UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
COMMISSION FILE NUMBER 0-20125
BASIN EXPLORATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1143307
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 17TH STREET, SUITE 3400, DENVER, CO 80202
(Address of principal executive offices) (Zip Code)
(303) 685-8000
(Registrant's telephone number, including area code)
370 17th Street, Suite 1800, Denver, CO 80202
(Former Address, If Changed Since Last Report)
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 the number of shares outstanding of each of the issuer's classes
of Common stock, as of the latest practicable date.
Outstanding at
CLASS APRIL 30, 1997
----------------------------------- ------------------
Common stock, $.01 par value 10,779,000 shares
<PAGE>
BASIN EXPLORATION, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996..................... 3
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996 .............. 5
Consolidated Statements of Changes in
Stockholders' Equity..................................... 6
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996............... 7
Notes to Consolidated Financial Statements................ 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
PART II. OTHER INFORMATION
Item 5. Other Information..........................................15
Item 6. Exhibits and Reports on Form 8-K...........................15
SIGNATURES...........................................................18
EXHIBITS -
Index to Exhibits...................................................19
2
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
(In thousands) March 31, December 31,
1997 1996
-------- ------------
CURRENT ASSETS:
Cash and equivalents $ 461 $ 22,023
Accounts receivable 4,309 5,108
Stockholder note receivable 559 559
Prepaids and other 3,617 2,203
------- ---------
8,946 29,893
------- ---------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, under the full
cost method of accounting
Proved 100,844 78,641
Unproved 10,635 9,822
Less accumulated depreciation,
depletion and amortization (37,514) (36,581)
------- -------
73,965 51,882
Furniture and equipment, net 2,573 2,918
------- -------
76,538 54,800
------- -------
Other assets 213 264
------- -------
$ 85,697 $ 84,957
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands, except share data) March 31, December 31,
1997 1996
-------- --------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 9,005 $ 7,469
Accrued ad valorem taxes 2,293 2,040
Income taxes payable 42 1,000
Current portion of long-term debt 145 206
-------- --------
11,485 10,715
LONG-TERM DEBT, net of current portion 169 218
AD VALOREM TAXES AND OTHER 453 513
DEFERRED INCOME TAXES 4,765 4,760
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per
share; 10,000,000 shares authorized,
no shares issued and outstanding
Common stock, par value $.01 per
share, 50,000,000 shares authorized,
10,757,000 shares issued 108 108
Additional paid-in capital 59,284 59,219
Retained earnings 9,565 9,556
Common stock held in treasury, at cost,
56,000 shares (132) (132)
------ ------
Total stockholders' equity 68,825 68,751
------ ------
$ 85,697 $ 84,957
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended
March 31,
(In thousands, except per share data) 1997 1996
---- ----
REVENUE:
Oil sales $ 2,155 $ 3,875
Gas sales 1,082 3,611
Interest and other 175 90
-------- --------
3,412 7,576
-------- --------
COSTS AND EXPENSES:
Lease operating expenses 1,059 1,676
Production taxes 364 726
Depreciation, depletion and amortization 1,160 3,354
General and administrative, net 786 1,189
Interest expense 29 1,529
Other - 18
----- -----
3,398 8,492
----- -----
INCOME (LOSS) BEFORE INCOME 14 (916)
TAXES
Income tax provision 5 -
----- ------
NET INCOME (LOSS) $ 9 $ (916)
====== ======
EARNINGS (LOSS) PER SHARE $ - $(0.09)
====== ======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,701 10,687
====== ======
The accompanying notes are an integral part of these
consolidated financial statements
5
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON STOCK PAID -IN TREASURY STOCK EARNINGS STOCKHOLDERS'
(IN THOUSANDS) SHARES AMOUNT CAPITAL SHARES AMOUNT (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1996 10,724 $ 107 $ 59,288 (32) $ (94) $(6,014) $53,287
Issuance and vesting of restricted
stock and stock options 33 1 181 - - - 182
Purchase of treasury stock and - - (250) (24) (38) - (288)
options
Net income - - - - - 15,570 15,570
----------------------------------------------------------------------------------------
BALANCES, December 31, 1996 10,757 $108 $ 59,219 (56) $(132) $ 9,556 $68,751
Issuance and vesting of restricted
stock and stock options - - 65 - - - 65
Net income - - - - - 9 9
----------------------------------------------------------------------------------------
