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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, 1995,
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
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
9.25% Notes due 2002 New York Stock Exchange
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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. [ ]
Aggregate market value of the voting stock held by
non-affiliates of registrant as of February 29, 1996 $2,013,681,098
Number of shares of registrant's common stock
outstanding as of February 29, 1996 77,449,273
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of registrant's proxy statement relating to registrant's 1996
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . 16
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . 27
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . 28
11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . 28
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . 29
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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) or millions of British thermal units per day (MMBtud),
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, crude oil and natural gas
liquids. In North America, Apache's exploration and production interests are
focused on the Gulf of Mexico, the Anadarko Basin, the Permian Basin, the Gulf
Coast, East Texas and the Western Sedimentary Basin of Canada. Outside of North
America, Apache has exploration and production interests offshore Western
Australia and in Egypt, and exploration interests in Indonesia, offshore China
and offshore the Ivory Coast. 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 U.S., Canadian and international
properties through operating subsidiaries, such as MW Petroleum Corporation
(MW), DEK Energy Company (DEKALB, formerly known as DEKALB Energy Company),
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.
On May 17, 1995, Apache acquired DEKALB, an oil and gas company
engaged in the exploration for, and the development of, crude oil and natural
gas in Canada, through a merger which resulted in DEKALB becoming a
wholly-owned subsidiary of Apache. The merger was accounted for as a "pooling
of interests" for financial accounting purposes. As a result, this Form 10-K
has been prepared to present information for 1995 and all preceding years on a
combined basis using the pooling of interests method of accounting.
1995 RESULTS
In 1995, Apache had net income of $20.2 million, or $.28 per share, on
total revenues of $750.7 million. Net cash provided by operating activities
during 1995 was $332.1 million.
The year 1995 was Apache's 18th consecutive year of production growth
and eighth consecutive year of oil and gas reserves growth. Apache's average
daily production was approximately 50.2 Mbbls of oil and 577 MMcf of natural
gas for the year. Giving effect to 1995 acquisitions and drilling activity, and
$271.9 million in property dispositions, the Company's estimated proved
reserves increased by 151.3 MMboe in 1995 over the prior year (prior to
restatement for the DEKALB merger) to 420.6 MMboe, of which approximately 60
percent was natural gas. Based on 269.3 MMboe reported at year-end 1994 (which
was increased to 330 MMboe when 1994 results were restated for the DEKALB
merger), Apache's growth in reserves during the year reflects the replacement
of 379 percent of the Company's 1995 production (267 percent based on the
restated 1994 year-end reserves of 330 MMboe). In 1995, the Company replaced
approximately 100 percent of its production through drilling, revisions,
recompletions, workovers and other production enhancement projects. Apache's
active drilling and workover program yielded 168 new producing U.S. and
Canadian wells out of 222 attempts, and involved 539 North American workover
and recompletion projects during the year.
At December 31, 1995, Apache had interests in approximately 4,624 net
oil and gas wells and 1,405,192 net developed acres of oil and gas properties.
In addition, the Company had interests in 777,380 net undeveloped acres under
U.S. and Canadian leases and 3,809,558 net undeveloped acres under
international exploration and production rights.
APACHE'S GROWTH STRATEGY
Apache's growth strategy is to increase oil and gas reserves,
production, 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.
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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; as a result, the Company operates properties
accounting for over 75 percent of its production.
Pursuing its acquire-and-develop strategy, Apache increased its total
proved reserves by 383 MMboe, more than 10 fold in the last 10 years (before
restatement of prior years as a result of the DEKALB merger). 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 1995 Apache acquired $820.9 million of
additional properties (not including the DEKALB merger) and replaced 100
percent of its U.S. production through its drilling, workover and recompletion
program.
Apache's international investments supplement its long-term growth
strategy. Although international exploration is recognized as higher-risk than
most of Apache's U.S. and Canadian activities, it offers potential for greater
rewards and significant reserve additions. Apache directed its international
efforts in 1995 toward development of certain discoveries offshore Western
Australia and in Egypt, and toward further exploration of its concessions in
China, Indonesia, 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
In September, 1995, the Company acquired substantially all of the oil
and gas assets (the Aquila Assets) of Aquila Energy Resources Corporation
(Aquila), a wholly owned, indirect subsidiary of UtiliCorp United Inc., for
approximately $210 million, subject to adjustment. The Aquila Assets include:
proved reserves totaling an estimated 157 Bcf of gas equivalent; approximately
107,000 developed and 49,000 undeveloped net acres located primarily in the
Company's Anadarko-Basin and Gulf of Mexico core areas; a five-year, four-month
premium gas contract effective September 1, 1995; and non-operated interests in
four gas processing plants. The gas contract calls for Aquila Energy Marketing
Corporation to purchase 20 to 25 MMcf of gas per day from the Company at a
price of $2.70 per Mcf in 1996, escalating to $3.20 per Mcf in the year 2000.
The Aquila Assets were accounted for under the purchase method of accounting.
At the time of acquisition, the Aquila properties were producing
approximately 67 MMcf of gas and 2,900 barrels of oil per day, with
approximately 77 percent of proved reserves concentrated in seven fields and 77
percent of the properties' net production operated by the Company.
Approximately $143 million of the consideration for the Aquila Assets was
provided through deferred tax-free exchange of like-kind properties of
qualifying use. The properties exchanged by the Company were primarily lower
margin and non-strategic properties located in the Rocky Mountains that were
previously selected for sale by the Company in connection with its ongoing
program of selective property dispositions. The remainder of the consideration
for the Aquila Assets was provided by a portion of the proceeds from the sale
of 7.45 million shares of the Company's common stock on September 27, 1995.
TRANSACTIONS IN EARLY 1995. On March 1, 1995, Apache purchased
certain U.S. oil and gas properties from Texaco Exploration and Production Inc.
(Texaco) for an adjusted purchase price of $567 million. The Texaco properties
comprised estimated proved reserves at the effective date of approximately 105
MMboe (after adjustment for the exercise of preferential rights and properties
excluded following due diligence and using unescalated prices), of which
approximately 70 percent was oil. At the time of purchase, the daily production
on the acquired properties was 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, East Texas, the Rocky Mountains and the
Gulf of Mexico. Apache operates approximately two-thirds of the production and
owns an average working interest of 70 percent in the operated
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properties. The Texaco transaction also included the acquisition of
approximately 500,000 net mineral acres, as well as a substantial quantity of
seismic data.
On May 17, 1995, Apache acquired DEKALB, an oil and gas company
engaged in the exploration for, and the development of, crude oil and natural
gas in Canada, through a merger which resulted in DEKALB's becoming a wholly
owned subsidiary of Apache. Pursuant to the merger agreement, the Company
issued 8.4 million shares of Apache Common Stock in exchange for all
outstanding DEKALB capital stock and DEKALB employee stock options outstanding
at the time of the merger and tendered to Apache. The merger was accounted for
as a pooling of interests for financial accounting purposes.
Through the DEKALB merger, Apache acquired an estimated 290 Bcf of
gas and 10 MMbbls of liquid hydrocarbons, together with interests in 14 gas
processing plants, six of which it operates, and 150,000 net undeveloped acres
primarily in the Western Sedimentary Basin of Alberta. The DEKALB merger
provided Apache with the infrastructure to conduct Canadian operations and an
inventory of drilling prospects in North America's largest natural gas basin.
The Canadian region, based on the DEKALB properties, became one of Apache's core
focus areas in 1995.
In early 1995, Apache announced plans to upgrade its properties
through the disposition of lower margin and non-strategic properties, including
the disposition of a substantial portion of its Rocky Mountain properties and
non-strategic assets from its other regions. During 1995, Apache completed
$271.9 million in property dispositions, including the disposition of $143
million of Rocky Mountain properties through a deferred tax-free, like-kind
exchange in consideration for certain of the Aquila Assets.
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 16 MMboe of proved
reserves through 90 smaller, tactical acquisitions for an aggregate
consideration of $84.9 million. Apache also sold $19.6 million of its
non-strategic properties during 1994.
EXPLORATION AND PRODUCTION
The Company's North American exploration and production activities are
divided into five operating regions, the Gulf Coast, Gulf of Mexico,
Midcontinent, Western and Canadian region. Approximately 95 percent of the
Company's proved reserves are located in the five North American regions.
Apache conducts its Australian exploration and production and its Indonesian
exploration through its Australian region, while all other international
interests are directed by the Company through its principal offices in Houston,
Texas. Information concerning the amount of revenue, operating income and
identifiable assets attributable to U.S., Canadian and international
operations, respectively, is set forth in the Supplemental Oil and Gas
Disclosures under Item 8 below, and incorporated herein by reference.
GULF COAST. The Gulf Coast region encompasses the Texas and Louisiana
coasts, central Texas and Mississippi. It was Apache's leading region in oil
and gas sales in 1995, contributing approximately $158 million from production
of 11.2 MMboe for the year. 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. The Company performed 327 workover and recompletion
operations during 1995 in the Gulf Coast region and participated in 36 wells
during the year, 20 of which were completed as producers, including 10 Austin
Chalk wells in Central Texas, eight of which were productive. As of December
31, 1995, the region encompassed approximately 306,249 net acres, and accounted
for 66.5 MMboe, or 16 percent, of the Company's year-end 1995 total proved
reserves.
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GULF OF MEXICO. The Gulf of Mexico region includes all of Apache's
interests in properties offshore Texas, Louisiana and Alabama. It was Apache's
leading region in production in 1995, producing approximately 12.7 MMboe and
$129 million in revenue for the year. At December 31, 1995, the Gulf of Mexico
region encompassed 342,179 net acres, located in both state and federal waters,
and accounted for 41.9 MMboe, or 10 percent, of the Company's year-end 1995
reserves. Apache's operations in the Gulf of Mexico focused on workovers and
recompletions, which totaled 59 in the region for 1995. Apache participated in
16 wells which were drilled in the region during the year, 14 of which were
completed as producers. At year-end, Apache's production in the Gulf of Mexico
was approximately 187 MMcf of gas per day.
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 nearly four decades, developing an extensive database of
geologic information and a substantial acreage position. In 1995, Apache
enhanced its position through the acquisition of the Aquila Assets and certain
Texaco properties. The Midcontinent region produced approximately 10.9 MMboe
for the year, creating $127 million in revenue for the Company.
At December 31, 1995 Apache held an interest in 410,379 net acres in
the region, which accounted for approximately 100.5 MMboe, or 24 percent, of
Apache's total proved reserves. Apache participated in drilling 57 wells in the
Midcontinent region during the year, 51 of which were completed as producing
wells. The Company performed 40 workover and recompletion operations in the
region during 1995.
WESTERN. The Western region includes the former Permian Basin region
and assets in the Green River Basin of Colorado and Wyoming and in the San Juan
Basin of New Mexico which were previously included in Apache's Rocky Mountain
region. In connection with its property rationalization program, Apache
disposed of a substantial portion of its Rocky mountain properties on September
1, 1995, including 1,600 wells in six states with daily production of
approximately 9 Mbls of oil and 9 MMcf of natural gas. See "Recent
Acquisitions and Dispositions" above. As a result, Apache closed its Rocky
Mountain region office and redeployed those employees to provide support for
its Canadian, Western and Gulf Coast operations.
The Western region properties are important producers for Apache,
producing approximately 8.8 MMboe and $125 million in oil and gas sales, 19
percent of the Company's production revenues during 1995. At December 31,
1995, the Company held 692,967 net acres in the region, which accounted for
134.3 MMboe, or 32 percent of the Company's total estimated proved reserves.
The Western region was also active in workovers and recompletions, which
totaled 76 for the year. Compared with 1994, Apache nearly doubled its
drilling activity in the region during 1995, with 53 of the 65 wells drilled in
the region completed as producers.
CANADA. Exploration and development activity in the Canadian region
is concentrated in the Provinces of Alberta and British Columbia. The region
produced approximately 4.8 MMboe, 85 percent of which was natural gas, and
generated $39 million in oil and gas sales, six percent of the Company's
production revenues in 1995. Apache participated in 48 wells in this region
during the year, 30 of which were completed as producers. The Company
performed 28 workovers and recompletions on operated wells during 1995. At
December 31, 1995, the region encompassed approximately 415,943 net acres, and
accounted for 57.9 MMboe, or 14 percent, of the Company's year-end 1995 total
proved reserves.
AUSTRALIA. The state of Western Australia became an important region
for Apache following the completion of the AERC acquisition in November 1993.
In 1995, the region generated four percent of the Company's production revenues
for the year. Natural gas production in the region increased by 20 percent
from the prior year to approximately 9.6 MMcfd in 1995. Average daily oil
production decreased by 1.6 percent to approximately 3,080 bopd in 1995,
primarily as a result of natural depletion. As of December 31, 1995, Apache
held 52,550 net developed acres and 2,954,562 net undeveloped acres in Western
Australia. Apache acts as operator for most of its properties in Western
Australia through its wholly owned subsidiary, AEL.
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During 1995, Apache's proved reserves in Australia increased by 81
percent to 19.6 MMboe, five percent of the Company's total proved reserves at
year end. The increase in Australian reserves was primarily attributable to
natural gas reserves booked at the East Spar discovery which were recorded only
after the Company had entered agreements for the sale and delivery of such gas.
See "Oil and Natural Gas Marketing."
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 gas
processing and compression facilities are located on Varanus Island in close
proximity to AEL's producing properties offshore in the Carnarvon Basin. In
1995, the Company and its partners commenced development of the East Spar field
from which gas will be transported to the Varanus Island site and, by agreement
with the Harriet Joint Venture, processed and transported to the mainland where
it will be delivered to gas pipelines connecting to the southwest and to the
eastern goldfields of Western Australia.
Apache also participated in the Wonnich discovery offshore Western
Australia which tested at 27 MMcfd of gas and 1,375 bopd. The company holds a
22.5-percent interest in the Wonnich field and plans to drill appraisal wells
during 1996 to determine the commercial potential of the discovery. Apache is
operator of the appraisal program and is conducting a development feasibility
study.
In early 1994, operations for Indonesia were consolidated under AEL
and directed from its offices in Perth, Western Australia. In 1995, tests were
conducted on two fields in the Bentu Segat Block in Central Sumatra, Indonesia,
confirming proven reserves of approximately 20 Bcf net to Apache. Apache is
operator of the Block, holding a working interest of 39 percent.
OTHER INTERNATIONAL OPERATIONS. Outside of Australia and Indonesia,
Apache currently has exploration and production interests in Egypt and
exploration interests in China and offshore the Ivory Coast. In 1995, Apache
Overseas, Inc., Apache International, Inc. and their subsidiaries (excluding
Australia and Indonesia as discussed above) drilled seven gross exploratory
wells, resulting in four producers, and four development wells, all of which
were productive.
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. Development began at the Qarun field in 1995, with three exploratory
and four development wells drilled. During development of the field,
approximately 6,500 bbls per day are being sold to the Egyptian General
Petroleum Corporation under terms of an early production agreement. Field
development is expected to be complete in late 1996 with production expected to
exceed 30,000 bbls of oil per day. Reserves will be booked in the first
quarter of 1996.
In early 1996 Apache was awarded the Darag Block in the extreme north
of the Gulf of Suez. Apache has a 50-percent interest and will act as
operator of the 460,000-acre Darag Block. Also in early 1996, Apache agreed to
participate as a 50-percent interest holder in the East Beni Suef Block, a
6.8-million-acre concession in the Western Desert of Egypt adjoining the Qarun
Block to the south.
In 1995, Apache became the operator of the Zhao Dong Block in the
Bohai Bay, offshore the People's Republic of China, where Apache increased its
interest to 50 percent in a concession containing approximately 48,677
undeveloped acres. In 1994, a discovery well tested at a rate of over 2,000
bbls per day and was confirmed by an appraisal well which tested 4,000 bbls per
day. In 1995, a second discovery well tested on pump at rates up to 1,300
bbls per day. The Company has elected to proceed with the second phase of
exploration, commencing in May 1996, which involves a commitment to drill two
additional exploratory wells. The Company is currently evaluating the
discovery areas for commercial potential.
OIL AND NATURAL GAS MARKETING
During 1995, Apache sold approximately 85 percent of its U.S. natural
gas on the spot market through Natural Gas Clearinghouse (NGC) or through
market responsive contracts with other parties; the remaining 15 percent was
sold through long-term, premium-priced contracts. Sales to NGC accounted for 27
percent of the Company's oil and gas revenues in 1995. On September 30, 1995,
the Company's contract with NGC terminated and the Company began to
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market all of its own natural gas, including the natural gas previously marketed
by NGC. The Company believes the prices that it obtains through its own natural
gas marketing activities are not substantially different from the prices that
would have been received in marketing through NGC.
On October 27, 1995, wholly-owned affiliates of each of Apache, Oryx
Energy Company and Parker & Parsley Petroleum Company formed Producers Energy
Marketing, LLC, a Delaware limited liability company (ProEnergy). Until
operations of ProEnergy begin, the Company will continue to market its own
natural gas. Once fully operational (which is expected to occur in the second
quarter of 1996), ProEnergy will market substantially all of its members'
domestic natural gas and natural gas liquids pursuant to member gas purchase
agreements having an initial term of 10 years, subject to early termination
following specified events. The price of gas purchased by ProEnergy from its
members will be based upon agreed indexes. ProEnergy will also provide certain
contract administration and other services.
ProEnergy's limited liability company agreement provides that capital
funding obligations, allocations of profit and loss and voting rights are
calculated based upon the members' respective throughputs of natural gas sold
to, or whose sales are managed by, ProEnergy. Each member's liability with
respect to future capital funding obligations is subject to certain
limitations. Natural gas throughputs will be calculated, profit distributed,
and/or capital called on a quarterly basis. As of December 31, 1995, the
Company was the holder of a majority interest in ProEnergy.
Apache is delivering natural gas under several long-term supply
contracts. In connection with the acquisition of the Aquila Assets in
September 1995, the Company entered into a five-year, four-month premium-price
gas contract under which Aquila Energy Marketing Corporation will purchase 20
to 25 MMcf of gas per day from Apache at a price of $2.70 per Mcf in 1996
escalating to $3.20 per Mcf in the year 2000. In August 1994, Apache signed a
long-term gas supply agreement with a cogeneration company under which Apache
will supply a minimum of 51.1 Bcf over 10 years for use in electric power
generation from a cogeneration facility located in northeast Texas. Under the
agreement, deliveries of approximately 20 MMcfd are scheduled to begin in early
1997. 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 a six year period which
began in January 1995, with volumes averaging 20 MMcfd.
Apache assumed its own U.S. 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.
Oil produced from Canadian properties is sold to crude oil purchasers
or refiners at market prices which depend on worldwide crude prices adjusted
for location and quality of the oil. Natural gas produced from Canadian
properties is sold to major aggregators of natural gas, gas marketers and
direct users under long and short-term contracts. The oil and gas contracts
provide for sales at specified prices, or at prices which are subject to change
due to market conditions.
The Company diversifies the markets for its Canadian gas production by
selling directly or indirectly to customers through aggregators and brokers in
the United States and Canada. The Company transports natural gas via the
Company's firm transportation contracts to California (12 MMcfd) and to the
Province of Ontario, Canada (four MMcfd) through end-users' firm transportation
contracts. In 1994, the Company contracted for the sale of five MMcfd of
natural gas to the Hermiston Cogeneration Project, located in the Pacific
Northwest of the United States. The Hermiston Project is expected to commence
purchases of natural gas in the third quarter of 1996.
In Australia, the Company entered into two contracts to deliver 32 Bcf
of gas from the East Spar field for industrial uses, including mining
operations, a power station and a nickel refinery. The contracts provide for
an average daily rate of 15 MMcfd net to the Company. To provide deliveries
under the contracts while the East Spar development is under construction, the
Harriet and East Spar joint ventures entered into a gas sales agreement under
which the Harriet Joint Venture is supplying 42 MMcf of gas per day to East
Spar's industrial customers. Apache operates the Harriet joint venture and
acts as contractor for the East Spar Joint Venture, holding a 22.5-percent
interest in Harriet and a 20-percent interest in East Spar.
7
<PAGE> 9
In 1995, the Harriet Joint Venture entered into a take-or-pay contract
to supply natural gas under which AEL has committed 14 Bcf of reserves for
delivery over a 10 year period. Approximately 20 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, under a long-term contract with a remaining period of 6-1/2 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. Payments received under this contract are
in Australian dollars.
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 1995.
Pricing under the contract in 1995 represented a fixed premium to the quoted
market prices of Tapis crude oil, with payment made in U.S. dollars. In 1995,
production sold under this contract realized an average price of $18.59 per
barrel (exclusive of the impact of hedging activities). 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 1995 with spot-market prices
during the year ranging from $1.25 per Mcf in July to $2.07 per Mcf in
December. Fluctuations are largely due to natural gas supply and demand
perceptions. Apache's average realized gas price of $1.57 per Mcf for 1995
declined 12 percent from the prior-year average of $1.78 per Mcf. Apache's 1994
average realized natural gas price declined eight percent from the 1993 average
of $1.94 per Mcf.
Due to minimum price contracts which escalate at an average of 80% of
the Australian consumer price index, AEL's natural gas production in Western
Australia is not subject to the same degree of price volatility as is its
domestic Apache's U.S. and Canadian gas production; however, natural gas sales
under such Australian minimum price contracts represent only about two percent
of the Company's total natural gas sales at year end. Total Australian gas
sales in 1995, including long-term contracts and spot sales averaged $1.86 per
Mcf, two percent below the 1994 average of $1.90 per Mcf.
Oil prices remained vulnerable to unpredictable political and economic
forces during 1995, but did not experience the wide fluctuations seen in
natural gas prices during the year. Management believes that 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 world-wide crude oil price averaged $17.09 per barrel in 1995,
up nine percent from the average price of $15.65 per barrel in 1994, and two
percent higher than the average price of $16.74 per barrel in 1993. Apache's
average crude oil price for its Australian production, including production
sold under the Marubeni contract, was $18.59 per barrel in 1995, three percent
higher than the average price in 1994.
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 9 to the Company's financial statements under Item 8
below.
8
<PAGE> 10
The Company's business has been and will continue to be affected by
future world-wide 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 (SEC'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 1995.
The SEC's 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
separate one-year waivers with respect to the properties acquired from Texaco
and Aquila, effective from the date of closing, the last of which will expire in
the third quarter of 1996. Under these waivers, if the ceiling is exceeded on
all U.S. properties, Apache is permitted to perform an additional ceiling test
excluding the capitalized costs and present value of the properties acquired
from Texaco and Aquila and would be required to record a write-down of carrying
value if the ceiling is still exceeded. If a write-down is required, it would
result in a one-time charge to earnings but would not impact net cash flow from
operating activities.
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.
At the U.S. federal level, the Federal Energy Regulatory Commission
(FERC) regulates interstate transportation of natural gas under the Natural Gas
Act. 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 natural gas produced in the U.S. 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.
9
<PAGE> 11
ENVIRONMENTAL MATTERS
Apache, as an owner or lessee and operator of oil and gas properties,
is subject to various federal, provincial, 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.
Apache maintains insurance coverage which it believes is 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, 1995, 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 Canada, 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.
EMPLOYEES
On December 31, 1995, Apache had 1,285 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. At
year-end 1995, the Company maintained regional exploration and production
offices in Tulsa, Oklahoma; Houston, Texas; Calgary, Alberta; and Perth,
Western Australia. In 1995, the Company closed its Denver, Colorado office and
redeployed those employees to its remaining region offices in connection with
the sale of a substantial portion of the Company's Rocky Mountain properties
and the reorganization of the Rocky Mountain and Permian Basin regions as
Apache's Western region.
10
<PAGE> 12
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, 1995, are as follows:
<TABLE>
<CAPTION>
Undeveloped Acreage Developed Acreage
-------------------------- ------------------------
Gross Net Gross Net
Acres Acres Acres Acres
----- ----- ----- -----
<S> <C> <C> <C> <C>
GULF COAST.............................................
Alabama............................................ 7,789 1,375 -- --
Florida............................................ 162 14 -- --
Louisiana.......................................... 15,850 11,929 129,020 99,533
Mississippi........................................ 3,921 498 4,850 2,354
Texas.............................................. 106,242 47,842 291,635 142,704
--------- ------- --------- ---------
Total.............................................. 133,964 61,658 425,505 244,591
--------- ------- --------- ---------
GULF OF MEXICO
Alabama............................................ -- -- 34,560 9,457
Louisiana.......................................... 96,433 48,613 294,855 128,377
Texas.............................................. 90,783 57,759 233,334 97,973
--------- ------- --------- ---------
Total.............................................. 187,216 106,372 562,749 235,807
--------- ------- --------- ---------
MIDCONTINENT
Arkansas........................................... 699 327 5,548 3,667
Kansas............................................. 160 56 -- --
Louisiana.......................................... 6,750 4,505 49,394 34,112
Oklahoma........................................... 137,051 55,414 532,359 248,162
Pennsylvania....................................... -- -- 796 38
Texas.............................................. 25,301 14,335 136,372 49,763
--------- ------- --------- ---------
Total.............................................. 169,961 74,637 724,469 335,742
--------- ------- --------- ---------
WESTERN
Colorado........................................... 41,299 36,181 18,938 19,387
Michigan........................................... 200 16 -- --
New Mexico ........................................ 100,357 51,699 122,406 58,936
North Dakota ...................................... 100 50 197 197
Texas.............................................. 130,242 66,986 282,377 210,799
Utah............................................... 2,797 1,091 4,647 4,432
Wyoming............................................ 433,154 226,321 34,820 16,872
--------- ------- --------- ---------
Total.............................................. 708,149 382,344 463,385 310,623
--------- ------- --------- ---------
TOTAL UNITED STATES 1,199,290 625,011 2,176,108 1,126,763
--------- ------- --------- ---------
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
Undeveloped Acreage Developed Acreage
---------------------- ------------------------
Gross Net Gross Net
Acres Acres Acres Acres
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTERNATIONAL
Australia.......................................... 8,312,100 2,954,562 280,460 52,550
Canada............................................. 246,391 156,862 389,903 259,081
China.............................................. 48,677 24,339 -- --
Egypt.............................................. 1,909,080 447,270 18,300 4,575
Indonesia.......................................... 722,290 280,890 -- --
Ivory Coast........................................ 256,243 102,497 -- --
---------- --------- --------- ---------
TOTAL INTERNATIONAL.................................... 11,494,781 3,966,420 688,663 316,206
---------- --------- --------- ---------
TOTAL COMPANY.......................................... 12,694,071 4,591,431 2,864,771 1,442,969
========== ========= ========= =========
</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, 1995, is set forth below.
<TABLE>
<CAPTION>
Gas Oil
-------------------- ----------------
Gross Net Gross Net
------ ----- ----- -----
<S> <C> <C> <C> <C>
Gulf of Mexico . . . . . . . . . . . . . . . . . . . . . . 227 76 66 24
Midcontinent . . . . . . . . . . . . . . . . . . . . . . . 1,478 534 1,465 364
Western . . . . . . . . . . . . . . . . . . . . . . . . . 250 125 3,977 1,982
Gulf Coast . . . . . . . . . . . . . . . . . . . . . . . . 328 262 1,083 866
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 437 301 649 85
Other International . . . . . . . . . . . . . . . . . . . . 5 1 22 4
----- ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,725 1,299 7,262 3,325
===== ===== ===== =====
</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, 1995, the Company was participating in 35 wells in the U.S., six Canadian
wells and three international wells in the process of drilling.
<TABLE>
<CAPTION>
Exploratory Developmental
------------------------ -------------------------
Productive Dry Total Productive Dry Total
---------- --- ----- ---------- --- -----
<S> <C> <C> <C> <C> <C> <C>
1995
----
United States . . . . . . . . . . . . . . . . . . . . 9 15 24 129 21 150
Canada . . . . . . . . . . . . . . . . . . . . . . . 16 13 29 14 5 19
International . . . . . . . . . . . . . . . . . . . . 8 12 20 4 2 6
-- -- -- --- -- ---
Total . . . . . . . . . . . . . . . . . . . . . . . 33 40 73 147 28 175
== == == === == ===
1994
----
United States . . . . . . . . . . . . . . . . . . . . 20 17 37 223 39 262
Canada . . . . . . . . . . . . . . . . . . . . . . . 18 12 30 35 3 38
International . . . . . . . . . . . . . . . . . . . . 7 8 15 2 -- 2
Total . . . . . . . . . . . . . . . . . . . . . . . 45 37 82 260 42 302
== == == === == ===
1993
----
United States . . . . . . . . . . . . . . . . . . . . 12 19 31 198 37 235
Canada . . . . . . . . . . . . . . . . . . . . . . . 11 15 26 13 1 14
International . . . . . . . . . . . . . . . . . . . . 3 5 8 -- -- --
Total . . . . . . . . . . . . . . . . . . . . . . . . 26 39 65 211 38 249
== == == === == ===
</TABLE>
12
<PAGE> 14
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>
1995
----
United States . . . . . . . . . . . . . . . . . . . . 3.7 6.2 9.9 57.3 14.0 71.3
Canada . . . . . . . . . . . . . . . . . . . . . . . 14.0 9.4 23.4 13.4 3.4 16.8
International . . . . . . . . . . . . . . . . . . . . 2.4 3.0 5.4 0.8 1.4 2.2
---- ---- ---- ----- ---- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . 20.1 18.6 38.7 71.5 18.8 90.3
==== ==== ==== ===== ==== =====
1994
----
United States . . . . . . . . . . . . . . . . . . . . 10.7 10.4 21.1 100.1 27.0 127.1
Canada . . . . . . . . . . . . . . . . . . . . . . . 13.0 7.0 20.0 28.0 2.0 30.0
International . . . . . . . . . . . . . . . . . . . . 2.3 2.4 4.7 0.4 -- 0.4
- ---- ---- ---- ----- ---- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . 26.0 19.8 45.8 128.5 29.0 157.5
==== ==== ==== ===== ==== =====
1993
----
United States . . . . . . . . . . . . . . . . . . . . 4.2 10.4 14.6 90.4 22.2 112.6
Canada . . . . . . . . . . . . . . . . . . . . . . . 8.0 11.0 19.0 6.0 1.0 7.0
International . . . . . . . . . . . . . . . . . . . . 0.6 1.3 1.9 -- -- --
---- ---- ---- ----- ---- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . 12.8 22.7 35.5 96.4 23.2 119.6
==== ==== ==== ===== ==== =====
</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>
1995 . . . . . . . . . . 18,324 763 210,632 $3.91 $17.09 $12.05 $1.57
1994 . . . . . . . . . . 13,815 724 176,396 3.40 15.65 11.28 1.78
1993 . . . . . . . . . . 13,036 733 131,591 3.94 16.74 11.55 1.94
</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 U.S., Canadian 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 the Supplemental Oil and Gas Disclosures under Item 8 below.
13
<PAGE> 15
The following table sets forth the Company's estimated proved developed and
undeveloped reserves as of December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Oil, NGLs and
Natural Gas Condensate
(Bcf) (MMbbls)
----------- -------------
<S> <C> <C>
1995
----
Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,298.5 137.5
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203.4 32.8
------- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,501.9 170.3
======= =====
1994
----
Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,184.9 100.0
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.3 10.6
------- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,316.2 110.6
======= =====
1993
----
Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983.7 92.6
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141.9 10.4
------- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,125.6 103.0
======= =====
</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, 1995, 1994 and 1993. 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,
------------
1995 . . . . . . . . . . . . . . . . $4,043,024 $3,390,103 $2,344,357 $2,056,558
1994 . . . . . . . . . . . . . . . . 2,581,459 2,390,126 1,600,927 1,512,305
1993 . . . . . . . . . . . . . . . . 2,591,290 2,289,172 1,626,096 1,450,669
</TABLE>
At December 31, 1995, 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,
------------
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 457,946 $ 481,326
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,549 418,612
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413,937 345,572
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 2,729,592 2,144,593
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,043,024 $3,390,103
========== ==========
</TABLE>
The Company believes that no major discovery or other favorable or adverse
event has occurred since December 31, 1995, 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 SEC guidelines and do not
reflect current prices. Since January 1, 1995, no oil or gas reserve
information has been filed with, or included in any report to, any U.S.
authority or agency
14
<PAGE> 16
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.
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 obligations or duties under applicable laws, ordinances, rules, regulations
and orders of arbitral or governmental authorities. In addition, the interests
may 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 10 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 1995.
15
<PAGE> 17
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 1995
and 1994. Prices shown are from the New York Stock Exchange Composite
Transactions Reporting System.
<TABLE>
<CAPTION>
1995 1994
---------------------------- ------------------------------
Price Range Price Range
------------- Dividends --------------- Dividends
High Low per Share High Low per Share
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . . . . . . . . . . . $27 3/8 $22 1/4 $ .07 $26 7/8 $22 1/2 $ .07
Second Quarter . . . . . . . . . . . . . . 31 25 3/8 $ .07 29 1/4 22 1/4 $ .07
Third Quarter . . . . . . . . . . . . . . . 30 1/4 25 3/4 $ .07 29 1/4 23 $ .07
Fourth Quarter . . . . . . . . . . . . . . 29 5/8 23 1/8 $ .07 28 7/8 23 5/8 $ .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 29,
1996, was $26.00. At December 31, 1995, there were 77,378,958 shares of Apache
common stock outstanding, held by approximately 12,000 shareholders of record
and 30,000 beneficial owners.
Each share of Apache common stock also represents one preferred share
purchase right which, when exercisable, would entitle the holder to purchase
one ten-thousandth of a share of Series A Junior Participating Preferred Stock
for a purchase price of $100 and, under certain circumstances, would entitle
the holder to acquire additional shares of Apache common stock. See Note 7 to
the Company's financial statements under Item 8 below.
The Company has paid cash dividends on its common stock for 116
consecutive quarters through December 31, 1995, 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.
16
<PAGE> 18
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, 1995, which information has been derived from the Company's
audited financial statements. Apache's previously reported data for 1995 and
prior years has been restated to reflect the merger with DEKALB under the
pooling of interests method of accounting. This information should be read in
connection with and is qualified in its entirety by the more detailed
information in the Company's financial statements under Item 8 below.
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993(a) 1992(b) 1991(c)
----------- ---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total revenues $ 750,702 $ 592,626 $ 512,632 $ 517,403 $ 457,872
Income (loss) from continuing
operations 20,207 45,583 41,421 (14,632) (35,216)
Income (loss) per common
share - continuing operations .28 .65 .67 (.26) (.65)
Cash dividends per common share(d) .28 .28 .28 .28 .28
BALANCE SHEET DATA
Working capital (deficit) $ (22,013) $ (3,203) $ (55,538) $ (32,775) $ (57,593)
Total assets 2,681,450 2,036,627 1,759,203 1,774,767 1,597,633
Long-term debt 1,072,076 719,033 504,334 524,098 658,395
Shareholders' equity 1,091,805 891,087 868,596 554,524 601,181
Common shares outstanding at
end of year 77,379 69,666 69,504 55,361 55,305
</TABLE>
(a) Includes financial data for Hadson Energy Resources Corporation
(subsequently Apache Energy Resources Corporation) after June 30, 1993,
and for Hall-Houston Oil Company after July 31, 1993. See Note 1 to the
Company's financial statements under Item 8 below.
(b) The net loss in 1992 resulted from the sale of substantially all of
DEKALB's U.S. assets for a loss of $25.6 million after-tax. DEKALB also
reported Canadian ceiling test write-downs of $15.9 million after-tax and
U.S. ceiling test write-downs of $24.7 million after-tax.
(c) Includes financial data for MW after June 30, 1991. The net loss in 1991
resulted from DEKALB reporting U.S. ceiling test write-downs of $66
million after-tax.
(d) No cash dividends were paid on outstanding DEKALB common stock in 1995,
1994, 1993 and 1992. Cash dividends paid on DEKALB common stock totaled
$.8 million in 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 Note 2 to the Company's financial statements under Item 8
below.
17
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Apache's results of operations and financial position during 1995 were
significantly impacted by the following factors:
PROPERTY ACQUISITIONS - Acquisitions continued to be a significant part of
Apache's growth strategy in 1995, with the Company adding over 156 MMboe of
proved reserves during the year through purchases. Led by the addition of
interests from Texaco Exploration and Production Inc. (Texaco) and Aquila
Energy Resources Corporation (Aquila), Apache spent $820.9 million on the
acquisition of oil and gas properties during 1995. Acquisitions were a major
force behind Apache posting its 18th consecutive year of production growth and
record year-end reserves of 420.6 MMboe. The Texaco and Aquila properties,
combined with properties acquired from Crystal Oil Company (Crystal) in late
1994, boosted Apache's 1995 production by nearly 92 MMcf/d of natural gas and
17 Mb/d of oil.
DEKALB MERGER - On May 17, 1995, Apache acquired DEKALB Energy Company
(DEKALB, now known as DEK Energy Company) through a merger which resulted in
DEKALB becoming a wholly-owned subsidiary of Apache. Pursuant to the merger
agreement, Apache issued 8.4 million shares of its common stock in exchange for
outstanding DEKALB stock and DEKALB employee stock options that remained
outstanding at the time of the merger. The merger was accounted for as a
"pooling of interests." As a result, Apache's financial information for all
preceding periods and the following management discussion have been prepared on
a combined basis using the pooling of interests method of accounting.
Apache's earnings for 1995 were reduced by a non-recurring pre-tax
charge of approximately $10 million for investment banking fees, severance
payments and other costs associated with the merger. The merger costs, which
are largely non-deductible for income tax purposes, reduced Apache's 1995 net
income by $8.7 million, or $.12 per share.
COMMODITY PRICES - During 1995, natural gas spot prices remained volatile,
fluctuating from a low of $1.25 per Mcf in July to a high of $2.07 per Mcf in
December. Domestic spot prices during the first eight months of 1995 lagged
behind comparable prices in 1994, then rebounded above 1994 levels during the
last four months of the year. As a result, Apache's average gas price for 1995
was down 12 percent from a year ago, negatively impacting earnings by
approximately $26 million. A nine-percent increase in the Company's average
oil price from 1994 offset nearly $16 million of the impact of lower gas
prices. On an equivalent basis, prices negatively impacted earnings by $.15
per share.
HEDGING LOSS - In December 1995, Apache recorded a pre-tax hedging loss of
$9.3 million resulting from the decoupling of New York Mercantile Exchange
(NYMEX) natural gas futures prices and actual cash prices received by producers
for natural gas delivered throughout most of the United States. The loss,
which stems from contracts for January through March, 1996 deliveries, reduced
Apache's 1995 net income by $5.9 million, or $.08 per share.
RESULTS OF OPERATIONS
NET INCOME AND REVENUE
Apache reported 1995 net income of $20.2 million, or $.28 per share,
compared with $45.6 million, or $.65 per share in 1994. The decline was due to
the lower natural gas realizations and the non-recurring charges noted above.
Absent one-time charges for the merger costs and hedging loss, 1995 earnings
would have totaled $.48 per share.
18
<PAGE> 20
Revenues for 1995 totaled $750.7 million, an increase of 27 percent from a
year ago. Apache's oil and gas production revenues, boosted by record levels
of oil and gas production and a $1.44 per barrel increase in Apache's average
realized oil price, rose 21 percent from 1994. A 12 percent decline in the
Company's average realized gas price dampened further improvement in Apache's
oil and gas production revenues. Also during 1995, Apache more than doubled
its gathering, processing and marketing revenues to $97.2 million.
Volume and price information concerning the Company's oil and gas
production is summarized below:
<TABLE>
<CAPTION>
Selected Oil and Gas
Operating Statistics 1995 1994 1993
- --------------------- ----------- ---------- ---------
<S> <C> <C> <C>
Natural Gas Volume - Mcf per day:
United States . . . . . . . . . . . . . . 500,441 419,161 299,486
Canada . . . . . . . . . . . . . . . . . . 67,083 56,142 57,449
International . . . . . . . . . . . . . . 9,551 7,975 3,589
---------- ---------- ---------
Total . . . . . . . . . . . . . . . . . . 577,075 483,278 360,524
========== ========== =========
Average Natural Gas Price - Per Mcf . . . . . $ 1.57 $ 1.78 $ 1.94
Oil Volume - Barrels per day:
United States . . . . . . . . . . . . . . 45,084 32,669 31,809
Canada . . . . . . . . . . . . . . . . . . 1,999 2,003 2,033
International . . . . . . . . . . . . . . 3,120 3,177 1,874
---------- ---------- ---------
Total . . . . . . . . . . . . . . . . . . 50,203 37,849 35,716
========== ========== =========
Average Oil Price - Per barrel . . . . . . . . $ 17.09 $ 15.65 $ 16.74
Natural Gas Liquids (NGL) -
Barrels per day: . . . . . . . . . . . . . 2,090 1,985 2,008
Average NGL Price - Per barrel . . . . . . . . $ 12.05 $ 11.28 $ 11.55
</TABLE>
Natural gas sales contributed $330.7 million to 1995 revenues, up five
percent from 1994 as production gains from acquisitions and drilling more than
offset the impact of a $.21 per Mcf decline in the Company's average realized
gas price. Acquisitions boosted Apache's 1995 gas production by approximately
92 MMcf/d, while drilling additions outpaced the impact of property
divestitures and natural depletion. Apache realized production gains in each of
its three operating areas; the United States, Canada and Australia. In
addition to production gains from drilling, the Australian sales benefited from
new markets for its natural gas. The Company's average realized natural gas
price declined 12 percent from 1994, negatively impacting sales by
approximately $44 million.
Reflecting an increase in both production and prices, oil sales jumped 45
percent in 1995 to $313.2 million. Apache's oil production rose 12.4 Mb/d, or
33 percent, from a year ago as property divestitures and natural depletion
partially offset the 17 Mb/d of production added through acquisitions. The
Company's average realized oil price increased nine percent in 1995 to $17.09
per barrel.
Revenues from the sale of natural gas liquids totaled $9.2 million in
1995, up 13 percent from a year ago due to higher prices and a slight increase
in volumes.
19
<PAGE> 21
Gathering, processing and marketing revenues in 1995 more than doubled
from a year ago to $97.2 million. The revenue increase primarily reflects
additional volumes sold under crude oil and natural gas contracts, an activity
that typically has low margins. Apache's gross margin from gathering,
processing and marketing activities declined seven percent from a year ago due
to the sale of the Company's interest in the Little Knife gas plant as part of
Apache's divestiture of Rocky Mountain properties, reduced gathering volumes,
and a lower per-barrel crude-oil margin resulting from a higher mix of
low-margin sour-grade oil.
Other revenues in 1995 of $.4 million reflects $4.3 million of contract
settlement income, $2.2 million in gains from the sales of non-oil-and-gas
assets, $1.1 million of Canadian royalty credits and $2.1 million of other
income, offset by the $9.3 million hedging loss from the decoupling of NYMEX
and wellhead prices.
COSTS AND EXPENSES
Operating costs increased $62.3 million, or 42 percent, in 1995 due to the
impact of Apache's acquisitions. Based on an equivalent unit of production,
operating costs increased $.51 per barrel to $3.91 per barrel for 1995. The
15- percent increase in unit cost reflects the high percentage of oil
properties comprising the Texaco acquisition, as oil properties typically have
a higher per-unit cost than gas properties.
Depreciation, depletion and amortization (DD&A) expense rose 15 percent
from a year ago due to the increase in oil and gas production. On a per unit
basis, DD&A expense declined six percent to $5.49 per boe. Apache's full cost
amortization rates fell in the United States, Canada and Australia due to the
favorable impact of reserve additions and revisions.
Administrative, selling and other costs declined $2.2 million, or six
percent, in 1995 due primarily to the elimination of duplicate administrative
functions following the merger of DEKALB into Apache. Apache integrated its
1995 acquisitions with minimal increases in administrative staff. On an
equivalent unit of production basis, administrative, selling and other costs
declined 24 percent from 1994 to $.67 per boe.
Net financing costs of $70.6 million were slightly more than double the
1994 amount due to increased debt levels from acquisitions and due to higher
interest rates. Apache's average interest rate increased from 6.3 percent in
1994 to 7.4 percent in 1995 due to higher market rates and Apache's higher debt
to total capitalization rate following the acquisition of properties from
Texaco.
HEDGING ACTIVITY
The Company periodically enters into hedging activities with respect to a
portion of its projected oil and natural gas production through a variety of
financial arrangements intended to support oil and natural gas prices at
targeted levels and to minimize the impact of price fluctuations. Apache uses
swaps, puts, collars and fixed-price contracts to hedge its commodity prices.
As noted in the Company's significant accounting policies, normal recurring
gains or losses on these activities are recognized in oil and gas production
revenues when the hedged volumes are produced.
In 1995, Apache recognized net recurring gains from hedging activities
which boosted oil and gas production revenues by approximately $1.5 million and
$3.5 million, respectively. These gains increased the Company's average
realized oil and natural gas prices in 1995 by $.08 per barrel and $.02 per
Mcf, respectively. Also in 1995, the Company realized $4.8 million of gains
from hedging activities that relate to future production periods. These gains
will be recognized in oil and gas production revenues over periods ranging from
one to 60 months based on physical production.
During the fourth quarter of 1995, Apache entered into swap agreements for
January, February and March 1996 production under which the Company will
receive a fixed price averaging $1.98 per Mcf on approximately 300 MMcf/d. The
hedges, which covered approximately one-half of Apache's expected natural gas
production, will limit the upside potential from the physical sale of Apache's
natural gas during the first quarter of 1996.
20
<PAGE> 22
In addition to limiting first quarter 1996 gas prices, the hedges on the
1996 production resulted in a charge to current year earnings. In late 1995, a
marketing anomaly developed in which NYMEX natural gas futures prices, commonly
used as the reference price in hedge agreements, lost their correlation to
wellhead prices. Due to frigid temperatures in the northeastern United States
and pipeline constraints in the nation's gas transportation system, NYMEX
natural gas prices rose substantially higher than prices received by producers
west of the Mississippi River. Producers, such as Apache, with large volumes
of production in Texas and Oklahoma were unable to realize the record increases
in NYMEX prices. As a result of this significant decoupling of NYMEX and
wellhead prices, Apache recognized a pre-tax hedging loss of $9.3 million in
1995 which was reported as a reduction of Other Revenues on the Company's
Statement of Consolidated Income.
Effective with contracts covering April 1996 and subsequent deliveries,
Apache has limited its hedges to production volumes deliverable to the
northeastern United States.
PRIOR YEAR COMPARATIVE INFORMATION
Apache reported net income for 1994 of $45.6 million, a three-percent
decrease from 1993 earnings of $46.8 million. The Company's 1993 net income
included a one-time benefit of $5.3 million, or $.08 per share, for the
cumulative effects of a change in accounting principle related to the adoption
of the liability method of accounting for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 109. Significant factors contributing
to the higher income from continuing operations were increased oil production
and substantially increased natural gas production, partially offset by
decreases in oil and natural gas prices.
Revenues for 1994 totaled $592.6 million, or 16 percent higher than in
1993. Oil and gas production revenues in 1994 totaled $538.4 million, an
increase of 12 percent over oil and gas production revenues of $481.8 million
in the prior year. Oil and gas production revenues in 1994 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.
Natural gas sales contributed $314 million to revenues, up 23 percent from
1993, the result of higher annual production partially offset by lower prices
during 1994. Gas production for the year averaged 483 MMcf/d, up 34 percent
from 1993, positively affecting gas sales by $87 million. This increase is
principally the result of production increases from developmental drilling and
the contribution of 12 months of operations from properties acquired in 1993,
the most significant of which were the offshore properties acquired from
Hall-Houston Oil Company (Hall-Houston) and the properties added through
Apache's mid-1993 merger with Hadson Energy Resources Corporation (subsequently
known as Apache Energy Resources Corporation or AERC). Acquisitions added
approximately 50 MMcf/d of production increases for the year, whereas
developmental drilling and recompletions accounted for nearly 73 MMcf/d.
Apache's average realized price for its natural gas was $1.78 per Mcf
during 1994, eight percent lower than the average price of $1.94 per Mcf during
1993, which negatively affected natural gas sales by $28.2 million. Natural
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 natural gas price by $.02 per Mcf ($3 million in sales)
compared to a $.04 per Mcf decrease ($5.4 million in sales) in 1993.
The impact of increased oil production was offset by lower oil prices in
1994. Oil production contributed $216.2 million to revenues during 1994, less
than one percent below Apache's oil sales in 1993. Average daily oil
production of approximately 37.9 Mbbls reflected a six percent increase over
the prior year, positively affecting oil sales by $13 million, as acquisitions
offset the effects of natural depletion. Oil sales represented 40 percent of
total oil and gas production revenues in 1994 compared to 45 percent of total
oil and gas production revenues in 1993.
21
<PAGE> 23
The Company's average realized oil price for 1994 of $15.65 per barrel
declined seven percent from 1993, negatively affecting oil sales by $15
million. Apache's average realized oil prices in 1994 ranged from $12.64 per
barrel in March to $17.84 per barrel in July. Hedging activities increased
Apache's average realized oil price by $.20 per barrel ($2.7 million in sales)
as compared to a $.37 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 Production Company.
