINEERING BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.1. Appointment of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.4. No Responsibility for Loans, Recitals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.5. Action on Instructions of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.6. Employment of Agents and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.7. Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.8. Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.9. Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.10. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.11. Certain Successor Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XVI SETOFF; RATABLE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
16.1. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
16.2. Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XVII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 65
17.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
17.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
17.3. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
17.4. Dissemination of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
17.5. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XVIII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
18.1. Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
18.2. Change of Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
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ARTICLE XIX COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XX NO ORAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
EXHIBIT A-1 REVOLVING NOTE (Revolving Loans)
EXHIBIT A-2 COMPETITIVE BID NOTE (Competitive Bid Loans)
EXHIBIT B FORM OF LEGAL OPINION
EXHIBIT C APACHE CORPORATION COMPLIANCE CERTIFICATE
EXHIBIT D ASSIGNMENT AGREEMENT
EXHIBIT E COMPETITIVE BID QUOTE REQUEST
EXHIBIT F CONTINUATION/CONVERSION NOTICE
EXHIBIT G MAYER, BROWN & PLATT OPINION
EXHIBIT H INVITATION FOR COMPETITIVE BID QUOTES
EXHIBIT I CONSENT, ACKNOWLEDGEMENT AND AGREEMENT
EXHIBIT J CONFIDENTIALITY AGREEMENT
EXHIBIT K COMPETITIVE BID QUOTE
EXHIBIT L FORM OF GUARANTY
SCHEDULE A COMMITMENTS UNDER APRIL 1994 AGREEMENT
SCHEDULE B ALTERNATE BASE RATE SPREAD, EURODOLLAR SPREAD, FACILITY FEE RATES
SCHEDULE 8.8 SUBSIDIARIES
SCHEDULE 11.1 INDEBTEDNESS; LIENS
SCHEDULE 11.3 CERTAIN PROPERTIES
SCHEDULE 11.12 INVESTMENTS
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amended and Restated Credit Agreement, dated as of March 1,
1995, is among Apache Corporation, a Delaware corporation (the "Company"), the
various commercial lending institutions as are or may become parties hereto
(the "Lenders"), The First National Bank of Chicago, as Administrative Agent
and Arranger and Chemical Bank, as Co-Agent (the "Co-Agent") and as Arranger.
RECITALS:
1. The Company, the Lenders, The First National Bank of
Chicago as Administrative Agent and as Collateral Agent and Chemical Bank, as
Co-Agent have heretofore entered into that certain Reducing Revolving Credit
and Term Loan Agreement, dated as of July 1, 1991, that certain Amendment No.
1, dated as of November 1, 1991 and that certain Amendment No. 2, dated as of
December 1, 1991 (as so amended, the "July 1991 Agreement"), pursuant to which
the Lenders agreed to make Term Loans and Revolving Loans (each as defined in
the July 1991 Agreement and herein called, respectively, the "1991 Term Loans"
and the "1991 Revolving Loans").
2. In order to restructure the indebtedness incurred by the
Company to the Lenders pursuant to the July 1991 Agreement, the Company, the
Lenders, the Administrative Agent, the Collateral Agent and the Co-Agent
entered into that certain Amended and Restated Credit Agreement, dated as of
April 15, 1992, a first amendment thereto, dated July 21, 1992, a second
amendment thereto dated December 31, 1992, the Third Amendment to Amended and
Restated Credit Agreement, dated as of April 30, 1993, and the Fourth Amendment
to Amended and Restated Credit Agreement, dated as of July 13, 1993 (as so
amended, the "April 1992 Agreement"), pursuant to which the Lenders agreed to
make Revolving Loans (as defined in the April 1992 Agreement and herein called
"1992 Revolving Loans").
3. In order to restructure the indebtedness incurred by the
Company to the Lenders pursuant to the July 1991 Agreement, as renewed,
restated extended and converted into 1992 Revolving Loans pursuant to the April
1992 Agreement, the Company, the Lenders, the Administrative Agent, the
Collateral Agent and the Co-Agent for the Lenders entered into that certain
Second Amended and Restated Credit Agreement dated as of April 30, 1994 (the
"April 1994 Agreement") pursuant to which the Lenders agreed to make Revolving
Loans (as defined in the April 1994 Agreement and herein called "1994 Revolving
Loans"), each in an aggregate amount not to exceed the amount set forth beside
the name of such bank on Schedule A.
4. On the terms and subject to the conditions of this
Agreement, all 1994 Revolving Loans of the Lenders to the Company outstanding
on the Effective Date (as hereinafter defined) shall, on the Effective Date, be
renewed, restated, extended and converted into (but shall not be deemed to be
repaid) Revolving Loans under this Agreement.
5. The Company, the Lenders, the Administrative Agent, the
Co-Agent and the Arrangers hereby amend the April 1994 Agreement and restate
the April 1994 Agreement in its entirety as follows:
ARTICLE I
DEFINITIONS AND TERMS OF CONSTRUCTION
1.1. Definitions. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except
<PAGE> 8
where the context otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and the plural forms
thereof):
"Accepting Lender" is defined in Section 2.2.
"Acknowledgment of Guaranty" means an acknowledgment to guaranty,
substantially in the form of Exhibit I hereto, dated the Effective Date, duly
executed and delivered to the Administrative Agent by each of MW Petroleum and
Apache Energy Resources.
"Acquisition" means any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Company or any of the Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any Person or division thereof, whether
through purchase of assets, merger or otherwise or (ii) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency).
"Administrative Agent" means The First National Bank of Chicago in its
capacity as administrative agent for the Lenders pursuant to Article XV, and
not in its individual capacity as a Lender or in its capacity as an Engineering
Bank or Arranger, and any successor Administrative Agent appointed pursuant to
Article XV.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by the Lenders or any of them to the Company
on the same Borrowing Date, at the same Rate Option (or on the same interest
basis in the case of a Competitive Bid Loan) and, in the case of Eurodollar
Loans, for the same Interest Period.
"Affiliate" of any Person means any Person directly or indirectly
controlling, controlled by or under direct or indirect common control of such
Person, but shall not, in the case of the Company or any Subsidiary, include
(except for the purposes of Sections 11.9 and 15.9) Apache Energy Limited or
its Subsidiaries. A Person shall be deemed to control another Person if the
controlling Person owns directly or indirectly 20% or more of any class of
voting securities of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agents" means each of the Administrative Agent, the Arrangers, the
Co-Agent and the Engineering Banks.
"Aggregate Available Commitment" means, as of the time a determination
thereof is to be made, the lesser of (x) the Aggregate Commitment, and (y) the
sum of the Borrowing Base plus the then effective Non-conforming Borrowing
Base, as such Aggregate Available Commitment shall be reduced from time to time
pursuant to Section 2.3(a), (d), (e) or (f) or Section 4.2(d).
"Aggregate Commitment" means, as of the time a determination thereof
is to be made, the sum of the Commitments of all the Lenders hereunder, being
$1,000,000,000 as of the date hereof, and as reduced from time to time after
the date hereof pursuant to Sections 4.2(d), 4.6 and 13.1.
"Aggregate Unavailable Commitment" means, as of the time a
determination thereof is to be made, the difference between (x) the Aggregate
Commitment and (y) the Aggregate Available Commitment.
2
<PAGE> 9
"Agreement" means this Third Amended and Restated Credit Agreement, as
it may be amended, supplemented, restated or otherwise modified and in effect
from time to time.
"Agreement Accounting Principles" means, on any date, those generally
accepted accounting principles applied in preparing the financial statements
referred to in Section 8.4.
"Alternate Base Rate" means, on any date and with respect to all
Floating Rate Advances, a fluctuating rate of interest per annum equal to the
higher of (i) the Corporate Base Rate, and (ii) the Federal Funds Effective
Rate most recently determined by the Administrative Agent plus 1/2%. Changes
in the rate of interest on that portion of any Advance maintained as a Floating
Rate Advance will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the Company
and the Lenders of changes in the Alternate Base Rate.
"Alternate Base Rate Spread" means the applicable rate per annum set
forth in Schedule B.
"Anniversary Date" means any March 1, with the first such date being
March 1, 1996.
"Annual Certificate of Extension" means a certificate of the Company,
executed by an Authorized Officer and delivered to the Administrative Agent,
which requests an extension of the then scheduled Termination Date pursuant to
Section 2.2.
"Apache Energy Limited" means Apache Energy Limited, an Australian
corporation, f/k/a Hadson Energy Limited.
"Apache Energy Resources" means Apache Energy Resources Corporation, a
Delaware corporation, f/k/a Hadson Energy Resources Corporation.
"Apache Guaranty" means that certain Guaranty, dated as of April 30,
1994, by Apache Energy Resources in favor of the Agents and the Lenders, as
such may be amended, supplemented, restated, reaffirmed or otherwise modified
from time to time.
"Approved Engineers" means Ryder Scott Company Petroleum Engineers or
Netherland, Sewell & Associates, Inc. or other independent petroleum engineers
of recognized standing and experience in the evaluation of hydrocarbon reserves
who each of the Engineering Banks and the Required Lenders determine to be
acceptable.
"Approved Engineers' Report" means a report prepared (except to the
extent set forth below) and certified by the Approved Engineers and furnished
by the Company to the Lenders pursuant to Section 9.1(d) or (e) which shall set
forth (i) the estimated volume and rate of production of Hydrocarbons which may
reasonably be expected to be produced from Proved Reserves for each Property,
(ii) a computation of the projected gross revenues from Proved Reserves
attributable to each Property, (iii) a computation of the future net revenues
for each Property, showing separately net revenues from Proved Developed
Producing Reserves, Proved Developed Non-Producing Reserves and Proved
Undeveloped Reserves, and (iv) projections as to the amount of Proved Reserves
for each Property, showing separately Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves;
provided, that such Properties shall not include Properties the subject of
Limited Recourse Indebtedness permitted by Section 11.1(d) or Properties on
which a Lien has been granted pursuant to the facility described in item 1 of
Schedule 11.1. The Approved Engineers' Report shall be prepared using economic
parameters (including
3
<PAGE> 10
pricing, inflation and discount rate) provided by the Engineering Banks and in
accordance with established criteria generally accepted in the oil and gas
industry for use by independent petroleum engineers in making determinations
and appraisals of hydrocarbon reserves, including assumptions, estimates and
projections as to production expenses, availability of reserves and rates of
production; provided, however, that in preparing such report, the Approved
Engineers need only make an independent evaluation of Properties comprising not
less than (x) 70% in value of the Properties included in the most recent
Approved Engineers' Report and (y) 80% in value of any Properties not included
in the most recent Approved Engineers' Report, and may review the evaluation by
the Company's petroleum engineers in accordance with the foregoing criteria of
the remainder of the Properties. The Engineering Banks may, in their sole
discretion after consulting with the Company, require modification of any
assumption, projection or estimate which they (acting reasonably) find
unacceptable.
"April 1992 Agreement" is defined in Recital 2.
"April 1994 Agreement" is defined in Recital 3.
"Arranger" means each of First Chicago and Chemical in their
respective capacities as arranger pursuant to Article XV and not in their
respective individual capacities as a Lender, an Engineering Bank, the
Administrative Agent, or the Co-Agent, as the case may be.
"Assignment Agreement" means an agreement executed by an assignor
Lender and an assignee Lender pursuant to Section 17.3 substantially in the
form of Exhibit D hereto.
"Authorized Officer" means any officer of the Company, acting singly,
specified as such to the Administrative Agent in writing by the Vice
President/Treasurer.
"Borrowing Base" means the Borrowing Base then in effect calculated
and established in accordance with the terms and provisions of Section 2.3.
"Borrowing Date" means any Business Day on which an Advance is made
hereunder.
"Borrowing Notice" is defined in Section 3.3.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of Eurodollar Advances, a day other than Saturday or Sunday on
which banks are open for business in Chicago and New York and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day other than Saturday or Sunday on which banks are
open for business in Chicago and New York.
"Capitalized Lease" means, with any respect to a Person, any lease of
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" means, with respect to a Person, the
amount of the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with Agreement Accounting Principles.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more
than one year after such time, issued or guaranteed by the United
States Government;
4
<PAGE> 11
(b) commercial paper, maturing not more than nine
months from the date of issue, which is issued by any Agent or any
Agent's holding company, or by
(i) a corporation (other than the Company
or an Affiliate of the Company) organized under the laws of
any state of the United States or of the District of
Columbia and rated A-1 by Standard & Poor's Corporation or
P-1 by Moody's Investors Service, Inc., or
(ii) any Lender (or its holding company)
which has (or which at the time is a subsidiary of a
holding company which has) a Qualified Long Term Rating;
(c) any certificate or deposit or banker's acceptance,
maturing not more than one year after such time, which is issued by
any Agent or any Agent's holding company, or by either
(i) a commercial banking institution that
is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not
less than $500,000,000, which has (or which at the time is
a subsidiary of a holding company which has) a Qualified
Long Term Rating, or
(ii) any Lender which has (or which is a
subsidiary of a holding company which has) a Qualified Long
Term Rating; or
(d) any repurchase agreement entered into with any
Agent or any Lender (or other commercial banking institution of the
stature referred to in clause (c)(i)) which
(i) is secured by a fully perfected
security interest in any obligation of the type described
in any of clauses (a) through (c); and
(ii) has a market value at the time such
repurchase agreement is entered into of not less than 100%
of the repurchase obligation of such Lender or Agent (or
other commercial banking institution) thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List.
"Change in Control" means:
(a) the failure by the Company to own, free
and clear of all Liens or encumbrances, 100% of the
outstanding capital stock of each of MW Petroleum and
Apache Energy Resources on a fully diluted basis or the
failure of MW Petroleum to own, free and clear of all Liens
or encumbrances, 100% of the outstanding capital stock of
MWJR on a fully diluted basis, except as a result of the
merger of any of MW Petroleum, Apache Energy Resources and
MWJR into the Company pursuant to Section 11.2; or
(b) any Unrelated Person or any Unrelated
Persons acting together which would constitute a Group,
together with any Affiliates or Related Persons thereof (in
each case also constituting Unrelated Persons), shall at
any time either
5
<PAGE> 12
(i) Beneficially Own more than 20% of the aggregate voting power of
all classes of Voting Stock of the Company or (ii) succeed in having
sufficient of its or their nominees elected to the Board of Directors
of the Company such that such nominees, when added to any existing
director remaining on the Board of Directors of the Company after such
election who is an Affiliate or Related Person of such Person or
Group, shall constitute a majority of the Board of Directors of the
Company. As used herein (A) "Beneficially Own" means "beneficially
own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended, or any successor provision thereto; (B) Group" means a
"group" for purposes of Section 13(d) of the Securities Exchange Act
of 1934, as amended; (C) Unrelated Person" means at any time any
Person other than the Company or any Subsidiary and other than any
trust for any employee benefit plan of the Company or any Subsidiary
of the Company; (D) "Related Person" of any Person shall mean any
other Person owning (1) 5% or more of the outstanding common stock of
such Person or (2) 5% or more of the Voting Stock of such Person; and
(E) "Voting Stock" of any Person shall mean capital stock of such
Person which ordinarily has voting power for the election of directors
(or persons performing similar functions) of such Person, whether at
all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
"Chemical" means Chemical Bank in its individual capacity and its
successors.
"Claims" is defined in Section 14.7.
"Co-Agent" is defined in the Preamble.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified and in effect from time to time.
"Commitment" means, with respect to each Lender, the obligation of
such Lender to make Loans not exceeding the amount set forth as its Commitment
opposite its signature below or in the relevant Assignment Agreement, as such
amount may be modified from time to time pursuant to the provisions of this
Agreement, including any Assignment Agreement executed by such Lender and its
Assignee Lender and delivered pursuant to Section 17.3 and any reduction
pursuant to Sections 4.6, or 13.1; it being understood, however, that a change
in the Borrowing Base does not constitute a modification of any Commitment.
"Company" is defined in the Preamble.
"Company's Engineers' Report" means a report prepared by the Company's
engineering staff and certified by the Company's head of Technical Services and
furnished by the Company to the Lenders pursuant to Section 9.1(f) which shall
set forth (i) the estimated volume and rate of production of Hydrocarbons which
may reasonably be expected to be produced from Proved Reserves for each
Property, (ii) a computation of the projected gross revenues from Proved
Reserves attributable to each Property, (iii) a computation of the future net
revenues for each Property, showing separately net revenues from Proved
Developed Producing Reserves, Proved Developed Non-Producing Reserves and
Proved Undeveloped Reserves and (iv) projections as to the amount of Proved
Reserves for each Property, showing separately Proved Developed Producing
Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped
Reserves; provided, that such Properties shall not include Properties the
subject of Limited Recourse Indebtedness permitted by Section 11.1(d) or
Properties on which a Lien has been granted pursuant to the facility described
in item 1 of Schedule 11.1. The
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Company's Engineers' Report shall be prepared using economic parameters
(including pricing, inflation and discount rate) provided by the Engineering
Banks and in accordance with established criteria generally accepted in the oil
and gas industry for use by independent petroleum engineers in making
determinations and appraisals of hydrocarbon reserves, including assumptions,
estimates and projections as to production expenses, availability of reserves
and rates of production. The Engineering Banks may, in their sole discretion
after consulting with the Company, require modification of any assumption,
projection or estimate which they (acting reasonably) find unacceptable.
"Competitive Bid Advance" means a borrowing hereunder consisting of
the aggregate amount of the several Competitive Bid Loans made by some or all
of the Lenders to the Company at the same time, having the same Stated Maturity
Date and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 3.4(e).
"Competitive Bid Loan" means, with respect to a Lender, a competitive
bid loan made by such Lender pursuant to Section 2.1 and Section 3.4 as the
result of a Competitive Bid Borrowing Notice from the Company requesting a
Competitive Bid Advance.
"Competitive Bid Margin" means the margin above or below the
applicable Eurodollar Base Rate or Alternate Base Rate offered for a Bid Loan,
expressed as a percentage (rounded to the nearest 1/16 of 1%) to be added or
subtracted from the Eurodollar Base Rate or the Alternate Base Rate, as
applicable.
"Competitive Bid Note" means a promissory note in substantially the
form of Exhibit "A-2" hereto, with applicable insertions, duly executed and
delivered to the Administrative Agent by the Company for the account of a
Lender and payable to the order of such Lender, including any amendment,
modification, renewal or replacement of such promissory note.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in
the form of Exhibit K hereto completed and delivered by a Lender to the
Administrative Agent in accordance with Section 3.4(c).
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit E hereto completed and delivered by the
Company to the Administrative Agent in accordance with Section 3.4(a).
"Consolidated Interest Expense" means, for any period for which a
determination thereof is to be made, total interest expense, whether paid or
accrued (but excluding that attributable to Capitalized Leases), of the Company
and the Consolidated Subsidiaries on a consolidated basis including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing.
"Consolidated Net Income" means, for any period for which a
determination thereof is to be made, the net income (or loss) after taxes of
the Company and the Consolidated Subsidiaries on a consolidated basis for such
period taken as a single accounting period; provided that there shall be
excluded the income (or loss) of any Affiliate of the Company or other Person
(other than a Consolidated Subsidiary of the Company) in which any Person
(other than the Company or any of the Consolidated Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of the Consolidated
Subsidiaries by such Affiliate or other Person during such period.
"Consolidated Subsidiary" means, as of the time a determination
thereof is to be made, any Subsidiary or other entity the accounts of which
would be
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<PAGE> 14
consolidated with those of the Company in its consolidated financial statements
if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" means, as of the time a
determination thereof is to be made, the consolidated stockholders' equity of
the Company and the Consolidated Subsidiaries, less their consolidated
intangible assets, all determined as of such date in accordance with Agreement
Accounting Principles.
"Contingent Obligation" means, with respect to any Person as of the
time a determination thereof is to be made, any agreement, undertaking or
arrangement by which such Person guarantees, endorses or otherwise becomes or
is contingently liable (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise
invest in, a debtor, or otherwise to assure a creditor against loss) in respect
of any Indebtedness, obligation or other liability of itself or any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the shares
or partnership interests of any other Person, or is liable in respect of the
obligations of a partnership of which such Person is a partner.
"Continuation/Conversion Notice" means a notice by means of telecopy
or telephone (confirmed in writing promptly thereafter if by telephone) of
continuation or conversion, which notice shall specify the principal amount to
be continued or converted, the date of such continuation or conversion, the
type of Revolving Loan and, if such Revolving Loan is to be a Revolving
Eurodollar Loan, the Interest Period, which notice, when delivered by telecopy
or confirmed in writing, shall be substantially in the form of Exhibit "F" and
executed on behalf of the Company by an Authorized Officer.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company or any Subsidiary, are treated
as a single employer under Section 414(b) or 414(c) of the Code.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"Debt" means all Indebtedness of the type referred to in clauses (i),
(ii), (iii), (iv) and (v) of the definition of Indebtedness.
"Debt/Capitalization Ratio" means, as of the time a determination
thereof is to be made, the ratio expressed as a decimal of (x) the aggregate
outstanding amount of the consolidated Debt of the Company and its Consolidated
Subsidiaries, to (y) the sum of the consolidated stockholders' equity of the
Company and its Consolidated Subsidiaries plus the aggregate outstanding amount
of the consolidated Debt of the Company and its Consolidated Subsidiaries;
provided, however, that for purposes of the definitions of Alternate Base Rate
Spread and Eurodollar Spread and for purposes of Section 2.5(a) the
Debt/Capitalization Ratio on each day commencing on the forty-fifth (45th) day
following the end of a calendar quarter shall be deemed to be the lesser of (a)
the Debt/ Capitalization Ratio as of the end of such calendar quarter and (b)
the Debt/Capitalization Ratio as of the final day of the month following the
end of such calendar quarter, in each case based on a certificate received by
the Administrative Agent and the Lenders from the Vice President and Treasurer
of the Company pursuant to Section 9.1(k), provided further that until the
forty-fifth (45th) day following the calendar quarter ending March 31, 1995,
the Debt/Capitalization Ratio shall be deemed to be in the range of 0.550 to
0.599 for purposes of the definition of Alternate Base Rate Spread and
Eurodollar Spread.
"Declining Lender" is defined in Section 2.2.
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"Default" means an event described in Article XII.
"DEKALB" means DEKALB Energy Company, a Delaware corporation.
"DEKALB Merger" means the Acquisition by XPX Acquisitions, Inc., a
Delaware corporation ("XPX") wholly with the Company's common stock (except for
cash for (i) fractional shares, (ii) payments in respect of dissenters' rights
and (iii) certain employee options), of, and the subsequent merger with and
into, DEKALB, with DEKALB as the survivor.
"DEKALB Notes" means (i) DEKALB Energy Company 10% Notes due April 15,
1998 issued in an original aggregate amount not in excess of $50,000,000, and
(ii) DEKALB Energy Company 9-7/8% Notes due July 15, 2000 issued in an original
aggregate amount not in excess of $75,000,000, both issued pursuant to that
certain Indenture, dated as of April 1, 1988, between DEKALB and Continental
Illinois National Bank and Trust Company of Chicago, a national banking
association, as Trustee (the "DEKALB Trustee"), as modified and supplemented by
that certain First Supplemental Indenture, dated as of April 1, 1988, between
DEKALB and the DEKALB Trustee.
"Drilling Partnership" means each general and limited partnership in
existence and which has not been dissolved by action of the general partner at
the Effective Date (other than Apache Offshore Investment Partnership) whose
sole general partner and managing partner, if any, is the Company, and which is
engaged principally in the business of exploration for, and the production of,
oil and gas.
"EBITDDA" means, for any period for which a determination thereof is
to be made, without duplication, the sum of the amounts for such period of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) depreciation
expense and depletion expense, (iv) amortization expense, (v) federal and state
taxes, (vi) other non-cash charges and expenses and (vii) any losses arising
outside of the ordinary course of business which have been included in the
determination of Consolidated Net Income; less any gains arising outside of the
ordinary course of business which have been included in the determination of
Consolidated Net Income, all as determined on a consolidated basis for the
Company and the Consolidated Subsidiaries.
"Effective Date" means a date agreed upon by the Company, the
Arrangers and the Administrative Agent as the date on which the conditions
precedent set forth in Section 7.1 of this Agreement have been satisfied.
"Effectiveness Notice" means a notice and certificate of the Company
properly executed by an Authorized Officer addressed to the Lenders and
delivered to the Administrative Agent, in sufficient number of counterparts to
provide one for each Lender, whereby the Company certifies satisfaction of all
the conditions precedent to the effectiveness of this Agreement under Section
7.1.
"Engineering Bank" means each of First Chicago and Chemical in their
respective capacities as Engineering Banks.
"Environmental Law" means any federal, state, or local statute, or
rule or regulation promulgated thereunder, any judicial or administrative order
or judgment or written administrative request to which the Company or any
Subsidiary is party or which are applicable to the Company or any Subsidiary or
the Properties (whether or not by consent), and any provision or condition of
any permit, license or other governmental operating authorization, relating to
(A) protection of the environment, persons or the public welfare from actual or
potential exposure for the effects of exposure to any actual or potential
release, discharge, spill or emission (whether past or present) of, or
regarding the manufacture, processing, production, gathering, transportation,
importation, use, treatment,
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storage or disposal of, any chemical, raw material, pollutant, contaminant or
toxic, corrosive, hazardous, or non-hazardous substance or waste, including
petroleum; or (B) occupational or public health or safety.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Advance" means a Eurodollar Bid Rate Advance or a
Eurodollar Revolving Advance.
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes
setting forth Competitive Bid Margins pursuant to Section 3.4.
"Eurodollar Base Rate" means, with respect to a Eurodollar Revolving
Advance or a Eurodollar Bid Rate Advance for the relevant Interest Period, the
rate determined by the Administrative Agent to be the arithmetic average of the
rates reported to the Administrative Agent by each Reference Lender as the rate
at which deposits in U.S. dollars are offered by such Reference Lender to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Interest Period,
in the approximate amount of such Reference Lender's relevant Eurodollar
Revolving Loan or, in the case of a Eurodollar Bid Rate Loan, the amount of the
Eurodollar Bid Rate Loan requested by the Company, and having a maturity
approximately equal to such Interest Period. If any Reference Lender fails to
provide such quotation to the Administrative Agent, then the Administrative
Agent shall determine the Eurodollar Base Rate on the basis of the quotations
of the remaining Reference Lender.
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate
Loan made by a given Lender for the relevant Interest Period, the sum of (i)
the Eurodollar Base Rate and (ii) the Competitive Bid Margin offered by such
Lender and accepted by the Company.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which
bears interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Competitive Bid Loan which bears
interest at the Eurodollar Bid Rate.
"Eurodollar Loan" means a Eurodollar Bid Rate Loan or a Eurodollar
Revolving Loan.
"Eurodollar Revolving Advance" means a Revolving Advance which bears
interest at a Eurodollar Rate.
"Eurodollar Revolving Loan" means a Revolving Loan which bears
interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Loan or Advance for each
day during the relevant Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to that Interest Period, divided by (b) one
minus the Reserve Requirement (expressed as a decimal) applicable to that
Interest Period, plus (ii) the Eurodollar Spread applicable to that day. The
Eurodollar Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.
"Eurodollar Spread" means the applicable rate per annum set forth in
Schedule B.
"Federal Funds Effective Rate" means, for any period for which a
determination thereof is made, a fluctuating interest rate per annum equal for
each day during such period to (i) the weighted average of the rates on
overnight
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<PAGE> 17
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the preceding Business Day) by the Federal Reserve Bank of
New York; or (ii) if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) for such day on such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors and assigns.
"Floating Bid Rate" means, with respect to a Floating Bid Rate Loan
made by a given Lender, the sum of (i) the Alternate Base Rate, changing when
and as the Alternate Base Rate changes, and (ii) the Competitive Bid Margin
offered by such Lender and accepted by the Company.
"Floating Bid Rate Advance" means a Competitive Bid Advance which
bears interest at the Floating Bid Rate.
"Floating Bid Rate Loan" means a Competitive Bid Loan which bears
interest at the Floating Bid Rate.
"Floating Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth the Competitive Bid Margin for Floating Bid Rates pursuant to
Section 3.4.
"Floating Rate Revolving Advance" means a Revolving Advance which
bears interest at the Floating Revolving Rate.
"Floating Rate Revolving Loan" means a Revolving Loan which bears
interest at the Floating Revolving Rate.
"Floating Revolving Rate" means a rate per annum equal to the sum of
the Alternate Base Rate, changing when and as the Alternate Base Rate changes,
plus the Alternate Base Rate Spread, in effect from time to time.
"Guarantor" means each of MW Petroleum, Apache Energy Resources and
any Subsidiary of the Company which is a guarantor pursuant to a Guaranty in
favor of the Agents and the Lenders delivered pursuant to Section 9.11.
"Guaranty" means the MW Guaranty, the Apache Guaranty and each other
Guaranty delivered pursuant to Section 9.11, in each case as such Guaranty may
from time to time be amended, supplemented, restated, reaffirmed or otherwise
modified.
"Hazardous Material" means
i. any "hazardous substance", as defined by CERCLA;
ii. any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
iii. any petroleum, crude oil or any fraction thereof;
iv. any hazardous, dangerous or toxic chemical,
material, waste or substance within the meaning of any Environmental
Law;
v. any radioactive material, including any naturally
occurring radioactive material, and any source, special or by-product
material as defined in 42 U.S.C. Section 2011 et. seq., and any
amendments or reauthorizations thereof;
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vi. asbestos-containing materials in any form or condition; or
vii. polychlorinated biphenyls in any form or condition.
"Hydrocarbon Interests" means leasehold and other interests in or
under leases with respect to property located in the United States of America
and any other countries acceptable to the Required Lenders, mineral fee
interests, production sharing contracts, overriding royalty and royalty
interests, net profit interests and production payment interests, insofar and
only insofar as such interests relate to Hydrocarbons located in the United
States of America and any other countries acceptable to the Required Lenders,
including any reserved or residual interests of whatever nature.
"Hydrocarbons" means oil, gas and all other liquid or gaseous
hydrocarbons and all products refined therefrom and all other minerals and
substances including, sulfur, geothermal steam, water, carbon dioxide, helium
and any and all other minerals, ores or substances of value and the products
and proceeds therefrom.
"include" or "including" means including without limiting the
generality of any description preceding such terms, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree that the rule
of ejusdem generis shall not be applicable to limit a general statement, which
is followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" means, with respect to a Person, such Person's (i)
obligations for borrowed money, (ii) obligations representing the deferred
purchase price of property or services, including obligations payable out of
Hydrocarbon production, other than accounts payable arising in the ordinary
course of such Person's business payable on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by Liens (other than Liens
permitted by Section 11.5, clauses (a) through (d) or clauses (f) through (h))
or payable out of the proceeds of production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by
notes, bonds, debentures, acceptances, or other instruments, (v) Capitalized
Lease Obligations, (vi) liabilities under interest rate swap, exchange, collar
or cap agreements and all other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or currency exchange rates,
(vii) liabilities under commodity hedge, commodity swap, exchange, collar or
cap agreements, fixed price agreements and all other agreements or arrangements
designed to protect a person against fluctuations in oil or gas prices, and
(viii) obligations, contingent or otherwise, relative to the amount of all
letters of credit, whether or not drawn, and (ix) all Contingent Obligations of
such Person in respect of any of the foregoing; provided, however, that such
term shall not include any amounts included as deferred credits on the
financial statements of such Person or of a consolidated group including such
Person, determined in accordance with Agreement Accounting Principles; provided
further that for purposes of the foregoing clauses (ii) and (iii), obligations
pursuant to any oil, gas and/or mineral leases, farm-out agreements, division
orders, contracts for the exchange or processing of oil, gas and/or other
hydrocarbons, unitization and pooling declarations and agreements, operating
agreements, development agreements, area of mutual interest agreements, and
other agreements which are customary in the oil, gas and other mineral
exploration, development and production business and in the business of
processing of gas and gas condensate production for the extraction of products
therefrom shall not be Indebtedness.
"Indemnified Person" is defined in Section 14.7.
"Interest Period" means, with respect to a Eurodollar Bid Rate Advance
or a Eurodollar Revolving Advance, a period of one (1), two (2), three (3) or,
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subject to availability, six (6) months commencing on a Business Day selected
by the Company pursuant to this Agreement. Such Interest Period shall end on
(but exclude) the day which corresponds numerically to such date one (1), two
(2), three (3) or six (6) months thereafter, provided, however, that if there
is no such numerically corresponding day in such next, second, third or sixth
succeeding month, such Eurodollar Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month.
Notwithstanding the foregoing, with respect only to Eurodollar Revolving Loans
and Eurodollar Bid Rate Loans outstanding prior to the ninetieth day following
the Closing Date (or such earlier date communicated to the Company by the
Arrangers), (i) the Company may, select such other Interest Periods as the
Lenders may from time to time agree commencing on a Business Day selected by
the Company and ending on (but excluding) the day such number of days after
such date and (ii) the Company may not select any Interest Period ending after
such ninetieth day (or such earlier date communicated to the Company by the
Arrangers). If an Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next succeeding Business
Day; provided, however, that if said next succeeding Business Day falls in the
next month, such Interest Period shall end on the immediately preceding
Business Day.
"International" means Apache International, Inc., a Delaware
corporation, Subsidiaries of Apache International, Inc., and Subsidiaries of
the Company which own properties or conduct operations or propose to own
properties or conduct operations exclusively outside of the United States of
America, except for Apache Energy Resources, Subsidiaries of Apache Energy
Resources, Apache Energy Limited, and Apache Overseas, Inc.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit (excluding accounts receivable arising in the ordinary
course of business on terms customary in the trade) or contribution of capital
by such Person to any other Person or any investment in, or purchase or other
acquisition of, the stock, notes, debentures or other securities of any other
Person made by such Person. The amount of any Investment shall be the original
principal or capital amount thereof less all returns of principal or equity
thereon (and without adjustment by reason of the financial condition of such
other Person) and shall, if made by the transfer or exchange of property other
than cash, be deemed to have been made in an original principal or capital
amount equal to the fair market value of such property.
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit H hereto, completed
and delivered by the Administrative Agent to the Lenders in accordance with
Section 3.4(b).
"July 1991 Agreement" is defined in Recital 1.
"Lenders" means the financial institutions listed on the signature
pages of this Agreement and their respective successors and assigns in
accordance with Section 17.3 (including any commercial lending institution
becoming a party hereto pursuant to an Assignment Agreement) or otherwise by
operation of law.
"Lending Installation" means any office, branch, subsidiary or
affiliate of any Lender, the Administrative Agent or any Arranger.
"Lien" means any interest in assets or property securing an obligation
owed to, or a claim by, a Person other than the owner of the asset or property,
whether such interest is based on the common law, statute or contract, and
whether such obligation or claim is fixed or contingent, and including any
security interest, mortgage, pledge, lien, claim, charge, encumbrance, contract
for deed, installment sales contract, production payment, lessor's interest
under a Capitalized Lease or analogous instrument, in, of or on any Person's
assets or properties in favor of any other Person.
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"Limited Recourse Indebtedness" is defined in Section 11.1.
"Loan" means any of the Revolving Loans and the Competitive Bid Loans.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Assignment Agreements, and the agreement with respect to fees described in
Section 2.5(b), together with all exhibits, schedules and attachments thereto,
and all other agreements, documents, certificates, financing statements and
instruments from time to time executed and delivered pursuant to or in
connection with any of the foregoing.
"MW Guaranty" means that certain Guaranty, dated as of July 1, 1991,
by MW Petroleum Corporation, a Delaware corporation, as assumed by MW Petroleum
pursuant to that certain Assumption Agreement, dated as of December 24, 1991,
as amended, supplemented, reaffirmed, restated or otherwise modified.
"MW Petroleum" means MW Petroleum Corporation, a Colorado corporation.
"MWJR" means MWJR Petroleum Corporation, a Delaware corporation.
"Material Adverse Effect" means with respect to any matter that such
matter (i) could reasonably be expected to materially and adversely affect the
assets, business, properties, condition (financial or otherwise), prospects, or
results of operations of the Company and its Subsidiaries, taken as a whole, or
the value or condition of the Properties taken as a whole, or the ability of
the Company or any Subsidiary to perform its respective obligations under any
of the Loan Documents or (ii) has been brought by or before any court or
arbitrator or any governmental body, agency or official, and draws into
question or otherwise has or reasonably could be expected to have a material
adverse effect on the validity or enforceability of any material provision of
any Loan Document against any obligor party thereto or the rights, remedies and
benefits available to the Agents and the Lenders under the Loan Documents.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement to which the Company or any member of the Controlled Group
is a party and to which more than one employer is obligated to make
contributions.
"1992 Revolving Loans" is defined in Recital 2.
"1994 Revolving Loans" is defined in Recital 3.
"1995 Engineers' Report" means those certain engineering reports of
the Company's engineers, Ryder Scott Company Petroleum Engineers, dated as of
January 25, 1995 with respect to the Properties, copies of which have been
delivered to each of the Lenders.
"Non-conforming Borrowing Base" means the amount by which outstanding
Advances may exceed the Borrowing Base then in effect, but in no event shall
such Non-conforming Borrowing Base exceed (a) $135,000,000 prior to May 10,
1996, (b) $85,000,000 on and after May 10, 1996 through November 4, 1996 and
(c) $0.0 thereafter, as such Non-conforming Borrowing Base may be reduced
pursuant to Section 4.2(d) or 4.6 or as a result of a redetermination of the
Borrowing Base or reduction in the Aggregate Available Commitment, provided
that at no time shall the Non-conforming Borrowing Base be increased.
"Note" means any Revolving Note or any Competitive Bid Note.
"Notice of Assignment" is defined in Section 17.3(b).
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"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid facility fees, and all other
obligations of the Company or any Subsidiary to any Lender or any Agent,
whether or not contingent, arising under or in connection with any of the Loan
Documents, and all obligations in respect of any interest rate swap or interest
rate cap or collar agreement or other interest rate hedging agreement entered
into by the Company or any Subsidiary with any Lender.
"Offshore" means Apache Offshore Petroleum Limited Partnership, a
Delaware limited partnership.
"or" as used in this Agreement is not exclusive.
"Original Revolving Loans" is defined in Recital 1.
"Original Term Loans" is defined in Recital 1.
"Original Termination Date" means March 1, 2000.
"Participant" is defined in Section 17.2(a).
"Payment Date" means the second day of January and the first day of
each April, July and October of each calendar year, commencing April 1, 1995.
"PBGC" means the Pension Benefit Guaranty Corporation and its
successors and assigns.
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which the Company or any member of the Controlled Group may
have any liability.
"Projections" means the Company's Operations and Financial Summary
Data consisting of the Company Case dated 2/15/95 and the Liquidating Case
dated 2/2/95.
"Properties" means Hydrocarbon Interests and the properties now or
hereafter pooled or unitized with Hydrocarbon Interests; all presently existing
or future unitization, pooling agreements and declarations of pooled units and
the units created thereby (including without limitation all units created under
orders, regulations and rules of any governmental body or agency having
jurisdiction) which may affect all or any portion of the Hydrocarbon Interests;
all operating agreements, contracts and other agreements which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests
and such properties; all Hydrocarbons in and under and which may be produced
and saved or attributable to the Hydrocarbon Interests and such properties; all
Hydrocarbons in and under and which may be produced and saved or attributable
to the Hydrocarbon Interests and such properties, the lands covered thereby and
all oil in tanks and all rents, issues, profits, proceeds, products, revenues
and other incomes from or attributable to the Hydrocarbon Interests and such
properties; all tenements, hereditaments, appurtenances and properties in
anywise appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests, properties, rights, titles, interests and estates described or
referred to above, including any and all property, real or personal, now owned
or hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such
Hydrocarbon Interests or
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property (excluding drilling rigs, automotive equipment or other personal
property which may be on such premises for the purpose of drilling a well or
for other similar temporary uses) and including any and all oil wells, gas
wells, injection wells or other wells, buildings, structures, fuel separators,
liquid extraction plants, plant compressors, pumps, pumping units, field
gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and
all of the foregoing in each case which are owned by the Company or any
Subsidiary.
"Proved Developed Non-Producing Reserves" means, with respect to the
Properties, those quantities of Hydrocarbons, estimated with reasonable
certainty, as demonstrated by geological and engineering data, to be
economically recoverable from the Properties by producing methods under
existing economic conditions using existing equipment and operating methods
from locations which are behind the casing of existing wells or at minor depths
below the present bottom of such wells and which are expected to be produced
through these wells in the predictable future, where a relatively small
expenditure is required for completion or recompletion to make such
Hydrocarbons available for production.
"Proved Developed Producing Reserves" means, with respect to the
Properties, those quantities of Hydrocarbons, estimated with reasonable
certainty, as demonstrated by geological and engineering data, to be
economically recoverable from the Properties by producing methods under
existing economic conditions using existing equipment and operating methods
from existing completion intervals open for production in existing wells.
"Proved Reserves" means, with respect to the Properties, the sum of
Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves
and Proved Undeveloped Reserves.
"Proved Undeveloped Reserves" means, with respect to the Properties,
those quantities of Hydrocarbons, estimated with reasonable certainty, as
demonstrated by geological and engineering data, to be economically recoverable
from the Properties by producing methods under existing economic conditions
using existing equipment, or equipment for which there is a reasonable
expectation of or commitment to installation in the future, and operating
methods from (i) existing wells where a relatively large expenditure is
required for completion or recompletion and (ii) new wells on undrilled
locations (a) which are direct offsets to existing wells then or previously
open for production, (b) which are within known proved productive limits of the
subject formation, estimated with reasonable certainty, (c) which conform to
existing completion intervals for existing wells and (d) which will be
developed with a reasonable degree of certainty.
"Purchase and Sale Agreement" means that certain Purchase and Sale
Agreement dated December 22, 1994 by and between Texaco and the Company, as the
same may be amended, supplemented or otherwise modified from time to time.
"Purchaser" is defined in Section 17.3(a).
"Qualified Long Term Rating" means in respect of any Person, a Person
which has publicly traded debt securities rated either A- or higher by Standard
& Poor's Corporation or A(3) or higher by Moody's Investors Service, Inc.
"Rate Option" means the Eurodollar Rate or the Floating Rate.
"Rating Agency" means each of Duff & Phelps Credit Rating Company,
Moody's Investors Service, Inc. and Standard & Poor's Corporation.
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<PAGE> 23
"Reference Lenders" means First Chicago and Chemical.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors or any successor Person relating to reserve requirements applicable
to member banks of the Federal Reserve System or any successor Person.
"Regulation U" means any of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulations or official interpretations of said
Board of Governors or any successor Person relating to the extension of credit
for the purpose of purchasing or carrying margin stocks applicable to member
banks of the Federal Reserve System or any successor Person.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 2.2.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall
be a Reportable Event regardless of the issuance of any such waivers in
accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means, as of any date of determination, Lenders
(including First Chicago and Chemical) having in the aggregate at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders holding at least 66-2/3% of the then outstanding principal
amount of the Loans.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or regulations issued from time to time by the Board
of Governors of the Federal Reserve System) which is then applicable to assets
or liabilities consisting of and including with a maturity equal to that of the
"Eurocurrency Liabilities", as defined in Regulation D, having a term
approximately equal or comparable to such Interest Period.
"Revolving Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Revolving Loans made by the Lenders or any of
them to the Company on the same Borrowing Date, at the same Rate Option and, in
the case of Eurodollar Revolving Loans, for the same Interest Period.
"Revolving Loan" means, with respect to a Lender, a revolving loan
made by such Lender pursuant to Sections 2.2 and 3.3 as the result of a
Borrowing Notice from the Company requesting an Advance.
"Revolving Note" means a promissory note in substantially the form of
Exhibit "A-1" hereto (with appropriate insertions and deletions), duly executed
and delivered to the Administrative Agent by the Company and payable to the
order of a Lender in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
"Sale" means any sale, transfer, assignment, lease, conveyance,
exchange, swap or other disposition.
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<PAGE> 24
"Schedules" means Schedules A, 8.8, 11.1 and 11.12 hereto.
"Single Employer Plan" means a Plan maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of
the Controlled Group.
"Solvent" means, with respect to any Person at any time, a condition under
which
the fair saleable value of such Person's assets
is, on the date of determination, greater than the total amount of
such Person's liabilities (including contingent and unliquidated
liabilities) at such time;
such Person is able to pay all of its liabilities
as such liabilities mature; and
such Person does not have unreasonably small
capital with which to conduct its business.
For purposes of this definition
(i) the amount of a Person's contingent or
unliquidated liabilities at any time shall be that amount
which, in light of all the facts and circumstances then
existing, represents the amount which can reasonably be
expected to become an actual or matured liability;
(ii) the "fair saleable value" of an asset
shall be the amount which may be realized within a
reasonable time either through collection or sale of such
asset at its regular market value; and
(iii) the "regular market value" of an asset
shall be the amount which a capable and diligent business
person could obtain for such asset from an interested buyer
who is willing to purchase such asset under ordinary
selling conditions.
"Stated Maturity Date" is defined in Section 3.4(a).
"Subordinated Indebtedness" means any Indebtedness described in
Schedule 11.1 as subordinated indebtedness and any Indebtedness of the Company
or any of its Subsidiaries permitted pursuant to Section 11.1(c).
"Subsidiary" means, with respect to any Person, any other Person more
than 50% of the outstanding voting securities of which shall at the time be
owned or controlled, directly or indirectly, by such Person; provided, that
with respect to the Company, Subsidiaries shall include MW Petroleum, MWJR,
each Drilling Partnership and any other Person more than 50% of the outstanding
voting securities of which shall at the time be owned or controlled, directly
or indirectly, by the Company or by one or more Subsidiaries or by the Company
and one or more Subsidiaries; further provided, that, notwithstanding the
foregoing, Subsidiaries of the Company shall not include, for the purposes of
Article VIII (except for Sections 8.10, 8.15 and 8.16), Article IX, Article XI
(except for Sections 11.2 and 11.9) and Article XII (except for Section 12.1
insofar as the representation or warranty which is breached or shall be false
was made pursuant to Section 8.10, Section 8.15 or Section 8.16), Apache Energy
Limited and its Subsidiaries.
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<PAGE> 25
"Termination Date" means the Original Termination Date, or such other
later date as may result from any extension requested by the Company and
consented to by the Lenders pursuant to Section 2.2.
"Texaco" means Texaco Exploration and Production Inc., a Delaware
corporation.
"Texaco Acquisition" means the acquisition by the Company pursuant to
the Purchase and Sale Agreement of Properties as described therein.
"Transferee" is defined in Section 17.4.
"Unfunded Liabilities" means, (i) in the case of Single Employer
Plans, the amount (if any) by which the present value of all vested
nonforfeitable benefits under such Plan exceeds the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plans, and (ii) in the case of Multiemployer
Plans, the withdrawal liability that would be incurred by the Controlled Group
if all members of the Controlled Group completely withdrew from all
Multiemployer Plans.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Utilized Commitment" means the sum of the aggregate outstanding
principal amount of Loans. With respect to each Lender, its share, in dollars,
of the Utilized Commitment shall be calculated as the sum of the aggregate
outstanding principal amount of such Lender's Loans.
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
voting securities of which shall at the time be owned or controlled, directly
or indirectly, by the Company or one or more Wholly-Owned Subsidiaries, or by
the Company and one or more Wholly-Owned Subsidiaries, or any similar business
organization which is so owned or controlled.
1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Schedule and Exhibit
hereto and in each Note, Borrowing Notice, Competitive Bid Borrowing Notice,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
1.3. Cross References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article, Section,
Exhibit or Schedule are references to such Article or Section of or Schedule or
Exhibit to this Agreement or such other Loan Document, as the case may be, and,
unless otherwise specified, references in any Article, Section or definition to
any clause are references to such clause of such Article, Section or
definition.
1.4. Accounting and Financial Determination. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder, and all financial statements required to be delivered hereunder or
thereunder, shall be prepared in accordance with, the Agreement Accounting
Principles.
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ARTICLE II
THE FACILITIES
2.1. The Facility.
(a) Description of Facility. On the Effective Date,
all outstanding 1994 Revolving Loans shall be renewed, restated,
extended and converted into (but shall not be deemed to be repaid)
Revolving Loans under this Agreement; provided, however, that from and
including the Effective Date the Eurodollar Spread applicable with
respect to such renewed, restated, extended and converted 1994
Revolving Loans shall be determined pursuant to this Agreement. On
the terms and subject to the conditions set forth in this Agreement
(including satisfaction of the conditions precedent set forth
in Article VII), the Lenders grant to the Company a revolving credit
facility pursuant to which, and upon the terms and conditions herein
set out:
(i) each Lender severally agrees to make
Revolving Loans to the Company in
accordance with this Section and
Article III; and
(ii) each Lender may, in its sole
discretion, make bids to make
Competitive Bid Loans to the Company in
accordance with this Section and
Article III.
(b) Facility Amount. In no event may the aggregate
principal amount of all outstanding Loans (including both the
Revolving Loans and the Competitive Bid Loans) exceed the Aggregate
Available Commitment and no Lender shall be obligated to make any Loan
hereunder if, after giving effect to such Loan, the sum of the
aggregate outstanding principal amount of all Loans would exceed the
Aggregate Available Commitment (as then in effect after giving effect
to any reductions thereof to be effectuated on such day).
(c) All Loans. Subject to the terms and conditions of
this Agreement, the Company may borrow, repay and reborrow all Loans
made under this Agreement at any time prior to the Termination Date.
The obligations of the Lenders to make Loans shall cease on the
Termination Date, and any and all Loans outstanding on such date shall
be due and payable on such date.