BALANCES, March 31, 1997 10,757 $108 $ 59,284 (56) $(132) $ 9,565 $68,825
========================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) For the Three Months Ended
March 31,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9 $ (916)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities -
Depreciation, depletion and amortization 1,160 3,354
Deferred income tax expense (benefit) 5 -
Stock compensation expense 65 47
Amortization of debt issuance expense - 65
Other (6) -
Changes in operating assets and liabilities -
Decrease (increase) in -
Restricted cash - (16)
Receivables 799 1,438
Inventory and other (1,364) 81
(Decrease) increase in
Accounts payable and accrued expenses 1,706 13
Ad valorem taxes and other 193 (75)
Income taxes payable (958) -
-------- --------
Net cash provided by operating activities 1,609 3,991
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions (23,245) (4,443)
Proceeds from sale of property and equipment 184 37,202
-------- --------
Net cash provided by (used in) investing activities (23,061) 32,759
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable and long-term debt (110) (37,149)
Purchase of treasury stock and options - (5)
-------- --------
Net cash used in financing activities (110) (37,154)
-------- --------
DECREASE IN CASH AND EQUIVALENTS (21,562) (404)
CASH AND EQUIVALENTS, beginning of period 22,023 1,613
-------- --------
CASH AND EQUIVALENTS, end of period $ 461 $ 1,209
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 23 $ 1,271
======== ========
Cash paid for income taxes $ 958 $ -
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) UNAUDITED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of Basin Exploration, Inc.
and its wholly-owned subsidiaries (collectively, "Basin" or the "Company") as of
March 31, 1997 and the results of operations and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full year. Management believes the disclosures made are adequate to
ensure that the information is not misleading, and suggests that these financial
statements be read in conjunction with the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
8
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Basin Exploration, Inc. ("Basin" or the "Company") is an independent energy
company engaged in the acquisition, exploration and development of oil and gas
properties and marketing of the related oil and gas production in the United
States, including the Gulf of Mexico. Basin's revenue and results of operations
are significantly affected by changes in oil and gas prices. Assuming level
production, the Company's total revenue would generally be higher in the first
and fourth quarters due to higher natural gas prices typically resulting from
greater demand during colder months. The following discussion should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto.
RESULTS OF OPERATIONS
REVENUE. Revenue for the three months ended March 31, 1997 was $3,412,000,
representing a decrease of $4,164,000, or 55%, as compared to the first quarter
of 1996. The following table reflects the Company's average oil and gas prices
and its average daily oil and gas production for the periods presented:
THREE MONTHS ENDED MARCH 31,
1997 1996 % CHANGE
Average price:
Oil (per bbl)............. $20.41 $17.94 14
Gas (MMcf)................ $ 2.69 $ 1.47 83
Average daily production:
Oil (bbl)................. 1,173 2,374 (51)
Gas (Mcf)................. 4,473 27,000 (83)
The decreases in average daily production were primarily attributable to sales
of producing properties during 1996. The Company consummated two transactions
during 1996 in which all of its assets in the D-J Basin were sold. As of
December 31, 1995, these assets represented approximately two-thirds of the
Company's producing wells and 70% of its proved oil and gas reserves. Excluding
production and sales from such D-J Basin properties, average oil and gas prices
and average daily oil and gas production for the periods presented were:
9
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
1997 1996 % CHANGE
Average price:
Oil (per bbl)............. $ 20.41 $ 18.95 8
Gas (per Mcf)............. $ 2.69 $ 1.28 110
Average daily production:
Oil (Bbl)................. 1,173 1,182 (1)
Gas (Mcf)................. 4,473 4,977 (10)
LEASE OPERATING EXPENSES. Lease operating expenses for the three months ended
March 31, 1997 were $1,059,000, a decrease of $617,000, or 37%, compared to
1996. Lease operating costs per Mcfe produced during the three months ended
March 31, 1997 averaged $1.02 compared to $.45 in 1996. These higher costs per
Mcfe were caused primarily by the increased portion of the Company's total
active wells that are oil wells, with typically higher unit operating costs,
following the sale of the D-J Basin assets.