Revenues from the sale of natural gas liquids decreased four percent from
1993, to $8.2 million in 1994.
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 $9.5 million in 1994, up from $4.3 million in
1993. Non-recurring revenues in 1994 included $4 million from the favorable
resolution of take-or-pay contract issues, $2.2 million in gains from the sale
of stock held for investment and $3.3 million of other income.
Operating costs per equivalent unit of production declined 14 percent in
1994, as a 23-percent increase in production volumes more than offset a
six-percent increase in operating costs. Aggregate operating costs increased
from $140.6 million in 1993 to $149.5 million in 1994. On an equivalent unit
of production basis, operating costs in 1994 declined to $3.40 per boe, down
from $3.94 per boe in 1993. Apache's declining costs per boe reflect
increasing natural gas production and lower production costs.
DD&A expense rose 30 percent year-over-year to $257.8 million due to
increased oil and natural gas production and a higher U.S. amortization rate
expressed on a boe basis. Apache's U.S. amortization rate increased from $5.61
per boe in 1993 to $5.88 per boe in 1994 due to higher finding costs during the
last two years. Recurring international DD&A expense increased as higher
Australian production more than offset the impact of lower Canadian 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 and Indonesia during 1994.
Administrative, selling and other costs increased $2.1 million in 1994, or
six percent from 1993. These costs, on an equivalent unit of production basis,
declined 15 percent from the prior year to $.88 per boe in 1994 from $1.03 per
boe in 1993, reflecting the increase in production over the prior year and
results of the Company's continuing efforts to contain costs. The Company
integrated AERC and the Hall-Houston properties with minimal increases in
administrative staff.
Net financing costs of $34.7 million were 13 percent higher than 1993,
primarily a result of increasing interest rates and increased debt from
acquisitions. 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.
22
<PAGE> 24
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, payment of dividends, and capital obligations for affiliated
ventures. 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 natural gas prices and
corresponding changes in cash flow.
CAPITAL EXPENDITURES - A summary of oil and gas capital expenditures over
the last three years is presented below:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Exploration and Development:
United States . . . . . . . . . . . . . . . $ 216,430 $ 270,588 $ 200,924
Canada . . . . . . . . . . . . . . . . . . . 27,788 41,595 18,901
Other International . . . . . . . . . . . . 67,950 31,942 18,006
------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . . . $ 312,168 $ 344,125 $ 237,831
============ ============ ============
Acquisitions of Oil and Gas Properties $ 820,918 $ 180,742 $ 326,676
============ ============ ============
</TABLE>
Expenditures for exploration and development totaled $312.2 million in
1995 compared to $344.1 million in 1994. Apache's drilling program in 1995
added 54 MMboe of reserves (including revisions), replacing 100 percent of
production. In the U.S., Apache completed 138 gross wells as producers out of
174 gross wells drilled during the year compared with 210 gross producers out
of 299 gross wells drilled in 1994. With DEKALB's merger into Apache in 1995
and a higher level of funds spent on acquisitions, the number of wells drilled
in Canada declined from 68 gross wells in 1994 to 48 gross wells in 1995.
Internationally, the Company had discoveries from 12 of 26 wells drilled
in 1995 compared to nine of 17 wells in 1994. The international wells drilled
in 1995 included six successful wells in Egypt, from which full production is
expected to commence by mid 1996, and two wells with oil and gas shows in the
People's Republic of China. Since 1994, Apache has spent approximately $25
million on exploratory wells in the Zhao Dong Block in China, with three
successful wells. Apache, which recently announced plans to proceed with the
second exploration phase under its contract with the People's Republic of
China, is continuing to appraise the field.
U.S. and Canadian expenditures for exploration and development in 1996,
including workover and recompletion operations, are expected to be comparable
to the 1995 expenditure level. The Company expects its other international
exploration and development expenditures in 1996 to total approximately $120
million.
Cash expenditures for acquisitions of oil and gas properties during 1995
totaled $820.9 million as the Company added 156 MMboe of oil and gas reserves
through purchases. The most significant of the 59 transactions Apache
completed during 1995 were the Company's acquisition of properties from Texaco
and Aquila.
23
<PAGE> 25
On March 1, 1995, Apache purchased certain U.S. oil and gas properties
from Texaco for approximately $567 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.
In September 1995, Apache acquired substantially all of the oil and gas
assets of Aquila for approximately $210 million. The oil and gas properties
included approximately 107,000 developed and 49,000 undeveloped net acres
located primarily in Apache's Anadarko Basin and Gulf of Mexico core areas.
Also included in the transaction was the purchase of a five-year, four-month
premium-gas contract and interests in four gas processing plants.
Cash expenditures for acquisitions, excluding AERC, totaled $180.7 million
in 1994 compared to $192.3 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 for $95.8 million. Apache also
acquired approximately $84.9 million of other oil and gas properties through a
number of separate transactions during 1994. Funds for the 1994 acquisitions
were obtained principally from borrowings under the Company's revolving bank
credit facility.
The aggregate cost of acquisitions in 1993, including the value of the
shares issued and liabilities added through the acquisition of AERC, totaled
$326.7 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 $78.6 million of other properties during 1993, primarily representing
purchases of additional working interests in properties in which Apache already
held an interest.
Other capital expenditures for 1993 include the purchase of Natural Gas
Clearinghouse's (NGC) interest in a gas gathering system in Oklahoma, which
Apache sold in March 1993, as described under "Capital Resources and Liquidity"
below.
DEBT AND INTEREST COMMITMENTS - At December 31, 1995, Apache had
outstanding $620 million under its revolving bank credit facility and an
aggregate of $455.1 million in principal amount of other debt, comprised
principally of notes and debentures maturing in the years 1997 through 2002.
Apache made cash payments on debt totaling $500.6 million in 1995, of which
less than $1 million was scheduled under the Company's debt obligations. The
1995 payments on debt reflect the reduction of amounts outstanding on the
Company's revolving credit facility after issuing $172.5 million of 6-percent
debentures in January 1995, and the reduction of debt through property sales to
achieve the Company's stated goal of maintaining a debt level below 50 percent
of total capitalization. Interest payments on the Company's outstanding debt
obligations during 1996 are projected (using weighted average balances for
floating rate obligations) to be approximately $82 million, while scheduled
principal payments for 1996 currently total $3 million.
DIVIDEND PAYMENTS - Dividends paid during 1995 totaled $18.9 million, up
10 percent from 1994, primarily due to the issuance of 7.45 million shares of
the Company's common stock in connection with the September 1995 common stock
offering. The Company's dividend policy currently provides for the payment of
regular quarterly dividends at the rate of $.28 per share annually, subject to
the Company's cash requirements, applicable debt covenants and other factors
deemed relevant by the Board of Directors.
24
<PAGE> 26
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 - Apache's net cash provided by
operating activities during 1995 totaled $332.1 million, down $25.6 million from
1994. The prior-year cash flow included 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. Eliminating the effects of the forward
sale transaction, net cash provided by operating activities in 1995 increased by
five percent over 1994, reflecting the results of increased production partially
offset by lower gas prices and non- recurring charges. Net cash provided by
operating activities in 1994 was up $101.8 million from 1993 primarily due to
increased natural gas production and the $67.4 million forward sale of gas.
LONG-TERM BORROWINGS - 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 for 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. Costs associated with the issue of
these debentures totaled $4.4 million.
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.
Under terms of the credit agreement at December 31, 1995, the Company must
(i) maintain a minimum consolidated tangible net worth of $816 million, which
is adjusted quarterly for subsequent earnings and securities transactions, and
(ii) maintain a ratio of (a) earnings before interest expense, state and
federal taxes, and 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. 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.
On February 27, 1996, Apache completed its offering of $100 million
principal amount of unsecured 7.7% notes due March 15, 2026. Proceeds from the
notes will be used to reduce amounts outstanding under the Company's revolving
bank credit facility.
STOCK TRANSACTIONS - On September 27, 1995, Apache closed an equity
offering of 7.45 million shares of Apache common stock. Net proceeds of
approximately $195.5 million were used to repay existing indebtedness under the
Company's revolving bank credit facility, to finance the Aquila transaction and
for general corporate purposes.
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.
In addition to the public offerings, Apache issued 307,977 shares of
Apache common stock in conjunction with its mid-1993 acquisition of AERC.
25
<PAGE> 27
ASSET SALES - In early 1995, Apache announced plans to accelerate the
disposition of lower-margin and non-strategic properties, including the sale of
a substantial portion of its Rocky Mountain properties. During 1995, Apache
received $271.9 million from the sale of such properties, utilizing the
proceeds to reduce bank debt. Apache received $19.5 million and $10.3 million
from the sale of non-strategic oil and gas properties during 1994 and 1993,
respectively.
In March 1993, Apache and NGC completed the sale of their respective
interests in a gathering system located 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.
LIQUIDITY - The Company had $13.6 million in cash and cash equivalents on
hand at December 31, 1995, down from $30 million at the end of 1994. Apache
utilized available cash in 1995 to reduce its bank debt and resulting debt to
total capitalization ratio, achieving a reduction in the Company's interest
rates. Apache's ratio of current assets to current liabilities at year end of
.90:1 declined slightly from a ratio of .98:1 at December 31, 1994.
Management believes that cash on hand at year end, net cash generated from
operations and available borrowing capacity under its revolving bank credit
facility will be adequate to satisfy the Company's financial obligations to
meet future liquidity needs for at least the next two fiscal years.
FUTURE TRENDS
Apache's growth strategy is to increase oil and gas reserves, production
and cash flow through a combination of acquisitions, moderate-risk drilling and
development of its inventory of existing properties. An emerging aspect of
Apache's strategy is its exploration and development activity in the
international arena where there are generally larger reserve targets than in
North America.
In 1996, Apache expects domestic exploration and development outlays to be
comparable to those reported in 1995 as the Company focuses on reserve
enhancement and cash flow acceleration on recently acquired properties.
Internationally, the Company projects capital expenditures to nearly double
from 1995 as Apache continues to exploit its concessions in Western Australia,
Egypt, China and Indonesia. Proposed exploration and development expenditures
in 1996 will be reviewed at least quarterly in light of fluctuating product
prices and Apache's objective to fund operations through internally generated
cash flow.
NATURAL GAS MARKETING
On September 30, 1995, the Company's contract with NGC terminated, and
Apache began to market all of its own natural gas. The Company believes the
prices that it obtains through its own marketing activities are not
substantially different from the prices that would have been received through
NGC.
In October 1995, subsidiaries of Apache, Oryx Energy Company and Parker &
Parsley Petroleum Company announced their formation of Producers Energy
Marketing, LLC (ProEnergy), a natural gas marketing company organized to create
a direct link between natural gas producers and purchasers. ProEnergy is
designed to purchase and sell producer-owned gas directly into the marketplace
at index prices substantially equivalent to spot market prices and provide
expanded value to its customers. Until ProEnergy is fully operational, which
is expected to occur in the second quarter of 1996, Apache will continue to
market its own natural gas. Apache and other members of ProEnergy have agreed
to fund the reasonably anticipated capital needs of ProEnergy. In January
1996, Apache paid $5.8 million to ProEnergy for Apache's share of
capital-funding obligations for the start-up of ProEnergy.
26
<PAGE> 28
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-34 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.
27
<PAGE> 29
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 1996 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.
28
<PAGE> 30
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
Auditors' report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Report of management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statement of consolidated income for each of the three years
in the period ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . F-4
Statement of consolidated cash flows for each of the three years
in the period ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated balance sheet as of December 31, 1995 and 1994 . . . . . . . . . . . . F-6
Statement of consolidated shareholders' equity for each of the
three years in the period ended December 31, 1995 . . . . . . . . . . . . . . . . F-8
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . F-9
Supplemental oil and gas disclosures . . . . . . . . . . . . . . . . . . . . . . . . F-28
Supplemental quarterly financial data . . . . . . . . . . . . . . . . . . . . . . . F-34
</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.
29
<PAGE> 31
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 -- Amended and Restated 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
Amendment No. 3 to Registrant's Registration Statement on Form S-4, Registration No. 33-57321,
filed April 14, 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 -- Certificate of Ownership and Merger Merging Apache Energy Resources Corporation into Registrant,
effective December 31, 1995, as filed with the Secretary of State of Delaware on December 21,
1995.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*3.3 -- Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred
Stock of Registrant, effective January 31, 1996, as filed with the Secretary of State of Delaware
on January 22, 1996.
*3.4 -- Bylaws of Registrant, dated as of February 9, 1996.
*4.1 -- Form of Registrant's common stock certificate.
4.2 -- Rights Agreement, dated as of January 10, 1986, between Registrant and First Trust Company, Inc.,
rights agent, relating to the declaration of a rights dividend to Registrant's common
shareholders 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).
4.3 -- Rights Agreement, dated as of January 31, 1996, between Registrant and Norwest Bank Minnesota,
N.A., rights agent, relating to the declaration of a rights dividend to Registrant's common
shareholders of record on January 31, 1996 (incorporated by reference to Exhibit (a) to
Registrant's Registration Statement on Form 8-A, dated January 24, 1996, 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 (incorporated by reference to Exhibit 10.2 to
Registrant's Annual Report on Form 10-K for year ended December 31, 1994, SEC File No. 1-4300).
10.3 -- First Amendment to Third Amended and Restated Credit Agreement, dated April 14, 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 (incorporated by reference to
Exhibit 99.3 to Registrant's Registration Statement on Form S-3, Registration No. 33-63923, filed
November 2, 1995).
10.4 -- Second Amendment to Third Amended and Restated Credit Agreement, dated October 23, 1995, among
Registrant, the lenders names therein, and the First National Bank of Chicago, as Administrative
Agent and Arranger, and Chemical Bank, as Co-Agent and Arranger (incorporated by reference to
Exhibit 99.4 to Registrant's Registration Statement on Form S-3, Registration No. 33-63923, filed
November 2, 1995).
*10.5 -- Third Amendment to Third Amended and Restated Credit Agreement, dated December 18, 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.
*10.6 -- Fourth Amendment to Third Amended and Restated Credit Agreement, dated December 22, 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.
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
*10.7 -- Fifth Amendment to Third Amended and Restated Credit Agreement, dated January 22, 1996, 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.
10.8 -- 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.)
+10.9 -- 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).
+10.10 -- 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).
+10.11 -- 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).
+10.12 -- Apache Corporation Retirement/401(k) Savings Plan, dated December 22, 1994, effective January 1,
1995 (incorporated by reference to Exhibit 10.7 to Registrant's Annual Report on Form 10-K for
year ended December 31, 1994, SEC File No 1-4300).
+ 10.13 -- Amendments to the Apache Corporation Retirement/401(k) Savings Plan, each dated April 19, 1995
(incorporated by reference to Exhibit 4.6 to Registrant's Registration Statement on Form S-8,
Registration No. 33-63817, filed October 31, 1995).
+*10.14 -- Amendments to the Apache Corporation Retirement/401(k) Savings Plan, effective May 4, 1995 and
May 17, 1995.
+*10.15 -- Non-Qualified Retirement/Savings Plan of Apache Corporation, dated November 16, 1989.
+*10.16 -- First Amendment to the Non-Qualified Retirement/Savings Plan of Apache Corporation, dated October
24, 1995.
+10.17 -- 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).
+10.18 -- 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).
+*10.19 -- Apache Corporation 1990 Stock Incentive Plan, as amended and restated February 9, 1996.
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
+*10.20 -- Apache Corporation 1995 Stock Option Plan, as amended and restated February 9, 1996.
+10.21 -- 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).
+10.22 -- Apache Corporation Directors' Deferred Compensation Plan, as amended and restated September 14,
1994 (incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for
year ended December 31, 1994, SEC File No. 1-4300).
+10.23 -- 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).
+10.24 -- 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).
+10.25 -- 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).
+10.26 -- 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).
+10.27 -- 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).
*10.28 -- Member Gas Purchase Agreement, dated March 1, 1996, by and among Apache Gathering Company, Apache
Corporation, MW Petroleum Corporation, DEK Energy Company, Apache Transmission Corporation-Texas
and Apache Marketing, Inc., as seller, and Producers Energy Marketing, LLC, as buyer.
10.29 -- Asset Purchase and Sale Agreement, dated July 8, 1992, between DEKALB and Louis Dreyfus Gas
Holdings Inc. (incorporated by reference to Exhibit 10.10 to DEKALB's Current Report on Form 8-K,
dated October 16, 1992, SEC File No. 0-2886).
*11.1 -- Statement regarding computation of earnings per share of Registrant's common stock for the year
ended December 31, 1995.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit No.
-----------
Description
-----------
<S> <C>
*21.1 -- Subsidiaries of Registrant
*23.1 -- Consent of Arthur Andersen LLP
*23.2 -- Consent of Coopers & Lybrand
*23.3 -- 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 by Apache during the
fiscal quarter ended December 31, 1995:
October 27, 1995 - Item 5. Other Events - Wholly owned affiliates of
Apache, Oryx Energy Company and Parker & Parsley Petroleum Company
formed Producers Energy Marketing, LLC ("ProEnergy"), which will
market natural gas and natural gas liquids for such members pursuant
to member gas purchase agreements having an initial term of ten years,
subject to early termination following specified events.
December 14, 1995 - Item 5. Other Events - Apache's board of directors
(i) adopted a Rights Agreement, effective as of the close of business
on January 31, 1996, to replace the existing Rights Agreement (adopted
on January 10, 1986) which expired by its own terms as of the close of
business on January 31, 1996, and (ii) declared a dividend on each
outstanding share of Apache common stock held of record as of January
31, 1996 of one right to purchase, for $100, one ten-thousandth
(1/10,000) of a share of Series A Junior Participating Preferred Stock
or, under certain circumstances, Apache common stock or other
securities.
34
<PAGE> 36
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 27, 1996 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
- ------------------------------ Officer (Principal Executive
Raymond Plank Officer) March 27, 1996
/s/ Mark A. Jackson Vice President and Chief
- ------------------------------ Financial Officer (Principal
Mark A. Jackson Financial Officer) March 27, 1996
/s/ Thomas L. Mitchell Controller and Chief
- ------------------------------ Accounting Officer (Principal
Thomas L. Mitchell Accounting Officer) March 27, 1996
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Frederick M. Bohen Director
- -------------------------------
Frederick M. Bohen March 27, 1996
/s/ Virgil B. Day Director
- -------------------------------
Virgil B. Day March 27, 1996
/s/ G. Steven Farris Director
- -------------------------------
G. Steven Farris March 27, 1996
/s/ Randolph M. Ferlic Director
- -------------------------------
Randolph M. Ferlic March 27, 1996
/s/ Eugene C. Fiedorek Director
- -------------------------------
Eugene C. Fiedorek March 27, 1996
/s/ W. Brooks Fields Director
- -------------------------------
W. Brooks Fields March 27, 1996
/s/ Robert V. Gisselbeck Director
- -------------------------------
Robert V. Gisselbeck March 27, 1996
/s/ Stanley K. Hathaway Director
- -------------------------------
Stanley K. Hathaway March 27, 1996
/s/ John A. Kocur Director
- -------------------------------
John A. Kocur March 27, 1996
/s/ Joseph A. Rice Director
- -------------------------------
Joseph A. Rice March 27, 1996
</TABLE>
<PAGE> 38
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, 1995
and 1994, and the related statements of consolidated income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995. 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 did not audit the financial statements of
DEKALB Energy Company, a company acquired during 1995 in a transaction
accounted for as a pooling of interests, as of and for the years ended December
31, 1994 and 1993, as discussed in Note 2. Such financial statements are
included in the consolidated financial statements of Apache Corporation and
Subsidiaries and reflect total assets and total revenues of 10 percent and
eight percent, respectively, of the related consolidated totals as of and for
the year ended December 31, 1994, and total revenues of nine percent of the
related consolidated total for the year ended December 31, 1993, after
restatement to reflect certain adjustments as set forth in Note 2. The
financial statements of DEKALB Energy Company, prior to those adjustments, were
audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to pre-1995 amounts included for DEKALB Energy
Company, is based solely upon the report of the other auditors.
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, and the report of other
auditors, provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As explained in Note 5 to the Consolidated Financial Statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
ARTHUR ANDERSEN LLP
Houston, Texas
February 27, 1996
F-1
<PAGE> 39
AUDITORS' REPORT
To the Shareholders and Board of Directors of DEKALB Energy Company:
We have audited the consolidated balance sheets of DEKALB Energy Company as
at December 31, 1994 and 1993, and the consolidated statements of operations,
shareholders' equity and cash flows for each of the two years in the period
ended December 31, 1994. These consolidated 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 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the consolidated financial position of DEKALB Energy
Company as at December 31, 1994, and the consolidated results of its operations
and its cash flows for each of the two years in the period ended December 31,
1994, in accordance with United States generally accepted accounting
principles.
COOPERS & LYBRAND
Calgary, Alberta
February 13, 1995
F-2
<PAGE> 40
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 financial statements of Apache Corporation and Subsidiaries, except for
DEKALB Energy Company prior to 1995, have been audited by Arthur Andersen LLP,
independent public accountants. The financial statements of DEKALB Energy
Company and its subsidiaries for 1994 and prior periods were audited by Coopers
& Lybrand. Their audits included developing an overall understanding of each
Company's accounting systems, procedures and internal controls and conducting
tests and other auditing procedures sufficient to support their opinions on the
fairness of the respective consolidated financial statements.
The Apache Corporation 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 and Chief Financial Officer
Thomas L. Mitchell
Controller and Chief Accounting Officer
F-3
<PAGE> 41
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------
1995 1994 1993
------------ ------------- -------------
(In thousands, except per common share data)
<S> <C> <C> <C>
REVENUES:
Oil and gas production revenues . . . . . . . . . . . $ 653,144 $ 538,389 $ 481,848
Gathering, processing and marketing revenues . . . . . 97,207 44,287 25,862
Equity in income of affiliates . . . . . . . . . . . . -- 459 624
Other revenues . . . . . . . . . . . . . . . . . . . . 351 9,491 4,298
------------ ------------- -------------
750,702 592,626 512,632
------------ ------------- -------------
OPERATING EXPENSES:
Depreciation, depletion and amortization . . . . . . . 297,485 257,821 198,320
Impairments . . . . . . . . . . . . . . . . . . . . . -- 7,300 23,200
Gain on disposal of assets . . . . . . . . . . . . . . -- -- (513)
Operating costs . . . . . . . . . . . . . . . . . . . 211,742 149,474 140,580
Gathering, processing and marketing costs . . . . . . 91,243 37,866 21,010
Administrative, selling and other . . . . . . . . . . 36,552 38,729 36,629
Merger costs . . . . . . . . . . . . . . . . . . . . . 9,977 -- --
Financing costs:
Interest expense . . . . . . . . . . . . . . . . . . 88,057 37,838 34,205
Amortization of deferred loan costs . . . . . . . . 4,665 3,987 3,896
Capitalized interest . . . . . . . . . . . . . . . . (19,041) (6,034) (6,279)
Interest income . . . . . . . . . . . . . . . . . . (3,121) (1,048) (1,145)
------------ ------------- -------------
717,559 525,933 449,903
------------ ------------- -------------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 33,143 66,693 62,729
Provision for income taxes . . . . . . . . . . . . . . 12,936 21,110 21,308
------------ ------------- -------------
INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . 20,207 45,583 41,421
Cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . -- -- 5,334
------------ ------------- -------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 20,207 $ 45,583 $ 46,755
============ ============= =============
INCOME PER COMMON SHARE:
Continuing operations . . . . . . . . . . . . . . . . $ .28 $ .65 $ .67
Cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . -- -- .08
------------ ------------- -------------
NET INCOME PER COMMON SHARE . . . . . . . . . . . . . . . $ .28 $ .65 $ .75
============ ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . 71,792 69,715 62,013
============ ============= =============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of this statement.
F-4
<PAGE> 42
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------
1995 1994 1993
------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations . . . . . . . . . . . . $ 20,207 $ 45,583 $ 41,421
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation, depletion and amortization . . . . . . . 297,485 257,821 198,320
Impairments . . . . . . . . . . . . . . . . . . . . . . -- 7,300 23,200
Amortization of deferred loan costs . . . . . . . . . . 4,665 3,987 3,896
Provision for deferred income taxes . . . . . . . . . 29,382 24,385 20,539
Other deferred credits . . . . . . . . . . . . . . . . 4,584 -- --
Gain on disposal of assets . . . . . . . . . . . . . . -- -- (513)
Other . . . . . . . . . . . . . . . . . . . . . . . . . -- 46 140
Cash distributions less than earnings of affiliates . . . -- (459) (662)
Gain on sale of stock held for investment . . . . . . . . (906) (2,178) --
Changes in operating assets and liabilities,
net of effects of acquisitions:
Increase in receivables . . . . . . . . . . . . . . . . (64,399) (12,128) (8,641)
(Increase) decrease in advances to oil and
gas ventures and other . . . . . . . . . . . . . . . (189) (2,281) 137
(Increase) decrease in deferred charges and other . . . (1,294) (3,238) 2,120
Increase (decrease) in payables . . . . . . . . . . . . 37,254 (17,288) (5,463)
Increase (decrease) in accrued operating expenses . . . 15,236 541 (8,177)
Advance from gas purchaser . . . . . . . . . . . . . . (7,038) 67,376 --
Decrease in deferred credits and noncurrent liabilities (2,864) (11,768) (11,166)
------------- ------------- -------------
Cash flows from continuing operations . . . . . . . . 332,123 357,699 255,151
Cash flows from discontinued operations . . . . . . . -- 70 840
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . 332,123 357,769 255,991
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures . . . . . . . . . (312,168) (344,125) (237,831)
Acquisition of oil and gas properties . . . . . . . . . . (820,918) (180,742) (192,256)
Purchase of premium gas contract . . . . . . . . . . . . . (28,700) -- --
Non-cash portion of net oil and gas property additions . 5,092 5,480 8,789
Purchase of AERC stock, net of cash acquired . . . . . . . -- (13,885) (70,692)
Purchase of stock held for investment . . . . . . . . . . (307) (5,051) --
Proceeds from sale of oil and gas properties . . . . . . . 271,937 19,525 10,342
Prepaid acquisition cost . . . . . . . . . . . . . . . . . 25,377 (25,377) --
Proceeds from sale of stock held for investment . . . . . 2,835 6,640 --
Proceeds from sale of gas gathering system . . . . . . . . -- -- 32,201
Other capital expenditures, net . . . . . . . . . . . . . (16,559) (11,968) (32,370)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 3,307 (1,716) 1,145
------------- ------------- -------------
NET CASH USED BY INVESTING ACTIVITIES: . . . . . . (870,104) (551,219) (480,672)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings . . . . . . . . . . . . . . . . . . . 856,159 244,058 275,424
Payments on long-term debt . . . . . . . . . . . . . . . . (500,579) (38,019) (180,400)
Net increase (decrease) in short-term borrowings . . . . . -- (5,478) 5,455
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (18,915) (17,131) (14,919)
Proceeds from issuance of common stock . . . . . . . . . . 197,006 4,599 134,224
Payments to acquire treasury stock . . . . . . . . . . . . (26) (3,389) (104)
Cost of debt and equity transactions . . . . . . . . . . . (12,074) (875) (270)
------------- ------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . 521,571 183,765 219,410
------------- ------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . (16,410) (9,685) (5,271)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . 30,043 39,728 44,999
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . $ 13,633 $ 30,043 $ 39,728
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of this statement.
F-5
<PAGE> 43
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
------------- --------------
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 13,633 $ 30,043
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,949 111,310
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,764 8,868
Advances to oil and gas ventures and other . . . . . . . . . . . . . 8,990 10,093
------------- --------------
208,336 160,314
------------- --------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . 3,956,833 3,265,770
Unproved properties and properties under
development, not being amortized . . . . . . . . . . . . . . . . 335,842 157,379
Gas gathering, transmission and processing facilities . . . . . . . . 33,088 25,809
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,341 49,912
------------- --------------
4,377,104 3,498,870
Less: Accumulated depreciation, depletion and amortization . . . . . (1,975,543) (1,682,039)
------------- --------------
2,401,561 1,816,831
------------- --------------
OTHER ASSETS:
Deferred charges and other . . . . . . . . . . . . . . . . . . . . . 71,553 59,482
------------- --------------
$ 2,681,450 $ 2,036,627
============= ==============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of this statement.
F-6
<PAGE> 44
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
------------ ------------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . $ 3,000 $ 100
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 138,269 92,861
Accrued operating expense . . . . . . . . . . . . . . . . . . . . . 26,863 16,722
Accrued exploration and development . . . . . . . . . . . . . . . . . 30,251 25,077
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . 9,733 10,794
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 22,233 17,963
------------ ------------
230,349 163,517
------------ ------------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,072,076 719,033
------------ ------------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,575 151,216
Advance from gas purchaser . . . . . . . . . . . . . . . . . . . . . 60,338 67,376
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,307 44,398
------------ ------------
287,220 262,990
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000 shares authorized,
78,498,892 and 70,785,067 shares issued, respectively . . . . . . 98,124 88,482
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 687,465 500,101
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 335,470 335,293
Treasury stock, at cost, 1,119,934 and
1,118,975 shares, respectively . . . . . . . . . . . . . . . . . . (13,478) (13,452)
Currency translation adjustments . . . . . . . . . . . . . . . . . . (15,776) (19,337)
------------ ------------
1,091,805 891,087
------------ ------------
$ 2,681,450 $ 2,036,627
============ ============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of this statement.
F-7
<PAGE> 45
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Currency Total
Common Paid-In Retained Treasury Translation Shareholders'
Stock Capital Earnings Stock Adjustment Equity
-------- --------- ---------- -------- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 . . . . . . . . . . $ 70,912 $ 229,137 $ 276,039 $(15,339) $ (6,225) $554,524
Net income . . . . . . . . . . . . . . . . -- -- 46,755 -- -- 46,755
Dividends ($.28 per common share) . . . . . -- -- (15,902) -- -- (15,902)
Common shares issued . . . . . . . . . . . 17,538 270,859 -- -- -- 288,397
Treasury shares issued . . . . . . . . . . -- (108) -- 950 -- 842
Treasury shares purchased . . . . . . . . . -- -- -- (104) -- (104)
Treasury shares retired . . . . . . . . . . (8) (71) -- 79 -- --
Currency translation adjustments . . . . . -- -- -- -- (5,916) (5,916)
-------- --------- ---------- -------- -------- ---------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . . 88,442 499,817 306,892 (14,414) (12,141) 868,596
Net income . . . . . . . . . . . . . . . . -- -- 45,583 -- -- 45,583
Dividends ($.28 per common share) . . . . . -- -- (17,182) -- -- (17,182)
Common shares issued . . . . . . . . . . . 281 3,428 -- -- -- 3,709
Treasury shares issued . . . . . . . . . . -- -- -- 966 -- 966
Treasury shares purchased . . . . . . . . . -- -- -- (3,389) -- (3,389)
Treasury shares retired . . . . . . . . . . (241) (3,144) -- 3,385 -- --
Currency translation adjustments . . . . . -- -- -- -- (7,196) (7,196)
-------- --------- ---------- -------- -------- ---------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . . 88,482 500,101 335,293 (13,452) (19,337) 891,087
Net income . . . . . . . . . . . . . . . . -- -- 20,207 -- -- 20,207
Dividends ($.28 per common share) . . . . . -- -- (20,030) -- -- (20,030)
Common shares issued . . . . . . . . . . . 9,642 187,364 -- -- -- 197,006
Treasury shares purchased . . . . . . . . . -- -- -- (26) -- (26)
Currency translation adjustments . . . . . -- -- -- -- 3,561 3,561
-------- --------- ---------- -------- -------- ---------
BALANCE, DECEMBER 31, 1995 . . . . . . . . . . $ 98,124 $ 687,465 $ 335,470 $(13,478) $(15,776) $1,091,805
======== ========= ========== ======== ======== =========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of this statement.
F-8
<PAGE> 46
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Apache Corporation (Apache or the Company) is an
independent energy company that explores for, develops, produces, gathers,
processes and markets natural gas, crude oil and natural gas liquids. The
Company's North American exploration and production activities are divided into
four U.S. operating regions, the Gulf of Mexico, Midcontinent, Gulf Coast and
Western regions, plus a Canadian region. Approximately 95 percent of the
Company's proved reserves are located in the four U.S. regions and Canada.
Internationally, Apache has production interests in Australia and Egypt, and is
currently focusing its international exploration efforts in Western Australia,
Egypt, China and Indonesia.
Apache holds interests in many of its properties through operating
subsidiaries, such as MW Petroleum Corporation (MW), DEK Energy Company (DEK,
formerly known as DEKALB Energy Company), 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.
The Company's future financial condition and results of operations will
depend upon prices received for its oil and natural gas production and the
costs of acquiring, finding, developing and producing reserves. A substantial
portion of the Company's production is sold under market-sensitive contracts.
Prices for oil and natural gas are subject to fluctuations in response to
changes in supply, market uncertainty and a variety of factors beyond the
Company's control. These factors include worldwide political instability
(especially in the Middle East), the foreign supply of oil and natural gas, the
price of foreign imports, the level of consumer demand, and the price and
availability of alternative fuels. With natural gas accounting for 65 percent
of Apache's 1995 production on an energy equivalent basis, the Company was
affected more by fluctuations in natural gas prices than in oil prices.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of Apache and its subsidiaries after
elimination of intercompany balances and transactions. The Company's interests
in oil and gas ventures and partnerships are proportionately consolidated.
CASH EQUIVALENTS - 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.
INVENTORIES - Inventories consist principally of tubular goods, production
equipment and oil produced but not sold, all 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.
Exclusive of field level costs, Apache capitalized $12.5 million, $14.6 million
and $12.2 million of internal costs in 1995, 1994 and 1993, 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 $16.3 million, $13.2 million and $10.8 million in 1995, 1994, and 1993,
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
F-9
<PAGE> 47
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
capitalized to oil and gas properties. Unless a significant portion of the
Company's reserve volumes are sold (greater than 25 percent), 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
unit-of-production method based upon production and estimates of proved reserve
quantities. Unevaluated costs and related capitalized interest costs are
excluded from the amortization base until the properties associated with these
costs are evaluated and determined to be productive. The amortizable base
includes estimated future development costs 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. Included in the estimated future net cash flows
are Canadian provincial tax credits expected to be realized beyond the date at
which the legislation, under its provisions, could be repealed. To date, the
Canadian provincial government has not indicated an intention to repeal this
legislation.
The costs of certain unevaluated 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 two to 20 years. Accumulated depreciation for these
assets totaled $26.3 million and $25.7 million at December 31, 1995 and 1994,
respectively.
ACCOUNTS PAYABLE - Included in accounts payable at December 31, 1995 and
1994, are liabilities of approximately $48 million and $30.3 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.
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, 1995.
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.
F-10
<PAGE> 48
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 volumes are produced. 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 resulted in a one-time benefit
of $5.3 million in the first quarter of 1993.
FOREIGN CURRENCY TRANSLATION - The U.S. dollar is considered the functional
currency for each of the Company's international operations except for the
Canadian subsidiary whose functional currency is the Canadian dollar.
Translation adjustments resulting from translating the Canadian subsidiary
foreign currency financial statements into U.S. dollar equivalents are reported
separately and accumulated in a separate component of shareholders' equity. For
other 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 - Amounts are based on the weighted average number
of shares of common stock 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.
STOCK-BASED COMPENSATION - The Company accounts for employee stock-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, the adoption of SFAS No. 123, "Accounting for
Stock-Based Compensation" in 1996 will have no effect on the Company's results
of operations.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepting accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates with regard to these financial statements include the
estimate of proved oil and gas reserve volumes and the related present value of
estimated future net revenues therefrom (see Supplemental Oil and Gas
Disclosures).
F-11
<PAGE> 49
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
In September 1995, Apache acquired substantially all of the oil and gas
assets of Aquila Energy Resources Corporation (Aquila) for approximately $210
million. The acquired assets included proved reserves totaling an estimated
157 Bcf of gas equivalent, approximately 107,000 developed and 49,000
undeveloped net acres located primarily in Apache's Anadarko Basin and Gulf of
Mexico core areas, a five-year, four-month premium-price gas contract effective
September 1, 1995, and non-operated interests in four gas processing plants.
The gas contract calls for Aquila Energy Marketing Corporation, a wholly owned
subsidiary of UtiliCorp, to purchase 20 to 25 MMcf of gas per day from Apache
at a price of $2.70 per Mcf in 1996, escalating to $3.20 per Mcf in the
year 2000.
On May 17, 1995, Apache acquired DEKALB Energy Company (DEKALB, now known
as DEK Energy Company), an oil and gas company engaged in the exploration for,
and the development of, crude oil and natural gas in Canada, through a merger
which resulted in DEKALB becoming a wholly owned subsidiary of Apache.
Pursuant to the merger agreement, 8.4 million shares of Apache common stock
were exchanged for the outstanding DEKALB stock and DEKALB employee stock
options. Merger costs of approximately $10 million were charged to expense in
the second quarter of 1995. The merger was accounted for as a "pooling of
interests" and, as a result, the Company's consolidated financial statements
for periods prior to the merger have been restated to include combined results
with DEKALB.
In connection with the DEKALB merger, the methods used by Apache and DEKALB
in computing DD&A of proved oil and gas properties were conformed to the
units-of-production method using physical units. This method was previously
used by DEKALB and in conforming the methods used, Apache adopted the
units-of-production method in lieu of the future gross revenue method. The
conforming adjustments for DD&A have been reflected retroactively in the
accompanying consolidated financial statements along with an adjustment to
DEKALB's previously recorded deferred tax valuation allowance for U.S.
operating loss carryforwards expected to be utilized by Apache in future
periods. All other adjustments are reclassifications to conform financial
statement presentation. Apache and DEKALB had no significant intercompany
transactions prior to the merger.
F-12
<PAGE> 50
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the previously separate results of Apache and DEKALB to
the restated combined results is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1994 1993
------------- ------------
(In thousands)
<S> <C> <C>
Revenues:
Apache . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 545,621 $ 466,638
DEKALB . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,290 45,903
Reclassifications to
conform presentation . . . . . . . . . . . . . . . . . . . 715 91
------------- ------------
$ 592,626 $ 512,632
============= ============
Income from continuing operations:
Apache . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,837 $ 37,334
DEKALB . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,813 5,672
Conforming adjustments:
DD&A . . . . . . . . . . . . . . . . . . . . . . . . . . (6,682) (4,311)
Income taxes . . . . . . . . . . . . . . . . . . . . . . 2,615 2,726
------------- ------------
$ 45,583 $ 41,421
============= ============
Net income:
Apache . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,837 $ 37,334
DEKALB . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,813 11,006
Conforming adjustments:
DD&A . . . . . . . . . . . . . . . . . . . . . . . . . . (6,682) (4,311)
Income taxes . . . . . . . . . . . . . . . . . . . . . . 2,615 2,726
------------- ------------
$ 45,583 $ 46,755
============= ============
</TABLE>
On March 1, 1995, Apache completed the acquisition of 315 oil and gas
fields from Texaco Exploration and Production Inc. (Texaco) for an adjusted
purchase price of $567 million. The Texaco properties included estimated
proved reserves at the effective date, after adjustment for the exercise of
preferential rights and properties excluded following due diligence, of
approximately 105 MMboe.
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 outstanding stock of Hadson Energy Resources
Corporation (subsequently known as Apache Energy Resources Corporation, or
AERC, which was merged into Apache in December 1995) for approximately $98
million through a series of privately negotiated transactions and a merger
approved by 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
F-13
<PAGE> 51
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 for cash.
Also in 1993, Apache entered into two agreements to purchase a total of 104
Bcfe of proved reserves from Hall- Houston Oil Company (Hall-Houston) for an
aggregate consideration of $113.7 million. These transactions included
interests in 63 producing fields and 12 fields under development or awaiting
pipeline connections.
Except for the DEKALB transaction, each transaction described above has
been accounted for using the purchase method of accounting and has been
included in the financial statements of Apache since the dates of acquisition.
The following unaudited pro forma summary of the Company's consolidated
results of operations were prepared as if the Texaco transaction, discussed
above, occurred on January 1 of each of the years presented. The pro forma
data is based on numerous assumptions and is not necessarily indicative of
future operations.
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------
(Unaudited) 1995 1994
- ----------- ------------- -------------
(In thousands, except per common share data)
<S> <C> <C>
Revenues and other income . . . . . . . . . . . . . . . . $ 774,477 $ 755,926
Net income . . . . . . . . . . . . . . . . . . . . . . . 18,914 35,359
Income per common share . . . . . . . . . . . . . . . . . .26 .51
Weighted average common shares outstanding . . . . . . . 71,792 69,715
</TABLE>
DIVESTITURES
In September 1995, Apache closed the sale of non-strategic oil and gas
properties in its Rocky Mountain region for approximately $140 million net to
Apache. The assets included Apache's interests in 138 fields with
approximately 1,600 active wells in Colorado, Montana, North and South Dakota,
Utah and Wyoming. The Company retained its interests in the Green River Basin
of Colorado and Wyoming and in the San Juan Basin of Colorado and New Mexico.
Proceeds from the sale of all oil and gas properties sold during 1995 totaled
$271.9 million.
3. INVESTMENTS IN EQUITY SECURITIES
Apache has certain investments in equity securities which are classified as
"available-for-sale" pursuant to SFAS No. 115, "Accounting For Certain
Investments iN Debt and Equity Securities." At December 31, 1995, the
aggregate cost basis totaled $5.6 million and the related aggregate fair value
approximated cost.
The Company realized gross gains totaling $.9 million and $2.2 million from
the sale of available-for-sale securities during 1995 and 1994, respectively.
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-14
<PAGE> 52
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEBT
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994
------------- ------------
(In thousands)
<S> <C> <C>
LONG-TERM DEBT
Apache debt:
Revolving bank facility . . . . . . . . . . . . . . . . . . . $ 620,000 $ 454,000
6-percent subordinated debentures due 2002 . . . . . . . . . . 172,500 --
9.25-percent notes due 2002, net of discount . . . . . . . . . 99,742 99,713
3.93-percent convertible notes due 1997 . . . . . . . . . . . 75,000 75,000
Money market lines . . . . . . . . . . . . . . . . . . . . . . 3,000 --
------------- ------------
970,242 628,713
------------- ------------
Subsidiary and other obligations:
Bank of Montreal facility . . . . . . . . . . . . . . . . . . 27,000 --
DEKALB 9.875-percent note due 2000 . . . . . . . . . . . . . . 29,225 29,225
DEKALB 10-percent note due 1998 . . . . . . . . . . . . . . . 22,100 22,100
Royal Bank of Canada facility . . . . . . . . . . . . . . . . -- 10,222
AEL acceptance facility . . . . . . . . . . . . . . . . . . . 24,200 25,800
Share of offshore partnership financing . . . . . . . . . . . 2,309 2,973
Other notes payable . . . . . . . . . . . . . . . . . . . . . -- 100
------------- ------------
104,834 90,420
------------- ------------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,075,076 719,133
Less: Current maturities . . . . . . . . . . . . . . . . . . . . (3,000) (100)
------------- ------------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,072,076 $ 719,033
============= ============
</TABLE>
At December 31, 1995, Apache had a $1 billion revolving bank facility
funded by a group of banks. The maximum amount available is 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, 1995, the borrowing
base was $706 million and the principal amount outstanding was $620 million.
The bank facility is scheduled to mature on March 1, 2000, and the agreement
provides for perpetual one-year extensions as requested year-by- year by the
Company and is subject to the approval of the banks. Interest on amounts
borrowed is charged at the First National Bank of Chicago's base rate or at the
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, 1995, the margin was .35 percent. The Company pays a facility fee
of .15 percent on the available portion of the commitment and .075 percent on
the unavailable portion of the commitment.
On January 4, 1995, Apache completed the issue of $172.5 million of
6-percent Convertible Subordinated Debentures due 2002 (the 6-percent
debentures). The 6-percent debentures are convertible at the option of the
holder into Apache common stock at a price of $30.68 per share.
The 9.25-percent notes totaling $100 million were issued by Apache in May
1992 and are not redeemable prior to their maturity in June 2002. In December
1992, Apache issued the 3.93-percent convertible notes. The 3.93-percent notes
mature in November
F-15
<PAGE> 53
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997, and are not redeemable prior to maturity; however, they are convertible
into Apache common stock at $27 per share, subject to adjustment under certain
circumstances.
The indentures for the 9.25-percent and 3.93-percent 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 $1 billion bank facility require the Company to
maintain a minimum consolidated tangible net worth of not less than $816
million at December 31, 1995. The minimum consolidated tangible net worth
requirement is adjusted quarterly for subsequent earnings and equity
transactions. The Company is also required 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.
The Company was in compliance with all financial covenants at December 31,
1995.
At December 31, 1995, the Company also had an aggregate borrowing capacity
of $40 million under certain uncommitted money market lines of credit which the
Company used from time to time for working capital purposes. As of December
31, 1995, an aggregate of $3 million was outstanding under such lines of
credit.
In connection with Apache's Canadian operations, Apache Canada Ltd., a
wholly-owned subsidiary of DEK, also had a $30 million U.S. revolving term
credit facility under which $27 million was outstanding at December 31, 1995.
The size of this facility was increased to $45 million in January 1996.
The DEKALB 10-percent and 9.875-percent notes mature on April 15, 1998 and
July 15, 2000, respectively. The 10 percent notes are currently redeemable at
par plus accrued interest.
During 1994, Apache 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
with the Bank of Montreal which provided funding for the construction of an
offshore gas gathering project. The borrowing base is $30 million, of which
$24.2 million was outstanding at December 31, 1995. The AEL credit facility is
not guaranteed by Apache.
A $35 million banking facility was established in 1992 by Apache on behalf
of Apache Offshore Investment Partnership. At December 31, 1995, the
commitment under this facility was $16.5 million, which is scheduled to reduce
by $1.5 million on a quarterly basis. The amount outstanding at year-end was
$8.6 million, of which Apache's share was $2.3 million.
As of December 31, 1995 and 1994, the Company had approximately $19.3
million and $12 million, respectively, of unamortized costs associated with
its various debt obligations. These costs are reflected as deferred charges on
the accompanying Consolidated Balance Sheet and are being amortized over the
life of the related debt.
On February 27, 1996, Apache completed its offering of $100 million
principal amount of unsecured 7.7-percent notes due March 15, 2026.
F-16
<PAGE> 54
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AGGREGATE MATURITIES OF DEBT
<TABLE>
<CAPTION>
December 31, 1995
-----------------
(In thousands)
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . $ 3,000
1997 . . . . . . . . . . . . . . . . . . . . . . 103,101
1998 . . . . . . . . . . . . . . . . . . . . . . 23,308
1999 . . . . . . . . . . . . . . . . . . . . . . 24,200
2000 . . . . . . . . . . . . . . . . . . . . . . 649,225
Thereafter . . . . . . . . . . . . . . . . . . . 272,242
-------------
$ 1,075,076
=============
</TABLE>
5. INCOME TAXES
Income(loss) before income taxes is composed of the following:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
United States . . . . . . . . . . . . . . . $ 28,155 $ 59,948 $ 74,279
International . . . . . . . . . . . . . . . 4,988 6,745 (11,550)
------------- ------------- -------------
Total . . . . . . . . . . . . . . . . . . $ 33,143 $ 66,693 $ 62,729
============= ============= =============
</TABLE>
The total provision for income taxes consists of the following:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------
1995 1994 1993
------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
Current taxes:
Federal . . . . . . . . . . . . . . . . $ (16,776) $ (3,890) $ 140
State . . . . . . . . . . . . . . . . . -- 100 50
Foreign . . . . . . . . . . . . . . . . 330 515 579
Deferred taxes . . . . . . . . . . . . . . . 29,382 24,385 20,539
------------- ------------- -------------
12,936 21,110 21,308
Cumulative effect of adoption of
SFAS No. 109 . . . . . . . . . . . . . . -- -- (5,334)
------------- ------------- -------------
$ 12,936 $ 21,110 $ 15,974
============= ============= =============
</TABLE>
F-17
<PAGE> 55
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 (OBRA) of 1993. Effective January 1,
1993, the Company adopted SFAS No. 109, resulting in a one-time benefit of $5.3
million.
A reconciliation of the federal statutory income tax amounts to the
effective amounts is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------
1995 1994 1993
------------ ------------ -----------
(In thousands)
<S> <C> <C> <C>
Statutory income tax . . . . . . . . . . . . . . . $ 11,600 $ 23,343 $ 21,955
State income tax, less federal benefit . . . . . . 1,282 1,013 965
Taxation of foreign operations . . . . . . . . . . 135 1,486 969
Utilization of federal income tax credits . . . . -- (1,545) (2,133)
Increase in corporate income tax rate
provided for in OBRA . . . . . . . . . . . . . . -- -- 3,500
Increase in foreign corporate
income tax rates . . . . . . . . . . . . . . . . 1,757 -- --
DEKALB income tax benefit limitation
recorded (reversed) . . . . . . . . . . . . . . . (1,200) (2,499) (1,769)
All other, net . . . . . . . . . . . . . . . . . . (638) (688) (2,179)
------------ ------------ -----------
$ 12,936 $ 21,110 $ 21,308
============ ============ ===========
</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.