(d) Revolving Advances. Each Revolving Advance
hereunder shall consist of borrowings made from the several Lenders
ratably in proportion to the amounts of their respective Commitments.
The aggregate outstanding amount of Competitive Bid Loans shall reduce
each Lender's portion of the Aggregate Available Commitment ratably in
the proportion such Lender's Commitment bears to the Aggregate
Commitment regardless of which Lender or Lenders makes such
Competitive Bid Loans.
(e) Competitive Bid Loans. In addition to Revolving
Loans pursuant to Section 2.1(d), but subject to the terms and
conditions of this Agreement (including, without limitation, the
limitation set forth in Section 2.1(b) as to the maximum aggregate
principal amount of all outstanding Loans hereunder, the Company may,
as set forth in this Section 2.1(e) and Article III, at any time
request the Lenders, prior to the Termination Date, to make offers to
make Competitive Bid Advances to the Company. Each Lender may, but
shall have no obligation to, make such offers and the Company may, but
shall have no obligation to, accept such offers.
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2.2. Extension of Termination Date and of Commitment.
(a) Subject to the other provisions of this Agreement,
the Aggregate Commitment shall be effective for an initial period from
the Effective Date to the Original Termination Date; provided that the
Aggregate Commitment, and concomitantly the Termination Date, may be
extended for successive one year periods expiring on the date which is
one (1) year from the then scheduled Termination Date. If the Company
shall request in an Annual Certificate of Extension delivered to the
Administrative Agent concurrently with delivery of the Approved
Engineers' Report delivered prior to the then scheduled Termination
Date pursuant to Section 9.1(d) that the Aggregate Commitment be
extended for one year from the then scheduled Termination Date, then
the Administrative Agent shall promptly notify each Lender of such
request and each Lender shall notify the Administrative Agent, no
later than the next date by which each Lender is required, pursuant to
Section 2.3(a), to (i) approve or disapprove the Engineering Banks'
determination of the Borrowing Base and (ii) whether it, in the
exercise of its sole discretion, will extend the Termination Date for
such one year period. Any Lender which shall not timely notify the
Administrative Agent whether it will extend the Termination Date shall
be deemed to not have agreed to extend the Termination Date. No
Lender shall have any obligation whatsoever to agree to extend the
Termination Date. Any agreement to extend the Termination Date by any
Lender shall be irrevocable, except as provided in Section 2.2(c).
(b) If all the Lenders notify the Administrative Agent
pursuant to clause (a) of this Section 2.2 of their agreement to
extend the Termination Date (such Lenders agreeing to extend the
Termination Date herein called the "Accepting Lenders"), then the
Administrative Agent shall so notify each Lender and the Company, and
such extension shall be effective without other or further action by
any party hereto for such additional one year period.
(c) If Lenders constituting at least the Required
Lenders approve the extension of the then scheduled Termination Date
and if one (1) or more of the Lenders shall notify, or be deemed to
notify, the Administrative Agent pursuant to clause (a) of this Section
2.2 that it will not extend the then scheduled Termination Date (such
Lenders herein called the "Declining Lenders"), then (A) the
Administrative Agent shall promptly so notify the Company and the
Accepting Lenders, (B) the Accepting Lenders shall, upon the Company's
election to extend the then scheduled Termination Date in accordance
with clause (i) or (ii) below, extend the then scheduled Termination
Date and (C) the Company shall pursuant to a notice delivered to the
Administrative Agent, the Accepting Lenders and the Declining Lenders,
no later than the fifth day following the date by which each Lender is
required, pursuant to Section 2.2(a), to approve or disapprove the
requested extension of the Aggregate Commitment, either:
(i) elect to extend the Termination Date
with respect to the Accepting Lenders and direct the
Declining Lenders to terminate their Commitments, which
termination shall become effective on the date which would
have been the Termination Date except for the operation of
this Section 2.2. On such date, (x) the Company shall
deliver a notice of the effectiveness of such termination
to the Declining Lenders with a copy to the Administrative
Agent and (y) the Company shall pay in full in immediately
available funds all Obligations of the Company owing to the
Declining Lenders and (z) upon the occurrence of the events
set forth in clauses (x) and (y), the Declining Lenders
shall each cease to be a Lender hereunder for all purposes,
other than for
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purposes of Section 14.7, and shall cease to have any obligations or
any Commitment hereunder, other than to the Agents pursuant to Section
15.8 and the Administrative Agent shall promptly notify the Accepting
Lenders and the Company of the new Aggregate Commitment; or
(ii) elect to extend the Termination Date
with respect to the Accepting Lenders and, prior to or no
later than the then scheduled Termination Date, (A) to
replace one or more of the Declining Lender or Lenders with
another lender or lenders reasonably acceptable to the
Administrative Agent (such lenders herein called the
"Replacement Lenders") and (B) the Company shall pay in
full in immediately available funds all Obligations of the
Company owing to the Declining Lenders which are not being
replaced, as provided in clause (i) above; provided that
(x) the Replacement Lender or Lenders shall purchase, and
the Declining Lender or Lenders shall sell, the Notes of
the Declining Lender or Lenders being replaced and the
Declining Lender's or Lenders' rights hereunder without
recourse or expense to, or warranty by, such Declining
Lender or Lenders being replaced for a purchase price equal
to the aggregate outstanding principal amount of the Note
or Notes payable to such Declining Lender or Lenders plus
any accrued but unpaid interest on such Note or Notes and
accrued but unpaid fees in respect of such Declining
Lender's or Lenders' Loans and Commitments hereunder, and
(y) all obligations of the Company owing under or in
connection with this Agreement to the Declining Lender or
Lenders being replaced (including, without limitation, such
increased costs, breakage fees payable under Section 6.3
and all other costs and expenses payable to each such
Declining Lender) shall be paid in full in immediately
available funds to such Declining Lender or Lenders
concurrently with such replacement, and (z) upon the
payment of such amounts referred to in clauses (x) and (y),
the Replacement Lender or Lenders shall each constitute a
Lender hereunder and the Declining Lender or Lenders being
so replaced shall no longer constitute a Lender (other than
for purposes of Section 14.7), and shall no longer have any
obligations hereunder, other than to the Agents pursuant to
Section 15.8; or
(iii) elect to revoke and cancel the
extension request in such Annual Certificate of Extension
by giving notice of such revocation and cancellation to the
Administrative Agent (which shall promptly notify the
Lenders thereof) no later than the fifth day following the
date by which each Lender is required, pursuant to Section
2.2(a), to approve or disapprove the requested extension of
the Aggregate Commitment.
If the Company fails to timely provide the election notice referred to
in this clause (c), the Company shall be deemed to have revoked and cancelled
the extension request in the Annual Certificate of Extension and to have elected
not to extend the Aggregate Commitment, and the concomitant Termination Date
with respect to the Accepting Lenders, and on the then scheduled Termination
Date the Company shall repay in full all amounts outstanding under the Loans.
2.3. Borrowing Base and Aggregate Available Commitment.
(a) Initial Borrowing Base; Scheduled Semi-Annual and
Discretionary Determinations of the Borrowing Base; Procedures for
Determination of the Borrowing Base. The initial Borrowing Base shall
be $765,000,000. The Borrowing Base shall be redetermined upon
receipt by the Administrative Agent, the Engineering Banks and the
Lenders of the
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relevant Approved Engineers' Report or Company's Engineers' Report, as
the case may be, pursuant to Sections 2.3(b) or (e) or 9.1(d), (e) or
(f). The redeterminations of the Borrowing Base described in the
preceding sentence shall be made as follows: The Engineering Banks
shall make a determination of the Borrowing Base in accordance with
the criteria described in clause (c) of this Section 2.3, within
thirty (30) days after receipt of the Approved Engineers' Report or
the Company's Engineers' Report, as the case may be. Within ten (10)
days following such determination, the Administrative Agent shall
notify the Lenders in writing of such determination the amount, if
any, of the Non-conforming Borrowing Base and the resulting Aggregate
Available Commitment. Each Lender shall notify the Administrative
Agent in writing, by telex or by facsimile transmission whether it
approves or disapproves of any such determination within ten (10)
Business Days of its receipt of such notice from the Administrative
Agent; provided that any Lender which does not so notify the
Administrative Agent shall be deemed to have approved of such
determination. Upon the approval (or deemed approval) by the Required
Lenders, such determination shall thereafter be the Borrowing Base or
the Aggregate Available Commitment, as the case may be, and the
Administrative Agent shall within five (5) days of such approval
notify the Company in writing of such redetermined Borrowing Base.
The Administrative Agent shall promptly notify the Company and the
Lenders of any change in the Borrowing Base. Additionally, the
Aggregate Available Commitment may or will be reduced from time to
time as provided in Sections 2.3(d), (e) and (f), Section 4.2(d) and
Section 11.1.
(b) Determination of Borrowing Base at Request of
Company. The Company may request one Borrowing Base determination
between any regularly scheduled semi-annual redeterminations of the
Borrowing Base by delivery to the Administrative Agent, the
Engineering Banks and the Lenders of a written request for such
determination; provided that a deemed request for a determination of
the Borrowing Base pursuant to Section 11.1(c), (d) or (e) shall not
preclude the Company's requesting a Borrowing Base determination to
which it is otherwise entitled pursuant to this clause (b). In
connection with such determination the Company shall deliver to the
Administrative Agent, the Engineering Banks and the Lenders such
reports and information concerning the Properties (which may include
in the Engineering Banks' sole discretion an Approved Engineers'
Report or a Company's Engineers' Report as of such date) as the
Engineering Banks shall deem appropriate in its or their sole
discretion.
(c) Criteria for Determination of the Borrowing Base.
Each determination by the Engineering Banks and the approval by the
Required Lenders of the Borrowing Base attributable to the Properties
owned by the Company and its Subsidiaries including Properties owned
through partnerships (but not to exceed in each case an undivided
share of such Properties equal to the Company's ownership share of
such partnerships) shall be made by them in the exercise of their
respective sole discretion based on their then current engineering
criteria and oil and gas lending criteria, all as determined using the
then most recently received Approved Engineers' Report or Company's
Engineers' Report, as the case may be, and, subject to the approval of
the Required Lenders to the extent set forth in clause (a) of this
Section 2.3, shall be conclusive and binding in the absence of
manifest error.
(d) Redeterminations of Borrowing Base Upon Material
Adverse Effect. In the event of:
(i) the assertion or filing of any adverse
claim, defect or encumbrance affecting or purporting to
affect the title of the Company or any Subsidiary to any
Property; or
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(ii) any blow out or other casualty
affecting any Property or the production of oil and gas
therefrom; or
(iii) any withholding after one hundred
twenty (120) days following commencement of production by
any Person of sums due the Company or any Subsidiary in
respect of Hydrocarbons produced, which withholding results
from an allegation or claim affecting such Person's rights
to such payment;
which would have or be a Material Adverse Effect, the Engineering
Banks shall have the right in their sole discretion to reduce the
Borrowing Base, either temporarily or permanently, by the amount
included therein with respect to the interest as to which a claim,
defect, encumbrance, withholding or dispute has arisen or exists or a
casualty has occurred. The failure of the Engineering Banks to make
any such reduction upon receipt of any notice with respect to any such
claim, dispute or casualty shall not preclude their later election to
so reduce the Borrowing Base.
(e) Redetermination of Borrowing Base Upon Material
Changes. In the event that "material changes" occur between the dates
of determination of the Borrowing Base (i) in oil and/or gas prices,
(ii) in taxes, (iii) in anticipated rates or amounts of production
from any Properties included in the Borrowing Base, (iv) in the
Company's or any Subsidiary's, as the case may be, title or purported
title to the Properties, (v) in operating, lease, royalty and other
arrangements relating to the Properties, (vi) in operating costs with
respect to the Properties, or (vii) in the Company's anticipated
revenues as a result of the Company or any of its Subsidiaries'
granting a Lien upon any of its Properties securing Indebtedness
permitted by Section 11.1(g) or incurring Indebtedness permitted by
Section 11.1(g), then in any such event the Engineering Banks may, in
their sole discretion, redetermine the Borrowing Base in accordance
with the standards set forth in Section 2.3(c) prior to the receipt of
either a new Approved Engineers' Report or a new Company's Engineers'
Report by adjusting the Borrowing Base to reflect the changes which
have occurred. For the purposes hereof, "material changes" shall be
deemed to have occurred for purposes of this Section 2.3(e) when such
changes would in the aggregate result in a material decrease in the
Borrowing Base as determined by the Engineering Banks in their sole
and absolute discretion.
(f) Reduction of Aggregate Available Commitment Upon
Sales of Certain Properties. Upon consummation of the Sale of any
Property in the Borrowing Base constituting a permitted and designated
Sale under clause (iii) of Section 11.3, the Aggregate Available
Commitment shall be reduced on account of such Sale by an amount equal
to the proceeds of such Sale net of reasonable incidental brokerage
and legal costs actually paid to third parties, net of taxes
associated with such Sale payable in cash concurrently with the
consummation of such Sale, and net of federal and state income taxes
estimated to be due in respect of such Sale by the Company acting
reasonably and in good faith, provided reserves for such taxes are
established by the Company. Upon the consummation of the Sale of any
Property in the Borrowing Base constituting a permitted Sale under
clause (iv) of Section 11.3, the Aggregate Available Commitment shall
be reduced by an amount equal to the amount of the mandatory
prepayment, if any, required to be made under Section 4.2(d) on
account of such Sale.
(g) Title Warranty. Delivery to the Lenders of any
Approved Engineers' Report or Company's Engineers' Report shall be
deemed to be a reaffirmation as of the date of delivery of such report
of the representation and warranties in Section 8.14.
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2.4. [Intentionally Omitted.]
2.5. Facility Fee; Other Fees.
(a) Facility Fee.
(i) The Company agrees to pay to the Administrative
Agent for the account of each Lender a facility
fee for the period from (and including) the date
hereof to the Termination Date, at the applicable
rates per annum set forth in Schedule B on such
Lender's ratable portion of the Aggregate
Available Commitment as in effect from time to
time; provided, however, that a reduction in a
Lender's portion of the Aggregate Available
Commitment pursuant to Section 2.1(d) shall not
reduce such Lender's ratable portion of the
Aggregate Available Commitment for the purposes of
this Section 2.5(a)(i).
(ii) The Company agrees to pay to the Administrative
Agent for the account of each Lender a facility
fee for the period from (and including) the date
hereof to the Termination Date, at one-half of the
rates applicable per annum set forth in Schedule B
on such Lender's ratable portion of the Aggregate
Unavailable Commitment as in effect from time to
time; provided, however, that a reduction in a
Lender's portion of the Aggregate Available
Commitment pursuant to Section 2.1(d) shall not
reduce such Lender's ratable portion of the
Aggregate Unavailable Commitment for the purposes
of this Section 2.5(a)(ii).
Facility fees accruing pursuant to this Section 2.5(a) shall be
payable in arrears on each Payment Date hereafter and on the
Termination Date. In addition to the foregoing, the Company agrees to
pay all fees accruing prior to date hereof with respect to each
Lender's commitments under the April 1994 Agreement.
(b) Agents' Fees. The Company shall pay to each Agent
for its own respective account such fees in connection with this
Agreement as previously have been agreed in a writing among them (as
such writing may hereafter be amended, supplemented, restated or
otherwise modified and in effect).
ARTICLE III
BORROWING; SELECTING RATE OPTIONS; ETC.
3.1. Method of Borrowing.
(a) Revolving Loans. Not later than noon Chicago time
on each Borrowing Date for Revolving Loans, each Lender shall make
available its Loan or Loans, in funds immediately available in
Chicago, to the Administrative Agent at its address specified pursuant
to Article XVIII. The Administrative Agent will make the funds so
received from the Lenders with respect to Revolving Loans available to
the Company at the Administrative Agent's aforesaid address.
(b) Competitive Bid Loans. Not later than noon
Chicago time on the Borrowing Date specified for each Competitive Bid
Loan, each Lender whose Competitive Bid Quote in respect thereof the
Company accepted pursuant to Section 3.4(e) shall make available its
Competitive Bid Loan,
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in funds immediately available in Chicago, to the Administrative Agent
at its address specified pursuant to Article XVIII. The Administrative
Agent will make the funds so received from the Lenders with respect to
Competitive Bid Loans available to the Company at the Administrative
Agent's aforesaid address.
3.2. [Intentionally Omitted.]
3.3. Method of Selecting Rate Options and Interest Periods for
Revolving Loans. The Company shall select the Rate Option and Interest Period
applicable to each Revolving Advance from time to time. The Company shall give
the Administrative Agent irrevocable notice (a "Borrowing Notice") not later
than (a) 10:00 a.m. Chicago time on the Borrowing Date of each Floating Rate
Revolving Advance, and (b) 11:00 a.m. Chicago time at least three (3) Business
Days before the Borrowing Date for each Eurodollar Revolving Advance,
specifying:
(i) the Borrowing Date, which shall be a
Business Day, of such Revolving Advance,
(ii) the aggregate amount of such Revolving
Advance,
(iii) the Rate Option selected for such
Revolving Advance,
(iv) in the case of each Eurodollar
Revolving Advance, the Interest Period applicable thereto.
Each Eurodollar Revolving Advance shall bear interest from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined from time to
time as applicable to such Eurodollar Revolving Advance. The Company shall
select Interest Periods with respect to Eurodollar Revolving Advances so that
it is not necessary to pay a Eurodollar Revolving Advance prior to the last day
of the applicable Interest Period in order to make the mandatory repayment on
the Termination Date.
3.4. Competitive Bid Loans.
(a) Competitive Bid Quote Request. When the Company
wishes to request offers to make Competitive Bid Loans under this
Agreement, it shall transmit to the Administrative Agent by telex or
telecopy a Competitive Bid Quote Request substantially in the form
of Exhibit E hereto so as to be received no later than (i) 10:00 a.m.
(Chicago time) at least four Business Days prior to the Borrowing Date
proposed therein, in the case of a Eurodollar Auction or (ii) 9:00
a.m. (Chicago time) at least one Business Day prior to the Borrowing
Date proposed therein, in the case of a Floating Rate Auction
specifying:
(i) the proposed Borrowing Date, which
shall be a Business Day, for the proposed Competitive Bid
Advance;
(ii) the aggregate principal amount of such
Competitive Bid Advance;
(iii) whether the Competitive Bid Quotes
requested are to set forth a Eurodollar Bid Rate or a
Floating Bid Rate, or both;
(iv) in the case of each Floating Rate
Auction, the maturity date (relative to each Competitive
Bid Loan, its "Stated Maturity Date") for the proposed
Competitive Bid Advance (which Stated Maturity Date may not
be earlier than the date occurring
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seven (7) days after the proposed Borrowing Date of such
Competitive Bid Advance or later than the earlier of (x)
the date occurring 185 days after the proposed Borrowing
Date of such Competitive Bid Advance and (y) the
Termination Date); and
(v) in the case of each Eurodollar Bid Rate
Advance, the Interest Period applicable thereto (which may
not end after the Termination Date); provided that the
final day of the Interest Period applicable to each
Eurodollar Bid Rate Loan shall be the Stated Maturity Date
thereof.
The Company may request offers to make Competitive Bid
Loans for more than one Interest Period in a single Competitive Bid
Quote Request. No Competitive Bid Quote Request shall be given within
5 Business Days (or such other number of days as the Company and the
Administrative Agent may agree) of any other Competitive Bid Quote
Request. A Competitive Bid Quote Request that does not conform
substantially to the format of Exhibit E hereto shall be rejected, and
the Administrative Agent shall promptly notify the Company of such
rejection by telex or telecopy.
(b) Invitation for Competitive Bid Quotes. Promptly
and in any event before the close of business on the same Business Day
of receipt of a Competitive Bid Quote Request that is not rejected
pursuant to Section 3.4(a), the Administrative Agent shall send to each
of the Lenders by telex or telecopy an Invitation for Competitive Bid
Quotes substantially in the form of Exhibit H hereto, which shall
constitute an invitation by the Company to each Lender to submit
Competitive Bid Quotes offering to make the Competitive Bid Loans to
which such Competitive Bid Quote Request relates in accordance with
this Section 3.4; provided that the Administrative Agent shall not be
required to send an Invitation for Competitive Bid Quotes to any
Lender that has failed to submit a Competitive Bid Quote after each of
the last three Invitations for Competitive Bid Quotes sent to such
Lender unless the Company or such Lender has given notice to the
Administrative Agent specifically referring to such Invitation for
Competitive Bid Quotes and requesting that this proviso not apply to
such Invitation for Competitive Bid Quotes, in which case this proviso
automatically shall not apply to such Invitation for Competitive Bid
Quotes.
(c) Submission and Contents of Competitive Bid Quotes.
(i) Each Lender may, in its sole discretion, submit a
Competitive Bid Quote containing an offer or
offers to make Competitive Bid Loans in response
to any Invitation for Competitive Bid Quotes.
Each Competitive Bid Quote must comply with the
requirements of this Section 3.4(c) and must be
submitted to the Administrative Agent by telex or
telecopy at its offices specified pursuant to
Article XVIII not later than (a) 10:00 a.m.
(Chicago time) at least three Business Days prior
to the proposed Borrowing Date, in the case of a
Eurodollar Auction or (b) 9:00 a.m. (Chicago time)
on the proposed Borrowing Date, in the case of a
Floating Rate Auction (or, in either case upon
reasonable prior notice to the Lenders, such other
time and date as the Company and the
Administrative Agent may agree); provided that
Competitive Bid Quotes submitted by First Chicago
may only be submitted if the Administrative Agent
or First Chicago notifies the Company of the terms
of the offer or offers contained therein not later
than 15 minutes prior to the latest time at which
the relevant Competitive Bid Quotes must be
submitted by the other Lenders. Subject to
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Articles VII and XII, any Competitive Bid Quote so
made shall be irrevocable except with the written
consent of the Administrative Agent given on the
instructions of the Company.
(ii) Each Competitive Bid Quote shall be in
substantially the form of Exhibit K hereto and
shall in any case specify:
a. the proposed Borrowing Date, which
shall be the same as that set forth in the applicable
Invitation for Competitive Bid Quotes;
b. the Stated Maturity Date and the
principal amount of the Competitive Bid Loan for which each
such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the
quoting Lender, (2) must be at least $5,000,000 and an
integral multiple of $1,000,000, and (3) may not exceed the
principal amount of Competitive Bid Loans for which offers
were requested;
c. the Competitive Bid Margin offered for
each such Competitive Bid Loan;
d. the minimum amount, if any, of the
Competitive Bid Loan which may be accepted by the Company;
and
e. the identity of the quoting Lender.
(iii) The Administrative Agent shall reject any
Competitive Bid Quote that:
a. is not substantially in the form of
Exhibit K hereto or does not specify all of the information
required by Section 3.4(c)(ii);
b. contains qualifying, conditional or
similar language, other than any such language contained in
Exhibit K hereto;
c. proposes terms other than or in
addition to those set forth in the applicable Invitation
for Competitive Bid Quotes; or
d. arrives after the time set forth in
Section 3.4(c)(i).
If any Competitive Bid Quote shall be rejected pursuant to
this Section 3.4(c)(iii), then the Administrative Agent shall notify
the relevant Lender of such rejection as soon as practical.
(d) Notice to Company. The Administrative Agent shall
promptly notify the Company of the terms (i) of any Competitive Bid
Quote submitted by a Lender that is in accordance with Section 3.4(c)
and (ii) of any Competitive Bid Quote that amends, modifies or is
otherwise inconsistent with a previous Competitive Bid Quote submitted
by such Lender with respect to the same Competitive Bid Quote Request.
Any such subsequent Competitive Bid Quote shall be disregarded by the
Administrative Agent unless such subsequent Competitive Bid Quote
specifically states that it is submitted solely to correct a manifest
error in such former Competitive Bid Quote. The Administrative
Agent's notice to the Company shall specify the aggregate principal
amount of Competitive Bid Loans for which offers
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<PAGE> 35
have been received for each Interest Period or Stated Maturity Date
specified in the related Competitive Bid Quote Request and the
respective principal amounts and Eurodollar Bid Rates or Floating Bid
Rates, as the case may be, so offered.
(e) Acceptance and Notice by Company. Not later than
(i) 11:00 a.m. (Chicago time) at least three Business Days prior to
the proposed Borrowing Date, in the case of a Eurodollar Auction or
(ii) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the
case of a Floating Rate Auction (or, in either case upon reasonable
prior notice to the Lenders, such other time and date as the Company
and the Administrative Agent may agree), the Company shall notify the
Administrative Agent of its acceptance or rejection of the offers so
notified to it pursuant to Section 3.4(d); provided, however, that the
failure by the Company to give such notice to the Administrative Agent
shall be deemed to be a rejection of all such offers. In the case of
acceptance, such notice (a "Competitive Bid Borrowing Notice") shall
specify the aggregate principal amount and the Interest Period and
Stated Maturity Date of each offer that is accepted. The Company may
accept any Competitive Bid Quote in whole or in part (subject to the
terms of Section 3.4(c)(ii)d); provided that:
a. the aggregate principal amount of each
Competitive Bid Advance may not exceed the applicable
amount set forth in the related Competitive Bid Quote
Request;
b. acceptance of offers may only be made
on the basis of ascending Eurodollar Bid Rates or Floating
Bid Rates, as the case may be; and
c. the Company may not accept any offer
that is described in Section 3.4(c)(iii) or that otherwise
fails to comply with the requirements of this Agreement.
(f) Allocation by Administrative Agent. If offers are
made by two or more Lenders with the same Eurodollar Bid Rates or
Floating Rates, as the case may be, for a greater aggregate principal
amount than the amount in respect of which offers are accepted for the
related Interest Period, the principal amount of Competitive Bid Loans
in respect of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in such
multiples, not greater than $1,000,000, as the Administrative Agent
may deem appropriate) in proportion to the aggregate principal amount
of such offers; provided, however, that no Lender shall be allocated a
portion of any Competitive Bid Advance which is less than the minimum
amount which such Lender has indicated that it is willing to accept.
Allocations by the Administrative Agent of the amounts of Competitive
Bid Loans shall be conclusive in the absence of manifest error. The
Administrative Agent shall promptly, but in any event on the same
Business Day, notify each Lender of its receipt of a Competitive Bid
Borrowing Notice and the aggregate principal amount of such
Competitive Bid Advance allocated to each participating Lender.
3.5. Minimum Amount of Each Advance. Each requested Advance
shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if
in excess thereof); provided, however, that any Floating Bid Rate Advance and
any Floating Rate Revolving Advance may be in the amount of the difference
between (i) the Aggregate Available Commitment minus (ii) the sum of the
outstanding principal amount of all Loans.
3.6. Continuation and Conversion Elections. By providing a
Continuation/Conversion Notice to the Administrative Agent on or before 11:00
a.m.
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<PAGE> 36
Chicago time, in the case of a Eurodollar Revolving Loan, or 10:00 a.m. Chicago
time, in the case of a Floating Rate Revolving Loan, on a Business Day, the
Company may from time to time irrevocably elect, on, in the case of a
Eurodollar Revolving Loan, not less than three nor more than five, and in the
case of a Floating Rate Revolving Loan not less than one or more than three,
Business Days' notice, that all, or any portion in an aggregate minimum amount
of $5,000,000 and an integral multiple of $1,000,000 or the remaining balance
of any Revolving Loans be, in the case of Floating Rate Revolving Loans
converted into Eurodollar Revolving Loans or, in the case of Eurodollar
Revolving Loans converted into Floating Rate Revolving Loans or continued as
Eurodollar Revolving Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any Eurodollar Revolving Loan at
least three Business Days before the last day of the then current Interest
Period with respect thereto, such Eurodollar Revolving Loan shall, on such last
day, automatically convert to a Floating Rate Revolving Loan); provided,
however, that no portion of the outstanding principal amount of any Loans may
be continued as, or be converted into, a Eurodollar Advance when any Default
has occurred and is continuing.
3.7. Telephonic Notices. The Company hereby authorizes the
Lenders and the Administrative Agent to extend Advances, effect Rate Option
selections and submit Competitive Bid Quotes based on telephonic notices made
by any Person or Persons the Administrative Agent or any Lender in good faith
believes to be acting on behalf of the Company. The Company agrees to deliver
promptly to the Administrative Agent a written confirmation of each telephonic
notice signed by an Authorized Officer. If the written confirmation differs in
any material respect from the action taken by the Administrative Agent and the
Lenders, the records of the Administrative Agent and the Lenders shall govern
absent manifest error.
3.8. Rate after Maturity. Except as provided in the next
sentence, any Advance not paid at maturity, whether by acceleration or
otherwise, shall bear interest until paid in full at a rate per annum equal to
the Floating Revolving Rate plus 2%. In the case of a Eurodollar Advance the
maturity of which is accelerated, such Eurodollar Advance shall bear interest
for the remainder of the applicable Interest Period, at the higher of the rate
(including the Eurodollar Spread or the Competitive Bid Margin, as applicable)
otherwise applicable to such Interest Period plus 2% per annum or the Floating
Revolving Rate plus 2% per annum.
3.9. Interest Payment Dates; Determination of Interest and Fees.
(a) Interest Payment Dates.
(i) Interest accrued and unpaid on each
Floating Rate Revolving Advance shall be payable on each
Payment Date and on any date on which such Floating Rate
Revolving Advance is paid or prepaid, whether due to
acceleration or otherwise. Interest accrued on each
Eurodollar Revolving Advance shall be payable on the last
day of its applicable Interest Period and on any date on
which such Eurodollar Revolving Advance is prepaid, whether
due to acceleration or otherwise. Interest accrued on each
Eurodollar Revolving Advance having an Interest Period
longer than three (3) months shall also be payable on the
last day of each three-month interval during such Interest
Period.
(ii) Interest on the outstanding principal
amount of Competitive Bid Loans shall be payable on the
Stated Maturity Date for each such Competitive Bid Loan;
provided, however, that in the case of a Eurodollar Bid
Rate Advance having an Interest Period longer than three
(3) months, interest accrued on such Eurodollar
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<PAGE> 37
Bid Rate Advance shall also be payable on the last day of
each three-month interval during such Interest Period.
Interest shall be payable for the day an Advance is made but not for the day of
any payment on the amount paid if payment is received prior to noon (local
time) at the place of payment. If any payment of principal of, or interest on,
an Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day (except as provided in the
definition of Interest Period) and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
(b) Determination of Interest and Fees. Interest on
any Advance or portion thereof bearing interest at the Floating
Revolving Rate or the Floating Bid Rate and facility fees shall be
calculated for actual days elapsed on the basis of a 365- or, if
applicable, 366-day year, and all other interest and fees shall be
calculated for actual days elapsed on the basis of a 360-day year.
Changes in the Alternate Base Rate Spread and the Eurodollar Spread
attributable to a change in the Debt/Capitalization Ratio or to a
change in the Company's Long-term Debt Rating, if any, shall be
effective on the forty-fifth (45th) day of a calendar quarter.
3.10. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative
Agent will notify each Lender of the contents of each commitment reduction
notice, Borrowing Notice, Continuation/Conversion Notice, Competitive Bid Quote
Request and repayment notice received by it hereunder. The Administrative
Agent will notify each Lender of the Eurodollar Rate applicable to each
Eurodollar Advance promptly upon determination of such Eurodollar Rate and will
give each Lender prompt notice of each change in the Alternate Base Rate. Each
Reference Lender agrees to furnish timely information for the purpose of
determining the Eurodollar Rate.
3.11. Non-Receipt of Funds by the Administrative Agent. Unless
the Company or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the
Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of the Company, a payment of principal, interest, fees or
other amounts to the Administrative Agent for the account of the Lenders or any
Agent, that it does not intend to make such payment, the Administrative Agent
may assume that such payment has been made. The Administrative Agent may, but
shall not be obligated to, make the amount of such payment available to the
intended recipient in reliance upon such assumption. If such Lender or the
Company, as the case may be, has not in fact made such payment to the
Administrative Agent, the recipient of such payment shall, on demand by the
Administrative Agent, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Company, the interest rate applicable to the relevant Loan or, in the case of
payments in respect of interest, fees or other amounts, at a rate equal to the
Floating Rate.
ARTICLE IV
MANDATORY PAYMENTS; REDUCTIONS OF COMMITMENTS; ETC.
4.1. [Intentionally Omitted.]
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4.2. Mandatory Prepayments.
(a) Mandatory Prepayment on Account of Excess of
Outstandings Over Aggregate Available Commitment. In the event that
after giving effect to all other payments or prepayments required to
be made under this Section 4.2 on any Business Day the aggregate
outstanding principal amount of the Loans shall at any time exceed the
Aggregate Available Commitment, the Company shall within ninety (90)
days make a mandatory prepayment on the Loans in an amount equal to
such excess together with all interest accrued on the amount of such
prepayment to the date thereof. Notwithstanding that the Company
shall have a 90-day period in which to make any mandatory prepayment
specified in this Section 4.2(a), (i) the Company shall not be entitled
to borrow Loans during such period without meeting the test
under Section 2.1(b) and (ii) the Company shall make all other
prepayments and payments required under or in connection with this
Agreement as required; provided, that for purposes of the foregoing
provisions of this sentence the conversion of an outstanding
Eurodollar Loan into a Floating Rate Loan during such period shall not
be deemed to be the borrowing of a Loan.
(b) Mandatory Prepayment on Account of Sales of
Certain Properties Included in the Borrowing Base. Promptly upon the
consummation of any Sale of any Property included in the Borrowing
Base constituting (and designated by the Company in a notice to the
Administrative Agent as constituting) a permitted Sale under clause
(iii) of Section 11.3 and in any event within three (3) Business Days
thereof, the Company shall make a mandatory prepayment hereunder equal
to the amount, if any, by which the aggregate outstanding principal
amount of all Loans on the date of such mandatory prepayment exceeds
the Aggregate Available Commitment (as then in effect after giving
effect to any reduction thereof resulting from such Sale).
(c) [Intentionally Omitted.]
(d) Mandatory Prepayment on Account of Extraordinary
Sales of Properties. In the event the Company or any Subsidiary
proposes to consummate a Sale of any Property, which Sale is not
otherwise permitted under clause (i) or (ii) of Section 11.3 or
otherwise permitted and designated under clause (iii) of Section 11.3,
the Company shall promptly notify the Administrative Agent, the
Engineering Banks and the Lenders of such proposed Sale, which notice
shall describe such Property and, if known, the proposed terms of
Sale. In connection therewith the Company shall deliver to the
Administrative Agent, the Engineering Banks and the Lenders such
reports and information concerning such Property (which may include in
the Engineering Banks' sole discretion an Approved Engineers' Report
or a Company's Engineers' Report as of such date) and such Sale as
each of the Engineering Banks shall deem appropriate in its sole
discretion. Promptly following receipt of such report and
information, the Engineering Banks shall make a recommendation (and
the Administrative Agent shall notify the Lenders in writing of such
recommendation) of (A) if the Non-conforming Borrowing Base is $0.00,
whether they approve of such Sale and, if so approved, the amount of
prepayment that the Company shall be required to make under
this Section 4.2(d) (which amount shall also be the amount of the
reduction in the Aggregate Available Commitment pursuant to Section
2.3(f)), and (B) if the Non-conforming Borrowing Base is not $0.00,
whether to approve such sale, which recommendations shall be made by
the Engineering Banks in the exercise of their sole
discretion; provided, however, that in the event the Company or any
Subsidiary proposes to consummate a Sale with respect to a Property
not included within the Borrowing Base when the Non-conforming
Borrowing Base is $0.00, no mandatory prepayment shall be required;
and provided further, that in
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no event shall the Aggregate Available Commitment be reduced by an
amount in excess of the proceeds of such Sale net of costs, charges,
and taxes incidental to the Sale, as provided in Section 2.3(f) for
Sales pursuant to clause (iii) of Section 11.3; and provided further,
that until the Non-conforming Borrowing Base is $0.00, the Aggregate
Available Commitment automatically shall be reduced upon consummation
of any such approved Sale by an amount equal to the proceeds of such
Sale net of costs, charges and taxes incidental to such Sale. Each
Lender shall notify the Administrative Agent in writing, by telex or
by facsimile transmission whether it approves or disapproves (which
approval or disapproval shall be made by each Lender in the exercise
of its sole discretion) of such recommendation and of such Sale within
ten (10) Business Days of its receipt of such recommendation from the
Administrative Agent; provided, that any Lender which does not so
notify the Administrative Agent shall be deemed to have approved of
such Sale, and, if applicable, such amount of prepayment and such
reduction in the Aggregate Available Commitment. Upon the approval of
the Required Lenders, the Administrative Agent shall promptly notify
the Company of such determination. The Company promptly upon the
consummation of any such permitted Sale and in any event within three
(3) Business Days thereof, shall, if required, make a mandatory
prepayment hereunder in the amount so determined in accordance with
this clause (d) or, in the amount that the outstanding principal amount
of the Loans exceeds the Aggregate Available Commitment as so
automatically reduced, as the case may be.
(e) Application of Mandatory Prepayments. Each
mandatory prepayment made under this Section 4.2 shall be applied (i)
first, ratably among the Lenders with respect to any principal and
interest due in connection with Revolving Loans, (ii) second, after
all amounts described in clause (i) have been satisfied, ratably among
those Lenders for whom any payment of principal and interest is due in
connection with any Competitive Bid Loans and (iii) third, after all
amounts described in clauses (i) and (ii) have been satisfied, ratably
to any other Obligations then due.
4.3. Voluntary Prepayments. The Company may from time to time,
at its option, prepay outstanding Advances, upon three (3) Business Days' prior
notice to the Administrative Agent in the case of a Eurodollar Advance, or upon
one (1) Business Day's prior notice to the Administrative Agent in the case of
a Floating Rate Advance; provided that each such prepayment shall be in a
minimum aggregate amount of $4,000,000 or any integral multiple of $1,000,000
in excess thereof without penalty or premium, except that if such prepayment of
a Eurodollar Loan occurs prior to a last day of any applicable Interest Period,
the Company shall also pay the amount specified in Section 6.3 at the time of
such prepayment. Such prepayments shall be applied, at the Company's option,
against outstanding Revolving Loans and Competitive Bid Loans and against
installments or amounts due on account thereof in such order of application as
the Company shall direct; provided, that if the Company fails to direct an
order of application at or prior to the time of such notice of prepayment, then
such prepayments shall be applied (i) first, ratably among the Lenders with
respect to any principal and interest due in connection with Revolving Loans,
(ii) second, after all amounts described in clause (i) have been satisfied,
ratably among those Lenders for whom any payment of principal and interest is
due in connection with any Competitive Bid Loans and (iii) third, after all
amounts described in clauses (i) and (ii) have been satisfied, ratably to any
other Obligations then due; provided, further, that if, at the time of any such
prepayment, any Default shall have occurred and shall be continuing, then the
holders of the Obligations shall share such prepayment on a pro rata basis,
based on the respective amount of Obligations owing to each such holder
(whether or not matured and currently payable and whether consisting of
principal, accrued
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interest, fees, expenses, indemnities or other types of Obligations) as of the
date of occurrence of such Default.
4.4. Method of Payment. All payments of principal, interest,
and fees hereunder shall be made by noon (local time at the place of payment)
on the date when due in immediately available funds to the Administrative Agent
at the Administrative Agent's address specified pursuant to Article XVIII, or
at any other single Lending Installation of the Administrative Agent specified
not less than five (5) days prior to the date when due in writing by the
Administrative Agent to the Company and shall be applied (i) first, ratably
among the Lenders with respect to any principal and interest due in connection
with Revolving Loans, (ii) second, after all amounts described in clause (i)
have been satisfied, ratably among those Lenders for whom any payment of
principal and interest is due in connection with any Competitive Bid Loans and
(iii) third, after all amounts described in clauses (i) and (ii) have been
satisfied, ratably to any other Obligations then due; provided, however, that,
if, at the time of any such payment, any Default shall have occurred and shall
be continuing, then the holders of the Obligations shall share such payment on
a pro rata basis, based on the respective amount of Obligations owing to each
such holder (whether or not matured and currently payable and whether
consisting of principal, accrued interest, fees, expenses, indemnities or other
types of Obligations) as of the date of occurrence of such Default. As between
the Company and any Lender, the timely receipt of any payment by the
Administrative Agent from the Company for the account of such Lender shall
constitute receipt by such Lender. Each payment delivered to the
Administrative Agent for the account of any Lender shall be delivered promptly
by the Administrative Agent to such Lender in the same type of funds which the
Administrative Agent received at its address specified pursuant to Article
XVIII or at any Lending Installation specified in a notice received by the
Administrative Agent from such Lender. Each of the Company and the
Administrative Agent shall be deemed to have complied with this Section 4.4
with respect to any payment if it shall have initiated a wire transfer to the
appropriate recipient thereof and furnished such recipient with the identifying
number of such wire transfer.
4.5. Notes. Each Lender is hereby authorized to record the
principal amount of each of its Loans and each repayment thereof, on the
schedule attached to each of its Notes, provided, however, that the failure to
so record shall not affect the Company's obligations under any such Note.
4.6. Voluntary Reductions of Commitments and the Non-conforming
Borrowing Base. The Company may permanently reduce the Aggregate Commitment or
the Non-conforming Borrowing Base in whole, or in part, ratably among the
Lenders, in a minimum aggregate amount of $5,000,000 or any integral multiple
of $1,000,000 in excess thereof; provided, however, that the amount of the
Aggregate Commitment may not be reduced to an amount which would cause it to be
less than the outstanding principal amount of the Loans and further provided
that any reduction of the Aggregate Commitment shall first reduce the portion
of the Aggregate Commitment attributable to the Non-conforming Borrowing Base
until the Non-conforming Borrowing Base is reduced to $0.00. All accrued
facility fees shall be payable on the effective date of any such reduction or
termination of the Aggregate Commitment.
4.7. Voluntary and Mandatory Prepayments. Any prepayments of
principal of the Loans, whether voluntary or mandatory, shall include accrued
interest to, but not including, the date of the prepayment on the principal
amount being prepaid.
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ARTICLE V
[Intentionally Omitted.]
ARTICLE VI
CHANGE IN CIRCUMSTANCES; TAXES
6.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any reasonable interpretation thereof, or
compliance of any Lender with such,
(a) imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender or any applicable Lending Installation
(other than reserves and assessments taken into account in determining
the interest rate applicable to Eurodollar Advances), or
(b) imposes any other condition the result of which is
to increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining Loans or reduces any
amount receivable by any Lender or any applicable Lending Installation
in connection with Loans, or requires any Lender or any applicable
Lending Installation to make any payment calculated by reference to
the amount of Loans held or interest received, by an amount reasonably
deemed material by such Lender,
then, within 15 days of demand by such Lender, the Company shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender reasonably determines is attributable to
making, funding and maintaining its Loans and its Commitment.
6.2. Availability of Rate Options. If any Lender determines
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, (i) the Administrative Agent shall suspend the
availability of the Eurodollar Rate with respect to such Lender until such time
as such situation is no longer the case, (ii) any Eurodollar Loans from such
Lender then outstanding shall bear interest at the Floating Rate for the
remainder of the Interest Period applicable to such Loan and (iii) until such
time as such situation is no longer the case, any Eurodollar Advance made
thereafter shall consist of a Floating Rate Loan made by such Lender(s) and
Eurodollar Loans made by each other Lender. If the Required Lenders reasonably
determine that deposits of a type or maturity appropriate to match fund
Eurodollar Advances are not available, the Administrative Agent shall suspend
the availability of the Eurodollar Rate with respect to any Eurodollar Advances
made after the date of any such determination until such time as such situation
is no longer the case. If the Required Lenders determine that the Eurodollar
Rate does not accurately reflect the cost of making a Eurodollar Advance at
such Eurodollar Rate, then, if for any reason whatsoever the provisions of
Section 6.1 are inapplicable, the Administrative Agent shall suspend the
availability of the Eurodollar Rate with respect to any Eurodollar Advances
made on or after the date of any such determination until such time as such
situation is no longer the case and shall require any outstanding Eurodollar
Advances to be repaid.
6.3. Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment, conversion or otherwise
(except pursuant to Section 6.2), or a Eurodollar Advance is not made on the
date
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specified by the Company for any reason other than default by the Lenders, the
Company will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurodollar
Advance (net of any cost or expense, unless Section 6.1, 6.5 or 6.6 is
applicable thereto, which the Lender would have incurred with respect to such
Eurodollar Advance had such prepayment or failure to fund not occurred).
6.4. Lending Installations. Each Lender may book its Loans at
any Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
or facsimile notice to the Administrative Agent and the Company, designate a
Lending Installation through which Loans will be made by it and for whose
account Loan payments are to be made. To the extent reasonably possible, each
Lender shall designate an alternate Lending Installation with respect to its
Eurodollar Loans to reduce any liability of the Company to such Lender under
Sections 6.1, 6.5 and 6.6 or to avoid the unavailability of a Rate Option under
Section 6.2, so long as such designation is not disadvantageous to such Lender
in the sole opinion of such Lender.
6.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Commitments or the Loans made by such Lender is reduced to a
level below that which such Lender, or such controlling Person, as the case may
be, could have achieved but for the occurrence of any such circumstance (taking
into account such Person's policies as to capital adequacy), then, in any such
case upon notice from time to time by such Lender to the Company, the Company
shall immediately pay directly to such Lender additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction in rate of
return. A statement of such Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Company. In determining such
amount, such Lender may use any method of averaging and attribution that it (in
its sole and absolute discretion) shall deem applicable.
6.6. Taxes. All payments by the Company or any Guarantor of
principal of, and interest on, the Loans and all other amounts payable
hereunder and in connection herewith shall be made free and clear of and
without deduction for any present or future income, excise, stamp or franchise
taxes and other taxes, fees, duties, withholdings or other charges of any
nature whatsoever imposed by any taxing authority, but excluding franchise
taxes and taxes imposed on or measured by any Agent's or any Lender's, as
applicable, net income or receipts (such non-excluded items being called
"Taxes"). In the event that any withholding or deduction from any payment to
be made by the Company or any Guarantor hereunder or under any Loan Document is
required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an
official receipt or other documentation satisfactory to the
Administrative Agent or
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the relevant Agent or Lender evidencing such payment to such
authority; and
(c) pay to the Administrative Agent for the account of
the Agents and the Lenders such additional amount or amounts as is
necessary to ensure that the net amount actually received by each
Agent and Lender will equal the full amount such Agent or Lender would
have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Agent or any Lender,
with respect to any payment received by it hereunder or in connection herewith,
the relevant Agent or Lender may pay such Taxes and the Company will promptly
pay such additional amounts (including any penalties, interest or expenses) as
is necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Agents and Lenders, the required receipts or other required
documentary evidence, the Company shall indemnify the Agents and the Lenders
for any incremental Taxes, interest or penalties that may become payable by any
Agent or Lender as a result of any such failure. For purposes of this Section
6.6, a distribution hereunder by the Administrative Agent or any other Agent or
any Lender to or for the account of any Agent or Lender shall be deemed a
payment by the Company.
Notwithstanding the foregoing, if any Agent or any Lender not
incorporated or organized under the laws of the United States of America, or a
state thereof, fails to timely deliver the forms required to be delivered
pursuant to Section 6.8 in a situation in which timely delivery of such forms
would eliminate some or all requirements for withholding of United States
federal income taxes by the Company or any Guarantor in connection with
payments under this Agreement or the other Loan Documents, then the Company
shall not be required to pay or reimburse to the Lender or Agent any amount in
respect of such Taxes withheld that would not have been required to be withheld
if such Lender or Agent had timely delivered such forms.
6.7. Lender Statements; Survival of Indemnity; Substitution of
Lenders; Limitation on Claims by Lenders. Each Agent and Lender shall deliver
to the Company and the Administrative Agent a written statement of such Agent
or Lender, as the case may be, as to the amount due, if any, under Sections
6.1, 6.3, 6.5 or 6.6. Such written statement shall set forth in reasonable
detail the calculations upon which such Agent or Lender, as the case may be,
determined such amount and shall be final, conclusive and binding on the
Company in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan shall be calculated as
though each Lender funded its Eurodollar Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that
is the case or not. Unless otherwise provided herein, the amount specified in
the written statement shall be payable on demand after receipt by the Company
of the written statement. The obligations of the Company under Sections 6.1,
6.3, 6.5 and 6.6 shall survive payment of the Obligations and termination of
this Agreement. In the event that any Lender shall deliver to the Company and
the Administrative Agent a written statement as to an amount due under Section
6.1, 6.3, 6.5 or 6.6, the Company may, at its sole expense and effort, require
such Lender to transfer and assign, without recourse (in accordance with
Section 17.3) all of its interests, rights and obligations under this Agreement
to an assignee which shall assume such assigned obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) such
assignment shall not conflict with any
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law, rule or regulation or order of any court or other governmental authority,
(ii) the Company shall have received a written consent of the Administrative
Agent and the Arrangers in the case of an entity that is not a Lender, which
consent shall not be unreasonably withheld, (iii) the Company or such assignee
shall have paid to the assigning Lender in immediately available funds the
principal of and interest accrued to the date of such payment on the Loans made
by it hereunder and all other amounts owed to it hereunder and the fee payable
to the Administrative Agent pursuant to Section 17.3(b) and (iv) that nothing
in the foregoing is intended or shall be construed as obligating any Lender to
locate such an assignee. The Company shall not be required to pay to any
Lender any amount under Section 6.1, 6.3, 6.5, or 6.6 in respect of any time or
period more than twelve months prior to the time such Lender notifies or bills
the Company of or for such amount.