PRODUCTION TAXES. Production taxes for the three months ended March 31, 1997
were $364,000, a decrease of $362,000, or 50%, compared to 1996. Production
taxes as a percent of oil and gas sales for the three months ended March 31,
1997 were 11.2%, compared to 9.7% in 1996. The increased average tax rate was
due to a greater portion of sales occurring in higher-tax jurisdictions in 1997.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization expense for the three months ended March 31, 1997 was $1,160,000, a
decrease of $2,194,000, or 65%, as compared to 1996. The decrease was primarily
attributable to the lower production volumes in 1997 as compared to 1996. The
depletion rate of $.90 per Mcfe produced in the three months ended March 31,
1997 compared to an $.83 per Mcfe average depletion rate during
1996. The higher rate in 1997 was largely due to higher-cost Gulf of Mexico
proved reserves acquired in the first quarter of 1997 which, although not yet
producing, were incorporated in the computation of the depletion rate for the
period.
GENERAL AND ADMINISTRATIVE, NET. General and administrative expenses for the
three months ended March 31, 1997 were $786,000, a decrease of $403,000, or 34%,
as compared to 1996. The decreases resulted primarily from staff reductions made
during the first half of 1996 and related reductions in office rent expense
attributable to the Company's move to smaller quarters in the second half of
1996.
INTEREST EXPENSE. Interest expense, which includes commitment fees on the unused
line of credit, for the three months ended March 31, 1997 totaled $29,000
representing a decrease of $1,500,000, or 98%, as compared to 1996. The decrease
was attributable to lower average borrowings as a result of asset sales proceeds
applied to debt retirement during 1996, as summarized below:
10
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
1997 1996
Average borrowings (in thousands) $ 400 $ 71,100
Average interest rate on borrowings 6.6% 8.6%
INCOME TAX BENEFIT (PROVISION). The income tax provision for 1997 approximates
the amount that would be calculated by applying statutory income tax rates to
income before income taxes. No income tax benefit was recorded during the three
months ended March 31, 1996 as realization of net operating loss tax benefits
was not reasonably assured prior to the consummation of the second D-J Basin
asset sale.
LIQUIDITY AND CAPITAL RESOURCES
In February 1996, the Company entered into two agreements pursuant to which it
sold all of its assets in the D-J Basin, effective January 1, 1996, for an
aggregate adjusted sales price of $123.5 million. The sale of approximately
one-third of these D-J Basin assets was closed in March 1996 and the sale of the
remainder was closed in June 1996. Combined, these transactions resulted in the
disposition of two-thirds of the Company's total wells and approximately 70% of
its estimated proved oil and gas reserves as of December 31, 1995. A portion of
the sales proceeds was used to repay all outstanding long-term debt and the
remainder, net of transaction costs, was initially invested in short-term,
interest-bearing cash equivalents pending redeployment into new oil and gas
investments. The Company's remaining producing properties after the sale were
primarily mature oil and gas fields in the Powder River Basin, Green River
Basin, and elsewhere in the Rocky Mountain region. The Company has, since the
beginning of 1996, been focusing its exploratory activities in the shallow
waters of the Gulf of Mexico, and its acquisition and exploitation efforts in
the Gulf Coast and Rocky Mountain areas. At the beginning of 1997, the Company
had net working capital of approximately $19.2 million, including $22.0 million
of cash equivalents, and had virtually no long-term debt. After investing
approximately $23.2 million in oil and gas activities during the first quarter
of 1997, the Company ended the period with a working capital deficit of $2.5
million, but continued to be essentially free of long-term debt.