The net deferred tax liability is comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994
--------------- ---------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Deferred income . . . . . . . . . . . . . . . . . . . . . . $ (2,410) $ (30,343)
Federal net operating loss carryforwards . . . . . . . . . (57,642) (27,448)
State net operating loss carryforwards . . . . . . . . . . (10,126) (5,660)
Alternative minimum tax credits . . . . . . . . . . . . . . (6,239) (20,792)
Accrued expenses and liabilities . . . . . . . . . . . . . (9,136) (7,628)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,787) (9,392)
--------------- ---------------
Total deferred tax assets . . . . . . . . . . . . . . . (95,340) (101,263)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . 1,374 1,374
--------------- ---------------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . (93,966) (99,889)
--------------- ---------------
Deferred tax liabilities:
Depreciation, depletion and amortization . . . . . . . . . 271,020 243,171
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,521 7,934
--------------- ---------------
Total deferred tax liabilities . . . . . . . . . . . . . 275,541 251,105
--------------- ---------------
Deferred income tax liability . . . . . . . . . . . . . . . . $ 181,575 $ 151,216
=============== ===============
</TABLE>
F-18
<PAGE> 56
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
U.S. deferred taxes have not been provided on foreign earnings totaling $61
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, 1995, the Company has U.S. Federal net operating loss
carryforwards of $158.8 million and statutory depletion carryforwards of $7
million available to reduce future U.S. Federal taxable income. The net
operating loss carryforwards will expire unless otherwise utilized, beginning
in 1996. The statutory depletion may be carried forward indefinitely. The
Company has alternative minimum tax (AMT) credit carryforwards of $6.2 million
and investment tax credits of approximately $1.6 million. AMT credits can be
carried forward indefinitely and may only be used to reduce regular tax
liabilities in excess of AMT liabilities. If the investment tax credits are
not utilized, they will expire by 1996. The Company also has foreign net
operating loss carryforwards of $5.9 million and foreign capital loss
carryforwards of $6.3 million which may be carried forward indefinitely and may
be utilized to reduce future foreign taxable income. Management believes it is
more likely than not that the deferred tax assets, net of the valuation
allowance, will be realized.
6. 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 in 1995 and escalating at $.10 per MMBtu per
year through the year 2000. 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 $.05 per MMBtu premium
associated with a monthly fee to be paid by the purchaser. The Company,
through its marketing subsidiaries, may purchase gas from third parties to
satisfy gas delivery requirements of this arrangement. Contracted volumes
relating to this arrangement are included in the Company's Supplemental Oil and
Gas Disclosures.
This payment has been classified as an advance on the balance sheet and is
being reduced as gas is delivered to the purchaser under the terms of the
contract. At December 31, 1995, $60.3 million was still outstanding. Gas
volumes delivered to the purchaser are reported as revenue at prices used to
calculate the amount advanced, before imputed interest, minus or plus amounts
paid or received by Apache applicable to the price swap agreement. Interest
expense is recorded based on a 9 1/2-percent rate.
F-19
<PAGE> 57
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL STOCK
COMMON STOCK OUTSTANDING
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year . . . . . . . . . . . . 69,666,092 69,504,310 55,361,438
Treasury shares issued (acquired), net . . . . . . (959) 129,852 119,087
Treasury shares acquired and retired . . . . . . . -- (192,808) (6,302)
Shares issued:
DEKALB merger . . . . . . . . . . . . . . . . . 153,229 -- --
Public equity offerings . . . . . . . . . . . . 7,450,000 -- 5,795,000
Acquisition of AERC . . . . . . . . . . . . . . -- 2,974 305,003
Conversion of 7 1/2-percent debentures . . . . -- -- 7,816,453
Dividend reinvestment plan . . . . . . . . . . 26,809 13,789 --
Stock option plans 83,787 207,975 113,631
---------- ---------- ----------
Balance, end of year . . . . . . . . . . . . . . . 77,378,958 69,666,092 69,504,310
========== ========== ==========
</TABLE>
Public Equity Offering -- In September 1995, Apache completed a public
offering of approximately 7.5 million shares of Apache common stock for net
proceeds of $195.5 million.
In March 1993, Apache completed a 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, 1995, common shares totaling
3,376,070 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 $2.3927 to $29.00 with an aggregate
exercise price of $29.1 million. The following table summarizes the changes in
stock options for each year and the number of common shares available for
option grants at year end:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Outstanding, beginning of year . . . . . . . . . 1,340,048 1,178,505 1,173,158
Exercised ($2.3927 to $26.875) . . . . . . . . . (130,513) (207,975) (129,085)
Granted ($23.25 to $29.00) . . . . . . . . . . . 396,600 546,984 355,505
Canceled or expired ($8.432 to $27.25) . . . . . (387,768) (177,466) (221,073)
--------- --------- ---------
Outstanding, end of year . . . . . . . . . . . . 1,218,367 1,340,048 1,178,505
========= ========= =========
Available for grant, end of year . . . . . . . 2,157,703 815,191 1,241,460
========= ========= =========
</TABLE>
Preferred Stock -- The Company has five million shares of no par preferred
stock authorized, of which 25,000 shares have been "designated" Series A Junior
Participating Preferred Stock and authorized for issuance pursuant to certain
rights that trade with Apache common stock. There are no shares of preferred
stock issued and outstanding; however, shares of preferred stock are reserved
for issuance upon the exercise of the preferred stock purchase rights discussed
below.
F-20
<PAGE> 58
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rights to Purchase Preferred Stock -- In December 1995, the Company
declared a dividend of one right (a Right) for each outstanding share of Apache
common stock effective on January 31, 1996. Each Right entitles the registered
holder to purchase from the Company one ten-thousandth (1/10,000) of a share of
Series A Junior Participating Preferred Stock at a price of $100 per one
ten-thousandth of a share, subject to adjustment. The Rights are exercisable
10 calendar days following a public announcement that certain persons or groups
acquired 20 percent or more of the outstanding shares of Apache common stock or
10 business days following commencement of an offer for 30 percent or more of
the outstanding shares of Apache common stock. Unless and until the Rights
become exercisable, they will be transferred with and only with the shares of
Apache common stock. If the Company engages in certain business combinations
or a 20- percent shareholder 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 outstanding shares of Apache 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 $.01 per Right at any time until 10 business days after public
announcement that a person has acquired 20 percent or more of the outstanding
shares of Apache common stock. The Rights will expire on January 31, 2006,
unless earlier redeemed by the Company. Unless the Rights have been previously
redeemed, all shares of Apache common stock issued by the Company will include
Rights.
8. NON-CASH INVESTING AND FINANCING ACTIVITIES
A summary of non-cash investing and financing activities is presented
below.
In 1993, Apache acquired Hadson Energy Resources Corporation (now AERC) for
approximately $98 million in cash and Apache common stock. The accompanying
financial statements include 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 $13.9 million for AERC shares that had not been
surrendered by the end of 1993.
In September 1993, Apache called for redemption of its 7 1/2-percent
convertible subordinated debentures due 2000. Approximately 99 percent of the
holders of the debentures elected to convert the principal amount of their
debentures into shares of Apache common stock, with the balance electing to
receive cash ($.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
(7.8 million shares of common stock issued) . . . . . . . . . . . . . . . . . $ 147,214
===============
</TABLE>
F-21
<PAGE> 59
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest, net of amounts capitalized . . . . . . . $ 64,365 $ 30,909 $ 35,336
Income and other taxes, net of refunds . . . . . . (15,225) 6,874 (86)
</TABLE>
9. 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, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents . . . . . . . . . . $ 13,633 $ 13,633 $ 30,043 $ 30,043
Investment securities . . . . . . . . . . . . 5,620 6,084 7,242 7,422
Long-term debt:
Bank debt . . . . . . . . . . . . . . . . . (671,200) (671,200) (490,022) (490,022)
6-percent subordinated debentures . . . . . (172,500) (198,375) -- --
9.25-percent notes due 2002 . . . . . . . . (99,742) (113,750) (99,713) (100,213)
3.93-percent convertible notes due 1997 . . (75,000) (88,733) (75,000) (79,928)
9.875-percent notes due 2000 . . . . . . . (29,225) (33,217) (29,225) (29,079)
10-percent notes due 1998 . . . . . . . . . (22,100) (22,199) (22,100) (21,934)
Other debt . . . . . . . . . . . . . . . . . ( 5,309) ( 5,309) (3,073) (3,073)
Hedging financial instruments:
Interest rate swap . . . . . . . . . . . . -- (40) -- (181)
Foreign currency rate contracts . . . . . . -- 81 -- --
Commodity price swaps (1) . . . . . . . . . (9,326) (30,631) -- (1,190)
</TABLE>
(1) Includes $(7.9) million in 1995 for fixed to floating price swaps where
there is an offsetting position with a physical contract. See Commodity
Price Hedges below.
The following methods and assumptions were used to estimate the fair value
of the financial instruments summarized in the table above. The carrying
values of trade receivables and trade payables included in the accompanying
Consolidated Balance Sheet approximated market value at December 31, 1995 and
1994.
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 at year end.
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 fair
values of the 6-percent debentures and 9.875-percent and 10-percent notes are
based upon estimates provided to the Company by independent sources.
F-22
<PAGE> 60
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest Rate Instruments -- The Company periodically enters into various
financial instruments to manage its interest rate exposure. At December 31,
1995, the Company had one outstanding interest rate swap agreement with a
notional principal amount totaling $6 million. The notional amount reduces by
$2 million each quarter 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.
Foreign Currency Rate Contracts -- The Company periodically enters into
forward foreign currency exchange contracts to reduce the impact of foreign
currency fluctuations on operating results. At December 31, 1995, Apache had
open forward contracts for $2.5 million of Australian dollars. The fair value
of these contracts was based on rates quoted from financial institutions.
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. As a result
of these activities, Apache recognized net hedging losses in 1995 and 1993 of
$4.3 million and $.6 million, respectively, while recognizing a net gain of
$5.7 million in 1994. The 1995 net loss reflected a $9.3 million pre-tax
charge to earnings resulting from the loss of correlation of New York
Mercantile Exchange (NYMEX) prices from actual wellhead prices for certain
positions in January through March 1996 production, reported as a reduction of
other revenues; offset by $5 million of commodity pricing gains which increased
1995 oil and gas production revenues. The 1994 net hedging gain and 1993 net
hedging loss were recognized in oil and gas production revenues during each of
the respective years.
At December 31, 1995, Apache's Consolidated Balance Sheet included deferred
credits totaling $4.8 million for gains realized on the early termination of
commodity price hedges in 1995 and prior years. The hedging gains will be
recognized into oil and gas production revenues over periods ranging from one
to 60 months as the hedged production occurs.
F-23
<PAGE> 61
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table and notes thereto cover the Company's pricing and
notional volumes on open natural gas commodity hedges as of December 31, 1995:
<TABLE>
<CAPTION>
Production Periods
-----------------------------------------------
1996 1997 1998 1999 2000
------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
NYMEX Based Swap Positions:
Receive fixed price (thousand MMBtu/d)(1) 162.1 -- -- -- --
Average swap price, per MMBtu(1) 1.89 -- -- -- --
Pay fixed price (thousand MMBtu/d)(2) 48.2 46.4 40.0 40.0 40.0
Average swap price, per MMBtu(2) 1.85 1.92 2.02 2.11 2.21
</TABLE>
(1) The Company receives a payment in the event the swap price is above the
NYMEX settlement price and, conversely, makes a payment if the NYMEX
settlement price is greater than the swap price. To reduce its exposure to
a non- correlation of NYMEX prices and the cash markets for natural gas
during the first quarter of 1996, the Company entered into reverse swap
transactions. Volumes and pricing relating to the reverse swap positions,
which are not reflected in the above table, equated to 34.1 thousand
MMBtu/d with an average fixed swap price of $2.77 per MMBtu. The Company
will make payments if the swap prices are greater than NYMEX settlement
prices on these positions the first quarter of 1996.
(2) The Company has various contracts to supply gas at fixed prices. In order
to lock in a margin on a portion of the volumes, the Company is a fixed
price payor on swap transactions. The average physical contract price
ranges from $2.24 in 1996 to $2.78 in 2000. The fair value of these hedges
was a negative $7.9 million at December 31, 1995, with most of the negative
value related to the arrangement discussed in Note 6.
At December 31, 1995, the Company had price swaps in place for the year
1996 for 100,000 barrels of Australian crude oil production at an average TAPIS
crude oil price of $19.23 per barrel and for 532,500 barrels of its domestic
production at an average NYMEX price of $18.54 per barrel.
In connection with the purchase of MW 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, 1995) 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: MMbbls Price Bcf Price
------------------- ------ ----- --- -----
<S> <C> <C> <C> <C>
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-24
<PAGE> 62
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
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.
As part of the Company's due diligence review for acquisitions, Apache
conducts an extensive environmental evaluation of purchased properties.
Depending on the extent of an identified environmental problem, the Company may
exclude the property from the acquisition, or agree to assume liability for
remediation of the property. As of December 31, 1995, Apache had a reserve for
environmental remediation of approximately $8 million. The Company is not aware
of any environmental claims existing as of December 31, 1995, which have not
been provided for or would otherwise have a material impact on its financial
position or results of operations. There can be no assurance, however, that
current regulatory requirements will not change, or past non-compliance with
environmental laws will not be discovered on the Company's properties.
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 $81.8 million through 1998.
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. Additionally, DEK maintains a
separate retirement plan. Total expenses under all plans were $7 million, $5.8
million and $5.6 million for 1995, 1994 and 1993, respectively. The unfunded
liability for all plans has been accrued in the Consolidated Balance Sheet.
Lease Commitments -- The Company has leases for office space and equipment
with varying expiration dates through 2007. Net rental expense was $5.2
million, $4.4 million and $5.0 million for 1995, 1994 and 1993, respectively.
F-25
<PAGE> 63
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1995, minimum rental commitments under long-term
operating leases and long-term pipeline transportation commitments, ranging
from 15 to 30 years, are as follows:
<TABLE>
<CAPTION>
Net
Minimum Pipeline Net
Rental Sublease Rental Transportation Minimum
Commitments Rentals Commitments Commitments Commitments
------------ ---------- ------------ -------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1996 . . . . . . . $ 8,922 $ (1,539) $ 7,383 $ 3,926 $ 11,309
1997 . . . . . . . 7,545 (798) 6,747 3,187 9,934
1998 . . . . . . . 7,349 (228) 7,121 2,831 9,952
1999 . . . . . . . 7,089 (147) 6,942 2,813 9,755
2000 . . . . . . . 6,413 (147) 6,266 2,796 9,062
Thereafter . . . . 36,093 (86) 36,007 51,937 87,944
------------ ---------- ------------ ------------ ------------
$ 73,411 $ (2,945) $ 70,466 $ 67,490 $ 137,956
============ ========== ============ ============ ============
</TABLE>
11. CUSTOMER INFORMATION
Major Purchasers -- Natural Gas Clearinghouse (NGC) was the principal
purchaser of Apache's spot market gas production from April 1990 through
September 30, 1995. On September 30, 1995, the Company's contract with NGC was
terminated, and Apache began marketing its own natural gas. Sales to NGC
accounted for 27 percent, 37 percent and 33 percent of the Company's oil and
gas revenues in 1995, 1994 and 1993, respectively. Sales to Amoco represented
11 percent of the Company's 1993 oil and gas revenues and were less than 10
percent for 1995 and 1994.
Apache will sell substantially all of its natural gas production to
ProEnergy upon commencement of full operations of ProEnergy (which is
anticipated to occur in the second quarter of 1996). As of December 31, 1995,
Apache, by agreement, owned a 57.91 percent interest in ProEnergy. Apache's
interest, however, will fluctuate as its throughput of natural gas varies.
Sales of natural gas by Apache to ProEnergy will be made at agreed index
prices, which indices are based generally upon prevailing spot market prices at
the relevant delivery points.
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.
Sales of natural gas by Apache to ProEnergy will similarly be
uncollateralized. Apache and the other members of ProEnergy have agreed to fund
the reasonably anticipated future capital needs of ProEnergy. In addition,
ProEnergy announced on February 1, 1996, that it had executed a $150 million,
three-year revolving credit facility with a syndicate of banks to finance its
operations. ProEnergy will, however, be subject to the risks inherent in the
natural gas marketing industry.
F-26
<PAGE> 64
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. BUSINESS SEGMENT INFORMATION
The Company's operations are primarily related to natural gas and
crude oil exploration and production. Accordingly, such operations are
classified as one business segment. Financial information by geographic area
is presented below:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Gross Operating Revenues:
United States . . . . . . . . . . . . . . . . . . . $ 682,432 $ 518,735 $ 450,517
Canada . . . . . . . . . . . . . . . . . . . . . . . 40,508 47,005 45,994
Other International . . . . . . . . . . . . . . . . 27,762 26,427 15,497
Equity in income of affiliates and gain
on sale of investment in affiliate . . . . . . . . . -- 459 624
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . $ 750,702 $ 592,626 $ 512,632
============ ============ ============
Operating Income (Loss):
United States . . . . . . . . . . . . . . . . . . . $ 131,888 $ 119,764 $ 130,008
Canada . . . . . . . . . . . . . . . . . . . . . . . 11,077 20,748 18,385
Other International . . . . . . . . . . . . . . . . 7,267 (806) (18,982)
------------ ------------ ------------
Operating income . . . . . . . . . . . . . . . . . . . . 150,232 139,706 129,411
Equity in income of affiliates and gain on sale
of investment in affiliate . . . . . . . . . . . . . -- 459 624
Administrative, selling and other . . . . . . . . . . . . (36,552) (38,729) (36,629)
Merger costs . . . . . . . . . . . . . . . . . . . . . . (9,977) -- --
Financing costs . . . . . . . . . . . . . . . . . . . . . (70,560) (34,743) (30,677)
------------ ------------ ------------
Income before income taxes . . . . . . . . . . . . . . . $ 33,143 $ 66,693 $ 62,729
============ ============ ============
Identifiable Assets:
United States . . . . . . . . . . . . . . . . . . . $ 2,295,966 $ 1,717,058 $ 1,460,267
Canada . . . . . . . . . . . . . . . . . . . . . . . 216,216 196,589 187,574
Other International . . . . . . . . . . . . . . . . 169,268 122,980 111,362
------------ ------------ ------------
Total . . . . . . . . . . . . . . . . . $ 2,681,450 $ 2,036,627 $ 1,759,203
============ ============ ============
</TABLE>
F-27
<PAGE> 65
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,
----------------------------------------------
1995 1994 1993
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Oil and gas revenues . . . . . . . . . . . . . . . . . $ 586,711 $ 467,161 $ 421,845
------------ ------------ ------------
Operating costs:
Depreciation, depletion and amortization . . . . . 262,689 222,935 170,128
Loss on disposal of assets . . . . . . . . . . . -- -- (513)
Lease operating . . . . . . . . . . . . . . . . . 161,631 107,361 102,830
Production taxes . . . . . . . . . . . . . . . . . 26,936 22,280 21,218
Income tax . . . . . . . . . . . . . . . . . . . . 50,118 44,821 50,215
------------ ------------ ------------
501,374 397,397 343,878
------------ ------------ ------------
Results of operations . . . . . . . . . . . . . . . . . $ 85,337 $ 69,764 $ 77,967
============ ============ ============
Amortization rate per boe . . . . . . . . . . . . . . . $ 5.54 $ 5.88 $ 5.61
============ ============ ============
CANADA
Oil and gas revenues . . . . . . . . . . . . . . . . . $ 38,831 $ 44,889 $ 44,506
------------ ------------- ------------
Operating costs:
Depreciation, depletion and amortization . . . . . 15,475 14,603 15,142
Lease operating . . . . . . . . . . . . . . . . . 12,911 11,654 12,467
Income tax . . . . . . . . . . . . . . . . . . . . 4,658 8,833 8,164
------------ ------------- ------------
33,044 35,090 35,773
------------ ------------- ------------
Results of operations . . . . . . . . . . . . . . . . . $ 5,787 $ 9,799 $ 8,733
============ ============ ============
Amortization rate per boe . . . . . . . . . . . . . . . $ 3.08 $ 3.34 $ 3.38
============ ============ ============
OTHER INTERNATIONAL
Oil and gas revenues . . . . . . . . . . . . . . . . . $ 27,602 $ 26,339 $ 15,497
------------ ------------ ------------
Operating costs:
Depreciation, depletion and amortization . . . . . 10,225 11,754 7,214
Impairments . . . . . . . . . . . . . . . . . . . -- 7,300 23,200
Lease operating . . . . . . . . . . . . . . . . . 6,534 6,257 3,456
Production taxes . . . . . . . . . . . . . . . . . 1,957 1,922 609
Income tax (benefit) . . . . . . . . . . . . . . . 3,199 (295) (6,264)
------------ ------------ ------------
21,915 26,938 28,215
------------ ------------ ------------
Results of operations . . . . . . . . . . . . . . . . . $ 5,687 $ (599) $ (12,718)
============ ============ ============
Amortization rate per boe - recurring . . . . . . . . . $ 5.94 $ 7.15 $ 8.00
============ ============ ============
TOTAL
Oil and gas revenues . . . . . . . . . . . . . . . . . $ 653,144 $ 538,389 $ 481,848
------------ ------------ ------------
Operating costs:
Depreciation, depletion and amortization . . . . . 288,389 249,292 192,484
Impairments . . . . . . . . . . . . . . . . . . . -- 7,300 23,200
(Gain) loss on disposal of assets . . . . . . . . -- -- (513)
Lease operating . . . . . . . . . . . . . . . . . 181,076 125,272 118,753
Production taxes . . . . . . . . . . . . . . . . . 28,893 24,202 21,827
Income tax . . . . . . . . . . . . . . . . . . . . 57,975 53,359 52,115
------------ ------------ ------------
556,333 459,425 407,866
------------ ------------ ------------
Results of operations . . . . . . . . . . . . . . . . . $ 96,811 $ 78,964 $ 73,982
============ ============ ============
</TABLE>
F-28
<PAGE> 66
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, 1995, by the
year in which such costs were incurred:
<TABLE>
<CAPTION>
1992 and
Total 1995 1994 1993 Prior
----------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Leasehold and seismic . . . . . $ 241,138 $ 172,187 $ 29,956 $ 18,408 $ 20,587
Exploration and development . . 10,208 10,208 -- -- --
International . . . . . . . . . 84,496 57,739 16,765 8,810 1,182
----------- ---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . $ 335,842 $ 240,134 $ 46,721 $ 27,218 $ 21,769
=========== =========== ========== ========== ==========
</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,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Acquisition of proved properties(1) . . . . . . . . $ 818,682 $ 179,972 $ 242,659
Acquisition of unproved properties . . . . . . . . 21,446 32,526 14,342
Exploration . . . . . . . . . . . . . . . . . . . 23,520 16,722 16,979
Development . . . . . . . . . . . . . . . . . . . 156,845 216,451 164,839
Capitalized interest . . . . . . . . . . . . . . . 14,619 4,889 4,764
Property sales . . . . . . . . . . . . . . . . . . (271,937) (5,854) (9,430)
----------- ----------- -----------
763,175 444,706 434,153
----------- ----------- -----------
CANADA
Acquisition of proved properties . . . . . . . . . 2,236 770 2,075
Acquisition of unproved properties . . . . . . . . 3,511 7,337 2,686
Exploration . . . . . . . . . . . . . . . . . . . 7,857 13,399 8,168
Development . . . . . . . . . . . . . . . . . . . . 15,105 19,714 6,532
Capitalized interest . . . . . . . . . . . . . . . 1,315 1,145 1,515
Property sales . . . . . . . . . . . . . . . . . . -- (13,671) (912)
----------- ----------- -----------
30,024 28,694 20,064
----------- ----------- -----------
OTHER INTERNATIONAL
Acquisition of proved properties(2) . . . . . . . . -- -- 81,942
Exploration . . . . . . . . . . . . . . . . . . . 55,897 30,089 18,006
Development . . . . . . . . . . . . . . . . . . . . 8,946 1,853 --
Capitalized interest . . . . . . . . . . . . . . . 3,107 -- --
----------- ----------- -----------
67,950 31,942 99,948
----------- ----------- -----------
TOTAL
Acquisition of proved properties . . . . . . . . . 820,918 180,742 326,676
Acquisition of unproved properties . . . . . . . . 24,957 39,863 17,028
Exploration . . . . . . . . . . . . . . . . . . . 87,274 60,210 43,153
Development . . . . . . . . . . . . . . . . . . . 180,896 238,018 171,371
Capitalized interest . . . . . . . . . . . . . . . 19,041 6,034 6,279
Property sales . . . . . . . . . . . . . . . . . . (271,937) (19,525) (10,342)
----------- ----------- -----------
$ 861,149 $ 505,342 $ 554,165
=========== =========== ===========
</TABLE>
- ---------------------
(1) Acquisition of proved properties included unevaluated cost of $162.2
million, $12 million and $26.8 million for transactions completed in
1995, 1994 and 1993, respectively.
(2) International acquisitions in 1993 included $16.8 million of unevaluated
costs added through the merger of AERC.
F-29
<PAGE> 67
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,
----------------------------------
1995 1994
--------------- --------------
(In thousands)
<S> <C> <C>
UNITED STATES
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,434,170 $ 2,810,670
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . 251,347 111,672
--------------- --------------
3,685,517 2,922,342
Accumulated depreciation, depletion and amortization . . . . . . . . (1,700,228) (1,437,540)
--------------- --------------
1,985,289 1,484,802
--------------- --------------
CANADA
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 346,547 312,649
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . 15,957 11,454
--------------- --------------
362,504 324,103
Accumulated depreciation, depletion and amortization . . . . . . . . (159,533) (139,555)
--------------- --------------
202,971 184,548
--------------- --------------
OTHER INTERNATIONAL
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 176,116 142,451
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . 68,538 34,253
--------------- --------------
244,654 176,704
Accumulated depreciation, depletion and amortization . . . . . . . . (89,495) (79,270)
--------------- --------------
155,159 97,434
--------------- --------------
TOTAL
Proved properties . . . . . . . . . . . . . . . . . . . . . . . . . . 3,956,833 3,265,770
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . 335,842 157,379
--------------- --------------
4,292,675 3,423,149
Accumulated depreciation, depletion and amortization . . . . . . . . (1,949,256) (1,656,365)
--------------- --------------
$ 2,343,419 $ 1,766,784
=============== ==============
</TABLE>
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 U.S., Canadian and
certain international properties are subject to review by Ryder Scott Company
Petroleum Engineers, independent petroleum engineers. Other 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.
F-30
<PAGE> 68
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL OIL AND GAS DISCLOSURES -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Crude Oil, Condensate and Natural Gas Liquids
----------------------------------------------
(In thousands of barrels)
United Other
States Canada Int'l Total
------- ------ ------ -------
<S> <C> <C> <C> <C>
Total proved reserves:
Balance December 31, 1992 . . . . . . . . . . . . . . . 80,195 13,984 464 94,643
Extensions, discoveries and other additions . . . 10,885 397 -- 11,282
Purchases of minerals in-place . . . . . . . . . 9,871 188 5,095 15,154
Revisions of previous estimates . . . . . . . . . (3,215) (300) 1,125 (2,390)
Production . . . . . . . . . . . . . . . . . . . (12,096) (989) (684) (13,769)
Sales of properties . . . . . . . . . . . . . . . (1,917) (46) -- (1,963)
------- ------ ------ -------
Balance December 31, 1993 . . . . . . . . . . . . . . . 83,723 13,234 6,000 102,957
Extensions, discoveries and other additions . . . 9,669 690 349 10,708
Purchases of minerals in-place . . . . . . . . . 9,232 83 -- 9,315
Revisions of previous estimates . . . . . . . . . 5,347 (2,239) 273 3,381
Production . . . . . . . . . . . . . . . . . . . (12,418) (962) (1,159) (14,539)
Sales of properties . . . . . . . . . . . . . . . (1,108) (90) -- (1,198)
------- ------ ------ -------
Balance December 31, 1994 . . . . . . . . . . . . . . . 94,445 10,716 5,463 110,624
Extension, discoveries and other additions . . . 6,685 306 3,058 10,049
Purchases of minerals in-place . . . . . . . . . 99,148 119 -- 99,267
Revisions of previous estimates . . . . . . . . . 12,172 (388) 10 11,794
Production . . . . . . . . . . . . . . . . . . . (17,011) (937) (1,139) (19,087)
Sales of properties . . . . . . . . . . . . . . . (42,318) -- -- (42,318)
------- ------ ------ -------
Balance December 31, 1995 . . . . . . . . . . . . . . . 153,121 9,816 7,392 170,329
======= ====== ====== =======
Proved developed reserves:
December 31, 1992 . . . . . . . . . . . . . . . . . . . 72,596 13,972 464 87,032
December 31, 1993 . . . . . . . . . . . . . . . . . . . 74,288 13,221 5,113 92,622
December 31, 1994 . . . . . . . . . . . . . . . . . . . 84,085 10,612 5,322 100,019
December 31, 1995 . . . . . . . . . . . . . . . . . . . 123,726 9,597 4,141 137,464
<CAPTION>
Natural Gas
------------------------------------------------
(Millions of cubic feet)
United Other
States Canada Int'l Total
--------- ------- ------ ---------
<S> <C> <C> <C> <C>
Total proved reserves:
Balance December 31, 1992 . . . . . . . . . . . . . . . 643,299 276,343 -- 919,642
Extensions, discoveries and other additions . . . 119,210 19,094 -- 138,304
Purchases of minerals in-place . . . . . . . . . 174,115 4,405 33,343 211,863
Revisions of previous estimates . . . . . . . . . (7,335) 2,198 1,327 (3,810)
Production . . . . . . . . . . . . . . . . . . . (109,312) (20,969) (1,310) (131,591)
Sales of properties . . . . . . . . . . . . . . . (5,118) (3,660) -- (8,778)
--------- ------- ------ ---------
Balance December 31, 1993 . . . . . . . . . . . . . . . 814,859 277,411 33,360 1,125,630
Extensions, discoveries and other additions . . . 190,386 44,912 408 235,706
Purchases of minerals in-place . . . . . . . . . 158,309 2,710 -- 161,019
Revisions of previous estimates . . . . . . . . . (21,937) 6,880 1,114 (13,943)
Production . . . . . . . . . . . . . . . . . . . (152,994) (20,491) (2,911) (176,396)
Sales of properties . . . . . . . . . . . . . . . (4,335) (11,526) -- (15,861)
--------- ------- ------ ---------
Balance December 31, 1994 . . . . . . . . . . . . . . . 984,288 299,896 31,971 1,316,155
Extension, discoveries and other additions . . . 85,032 26,488 42,332 153,852
Purchases of minerals in-place . . . . . . . . . 335,865 4,662 -- 340,527
Revisions of previous estimates . . . . . . . . . 56,281 (18,141) 2,342 40,482
Production . . . . . . . . . . . . . . . . . . . (182,661) (24,485) (3,486) (210,632)
Sales of properties . . . . . . . . . . . . . . . (138,464) -- -- (138,464)
--------- ------- ------ ---------
Balance December 31, 1995 . . . . . . . . . . . . . . . 1,140,341 288,420 73,159 1,501,920
========= ======= ====== =========
Proved developed reserves:
December 31, 1992 . . . . . . . . . . . . . . . . . . . 585,424 263,305 -- 848,729
December 31, 1993 . . . . . . . . . . . . . . . . . . . 696,421 263,070 24,251 983,742
December 31, 1994 . . . . . . . . . . . . . . . . . . . 888,039 274,611 22,265 1,184,915
December 31, 1995 . . . . . . . . . . . . . . . . . . . 1,003,853 274,306 20,308 1,298,467
</TABLE>
F-31
<PAGE> 69
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,
---------------------------------------------------------
1995 1994 1993
--------------- --------------- --------------
(In thousands)
<S> <C> <C> <C>
UNITED STATES
Cash inflows . . . . . . . . . . . . . . . . $ 5,617,297 $ 3,401,300 $ 3,062,525
Production and development costs . . . . . . (2,126,984) (1,294,801) (1,085,205)
Income tax expense . . . . . . . . . . . . . (753,425) (376,932) (362,353)
--------------- --------------- --------------
Net cash flows . . . . . . . . . . . . . . . 2,736,888 1,729,567 1,614,967
10-percent annual discount rate . . . . . . . (1,105,629) (628,408) (550,887)
--------------- --------------- --------------
Discounted future net cash flows . . . . . . 1,631,259 1,101,159 1,064,080
--------------- --------------- --------------
CANADA
Cash inflows (1) . . . . . . . . . . . . . . 550,627 536,463 672,023
Production and development costs . . . . . . (186,388) (156,589) (155,238)
Income tax expense . . . . . . . . . . . . . (82,124) (91,740) (135,319)
--------------- --------------- --------------
Net cash flows . . . . . . . . . . . . . . . 282,115 288,134 381,466
10-percent annual discount rate . . . . . . . (124,835) (128,558) (179,046)
--------------- --------------- --------------
Discounted future net cash flows . . . . . . 157,280 159,576 202,420
--------------- --------------- --------------
OTHER INTERNATIONAL
Cash inflows . . . . . . . . . . . . . . . . 287,817 163,303 154,466
Production and development costs . . . . . . (99,345) (68,217) (57,281)
Income tax expense . . . . . . . . . . . . . (53,520) (27,910) (24,680)
--------------- --------------- --------------
Net cash flows . . . . . . . . . . . . . . . 134,952 67,176 72,505
10-percent annual discount rate . . . . . . . (53,932) (15,366) (21,209)
--------------- --------------- --------------
Discounted future net cash flows . . . . . . 81,020 51,810 51,296
--------------- --------------- --------------
TOTAL
Cash inflows . . . . . . . . . . . . . . . . 6,455,741 4,101,066 3,889,014
Production and development costs . . . . . . (2,412,717) (1,519,607) (1,297,724)
Income tax expense . . . . . . . . . . . . . (889,069) (496,582) (522,352)
--------------- --------------- --------------
Net cash flows . . . . . . . . . . . . . . . 3,153,955 2,084,877 2,068,938
10-percent annual discount rate . . . . . . . (1,284,396) (772,332) (751,142)
--------------- --------------- --------------
Discounted future net cash flows (2) . . . . $ 1,869,559 $ 1,312,545 $ 1,317,796
=============== =============== ==============
</TABLE>
- ---------------
(1) Included in cash inflows is approximately $25.3 million, $25.7 million and
$39.4 million ($9.8 million, $9.8 million and $12.0 million after discount
at 10 percent per annum) for 1995, 1994 and 1993, respectively, of Canadian
provincial tax credits expected to be realized beyond the date at which the
legislation, under its provisions, could be repealed.
(2) Estimated future net cash flows before income tax expense, discounted at 10
percent per annum, totaled approximately $2.34 billion, $1.60 billion and
$1.63 billion as of December 31, 1995, 1994 and 1993, respectively.
F-32
<PAGE> 70
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,
----------------------------------------
1995 1994 1993
----------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
Sales, net of production costs . . . . . . . . . . . . . . . $ (443,175) $ (388,915) $ (341,268)
Net change in prices and production costs . . . . . . . . . . 201,723 (173,059) (25,742)
Discoveries and improved recovery, net of related costs . . . 210,151 211,358 227,500
Change in future development costs . . . . . . . . . . . . . 74,047 24,065 2,236
Revision of quantities . . . . . . . . . . . . . . . . . . . 127,939 13,167 (26,752)
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 726,240 165,273 352,918
Accretion of discount . . . . . . . . . . . . . . . . . . . . 160,093 159,302 124,599
Change in income taxes . . . . . . . . . . . . . . . . . . . (186,415) 16,517 (67,242)
Sales of properties . . . . . . . . . . . . . . . . . . . . . (232,629) (21,497) (7,698)
Change in production rates and other . . . . . . . . . . . . (80,960) (11,462) 47,372
----------- ----------- ----------
$ 557,014 $ (5,251) $ 285,923
=========== =========== ==========
</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
deterioration of gas or oil prices from year-end levels could result in the
Company recording a non-cash charge to earnings related to its oil and gas
properties. 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
two separate one-year waivers with respect to the properties acquired from
Texaco and Aquila. If the ceiling is exceeded on all U.S. properties, Apache
will be required to perform an additional ceiling test excluding the Texaco and
Aquila properties and record a write-down of carrying value if the ceiling is
still exceeded.
F-33
<PAGE> 71
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>
1995
Revenues . . . . . . . . . . . . . . . . . . $ 167,718 $ 206,052 $ 181,247 $ 195,685 $ 750,702
Expenses, net . . . . . . . . . . . . . . . . 163,635 205,515 174,205 187,140 730,495
---------- --------- --------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . $ 4,083 $ 537 $ 7,042 $ 8,545 $ 20,207
========== ========= ========= ========== ==========
Net income per common share . . . . . . . . . $ .06 $ .01 $ .10 $ .11 $ .28
========== ========= ========= ========== ==========
1994
Revenues . . . . . . . . . . . . . . . . . . $ 132,721 $ 147,054 $ 152,971 $ 159,880 $ 592,626
Expenses, net . . . . . . . . . . . . . . . . 124,496 134,147 140,582 147,818 547,043
---------- --------- --------- ---------- ----------
Net income $ 8,225 $ 12,907 $ 12,389 $ 12,062 $ 45,583
========== ========= ========= ========== ==========
Net income per common share . . . . . . . . . $ .12 $ .19 $ .18 $ .17 $ .65
========== ========= ========= ========== ==========
</TABLE>
- ------------------
The sum of the individual quarterly earnings per share may not agree with
year-to-date earnings per share as each period's computation is based on the
weighted average number of common shares outstanding during that period.
F-34
<PAGE> 72
APACHE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL QUARTERLY FINANCIAL DATA -- (CONTINUED)
(UNAUDITED)
The 1994 quarterly data shown above was restated to combine the
operations of DEKALB with Apache in accordance with the "pooling of interests"
method of accounting. Additionally, as described in Note 2 to the consolidated
financial statements, conforming adjustments relative to DD&A and income taxes
were made along with certain reclassifications. A reconciliation of the
separate results, as previously reported in Apache's and DEKALB's 1994
quarterly reports on Form 10-Q, to the combined results is an follows:
<TABLE>
<CAPTION>
First Second Third Fourth Total
---------- ---------- --------- --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Apache . . . . . . . . . . . . . . . . . . . . $ 121,591 $ 134,947 $ 140,765 $ 148,318 $ 545,621
DEKALB . . . . . . . . . . . . . . . . . . . . 11,130 12,107 12,206 10,847 46,290
Reclassification to conform presentation . . . -- -- -- 715 715
---------- ---------- --------- --------- ---------
$ 132,721 $ 147,054 $ 152,971 $ 159,880 $ 592,626
========== ========== ========= ========= =========
Income from continuing operations:
Apache . . . . . . . . . . . . . . . . . . . . $ 9,407 $ 10,196 $ 10,574 $ 12,660 $ 42,837
DEKALB . . . . . . . . . . . . . . . . . . . . 1,750 2,416 1,890 757 6,813
Conforming adjustments . . . . . . . . . . . . (2,932) 295 (75) (1,355) (4,067)
---------- ---------- --------- --------- ---------
$ 8,225 $ 12,907 $ 12,389 $ 12,062 $ 45,583
========== ========== ========= ========= =========
Net income:
Apache . . . . . . . . . . . . . . . . . . . . $ 9,407 $ 10,196 $ 10,574 $ 12,660 $ 42,837
DEKALB . . . . . . . . . . . . . . . . . . . . 1,750 2,416 1,890 757 6,813
Conforming adjustments . . . . . . . . . . . . (2,932) 295 (75) (1,355) (4,067)
---------- ---------- --------- --------- ---------
$ 8,225 $ 12,907 $ 12,389 $ 12,062 $ 45,583
========== ========== ========= ========= =========
Income per common share from
continuing operations:
Apache . . . . . . . . . . . . . . . . . . . . $ .15 $ .17 $ .17 $ .21 $ .70
---------- ---------- --------- --------- ---------
DEKALB . . . . . . . . . . . . . . . . . . . . $ .18 $ .25 $ .20 $ .08 $ .71
---------- ---------- --------- --------- ---------
As combined . . . . . . . . . . . . . . . . . $ .16 $ .19 $ .18 $ .19 $ .71
Conforming adjustments . . . . . . . . . . . . (.04) -- -- (.02) (.06)
---------- ---------- --------- --------- ---------
$ .12 $ .19 $ .18 $ .17 $ .65
========== ========== ========= ========= =========
Net income per common share:
Apache . . . . . . . . . . . . . . . . . . . . $ .15 $ .17 $ .17 $ .21 $ .70
---------- ---------- --------- --------- ---------
DEKALB . . . . . . . . . . . . . . . . . . . . $ .18 $ .25 $ .20 $ .08 $ .71
---------- ---------- --------- --------- ---------
As combined . . . . . . . . . . . . . . . . . $ .16 $ .19 $ .18 $ .19 $ .71
Conforming adjustments . . . . . . . . . . . . (.04) -- -- (.02) (.06)
---------- ---------- --------- --------- ---------
$ .12 $ .19 $ .18 $ .17 $ .65
========== ========== ========= ========= =========
</TABLE>
F-35
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.2 -- Certificate of Ownership and Merger Merging Apache Energy Resources Corporation into Registrant,
effective December 31, 1995, as filed with the Secretary of State of Delaware on December 21,
1995.
3.3 -- Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred
Stock of Registrant, effective January 31, 1996, as filed with the Secretary of State of Delaware
on January 22, 1996.
3.4 -- Bylaws of Registrant, dated as of February 9, 1996.
4.1 -- Form of Registrant's common stock certificate.
10.5 -- Third Amendment to Third Amended and Restated Credit Agreement, dated December 18, 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.
10.6 -- Fourth Amendment to Third Amended and Restated Credit Agreement, dated December 22, 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.
10.7 -- Fifth Amendment to Third Amended and Restated Credit Agreement, dated January 22, 1996, 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.
10.14 -- Amendments to the Apache Corporation Retirement/401(k) Savings Plan, effective May 4, 1995 and
May 17, 1995.
10.15 -- Non-Qualified Retirement/Savings Plan of Apache Corporation, dated November 16, 1989 .
10.16 -- First Amendment to the Non-Qualified Retirement/Savings Plan of Apache Corporation, dated October
24, 1995.
10.19 -- Apache Corporation 1990 Stock Incentive Plan, as amended and restated February 9, 1996.
10.20 -- Apache Corporation 1995 Stock Option Plan, as amended and restated February 9, 1996.
10.28 -- Member Gas Pruchase Agreement, dated March 1, 1996, by and among Apache Gathering Company, Apache
Corporation, MW Petroleum Corporation, DEK Energy Company, Apache Transmission Corporation-Texas
and Apache Marketing, Inc., as seller, and Producers Energy Marketing, LLC, as buyer.
11.1 -- Statement regarding computation of earnings per share of Registrant's common stock for the year
ended December 31, 1995.
21.1 -- Subsidiaries of Registrant
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Coopers & Lybrand
23.3 -- Consent of Ryder Scott Company Petroleum Engineers
27.1 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.2
Page 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
OWNERSHIP, WHICH MERGES:
"APACHE ENERGY RESOURCES CORPORATION", A DELAWARE CORPORATION,
WITH AND INTO "APACHE CORPORATION" UNDER THE NAME OF "APACHE
CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE
OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWENTY-FIRST DAY OF
DECEMBER, A.D. 1995, AT 12 O'CLOCK P.M.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL]
AUTHENTICATION: 7762929
DATE: 12-21-95
<PAGE> 2
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
APACHE ENERGY RESOURCES CORPORATION
INTO
APACHE CORPORATION
Apache Corporation, a corporation organized and existing under the
laws of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That Apache Corporation was incorporated on the 6th day of
December, 1954, pursuant to the General Corporation Law of the State of
Delaware.
SECOND: That Apache Corporation owns all of the issued and
outstanding shares of the capital stock of Apache Energy Resources Corporation,
a corporation formerly known as Hadson Energy Resources Corporation and which
was incorporated on the 26th day of October, 1989, pursuant to the General
Corporation Law of the State of Delaware.
THIRD: That Apache Corporation, by the following resolutions of its
Board of Directors, duly adopted at a meeting held on the 14th day of December,
1995, determined to and did merge into itself said Apache Energy Resources
Corporation:
RESOLVED that Apache Energy Resources Corporation ("AERC"), a
wholly owned subsidiary of Apache Corporation, be merged with and into
Apache Corporation ("Apache"), with Apache being the surviving
corporation.
FURTHER RESOLVED that the merger shall be effective as of
midnight on December 31, 1995.
FURTHER RESOLVED that all of the shares of the capital stock
of AERC issued and outstanding as of the effective date of the merger
shall be cancelled without consideration.
FURTHER RESOLVED that upon the merger taking effect, Apache
shall thereupon and thereafter possess all the rights, privileges,
immunities, and franchises, of a public as well as a private nature,
of each of Apache and AERC; that all property, real, personal, and
mixed, and all debts due on whatever account, including subscriptions
to shares, and all other chooses in action, and every other interest
of or belonging to or due to AERC shall be deemed to be transferred to
and vested in Apache without further act or deed; that the title to
any real estate, or any interest therein vested in either of Apache or
AERC shall not revert or be in any way impaired by reason of the
merger; and that such transfer to and vesting in Apache shall be
deemed to occur by operation of law, and no consent or approval of any
other person shall be required in connection with any such transfer or
vesting unless such consent or approval is specifically required in
the event of merger by law or by
<PAGE> 3
express provision in any contract, agreement, decree, order, or other
instrument to which either of Apache or AERC is a party or by which
either is bound.
FURTHER RESOLVED that upon the merger taking effect, Apache
shall be responsible and liable for all the liabilities and
obligations of AERC; that any claim existing or action or proceeding,
whether civil or criminal, pending by or against AERC may be
prosecuted as if the merger had not taken place; and that neither the
rights of creditors nor any liens upon the property of either of
Apache or AERC shall be impaired by such merger.
FURTHER RESOLVED that the proper officers of Apache are hereby
authorized and directed, in the name and on behalf of Apache, to
prepare and execute a Certificate of Ownership and Merger setting
forth a copy of the resolutions authorizing the merger of AERC with
and into Apache and the assumption by Apache of the liabilities and
obligations of AERC, and the date of adoption thereof, and to cause
such Certificate of Ownership and Merger to be filed with the Delaware
Secretary of State and a certified copy of same recorded in the office
of the Recorder of Deeds of New Castle County.
FURTHER RESOLVED that the proper officers of Apache be, and
they hereby are, authorized and directed to take such further action
and to execute such certificates and other documents as they, in their
discretion, shall deem necessary or advisable to consummate the merger
and effect the foregoing resolutions.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding,
this merger may be amended or terminated and abandoned by the Board of
Directors of Apache Corporation at any time prior to the date of filing the
merger with the Delaware Secretary of State.
IN WITNESS WHEREOF, Apache Corporation has caused this Certificate of
Ownership and Merger to be executed by its duly authorized officers as of this
20th day of December, 1995.
APACHE CORPORATION
By: /s/ G. Steven Farris
-------------------------------------
G. Steven Farris
President and Chief Operating Officer
ATTEST:
/s/ Cheri L. Peper
- --------------------------------
Cheri L. Peper
Corporate Secretary
2
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STATE OF TEXAS
COUNTY OF HARRIS
The foregoing instrument was acknowledged before me this 20th day of
December, 1995, on behalf of Apache Corporation, by G. Steven Farris, President
and Chief Operating Officer of Apache Corporation, a Delaware corporation.
/s/ Valencia A. McNeil
----------------------------------------
Valencia A. McNeil, Notary Public in and
for the State of Texas
[SEAL] VALENCIA A. MCNEIL
My Commission Expires
April 16, 1998
3
<PAGE> 1
EXHIBIT 3.3
Page 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "APACHE CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-SECOND
DAY OF JANUARY, A.D. 1996, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL]
AUTHENTICATION: 7798054
DATE: 01-23-96
<PAGE> 2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
APACHE CORPORATION
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Apache Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in accordance
with the provisions of the Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors at a meeting duly held on December 14,
1995, adopted the following resolution creating a series of twenty-five
thousand (25,000) shares of Preferred Stock designated as "Series A Junior
Participating Preferred Stock":
RESOLVED: That, pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, the Board of
Directors hereby creates a series of Preferred Stock of the
Corporation and hereby states the designation and number of shares,
and fixes the relative rights, preferences and limitations thereof (in
addition to the provisions set forth in the Restated Certificate of
Incorporation of the Corporation, which are applicable to all series
of the Corporation's preferred stock) as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred
Stock, no par value per share, that shall be designated as "Series A Junior
Participating Preferred Stock," and the number of whole shares constituting
such series shall be 25,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, however, that no
decrease shall reduce the number of shares of Series A Junior Participating
Preferred Stock to less than the number of shares then issued and outstanding
plus the number of shares issuable upon exercise of outstanding rights, options
or warrants, or upon conversion of outstanding securities issued by the
Corporation.