6.8. Withholding Tax Exemption. At least five (5) Business Days
prior to the first date on which interest or fees are payable hereunder (but in
no event prior to the Effective Date) for the account of any Lender or any
Agent, each Lender or Agent that is not incorporated or organized under the
laws of the United States of America, or a state thereof, agrees that it will
deliver to each of the Company and the Administrative Agent two (2) duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender or Agent, as the case may be, is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each
Lender or Agent which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Administrative Agent two (2) additional
copies of such form (or a successor form) on or before the date that such form
expires (currently, three (3) successive calendar years for Form 1001 and one
(1) calendar year for Form 4224) or becomes obsolete or after the occurrence of
any event requiring a change in the most recent forms so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Administrative Agent, in each case certifying
that such Lender or Agent, as the case may be, is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender or Agent from duly
completing and delivering any such form with respect to it and such Lender or
Agent, as the case may be, advises the Company and the Administrative Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions of Effectiveness. The effectiveness of this
Agreement and the obligation of each Lender to make Loans hereunder, are
subject to the conditions precedent that the Company has furnished to the
Administrative Agent all of the following, each in form and substance
satisfactory to each of the Administrative Agent and the Arrangers, and each
(except for the Notes, of which only one original of each type shall be signed
for each Lender) in sufficient number of duly executed signed counterparts (or
photocopies thereof) to provide one for the Administrative Agent, the Arrangers
and each Lender:
(i) Copies of the Articles of Incorporation
of each of the Company, MW Petroleum and Apache Energy
Resources, together with all amendments, and certificates
of good standing, all of the foregoing certified by the
appropriate governmental officer in their respective
jurisdiction of incorporation and, in the case
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of certificates of good standing, in each jurisdiction in
which its business is conducted.
(ii) Copies, certified by the Secretary or
Assistant Secretary of each of the Company, Apache Energy
Resources, and MW Petroleum, of their respective By-Laws
and of their respective Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed
necessary by counsel for the Administrative Agent)
authorizing the execution, delivery and performance of the
Loan Documents and the Purchase and Sale Agreement.
(iii) Incumbency certificates, executed by
the Secretary or Assistant Secretary of each of the
Company, Apache Energy Resources, and MW Petroleum, which
shall identify by name and title and bear the signature of
the officers of the Company, Apache Energy Resources, and
MW Petroleum, respectively, authorized to sign the Loan
Documents and (in the case of the Company) to make
borrowings hereunder, upon which certificate the Agents and
the Lenders shall be entitled to rely until informed of any
change in writing by the Company, Apache Energy Resources,
or MW Petroleum, respectively.
(iv) Written opinions of the Company's, MW
Petroleum's, and Apache Energy Resources', counsel
acceptable to each of the Arrangers, addressed to the
Agents and the Lenders in substantially the form of Exhibit
"B" hereto, with such modifications, additions,
alterations, exceptions, assumptions and provisions as
shall be acceptable to each of the Arrangers.
(v) The Notes payable to the order of each
of the Lenders.
(vi) A certificate of an Authorized Officer
of the Company, satisfactory to each of the Arrangers,
regarding insurance maintained by the Company.
(vii) The Acknowledgment to Guaranty of each
of MW Petroleum and Apache Energy Resources.
(viii) The opinion of Mayer, Brown & Platt,
special counsel to the Administrative Agent and the
Arrangers, substantially in the form of Exhibit "G" hereto.
(ix) The Effectiveness Notice.
(x) A certificate, signed by the Vice
President/Treasurer of the Company, stating that on the
Effective Date no Default or Unmatured Default has occurred
and is continuing.
(xi) Copies of the Purchase and Sale
Agreement and any amendments or modifications in effect
with respect thereto, together with a plan of transition
agreed to in writing by Texaco with respect to the
Properties to be acquired pursuant to the Purchase and Sale
Agreement, in each case certified by an Authorized Officer
of the Company, together with the opinions of counsel for
Texaco and the Company required to be delivered pursuant to
the Purchase and Sale Agreement addressed to the Agents and
the Lenders.
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(xii) A certificate of an Authorized Officer
of the Company certifying, together with other evidence
satisfactory to the Administrative Agent, that, subject to
the recordation of the assignments to be executed and
delivered under the Purchase and Sale Agreement and the
title adjustment mechanism provided therein, the Company
will have defensible title to the Properties to be acquired
from Texaco under the Purchase and Sale Agreement.
(xiii) Evidence, in form and substance
satisfactory to the Arrangers that (1) the acquisition of
the Properties pursuant to the Purchase and Sale Agreement
shall have been consummated prior to or concurrently with
the initial Advance in compliance with applicable law
including the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended, and pursuant to the terms and
conditions set forth in the Purchase and Sale Agreement
without giving effect to waivers or amendments (except
waivers or amendments consented to by the Arrangers) and
(2) the purchase price for the acquisition and Sale shall
not exceed $597,000,000 in cash.
(xiv) A copy of the letter from Apache to
Texaco dated February 14, 1995, concerning the Properties
described in Schedule 11.3 regarding the Hugoton/Panhandle
properties to be sold to Cross Timbers Production Company
for $20 million, which is expected to close on or before
April 1, 1995, a description of the subject properties
being attached to such letter of February 14, 1995.
(xv) Such other instruments and documents as
any of the Arrangers or its counsel may have reasonably
requested.
The effectiveness of this Agreement and the obligation of each Lender
to make Loans hereunder, are further conditioned upon satisfaction of the
following on or prior to the Effective Date:
(a) the Administrative Agent shall have received the
fees to be received as set forth in the agreement with respect to fees
described inSection 2.5(b) and Chemical Bank shall have received the
fees described in the letter dated February 3, 1995.
(b) Upon the effectiveness of this Agreement, the
Administrative Agent, on behalf of the Company, shall have paid to
each bank listed in Schedule A, on the Effective Date, with proceeds
of the initial Loans made available hereunder, an amount equal to the
unpaid principal and accrued interest on all 1994 Revolving Loans made
by each such bank to the Company which are outstanding on the
Effective Date, plus all fees, costs (including, without limitation,
costs resulting from the repayment of such 1994 Revolving Loans prior
to the last day of the applicable Interest Period thereof, as more
fully described in Section 6.3 of the April 1994 Agreement) and
expenses payable to each such bank under the April 1994 Agreement,
which amounts shall be promptly delivered by the Administrative Agent
to each such bank at the address specified pursuant to Article XVIII
of the April 1994 Agreement or at any other address specified in a
notice received by the Administrative Agent from each such bank. The
Lenders and the Agents hereby consent to such repayment.
7.2. Each Advance. The Lenders shall not be required to make
any Advance unless on the applicable Borrowing Date:
(a) There exists no Default or Unmatured Default.
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(b) The representations and warranties contained in
Article VIII, including in Sections 8.3 and 8.7, or contained in any
other Loan Document are true and correct as of such Borrowing Date
except for changes in the Schedules hereto reflecting transactions
permitted by this Agreement.
(c) All legal requirements arising under or in
connection with the Loan Documents or applicable laws, rules or
regulations and incident to the making of such Advance shall be
satisfactory to the Arrangers and their respective counsel.
(d) No event, occurrence, action, inaction or other
item shall have occurred which could have or could cause a Material
Adverse Effect.
Each Borrowing Notice, Competitive Bid Borrowing Notice and
Continuation/Conversion Notice with respect to each Advance shall constitute a
representation and warranty by the Company that the conditions contained in
Sections 7.2(a) and 7.2(b) have been satisfied and, that after giving effect to
such Advance and the assignment or application of the proceeds thereof, the
outstanding Loans will not exceed the Aggregate Commitment.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders and the Agents that:
8.1. Corporate Existence and Standing. The Company is a
corporation, and each Subsidiary is a corporation or other legal entity, in
either case duly incorporated or otherwise properly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization and has all requisite authority, permits and approvals, and is in
good standing to conduct its business in each jurisdiction in which its
business is conducted.
8.2. Authorization and Validity. The Company and each
Subsidiary has the corporate or partnership power and authority and legal right
to execute and deliver the Loan Documents and to perform its respective
obligations thereunder, and the Company has the corporate power and authority
and legal right to execute and deliver the Purchase and Sale Agreement and to
perform its obligations thereunder. The execution and delivery by the Company
and each Subsidiary of the Loan Documents to which it is a party and the
execution and delivery by the Company of the Purchase and Sale Agreement and
the performance in each case of the Company's and such Subsidiary's obligations
thereunder have been duly authorized by proper corporate or partnership
proceedings, and the Loan Documents and the Purchase and Sale Agreement have
been duly executed and delivered and constitute legal, valid and binding
obligations of the Company and each Subsidiary party thereto, in each case
enforceable against the Company and such Subsidiary in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
8.3. No Conflict; Government Consent. Neither the execution and
delivery by the Company and each Subsidiary of the Loan Documents and, in the
case of the Company, the Purchase and Sale Agreement, nor the consummation of
the transactions therein contemplated, nor compliance with the provisions
thereof will violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Company or any Subsidiary or the
Company's or any Subsidiary's articles of incorporation or by-laws or
partnership agreement or the provisions of any indenture, instrument or
agreement to which the Company or any Subsidiary is a party or is subject, or
by which it, or its property, is bound,
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or conflict with or constitute a default thereunder, or result in the creation
or imposition of any Lien in, of or on all or any part of the property of the
Company or any Subsidiary. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the Loan Documents or the Purchase and Sale
Agreement.
8.4. Financial Statements. The consolidated financial
statements of the Company dated December 31, 1993 heretofore delivered to the
Lenders were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition of the Company and the
Subsidiaries at such date and the consolidated results of their operations for
the period then ended.
8.5. Material Adverse Change. Since December 31, 1993, there
has been no change in the business, assets, properties, operations, condition
(financial or otherwise) or results of operations or prospects of the Company
and its Subsidiaries, Apache Energy Resources, or MW Petroleum and its
Subsidiaries or any legal or regulatory development which could have or be a
Material Adverse Effect.
8.6. Taxes. The Company and the Subsidiaries have filed all
United States federal tax returns and all other tax returns which are required
to be filed and have paid all taxes due pursuant to said returns or pursuant to
any assessment received by the Company or any Subsidiary, except such taxes, if
any, as are being contested in good faith and as to which adequate reserves
have been provided. The United States income tax returns of the Company and
the Subsidiaries (other than MW Petroleum and MWJR) have been audited by the
Internal Revenue Service or, if no audit was performed, the statute of
limitations permitting such an audit has run, through the fiscal year ended
December 31, 1989. No tax liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves on
the books of the Company and the Subsidiaries in respect of any taxes or other
governmental charges are adequate.
8.7. Litigation and Contingent Obligations. There is no
litigation, arbitration, governmental investigation, proceeding or inquiry
pending or, to the knowledge of any of their officers, threatened against or
affecting the Company or any Subsidiary which is or could have a Material
Adverse Effect. The Company and its Subsidiaries have no material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 8.4.
8.8. Subsidiaries. Schedule 8.8 hereto contains an accurate
list of all of the presently existing Subsidiaries of the Company as of the
date of this Agreement, setting forth their respective jurisdictions of
incorporation or organization and the percentage of their respective capital
stock or, the revenue share attributable to the general and limited partnership
interests, as the case may be, owned by the Company or other Subsidiaries. All
of the issued and outstanding shares of capital stock of such Subsidiaries
which are corporations have been duly authorized and issued and are fully paid
and non-assessable.
8.9. ERISA. The Unfunded Liabilities of all Plans do not in the
aggregate exceed $10,000,000. Each Plan complies in all material respects with
all applicable requirements of law and regulations, no Reportable Event has
occurred with respect to any Plan, neither the Company nor any other members of
the Controlled Group has withdrawn from any Plan or initiated steps to do so,
and no steps have been taken to terminate any Plan.
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8.10. Accuracy of Information. No information, exhibit or report
furnished by the Company or any Subsidiary to any Agent or to any Lender in
connection with the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not misleading.
8.11. Regulation-U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Company and the Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
8.12. Material Agreements. Neither the Company nor any
Subsidiary is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in (i) any agreement to
which it is a party, which default might have a Material Adverse Effect, (ii)
any agreement or instrument evidencing or governing Indebtedness which default
might have a Material Adverse Effect or (iii) the Purchase and Sale Agreement
which default might have a Material Adverse Effect.
8.13. Compliance With Laws. The Company and the Subsidiaries
have complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective Properties.
Neither the Company nor any of the Subsidiaries has received any notice to the
effect that it, its operations or the Properties are not in material compliance
with any of the requirements of applicable federal, state or local
environmental, health and safety statutes and regulations, or are the subject
of any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or substance
into the environment, whether from the Properties or elsewhere, which in any
case would have a Material Adverse Effect.
8.14. Title to Properties. Each of the Company and the
Subsidiaries has defensible title to substantially all of its properties
(including Properties acquired pursuant to the Purchase and Sale Agreement) and
assets, whether legal or beneficial, free and clear of any and all Liens other
than those Liens permitted by Section 11.5; provided, that for purposes of this
Section 8.14 the failure of title to any Property acquired pursuant to the
Purchase and Sale Agreement shall not be a breach of this Section 8.14, if and
so long as, the Company is diligently pursuing its recourse against Texaco
under the Purchase and Sale Agreement. The 1995 Engineers' Report refers to
and covers all of the reserves in the Properties as of the Effective Date and
such Report covers no reserves other than in such Properties.
8.15. Investment Company Act. Neither the Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.16. Public Utility Holding Company Act. Neither the Company
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
8.17. Subordinated Indebtedness. The Obligations constitute
senior indebtedness which is entitled to the benefits of the subordination
provisions of all outstanding Subordinated Indebtedness.
8.18. Post-Retirement Benefits. The present value of the
expected cost of post-retirement medical and insurance benefits payable by the
Company and its
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Subsidiaries to its employees and former employees, as estimated by the Company
in accordance with reasonable procedures and assumptions deemed reasonable by
the Required Lenders, does not exceed $2,000,000.
8.19. Solvency. As of the Effective Date, (i) the Company is
Solvent, (ii) the Consolidated Subsidiaries of the Company on a consolidated
basis are Solvent and (iii) each Guarantor and its Consolidated Subsidiaries on
a consolidated basis is Solvent.
8.20. Environmental Warranties. In the ordinary course of its
business, the Company conducts an ongoing review of the effect of Environmental
Laws on the business, operations and Properties of the Company and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including any capital or operating expenditures required
for clean-up or closure of Properties presently owned or operated, any capital
or operating expenditures required to achieve or maintain compliance with
environmental protection standards imposed by law or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in
the level of or change in the nature of operations conducted thereat and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Company has
reasonably concluded that, except as disclosed in writing by the Company to the
Lenders and the Agents, to the best of its knowledge after due inquiry:
(a) all facilities and property (including underlying
groundwater) owned, leased or operated by the Company or any
Subsidiary have been, and continue to be, owned, leased or operated by
the Company or any Subsidiary in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending
or threatened
(i) claims, complaints, notices or
inquiries to, or requests for information received by, the
Company or any Subsidiary with respect to any alleged
violation of any Environmental Law, that, singly or in the
aggregate, have or may reasonably be expected to have a
Material Adverse Effect, or
(ii) claims, complaints, notices or
inquiries to, or requests for information received by, the
Company or any Subsidiary regarding potential liability
under any Environmental Law or under any common law
theories relating to operations or the condition of any
facilities or property (including underlying groundwater)
owned, leased or operated by the Company or any Subsidiary
that, singly or in the aggregate, have, or may reasonably
be expected to have a Material Adverse Effect;
(c) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or leased by the
Company or any Subsidiary that, singly or in the aggregate, have, or
may reasonably be expected to have, a Material Adverse Effect;
(d) the Company and each Subsidiary have been issued
and are in material compliance with all permits, certificates,
approvals, licenses and other authorizations relating to environmental
matters and necessary or desirable for their businesses;
(e) no property now or previously owned, leased or
operated by the Company or any Subsidiary is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, or, to the
extent that such
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listing may, singly or in the aggregate, have, or may reasonably be
expected to have a Material Adverse Effect, on the CERCLIS or on any
other federal or state list of sites requiring investigation or
clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned, leased or operated by the Company or any
Subsidiary that, singly or in the aggregate, have, or may reasonably
be expected to have, a Material Adverse Effect;
(g) none of the Company or any Subsidiary has directly
transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, or, to the
extent that such listing may, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect, on the
CERCLIS or on any federal or state list or which is the subject of
federal, state or local enforcement actions or other investigations
which may lead to material claims against the Company or such
Subsidiary for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA;
(h) there are no polychlorinated biphenyls,
radioactive materials or friable asbestos present at any property now
or previously owned or leased by the Company or any Subsidiary that,
singly or in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect; and
(i) no condition exists at, on or under any property
now or previously owned or leased by the Company or any Subsidiary
which, with the passage of time, or the giving of notice or both,
would give rise to material liability under any Environmental Law
that, singly or in the aggregate have, or may reasonably be expected
to have a Material Adverse Effect.
ARTICLE IX
AFFIRMATIVE COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
9.1. Financial Reporting. The Company will maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Lenders:
(a) As soon as available and in any event within 90
days after the close of each of its fiscal years, an unqualified audit
report certified by independent certified public accountants,
acceptable to the Required Lenders, prepared in accordance with
generally accepted accounting principles on a consolidated basis for
itself and its Consolidated Subsidiaries, including balance sheets as
of the end of such period, related profit and loss and reconciliation
of surplus statements, and a statement of cash flows, accompanied by a
certificate of said accountants to the effect that, in the course of
their examination necessary for their certification of the foregoing,
they have obtained no knowledge of any Default or Unmatured Default,
or if, in the opinion of such accountants, any Default or Unmatured
Default shall exist, stating the nature and status thereof.
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(b) As soon as available and in any event within 45
days after the close of the first three quarterly periods of each of
its fiscal years, for itself and the Consolidated Subsidiaries,
consolidated unaudited balance sheets as at the close of each such
period and consolidated profit and loss and reconciliation of surplus
statements and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter.
(c) Together with the financial statements required
under clauses (a) and (b), a compliance certificate in substantially
the form of Exhibit "C" hereto signed by its vice president/treasurer
and addressing the matters set forth therein.
(d) Promptly after December 31 of each calendar year,
commencing December 31, 1994, and in any event not later than March 15
of the next succeeding calendar year, an Approved Engineers' Report
prepared as of December 31 of such calendar year, in form and
substance satisfactory to the Engineering Banks.
(e) Within 45 days in the case of a Company's
Engineers' Report and 60 days in the case of an Approved Engineers'
Report, of any request by the Required Lenders in connection with any
(other than the scheduled semi-annual redeterminations of the
Borrowing Base) determination of the Borrowing Base pursuant to
Section 2.3(a), an Approved Engineers' Report or a Company's
Engineers' Report, as the case may be, prepared as of the date of such
request, in form and substance satisfactory to the Required Lenders.
(f) Promptly after June 30 of each calendar year and
in any event not later than September 15 of such calendar year, a
Company's Engineers' Report prepared as of June 30 of such calendar
year, in form and substance satisfactory to the Engineering Banks.
(g) Promptly upon the furnishing thereof to the
shareholders of the Company copies of all financial statements,
reports and proxy statements so furnished.
(h) Promptly upon the filing thereof, copies of all
publicly available registration statements and annual, quarterly,
monthly or other regular reports which the Company or any Subsidiary
(other than a Drilling Partnership) or any other Affiliate files with
the Securities and Exchange Commission.
(i) Promptly after December 31 of each calendar year,
commencing December 31, 1995, and in any event no later than March 21
of the next succeeding calendar year, a budget (including specific
capital expenditures information) through the Termination Date for the
Company and its Subsidiaries certified by the Vice President/Treasurer
of the Company and in a format consistent with the Projections and
otherwise in form and substance satisfactory to the Administrative
Agent and the Arrangers.
(j) At the request of the Administrative Agent, either
Arranger, or the Required Lenders promptly after June 30 of each
calendar year, commencing June 30, 1995, and in any event prior to
October 1 of such calendar year, an update of the budget described in
clause (i) of this Section 9.1 in form and substance satisfactory to
the Administrative Agent and signed by the Vice President/Treasurer of
the Company.
(k) Promptly and in any event within 40 days after the
close of each calendar quarter during each year, a certificate of an
Authorized Officer certifying to the Administrative Agent and the
Lenders the
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Debt/Capitalization Ratio and the calculation thereof as of the last
day of the immediately preceding calendar quarter.
(l) Such other information (including engineering,
financial and non-financial information) as the Administrative Agent,
either Arranger or any Lender may from time to time reasonably
request.
9.2. Use of Proceeds. The Company will, and will cause each
Subsidiary to, use the proceeds of the Loans (i) to refinance existing
Indebtedness of the Company and the Subsidiaries, (ii) for the Company's and
the Subsidiaries' general corporate purposes or (iii) to pay the purchase
price, fees and expenses of or relating to the Texaco Acquisition.
9.3. Notice of Default, Unmatured Default, Litigation and
Material Adverse Effect. The Company will give prompt notice in writing to the
Lenders, to Apache Energy Resources, and to MW Petroleum of (i) the occurrence
of any Default or Unmatured Default and the steps, if any, being taken to cure
it, (ii) the occurrence of any adverse development with respect to any labor
controversy, litigation, action or proceeding described in Section 8.7, or the
commencement of any labor, controversy, litigation, action or proceeding of the
type described in Section 8.7 together with copies of all material pleadings
relating thereto, and (iii) the occurrence of any other development, financial
or otherwise, which might have or be a Material Adverse Effect or might
materially adversely affect the ability of the Company to repay the
Obligations.
9.4. Conduct of Business. The Company will, and will cause its
Subsidiaries to, carry on and conduct its respective business in substantially
the same manner and in substantially the same fields of enterprise as it is
presently conducted and, except to the extent permitted by Section 11.2, will,
and will cause each Subsidiary to, do all things necessary to remain duly
incorporated or organized, validly existing and in good standing as a domestic
corporation or partnership, as the case may be, in its jurisdiction of
incorporation or organization and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted.
9.5. Taxes. The Company will, and will cause each Subsidiary
to, pay when due all taxes, assessments and governmental charges and levies
upon it or its income, profits or property, and all lawful claims which, if
unpaid, might become a Lien upon any properties of the Company or any
Subsidiary, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves in accordance with
generally accepted accounting principles have been set aside on its books.
9.6. Insurance. The Company and its Subsidiaries will maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and business against such liabilities, casualties, risks
and contingencies and in such types and amounts as customary in the case of
corporations engaged in the same or similar businesses and similarly situated.
Upon the request of the Administrative Agent, the Company will furnish or cause
to be furnished to the Administrative Agent from time to time a summary of the
insurance coverage of the Company and its Subsidiaries in form and substance
satisfactory to the Required Lenders in their reasonable judgment, and, if
requested, will furnish the Administrative Agent copies of the applicable
policies. In the case of any fire, accident or other casualty causing loss or
damage to any property of the Company or any of its Subsidiaries, the proceeds
of such policies will be used (i) to repair or replace the damaged property or
(ii) to prepay the Obligations, at the election of the Company.
9.7. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject.
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9.8. Maintenance of Properties. The Company will and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect and
keep its properties in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.
9.9. Inspection. The Company will, and will cause each
Subsidiary to, permit the Lenders, by their respective representatives and
agents, to inspect any of the properties, corporate books and financial records
of the Company and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Company and each Subsidiary, and to
discuss the affairs, finances and accounts of the Company and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may designate. Any information
received by the Lenders as a result of the foregoing shall be included in
information subject to the confidentiality provisions set forth in Exhibit "J"
hereto.
9.10. Operation of Properties. The Company will, and will cause
each Subsidiary owning Properties included in the Borrowing Base to, preserve,
operate and maintain, or cause to be preserved, operated and maintained, the
Properties in a good and workmanlike manner continuously to their economic
limit as a prudent operator in accordance with good oil and gas industry
standards.
9.11. Delivery of Guaranties. The Company shall at its own
expense from time to time cause each of its Subsidiaries which owns, legally or
beneficially, Properties included in the Borrowing Base from time to time to
deliver to the Administrative Agent a duly executed Guaranty, substantially in
the form of Exhibit "L", together with such related documents and opinions as
the Administrative Agent may request.
9.12. Environmental Covenant. The Company will, and will cause
each of its Subsidiaries to,
(a) use, operate and maintain all of its facilities
and properties in material compliance with all Environmental Laws,
keep all necessary permits, approvals, certificates, licenses and
other authorizations relating to environmental matters in effect and
remain in material compliance therewith, and handle all Hazardous
Materials in material compliance with all applicable Environmental
Laws;
(b) (i) promptly notify the Administrative Agent and
provide copies upon receipt of all material written claims,
complaints, notices, liens or inquiries relating to the condition of
its facilities and properties or compliance with Environmental Laws,
(ii) within ninety (90) days have dismissed with prejudice any actions
or proceedings relating to compliance with Environmental Laws which
would or could in the reasonable opinion of either of the Arrangers
have a Material Adverse Effect; and (iii) diligently pursue cure of
any material underlying environmental problem which forms the basis of
any such claim, complaint, notice, lien, inquiry, proceeding or
action; and
(c) provide such information and certifications which
either of the Arrangers may reasonably request from time to time to
evidence compliance with this 9.12.
9.13. [Intentionally Omitted.]
9.14. [Intentionally Omitted.]
9.15. Further Assurances.
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(a) Further Assurances. The Company will cure and
will cause its respective Subsidiaries to cure promptly any defects in
the creation and issuance of any Obligations and the execution and
delivery of any Guaranty. The Company and each Subsidiary will at its
expense promptly execute and deliver to the Administrative Agent upon
request all such other and further reasonable documents, agreements
and instruments in compliance with, or accomplishment of, the
covenants and agreements of the Company and such Subsidiary in any
Loan Document.
ARTICLE X
FINANCIAL COVENANTS
10.1. Consolidated Tangible Net Worth. The Company will maintain
Consolidated Tangible Net Worth of not less than the sum of (i) $650,000,000,
plus (ii) the product of 0.50 times the sum of Consolidated Net Income for each
calendar quarter beginning with the calendar quarter ending June 30, 1995
during which Consolidated Net Income is greater than $0, plus (iii) the product
of 0.50 times the proceeds of the sale by the Company and its Subsidiaries of
securities (other than securities constituting Indebtedness) net of reasonable
incidental, brokerage and legal costs actually paid to third parties (which
proceeds, in the event of a pooling of interest transaction, shall be deemed to
be one-half of the net addition to the Company's consolidated balance sheet)
plus (iv) in the case of the DEKALB Merger, an amount equal to the product of
0.80 times the net addition to the Company's consolidated balance sheet as a
result of such pooling of interest.
10.2. Ratio of EBITDDA to Consolidated Interest. The Company
shall not permit the ratio of (i) EBITDDA to (ii) Consolidated Interest Expense
for any four consecutive calendar quarters ending on the last day of any
calendar quarter to be less than 3.70 to 1.0.
ARTICLE XI
NEGATIVE COVENANTS
11.1. Indebtedness. The Company will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(a) The Obligations arising under the Loan Documents,
Contingent Obligations permitted under Section 11.4 and Indebtedness
of International or Apache Energy Resources pursuant to Investments by
the Company permitted by Section 11.12(e);
(b) Indebtedness existing on the date hereof and
described in Schedule 11.1 hereto and the DEKALB Indebtedness
described in Schedule 11.1;
(c) Other Indebtedness of the Company or any
Subsidiary consented to by the Required Lenders in the exercise of
their sole discretion having no conditions precedent or covenants or
defaults more onerous to the Company or such Subsidiary than the
conditions precedent and covenants and defaults contained herein and
which is expressly made subordinate and junior in right of payment to
the Obligations and which contains terms (including interest rates,
amortization and maturity) and provisions satisfactory to the Required
Lenders in the exercise of their sole discretion;
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(d) Other Indebtedness of the Company or any
Subsidiary consented to by the Required Lenders in the exercise of
their sole discretion and constituting Limited Recourse Indebtedness,
provided that such Limited Recourse Indebtedness contains terms
(including interest rates, amortization and maturity) and provisions
satisfactory to the Required Lenders in the exercise of their sole
discretion;
(e) Other Indebtedness of the Company or any
Subsidiary, consented to by the Required Lenders in the exercise of
their sole discretion having no conditions precedent or covenants or
defaults more onerous to the Company or such Subsidiary than the
conditions precedent and covenants and defaults contained herein and
which contains terms (including interest rates, amortization, maturity
and the application of the proceeds thereof) and provisions
satisfactory to the Required Lenders in the exercise of their sole
discretion;
(f) Indebtedness of the type referred to in clause
(vi) of the definition of Indebtedness;
(g) Indebtedness of the type referred to in clause
(vii) of the definition of Indebtedness, provided such Indebtedness is
otherwise permitted pursuant to Section 11.13;
(h) Additional Indebtedness of the Company not
included in the foregoing clauses (a) through (g) in an aggregate
principal amount not exceeding $40,000,000, exclusive of any
Contingent Obligations permitted under Section 11.4;
provided, that if the Company shall request that any Indebtedness be permitted
as Subordinated Indebtedness pursuant to clause (c), as Limited Recourse
Indebtedness pursuant to clause (d), or as Indebtedness pursuant to clause (e),
the Administrative Agent or any Arranger shall notify the Company that it or
they, as the case may be, deem such request by the Company to be a request for
a redetermination of the Borrowing Base pursuant to Section 2.3(b), in which
event the Company shall supply such information and reports provided pursuant
to such Section 2.3(b) and the Engineering Banks and the Required Lenders shall
make a determination of the Borrowing Base in accordance with the provisions of
Section 2.3(a), giving effect to such requested Indebtedness. For purposes
hereof, "Limited Recourse Indebtedness" shall mean Indebtedness of a Person for
which there is no recourse whatsoever to such Person for the repayment thereof
other than recourse limited to the cash flow from the assets constituting
collateral therefor and recourse to the extent necessary to enable amounts to
be claimed in respect of such Indebtedness upon an enforcement of any Lien on
any such assets; provided that (a) the extent of such recourse is limited
solely to the amount of any recoveries made on any such enforcement, (b) such
Person is not entitled, by virtue of any right or claim arising out of or in
connection with such Indebtedness to commence proceedings for the winding up or
dissolution of, or to appoint or procure the appointment of any receiver,
trustee or similar person or official in respect of, such Person or any of its
assets (other than the assets the subject of such Lien) and (c) except as
provided in the foregoing (a) and (b), neither the Company nor any Subsidiary
shall have any contingent liability in respect thereof other than Contingent
Obligations permitted pursuant to Section 11.4.
11.2. Merger. The Company will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person or Persons
except that notwithstanding the foregoing, a Subsidiary may merge into the
Company and a Subsidiary (other than a Guarantor) may merge into a Wholly-Owned
Subsidiary; provided, however that the foregoing shall not prohibit mergers or
consolidations in any calendar year not in excess of five percent (5%) of the
consolidated total assets of the Company and its Consolidated Subsidiaries
immediately prior to the
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initial such merger or consolidation during such calendar year if (i) the
Company or such Subsidiary, as the case may be, is the surviving entity of such
merger (and if a merger between the Company and any Subsidiary, the Company is
the surviving entity) and (ii) after giving effect to such merger or
consolidation, no Default or Unmatured Default shall occur and be continuing;
provided, further that the foregoing shall not prohibit the DEKALB Merger.
11.3. Sale of Assets. The Company will not, nor will it permit
any Subsidiary to, lease, sell, transfer, convey, assign, issue or otherwise
dispose of any of its property, assets (including stocks or partnership
interests in or of any Subsidiary) or business to any other Person, whether in
one transaction or in a series of transactions, except:
(i) Sales of Hydrocarbon inventory and
severed oil and gas in the ordinary course of business.
(ii) Sales of Properties (other than
Hydrocarbon inventory and severed oil and gas in the
ordinary course of business) or other assets with a fair
market value not in excess of $10,000,000 for all such
Sales permitted pursuant to this clause (ii) during any
consecutive six-month period.
(iii) Sales of Properties (other than sales
of Hydrocarbon inventory and severed oil and gas in the
ordinary course of business) having a fair market value not
in excess of $50,000,000 in the aggregate for all such
Sales during any period occurring between successive dates
of determination of the Borrowing Base pursuant to Section
2.3; provided, however, that concurrently with any such
Sale the Aggregate Available Commitment shall be reduced
pursuant to Section 2.3(f), and the Company shall make any
mandatory prepayment required pursuant to Section 4.2(b).
(iv) Sales of Properties (other than sales
of Hydrocarbon inventory and severed oil and gas in the
ordinary course of business) not described in the foregoing
clause (ii) or (iii) if the Required Lenders give prior
written consent to such Sale in the exercise of their sole
discretion; provided, that the consent of the Required
Lenders shall not be required for the Sale of the
Properties described in Schedule 11.3 hereof for at least
the amount described in a letter agreement dated on or
prior to the Effective Date delivered pursuant to Section
7.1 (xiv); provided, further, however, that concurrently
with any such Sale (A) if the Non-conforming Borrowing Base
is $0.00, the Aggregate Available Commitment shall be
reduced pursuant to Section 2.3(f), (B) if the
Non-conforming Borrowing Base is not $0.00, the Aggregate
Available Commitment shall be reduced as provided in
Section 4.2(d), and (C) the Company shall make a mandatory
prepayment pursuant to Section 4.2(d).
(v) Sales of assets (other than sales of
Hydrocarbon inventory and severed oil and gas in the
ordinary course of business and other than assets
constituting Properties) if the Required Lenders give prior
written consent to such Sale in the exercise of their sole
discretion.
(vi) The issuance by the Company of common
stock.
(vii) A transfer, conveyance or assignment to
the Company of Properties as a result of the winding up and
liquidation of a Drilling Partnership.
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(viii) A transfer, conveyance or assignment to
the Company or a Subsidiary of Properties as a result of a
merger permitted pursuant to Section 11.2.
Anything herein contained to the contrary notwithstanding, the Company will
not, nor will it permit any Subsidiary to, consummate any Sale otherwise
permitted hereunder if it receives therefor consideration other than cash or
other consideration readily convertible to cash or which is less than the fair
market value of the relevant property or asset.
11.4. Contingent Obligations. The Company will not, nor will it
permit any Subsidiary to, make or suffer to exist any Contingent Obligation
(including, without limitation, any Contingent Obligation with respect to the
obligations of a Subsidiary) in an aggregate amount for all such Persons and
Contingent Obligations as of any date of determination in excess of $30,000,000
except (a) by endorsement of instruments for deposit or collection in the
ordinary course of business, (b) any Contingent Obligation pursuant to any of
the Loan Documents, (c) Contingent Obligations in respect of Apache Offshore
Investment Partnership or Offshore outstanding as of the Effective Date or in
replacement of such outstanding Contingent Obligations pursuant to the facility
described in item 1 of Schedule 11.1, and not exceeding in the aggregate the
lesser of (i) $40,000,000 or (ii) the greater of (A) $23,000,000 or (B) the
present value (discounted at 10%) of Apache Offshore Investment Partnership's
proved reserves as shown in the most recent Form 10-K filed with the Securities
and Exchange Commission, (d) net Contingent Obligations of International
consisting of foreign work commitments or other similar obligations under
exploration or production licenses or agreements entered into by International
in the ordinary course of business not to exceed net at any one time
outstanding for all such Contingent Obligations of $60,000,000; provided that
for purposes of this clause (d), net Contingent Obligations shall be deemed to
be the difference between the aggregate for all such Contingent Obligations in
respect of foreign work commitments or other similar obligations less the
aggregate of such Contingent Obligations in respect of which another industry
partner (which the Company reasonably believes is capable of performing such
commitments or obligations) has become obligated to perform, (e) Contingent
Obligations in the form of Indebtedness of the type referred to in clause vii
of the definition of Indebtedness; provided such Contingent Obligations are
otherwise permitted pursuant to Section 11.13; (f) Contingent Obligations in
support of Indebtedness of the type referred to in clause vii of the definition
of Indebtedness, in an aggregate amount as of any date of determination not in
excess of $30,000,000; (g) any Contingent Obligations pursuant to Indebtedness
of the type referred to in clause (vi) of the definition of Indebtedness; and
(h) Contingent Obligations in respect of obligations of partnerships of which
the Company or its Subsidiaries are partners pursuant to any oil, gas and/or
mineral leases, farm-out agreements, division orders, contracts for the sale,
delivery, purchase, exchange, or processing of oil, gas and/or other
hydrocarbons, unitization and pooling declarations and agreements, operating
agreements, development agreements, area of mutual interest agreements, and
other agreements which are customary in the oil, gas and other mineral
exploration, development and production business and in the business of
processing of gas and gas condensate production for the extraction of products
therefrom.
11.5. Liens. The Company will not, nor will it permit any
Subsidiary or Affiliate to, create, incur, or suffer to exist any Lien in, of
or on (i) any of the Company's, the Subsidiaries' and the Affiliates'
consolidated assets, revenues and properties securing an amount greater than
$5,000,000 in the aggregate for all such Liens or (ii) any of the Properties,
except in either case:
(a) Liens for taxes, assessments or governmental
charges or levies on its property if the same shall not at the time be
delinquent or
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thereafter can be paid without penalty, or are being contested in good
faith and by appropriate proceedings and for which adequate reserves
in accordance with generally accepted accounting principles shall have
been set aside on its books.
(b) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business which secure obligations not more than
60 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with generally accepted accounting principles shall have been set
aside on its books.
(c) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation.
(d) Utility easements, building restrictions and such
other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character
and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of the Company,
the Subsidiaries or the Affiliates, as the case may be.
(e) Liens existing on the date hereof described in
Schedule 11.1 and securing the Indebtedness described in Schedule 11.1
hereto or otherwise permitted in connection with Indebtedness of the
type described in Section 11.1(d) consented to by the Required Lenders
in the exercise of their sole discretion.
(f) Liens arising under operating agreements in
respect of obligations which are not yet due or which are being
contested in good faith by appropriate proceedings.
(g) Liens reserved in oil, gas and/or mineral leases
for bonus or rental payments and for compliance with the terms of such
leases.
(h) Liens pursuant to partnership agreements, oil, gas
and/or mineral leases, farm-out agreements, division orders, contracts
for the sale, delivery, purchase, exchange, or processing of oil, gas
and/or other hydrocarbons, unitization and pooling declarations and
agreements, operating agreements, development agreements, area of
mutual interest agreements, and other agreements which are customary
in the oil, gas and other mineral exploration, development and
production business and in the business of processing of gas and gas
condensate production for the extraction of products therefrom.
(i) Liens on Properties owned by Offshore arising out
of the facility described in item 1 of Schedule 11.1.
11.6. [Intentionally Omitted.]
11.7. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) [Intentionally Omitted.]
(b) [Intentionally Omitted.]
(c) the Company will not and will not permit any of
its Subsidiaries to make any optional payment or prepayment on, or
redemption of, or redeem, purchase or defease prior to its stated
maturity, any
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Indebtedness other than Indebtedness incurred under this Agreement,
the other Loan Documents, Indebtedness of Offshore or Indebtedness
evidenced by the DEKALB Notes; provided with respect to Indebtedness
of Offshore, that the optional payment or prepayment be made with
proceeds of the facility described in item A.1 of Schedule 11.1;
provided with respect to Indebtedness of DEKALB evidenced by the
DEKALB Notes, that the optional payment or prepayment be made with
proceeds of the facility described in item B.1 or B.2 of Schedule 11.1,
with cash on hand at DEKALB or with proceeds of Investments permitted
pursuant to Section 11.12(i); and provided that DEKALB may borrow,
repay and reborrow pursuant to the facilities described as item B.1,
B.2 and B.3 of Schedule 11.1;
(d) the Company will not, and will not permit any
Subsidiary to, make any deposit for any of the foregoing purposes;
provided, that notwithstanding the foregoing clause (c), the Company shall be
permitted to make an optional payment or prepayment on, or redeem, purchase or
defease Subordinated Indebtedness or any other Indebtedness of itself or its
Subsidiaries so long as the Debt/Capitalization Ratio following such payment,
repayment, redemption, purchase or defeasance is less than .45 to 1.0.
11.8. Rental Obligations. The Company will not, and will not
permit any of its Subsidiaries to, enter into at any time any arrangement
(other than oil, gas and mineral leases and leases of rights-of-way and
easements and other than short-term operating equipment rental arrangements)
which does not create a Capitalized Lease Obligation and which involves the
leasing by the Company or any of its Subsidiaries from any lessor of any real
or personal property (or any interest therein), except arrangements which,
together with all other such arrangements which shall then be in effect, will
not require the payment of an aggregate amount of rentals by the Company and
its Subsidiaries in excess of (excluding escalations resulting from a rise in
the consumer price or similar index) $10,000,000 for any calendar year;
provided, however, that any calculation made for purposes of this Section shall
exclude any amounts required to be expended for normal maintenance and repairs,
insurance, taxes, assessments, and other similar charges.
11.9. Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement is fair and equitable to the Company or such
Subsidiary, as the case may be, and is not of a sort which would not be entered
into by a prudent Person in the position of the Company or such Subsidiary
with, or which is on terms which are less favorable than are obtainable from,
any Person which is not one of its Affiliates.
11.10. Negative Pledges, etc. The Company will not, and will not
permit any of its Subsidiaries to, enter into, on or at any time after the
Effective Date, any agreement (excluding this Agreement and any other Loan
Document) directly or indirectly prohibiting the creation, assumption or
perfection of any Lien upon its properties, revenues or assets, whether now
owned or hereafter acquired, restricting any loans, advances or other
Investments to or in the Company or any of its Subsidiaries, restricting the
capitalization of the Company or any Subsidiary, restricting the ability of any
Subsidiary to make dividend payments or other distributions or payments (by way
of dividends, advances, repayments of loans or advances, reimbursements or
otherwise) or restricting the ability of the Company or any Subsidiary to amend
or otherwise modify this Agreement or any other Loan Document.
11.11. Regulation U Acquisitions. The Company will not, nor will
it permit any Subsidiary to, use any of the proceeds of the Loans to purchase
or carry any "margin stock" (as defined in Regulation U) or to make any
Acquisition except (i) Acquisitions not involving "margin stock", where such
Acquisition
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shall have been approved or consented to by the board of directors or similar
governing entity of the Person being acquired; (ii) Acquisitions involving
"margin stock" where such Acquisitions shall have been approved or consented to
by the board of directors or similar governing entity of the Person being
acquired and (iii) Acquisitions of not more than 15% of the outstanding equity
securities of any issuer, whether or not such securities are "margin stock";
provided, however, that the amount paid by the Company to consummate all
Acquisitions of the type described in clauses (ii) and (iii) shall not exceed
$15,000,000 in the aggregate.
11.12. Investments. The Company will not, and will not permit any
of its Subsidiaries to make, incur, assume or suffer to exist any Investment in
any other Person, except:
(a) Investments existing on the Effective Date and
identified in Schedule 11.12;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 11.1 and Investments permitted as
Contingent Obligations pursuant to Section 11.4;
(d) in the ordinary course of business, Investments
(other than the contribution of Hydrocarbon Interests) by the Company
in any Guarantor;
(e) in the ordinary course of business, (i)
Investments by the Company in International or Apache Energy Limited
(or by Apache Energy Resources in Apache Energy Limited) not to exceed
$45,000,000 (provided that until such time as the Non-conforming
Borrowing Base is $0.00, such amount shall be $30,000,000) in the
aggregate for all such Investments made, incurred or assumed in any
calendar year; provided, that Investments made by Apache Energy
Resources in Apache Energy Limited using the proceeds of Investments
by the Company in Apache Energy Resources shall not be included in
such aggregate amount and (ii) Investments by the Company in
International or Apache Energy Limited (or by Apache Energy Resources
in Apache Energy Limited) for the purpose of capital expenditures in
respect of Properties owned by International or Apache Energy Limited,
as the case may be, and included in the Borrowing Base, and consisting
of Hydrocarbon Interests located in countries (other than the United
States of America) approved by the Required Lenders pursuant to the
definition of Hydrocarbon Interests and not to exceed in the aggregate
capital expenditures in respect thereof set forth in the then most
recent Approved Engineers' Report or Company's Engineers' Report to be
delivered pursuant to Section 9.1;
(f) Investments by Subsidiaries of International in
Subsidiaries of International;
(g) Other Investments in an aggregate amount not to
exceed $15,000,000 during any calendar year;
(h) Investments in Persons which (A) Persons arise as
a result of joint operations of oil and gas properties located in the
United States of America, in which such joint operators each directly
own undivided interests, pursuant to joint operating agreements
containing terms and provisions customary in the oil and gas industry
and entered into in the ordinary course of business (and not arising
as a result of a joint venture agreement or partnership agreement,
whether written, oral, express
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or implied) and (B) Investments are in respect of the joint operations
of such Properties pursuant to such joint operating agreements;
(i) Investments in DEKALB and its Subsidiaries not to
exceed $10,000,000 in the aggregate at any time outstanding;
provided, however, that
(j) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements;
and
(k) no Investment otherwise permitted by clause (d),
(e) (f) or (g) shall be permitted to be made if, immediately before or
after giving effect thereto, any Default shall have occurred and be
continuing.
11.13. Hedging Contracts. The Company will not and will not
permit any of its Subsidiaries to enter into or become obligated under any
contract for sale for future delivery of oil or gas, whether or not the subject
oil or gas is to be delivered, hedging contract, forward contract, commodity
swap agreement, futures contract or other similar agreement except for such
contracts which in the aggregate do not cover at any time a volume of oil or
gas, as the case may be, equal to more than 75% of the projected production of
oil or gas, as the case may be, from the Properties included in the Borrowing
Base for the term covered by such contracts.
11.14. Approval of Consents. In any instance in this Article XI
where it is provided that an action may be taken by the Company or a Subsidiary
only with the approval or consent of the Required Lenders, the failure by a
Lender to respond to a request for such approval or consent within 10 Business
Days of receipt of a request for such approval or consent (or such other length
of time as specified by the Administrative Agent in such request) shall be
deemed an approval of, or consent to, such request.
ARTICLE XII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a "Default":
12.1. Breach of Warranties and Misleading Statements. Any
representation or warranty made or deemed made pursuant to Article VIII, by or
on behalf of the Company or any Subsidiary to the Lenders, the Administrative
Agent, the Co-Agent, the Arrangers or the Engineering Banks under or in
connection with this Agreement, any Loan, any Loan Document, or any
certificate, or, information delivered in connection with this Agreement, any
other Loan Document is breached or shall be false, incomplete or incorrect on
the date as of which made or deemed made in any material respect.
12.2. Nonpayment of Notes, Fees and other Obligations.
Nonpayment of principal of any Note when due; or nonpayment of interest upon
any Note or of any facility fee or other Obligation under any of the Loan
Documents within three (3) days after the same becomes due.
12.3. Breach of Certain Covenants. The breach by the Company of
any of the terms or provisions of Section 9.2, 9.3, 9.15 or Article X or
Article XI.
12.4. [Intentionally Omitted.]
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12.5. Non-Compliance with this Agreement. The breach by the
Company (other than a breach which constitutes a Default under any other
Section of this Article XII) of any of the terms, provisions or covenants of
this Agreement which is not remedied within 30 days after written notice from
the Administrative Agent or any Lender.
12.6. Cross-Defaults.
(a) Failure of the Company or any Subsidiary to pay
any Indebtedness (other than Limited Recourse Indebtedness of such
Person) in excess of $25,000,000 in aggregate principal amount when
due; or the default by the Company or any Subsidiary in the
performance of any term, provision or condition contained in any
agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit the holder or
holders of such Indebtedness to cause, such Indebtedness to become due
prior to its stated maturity; or any such Indebtedness of the Company
or any Subsidiary shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment) prior to
the stated maturity thereof; or the Company or any Subsidiary shall
not pay, or shall admit in writing its inability to pay, its debts
generally as they become due.
(b) Failure of an Affiliate (other than any
Subsidiary) to pay any Indebtedness (other than Limited Recourse
Indebtedness) in excess of $25,000,000 in aggregate principal amount
when due or any such Indebtedness of an Affiliate shall be declared to
be due and payable or required to be prepaid (other than a regularly
scheduled payment) prior to the stated maturity thereof; or an
Affiliate shall not pay, or shall admit in writing its inability to
pay, its debts as they become due, if any of the foregoing would have
a Material Adverse Effect.
12.7. Voluntary Dissolution and Insolvency Proceedings and
Actions. The Company, any Subsidiary or any Affiliate shall (a) have an order
for relief entered with respect to it under Federal bankruptcy laws as now or
hereafter in effect, (b) make an assignment for the benefit of creditors, (c)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (d) institute any proceeding seeking an order
for relief under Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (e)
take any corporate or partnership action to authorize or effect any of the
foregoing actions set forth in this Section 12.7 or (f) fail to contest in good
faith any appointment or proceeding described in Section 12.8; provided,
however, that if any of the foregoing shall occur with respect to any
Affiliate, it shall not constitute a Default hereunder unless it shall have a
Material Adverse Effect.
12.8. Involuntary Insolvency Proceedings or Dissolution. Without
the application, approval or consent of the Company, any Subsidiary or any
Affiliate, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for such Person or any substantial part of its property, or a
proceeding described in Section 12.7(d) shall be instituted against the
Company, any Subsidiary or any Affiliate and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30 consecutive days; provided, however, that if any of the foregoing shall
occur with respect to any Affiliate, it shall not constitute a Default
hereunder unless it shall have a Material Adverse Effect.