The Company has a line of credit established with its bank group that provides
for the interest rate on borrowings to be determined by reference to either the
prime rate or LIBOR, at the Company's election. A varying spread of 0% to 0.5%
is added to the prime rate, or 0.625% to 1.25% is applied to LIBOR, based upon
the Company's debt-to-capitalization ratio at the time. The credit agreement
provides for borrowings to be revolving loans until August 1, 1999, at which
time the outstanding balance will be converted into a four-year amortizing term
loan. The credit agreement contains
11
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
various covenants, including ones that could limit the Company's ability to
incur other debt, dispose of assets, pay dividends, or repurchase stock. The
borrowing base under the revolving credit facility was established at $25
million in August 1996 and is scheduled to be redetermined as of April 30, 1997
and generally at six month intervals thereafter until converted into a term
loan. The Company has been notified by its agent bank that the borrowing base
that will be effective for the six months beginning April 30, 1997 will be $32.5
million. Because this increase is based, in part, on Gulf of Mexico proved
reserves that have not yet commenced production, the interest rate that will be
applied during this six-month period whenever borrowings under the line of
credit exceed $25 million will be 0.5% greater than would otherwise be
applicable. As of March 31, 1997 there were no borrowings outstanding under the
facility.
The Company's capital expenditures are generally discretionary and activity
levels are determined by a number of factors, including oil and gas prices,
interest rates, availability of funds, quantity and character of identified
investment projects, availability of service providers, and competition. The
Company's capital budget for calendar 1997 is presently established at
approximately $55 million, allocated as follows: approximately $15 million is
provided for proved property acquisitions consummated in the first quarter;
approximately $20 million is provided for acquisitions of prospect leaseholds,
seismic data procurement, and exploratory drilling costs; approximately $15
million relates to anticipated development of the Company's existing property
base; and approximately $5 million is provided for other activities, including
current year development of assumed exploratory discoveries. Approximately $23.2
million was invested during the first quarter of 1997. The remaining budget for
the year of approximately $31.8 million is partially uncommitted and is
dependent on future developments that are not entirely within the Company's
control, such as drilling rig availability, success in acquiring leaseholds, and
drilling results. Further, the Company intends to continue to pursue
acquisitions of proved properties, which, while not budgeted, could be very
significant. Therefore, the Company's actual capital expenditures may vary
significantly from these budgeted amounts.
The Company participated in winning bids for 11 tracts at the central Gulf of
Mexico lease sale held on March 5, 1997 by the federal government's Minerals
Management Service (MMS). If all 11 tracts are awarded by the MMS, which can
choose to reject all bids for a given lease, the Company's net share of the
related leasehold bonuses will total approximately $5.7 million. A deposit of
20% of the bid amount was included with the submitted bids. Upon award, the
Company will owe the remainder which, in the aggregate, would total
approximately $4.6 million. Otherwise, the Company had no extraordinary capital
expenditure commitments pending at March 31, 1997.
Approximately $20.4 million of investments made during the first quarter of 1997
related to operations in the Gulf of Mexico. Such amounts were incurred
primarily for a $14.4 million acquisition of properties with proved and probable
reserves, the continuation drilling of an exploratory well commenced in 1996,
the drilling of a successful delineation well related to a new field discovery,
and acquisitions of 3-D seismic data.
In late-1996 and early-1997 the Company participated in drilling two successful
Gulf of Mexico exploratory wells on Eugene Island (EI) Blocks 64 and 65,
respectively. The successful field
12
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
delineation well drilled in the first quarter of 1997 was located on EI 65. The
EI 64 well is expected to commence production in the third quarter of 1997 after
completion and tie-in to a nearby production platform owned and operated by a
third party. A production platform is scheduled to be installed on the EI 65
property in the third quarter of 1997 to commence production from both the #1
and #2 wells. Through the $14.4 million acquisition consummated in the first
quarter of 1997, the Company increased its interests in EI Blocks 64 and 65 and
acquired interests in East Cameron (EC) Block 378. A well on EC 378 was
completed subsea in January 1997 and is waiting on pipeline installation to
connect to a nearby third party production platform. Production from EC 378 is
expected to commence during the fourth quarter of 1997.