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2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of record of shares of Series A Junior
Participating Preferred Stock as of the close of business on the last Business
Day of December, March, June and September in each year, in preference to the
holders of shares of any class or series of stock of the Corporation ranking
junior to the Series A Junior Participating Preferred Stock, shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
last Business Day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $100 or (b) the Adjustment Number (as defined below) times
the aggregate per share amount of all cash dividends, and the Adjustment Number
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value $1.25
per share, of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 10,000. In the event the Corporation
shall at any time after January 31, 1995 (the "Effective Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly
2
<PAGE> 4
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating Preferred Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of Directors
may fix a record date for the determination of holders of shares of Series A
Junior Participating Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 60
days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as required by law and by Section 10 hereof,
holders of Series A Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of
Series A Junior Participating Preferred Stock, or to such holders and holders
of any such shares ranking on a parity therewith, upon such terms as the Board
of Directors, after consideration of the respective annual
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<PAGE> 5
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary or
other affiliate controlled by the Corporation to purchase or otherwise acquire
for consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired promptly after the
acquisition thereof. All such shares shall upon their retirement become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors, subject to any conditions and restrictions on
issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) the Adjustment Number. Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of (1) Series A Junior Participating
Preferred Stock and (2) Common Stock, respectively, (a) holders of Series A
Junior Participating Preferred Stock and (b) holders of shares of Common Stock
shall, subject to the prior rights of all other series of Preferred Stock, if
any, ranking prior thereto, receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to (x) the Series A Junior Participating Preferred Stock and (y)
the Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the
Corporation into or with another corporation nor the merger or consolidation of
any other corporation into or with the Corporation
4
<PAGE> 6
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating
Preferred Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise, and shall rank senior to the Common
Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as a
class.
11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
This Certificate shall be effective as of January 31, 1996.
IN WITNESS WHEREOF, said Apache Corporation has caused this Certificate to be
signed by Raymond Plank, its Chairman and Chief Executive Officer, this 18th
day of January, 1996.
APACHE CORPORATION
By: /s/ Raymond Plank
-----------------------------------
Name: Raymond Plank
Title: Chairman and Chief Executive
Officer
5
<PAGE> 1
EXHIBIT 3.4
BYLAWS OF
APACHE CORPORATION
(AS OF FEBRUARY 9, 1996)
ARTICLE I.
NAME OF CORPORATION
The name of the corporation is Apache Corporation.
ARTICLE II.
OFFICES
SECTION 1. The principal office of the corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware, and the name of
its resident agent in charge thereof is The Corporation Trust Company.
SECTION 2. The corporation may have such other offices either within
or without the State of Delaware as the board of directors may designate or as
the business of the corporation may from time to time require.
ARTICLE III.
SEAL
The corporate seal shall have inscribed upon it the name of the
corporation and other designations as the board of directors from time to time
determine. There may be alternate seals of the corporation.
Page 1
<PAGE> 2
ARTICLE IV.
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders of
the corporation shall be held at the office of the corporation in the City of
Houston, Texas, or at any other place within or without the State of Delaware
that shall be stated in the notice of the meeting.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders of
the corporation shall be held at the place and time within or without the State
of Delaware that may be designated by the board of directors, on the first
Thursday in May in each year if not a legal holiday, and if a legal holiday,
then at the same time on the next succeeding business day for the purpose of
electing directors and for the transaction of any other business that may
properly come before the meeting.
SECTION 3. SPECIAL MEETINGS OF THE STOCKHOLDERS. Special meetings of
the stockholders of the corporation, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the chairman of the board and
shall be called by the chairman of the board or secretary at the request in
writing of a majority of the board of directors. The request shall state the
purpose or purposes of the proposed meeting.
SECTION 4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting and in the case of special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than 50 days before the date of the meeting either
personally, by mail or other lawful means by or at the direction of the
chairman of the board or the secretary to each stockholder of record entitled
to vote at the meetings. If mailed, the notice shall be deemed to be delivered
when deposited in the United States Postal Service, addressed to the
stockholder at his address as it appears on the stock transfer books of the
corporation with postage thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS FOR FIXING OF RECORD DATE. For
the purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders or adjournment thereof, the board of directors may
close the stock transfer books of the corporation for a period not exceeding 50
days preceding the date of any meeting of stockholders. In lieu of closing the
stock transfer books, the board of directors may fix in advance a date, not
exceeding 50 days preceding the date of any meeting of stockholders, as a
record date for the determination of the stockholders entitled to notice of and
to vote at the meeting and any adjournment thereof, and only the stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
the notice of and to vote at the meeting and any adjournment thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the corporation shall prepare and make, at
least ten days before every meeting
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of the stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. The list shall be open to the examination of any stockholder
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the election is to be held and
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held, and the list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
Upon the willful neglect or refusal of the board of directors of the
corporation to produce a list at any meeting of the stockholders at which an
election is to be held in accordance with this Section 6, they shall be
ineligible to hold any office at such election.
SECTION 7. VOTING RIGHTS. At each meeting of the stockholders of the
corporation, every stockholder having the right to vote thereat shall be
entitled to vote in person or by proxy, but no proxy shall be voted after three
years from its date unless the proxy provides for a longer period. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
shall have one vote for each share of stock having voting power registered in
his name. The vote at an election for directors, and upon the demand of any
stockholder, the vote upon any question before a meeting of the stockholders,
shall be by written ballot. All elections shall be had and all questions
decided by a plurality vote except where by statute, by provision in the
Certificate of Incorporation or these bylaws it is otherwise provided.
Prior to any meeting, but subsequent to the date fixed by the board of
directors pursuant to Section 5 of Article IV of these bylaws, any proxy may
submit his proxy to the secretary for examination. The certificate of the
secretary as to the regularity of the proxy and as to the number of shares held
by the persons who severally and respectively executed such proxies shall be
received as prima facie evidence of the number of shares represented by the
holder of the proxy for the purpose of establishing the presence of a quorum at
the meeting and of organizing the same.
SECTION 8. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, initially present in person or
represented by proxy, shall be requisite, and shall constitute a quorum of all
meetings of the stockholders for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
bylaws. If, however, a majority shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or by proxy, shall have power to adjourn the meeting from time to
time, without notice, other than announcement at the meeting, until the
requisite amount of voting stock shall be present. At the adjourned meeting at
which the requisite amount of voting stock shall be represented, any business
may be transacted which might have been transacted at the meeting as originally
notified.
SECTION 9. INSPECTORS. At each meeting of the stockholders, the
polls shall be opened and closed. The proxies and the ballots shall be
received and taken in charge and all questions touching the qualifications of
voters and the validity of proxies and the acceptance or
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rejection of votes shall be decided by three inspectors. The inspectors shall
be appointed by the board of directors before or at the meeting, or if no
appointment shall have been made, then by the presiding officer at the meeting.
If, for any reason any of the inspectors previously appointed shall fail to
attend or refuse or be unable to serve, inspectors in place of any so failing
to attend or refusing or unable to serve shall be appointed in like manner.
SECTION 10. WAIVER OF NOTICE. Whenever any notice whatever is
required to be given pursuant to the provisions of a statute, the Certificate
of Incorporation or these bylaws of the corporation, a waiver thereof in
writing signed by the person or persons entitled to the notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
SECTION 11. STOCKHOLDER ACTION. Any action required or permitted to
be taken by the stockholders must be effected at a duly called annual or
special meeting of stockholders and may not be effected by any consent in
writing by stockholders.
SECTION 12. NOTICE OF STOCKHOLDER BUSINESS. At an annual meeting of
the stockholders, only business shall be conducted that has been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors, (b) otherwise
properly brought before the meeting by or at the direction of the board of
directors, or (c) otherwise properly brought before the meeting by a
stockholder, which stockholder must have given timely notice thereof in writing
to the secretary of the corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
the corporation, not less than 60 days nor more than 90 days prior to the
meeting; provided, however, that in the event that less than 70 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely, must be so received not
later than the close of business on the tenth day following the day on which
the notice of the date of the annual meeting was mailed or public disclosure
was made. A stockholder's notice to the secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (w) a brief
description of the business desired to be brought before the annual meeting,
(x) the name and address, as they appear on the corporation's books, of the
stockholder proposing the business, (y) the class and number of shares of the
corporation which are beneficially owned by the stockholder, and (z) any
material interest of the stockholder in the business. Notwithstanding anything
in these bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 12.
The chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 12, and if he should
so determine, he shall so declare to the meeting and any business not properly
brought before the meeting shall not be transacted. This section sets forth
only the procedure by which business may be properly brought before an annual
meeting of stockholders and does not in any way grant additional rights to
stockholders beyond those currently afforded them by law.
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SECTION 13. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 13 shall
be eligible for election as directors. Nominations of persons for election to
the board of directors of the corporation may be made at a meeting of
stockholders, by or at the direction of the board of directors or by any
stockholder of the corporation entitled to vote for the election of directors
at the meeting who complies with the notice procedures set forth in this
Section 13. Any nominations, other than those made by or at the direction of
the board of directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which the notice of the
date of the meeting was mailed or public disclosure was made. The
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director (i) the name,
age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
the corporation which are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation the person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of the stockholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by the stockholder. At the request of the board of directors, any person
nominated by the board of directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section 13. The
chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by these bylaws, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded. This section
sets forth only the procedure by which nominations for directors may be made
and does not in any way grant additional rights to stockholders beyond those
currently afforded them by law.
ARTICLE V.
DIRECTORS
SECTION 1. GENERAL POWERS. The property, business and affairs of the
corporation shall be managed by its board of directors which may exercise all
powers of the corporation and do
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all lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these bylaws directed or required to be exercised or done
by the stockholders.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The board of directors
shall consist of not less than seven nor more than 13 members. The directors
shall be elected in the manner set forth in Article Ninth of the Certificate of
Incorporation of the corporation. The term of office of directors shall be
three years except as provided in Article Ninth of the Certificate of
Incorporation of the corporation. Directors need not be stockholders or
residents of the State of Delaware.
SECTION 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any vacancies
on the board of directors or any newly created directorships shall be filled by
the board of directors in the manner set forth in Article Ninth of the
Certificate of Incorporation of the corporation. If the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any increase therein), then upon application, any
stockholder or stockholders holding at least ten percent of the total number of
shares of the capital stock of the corporation at the time outstanding having
the right to vote for directors may require the board of directors to call a
special meeting of the stockholders for the purpose of electing directors to
fill the vacancy or vacancies or newly created directorships or to replace the
director or directors chosen by the directors then in office as aforesaid. The
person or persons elected at a special meeting of the stockholders shall serve
as director or as directors until the next annual meeting of stockholders and
until their successors are duly elected and qualified and shall displace any
person or persons who may theretofore have been appointed by the directors then
in office as aforesaid.
SECTION 4. CATASTROPHE. During any emergency period following a
national catastrophe due to enemy attack, or act of God, a majority of the
surviving members of the board who have not been rendered incapable of acting
due to physical or mental incapacity or due to the difficulty of transportation
to the place of the meeting shall constitute a quorum for the purpose of
filling vacancies on the board of directors and among the elected and appointed
officers of the corporation.
SECTION 5. PLACE OF MEETINGS. The directors of the corporation may
hold their meetings, both regular and special, at a place or places within or
without the State of Delaware that the board of directors may from time to time
determine.
SECTION 6. FIRST MEETING. The first meeting of the board of
directors following the annual meeting of stockholders shall be held at the
time and place that shall be fixed by the chairman of the board and shall be
called in the same manner as a special meeting.
SECTION 7. REGULAR MEETINGS. Regular meetings of the board of
directors may be held without notice at the time and place that shall from time
to time be determined by the board of directors.
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SECTION 8. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by the chairman of the board on three days notice to
each director, either personally or by mail, by telegram, or by facsimile or
other lawful means; special meetings of the board of directors shall be called
by the chairman of the board or secretary in like manner and upon like notice
upon the written request of two directors.
SECTION 9. QUORUM. At all meetings of the board of directors, a
majority of the directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting, at which there is a quorum present, shall be
the act of the board of directors, except as may be otherwise specifically
provided by statute, the Certificate of Incorporation or by these bylaws. If
at any meeting of the board of directors there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
without notice, other than by announcement at the meeting, until a sufficient
number of directors to constitute a quorum shall attend. At any adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the original meeting as originally
notified.
SECTION 10. BUSINESS TO BE CONDUCTED. Unless otherwise indicated in
the notice, any and all business may be transacted at a regular or special
meeting of the board of directors. In the event a special meeting of the board
of directors is held without notice, any and all business may be transacted at
the meeting provided all directors are present.
SECTION 11. ORDER OF BUSINESS. At all meetings of the board of
directors, business shall be transacted in the order that from time to time the
board may determine by resolution. At all meetings of the board of directors
the chairman of the board or in his absence the vice chairman shall preside.
In the absence of the chairman and vice chairman of the board, the directors
present shall elect any director as chairman of the meeting.
SECTION 12. COMPENSATION OF DIRECTORS. Directors of the corporation
shall receive the compensation for their services that the board of directors
may from time to time determine and all directors shall be reimbursed for their
expenses of attendance at each regular or special meeting of the board or any
committee thereof.
SECTION 13. COMMITTEES. The board of directors may by resolution
passed by a majority of the board, in addition to the executive committee,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. Any committee, to the extent provided in
the resolution, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it. Any committee or committees shall have the name or names that may
be determined from time to time by resolution adopted by the board of
directors. Other than for a committee of one director, the chairman of the
board shall be an ex officio member of any board committee except the audit
committee, the management development and compensation committee, and the stock
option plan committee.
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SECTION 14. EXECUTIVE COMMITTEE.
A. MEMBERS. The executive committee shall consist of not less than
four nor more than five members of the board of directors, as is fixed by the
board of directors, and shall include the chairman and vice chairman of the
board as ex officio members, together with the two or three members of the
board of directors, as may be the case, elected by the board of directors.
B. TERM OF OFFICE. Each of the elected members of the executive
committee shall be elected for a one year term and shall serve until his
successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the executive committee shall
be held each year at the first meeting of the board of directors following the
annual meeting of stockholders. Should a member of the executive committee for
any reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting following the
occurrence of such vacancy.
D. COMPENSATION. Each member of the executive committee shall receive
the compensation that the board of directors shall from time to time determine
and shall be reimbursed for their expenses of attendance at regular or special
meetings.
E. CHAIRMAN AND SECRETARY OF THE EXECUTIVE COMMITTEE. The chairman
and secretary of the executive committee shall be elected by members of the
executive committee.
F. MEETINGS. Regular meetings of the executive committee may be held
without call or notice of the time and place that the executive committee
determines. Special meetings of the executive committee may be called by any
member, either personally or by mail, by telegram, by facsimile or other lawful
means forwarded not later than 48 hours prior to the date and time set forth
for the meeting. Upon request of any member, the secretary of the corporation
shall give the required notice calling the meeting.
G. QUORUM. At any meeting of the executive committee, three members
shall constitute a quorum. Any action of the executive committee to be
effective must be authorized by not less than three affirmative votes.
H. RULES. The executive committee shall fix its own rules of
procedure, provided the same do not contravene the provisions of the law, the
Certificate of Incorporation or these bylaws.
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I. AUTHORITY AND RESPONSIBILITY.
(a) The executive committee is vested with the authority to exercise
the full power of the board of directors, within the policies
established by the board of directors to govern the conduct of the
business of the corporation, in the intervals between meetings of the
board of directors.
(b) The executive committee, in addition to the general authority
vested in it, may be vested with other specific powers and authority
by resolution of the board of directors.
J. REPORTS. All action by the executive committee shall be reported
to the board of directors at its meeting next succeeding the action, and shall
be subject to revision or alteration by the board of directors; provided,
however, that no rights or acts of third parties shall be affected by any such
revision or alteration.
SECTION 15. AUDIT COMMITTEE.
A. MEMBERS. The audit committee shall consist of not less than three
nor more than five members of the board of directors, determined by the board
of directors, and shall include only outside directors of the corporation.
B. TERM OF OFFICE. Each of the elected members of the audit
committee shall be elected for a one year term and shall serve until a
successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the audit committee shall be
held each year at the first meeting of the board of directors following the
annual meeting of stockholders. Should a member of the audit committee for any
reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting.
D. COMPENSATION. Each member of the audit committee shall receive
the compensation the board of directors determines and shall be reimbursed for
their expenses for attendance at regular or special meetings.
E. CHAIRMAN AND SECRETARY OF THE AUDIT COMMITTEE. The chairman and
secretary of the audit committee shall be elected by the members of the audit
committee.
F. MEETINGS. Regular meetings of the audit committee may be held
without call or notice of the time and place that the audit committee
determines. Special meetings of the audit committee may be called by any
member, either personally or by mail, by telegram, by facsimile or other lawful
means forwarded not later than 48 hours prior to the date and time set forth
for the
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meeting. Upon request of any member, the secretary of the corporation shall
give the required notice calling the meeting.
G. QUORUM. At any meeting of the audit committee, a majority of
committee members shall constitute a quorum. Any action of the audit committee
to be effective must be authorized by the affirmative votes of a majority of
committee members.
H. RULES. The audit committee shall determine its own rules of
procedure, provided the rules do not contravene the provisions of the law, the
Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY.
(a) The audit committee is vested with the authority to (i) review
with the independent and internal auditors of the corporation their
respective audit and review programs and procedures; (ii) review the
corporation's financial statements; (iii) review the adequacy of the
corporation's system of internal accounting controls and the scope and
results of internal audit engagements, special services provided by
them and related fees; and (iv) make recommendations to the board of
directors regarding the independence of the independent auditors and
their engagement or discharge.
(b) The audit committee, in addition to the authority vested in it
under subsection (a) above, may be vested with other specific powers
and authority by resolution of the board of directors.
J. REPORTS. All action by the audit committee shall be reported to
the board of directors at its next meeting, and shall be subject to revision or
alteration by the board of directors.
SECTION 16. MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
A. MEMBERS. The management development and compensation
committee shall consist of not less than three nor more than five members of
the board of directors, determined by the board of directors, and shall include
only outside directors of the corporation.
B. TERM OF OFFICE. Each of the elected members of the management
development and compensation committee shall be elected for a one year term and
shall serve until a successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the management
development and compensation committee shall be held each year at the first
meeting of the board of directors following the annual meeting of stockholders.
Should a member of the management development and compensation committee for
any reason be unable to serve for the term to which he was elected, the vacancy
shall be filled by the board of directors at its next meeting.
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D. COMPENSATION. Each member of the management development and
compensation committee shall receive the compensation the board of directors
determines and shall be reimbursed for their expenses for attendance at regular
or special meetings.
E. CHAIRMAN AND SECRETARY OF THE MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE. The chairman and secretary of the management
development and compensation committee shall be elected by the members of the
management development and compensation committee.
F. MEETINGS. Regular meetings of the management development and
compensation committee may be held without call or notice of the time and place
that the management development and compensation committee determines. Special
meetings of the management development and compensation committee may be called
by any member, either personally or by mail, by telegram, by facsimile or other
lawful means forwarded not later than 48 hours prior to the date and time set
forth for the meeting. Upon request of any member, the secretary of the
corporation shall give the required notice calling the meeting.
G. QUORUM. At any meeting of the management development and
compensation committee, a majority of committee members shall constitute a
quorum. Any action of the management development and compensation committee to
be effective must be authorized by the affirmative votes of a majority of
committee members.
H. RULES. The management development and compensation committee
shall determine its own rules of procedure, provided the rules do not
contravene the provisions of the law, the Certificate of Incorporation or these
bylaws.
I. AUTHORITY AND RESPONSIBILITY. The management development and
compensation committee has two principal responsibilities:
(a) to monitor the corporation's management resources, structure,
succession planning, development, and selection process, and the
performance of key executives;
(b) to review and approve executive compensation and changes; and
(c) to make such reports on executive compensation as appropriate or
required.
The management development and compensation committee also serves as
the committee administering all incentive compensation plans other than the
corporation's stock option plans.
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J. REPORTS. All action by the management development and
compensation committee shall be reported to the board of directors at its next
meeting, and shall be subject to revision or alteration by the board of
directors.
SECTION 17. STOCK OPTION PLAN COMMITTEE
A. MEMBERS. The stock option plan committee shall consist of not
less than two nor more than five members of the board of directors, determined
by the board of directors. It is intended that the members of the stock option
plan committee shall include only directors of the corporation who qualify as
"outside directors" pursuant to Section 162(m) or any successor section(s) of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
B. TERM OF OFFICE. Each of the elected members of the stock
option plan committee shall be elected for a one year term and shall serve
until a successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the stock option plan
committee shall be held each year at the first meeting of the board of
directors following the annual meeting of stockholders. Should a member of the
stock option plan committee for any reason be unable to serve for the term to
which he was elected, the vacancy shall be filled by the board of directors at
its next meeting.
D. COMPENSATION. Each member of the stock option plan committee
shall receive the compensation the board of directors determines and shall be
reimbursed for their expenses for attendance at regular or special meetings.
E. CHAIRMAN AND SECRETARY OF THE STOCK OPTION PLAN COMMITTEE.
The chairman and secretary of the stock option plan committee shall be elected
by the members of the stock option plan committee.
F. MEETINGS. Regular meetings of the stock option plan committee
may be held without call or notice of the time and place that the stock option
plan committee determines. Special meetings of the stock option plan committee
may be called by any member, either personally or by mail, by telegram, by
facsimile or other lawful means forwarded not later than 48 hours prior to the
date and time set forth for the meeting. Upon request of any member, the
secretary of the corporation shall give the required notice calling the
meeting.
G. QUORUM. At any meeting of the stock option plan committee, a
majority of committee members shall constitute a quorum, provided that such
quorum shall not be less than two members. Any action of the stock option plan
committee to be effective must be authorized by the affirmative votes of a
majority of committee members.
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H. RULES. The stock option plan committee shall determine its
own rules of procedure, provided the rules do not contravene the provisions of
the law, the Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY. The stock option plan committee
has two principal responsibilities:
(a) to monitor and report on the corporation's stock option plans; and
(b) to establish any performance goals under which compensation in the
form of stock option grants is paid to employees of the corporation,
and to make such grants of stock options, in the discretion of the
stock option plan committee, on the terms and conditions set forth in
the option plans or otherwise established by the stock option plan
committee.
J. REPORTS. All action by the stock option plan committee shall
be reported to the board of directors at its next meeting, and is subject to
ratification by the board of directors.
SECTION 18. NOMINATING COMMITTEE.
A. MEMBERS. The nominating committee shall consist of not less than
three nor more than five members of the board of directors, determined by the
board of directors.
B. TERM OF OFFICE. Each of the elected members of the nominating
committee shall be elected for a one year term and shall serve until a
successor shall have been duly elected and qualified.
C. ELECTION. The election of members of the nominating committee
shall be held each year at the first meeting of the board of directors
following the annual meeting of stockholders. Should a member of the
nominating committee for any reason be unable to serve for the term to which he
was elected, the vacancy shall be filled by the board of directors at its next
meeting.
D. COMPENSATION. Each member of the nominating committee shall
receive the compensation the board of directors determines and shall be
reimbursed for their expenses for attendance at regular or special meetings.
E. CHAIRMAN AND SECRETARY OF THE NOMINATING COMMITTEE. The chairman
and secretary of the nominating committee shall be elected by the members of
the nominating committee.
F. MEETINGS. Regular meetings of the nominating committee may be
held without call or notice of the time and place that the nominating committee
determines. Special meetings of the nominating committee may be called by any
member, either personally or by mail, by telegram, by
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facsimile or other lawful means forwarded not later than 48 hours prior to the
date and time set forth for the meeting. Upon request of any member, the
secretary of the corporation shall give the required notice calling the
meeting.
G. QUORUM. At any meeting of the nominating committee, a majority of
committee members shall constitute a quorum. Any action of the nominating
committee to be effective must be authorized by the affirmative votes of a
majority of committee members.
H. RULES. The nominating committee shall determine its own rules of
procedure, provided the rules do not contravene the provisions of the law, the
Certificate of Incorporation or these bylaws.
I. AUTHORITY AND RESPONSIBILITY.
(a) The nominating committee is vested with the authority and
responsibility to (i) recommend to the board of directors criteria for
selection of candidates to serve on the board of directors; (ii)
recommend to the board of directors qualified candidates to fill any
newly created directorships or vacancies on the board of directors
which occur between annual meetings of stockholders without regard to
race, sex, age, religion or physical disability; (iii) recommend
candidates for election to the committees of the board of directors;
(iv) periodically review, assess, and make recommendations to the
board of directors with regard to the size and composition of the
board of directors, and its evaluation of incumbent directors; (v)
cause the names of all director candidates that are approved by the
board of directors to be listed in the corporation's proxy materials
and support the election of all candidates so nominated by the board
of directors to the extent permitted by law; (vi) evaluate and
recommend to the board of directors potential candidates to serve in
the future on the board of directors to assure the continuity and
succession of the board of directors; and (vii) otherwise aid in
attracting qualified candidates to the board of directors.
(b) Only candidates recommended by the nominating committee shall be
eligible for nomination by the board of directors for election, or to
fill a vacancy or any newly created directorship, but if the board
does not approve one or more of the candidates recommended by the
nominating committee, the nominating committee shall submit a
recommendation of other candidates. If for any reason the nominating
committee shall fail to act or determines not to make a
recommendation, the board of directors shall fill any vacancy or newly
created directorship in the manner that it deems appropriate.
(c) The nominating committee, in addition to the authority vested in
it under subsections (a) and (b) above, shall have all additional
powers necessary to carry out its responsibilities, and may be vested
with other specific powers and authority by resolution of the board of
directors.
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J. REPORTS. All action by the nominating committee shall be reported
to the board of directors at its next meeting, and shall be subject to revision
or alteration by the board of directors.
K. RIGHTS OF STOCKHOLDERS. Nothing in this Section 18 shall affect
or restrict the right of any stockholder to nominate any person for election as
a director where such nomination is otherwise authorized by law and made in
accordance with Section 13 of Article IV of these bylaws.
SECTION 19. ELECTION OF OFFICERS. At the first meeting of the board
of directors in each year, at which a quorum shall be present, following the
annual meeting of the stockholders of the corporation, the board of directors
shall proceed to the election of the officers of the corporation.
SECTION 20. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the board of directors or of any committee
thereof may be taken without a meeting, if prior to the action a written
consent thereto is signed by all members of the board of directors or of the
committee, as the case may be, and such written consent is filed with the
minutes of the proceedings of the board of directors or committee.
SECTION 21. WAIVER OF NOTICE. Whenever any notice whatever is
required to be given pursuant to the provisions of a statute, the Certificate
of Incorporation or these bylaws of the corporation, a waiver thereof in
writing signed by the person or persons entitled to the notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VI.
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
chairman of the board, vice chairman of the board, president, one or more
executive vice presidents, one or more senior vice presidents, one or more vice
presidents, secretary, treasurer, controller and such assistant vice
presidents, assistant secretaries, assistant treasurers and assistant
controllers as the board of directors may provide for and elect. The chairman
of the board and the vice chairman of the board shall be members of the board
of directors. Any two or more offices may be held by the same person. The
board of directors may appoint such other officers as they shall deem
necessary, who shall have the authority and shall perform the duties that from
time to time may be prescribed by the board of directors. In its discretion,
the board of directors by a vote of a majority thereof may leave unfilled for
any period that it may fix by resolution any office except those of president,
treasurer and secretary.
SECTION 2. ELECTION. The board of directors at their first meeting
after each annual meeting of the stockholders or at any regular or special
meeting shall elect, as may be required, a chairman of the board, vice chairman
of the board, president, and one or more executive vice
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presidents, senior vice presidents, vice presidents, a secretary, treasurer,
controller, and assistant vice presidents, assistant secretaries, assistant
treasurers, and assistant controllers.
SECTION 3. TENURE. The officers of the corporation elected by the
board of directors shall hold office for one year and until their successors
are chosen and qualify in their stead. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors.
SECTION 4. SALARIES. The salaries of the officers of the corporation
shall be recommended by the management development and compensation committee
and approved by the board of directors.
SECTION 5. VACANCIES. If the office of any officer of the
corporation becomes vacant by reason of death, resignation, disqualification or
otherwise, the directors by a majority vote, may choose his successor or
successors.
SECTION 6. RESIGNATION. Any officer may resign his office at any
time, such resignation to be made in writing and take effect at the time of
receipt by the corporation, unless some time be fixed in the resignation and
then from that time. The acceptance of a resignation shall not be required to
make it effective.
SECTION 7. DELEGATION OF DUTIES. Duties of officers may be delegated
in case of the absence of any officer of the corporation or for any reason that
the board of directors may deem sufficient. The board of directors may
delegate the powers or duties of the officer to any other officer or to any
director, except as otherwise provided by statute, for the time being, provided
a majority of the entire board of directors concurs therein.
SECTION 8. CHAIRMAN OF THE BOARD. The chairman of the board shall be
the chief executive officer and shall have, subject to the direction of the
board of directors, general control and management of the corporation's
business and affairs and shall see that all the policies and resolutions of the
board of directors are carried into effect, subject, however, to the right of
the board of directors to delegate any specific powers, except such as may be
by statute exclusively conferred on the president, to any other officer or
officers of the corporation. He shall preside at all meetings of stockholders
and the board of directors at which he may be present.
SECTION 9. VICE CHAIRMAN OF THE BOARD. The vice chairman shall
preside at all meetings of the board of directors and stockholders from which
the chairman of the board may be absent, and shall perform such other duties
that shall be specifically assigned to him from time to time by the board of
directors or the chairman of the board.
SECTION 10. PRESIDENT. The president shall be the chief operating
officer and shall perform those duties that shall be specifically assigned to
him from time to time by the board of directors. In the absence of the chief
executive officer or in the event of his death, inability or
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refusal to act, the president shall perform the duties of the chief executive
officer, and when so acting shall have the powers of and be subject to all the
restrictions upon the chief executive officer.
SECTION 11. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS, AND
VICE PRESIDENTS. In the absence of the president or in the event of his death,
inability or refusal to act, the senior executive vice president present shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. In the
absence of the president and all executive or senior vice presidents, or in the
event of their deaths, inability or refusal to act, a vice president designated
by the board of directors, or in case the board of directors has failed to act,
designated by the chief executive officer, shall perform the duties of the
president and when so acting shall have all the powers of and be subject to all
the restrictions upon the president. The executive vice presidents, the senior
vice presidents, and all other vice presidents shall perform those duties
consistent with these bylaws and that may be specifically designated by the
president or by the board of directors.
SECTION 12. ASSISTANT VICE PRESIDENTS. The assistant vice presidents
shall perform those duties, not inconsistent with these bylaws, the Certificate
of Incorporation or statute and that may be specifically designated by the
board of directors or the president. In the absence of the executive vice
presidents, senior vice presidents, or vice presidents, an assistant vice
president (or in the event there be more than one assistant vice president, the
assistant vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the executive vice presidents, senior
vice presidents or vice presidents, and when so acting, shall have all the
powers of and be subject to all restrictions upon the executive vice
presidents, the senior vice presidents, and vice presidents.
SECTION 13. SECRETARY. The secretary shall attend and keep all the
minutes of all meetings of the board of directors and all meetings of the
stockholders and, when requested by the board of directors, of any committees
of the board of directors. He shall give, or cause to be given, notice of all
meetings of the stockholders and board of directors and when so ordered by the
board of directors, shall affix the seal of the corporation thereto; he shall
have charge of all of those books and records that the board of directors may
direct, all of which shall, at all reasonable times, be open to the examination
of any director at the office of the corporation during business hours; he
shall, in general, perform all of the duties incident to the office of
secretary subject to the control of the board of directors or of the president,
under whose supervision he shall be, and shall do and perform any other duties
that may from time to time be assigned to him by the board of directors.
SECTION 14. ASSISTANT SECRETARIES. In the absence of the secretary
or in the event of his death, inability or refusal to act, the assistant
secretary (or in the event there be more than one assistant secretary, the
assistant secretaries in the order designated at the time of their election, or
in the absence of any designation, then in the order of their election) shall
perform the duties of the secretary, and when so acting shall have all the
powers of and be subject to all the restrictions upon the secretary and shall
perform any other duties that may from time to time be assigned to him by the
board of directors, the president or the secretary.
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SECTION 15. TREASURER. The treasurer shall have custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for money due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in those
banks or depositories that shall be selected and designated by the board of
directors and shall in general perform all of the duties incident to the office
of treasurer and any other duties that may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give bond for the faithful discharge of his duties in the sum
and with the surety or sureties as the board of directors shall determine.
SECTION 16. ASSISTANT TREASURERS. In the absence of the treasurer or
in the event of his death, inability or refusal to act, the assistant treasurer
(or in the event there be more than one assistant treasurer, the assistant
treasurers in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the treasurer and when so acting shall have all the powers and be
subject to all the restrictions upon the treasurer, and shall perform any other
duties that from time to time may be assigned to him by the president,
treasurer or the board of directors. The assistant treasurers shall, if
required by the board of directors, give bonds for the faithful discharge of
their duties in the sums and with the surety or sureties that the board of
directors shall determine.
SECTION 17. CONTROLLER. The controller shall maintain adequate
records of all assets, liabilities and transactions of the corporation; see
that adequate audits thereof are currently and regularly made; and, in
conjunction with other officers and department heads, initiate and enforce
measures and procedures whereby the business of the corporation shall be
conducted with the maximum safety, efficiency and economy. Except as otherwise
determined by the board of directors, or lacking a determination by the board
of directors, then by the president, his duties and powers shall extend to all
subsidiary corporations and, so far as may be practicable, to all affiliate
corporations. He shall have any other powers and perform other duties that may
be assigned to him by the president or by the board of directors. If required
by the board of directors, the controller shall give bond for the faithful
discharge of his duties in the sum and with the surety or sureties as the board
of directors shall determine.
SECTION 18. ASSISTANT CONTROLLERS. In the absence of the controller
or in the event of his death, inability or refusal to act, the assistant
controller (or in the event there be more than one assistant controller, the
assistant controllers, in the order designated at the time of their election,
or in the absence of any designation, then in the order of their election)
shall perform the duties of the controller and when so acting shall have all
the powers and be subject to all the restrictions upon the controller, and
shall perform any other duties that from time to time may be assigned to him by
the president, controller or the board of directors. The assistant controllers
shall, if required by the board of directors, give bonds for the faithful
discharge of their duties in the sums and with the surety or sureties that the
board of directors shall determine.
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ARTICLE VII.
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
SECTION 1. The board of directors shall indemnify any person (and
that person's heirs and personal representatives) who was or is a party or is
threatened or expected to be made a party to any threatened, pending or
completed action, suit, arbitration or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, partner or agent of another
corporation, partnership (including a partnership in which the corporation is a
partner), joint venture, trust or other enterprise, against expenses
(including, but not limited to, attorneys' fees, expert fees, bonds,
prospective or retroactive insurance premiums or costs, litigation, appeal and
court costs and out-of-pocket expenses of such person during any investigation
hearing, arbitration, trial, or appeal of any such action, suit or proceeding,
including any interest payable thereon), judgments, damages, arbitration
awards, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit, arbitration or proceeding,
including any interest payable thereon, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. The board of directors shall indemnify any person (and
that person's heirs and personal representatives) who was or is a party or is
threatened or expected to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, partner or agent
of another corporation, partnership (including a partnership in which the
corporation is a partner), joint venture, trust or other enterprise against
expenses (including, but not limited to, attorneys' fees, expert fees, bonds,
prospective or retroactive insurance premiums or costs, litigation, appeal and
court costs, and out-of-pocket expenses of such person during any
investigation, hearing, trial or appeal of any such action or suit, including
any interest payable thereon), actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged
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<PAGE> 20
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. To the extent that a present or past director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, arbitration or proceeding referred to
in Sections 1 and 2, or in defense of claim, issue or matter therein, he shall
be indemnified against expenses (including, but not limited to, attorneys'
fees, expert fees, bonds, prospective or retroactive insurance premiums or
costs, litigation, appeal, and court costs, and out-of-pocket expenses of such
person during any investigation, hearing, arbitration, trial or appeal of any
such action, suit or proceeding) actually and reasonably incurred by him in
connection therewith, including any interest payable thereon.
SECTION 4. The board of directors shall cause the corporation to
advance to any person covered by Sections 1 or 2 the expenses (including, but
not limited to, attorneys' fees, expert fees, bonds, prospective or retroactive
insurance premiums or costs, litigation, appeal, and court costs and
out-of-pocket expenses, of such person during any investigation, hearing,
arbitration, trial or appeal of any such action, suit, arbitration or
proceeding) incurred by that person in defending a threatened, pending, or
completed civil, criminal, administrative, or investigative action suit,
arbitration, or proceeding, including any interest payable thereon, in advance
of the final disposition of such action, suit or proceeding.
SECTION 5. Any advance by the board of directors under Section 4
above to any employee or agent who is not a present or past director or officer
of the corporation shall be conditional upon evidence of compliance with the
terms and conditions, if any, deemed appropriate and specified by the board of
directors for such advance if such employee or agent is determined ultimately
to be not legally entitled to indemnification from the corporation.
SECTION 6. Any advance authorized by the board of directors under
Section 4 above to a present or past officer or director shall be conditional
upon prior receipt by the corporation of a written undertaking from that
officer or director to repay such advance if he is determined ultimately to be
not legally entitled to indemnification from the corporation. Such undertaking
shall be in the form of a simple agreement by the officer or director to repay
advances made to him in the event that it is determined ultimately that he is
not legally entitled to indemnification by the corporation. Such undertaking
shall specifically state that no bond, collateral or other security shall be
required by the officer or director to insure its performance and that no
interest on any amount advanced shall be required to be paid to the corporation
if the officer or director is determined ultimately to be not legally entitled
to indemnification from the corporation.
SECTION 7. The board of directors, in its sole discretion, may
establish and may fund in advance and from time to time, in whole or in part, a
separate provision or provisions, which may
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<PAGE> 21
be in the form of a trust fund, periodic or advance retainers to counsel, or
otherwise as the board of directors may determine in each instance, to be used
as payment and/or advances of indemnification obligations under this Article
VII to officers, directors, employees and agents of the corporation; provided,
however, that any amount which is contributed to such fund shall not in any way
be construed to be a limitation on the amount of indemnification and/or
advances of the corporation.
SECTION 8. The board of directors shall cause the corporation to pay
to any director, officer, employee or agent all expenses (including, but not
limited to, attorneys' fees, expert fees, bonds, prospective or retroactive
insurance premiums or costs, litigation, appeal, and court costs, and
out-of-pocket expenses of such person during any investigation, hearing,
arbitration, trial or appeal of any such action, suit, arbitration or
proceeding, including any interest payable thereon), which may be incurred by
such director, officer, employee or agent in enforcing his rights to
indemnification (as set forth herein in Sections 1, 2 and 3) and/or advances
(as set forth herein in Section 4) whether or not such director, officer,
employee or agent is successful in enforcing such rights and whether or not
suit or other proceedings are commenced.
SECTION 9. Any amendment to this Article VII shall only apply
prospectively and shall in no way affect the corporation's obligations to
indemnify and make advances to officers, directors, employees and agents as set
forth in this Article VII for actions or events which occurred before any such
amendment, and provided that any amendment to this Article VII shall require
affirmative vote of four-fifths of the entire board of directors.
SECTION 10. Any indemnification granted under the provisions of
Sections 1, 2, 3 and 8 above shall be subject to the provisions of subsections
(d), (e), (f) and (g) of Section 145 of the General Corporation Law of the
State of Delaware.
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any
officer or officers, agent or agents to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loan shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name,
unless authorized by resolution of the board of directors. Such authority may
be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other order or
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents and in such manner that shall from time to time be
determined by resolution of the board of directors.
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<PAGE> 22
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in the bank or banks or other depositories that the board of directors may
elect.
ARTICLE IX.
VOTING OF STOCK OF OTHER CORPORATIONS
Unless otherwise ordered by the board of directors, the chairman of
the board shall have full power and authority on behalf of the corporation to
act and vote at any meeting of stockholders of any corporation in which the
corporation may hold stock, and at any such meeting, shall possess, and may
exercise, any and all of the rights and powers incident to the ownership of the
stock, which, as the owner thereof, the corporation might have possessed and
exercised if present. The board of directors by resolution from time to time,
may confer like powers upon any other person or persons.
ARTICLE X.
NOTICES
SECTION 1. FORM OF NOTICE. Whenever under the provisions of the
statutes, the Certificate of Incorporation, or these bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean
personal notice, but the notice may be given in writing by mail, which shall
mean depositing same in a United States Postal Service post office or letter
box, in a postage paid, sealed envelope, addressed to the stockholder or
director at the address that appears on the books of the corporation or, in
default of other address, to such director or stockholder at the United States
Postal Service general post office in the City of Wilmington, Delaware, and the
notice shall be deemed to be given at the time when the same shall be thus
mailed or by any other means expressly provided for in these bylaws.
SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provision of the statutes, the Certificate of Incorporation or
these bylaws, a waiver thereof in writing signed by the person or persons
entitled to the notice whether before or after the time stated therein shall be
deemed equivalent thereto.
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<PAGE> 23
ARTICLE XI.
STOCK CERTIFICATES
SECTION 1. CERTIFICATES FOR SHARES. The certificates for shares of
the capital stock of the corporation shall be in the form, not inconsistent
with the Certificate of Incorporation, that shall be approved by the board of
directors. The certificate shall be signed by the chairman of the board,
president or a vice president, and either the treasurer or an assistant
treasurer, or the secretary or an assistant secretary, but where the
certificate is signed by a transfer agent or an assistant transfer agent and a
registrar, the signatures of the chairman of the board, president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimiles. All certificates shall be consecutively numbered, and the name
of the person owning the shares represented thereby, with the number of shares
and the date of issue shall be entered in the corporation's books. No
certificate shall be valid unless it is signed by the chairman of the board,
president, or a vice president, and either the treasurer or an assistant
treasurer, or the secretary or an assistant secretary, but where the
certificate is signed by a transfer agent or an assistant transfer agent and a
registrar, the signatures of the chairman of the board, president, vice
president, treasurer, assistant treasurer, secretary or assistant secretary may
be facsimiles. All certificates surrendered to the corporation shall be
canceled, and no new certificates shall be issued until the former certificate
for the same number of shares of the same class shall have been surrendered and
canceled.
SECTION 2. TRANSFER OF SHARES. Shares of the capital stock of the
corporation shall be transferred only on the books of the corporation by the
holder thereof in person or by his attorney upon surrender and cancellation of
certificates for the same number of shares.
SECTION 3. REGULATIONS. The board of directors shall have authority
to make any rules and regulations that they may deem expedient concerning the
issue, transfer and registration of certificates for shares of the capital
stock of the corporation. The board of directors may appoint one or more
transfer agents or assistant transfer agents and one or more registrars of
transfers and may require all certificates to bear the signature of the
transfer agent or assistant transfer agent and a registrar of transfers. The
board of directors may at any time terminate the appointment of any transfer
agent or any assistant transfer agent or any registrar of transfers by the vote
of a majority of the board of directors.
Page 23
<PAGE> 24
SECTION 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS' RIGHTS.
The board of directors may close the stock transfer books of the corporation
for a period not exceeding 50 days preceding the date of any meeting of
stockholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or for a period not exceeding 50 days in
connection with obtaining the consent of stockholders for any purpose. In lieu
of closing the stock transfer books as aforesaid, the board of directors may
fix a date not exceeding 50 days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting and any adjournment thereof, or entitled
to receive payment of any dividend, or to any allotment of rights, or to
exercise the rights in respect of any change, conversion or exchange of capital
stock, or to give such consent, and in such case the stockholders and only the
stockholders that shall be stockholders of record on the date so fixed shall be
entitled to the notice or to receive payment of the dividend, or to receive the
allotment of rights, or to exercise the rights or to give such consent, as the
case may be, notwithstanding any transfer of any stock on the books of the
corporation after any record date fixed as aforesaid.
SECTION 5. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in the share or shares on the part of
any other person whether or not it shall have express or other notice thereof
except as otherwise provided by the laws of the State of Delaware.
SECTION 6. LOST CERTIFICATES. The board of directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact with the person
claiming the certificate of stock to be lost or destroyed. When authorizing
the issue of a new certificate or certificates, the board of directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of the lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in a manner that it shall require for
each share of stock having voting power registered in his name and to give the
corporation a bond in the sum that it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
SECTION 7. DIVIDENDS. The board of directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
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<PAGE> 25
SECTION 8. RESERVE FUNDS. Before payment of any dividend there may
be set aside out of any funds of the corporation available for dividends the
sum or sums that the board of directors may from time to time in their absolute
discretion think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for any other purpose that the directors shall think conducive
to the interest of the corporation and the board of directors may modify or
abolish the reserve in the manner in which it was created.
ARTICLE XII.
GENERAL PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall
begin on the first day of January in each year.
SECTION 2. INSPECTION OF BOOKS. The board of directors shall
determine from time to time whether, and if allowed, when and under what
conditions and regulations, the accounts and books of the corporation (except
as may be by statute specifically open to inspection) or any of them, shall be
open to the inspection of the stockholders, and a stockholder's rights in this
respect are, and shall be, restricted and limited accordingly.
SECTION 3. GENDER. The use of the masculine gender in these bylaws
shall be deemed to include the feminine gender.
ARTICLE XIII.
AMENDMENTS TO AND SUSPENSION OF BYLAWS
SECTION 1. AMENDMENTS. Subject to the provisions of Section 12 of
Article IV, these bylaws may be altered or repealed at any regular meeting of
the stockholders or at any special meeting of the stockholders at which a
quorum is present or represented, provided notice of the proposed alteration or
repeal be contained in the notice of the special meeting, by the affirmative
vote of a majority of the stockholders entitled to vote at the meeting and
present or represented thereat, or by the affirmative vote of a majority of the
board of directors at any regular meeting of the board of directors or at any
special meeting of the board of directors, if notice of the proposed alteration
or repeal be contained in the notice of the special meeting.
SECTION 2. SUSPENSION. Any provision of these bylaws may be suspended
by vote of two-thirds of the votes cast upon the motion to suspend except that
the suspension of the bylaw provision might be in contravention of any
provision of any statute or of the Certificate of Incorporation.
* * *
Page 25
<PAGE> 1
EXHIBIT 4.1
<TABLE>
<S> <C> <C>
NUMBER [VIGNETTE] ____________
SSP ______ SHARES
THIS CERTIFICATE IS TRANSFERABLE APACHE INCORPORATED UNDER THE LAWS
IN MINNEAPOLIS, MINNESOTA OR CORPORATION OF THE STATE OF DELAWARE
NEW YORK, NEW YORK
COMMON STOCK COMMON STOCK
This Certifies that _________________________ CUSIP 037411 10 5
SEE REVERSE FOR CERTAIN DEFINITIONS
PAR VALUE
$1.25 EACH
CERTIFICATE OF STOCK
is the owner of _________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Apache Corporation, transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.
Witness the signatures of its duly authorized officers.
Countersigned and Registered:
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT
/s/ Raymond Plank AND REGISTRAR
- -----------------
CHAIRMAN
/s/ C. L. Peper
--------------- By _________________
SECRETARY DATED: _________________________ AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
APACHE CORPORATION
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM --- as tenants in common UNIF TRF MIN ACT --- ______ Custodian ______________
TEN ENT --- as tenants by the entireties (Cust) (Minor)
JT TEN --- as joint tenants with right of under Uniform Transfers to Minors
survivorship and not as tenants Act _________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
This certificate also evidences and entitles the holder hereof to certain
rights (the "Rights") as set forth in a Rights Agreement between Apache
Corporation and Norwest Bank Minnesota, N.A., as Rights Agent, dated as of
January 31, 1996 as the same may be amended from time to time (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of Apache
Corporation. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Apache Corporation will mail to the holder of
this certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, as set forth in the
Rights Agreement, Rights owned by or transferred to any Person who is or
becomes an Acquiring Person (as defined in the Rights Agreement) and certain
transferees thereof will be come null and void and will no longer be
transferable.
For value received, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, _________________________
NOTICE: THE SIGNATURE(S) TO ______________________________________________
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT AL-
TERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER. ______________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
ELIGIBLE GUARANTOR INSTITUTION, (Banks,
Stockbrokers, Savings and Loan Associations
and Credit Unions) WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.5
________________________________________________________________________________
THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
dated as of December 18, 1995
among
APACHE CORPORATION
and
VARIOUS COMMERCIAL LENDING INSTITUTIONS,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Arranger
and
CHEMICAL BANK,
as Co-Agent and Arranger
________________________________________________________________________________
<PAGE> 2
THIRD AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of December 18, 1995, (the "Third Amendment"), 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 (in such capacity, the
"Administrative Agent") and Arranger (in such capacity, an "Arranger") and
CHEMICAL BANK, as Co-Agent (in such capacity, the "Co-Agent") and Arranger (in
such capacity, an "Arranger").