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12.9. Condemnation. Any court, government or governmental agency
shall condemn, seize or otherwise appropriate, or take custody or control of
all or any portion of the assets of the Company or any Subsidiary with a fair
market value in excess of $50,000,000 in the aggregate for all such assets;
provided, that for purposes of the foregoing, the fair market value of the
assets of a Subsidiary constituting a Drilling Partnership condemned, seized or
otherwise appropriated or taken into custody or control shall be deemed to be
the product of such fair market value times the Company's direct ownership
percentage of such Drilling Partnership; and, provided, further, that this
Section 12.9 shall not apply to any assets which are not included in the
Borrowing Base and which are either: (i) owned by International or (ii) owned
by the Company or a Subsidiary other than International and located outside of
the United States of America.
12.10. Judgments. The Company or any Subsidiary shall fail within
45 days to pay, bond or otherwise discharge any uninsured portion of any
judgment or order for the payment of money in excess of $10,000,000 in the
aggregate for all such judgments and orders, which is not stayed on appeal or
is not otherwise being appropriately contested in good faith.
12.11. Plans. The Unfunded Liabilities of all Plans shall exceed
in the aggregate $10,000,000.
12.12. Material Adverse Effect. The Company, any Subsidiary, or
any of the Properties shall be the subject of any proceeding or investigation
pertaining to the release by any of them or from such Property of any toxic or
hazardous waste or substance into the environment, or any violation of any
federal, state or local environmental, health or safety law or regulation,
which would, in any case, have or be a Material Adverse Effect; or the
occurrence of any material adverse change in the business, assets, properties,
operations, conditions or prospects (financial or otherwise) of the Company and
any of its Subsidiaries taken as a whole or in the ability of the Company or
its Subsidiaries to perform their respective obligations under the Loan
Documents.
12.13. Other Defaults Under Loan Documents. The occurrence of any
default under any Loan Document (other than this Agreement or the Notes) or the
breach of any of the terms or provisions of any Loan Document (other than this
Agreement or the Notes) which default or breach continues beyond any period of
grace therein provided.
12.14. Failure of Loan Documents. Any Loan Document shall fail to
remain in full force or effect or shall be declared null and void, or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Loan Document.
12.15. Change in Control. Any Change in Control shall occur.
ARTICLE XIII
ACCELERATION, WAIVERS, AMENDMENTS, REMEDIES; RELEASES
13.1. Acceleration. If any Default described in Section 12.7 or
12.8 occurs with respect to the Company, (a) the obligations of the Lenders to
make Loans hereunder shall automatically terminate, (b) the Obligations shall
immediately become due and payable without any election or action on the part
of any Agent or any Lender and without presentment, demand, protest or notice
of any kind, including without notice of acceleration or notice of intent to
accelerate, all of which the Company and each Guarantor each hereby expressly
waives, and (c) the Agents and the Lenders and each of them shall be able to
exercise any rights available to it or them under the Loan Documents, the
Guaranties or by law. If any other Default occurs, (a) the Required Lenders
may terminate or
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suspend the obligations of the Lenders to make Loans hereunder, or declare the
Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
notice of any kind, including without notice of acceleration or notice of
intent to accelerate, all of which the Company and each Guarantor each hereby
expressly waives, and (b) the Agents and the Lenders and each of them shall be
able to exercise any rights available to it or them under the Loan Documents,
the Guaranty or by law. The Administrative Agent hereby agrees, at the written
direction of the Required Lenders, subject to the provisions of Article XV, to
exercise any of the foregoing rights available to it.
13.2. Amendments. Subject to the provisions of this Article
XIII, the Required Lenders (or the Administrative Agent with the consent in
writing of the Required Lenders) and the Company may enter into agreements
supplemental hereto for the purpose of adding or elucidating any provisions to
the Loan Documents or changing in any manner the rights and remedies of the
Lenders or the Company hereunder or waiving any Default hereunder; provided
however that Sections 2.3 and the related definitions in Section 1.1 shall not
be changed without the prior written consent of the Required Lenders; provided,
further however, that no such supplemental agreement shall, without the consent
of each Lender affected thereby:
(a) Extend the maturity of any Loan, Note or payment
under a Guaranty, or reduce the principal amount of any of them, or
reduce the rate or extend the time of payment of interest or fees
thereon.
(b) Reduce the percentage specified in the definition
of Required Lenders.
(c) Extend the Termination Date or reduce the amount
or extend the payment date for, the mandatory payments required under
Section 4.2 or increase the amount of the Commitment of any Lender
hereunder or permit the Company to assign its rights or obligations
under this Agreement or under any other Loan Document.
(d) Amend this Section 13.2.
No amendment of any provision of this Agreement relating to any Agent shall be
effective without the written consent of such Agent. The Administrative Agent
may waive payment of the fee required under Section 17.3(b) without obtaining
the consent of any of the Lenders.
13.3. Preservation of Rights. All remedies contained in the Loan
Documents or afforded by law shall be cumulative and all shall be available to
the Agents and the Lenders until the Obligations have been paid in full. No
delay or omission of the Lenders, the Agents or any of them to exercise any
right under the Loan Documents shall impair such right or be construed to be a
waiver of any Default or an acquiescence therein, and the making of a Loan
notwithstanding the existence of a Default or the inability of the Company to
satisfy the conditions precedent to such Loan shall not constitute any waiver
or acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders and the Agents required pursuant to Section 13.2, and
then only to the extent specifically set forth in such writing.
Notwithstanding the foregoing or any other provision of this Agreement, each of
the various written consents provided by the Administrative Agent on behalf of
the Lenders, or any group of Lenders, with respect to the April 1994 Agreement
shall remain in full force and effect according to its terms, including,
without limitation, each consent contained in that certain letter from the
Administrative Agent to the
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Company dated January 20, 1994, concerning the purchase by the Company of up to
five million shares of its common stock.
ARTICLE XIV
GENERAL PROVISIONS
14.1. Survival of Representations. All representations and
warranties of the Company, MW Petroleum and any other Subsidiary contained in
the July 1991 Agreement, the April 1992 Agreement, the April 1994 Agreement,
this Agreement, or in any other Loan Document shall survive the delivery of the
Notes and the making of the Loans herein contemplated until all the Obligations
have been paid and this Agreement has been terminated.
14.2. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Company in violation of any limitation or prohibition
provided by any applicable statute or regulation.
14.3. Taxes. Any taxes (excluding income taxes) or other similar
assessments or charges payable or ruled payable by any governmental authority
in respect of the Loan Documents shall be paid by the Company, together with
interest and penalties, if any.
14.4. Headings. Article and section headings in the Loan
Documents are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
14.5. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Company, the Agents and the Lenders and
supersede all prior agreements and understandings among the Company, the Agents
and the Lenders relating to the subject matter thereof.
14.6. Several Obligations. The respective obligations of the
Lenders hereunder are several and not joint and no Lender shall be the partner
or agent of any other (except to the extent to which an Agent is authorized to
act as such). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of its obligations
hereunder. This Agreement is not intended to, and shall not be construed so as
to, confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
14.7. Reimbursement of Costs and Expenses; Indemnification.
(a) Reimbursement of Costs and Expenses. The Company
shall reimburse each Agent for any reasonable costs, internal charges
and out-of-pocket expenses (including fees and expenses of consultants
and attorneys' fees and time charges of attorneys for such Agent,
which attorneys may be employees of such Agent) paid or incurred by
such Agent in connection with the preparation, review, execution,
delivery, amendment, modification and administration of the Loan
Documents including, without limitation, the fees incurred by such
Agent in connection with its initial evaluation of the Properties.
The Company shall reimburse each Agent and the Lenders for any costs,
internal charges and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Agent and the Lenders, which
attorneys may be employees of the Agents or the Lenders) paid or
incurred by any Agent or any Lender in connection with the collection
and enforcement of the Loan Documents.
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(b) Indemnification. In consideration of the
execution and delivery of this Agreement by each Lender and the
extension of the Commitments, the Company hereby indemnifies,
exonerates and holds each Agent and each Lender, and their respective
directors, agents, officers and employees ("Indemnified Persons") free
and harmless from and against any and all losses, claims, damages,
penalties, judgments, liabilities, actions, suits, costs and expenses
(including, without limitation, all expenses of litigation or
preparation therefor whether or not any Agent or any Lender or any
Indemnified Person is a party thereto and all other attorneys' fees
and disbursements) (Claims") which any of them may pay or incur as a
result of, arising out of, or relating to,
(i) this Agreement, the other Loan
Documents, the transactions contemplated hereby or thereby;
(ii) the direct or indirect application or
proposed application of the proceeds of any Loan hereunder;
(iii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with
the proceeds of any Loan;
(iv) any investigation, litigation or
proceeding related to any acquisition or proposed
acquisition by the Company, any of its Subsidiaries, Apache
Energy Resources or Apache Energy Limited of all or any
portion of the stock or assets of any Person, whether or
not any Agent or any Lender is party thereto;
(v) any investigation, litigation or
proceeding related to any environmental cleanup, audit,
compliance or other matter relating to any Environmental
Law or the condition of any facility or property owned,
leased or operated by the Company or any Subsidiary;
(vi) the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission,
discharging or releases from, any facility or property
owned, leased or operated by the Company or any Subsidiary
thereof of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of,
the Company or such Subsidiary; or
(vii) any misrepresentation, inaccuracy or
any breach in or of Section 8.20 or Section 9.12;
(the foregoing collectively the "Indemnified Liabilities"), except to the
extent that a final order of a court of competent jurisdiction finds that such
Indemnified Liability arises solely from such Indemnified Person's gross
negligence or wilful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The
obligations of the Company under this Section 14.7 shall survive the
termination of this Agreement or any non-assumption of this Agreement in a
bankruptcy or similar proceeding. The Company shall be obligated to indemnify
the Indemnified Persons for all Claims regardless of whether the Company had
knowledge of the facts and circumstances giving rise to such Claims.
14.8. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Administrative
Agent with
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sufficient counterparts so that the Administrative Agent may furnish one to
each of the Lenders and each of the Agents.
14.9. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
14.10. Nonliability of Lenders. The relationship between the
Company on the one hand and the Lenders and the Agents on the other hand shall
be solely that of borrower and lender. None of the Agents nor any Lender shall
have any fiduciary responsibilities to the Company or any of its Subsidiaries
or Affiliates. None of the Agents nor any Lender undertakes any responsibility
to the Company or any of its Subsidiaries or Affiliates to review or inform the
Company of any matter in connection with any phase of the Company's or such
Subsidiary's or Affiliate's business or operations.
14.11. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
14.12. CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY AGENT, THE LENDERS OR THE COMPANY SHALL BE
BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT ANY AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF
THE STATE OF ILLINOIS AND THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT
THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.13. Confidentiality. Each Lender and each Agent agrees to hold
any confidential information which it may receive from the Company pursuant to
this Agreement in confidence in accordance with the provisions set forth in
Exhibit "J" hereto. In addition to the disclosures permitted in such
provisions, the Lenders and the Agents each shall be permitted to make
disclosures of such information in accordance with Section 17.4.
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ARTICLE XV
THE ADMINISTRATIVE AGENT,
THE ARRANGERS AND THE ENGINEERING BANKS
15.1. Appointment of Agents. The First National Bank of Chicago
is hereby appointed Administrative Agent and Arranger hereunder and under each
other Loan Document, and Chemical is hereby appointed Co-Agent and Arranger
hereunder and under each other Loan Document, and each of First Chicago and
Chemical is appointed as an Engineering Bank hereunder and each of the Lenders
irrevocably authorizes each such Agent to act in such capacities. Each Agent
agrees to act as such upon the express conditions contained in this Article XV.
No Agent shall have a fiduciary relationship in respect of any Lender by reason
of this Agreement or any of the other Loan Documents.
15.2. Powers. Each Agent shall have and may exercise such powers
under this Agreement and the other Loan Documents as are specifically delegated
to it by the terms of each thereof, together with such powers as are reasonably
incidental thereto. None of the Agents shall have implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action by an Agent specifically provided by the Loan Documents to be taken
by such Agent.
15.3. General Immunity. No Agent nor any of its respective
directors, officers, agents or employees shall be liable to any Lender or any
of the other Agents for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or wilful misconduct as
established by final order of a court of competent jurisdiction.
15.4. No Responsibility for Loans, Recitals, etc. No Agent nor
any of its respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article VII, except receipt by an
Agent of items required to be delivered to such Agent unless such condition
shall have been waived in accordance with Section 13.2; or (iv) the validity,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or writing furnished in connection therewith.
15.5. Action on Instructions of Lenders. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions signed by
the Required Lenders, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Lenders, the other Agents
and all holders of Notes.
15.6. Employment of Agents and Counsel. Each Agent may execute
any of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Each Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
respective duties hereunder and under any other Loan Document.
15.7. Reliance on Documents; Counsel. Each Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine and
correct and to have
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been signed or sent by the proper person or persons, and, in, respect to legal
matters, upon the opinion of counsel selected by such Agent, which counsel may
be employees of the Agents or any of them.
15.8. Reimbursement and Indemnification. Each Lender agrees to
reimburse and indemnify each of the Administrative Agent, each Arranger and
each Engineering Bank ratably in proportion to such Lender's Aggregate
Commitments, (i) for any amounts (other than principal or interest) not
reimbursed by the Company or any Guarantor for which such Agent is entitled to
reimbursement by the Company under the Loan Documents, and (ii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents,
provided that no Lender shall be so liable to the extent any of the foregoing
is found by a final order of a court of competent jurisdiction to have arisen
solely from such Agent's gross negligence or willful misconduct.
15.9. Rights as a Lender. With respect to its Commitments, Loans
made by it and the Notes issued to it, each Agent shall have the same rights
and powers hereunder and under each other Loan Document as any Lender and may
exercise the same as though it did not hold such role, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include each of them
in its individual capacity. In addition to, and not by way of limitation of
the rights set forth in Section 15.2 and this Section 15.9, each Agent may
accept deposits from, lend money to, and generally engage in any kind of
banking or trust business with the Company or any Subsidiary or any other
Affiliate of the Company as if it did not hold such role.
15.10. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon any Agent or any other Lender and
based on the financial statements prepared by the Company and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other Loan Documents.
15.11. Certain Successor Agents. Any Agent may resign at any time
by giving thirty (30) days' prior written notice thereof to the Lenders and the
Company. Upon any such resignation, the Company shall, if no Default or
Unmatured Default has occurred and is continuing, have the right (subject to
the consent of the Required Lenders) to appoint, on behalf of the Company and
the Lenders, a Lender as a successor Agent. If no successor Agent shall have
been so appointed by the Company and shall have accepted such appointment
within thirty (30) days' after the retiring Agent's giving notice of
resignation, then the retiring Agent may appoint, on behalf of the Company and
the Lenders, a Lender as a successor Agent; provided, however, that the Company
may, within the one year period following the appointment of a successor Agent,
and upon thirty (30) days written notice to the Lenders, remove the successor
Agent and appoint a successor Agent acceptable to the Company (subject to the
consent of the Required Lenders). Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and Obligations (but not any liability arising from its gross negligence
or wilful misconduct as established by a final order of a court of competent
jurisdiction) hereunder and under the other Loan Documents. After any retiring
Agent's resignation hereunder
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<PAGE> 71
as Agent, the provisions of this Article XV shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as an Agent hereunder and under the other Loan Documents.
ARTICLE XVI
SETOFF; RATABLE PAYMENTS
16.1. Setoff. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Company becomes insolvent,
however evidenced, or any Default or Unmatured Default occurs, any indebtedness
from any Lender to the Company (including all account balances, whether
provisional or final and whether or not collected or available) may be offset
and applied toward the payment of the Obligations owing to such Lender, whether
or not the Obligations, or any part hereof, shall then be due and payable.
16.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans in a greater proportion than
it would have received pursuant to an allocation using the method set forth in
Section 4.3 or 4.4 (except for payments made with respect to 1994 Revolving
Loans which are outstanding on the Effective Date pursuant to Section 7.1(d)),
such Lender agrees, promptly upon demand, to purchase a portion of the Loans
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of such type of Loans. If any Lender, whether in connection
with setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to set off, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to the Obligations owing to each of them. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
ARTICLE XVII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
17.1. Successors and Assigns. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Company,
the Agents and the Lenders and their respective successors and assigns, except
that the Company shall not have the right to assign its rights or obligations
under the Loan Documents and any assignment by any Lender must be made in
compliance with Section 17.3. The Administrative Agent may treat the payee of
any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 17.3 in the case of an assignment thereof or, in
the case of any other transfer, a written notice of the transfer is filed with
such Agent. Any assignee or transferee of a Note agrees by acceptance thereof
to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
17.2. Participations.
(a) Any Lender, in the ordinary course of its business
and in accordance with applicable law, at any time may sell to one or
more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender under
the Loan Documents. In
65
<PAGE> 72
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's Obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note or Obligation for all
purposes under the Loan Documents, and the Company and the Agents
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan
Documents.
(b) Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, postpones any
date fixed for any regularly-scheduled payment of principal of, or
interest or fees on, or reimbursement obligation with respect to, any
such Loan or Commitment, releases any guarantor of any such Obligation
or releases all or substantially all of the collateral (except as
permitted by Section 13.2(d)), if any, securing any such Obligation.
(c) The Company agrees that each Participant shall be
deemed to have the right of setoff provided in Section 16.1 in respect
of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan
Documents, provided that each Lender shall retain the right of setoff
provided in Section 16.1 with respect to the amount of participating
interests sold to each Participant. The Lenders agree to share with
each Participant, and each Participant, by exercising the right of
setoff provided in Section 16.1, agrees to share with each Lender, any
amount received pursuant to the exercise of its right of setoff, such
amounts to be shared in accordance with Section 16.2 as if each
Participant were a Lender. The Company also agrees that each
Participant shall be entitled to the benefits of Sections 6.1 and 6.3
with respect to its participation in the Commitments or the Loans
outstanding from time to time; provided, that no Participant shall be
entitled to receive any greater amount pursuant to such Sections than
the transferor Lender would have been entitled to receive in respect
of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
17.3. Assignments.
(a) Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to
one or more banks or other entities (Purchasers") all or any part of
its rights and obligations under the Loan Documents subject to a
minimum of $15,000,000 or such lesser amount as may be agreed to by
the Company; provided that with respect to any Purchaser which is not
an Affiliate of such assigning Lender, such assignment shall require
the consent of the Company, which consent of the Company shall not be
unreasonably withheld or delayed. Such assignment shall be
substantially in the form of Exhibit "D" hereto. The consent of the
Administrative Agent shall also be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender.
All such consents shall be substantially in the form attached as
Exhibits "D-II" or "D-III" to Exhibit "D" hereto and shall not be
unreasonably withheld.
(b) Upon (i) delivery to the Administrative Agent of a
notice of assignment, substantially in the form attached as Exhibit
"D-I" to Exhibit "D" hereto (a "Notice of Assignment"), together with
any consents
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<PAGE> 73
required by Section 17.3.(a), and (ii) payment of a $3,000 fee to the
Administrative Agent for processing such assignment, such assignment
shall become effective on the effective date specified in such Notice
of Assignment; provided, however, that any amounts paid by the Company
to, or for the benefit of, the assigning Lender, on or before the
execution date of the assignment, if such date is later than the
effective date of the assignment, shall be deemed paid to and for the
benefit of the Purchaser for all purposes. On and after the effective
date of such assignment, such Purchaser shall for all purposes be a
Lender, party to this Agreement and any other Loan Document executed
by the Lenders, and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the
Company, the Lenders or any Agent shall be required to release the
transferor Lender, with respect to the percentages of the Commitment,
and the Loans assigned to such Purchaser and the transferor Lender
shall henceforth be so released. Upon the consummation of any
assignment to a Purchaser pursuant to this Section 17.3(b, the Company
shall issue replacement Notes to such transferor Lender and shall
issue new Notes or, as appropriate, replacement Notes, to such
Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.
(c) The provisions of the foregoing clauses (a) and
(b) shall not apply to or restrict, or require the consent of or
notice to any Person to effectuate, the pledge or assignment by any
Agent or Lender of its rights or obligations under any Loan Documents
to any Federal Reserve Bank.
17.4. Dissemination of Information. The Company authorizes each
Agent and each Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Company and the
Subsidiaries, provided that such Transferee and prospective Transferee agrees
in writing to be bound by Section 14.13 of this Agreement.
17.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 6.8.
ARTICLE XVIII
NOTICES
18.1. Giving Notice. Except as otherwise permitted by Section
4.5 with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes).
18.2. Change of Address. The Company, each Agent, and each
Lender may change the address for service of notice upon it by a notice in
writing to the other parties hereto.
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<PAGE> 74
ARTICLE XIX
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Agents and the Lenders and each party has notified the Administrative Agent, by
telex, facsimile or telephone, that it has taken such action.
ARTICLE XX
NO ORAL AGREEMENTS
THIS WRITTEN AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
IN WITNESS WHEREOF, the Company, the Lenders and the Agents have
executed this Agreement as of the date first above written.
APACHE CORPORATION
By:/s/ Clyde E. McKenzie
---------------------------------
Title: Clyde E. McKenzie
Vice President and Treasurer
2000 Post Oak Boulevard
Suite 100
Houston, Texas 77056-4400
Attention: Clyde McKenzie
Vice President and Treasurer
with a copy to:
Zurab S. Kobiashvili
Vice President and General Counsel
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Facsimile: (713) 296-6459
Telephone: (713) 296-6000
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<PAGE> 75
Commitments
$550,000,000
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Administrative
Agent, Arranger and Engineering Bank
By: /s/ W. Walter Green
--------------------------------------
Title: W. Walter Green, Attorney-in-fact
for The First National Bank of
Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: W. Walter Green, III
Petroleum and Mining
Division
Suite 0363
Facsimile: (312) 732-3055
Telephone: (312) 732-7235
with a copy to:
Attention: Thomas E. Both
Syndications and
Placements/Agency
Suite 0353
Facsimile: (312) 732-2038
Telephone: (312) 732-7268
69
<PAGE> 76
$450,000,000 CHEMICAL BANK, Individually and as Co-
Agent, Arranger and Engineering Bank
By: /s/ Ronald Potter
---------------------------------
Title: Managing Director
----------------------------
270 Park Avenue
Energy Portfolio, 10th Floor
New York, New York 10017-2070
Attention: Ronald Potter
Facsimile: (212) 270-3860
Telephone: (212) 270-2057
with a copy to:
Lori Vetters
Chemical Banking Corporation
707 Travis
5th Floor North
Houston, Texas 77002
Facsimile: (713) 236-4117
Telephone: (713) 236-4332
________________
$1,000,000,000
AGGREGATE
COMMITMENT
70
<PAGE> 77
SCHEDULE B
ALTERNATE BASE RATE SPREAD
<TABLE>
<CAPTION>
Less .40/ .45/ .50/ .55/ .60 or
Debt/Capitalization Ratio than .40 .449 .499 .549 .599 greater
- ------------------------- -------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
BBB/Baa2 or Higher*
Floating Spread 0 0 0 0 .125% .125%
BBB-/Baa3 or Higher*
Floating Spread 0 0 0 0 .125% .375%
Lower than BBB-/Baa3*
Floating Spread 0 0 0 0 .375% .50%
</TABLE>
EURODOLLAR SPREAD
<TABLE>
<CAPTION>
Less .40/ .45/ .50/ .55/ .60 or
Debt/Capitalization Ratio than .40 .449 .499 .549 .599 greater
- ------------------------- -------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
BBB/Baa2 or Higher*
Eurodollar Spread .25% .375% .50% .875% 1.125% 1.125%
BBB-/Baa3 or Higher*
Eurodollar Spread .375% .50% .625% .875% 1.125% 1.375%
Lower than BBB-/Baa3*
Eurodollar Spread .50% .50% .625% 1.00% 1.375% 1.50%
</TABLE>
FACILITY FEE RATES
<TABLE>
<CAPTION>
Less .40/ .45/ .50/ .55/ .60 or
Debt/Capitalization Ratio than .40 .449 .499 .549 .599 greater
- ------------------------- -------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
BBB/Baa2 or Higher*
Facility Fee .25% .25% .25% .375% .375% .375%
BBB-/Baa3 or Higher*
Facility Fee .25% .25% .375% .375% .375% .375%
Lower than BBB-/Baa3*
Facility Fee .25% .25% .375% .375% .375% .50%
</TABLE>
- -------------
* Rating of the Company's Long-Term Debt by (2) two or more Rating Agencies
<PAGE> 1
EXHIBIT 10.7
APACHE CORPORATION
RETIREMENT/401(k) SAVINGS PLAN
Amended and Restated
Effective January 1, 1995
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Account Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Affiliated Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Alternate Payee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Annual Addition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Company Mandatory Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Company Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Company Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Covered Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Determination Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 Disability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 Domestic Relations Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 Employment Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.21 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.22 Family Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.23 Family Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Five-Percent Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.25 Former Amoco Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.26 Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.27 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.28 Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.29 Lapse in Apache Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.30 Limitation Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.31 Non-Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.32 Non-Key Employee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.33 Normal Retirement Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.34 Normal Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.35 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 Participant Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.37 Period of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.38 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 Qualified Domestic Relations Order ("QDRO"). . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.40 Qualified Non-Elective Contributions ("QNECs") . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.41 Qualified Matching Contributions ("QMACs") . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.42 Reemployment Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.43 Required Beginning Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.44 Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.45 Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.46 Termination from Service Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.47 Top-Paid Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.48 Transferred Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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1.49 Valuation Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.50 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Participation - Required Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Reemployment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Enrollment - Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Company Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Participant Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Return of Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Limitation on Annual Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Contribution Limits for Highly Compensated Employees (ADP Test). . . . . . . . . . . . . . . . . . 14
3.6 Contribution Limits for Highly Compensated Employees (ACP Test). . . . . . . . . . . . . . . . . . 15
3.7 Contribution Limits for Highly Compensated Employees (Multiple Use). . . . . . . . . . . . . . . . 16
3.8 QNECs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 QMACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV INTERESTS IN THE TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Participants' Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Valuation of Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Allocation of Increase or Decrease in Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Allocation of Company Mandatory Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V AMOUNT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Vesting Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Restoration of Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Method of Forfeiture Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Allocation of Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 Credits for Pre-Lapse Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Transfers - Portability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.8 Reemployment - Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Transfer of Participants to Natural Gas Clearinghouse. . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Distributable Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Manner of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Time of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Direct Rollover Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 In-Service Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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ARTICLE VIII ALLOCATION OF RESPONSIBILITIES - NAMED FIDUCIARIES . . . . . . . . . . . . . . . . . . . . . 28
8.1 No Joint Fiduciary Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.3 The Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 The Committee - Plan Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5 Committee to Construe Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.6 Organization of Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Interested Committee Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.8 Agent for Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.9 Indemnification of Committee Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.10 Conclusiveness of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.11 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX TRUST AGREEMENT - INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.1 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.2 Expenses of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.3 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Termination of Plan or Discontinuance of Contributions . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Allocations upon Termination or Discontinuance of Company Contributions . . . . . . . . . . . . . . 31
10.3 Procedure Upon Termination of Plan or Discontinuance of Contributions . . . . . . . . . . . . . . . 32
10.4 Amendment by Apache . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XI PLAN ADOPTION BY AFFILIATED ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Adoption of Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2 Agent of Affiliated Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.3 Disaffiliation and Withdrawal from Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Effect of Disaffiliation or Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.5 Distribution Upon Disaffiliation or Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Application of Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Determination of Top-Heavy Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.3 Special Vesting Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4 Special Minimum Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.5 Change in Top-Heavy Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.1 RIGHT TO DISMISS EMPLOYEES - NO EMPLOYMENT CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . 36
13.2 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.3 Source of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.4 Exclusive Benefit of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.5 Forms of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.6 Failure of Any Other Entity to Qualify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.7 Notice of Adoption of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.8 Plan Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.9 Inalienability of Benefits - Domestic Relations Orders . . . . . . . . . . . . . . . . . . . . . . 37
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13.10 Payments Due Minors or Incapacitated Individuals. . . . . . . . . . . . . . . . . . . . . . . . 39
13.11 Uniformity of Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.12 Disposition of Unclaimed Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.13 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XIV MATTERS AFFECTING COMPANY STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1 Voting, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.3 Retention/Sale of Company Stock and Other Securities. . . . . . . . . . . . . . . . . . . . . . . 40
14.4 Tender Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.5 Stock Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Other Rights Appurtenant to the Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.7 Information to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8 Information to Account Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.10 Former Account Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.11 No Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.12 Trustee to Follow Instructions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.13 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.14 Investment of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.15 Independent Fiduciary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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APACHE CORPORATION
RETIREMENT/401(k) SAVINGS PLAN
PREAMBLE
Apache Corporation, a Delaware corporation ("Apache"), effective
January 1, 1989, amended and restated a profit sharing plan (the "Plan") to
permit before-tax employee contributions via a cash or deferred arrangement
that is qualified under Code section 401(k). The Plan is hereby renamed the
Apache Corporation Retirement/401(k) Savings Plan. The Plan is hereby amended
and restated as set forth below, effective January 1, 1995.
Any Participant (as defined herein) in the Plan who is credited with
at least one Hour of Service (as defined herein) after December 31, 1994 shall
be subject to the provisions of this Plan as so amended and restated. Any
Participant in the Plan who is not credited with an Hour of Service after
January 1, 1995 shall continue to be governed by the provisions of the Plan as
in effect immediately prior to January 1, 1995.
Each Appendix to this Plan is a part of the Plan document. It is
intended that an Appendix will be used to (1) describe which business entities
are actively participating in the Plan, (2) describe any special participation,
eligibility, vesting or other provisions that apply to the employees of a
business entity, (3) describe any special provisions that apply to Participants
affected by a designated corporation transaction, and (4) describe any special
distribution rules that apply to directly transferred benefits from other
plans.
ARTICLE I
DEFINITIONS
The following words and phrases shall have the meaning set forth below:
1.1 "Account Owner " means a Participant who has an Account
balance, an Alternate Payee who has an Account balance, or a beneficiary who
has obtained an interest in the Account(s) of the previous Account Owner
because of the previous Account Owner's death.
1.2 "Accounts" means the various Participant accounts established
pursuant to section 4.1.
1.3 "Affiliated Entity" means:
(a) for all sections of the Plan except those listed in
subsection (b), an corporation or other entity, now or hereafter formed, that
is or shall become affiliated with Apache, either directly or indirectly,
through stock ownership or control, and which is (i) included in the controlled
group of corporations (within the meaning of Code section 1563(a) without
regard to Code section 1563(a)(4) and Code section 1563(e)(3)(C)) in which
Apache is also included; (ii) included in the group of entities (whether or not
incorporated) under common control (within the meaning of the Code section
414(c)) in which Apache is also included; (iii) included in an affiliated
service group (within the meaning of Code section 414(m)) in which Apache is
also included; (iv) required to be aggregated with Apache by Code section
414(o); or (v) affiliated with Apache through stock ownership or as otherwise
determined by Apache.
(b) for purposes of determining Annual Additions under
section 1.4, limiting Annual Additions to a Participant's Account(s) under
section 3.4, and construing the defined terms as they are used in sections 1.4
and 3.4 (such as " Compensation" and "Employee"), the term "Affiliated Entity"
means any Affiliated Entity as determined in paragraphs
1
<PAGE> 7
(a)(iii) and (a)(iv), and any entity that would be an Affiliated Entity under
paragraph (a)(i) or (a)(ii) if the phrase "more than 50%" were substituted for
the phrase "at least 80%" each place it occurs in Code section 1653(a)(1).
1.4 "Alternate Payee" means a Participant's Spouse, former
spouse, child, or other dependent who is recognized by a QDRO as having a right
to receive all, or a portion of, the benefits payable under this Plan with
respect to such Participant.
1.5 "Annual Addition" means the allocations to a Participant's
Account(s) for any Limitation Year, as described in detail below.
(a) Annual Additions shall include: (i) Company
Contributions (except as provided in paragraphs (b)(iii) and (b)(iv)) to this
Plan and Company contributions to any other defined contribution plan
maintained by the Company or any Affiliated Entity, including Company Matching
Contributions forfeited to satisfy the ACP test of section 3.6, (ii) after-tax
contributions to any other defined contribution plan maintained by the Company
or an Affiliated Entity; (iii) Participant Before-Tax Contributions to this
Plan and similar contributions to any other defined contribution plan
maintained by the Company or an Affiliated Entity, including any such
contributions distributed to satisfy the ADP test of section 3.5; (iv)
forfeitures allocated to a Participant's Account(s) in this Plan and any other
defined contribution plan maintained by the Company or any Affiliated Entity
(except as provided in paragraphs (b)(iii) and (b)(vii) below); (v) all amounts
paid or accrued after December 31, 1985 in Taxable Years ending after December
31, 1985, to a welfare benefit fund as defined in Code section 419(e) and
allocated to the separate account (under the welfare benefit fund) of a Key
Employee to provide post-retirement medical benefits; and (vi) contributions
allocated on the Participant's behalf to any individual medical account as
defined in Code section 415(l)(2).
(b) Annual Additions shall not include: (i) rollover
contributions made pursuant to Code section 402(a)(5), 403(a)(4), 403(b)(8),
405(d)(3), 408(d)(3), or 409(b)(3)(C) to any defined contribution plan
maintained by the Company or an Affiliated Entity; (ii) repayments of loans
made to a Participant from a qualified plan maintained by the Company or any
Affiliated Entity; (iii) repayments of forfeitures for rehired Participants, as
described in Code sections 411(a)(7)(B) and 411(a)(3)(D); (iv) direct transfers
of employee contributions from one qualified plan to any qualified defined
contribution plan maintained by the Company or any Affiliated Entity; (v)
deductible employee contributions within the meaning of Code section 72(o)(5);
(vi) employee contributions to a simplified employee pension, if the
contributions are deductible under Code section 219(a); or (vii) repayments of
forfeitures of missing individuals pursuant to section 13.12.
1.6 "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations and rulings in effect thereunder from
time to time.
1.7 "Committee" means the administrative committee provided for in
section 8.4.
1.8 "Company" means Apache, an successor thereto, and any other
Affiliated Entity that adopts the Plan pursuant to Article XI. Each Company is
listed in Appendix A.
1.9 "Company Contributions" means all contributions to the Plan
made by the Company pursuant to section 3.1 for the Plan Year.
1.10 "Company Mandatory Contributions" means all contributions to
the Plan made by the Company pursuant to subsection 3.1(b) for the Plan Year.
1.11 "Company Matching Contributions" means all contributions to
the Plan made by the Company pursuant to subsection 3.1(b) for the Plan Year.
1.12 "Company Stock" means shares of the $1.25 par value common
stock of Apache.
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<PAGE> 8
1.13 "Compensation" means:
(a) Code Section 415 Compensation. For purposes of
determining the limitation on Annual Additions under section 3.4 of the minimum
contribution under section 12.4 when the Plan is top-heavy, Compensation shall
mean those amounts reported as "wages, tips, other compensation" on Form W-2
by the Company or an Affiliated Entity. For purposes of section 3.4,
Compensation shall be measured over a Limitation Year. For purposes of section
12.4, Compensation shall be measured over the portion of a Plan Year (i) after
the employee has satisfied an eligibility requirement of section 2.1 and (ii)
while the Employee is a Covered Employee.
(b) Code Section 414(q) Compensation. For purposes of
identifying Highly Compensated Employees and Key Employees under sections 1.26,
1.28 and 1.47, Compensation shall mean those amounts reported as "wages, tips,
other compensation" on Form W-2 by the Company or an Affiliated Entity;
Compensation shall also include elective contributions that are not includable
in the Employee's income pursuant to Code sections 125, 402(h), or 403(b). For
purposes of identifying Highly Compensated Employees, Compensation shall be
measured over a Determination Year. Compensation shall include only amounts
paid to the Employee, and shall not include any additional amounts accrued by
the Employee.
(c) Code Section 414(s) Compensation. For purposes of
the ADP, ACP, and multiple use tests under sections 3.5, 3.6, and 3.7, and for
purposes of allocating QNECs under subsection 3.8(b), Compensation shall mean
any definition of compensation for a Plan Year, as selected by the Committee,
that satisfies the requirements of Code section 414(s) and the regulations
promulgated thereunder. The definition of Compensation used in one Plan Year
may differ from the definition used in another Plan Year.
(d) Benefit Compensation. For purposes of determining
and allocating Company Mandatory Contributions under subsection 3.1(a) and
section 4.4, Compensation shall generally mean regular compensation paid by the
Company.
(i) Specifically, Compensation shall include:
(A) regular salary or wages,
(B) overtime pay,
(C) bonuses,
(D) salary reductions pursuant to
this Plan,
(E) salary reductions that are
excludable from an Employee's
gross income pursuant to Code
section 125, and
(F) amounts contributed as salary
deferrals to the Company's
Nonqualified Retirement/Savings Plan.
(ii) Compensation shall exclude:
(A) commissions,
(B) severance pay,
(C) moving expenses,
(D) any gross-up of moving expenses to
account for increased income taxes,
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<PAGE> 9
(E) foreign service premiums paid as an
inducement to work outside of the
United States,
(F) credits or benefits under this Plan,
(G) other contingent compensation,
(H) contributions to any other fringe
benefit plan (including, but not
limited to, overriding royalty
payments or any other
exploration-related payments), and
(I) bonuses paid as an inducement to
enter the employment of the Company.
Compensation shall be measured over that portion of a Plan Year while the
Employee is a Covered Employee. Compensation shall include only amounts paid
to the Employee during the Plan Year, and shall not include any amounts accrued
by but not paid to the Employee during the Plan Year.
(e) Deferral Compensation. For purposes of determining
Participant Before-Tax Contributions under section 3.2 and for purposes of
determining and allocating Company Matching Contributions under subsection
3.1(b), Compensation shall mean Compensation as defined in subsection (d), with
the following modification. Compensation shall be measured over each pay
period (i) after the Employee has satisfied the eligibility requirements of
subsection 2.1(a) and (ii) while the Employee is a Covered Employee.
(f) Limit on Compensation. For purposes of calculating
the minimum contribution required in top-heavy years under subsection (a), for
all purposes of subsections (c) and (d), and for purposes of determining the
maximum allocation of Company Matching Contributions under subsection (e), the
Compensation taken into account for the appropriate time period shall not
exceed the dollar limit specified in Code section 401(a)(17) in effect for the
calendar year in which the time period begins.
1.14 "Covered Employee" means any employee of the Company except
for:
(a) a leased employee within the meaning of Code section
414(n)(2);
(b) a non-resident alien;
(c) An Employee included in a unit of Employees covered
by a collective bargaining agreement, unless the collective bargaining
agreement specifically provides for such Employee's participation in the Plan;
and
(d) An Employee who has worked for less than six
consecutive months and whose job is classified as "temporary."
1.15 "Determination Date" means, with respect to each Plan Year,
the last day of the preceding Plan Year; provided however, that in the case of
the first Plan Year of the Plan, the Determination Date shall be the last day
of the first Plan Year.
1.16 "Determination Year" means the Plan Year.
1.17 "Disability" means a disability due to sickness or injury
which renders an Employee incapable of performing any services for the Company
or an Affiliated Entity for which the Employee is qualified by education,
training, or experience. Evidence of disability satisfactory to Apache shall
be required.
1.18 "Domestic Relations Order" means any judgment, decree, or
order (including approval of a property settlement agreement) issued by a court
of competent jurisdiction that relates to the provisions of child support,
alimony or
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maintenance payments, or marital property rights to a Spouse, former spouse,
child, or other dependent of the Participant and is made pursuant to a state
domestic relations law (including a community property law).
1.19 "Employee" means each individual who performs services for
the Company or an Affiliated Entity and whose wages are subject to withholding
by the Company or an Affiliated Entity. The term "Employee" shall include
only individuals currently performing services for the Company or an Affiliated
Entity, and shall exclude former Employees who are still being paid by the
Company or an Affiliated Entity (whether through the payroll system, through
overriding royalty payments, through exploration-related payments, or
otherwise). The term "Employee" shall also include leased employees within the
meaning of Code section 414(n)(2); however, if leased employees constitute 20%
or less of the Non-Highly Compensated Employees of the Company and any
Affiliated Entities, the term "Employee" shall not include any leased employee
covered by a qualified plan described in Code section 414(n)(5)(B) that is
maintained by the leased employee's employer.
1.20 "Employment Commencement Date" means the date on which an
Employee first performs an Hour of Service.
1.21 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and rulings in effect thereunder from
time to time.
1.22 "Family Group" means:
(a) for purposes of subsections 1.23(a) and 1.23(e), a
Five-Percent Owner or one of the ten most highly paid Highly Compensated
Employees of the Company or an Affiliated Entity, such Employee's Spouse, and
such Employee's descendants under the age of 19; and
(b) for purposes of subsections 1.23(b) , 1.23(c), and
1.23(d), a Five-Percent Owner or one of the ten most highly paid Highly
Compensated Employees of the Company or an Affiliated Entity, and such
Employee's Spouse, lineal ascendants, descendants, and the spouses of any such
lineal ascendants or descendants.
1.23 "Family Member" means an Employee who is a member of a Family
Group. An Employee who is a member of a Family Group described in subsection
1.22(a) during any day of a Plan Year shall be considered a Family Member for
the entire Plan Year. An Employee who is a member of a Family Group described
in subsection 1.22(b) during any day of a Determination Year shall be
considered a Family Member for the entire Determination Year. The special
rules relating to Family Members are described below.
(a) The Compensation of the Family Members in one Family
Group is aggregated, and the combined Compensation of such Family Members is
limited to the dollar limit specified in Code section 401(a)(17) for the
purposes described in subsection 1.13(f).
(b) The term "Highly Compensated Employee" shall include
the Highly Compensated Employee (as determined in Section 1.26) and, if the
Highly Compensated Employee is a Five-Percent Owner or one of the ten most
highly paid Highly Compensated Employees of the Company or any Affiliated
Entity, the term shall also include any Family Member within the same Family
Group. The Employees who are among the ten most highly paid Highly Compensated
Employees, the Employees who are among the 100 most highly paid Employees, and
the Employees who are members of the Top-Paid Group, shall be determined
before the aggregation rule of the preceding sentence is applied.
(c) The limitations of section 3.4 and 3.2(b) shall apply
separately to each Family Member.
(d) For purposes of the ADP, ACP, and multiple use tests
of sections 3.5, 3.6, and 3.7, if two or more Family Groups contain the same
Family Member who is a Covered Employee and who has satisfied the requirements
of section 2.1, all Family Members in those Family Groups are treated as one
Highly Compensated Employee. The Compensation of all Family Members included
in the Highly Compensated Employee shall be aggregated, and the total
Compensation shall be limited to the dollar limit specified in Code section
401(a)(17). One actual deferral percentage and
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one actual contribution percentage shall be calculated for such Highly
Compensated Employee. Any return of Participant Before-Tax Contributions or
forfeiture of Company Matching Contributions that is required by section 3.6 or
3.7 for the Highly Compensated Employee shall be apportioned, to the extent
possible, among the Account(s) of each Family Member in proportion to each
Family Member's Company Matching Contributions. Any return of Participant
Before-Tax Contributions that is required by section 3.5 for the Highly
Compensated Employee shall be apportioned among the Account(s) of each Family
Member in proportion to each Family Member's Participant Before-Tax
Contributions.
(e) If two or more Family Members of one Family Group are
entitled to an allocation of Company Mandatory Contributions under section 4.4,
the Compensation of the Family Members is aggregated and limited to the dollar
limit specified in Code section 401(a)(17), and the allocation of the Family
Group is based on aggregated Compensation. Each Family Member shall receive a
share of the Family Group's allocation in proportion to his or her
Compensation.
1.24 "Five-Percent Owner" means:
(a) With respect to a corporation, any individual who
owns (either directly or indirectly according to the rules of Code section 318)
more than 5% of the value of the outstanding stock of the corporation or stock
processing more than 5% of the total combined voting power of all stock of the
corporation.
(b) With respect to a non-corporate entity, any
individual who owns (either directly or indirectly according to rules similar
to those of Code section 318) more than 5% of the capital or profits interest
in the entity.
An individual shall be a Five-Percent Owner for a particular year if such
individual is a Five-Percent Owner at any time during such year.
1.25 "Former Amoco Employee" means an Employee who was formerly
employed by Amoco Production Company or its subsidiaries and who became an
Employee of the Company pursuant to the provisions of that certain Stock
Purchase Agreement effective June 30, 1991, between Amoco Production Company,
Apache, and others.
1.26 "Highly Compensated Employee" means:
(a) Any Employee who performs service for the Company or
an Affiliated Entity during the Determination Year and who, during the
Determination Year: (i) received Compensation from the Company and Affiliated
Entities in excess of the dollar limit in effect under Code section
414(q)(1)(B); (ii) received Compensation from the Company and Affiliated
Entities in excess of the dollar limit in effect under Code section
414(q)(1)(C) and was a member of the Top-Paid Group; and (iii) was an officer
of the Company or an Affiliated Entity and received Compensation greater than
50% of the dollar limit in effect under Code section 415(b)(1)(A).
(b) A Five-Percent Owner during the Determination Year.
(c) If no officer has Compensation in excess of 50% of
the limit described in paragraph (a)(iii) above, the highest paid officer for
that year shall be treated as a Highly Compensated Employee.
(d) For purposes of determining Highly Compensated
Employees under paragraph (a)(iii), the number of officers shall be limited to
50 (or, if lesser, the greater of three or 10% of all Employees, excluding
those Employees who may be excluded in determining the Top-Paid Group).
(e) Notwithstanding the above, if the Company and
Affiliated Entities maintained significant business activities in at least two
significantly separate geographic areas during the Determination Year, Apache
may elect, in its sole discretion, to identify Highly Compensated Employees
using the simplified method described in Code section 414(q)(12). Under this
method, Highly Compensated Employees are identified using the method described
in subsections (a) through (d) above, with the following modifications: (i)
the "dollar limit in effect under Code section
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<PAGE> 12
414(q)(1)(B)" in paragraph (a)(i) is replaced by the "dollar limit in effect
under Code section 414(q)(1)(C)"; and (ii) paragraph (a)(ii) is deleted.
1.27 "Hour of Service" means each hour for which an Employee is
paid or entitled to payment by the Company or an Affiliated Entity for the
performance of duties for the Company or an Affiliated Entity during the
applicable computation period. Hours of Service shall be credited to the
Employee for the computation period or periods in which the duties are
performed, regardless of when the Employee is paid for those duties.
1.28 "Key Employee" means an individual described in Code section
416(i) and the regulations promulgated thereunder.
1.29 "Lapse in Apache Employment" means the period commencing on
the Termination from Service Date and ending on the Reemployment Commencement
Date. A Participant shall incur a one-year Lapse in Apache Employment if the
Participant does not perform an Hour of Service in the 12-month period
beginning on any anniversary of his or her Termination from Service Date.
1.30 "Limitation Year" means the calendar year for purposes of Code
section 415.
1.31 "Non-Highly Compensated Employee" means an Employee of the
Company or an Affiliated Entity who is neither a Highly Compensated Employee
nor a Family Member.
1.32 "Non-Key Employee" means an Employee who is not a Key Employee.
1.33 "Normal Retirement Age" means age 65.
1.34 "Normal Retirement Date" means the first of the month
immediately following Normal Retirement Age.
1.35 "Participant" means any individual with an Account balance
under the Plan except beneficiaries and Alternate Payees. The term
"Participant" shall also include any Covered Employee who has satisfied the
eligibility requirements of section 2.1, but who does not yet have an account
balance.
1.36 "Participant Before-Tax Contributions" means contributions
made to the Plan by the Company, at the election of the Participant, in lieu of
cash, pursuant to section 3.2, that are excludable from the Participant's
income under Code sections 401(k) and 402(e)(3).
1.37 "Period of Service" means a period commencing on an Employee's
Employment Commencement Date or Reemployment Commencement Date, whichever is
applicable, and ending on his or her Termination from Service Date. A Period
of Service shall also include the period between an Employee's Termination from
Service Date and his or her Reemployment Commencement Date if the Employee does
not incur a one-year Lapse in Apache Employment between such dates; however,
the period between the first and second anniversaries of an Employee's absence
from work because of parental leave (as explained in paragraph 1.46(b)(i))
shall not be included in the Employee's Period of Service. A Period of Service
for a Former Amoco Employee shall also include any periods of employment with
Amoco Production Company or its subsidiaries. Periods of Service shall not
include any period following a Participant's Termination from Service Date
solely because of a severance payment of payments made to an individual with
respect to his or her termination of employment.
1.38 "Plan Year" means the 12-month period on which the records of
the Plan are kept, which shall be the calendar year.
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1.39 "Qualified Domestic Relations Order ("QDRO") " means a
Domestic Relations Order that creates or recognizes the existence of an
Alternate Payee's right to, or assigns to an Alternate Payee the right to,
receive all or a portion of the benefits payable with respect to a Participant
under the Plan and with respect to which the requirements of Code section
414(p) and ERISA section 206(d)(3) are met.
1.40 "Qualified Non-Elective Contributions ("QNECs") " means any
contribution to the Plan made by the Company, or any portion of the forfeitures
designated as QNECs under section 5.5, that satisfies the requirements of
section 3.8.
1.41 "Qualified Matching Contributions ("QMACs") " means that
portion of Company Matching Contributions so designated by the Company, or any
portion of the forfeitures designated as QMACs under section 5.5, that satisfy
the requirements of section 3.9.
1.42 "Reemployment Commencement Date" means the first date
following a Lapse in Apache Employment on which the Employee performs an Hour
of Service.