Management believes that the remainder of the current-year budget, as described
above, can be funded without new sources of capital by utilizing projected cash
flow and borrowings under the Company's revolving credit facility. The Company's
ability to fund investment activities in future periods may be significantly
affected by the results obtained from investments made in 1997. Cash flow is
expected to increase significantly during the latter part of the year when EI
64, EI 65 and EC 378 are projected to be on-line; however, these properties have
not produced before and the forecast on-line dates and production rates may not
be achieved. Failure of these properties to perform as expected could impair the
Company's borrowing capacity as well as its cash flow. If conditions warrant,
the Company may consider raising additional capital through issuance of debt or
equity securities. Should the Company undertake a large acquisition, issuing
such securities or monetizing assets would likely be required to fund the
transaction.
CHANGES IN PRICES
The Company's revenue, cash flow, and the value of its oil and gas properties
have been, and will continue to be, affected by changes in oil and natural gas
prices. The Company's ability to maintain current borrowing capacity and to
obtain additional capital on attractive terms is also substantially dependent on
oil and natural gas prices. As such, changes in oil and gas prices can
significantly affect the amount of the Company's capital expenditures. Oil and
natural gas prices are subject to significant seasonal and other fluctuations
that are beyond the Company's ability to control or predict. The Company
periodically enters into product swap agreements in order to hedge against the
volatility of product prices. Although the Company enters into the agreements to
limit exposure to price decreases, the agreements also limit the Company's
ability to benefit from significant price increases on the contract volumes.
Effective July 1, 1996, the Company entered into a crude oil swap agreement with
a contract volume of 10,000 barrels per month through December 31, 1997. This
agreement provides for cash settlement of the differential between the $18.32
per barrel contract price and the average closing NYMEX crude oil price during
each month. The Company has also entered into a crude oil collar arrangement
effective for calendar 1997 on an additional 10,000 barrels per month. This
agreement provides for the cash settlement of the differential between the
monthly average closing NYMEX price and the contract floor of $19.50 per barrel
or the contract ceiling of $24.35 per barrel, if the average monthly NYMEX price
falls outside of the range defined by such contract floor and contract ceiling.
Effective October 1, 1997, the Company entered into a natural gas collar
arrangement for the succeeding 12-month period, for a contract volume of 450,000
MMBTU per month. The applicable NYMEX floor and ceiling prices vary by
13
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
month, and average $1.99 and $2.432, respectively, over the contract term. Any
gain or loss realized on these agreements is included as a component of sales in
the month of production.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements that are not historical facts contained in this report are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ from projected results. Such statements address
activities, events or developments that the Company expects, believes, projects,
intends or anticipates will or may occur, including such matters as future
capital, development and exploration expenditures (including the amount and
nature thereof), drilling of wells, future production of oil and gas, business
strategies, cash flow and anticipated liquidity, prospect development and
property acquisition, or marketing of oil and gas. Factors that could cause
actual results to differ materially ("Cautionary Disclosures") are described,
among other places, in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission. Without limiting the
Cautionary Disclosures so described, Cautionary Disclosures include, among
others: general economic conditions, the market price of oil and natural gas,
the risks associated with exploration, the Company's ability to find, acquire,
market, develop and produce new properties, operating hazards attendant to the
oil and natural gas business, downhole drilling and completion risks that are
generally not recoverable from third parties or insurance, the Company's
inexperience in the Gulf of Mexico, uncertainties in the estimation of proved
reserves and in the projection of future rates of production and timing of
development expenditures, potential mechanical failure of individually
significant productive wells, the strength and financial resources of the
Company's competitors, the Company's ability to find and retain skilled
personnel, climatic conditions, labor relations, availability and cost of
material and equipment, delays in anticipated start-up dates, environmental
risks, the results of financing efforts, actions or inactions of third-party
operators of the Company's properties, and regulatory developments. All written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the Cautionary
Disclosures. The Company disclaims any obligation to update or revise any
forward-looking statement to reflect events or circumstances occurring hereafter
or to reflect the occurrence of anticipated or unanticipated events.