W I T N E S S E T H:
1. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent have heretofore entered into that certain Third Amended
and Restated Credit Agreement, dated as of March 1, 1995, as previously amended
(the "Credit Agreement").
2. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent now intend to amend the Credit Agreement (i) to permit
Apache Oil Egypt, Inc. to finance its share of the cost to develop a recent
discovery in the Qarun Concession in the Western Desert of the Arab Republic of
Egypt by entering into a $25 million loan to be arranged by the International
Finance Corporation, (ii) to clarify certain provisions of the Credit Agreement
relating to permitted Contingent Obligations, (iii) to adjust the pricing under
the Credit Agreement, (iv) to remove two of the current Lenders and to reduce
the Commitments of two of the current Lenders under the Third Amended and
Restated Credit Agreement and to adjust the Commitments and percentages of the
remaining Lenders to reflect such removals and reductions and (v) to address
various other issues in connection therewith as follows:
I. AMENDMENTS TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT.
A. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definitions of "Apache Egypt" and "IFC" in appropriate
alphabetical order:
"Apache Egypt" means Apache Oil Egypt, Inc., a Delaware
corporation.
"IFC" means the International Finance Corporation.
B. The definition of "Lenders" appearing in Section 1.1 of the
Credit Agreement is hereby amended in its entirety to the following:
<PAGE> 3
"Lenders" means the financial institutions listed on Exhibit
"A" to the Third Amendment to Third Amended and Restated Credit
Agreement dated as of December 14, 1995 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.
C. Section 11.1 of the Credit Agreement is hereby amended (i) by
amending subsection 11.1(a) in its entirety to the following:
" (a) The Obligations arising under the Loan Documents,
Contingent Obligations permitted under Section 11.4, and intercompany
Indebtedness pursuant to Investments by the Company permitted by
Sections 11.12(d), (e), (g), (h) and (i);";
(ii) by deleting from subsection 11.1(i) the letter "(h)" from the second line
thereof and by replacing it with the letter "(i)"; (iii) by relettering
subsection 11.1(i) as subsection 11.1(j); and (iv) by inserting the following
after subsection 11.1(h) thereof:
" (i) Other Indebtedness of Apache Egypt to IFC in a
maximum aggregate principal amount of $25,000,000, together with
interest, fees and expenses related thereto; and".
D. Section 11.4 of the Credit Agreement is hereby amended (i) by
deleting "$30,000,000" from the fifth line of Section 11.4 and by replacing it
with "45,000,000"; (ii) by amending subsection 11.4(d) in its entirety to the
following:
"(d) (i) net Contingent Obligations of International and Apache
Overseas, Inc. and any Subsidiaries of Apache Overseas, Inc.
consisting of foreign work commitments or other similar obligations
(but not including obligations under authorizations for expenditures
and other joint operating arrangements) under exploration or
production licenses or agreements entered into by International or
Apache Overseas, Inc. or any Subsidiaries of Apache Overseas, Inc. in
the ordinary course of business not to exceed net at any one time
outstanding for all such Contingent Obligations of $85,000,000 and
(ii) Contingent Obligations of International and Apache Overseas, Inc.
and any Subsidiaries of Apache Overseas, Inc. consisting of
obligations under authorizations for expenditures and other joint
operating arrangements entered into by International or Apache
Overseas, Inc. or any Subsidiaries of Apache Overseas, Inc. in the
ordinary course of business; provided that for purposes of clause
(d)(i), net Contingent Obligations shall be deemed to be
2
<PAGE> 4
the difference between the aggregate for all such Contingent
Obligations in respect of foreign work commitments or other similar
obligations in which International or Apache Overseas, Inc. or any
Subsidiaries of Apache Overseas, Inc. is required to perform or pay a
certain amount (but not including obligations under authorizations for
expenditures and other joint operating arrangements) 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,";
(iii) by deleting the word "and" at the end of subsection 11.4(g); and (iv) by
deleting subsection 11.4(h) in its entirety and inserting the following:
"(h) Contingent Obligations in respect of obligations of partnerships,
corporations or limited liability companies of which the Company or
its Subsidiaries are partners, shareholders or members, respectively,
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, marketing agreement or
arrangements, 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, and (i) Contingent Obligations
of the Company to IFC relating to Apache Egypt not exceeding
$25,000,000 in the aggregate principal amount, together with interest,
fees and expenses related thereto."
E. Section 11.5 of the Credit Agreement is hereby amended by
inserting the following after subsection 11.5(i) thereof:
"(j) Liens securing the Indebtedness permitted in connection with
Section 11.1(i)."
F. Subsection 11.7(c) of the Credit Agreement is hereby amended
in its entirety to the following:
" (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 Indebtedness other than Indebtedness incurred under this
Agreement, the other Loan Documents, or the repurchase of any
3
<PAGE> 5
remarketed notes under the Remarketed Note Program, Indebtedness of
Offshore, Indebtedness evidenced by the DEKALB Notes or Indebtedness
to the IFC in connection with Apache Egypt; 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;".
G. Section 11.12 of the Credit Agreement is hereby amended (i) by
amending subsection 11.12(e) in its entirety to the following:
" (e) in the ordinary course of business, Investments in
Subsidiaries, including, without limitation, International, Apache
Energy Limited, Apache Overseas, Inc. or any of their Subsidiaries,
for (i) the acquisition, exploration, drilling or development of
Properties which are located outside the United States of America and
are not included in the Borrowing Base, or (ii) costs incurred in
connection with gathering, processing, transporting and marketing
production from such Properties;";
(ii) by amending subsection 11.12(f) in its entirety to the following:
" (f) [Intentionally Omitted];";
and (iii) by amending subsection 11.12(h) in its entirety to the following:
" (h) Investments in Persons which (A) Persons arise as a
result of joint operations of oil and gas properties wherever located,
pursuant to joint operating agreements, partnership agreements, or
joint venture agreements containing terms and provisions customary in
the oil and gas business and entered into in the ordinary course of
business, and (B) Investments are in respect of the joint operations
of such Properties pursuant to such joint operating agreements,
partnership agreements or joint venture agreements;".
H. Schedule B to the Credit Agreement is hereby replaced by
Schedule B to this Third Amendment, and the definition of Alternate
4
<PAGE> 6
Base Rate Spread in the Credit Agreement shall be amended in its entirety to
the following:
"Alternate Base Rate Spread means 0.00 for all purposes of this
Agreement."
II. EFFECTIVENESS. This Third Amendment shall become effective as
of the date hereof when the Administrative Agent shall have received (a)
counterparts hereof duly executed by the Company, the Lenders, the
Administrative Agent and the Co-Agent (or, in the case of any party as to which
an executed counterpart shall not have been received, telegraphic, telex, or
other written confirmation from such party of execution of a counterpart hereof
by such party), (b) duly executed promissory notes substantially in the form of
Exhibits A-1 to the Third Amended and Restated Credit Agreement payable to the
order of The First National Bank of Chicago, Bank of Montreal, NationsBank,
Banque Paribas, The Chase Manhattan Bank, N.A., Christiania Bank og
Kreditkasse, The Long-Term Credit Bank of Japan, Ltd. and Royal Bank of Canada,
Grand Cayman (North American #1) Branch, each in a principal amount equal to
the Commitment of such Lender set forth in Exhibit "A" hereto, and (c) payments
by any Lenders which may be required as a result of the adjustment of the
Commitments of such Lenders pursuant to this Third Amendment. Upon
effectiveness of this Third Amendment, each Lender shall have the Commitment
and percentage set forth in Exhibit "A" hereto.
III. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce
the Lenders, the Administrative Agent, the Co-Agent and the Arrangers to enter
into this Third Amendment, the Company hereby reaffirms, as of the date hereof,
its representations and warranties in their entirety contained in Article VIII
of the Credit Agreement and in all other documents executed pursuant thereto
(except to the extent such representations and warranties relate solely to an
earlier date) and additionally represents and warrants as follows:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation 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.
(ii) The Company has the corporate power and authority and
legal right to execute and deliver this Third Amendment and to perform
its obligations hereunder. The execution and delivery by the Company
of this Third Amendment and the performance of its obligations
hereunder have been duly authorized by proper corporate proceedings,
and this Third Amendment and the Credit Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the
5
<PAGE> 7
Company, enforceable against the Company in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally.
(iii) No Default or Unmatured Default has occurred and is
continuing as of the date hereof.
(iv) There has been no material adverse change (a) in the
businesses, assets, properties, operations, condition (financial or
otherwise) or results of operations or prospects of the Company and
its Subsidiaries from March 1, 1995, (b) affecting the rights and
remedies of the Lenders under and in connection with this Third
Amendment and the Credit Agreement, as amended by this Third
Amendment, or (c) in the ability of the Company to perform its
obligations under this Third Amendment or the Credit Agreement, as
amended by this Third Amendment.
(v) 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
its Subsidiaries which is or could have a Material Adverse Effect.
IV. DEFINED TERMS. Except as amended hereby, terms used herein
when defined in the Credit Agreement shall have the same meanings herein unless
the context otherwise requires.
V. REAFFIRMATION OF CREDIT AGREEMENT. This Third Amendment shall
be deemed to be an amendment to the Credit Agreement, and the Credit Agreement,
as amended hereby, is hereby ratified, approved and confirmed in each and every
respect. All references to the Credit Agreement herein and in any other
document, instrument, agreement or writing shall hereafter be deemed to refer
to the Credit Agreement as amended hereby.
VI. GOVERNING LAW. THIS THIRD AMENDMENT 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.
All obligations of the Company and rights of the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers and any other holders of the Notes
expressed herein shall be in addition to and not in limitation of those
provided by applicable law.
VII. SEVERABILITY OF PROVISIONS. Any provision in this Third
Amendment 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
6
<PAGE> 8
this end the provisions of this Third Amendment are declared to be severable.
VIII. COUNTERPARTS. This Third Amendment 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 Third Amendment by
signing any such counterpart.
IX. HEADINGS. Article and section headings in this Third
Amendment are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Third Amendment.
X. SUCCESSORS AND ASSIGNS. This Third Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
XI. NOTICE. THIS WRITTEN THIRD AMENDMENT TOGETHER WITH THE THIRD
AMENDED AND RESTATED CREDIT AGREEMENT 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 BETWEEN THE PARTIES.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
7
<PAGE> 9
IN WITNESS WHEREOF, the Company, the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers have executed this Third Amendment as of
the date first above written.
APACHE CORPORATION
By:/s/ Clyde E. McKenzie
------------------------------------
Name: Clyde E. McKenzie
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually, as Administrative Agent
and as Arranger
By:/s/ Christine Frank
------------------------------------
Name: Christine Frank
Title: Vice President
CHEMICAL BANK, Individually, as
Co-Agent and as Arranger
By:/s/ R. Potter
------------------------------------
Name: Ronald Potter
Title: Managing Director
BANK OF MONTREAL, Individually and as
Lead Manager
By:/s/ Robert Roberts
------------------------------------
Name: Robert L. Roberts
Title: Director, U.S. Corporate Banking
S-1
<PAGE> 10
CIBC INC., Individually and as Lead
Manager
By:/s/ Gary C. Gaskill
------------------------------------
Name: Gary C. Gaskill
Title: Vice President
NATIONSBANK, Individually and as Lead
Manager
By:/s/ Jo A. Tamalis
------------------------------------
Name: Jo A. Tamalis
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ Laura B. Shepard
------------------------------------
Name: Laura B. Shepard
Title: Vice President
BANQUE PARIBAS
By:/s/ Charles K. Thompson
------------------------------------
Name: Charles K. Thompson
Title: Group Vice President
By:/s/ G.J. Jeram
------------------------------------
Name: G.J. Jeram
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By:/s/ R.A. Erbert
------------------------------------
Name: Richard A. Erbert
Title: Vice President
S-2
<PAGE> 11
MIDLAND BANK PLC, NEW YORK BRANCH
By:/s/ John A. Cleveland
------------------------------------
Name: John A. Cleveland
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:/s/ P.W. McNeal
------------------------------------
Name: Philip W. McNeal
Title: Vice President
ABN-AMRO BANK N.V. - HOUSTON AGENCY
By:/s/ Michael N. Oakes
------------------------------------
Name: Michael N. Oakes
Title: Vice President
By:/s/ H. Gene Shiels
------------------------------------
Name: H. Gene Shiels
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ J.R. Vaughan, Jr.
------------------------------------
Name: J.R. Vaughan, Jr.
Title: Vice President and Director
Energy & Utilities Division
THE BANK OF NOVA SCOTIA, SAN FRANCISCO
AGENCY
By:/s/ F.C.H. Ashby
------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
S-3
<PAGE> 12
THE CHASE MANHATTAN BANK, N.A.
By:/s/ Bettylou J. Robert
------------------------------------
Name: Bettylou J. Robert
Title: Vice President
CITIBANK, N.A.
By:/s/ Arezoo Jafari
------------------------------------
Name: Arezoo Jafari
Title: Assistant Vice President
THE FUJI BANK, LIMITED - HOUSTON AGENCY
By:/s/ Soichi Yoshida
------------------------------------
Name: Soichi Yoshida
Title: Vice President & Senior Manager
UNION BANK OF SWITZERLAND, HOUSTON
AGENCY
By:/s/ E. Swann
------------------------------------
Name: Evans Swann
Title: Managing Director
By:/s/ Kelly Boots
------------------------------------
Name: Kelly Boots
Title: Assistant Treasurer
S-4
<PAGE> 13
UNION BANK
By:/s/ Richard P. DeGrey
------------------------------------
Name: Richard P. DeGrey
Title: Vice President
By:/s/ Walter M. Roth
------------------------------------
Name: Walter M. Roth
Title: Vice President
CHRISTIANIA BANK OG KREDITKASSE
By:/s/ Jahn O. Roising
------------------------------------
Name: Jahn O. Roising
Title: First Vice President
By:/s/ Peter M. Dodge
------------------------------------
Name: Peter M. Dodge
Title: Vice President
COLORADO NATIONAL BANK
By:/s/ Monte E. Deckerd
------------------------------------
Name: Monte E. Deckerd
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:/s/ S. Otsubo
------------------------------------
Name: Satoru Otsubo
Title: Joint General Manager
S-5
<PAGE> 14
NBD BANK
By:/s/ George R. Schanz
------------------------------------
Name: George R. Schanz
Title: Vice President
ROYAL BANK OF CANADA, GRAND CAYMAN
(NORTH AMERICAN #1) BRANCH
By:/s/ J.D. Frost
------------------------------------
Name: J.D. Frost
Title: General Manager
S-6
<PAGE> 15
SCHEDULE B
EURODOLLAR SPREAD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Debt/Capitalization Ratio Less than .55 .55 or greater
- --------------------------------------------------------------------------------
<S> <C> <C>
A-/A3 or Higher*
Floating Spread .250% .500%
- --------------------------------------------------------------------------------
BBB/Baa2 or Higher*
Floating Spread .350% .600%
- --------------------------------------------------------------------------------
BBB-/Baa3 or Higher*
Floating Spread .425% .675%
- --------------------------------------------------------------------------------
Lower than BBB-/Baa3*
Floating Spread .625% .875%
- --------------------------------------------------------------------------------
<CAPTION>
FACILITY FEE RATES
- --------------------------------------------------------------------------------
Debt/Capitalization Ratio Less than .55 .55 or greater
- --------------------------------------------------------------------------------
<S> <C> <C>
A-/A3 or Higher*
Floating Spread .125% .125%
- --------------------------------------------------------------------------------
BBB/Baa2 or Higher*
Floating Spread .150% .150%
- --------------------------------------------------------------------------------
BBB-/Baa3 or Higher*
Floating Spread .200% .200%
- --------------------------------------------------------------------------------
Lower than BBB-/Baa3*
Floating Spread .250% .250%
- --------------------------------------------------------------------------------
</TABLE>
*Rating of the Company's Long-Term Debt by (2) two or more Rating Agencies
Schedule B - Page 1
<PAGE> 16
EXHIBIT "A"
<TABLE>
<CAPTION>
COMMITMENT
NAME OF LENDER $ MILLIONS PERCENTAGE
- -------------- ---------- ----------
<S> <C> <C>
The First National Bank
of Chicago (Administrative
Agent) $100 10.0%
Chemical Bank (Co-Agent) 65 6.5%
Bank of Montreal 65 6.5%
NationsBank 65 6.5%
CIBC Inc. 50 5.0%
Royal Bank of Canada,
Grand Cayman (North
America #1) Branch 50 5.0%
Bank of America National
Trust & Savings Association 45 4.5%
Christiania Bank og
Kreditkasse 45 4.5%
Societe Generale,
Southwest Agency 45 4.5%
Morgan Guaranty Trust
Company of New York 45 4.5%
ABN-AMRO Bank N.V. -
Houston Agency 40 4.0%
The Bank of Nova Scotia,
San Francisco Agency 40 4.0%
Bank of Switzerland 40 4.0%
CitiBank, N.A. 40 4.0%
The First National Bank
of Boston 40 4.0%
The Fuji Bank, Limited -
Houston Agency 40 4.0%
The Long-Term Credit Bank
of Japan, Ltd. 40 4.0%
</TABLE>
Exhibit "A" - Page 1
<PAGE> 17
<TABLE>
<S> <C> <C>
Union Bank 40 4.0%
Banque Paribas 35 3.5%
The Chase Manhattan Bank,
N.A. 35 3.5%
Colorado National Bank 35 3.5%
------ ----
TOTAL $1,000 100%
</TABLE>
Exhibit "A" - Page 2
<PAGE> 1
EXHIBIT 10.6
________________________________________________________________________________
FOURTH AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
dated as of December 22, 1995
among
APACHE CORPORATION
and
VARIOUS COMMERCIAL LENDING INSTITUTIONS,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Arranger
and
CHEMICAL BANK,
as Co-Agent and Arranger
________________________________________________________________________________
<PAGE> 2
FOURTH AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of December 22, 1995, (the "Fourth Amendment"), 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 (in such capacity, the
"Administrative Agent") and Arranger (in such capacity, an "Arranger") and
CHEMICAL BANK, as Co-Agent (in such capacity, the "Co-Agent") and Arranger (in
such capacity, an "Arranger").
W I T N E S S E T H:
1. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent have heretofore entered into that certain Third Amended
and Restated Credit Agreement, dated as of March 1, 1995, as previously amended
(the "Credit Agreement").
2. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent now intend to amend the Credit Agreement (i) to permit
Apache Gathering Company to become a member of Producers Energy Marketing, LLC,
(ii) to permit the Company to guarantee the payment of obligations of Apache
Gathering Company to Producers Energy Marketing, LLC and (iii) to address
various other issues in connection therewith as follows:
I. AMENDMENTS TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT.
A. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition of "Producers Energy" in appropriate
alphabetical order:
"Producers Energy" means Producers Energy Marketing, LLC, a
Delaware limited liability company.
B. The definitions of "Contingent Obligation", "Indebtedness" and
"Subsidiary" appearing in Section 1.1 of the Credit Agreement are hereby
amended in their entirety to the following:
"Contingent Obligation" means, with respect to any Person as
of the time a determination thereof is to be made, any obligation,
contingent or otherwise, of any such Person, directly or indirectly,
guaranteeing, endorsing or otherwise becoming 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
<PAGE> 3
creditor against loss) for any Indebtedness of itself or of any other
Person (other than by endorsements of instruments in the course of
business).
"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 furtherthat for purposes of the foregoing clauses (ii), (iii)
and (ix), 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, marketing agreements
or arrangements, 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.
"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
2
<PAGE> 4
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;
further provided, that, notwithstanding the foregoing, Subsidiaries of
the Company shall not include Producers Energy except for the purposes
of Sections 8.10, 8.15, 8.16 and 12.1 (insofar as the representation
or warranty which is breached or shall be false was made pursuant to
Sections 8.10, 8.15 or 8.16).
C. Section 11.1 of the Credit Agreement is hereby amended by
deleting subsection 11.1(a) in its entirety and inserting the following before
the semicolon:
"(a) The Obligations arising under the Loan Documents,
Contingent Obligations permitted under Section 11.4 (whether or not
then payable), and intercompany Indebtedness pursuant to Investments
by the Company permitted by Sections 11.12(d), (e), (g), (h) and (i)".
D. Section 11.4 of the Credit Agreement is hereby amended (i) by
deleting "$45,000,000" from the fifth line of Section 11.4 and by replacing it
with "30,000,000"; (ii) by deleting subsection 11.4(h) in its entirety and
inserting the following before the comma:
"(h) Contingent Obligations of the Company or any of its Subsidiaries
in respect of itself or in respect of obligations of partnerships,
corporations or limited liability companies of which the Company or
its Subsidiaries are partners, shareholders or members, respectively,
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, marketing agreements
or
3
<PAGE> 5
arrangements, 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";
and (iii) by inserting the following after subsection 11.4(i) thereof before
the period:
", and (j) Contingent Obligations of the Company and any of its
Subsidiaries to or in respect of Producers Energy which when
aggregated with the Investments of the Company and any of its
Subsidiaries permitted with respect to Producers Energy pursuant to
subsection 11.12(c) do not exceed $30,000,000 in the aggregate".
E. Section 11.12 of the Credit Agreement is hereby amended by
deleting subsection 11.12(c) in its entirety and inserting the following before
the semicolon:
"(c) without duplication, Investments permitted as
Indebtedness pursuant to Section 11.1 and Investments permitted as
Contingent Obligations pursuant to Section 11.4 (including, without
limitation, Investments of the Company and any of its Subsidiaries in
Producers Energy which when aggregated with the Contingent Obligations
of the Company and any of its Subsidiaries permitted pursuant to
subsection 11.4(j) do not exceed $30,000,000 in the aggregate)".
F. Section 14.7 of the Credit Agreement is hereby amended (i) by
deleting the word "or" at the end of subsection 14.7(b)(vi) and (ii) by
inserting the following after subsection 14.7(b)(vii) thereof:
"or (viii) any investigation, litigation or proceeding related to
any Investment by the Company, any of its Subsidiaries, Apache Energy
Resources, Apache Energy Limited or Producers Energy in any Person,
whether or not any Agent or any Lender is party thereto;".
II. EFFECTIVENESS. This Fourth Amendment shall become effective
as of the date hereof when the Administrative Agent shall have received
counterparts hereof duly executed by the Company, the Required Lenders, the
Administrative Agent and the Co-Agent (or, in the case of any party as to which
an executed counterpart shall not have been received, telegraphic, telex, or
other written confirmation from such party of execution of a counterpart hereof
by such party).
III. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce
the Lenders, the Administrative Agent, the Co-Agent and the
4
<PAGE> 6
Arrangers to enter into this Fourth Amendment, the Company hereby reaffirms, as
of the date hereof, its representations and warranties in their entirety
contained in Article VIII of the Credit Agreement and in all other documents
executed pursuant thereto (except to the extent such representations and
warranties relate solely to an earlier date) and additionally represents and
warrants as follows:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation 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.
(ii) The Company has the corporate power and authority and
legal right to execute and deliver this Fourth Amendment and to
perform its obligations hereunder. The execution and delivery by the
Company of this Fourth Amendment and the performance of its
obligations hereunder have been duly authorized by proper corporate
proceedings, and this Fourth Amendment and the Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally.
(iii) No Default or Unmatured Default has occurred and is
continuing as of the date hereof.
(iv) There has been no material adverse change (a) in the
businesses, assets, properties, operations, condition (financial or
otherwise) or results of operations or prospects of the Company and
its Subsidiaries from March 1, 1995, (b) affecting the rights and
remedies of the Lenders under and in connection with this Fourth
Amendment and the Credit Agreement, as amended by this Fourth
Amendment, or (c) in the ability of the Company to perform its
obligations under this Fourth Amendment or the Credit Agreement, as
amended by this Fourth Amendment.1
(v) 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
its Subsidiaries which is or could have a Material Adverse Effect.
IV. DEFINED TERMS. Except as amended hereby, terms used herein
when defined in the Credit Agreement shall have the same meanings herein unless
the context otherwise requires.
5
<PAGE> 7
V. REAFFIRMATION OF CREDIT AGREEMENT. This Fourth Amendment
shall be deemed to be an amendment to the Credit Agreement, and the Credit
Agreement, as amended hereby, is hereby ratified, approved and confirmed in
each and every respect. All references to the Credit Agreement herein and in
any other document, instrument, agreement or writing shall hereafter be deemed
to refer to the Credit Agreement as amended hereby.
VI. GOVERNING LAW. THIS FOURTH AMENDMENT 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.
All obligations of the Company and rights of the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers and any other holders of the Notes
expressed herein shall be in addition to and not in limitation of those
provided by applicable law.
VII. SEVERABILITY OF PROVISIONS. Any provision in this Fourth
Amendment 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 this Fourth Amendment are
declared to be severable.
VIII. COUNTERPARTS. This Fourth Amendment 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 Fourth Amendment by
signing any such counterpart.
IX. HEADINGS. Article and section headings in this Fourth
Amendment are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Fourth Amendment.
X. SUCCESSORS AND ASSIGNS. This Fourth Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
XI. NOTICE. THIS WRITTEN FOURTH AMENDMENT TOGETHER WITH THE THIRD
AMENDED AND RESTATED CREDIT AGREEMENT 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 BETWEEN THE PARTIES.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
6
<PAGE> 8
IN WITNESS WHEREOF, the Company, the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers have executed this Fourth Amendment as of
the date first above written.
APACHE CORPORATION
By:/s/ Clyde E. McKenzie
------------------------------------
Name: Clyde E. McKenzie
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually, as Administrative Agent
and as Arranger
By:/s/ Christine Frank
------------------------------------
Name: Christine Frank
Title: Vice President
CHEMICAL BANK, Individually, as
Co-Agent and as Arranger
By:/s/ R. Potter
------------------------------------
Name: Ronald Potter
Title: Managing Director
BANK OF MONTREAL, Individually and as
Lead Manager
By:/s/ Robert Roberts
------------------------------------
Name: Robert L. Roberts
Title: Director, U.S. Corporate Banking
S-1
<PAGE> 9
CIBC INC., Individually and as Lead
Manager
By:
------------------------------------
Name:
Title:
NATIONSBANK, Individually and as Lead
Manager
By:/s/ Jo Tamalis
------------------------------------
Name: Jo A. Tamalis
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ Laura B. Shepard
------------------------------------
Name: Laura B. Shepard
Title: Vice President
BANQUE PARIBAS
By:/s/ Charles K. Thompson
------------------------------------
Name: Charles K. Thompson
Title: Group Vice President
By:/s/ G.J. Jeram
------------------------------------
Name: G.J. Jeram
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By:/s/ R.A. Erbert
------------------------------------
Name: Richard A. Erbert
Title: Vice President
S-2
<PAGE> 10
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:/s/ P.W. McNeal
------------------------------------
Name: Philip W. McNeal
Title: Vice President
ABN-AMRO BANK N.V. - HOUSTON AGENCY
By:/s/ Michael N. Oakes
------------------------------------
Name: Michael N. Oakes
Title: Vice President
By:/s/ H. Gene Shiels
------------------------------------
Name: H. Gene Shiels
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ Michael Kane
------------------------------------
Name: Michael Kane
Title: Managing Director
THE BANK OF NOVA SCOTIA, SAN FRANCISCO
AGENCY
By:/s/ A.S. Norsworthy
------------------------------------
Name: A.S. Norsworthy
Title: Assistant Agent
THE CHASE MANHATTAN BANK, N.A.
By:/s/ Bettylou J. Robert
------------------------------------
Name: Bettylou J. Robert
Title: Vice President
S-3
<PAGE> 11
CITIBANK, N.A.
By:/s/ Carolyn R. Bodmer
------------------------------------
Name: Carolyn R. Bodmer
Title: Vice President
THE FUJI BANK, LIMITED - HOUSTON AGENCY
By:/s/ Soichi Yoshida
------------------------------------
Name: Soichi Yoshida
Title: Vice President & Senior Manager
UNION BANK OF SWITZERLAND, HOUSTON
AGENCY
By:/s/ E. Swann
------------------------------------
Name: Evans Swann
Title: Managing Director
By:/s/ Kelly Boots
------------------------------------
Name: Kelly Boots
Title: Assistant Treasurer
UNION BANK
By:/s/ Richard P. DeGrey
------------------------------------
Name: Richard P. DeGrey
Title: Vice President
By:/s/ W.M. Roth
------------------------------------
Name: Walter M. Roth
Title: Vice President
S-4
<PAGE> 12
CHRISTIANIA BANK OG KREDITKASSE
By:/s/ Peter M. Dodge
------------------------------------
Name: Peter M. Dodge
Title: Vice President
By:/s/ Hans Chr. Kjelsrud
------------------------------------
Name: Hans Chr. Kjelsrud
Title: Vice President
COLORADO NATIONAL BANK
By:
------------------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:/s/ S. Otsubo
------------------------------------
Name: Satoru Otsubo
Title: Joint General Manager
ROYAL BANK OF CANADA, GRAND CAYMAN
(NORTH AMERICAN #1) BRANCH
By:/s/ J.D. Frost
------------------------------------
Name: J.D. Frost
Title: Senior Manager
S-5
<PAGE> 1
EXHIBIT 10.7
________________________________________________________________________________
FIFTH AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
dated as of January 22, 1996
among
APACHE CORPORATION
and
VARIOUS COMMERCIAL LENDING INSTITUTIONS,
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and Arranger
and
CHEMICAL BANK,
as Co-Agent and Arranger
________________________________________________________________________________
<PAGE> 2
FIFTH AMENDMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 22, 1996, (the "Fifth Amendment"), 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 (in such capacity, the
"Administrative Agent") and Arranger (in such capacity, an "Arranger"), and
CHEMICAL BANK, as Co-Agent (in such capacity, the "Co-Agent") and Arranger (in
such capacity, an "Arranger").
W I T N E S S E T H:
1. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent have heretofore entered into that certain Third Amended
and Restated Credit Agreement, dated as of March 1, 1995, as previously amended
(the "Credit Agreement").
2. The Company, the Lenders, the Arrangers, the Co-Agent and the
Administrative Agent now intend to amend the Credit Agreement (i) to permit
negative pledges by Apache Canada Ltd. (formerly known as DEKALB Energy Canada
Ltd.), Apache Qarun Corporation LDC and Apache Oil Egypt, Inc., (ii) to permit
the increase in the maximum availability under the Apache Canada Ltd. revolving
credit facility from $30,000,000 to $45,000,000, and (iv) to address various
other issues in connection therewith as follows:
I. AMENDMENTS TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT.
A. Section 1.1 of the Credit Agreement is hereby amended by
adding the following definition of "Apache Canada" in appropriate alphabetical
order:
"Apache Canada" means Apache Canada Ltd. (formerly known as
DEKALB Energy Canada Ltd.), a corporation organized under the laws of
Alberta, Canada.
B. The definition of "Apache Egypt" appearing in Section 1.1 of
the Credit Agreement is hereby amended in its entirety to the following:
"Apache Egypt" means Apache Oil Egypt, Inc., a Delaware
corporation, and Apache Qarun Corporation LDC, a Cayman Islands
company formed under the Companies Law of the Cayman Islands, British
West Indies.
<PAGE> 3
C. Section 11.4 of the Credit Agreement is hereby amended by
deleting subsections 11.4(i) and 11.4(j) in their entirety and inserting the
following before the period:
" (i) Contingent Obligations of the Company to IFC relating to Apache
Egypt not exceeding $25,000,000 in the aggregate principal amount,
together with interest, fees and expenses related thereto, (j)
Contingent Obligations of DEKALB in respect of the facility described
as item 1 of Part B of Schedule 11.1, and (k) Contingent Obligations
of the Company and any of its Subsidiaries to or in respect of
Producers Energy which when aggregated with the Investments of the
Company and any of its Subsidiaries permitted with respect to
Producers Energy pursuant to subsection 11.12(c) do not exceed
$30,000,000 in the aggregate".
D. Section 11.7 of the Credit Agreement is hereby amended by
deleting subsection 11.7(c) in its entirety and inserting the following before
the semicolon:
" (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 Indebtedness other than Indebtedness incurred under this
Agreement, the other Loan Documents, or the repurchase of any
remarketed notes under the Remarketed Note Program, Indebtedness of
Offshore, Indebtedness evidenced by the DEKALB Notes or Indebtedness
to the IFC in connection with Apache Egypt; 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 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
and B.2 of Schedule 11.1;".
E. Section 11.10 of the Credit Agreement is hereby amended in its
entirety to the following:
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
2
<PAGE> 4
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; provided, however, that,
notwithstanding the foregoing, this section shall not apply to Apache
Canada, Apache Egypt or any of their Subsidiaries or to any
restrictions on the creation, assumption or perfection of any Lien on,
or any transfer or sale of, any of their respective securities.
F. Part B of Schedule 11.1 of the Third Amended and Restated
Credit Agreement is hereby amended to read in its entirety as follows:
Indebtedness of DEKALB
1. A revolving credit facility with a maximum aggregate principal
amount of up to $45 million (U.S.) pursuant to that certain
Credit Agreement, dated as of May 17, 1995, among Apache
Canada Ltd. (formerly known as DEKALB Energy Canada, Ltd.),
various financial institutions and the Bank of Montreal, as
Agent, as may be amended from time to time.
2. An overdraft facility of Apache Canada Ltd. (formerly known as
DEKALB Energy Canada Ltd.) at Royal Bank of Canada not to
exceed $5 million (U.S.) in amount to facilitate check
clearing.
3. 10% Notes of DEKALB due April 15, 1998 (approximately $22.1
million (U.S.) in outstanding principal amount as of March 1,
1995).
4. 9 7/8% Notes of DEKALB due July 15, 2000 (approximately $29.2
million (U.S.) in outstanding principal amount as of March 1,
1995).
II. EFFECTIVENESS. This Fifth Amendment shall become effective as
of the date hereof when the Administrative Agent shall have received
counterparts hereof duly executed by the Company, the Required Lenders, the
Administrative Agent and the Co-Agent (or, in the case of any party as to which
an executed counterpart shall not have been received, telegraphic, telex, or
other written confirmation from such party of execution of a counterpart hereof
by such party).
3
<PAGE> 5
III. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. To induce
the Lenders, the Administrative Agent, the Co-Agent and the Arrangers to enter
into this Fifth Amendment, the Company hereby reaffirms, as of the date hereof,
its representations and warranties in their entirety contained in Article VIII
of the Credit Agreement and in all other documents executed pursuant thereto
(except to the extent such representations and warranties relate solely to an
earlier date) and additionally represents and warrants as follows:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation 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.
(ii) The Company has the corporate power and authority and
legal right to execute and deliver this Fifth Amendment and to perform
its obligations hereunder. The execution and delivery by the Company
of this Fifth Amendment and the performance of its obligations
hereunder have been duly authorized by proper corporate proceedings,
and this Fifth Amendment and the Credit Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except
as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
(iii) No Default or Unmatured Default has occurred and is
continuing as of the date hereof.
(iv) There has been no material adverse change (a) in the
businesses, assets, properties, operations, condition (financial or
otherwise) or results of operations or prospects of the Company and
its Subsidiaries from March 1, 1995, (b) affecting the rights and
remedies of the Lenders under and in connection with this Fifth
Amendment and the Credit Agreement, as amended by this Fifth
Amendment, or (c) in the ability of the Company to perform its
obligations under this Fifth Amendment or the Credit Agreement, as
amended by this Fifth Amendment.
(v) 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
its Subsidiaries which is or could have a Material Adverse Effect.
4
<PAGE> 6
IV. DEFINED TERMS. Except as amended hereby, terms used herein
when defined in the Credit Agreement shall have the same meanings herein unless
the context otherwise requires.
V. REAFFIRMATION OF CREDIT AGREEMENT. This Fifth Amendment shall
be deemed to be an amendment to the Credit Agreement, and the Credit Agreement,
as amended hereby, is hereby ratified, approved and confirmed in each and every
respect. All references to the Credit Agreement herein and in any other
document, instrument, agreement or writing shall hereafter be deemed to refer
to the Credit Agreement as amended hereby.
VI. GOVERNING LAW. THIS FIFTH AMENDMENT 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.
All obligations of the Company and rights of the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers and any other holders of the Notes
expressed herein shall be in addition to and not in limitation of those
provided by applicable law.
VII. SEVERABILITY OF PROVISIONS. Any provision in this Fifth
Amendment 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 this Fifth Amendment are
declared to be severable.
VIII. COUNTERPARTS. This Fifth Amendment 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 Fifth Amendment by
signing any such counterpart.
IX. HEADINGS. Article and section headings in this Fifth
Amendment are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Fifth Amendment.
X. SUCCESSORS AND ASSIGNS. This Fifth Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
XI. NOTICE. THIS WRITTEN FIFTH AMENDMENT TOGETHER WITH THE THIRD
AMENDED AND RESTATED CREDIT AGREEMENT 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 BETWEEN THE PARTIES.
5
<PAGE> 7
IN WITNESS WHEREOF, the Company, the Lenders, the Administrative
Agent, the Co-Agent and the Arrangers have executed this Fifth Amendment as of
the date first above written.
APACHE CORPORATION
By:/s/ Clyde E. McKenzie
------------------------------------
Name: Clyde E. McKenzie
Title: Vice President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually, as Administrative Agent
and as Arranger
By:/s/ Steven P. Capouch
------------------------------------
Name: Steven P. Capouch
Title: Vice President
CHEMICAL BANK, Individually, as
Co-Agent and as Arranger
By:/s/ R. Potter
------------------------------------
Name: Ronald Potter
Title: Managing Director
BANK OF MONTREAL, Individually and as
Lead Manager
By:/s/ Robert Roberts
------------------------------------
Name: Robert L. Roberts
Title: Director, U.S. Corporate Banking
S-1
<PAGE> 8
CIBC INC., Individually and as
Lead Manager
By:/s/ Gary C. Gaskill
--------------------------------
Name: Gary C. Gaskill
Title: Authorized Signatory
NATIONSBANK, Individually and as
Lead Manager
By:/s/ Jo A. Tamalis
--------------------------------
Name: Jo A. Tamalis
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ C. Paige DiMaggio
--------------------------------
Name: C. Paige DiMaggio
Title: Vice President
BANQUE PARIBAS
By:/s/ Charles K. Thompson
--------------------------------
Name: Charles K. Thompson
Title: Group Vice President
By:/s/ David P. Lee
--------------------------------
Name: David P. Lee
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By:/s/ Richard A. Erbert
--------------------------------
Name: Richard A. Erbert
Title: Vice President
S-2
<PAGE> 9
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:/s/ P.W. McNeal
--------------------------------
Name: Philip W. McNeal
Title: Vice President
ABN-AMRO BANK N.V. - HOUSTON AGENCY
By: ABN AMRO North America, Inc.,
as Agent
By:/s/ Michael Oakes
--------------------------------
Name: Michael N. Oakes
Title: Vice President and Director
By:/s/ W. Bryan Chapman
--------------------------------
Name: W. Bryan Chapman
Title: Vice President and Director
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ Michael Kane
--------------------------------
Name: Michael Kane
Title: Managing Director
THE BANK OF NOVA SCOTIA, SAN
FRANCISCO AGENCY
By:/s/ A.S. Norsworthy
--------------------------------
Name: A.S. Norsworthy
Title: Assistant Agent
THE CHASE MANHATTAN BANK, N.A.
By:/s/ Bettylou J. Robert
--------------------------------
Name: Bettylou J. Robert
Title: Vice President
S-3
<PAGE> 10
CITIBANK, N.A.
By:/s/ Arezoo Jafari
--------------------------------
Name: Arezoo Jafari
Title: Assistant Vice President
THE FUJI BANK, LIMITED - HOUSTON
AGENCY
By:/s/ Soichi Yoshida
--------------------------------
Name: Soichi Yoshida
Title: Vice President & Senior
Manager
UNION BANK OF SWITZERLAND, HOUSTON
AGENCY
By:/s/ Evans Swann
--------------------------------
Name: Evans Swann
Title: Managing Director
By:/s/ Kelly Boots
--------------------------------
Name: Kelly Boots
Title: Assistant Treasurer
UNION BANK
By:/s/ Richard P. DeGrey
--------------------------------
Name: Richard P. DeGrey
Title: Vice President
By:
--------------------------------
Name:
Title:
S-4
<PAGE> 11
CHRISTIANIA BANK OG KREDITKASSE
By:/s/ Jahn O. Roising
--------------------------------
Name: Jahn O. Roising
Title: First Vice President
By:/s/ Peter M. Dodge
--------------------------------
Name: Peter M. Dodge
Title: Vice President
COLORADO NATIONAL BANK
By:/s/ Kathryn A. Gaiter
--------------------------------
Name: Kathryn A. Gaiter
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By:/s/ S. Otsubo
--------------------------------
Name: Satoru Otsubo
Title: Joint General Manager
ROYAL BANK OF CANADA, GRAND CAYMAN
(NORTH AMERICAN #1) BRANCH
By:/s/ Linda M. Stephens
--------------------------------
Name: Linda M. Stephens
Title: Manager
S-5
<PAGE> 1
EXHIBIT 10.14
AMENDMENT
TO
APACHE CORPORATION RETIREMENT/401(k) SAVINGS PLAN
Apache Corporation ("Apache") maintains the Apache Corporation
Retirement/401(k) Savings Plan (the "Plan"). Pursuant to section 10.4 of the
Plan, Apache has retained the right to amend the Plan. Apache hereby
exercises that right by amending the Plan as follows.
1. Effective as of May 4, 1995, paragraph 1.13(d)(ii) shall be amended by
inserting the following subparagraph (H), and renumbering existing paragraphs
(H) and (I).
(H) any amounts relating to the granting of a stock
option under the Apache Corporation 1995 Stock
Option Plan, the exercise of such a stock
option, or the sale or deemed sale of any shares
thereby acquired;
2. Effective as of May 17, 1995, Appendix A shall be replaced in its
entirety by the following Appendix A.
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
Apache Energy Resources Corporation January 1, 1994 December 31, 1995
(known as Hadson Energy Resources
Corporation before January 1, 1995)
Apache Energy Limited (known as January 1, 1994 N/A
Hadson Energy Limited before
January 1, 1995)
Apache Canada Ltd. May 17, 1995 N/A
</TABLE>
- - END OF APPENDIX A --
<PAGE> 2
3. Effective as of May 17, 1995, the following Appendix F shall be added
to the Plan.
APPENDIX F
DEKALB ENERGY COMPANY/APACHE CANADA LTD.
Introduction
Through a merger effective as of May 17, 1995, Apache now
holds 100% of the stock of DEKALB Energy Company (which has been
renamed Apache Canada Ltd.). Apache Canada Ltd. has adopted this
Plan, and Apache has approved its adoption, as of May 17, 1995, for
the eligible employees of Apache Canada Ltd.
Capitalized terms in this Appendix have the same meanings as
those given to them in the Plan. The regular terms of the Plan shall
apply to the employees of Apache Canada Ltd., except as provided
below.
Eligibility to Participate
Notwithstanding section 1.14, an employee of Apache Canada
Ltd. shall be a Covered Employee only if (1) he or she is either a
U.S. citizen or a U.S. resident, and (2) he or she was employed by
Apache or another Company immediately before becoming an employee of
Apache Canada Ltd. The provisions of Article II, which discuss when a
Covered Employee may participate in the Plan, shall apply without
modification to Covered Employees employed by Apache Canada Ltd.
Compensation
If the payroll of the Apache Canada Ltd. employee is handled
in the United States, then the definitions of Compensation in section
1.13 shall apply. To the extent that the payroll of the Apache Canada
Ltd. employee is handled outside of the United States, the following
definitions of Compensation shall apply in lieu of the definitions
found in subsections 1.13(a) and 1.13(b):
(a) Code section 415 Compensation. For purposes of
determining the limitation on Annual Additions under section 3.4 and
the minimum contribution under section 12.4 when the Plan is
top-heavy, Compensation shall mean foreign earned income (within the
meaning of Code section 911(b)) paid by the Company or an Affiliated
Entity, but shall not include any Participant Before-Tax Contributions
or any other elective contributions that are not includable in the
Employee's income pursuant to Code sections 125, 402(e)(3), 402(h), or
403(b). 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 foreign earned
income (within the meaning of Code section 911(b)) paid by the Company
or an Affiliated Entity, including elective contributions that are not
includable in the Employee's income pursuant to Code sections 125,
402(e)(3), 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.
<PAGE> 3
-- END OF APPENDIX F --
IN WITNESS WHEREOF, this Amendment has been executed the date set forth below.
APACHE CORPORATION
/s/ Roger B. Rice
---------------------------------------------------
Roger B. Rice
Vice President, Human Resources and Administration
<PAGE> 1
EXHIBIT 10.15
NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF
APACHE CORPORATION
EFFECTIVE NOVEMBER 16, 1989
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
I. Definitions
-----------
1.01 Account 2
1.02 Committee 2
1.03 Company 2
1.04 Company Deferrals 2
1.05 Compensation 2
1.06 Deferred Contributions 3
1.07 Enrollment Agreement 3
1.08 Participant 3
1.09 Plan Year 3
1.10 Trust 3
1.11 Trust Agreement 3
1.12 Trustee 3
1.13 Valuation Date 4
II. Eligibility and Participation
-----------------------------
2.01 Eligibility and Participation 5
2.02 Enrollment 5
2.03 Failure of Eligibility 5
III. Contribution-Deferrals
----------------------
3.01 Participant Deferrals 6
3.02 Company Deferrals 7
3.03 Increase in Contributions During Initial Plan Year 7
IV. Investment of Deferrals and Accounting
--------------------------------------
4.01 Investments 8
V. Distributions
-------------
5.01 Time of Distribution 9
5.02 Method and Amount of Distribution 10
5.03 Beneficiaries 10
5.04 Hardship Distributions 11
</TABLE>
<PAGE> 3
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C> <C>
VI. Administration
--------------
6.01 The Committee -- Plan Administrator 13
6.02 Committee to Administer and Interpret Plan 13
6.03 Organization of Committee 13
6.04 Indemnification 13
6.05 Agent for Process 13
6.06 Determination of Committee Final 14
VII. Trust
-----
7.01 Trust Agreement 15
7.02 Expenses of Trust 15
VIII. Amendment and Termination
-------------------------
8.01 Termination of Plan 16
8.02 Amendment by Company 16
IX. Miscellaneous
-------------
9.01 Funding of Benefits - No Fiduciary Relationship 17
9.02 Right to Terminate Employment 17
9.03 Inalienability of Benefits 17
9.04 Claims Procedure 17
9.05 Disposition of Unclaimed Distributions 18
9.06 Distributions Due Infants or Incompetents 19
9.07 Use and Form of Words 19
9.08 Headings 19
9.09 Governing Law 19
</TABLE>
ii
<PAGE> 4
NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF
APACHE CORPORATION
Apache Corporation (the "Company") hereby establishes a Non-Qualified
Retirement/Savings Plan (the "Plan") effective as of November 16,
1989. The Company previously established the Apache Corporation
401(k) Retirement/Savings Plan (the "Retirement/Savings Plan"). The
Company intends that this Plan shall provide a select group of
management or highly compensated employees of the Company with
deferred retirement benefits in addition to the retirement benefits
provided under the Retirement/Savings Plan, in cases where benefits
under the Retirement/Savings Plan may be limited by Section 415 of the
Internal Revenue Code of 1986, as amended (the "Code"), or in cases
where participation in the Retirement/Savings Plan will otherwise be
adversely affected by provisions of the Code, in consideration of the
valuable services provided by such employees to the Company and to
induce such employees to remain in the employ of the Company or its
affiliates. The Company intends that the Plan shall not be treated as
a "funded" plan for purposes of either the Internal Revenue Code of
1986 (the "Code") or the-Employee Retirement Income Security Act of
1974, as amended ("ERISA").
<PAGE> 5
ARTICLE I
DEFINITIONS
Defined terms used in this Plan shall have the meanings set forth
below or the same meanings as in the Retirement/Savings Plan, as the
case may be:
1.01 Account
"Account" means the account maintained for each Participant to which
shall be credited all Deferred Contributions made by a Participant,
all Company Deferrals on behalf of a Participant, and all adjustments
thereto.
1.02 Committee
"Committee" means the administrative committee provided for in Section
6.01.
1.03 Company
"Company" means (i) Apache Corporation, and (ii) any other corporation
or unincorporated trade or business which, with approval of the Board
of Directors of Apache Corporation, has adopted the Plan and is a
member of the same controlled group of corporations or the same group
of trades or businesses under common control (within the meaning of
Sections 414(b) and 414(c) of the Code) as Apache Corporation, or an
affiliated service group (as defined in Section 414(m) of the Code)
which includes Apache Corporation or any other entity required to be
aggregated with Apache Corporation pursuant to regulations under
Section 414(o) of the Code.
1.04 Company Deferrals
"Company Deferrals" means the amount of matching Company Deferrals
allocated to a Participant's Account pursuant to Section 3.02.