1.43 "Required Beginning Date" means:
(a) for a Participant who attains age 70-1/2 after
December 31, 1987, April 1 of the calendar year following the calendar year in
which the Participant attains age 70-1/2;
(b) for a Participant who attains age 70-1/2 before
January 1, 1988, and is not a "five-percent owner" (as defined below), April 1
of the calendar year following the later of (i) the calendar year in which the
Participant attains age 70-1/2, or (ii) the calendar year in which the
Participant retires;
(c) for a Participant who attains age 70-1/2 during
calendar year 1988 and is not a "five-percent owner" (as defined below), April
1, 1990; and
(d) for a Participant who attains age 70-1/2 before
January 1, 1988, and is a "five-percent owner" (as defined below), April 1 of
the calendar year following the later of (i) the calendar year in which the
Participant attains age 70-1/2, or (ii) earlier of (A) the calendar year with
or within which ends the Plan Year in which the Participant becomes a
"five-percent owner," or (B) the calendar year in which the Participant
retires.
For purposes of this section only, a "five-percent owner" means any individual
who is a Five-Percent Owner at any time subsequent to the Plan Year ending
within the calendar year in which such individual attains age 65-1/2.
1.44 "Spouse" means the individual to whom a Participant is
lawfully married according to the laws of the state of the Participant's
domicile on one of the following dates: the date of the Participant's death,
the date any election is filed pursuant to Article VI, or the date the
Participant's benefits commence, as applicable.
1.45 "Taxable Year" means the accounting period of Apache for
federal income tax purposes.
1.46 "Termination from Service Date" means the earlier of the
following dates:
(a) the last day an Employee performs services for the
Company or an Affiliated Entity if the Employee quits (except as provided in
paragraph (b)(iii)), is discharged, retires, or dies; or
(b) the first anniversary of the day a former Employee is
absent from the Company or Affiliated Entity for any reason other than
resignation, discharge, retirement, or death (such as vacation, holiday,
sickness, disability, leave of absence, or temporary lay- off), with the
following exceptions:
(i) If the former Employee is absent from the
Company or Affiliated Entity because of parental leave (which includes
only the pregnancy of the former Employee, the birth of the
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<PAGE> 14
former Employee's child, the placement of a child with the former
Employee in connection with adoption of such child by the former
Employee, or the caring for such child immediately following birth or
placement) on the first anniversary of the day the former Employee was
first absent, the Termination from Service Date shall be the second
anniversary of his or her absence, no Termination from Service Date
shall occur.
(ii) If the former Employee is absent from the
Company or Affiliated Entity for more than one year because of an
approved leave of absence (either with or without pay) for any reason
(including, but not limited to, jury duty and military duty) and the
former Employee returns to work at or prior to the expiration of his
or her leave of absence, no Termination from Service Date shall occur.
(iii) If a former Employee is absent from the
Company or an Affiliated Entity because of a Disability incurred while
employed by the Company or an Affiliated Entity, a Termination from
Service Date shall not occur until the later of the first anniversary
of his or her absence or the date he or she recovers from the
Disability, regardless of whether the former Employee quits during the
Disability.
1.47 "Top-Paid Group" means the top 20% of Employees ranked on the
basis of Compensation received during the Determination Year. For purposes of
determining the number of Employees in the Top-Paid Group, the following
Employees may be excluded:
(a) any Employee who has not completed six months of
service before the end of the applicable year;
(b) any Employee who normally works less than 17-1/2
hours per week, as defined in the regulations under Code section 414(q);
(c) any Employee who normally works less than six months
during the applicable year, as defined in the regulations under Code section
414(q);
(d) any Employee who has not attained age 21 before the
end of the applicable year; and
(e) any Employee who is a non-resident alien and who
receives no earned income (within the meaning of Code section 911(d)(2)) from
the Company or any Affiliated Entity that constitutes income from sources
within the United States (within the meaning of Code section 861(a)(3)) during
the applicable year.
Notwithstanding the foregoing, Apache may elect, on a consistent and uniform
basis, to modify the permissible exclusions set forth above by substituting any
shorter period of service or lower age. Apache may elect to include all
Employees in determining the Top-Paid Group.
1.48 "Transferred Participant" means a Participant whose employment
is transferred from the Company to Natural Gas Clearinghouse ("NGC"), a
Colorado general partnership, pursuant to the terms of the Employee Benefits
Agreement, effective April 1, 1990, between Apache and NGC.
1.49 "Valuation Date" means the last day of each Plan Year and any
other dates as specified in section 4.2 as of which the assets of the Trust
Fund are valued at fair market value and as of which the increase or decrease
in the net worth of the Trust Fund is allocated among the Participants'
Accounts.
1.50 "Year of Service" means all Periods of Service (measured in
months) required to be taken into account under section 1.37, divided by 12.
Fractional Years of Service are not taken into account.
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ARTICLE II
PARTICIPATION
2.1 Participation - Required Service.
(a) Participant Before-Tax Contributions. A Covered Employee
(which only includes Employees of the Company) who is a Participant in the Plan
on December 31, 1994, and who is a Covered Employee on January 1, 1995, shall
continue to participate on January 1, 1995. Each other Covered Employee (which
only includes Employees of the Company) shall be eligible to begin to make
Participant Before-Tax Contributions as of the first day of the first pay
period following the later of : (i) 90 days of employment with the Company or
an Affiliated Entity; or (ii) the date the Employee become a Covered Employee.
(b) Company Mandatory Contributions. Each Covered Employee shall
be eligible to participate in the Plan with respect to the 6% Company Mandatory
Contribution provided by section 3.1 on the day the Employee first becomes a
Covered Employee.
2.2 Reemployment.
(a) Termination without Vesting. If a Participant terminates
employment before having any vested interest in his or her Company
Contributions Account under section 5.1 and is thereafter reemployed by the
Company or an Affiliated Entity, (i) the Employee shall be treated as a new
Employee for participation purposes if the Employee incurred a one-year Lapse
in Apache Employment before rehire, and (ii) if the Employee did not incur a
one-year Lapse in Apache Employment before rehire, the Employee shall be
eligible to again participate in the Plan under section 2.1 as if he or she has
been employed by the Company, but not as a Covered Employee, during the break
in employment.
(b) Termination with Vesting. If the case of any Participant who
terminates employment with a vested interest in his or her Company
Contributions Account under section 5.1, (i) he or she shall be eligible to
receive Company Mandatory Contributions as of the later of his or her
Reemployment Commencement Date or the date he or she again becomes a Covered
Employee, and (ii) he or she shall be eligible to make Participant Before-Tax
Contributions as of the first day of the first pay period following the later
of his or her Reemployment Commencement Date or the date he or she again became
a Covered Employee.
2.3 Enrollment - Procedure.
Notwithstanding sections 2.1 and 2.2, a Covered Employee shall not be
eligible to participate in the Plan until after completing the enrollment
procedures specified by the Committee. Such enrollment procedures may, for
example, require the Covered Employee to complete and sign an enrollment form
or to complete a voice-response telephone enrollment. The Covered Employee
shall provide the initial investment direction, the address and date of birth
of the Employee, and the name, address, and date of birth of each beneficiary
of the Employee, the initial rate of the Participant Before-Tax Contributions,
and any other information requested by the Committee. An election to make
Participant Before-Tax Contributions shall not be effective until after the
Covered Employee has properly completed the enrollment procedures. The
Committee may require that the enrollment procedure be completed a certain
number of days prior to the date that a Covered Employee actually begins to
participate.
ARTICLE III
CONTRIBUTIONS
The only contributions that can be made to the Plan are Company
Contributions pursuant to section 3.1, Participant Contributions pursuant to
section 3.2, contributions pursuant to subsection 5.3(b), and loan repayments.
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3.1 Company Contributions.
(a) Company Mandatory Contributions. For each Plan Year, the
Company shall contribute to the Trust Fund no less than 6% of the Compensation
of those Participants eligible to share in an allocation of Company Mandatory
Contributions pursuant to section 4.4. The Company may elect to treat any
portion of forfeitures occurring during the Plan Year as Company Mandatory
Contributions, pursuant to section 5.5. Company Mandatory Contributions shall
be allocated to Company Contributions Accounts.
(b) Company Matching Contributions. As of the last day of each
pay period, the Committee shall allocate Company Matching Contributions
(including such forfeitures occurring during the pay period that are treated as
Company Matching Contributions pursuant to section 5.5) to each Participant who
made Participant Before-Tax Contributions during the pay period as follows.
The Company Matching Contribution allocated to a Participant shall equal a
"matching percentage" multiplied by that portion of the Participant Before-Tax
Contributions for the pay period that do not exceed 6% of the Participant's
Compensation for the pay period. The matching percentage equals 100% unless
one or more of the following conditions applies, in which case the matching
percentage equals 50%.
(i) The Participant is younger than age 59-1/2 on the
first day of the pay period and the Participant has, in the six months
preceding the pay period, sold Company Stock from any of his or her
Accounts (other than sales of Company Stock necessary to fund the
Participant's loan or to pay any fees charged to his or her Accounts).
(ii) The Participant has elected to invest any portion of
the pay period's Company Matching Contribution in an investment option
other than Company Stock. The matching percentage is 50% only to the
extent that this condition applies.
(iii) The Participant has elected to invest any portion of
the pay period's Participant Before-Tax Contribution in an investment
other than Company Stock. The matching percentage is 50% only to the
extent that this conditions applies. The matching percentage shall be
applied first to the Participant Before-Tax Contributions that are
invested in Company Stock. For example, if paragraphs (i) and (ii) do
not apply, and if a Participant contributes 10% of Compensation as a
Participant Before-Tax Contribution in the pay period and he or she
elects to invest half the contribution in Company Stock and half in
another investment option, then the Participant's allocation of
Company Matching Contributions for the pay period will equal 100% of
5% of the pay period's Compensation plus 50% of 1% of the pay period's
Compensation, for a total match of 5-1/2% of the pay period's
Compensation; the remaining Participant Before-Tax Contribution (of 4%
of the Participant's Compensation for the pay period) will not be
matched.
Company Matching Contributions in a Plan Year shall accrue only on
Participant Before-Tax Contributions up to 6% of the Code section 401(a)(17)
limit for that Plan Year. Any Company Matching Contributions allocated during
the Plan Year in which they were accrued shall be allocated on a temporary
basis only; the allocation shall become final after the Committee verifies that
the allocation complies with the terms of the Plan, including the limits of
Code section 401(a)(17). Any reduction in the allocation to comply with Code
section 401(a)(17), adjusted to reflect investment experience, shall be used to
pay those expenses of the Plan that are properly payable from the Trust Fund or
to reduce future Company Contributions to the Plan.
(c) Miscellaneous Contributions.
(i) The Company may make additional contributions to the
Plan to restore amounts forfeited from the Company Contributions
Accounts of certain rehired Participants, pursuant to section 5.4.
This additional contribution shall be required only when the
forfeitures occurring during the Plan Year are insufficient to restore
such forfeited amounts, as described in section 5.5. This
contribution shall be allocated to the Participant's Company
Contributions Account.
(ii) The Company may make additional contributions to the
Plan to satisfy the minimum contribution required by section 12.4.
The Company may elect to use any portion of forfeitures
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<PAGE> 17
occurring during the Plan Year for this purpose, pursuant to section
5.5. For Non-Highly Compensated Employees, this contribution shall be
allocated to Participant Before-Tax Contributions Accounts; for Highly
Compensated Employees, this contribution shall be allocated to Company
Contributions Accounts.
(iii) The Company may make additional contributions to the
Plan to restore the forfeited benefit of any missing individual,
pursuant to section 13.12. This additional contribution shall be
required only when the forfeitures occurring during the Plan Year are
insufficient to restore such forfeited amounts, as described in
section 5.5.
(iv) The Company may make QNECs to the Plan to enable the
Plan to satisfy the ADP, ACP, and multiple use tests of sections 3.5,
3.6, and 3.7. The Company may elect to treat any portion of
forfeitures occurring during the Plan Year as QNECs, pursuant to
section 5.5. QNECs shall be allocated to Participant Before-Tax
Contribution Accounts.
(d) Contributions Contingent on Deductibility. The Company
Contributions for a Plan Year (excluding forfeitures), when combined with
Participant Before-Tax Contributions for the Plan Year, shall not exceed the
amount allowable as a deduction for the Taxable Year ending with or within the
Plan Year pursuant to Code section 404. The amount allowable as a deduction
under Code section 404 shall include carry forwards of unused deductions for
prior Taxable Years. If the Code section 404 deduction limit would be exceeded
for any Plan Year, the Plan contributions shall be reduced, in the following
order, until the Plan contributions equal the Code section 404 deduction limit:
first, the Company Matching Contributions for those Highly Compensated
Employees who are eligible to participate in the Company's Nonqualified
Retirement/Savings Plan; second, the Participant Before-Tax Contributions for
those Highly Compensated Employees who are eligible to participate in the
Company's Nonqualified Retirement/Savings Plan; third, the Company Mandatory
Contributions for those Highly Compensated Employees who are eligible to
participate in the Company's Nonqualified Retirement/Savings Plan. Company
Contributions other than QNECs shall be paid to the Trustee no later than the
due date (including any extensions) for filing the Company's federal income tax
return for such year; QNECs paid to the Trustee no later than the due date
(including any extensions) for filing the Company's federal income tax return
for such year shall be deductible in such year; QNECs shall be paid to the
Trustee within two and one-half months after the close of the Plan Year if
possible, and in no event later than 12 months after the close of the Plan
Year. Company Contributions may be made without regard to current or
accumulated earnings and profits; nevertheless, this Plan is intended to
qualify as a "profit sharing plan" as defined in Code section 401(a). The
appropriate contribution of the Company to the Trust Fund may be paid by the
Company in the form of Company Stock, cash, other assets of any character, or
in any combination of the foregoing, as determined by the Company.
3.2 Participant Contributions.
A Participant may elect to defer the receipt of a portion of his or
her Compensation during the Plan Year and contribute such amount to the Plan as
Participant Before-Tax Contributions. Participant Before--Tax Contributions
may be made in whole percentages (up to a maximum of 10%) of Compensation
received in a pay period. The Company shall pay the amount deducted from the
Participant's Compensation to the Trustee promptly after the deduction is made.
(a) Participant After-Tax Contributions. Participants cannot
make after-tax contributions to the Plan.
(b) Participant Before-Tax Contributions. Participant Before-Tax
Contributions shall be allocated to Participant Before-Tax Contributions
Accounts. The sum of Participant Before-Tax Contributions to this Plan and
similar contributions to any other plan containing a qualified cash or deferred
arrangement that is maintained by the Company or an Affiliated Entity shall not
exceed the dollar limit in effect under Code section 402(g)(1) in any calendar
year. The Company shall inform the Committee if such limit has been exceeded;
the excess amount (less any amount already returned pursuant to section 3.5 or
3.7) shall be returned to the Participant as soon as administratively possible,
and in no event later than April 15 of the succeeding calendar year. If the
sum of the Participant Before-Tax Contributions, similar contributions to any
qualified plan maintained by an Affiliated Entity, and any similar
contributions to a qualified plan maintained by an unrelated entity exceed the
dollar limit in effect under Code section 402(g)(1) in a calendar year, and
the Participant is an Employee on the last day of the Plan Year and informs the
Committee of the amount of the excess allocated to this Plan, then the excess
(less any amount already returned pursuant to section 3.4, 3.5, or 3.7) shall
be
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returned to the Participant as soon as administratively practicable, and in no
event later than April 15 of the succeeding calendar year. The amount returned
shall be adjusted to reflect the net increase or decrease in the net worth of
the Participant's Before-Tax Contributions Account attributable to such amount
for the Plan Year. The Committee may use any reasonable method to allocate
this adjustment. Company Matching Contributions attributable to amounts
returned under this paragraph shall be forfeited. Unmatched Participant
Before-Tax Contributions shall be returned first.
(c) Participant Elections. Participant Before-Tax Contributions
shall be made according to rules prescribed by the Committee, and may only be
made after the Company has received written authorization from a Participant to
deduct such contributions from his or her Compensation. Such authorization
shall remain in effect until revoked or changed by the Participant. The
Participant may change his or her authorization as of the first day of any
calendar quarter by filing an election no later than the first day of the
quarter. In addition, a Participant may reduce his or her Participant
Before-Tax Contribution rate to 0% at any time by filing an election no later
than the first day of the pay period in which such suspension will occur. A
Participant who has elected to reduce his or her Participant Before-Tax
Contribution rate to 0% may not make Participant Before-Tax Contributions for
at least three months. To be effective, any authorization, change of
authorization, or notice of revocation must be filed with the Committee
according to such restrictions and requirements as the Committee prescribes.
The Committee shall establish procedures for Participants to change their
contribution elections, which procedures shall be in writing and communicated
to Participants. The Committee shall have the authority to change such
procedures at any time and from time to time and shall have the authority to
designate additional dates as of which a Participant may change his or her rate
of Participant Before-Tax Contributions.
3.3 Return of Contributions.
Upon request of the Company, the Trustee shall return:
(a) To the Company, any Company Contribution made under a mistake
of fact. The amount that shall be returned shall not exceed the excess of the
amount contributed (reduced to reflect any decrease in the net worth of the
appropriate Accounts attributable thereto) over the amount that would have been
contributed without the mistake of fact. Appropriate reductions shall be made
in the Accounts of Participants to reflect the return of any contributions
previously credited to such Accounts. If the Company so requests, any
contribution made under a mistake of fact shall be returned to the Company
within one year after the date of payment.
(b) To the Company, any Company Contribution or Participant
Before-Tax Contribution that is not deductible under Code section 404. The
Company shall pay any returned Participant Before-Tax Contribution to the
appropriate Participant or the Company's Nonqualified Retirement/Savings Plan,
as appropriate, as soon as administratively practicable, subject to any
withholding. All contributions under the Plan are expressly conditioned upon
their deductibility for federal income tax purposes. The amount that shall be
returned shall be the excess of the amount contributed (reduced to reflect any
decreased in the net worth of the appropriate Accounts attributable thereto)
over the amount that would have been contributed if there had not been a
mistake in determining the deduction. Appropriate reductions shall be made in
the Accounts of Participants to reflect the return of any contributions
previously credited to such Accounts. Any contribution conditioned on its
deductibility shall be returned within one year after it is disallowed as a
deduction.
(c) A contribution shall be returned under this section only to
the extent that its return will not reduce the Account(s) of a Participant to
an amount less than the balance that would have been credited to the
Participant's Account(s) had the contribution not been made.
3.4 Limitation on Annual Additions.
(a) The Annual Additions to a Participant's Account(s) in this
Plan and any other defined contribution plan maintained by the Company or an
Affiliated Entity for any Limitation Year shall not exceed in the aggregate the
lesser of (i) 25% of such Employee's Compensation or (ii) the greater of
$30,000 or one-quarter of the dollar limit in effect under Code section
415(b)(1)(A).
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(b) If, as a result of a reasonable error in estimating
Compensation, or as a result of the allocation of forfeitures, or as a result
of other facts and circumstances as provided in the regulations under Code
section 415, the Annual Additions to a Participant's Account(s) would, but for
this subsection, exceed the foregoing limits, the Annual Additions shall be
reduced, to the extent necessary, in the following order: unmatched Participant
Before-Tax Contributions, then matched Participant Before-Tax Contributions and
the corresponding Company Matching Contributions, and then Company Mandatory
Contributions. The Company shall pay any reduction in Participant Before-Tax
Contributions to the Participant as soon as administratively practicable,
subject to any withholding, or, if such Participant is a participant in the
Company's Nonqualified Retirement/Savings Plan, then the amount of any such
reduction shall be transferred to the trustee of such plan on behalf of such
Participant. The amount of any reduction of Company Contributions shall be
placed in a suspense account in the Trust Fund and used to reduce Company
Contributions to the Plan. The following rules shall apply to such suspense
account: (i) no further Company Contributions may be made if the allocation
thereof would be precluded by Code section 415; (ii) any increase or decrease
in the net value of the Trust Fund attributable to the suspense account shall
not be allocated to the suspense account, but shall be allocated to the
Accounts; and (iii) all amounts held in the suspense account shall be allocated
as of each succeeding allocation date on which forfeitures may be allocated
pursuant to section 5.5 (and may be allocated more frequently if the Committee
so directs), until the suspense account is exhausted.
3.5 Contribution Limits for Highly Compensated Employees (ADP Test).
(a) Limits on Contributions. Notwithstanding any provision in
this Plan to the contrary, the actual deferral percentage ("ADP") test of Code
section 401(k)(3) shall be satisfied. Code section 401(k) and the regulations
issued thereunder are hereby incorporated by reference to the extent permitted
by such regulations.
(b) Permissible Variations of the ADP Test. To the extent
permitted by the regulations under Code sections 401(m) and 401(k), Participant
Before-Tax Contributions, QMACs, and QNECs may be used to satisfy the ACP test
of section 3.6 if they are not used to satisfy the ADP test.
(c) Advanced Limitation on Participant Before-Tax Contributions or
Company Matching Contributions. The Committee may limit the Participant
Before-Tax Contributions of any Highly Compensated Employee (or any Employee
expected to be a Highly Compensated Employee) at any time during the Plan Year
(with the result that his or her share of Company Matching Contributions may be
limited). This limitation may be made, if practicable, whenever the Committee
believes that the limits of this section or sections 3.4, 3.6 or 3.7 will not
be satisfied for the Plan Year.
(d) Corrections to Satisfy Test. If the Committee believes that
the ADP test will not be satisfied for the Plan Year, the Committee may
recommend to the Company and the Company may designate any portion of its
Company Matching Contributions as QMACs before such contributions are made to
the Plan, pursuant to section 3.9. If the ADP test is not satisfied for the
Plan Year, the Committee shall decide which one or more of the following
methods shall be employed to satisfy the ADP test:
(i) The Committee may recommend to the Company and the
Company may make QNECs to the Plan, pursuant to section 3.8, within
two and one-half months after the close of the Plan Year if possible,
and in no event later than 12 months after the close of the Plan Year.
(ii) Participant Before-Tax Contributions of Highly
Compensated Employees may be returned to the Highly Compensated
Employee, without the consent of either the Highly Compensated
Employee or his or her Spouse, subject to the rules of subsection
(e). Any such return shall be made within two and one-half months
after the close of the Plan Year if possible, and in no event later
than 12 months after the close of the Plan Year. Company Matching
Contributions attributable to such returned amounts shall be paid to
the Participant. Unmatched Participant Before-Tax Contributions shall
be returned first.
(iii) In a top-heavy Plan Year, the QMACs of a Non-Key
Employee who is a Highly Compensated Employee may be treated as
Company Discretionary Contributions to the extent necessary to
satisfy the minimum contribution requirement of section 12.4.
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(e) Determining Amounts Returned. If the ADP test is not
satisfied and the Committee elects to return contributions pursuant to
paragraph (d)(ii) above, the following procedure shall be applied to determine
the amounts returned. The Highly Compensated Employee(s) with the highest
actual deferral ration (as defined in the regulations under Code section
401(k)) shall have an amount returned until his or her actual deferral ratio is
reduced to the greater of (i) the actual deferral ratio that causes the ADP
test to be satisfied or (ii) the actual deferral ratio of the Highly
Compensated Employee with the next highest actual deferral ratio. The process
described in the preceding sentence shall continue until the ADP test is
satisfied. The amounts returned shall be reduced by any previous amounts
returned. The amount returned shall be adjusted to reflect any increase or
decrease in the net worth of the Accounts attributable to such contributions
for the Plan Year. The Committee may use any reasonable method to calculate
this adjustment.
(f) Coordination with Top-Heavy Provisions. Any QMACs used to
satisfy the minimum contribution requirement for Non-Key Employees under
section 12.4 shall not be a part of the ADP test.
3.6 Contribution Limits for Highly Compensated Employees (ACP Test).
(a) Limits on Contributions. Notwithstanding any provision in
this Plan to the contrary, the actual contribution percentage ("ACP") test of
Code section 401(m)(2) shall be satisfied. Code section 401(m) and the
regulations issued thereunder are hereby incorporated by reference to the
extent permitted by such regulations.
(b) Permissible Variations of the ACP Test. To the extent
permitted by the regulations under Code sections 401(m) and 401(k), Participant
Before-Tax Contributions, QMACs and QNECs may be used to satisfy this test if
not used to satisfy the ADP test of section 3.5.
(c) Corrections to Satisfy Test. If the ACP test is not
satisfied, the Committee shall decide which one or more of the following
methods shall be employed to satisfy the ACP test:
(i) The Committee may recommend the Company and the
Company may make QNECs to the Plan, pursuant to section 3.8, within
two and one-half months after the close of the Plan Year if possible,
and in no event later than 12 months after the close of the Plan Year.
(ii) The non-vested Company Matching Contributions
allocated to Highly Compensated Employees as of any date during the
Plan Year may be forfeited as of the last day of the Plan Year,
subject to the rules of subsection (d). For this purpose, the vested
percentage is determined as of the last day of the Plan Year; the
vested percentage of any QMAC is the vested percentage that would have
applied to such contribution if it had not been designated as a QMAC.
Any such forfeiture shall be made as soon as practicable, within two
and one-half months after the close of the Plan Year if possible, and
in no event later than 12 months after the close of the Plan Year.
(iii) In a top-heavy Plan Year, the Company Matching
Contributions of any Non-Key Employee who is a Highly Compensated
Employee may be treated as Company Discretionary Contributions to the
extent necessary to satisfy the minimum contribution requirement of
section 12.4.
(iv) Those vested Company Matching Contributions and those
Participant Before-Tax Contributions that are taken into account for
this ACP test for any Highly Compensated Employee may be returned to
such Highly Compensated Employee, without the consent of either the
Highly Compensated Employee or his or her Spouse, subject to the rules
of subsection (d). Any such return of Participant Before-Tax
Contributions or vested Company Matching Contributions shall be made
within two and one-half months after the close of the Plan Year if
possible, and in no event later than 12 months after the close of the
Plan Year.
(d) Determining Amount Forfeited. If the ACP test is not
satisfied and the Committee elects to forfeit certain Company Matching
Contributions pursuant to paragraph (d)(ii) above, the following procedure
shall be applied to determine the amount forfeited. The Highly Compensated
Employee(s) with the highest actual contribution ratio (as defined in the
regulations under Code section 401(m)) shall have an amount forfeited until his
or her actual contribution ratio is reduced to the greater of (i) the actual
contribution ratio that causes the ACP test to be satisfied or (ii) the actual
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contribution ratio of the Highly Compensated Employee with the next highest
actual contribution ratio. The process described in the preceding sentence
shall continue until the ACP test is satisfied. The process shall apply to
only those Highly Compensated Employees who are not 100% vested in their
Company Contributions Accounts. The amounts forfeited shall be reduced by any
amounts previously returned or forfeited. The amounts forfeited shall be
adjusted to reflect any increase or decrease in the net worth of the Accounts
attributable to such contributions for the Plan Year. The Committee may use
any reasonable method to calculate this adjustment.
(e) Coordination with Top-Heavy Provisions. Any Company Matching
Contributions used to satisfy the minimum contribution requirement for Non-Key
Employees under section 12.4 shall not be a part of this ACP test.
3.7 Contribution Limits for Highly Compensated Employees (Multiple Use).
(a) Limits on Contributions. Notwithstanding any provision in
this Plan to the contrary, the multiple use test described in the regulations
under Code section 401(m) shall be satisfied. Code section 401(m) and the
regulations issued thereunder are hereby incorporated by reference to the
extent permitted by such regulations.
(b) Corrections to Satisfy Multiple Use Test. If the multiple use
test is not satisfied, the Company shall cause the contributions to the
Accounts of the Highly Compensated Employees to be adjusted using one or more
of the methods described in subsections 3.5(d) and 3.6(c). The Company shall
apply such methods to all Highly Compensated Employees. The Company may also
use any other correction method permitted in the regulations under Code section
401(m). Any Company Matching Contributions used to satisfy the minimum
contribution requirement for Non-Key Employees under section 12.4 shall not be
a part of this multiple use test.
3.8 QNECs.
QNECs shall satisfy all of the following requirements:
(a) QNECs shall be made within two and one-half months after the
close of the Plan Year to which they apply, if possible, and in no event later
than 12 months after the close of such Plan Year.
(b) As of the last day of each Plan Year, the Committee shall
allocate the QNECs for such Plan Year (including such forfeitures occurring
during such Plan Year that are treated as QNECs pursuant to section 5.5).
These amounts shall be allocated to the Participant Before-Tax Contributions
Accounts of those Non-Highly Compensated Employees who made Participant
Before-Tax Contributions or received an allocation of Company Mandatory
Contributions or performed one or more Hours of Service as a Covered Employee
during such Plan Year after satisfying the eligibility requirements of section
2.1, as follows:
(i) QNECs shall be allocated to the Participant
Before-Tax Contributions Account of the Non-Highly Compensated
Employee(s) with the least Compensation, until either the QNECs are
exhausted or the limit of section 3.4 is reached for such Non-Highly
Compensated Employee(s).
(ii) Any remaining QNECs shall be allocated to the
Participant Before-Tax Contributions Account of the Non-Highly
Compensated Employee(s) with the next lowest Compensation, until
either the QNECs are exhausted or the limit of section 3.4 is reached
for such Non-Highly Compensated Employee(s).
(iii) The procedure in paragraph (ii) shall be repeated
until all QNECs have been allocated.
(c) QNECs shall be treated as a Company Mandatory Contribution for
purposes of calculating the percentages of Compensation for Key Employees and
Non-Key Employees of section 12.4.
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3.9 QMACs.
QMACs shall satisfy the following requirements:
(a) The Company may designate all or any portion of any
Participant's allocation of Company Matching Contributions as Qualified
Matching Contributions. Such designation shall be made before such
contributions are made to the Trust Fund.
(b) QMACs shall be allocated to Participant Before-Tax
Contributions Accounts.
ARTICLE IV
INTERESTS IN THE TRUST FUND
4.1 Participants' Accounts.
The Committee shall establish and maintain separate Accounts in the
name of each Participant, but the maintenance of such Accounts shall not
require any segregation of assets of the Trust Fund. Each Account shall
contain the contributions specified below and the increase or decrease in the
net worth of the Trust Fund attributable to such contributions.
(a) Participant Before-Tax Contributions Account. A Participant
Before-Tax Contributions Account shall be established for each Participant who
makes Participant Before-Tax Contributions, or who receives an allocation of
QNECs or QMACs. The Committee may elect to establish subaccounts for the
different types of contributions allocated to this Account.
(b) Company Contributions Account. A Company Contributions
Account shall be established for each Participant who receives an allocation of
Company Mandatory Contributions or an allocation of Company Matching
Contributions that are not designated as QMACs. The Committee may elect to
establish subaccounts for the different types of contributions allocated to
this Account.
4.2 Valuation of Trust Fund.
(a) General. The Trustee shall value the assets of the Trust Fund
at least annually as of the last day of the Plan Year, and as of any other
dates determined by the Committee, at their current fair market value and
determine the net worth of the Trust Fund. In addition, the Committee may
direct the Trustee to have a special valuation of the assets of the Trust Fund
when the Committee determines, in its sole discretion, that such valuation is
necessary or appropriate or in the event of unusual market fluctuations of such
assets. Such special valuation shall not include any contributions made by
Participants since the preceding Valuation Date, any Company Contributions for
the current Plan Year, or any unallocated forfeitures. The Trustee shall
allocate the expenses of the Trust Fund occurring since the preceding Valuation
Date, pursuant to section 9.2, and then determine the increase or decrease in
the net worth of the Trust Fund that has occurred since the preceding Valuation
Date. The Trustee shall determine the share of the increase of decrease that
is attributable to the non-separately accounted for portion of the Trust Fund
and to any amount separately accounted for, as described in subsections (b) and
(c).
(b) Mandatory Separate Accounting. The Trustee shall separately
account for (i) any individually directed investments permitted under section
9.3, and (ii) amounts subject to a Domestic Relations Order, to provide a more
equitable allocation of any increase or decrease in the net worth of the
Accounts.
(c) Permissible Separate Accounting. The Trustee may separately
account for the following amounts to provide a more equitable allocation of any
increase or decrease in the net worth of the Trust Fund:
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(i) the distributable amount of a Participant, pursuant
to section 6.6, including any amount distributable to an Alternate
Payee or to a beneficiary of a deceased Participant; and
(ii) Company Matching Contributions made since the
preceding Valuation Date;
(iii) Participant Before-Tax Contributions that were
received by the Trustee since the preceding Valuation Date;
(iv) Company Matching Contributions and Participant
Before-Tax Contributions of Highly Compensated Employees that may need
to be distributed or forfeited to satisfy the ADP, ACP, and multiple
use tests of sections 3.5, 3.6, and 3.7;
(v) Any other amounts for which separate accounting will
provide a more equitable allocation of the increase or decrease in the
net worth of the Trust Fund.
4.3 Allocation of Increase or Decrease in Net Worth.
(a) The Committee shall, as of each Valuation Date, allocate the
increase or decrease in the net worth of the Trust Fund that has occurred since
the preceding Valuation Date between the non-separately accounted for portion
of the Trust Fund and the amounts separately accounted for that are identified
in subsections 4.2(b) and 4.2(c).
(b) The increase or decrease attributable to the non-separately
accounted for portion of the Trust Fund shall be allocated among the
appropriate Accounts in the ratio that the dollar value of each such Account
bore to the aggregate dollar value of all such Accounts on the preceding
Valuation Date after all allocations and credits made as of such date had been
completed.
(c) After the allocation in subsection (b) is completed, the
Committee shall allocate any amounts separately accounted for (including the
increase or decrease in the net worth of the Trust Fund attributable to such
amounts) to the appropriate Account(s) if such separate accounting is no longer
necessary.
4.4 Allocation of Company Mandatory Contributions.
As of the last day of the Plan Year, the Committee shall allocate the
Company Mandatory Contributions for the Plan Year (including forfeitures
occurring during the Plan Year that are treated as Company Mandatory
Contributions pursuant to section 5.5). These amounts shall be allocated among
the Company Contributions Accounts of Participants who received credit for one
Hour of Service as a Covered Employee during the Plan Year and who were
employed on the last day of the Plan Year. Each such Participant shall receive
an allocation of 6% of his or her Compensation.
ARTICLE V
AMOUNT OF BENEFITS
5.1 Vesting Schedule.
A Participant shall have a fully vested and nonforfeitable interest in
all his or her Account(s) upon his or her Normal Retirement Age if he or she is
an Employee on such date, upon his or her death while an Employee or while on
an approved leave of absence from the Company or an Affiliated Entity, or upon
his or her termination of employment with the Company or an Affiliated Entity
because of a Disability. In all other instances a Participant's vested
interest shall be calculated according to the following rules.
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(a) Participant Before-Tax Contributions Account. A Participant
shall be fully vested at all times in his or her Participant Before-Tax
Contributions Account.
(b) Company Contributions Account. A Participant shall become
fully vested in his or her Company Contributions Account in accordance with the
following schedule:
Completed Years of Service Vested Percentage
fewer than 1 0
1 20
2 40
3 60
4 80
5 or more 100
(c) Special Vesting Rule. All Participants in the Plan who are
Employees of the Company on July 1, 1992 shall become 100% vested with respect
to all Company Matching Contributions and Company Mandatory Contributions,
together with any earnings attributable thereto, made as of any date prior to
July 2, 1992. If a Participant was not previously 100% vested, then the amount
that becomes 100% vested pursuant to this subsection shall be allocated to a
special Company Contributions Account; a new Company Contributions Account
shall be established for all Company Matching Contributions not designated as
QMACs and Company Mandatory Contributions made on behalf of the Participant as
of any date subsequent to July 1, 1992. Whenever any Participant becomes 100%
vested in the two separate Company Contributions Accounts, those Accounts shall
be merged into one Company Contributions Account.
(d) Partial Termination. A partial termination of the Plan
occurred as a result of the relocation of Apache's headquarters from Denver,
Colorado to Houston, Texas. As a result, notwithstanding subsection (b), the
Company Contributions Accounts off all Denver-based Participants who were laid
off or who voluntarily severed their employment with the Company after August
5, 1991, in connection with the corporate relocation, are 100% vested.
(e) Change of Control. Notwithstanding the foregoing provisions
of this section 5.1, the Company Contributions Accounts of all Participants
shall be fully vested as of the effective date of a Change of Control, as
defined in this subsection, and at all times thereafter. For purposes of this
subsection, a "Change of Control" shall mean the event occurring when a person,
partnership or corporation together with all persons, partnerships or
corporations acting in concert with such person, partnership or corporation, or
any or all of them, acquires more than 20% of Apache's outstanding voting
securities; provided that a Change of Control shall not occur if, prior to the
acquisition of more than 20% of Apache's voting securities, Apache's Board of
Directors by majority vote designates the person, partnership, or corporation
as an approved acquiror and resolves that a Change of Control will not have
occurred for purposes of this Plan.
5.2 Forfeitures.
(a) Notwithstanding the vesting rules of section 5.1, Annual
Additions to a Participant's Accounts and any increase or decrease in the net
worth of the Participant's Accounts attributable to such Annual Additions may
be reduced to satisfy the limits described in section 3.4. Any reduction shall
be allocated as specified in section 3.4.
(b) Notwithstanding the vesting rules of section 5.1, QMACs and
any increase or decrease in the net worth of the Account(s) attributable to
such contributions may be forfeited as of the last day of the Plan Year to
satisfy the ACP test, as provided in subsection 3.6(c). Any such forfeiture
shall be allocated as specified in section 5.5.
(c) Notwithstanding the vesting rules of section 5.1, Company
Matching Contributions and any increase or decrease in the net worth of the
Account(s) attributable to such contributions may be forfeited as of the last
day of the Plan Year if the Participant Before-Tax Contribution that they
matched was returned under section 3.2 or subsection 3.5(d). Any such
forfeiture shall be allocated as specified in section 5.5.
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(d) Notwithstanding the vesting rules of section 5.1, a missing
individual's vested Accounts may be forfeited as of the last day of any Plan
Year, as provided in section 13.12. Any such forfeiture shall be allocated as
specified in section 5.5.
(e) A Participant's non-vested interest in his or her Company
Contributions Account shall be forfeited at the end of the Plan Year in which
the Participant terminates employment. Any such forfeiture shall be allocated
as specified in section 5.5.
(f) Notwithstanding the vesting rules of section 5.1, Company
Matching Contributions that would violate Code section 401(a)(17), and any
increase or decrease in the net worth of the Account(s) attributable to such
contributions, may be forfeited as specified in subsection 3.1(b). Any such
reduction shall be allocated as specified in subsection 3.1(b).
5.3 Restoration of Forfeitures.
(a) The forfeiture of a missing individual's Account(s), as
described in section 13.12, shall be restored to such individual if the
individual makes a claim for such amount.
(b) If a Participant is rehired before incurring five-consecutive
one-year Lapses in Apache Employment , and the Participant has received a
distribution of his or her entire vested interest in his or her Company
Contribution Account (with the result that the Participant forfeited his or her
non-vested interest in such Account), then the exact amount of the forfeiture
shall be restored to the Participant's Account. All the rights, benefits and
features available to the Participant when the forfeiture occurred shall be
available with respect to the restored forfeiture.
(c) If a Participant who is rehired before incurring five
consecutive one-year Lapses in Apache Employment has his or her Accounts
restored as above provided, and again terminates employment prior to becoming
fully vested in his or her Company Contributions Account, the vested portion of
his or her Company Contributions Account shall be determined by applying the
vested percentage determined under section 5.1 to the sum of (A) and (B), then
subtracting (B) from such sum, where: (A) is the value of the Participant's
Company Contributions Account as of the Valuation Date immediately following
his or her most recent termination of employment; and (B) is the amount
previously distributed to the Participant on account of the prior termination
of employment.
(d) If a Participant is rehired after having incurred five
consecutive one-year Lapses in Apache Employment, then no amount forfeited from
his or her Company Contributions Account shall be restored to that Account.
5.4 Method of Forfeiture Restoration.
Forfeitures that are restored pursuant to section 5.3 shall be
accomplished by an allocation of the forfeitures occurring during the Plan
Year, pursuant to section 5.5, or if such forfeitures are insufficient, by a
special Company Contribution, pursuant to paragraph 3.1(c)(i).
5.5 Allocation of Forfeitures.
As of the last day of each Plan Year, the forfeitures that occurred
during the Plan Year shall be allocated first to restore the forfeited portions
of the Company Contributions Accounts of reemployed Participants described in
section 5.3. Any remaining forfeitures shall be applied to reduce any type(s)
of current or future Company Contributions under section 3.1, or to pay those
expenses of the Plan that are properly payable from the Trust Fund. Apache
shall decide, on behalf of each employer, the amount and type(s) of Company
Contributions or Plan expenses the forfeitures shall reduce.
5.6 Credits for Pre-Lapse Service.
(a) Company Contributions Made After Reemployment.
(i) A Participant who is vested in any portion of his or
her Company Contributions Account, who incurs a one-year Lapse in
Apache Employment, and who is thereafter reemployed, shall
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receive credit for vesting purposes for Years of Service prior to a
one-year Lapse in Apache Employment upon completing a Year of Service
after such one-year Lapse in Apache Employment.
(ii) A Participant who is not vested in any portion of his
or her Company Contributions Account, who incurs a one- year Lapse in
Apache Employment and who is thereafter reemployed, shall receive
credit for vesting purposes for Years of Service prior to a one-year
Lapse in Apache Employment only if (A) the Participant completes a
Year of Service after such Lapse in Apache Employment, and (B) the
number of consecutive one-year Lapses in Apache Employment is less
than the greater of five or the aggregate number of Years of Service
before such lapse.
(b) Company Contributions Made Prior to Termination. Years of
Service after a Participant has incurred five consecutive one-year Lapses in
Apache Employment shall be disregarded in determining the vested percentage in
a Participant's Company Contributions Account at the time of the lapse.
5.7 Transfers - Portability.
If any other employer adopts this or a similar profit sharing plan and
enters into a reciprocal agreement with the Company that provides that (a) the
transfer of a Participant from such employer to the Company (or vice versa)
shall not be deemed a termination of employment for purposes of the plans, and
(b) service with either or both employers shall be credited for purposes of
vesting under both plans, then the transferred Participant's Account shall be
unaffected by the transfer, except, if deemed advisable by the Committee, it
may be transferred to the trustee of the other plan.
5.8 Reemployment - Separate Account.
If a Participant who is not fully vested terminates employment and
then returns to employment with the Company or an Affiliated Entity before
receiving the entire vested portion of his or her Company Contributions
Account, the vested portion that has not been distributed shall be held in a
separate Company Contributions Account for such Participant. The Participant
shall be fully vested in such Account and no further Company Contributions
shall be allocated to that Account. In all other respects, such Account shall
be treated as a Company Contributions Account. A new Company Contributions
Account shall be established to which all appropriate Company Contributions
made after the date of reemployment shall be allocated. If a Participant
becomes fully vested in two or more Company Contributions Accounts, all such
amounts shall be merged into one Account.
5.9 Transfer of Participants to Natural Gas Clearinghouse.
A Transferred Participant shall be treated as though employed by the
Company, for all purposes of the Plan (and not for any other purpose) other
than eligibility to make Participant Before-Tax Contributions or to receive a
Company Mandatory Contribution, a Company Matching Contribution, or a QNEC with
respect to any period following the transfer of employment to NGC, so long as
the Transferred Participant is employed by NGC. A Transferred Participant
shall continue to be treated as an Employee for all purposes of the Plan (other
than the eligibility to make or receive contributions), including but not
limited to the right to make withdrawals under Article VII and to make
investment elections pursuant to Article IX, so long as the Transferred
Participant is employed by NGC. A Transferred Participant shall continue to be
treated as an Employee for such purposes (and for no other purpose) until such
time as his or her employment with NGC terminates, at which point such
termination of employment shall be treated as termination of employment with
the Company for purposes of Article VI. A Transferred Participant may borrow
from the Plan under section 7.2 only if the Transferred Participant is a party
in interest (within the meaning of ERISA section 3(14)) with respect to the
Plan.
If a Transferred Participant transfers employment from NGC back to the
Company pursuant to the terms of an Employee Benefits Agreement effective May
1, 1991 between Apache and NGC, such transfer shall not constitute a
termination of employment with the Company. Any such Participant shall become
eligible to participate in the Plan in accordance with the provisions of
section 2.1. If the Transferred Participant previously made an irrevocable
election, pursuant to the provisions of subsection 3.1(b), to have the
Participant's Before-Tax Contributions, and the related
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Company Matching Contributions, invested in Company Stock, such election shall
continue to govern the Transferred Participant's participation in the Plan.
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1 Beneficiaries.
(a) Each Account Owner shall file with the Committee a designation
of the beneficiaries and contingent beneficiaries to whom the distributable
amount (determined pursuant to section 6.3) shall be paid in the event of his
or her death. In the absence of an effective beneficiary designation as to any
portion of the distributable amount after a Participant dies, such amount shall
be paid to the Participant's surviving Spouse, or, if none, to his or her
estate. In the absence of an effective beneficiary designation as to any
portion of the distributable amount after any non-Participant Account Owner
dies, such amount shall be paid to the Account Owner's estate.
(b) A beneficiary designation may be changed by the Account Owner
at any time and without the consent of any previously designated beneficiary.
However, if the Account Owner is a married Participant, his or her Spouse shall
be his or her beneficiary unless his or her Spouse has consented to the
designation of a different beneficiary. To be effective, the Spouse's consent
must be in writing, witnessed by a notary public and filed with the Committee.
Any such election shall be effective only as to the Spouse who signed the
election. If a Participant has designated his or her Spouse as his or her
beneficiary, and the Participant and that Spouse subsequently divorce, then the
beneficiary designation shall be void and of no effect on the day such divorce
is final.
6.2 Consent.
(a) Except for distributions identified in subsection (b),
distributions may be made only after the appropriate consent has been obtained
under this subsection. Distributions to a Participant shall be made only with
the Participant's consent to the manner of distribution and the time of
distributions. Distributions to a beneficiary of a deceased Participant shall
be made only with the beneficiary's consent to the manner of distribution and
the time of distribution. Distributions to an Alternate Payee or his or her
beneficiary shall be made as specified in the QDRO. To be effective, the
consent must be in writing, signed by the distributee, and filed with the
Committee within 90 days before the distribution is to commence. A consent
once given shall be irrevocable after distribution has begun. Nevertheless, if
a distributee has elected to receive his or her distribution in the form of
installments, he or she may elect to accelerate any or all remaining
installments.
(b) Consent is not required for the following distributions:
(i) Corrective distributions under Article III that are
returned to the Participant because the contribution is not deductible
by the Company or because the contribution would exceed the limits of
Code sections 401(a)(17), 415(c)(1), 4415(e), 402(g), 401(k)(3),
401(m)(2), or 401(m)(9);
(ii) Distributions that are required to comply with Code
section 401(a)(9);
(iii) Immediate cashouts of less than $3,500, as described
in subsection 6.5(d);
(iv) Distributions pursuant to Code section 401(a)(14); and
(v) Distributions after the later of the Participant's
Normal Retirement Age or age 62, provided that the Participant has
terminated employment before the distribution is made.
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6.3 Distributable Amount.
The distributable amount of a Participant's Account(s) is the vested
portion of the Account(s) (as determined by Article V) as of the Valuation Date
coincident with or next preceding the date distribution is made to the
Participant or beneficiary, reduced by (a) any amount that is payable to an
Alternate Payee pursuant to section 13.9, (b) any amount withdrawn pursuant to
section 7.1 since such Valuation Date, and (c) the outstanding amount of any
loan under section 7.2. Nevertheless, the Committee shall temporarily suspend
or limit distributions (by reducing the distributable amount), as explained in
section 13.9, when the Committee is informed that a QDRO affecting the
Participant's Accounts is in process or may be in process.
6.4 Manner of Distribution.
(a) The distributable amount shall be paid in accordance with
either one or a combination of both of the following methods as the distributee
may elect subject to the limitations of subsection (b): (i) by a lump sum
distribution (other than an annuity), or (ii) by monthly, quarterly, or annual
installments (which must be as nearly equal as possible) over a specified
period not exceeding the joint life expectancy of the Participant and his or
her beneficiary, calculated according to the regulations issued under Code
section 401(a)(9). Once installment payments have begun, the distributee may
elect to accelerate any or all remaining payments pursuant to such requirements
as may be adopted by the Committee.
(b) Alternate Payees shall be entitled to only lump sum
distributions. Only lump sum distributions are available for distributions of
small amounts under subsection 6.5(d).
(c) If all or a portion of a Participant's Accounts are invested
in shares of Company Stock at the time amounts become distributable pursuant to
Article VI, the Participant may elect to receive a lump sum distribution of the
whole shares of Company Stock allocated to his or her Accounts together with a
cash lump sum payment for any fractional share and for any portion of the
Accounts not invested in shares of Company Stock. The Committee shall
establish appropriate election procedures from time to time with respect to
distribution elections. If a Participant fails to make an election with
respect to the form of distribution, the distribution of that portion of the
Participant's Accounts which is invested in shares of Company Stock shall be
made in the form of shares of Company Stock. Notwithstanding the foregoing,
any fractional share of Company Stock shall be converted to and paid in the
form of cash.
6.5 Time of Distribution.
(a) Earliest Date of Distribution. Unless an earlier distribution
is permitted by subsection (b) or required by subsection (c), the earliest date
that a Participant may elect to receive a distribution is as follows.
(i) Termination of Employment or Disability. A
Participate may elect to receive a distribution as soon as practicable
after he terminates employment or incurs a Disability. However,
distribution from a Participant Before-Tax Contribution Account shall
not occur pursuant to this paragraph unless (A) the Participant has
separated from service within the meaning of Code section
401(k)(2)(B)(i)(I), (B) the Participant has incurred a Disability, or
(C) the Participant has been affected by a corporate transaction
described in Code section 401(k)(10)(A)(ii) or Code section
401(k)(10)(A)(iii).