14
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 5 OTHER INFORMATION
On April 28, 1997, the Company's Board of Directors authorized
the combination of the Company's Equity Incentive Plan and
Non-Employee Director's Stock Option Plan, to reduce the
administrative burden of maintaining separate plans and to
provide to the Company the benefit of the ability to make
discretionary grants of equity incentive benefits to its
non-employee directors. This action was initiated in view of
recent changes by the Securities Exchange Commission to its
Regulations under Section 16 of the Securities Exchange Act of
1934. These amendments modified the regulations applicable to
equity incentive plans for an issuer's officers and directors,
specifically eliminating the requirements which previously
induced issuers to maintain separate stock option plans for
outside directors and to limit such plans to non-
discretionary grants of benefits, so as to not disqualify
non-employee directors from serving on incentive compensation
committees for the issuer's employees. The combined plan is
filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.
Stock options granted to the Company's Equity Incentive Plan
and Non-Employee Director Plan and outstanding at the time of
the combination of the plans remain outstanding and
exercisable for the identical number of shares and at the same
times and exercise prices applicable to such options prior to
the combination.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1 -- Agreement and Plan of Merger between Sterling Energy
Corporation, Basin Energy, Inc. and Basin Exploration, Inc.
dated October 13, 1994(7)
2.2 -- Plan of Merger between Basin Sterling, Inc. and Basin
Exploration, Inc. dated November 22, 1994(8)
2.3 -- Plan of Merger between Basin Operating Company and Basin
Exploration, Inc. dated December 14, 1994(8)
3.1 -- Restated Certificate of Incorporation of Basin.(2)
3.2 -- Restated Bylaws of Basin.(2)
4.1 -- Common Stock Certificate of Basin.(2)
10.1 -- Equity Incentive Plan as amended April 28, 1997.(1)
10.3 -- Key Employee Participation Plan.(2)
10.4 -- Employment Agreement dated March 31, 1992 by and between Basin
and Michael S. Smith.(3)
10.5 -- Gulf Coast Geoscientist Overriding Royalty Interest Plan dated
November 30, 1995.(10)
10.6 -- Form of Rights Agreement dated as of February 24, 1996,
between Basin Exploration, Inc. and Corporate Stock Transfer,
Inc. as Rights Agent.(9)
10.7 -- Performance Shares Plan approved February 4, 1997.(12)
10.8 -- Change of Control Employment Agreement dated October 13, 1995
between Basin Exploration, Inc. and Howard L. Boigon.(10)
10.9 -- Employment Agreement dated August 28, 1995 between Basin
Exploration, Inc. and Samuel D. Winegrad.(10)
10.10 -- Employment Agreement dated June 28, 1995 between Basin
Exploration, Inc. and Neil L. Stenbuck.(10)
10.11 -- Employment Agreement dated November 10, 1995 between Basin
Exploration, Inc. and David A. Pustka.(10)
10.12 -- Employment Agreement dated February 23, 1996 between Basin
Exploration, Inc. and Thomas J. Corley.(12)
10.13 -- Assignment and Assumption of Lease dated December 18, 1995 by
and between Team, Inc., as original Tenant, Basin Exploration,
Inc., as New Tenant, and FC Tower Property Partners, L.P.,
as Landlord.(9)
15
<PAGE>
10.14 -- First Supplement to Amended Mortgage, Security Agreement,
Assignment, Financing Statement and Fixture Filing dated May
8, 1995 by and between Basin Exploration, Inc. and Basin Gas
Ltd. to NationsBank of Texas, N.A., as successor collateral
agent for the benefit of Colorado National Bank, Union Bank
and NationsBank of Texas, N.A.(8)
10.15 -- Second Supplement to Amended Mortgage, Security Agreement,