1.05 Compensation
"Compensation" means regular compensation paid from the Company
including overtime pay and bonuses, but excluding commissions,
credits, other contingent compensation, Company Deferrals, Company
contributions under the Retirement/ Savings Plan and contributions to
any other fringe benefit plan. Compensation shall be the amount
determined prior to any salary reduction described in Section 3.01 of
this Plan, Section 3.01 of the Retirement/Savings Plan and under
Section 125 of the Code.
2
<PAGE> 6
1.06 Deferred Contributions
"Deferred Contributions" means the amounts of a Participant's
Compensation which he elects to defer and have allocated to his
Account pursuant to Section 3.01.
1.07 Enrollment Agreement
"Enrollment Agreement" means an application for participation in the
Plan, execution of which by an eligible employee is required under
Article II for Plan participation.
1.08 Participant
"Participant" means any eligible employee selected to participate in
this Plan who has completed an Enrollment Agreement and is entitled to
the distribution of benefits hereunder.
1.09 Plan Year
"Plan Year" means the period during which the Plan records are kept.
The initial Plan Year shall be a year commencing November 16, 1989 and
ending December 31, 1989. Subsequent Plan Years shall be the calendar
year.
1.10 Trust
"Trust" means the trust or trusts, if any, created by the Company to
provide funding for the distribution of benefits in accordance with
the provisions of the Plan. The assets of any such Trust shall remain
subject to the claims of the Company's general creditors in the event
of the Company's insolvency.
1.11 Trust Agreement
"Trust Agreement" means the written instrument pursuant to which each
separate Trust is created.
1.12 Trustee
"Trustee" means one or more banks, trust companies or insurance
companies designated by the Company to hold and invest the Trust Fund
and to pay benefits and expenses as authorized by the Committee in
accordance with the terms and provisions of the Trust Agreement.
3
<PAGE> 7
1.13 Valuation Date
"Valuation Date" means the last day of the Plan Year or any other date
specified by the Committee for the valuation of the Participants'
Accounts.
4
<PAGE> 8
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 Eligibility and Participation
The Committee shall from time to time in its sole discretion select
those employees of the Company who are eligible to participate in the
Plan from those employees who are (i) eligible to participate in the
Retirement/Savings Plan; and (ii) are among a select group of
management or highly compensated employees.
2.02 Enrollment
Employees who have been selected by the Committee to participate in
the Plan shall enroll in the Plan by (i) entering into an Enrollment
Agreement with the Company, which shall contain the Participant's
beneficiary designation under Section 5.03 and such other terms as the
Company deems appropriate and necessary, and (ii) completing such
other forms and furnishing such other information as the Company may
reasonably require.
2.03 Failure of Eligibility
No Deferred Contributions or Company Deferrals shall be added to a
Participant's Account after the Participant ceases to meet the
eligibility criteria as determined by the Committee for participation
herein. The determination of the Committee with respect to the
termination of participation in the Plan shall be final and binding on
all parties affected thereby. Any benefits accrued hereunder,
however, at the time of such change, shall remain distributable in
accordance with the provisions of the Plan.
5
<PAGE> 9
ARTICLE III
CONTRIBUTION DEFERRALS
3.01 Participant Deferrals
(a) A Participant may elect to defer a portion of his Compensation
by filing an Enrollment Form with the Committee. The
Enrollment Form must be filed on or before the first day of
the Plan Year in which the deferral is to be made, unless the
Participant was not eligible to participate in the Plan on
such date, in which case the Enrollment Form must be filed
within 30 days after the date on which such Participant became
eligible to participate.
(b) The amount of a Participant's Deferred Contributions
made pursuant to the Plan shall equal the amount of
Participant Deferrals which would have been credited to the
Participant's Deferral Account pursuant to Section 3.01(a) of
the Retirement/Savings Plan but could not be so credited due
to restrictions imposed by the Code, including without
limitation restrictions under Sections 401(a)(17), 401(k)(3),
402(g) and 415(c). The amount of a Participant's Deferred
Contribution shall be determined by reference to the
Participant's elected Deferral Percentage under the
Retirement/Savings Plan as of the first day of the Plan Year
or, if the Participant was not eligible to participate in this
Plan on such date, on the first day on which the Participant
was eligible to participate in this Plan, without regard to
any change in the Participant's Deferral Percentage under the
Retirement/Savings Plan which subsequently becomes effective
in such Plan Year. An election to participate in this Plan
for any Plan Year shall be irrevocable; provided, however,
that a Participant's Deferred Contributions shall be suspended
for a period of twelve (12) months following the date the
Participant receives a hardship withdrawal pursuant to Section
5.01 of the Retirement/Savings Plan or Section 5.04 of the
Plan. Notwithstanding anything herein to the contrary, a
Participant shall not be permitted to defer Compensation which
is earned or payable prior to the execution and delivery of
the Participant's Enrollment Agreement.
(c) Deferred Contributions shall be deducted through payroll
withholding from the Participant's regular compensation
payable by the Company and shall be credited to the
Participant's Account on or about the date or dates such
amount would have been credited to his account in the
Retirement/Savings Plan, if such amounts had in fact been
credited to his account in the Retirement/Savings Plan.
6
<PAGE> 10
3.02 Company Deferrals
The Company shall cause to be credited to a Participant's Account for
each Plan Year an amount equal to the difference between (i) the
Company contributions (including both automatic and matching
contributions) that would have been made on the Participant's behalf
under Section 3.03 of the Retirement/Savings Plan for such Plan Year
if the Participant's contributions under the Retirement/Savings Plan
for such Plan Year had included the Deferred Contributions to this
Plan, without taking into account restrictions imposed by the Code,
including without limitation restrictions under Sections 401(a)(17),
401(k)(3), 401(m), 402(g) and 415(c); and (ii) Company contributions
actually made on the Participant's behalf under Section 3.03 of the
Retirement/Savings Plan. All such amounts shall be credited to the
Participant's Account on or about the date or dates such amounts would
have been credited to his account in the Retirement/Savings Plan if
such amounts had in fact been credited to his account in the
Retirement/Savings Plan.
3.03 Increase in Contributions During Initial Plan Year
For the initial Plan Year commencing November 16, 1989 and ending
December 31, 1989 only, the amount of a Participant's Deferred
Contributions and Company Deferrals shall include an amount equal to
the income that would have been earned on Deferred Contributions and
Company Deferrals had this Plan been in effect on January 1, 1989 and
had the Deferred Contributions been invested in a money market fund
from the date the Deferred Contributions would have been made.
7
<PAGE> 11
ARTICLE IV
INVESTMENT OF DEFERRALS AND ACCOUNTING
4.01 Investments
All amounts credited to a Participant's Account, together with the
earnings thereon, shall be credited with income and loss as if
invested in one or more investment alternatives selected by the
Committee. At such times and under such procedures as the Committee
shall designate, each Participant shall have the right to elect among
investment alternatives made available by the Committee, including
without limitation the right to transfer all or a portion of the funds
in the Participant's Account among such available investment
alternatives. The Committee shall give written notice to the
Participants of the investment alternatives, if any, available to them
for election. The Committee may change, add to or subtract from the
investment alternatives available at any time. Nothing contained in
this Section shall be construed to give any Participant any power or
control to make investment directions or otherwise influence in any
manner the investment and reinvestment of assets contained within any
investment alternative, such control being at all times retained in
the full discretion of the Committee. Nothing contained in this
Section shall be construed to require the Committee to make investment
choices available to Participants, and in lieu thereof the investment
alternative may be selected by the Committee. Cash may be deemed to
remain uninvested for a reasonable period of time following payroll
withdrawal, as determined from time to time by the Committee, without
interest. Nothing contained in this Section shall be construed to
require the Company or the Committee to fund any Participant's
Account, and the investment alternatives discussed herein may be used
solely as a means to establish income and loss without the actual
funding of the Participants' Accounts.
8
<PAGE> 12
ARTICLE V
DISTRIBUTIONS
5.01 Time of Distribution
(a) Retirement Benefits: The retirement benefit payable under the
Plan in the case of a Participant whose employment with the
Company is terminated on or after his Normal Retirement Age
shall be equal to one hundred percent (100%) of the value of
his Accounts on the Valuation Date immediately following his
termination of employment.
(b) Disability Benefits: The disability benefit payable under the
Plan in the case of a Participant whose employment with the
Company is terminated because he is Permanently and Totally
Disabled shall be equal to one hundred percent (100%) of the
value of his Accounts on the Valuation Date immediately
following the date on which he is determined to be Permanently
and Totally Disabled.
(c) Death Benefits: The death benefit payable to a beneficiary
under the Plan in the case of a Participant whose employment
with the Company is terminated due to his death shall be equal
to one hundred percent (100%) of the value of his Accounts on
the Valuation Date immediately following the Participant's
death.
(d) Benefits Upon Termination of Employment: The benefit payable
under the Plan in the case of a Participant whose employment
with the Company is terminated for any reason other than
retirement, Permanent and Total Disability or death shall be
equal to:
(i) the value of his Deferred Contributions, as adjusted,
as of the Valuation Date immediately following his
termination of employment; plus
(ii) the value of the vested portion of his Company
Deferrals, as adjusted, as of the Valuation Date
immediately following his termination of employment,
determined as follows:
9
<PAGE> 13
Years of Completed Service
at Date of Termination Vested Portion
---------------------- --------------
Less than 1 0%
1 20
2 40
3 60
4 80
5 and over 100
For purposes of the preceding table, years of completed
service at date of termination shall be determined in the same
manner as in the Retirement/Savings Plan.
(e) Notwithstanding Section 5.01(d), the value of the Company
Deferrals of all Participants shall be fully vested as of the
effective date of a "Change of Control," as defined herein, and
at all times thereafter. For purposes of this Section, 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 Corporation's outstanding
voting securities; provided that a Change of Control shall not
occur if, prior to the acquisition of more than 20% of the
voting securities, Apache Corporation'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.
5.02 Method and Amount of Distribution
Amounts distributable pursuant to Section 5.01 shall be distributed in
a single sum cash payment. Payment shall be made as soon as
practicable, but in no case later than sixty (60) days following the
end of the Plan Year in which the Participant terminates employment.
5.03 Beneficiaries
Each Participant shall designate one or more persons, trusts or other
entities as his beneficiary (the "Beneficiary") to receive any amounts
distributable hereunder at the time of the Participant's death. Such
designation shall be made by the Participant in his Enrollment
Agreement and may be changed from time to time by the Participant. In
the absence of an effective beneficiary designation as to part or all
of a Participant's interest in the Plan, such amount shall be
distributed to the personal representative of the Participant's
estate.
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<PAGE> 14
5.04 Hardship Distributions
A Participant may request, and the Committee may approve or disapprove
in its sole discretion, a withdrawal of part or all of the vested
portion of the Participant's Account, subject to the following:
(a) The Participant must file a written request for withdrawal
with the Committee at least fifteen (15) days in advance,
along with such information as the Committee may request for
this purpose. The Committee shall review the information
filed as soon as practicable after it is received and shall
promptly inform the Participant of the results of the
Committee's determination.
(b) Such withdrawal may be made only for the purpose of meeting an
unforeseeable emergency, which shall be defined as a severe
financial hardship to the Participant resulting from a sudden
and unexpected illness or accident of the Participant or of a
dependent (as defined in Section 152(a) of the Code) of the
Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control
of the Participant, and only if and to the extent other
resources which could alleviate such need are not reasonably
available to the Participant.
(c) An unforeseeable emergency shall be determined to exist by the
Committee based on all relevant facts and circumstances.
(d) If the Committee determines that a hardship exists, the
Participant must represent to the Committee by written
certification that the need cannot be relieved through
reimbursement or compensation by insurance or otherwise; by
liquidation of the Participant's assets, to the extent that
liquidation of such assets would not itself cause severe
financial hardship; or by cessation of deferrals under the
Plan and any other plans maintained by the Company.
(e) If the Committee is satisfied that the foregoing requirements
are satisfied and determines, in its sole discretion, to
permit a hardship withdrawal, it will determine the amount of
hardship withdrawal necessary to satisfy the need of the
Participant and will distribute such amount to the
Participant.
11
<PAGE> 15
(f) The Participant's deferrals shall be suspended for twelve (12)
months following the date the Participant receives a hardship
withdrawal.
12
<PAGE> 16
ARTICLE VI
ADMINISTRATION
6.01 The Committee -- Plan Administrator
The Committee members for the Plan shall be the same committee members
as for the Retirement/Savings Plan.
6.02 Committee to Administer and Interpret Plan
The Committee shall administer the Plan and shall have all powers
necessary for that purpose, including, but not by way of limitation,
power to interpret the Plan, to determine the eligibility, status and
rights of all persons under the Plan and, in general, to decide any
dispute. The Committee shall direct the Company, the Trustee, or
both, as the case may be, concerning distributions in accordance with
the provisions of the Plan. The Committee shall maintain all Plan
records except records of any Trust.
6.03 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.
6.04 Indemnification
The Committee and all of the agents and representatives of the
Committee shall be indemnified and saved harmless by the Company
against any claims, and the expenses of defending against such claims,
resulting from any action or conduct relating to the administration of
the Plan, except claims judicially determined to be attributable to
gross negligence or willful misconduct.
6.05 Agent for Process
The Committee shall appoint an agent of the Plan for service of all
process.
13
<PAGE> 17
6.06 Determination of Committee Final
The decisions made by the Committee shall be final and conclusive on
all persons.
14
<PAGE> 18
ARTICLE VII
TRUST
7.01 Trust Agreement
The Company may, but shall not be required to, adopt a separate Trust
Agreement for the holding, investment and administration of the funds
contributed to Accounts under the Plan. The Trustee shall maintain
and allocate assets to a separate account for each Participant under
the Plan. The assets of any such Trust shall remain subject to the
claims of the Company's general creditors in the event of the
Company's insolvency.
7.02 Expenses of Trust
The parties expect that any Trust created pursuant to Section 7.01
will be treated as a "grantor" trust for federal and state income tax
purposes and that, as a consequence, such Trust will not be subject to
income tax with respect to its income. However, if the Trust should
be taxable, the Trustee shall pay all such taxes out of the Trust.
All expenses of administering any such Trust shall be a charge against
and shall be paid from the assets of such Trust.
15
<PAGE> 19
ARTICLE VIII
AMENDMENT AND TERMINATION
8.01 Termination of Plan
The Company expects to continue the Plan indefinitely, but the Company
may terminate the Plan at any time.
8.02 Amendment by Company
The Company may amend the Plan at any time and from time to time,
retroactively or otherwise, but no amendment shall reduce any benefit
that has accrued on the effective date of the amendment.
16
<PAGE> 20
ARTICLE IX
MISCELLANEOUS
9.01 Funding of Benefits -- No Fiduciary Relationship
All benefits payable under the Plan shall be distributed in cash or in
kind, in the discretion of the Committee. Benefits shall be paid
either out of the Trust or, if no Trust is in existence or if the
assets in the Trust are insufficient to provide fully for such
benefits, then such benefits shall be distributed by the Company out
of its general assets. Nothing contained in the Plan shall be deemed
to create any fiduciary relationship between the Company and the
Participants. Notwithstanding anything herein to the contrary, to the
extent that any person acquires a right to receive benefits under the
Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company, except to the extent provided in the
Trust Agreement, if any.
9.02 Right to Terminate Employment
The Company may terminate the employment of any Participant as freely
and with the same effect as if the Plan were not in existence.
9.03 Inalienability of Benefits
No Participant shall have the right to assign, transfer, hypothecate,
encumber or anticipate his interest in any benefits under the Plan,
nor shall the benefits under the Plan be subject to any legal process
to levy upon or attach the benefits for payment for any claim against
the Participant or his spouse. If, notwithstanding the foregoing
provision, any Participant's benefits are garnished or attached by the
order of any court, the Company may bring an action for declaratory
judgment in a court of competent jurisdiction to determine the proper
recipient of the benefits to be distributed pursuant to the Plan.
During the pendency of the action, any benefits that become
distributable shall be paid into the court as they become
distributable, to be distributed by the court to the recipient it
deems proper at the conclusion of the action.
9.04 Claims Procedure
(a) All claims shall be filed in writing by the Participant, his
spouse or the authorized representative of the claimant, by
completing such procedures as the Committee shall require.
Such procedures shall be reasonable and may
17
<PAGE> 21
include the completion of forms and the submission of
documents and additional information.
(b) If a claim is denied, 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 Participant or beneficiary and the extension shall not
exceed 90 days.
(c) The Committee shall provide adequate notice, in writing, to
any claimant whose claim has been denied, setting 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
his claims and an explanation of why such material or
information is necessary, all written in a manner calculated
to be understood by the claimant. Such notice shall include
appropriate information as to the steps to be taken if the
claimant wishes to submit his claim for review. The claimant
or the claimant's authorized representative may request such
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. A decision on review shall be made not later
than 60 days after the Committee's receipt of the request for
review. 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 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.
9.05 Disposition of Unclaimed Distributions
Each Participant must file with the Company from time to time in
writing his post office address and each change of post office
address. Any communication, statement or notice addressed to a
Participant at his last post office address on file with the Company,
or if no address is filed with the Company, then at his last post
office address as shown on the Company's records, will be binding on
the Participant and his spouse for all purposes of the Plan. The
Company shall not be required to search for or locate a Participant or
his spouse.
18
<PAGE> 22
9.06 Distributions Due Infants or Incompetents
If any person entitled to a distribution under the Plan is an infant,
or if the Committee determines that any such person is incompetent by
reason of physical or mental disability, whether or not legally
adjudicated an incompetent, the Committee shall have the power to
cause the distributions becoming due to such person to be made to
another for his or her benefit, without responsibility of the
Committee to see to the application of such distributions.
Distributions made pursuant to such power shall operate as a complete
discharge of the Company, the Trustee, if any, and the Committee.
9.07 Use and Form of Words
When any words are used herein in the masculine gender, they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and vice versa. Whenever any words
are used herein in the singular form, they shall be construed as
though they were also used in the plural form in all cases where they
would so apply, and vice versa.
9.08 Headings
Headings of Articles and Sections are inserted solely for convenience
and reference, and constitute no part of the Plan.
9.09 Governing Law
The Plan shall be governed by and construed in accordance with the
laws of the State of Colorado, without regard to its conflicts of laws
principles.
APACHE CORPORATION
By: /s/ Raymond Plank
----------------------------------------------
Raymond Plank
Title: Chairman of the Board
-------------------------------------------
Date: November 16, 1989
--------------------------------------------
19
<PAGE> 1
EXHIBIT 10.16
FIRST AMENDMENT
TO
NON-QUALIFIED RETIREMENT/SAVINGS PLAN
OF APACHE CORPORATION
RECITALS
Effective as of November 16, 1989, Apache Corporation, a Delaware
corporation, established the Non-Qualified Retirement/Savings Plan of Apache
Corporation (the "Plan"). Under Section 8.02 of the Plan, Apache Corporation
reserved the right and power to amend the Plan at any time and from time to
time. Pursuant to that power, the Plan is hereby amended, effective as of the
dates set forth below, as follows:
AMENDMENTS
1. Effective as of January 1, 1995, the second sentence of the Preamble
on page 1 shall be replaced in its entirety by the following:
"The Company previously established the Apache Corporation
Retirement/401(k) Savings Plan which was known as the Apache
Corporation 401(k) Retirement/Savings Plan until January 1, 1995 (the
"Retirement/Savings Plan")."
2. Effective as of November 16, 1989, Section 1.04 shall be replaced in
its entirety by the following:
"1.04 Company Deferrals
"Company Deferrals" means the allocations to a Participant's
Account made pursuant to Section 3.02."
3. Effective as of November 16, 1989 (except for Section 1.05(b)(ix)),
Section 1.05 shall be replaced in its entirety by the following:
"1.05 Compensation.
"Compensation" shall generally mean regular compensation paid by the
Company.
(a) Specifically, Compensation shall include:
(i) regular salary or wages,
(ii) overtime pay,
(iii) bonuses,
1
<PAGE> 2
(iv) salary reductions pursuant to the
Retirement/Savings Plan,
(v) salary reductions that are excludable from an
Employee's gross income pursuant to Code
section 125, and
(vi) amounts contributed as salary deferrals to
this Plan.
(b) Compensation shall exclude:
(i) commissions,
(ii) severance pay,
(iii) moving expenses,
(iv) any gross-up of moving expenses to account
for increased income taxes,
(v) foreign service premiums paid as an
inducement to work outside of the United
States,
(vi) Company contributions under the
Retirement/Savings Plan,
(vii) other contingent compensation,
(viii) contributions to any other fringe benefit
plan (including, but not limited to,
overriding royalty payments or any other
exploration-related payments), and
(ix) effective January 1, 1991, bonuses paid as an
inducement to enter the employment of the
Company.
Compensation shall include only amounts actually paid to the
Participant during that portion of a Plan Year while the Participant
is eligible to participate in this Plan."
4. Effective as of November 16, 1989, Section 3.01(b) shall be replaced
in its entirety by the following:
"(b) The amount of a Participant's Deferred Contributions made
pursuant to the Plan shall equal the amount of Participant
Before-Tax Contributions that would have been credited to the
Participant's Before-Tax Contributions Account pursuant to
Section 3.2 of the Retirement/Savings Plan but could not be so
credited due to restrictions imposed by the Code, including
without limitation restrictions under Section 401(a)(17),
401(k)(3), 401(m), 402(g),
2
<PAGE> 3
and 415(c). The amount of a Participant's Deferred
Contribution shall be determined by reference to the
Participant's elected Before-Tax Contribution percentage under
the Retirement/Savings Plan as of the first day of the Plan
Year or, if the Participant was not eligible to participate in
this Plan on such date, as of the first day on which the
Participant is eligible to participate in this Plan, without
regard to any change in the Participant's Before-Tax
Contribution percentage under the Retirement/Savings Plan
which subsequently becomes effective in such Plan Year. An
election to participate in this Plan for any Plan Year shall
be irrevocable; provided, however, that a Participant's
Deferred Contributions shall be suspended as specified in
Section 5.04 following a hardship withdrawal from this Plan
and shall also be suspended, for the number of months required
by Section 7.1 of the Retirement/Savings Plan, following a
hardship withdrawal from that plan. Notwithstanding anything
herein to the contrary, a Participant shall not be permitted
to defer compensation which is earned or payable prior to the
execution and delivery of the Participant's enrollment
agreement."
5. Effective as of November 16, 1989, Section 3.02 shall be amended by
changing both occurrences of "Section 3.03 of the Retirement/Savings Plan" to
"Section 3.1 of the Retirement/Savings Plan."
6. Effective as of July 1, 1992, the following new subsection shall be
added to the end of Section 5.01:
"(f) All Participants in the Plan who are employed by the Company
on July 1, 1992 shall become 100% vested with respect to all
Company Deferrals made to the Plan prior to or as of July 1,
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 account and a new
account shall be established for all Company Deferrals made
with respect to such Participant subsequent to July 1, 1992.
At such time as any such Participant becomes 100% vested in
accordance with the rules of subsection (d) above, the
Participant's two separate accounts shall be merged into one
account."
7. Effective as of January 1, 1992, Section 5.04(f) shall be replaced in
its entirety by the following:
"(f) The Participant's deferrals shall be suspended for six (6)
months following the date of his hardship withdrawal from this
Plan. If a Participant makes a hardship withdrawal from this
Plan and also makes a hardship withdrawal from the
Retirement/Savings Plan, the suspension period under this Plan
shall run concurrently with the suspension period under the
Retirement/Savings Plan, if any, and the suspension period
under this Plan shall be the longer of the suspension period
provided under the Retirement/Savings Plan or the 6-month
suspension provided by this Plan."
3
<PAGE> 4
8. Effective as of January 1, 1992, the first sentence of Section 6.02
shall be replaced by the following:
"The Committee shall administer the Plan and shall have all discretion
and powers necessary for that purpose, including, but not by way of
limitation, full discretion and power to interpret the Plan, to
determine the eligibility, status and rights of all persons under the
Plan and, in general, to decide any dispute."
9. Effective as of the date this amendment is executed, the following
paragraph shall be added to the end of Section 8.02:
"Each amendment shall be in writing. Each amendment shall be approved
by Apache Corporation's board of directors or by an officer of Apache
Corporation who is authorized by Apache Corporation's board of
directors to amend the Plan. Each amendment shall be executed by an
officer of Apache Corporation to whom Apache Corporation's board of
directors has delegated the authority to execute the amendment."
10. Effective as of the date this amendment is executed, Section 9.09
shall be replaced in its entirety by the following:
"9.09 Governing Law.
The Plan shall be construed in accordance with ERISA, the
Code, and, to the extent applicable, the laws of the State of Texas,
excluding any conflicts-of-law provisions."
IN WITNESS WHEREOF, this First Amendment has been executed this 24th day of
October, 1995.
APACHE CORPORATION
/s/ Roger B. Rice
---------------------------------------------------
Roger B. Rice
Vice President, Human Resources and Administration
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EXHIBIT 10.19
APACHE CORPORATION
1990 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED FEBRUARY 9, 1996)
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TABLE OF CONTENTS
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PAGE
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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 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Shareholder Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8 - Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Limitation on Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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8.3 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9 - Rights of Employees; Participants . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Nontransferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 10 - General Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . 13
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 14 - Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.1 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.2 Federal Securities Law Requirements . . . . . . . . . . . . . . . . . . . . . . 14
14.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 15 - Duration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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APACHE CORPORATION
1990 STOCK INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 Establishment. Apache Corporation, a Delaware corporation
(hereinafter referred to, together with its Affiliated Corporations (as defined
in subsection 2.1(a)) as the "Company" except where the context otherwise
requires), hereby establishes the Apache Corporation 1990 Stock Incentive 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 shareholder value,
so that the income of the key management employees is more closely aligned with
the income of the Company's shareholders. 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 September 19, 1990. 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 shareholder approval is not necessary.
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) of the Internal
Revenue Code.
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(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means a committee consisting of members of the
Board who are 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 Rule 16b-3 or any successor rule promulgated under the Securities
Exchange Act of 1934 (the "1934 Act"). Members of the Committee shall be
appointed from time to time by the Board, shall serve at the pleasure of the
Board and may resign at any time upon written notice to the Board.
(d) "Effective Date" means the effective date of the Plan,
September 19, 1990.
(e) "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.
(f) "Fair Market Value" means the closing price of the Stock on
the composite tape on 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.
(g) "Internal Revenue Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
(h) "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 422A of
the Internal Revenue Code.
(i) "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).
(j) "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.
(k) "Stock" means the $1.25 par value Common Stock of the Company.
2.2 Gender and Number. 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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SECTION 3
PLAN ADMINISTRATION
The Plan shall also 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 and 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.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. Two Million Fifty Thousand (2,050,000) 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 by the shareholders of
the Company if, in the opinion of counsel for the Company, such shareholder
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 treasury Stock, 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 or for any reason is terminated unexercised, and any
shares of Stock that for any
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other reason are not issued to an Eligible Employee 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 in 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, 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 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
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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 of other securities, the
Option Price shall be increased by the amount of the price that is payable by
the Participant for such Stock 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% 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 9 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 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
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notice to the Participants, provide that all unexercised Options must be
exercised within a specified number of days of the date of such notice or they
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
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, a Participant may be granted one or more Options.
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).
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 "Option
Holder"), 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.
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(a) Number of Shares. Each stock option agreement shall state
that it covers a specified number of shares of the 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 Option Holder (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 and subsection 7.2(d)(iv) hereof, each Option granted under
the Plan shall become exercisable in increments such that 25% 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% increment shall
become exercisable only if the Option Holder has been continuously employed by
the Company from the date the Option is granted through the date on which each
such additional 25% 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 Option Holder:
(i) If the employment of the Option Holder 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) (i) shall be limited to determining the consequences of a
termination and that nothing in this subsection 7.2(d) (i) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any employee.
(ii) If the Option Holder retires from employment by the
Company or its affiliates on or after attaining age 65, the Option may be
exercised by the Option Holder within 36 months following his or her retirement
(provided that such exercise must occur within the Option Period), but not
thereafter. In the event of the Option Holder's death during such 36-month
period, each Option may be exercised by those entitled to do so in the manner
referred to in (iv) below. 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 Option Holder's retirement.
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(iii) If the Option Holder becomes disabled (as determined
pursuant to the Company's Long-Term Disability Plan), during the Option Period
while still employed, or within the three-month period referred to in (v)
below, or within the 36-month period referred to in (ii) above, the Option may
be exercised by the Option Holder or by his or her guardian or legal
representative, within twelve months following the Option Holder's 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 the event of the Option Holder's death during such twelve-month
period, each Option may be exercised by those entitled to do so in the manner
referred to in (iv) below. 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 Option Holder's disability.
(iv) In the event of the Option Holder's death while still
employed by the Company, each Option of the deceased Option Holder may be
exercised by those entitled to do so under the Option Holder's will or under
the laws of descent and distribution within twelve months following the Option
Holder's death (provided that in any event such exercise must occur within the
Option Period), but not thereafter, as to all shares of Stock which are subject
to such Option, including each 25% increment of the Option, if any, which has
not yet become exercisable at the time of the Option Holder's death. In the
event of the Option Holder's death within the 36-month period referred to in
(ii) above or within the twelve-month period referred to in (iii) above, each
Option of the deceased Option Holder that is exercisable at the time of death
may be exercised by those entitled to do so under the Option Holder's will or
under the laws of descent and distribution within twelve months following the
Option Holder's death or within the 36-month period referred to in (ii), if
applicable and if longer (provided that in any event such exercise must occur
within the Option Period). The provisions of this paragraph (iv) of subsection
7.2(d) shall be applicable to each Stock Option Agreement as if set forth
therein word for word. Each Stock Option Agreement executed by the Company
prior to the adoption of this provision shall be deemed amended to include the
provisions of this paragraph and all Options granted pursuant to such Stock
Option Agreements shall be exercisable as provided herein.
(v) If the employment of the Option Holder by the Company is
terminated (which for this purpose means that the Option Holder is no longer
employed by the Company or by an Affiliated Corporation) within the Option
Period for any reason other than cause, retirement on or after attaining age
65, disability or the Option Holder's death, the Option may be exercised by the
Option Holder 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 employment.
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(e) Transferability. Each stock option agreement shall provide
that the Option granted therein is not transferable by the Option Holder except
by will or pursuant to the laws of descent and distribution, and that such
Option is exercisable during the Option Holder's lifetime only by him or her,
or in the event of disability or incapacity, by his or her guardian or legal
representative.
(f) Agreement to Continue in Employment. Each stock option
agreement shall contain the Option Holder'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 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 Corporate
Secretary of the Company of written notice specifying the number of shares 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 Option (or portion thereof) which is being exercised and the
number of shares with respect to which the Option is being exercised. The
exercise of the Stock Option shall be deemed effective upon receipt of such
notice by the Corporate Secretary and payment to the Company. If requested by
the Company, such notice shall contain the Option Holder'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 purchase price of the Stock 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 Option Holder. If certificates representing
Stock are used to pay all or part of the exercise price, separate certificates
for the same number of shares of Stock shall be issued by the Company and
delivered to the Option Holder representing each certificate used to pay the
Option Price, and an additional certificate shall be issued by the Company and
delivered to the Option Holder representing the additional shares, in excess of
the Option Price, to which the Option Holder is entitled as a result of the
exercise of the Option.
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(ii) the exercise price shall be paid by any of the following
methods or any combination of the following methods:
(A) in cash;
(B) by certified or cashier's check payable to the
order of the Company;
(C) by delivery to the Company of certificates
representing the number of shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase 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 Option
Holder for such minimum period of time as may be 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 purchase 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 Option Holder
necessary to pay the exercise 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) Withholding. Each stock option agreement shall provide that,
upon exercise of the Option, the Option Holder shall make appropriate
arrangements with the Company to provide for the Amount of additional
withholding required by Sections 3102 and 3402 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.
(j) Adjustment of Options. Subject to the limitations contained
in Sections 7 and 12, the Committee may make any adjustment in the exercise
price, the number of shares subject to, or the terms of an outstanding Option
and a subsequent granting of an Option by amendment or by substitution of an
outstanding Option. Such amendment, substitution, or regrant may result in
terms and conditions (including exercise price, number of shares covered,
vesting schedule or exercise 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
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<PAGE> 14
Participant. If such action is effected by amendment, the effective date of
such amendment will be the date of the original grant.
7.3 Shareholder Privileges. No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to which
there is a record date preceding the date such Option Holder becomes the holder
of record of such Stock, except as provided in Section 4.
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, then the Committee may, in its sole discretion, without
obtaining shareholder approval, to the extent permitted in Section 12, take any
or all of the following actions: (a) accelerate the exercise dates of any
outstanding Options or make all such Options fully vested and exercisable; (b)
grant a cash bonus award to any Option Holder in an amount necessary to pay the
exercise price of all or any portion of the Options then held by such Option
Holder; (c) pay cash to any or all Option Holders in exchange for the
cancellation of their outstanding Options in an amount equal to the difference
between the exercise 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 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 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 which
constitute a change in control within the meaning of that Plan.
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<PAGE> 15
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 compensation of the Participant from the rate 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, 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
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 any person to
whom an Option is granted, as a condition of exercising such 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.
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<PAGE> 16
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 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 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 or qualification.
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 employee 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 shareholders
if shareholder 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 shareholder approval is otherwise necessary
or desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options theretofore granted under the Plan, without the
consent of the Participant holding such Options.
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.
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<PAGE> 17
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 electing to transfer
to the Company, or to have the Company withhold from shares otherwise issuable
to the Participant, 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
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 date that the amount of tax to be withheld is to be
determined (the "Tax Date"). Any such elections by Participants to have shares
of Stock withheld for this purpose will be subject to the following
restrictions:
(a) All elections must be made prior to the Tax 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 of the 1934 Act ("Section 16"), the
Participant must satisfy the requirements of such Section 16 and any applicable
Rules 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 Law 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 promulgated under the 1934 Act, to qualify the Option for any
exception from the provisions of Section 16(b) of the 1934 Act available under
that 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 agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Colorado.
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SECTION 15
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board of
Directors, 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 September 18, 1995. Options outstanding at the time of
the Plan termination may continue to be exercised in accordance with their
terms.
Dated: February 9, 1996
APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper By: /s/ Roger B. Rice
- -------------------------- ------------------------
Cheri L. Peper Roger B. Rice
Corporate Secretary Vice President
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<PAGE> 1
EXHIBIT 10.20
APACHE CORPORATION
1995 STOCK OPTION PLAN
(AS AMENDED AND RESTATED FEBRUARY 9, 1996)
<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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3 - Plan Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4 - Stock Subject to the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6 - Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7 - Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Grant of Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Stockholder Privileges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8 - Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Limitation on Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
8.3 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9 - Rights of Employees; Participants . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Nontransferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 10 - General Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.1 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11 - Other Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 12 - Plan Amendment, Modification and Termination . . . . . . . . . . . . . . . . . . . . 14
Section 13 - Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Withholding Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Withholding With Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 14 - Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.2 Federal Securities Laws Requirements . . . . . . . . . . . . . . . . . . . . . . 15
14.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 15 - Duration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ii
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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
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<PAGE> 5
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.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Stock Option Plan 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
<PAGE> 6
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.
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.
3
<PAGE> 7
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 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
4
<PAGE> 8
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 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.
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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 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
6
<PAGE> 10
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 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 and subsection 7.2(d)(iv) 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
7
<PAGE> 11
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 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 within 36 months following his or her retirement (provided that
such exercise must occur within the Option Period), but not thereafter. In the
event of the Participant's death during such 36-month period, each Option may
be exercised by those entitled to do so in the manner referred to in (iv)
below. 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 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 (v) below, or within the 36-month period referred to in (ii)
above, the Option may be exercised by the Participant or by his or her guardian
or legal representative, within twelve months following the Participant's
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 the event of the Participant's death during such
twelve- month period, each Option may be exercised by those entitled to do so
in the manner referred to in (iv) below. 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 Participant's disability.
(iv) In the event of the Participant's death while still
employed by the Company, each Option of the deceased Participant may be
exercised by those entitled to
8
<PAGE> 12
do so under the Participant's will or under the laws of descent and
distribution within twelve months following the Participant's death (provided
that in any event such exercise must occur within the Option Period), but not
thereafter, as to all shares of Stock which are subject to such Option,
including each 25-percent increment of the Option, if any, which has not yet
become exercisable at the time of the Participant's death. In the event of the
Participant's death within the 36-month period referred to in (ii) above or
within the twelve-month period referred to in (iii) above, each Option of the
deceased Participant that is exercisable at the time of death may be exercised
by those entitled to do so under the Participant's will or under the laws of
descent and distribution within twelve months following the Participant's death
or within the 36-month period referred to in (ii), if applicable and if longer
(provided that in any event such exercise must occur within the Option Period).
The provisions of this paragraph (iv) of subsection 7.2(d) shall be applicable
to each Stock Option Agreement as if set forth therein word for word. Each
Stock Option Agreement executed by the Company prior to the adoption of this
provision shall be deemed amended to include the provisions of this paragraph
and all Options granted pursuant to such Stock Option Agreements shall be
exercisable as provided herein.
(v) 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 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.
9
<PAGE> 13
(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 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
10
<PAGE> 14
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.
11
<PAGE> 15
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
12
<PAGE> 16
employment or to increase or decrease the level of the Participant's
compensation from 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.
13
<PAGE> 17
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.
14
<PAGE> 18
Any such elections by Participants to have shares of Stock withheld for this
purpose will be subject to the following restrictions:
(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.
15
<PAGE> 19
Dated: February 9, 1996
APACHE CORPORATION
ATTEST:
/s/ Cheri L. Peper By: /s/ Roger B. Rice
- -------------------------- ------------------------
Cheri L. Peper Roger B. Rice
Corporate Secretary Vice President
16
<PAGE> 1
EXHIBIT 10.28
MEMBER GAS PURCHASE AGREEMENT
DATED
MARCH 1, 1996
BY AND AMONG
APACHE GATHERING COMPANY,
APACHE CORPORATION,
MW PETROLEUM CORPORATION,
DEK ENERGY COMPANY,
APACHE TRANSMISSION CORPORATION - TEXAS
AND
APACHE MARKETING, INC.
AS SELLER
AND
PRODUCERS ENERGY MARKETING, LLC
AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SUBJECT MATTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Covenant to Cooperate on Transportation . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Covenant to Cooperate on Production . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III COMMITMENT OF GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Committed Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Excluded Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Disposition Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Affiliates and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Seller's Estimate; Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Operational Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Lien Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV QUANTITY; SCHEDULING AND TRANSPORTATION
OF DAILY VOLUMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Purchase and Sale Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Certain Events Related to the Delivery and
Taking of Committed Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Provision Regarding Output Contract Laws . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V DELIVERY POINT(S) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI QUALITY, PRESSURE AND MEASUREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Nonconforming Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Initial Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Alternate Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Costs of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Redetermination of Index(es) and Index Price Adjustments . . . . . . . . . . . . . . . 15
ARTICLE VIII BILLING AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Invoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Monthly Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 Disputed Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Overdue Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7 INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX EFFECTIVE DATE AND TERM; RELEASE OF GAS . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Restricted Gas; Release of Committed Gas . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
10.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.3 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.4 Marketing of Force Majeure Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XI IMBALANCE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Cooperation of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Liability for Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.4 Operational Flow Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XII CERTAIN EVENTS AFFECTING PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Buyer and Seller Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.2 Offset Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XIII CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.1 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.1 Seller's Title Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.2 No Continuing Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.3 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.4 Exclusion of Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.6 Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14.7 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
14.8 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.10 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
14.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.12 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.13 Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
14.14 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . 31
14.15 Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . 32
14.16 Seller's Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.17 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.18 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.19 Waiver of Consumer Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ii
<PAGE> 4
MEMBER GAS PURCHASE AGREEMENT
THIS MEMBER GAS PURCHASE AGREEMENT ("Agreement") is made and entered
by and among APACHE GATHERING COMPANY, a Delaware corporation, APACHE
CORPORATION, a Delaware corporation, MW PETROLEUM CORPORATION, a Colorado
corporation, DEK ENERGY COMPANY, a Delaware corporation, APACHE TRANSMISSION
CORPORATION - TEXAS, a Texas corporation, and APACHE MARKETING, INC., a
Delaware corporation (together with all Affiliates (as hereinafter defined),
collectively herein referred to as "Seller") and PRODUCERS ENERGY MARKETING,
LLC ("Buyer" and sometimes referred to herein as "LLC"), a Delaware limited
liability company.
W I T N E S S E T H:
WHEREAS, Seller desires to sell and Buyer desires to purchase
Committed Gas (as hereinafter defined) in accordance with the terms of this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, Seller and Buyer do hereby contract and agree with each other
as follows:
ARTICLE I.
DEFINITIONS
For the purposes hereof, the following words, phrases and terms shall
have meanings as defined below. Other words, phrases and terms are defined
elsewhere in this Agreement.
1.1 "Affected Party" shall mean a party whose ability to
perform its obligations under this Agreement has been affected by an Event.
1.2 "Affiliate" shall mean any individual, partnership,
corporation, limited liability company, trust or other Entity or association,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with a person or Entity. The term
"control," as used in the immediately preceding sentence, means, with respect
to a corporation, the right to exercise, directly or indirectly, more than
fifty (50%) percent of the voting rights attributable to the controlled
corporation, and, with respect to any individual, partnership, trust, other
Entity or association, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of the controlled
Entity. For purposes of this Agreement, (i) Buyer and Seller shall not be
deemed Affiliates, and (ii) field-wide and individual well units created
pursuant to 52 O.S. Section 287.8 (and like statutes in jurisdictions other
than Oklahoma) shall not be deemed Affiliates of Buyer or Seller.
1.3 "Aggregation Area" shall mean zones, pooling points or
other marketing aggregation areas established by the Tariff of a Transporter.
The Aggregation Area(s), subject to revision in accordance with Section 5.1,
are listed in EXHIBIT A.
1.4 "Alternate Price" shall have the meaning set forth in
Section 7.2.
1.5 "BTU" shall mean British Thermal Unit.
1.6 "Business Day" means a day other than a Saturday, Sunday or
a legal holiday or a day on which banking institutions are authorized by law to
close in Houston, Texas.
<PAGE> 5
1.7 "Committed Gas" shall have the meaning set forth in Section
3.1.
1.8 "Contract Price" shall mean the Initial Price or the
Alternate Price, as applicable.
1.9 "C.T." shall mean Central Time.
1.10 "Day" shall mean a period of twenty-four (24) consecutive
hours commencing at 7:00 a.m. C.T. on one calendar day and ending at 7:00 a.m.
C.T. on the following calendar day.
1.11 "Deferred Amount" shall have the meaning set forth in
Section 8.2.
1.12 "Delivery Point(s)" means the measuring station or other
measurement facilities at the point of interconnection between the facilities
of Seller (or Seller's Transporter, as the case may be) and the facilities of
Buyer (or Buyer's Transporter, as the case may be) where Committed Gas is
transferred by Seller to Buyer. The Delivery Point(s), subject to revision in
accordance with Section 5.1, are described in EXHIBIT A.
1.13 "Effective Date" shall mean April 1, 1996.
1.14 "Event" shall mean a Buyer Event, as defined in Section
12.1(a), or a Seller Event, as defined in Section 12.1(b).
1.15 "Entity" shall mean any association, corporation, general
partnership, limited partnership, limited liability company, joint stock
association, joint venture, firm, trust, business trust, cooperative, and
foreign associations of like structure.
1.16 "Excluded Gas" shall have the meaning set forth in Section
3.2.
1.17 "FERC" means the Federal Energy Regulatory Commission or
any successor thereto having jurisdiction.
1.18 "Gas" or "gas" shall mean natural gas produced from gas
wells, casinghead gas produced from oil wells, and residue gas resulting from
the processing of such gas well gas or casinghead gas.
1.19 "Imbalance Penalties" means, for Committed Gas delivered to
each Delivery Point(s), any imbalance penalty charges assessed against Buyer or
Seller by a Transporter pursuant to such Transporter's Tariff for Buyer's
failure to take or Seller's failure to deliver Seller's Estimate for such
Delivery Point(s), or Buyer's failure to submit a timely and accurate
nomination to such Transporter.
1.20 "Index" for a particular source of supply in the area where
the applicable Delivery Point(s) is/are located shall be that published
index(es) which has been determined by mutual agreement (or if there is no
published index for the relevant Delivery Point(s), then suchother index(es) as
may be selected by mutual agreement), to best represent the market price for
Gas of like quantities and quality at the Delivery Point(s), after Index Price
Adjustments. The initial Index(es) applicable to each Delivery Point(s) is
(are) set forth on EXHIBIT A.
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<PAGE> 6
1.21 "Index Price" for any Delivery Point(s) shall be the price
for Gas determined by the applicable Index on the first Day of the applicable
Month.
1.22 "Index Price Adjustments" shall mean, with respect to an
Index Price for any Delivery Point(s), all actual and reasonable net costs,
and/or differentials, customarily taken into account in the natural gas
marketing industry in determining basis, and necessary to adjust the Index
Price for Gas to accurately reflect the market price for Gas of like quantities
and quality at the Delivery Point(s). The initial Index Price Adjustments
applicable to each Delivery Point(s) are listed on EXHIBIT A.
1.23 "Initial Price" shall have the meaning set forth in Section
7.1.
1.24 "Material Buyer Take Event" shall have the meaning set
forth in Section 4.2(c).
1.25 "Month," as applicable, shall mean (i) the period beginning
on the first Day of each calendar month and ending at the beginning of the
first Day of the next succeeding calendar month or (ii) if the above-referenced
definition of "Month" differs from the meaning of such term in the Tariff of
the applicable Transporter in a context where such difference is applicable to
the provision in question, then the term "Month" shall have the meaning set
forth in such Tariff.
1.26 "MMBtu" shall mean one million (1,000,000) British Thermal
Units.
1.27 "Net Profit Before Profit Sharing" shall have the meaning
set forth in the Participant Profit Sharing Agreement.
1.28 "Operational Flow Order" or "OFO" shall have the meaning
set forth in Section 11.4.
1.29 "Participating Producers" shall mean the parties (other
than the LLC) to participant profit sharing agreements.
1.30 "Participant Profit Sharing Agreement" shall mean a
Participant Profit Sharing Agreement between Buyer and Seller executed and
delivered in accordance with Section 9.2(c)(i).
1.31 "Participant Aggregate Profit Sharing Amount" shall have
the meaning set forth in the Participant Profit Sharing Agreement.
1.32 "Reference Rate" shall mean the lesser of (i) two percent
(2%) above the per annum rate of interest announced from time to time as the
"prime rate" for commercial loans by Chase Manhattan Bank of New York (or its
successor), as such "prime rate" may change from time to time, or (ii) the
maximum applicable nonusurious rate of interest.
1.33 "Restricted Gas" shall have the meaning set forth in
Section 9.2.
1.34 "Seller's Estimate" means, with respect to each Delivery
Point(s), Seller's good faith estimate under Section 3.5 of the quantity of
Committed Gas that Seller expects to deliver at each such Delivery Point(s) for
the relevant Month.
1.35 "Seller's Wells" means the wells described on EXHIBIT A, as
such Exhibit may be revised from time to time in accordance with this
Agreement.
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<PAGE> 7
1.36 "Tariff" means (i) the currently effective tariff of a
Transporter, as filed from time to time with the FERC or any other governmental
authority, or (ii) if a Transporter does not have a tariff on file with the
FERC or any other governmental authority, such Transporter's currently
effective operating policies and procedures, as such policies and procedures
may change from time to time.
1.37 "Transporter" shall mean an interstate or intrastate
pipeline, including, without limitation, a gathering pipeline, that transports
Committed Gas.
1.38 "Unaffected Party" shall mean a party whose ability to
perform its obligations under this Agreement has not been affected by an Event.
1.39 "Year" shall be a period of twelve (12) consecutive Months.
ARTICLE II.
SUBJECT MATTER
2.1 Generally. Subject to the other terms and conditions of
this Agreement (including, without limitation, Article IV), Seller hereby
agrees to sell to Buyer and Buyer hereby agrees to purchase from Seller
deliverable Committed Gas.
2.2 Covenant to Cooperate on Transportation. Subject to the
other terms and provisions of this Agreement, the parties understand and agree
that Buyer shall make arrangements for the resale and the transportation of
Committed Gas sold hereunder from the Delivery Point(s), and Seller agrees to
provide reasonable cooperation as may be necessary to effectuate such resale
and transportation. Notwithstanding the foregoing, however, neither party
shall be obligated to build pipelines or other transportation facilities to
effect the delivery or receipt of Committed Gas hereunder.
2.3 Covenant to Cooperate on Production. Subject to the
other terms and conditions of this Agreement, Buyer will take Committed Gas in
the manner that is least disruptive to Seller's operations. Without limiting
the generality of the foregoing, Buyer shall give priority, to the fullest
extent practicable, to accepting deliveries of Committed Gas (i) that is
casinghead Gas and/or Gas that is produced from oil wells, (ii) the production
of which is necessary to maintain Seller's leases in full force and effect, or
(iii) the production of which is necessary to avoid injury to Seller's
reservoirs or material diminution in the aggregate production therefrom.