(ii) During Employment. A Participant may not obtain a
distribution while employed by the Company or an Affiliated Entity,
except as provided in subsection (c) (relating to the required minimum
distribution at a Participant's Required Beginning Date) or section
7.1 (relating to in-service withdrawals).
(b) Alternate Earliest Date of Distribution. Notwithstanding
subsection (a), unless a Participant elects otherwise, his or her distribution
shall commence no later than 60 days after the close of the latest of: (i) the
Plan Year in which the Participant attains Normal Retirement Age; (ii) the Plan
Year in which occurs the tenth anniversary of the year in which the Participant
commenced participation in the Plan; and (iii) the Plan Year in which the
Participant terminates employment with the Company and Affiliated Entities.
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(c) Latest Date of Distribution. Distribution must be made (i) in
a lump sum not later than the Required Beginning Date, or (ii) in installments
commencing not later than the Required Beginning Date. A Participant shall
receive annual distributions of at least the minimum amount required to be
distributed pursuant to regulations issued under Code section 401(a)(9). In
calculating the minimum required distribution, (i) the life expectancies of the
Participant and his or her beneficiary shall be used, (ii) the life expectancy
of the Participant shall be recalculated annually only if the Participant
affirmatively elects such recalculation, (iii) if the beneficiary is the
Participant's Spouse, the life expectancy of the Spouse shall be recalculated
annually only if the Participant affirmatively elects such recalculation, and
(iv) if the Participant does not inform the Committee of the birthdate of his
or her beneficiary a reasonable time before the Required Beginning Date, the
Participant's minimum required distributions shall be calculated using only the
Participant's life expectancy.
(d) Small Amounts. If the aggregate value of the nonforfeitable
portion of a Participant's Accounts is $3,500 or less (calculated in accordance
with the applicable Treasury regulations) on the earliest date the Participant
may elect to receive a distribution under this section, then the Participant
shall receive a lump sum distribution as soon as practicable after terminating
employment.
(e) Distribution Upon Participant's Death.
(i) This paragraph shall apply if the distribution did
not begin before the Participant died. If the aggregate cash value of
the nonforfeitable portion of the Participant's Accounts is $3,500 or
less (calculated in accordance with applicable Treasury regulations),
the beneficiary shall receive a lump sum distribution as soon as
practicable after the Participant dies. Otherwise, the beneficiary
may elect to have the distributable amount distributed (A) by the end
of the calendar year containing the fifth anniversary of the
Participant's death, or (B) in installments over a period not
exceeding the life expectancy of the beneficiary, with the first
installment distributed by the end of the calendar year containing the
first anniversary of the Participant's death. However, if the
beneficiary is the Participant's surviving Spouse, the beneficiary
may elect to defer distribution until the end of the calendar year in
which the Participant would have attained age 70-1/2, or, if later,
the end of the calendar year containing the first anniversary of the
Participant's death. If the surviving Spouse makes such an election
but dies before receiving the entire distributable amount, then the
rules of this paragraph shall be applied as if the Spouse were the
Participant and as if the Spouse's beneficiary were the Participant's
beneficiary.
(ii) If distribution began before the Participant died,
then the remaining distributable amount shall be distributed at least
as rapidly as under the method in use on the date of the Participant's
death.
(f) Alternate Payee. Distributions to Alternate Payees and their
beneficiaries shall be made as specified in section 13.9.
(g) 242(b) Elections. Notwithstanding the foregoing, distribution
of a Participant's Account(s), including the Account(s) of a Participant who is
a Key Employee in a top-heavy plan, may be made in accordance with all of the
following rules (regardless of when such distribution commences);
(i) The distribution must be one that would not have
disqualified the Plan under Code section 401(a)(9) prior to its
amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
(ii) The distribution must be in accordance with a method
of distribution designated by the Participant whose interest in the
Plan is being distributed, or if the Participant is deceased, by the
designated beneficiary of such Participant.
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(iii) The designation must have been in writing, signed by
the Participant or designated beneficiary, and made before January 1,
1984.
(iv) The Participant must have accrued a benefit under the
Plan as of December 31, 1983.
6.6 Direct Rollover Election.
A Participant, an Alternate Payee who is the Spouse or former Spouse
of the Participant, or a surviving Spouse of a deceased Participant
(collectively, the "distributee") may direct the Trustee to pay all or any
portion of his or her "eligible rollover distribution" to an "eligible
retirement plan" in a "direct rollover." Within a reasonable period of time
before an eligible rollover distribution, the Committee shall inform the
distributee of this direct rollover option, the appropriate withholding rules,
other rollover options, the options regarding income taxation, and any other
information required by Code section 402(f).
An "eligible rollover distribution" is any distribution or in-service
withdrawal other than (a) distributions required under Code section 401(a)(9),
(b) distributions of amounts that have already been subject to federal income
tax (such as defaulted loans or after-tax voluntary contributions), (c)
installment payments in a series of substantially equal payments made at least
annually and (i) made over a specified period of ten or more years, (ii) made
for the life or life expectancy of the distributee, or (iii) made for the joint
life or joint life expectancy of the distributee and his or her designated
beneficiary, (d) a distribution to satisfy the limits of Code section 415 or
402(g), (e) a distribution to satisfy ADP, ACP, or multiple use tests, or (f)
any other actual or deemed distribution specified in the regulations issued
under Code section 402(c).
For a Participant or an Alternate Payee who is the Spouse or former
Spouse of the Participant, an "eligible retirement plan" is an individual
retirement account or annuity described in Code section 408(a) or 408(b), an
annuity plan described in Code section 403(a), or the qualified trust of a
defined contribution plan that accepts eligible rollover distributions. For a
surviving Spouse of a deceased Participant, an "eligible retirement plan" is an
individual retirement account or annuity.
A "direct rollover" is a payment by the Trustee to the eligible
retirement plan specified by the distributee.
ARTICLE VII
WITHDRAWALS
7.1 In-Service Withdrawals.
An Employee may withdraw amounts from his or her Account(s) only as
provided in this section. To request a withdrawal, an Employee must submit a
written request to the Committee. An Employee may make withdrawals as follows.
(a) Withdrawals for Employees Age 59-1/2 or Older.
(i) An Employee who has attained age 59-1/2 may at any
time thereafter withdraw any portion of his or her Participant
Before-Tax Contributions Account and any vested portion of his or her
Company Contributions Account in minimum amounts of $1,000 or the
Account balance, whichever is less, up to two times per Plan Year.
(ii) An Employee shall be permitted to make such a
withdrawal by delivering written notice to the Committee at least 15
days prior to the next following Valuation Date. Withdrawals shall be
made in cash except as provided in subsection (c) below.
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(iii) If the Employee is not fully vested in his or her
Company Contributions Account at the time of a withdrawal under this
subsection, the rules of subsection 5.3(c) shall be applied when
determining the vested portion of the Company Contributions Account at
any time thereafter.
(b) Participant Before-Tax Contributions Account. An Employee may
withdraw all or any portion of his or her Participant Before- Tax
Contributions, subject to the limits of subsection (d), provided that the
Employee has an immediate and heavy financial need, as defined in paragraph
(i), the withdrawal is needed to satisfy the financial need, as explained in
paragraph (ii), and the amount of the withdrawal does not exceed the limits in
paragraph (iii).
(i) Financial Need. The following expenses constitute an
immediate and heavy financial need: medical care of the Employee, the
Employee's Spouse, or the Employee's dependents; costs associated with
the purchase of a principal residence of the Employee; tuition and
related educational fees for the next 12 months of post-secondary
education of the Employee, the Employee's Spouse, or the Employee's
dependents; payments to prevent the Employee from being evicted from
his or her principal residence; and payments to prevent the mortgage
on the Employee's principle residence from being foreclosed. In
addition, the Committee may determine, based on a review of all
relevant facts and circumstances, that a particular expense or series
of expenses of the Employee constitutes an immediate and heavy
financial need.
(ii) Satisfaction of Need. The withdrawal is deemed to be
needed to satisfy the Employee's financial need if (A) the Employee
has obtained all withdrawals and all non-taxable loans available from
the Company's and any Affiliated Entities' qualified plans, (B) for a
period of at least 12 months from the date the Employee receives the
withdrawal, he or she ceases to make Participant Before-Tax
Contributions and elective contributions to all qualified and
non-qualified plans maintained by the Company or any Affiliated
Entity, and (C) the Participant Before-Tax Contributions that the
Employee makes in the calendar year after the withdrawal is limited to
the dollar limit in effect under Code section 402(g)(1) ($8,728 in
1992) for the calendar year after the withdrawal, less the Employee's
Participant Before-Tax Contributions made during the calendar year of
the withdrawal.
(iii) Maximum Withdrawal. An Employee may not withdraw
more than the sum of the amount needed to satisfy his or her financial
need and any taxes and penalties resulting from the withdrawal. An
Employee may not withdraw any amount in excess of his or her
Participant Before-Tax Contributions unless the Employee has attained
age 59-1/2.
(c) Form of Payment of Withdrawal. This subsection shall be
effective beginning March 1, 1990. Withdrawals under subsection (b) shall be
in cash. Withdrawals under subsection (a) shall be in cash, except that any
portion of a Participant's Accounts that is invested in Company Stock may, at
the election of the Participant made at the time that written notice of
withdrawal is made to the Committee, be withdrawn in the form of whole shares
of Company Stock.
(d) Withdrawal Rules. An Employee may not withdraw any amount
that has been borrowed or that is subject to a QDRO. The Committee shall
temporarily suspend or limit withdrawals under this section, as explained in
section 13.9, when the Committee is informed that a QDRO affecting the
Employee's Accounts is in process or may be in process. The Committee shall
issue such rules as to the frequency of withdrawals, and withdrawal procedures,
as it deems appropriate. The Committee may postpone the withdrawal until after
the next Valuation Date. The Committee may have a special valuation of the
Trust Fund performed before a withdrawal is permitted. The Plan may charge a
fee for the withdrawal as well as a fee for having a special valuation
performed, as determined by the Committee in its sole discretion.
7.2 Loans.
The Committee is authorized, as one of the Plan fiduciaries
responsible for investing Plan assets, to establish a loan program. The loan
program shall become effective on the date determined by the Committee. The
Committee shall administer the Plan's loan program in accordance with the
following rules:
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(a) Availability. Loans are available only to Participants who
are Employees, Participants who are parties-in-interest (within the meaning of
ERISA section 3(14)), and beneficiaries who are parties-in-interest
(collectively referred to in this section as "Borrowers"). No loan shall be
made to any individual while the individual falls into any of the following
categories, nor shall any loan be made of amounts accrued while such individual
fell into any of the following categories:
(i) owner-employee within the meaning of Code
section 401(c)(3); or
(ii) Employee or officer who owns (or is considered as
owning within the meaning of Code section 318(a)(1) on any day during
the taxable year of the Company or Affiliated Entity) 5% or more of
the stock of the Company or any Affiliated Entity that is an S
corporation; or
(iii) sibling (of the whole- or half-blood), spouse,
ancestor or lineal descendant of any individual described in
paragraphs (i) or (ii),
unless such individual has furnished to the Committee a written exemption,
granted by the Department of Labor, exempting the loan from the prohibited
transaction provisions of ERISA and the Code. The Committee shall temporarily
reduce the amount a Participant may borrow or temporarily prevent the
Participant from borrowing, as described in section 13.9, when the Committee is
informed that a QDRO affecting the Participant's Accounts is in process or may
be in process.
(b) Number of Loans. A Borrower may have no more than one loan
outstanding. The Committee may change the maximum number of outstanding loans
allowed at any time.
(c) Loan Amount. The Committee may establish a minimum loan
amount of no more than $500. The Committee may require loans to be made in
increments of no more than $100. The amount that a Borrower may borrow is
subject to the following limits.
(i) A Borrower may only borrow an amount up to the
aggregate Participant Before-Tax Contributions made by the relevant
Participant, less any of such amounts previously withdrawn.
(ii) At the time the loan from this Plan is made, the
aggregate outstanding balance of all the Borrower's loans from all
qualified plans maintained by the Company and Affiliated Entities,
including the new loan from this Plan, shall not exceed 50% of the
Borrower's vested interest in all qualified plans maintained by the
Company and Affiliated Entities.
(iii) For purposes of this paragraph, the term "one-year
maximum" means the largest aggregate outstanding balance, on any day
in the one-year period ending on the day before the new loan from this
Plan is obtained, of all loans to the Borrower from all qualified
plans maintained by the Company and Affiliated Entities. For purposes
of this paragraph, the term "existing loans" means the aggregate
outstanding balance, on the day the new loan is made to the Borrower,
of all loans to the Borrower from all qualified plans maintained by
the Company and Affiliated Entities, excluding the new loan from this
Plan. If the existing loans are greater than or equal to the one-year
maximum, then the new loan from this Plan shall not exceed $50,000
minus the existing loans. If the existing loans are less than the
one-year maximum, then the new loan from this Plan shall not exceed
$50,000 minus the one-year maximum.
For purposes of applying the above limits, the vested portion of the Borrower's
accounts under this Plan and all other plans maintained by the Company and
Affiliated Entities shall be determined without regard to any accumulated
deductible employee contributions (as defined in Code section 72(o)(5)(B)), and
without regard to any amounts accrued while the Borrower was ineligible to
obtain a loan (as described in subsection (a)). Notwithstanding the foregoing,
the Committee may, in its sole discretion, establish lesser limits on the
amounts that may be borrowed, which limits shall be applied in a
non-discriminatory manner. The Committee shall temporarily reduce the amount a
Participant may borrow or temporarily prevent the Participant from borrowing,
as described in section 13.9, when the Committee is informed that a QDRO
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<PAGE> 33
affecting the Participant's Accounts is in process or may be in process. No
loan shall be made of amounts that are required to be distributed prior to the
end of the term of the loan.
(d) Interest. Each loan shall bear a reasonable rate of interest,
which shall remain fixed for the duration of the loan. The Committee or its
agent shall determine the reasonable rate of interest on the date the loan
documents are prepared. The Committee shall have the authority to establish
procedures from time to time for determining the rate of interest. In the
absence of Committee action, the interest rate shall be equal to the prime
lending rate, plus 1%, as published in the Wall Street Journal on the first day
that such newspaper is published during the calendar quarter in which the loan
documents are prepared.
(e) Repayment. All loans shall be repaid, with interest, in
substantially level amortized payments made not less frequently than quarterly.
The maximum term for a loan is four years; the minimum term for a loan is one
year. The Committee has the authority to decrease the minimum term for future
loans and the authority to increase the maximum term for future loans to no
more than five years. Loan repayments shall be accelerated, and all loans
shall be payable in full on the date the Borrower separates from service (if
the Borrower is an Employee), the date the Borrower becomes ineligible to
borrow from the Plan under to subsection (a), and on any other date or any
other contingency as determined by the Committee. If the Borrower is an
Employee, loans shall be repaid through payroll withholding unless (i) the
Employee is pre- paying his or her loan, in which case the pre-payment need not
be through payroll withholding, or (ii) the Employee is on an unpaid leave of
absence, in which case he or she may pay any installment by personal check.
Partial pre-payments are not accepted; however, the Committee may decide to
accept partial pre-payments in the future.
(f) Default. A loan shall be considered to be in default if any
loan installment is not paid within 60 days of its due date. If a default is
not cured within five days, the Committee may, in addition to all other
remedies, apply the Borrower's Plan accounts toward payment of the loan;
however, the Trustee may not exercise such right of set-off with respect to the
Borrower's Participant Before-Tax Account until such account has become
payable, pursuant to section 6.5 or 7.1.
(g) Administration. A Borrower shall apply for a loan by
completing the application procedures specified by the Committee. Until
changed by the Committee, a Borrower shall apply for a loan by calling the
Trustee and completing a voice application. The loan shall be processed in
accordance with reasonable procedures adopted from time to time by the
Committee. The Committee may impose a loan application fee, a loan origination
fee, a loan pre-payment fee, and loan maintenance fees. All loans shall be
evidenced by a promissory note and shall be fully secured. No Borrower whose
Plan accounts are so pledged may obtain distribution of any portion of the
accounts that have been pledged. The rights of the Trustee under such pledge
shall have priority over all claims of the Borrower, his or her beneficiaries,
and creditors. Each loan shall be treated as a directed investment. Any
increase or decrease in the net worth of the Trust Fund attributable to such
loan shall be allocated solely to the Plan accounts of the Borrower.
ARTICLE VIII
ALLOCATION OF RESPONSIBILITIES - NAMED FIDUCIARIES
8.1 No Joint Fiduciary Responsibilities.
The Trustee(s) and the Committee shall be the named fiduciaries under
the Plan and Trust agreement and shall be the only named fiduciaries
thereunder. The fiduciaries shall have only the responsibilities specifically
allocated to them herein or in the Trust agreement. Such allocations are
intended to be mutually exclusive and there shall be no sharing of fiduciary
responsibilities. Whenever one named fiduciary is required by the Plan or
Trust agreement to follow the directions of another named fiduciary, the two
named fiduciaries shall not be deemed to have been assigned a shared
responsibility, but the responsibility of the named fiduciary giving the
directions shall be deemed his or her sole responsibility, and the
responsibility of the named fiduciary receiving those directions shall be to
follow them insofar as the instructions are on their face proper under
applicable law.
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8.2 The Company.
The Company shall be responsible for: (a) making Company
Contributions; (b) certifying to the Trustee the names and specimen signatures
of the members of the Committee acting from time to time; (c) keeping accurate
books and records with respect to its Employees and the appropriate components
of each Employee's Compensation and furnishing such data to the Committee; (d)
selecting agents and fiduciaries to operate and administer the Plan and Trust;
(e) appointing an investment manager if it determines that one should be
appointed; and (f) reviewing periodically the performance of such agents,
managers, and fiduciaries.
8.3 The Trustee.
The Trustee shall be responsible for: (a) the investment of the Trust
Fund to the extent and in the manner provided in the Trust agreement; (b) the
custody and preservation of Trust assets delivered to it; and (c) the payment
of such amounts from the Trust Fund as the Committee shall direct.
8.4 The Committee - Plan Administrator.
The Board of Directors of Apache (the "Board") shall appoint an
administrative Committee consisting of no fewer than three individuals who may
be, but need not be, Participants, officers, directors, or Employees of the
Company. If the Board does not appoint a Committee, Apache shall act as the
Committee under the Plan. The members of the Committee shall hold office at
the pleasure of the Board and shall service without compensation. The
Committee shall be the "Plan administrator" as defined in section 3(16)(A) of
ERISA. It shall be responsible for establishing and implementing a funding
policy consistent with the objectives of the Plan and with the requirements of
ERISA. This responsibility shall include establishing (and revising as
necessary) short-term and long-term goals and requirements pertaining to the
financial condition of the Plan, communicating such goals and requirements to
the persons responsible for the various aspects of the Plan operations and
monitoring periodically the implementation of such goals and requirements.
8.5 Committee to Construe Plan.
(a) The Committee shall administer the Plan and shall have all
discretion, power and authority necessary for that purpose, including, but not
by way of limitation, the full and absolute discretion and power to interpret
the Plan, to determine the eligibility, status, and rights of all individuals
under the Plan, and in general to decide any dispute and all questions arising
in connection with the Plan. The Committee shall direct the Trustee concerning
all distributions from the Trust Fund, in accordance with the provisions of the
Plan, and shall have such other powers in the administration of the Trust Fund
as may be conferred upon it by the Trust agreement. The Committee shall
maintain all Plan records except records of the Trust Fund.
(b) The Committee may adjust the Account(s) of any Participant, in
order to correct errors and rectify omissions, in such manner as the Committee
believes will best result in the equitable and nondiscriminatory administration
of the Plan.
8.6 Organization of Committee.
The Committee shall adopt such rules as it deems desirable for the
conduct of its affairs and for the administration of the Plan. It may appoint
agents (who need not be members of the Committee) to whom it may delegate such
powers as it deems appropriate, except that any dispute shall be determined by
the Committee. The Committee may make its determinations with or without
meetings. It may authorize one or more of its members or agents to sign
instructions, notices and determinations on its behalf. The action of a
majority of the Committee shall constitute the action of the Committee.
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8.7 Interested Committee Members.
If a Committee decision or action affects a small number of
Participants including a Committee member, then such Committee member shall not
participate in the Committee decision or action. The action of a majority of
the disinterested Committee members shall constitute the action of the
Committee.
8.8 Agent for Process.
Apache's Vice President, General Counsel, and Secretary shall be the
agent of the Plan for service of all process.
8.9 Indemnification of Committee Members.
The Company shall indemnify and hold the members of the Committee, and
each of them, harmless from the effects and consequences of their acts,
omissions, and conduct in their official capacities, except to the extent that
the effects and consequences thereof shall result from their own willful
misconduct, breach of good faith, or gross negligence in the performance of
their duties. The foregoing right of indemnification shall not be exclusive of
the rights to which each such member may be entitled as a matter of law.
8.10 Conclusiveness of Action.
Any action taken by the Committee on matters within the discretion of
the Committee shall be conclusive, final and binding upon all participants in
the Plan and upon all persons claiming any rights hereunder, including
alternate payees and beneficiaries.
8.11 Payment of Expenses.
The members of the Committee shall serve without compensation but
their reasonable expenses shall be paid by the Company. The compensation of
fees of accountants, counsel and other specialists and any other costs of
administering the Plan or Trust Fund may be charged to the Trust Fund, to the
extent permissible under the provisions of ERISA.
ARTICLE IX
TRUST AGREEMENT - INVESTMENTS
9.1 Trust Agreement.
Apache has entered into a Trust agreement to provide for the holding,
investment and administration of the funds of the Plan. The Trust agreement
shall be part of the Plan, and the rights and duties of any individual under
the Plan shall be subject to all terms and provisions of the Trust agreement.
9.2 Expenses of Trust.
(a) Except as provided in subsection (b) below, all taxes upon or
in respect of the Trust shall be paid by the Trustee out of the Trust assets,
and all expenses of administering the Trust shall be paid by the Trustee out of
the Trust assets, to the extent such taxes and expenses are not paid by the
Company or the Account Owner. No fiduciary shall receive any compensation for
services rendered to the Plan if the fiduciary is being compensated on a full
time basis by the Company.
(b) To the extent not paid by the Company, all expenses of
individually directed transactions in Trust assets, including without
limitation the Trustee's transaction fee, brokerage commissions, transfer
taxes, interest on insurance policy loans, and any taxes and penalties that may
be imposed as a result of an individual's investment direction shall be
assessed against the Account(s) of the Account Owner directing such
transactions.
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9.3 Investments.
(a) Section 404(c) Plan. The Plan is intended to be a plan
described in ERISA section 404(c). To the extent that an Account Owner
exercises control over the investment of his or her Accounts, no person who is
a fiduciary shall be liable for any loss, or by reason of any breach, that is
the direct and necessary result of the Account Owner's exercise of control.
(b) Directed Investments. Accounts shall be invested, upon the
written or telephone voice-response direction of each Account Owner, in any one
or more of a series of investment funds designated by the Committee from time
to time. One or more such funds may, at the sole discretion of the Committee,
consist of shares of Company Stock. If so directed by Account Owners, up to
100% of the Accounts under the Plan may be invested in Company Stock. The
funds available for investment and the principal features thereof, including a
general description of the investment objectives, the risk and return
characteristics, and the type and diversification of the investment portfolio
of each fund, shall be communicated to the Account Owners in the Plan from time
to time. Any changes in such funds shall be immediately communicated to all
Account Owners.
(c) Absence of Directions. To the extent that an Account Owner
fails to affirmatively direct the investment of his or her Accounts, the
Committee shall direct the Trustee in writing concerning the investment of such
Accounts. The Committee shall act by majority vote. Any dissenting member of
the Committee shall, having registered his or her dissent in writing,
thereafter cooperate to the extent necessary to implement the decision of the
Committee.
(d) Change in Investment Directions. Account Owners may change
their investment directions, with respect to investment of new contributions
and with respect to the investment of existing amounts allocated to Accounts,
every three months unless the Committee determines that more frequent changes
in investment directions shall be made available with respect to one or more of
the investment funds. Such changes shall be effective, prospectively, as of
the time established by the Committee. The Committee shall establish
procedures for giving investment directions, which shall be in writing and
communicated to Account Owners. For example, the procedures could permit an
Account Owner to change the investment direction of new contributions as of the
first day of every calendar quarter, provided that the Committee receives at
least two weeks prior written notice; the procedures could also permit an
Account Owner to change the investment direction of existing Account balances
once in a calendar quarter, on any business day, by giving telephone
voice-response instructions to the Trustee.
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination of Plan or Discontinuance of Contributions.
Apache expects to continue the Plan indefinitely, but the continuance
of the Plan and the payment of contributions are not assumed as contractual
obligations. Apache may terminate the Plan or discontinue contributions at any
time. Upon the termination (or partial termination) of the Plan or the
complete discontinuance of contributions, the Accounts of all affected
Participants shall become fully vested, notwithstanding any other provision
hereof, the only Participants who are affected by a partial termination are
those whose employment with the Company or Affiliated Entity is terminated as a
result of the corporate event causing the partial termination; Employees
terminated for cause are not affected by a partial termination.
10.2 Allocations upon Termination or Discontinuance of Company
Contributions.
Upon the termination or partial termination of the Plan or upon the
complete discontinuance of contributions , the Committee shall promptly notify
the Trustee of such termination or discontinuance. The Trustee shall then
determine, in the manner prescribed in section 4.2, the net worth of the Trust
Fund as of the close of the last business day of the calendar month in which
such notice was received by the Trustee. The Trustee shall advise the
Committee of any increase or decrease in such net worth that has occurred since
the preceding Valuation Date. After crediting to the Participant Before-
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Tax Contributions Account of each Participant any amount contributed since the
preceding Valuation Date, the Committee shall thereupon allocate, in the manner
described in section 4.3, among the remaining Plan Accounts, in the manner
described in Articles III, IV and V, any Company Contributions or forfeitures
occurring since the preceding Valuation Date.
10.3 Procedure Upon Termination of Plan or Discontinuance of Contributions.
If the Plan has been terminated or partially terminated, or if a
complete discontinuance of contributions to the Plan has occurred, then after
the allocations required under section 10.2 have been completed, the Trustee
shall distribute or transfer the Account(s) of affected Employees as follows.
(a) Participant Before-Tax Contributions Accounts. If the Company
or Affiliated Entity maintains or establishes another defined contribution plan
(other than an employee stock ownership plan defined in Code section
49756(e)(7)), then no amount in a Participant Before-Tax Contributions Account
may be distributed to any Employee who has not yet attained age 59-1/2.
(b) Other Rules.
(i) If the affected Employee's Account(s) have an
aggregate value of $3,500 or less (calculated in accordance with
applicable Treasury regulations), then the Trustee shall distribute
the Employee's Account(s) (except, if subsection (a) applies, the
Participant Before-Tax Contributions Account) to the Employee in a
lump sum (other than an annuity).
(ii) If the affected Employee's Account(s) have an
aggregate value of more than $3,500 (calculated in accordance with
applicable Treasury regulations), and if the Company or an Affiliated
Entity does not maintain another defined contribution plan (other than
an employee stock ownership plan within the meaning of Code section
4975(e)(7)), then the Trustee shall distribute the Employee's
Account(s) to the Employee in a lump sum (other than an annuity).
(iii) If the affected Employee's Account(s) have an
aggregate value of more than $3,500 (calculated in accordance with
applicable Treasury regulations), and if the Company or an Affiliated
Entity maintains another defined contribution plan (other than an
employee stock ownership plan within the meaning of Code section
4975(e)(7)), then the Trustee shall transfer the Employee's Account(s)
to the other plan unless the Employee consents to an immediate
distribution of such Account(s) (except, if subsection (a) applies,
for the Participant Before-Tax Contributions Account) in a lump sum
(other than an annuity).
Any distribution or transfer made pursuant to this section may be in cash, in
shares of Company Stock, to the extent a Participant's Accounts are invested in
Company Stock, or partly in cash and partly in shares of Company Stock. After
all such distributions or transfers have been made, the Trustee shall be
discharged from all obligation under the Trust; no Participant or beneficiary
who has received any such distribution, or for whom any such transfer has been
made, shall have any further right or claim under the Plan or Trust.
10.4 Amendment by Apache.
Apache may at any time amend the Plan in any respect, without prior
notice, subject to the following limitations. No amendment shall be made that
would have the effect of vesting in the Company any part of the Trust Fund or
of diverting any part of the Trust Fund to purposes other than for the
exclusive benefit of Account Owners. The rights of any Account Owner with
respect to contributions previously made shall not be adversely affected by any
amendment. No amendment shall reduce or restrict, either directly or
indirectly, the accrued benefit (within the meaning of Code section 411(d)(6))
provided that any Account Owner before the amendment, except as permitted by
the Internal Revenue Service.
If the vesting schedule is amended, each Participant with at least
three Years of Service may elect, within the period specified in the following
sentence after the adoption of the amendment, to have his or her nonforfeitable
percentage
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computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence with the date the amendment is
adopted and shall end on the latest of: (a) 60 days after the amendment is
adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days
after the Participant is issued written notice of the amendment by the Company
or Committee. Furthermore, no amendment shall decrease the nonforfeitable
percentage, measured as of the later of the date the amendment is adopted or
effective, of any Account Owner's Accounts.
Each amendment shall be in writing. Each amendment shall be approved
by Apache's Board of Directors (the "Board") or by an officer of Apache who is
authorized by the Board to amend the Plan. Each amendment shall be executed
by an officer of Apache to whom the Board has delegated the authority to
execute the amendment.
ARTICLE XI
PLAN ADOPTION BY AFFILIATED ENTITIES
11.1 Adoption of Plan.
Apache may permit any Affiliated Entity to adopt the Plan and Trust
for its Employees. Thereafter, such Affiliated Entity shall deliver to the
Trustee a certified copy of the resolutions or other documents evidencing its
adoption of the Plan and Trust. The Employees of the Affiliated Entity
adopting the Plan shall not be eligible to invest their Accounts in Company
Stock until compliance with the applicable registration and reporting
requirements of the securities laws.
11.2 Agent of Affiliated Entity.
By becoming a party to the Plan, each Affiliated Entity appoints
Apache as its agent with authority to act for the Affiliated Entity in all
transactions in which Apache believes such agency will facilitate the
administration of the Plan. Apache shall have the sole authority to amend and
terminate the Plan.
11.3 Disaffiliation and Withdrawal from Plan.
(a) Disaffiliation. Any Affiliated Entity that has adopted the
Plan and thereafter ceases for any reason to be an Affiliated Entity shall
forthwith cease to be a party to the Plan.
(b) Withdrawal. Any Affiliated Entity may, by appropriate action
and written notice thereof to Apache, provide for the discontinuance of its
participation in the Plan. Such withdrawal from the Plan shall not be
effective until the end of the Plan Year.
11.4 Effect of Disaffiliation or Withdrawal.
If at the time of disaffiliation or withdrawal, the disaffiliating or
withdrawing entity, by appropriate action, adopts a substantially identical
plan that provides for direct transfers from this Plan, then, as to employees
of such entity, no plan termination shall have occurred; the new plan shall be
deemed a continuation of this Plan for such employees. In such case, the
Trustee shall transfer to the trustee of the new plan all of the assets held
for the benefit of employees of the disaffiliating or withdrawing entity, and
no forfeitures or acceleration of vesting shall occur solely by reason of such
action. Such payment shall operate as a complete discharge of the Trustee, and
of all organizations except the disaffiliating or withdrawing entity, of all
obligations under this Plan to employees of the disaffiliating or withdrawing
entity and to their beneficiaries. A new plan shall not be deemed
substantially identical to this Plan if it provides slower vesting than this
Plan. Nothing in this section shall authorize the divesting of any vested
portion of a Participant's Account(s).
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11.5 Distribution Upon Disaffiliation or Withdrawal.
(a) Disaffiliation. If an entity disaffiliates from Apache and
the provisions of section 11.4 are not followed, then the following rules apply
to the Account(s) of employees of the disaffiliating entity.
(i) If the disaffiliating entity maintains a defined
contribution plan (other than an employee stock ownership plan within
the meaning of Code section 4975(e)(7)), then the Trustee shall
transfer the Employee's Account(s) to the other plan, if the other
plan so allows, unless the employee consents to an immediate
distribution in a lump sum (other than an annuity) of the vested
portion of his or her Account(s). If the other plan does not permit a
transfer of Accounts, then the employee may retain his or her Accounts
in this Plan until the employee consents to a distribution pursuant to
Article VI. Notwithstanding the preceding sentences, an employee may
not consent to an immediate distribution from his or her Participant
Before-Tax Contributions Account unless he or she has attained age
59-1/2.
(ii) If the disaffiliating entity does not maintain a
defined contribution plan (other than an employee stock ownership plan
within the meaning of Code section 4975(e)(7)), then the Trustee shall
distribute the vested portion of the employee's Account(s) to the
employee in a lump sum (other than an annuity), upon the consent of
the employee. If the employee does not consent to an immediate
distribution, then distribution may only be made according to Article
VI.
(b) Withdrawal. If an Affiliated Entity withdraws from the Plan
and the provisions of section 11.4 are not followed, then the following rules
apply to the Account(s) of Employees of the withdrawing entity.
(i) If the withdrawing entity maintains a defined
contribution plan that accepts transfers from this Plan, then the
Employee may transfer his or her Account(s) from this Plan to such
plan. No forfeitures or acceleration of vesting shall occur solely by
reason of such transfer.
(ii) If the withdrawing entity does not maintain a defined
contribution plan that accepts transfers from this Plan, then the
Employee's Account(s) shall remain in this Plan.
(c) Any distribution or transfer made pursuant to this section may
be in cash, in shares of Company Stock, or partly in cash and partly in shares
of Company Stock. After such distribution or transfer has been made, no
Participant or beneficiary who has received any such distribution, or for whom
any such transfer has been made, shall have any further right or claim under
the Plan or Trust.
ARTICLE XII
TOP-HEAVY PROVISIONS
12.1 Application of Top-Heavy Provisions.
The provisions of this Article XII shall be applicable only if the
Plan becomes "top-heavy" as defined below for any Plan Year beginning after
December 31, 1983. If the Plan becomes "top-heavy" as of the Determination
Date for a Plan Year, the provisions of this Article XII shall apply to the
Plan effective as of the first day of such Plan Year and shall continue to
apply to the Plan until the Plan ceases to be "top-heavy" or until the Plan is
terminated or otherwise amended.
12.2 Determination of Top-Heavy Status.
The Plan shall be considered "top-heavy" for a Plan Year if, as of the
Determination Date for that Plan Year, the aggregate of the Account balances
(as calculated according to the regulations under Code section 416) of Key
Employees under this Plan (and under all other plans required or permitted to
be aggregated with this Plan) exceeds 60% of the
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aggregate of the Account balances (as calculated according to the regulations
under Code section 416) in this Plan (and under all other plans required or
permitted to be aggregated with this Plan) of all current Employees and all
former Employees who terminated employment within five years of the
Determination Date. This ratio shall be referred to as the "top-heavy ratio".
For purposes of determining the Account balance of any Participant,
distributions made with respect to such individual within a five-year period
ending on the Determination Date shall be included. This shall also apply to
distributions under a terminated plan that, if it had not been terminated,
would have been required to be included in an aggregation group. The Account
balances of a Participant who had once been a Key Employee, but who is not a
Key Employee during the Plan Year, shall not be taken into account. The
following plans must be aggregated with this Plan for the top-heavy test: (a)
a qualified plan maintained by the Company or an Affiliated Entity in which a
Key Employee participated during this Plan Year or during the previous four
Plan Years and (b) any other qualified plan maintained by the Company or an
Affiliated Entity that enables this Plan or any plan described in clause (a) to
meet the requirements of Code sections 401(a)(4) or 410. The following plans
may be aggregated with this Plan for the top-heavy test: any qualified plan
maintained by the Company or an Affiliated Entity that, in combination with the
Plan or any plan required to be aggregated with this Plan when testing this
Plan for top-heaviness, would satisfy the requirements of Code sections
401(a)(4) and 410. If one or more of the plans required or permitted to be
aggregated with this Plan is a defined benefit plan, a Participant's "account
balance" shall equal the present value of his or her accrued benefit, including
any distributions within five years of the Determination Date. If the
aggregation group includes more than one defined benefit plan, the same
actuarial assumptions shall be used with respect to each such defined benefit
plan. The foregoing top-heavy ratio shall be computed in accordance with the
provisions of Code section 416(g), together with the regulations and rulings
thereunder.
12.3 Special Vesting Rule.
Unless section 5.1 provides for faster vesting, the amount credited
to the Participant's Company Contributions Account shall vest in accordance
with the following schedule during any top-heavy Plan Year:
Completed Years of Service Vested Percentage
fewer than 2 0
2 20
3 40
4 60
5 80
6 or more 100
12.4 Special Minimum Contribution.
Notwithstanding the provisions of section 3.1 and Article IV to the
contrary, in every top-heavy Plan Year, a minimum allocation is required for
each Non-Key Employee who both (a) performed one or more Hours of Service
during the Plan Year as a Covered Employee after satisfying any eligibility
requirement of section 2.1, and (b) was an Employee on the last day of the Plan
Year. This minimum allocation is required regardless of whether such Non-Key
Employee made any required contributions to the Plan for such Plan Year. The
minimum allocation shall be a percentage of such Non-Key Employee's
Compensation. The percentage shall be the lesser of 3% or the largest
percentage of any Key Employee's Compensation contributed to the Plan. For
Non-Key Employees, this percentage takes into account all Company Contributions
and forfeitures, except for amounts used to restore the Accounts of a rehired
or missing Participant, allocated for the Plan Year; however, any Company
Matching Contributions for purposes of the ADP, ACP, and multiple use tests of
sections 3.5, 3.6, and 3.7, but shall be treated as Company Mandatory
Contributions for purposes of the Code section 401(a)(4) discrimination test.
For Key Employees, the percentage takes into account all Company Matching
Contributions and forfeitures, except for amounts used to restore the Accounts
of a rehired or missing Participant, allocated for the Plan Year, and the
Participant's Participant Before-Tax Contributions for the Plan Year. If this
minimum allocation is not satisfied for any Non-Key Employee, the Company shall
contribute the additional amount needed to satisfy this requirement to such
Non-Key Employee's Participant Before-Tax Contributions Account, if the Non-Key
Employee is a Non-Highly Compensated Employee, or if the Non-Key Employee is a
Highly Compensated Employee, to his or her Company Contributions Account.
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12.5 Change in Top-Heavy Status.
If the Plan ceases to be a "top-heavy" plan as defined in this Article
XII, and if any change in the benefit structure, vesting schedule or other
component of a Participant's accrued benefit shall occur as a result of such
change in top-heavy status, the nonforfeitable portion of each Participant's
benefit attributable to Company Contributions shall not be decreased as a
result of such change. In addition, each Participant with at least three Years
of Service with the Company and Affiliated Entities on the date of such change,
may elect to have the nonforfeitable percentage computed under the Plan without
regard to such change in status. The period during which the election may be
made shall commence on the date the Plan ceases to be a top-heavy plan and
shall end on the later of (a) 60 days after the change in status occurs, (b) 60
days after the change in status becomes effective, or (c) 60 days after the
Participant is issued written notice of the change by the Company or the
Committee.
ARTICLE XIII
MISCELLANEOUS
13.1 RIGHT TO DISMISS EMPLOYEES - NO EMPLOYMENT CONTRACT.
THE COMPANY AND AFFILIATED ENTITIES MAY TERMINATE THE EMPLOYMENT OF
ANY EMPLOYEE AS FREELY AND WITH THE SAME EFFECT AS IF THIS PLAN WERE NOT IN
EXISTENCE. PARTICIPATION IN THIS PLAN BY AN EMPLOYEE SHALL NOT CONSTITUTE AN
EXPRESS OR IMPLIED CONTRACT OF EMPLOYMENT BETWEEN THE COMPANY OR AN AFFILIATED
ENTITY AND THE EMPLOYEE.
13.2 Claims Procedure.
(a) All claims shall be filed in writing by the Participant, the
Participant's beneficiary, or the authorized representative of the claimant, by
completing any procedures that the Committee requires. These procedures shall
be reasonable and may include the completion of forms and the submission of
documents and additional information. For purposes of this section, a request
for an in-service withdrawal shall be considered a claim.
(b) The Committee shall review all materials and shall decide
whether to approve or deny the claim. If a claim is denied in whole or in
part, written notice of denial shall be furnished by the Committee to the
claimant within 90 days after the receipt of the claim by the Committee, unless
special circumstances require an extension of time for processing the claim, in
which event notification of the extension shall be provided to the claimant and
the extension shall not exceed 90 days. The written notice shall set forth the
specific reasons for such denial, specific reference to pertinent Plan
provisions, a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such material
or information is necessary, all written in a manner calculated to be
understood by the claimant. The notice shall include appropriate information
as to the steps taken if the claimant wishes to submit the denied claim for
review. The claimant may request a review upon written application, may review
pertinent documents, and may submit issues or comments in writing. The
claimant must request a review within the reasonable period of time prescribed
by the Committee. In no event shall such a period of time be less than 60
days. The Committee shall decide all reviews of denied claims. A decision on
review shall be rendered within 60 days of the receipt of request for review by
the Committee. If special circumstances require a further extension of time
for processing, a decision shall be rendered not later than 120 days following
the Committee's receipt of the request for review. If such an extension of
time for review is required, written notice of the extension shall be furnished
to the claimant prior to the commencement of the extension. The Committee's
decision on review shall be furnished to the claimant. Such decision shall be
in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, as well as specific
references to the pertinent Plan provisions on which the decision is based.
(c) The Committee shall have total discretionary authority to
determine eligibility, status, and the rights of all individuals under the Plan
and to construe any and all terms of the Plan.
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13.3 Source of Benefits.
All benefits payable under the Plan shall be paid solely from the
Trust Fund, and the Company and Affiliated Entities assume no liability or
responsibility therefor.
13.4 Exclusive Benefit of Employees.
It is the intention of the Company that no part of the Trust, other
than as provided in sections 3.3, 9.2, and 13.9 hereof and the Trust Agreement,
ever to be used for or diverted for purposes other than for the exclusive
benefit of Participants, Alternate Payees, and their beneficiaries, and that
this Plan shall be construed to follow the spirit and intent of the Code and
ERISA.
13.5 Forms of Notices.
Wherever provision is made in the Plan for the filing of any notice,
election, or designation by a Participant, Spouse, Alternate Payee, or
beneficiary, the action of such individual shall be evidenced by the execution
of such form as the Committee may prescribe for the purpose.
13.6 Failure of Any Other Entity to Qualify.
If any entity adopts this Plan but fails to obtain or retain the
qualification of the Plan under the applicable provisions of the Code, such
entity shall withdraw from this Plan upon a determination by the Internal
Revenue Service that it has failed to obtain or retain such qualification.
Within 30 days after the date of such determination, the assets of the Trust
Fund held for the benefit of the Employees of such entity shall be separately
accounted for and disposed of in accordance with the Plan and Trust.
13.7 Notice of Adoption of the Plan.
The Company shall provide each of its Employees with notice of the
adoption of this Plan, notice of any amendments to the Plan, and notice of the
salient provisions of the Plan prior to the end of the first Plan Year. A
complete copy of the Plan shall also be made available for inspection by
Employees or any other individual with an Account balance under the Plan.
13.8 Plan Merger.
If this Plan is merged or consolidated with, or its assets or
liabilities are transferred to, any other qualified plan of deferred
compensation, each Participant shall be entitled to receive a benefit
immediately after the merger, consolidation, or transfer that is equal to or
greater than the benefit the Participant would have been entitled to receive
immediately before the merger, consolidation, or transfer if this Plan had then
been terminated.
13.9 Inalienability of Benefits - Domestic Relations Orders.
(a) Except as provided in section 7.2, relating to Plan loans, and
subsection (b) below, no Participant or beneficiary shall have any right to
assign, alienate, transfer, or encumber his or her interest in any benefits
under this Plan, nor shall such benefits be subject to any legal process to
levy upon or attach the same for payment of any claim against any such
Participant or beneficiary.
(b) Subsection (a) shall apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
pursuant to a Domestic Relations Order unless such Domestic Relations Order is
a QDRO, in which case the Plan shall make payment of benefits in accordance
with the applicable requirements of any such QDRO.
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(c) In order to be a QDRO, the Domestic Relations Order must
satisfy the requirements of Code section 414(p) and ERISA section 206(d)(3).
In particular, the Domestic Relations Order: (i) must specify the name and the
last known mailing address of the Participant; (ii) must specify the name and
mailing address of each Alternate Payee covered by the order; (iii) must
specify either the amount or percentage of the Participant's benefits to be
paid by the Plan to each such Alternate Payee, or the manner in which such
amount or percentage is to be determined; (iv) must specify the number of
payments or period to which such order applies; (v) must specify each plan to
which such order applies; (vi) may not require the Plan to provide any type or
form of benefit, or any option, not otherwise provided under the Plan, subject
to the provisions of subsection (f); (vii) may not require the Plan to provide
increased benefits (determined on the basis of actuarial value); and (viii) may
not require the payment of benefits to an Alternate Payee if such benefits have
already been designated to be paid to another Alternate Payee under another
order previously determined to be a QDRO.
(d) In the case of any payment before an Employee has separated
from service, a Domestic Relations Order shall not be treated as failing to
meet the requirements of subsection (c) solely because such order requires that
payment of benefits be made to an Alternate Payee (i) on or after the dates
specified in subsection (f), (ii) as if the Employee had retired on the date on
which such payment is to begin under such order (but taking into account only
the Account balance on such date), and (iii) in any form in which such benefits
may be paid under the Plan to the Employee. For purposes of this subsection,
the Account balance as of the date specified in the QDRO shall be the vested
portion of the Employee's Account(s) on such date.
(e) The Committee shall establish reasonable procedures to
determine the qualified status of Domestic Relations Orders and to administer
distributions under QDROs. Such procedures shall be in writing and shall
permit an Alternate Payee to designate a representative to receive copies of
notices. The Committee shall temporarily prevent the Participant from
borrowing from his or her Accounts and shall temporarily suspend distributions
and withdrawals from the Participant's Accounts, except to the extent necessary
to make the required minimum distributions under Code section 401(a)(9), when
the Committee receives a Domestic Relations Order or a draft of such an order
that affects the Participant's Accounts or when one of the following
individuals informs the Committee, orally and in writing, that a QDRO is in
process or may be in process: the Participant, a prospective Alternate Payee,
or counsel for the Participant or a prospective Alternate Payee. The Committee
shall promulgate reasonable and non-discriminatory rules regarding such
suspensions, including but not limited to how long such suspensions remain in
effect. However, the Participant may borrow such amounts from the Plan,
subject to the limits of section 7.2, and the Participant may receive such
distributions and withdrawals from the Plan, subject to the rules of Articles
VI and VII, as are consented to in writing by all prospective Alternate Payees
identified in the Domestic Relations Order or, in the absence of a Domestic
Relations Order, as are consented to in writing by the prospective Alternate
Payee(s) who informed the Committee that a QDRO was in process or may be in
process. When the Committee receives a Domestic Relations Order it shall
promptly notify the Participant and each Alternate Payee of such receipt and
provide them with copies of the Plan's procedures for determining the qualified
status of the order. Within a reasonable period after receipt of a Domestic
Relations Order, the Committee shall determine whether such order is a QDRO and
notify the Participant and each Alternate Payee of such determination. During
any period in which the issue of whether a Domestic Relations Order is a QDRO
is being determined (by the Committee, by a court of competent jurisdiction, or
otherwise), the Committee shall separately account for the amounts payable to
the Alternate Payee if the order is determined to be a QDRO. If the order (or
modification thereof) is determined to be a QDRO within 18 months after the
date the first payment would have been required by such order, the Committee
shall pay the amounts separately accounted for (plus any interest thereon) to
the individual(s) entitled thereto. However, if the Committee determines that
the order is not a QDRO, or if the issue as to whether such order is a QDRO has
not been resolved within 18 months after the date of the first payment would
have been required by such order, then the Committee shall pay the amounts
separately accounted for (plus any interest thereon) to the individual(s) who
would have been entitled to such amounts if there had been no order. Any
determination that an order is a QDRO that is made after the close of the
18-month period shall be applied prospectively only. If the Plan's fiduciaries
act in accordance with fiduciary provision of ERISA in treating a Domestic
Relations Order as being (or not being) a QDRO or in taking action in
accordance with this subsection, then the Plan's obligation to the Participant
and each Alternate Payee shall be discharged to the extent of any payment made
pursuant to the acts of such fiduciaries.
(f) The Alternate Payee shall have the following rights under the
Plan:
(i) An Alternate Payee shall receive a lump sum
distribution of his or her Plan assets as soon as administratively
practicable after the Committee determines that the Domestic Relations
Order
38
<PAGE> 44
is a QDRO. If the Alternate Payee dies before the distribution is
made, the distribution shall be paid to the Alternate Payee's
beneficiary, as determined in subsection 6.1(a).
(ii) If the Alternate Payee cannot receive an immediate
distribution of his or her entire interest in the Plan (which would
occur if the Alternate Payee is awarded more than the distributable
amount in section 6.3), then the Alternate Payee's remaining interest
in the Plan shall be distributed as soon as administratively
practicable, in annual lump sums of the distributable amount. Upon
the Alternate Payee's death, his or her interest in the Plan shall be
distributed in a lump sum as soon as practicable to the Alternate
Payee's beneficiary, as determined in subsection 6.1(a).
(iii) Distribution to an Alternate Payee must occur on or
before the Participant's Required Beginning Date.
(iv) The Alternate Payee may bring claims against the Plan
in the same manner as a Participant pursuant to section 13.2.
13.10 Payments Due Minors or Incapacitated Individuals.
If any individual entitled to payment under the Plan is a minor, the
Committee shall cause the payment to be made to the custodian or representative
who, under the state law of the minor's domicile, is authorized to receive
funds on behalf of the minor. If any individual entitled to payment under this
Plan has been legally adjudicated to be mentally incompetent or incapacitated,
the Committee shall cause the payment to be made to the custodian or
representative who, under the state law of the incapacitated individual's
domicile, is authorized to receive funds on behalf of the incapacitated
individual. Payments made pursuant to such power shall operate as a complete
discharge of the Trust Fund, the Trustee, and the Committee.
13.11 Uniformity of Application.
The provisions of this Plan shall be applied in a uniform and
non-discriminatory manner in accordance with rules adopted by the Committee,
which rules shall be systematically followed and consistently applied so that
all individuals similarly situated shall be treated alike.
13.12 Disposition of Unclaimed Payments.
Each Participant, Alternate Payee, or beneficiary with an Account
balance in this Plan must file with the Committee from time to time in writing
his or her address, the address of each beneficiary (if applicable), and each
change of address. Any communication, statement, or notice addressed to such
individual at the last address filed with the Committee (or if no address is
filed with the Committee then at the last address as shown on the Company's
records) will be binding on such individual for all purposes of the Plan.
Neither the Committee nor the Trustee shall be required to search for or locate
any missing individual. If the Committee notifies an individual that he or she
is entitled to a distribution and also notifies him or her that a failure to
respond may result in a forfeiture of benefits, and the individual fails to
claim his or her benefits under the Plan or make his or her address known to
the Committee within a reasonable period of time after the notification, then
the benefits under the Plan of such individual shall be forfeited. Any amount
forfeited pursuant to this section shall be allocated pursuant to section 5.5.
If the individual should later make a claim for this forfeited amount, the
Company shall, if the Plan is still in existence, make a special contribution
to the Plan equal to the forfeiture, and such amount shall be distributed to
the individual; if the Plan is not then in existence, the Company shall pay the
amount of the forfeiture to the individual.
13.13 Applicable Law.
This Plan shall be construed and regulated by ERISA, the Code, and,
unless otherwise specified herein and to the extent applicable, the laws of the
State of Texas, excluding any conflicts-of-law provisions.
39
<PAGE> 45
ARTICLE XIV
MATTERS AFFECTING COMPANY STOCK
14.1 Voting, Etc.
The shares of Company Stock in Accounts, whether or not vested, may be
voted by the Account Owner to the same extent as if duly registered in the
Account Owner's name. The Trustee or its nominee in which the shares are
registered shall vote the shares solely as agent of the Account Owner and in
accordance with the instructions of the Account Owner. If no instructions are
received, the Trustee shall vote the shares of company Stock for which it has
received no voting instructions in the same proportions as the Account Owners
affirmatively directed their shares of Company Stock to be voted unless the
Trustee determines that a pro rata vote would be inconsistent with its
fiduciary duties under ERISA. If the Trustee makes such a determination, the
Trustee shall vote the Company Stock as it determines to be consistent with its
fiduciary duties under ERISA. Each Account Owner who has Company Stock
allocated to his or her Accounts shall direct the Trustee concerning the tender
(as provided below) and the exercise of any other rights appurtenant to the
Company Stock. The Trustee shall follow the directions of the Account Owner
with respect to the tender.
14.2 Notices.
Apache shall cause to be mailed or delivered to each Account Owner
copies of all notices and other communications sent to the Apache shareholders
at the same times so mailed or delivered by Apache to its other shareholders.
14.3 Retention/Sale of Company Stock and Other Securities.
The Trustee is authorized and directed to retain the Company Stock and
any other Apache securities acquired by the Trust except as follows:
(a) In the normal course of Plan administration, the Trustee shall
sell Company Stock to satisfy Plan administration and distribution requirements
as directed by the Committee or in accordance with provisions of the Plan
specifically authorizing such sales.
(b) In the event of a transaction involving the Company Stock
evidenced by the filing of Schedule 14D-1 with the Securities and Exchange
Commission ("SEC") or any other similar transaction by which any person or
entity seeks to acquire beneficial ownership of 50% or more of the shares of
Company Stock outstanding and authorized to be issued from time to time under
Apache's articles of incorporation ("tender offer"), the Trustee shall sell,
convey, or transfer Company Stock pursuant to written instructions of Account
Owners delivered to the Trustee in accordance with the following sections 14.4
through 14.15. For purposes of such provisions, the term "filing date" means
the date relevant documents concerning a tender offer are filed with the SEC
or, if such filing is not required, the date the Trustee receives actual notice
that a tender offer has commenced.
(c) If Apache makes any distribution of Apache securities with
respect to the shares of Company Stock held in the Plan, other than additional
shares of Company Stock (any such securities are hereafter referred to as
"stock rights"), the Trustee shall sell, convey, transfer, or exercise such
stock rights pursuant to written instructions of Account Owners delivered to
the Trustee in accordance with the following sections of this Article.
14.4 Tender Offers.
(a) Allocated Stock. In the event of any tender offer, each
Account Owner shall have the right to instruct the Trustee to tender any or all
shares of Company Stock, whether or not vested, that are allocated to his or
her Accounts under the Plan on or before the filing date. The Trustee shall
follow the instructions of the Account Owner. The Trustee shall not tender any
Company Stock for which no instructions are received.
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<PAGE> 46
(b) Unallocated Stock. The Trustee shall tender all shares of
Company Stock that are not allocated to Accounts in the same proportion as the
Account Owners directed the tender of Company Stock allocated to their Accounts
unless the Trustee determines that a pro rata tender would be inconsistent with
its fiduciary duties under ERISA. If the Trustee makes such a determination,
the Trustee shall tender or not tender the unallocated Company Stock as it
determines to be consistent with its fiduciary duties under ERISA.
(c) Suspension of Share Purchases. In the event of a tender
offer, the Trustee shall suspend all purchases of Company Stock pursuant to the
Plan unless the Committee otherwise directs. Until the termination of such
tender offer and pending such Committee direction, the Trustee shall invest
available cash pursuant to the applicable provisions of the Plan and the Trust
Agreement.
(d) Temporary Suspension of Certain Cash Distributions.
Notwithstanding anything in the Plan to the contrary, no option to receive cash
in lieu of Company Stock shall be honored during the pendency of a tender offer
unless the Committee otherwise directs.
14.5 Stock Rights.
(a) General. If Apache makes a distribution of stock rights with
respect to the Company Stock held in the Plan and if the stock rights become
exercisable or transferable (the date on which the stock rights become
exercisable or transferable shall be referred to as the "exercise date"), each
Account Owner shall determine whether to exercise the stock rights, sell the
stock rights, or hold the stock rights allocated to his or her Accounts. The
provisions of this section shall apply to all stock rights received with
respect to Company Stock held in Accounts, whether or not the Company Stock
with respect to which the stock rights were issued are vested.
(b) Independent Fiduciary. The Independent Fiduciary provided for
in this section 14.15 below shall act with respect to the stock rights. All
Account Owner directions concerning the exercise or disposition of the stock
rights shall be given to the Independent Fiduciary, who shall have the sole
responsibility of assuring that the Account Owners' directions are followed.
(c) Exercise of Stock Rights. If, on or after the exercise date,
an Account Owner wishes to exercise all or a portion of the stock rights
allocated to his or her Accounts, the Independent Fiduciary shall follow the
Account Owner's direction to the extent that there is cash or other liquid
assets available in his or her Accounts to exercise the stock rights.
Notwithstanding any other provision of the Plan, each Account Owner who has
stock rights allocated to his or her Accounts shall have a period of five
business days following the exercise date in which he or she may give
instructions to the Committee to liquidate any of the assets held in his or her
Accounts (except shares of Company Stock or assets such as guaranteed
investment contracts or similar investments), but only if he or she does not
have sufficient cash or other liquid assets in his or her Accounts to exercise
the stock rights. The liquidation of any necessary investments pursuant to an
Account Owner's direction shall be accomplished as soon as reasonably
practicable, taking into account any timing restrictions with respect to the
investment funds involved. The cash obtained shall be used to exercise the
stock rights, as the Account Owner directs. Any cash that is not so used shall
be invested in a cash equivalent until the next date on which the Account Owner
may change his or her investment directions under the Plan.
(d) Sale of Stock Rights. On and after the exercise date, the
Independent Fiduciary shall sell all or a portion of the stock rights allocated
to Accounts, as the Account Owner shall direct.
14.6 Other Rights Appurtenant to the Company Stock.
If there are any rights appurtenant to the Company Stock, other than
voting, tender, or stock rights, each Account Owner shall exercise or take
other appropriate action concerning such rights with respect to the Company
Stock, whether or not vested, that is allocated to their Accounts in the same
manner as the other holders of the Company Stock, by giving written
instructions to the Trustee. The Trustee shall follow all such instructions,
but shall take no action with respect to allocated Company Stock for which no
instructions are received. The Trustee shall exercise or take other
appropriate action concerning any such rights appurtenant to unallocated
Company Stock.
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<PAGE> 47
14.7 Information to Trustee.
Promptly after the filing date, the exercise date, or any other event
that requires action with respect to the Company Stock, the Committee shall
deliver or cause to be delivered to the Trustee or the Independent Fiduciary,
as appropriate, a list of the names and addresses of Account Owners showing
(i) the number of shares of Company Stock allocated to each Account Owner's
Accounts under the Plan, (ii) each Account Owner's pro rata portion of any
unallocated Company Stock, and (iii) each Account Owner's share of any stock
rights distributed by Apache. The Committee shall date and certify the
accuracy of such information, and such information shall be updated
periodically by the Committee to reflect changes in the shares of Company Stock
and other assets allocated to Accounts.
14.8 Information to Account Owners.
The Trustee or the Independent Fiduciary, as appropriate, shall
distribute and/or make available to each affected Account Owner the following
materials:
(a) A copy of the description of the terms and conditions of any
tender offer filed with the SEC on Schedule 14D-1, or any similar materials if
such filing is not required, any material distributed to shareholders generally
with respect to the stock rights, and any proxy statements and any other
material distributed to shareholders generally with respect to any action to be
taken with respect to the Company Stock.
(b) If requested by Apache, a statement from Apache's management
setting forth its position with respect to a tender offer that is filed with
the SEC on Schedule 14D-9 and/or a communication from Apache given pursuant to
17 C.F.R. 240.14d-9(e), as amended.
(c) An instruction form prepared by Apache and approved by the
Trustee or the Independent Fiduciary, to be used by an Account Owner who wishes
to instruct the Trustee to tender Company Stock in response to the tender
offer, to instruct the Independent Fiduciary to sell or exercise stock rights,
or to instruct the Trustee or Independent Fiduciary with respect to any other
action to be taken with respect to the Company Stock. The instruction form
shall state that (i) if the Account Owner fails to return an instruction form
to the Trustee by the indicated deadline, the Trustee will not tender any
shares of Company Stock the Account Owner is otherwise entitled to tender, (ii)
the Independent Fiduciary will not sell or exercise any right allocated to the
Account except upon the written direction of the Account Owner, (iii) the
Trustee or Independent Fiduciary will not take any other action that the
Account Owner could have directed, and (iv) Apache acknowledges and agrees to
honor the confidentiality of the Account Owner's directions to the Trustee.
(d) Such additional material or information as the Trustee or the
Independent Fiduciary may consider necessary to assist the Account Owner in
making an informed decision and in completing or delivering the instruction
form (and any amendments thereto) to the Trustee or the Fiduciary on a timely
basis.
14.9 Expenses.
The Trustee and the Independent Fiduciary shall have the right to
require payment in advance by Apache and the party making the tender offer of
all reasonably anticipated expenses of the Trustee and the Independent
Fiduciary, respectively, in connection with the distribution of information to
and the processing of instructions received from Account Owners.
14.10 Former Account Owners.
Apache shall furnish former Account Owners who have received
distributions of Company Stock so recently as to not be shareholders of record
with the information furnished pursuant to section 14.8. The Trustee and the
Independent Fiduciary are hereby authorized to take action with respect to the
Company Stock distributed to such former Account Owners in accordance with
appropriate instructions from them. If the Trustee does not receive
appropriate instructions, it shall take no action with respect to the
distributed Company Stock.
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<PAGE> 48
14.11 No Recommendations.
Neither the Committee, the Committee Fiduciary, the Trustee, nor the
Independent Fiduciary shall express any opinion or give any advice or
recommendation to any Account Owner concerning voting the Company Stock, any
tender offer, stock rights, or the exercise of any other rights appurtenant to
the Company Stock, nor shall they have any authority or responsibility to do
so. Neither the Trustee nor the Independent Fiduciary has any duty to monitor
or police the party making a tender offer or Apache in promoting or resisting a
tender offer; provided, however, that if the Trustee or the Independent
Fiduciary becomes aware of activity that on its face reasonably appears to the
Trustee or Independent Fiduciary to be materially false, misleading, or
coercive, the Trustee or the Independent Fiduciary, as the case may be, shall
promptly demand that the offending party take appropriate corrective action.
If the offending party fails or refuses to take appropriate corrective action,
the Trustee or the Independent Fiduciary, as the case may be, shall communicate
with affected Account Owners in such manner as it deems advisable.
14.12 Trustee to Follow Instructions.
(a) So long as the Trustee and the Independent Fiduciary, as the
case may be, have determined that the Plan is in compliance with ERISA section
404(c), the Trustee or the Independent Fiduciary shall tender, deal with stock
rights, and act with respect to any other rights appurtenant to the Company
Stock, pursuant to the terms and conditions of the particular transaction or
event, and in accordance with instructions received from Account Owners.
Except for voting, the Trustee or the Independent Fiduciary shall take no
action with respect to Company Stock, stock rights, or other appurtenant rights
for which no instructions are received, and such Company Stock, stock rights,
or other appurtenant rights shall be treated like all other Company Stock,
stock rights, or other appurtenant rights for which no instructions are
received. The Trustee, or if an Independent Fiduciary has been appointed, the
Independent Fiduciary, shall vote the allocated Company Stock that an Account
Owner does not vote as specified in section 14.1.
(b) If the Trustee or Independent Fiduciary determines that the
Plan does not satisfy the requirements of ERISA section 404(c), the Trustee or
Independent Fiduciary shall follow the instructions of the Account Owner with
respect to voting, tender, stock rights, or other rights appurtenant to the
Company Stock unless the Trustee or Independent Fiduciary determines that to do
so would be inconsistent with its fiduciary duties under ERISA. In such case,
the Trustee or the Independent Fiduciary shall take such action as it
determines to be consistent with its fiduciary duties under ERISA.
14.13 Confidentiality.
(a) The Committee shall designate one of its members (the
"Committee Fiduciary") to receive investment directions and to transmit such
directions to the Trustee or Independent Fiduciary, as the case may be. The
Committee Fiduciary shall also receive all Account Owner instructions
concerning voting, tender, stock rights, and other rights appurtenant to the
Company Stock. The Committee Fiduciary shall communicate the instructions to
the Trustee or the Fiduciary, as appropriate.
(b) Neither the Committee Fiduciary, the Trustee, nor the
Independent Fiduciary shall reveal or release any instructions received from
Account Owners concerning the Company Stock to Apache, an Affiliated Entity, or
the officers, directors, employees, agents, or representatives of Apache and
Affiliated Entities, except to the extent necessary to comply with Federal or
state law not preempted by ERISA. If disclosure is required by Federal or
state law, the information shall be disclosed to the extent possible in the
aggregate rather than on an individual basis.
(c) The Committee Fiduciary shall be responsible for reviewing the
confidentiality procedures from time to time to determine their adequacy. The
Committee Fiduciary shall ensure that the confidentiality procedures are
followed. The Committee Fiduciary shall also ensure that the Independent
Fiduciary provided for in section 14.15 is appointed.
(d) Apache, with the Trustee's cooperation, shall take such action
as is necessary to maintain the confidentiality of Account records including,
without limitation, establishment of security systems and procedures which
restrict access to Account records and retention of an independent agent to
maintain such records. If an independent recordkeeping agent is retained, such
agent must agree, as a condition of its retention by Apache, not to disclose
the
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<PAGE> 49
composition of any Accounts to Apache, an Affiliated Entity or an officer,
director, employee, or representative of Apache or an Affiliated Entity.
(e) Apache acknowledges and agrees to honor the confidentiality of
the Account Owners' instructions to the Committee Fiduciary, the Trustee, and
the Independent Fiduciary. If Apache, by it own act or omission, breaches the
confidentiality of Account Owner instructions, Apache agrees to indemnify and
hold harmless the Committee Fiduciary, the Trustee, or the Independent
Fiduciary, as the case may be, against and from all liabilities, claims and
demands, damages, costs, and expenses, including reasonable attorneys' fees,
that the Committee Fiduciary, the Trustee, or the Independent Fiduciary may
incur as a result thereof.
14.14 Investment of Proceeds.
If Company Stock or the rights are sold pursuant to the tender offer
or the provisions of the rights, the proceeds of such sale shall be invested in
accordance with the provisions of the Plan and the Trust Agreement.
14.15 Independent Fiduciary.
Apache shall appoint a fiduciary (the "Independent Fiduciary") to act
solely with respect to the Company Stock in situations which the Committee
Fiduciary determines involve a potential for undue influence by Apache in
connection with the Company Stock and the exercise of any rights appurtenant to
the Company Stock. If the Committee Fiduciary so determines, it shall give
written notice to the Independent Fiduciary, which shall have sole
responsibility for assuring that Account Owners receive the information
necessary to make informed decisions concerning the Company Stock, are free
from undue influence or coercion, and that their instructions are followed to
the extent proper under ERISA. The Independent Fiduciary shall act until it
receives written notice to the contrary from the Committee Fiduciary.
APACHE CORPORATION
Date: 12-22-94 By: /s/ Roger B. Rice
Its: Vice President, Human Resources
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<PAGE> 50
APPENDIX A
PARTICIPATING COMPANIES
The following Affiliated Entities were actively participating in the Plan as of
the following dates:
<TABLE>
<CAPTION>
Business Participation Participation
Began As Of Ended As Of
<S> <C> <C>
Apache International, Inc. September 22, 1987 N/A
Hadson Energy Resources Corporation January 1, 1994 N/A
Apache Energy Limited (known as January 1, 1994 N/A
Hadson Energy Limited before
January 1, 1995)
</TABLE>
- - END OF APPENDIX A --
A-1
<PAGE> 51
APPENDIX B
HADSON ENERGY RESOURCES CORPORATION
Introduction
Through a merger effective November 12, 1993, Apache now holds 100% of
the capital stock of Hadson Energy Resources Corporation ("HERC"). HERC and
its wholly owned subsidiary, Hadson Energy Limited ("HEL"), maintained the
Hadson Energy Resources Corporation Employee 401(k) Plan (the "HERC Plan"), a
profit sharing plan containing a cash or deferred arrangement. The HERC Plan
was terminated as of profit sharing plan containing a cash or deferred
arrangement. The HERC Plan was terminated as of December 31, 1993. Amounts
will be transferred from the HERC Plan to this Plan as soon as administratively
feasible after the Internal Revenue Service issues a favorable ruling with
respect to the termination of the HERC Plan. The transferred amounts will be
accounted for separately, and different distributional options will apply to
them, as described below. In addition, HERC and HEL have adopted this Plan,
and Apache has approved their adoption, as of January 1, 1994 for HERC's and
HEL's eligible employees. The employees will be given credit in this Plan, for
vesting and eligibility purposes, for their prior service with HERC and HEL.
This Appendix is intended to encompass all the protected benefits and
optional forms of benefit, as required by Code section 411(d)(6), with respect
to amounts transferred from the HERC Plan and shall be interpreted consistently
with that intent.
Capitalized terms in this Appendix have the same meanings as those
given to them in the Plan.
Service
This Appendix applies to all individuals who are common-law employees
of HERC or HEL ("Current HERC Employees") as of January 1, 1994. A Period of
Service for a Current HERC Employee shall include any periods of employment
before January 1, 1994 with HERC, HEL, and any of HERC's subsidiaries.
Participation
Notwithstanding sections 2.1 and 3.1, a Current HERC Employee who is a
Covered Employee shall be eligible to begin to make Participant Before-Tax
Contributions, and shall be eligible to participate in the Plan with respect to
the 6% Company Mandatory Contribution, on January 1, 1994.
Transfer of Accounts
The Trustee is authorized to accept the direct transfer of all assets
from the trustee of the HERC Plan. The assets may be transferred in kind or in
cash, as determined by the Committee. The Trustee shall accept a direct
transfer of any participant loan from the HERC Plan; such loan shall continue
to be administered according to the terms of its promissory note. The
Committee shall establish such procedures, rules, and regulations as it deems
necessary or appropriate to accommodate the transfer of assets. The Trustee
shall separately account for all assets directly transferred to this Plan. The
Trustee shall establish the following accounts for each individual whose
account(s) are transferred to this Plan: a Voluntary Contribution Account
(containing participant after-tax contributions and the investment earnings
thereon); a Salary Deferral Account (containing participant before-tax
contributions and the investment earnings thereon); a Salary Deferral Account
(containing qualified non-elective contributions, qualified matching
contributions, and the investment earnings thereon); and a HERC Contributions
Account (containing the employer's matching contributions, the employer's
discretionary contributions, and the investment earnings thereon)
(collectively, the "HERC Accounts").
Amounts transferred to this Plan from the HERC Plan cannot be
borrowed, and cannot be used as security for any loan from this Plan.
B-1
<PAGE> 52
Distributions
Unless waived in writing by the Participant or their beneficiary after
such person becomes entitled to a distribution from the Plan by reason of a
Participant's death, Disability, retirement, or other termination of employment
with the Company, or a termination or partial termination of the Plan, then in
addition to and notwithstanding any other provisions of the Plan, the
Participant or other beneficiary shall have the right to receive his or her
vested interest in the balance of his or her HERC Accounts in the following
optional forms and the at the following times.
To the extent that this Appendix does not provide for an alternative
or contrary requirement or procedure for distribution of a Participant's HERC
Account, the provisions of the Plan shall control. For example, all of the
consent and beneficiary designation provisions of the Plan govern the
distribution of HERC Accounts to the extent not inconsistent with the annuity
requirements below, and all distributions are subject to the direct rollover
rules of section 6.6.
Whether or not specifically stated hereinafter, the following
provisions apply only to the HERC Account balances.
1. Death or Disability.
Distributions pursuant to the Plan provisions control in the case of
distributions as a result of death or Disability, except to the extent that the
annuity requirements below are applicable, and except that installment payments
are not available.
2. Other than Death or Disability.
Distributions for reasons other than the Participant's death or
Disability shall be made in accordance with the following:
A Participant who has attained age 59-1/2 may withdraw any vested
amount from his or her HERC Accounts at any time, regardless of whether the
Participant has terminated employment with HERC.
A Participant may elect to withdraw any vested amount from his or her
HERC Accounts at any time after separating from service (within the meaning of
Code section 401(k)(2)(B)(i)(I)) with Apache, HERC, and all Affiliated
Entities.
A Participant may elect to withdraw any amount from his or her
Voluntary Contributions Account at any time, regardless of whether the
Participant has terminated employment with HERC.
A Participant younger than 59-1/2 who has not separated from service
with Apache, HERC, and Affiliated Entities, may make a hardship withdrawal from
his or her Salary Deferral Account under the same terms and conditions
described in section 7.1(b) of the Plan.
Notwithstanding any of the foregoing early distribution options, a
Participant whose vested interest in his or her HERC Account balances are
distributed pursuant to one of the options contained in this paragraph 2 shall
forfeit his or her nonvested interest in his or her HERC Account balances only
as of the last day of the Plan Year in which the Participant incurs a one-year
Lapse in Apache Employment.
All distributions made pursuant to this paragraph 2 shall be made in a
manner consistent with, and satisfies the provisions of, paragraphs 3 and 4
below, including, but not limited to, all notice and consent requirements of
Code sections 417 and 411(a)(11) and the Treasury Regulations thereunder.
3. Qualified Single Life or Joint and Survivor Annuity.
Paragraph 3 shall apply only to a Participant who elects to receive an
annuity.
B-2
<PAGE> 53
(a) Eligibility and Conditions. Unless the Participant elects, as
provided in 3(c), not to receive benefits in the form of a qualified joint and
survivor annuity, benefits attributable to HERC Account balances will be paid
in a form having the effect of a qualified joint and survivor annuity (as
defined in 3(b)(2)) with respect to any Participant who (1) is entitled to a
distribution, and (2) satisfies the marriage requirements provided in 3(d)(2).
In a similar fashion, if a Participant does not meet the marriage requirements,
such benefits will be paid in a form having the effect of a single life annuity
unless the Participant elects, similar to the election pursuant to 3(c) but
without the spousal consent requirement, to waive the life annuity.
(b) Definitions. As used in this paragraph
(1) Life Annuity. The term "life annuity" means an
annuity that provides retirement payments and requires the survival of the
Participant or the Participant's spouse as one of the conditions for any
payment or possible payment under the annuity.
(2) Qualified Joint and Survivor Annuity. The term
"qualified joint and survivor annuity" means an annuity for the life of the
Participant with a survivor annuity for the life of the Participant's spouse
which is one-half of the amount of the annuity payable during the joint lives
of the Participant and his or her spouse. A qualified joint and survivor
annuity shall be the actuarial equivalent of a life annuity for the life of the
Participant. The Committee shall direct the Trustee to apply the entire vested
amount in all of the Participant's HERC Accounts (whether vested before or upon
death, including the proceeds of insurance contract) to the purchase of an
annuity contract that satisfies all of the requirements of this paragraph 3 and
to distribute the contract to the Participant. Payments to the spouse of a
deceased Participant shall not be terminated or reduced because of such
spouse's remarriage.
(3) Normal Retirement Age. The term "normal retirement
age" means the Participant's 65th birthday.
(4) Annuity Starting Date. The term "annuity starting
date" means (i) the first day of the first period for which an amount is
payable as an annuity, whether by reason of retirement or by reason of
Disability, or (ii) in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which entitled the
Participant to such benefit.
(5) Day. The term "day" means a calendar day.
(c) Election Not to Take Joint and Survivor Annuity.
(1) In General. Each Participant may elect, at any time
during the election period described in 3(c)(3), not to receive a qualified
joint and survivor annuity. The election shall be in writing and clearly
indicate that the Participant is electing to receive all of his or her benefits
under the Plan in a form other than that of a qualified joint and survivor
annuity.
(2) Consent of Spouse. An election under 3(c)(1) above
shall not be effective unless (i) the Participant's spouse consents in writing
to the election, (ii) the election designates a beneficiary (or a form of
benefits) which may not be changed without spousal consent (or the consent of
the spouse expressly permits designation by the Participant without any
requirement of further consent by the spouse) and (iii) the spouse's consent
acknowledges the effect of the election and the consent is witnessed by a
Committee member or a notary public. The spouse's consent shall be filed with
the Committee at the same time that the Participant's election under 3(c)(1) is
filed with the Committee. If a spousal consent shall be filed together with
the Participant's election, the election shall take effect nevertheless it is
established to the satisfaction of the Committee that the Participant is not
married, the Participant's spouse cannot be located, or that other
circumstances prescribed in the Treasury Regulations exist. Any spousal
consent or establishment that spousal consent cannot be obtained shall be
effective only with respect to such spouse.
(3) Election Period. The Participant shall have an
election period which shall be a 90-day period ending on the annuity starting
date. If a Participant makes a request for additional information as provided
in 3(c)(4) below on or before the last day of the election period, the election
period shall be extended to the extent necessary to
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include the 90 calendar days immediately following the day the requested
additional information is personally delivered or mailed to the Participant.
(4) Information to be Provided by Plan Administrator.
(i) The Plan Administrator shall provide
to the Participants, at the time and in the manner specified
in 3(c)(4)(ii), the following information, as applicable to
the HERC Account balances under the Plan, written in
nontechnical language;
(A) A general explanation of the terms
and conditions of the qualified joint and survivor annuity;
the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity form of
benefit; the right of the Participant's spouse to consent to
any election to waive the joint and survivor annuity; the
right to revoke an election to waive; and the effect of such a
revocation; and
(B) A general explanation of the
relative financial effect on a Participant's annuity of the
election. Various methods may be used to explain such
relative financial effect, including information as to the
benefits the Participant would receive under the qualified
joint and survivor annuity stated as an arithmetic or
percentage reduction for a single life annuity; a table
showing the difference between a straight life annuity and a
qualified joint and survivor annuity in terms of a reduction
in dollar amounts or a table showing a percentage reduction
from the straight life annuity. The notice and explanation
required by this 3(c)(4)(i) must also inform the Participant
of the availability of the additional information specified in
3(c)(4)(iii) and how such information may be obtained.
(ii) The method or methods used to provide the
information may vary. If mail or personal delivery is used,
then, whether or not the information has been previously
provided, there must be a mailing or personal delivery of the
information by such time as to reasonably assure that it will
be received on a date that is no less than 30 days and no more
than 90 days before the annuity starting date. If a method
other than mail or personal delivery is used to provide
Participants with some or all of such information, it must be
a method that is reasonably calculated to reach the attention
of a Participant on or about the date prescribed in the
immediately preceding sentence and to continue to reach the
attention of such Participant during the election period
applicable to the Participant for which the information is
being provided (as, for example, by permanent posting,
repeated publication, etc.).
(iii) The Plan Administrator must furnish to a
particular Participant, upon a timely written request, a
written explanation in nontechnical language of the terms and
conditions of the qualified joint and survivor annuity and the
financial effect upon the particular Participant's annuity of
making any election under this paragraph. Such financial
effect shall be given in terms of dollars per annuity payment.
The Plan Administrator need not comply with more than one such
request made by a particular Participant. This explanation
must be personally delivered or mailed (first class mail,
postage prepaid) to the Participant within 30 days from the
date of the Participant's written request.
(5) Election is Revocable. Any election made under this
3(c) may be revoked in writing at any time during the specified election
period, and after such election has been revoked, another election under this
paragraph may be made at any time during the specified election period.
(6) Election by Surviving Spouse. The spouse of a
deceased Participant may elect to have the benefits attributable to HERC
Account balances paid in a form other than a survivor annuity. The Plan
Administrator must furnish to the spouse, within a reasonable amount of time
after a written request has been made by the spouse, a written explanation in
nontechnical language of the survivor annuity and any other form of payment
which may be selected. This explanation must state the financial effect (in
terms of dollars) of each form of payment. The Plan Administrator need not
respond to more than one such request.
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(d) Additional Plan Provisions.
(1) Claim for Benefits. As a condition precedent to the
payment of benefits, a Participant must express in writing to the Plan
Administrator the form in which he or she prefers benefits to be paid and
provide all the information reasonably necessary for the payment of such
benefits. However, if a Participant files a claim for benefits with the Plan
Administrator and provides the Plan Administrator with all the information
necessary for the payment of benefits but does not indicate a preference as to
the form for the payment of benefits, benefits attributable to HERC Account
balances must be paid in the form of a qualified joint and survivor annuity if
the Participant has attained normal retirement age unless such Participant has
made an effective election not to receive benefits in such form.
(2) Marriage Requirements.
(i) In General. A joint an survivor annuity
will be paid only if
(A) the Participant and his or her
spouse have been married to each other throughout a period of
one year ending on the annuity starting date; and
(B) the Participant shall notify the
Plan Administrator of his or her martial status within 30 days
after request is made for such information.
(ii) Special Rule. If a Participant marries
within one year before his or her annuity starting date and if
the Participant and such spouse have been married for at least
a one year period that ends on or before the Participant's
date of death, the Participant and such spouse shall be
treated as having been married throughout the one-year period
ending on the Participant's annuity starting date.
(3) Effect of Participant's Death on an Election or
Revocation of Election. The effect of an election or a revocation of an
election timely made under 3(c) shall not be altered by the death of the
Participant within any particular time period after such election or revocation
shall be made effective.
(e) Amount of Benefits. The amount of benefits shall be as
provided in 3(b).
(f) Commencement and Duration. The monthly surviving spouse's
benefit shall be payable to the spouse for life, beginning as of the first day
of the calendar month coincident with or next following the Participant's
death.
4. Qualified Preretirement Survivor Annuity.
Paragraph 4 shall apply only to a Participant who elects to receive an
annuity.
(a) Eligibility and Conditions. Unless the Participant elects,
as provided in 4(c), to waive death benefits in the form of a qualified
preretirement survivor annuity, death benefits attributable to HERC Account
balances will be paid in a form having the effect of a qualified preretirement
survivor annuity (as defined in paragraph 4(b)(2)) with respect to any
Participant who (1) dies prior to the annuity starting date, and (2) satisfies
the marriage requirement of 4(d).
(b) Definitions. As used in this paragraph
(1) Life Annuity. The term "life annuity" means an
annuity that provides retirement payments and requires the survival of the
Participant or the Participant's spouse as one of the conditions for any
payment or possible payment under the annuity.
(2) Qualified Preretirement Survivor Annuity. The term
"qualified preretirement survivor annuity" means an annuity for the life of the
surviving spouse of the Participant, which is the actuarial equivalent of 100%
of the Participant's HERC Account balance as of his or her
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<PAGE> 56
date of death. The Committee shall direct the Trustee to purchase an annuity
contract that satisfies all of the requirements of this paragraph 4 (provided
that the present value of the annuity contract is not less than 50% of the
Participant's vested amount in all of his or her HERC Accounts at his or her
date of death, whether vested before or upon death, including the proceeds of
insurance contracts) and to distribute the annuity contract to the surviving
spouse.
(3) Normal Retirement Age. The term "normal retirement
age" means the Participant's 65th birthday.
(4) Annuity Starting Date. The term "annuity starting
date" means (i) the first day of the first period for which an amount is
payable as an annuity, whether by reason of retirement or by reason of
Disability or (ii) in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which entitled the
Participant to such benefit.
(5) Day. The term "day" means a calendar day.
(c) Election to Waive Qualified Preretirement Survivor Annuity.
(1) In General.
(i) Each Participant may elect, during the
election period described in 4(c)(3), to waive the payment of
death benefits in the form of a qualified preretirement
survivor annuity.
(ii) The election shall be in writing and clearly
indicate that the Participant is electing to waive the payment
of death benefits in the form of a qualified preretirement
survivor annuity.
(2) Consent of Spouse. An election under 4(c)(1) shall
not be effective unless (i) the Participant's spouse consents in writing to the
election, (ii) the election designates a beneficiary (or a form of benefits)
which may not be changed without spousal consent (or the consent of the spouse
expressly permits the designations by the Participant without any requirement
of further consent by the spouse) and (iii) the spouse's consent acknowledges
the effect of the election and the consent is witnessed by a Committee member
or a notary public. The spouse's consent shall be filed with the Committee at
the same time that the Participant's election under 4(c)(1) is filed with the
Committee. If a spousal consent is not filed together with the Participant's
election, the election shall take effect nevertheless if it is established to
the satisfaction of the Committee that the Participant is not married, the
Participant's spouse cannot be located, or that other circumstances prescribed
in the Treasury Regulations exist. Any spousal consent or establishment that
spousal consent cannot be obtained shall be effective only with respect to such
spouse.
(3) Election Period. The Participant shall have an
election period which shall be a period that ends the later of (i) the period
beginning with the first day of the Plan Year in which the Participant attains
age 32 and ending with the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35, (ii) a reasonable time after the
individual becomes a Participant, (iii) a reasonable time after the joint and
survivor rules become effective to the Participant or (v) a reasonable time
after the Participant separates from service before attaining age 35.
(4) Information to be Provided by Plan Administrator.
(i) The Plan Administrator shall provide to the
Participants, at the time and in the manner specified in
4(c)(4), the following information, as applicable to the Plan,
written in nontechnical language:
(A) A general explanation of the
qualified preretirement survivor annuity; the Participant's
right to make, and the effect of, an election to waive the
preretirement survivor annuity form of death benefit; the
right of the Participant's spouse to consent to the election
to waive the preretirement survivor annuity; the right to
revoke an election to waive; and the effect of such a
revocation.
(B) A general explanation of the
relative financial effect on a Participant's death benefits of
the election. Various methods may be used to explain such
relative financial effect.
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(ii) The method or methods used to provide the
information may vary. If mail or personal delivery is used,
then, whether or not the information has been previously
provided, there must be a mailing personal delivery of the
information by such time as to reasonably assure that it will
be received within the period commencing with the first day of
the Plan Year in which the Participant attains age 32 and
ending with the last day of the Plan Year preceding the Plan
Year in which the Participant attains age 35. If a method
other than mail or personal delivery is used to provide
Participants with some or all of such information, it must be
a method that is reasonably calculated to reach the attention
of a Participant on or about the date prescribed in the
immediately preceding sentence and to continue to reach the
attention of such Participant during the election period
applicable to the Participant for which the information is
being provided (as, for example, be permanent posting,
repeated publication, etc.).
(5) Election is Revocable. Any election made under this
paragraph 4 may be revoked in writing at any time during the specified election
period, and after such election has been revoked, another election under this
paragraph may be made at any time during the specified election period.
(6) Election by Surviving Spouse. The surviving spouse
may elect to have benefits paid in a form other than a preretirement survivor
annuity. The Plan Administrator must furnish to the spouse, within a
reasonable amount of time after a written request has been made by the spouse,
a written explanation in nontechnical language of the preretirement survivor
annuity and any other form of payment that may be selected. The explanation
must state the financial effect (in terms of dollars) of each form of payment.
The Plan Administrator need not respond to more than one such request.
(d) Marriage Requirement. A preretirement survivor annuity will
be paid only if the Participant and his or her spouse have been married to each
other throughout a period of one year ending on the date of the Participant's
death.
(e) Amount of Benefits. The amount shall be as provided in 4(b).
(f) Commencement and Duration. The surviving spouse's benefit
shall be payable to the spouse for life, beginning as of the first day of the
calendar month coincident with or next following the Participant's death.
-- END OF APPENDIX B --
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APPENDIX C
CRYSTAL OIL COMPANY
Apache may enter into an asset purchase agreement with Crystal Oil
Company on or about December 31, 1994 (the "Closing Date"). Apache may hire
some employees of Crystal Oil Company on the Closing Date or within one week
after the Closing Date ("Ex-Crystal Employees"). This Appendix shall be
effective as of the Closing Date.
A Period of Service for an Ex-Crystal Employee shall include any
periods of employment with Crystal Oil Company and any business treated as a
single employer with Crystal Oil Company pursuant to Code section 414(b),
414(m), or 414(o).
Notwithstanding section 2.1 of the Plan, an Ex-Crystal Employee shall
be eligible to begin to make Participant Before-Tax Contributions, and shall be
eligible to participate in the Plan with respect to the 6% Company Mandatory
Contribution, on the date he or she becomes a Covered Employee.
--END OF APPENDIX C--
C-1
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EXHIBIT 10.13
APACHE CORPORATION
1995 STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1 - Introduction .................................................. 1
1.1 Establishment............................................... 1
1.2 Purposes ................................................... 1
1.3 Effective Date ............................................. 1
Section 2 - Definitions ................................................... 1
2.1 Definitions ................................................ 1
2.2 Headings; Gender and Number ................................ 2
Section 3 - Plan Administration .......................................... 3
Section 4 - Stock Subject to the Plan .................................... 3
4.1 Number of Shares .......................................... 3
4.2 Other Shares of Stock ..................................... 4
4.3 Adjustments for Stock Split, Stock Dividend, Etc. ......... 4
4.4 Dividend Payable in Stock of Another Corporation, Etc. .... 4
4.5 Other Changes in Stock .................................... 4
4.6 Rights to Subscribe ....................................... 5
4.7 General Adjustment Rules .................................. 5
4.8 Determination by the Committee, Etc. ...................... 5
Section 5 - Reorganization or Liquidation ................................ 5
Section 6 - Participation ................................................ 6
Section 7 - Stock Options ................................................ 6
7.1 Grant of Stock Options .................................... 6
7.2 Stock Option Agreements ................................... 7
7.3 Stockholder Privileges .................................... 10
Section 8 - Change in Control ............................................ 11
8.1 In General ................................................ 11
8.2 Limitation on Payments .................................... 11
8.3 Definition ................................................ 11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 9 - Rights of Employees; Participants ............................ 11
9.1 Employment ................................................ 11
9.2 Nontransferability ........................................ 12
Section 10 - General Restrictions ........................................ 12
10.1 Investment Representations ................................. 12
10.2 Compliance with Securities Laws ............................ 12
Section 11 - Other Employee Benefits ..................................... 13
Section 12 - Plan Amendment, Modification and Termination ................ 13
Section 13 - Withholding ................................................. 13
13.1 Withholding Requirement .................................... 13
13.2 Withholding With Stock .................................... 13
Section 14 - Requirements of Law ......................................... 14
14.1 Requirements of Law ........................................ 14
14.2 Federal Securities Laws Requirements ....................... 14
14.3 Governing Law ............................................. 14
Section 15 - Duration of the Plan ........................................ 14
</TABLE>
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<PAGE> 4
APACHE CORPORATION
1995 STOCK OPTION PLAN
Section 1
Introduction
1.1 Establishment. Apache Corporation, a Delaware corporation (hereinafter
referred to, together with its Affiliated Corporations (as defined in Section
2.1 hereof) as the "Company" except where the context otherwise requires),
hereby establishes the Apache Corporation 1995 Stock Option Plan (the "Plan")
for certain key employees of the Company. The Plan permits the grant of stock
options to certain key employees of the Company.
1.2 Purposes. The purposes of the Plan are to provide the key management
employees selected for participation in the Plan with added incentives to
continue in the long-term service of the Company and to create in such
employees a more direct interest in the future success of the operations of the
Company by relating incentive compensation to increases in stockholder value,
so that the income of the key management employees is more closely aligned with
the interests of the Company's stockholders. The Plan is also designed to
attract key employees and to retain and motivate participating employees by
providing an opportunity for investment in the Company.
1.3 Effective Date. The Effective Date of the Plan (the "Effective Date")
shall be May 4, 1995. This Plan and each option granted hereunder is
conditioned on and shall be of no force or effect until approval of the Plan by
the holders of the shares of voting stock of the Company unless the Company, on
the advice of counsel, determines that stockholder approval is not necessary.
The Committee (as defined in Section 2.1 hereof) may grant options the exercise
of which shall be expressly subject to the condition that the Plan shall have
been approved by the stockholders of the Company.
Section 2
Definitions
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Affiliated Corporation" means any corporation or other entity
(including but not limited to a partnership) which is affiliated with Apache
Corporation through stock ownership or otherwise and is treated as a common
employer under the provisions of Sections 414(b) and (c) or any successor
section(s) of the Internal Revenue Code.
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<PAGE> 5
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Management Development and Compensation
Committee of the Board, which is empowered hereunder to take actions in the
administration of the Plan. The Committee shall be constituted at all times as
to permit the Plan to comply with: (i) Rule 16b-3 or any successor rule(s)
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act"), and (ii) Section 162(m) or any successor section(s) of the Internal
Revenue Code and the regulations promulgated thereunder.
(d) "Eligible Employees" means those full-time key employees
(including, without limitation, officers and directors who are also employees)
of the Company or any division thereof, upon whose judgment, initiative and
efforts the Company is, or will become, largely dependent for the successful
conduct of its business.
(e) "Fair Market Value" means the closing price of the Stock as
reported on the New York Stock Exchange, Inc. Composite Transactions Reporting
System for a particular date. If there are no Stock transactions on such date,
the Fair Market Value shall be determined as of the immediately preceding date
on which there were Stock transactions.
(f) "Internal Revenue Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
(g) "Option" means a right to purchase Stock at a stated price for
a specified period of time. All Options granted under the Plan shall be
Options which are not "incentive stock options" as described in Section 422 or
any successor section(s) of the Internal Revenue Code.
(h) "Option Price" means the price at which shares of Stock subject
to an Option may be purchased, determined in accordance with subsection 7.2(b)
hereof.
(i) "Participant" means an Eligible Employee designated by the
Committee from time to time during the term of the Plan to receive one or more
Options under the Plan.
(j) "Stock" means the $1.25 par value Common Stock of the Company.
2.2 Headings; Gender and Number. The headings contained in the Plan are
for reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
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<PAGE> 6
Section 3
Plan Administration
The Plan shall be administered by the Committee. In accordance with the
provisions of the Plan, the Committee shall, in its sole discretion, select the
Participants from among the Eligible Employees, determine the Options to be
granted pursuant to the Plan, the number of shares of Stock to be issued
thereunder, the time at which such Options are to be granted, fix the Option
Price, and establish such other terms and requirements as the Committee may
deem necessary, or desirable and consistent with the terms of the Plan. The
Committee shall determine the form or forms of the agreements with Participants
which shall evidence the particular provisions, terms, conditions, rights and
duties of the Company and the Participants with respect to Options granted
pursuant to the Plan, which provisions need not be identical except as may be
provided herein. The Committee may from time to time adopt such rules and
regulations for carrying out the purposes of the Plan as it may deem proper and
in the best interests of the Company. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan, or in any
agreement entered into hereunder, in the manner and to the extent it shall deem
expedient and it shall be the sole and final judge of such expediency. No
member of the Committee shall be liable for any action or determination made in
good faith. The determination, interpretations and other actions of the
Committee pursuant to the provisions of the Plan shall be binding and
conclusive for all purposes and on all persons.
The Plan is intended to comply with the requirements of Section 162 or any
successor section(s) of the Internal Revenue Code ("Section 162") as to any
"covered employee" as defined in Section 162, and shall be administered,
interpreted and construed consistently therewith. In accordance with this
intent, the amount of compensation a Participant may receive from Options
granted under the Plan shall be based solely on an increase in the value of the
Stock after the date of the grant of the Option, or such other bases as may be
permitted by applicable law. The Committee is authorized to take such
additional action, if any, that may be required to ensure that the Plan
satisfies the requirements of Section 162 and the regulations promulgated or
revenue rulings published thereunder.
Section 4
Stock Subject to the Plan
4.1 Number of Shares. Subject to Section 7.1 and to adjustment pursuant to
Section 4.3 hereof, two million five hundred thousand (2,500,000) shares of
Stock are authorized for issuance under the Plan in accordance with the
provisions of the Plan and subject to such restrictions or other provisions as
the Committee may from time to time deem necessary. This authorization may be
increased from time to time by approval of the Board and the stockholders of
the Company if, in the opinion of counsel for the
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<PAGE> 7
Company, such stockholder approval is required. Shares of Stock which may
be issued upon exercise of Options shall be applied to reduce the maximum number
of shares of Stock remaining available for use under the Plan. The Company
shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock, or as Stock in the
Company's treasury, at least the number of shares from time to time required
under the provisions of the Plan, or otherwise assure itself of its ability to
perform its obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to an
Option which expires, is forfeited, is cancelled, or for any reason is
terminated unexercised, and any shares of Stock that for any other reason are
not issued to a Participant or are forfeited shall automatically become
available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall
at any time increase or decrease the number of its outstanding shares of Stock
or change in any way the rights and privileges of such shares by means of the
payment of a Stock dividend or any other distribution upon such shares payable
in Stock, or through a Stock split, subdivision, consolidation, combination,
reclassification or recapitalization involving the Stock, then in relation to
the Stock that is affected by one or more of the above events, the numbers,
rights and privileges of the following shall be increased, decreased or changed
in like manner as if they had been issued and outstanding, fully paid and
nonassessable at the time of such occurrence: (i) the shares of Stock as to
which Options may be granted under the Plan; and (ii) the shares of the Stock
then included in each outstanding Option granted hereunder.
4.4 Dividend Payable in Stock of Another Corporation, Etc. If the Company
shall at any time pay or make any dividend or other distribution upon the Stock
payable in securities or other property (except money or Stock), a
proportionate part of such securities or other property shall be set aside and
delivered to any Participant then holding an Option for the particular type of
Stock for which the dividend or other distribution was made, upon exercise
thereof. Prior to the time that any such securities or other property are
delivered to a Participant in accordance with the foregoing, the Company shall
be the owner of such securities or other property and shall have the right to
vote the securities, receive any dividends payable on such securities, and in
all other respects shall be treated as the owner. If securities or other
property which have been set aside by the Company in accordance with this
Section are not delivered to a Participant because an Option is not exercised,
then such securities or other property shall remain the property of the Company
and shall be dealt with by the Company as it shall determine in its sole
discretion.
4.5 Other Changes in Stock. In the event there shall be any change, other
than as specified in Sections 4.3 and 4.4 hereof, in the number or kind of
outstanding shares of Stock or of any stock or other securities into which the
Stock shall be changed or for
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<PAGE> 8
which it shall have been exchanged, and if the Committee shall in its discretion
determine that such change equitably requires an adjustment in the number or
kind of shares subject to outstanding Options or which have been reserved for
issuance pursuant to the Plan but are not then subject to an Option, then such
adjustments shall be made by the Committee and shall be effective for all
purposes of the Plan and on each outstanding Option that involves the particular
type of stock for which a change was effected.