Seller will notify Buyer of anticipated operational considerations at the time
Seller's Estimate is provided to Buyer in accordance with Section 3.5. Seller
will notify Buyer of unanticipated operational considerations within 24 hours
after Seller becomes aware of such considerations, and Buyer will respond to
such notice as soon as it is commercially reasonable for Buyer to do so.
ARTICLE III.
COMMITMENT OF GAS
3.1 Committed Gas. During the term hereof and subject to any
limitations herein set forth, Seller shall sell to Buyer and Buyer shall
purchase from Seller all Gas production
4
<PAGE> 8
owned or controlled (as defined in Article XIII) by Seller during the term of
this Agreement in North America (onshore and offshore), excluding, however, Gas
defined as Excluded Gas. All Gas described in the preceding sentence shall be
hereinafter referred to as "Committed Gas." Buyer's obligations under this
Section 3.1 with respect to Canada are contingent upon Buyer's creation of
lawful and commercially reasonable legal structures for doing business in
Canada, it being explicitly agreed and understood, without limitation of the
foregoing, that such structures (a) shall minimize any and all taxes payable in
the United States, Canada or any state or province or other governmental body
thereof (including, without limitation, severance taxes, income taxes,
franchise taxes, and obligations with respect to payment of provincial
royalties in respect of Committed Gas), (b) shall comply with all applicable
laws of the United States, Canada, or any state or province or other
governmental body thereof (including, without limitation, all energy regulatory
laws, all laws respecting the export or import of Gas, all laws respecting
investment in Canada or its provinces, all laws respecting the operation of
foreign-owned business organizations in Canada or its provinces and all laws
governing business organizations), and (c) shall otherwise be operationally
satisfactory and commercially reasonable, all the foregoing determinations with
respect to such Canadian matters to be made by mutual agreement of Buyer and
Seller.
3.2 Excluded Gas. "Excluded Gas" shall mean and include (a) at
Seller's sole discretion, Gas owned or controlled by Seller that is being sold,
on the Effective Date, on behalf of Seller under a joint operating agreement,
unit operating agreement or similar agreement to which Seller is a party, (b)
at Seller's sole discretion, Gas production commencing or acquired from a new
source after the Effective Date which is owned or controlled by Seller and
which Seller elects to have sold on its behalf under a joint operating
agreement, unit operating agreement or similar agreement to which Seller is a
party at any time after the Effective Date, provided that the quantity of such
Gas, when available for initial delivery by Seller, does not exceed 150,000
cubic feet per Day per well, (c) at Seller's sole discretion, Gas sold under
(i) any binding and enforceable Gas sales contracts existing on the Effective
Date, and (ii) any binding and enforceable Gas sales contracts burdening
properties acquired by Seller after the Effective Date (insofar as the same
existed as of the date of acquisition) during the primary term thereof and any
extensions of contracts described in (i) or (ii) above made in accordance with
the terms of such contracts governing extensions or renewals (it being
understood, however, that Seller, at its sole discretion, may have such
contracts administered by Buyer in accordance with that certain Contract
Administration Agreement of even date herewith between Seller and Buyer), and
(iii) applicable calls on production, rights of first refusal or similar rights
in favor of third parties with respect to Gas of the sort customarily found in
joint operating agreements, unit agreements or other agreements typically
entered into in connection with Gas exploration and production activities, to
which agreements Seller is a party on the Effective Date, and (iv) applicable
calls on production or reversionary rights to convert retained overriding
royalties into working interests in favor of third parties with respect to Gas
production commencing or acquired after the Effective Date, such rights being
of the sort customarily found in farm-ins or other drill-to-earn agreements,
(d) Gas subject to the reservations set forth in Sections 3.6 and 3.7, (e)
Disposition Gas (as defined in Section 3.3, if released in accordance with
Sections 3.3 and 9.2), (f) Lien Gas (as defined in Section 3.7, if released in
accordance with such Section 3.7), (g) other Committed Gas released from this
Agreement pursuant to the other terms hereof, (h) Withdrawal Gas (as defined in
Section 9.2, if released in accordance with such Section 9.2), or (i) such
other Gas as Buyer and Seller may mutually agree.
3.3 Disposition Gas.
(a) Definition of Disposition Gas. "Disposition Gas" shall
mean Committed Gas no longer owned or controlled by Seller as the result of a
Disposition, INSOFAR, AND ONLY
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<PAGE> 9
INSOFAR, AS Buyer determines pursuant to Section 9.2 that such Gas is not
Restricted Gas (and only such Gas which is not Restricted Gas shall be
Disposition Gas and be excluded from the term "Committed Gas" in accordance
with Section 9.2). For purposes hereof, the term "Disposition" means, with
regard to Committed Gas, a sale, trade, exchange or other transaction (other
than transactions governed by Section 3.7) whereby title and benefits of
ownership of Committed Gas are directly or indirectly transferred to one or
more third parties, including, without limitation, (i) a sale or transfer of
properties from which Committed Gas is produced, except to the extent the same
is sold or transferred to another Affiliate of such Seller (excluding, however,
any Sold Company (as hereinafter defined)), (ii) a sale or transfer of a
production payment in and from (or any other interest in or to the production
from) properties from which Committed Gas is produced, except to the extent the
same is sold or transferred to another Affiliate of such Seller, (iii) a sale
or transfer of all of the stock owned, legally or beneficially, of an Affiliate
of such Seller, except to the extent the same is sold or transferred to another
Affiliate of such Seller, (iv) a sale or transfer of all or so much of the
equity ownership, legally or beneficially owned or held, in and to an Affiliate
("Sold Company") of such Seller that, following the consummation of the sale or
transfer, the Sold Company would no longer be an Affiliate of such Seller. For
purposes of this Section 3.3, the term "third party" shall not include any
Affiliate of Seller. Notwithstanding the foregoing, Disposition Gas sold,
traded, exchanged or otherwise transferred in a Disposition (whether such
Disposition is consummated in a single or in multiple related transactions) in
which Seller receives cash or other consideration having an aggregate value of
less than $1,000,000, shall not be subject to the provisions of Section 3.3 or
9.2, shall not be deemed Restricted Gas under any circumstances, and shall be
sold, traded, exchanged or otherwise transferred free and clear of the
requirements of this Agreement, without notice to Buyer and without Buyer's
consent.
(b) Notice and Determination. Seller shall provide Buyer
with written notice of any intended Disposition as soon as practicable, but not
less than forty (40) Days before closing a Disposition. In its notice to
Buyer, Seller shall provide Buyer with a listing of the affected Delivery
Point(s) and the quantities of such Committed Gas estimated in good faith to be
producible from the properties to be subject to the Disposition. Seller shall
also provide Buyer with such additional information regarding such Disposition
as Buyer may reasonably request under the circumstances, but only if such
information is material to Buyer's determination pursuant to Section 9.2(b)
regarding its ability to satisfy its obligations to sell Gas to third parties.
Upon receipt of the information necessary to make its determination pursuant to
Section 9.2, Buyer shall immediately begin considering whether any of the
Committed Gas subject to such contemplated Disposition shall be Restricted Gas
(as defined in Section 9.2). Buyer shall make its determination regarding such
Committed Gas in accordance with and subject to the terms of Section 9.2, not
later than thirty (30) Days following receipt of a notice from Seller complying
with the requirements of the second grammatical sentence of this Section
3.3(b). Such determination shall be in writing, shall be delivered to Seller
within such 30- Day period, and shall either indicate that (i) such Committed
Gas shall be sold, traded, exchanged or otherwise transferred free and clear of
the requirements of this Agreement, or (ii) all or a portion of such Committed
Gas shall be Restricted Gas, and set forth the information required pursuant to
the second grammatical sentence of Section 3.3(b). Buyer's failure to respond
within such period shall be deemed, for purposes of Section 9.2, an
acknowledgement that none of the Disposition Gas is Restricted Gas, an all of
the Committed Gas, subject to the proposed Disposition, shall be released from
the terms of this Agreement in accordance with and subject to the terms of
Section 9.2. THE CONSEQUENCES DESCRIBED IN THE PRECEDING GRAMMATICAL SENTENCE
SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY FOR BUYER'S FAILURE TO NOTIFY
SELLER, IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, OF BUYER'S
DETERMINATION REGARDING THE EXISTENCE OF RESTRICTED GAS (IF ANY) IN CONNECTION
WITH A DISPOSITION, AND ALL
6
<PAGE> 10
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED IN RESPECT OF SUCH
EVENT. Notwithstanding anything stated herein to the contrary, to the extent
that Seller fails to consummate the proposed Disposition within one hundred
eighty (180) Days following Buyer's receipt of Seller's notice provided in
accordance with this Section 3.3(b), Seller shall be required to notify Buyer
in writing of the status of such Disposition, and shall continue to provide
such notification to Buyer at thirty (30) Day intervals thereafter until the
Disposition is either consummated or abandoned (it being understood and agreed
that Seller shall notify Buyer in writing within thirty (30) Days of the date
on which such Disposition is consummated or abandoned). If the contemplated
Disposition is abandoned, or if Seller fails timely to give the notices
required by the preceding grammatical sentence, then Buyer's determination
under Section 9.2 of how much of the Committed Gas, subject to the Disposition,
is Restricted Gas and how much of it is Disposition Gas shall automatically
terminate, and Seller shall once again be obligated to comply with all notice
obligations under this Section 3.3, and will be subject to a new determination
by Buyer under Section 9.2, in connection with any future proposed Disposition
of all or any part of such Committed Gas.
(c) Certain Exceptions. It is specifically understood and
agreed that Seller's sale of Committed Gas to a third party in connection with
a prepayment, conveyance of a production payment, or similar transaction in
which Committed Gas is sold in place prior to production, shall not be subject
to the requirements of Section 9.2, if and only if the contract(s) pursuant to
which such Committed Gas is/are sold are administered by Buyer in accordance
with the Contract Administration Agreement. Solely for purposes of
facilitating Buyer's performance of its obligations under the Contract
Administration Agreement, Seller shall give Buyer thirty (30) Days' written
notice before the consummation of a transaction of the type described in this
Section 3.3(c).
3.4 Affiliates and Subsidiaries. Each party included in the
term "Seller" shall cause any and all of their current and future Affiliates
(including subsidiaries) which own or control Gas production in North America,
onshore or offshore (but excluding any Gas defined as Excluded Gas), to the
extent not already parties to the Agreement and to the extent this Agreement is
still in full force and effect, to ratify, approve, assume and agree to be
bound by all of the terms, obligations, and provisions of this Agreement.
3.5 Seller's Estimate; Scheduling.
(a) Seller's Estimate Generally. For each Month during
the term of this Agreement, Seller shall provide Buyer with Seller's Estimate
on or before 12 noon C.T. on the fourth Day preceding the close of the New York
Mercantile Exchange gas futures contract for the applicable Month. Buyer shall
make nominations to Transporters, and generally make all arrangements necessary
for the receipt, transportation and delivery to market of the Committed Gas for
the applicable Month, all in accordance with Seller's Estimate (it being
understood that Buyer shall have no obligation to make arrangements for firm
transportation of the Committed Gas unless specifically agreed to in writing by
Buyer and Seller). If Seller fails to update Seller's Estimate for any
Delivery Point(s) for the applicable Month, the Seller's Estimate for such
Delivery Point(s) during the previous Month will serve as Seller's Estimate for
the Month in question.
(b) Reforecasts by Seller. The parties shall confer at
either party's initiative during each Month to reforecast the quantities of
Committed Gas scheduled to be delivered or taken pursuant to Seller's Estimate.
Without limiting the generality of the foregoing, Seller shall advise Buyer of
its intention to exercise its rights under Section 3.6(e) by the deadline set
forth therein. Seller shall promptly notify Buyer of any material changes in
the quantities of
7
<PAGE> 11
Committed Gas scheduled to be delivered or taken pursuant to Seller's Estimate,
as well as any condition or event that is reasonably likely to change such
quantities in such Estimate.
(c) Estimates of Additional Quantities of Committed Gas.
Seller and Buyer are aware that additional quantities of Committed Gas from new
sources of supply not included in Seller's Estimate will become available for
delivery to Buyer at various times after the first Day of an applicable Month.
At least two Business Days before the Day that Seller wishes to begin
deliveries of such additional quantities of Committed Gas, Seller shall provide
Buyer with a written notice setting forth (i) the Delivery Point(s) at which
Seller wishes to make such deliveries, (ii) the quantities of Committed Gas
that Seller estimates will be delivered to each such Delivery Point during the
Month in which initial deliveries occur, (iii) the Index(es) applicable to such
Delivery Point(s), (iv) any Index Price Adjustments applicable to the price
determined in accordance with such Index(es) and (v) any other information set
forth on Exhibit A. The Contract Price for such additional quantities shall be
determined in accordance with the foregoing information, subject to the
provisions of Article VII, including without limitation the rights of Buyer to
propose other Index(es) or Index Price Adjustments in accordance with Section
7.4. Buyer shall take such additional Quantities of Committed Gas in
accordance with, and subject to the terms of, Section 4.1.
3.6 Operational Reservations. Seller reserves unto itself, its
successors, assigns and Affiliates the following rights and quantities of Gas
sufficient to satisfy such rights:
(a) To operate Seller's leaseholds, lands and/or interests
therein, free from any control by Buyer, in such manner as Seller deems
advisable for the development and operation of Seller's leases (or on any unit,
including, without limitation, field-wide units), including the right (but
never the obligation) to drill new wells, enhance production, to repair and
rework Seller's Wells, to renew and extend (in whole or in part) any lease, to
abandon any well or surrender any lease (in whole or in part) for any reason,
to abandon, modify, extend or dispose of any production facilities owned or
installed (in whole or in part) by Seller, to treat Gas, to use Gas as
compressor fuel, to use Gas to generate power in connection with leasehold
operations, to lift oil by repressuring, recycling or pressure maintenance
operations, and to otherwise operate such leases and fields free from any
control by Buyer.
(b) To deliver Gas in quantities sufficient to fulfill
Seller's royalty or lease obligations from time to time, Seller's agreements
for easements, unit agreements, unit operating agreements, operating agreements
or any similar agreements affecting Seller's wells.
(c) To remove from its Gas all liquids, liquefiable
hydrocarbons, oil and/or condensate, both by lease separation and/or processing
in a plant prior to delivery at the Delivery Point(s). Seller, in its sole
discretion, may have Buyer negotiate on Seller's behalf a processing agreement
with the operator of a plant located upstream of the Delivery Point for the
processing of Seller's Gas, or administer any such new processing agreement or
an existing processing agreement for Seller, as part of the services Buyer
provides to Seller pursuant to that certain Member Service Agreement, of even
date herewith, between Seller and Buyer (the "Service Agreement"), for the fees
specified therein. The liquids, liquefiable hydrocarbons, oil and/or
8
<PAGE> 12
condensate removed (or the propanes, butanes, motor fuel or other products
obtained) therefrom (collectively "Removed Products") shall not be deemed
Committed Gas, nor shall such Removed Products otherwise be subject to this
Agreement. Wherever Seller is causing the Gas to be processed for its own
account prior to delivery at the Delivery Point(s), Seller shall use
commercially reasonable efforts to reserve the right to take residue Gas in
kind, and any residue Gas taken in kind shall be deemed Committed Gas subject
to this Agreement with the Delivery Point for same being at the tailgate of the
plant. If economically prudent, Buyer will use good faith efforts to cause the
Gas to be processed for Buyer's account and at Buyer's sole cost at a plant
located downstream of the Delivery Point under one or more processing
agreements with terms of three (3) years or less unless Seller's consent to a
longer processing agreement is obtained, and, in such event, (i) the quantity
of the residue Gas redelivered to Buyer by the plant will be used to calculate
the Committed Gas to be purchased and paid for hereunder and the Throughput
under the Limited Liability Company Agreement dated October 27, 1995, which
created Buyer (the "LLC Agreement"), (ii) Buyer will remit to Seller the net
revenue derived from such processing determined as the remainder of (a) the
revenues received from the sale of the Removed Products by Buyer or from the
plant, as applicable, minus (b) the sum of (1) the total transportation costs
incurred by Buyer for upstream transportation of the PVR or condensate, (2) all
fees and charges paid to the plant for the processing services, (3) all taxes
and other charges due on the Removed Products, the Gas (but only to the extent
associated with the processing), or the act of processing or selling such
items, and (4) the compensation due Buyer for negotiating and administering the
processing agreement as provided in the Service Agreement; provided, however,
it is expressly understood that if the net revenue for a Month is equal to or
less than zero (0), Seller shall not owe Buyer any money under this clause
(ii). The term "PVR" shall mean, with respect to each Month, the difference in
(i) the quantity of Gas delivered by Seller to Buyer and tendered to the plant
for processing, as measured at the plant inlet, and (ii) the quantity of
residue Gas redelivered to Buyer after processing in the plant, which
difference will represent the fuel, shrinkage and lost and unaccounted for
quantities allocated to the quantity of the Gas tendered for processing.
(d) To produce Gas without waste and in accordance with
prudent oil and gas field practices. Seller shall not be required to produce
any well at a rate in excess of the rate fixed by law or regulation or in
excess of the rate of flow which Seller determines, in its discretion,
exercised in good faith as a prudent operator, should be produced from such
well.
(e) To curtail or shut-in Gas due to prices that are
unacceptable to Seller. Seller shall give Buyer notice of any curtailment or
shut-in of Committed Gas before delivery of Seller's Estimate in Section 3.5.
Each curtailment notice shall be in writing and shall identify the quantities
of Committed Gas that Seller intends to curtail or shut-in, the Delivery
Point(s) affected, and the expected duration of such curtailment or shut-in
period. Seller shall not,
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however, shut-in or curtail any quantities of Committed Gas hereunder during
any Month in which such quantities have been included in Seller's Estimate.
Seller shall notify Buyer at least two (2) Business Days prior to any
applicable deadline in Transporter(s)' Tariffs for nominations (or nomination
changes) of Seller's intent to resume Sales of Committed Gas for which Seller
has previously given Buyer notice of Seller's intention to shut-in or curtail
deliveries during the current applicable Month under this Section 3.6(e).
Committed Gas reserved pursuant to this Section 3.6(e) shall not be sold to a
third party during any shut-in period.
(f) The right to pool or unitize Seller's leases with other
leases of Seller or others located in the field in which Seller's Wells are
located (it being understood that the Gas attributable or allocated to Seller's
interest in the pool or unit so created will remain Committed Gas).
(g) Gas required to be delivered to third parties under the
common law governing relationships between cotenants, or under gas balancing
agreements or similar arrangements affecting any of Seller's Wells.
3.7 Lien Gas.
(a) Generally. Notwithstanding anything stated herein to the
contrary, Seller shall in no way be prohibited or precluded from assigning or
granting a security interest, lien or other encumbrance (collectively, referred
to as "Liens") to secure the repayment of obligations that Seller owes to
commercial banks, insurance companies or other financial or trade creditors
(collectively, "Lenders") on any of the properties owned by Seller from which
Committed Gas is produced.
(b) Certain Rights. Seller shall use commercially reasonable
efforts to obtain from its Lenders an agreement that their Liens shall be
subordinate or otherwise subject to Buyer's rights and obligations under this
Agreement. If Seller notifies Buyer in writing that Seller has been
unsuccessful in obtaining such an agreement from its Lenders, Buyer hereby
agrees to subordinate its rights and interests hereunder and shall execute and
deliver to such Lenders such instruments or agreements in form and substance
reasonably satisfactory to Lenders and Buyer, as may be necessary to evidence
Buyer's subordination of its rights and interests in such Committed Gas. The
Committed Gas in which Buyer's rights are so subordinated shall be herein
referred to as "Lien Gas." Notwithstanding anything stated herein to the
contrary, Lien Gas shall remain Committed Gas hereunder so long as Lenders
permit such Committed Gas to be sold to Buyer, notwithstanding any provisions
in the documents creating or evidencing the Liens that assign or purport to
assign the Committed Gas to Lenders; but such Lien Gas shall be released from
the terms of this Agreement if Lenders foreclose their Lien, or exercise any
other remedy under the documents creating the Lien that would result in the
transfer of the title and the benefits of ownership of the Lien Gas to such
Lenders. Seller shall use commercially reasonable efforts in cooperating with
Buyer to (i) subject such Lien Gas to the terms of this Agreement as Committed
Gas hereunder, or (ii) continue sales of Lien Gas under this Agreement, or
under another contract with terms and conditions substantially the same as
those of this Agreement.
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(c) Other Transactions. It is specifically understood and
agreed that Seller may enter into financing transactions with a third party
other than those pursuant to which a Lien is created, including, without
limitation, transactions such as prepayments, conveyances of production
payments, or conveyances of overriding royalty interests, so long as the Gas
burdened by such transaction (including, without limitation, any Gas that was
Committed Gas prior to the consummation of such transaction) shall be sold to
Buyer as Committed Gas under the terms and conditions of this Agreement.
ARTICLE IV
QUANTITY; SCHEDULING AND TRANSPORTATION OF DAILY VOLUMES
4.1 Purchase and Sale Obligation.
(a) Seller's Delivery Obligation. Commencing on the
Effective Date and continuing through the term hereof, Seller agrees to sell
and deliver, or cause to be delivered and sold (excepting an event of Force
Majeure or any other reason excusing the performance of Seller's obligation to
sell and deliver Committed Gas hereunder, and subject in all respects to the
provisions of Sections 4.2(a) and 4.2(d)) to Buyer at the Delivery Point(s) one
hundred percent (100%) of deliverable Committed Gas, including, without
limitation, (i) one hundred percent (100%) of the quantities of Gas equal to
Seller's Estimate as set forth in Section 3.5(a), and (ii) one hundred percent
(100%) of additional Committed Gas as set forth in Section 3.5(c). It is
specifically understood and agreed that Seller shall have no obligation to
deliver (x) additional quantities of Committed Gas from new sources of supply
described in Section 3.5(c), in the Month when such additional quantities
become available for delivery, if such additional quantities were not
previously included in Seller's Estimate for that Month and (y) quantities of
Committed Gas for which Seller has given notice of its intention to curtail or
shut-in pursuant to Section 3.6(e).
(b) Buyer's Take Obligation. Commencing on the Effective
Date and continuing through the term hereof, Buyer agrees to take and purchase
(excepting an event of Force Majeure or any other reason excusing the
performance of Buyer's obligation to purchase and take Committed Gas
hereunder), and subject in all respects to the provisions of Sections 4.2(b)
and 4.2(d)) from Seller at the Delivery Point(s) one hundred percent (100%) of
deliverable Committed Gas, including, without limitation (a) one hundred
percent (100%) of Committed Gas delivered in accordance with Seller's Estimate
as set forth in Section 3.5(a), (b) one hundred percent (100%) of additional
Committed Gas for which Seller has given written notice as set forth in Section
3.5(c), and (c) one hundred percent (100%) of Committed Gas previously shut-in,
for which Seller has notified Buyer of Seller's intent to resume sales as
provided in Section 3.6(e). It is specifically understood and agreed that
Buyer shall have no obligation to take quantities of Committed Gas for which
Seller has given notice of its intention to curtail or shut-in pursuant to
Section 3.6(e). Buyer shall use commercially reasonable efforts to receive
Committed Gas at uniform hourly and Daily rates of flow.
4.2 Certain Events Related to the Delivery and Taking of Committed
Gas.
(a) Seller Delivery Event. If, during any Month, Seller
fails for any reason (other than Force Majeure or any other reason excusing
performance of Seller's obligation to deliver Committed Gas hereunder) to
deliver 100% of deliverable Committed Gas required to be delivered in
accordance with Section 4.1 (subject in all respects to the next-to-last
grammatical sentence of this Section 4.2(a), a "Seller Delivery Event"), and
Buyer, acting in a commercially
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reasonable manner, must purchase Gas to replace such quantities in order to
satisfy Buyer's legal obligations to third parties for the Month in question,
then Seller shall pay Buyer, in accordance with the provisions of Article VIII,
an amount equal to the product of (i) the positive difference between (A) the
price per MMBtu actually paid by Buyer for the replacement quantities and (B)
the Contract Price that Buyer would have paid for the quantities of Committed
Gas not delivered by Seller and (ii) the quantities of such replacement Gas
purchased by Buyer. Seller shall also pay Buyer, in accordance with the
provisions of Article VIII, the amount of any reasonably incurred incidental
out-of-pocket costs incurred by Buyer (including, by way of example rather than
enumeration, brokers' fees), less any expenses saved by Buyer, in consequence
of such Seller Delivery Event. Notwithstanding the foregoing, no Seller's
Delivery Event shall exist with respect to any Month so long as the quantity of
Committed Gas (including, without limitation, any additional quantities of
Committed Gas delivered pursuant to Sections 3.5(a), 3.5(c) or 3.6)) delivered
at each Aggregation Area is within a variance (positive or negative) of the
lesser of (y) five percent (5%) between quantities set forth in Seller's
Estimate and quantities delivered by Seller, or (z) the tolerance permitted by
the Tariff of the relevant Transporter. Nothing in the preceding grammatical
sentence shall be construed as relieving Seller from liability for an Imbalance
Penalty arising under Section 11.3 or amounts payable in respect of a violation
of an OFO, as more particularly set forth in Section 11.4.
(b) Buyer Take Event. If, during any Month, Buyer fails for
any reason (other than Force Majeure or any other reason excusing performance
of Buyer's obligation to take Committed Gas hereunder) to take at least ninety-
eight percent (98%) of deliverable Committed Gas required to be taken in
accordance with Section 4.1 (a "Buyer Take Event"), then such untaken Committed
Gas shall be released to Seller for the remainder of such Month, and Buyer
shall give Seller such notice as may be reasonably practicable under the
circumstances to facilitate Seller's ability to sell such Committed Gas.
Seller, acting in a commercially reasonable manner, may sell such untaken Gas
to a third party and Buyer shall pay Seller, in accordance with the provisions
of Article VIII, an amount equal to the product of (w) the positive difference
between (A) the Contract Price that Buyer would have paid for the quantities of
Committed Gas not taken by Buyer and (B) the price per MMBtu actually received
by Seller for such untaken Committed Gas from such third party and (x) the
positive difference between (A) the quantities of deliverable Committed Gas
required to be taken in accordance with Section 4.1 and (B) the quantities of
Committed Gas taken by Buyer. If Seller cannot sell such untaken Committed Gas
to a third party, the Seller shall receive no payment whatsoever in accordance
with the preceding grammatical sentence. Buyer shall also pay Seller the
amount of any reasonably incurred incidental out-of-pocket costs incurred by
Seller (including, by way of example rather than enumeration, brokers' fees),
less any expenses saved by Seller, in consequence of a Buyer Take Event.
(c) Material Buyer Take Event. Seller may, in its
discretion, terminate this Agreement if a Material Buyer Take Event occurs and
Seller gives Buyer written notice of Seller's intention to terminate this
Agreement within 90 days after the last Day of the calendar Year or calendar
quarter (as the case may be) in which a Material Buyer Take Event occurs (it
being understood that such termination shall be effective upon the effective
date of the lawful withdrawal of APACHE GATHERING COMPANY as a member of LLC).
Seller's right to terminate this Agreement for a Material Buyer Take Event
shall be waived if Seller fails to deliver to Buyer the notice described in the
preceding grammatical sentence of this Section 4.2(c) within the 90-Day period
set forth therein. The exercise of Seller's remedies for a Buyer Take Event in
accordance with Section 4.2(b), after the occurrence of a Material Buyer Take
Event, and termination of this Agreement in accordance with this Section
4.2(c), shall be Seller's sole and exclusive remedies for a Material Buyer Take
Event. Such termination shall be treated as a lawful withdrawal of Seller from
LLC for purposes of Section 9.2 of this Agreement, and will be
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subject to all other provisions of such Section 9.2, including, without
limitation, those provisions regarding Buyer's determination of Restricted Gas.
"Material Buyer Take Event" shall mean Buyer's failure for any reason (other
than Force Majeure or any other reason excusing performance of Buyer's
obligation to take Committed Gas hereunder) to take (i) 95% of deliverable
Committed Gas as set forth in Seller's Estimate during any calendar Year or
(ii) 90% of deliverable Committed Gas as set forth in Seller's Estimate during
any calendar quarter.
(d) Exclusive Consequences of Seller Delivery Event, Buyer
Take Event or Material Buyer Take Event. The sole consequences of a Seller
Delivery Event are set forth in Section 4.2(a), the sole consequences of a
Buyer Take Event are set forth in Section 4.2(b), and the sole consequences of
a Material Buyer Take Event are set forth in Section 4.2(c). ALL OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED IN RESPECT OF SUCH EVENTS.
THE PARTIES ACKNOWLEDGE THAT THE CONSEQUENCES OF THE EVENTS SET FORTH IN THIS
ARTICLE IV ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THAT THE CONSEQUENCES
SET FORTH HEREIN RESPECTING SUCH EVENTS CONSTITUTE A REASONABLE APPROXIMATION
OF THE HARM OR LOSS THAT WOULD BE SUFFERED BY EITHER PARTY AS A RESULT OF SUCH
EVENT.
4.3 Provision Regarding Output Contract Laws. The parties
acknowledge that deliveries of Committed Gas hereunder may increase or decrease
significantly from Month to Month as a consequence of the routine conduct of
the parties' operations and a variety of factors affecting the market for Gas
generally. Accordingly, the parties agree that (a) the obligations of Seller
(i) to sell and deliver Committed Gas and (ii) of Buyer to purchase and receive
Committed Gas, and (b) the methods used by Buyer and Seller pursuant to Section
3.5 to estimate the quantities of Committed Gas to be sold by Buyer and
purchased by Seller from Month to Month hereunder, are all commercially
reasonable means, arrived at by both parties, acting in good faith, to minimize
the severity of such increases and decreases in deliveries, consistent with the
commercial realities of producing and marketing the Committed Gas and the
realities of Gas markets generally. The parties agree that Section 2.306 of
the Texas Business and Commerce Code, or any provision of any law with similar
provisions (collectively, "Output Contract Laws"), is inapplicable to this
Agreement and the transactions hereby contemplated. To the extent that any
Output Contract Laws are held to apply to this Agreement and the transactions
hereby contemplated, the parties hereby WAIVE AND RELINQUISH any defenses to
the enforcement of this Agreement arising from such Output Contract Laws, and
any claims that may be asserted by either party arising from such Output
Contract Laws.
ARTICLE V.
DELIVERY POINT(S)
5.1 Generally. Committed Gas shall be delivered at the Delivery
Point(s) set forth on EXHIBIT A hereto (the "Delivery Point(s)"), as such
EXHIBIT A shall be updated from time to time by agreement of the parties,
consistent with their obligations under this Agreement. Title to the Committed
Gas shall pass to Buyer at the Delivery Point(s). As between the parties
hereto, Seller shall be responsible for any damage or injury caused by the
Committed Gas until it has been delivered to Buyer at the Delivery Point(s),
after which Buyer shall be responsible for any damage or injury caused thereby.
Either party may request in writing that the other party change
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any Delivery Point(s) set forth in EXHIBIT A. The other party shall not
unreasonably withhold its consent to the proposed change (it being specifically
understood and agreed, however, that the withholding of such consent shall be
reasonable if such other party would suffer economic detriment as a result of
the proposed change). Changes in Aggregation Area(s) pursuant to changes in
the Tariff of a Transporter shall also be reflected on EXHIBIT A within 30 Days
after either Buyer or Seller has learned of such change.
ARTICLE VI.
QUALITY, PRESSURE AND MEASUREMENT
6.1 Generally. Unless otherwise provided elsewhere in this
Agreement, all Committed Gas sold and purchased hereunder shall be of the same
quality, delivered at the same pressure and measured in the same manner as
provided from time to time in the then effective filed Tariff of the applicable
Buyer's Transporter receiving and transporting the Gas for the Buyer at the
applicable Delivery Point(s) (or such Transporter's other rules, guidelines,
and policies to the extent applicable and in effect). EXCEPT AS MADE IN THIS
SECTION 6.1 AND IN SECTION 14.1 (REGARDING SELLER'S TITLE), SELLER MAKES NO
OTHER WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO GAS
SOLD HEREUNDER, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
6.2 Nonconforming Gas. As to Committed Gas which fails to meet
the quality or pressure specifications above set forth, Buyer at its option may
refuse to accept any or all such Committed Gas (to be hereinafter referred to
as "Nonconforming Gas"). Acceptance of any or all Nonconforming Gas shall not
be deemed a waiver of Seller's obligations hereunder with respect to such Gas
or Buyer's rights with respect to any future deliveries of Nonconforming Gas.
Seller shall bring such Nonconforming Gas into conformity with the requirements
of Section 6.1 and, if such efforts are successful, such Nonconforming Gas
shall once again be Committed Gas and subject in all respects to the terms and
conditions of this Agreement. If it would be uneconomical for Seller to bring
such Nonconforming Gas into conformity with the requirements of Section 6.1,
however, Seller shall notify Buyer in writing of that fact (providing, in such
notice, Seller's reasons for such conclusion and the facts in support thereof),
whereupon Buyer may, in its discretion (a) accept such Nonconforming Gas for
delivery at a price mutually acceptable to Buyer and Seller, (b) have such Gas
brought into conformity with Section 6.1 at its sole cost and expense or (c)
release such Nonconforming Gas from this Agreement. Without limiting the
generality of the foregoing provision, however, it is expressly agreed and
understood that either party may, but neither shall be obligated to, install
and operate facilities to bring the Gas into conformity with such
specifications. Any such facilities shall be installed, operated and
maintained at the sole cost, risk and expense of the party which elected to
install such facilities. Either party may discontinue the operation of such
facilities if, in the sole judgment of the party installing same, such
operation is uneconomical. If neither party elects to install or continue the
operation of such facilities, Nonconforming Gas shall be released from the
terms hereof within thirty (30) Days of Buyer's or Seller's written request for
such a release. The provisions of this Section 6.2 set forth the sole remedies
for the delivery or non-acceptance, as applicable, of Nonconforming Gas.
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ARTICLE VII.
PRICE
7.1 Initial Price. Except as otherwise provided in Section 7.2,
Buyer shall pay Seller one hundred percent (100%) of the Initial Price for all
Committed Gas delivered hereunder during any Month. "Initial Price" shall mean
the Index Price, after Index Price Adjustments. In the event more than one
published index is listed on Exhibit "A" for use in determining the Index Price
for Gas at a Delivery Point, then the Index Price will be calculated using an
average of the published indices with appropriate Index Price Adjustments
(hereinafter referred to as a "Basket Price"); provided, however, if the
indices utilized in calculating the Basket Price in any Month differ by $0.15
per MMBtu or more, then the Basket Price will not be utilized for such Month in
determining the Index Price and the Index Price for such Month will be
determined for such source by applying the relevant indices to the actual
volumes for the pipeline(s) on which the Gas actually flowed during such Month
less any applicable Index Price Adjustments; provided, however, Buyer shall use
its best efforts to sell the Gas to a customer on the pipeline that has the
highest published index.
7.2 Alternate Price.
(a) Generally. Notwithstanding the provisions of Section
7.1, Buyer shall pay Seller 100% of the Alternate Price (hereinafter defined)
for the quantities of Committed Gas delivered for such Month at each
Aggregation Area that exceed, for any reason (including, without limitation,
the delivery of additional quantities of Committed Gas in accordance with
Section 3.5(c)) 105% of the sum of the quantities of Committed Gas estimated
for the Delivery Point(s) included in each such Aggregation Area, as set forth
in Seller's Estimate for such Month. Such quantities of Committed Gas
delivered in excess of 105% of Seller's Estimate for such Month shall be
hereinafter referred to as the "Excess Quantities." The Alternate Price,
however, shall be paid only if the difference between (i) the product of (a)
the Initial Price and (b) the Excess Quantities and (ii) the product of (a) the
Alternate Price and (b) the Excess Quantities, exceeds $5,000.
(b) Definition of Alternate Price. "Alternate Price"
means (i) the arithmetical average of Daily prices (to be computed from the Day
on which initial deliveries of Excess Quantities takes place, until the final
Day of the applicable Month) determined by the Gas Daily Index applicable to
the Delivery Point(s) included in each Aggregation Area where such Excess
Quantities are delivered, after (ii) Index Price Adjustments.
7.3 Costs of Delivery. Subject to the other provisions of this
Agreement, Seller shall be responsible for, and shall pay all costs and
expenses of, all arrangements necessary to deliver Committed Gas to the
Delivery Point(s) and Buyer shall be responsible for, and shall pay all costs
and expenses of, all arrangements necessary for the receipt, transportation and
delivery to market of the Committed Gas.
7.4 Redetermination of Index(es) and Index Price Adjustments. If,
during the term of this Agreement, (i) an Index used to determine the Index
Price for any Delivery Point ceases to be available, (ii) either party believes
that another Index more accurately reflects existing market conditions with
respect to any Delivery Point(s) than the Index currently being used with
respect to such Delivery Point(s), or (iii) either party believes that the
Index Price Adjustments with respect to any Index Price for any Delivery
Point(s) no longer accurately reflects all actual and reasonable net costs,
and/or differentials, customarily taken into account in the natural gas
marketing industry in determining basis, and necessary to adjust the Index
Price applicable to
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such Delivery Point(s), then either party may request the other to reconsider
the currently-applicable Index or Index Price Adjustment. If the parties
cannot agree on a replacement Index or an appropriate change to the Index Price
Adjustment in question, then the dispute shall be subject to arbitration in
accordance with Section 14.10. The parties shall review the appropriateness of
all Index(es) and Index Price Adjustments used hereunder not less than
semiannually.
ARTICLE VIII.
BILLING AND PAYMENT
8.1 Invoice. Unless otherwise agreed to by Buyer and Seller, by
the fifteenth (15th) Day of each Month following the Month in which Committed
Gas was delivered, Seller shall provide Buyer with a written or an
electronically transmitted statement in respect of the preceding Month setting
forth (a) the quantities of Committed Gas delivered at each Delivery Point(s),
(b) the Contract Price applicable to such Committed Gas at each such Delivery
Point(s), (c) any amounts due Seller in respect of any Buyer's Event (including
reasonably satisfactory evidence of such amount), and (d) any amounts due
Seller in respect of an Imbalance Penalty or violation of an OFO for which
Buyer is responsible (including reasonably satisfactory evidence of such
amounts), together with an invoice for payment based thereon. If actual
quantities delivered at each of such Delivery Point(s) are not available by the
fifteenth (15th) Day of the Month, Seller may furnish statements and invoices
based on Seller's Estimate, which statements and invoices shall be adjusted to
reflect actual deliveries as soon as practicable after such actual deliveries
become known. Within five Business Days of the request of either party, the
other party shall provide, to the extent it has a legal right of access thereto
and/or such statement is then available, a copy of the Transporter's allocation
or imbalance statement applicable to the Committed Gas for the requested
period. Buyer shall cooperate with Seller in helping Seller obtain all
information necessary or desirable to prepare Seller's statements and invoice
in accordance with this Section 8.1.
8.2 Monthly Payment. By no later than the twenty-fifth (25th) Day
of the Month following the Month in which Committed Gas was delivered, Buyer
shall pay, in immediately available funds via wire transfer (or other mutually
agreeable manner) and otherwise in accordance with Section 14.5, 50% of the
amount due Seller, net of any amounts due Buyer in accordance with the terms of
this Agreement. The remaining 50% of such amount shall be paid, in the manner
set forth in the preceding grammatical sentence, on the final Day of the Month
in question; PROVIDED, HOWEVER, THAT notwithstanding anything in this Agreement
to the contrary, Buyer, at its sole election and discretion, shall have the
right to defer payment to Seller of 20% of the remaining 50% of the amount due
Seller (the "Deferred Amount") until the 15th Day of the Month following the
end of the Month in question. If Seller provides Buyer with a written or
electronically transmitted statement and accompanying invoice in accordance
with Section 8.1, and if Buyer does not receive such statement and invoice
until after the 15th Day of the Month, then (x) Buyer's initial 50% payment
hereunder shall be due ten (10) Days after Buyer's receipt of such statement
and invoice and (y) Buyer's final 50% payment hereunder shall be due five (5)
Days after the initial payment was due in accordance with clause (x) (unless
Buyer elects to defer payment of the Deferred Amount, in which case the
Deferred Amount shall be due ten (10) Days after the initial payment was due in
accordance with clause (x)). If Buyer and Seller have agreed, in accordance
with Section 8.1, that it is unnecessary for Seller to provide Buyer with a
statement and accompanying invoice hereunder, then Buyer's payments hereunder
shall be payable in accordance with the first two grammatical sentences of this
Section 8.2, and shall be based on (1) applicable Transporter statements or,
(2) Seller's Estimate, but only if such
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Transporter's statements are not available by the 15th Day of the Month in
question (it being understood that such Seller's Estimate shall be adjusted to
reflect actual deliveries as soon as practicable after such actual deliveries
become known). Buyer shall submit to Seller with each Monthly payment a
written or electronically transmitted schedule showing, for each Delivery
Point(s) for such Month, (a) the quantity of Committed Gas delivered to such
Delivery Point(s) and any reductions thereto due to downstream processing
pursuant to Section 3.6(c), (b) the Contract Price applicable to such Committed
Gas, indicating where appropriate the applicability of the Base Price or the
Alternate Price, (c) the Index Price, (d) any Index Price Adjustments, (e) any
amounts due Buyer in respect of any Seller's Event (including reasonably
satisfactory evidence of such amounts), and (f) any amounts due Buyer in
respect of an Imbalance Penalty or violation for which Seller is responsible
(including reasonably satisfactory evidence of such amounts). If the Day on
which payment is due under this Section 8.2 does not fall on a Business Day,
then Buyer's payment shall be due on the next succeeding Business Day. Seller
shall cooperate with Buyer in helping Seller obtain all information necessary
or desirable to prepare Buyer's payment statements in accordance with this
Section 8.2.
8.3 Disputed Statements. Should a statement be disputed by a
party in good faith, the disputing party will pay any undisputed amount and
will notify the other party in writing of the disputed amount and the basis for
the dispute. Payment of the undisputed portion of a statement will not be
deemed a waiver of the paying party's right to recoup any overpayment, and
acceptance of such payment will not be deemed a waiver of the accepting party's
right to recover any underpayment. The party that rendered the disputed
statement will promptly investigate the dispute and will submit a corrected
statement, if necessary, within thirty (30) Days after receiving notice of the
dispute. If the parties cannot agree on the disputed amount within such 30-Day
period, then, if upon resolution of the dispute, a party is determined to have
underpaid the amount actually due, the party will remit the amount due, plus
interest thereon from the date such amount should have been paid until such
amount has been received by the underpaid party, calculated at the rate stated
in Section 8.5 herein. If upon resolution of the dispute, a party is
determined to have overpaid the amount actually due, the party to whom such
overpayment was made will refund the excess paid, plus interest thereon
calculated at the rate stated in Section 8.5 herein.
8.4 Errors. If an error is discovered in any statement rendered
hereunder, such error shall be adjusted within thirty (30) Days after notice of
the discovery of the error. Any dispute which is not timely resolved shall be
subject to arbitration in accordance with Section 14.10.
8.5 Overdue Payments. Subject in all respects to Section 8.3, if
either party fails to pay the amount due the other party when due hereunder as
set forth in Section 8.2, then interest on any such unpaid and overdue amount
shall accrue until paid at the Reference Rate. In addition, in the event that
Buyer elects to defer the payment of the Deferred Amount, as permitted in
Section 8.2, interest thereon shall not be incurred and shall not accrue until
after the same is due.
8.6 Audits. Each party shall keep and maintain true and correct
books, records, files and accounts of all information reasonably related to the
transactions contemplated by this Agreement, including all measurement records,
all information used to determine prices and calculate invoices, and all
invoices, statements, and payment records (collectively, the "Records"). All
such Records shall be maintained for at least thirty-six (36) Months after the
Month to which they pertain. Either party may, at its own expense, audit and
copy the other party's Records at any time during normal business hours upon at
least fifteen (15) Days written notice. Any statement, charge or payment under
this Agreement will be deemed final unless
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disputed in accordance with Section 8.3 within twenty-four (24) Months from the
final Business Day of the calendar year in which such statement, charge or
payment is made or rendered, except for any adjustments to such statement,
charge or payment due to volume adjustments of Committed Gas delivered at the
Delivery Point(s) and other adjustments caused by Transporters' statements
affecting payments for Committed Gas or Imbalance Penalties.
8.7 INDEMNITIES.
(a) Seller's Indemnities. Seller shall, in accordance with
this Section 8.7, indemnify, defend and hold Buyer harmless from and against
any and all claims (including, without limitation, personal injury claims),
costs, losses, causes of action, judgments, penalties, fines, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and costs of court); of any kind whatsoever (all of the foregoing being
hereinafter called "Losses") arising from or associated with (i) Gas prior to
the delivery of the same to Buyer at the Delivery Point, (ii) any liabilities
for which Seller is responsible and arising under Sections 11.3 or 11.4 hereof,
(iii) a breach of Seller's warranties in Section 14.1, or (iv) Gas delivered by
Seller hereunder, in respect of which claims of any type whatsoever are
asserted by or on behalf of owners of landowners' royalties, overriding
royalties, production payments, net profits interests or other types of
non-operating interests in oil and gas leases. Notwithstanding anything stated
in this Agreement to the contrary, the respective liability (under this Section
8.7 and under any other provision of this Agreement) of each of the undersigned
parties executing this Agreement as a Seller shall be several, not joint, and
shall be limited solely to those Losses (or the pro rata portion of such
Losses) arising from or attributable to Gas delivered by such Seller hereunder
(and each such Seller shall in no way be liable under this Section 8.7 for any
Losses arising from or attributable to any Losses relating to Gas delivered
hereunder by another Seller).
(b) Buyer's Indemnities. Buyer shall, in accordance with
this Section 8.7, indemnify, defend and hold each Seller harmless from and
against any and all Losses arising from or associated with (i) Committed Gas
after the delivery and receipt of the same to Buyer at the Delivery Point, or
(ii) any liabilities for which Buyer is responsible and arising under Sections
11.3 or 11.4.
(c) Claims for Indemnification. If either party seeks
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall give the party from whom indemnity is sought (the "Indemnifying
Party") prompt written notice of any matters which may give rise to a claim for
indemnification under this Section 8.7; provided, however, that failure or
delay in notification shall not relieve the Indemnifying Party from liability
hereunder unless (and only to the extent that delay in notifying the
Indemnifying Party of such claim hinders or prevents the Indemnifying Party's
defense of such claim or hinders or prevents the Indemnifying Party from
obtaining the benefits of existing insurance coverage for some or all liability
attributable to a Loss which would otherwise have been available to the
Indemnifying Party but for said delay), in which case (and only to such limited
extent), the Indemnified Party hereby WAIVES AND RELEASES the Indemnifying
Party from any liability attributable to or arising from such claims,
regardless of whether such claims were attributable to the negligence or strict
liability of the Indemnifying Party. The Indemnifying Party shall have the
right, in its own name or otherwise, to contest and defend by all appropriate
legal or other proceedings any claim, provided, however, that:
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(i) Notice of the Indemnifying Party's intention to
so contest shall be delivered to the Indemnified Party within fifteen (15) Days
from the date of the Indemnifying Party's receipt of the Indemnified Party's
notice;
(ii) The Indemnifying Party shall pay all costs and
expenses which it incurs in connection with such contest, including but not
limited to all attorneys', accountants' and expert witnesses' fees and the cost
of any bond which the Indemnifying Party is required by law to post in
connection with such contest; and
(iii) The Indemnifying Party shall conduct such
contest with attorneys approved by the Indemnified Party (which approval shall
not be unreasonably withheld), but the Indemnified Party shall have the right
to participate in such proceedings and to be represented by attorneys of its
own choosing, at its own cost and expense. If the Indemnified Party does not
elect to participate in any such proceedings, it shall be bound by the results
obtained by the Indemnifying Party, but the Indemnifying Party shall not enter
into any settlement or compromise of the claims being contested in such
proceeding without the consent of the Indemnified Party, which consent shall
not be unreasonably withheld.
(d) Payment and Consent. Amounts which the Indemnifying
Party must pay the Indemnified Party hereunder shall be due within thirty (30)
Days after (i) the Indemnified Party has paid any Losses subject to the
Indemnifying Party's indemnity hereunder and (ii) the Indemnified Party has
presented the Indemnifying Party with reasonably satisfactory evidence that the
amount of such Losses has been paid; provided, however, that notwithstanding
anything stated herein to the contrary with regard to amounts paid in
settlement of such Losses, the Indemnifying Party shall only be liable for
Losses attributable to amounts paid in settlement of any claims to the extent
that the Indemnifying Party has consented thereto in writing, and in the event
the Indemnified Party settles or otherwise consents to liability on any claims
without the prior written consent of the Indemnifying Party thereto, the
Indemnified Party hereby WAIVES AND RELEASES the Indemnifying Party from any
liability for such claims (and any Losses attributable to amounts paid in
settlement thereof, regardless of whether such Losses are attributable (in
whole or part) to the negligence or strict liability of the Indemnifying
Party). Any amounts which the Indemnifying Party owes but does not pay when
due under this Section 8.7 shall bear interest until paid at the Reference
Rate.
ARTICLE IX.
EFFECTIVE DATE AND TERM; RELEASE OF GAS
9.1 Generally. This Agreement shall be effective as of the
Effective Date and shall continue and remain in full force and effect until the
first to occur of the following: (a) the tenth (10th) anniversary of the
Effective Date (it being understood that, subject to the other terms and
conditions of this Section 9.1, this Agreement shall be automatically extended
for one Year, beginning with the tenth (10th) anniversary of the Effective
Date, and continuing on each subsequent anniversary of the Effective Date
thereafter, without necessity of further action of either party so long as
APACHE GATHERING COMPANY remains a member of LLC), (b) termination of this
Agreement pursuant to Section 9.2, (c) termination of this Agreement by Seller
for a Material Buyer Take Event in accordance with Section 4.2(c), (d)
termination of this Agreement upon occurrence of a Buyer Bankruptcy Event or a
Seller Bankruptcy Event in accordance with Section 12.1(c)(i), (e) termination
of this Agreement by Seller for a Buyer Payment Event in accordance with
Section 12.1(c)(i), (f) Seller's dissolution, (g) Buyer's dissolution, or (h)
December 31, 2020.
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9.2 Restricted Gas; Release of Committed Gas.
(a) Generally. The parties acknowledge that Buyer's loss
of Committed Gas due to (i) the lawful withdrawal of APACHE GATHERING COMPANY
as a member of LLC, or (ii) a Disposition of Gas designated hereunder as
Committed Gas (the instances described in clauses (i) and (ii) being
hereinafter referred to as "Restricted Gas Trigger Events" or a "RGTE") could
jeopardize Buyer's ability to satisfy its contractual obligations to deliver
Gas to third parties. The parties therefore agree that Buyer, acting in
accordance with the provisions of this Section 9.2, may declare certain
Committed Gas to be Restricted Gas (as defined in Section 9.2(b)), which
Restricted Gas shall continue to be sold to Buyer notwithstanding the
occurrence of a RGTE, pursuant to the terms of this Agreement or pursuant to a
Restricted Gas Purchase Agreement (as defined below), as more particularly
hereinafter set forth in this Section 9.2. Notwithstanding the continued sale
of Restricted Gas to Buyer, Buyer shall release only the affected Committed Gas
that is not Restricted Gas from the terms of this Agreement, effective (x) in
the case of a Disposition, upon the closing of the Disposition, and (y) in the
case of a lawful withdrawal of APACHE GATHERING COMPANY as a member of LLC,
upon the effective date of such withdrawal.
(b) Restricted Gas Defined; Restricted Gas Determinations.
(i) "Restricted Gas" shall mean Committed Gas,
the release of which, can reasonably be determined by Buyer to result in
Buyer's being unable to fulfill its obligations to deliver Gas to third parties
in a commercially reasonable manner and otherwise in accordance with the
Buyer's then-existing contractual obligations at the time Buyer makes its
determination that Committed Gas shall be Restricted Gas under this Section
9.2(b). Notwithstanding anything stated herein to the contrary, however, no
contractual obligation of Buyer to deliver Gas to third parties that Buyer
enters into on or after the RGTE Notice Date (hereinafter defined) may be
considered by Buyer in connection with its Restricted Gas determination under
this Section 9.2. "RGTE Notice Date" shall mean (x) in the case of a lawful
withdrawal of APACHE GATHERING COMPANY as a member of LLC (herein sometimes a
"Withdrawal RGTE"), on the date that Buyer receives notice of APACHE GATHERING
COMPANY'S intent to withdraw as a member of the LLC, or (y) in the case of a
Disposition (herein sometimes a "Disposition RGTE"), on the date that Buyer
receives notice from Seller in accordance with the provisions of Section 3.3(b)
hereof, relating to the proposed Disposition.
(ii) Buyer shall determine whether Committed Gas
shall be Restricted Gas as the result of a Restricted Gas Trigger Event (1)
with respect to a Disposition RGTE, within the period set forth in Section
3.3(b), (2) with respect to a Withdrawal RGTE (including, without limitation,
the withdrawal of APACHE GATHERING COMPANY in consequence of a Material Buyer
Take Event), as soon as practicable, but in no case longer than sixty (60)
Days following Buyer's receipt of Seller's notice of its intent to lawfully
withdraw as a member of LLC.
(iii) In connection with a Withdrawal RGTE, Buyer's
Restricted Gas determination shall be made in writing, and shall describe the
Restricted Gas that shall remain subject to the terms of this Agreement, as
more particularly set forth in, and subject in all respects to, Section 9.2(c)
below.
(iv) In connection with a Disposition RGTE,
Buyer's determination shall be made in writing, and shall set forth the terms
on which such Restricted Gas shall
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continue to be sold to Buyer pursuant to a Restricted Gas Purchase Agreement,
subject in all respects to Sections 9.2(d) and 9.2(e) below.
(v) If Buyer does not notify Seller of Buyer's
determination as to the existence of Restricted Gas within the periods set
forth in Section 9.2(b)(ii) above, Buyer shall be deemed to have agreed to
release all Committed Gas from the terms of this Agreement, effective as of the
dates set forth in Section 9.2(a)(x) or Section 9.2(a)(y), as applicable, and
this Agreement shall terminate (1) with respect to Disposition Gas, only as to
such Disposition Gas, but subject in all respects to Section 9.3, and (2) with
respect to the lawful withdrawal of APACHE GATHERING COMPANY as a member of
LLC, as to all Committed Gas sold hereunder, but subject in all respects to
Section 9.3. THE CONSEQUENCES DESCRIBED IN THE PRECEDING GRAMMATICAL SENTENCE
SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY FOR BUYER'S FAILURE TO NOTIFY
SELLER, IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, OF BUYER'S
DETERMINATION REGARDING THE EXISTENCE OF RESTRICTED GAS (IF ANY) IN CONNECTION
WITH A DISPOSITION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED IN RESPECT OF SUCH EVENT.
(vi) Seller shall continue to sell Committed Gas to
Buyer under the terms of this Agreement until (x) in the case of a Disposition
RGTE, the closing of the Disposition (subject to Sections 9.2(d) and 9.2(e)),
and (y) in the case of a Withdrawal RGTE, the effective date of such withdrawal
subject to Section 9.2(c).
(c) Continuation of This Agreement as to Restricted Gas in
Connection with Withdrawal.
(i) After Buyer's Restricted Gas determination in
connection with a Withdrawal RGTE, Seller shall continue to sell Committed Gas
to Buyer pursuant to an amendment modifying this Agreement to conform in all
material respects with gas purchase agreements then being entered into between
the LLC and Participating Producers, and further modified to (A) reflect the
release of all Withdrawal Gas (hereinafter defined) and/or Delivery Point(s)
associated with such Withdrawal Gas, and (B) limit the otherwise applicable
term of this Agreement to the period set forth in Buyer's Restricted Gas
determination in connection with the applicable Withdrawal RGTE, such period
not to exceed two (2) years from the date of such Restricted Gas determination.
It is specifically understood and agreed that Buyer and Seller shall execute
and deliver such amendment, which shall be consistent with the terms of this
Section 9.2(c)(i) and otherwise reasonably satisfactory in form and substance
to them both, within 30 days after the date of such Restricted Gas
determination. Simultaneously with the execution and delivery of such
amendment, Buyer and Seller shall also execute and deliver a Participant Profit
Sharing Agreement with respect to Gas sold under such amendment, which shall
have a Participant Aggregate Profit Sharing Amount equal to that which shall be
applicable to participant profit sharing agreements in effect or entered into
between the LLC and Participating Producers for the LLC fiscal year in which
such Participant Profit Sharing Agreement is executed and delivered.
(ii) Promptly following the notice of a lawful
withdrawal (or a proposed lawful withdrawal) of APACHE GATHERING COMPANY as a
member of LLC and the designation of any such Gas as Restricted Gas by Buyer,
in accordance with Section 9.2(b), Buyer shall (A) release all Committed Gas
from the terms of this Agreement, other than the Restricted Gas (such Committed
Gas released in accordance with this Section 9.2(c) is referred to herein as
"Withdrawal Gas"), (B) continue to purchase the Restricted Gas pursuant to the
terms of this Agreement, as modified in accordance with Section 9.2(c)(i), (C)
diligently seek to obtain
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alternate sources of Gas from third parties on economic terms comparable, in
Buyer's commercially reasonable judgment, to those under which Restricted Gas
continues to be sold to Buyer hereunder pursuant to Section 9.2(c)(i), and (D)
release any and all Restricted Gas promptly when (1) Buyer has obtained
acceptable alternate sources of Gas as specified in Section 9.2(c)(ii)(C) or
(2) Seller has given Buyer cash or other consideration satisfactory to Buyer in
consideration of Buyer's release of the Restricted Gas. Upon Buyer's release
of any and all Restricted Gas in accordance with (D) above (or upon the initial
determination by Buyer in connection with Section 9.2(b) above that there is no
Restricted Gas), this Agreement shall automatically terminate as between such
Seller and Buyer (subject in all respects, however, to Section 9.3), without
any further notice to or action by any party hereto.
(d) Restricted Gas in Connection with a Disposition. Upon
a proposed Disposition of Committed Gas by a Seller and the designation by
Buyer (pursuant to the terms of Section 3.3 and this Section 9.2) of any
Restricted Gas with respect to any Disposition Gas, Buyer shall (i) release all
Disposition Gas, (ii) purchase the Restricted Gas under a Restricted Gas
Purchase Agreement (as defined below), as more particularly set forth in
Section 9.2(e), and (iii) release any and all Committed Gas that otherwise
would have been deemed Restricted Gas in connection with such Disposition if,
prior to the consummation of the Disposition, such Seller has given Buyer cash
or other consideration satisfactory to Buyer in consideration of Buyer's
release of the Restricted Gas. If a contemplated Disposition (whether such
Disposition is consummated in a single or in multiple related transactions)
involves a Disposition of substantially all of the assets of APACHE GATHERING
COMPANY and APACHE GATHERING COMPANY contemplates withdrawing as a member of
LLC in connection with such Disposition(s), then unless Buyer otherwise agrees
in writing, each of such transactions shall be treated as a Disposition for
purposes of Sections 9.2(d) and (e), rather than a withdrawal under Section
9.2(c) which terms shall include, among others, (w) a provision for the sale of
the Restricted Gas to Buyer at a price equal to the price that Buyer pays
hereunder to Seller (calculated on an MMBtu basis), (x) a provision for the
quantity or quantities of Gas to be sold to Buyer thereunder to equal the
quantity(-ies) of Restricted Gas determined by Buyer to be applicable to the
Disposition in question, (y) a provision for the applicable Delivery Point(s),
and (z) a provision for the term of Restricted Gas Purchase Agreement to
continue for the applicable Term (as defined in the Restricted Gas Purchase
Agreement).
(e) Restricted Gas Purchase Agreement. On or before the
closing of a Disposition with respect to which Buyer has determined that there
is Restricted Gas, but not later than five (5) Days after the date of Buyer's
Restricted Gas determination in respect of a Disposition RGTE, Buyer and Seller
shall execute and deliver a separate gas purchase agreement in substantially
the form attached hereto as EXHIBIT B (the "Restricted Gas Purchase
Agreement"). Upon consummation of the applicable Disposition, such Restricted
Gas Purchase Agreement shall be effective as of the effective date of the
applicable Disposition (it being understood that Seller shall make as an
express condition to the consummation of the Disposition, the assumption by the
transferee of Seller's obligations pursuant to such Restricted Gas Purchase
Agreement). Notwithstanding anything stated herein to the contrary, in the
event that the Disposition is not consummated within one hundred eighty (180)
days following Buyer's receipt of Seller's notice provided in accordance with
Section 3.3(b), then the Restricted Gas Purchase Agreement shall automatically
terminate, without further action by or notice to any party, and any Restricted
Gas contemplated to be covered thereby shall continue to be Committed Gas under
this Agreement.
9.3 Survival. Notwithstanding anything stated in this Agreement
to the contrary, termination of this Agreement shall in no way relieve any
party from any obligations or liabilities accrued as of the date of
termination, and any imbalances in receipts or deliveries shall be
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corrected to zero within 60 Days after such date. All indemnity obligations of
the parties shall survive the termination of this Agreement.
ARTICLE X.
FORCE MAJEURE
10.1 Generally. In the event of either party hereto being rendered
unable, wholly or in part, by Force Majeure (hereinafter defined) to carry out
its obligations under this Agreement, other than the obligation to make
payments due hereunder, such party shall notify the other party by telephone as
soon as possible of the Force Majeure event and thereafter, as soon as
practicable, provide full particulars of such Force Majeure in writing, by
facsimile or other commercially reasonable means, to the other party within ten
(10) Days after the occurrence of the cause relied on. The obligations of the
parties, so far as they are affected by such Force Majeure, shall be suspended
from the inception of such Force Majeure during the continuance of any
inability so caused but for no longer period, and such cause shall be remedied
with all reasonable dispatch. Upon termination of the event of Force Majeure,
the party who had been affected by such event shall notify the other party by
telephone of such termination, and thereafter, as soon as practicable, provide
such other party with written notification of such termination by facsimile or
other commercially reasonable means, and the parties shall resume performance
under this Agreement as soon as practicable (it being understood, however, that
Seller's obligation to resume performance hereunder is subject in all respects
to the provisions of Section 10.4). The term "Force Majeure" as employed
herein shall mean acts of God, strikes, lockouts or other industrial
disturbances, acts of the public enemy, wars, blockades, insurrection, riots,
epidemics, landslides, lightning, earthquakes, fires, hurricanes, tropical
storms, floods, washouts, arrests and restraints of the government (federal,
state or local), inability of any party hereto to obtain necessary materials,
supplies or permits due to existing or future rules, orders and laws of
governmental authorities (federal, state or local), interruptions by government
or court orders, present and future orders of any regulatory body having proper
jurisdiction, civil disturbances, explosions, sabotage, breakage or accident to
machinery or lines of pipe, the necessity for making repairs or alterations to
machinery or lines of pipe, freezing of wells or lines of pipe, partial or
entire failure of wells (including, without limitation, well blowouts and well
craterings), inability or refusal of any Transporter of Gas to receive,
transport or deliver Gas sold and purchased hereunder (it being understood that
an OFO issued for reasons not within the control of either party shall be
considered an event of Force Majeure), and any other causes, whether of the
kind herein enumerated or otherwise, not within the control of the party
claiming suspension and which by the exercise of due diligence such party is
unable to overcome. Force Majeure shall also include the inability to acquire,
or the delays in acquiring, at reasonable cost and after the exercise of
reasonable diligence, any servitudes, right-of-way grants, permits or licenses
required to be obtained to enable a party hereto to fulfill its obligations
hereunder.
10.2 Exclusions. The term "Force Majeure" does not include loss of
Buyer's markets.
10.3 Labor Disputes. The settlement of strikes or lockouts shall
be entirely within the discretion of the party having the difficulty and the
above requirement of the use of diligence in restoring normal operating
conditions shall not require the settlement of strikes or lockouts by acceding
to the terms of the opposing party when such course is inadvisable in the
discretion of the party having the difficulty.
10.4 Marketing of Force Majeure Gas. If Buyer is unable to take
Committed Gas from any Delivery Point(s) due to the occurrence of Force
Majeure, Seller, acting in a commercially
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reasonable manner, may market and sell such Committed Gas from the affected
Delivery Point(s) to any third parties free from this Agreement and without any
obligation to Buyer during the continuance of the Force Majeure. As soon as
the Force Majeure that rendered Buyer unable to take Committed Gas is remedied
or terminated, Seller's obligation to thereafter commence selling the Committed
Gas to Buyer shall commence following the expiration of any agreement between
Seller and third parties for the purchase of Committed Gas that Buyer was
unable to take and that Seller subsequently marketed and sold to such parties
as permitted by this Section 10.4. It is specifically understood and agreed
that any such agreement between Seller and third parties shall be terminable
without penalty to Seller on not more than thirty (30) Days' notice, and Seller
shall use commercially reasonable efforts to terminate any such agreement
within a shorter period so that the Committed Gas being sold thereunder will be
available for inclusion in the Seller's Estimate that follows the date on which
Seller receives notice from Buyer pursuant to this Section 10.4 that such Force
Majeure has been remedied or terminated.
ARTICLE XI.
IMBALANCE RESOLUTION
11.1 Generally. Seller agrees that Gas will be delivered as nearly
as practicable at a relatively constant daily rate over the Month, but each
party shall be entitled to operate within the tolerances in the applicable
Tariff of a Transporter.
11.2 Cooperation of Parties. The parties recognize that imbalances
may occur on Transporters. Accordingly, Buyer and Seller agree to make every
reasonable effort to promptly eliminate or minimize such imbalances. The party
which is the shipper under the applicable transportation agreement ("Shipper"),
shall have the primary responsibility for eliminating or minimizing imbalances,
it being understood, however, that the party who is not the Shipper shall
cooperate with the Shipper's efforts in all reasonable respects.
11.3 Liability for Penalties. If any of the Transporter(s) of
Committed Gas sold and purchased hereunder elects to transport in accordance
with the general terms and conditions of its then applicable Tariff which allow
the Transporter(s) to impose Imbalance Penalties, including, without
limitation, cash-outs and overrun charges, Buyer and Seller shall be obligated
to take such commercially reasonable action as may be necessary in order to
avoid imposition of such charges. If, during any Month, Seller or Buyer
receives an invoice from a Transporter which includes an Imbalance Penalty, the
validity as well as the cause of such Imbalance Penalty shall be determined.
If it is determined that the Imbalance Penalty was imposed as a result of acts
or omissions of Buyer or Buyer's resale customer, then Buyer shall pay such
Imbalance Penalty and/or shall indemnify Seller for any such Imbalance Penalty
or cost as may be incurred by Seller. If it is determined that the Imbalance
Penalty was imposed as a result of acts or omissions of Seller (including,
without limitation, errors made in Seller's Estimate which are not corrected in
time to reasonably permit Buyer to adjust nominations within any deadline
established by the Tariff of a Transporter), then Seller shall pay such
Imbalance Penalty and/or shall indemnify Buyer for any such Imbalance Penalty
or cost as may be incurred by Buyer.
11.4 Operational Flow Orders. Should either party receive an
operational flow order or other order or notice from a Transporter requiring
action to be taken in connection with this Agreement or Gas flowing under this
Agreement (an "Operational Flow Order" or "OFO"), such party shall notify the
other party of the OFO as soon as practicable and simultaneously provide the
other party a copy of such OFO by facsimile or other commercially reasonable
means. The parties shall take all actions required by the OFO within the
period(s) prescribed therein.
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ARTICLE XII.
CERTAIN EVENTS AFFECTING PERFORMANCE
12.1 Buyer and Seller Events.
(a) Buyer Event Defined. Each of the following shall be
deemed a "Buyer Event": (i) Buyer's failure to pay or cause to be paid any
undisputed amount owing under this Agreement when due (including, without
limitation, interest accrued thereon in accordance with Section 8.5) for
fifteen (15) Days, subject in all respects to Buyer's rights under Section 8.3
(a "Buyer Payment Event"); (ii) a Buyer Take Event, as defined in Section
4.2(b); (iii) the occurrence of one or more of the following events with
respect to Buyer: (A) the entry of a decree or order for relief against Buyer
by a court of competent jurisdiction in any involuntary case brought against
Buyer under any bankruptcy insolvency or other similar law (collectively,
"Debtor Relief Laws") generally affecting the rights of creditors and relief of
debtors now or hereafter in effect, (B) the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar agent
under applicable Debtor Relief Laws for Buyer or for any substantial part of
its assets or property, (C) the ordering of the winding up or liquidation of
the Buyer's affairs, (D) the filing of a petition in any such involuntary
bankruptcy case, which petition remains undismissed for a period of 180 Days or
which is not dismissed or suspended pursuant to Section 305 of the Federal
Bankruptcy Code (or any corresponding provision of any future United States
bankruptcy law) (E) the commencement by Buyer of a voluntary case under any
applicable Debtor Relief Law now or hereafter in effect, (F) the consent by
Buyer to the entry of an order for relief in an involuntary case under any such
law or to the appointment of or the taking of possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar agent
under any applicable Debtor Relief Laws for the Member or for any substantial
part of its assets or property, or (G) the making by Buyer of any general
assignment for the benefit of its creditors (the events referred to in clauses
(A) through (G) being collectively referred to as a "Buyer Bankruptcy Event");
(iv) the inaccuracy, in any material respect, of any representation or warranty
made by Buyer in Section 14.15 (a "Buyer Representation Event"); or (v) Buyer's
failure to perform any covenant or other obligation in this Agreement (other
than those specified in clauses (i) through (iv) of this Section 12.1(a)), and
if such failure is susceptible of cure before Seller suffers any costs or
losses as a result of such Event, such failure is not remedied within thirty
(30) Days of Buyer's receipt of a written notice describing the particulars of
such failure in reasonable detail (a "Buyer Covenant Event").
(b) Seller Event Defined. Each of the following shall be
deemed a "Seller Event": (i) Seller's failure to pay or cause to be paid any
undisputed amount owing under this Agreement when due (including, without
limitation, interest accrued thereon in accordance with Section 8.5) for a
period of sixty (60) Days, subject in all respects to Seller's rights under
Section 8.3 (a "Seller Payment Event"); (ii) a Seller Delivery Event, as
defined in Section 4.2(a); (iii) the occurrence of one or more of the following
events with respect to Seller: (A) the entry of a decree or order for relief
against Seller by a court of competent jurisdiction in any involuntary case
brought against Seller under any bankruptcy insolvency or other similar law
(collectively, "Debtor Relief Laws") generally affecting the rights of
creditors and relief of debtors now or hereafter in effect, (B) the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar agent under applicable Debtor Relief Laws for Seller or for any
substantial part of its assets or property, (C) the ordering of the winding up
or liquidation of the Seller's affairs, (D) the filing of a petition in any
such involuntary bankruptcy case, which petition remains undismissed for a
period of 180 Days or which is not dismissed or suspended
25
<PAGE> 29
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law) (E) the commencement by
Seller of a voluntary case under any applicable Debtor Relief Law now or
hereafter in effect, (F) the consent by Seller to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or
the taking of possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar agent under any applicable Debtor
Relief Laws for the Seller or for any substantial part of its assets or
property, or (G) the making by Seller of any general assignment for the benefit
of its creditors (the events referred to in clauses (A) through (G) being
collectively referred to as a "Seller Bankruptcy Event"); (iv) the inaccuracy,
in any material respect, of any representation or warranty made by Seller in
Section 14.14 (a "Seller Representation Event"); or (v) Seller's failure to
perform any covenant or other obligation in this Agreement (other than those
specified in clauses (i) through (iv) of this Section 12.1(b)), and if such
failure is susceptible of cure before Buyer suffers any costs or losses as a
result of such Event, such failure is not remedied within thirty (30) Days of
Seller's receipt of a written notice describing the particulars of such failure
in reasonable detail (a "Seller Covenant Event").
(c) Consequences of Events.
(i) Except as explicitly provided in this Agreement,
and subject in all respects to the other terms and conditions hereof
(including, without limitation, Sections 4.2, 4.3 and 14.4), an Unaffected
Party may take such actions as it may be permitted to take under applicable law
in consequence of an Event, including, without limitation, the exercise of
offset rights under Section 12.2, the right to suspend further performance
under this Agreement and the right to terminate this Agreement, but only (A)
upon occurrence of a Buyer Bankruptcy Event or a Seller Bankruptcy Event
(whereupon this Agreement shall terminate automatically and immediately), (B)
upon occurrence of a Buyer Payment Event (whereupon this Agreement shall
terminate immediately, but only at Seller's election, and only if Seller had
previously given at least ten (10) Days' prior written notice to Buyer of
Seller's intent to terminate this Agreement), or (C) upon occurrence of a
Material Buyer Take Event, as provided in Section 4.2(c).
(ii) An Unaffected Party shall use commercially
reasonable efforts to mitigate costs or losses as a result of an Event,
including, without limitation, exercising commercially reasonable efforts to
find alternative markets for Committed Gas or alternative supplies of Gas, as
applicable.
(iii) Unless explicitly indicated to the contrary in
this Agreement, the remedies provided for in this Section 12.1 (including,
without limitation, termination of this Agreement) are cumulative of, and may
be exercised without prejudice to, any other remedies, whether at law or in
equity to which an Unaffected Party may be entitled under this Agreement for
any Event.
12.2 Offset Rights. Without prejudice to the rights or remedies of
either party hereunder, each party reserves to itself all rights, offsets,
set-offs, counterclaims and like remedies and defenses which such party is or
may be entitled to arising from or out of this Agreement or any other contract
or agreement to which Buyer and Seller are parties, and Buyer is entitled to
offset any payments due Seller hereunder against any payments owed to Buyer
under any other contract or agreement to which Buyer and Seller are parties and
for which the Seller against whom Buyer intends to exercise its offset rights
has defaulted in making such payment under such contract or agreement. It is
specifically understood and agreed that all rights, offsets, set-offs,
counterclaims and like remedies reserved under this Section 12.2 by each party
may be exercised against any Affiliate of the other party to the same extent as
if such remedies could be exercised directly against the other party.
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<PAGE> 30
ARTICLE XIII.
CERTAIN DEFINITIONS
13.1 Other Definitions. The phrases "Gas production owned or
controlled by Seller" and "Gas production acquired or obtained by Seller," as
used in this Agreement (including, but not limited to, Section 3.1 hereof),
shall mean Gas that is either: (i) owned by Seller as and when it is produced
at the wellhead (including, without limitation, residue Gas subject to Section
3.6(c)), (ii) purchased by Seller and resold by Seller to Buyer (such Gas being
called "Third-Party Gas"), but only if such Third-Party Gas is (a) being
gathered and commingled with Gas owned or controlled by Seller (within the
meaning of clauses (i) or (iii) of this Section 13.1) and all such Gas is
subsequently gathered, processed or otherwise treated in connection with the
marketing of such Gas, or (b) residue Gas subject to Section 3.6(c), which has
been commingled with and processed together with Gas owned or controlled by
Seller (within the meaning of clauses (i) or (iii) of this Section 13.1), or
(iii) Gas for which Seller has the written authority of the third party
owner(s) thereof to act as such owner(s)' representative, agent, or
attorney-in-fact in marketing such Gas (including, without limitation, under a
joint operating agreement pursuant to which Seller is the operator), but only
for the duration of such authorization.
ARTICLE XIV.
MISCELLANEOUS
14.1 Seller's Title Warranty. Seller warrants title to, or the
right to sell, all Gas delivered to Buyer under this Agreement. Seller also
warrants that all such Gas shall be free from all liens, encumbrances and
adverse claims, other than (i) Liens as permitted under Section 3.7, and (ii)
liens mandated by Section 9-319 of the Texas Business and Commerce Code and the
statutes, if any, in other jurisdictions with like lien provisions of mandatory
application.
14.2 No Continuing Waiver. The waiver by either party of any
breach of any of the provisions of this Agreement shall not constitute a
continuing waiver of other breaches of the same or other provisions of this
Agreement.
14.3 Government Regulation. This Agreement is subject to all
present and future valid laws, orders, rules and regulations of any regulatory
body of the federal government or any state, county or local governmental body
having jurisdiction.
14.4 Exclusion of Consequential Damages. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY PUNITIVE, SPECIAL, CONSEQUENTIAL, OR
INDIRECT DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS.
14.5 Notices. Unless otherwise explicitly provided herein, all
notices provided for in this Agreement shall be in writing and shall be (i)
delivered in person or by messenger, (ii) mailed by Federal Express or similar
private courier service, (iii) sent by United States certified mail (return
receipt requested), postage prepaid, (iv) by facsimile, telex or telecopier, or
(v) by any other commercially reasonable means, to the addresses of the parties
set forth below or to such other addresses as either party may designate in
writing to the other party. All notices given hereunder shall be effective on
the date of actual receipt at the appropriate address. Notice given
27
<PAGE> 31
pursuant to clause (iv) shall be effective (A) upon actual receipt if received
during recipient's normal business hours, or (B) at the beginning of the next
Business Day after receipt if received after the recipient's normal business
hours.
SELLER: Wire Transfer Payments:
First Bank of Minneapolis
ABA #091-000-022
Apache Corporation Master
Account #1-502-5008-9953
For credit of (appropriate name of entity)
Notices, Statements and Correspondence:
Apache Gathering Company
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
Telephone: (713) 296-6000
Facsimile: (713) 296-6474
BUYER: Wire Transfer Payments:
Producers Energy Marketing, LLC
Texas Commerce Bank of Houston
ABA No.: 113000609
Account No.: 001-00375832
Invoices:
Producers Energy Marketing, LLC
616 F.M. 1960 West, Suite 800
Houston, Texas 77090
Attn: Manager Gas Accounting
Telephone: (713) 583-6472
Facsimile: (713) 583-5252
Notices and Correspondence:
Producers Energy Marketing, LLC
616 F.M. 1960 West, Suite 800
Houston, Texas 77090
Attn: Manager Producer Services
Telephone: (713) 583-6252
Facsimile: (713) 583-5252
14.6 Assignability. This Agreement shall not be assigned by either
party without the prior written consent of the other party.
14.7 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
ITS PRINCIPLES OF CONFLICTS OF LAWS. Any dispute
28
<PAGE> 32
concerning the rights and obligations of Buyer and Seller hereunder, or the
interpretation of any provision of this Agreement, shall be resolved in
accordance with Section 14.10.
14.8 Integration. This Agreement sets forth all understandings of
Buyer and Seller with respect to the purchase and sale of Committed Gas. All
other agreements, oral or written, concerning such purchase and sale are merged
into and superseded by this Agreement. No modification or amendment hereof
shall be effective unless in writing and signed by both parties.
14.9 Confidentiality.
(a) Parties' Obligations. The terms of this Agreement,
including, but not limited to, the Contract Price and all other information
exchanged by the parties hereunder, will be kept confidential by the parties
unless such information becomes known to the public at large without breach of
this Agreement, or a party is obligated to disclose such information to (i) a
Transporter or other third party for the purpose of effectuating the sale and
transportation of the Gas pursuant to this Agreement, (ii) to meet applicable
securities or commodity exchange requirements, (iii) to meet regulatory filing
requirements, (iv) to comply with mandatory document production requirements
under federal or state Rules of Civil Procedure, a subpoena or other order of
judicial or administrative tribunal, (v) to comply with contractual
requirements with third parties or (vi) to comply with a request made by a
Lender. Without limiting the generality of the foregoing, it is specifically
understood and agreed that LLC may disclose a form of this Agreement (excluding
EXHIBIT A and such other provisions hereof as may be mutually acceptable to the
parties) for informational purposes to parties interested in joining LLC as
members or participating producers.
(b) Handling of Request for Disclosure. If either party
believes that it may be required to disclose information concerning this
Agreement that is to be kept confidential pursuant to Section 14.9(a), the
disclosing party will notify the other party in writing as soon as practicable
in advance of disclosure, specifying the nature of the request and the
information to be disclosed. To the extent permitted under statutes, rules,
regulations or contractual provisions applicable to the disclosure request, the
party required to make disclosure will assert any available privilege
permitting non-disclosure of the information that is to be kept confidential
hereunder, or request confidential treatment of the disclosed information,
including exemption from public disclosure under applicable "open records" and
"freedom of information" statutes. The party disclosing information required
to be kept confidential under Section 14.9(a) shall use commercially reasonable
efforts to obtain from the person to whom disclosure of such information is
made an agreement, to be signed by such person and any employee, agent,
officer, director or independent contractor of such person to whom disclosure
shall be made, such agreement to have terms and conditions substantially the
same as those set forth in this Section 14.9.
(c) Responsibility for Confidentiality. Each party will be
deemed solely responsible and liable for the actions of its employees,
independent contractors, officers, and agents for maintaining the
confidentiality commitments of this Article, but will be required in that
regard only to exercise such care in maintaining the confidentiality of this
Agreement as it normally exercises in preserving the confidentiality of its
other commercially sensitive documents.
14.10 Arbitration.
(a) Generally. Subject to the provisions of this Section
14.10, all claims, controversies, disputes and other matters in question
arising out of, or relating to, this Agreement
29
<PAGE> 33
or the breach hereof shall be decided by arbitration proceedings before three
(3) arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then existing unless the parties mutually
agree otherwise. This agreement to arbitrate shall bespecifically enforceable
under the prevailing arbitration law. The demand for arbitration shall be made
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in no event shall it be made when the institution of a legal or
equitable proceeding based upon such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. The parties shall
continue performing their obligations under this Agreement while any
arbitration proceeding hereunder is pending. The proceeding shall be held in
Houston, Texas or another location mutually agreeable to Buyer and Seller. The
arbitrators shall be selected in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The award rendered by a
majority of the arbitrators shall be final, and judgment may be entered upon it
in accordance with applicable law in any court having jurisdiction thereof, the
parties hereto consenting to the jurisdiction of such courts for such purpose.
The party prevailing in the arbitration shall also be awarded all reasonable
attorneys' fees, costs and expenses of arbitration, including, without
limitation, all arbitrators' fees, costs and expenses.
(b) Special Provisions Applicable to Pricing Disputes.
The provisions of this Section 14.10(b) shall apply to disputes relating to the
determination of the Contract Price, including, without limitation, issues
relating to the choice of an applicable Index, Index Price or the determination
of Index Price Adjustments (all such disputes being hereinafter called "Price
Disputes"). The arbitrators shall be selected in accordance with Section
14.10(a), it being understood, however, that at least one of the arbitrators
shall have, prior to appointment, a minimum of five (5) Years' experience in
the natural gas marketing industry. Each party shall deliver to the other
party and to the arbitrators, within ten (10) Business Days of the appointment
of the arbitrators, a written proposal stating such party's proposed outcome,
together with supporting materials and documentation. Each party shall submit
its response to the other party's proposal within ten (10) Business Days after
the arbitrators' and other party's receipt of such proposal. The arbitrators,
in their discretion, may request the submission of additional information, and
may conduct a hearing on the subject matter of the dispute. Within forty-five
(45) Days after the selection and appointment of the arbitrators, a majority of
the arbitrators shall select and adopt either Seller's proposal or Buyer's
proposal, without modification or compromise. The arbitrators shall make their
decision as follows: (i) in any Price Dispute over an Index, the arbitrators
shall decide which of the proposed Indexes presented to the arbitrators, after
Index Price Adjustments, best represents the market price for Gas of like
quantities and quality at the applicable Delivery Point(s), (ii) in any Price
Dispute over Index Price Adjustments, the arbitrators shall decide which
proposed Index Price Adjustment presented to the arbitrators best represents
the actual and reasonable net costs, and/or differentials, customarily taken
into account in the natural gas marketing industry in determining basis, and
necessary to adjust the Index Price to the Delivery Point(s), and (iii) in all
other Price Disputes, the arbitrators shall consider the terms and conditions
of this Agreement and the requirements of applicable Texas law, including,
without limitation, the Texas version of the Uniform Commercial Code in effect
at the period relevant to the Price Dispute under consideration. The
applicable Contract Price during the arbitration shall be the Contract Price
offered by the Buyer. Upon the conclusion of the arbitration, such Contract
Price, if it has changed as a result of the arbitrators' decision, shall be
adjusted retroactive to the first Day of the Month in which the dispute
resolved by the arbitration arose. Unless explicitly provided otherwise in
this Section 14.10(b), the provisions of Section 14.10(a) shall be applicable
to all arbitrations with respect to Price Disputes.
14.11 Taxes. The Contract Price to be paid by Buyer to Seller for
Committed Gas purchased and sold hereunder is inclusive of the reimbursement of
one hundred percent (100%)
30
<PAGE> 34
of all state severance tax reimbursement. Production, severance, ad valorem,
and/or similar taxes levied on the Committed Gas at or prior to the Delivery
Point(s), and all such taxes, if due, shall be paid by Seller; provided,
however, that where Buyer is required by law to be responsible for the payment
of production, severance or similar taxes, Buyer shall make such payment and
the Contract Price payable to Seller shall be correspondingly decreased by a
like amount. If state law requires Buyer to remit such taxes to the collecting
authority, then Buyer shall do so and deduct the taxes so paid on Seller's
behalf from payments otherwise due to Seller hereunder.
14.12 Construction of Agreement.
(a) General Principles. In construing this Agreement, the
following principles shall be followed:
(i) no consideration shall be given to the fact or
presumption that one party had a greater or lesser hand in drafting this
Agreement;
(ii) examples shall not be construed to limit,
expressly or by implication, the matter they illustrate;
(iii) the word "includes" and its syntactical
variants mean "includes, but is not limited to" and corresponding syntactical
variant expressions;
(iv) the plural shall be deemed to include the
singular and vice versa, as applicable;
(v) the term "party" shall refer to all Affiliates
of such party unless the context specifically indicates to the contrary; and
(vi) each exhibit, attachment, and schedule to this
Agreement is a part of this Agreement, but if there is any conflict or
inconsistency between the main body of this Agreement and any exhibit,
attachment, or schedule, the provisions of the main body of this Agreement
shall prevail.
(b) Severability. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under the present or future laws
effective during the term of this Agreement, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement, and (c) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision, there will be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and may
be legal, valid and enforceable.
14.13 Relationship of Parties. This Agreement does not create a
partnership, joint venture, or relationship of trust or agency between the
parties.
14.14 Representations and Warranties of the Seller. Each party
executing this Agreement as a Seller hereby represents and warrants to Buyer
that as to such Seller on and as of the date hereof (and no party executing
this Agreement as a Seller shall be liable to Buyer or another for any
inaccuracy of any representation or warranty made hereunder by another party
executing this Agreement as a Seller):
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<PAGE> 35
(a) It is duly formed and validly existing and, to the extent
it is a corporation, in good standing under the laws of the state or
jurisdiction of formation, with all requisite corporate, partnership or limited
liability company, as the case may be, power and authority to carry on the
business in which it is engaged and to perform its respective obligations under
this Agreement;
(b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite corporate, partnership, limited
liability company, or similar action;
(c) It has all the requisite corporate, limited liability
company, partnership or similar power and authority to enter into this
Agreement and perform its obligations hereunder;
(d) The execution and delivery of this Agreement do not, and
consummation of the transactions contemplated herein will not, violate any of
the material provisions of organizational documents, any material agreement
pursuant to which such party or its properties are bound or, to its knowledge,
any material applicable laws;
(e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditor's rights and general principles of
equity (whether applied in a proceeding in a court of law or equity); and
(f) It has assets of $5,000,000 or more according to its most
recent financial statements prepared in accordance with generally accepted
accounting principles, consistently applied, and knowledge and experience in
financial matters and the oil and gas industry that enable Seller to evaluate
the merits and risks of this Agreement.
14.15 Representations and Warranties of Buyer. Buyer hereby
represents and warrants to each party executing this Agreement as a Seller that
on and as of the date hereof:
(a) It is duly formed and validly existing and in good
standing under the laws of the state or jurisdiction of formation, with all
requisite limited liability company power and authority to carry on the
business in which it is engaged and to perform its respective obligations under
this Agreement;
(b) The execution and delivery of this Agreement have been
duly authorized and approved by all requisite limited liability company, or
similar action;
(c) It has all the requisite limited liability company or
similar power and authority to enter into this Agreement and perform its
obligations hereunder;
(d) The execution and delivery of this Agreement do not, and
consummation of the transactions contemplated herein will not, violate any of
the material provisions of organizational documents, any material agreement
pursuant to which such party or its properties are bound or, to its knowledge,
any material applicable laws;
(e) This Agreement is valid, binding, and enforceable against
it in accordance with its terms, subject to bankruptcy, moratorium, insolvency
and other laws generally affecting creditor's rights and general principles of
equity (whether applied in a proceeding in a court of law or equity); and
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<PAGE> 36
(f) It has assets of $5,000,000 or more according to its
most recent financial statements prepared in accordance with generally accepted
accounting principles, consistently applied, and knowledge and experience in
financial matters and the oil and gas industry that enable Buyer to evaluate
the merits and risks of this Agreement.
14.16 Seller's Agent. Each party executing this Agreement as a
Seller hereby appoints APACHE GATHERING COMPANY as its agent, attorney-in-fact
and representative ("Seller's Agent") for the purpose of (i) providing or
receiving any other notices required or permitted hereunder, (ii) receiving any
amounts or payments due any such Seller hereunder, (iii) making any elections
or taking any actions required or permitted hereunder by Seller, including,
without limitation, making any amendments to this Agreement or any Exhibit
thereto. Buyer is entitled to assume that Seller's Agent is authorized to act
on behalf of each Seller hereunder to avoid liability should any dispute as to
the matters set forth in the preceding sentence arise. It is specifically
understood and agreed, however, that (i) Buyer reserves the right to deal
directly with any party upon Buyer's actual awareness of any dispute between a
party and its Seller Agent and (ii) Buyer may interplead any amounts in dispute
between a party and its Seller Agent in accordance with and subject to the
terms of Section 8.7 and Section 14.17.
14.17 No Third Party Beneficiaries. Any agreement herein contained,
expressed or implied, shall be only for the benefit of the parties and their
respective legal representatives, successors, and assigns, and such agreements
or assumptions shall not inure to the benefit of any other person whomsoever,
it being the intention of the parties that no person shall be deemed a third
party beneficiary of this Agreement. It is specifically understood and agreed
that, in the performance of its duties hereunder, Buyer may interplead funds in
its possession with respect to this Agreement if there is a dispute regarding
the disposition of such funds between the Seller and a third person, or any
party and its Seller's Agent, and Buyer shall be indemnified for all Losses in
consequence of such interpleader in accordance with Section 8.7.
14.18 Further Assurances. Each party shall take such acts and
execute and deliver such documents in form and substance reasonably
satisfactory to each of them, in order to effectuate the purposes of this
Agreement.
14.19. WAIVER OF CONSUMER RIGHTS. BUYER AND EACH PARTY EXECUTING THIS
AGREEMENT AS A SELLER HEREBY WAIVE THEIR RESPECTIVE RIGHTS UNDER THE DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, BUYER AND EACH PARTY
EXECUTING THIS AGREEMENT AS A SELLER VOLUNTARILY CONSENT TO THIS WAIVER. IN
ADDITION, (i) BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT BUYER'S LEGAL
COUNSEL WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY
SELLER OR AN AGENT OF SELLER, AND (ii) EACH PARTY EXECUTING THIS AGREEMENT AS A
SELLER HEREBY REPRESENTS AND WARRANTS TO BUYER THAT SUCH SELLER'S LEGAL COUNSEL
WAS NOT DIRECTLY OR INDIRECTLY IDENTIFIED, SUGGESTED, OR SELECTED BY BUYER OR AN
AGENT OF BUYER.
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<PAGE> 37
IN WITNESS WHEREOF, this Agreement has been executed in duplicate
originals by the parties hereto as of the date set forth below the signature of
each party, but effective as of the Effective Date.
APACHE GATHERING COMPANY
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President
Date: March 1, 1996
---------------------------------------
SELLER
APACHE CORPORATION
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President and Chief Operating Officer
Date: March 1, 1996
----------------------------------------
SELLER
MW PETROLEUM CORPORATION
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President
Date: March 1, 1996
----------------------------------------
SELLER
DEK ENERGY COMPANY
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President
Date: March 1, 1996
----------------------------------------
SELLER
34
<PAGE> 38
APACHE TRANSMISSION CORPORATION
- TEXAS
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President
Date: March 1, 1996
----------------------------------------
SELLER
APACHE MARKETING, INC.
By: /s/ G. Steven Farris
------------------------------------------
Name: G. Steven Farris
Title: President
Date: March 1, 1996
----------------------------------------
SELLER
PRODUCERS ENERGY MARKETING, LLC
By: /s/ William P. Stokes, Jr.
------------------------------------------
Name: William P. Stokes, Jr.
Title: Chief Executive Officer
Date: February 29, 1996
----------------------------------------
BUYER
35
<PAGE> 1
EXHIBIT 11.1
APACHE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- ------------
<S> <C> <C> <C>
Weighted Average Calculation:
- -----------------------------
Net income $ 20,207 $ 45,583 $ 46,755
============= ============= ============
Weighted average shares outstanding 71,792 69,715 62,013
============= ============= ============
Net income per share,
based on weighted average
shares outstanding $ .28 $ .65 $ .75
============= ============= ============
Primary Calculation:
- --------------------
Net income $ 20,207 $ 45,583 $ 46,755
Assumed conversion of
3.93-percent debentures 2,162 2,121 2,145
------------- ------------- ------------
Net income, as adjusted $ 22,369 $ 47,704 $ 48,900
============= ============= ============
Common stock equivalents:
Weighted average shares outstanding 71,792 69,715 62,013
Stock options, using the treasury
stock method 106 115 242
Common stock equivalents
assuming conversion of 3.93-percent
debentures 2,778 2,778 2,778
------------- ------------- ------------
74,676 72,608 65,033
============= ============= ============
Net income per common share primary $ .28 $ .65 $ .75
============= ============= ============
</TABLE>
The assumed conversion of other convertible debt would be insignificant or
antidilutive 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 Java Sea, Inc. Delaware
Apache Oil Sumatra, Inc. Delaware
Apache Qarun Corporation LDC Cayman Islands
Apache Oil Egypt, Inc. Delaware
Apache Overseas, Inc. Delaware
Apache China Corporation LDC Cayman Islands
Apache Cote d'Ivoire Petroleum LDC Cayman Islands
Apache Darag Corporation LDC Cayman Islands
Apache Faiyum Corporation 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 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
Apache (WA 225) Pty Ltd. Western Australia
Mid Equipment, Incorporated Delaware
DEK Energy Company Delaware
DEK Energy Texas, Inc. Delaware
DEK Equipment Leasing Corporation #2 Delaware
DEK Exploration Inc. Delaware
DEK Gas Marketing, Inc. Delaware
DEK International Sales Corporation Delaware
DEK Petroleum Corporation Illinois
Apache Canada Ltd. Alberta, Canada
DEPCO, Inc. Texas
Heinold Holdings, Inc. Delaware
Kishwaukee Development Corporation Illinois
Western Cattle Systems, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-K into Apache Corporation's
previously filed Registration Statements on Form S-3 (Nos. 33-51253, 33-53129,
33-62753 and 33-63923), Form S-4 (No. 33-61669) and Form S-8 (Nos. 33-31407,
33-37402, 33-53442, 33-59721, 33-59723 and 33-63817).
ARTHUR ANDERSEN LLP
Houston, Texas
March 26, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND
We hereby consent to the incorporation in this Form 10-K of Apache
Corporation of our report dated February 13, 1995 on our audits of the
consolidated financial statements of DEKALB Energy Company as of December 31,
1994 and 1993 and for the years ended December 31, 1994 and 1993, and the
incorporation by reference of such report into Apache Corporation's previously
filed Registration Statements on Form S-3 (Nos. 33-51253, 33-53129, 33-62753
and 33-63923), Form S-4 (No. 33-61669) and Form S-8 (Nos. 33-31407, 33-37402,
33-53442, 33-59721, 33-59723 and 33-63817).
Coopers & Lybrand
Chartered Accountants
Calgary, Alberta, Canada
March 27, 1996
<PAGE> 1
EXHIBIT 23.3
[Letterhead of Ryder Scott Company]
As independent petroleum engineers, we hereby consent to the reference
in this Amendment on Form 10-K of Apache Corporation to our Firm's name and our
Firm's review of the proved oil and gas reserve quantities of Apache
Corporation and of DEKALB Energy Company, as of January 1, 1995, and to the
incorporation by reference of our Firm's name and review into Apache
Corporation's previously filed Registration Statements on Form S-3 (Nos.
33-51253, 33-53129, 33-62753 and 33-63923), Form S-4 (No. 33-61669) and Form
S-8 (Nos. 33-31407, 33-37402, 33-53442, 33-59721, 33-59723 and 33-63817).
Ryder Scott Company
Petroleum Engineers
Houston, Texas
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,633
<SECURITIES> 0
<RECEIVABLES> 175,949
<ALLOWANCES> 0
<INVENTORY> 9,764
<CURRENT-ASSETS> 208,336
<PP&E> 4,377,104
<DEPRECIATION> (1,975,543)
<TOTAL-ASSETS> 2,681,450
<CURRENT-LIABILITIES> 230,349
<BONDS> 1,072,076
<COMMON> 98,124
0
0
<OTHER-SE> 993,681
<TOTAL-LIABILITY-AND-EQUITY> 2,681,450
<SALES> 653,144
<TOTAL-REVENUES> 750,702
<CGS> 500,131
<TOTAL-COSTS> 600,470
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,057
<INCOME-PRETAX> 33,143
<INCOME-TAX> 12,936
<INCOME-CONTINUING> 20,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,207
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