4.6 Rights to Subscribe. If the Company shall at any time grant to the
holders of its Stock rights to subscribe pro rata for additional shares thereof
or for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the shares then under Option to any
Participant of the particular class of Stock involved the Stock or other
securities which the Participant would have been entitled to subscribe for if
immediately prior to such grant the Participant had exercised his entire
Option. If, upon exercise of any such Option, the Participant subscribes for
the additional shares or other securities, the Option Price shall be increased
by the amount of the price that is payable by the Participant for such
additional shares or other securities.
4.7 General Adjustment Rules. No adjustment or substitution provided for
in this Section 4 shall require the Company to sell a fractional share of Stock
under any Option, or otherwise issue a fractional share of Stock, and the total
substitution or adjustment with respect to each Option shall be limited by
deleting any fractional share. In the case of any such substitution or
adjustment, the total Option Price for the shares of Stock then subject to the
Option shall remain unchanged but the Option Price per share under each such
Option shall be equitably adjusted by the Committee to reflect the greater or
lesser number of shares of Stock or other securities into which the Stock
subject to the Option may have been changed.
4.8 Determination by the Committee, Etc. Adjustments under this Section 4
shall be made by the Committee, whose determinations with regard thereto shall
be final and binding upon all parties thereto.
Section 5
Reorganization or Liquidation
In the event that the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or if all or
substantially all of the assets or more than 20 percent of the outstanding
voting stock of the Company is acquired by any other corporation, business
entity or person, or in case of a reorganization (other than a reorganization
under the United States Bankruptcy Code) or liquidation of the Company, and if
the provisions of Section 8 hereof do not apply, the Committee, or the board of
directors of any corporation assuming the obligations of the Company, shall, as
to the Plan and outstanding Options either (i) make appropriate provision for
the adoption and
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<PAGE> 9
continuation of the Plan by the acquiring or successor corporation and for the
protection of any such outstanding Options by the substitution on an equitable
basis of appropriate stock of the Company or of the merged, consolidated or
otherwise reorganized corporation which will be issuable with respect to the
Stock, provided that no additional benefits shall be conferred upon the
Participants holding such Options as a result of such substitution, and the
excess of the aggregate Fair Market Value of the shares subject to the Options
immediately after such substitution over the Option Price thereof is not more
than the excess of the aggregate Fair Market Value of the shares subject to such
Options immediately before such substitution over the Option Price thereof, or
(ii) upon written notice to the Participants, provide that all unexercised
Options shall be exercised within a specified number of days of the date of such
notice or such Options will be terminated. In the latter event, the Committee
shall accelerate the exercise dates of outstanding Options so that all Options
become fully vested prior to any such event.
Section 6
Participation
Participants in the Plan shall be those Eligible Employees who, in the judgment
of the Committee, are performing, or during the term of their incentive
arrangement will perform, vital services in the management, operation and
development of the Company or an Affiliated Corporation, and significantly
contribute, or are expected to significantly contribute, to the achievement of
the Company's long-term corporate economic objectives. Participants may be
granted from time to time one or more Options; provided, however, that the
grant of each such Option shall be separately approved by the Committee, and
receipt of one such Option shall not result in automatic receipt of any other
Option. Upon determination by the Committee that an Option is to be granted to
a Participant, written notice shall be given to such person, specifying the
terms, conditions, rights and duties related thereto. Each Participant shall,
if required by the Committee, enter into an agreement with the Company, in such
form as the Committee shall determine and which is consistent with the
provisions of the Plan, specifying such terms, conditions, rights and duties.
Options shall be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date shall be the date of any related
agreement with the Participant. In the event of any inconsistency between the
provisions of the Plan and any such agreement entered into hereunder, the
provisions of the Plan shall govern.
Section 7
Stock Options
7.1 Grant of Stock Options. Coincident with or following designation for
participation in the Plan, an Eligible Employee may be granted one or more
Options. Grants of
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Options under the Plan shall be made by the Committee. In no event shall the
exercise of one Option affect the right to exercise any other Option or affect
the number of shares of Stock for which any other Option may be exercised,
except as provided in subsection 7.2(j) hereof. During the life of the Plan, no
Eligible Employee may be granted Options which in the aggregate pertain to in
excess of 25 percent of the total shares of Stock authorized under the Plan.
7.2 Stock Option Agreements. Each Option granted under the Plan shall be
evidenced by a written stock option agreement which shall be entered into by
the Company and the Participant to whom the Option is granted (the "Stock
Option Agreement"), and which shall contain the following terms and conditions,
as well as such other terms and conditions, not inconsistent therewith, as the
Committee may consider appropriate in each case.
(a) Number of Shares. Each Stock Option Agreement shall state that
it covers a specified number of shares of Stock, as determined by the
Committee.
(b) Price. The price at which each share of Stock covered by an
Option may be purchased shall be determined in each case by the Committee and
set forth in the Stock Option Agreement, but in no event shall the price be
less than the Fair Market Value of the Stock on the date the Option is granted.
(c) Duration of Options; Employment Required For Exercise. Each
Stock Option Agreement shall state the period of time, determined by the
Committee, within which the Option may be exercised by the Participant (the
"Option Period"). The Option Period must end, in all cases, not more than ten
years from the date an Option is granted. Except as otherwise provided in
Sections 5 and 8 hereof, each Option granted under the Plan shall become
exercisable in increments such that 25-percent of the Option will become
exercisable on each of the four subsequent one-year anniversaries of the date
the Option is granted, but each such additional 25-percent increment shall
become exercisable only if the Participant has been continuously employed by
the Company from the date the Option is granted through the date on which each
such additional 25-percent increment becomes exercisable.
(d) Termination of Employment, Death, Disability, Etc. Each Stock
Option Agreement shall provide as follows with respect to the exercise of the
Option upon termination of the employment or the death of the Participant:
(i) If the employment of the Participant by the Company is
terminated within the Option Period for cause, as determined by the Company,
the Option shall thereafter be void for all purposes. As used in this
subsection 7.2(d), "cause" shall mean a gross violation, as determined by the
Company, of the Company's established policies and procedures, provided that
the effect of this subsection 7.2(d) shall be limited to
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determining the consequences of a termination and that nothing in this
subsection 7.2(d) shall restrict or otherwise interfere with the Company's
discretion with respect to the termination of any employee.
(ii) If the Participant retires from employment by the Company
on or after attaining age 65, the Option may be exercised by the Participant,
or in the case of the Participant's death, by the persons specified in
subsection (iii) of this subsection 7.2(d), within 36 months following his or
her retirement (provided that such exercise must occur within the Option
Period), but not thereafter. In any such case the Option may be exercised only
as to the shares as to which the Option had become exercisable on or before the
date of the Participant's retirement.
(iii) If the Participant dies, or if the Participant becomes
disabled (as determined pursuant to the Company's Long-Term Disability Plan or
any successor plan), during the Option Period while still employed, or within
the three-month period referred to in (iv) below, or within the 36-month period
referred to in (ii) above, the Option may be exercised by those entitled to do
so under the Participant' s will or by the laws of descent and distribution
within twelve months following the Participant's death or disability, or within
the 36-month period referred to in (ii) if applicable and if longer (provided
that such exercise must occur within the Option Period), but not thereafter.
In any such case, the Option may be exercised only as to the shares of Stock as
to which the Option had become exercisable on or before the date of the first
of the Participant's disability or death.
(iv) If the employment of the Participant by the Company is
terminated (which for this purpose means that the Participant is no longer
employed by the Company or by an Affiliated Corporation) within the Option
Period for any reason other than cause, the Participant's retirement on or
after attaining age 65, the Participant's disability or death, the Option may
be exercised by the Participant within three months following the date of such
termination (provided that such exercise must occur within the Option Period),
but not thereafter. In any such case, the Option may be exercised only as to
the shares as to which the Option had become exercisable on or before the date
of termination of the Participant's employment.
(e) Transferability. Each Stock Option Agreement shall provide
that the Option granted therein is not transferable by the Participant except
by will or pursuant to the laws of descent and distribution, and that such
Option is exercisable during the Participant's lifetime only by him or her, or
in the event of the Participant's disability or incapacity, by his or her
guardian or legal representative.
(f) Agreement to Continue in Employment. Each Stock Option
Agreement shall contain the Participant's agreement to remain in the employment
of the Company, at the pleasure of the Company, for a continuous period of at
least one year after the date of
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such Stock Option Agreement, at the salary rate in effect on the date of such
agreement or at such changed rate as may be fixed, from time to time, by the
Company.
(g) Exercise, Payments, Etc.
(i) Each Stock Option Agreement shall provide that the method
for exercising the Option granted therein shall be by delivery to the Office of
the Secretary of the Company of written notice specifying the number of shares
of Stock with respect to which such Option is exercised and payment of the
Option Price. Such notice shall be in a form satisfactory to the Committee and
shall specify the particular Options (or portions thereof) which are being
exercised and the number of shares of Stock with respect to which the Options
are being exercised. The exercise of the Option shall be deemed effective on
the date such notice is received by the Office of the Secretary and payment is
made to the Company of the Option Price (the "Exercise Date"). If requested by
the Company, such notice shall contain the Participant's representation that he
or she is purchasing the Stock for investment purposes only and his or her
agreement not to sell any Stock so purchased in any manner that is in violation
of the Securities Act of 1933, as amended, or any applicable state law. Such
restriction, or notice thereof, shall be placed on the certificates
representing the Stock so purchased. The purchase of such Stock shall take
place at the principal offices of the Company upon delivery of such notice, at
which time the Option Price shall be paid in full by any of the methods or any
combination of the methods set forth in (ii) below. A properly executed
certificate or certificates representing the Stock shall be issued by the
Company and delivered to the Participant. If certificates representing Stock
are used to pay all or part of the Option Price, separate certificates for the
same number of shares of Stock shall be issued by the Company and delivered to
the Participant representing each certificate used to pay the Option Price, and
an additional certificate shall be issued by the Company and delivered to
Participant representing the additional shares of Stock, in excess of the
Option Price, to which the Participant is entitled as a result of the exercise
of the Option.
(ii) the Option Price shall be paid by any of the following
methods or any combination of the following methods:
(A) in cash;
(B) by personal, certified or cashier's check payable
to the order of the Company;
(C) by delivery to the Company of certificates
representing a number of shares of Stock then owned by the Participant, the
Fair Market Value of which equals the Option Price of the Stock purchased
pursuant to the Option, properly endorsed for transfer to the Company; provided
however, that shares of Stock used for this purpose must have been held by the
Participant for such minimum period of time as may be
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established from time to time by the Committee; for purposes of this Plan, the
Fair Market Value of any shares of Stock delivered in payment of the Option
Price upon exercise of the Option shall be the Fair Market Value as of the
Exercise Date; the Exercise Date shall be the day of delivery of the
certificates for the Stock used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed
notice of exercise together with irrevocable instructions to a broker to
deliver to the Company promptly the amount of the proceeds of the sale of all
or a portion of the Stock or of a loan from the broker to the Participant
necessary to pay the Option Price.
(h) Date of Grant. An Option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(i) Tax Withholding. Each Stock Option Agreement shall provide
that, upon exercise of the Option, the Participant shall make appropriate
arrangements with the Company to provide for the amount of additional tax
withholding required by Sections 3102 and 3402 or any successor section(s) of
the Internal Revenue Code and applicable state income tax laws, including
payment of such taxes through delivery of shares of Stock or by withholding
Stock to be issued under the Option, as provided in Section 13 hereof.
(j) Adjustment of Options. Subject to the limitations contained in
Sections 7 and 12 hereof, the Committee may make any adjustment in the Option
Price, the number of shares of Stock subject to, or the terms of an outstanding
Option and a subsequent granting of an Option, by amendment or by substitution
for an outstanding Option. Such amendment, substitution, or regrant may result
in terms and conditions (including Option Price, number of shares of Stock
covered, vesting schedule or Option Period) that differ from the terms and
conditions of the original Option. The Committee may not, however, adversely
affect the rights of any Participant to previously granted Options without the
consent of such Participant. If such action is effected by amendment, the
effective date of grant of such amendment will be the date of grant of the
original Option.
7.3 Stockholder Privileges. No Participant shall have any rights as a
stockholder with respect to any shares of Stock covered by an Option until the
Participant becomes the holder of record of such Stock. Except as provided in
Section 4 hereof, no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date on which such Participant becomes the holder of record of such Stock.
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Section 8
Change in Control
8.1 In General. In the event of a change in control of the Company as
defined in Section 8.3 hereof, then the Committee may, in its sole discretion,
without obtaining stockholder approval, to the extent permitted in Section 12
hereof, take any or all of the following actions: (a) accelerate the dates on
which any outstanding Options become exercisable or make all such Options fully
vested and exercisable; (b) grant a cash bonus award to any Participant in an
amount necessary to pay the Option Price of all or any portion of the Options
then held by such Participant; (c) pay cash to any or all Participants in
exchange for the cancellation of their outstanding Options in an amount equal to
the difference between the Option Price of such Options and the greater of the
tender offer price for the underlying Stock or the Fair Market Value of the
Stock on the date of the cancellation of the Options; and (d) make any other
adjustments or amendments to the outstanding Options.
8.2 Limitation on Payments. If the provisions of this Section 8 would
result in the receipt by any Participant of a payment within the meaning of
Section 280G or any successor section(s) of the Internal Revenue Code, and the
regulations promulgated thereunder, and if the receipt of such payment by any
Participant would, in the opinion of independent tax counsel of recognized
standing selected by the Company, result in the payment by such Participant of
any excise tax provided for in Sections 280G and 4999 or any successor
section(s) of the Internal Revenue Code, then the amount of such payment shall
be reduced to the extent required, in the opinion of independent tax counsel,
to prevent the imposition of such excise tax; provided, however, that the
Committee, in its sole discretion, may authorize the payment of all or any
portion of the amount of such reduction to the Participant.
8.3 Definition. For purposes of the Plan, a "change in control" shall mean
any of the events specified in the Company's Income Continuance Plan or any
successor plan which constitute a change in control within the meaning of such
plan.
Section 9
Rights of Employees; Participants
9.1 Employment. Nothing contained in the Plan or in any Option granted
under the Plan shall confer upon any Participant any right with respect to the
continuation of his or her employment by the Company or any Affiliated
Corporation, or interfere in any way with the right of the Company or any
Affiliated Corporation, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the level of the Participant's compensation from
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the level in existence at the time of the grant of an Option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute a termination of employment shall be determined by the Committee at
the time.
9.2 Nontransferability. No right or interest of any Participant in an
Option granted pursuant to the Plan shall be assignable or transferable during
the lifetime of the Participant, either voluntarily or involuntarily, or
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of a Participant' s death, a Participant's rights and
interests in Options shall, to the extent provided in Section 7 hereof, be
transferable by testamentary will or the laws of descent and distribution, and
payment of any amounts due under the Plan shall be made to, and exercise of any
Options may be made by, the Participant's legal representatives, heirs or
legatees. If in the opinion of the Committee a person entitled to payments or
to exercise rights with respect to the Plan is disabled from caring for his or
her affairs because of mental condition, physical condition or age, payment due
such person may be made to, and such rights shall be exercised by, such
person's guardian, conservator or other legal personal representative upon
furnishing the Committee with evidence satisfactory to the Committee of such
status.
Section 10
General Restrictions
10.1 Investment Representations. The Company may require a Participant, as
a condition of exercising an Option, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that such
person is acquiring the Stock subject to the Option for his own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.
10.2 Compliance with Securities Laws. Each Option shall be subject to the
requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the shares of Stock subject to
such Option upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance or purchase of shares of
Stock thereunder, such Option may not be accepted or exercised in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained on conditions acceptable to the Committee.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration, qualification, consent or approval.
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Section 11
Other Employee Benefits
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option shall not constitute "earnings" with
respect to which any other employee benefits of such Participant are
determined, including without limitation benefits under any pension, profit
sharing, life insurance or salary continuation plan.
Section 12
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or modify
the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the Company's
stockholders if stockholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if the Company, on the
advice of counsel, determines that stockholder approval is otherwise necessary
or desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Option theretofore granted under the Plan, without the
consent of the Participant holding such Option.
Section 13
Withholding
13.1 Withholding Requirement. The Company's obligations to deliver shares of
Stock upon the exercise of an Option shall be subject to the Participant's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements.
13.2 Withholding With Stock. At the time the Committee grants an Option, it
may, in its sole discretion, grant the Participant an election to pay all such
amounts of tax withholding, or any part thereof, by the transfer to the
Company, or to have the Company withhold from shares of Stock otherwise
issuable to the Participant upon the exercise of an Option, shares of Stock
having a value equal to the amount required to be withheld or such lesser
amount as may be elected by the Participant. All such elections shall be
subject to the approval or disapproval of the Committee. The value of shares
of Stock to be withheld shall be based on the Fair Market Value of the Stock on
the Exercise Date. Any such elections by Participants to have shares of Stock
withheld for this purpose will be subject to the following restrictions:
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(a) All elections shall be made on or prior to the Exercise Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company
within the meaning of Section 16 or any successor section(s) of the 1934 Act
("Section 16"), the Participant must satisfy the requirements of such Section
16 and any applicable rules and regulations thereunder with respect to the use
of Stock to satisfy such tax withholding obligation.
Section 14
Requirements of Law
14.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
14.2 Federal Securities Laws Requirements. If a Participant is an officer
or director of the Company within the meaning of Section 16, Options granted
hereunder shall be subject to all conditions required under Rule 16b-3, or any
successor rule(s) promulgated under the 1934 Act, to qualify the Option for any
exception from the provisions of Section 16 available under such Rule. Such
conditions are hereby incorporated herein by reference and shall be set forth
in the agreement with the Participant which describes the Option.
14.3 Governing Law. The Plan and all Stock Option Agreements hereunder shall
be construed in accordance with and governed by the laws of the State of Texas.
Section 15
Duration of the Plan
The Plan shall terminate at such time as may be determined by the Board, and no
Option shall be granted after such termination. If not sooner terminated under
the preceding sentence, the Plan shall fully cease and expire at midnight on
May 4, 2000. Options outstanding at the time of the Plan termination shall
continue to be exercisable in accordance with the Stock Option Agreement
pertaining to such Option.
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Dated: February 9, 1995
APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper By: /s/ Roger B. Rice
- ----------------------------- -----------------------------
Cheri L. Peper Roger B. Rice
Assistant Secretary Vice President
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EXHIBIT 10.15
APACHE CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
As Amended and Restated September 14, 1994
PURPOSE
The Directors' Deferred Compensation Plan (the "Plan") is designed to provide a
means for the optional deferral of compensation otherwise payable to individual
directors who are not employees of Apache Corporation ("Apache").
PLAN PROVISIONS
1. An individual director may elect to participate in the Plan and defer
all or any portion of the directors fees ("Deferred Compensation") which may
become payable to the participating director with respect to services as a
director during any calendar year (the "year") by the execution of a Directors'
Deferred Compensation Agreement between the participating director and Apache
("Agreement"). Directors fees shall include retainer fees and board and
committee meeting attendance fees, but shall not include any expense
reimbursement or any award under Apache's Equity Compensation Plan for
Non-Employee Directors.
2. An Agreement must be executed by the participating director on or
before December 31 of the year prior to the year for which Deferred
Compensation is elected. Once executed, an Agreement shall be irrevocable with
respect to the year made and shall remain in effect and be deemed a like
election for Deferred Compensation with respect to all years subsequent to such
year until the Agreement is terminated or amended. Any termination shall be
made in writing and provided to Apache's Corporate Secretary on or before
December 31 of the year prior to the year for which the termination is to be
effective. A participating director may amend his election for Deferred
Compensation by executing a new Agreement, which shall supersede any previous
Agreement. Any new Agreement must be executed by the participating director
and provided to Apache's Corporate Secretary on or before December 31 of the
year prior to the year for which the amended election is to be effective.
3. In the event an Agreement is terminated, the participating director's
Deferred Compensation will be retained in the Plan and paid only in accordance
with the provisions of such Agreement.
4. Apache will maintain a separate Deferred Compensation memorandum
account for each participating director. The amounts of Deferred Compensation,
plus interest accrued on such amounts at the annual rate earned by Apache's
short-term marketable securities portfolio, will be accumulated in each
memorandum account.
<PAGE> 2
5. All Deferred Compensation and interest accumulated in a participating
director's memorandum account will be classified in the same category as other
unsecured creditors and accounts payable of Apache, and neither the
participating director nor his beneficiary or estate shall have any property
interest whatsoever in any specific assets of Apache.
6. Upon retirement as a director of Apache, termination as a director of
Apache under other circumstances, or on a date specifically designated in the
applicable Agreement, the balance of the participating director's memorandum
account described in Section 4 above will be paid (a) in a lump sum, or (b) in
annual installments over a ten-year period (or some certain shorter period as
designated in the participating director's Agreement) beginning with the first
business day of the calendar year immediately following the participating
director's retirement or other termination, or with the date specifically
designated in the applicable Agreement.
The rate of interest defined in Section 4 above will continue to be
accrued on the remaining balances and accumulated in the participating
director's memorandum account during any installment payment periods.
7. The right of the participating director or any other person to receive
payments under the Plan shall not be assigned, transferred, pledged or
encumbered, except by will or by the laws of descent and distribution. Upon
the death of a participating director, any balance remaining in the
participating director's memorandum account at the time of his death will be
paid in a lump sum to his designated beneficiary or, if there is no designated
beneficiary, to his estate as soon as administratively practicable after the
participating director's death.
8. The Plan may be amended from time to time by vote of the board of
directors of Apache. However, no such Plan amendment may change a
participating director's irrevocable election as provided in Section 2 above,
increase the amounts payable to a participating director under the Plan, or
impair any rights to amounts accumulated in the memorandum account of a
participating director.
9. The Plan is to be binding upon Apache and upon its successors and
assigns. The Plan shall continue in effect from year to year unless and until
revoked by the board of directors of Apache. Any such revocation shall operate
only prospectively and shall not affect the rights and obligations under
elections previously made.
10. Except when otherwise indicated by the context, the definition of any
term herein in the singular shall also include the plural, and the masculine
gender shall also include the feminine gender.
11. The Plan and all Agreements hereunder shall be construed in accordance
with and governed by the laws of the State of Texas.
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EXHIBIT 10.24
CONSULTING AGREEMENT
THIS AGREEMENT is entered into between APACHE CORPORATION ("Apache"),
a Delaware corporation and WILLIAM J. JOHNSON ("Johnson") effective April 28,
1994.
RECITALS
Since May 1, 1991, Johnson has served Apache with diligence and
integrity as an officer and employee.
Apache and Johnson wish to provide for the termination of Johnson's
tenure as an officer and employee of Apache.
Apache and Johnson desire to terminate the agreement of employment
between Apache and Johnson dated March 20, 1991 and extinguish all rights of
Apache and Johnson thereunder.
Apache wishes to provide for continued service by Johnson as a
consultant to Apache.
Apache and Johnson wish to establish standards of confidentiality and
conduct between them.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Apache and Johnson agree as follows:
1. RESIGNATION. Effective 6 p.m. CST, April 28, 1994, Johnson's
employment with Apache terminated and, as a result, Johnson resigns all
positions as a director, officer and committee member of Apache, subsidiaries
and affiliated entities.
2. TERMINATION OF AGREEMENT OF EMPLOYMENT. The agreement of
employment between Apache and Johnson terminated effective 6 p.m. CST, April
28, 1994.
3. EMPLOYMENT. Notwithstanding the provisions of paragraph 2
above, commencing at 6 p.m. CST, April 28, 1994, Johnson will continue to be an
employee of the company in a non-executive capacity for all purposes through 6
p.m. CST, May 15, 1994 (the "Continued Employment Period"). During the
Continued Employment Period, Johnson will be compensated at a rate of
$36,460.00 per month (prorated by the day).
<PAGE> 2
4. CONSULTING. Apache engages Johnson to render consulting
services to Apache and its subsidiaries for a period commencing May 16, 1994,
and continuing through April 28, 1996 (the "Consulting Period").
5. SERVICES. During the Continued Employment Period and the
Consulting Period, Johnson shall perform such consulting services as are
reasonably requested by the Chief Executive Officer of Apache ("the CEO") and
those are not inconsistent with Johnson's prior duties and responsibilities as
an officer of Apache. Johnson shall not be required to maintain any office
hours, nor shall Johnson be present at the offices except upon request of the
CEO.
6. OTHER ACTIVITIES. Johnson's obligation to render consulting
services shall be subordinate to, and shall be rendered only to the extent
there is no interference with, his other business, employment and personal
activities. Johnson shall be free to accept full-time or part-time employment
with any organization, and to engage in any business enterprise on his own
behalf during the Continued Employment Period, the Consulting Period or
thereafter, whether or not the organization or enterprise competes with Apache,
so long as Johnson complies with paragraph 7 of this agreement.
7. CONFIDENTIALITY. Johnson shall maintain the confidentiality
of, and shall not disclose, Apache's business dealings, trade secrets, supplier
lists, customer lists, properties, geographic or financial areas of interests,
exploration plans or techniques or any other confidential information of or
relating to Apache, its subsidiaries or affiliates. Johnson shall not use such
information in any manner, whether for his own benefit or for the benefit of
any other person or entity, or to the detriment of Apache, its subsidiaries or
affiliates.
8. MONTHLY PAYMENTS. On or before the 16th day of each calendar
month during the Consulting Period, Johnson shall invoice Apache for services
in the amount of $36,460.00, and Apache shall pay Johnson the invoiced amount
on or before the first day of the next calendar month. The invoiced amounts
shall be paid if Johnson is disabled, and shall continue to be paid to
Johnson's estate, heirs and successors in the event of his death. The invoiced
amount shall continue to be paid without regard to Johnson's employment by
another organization, his participation in a partnership, or his engagement in
business for his own account. Failure or tardiness by Johnson in invoicing
Apache shall not waive or release Johnson's right to payment, but amounts
invoiced late shall not be due until a reasonable time after the invoice date.
9. EXPENSE REIMBURSEMENT. Subject to Apache's travel policies
governing its executives, Apache shall reimburse Johnson for all travel,
airline, room, entertainment, meal, beverage, car rental and other
out-of-pocket expenses incurred by Johnson in the course of performing his
consulting obligations under this agreement, provided that such consulting
expenses are approved in advance by Apache.
2
<PAGE> 3
10. BENEFITS. During the Continued Employment Period, Johnson
shall receive the same benefits as Apache provides its executive officers.
During the Consulting Period, Apache shall:
(a) provide medical, dental and vision benefits to
Johnson and his dependents to the same extent, and
subject to the same premium co-payments, as are
extended to Apache executives; and
(b) provide life insurance and disability benefits
(including supplemental group life insurance) to
Johnson to the same extent as extended to Apache
executives.
Apache shall not impair the cash value of any life insurance currently
maintained by Apache for Johnson, and that cash value shall remain the property
of Johnson. Apache shall cause its employees, insurance carriers and agents to
cooperate fully with Johnson in managing and maintaining Johnson's insurance
coverage, and responding to Johnson's insurance claims and responding to
Johnson's inquiries concerning insurance coverages.
11. PLAN BALANCES. Apache shall cooperate with Johnson in
administering his rights, pursuant to the Apache Corporation 401(k)
Retirement/Savings Plan and the Non-Qualified Retirement Plan. Johnson's
outstanding stock options and phantom stock units shall be governed by the
terms of Apache Corporation 1990 Stock Incentive Plan and the 1990 Phantom
Stock Appreciation Plan.
12. TAX AND FINANCIAL SERVICES. During the Consulting Period,
Johnson shall be entitled to reimbursement from Apache for the reasonable cost
of personal tax and financial counseling services provided by such tax and
financial advisors as may be selected by the employee.
13. RETIREMENT BENEFITS. At age 65, Johnson shall be paid an
amount equal to two-thirds his last annual salary ($350,000 per year), less (a)
any amounts paid to him under the pension or retirement plans or agreements of
Exxon Corporation and BP America or their affiliates, assigns or successors;
(b) the actuarially defined annual equivalent of pension income from the 6%
automatic company contributions to the 401(k) plan for Johnson's accounts; (c)
social security payments; and (d) $1500 per month.
One-twelfth of the above amounts so determined shall be paid monthly
for twenty years or for Johnson's life, whichever is less. Provided however,
in the event that Johnson dies during the twenty year period and is survived by
his current wife, Apache shall pay to Johnson's wife 50% of the sum determined
as above provided, for the unexpired portion of said twenty year period. In
the event that Johnson's wife predeceases him or dies after Johnson but prior
to the expiration of the 20 year term, any benefit due Johnson's wife shall
terminate and not be assignable to the estate of Johnson, his wife or
otherwise.
3
<PAGE> 4
Apache shall provide medical insurance after retirement in the form of
a Medicare supplement for Johnson and his spouse under the form of insurance
coverage then being provided to employees of the company, for and during
Johnson's life.
14. RELEASE. Johnson releases Apache and each of its
subsidiaries, affiliates, past and present, and Apache releases Johnson, from
any and all rights and claims arising in any way out of Johnson's employment or
acts or omissions of Apache or Johnson which occurred during the term of
Johnson's employment, or arose out of the termination of Johnson's employment.
Apache and Johnson further release and hold harmless each other from and
against any and all claims against the other that they may have based on any
negligent or intentional acts or omissions of any character whatsoever, whether
related to Johnson's employment or otherwise, including without limitation
statements made by, to or about Johnson or Apache which occurred prior to the
effective date of this agreement, whether known or unknown by Apache or
Johnson. The foregoing release includes without limitation any rights and
claims under state, federal, or local laws, including without limitation, the
Age Discrimination in Employment Act, the Texas Commission on Human Rights Act
and the common law of the states of Texas, Colorado, and any other
jurisdiction. Johnson and Apache further agree that they will not institute
any charge, complaint, or litigation against the other based on such released
rights and or claims. Notwithstanding the foregoing, the releases contained
herein shall not apply to any rights Johnson may have under: (a) Apache 1990
Stock Incentive Plan and the Stock Appreciation Plan and the Option Agreements
issued under those plans to which Johnson is a party; (b) Apache's 401(k) Plan
and Non-Qualified Retirement Plan; (c) this agreement; or (d) COBRA to receive
continued medical insurance benefits.
15. INDEPENDENT CONTRACTOR AND TAXES. Johnson acknowledges that
his engagement under this agreement during the Consulting Period is as an
independent contractor and not as an employee of Apache or its subsidiaries or
affiliates. Accordingly, Johnson will be responsible for payment of all income
tax and other taxes, levies or assessments by governmental entities on cash
amounts payable to Johnson, and Apache will not withhold any amounts from
payments made under this agreement. If the Internal Revenue Service or other
governmental authority asserts that Apache should have withheld federal income
taxes, Johnson's share of FICA taxes or other taxes, levies or assessments from
such payments, Johnson will reimburse Apache for any monies paid by Apache to
the governmental entity in compliance with such assertion, except for payments
of interest or penalties.
16. NONASSIGNABILITY. Neither this agreement nor any right or
interest herein will be assigned or transferred by Apache or Johnson without
the other's written consent, except as to:
(a) the rights of Johnson's spouse, estate, heirs and
devisees to certain benefits under this agreement as
specifically set forth herein; and
4
<PAGE> 5
(b) the sale of all or substantially all of Apache's
assets or the merger or combination of Apache with
another organization, if the asset purchaser or
surviving organization assumes the full performance
of Apache's obligations under this agreement, but
Apache shall not be relieved of its obligations under
this agreement by that assumption.
17. NO ATTACHMENT. Except as required by law, Johnson's right to
receive payments under this agreement shall not be subject to anticipation,
alienation, sale, encumbrance, pledge, hypothecation, execution, attachment,
levy, offset, deduction, set off, condition, or assignment by operation of law,
and any attempt, voluntary or involuntary, to affect such action shall be null
and void.
18. BINDING EFFECT. This agreement shall bind and inure to the
benefit of Johnson, Apache and its subsidiaries and affiliates and their
permitted successors and assigns.
19. AMENDMENT, MODIFICATION, WAIVER. This agreement shall not be
amended or modified except by an instrument in writing signed by the parties
hereto. No term of this agreement shall be deemed to have been waived, nor
shall there be an estoppel against enforcement against any provision of this
agreement, except by written instrument of the party charged with such waiver
or estoppel. No person or organization, including those within the definition
of company, not a party to this agreement or a permitted successor to a party
to this agreement, shall be a third party beneficiary of this agreement or
entitled to enforce its terms. Johnson acknowledges that he has had at least
21 days to consider this agreement and has had legal advise with respect
thereto.
20. REMEDIES. Upon material breach of this agreement by a party,
the other party shall be entitled to seek damages for breach, and or shall be
entitled to seek specific performance of this agreement. Johnson and Apache
acknowledge and confess that there is no adequate remedy at law for breach of
the obligations in this agreement other than the obligation for the payment of
money. The prevailing party in any litigation shall be entitled to an award of
attorneys' fees by the court. Interest on sums due from one party to the other
shall bear interest at the rate of 18% per annum (until paid).
21. NO OTHER BENEFITS. Except as specifically provided in this
agreement, Johnson shall not be entitled to any pension, profit sharing, bonus,
disability, life insurance or similar plan or program of Apache, whether now
existing or hereafter adopted for the benefit of Apache's employees or
consultants.
22. HEADINGS AND MEANINGS. The headings of the paragraphs of this
agreement are for convenience only and should not be considered in construing
or interpreting the agreement.
5
<PAGE> 6
23. GOVERNING LAW. This agreement has been executed and delivered
in the state of Texas, and its validity, and interpretation or, performance and
enforcement shall be governed by the laws of that state.
24. NOTICES. Any notice contemplated or permitted by this
agreement shall be delivered as follows:
To Apache or the Company:
Raymond Plank
Chairman and Chief Executive Officer
APACHE CORPORATION
2000 Post Oak Boulevard
Suite 100
Houston, Texas 77056-4400
Telephone: (713) 296-6100
Telecopier: (713) 296-6490
To William J. Johnson: WILLIAM J. JOHNSON
11523 Echo Wood
Houston, Texas 77024
Telephone: (713) 973-1259
The above addresses for a notice may be changed by written notice from the
changing party to the other party.
6
<PAGE> 7
25. REVOCATION. Johnson may rescind this agreement by written
notice to Apache delivered on or before 5 p.m. on the seventh day after its
execution by Apache and Johnson and with delivery to Johnson. If no such
notice of rescission is timely received by Apache, the effective time of this
agreement shall be as stated above. Upon rescission of this agreement, Johnson
shall repay to Apache all sums pursuant to this agreement, except salary for
services rendered by Johnson part prior to the effective time.
CONSULTANT
May 17, 1994 /s/ William J. Johnson
- ----------------------------- ---------------------------------
Date William J. Johnson
APACHE CORPORATION
May 17, 1994 /s/ Roger B. Rice
- ----------------------------- ---------------------------------
Date Roger B. Rice
Vice President, Human Resources &
Administration
7
<PAGE> 1
EXHIBIT 10.25
CONSULTING AGREEMENT
THIS AGREEMENT is entered into between APACHE CORPORATION ("Apache"),
a Delaware corporation and JOHN L. MORAN ("Moran") effective January 1, 1995.
RECITALS
Since February 1, 1984, Moran has served Apache with diligence and
integrity as an officer and employee.
Apache and Moran wish to provide for the termination of Moran's tenure
as an officer and employee of Apache.
Apache wishes to provide for continued service by Moran as a consultant
to Apache.
Apache and Moran wish to establish standards of confidentiality and
conduct between them.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Apache and Moran agree as follows:
1. RESIGNATION. Effective 6 p.m. CST, December 31, 1994, Moran's
employment with Apache terminated and, as a result, Moran resigns all positions
as a director, officer and committee member of Apache, subsidiaries and
affiliated entities.
2. CONSULTING. Apache engages Moran to render consulting
services to Apache and its subsidiaries for a period commencing January 1,
1995, and continuing through December 31, 1995 (the "Consulting Period").
3. SERVICES. During the Consulting Period, Moran shall perform
such consulting services as are reasonably requested by the Chief Operating
Officer of Apache ("the COO") and that are not inconsistent with Moran's prior
duties and responsibilities as an officer of Apache. Moran shall not be
required to maintain any office hours, nor shall Moran be present at the
offices except upon request of the COO.
4. OTHER ACTIVITIES. Moran's obligation to render consulting
services shall be subordinate to, and shall be rendered only to the extent
there is no interference with, his other business, employment and personal
activities. Moran shall be free to accept full-time or part-time employment
with any organization, and to engage in any business enterprise on his own
behalf during the Continued Employment Period, the Consulting Period or
thereafter, whether
1
<PAGE> 2
or not the organization or enterprise competes with Apache, so long as
Moran complies with paragraph 5 of this agreement.
5. CONFIDENTIALITY. Moran shall maintain the confidentiality of,
and shall not disclose, Apache's business dealings, trade secrets, supplier
lists, customer lists, properties, geographic or financial areas of interests,
exploration plans or techniques or any other confidential information of or
relating to Apache, its subsidiaries or affiliates. Moran shall not use such
information in any manner, whether for his own benefit or for the benefit of
any other person or entity, or to the detriment of Apache, its subsidiaries or
affiliates.
6. CONSULTING PAYMENTS. On January 31, 1995, Apache shall pay
Moran $225,000.00 as a non-refundable consulting payment. On January 15, 1996,
Apache shall pay Moran $225,000.00 as a non-refundable consulting payment.
7. EXPENSE REIMBURSEMENT. Subject to Apache's travel policies
governing its executives, Apache shall reimburse Moran for all travel, airline,
room, entertainment, meal, beverage, car rental and other out-of-pocket
expenses incurred by Moran in the course of performing his consulting
obligations under this agreement, provided that such consulting expenses are
approved in advance by Apache.
8. BENEFITS. During the Consulting Period, Apache shall:
a) provide medical, dental and vision benefits to Moran
and his dependents to the same extent, and subject to
the same premium co-payments, as are extended to
Apache executives; and
b) provide life insurance and disability benefits
(including supplemental group life insurance) to
Moran to the same extent as extended to Apache
executives.
Apache shall not impair the cash value of any life insurance currently
maintained by Apache for Moran, and that cash value shall remain the property
of Moran. Apache shall cause its employees, insurance carriers and agents to
cooperate fully with Moran in managing and maintaining Moran's insurance
coverage, and responding to Moran's insurance claims and responding to Moran's
inquiries concerning insurance coverages.
9. PLAN BALANCES. Apache shall cooperate with Moran in
administering his rights, pursuant to the Apache Corporation 401(k)
Retirement/Savings Plan and the Non-Qualified Retirement Plan. Moran's
outstanding stock options and phantom stock units shall be governed by the
terms of Apache Corporation 1990 Stock Incentive Plan and the 1990 Phantom
Stock Appreciation Plan.
2
<PAGE> 3
10. RELEASE. Moran releases Apache and each of its subsidiaries,
affiliates, past and present, and Apache releases Moran, from any and all
rights and claims arising in any way out of Moran's employment or acts or
omissions of Apache or Moran which occurred during the term of Moran's
employment, or arose out of the termination of Moran's employment. Apache and
Moran further release and hold harmless each other from and against any and all
claims against the other that they may have based on any negligent or
intentional acts or omissions of any character whatsoever, whether related to
Moran's employment or otherwise, including without limitation statements made
by, to or about Moran or Apache which occurred prior to the effective date of
this agreement, whether known or unknown by Apache or Moran. The foregoing
release includes without limitation any rights and claims under state, federal,
or local laws, including without limitation, the Age Discrimination in
Employment Act, the Texas Commission on Human Rights Act and the common law of
the states of Texas, Colorado, and any other jurisdiction. Moran and Apache
further agree that they will not institute any charge, complaint, or litigation
against the other based on such released rights and or claims. Notwithstanding
the foregoing, the releases contained herein shall not apply to any rights
Moran may have under: a) Apache 1990 Stock Incentive Plan and the Stock
Appreciation Plan and the Option Agreements issued under those plans to which
Moran is a party; b) Apache's 401(k) Plan and Non-Qualified Retirement Plan; c)
this agreement; or d) COBRA to receive continued medical insurance benefits.
11. INDEPENDENT CONTRACTOR AND TAXES. Moran acknowledges that his
engagement under this agreement during the Consulting Period is as an
independent contractor and not as an employee of Apache or its subsidiaries or
affiliates. Accordingly, Moran will be responsible for payment of all income
tax and other taxes, levies or assessments by governmental entities on cash
amounts payable to Moran, and Apache will not withhold any amounts from
payments made under this agreement. If the Internal Revenue Service or other
governmental authority asserts that Apache should have withheld federal income
taxes, Moran's share of FICA taxes or other taxes, levies or assessments from
such payments, Moran will reimburse Apache for any monies paid by Apache to the
governmental entity in compliance with such assertion, except for payments of
interest or penalties.
12. NONASSIGNABILITY. Neither this agreement nor any right or
interest herein will be assigned or transferred by Apache or Moran without the
other's written consent, except as to:
(a) the rights of Moran's spouse, estate, heirs and
devisees to certain benefits under this agreement as
specifically set forth herein; and
(b) the sale of all or substantially all of Apache's
assets or the merger or combination of Apache with
another organization, if the asset purchaser or
surviving organization assumes the full performance
of Apache's obligations under this agreement, but
Apache shall not be relieved of its obligations under
this agreement by that assumption.
3
<PAGE> 4
13. NO ATTACHMENT. Except as required by law, Moran's right to
receive payments under this agreement shall not be subject to anticipation,
alienation, sale, encumbrance, pledge, hypothecation, execution, attachment,
levy, offset, deduction, set off, condition, or assignment by operation of law,
and any attempt, voluntary or involuntary, to affect such action shall be null
and void.
14. BINDING EFFECT. This agreement shall bind and inure to the
benefit of Moran, Apache and its subsidiaries and affiliates and their
permitted successors and assigns.
15. AMENDMENT, MODIFICATION, WAIVER. This agreement shall not be
amended or modified except by an instrument in writing signed by the parties
hereto. No term of this agreement shall be deemed to have been waived, nor
shall there be an estoppel against enforcement against any provision of this
agreement, except by written instrument of the party charged with such waiver
or estoppel. No person or organization, including those within the definition
of company, not a party to this agreement or a permitted successor to a party
to this agreement, shall be a third party beneficiary of this agreement or
entitled to enforce its terms. Moran acknowledges that he has had at least 21
days to consider this agreement and has had legal advise with respect thereto.
16. REMEDIES. Upon material breach of this agreement by a party,
the other party shall be entitled to seek damages for breach, and or shall be
entitled to seek specific performance of this agreement. Moran and Apache
acknowledge and confess that there is no adequate remedy at law for breach of
the obligations in this agreement other than the obligation for the payment of
money. The prevailing party in any litigation shall be entitled to an award of
attorneys' fees by the court. Interest on sums due from one party to the other
shall bear interest at the rate of 18% per annum (until paid).
17. NO OTHER BENEFITS. Except as specifically provided in this
agreement, Moran shall not be entitled to any pension, profit sharing, bonus,
disability, life insurance or similar plan or program of Apache, whether now
existing or hereafter adopted for the benefit of Apache's employees or
consultants.
18. HEADINGS AND MEANINGS. The headings of the paragraphs of this
agreement are for convenience only and should not be considered in construing
or interpreting the agreement.
19. GOVERNING LAW. This agreement has been executed and delivered
in the state of Texas, and its validity, and interpretation or, performance and
enforcement shall be governed by the laws of that state.
20. NOTICES. Any notice contemplated or permitted by this
agreement shall be delivered as follows:
4
<PAGE> 5
To Apache or the Company:
Roger B. Rice
Vice President, Human Resources and
Administration
APACHE CORPORATION
2000 Post Oak Boulevard Suite 100
Houston, Texas 77056-4400
Telephone: (713) 296-6100
Telecopier: (713) 296-6490
To John L. Moran: JOHN L. MORAN
[Residence Address]
The above addresses for a notice may be changed by written notice from the
changing party to the other party.
21. REVOCATION. Moran may rescind this agreement by written
notice to Apache delivered on or before 5 p.m. on the seventh day after its
execution by Apache and Moran and with delivery to Moran. If no such notice of
rescission is timely received by Apache, the effective time of this agreement
shall be as stated above. Upon rescission of this agreement, Moran shall repay
to Apache all sums pursuant to this agreement, except salary for services
rendered by Moran part prior to the effective time.
CONSULTANT
1/30/95 /s/ John L. Moran
_______ ____________________________________
Date
John L. Moran
APACHE CORPORATION
1/30/95 /s/ Roger B. Rice
_______ ____________________________________
Date
Roger B. Rice
Vice President, Human Resources & Administration
5
<PAGE> 1
EXHIBIT 11.1
APACHE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1993 1992
-------------- ------------- --------------
<S> <C> <C> <C>
Weighted Average Calculation:
- ----------------------------
Net income $ 42,837 $ 37,334 $ 47,776
============= ============= =============
Weighted average shares outstanding 61,317 53,534 46,904
============= ============= =============
Net income per share, based on
weighted average shares outstanding $ .70 $ .70 $ 1.02
============= ============= ============
Primary Calculation:
- --------------------
Net income $ 42,837 $ 37,334 $ 47,776
Assumed conversion of
3.93-percent debentures 2,121 2,145 141
------------- ------------- --------------
Net income, as adjusted $ 44,958 $ 39,479 $ 47,917
============= ============ ============
Common stock equivalents:
Weighted average shares outstanding 61,317 53,534 46,904
Stock options 115 242 65
Common stock equivalents
assuming conversion of 3.93-percent
debentures 2,778 2,778 205
-------------- -------------- -------------
64,210 56,554 47,174
============= ============= =============
Net income per common share primary $ .70 $ .70 $ 1.02
============= ============= =============
</TABLE>
The assumed conversion of other convertible debt would be insignificant or
anti-dilutive for all the periods presented above.
<PAGE> 1
EXHIBIT 21.1
APACHE CORPORATION
LISTING OF SUBSIDIARIES
<TABLE>
<CAPTION>
EXACT NAME OF SUBSIDIARY JURISDICTION OF
AND NAME UNDER WHICH INCORPORATION OR
SUBSIDIARY DOES BUSINESS ORGANIZATION
________________________________________________________________________________
<S> <C>
Apache Foundation Minnesota
Apache Gathering Company Delaware
Apache Holdings, Inc. Delaware
Apache International, Inc. Delaware
Apache Cote d'Ivoire, Inc. Delaware
Apache Oil Australia Pty Limited New South Wales, Australia
Apache Oil Azerbaijan, Inc. Delaware
Apache Oil Congo, Inc. Delaware
Apache Oil Egypt, Inc. Delaware
Apache Oil Java Sea, Inc. Delaware
Apache Oil Sumatra, Inc. Delaware
Apache Overseas, Inc. Delaware
Apache China Corporation LDC Cayman Islands
Apache Cote d'Ivoire Petroleum LDC Cayman Islands
MW Petroleum Corporation Colorado
MWJR Petroleum Corporation Delaware
Nagasco, Inc. Delaware
Apache NGC, Inc. Delaware
Apache Marketing, Inc. Delaware
Apache Transmission Corporation - Texas Texas
Apache Crude Oil Marketing, Inc. Delaware
Nagasco Marketing, Inc. Delaware
Apache Corporation (New Jersey) New Jersey
Apache-Beals Corporation New York
Apache Oil Corporation Texas
Burns Manufacturing Company Minnesota
Apache Energy Resources Corporation Delaware
Apache Bentu Limited Oklahoma
Hadson Bunyu Limited Oklahoma
Apache Energy Limited Western Australia
Apache Northwest Pty Ltd. Western Australia
Petro Energy Limited New South Wales, Australia
Apache Beagle Pty Ltd. Western Australia
Apache Carnarvon Pty Ltd. Western Australia
Apache Dampier Pty Ltd. Western Australia
Hadson Pacific Pty Ltd. Western Australia
Hadson Timor Sea Pty Ltd. Western Australia
Apache (WA 225) Pty Ltd. Western Australia
Mid Equipment, Incorporated Delaware
XPX Acquisitions, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K into Apache Corporation's previously
filed Registration Statements on Form S-3 (Nos. 33-51253 and 33-53129), Form
S-4 (33-57321), and Form S-8 (Nos. 33-53442, 33-37402 and 33-31407).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Houston, Texas
March 3, 1995
<PAGE> 1
EXHIBIT 23.2
[Ryder Scott Company]
[Petroleum Engineers]
[Letterhead]
CONSENT OF PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the reference
to our Firm's name and to our Firm's review of Apache's proved oil and gas
reserve quantities as of January 1, 1995 included in the Company's Annual
Report on Form 10-K for the fiscal year ending December 31, 1994, and included
in or incorporated by reference into the Company's Registration Statements on
Form S-3 (Nos. 33-51253 and 33-53129), Form S-4 (33-57321), and Form S-8
(Nos. 33-53442, 33-37402 and 33-31407).
/s/ Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 3, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 15,063
<SECURITIES> 0
<RECEIVABLES> 101,801
<ALLOWANCES> 0
<INVENTORY> 8,868
<CURRENT-ASSETS> 134,897
<PP&E> 3,171,976
<DEPRECIATION> (1,486,543)
<TOTAL-ASSETS> 1,879,022
<CURRENT-LIABILITIES> 147,788
<BONDS> 657,486
<COMMON> 78,199
0
0
<OTHER-SE> 737,981
<TOTAL-LIABILITY-AND-EQUITY> 1,879,022
<SALES> 493,500
<TOTAL-REVENUES> 545,621
<CGS> 369,203
<TOTAL-COSTS> 415,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,099
<INCOME-PRETAX> 64,457
<INCOME-TAX> 21,620
<INCOME-CONTINUING> 42,837
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,837
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