Assignment, Financing Statement and Fixture Filing dated May
8, 1995 by and between Basin Exploration, Inc., and Basin
Gas Ltd. to NationsBank of Texas, N.A. in its capacity as
the successor collateral agent for the benefit of Colorado
National Bank, Union Bank and NationsBank of Texas, N.A.(10)
10.16 -- Agreement for Purchase and Sale of Assets (Monetization) dated
February 24, 1996 by and between Basin Exploration, Inc., HS
Resources, Inc. and Orion Acquisition, Inc.(7)
10.17 -- Agreement for Purchase and Sale of Assets (Wattenberg), dated
February 24, 1996 by and between Basin Exploration, Inc., HS
Resources, Inc. and Orion Acquisition, Inc.(7)
10.18 -- Lease of Office Space dated September 25, 1992, between
Brookfield Republic Inc. and Basin Operating Company, as
amended(4)+
10.19 -- First Lease of Additional Office Space dated as of December 1,
1994, between Brookfield Republic, Inc. and Basin Operating
Company.(6)+
10.20 -- Amended and Restated Credit Agreement dated August 6, 1996
between the Company and Colorado National Bank, Union Bank
of California, N.A. and NationsBank of Texas, N.A.(11)
10.21 -- Purchase and Sale Agreement dated February 13, 1997, between
Hall-Houston Oil Company et al as Sellers and Basin
Exploration, Inc. as Buyer.(12)++
21 -- Subsidiaries.(12)
27 -- Financial Data Schedule(1)
- --------------
1 Filed herewith.
2 Filed as an Exhibit to Basin's Registration Statement on
Form S-1 as filed on March 17, 1992, Registration No.
33-46486, and incorporated herein by reference.
3 Filed as an Exhibit to Amendment No. 1 to Basin's
Registration Statement on Form S-1 as filed on April 21,
1992, Registration No. 33-46486, and incorporated herein by
reference.
4 Filed as an Exhibit to Basin's Registration Statement on Form
S-1 as filed on October 25, 1993, Registration No. 33-70802,
and incorporated herein by reference.
5 Filed as an Exhibit to Form 8-K filed on December 10, 1994,
and incorporated herein by reference.
6 Filed as an Exhibit to Form 10-K/A-1 filed on June 26, 1995
and incorporated herein by reference.
7 Filed as an Exhibit to Form 8-K filed on March 6, 1996, and
incorporated herein by reference.
8 Filed as an Exhibit to Form 10-K filed on March 28, 1995, and
incorporated herein by reference.
9 Filed as an Exhibit to Form 8-K filed on February 26, 1996,
and incorporated herein by reference.
10 Filed as an Exhibit to Form 10-K filed on March 28, 1996, and
incorporated herein by reference.
11 Filed as an Exhibit to Form 10-Q filed on August 14, 1996, and
incorporated herein by reference.
12 Filed as an Exhibit to Form 10-K filed on March 31, 1997, and
incorporated herein by reference.
+ Confidential treatment has been granted for portions of these
Exhibits.
++ Confidential treatment has been requested for portions of this
Exhibit.
16
<PAGE>
(b) Reports on Form 8-K
None
17
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
BASIN EXPLORATION, INC.
(Registrant)
Date: May 13, 1997 By:/S/ NEIL L. STENBUCK
--------------------
Neil L. Stenbuck
Chief Financial Officer
Date: May 13, 1997 By:/S/ JAMES A TUELL
-----------------
James A. Tuell
Controller
(Principal Accounting Officer)
18
<PAGE>
Index to Exhibits
EXHIBIT NUMBERS EXHIBITS PAGE
10.1 Equity Incentive Plan as Amended April 28, 1997
27. Financial Data Schedule
19
BASIN EXPLORATION, INC.
EQUITY INCENTIVE PLAN
(as amended April 28, 1997)
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. Basin Exploration, Inc., 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 Basin Exploration, Inc. Equity Incentive Plan
(the "Plan") for certain key employees, non-employee directors and consultants
of the Company.
1.2 PURPOSES. The purposes of the Plan are to provide participants
with added incentives to continue in the long-term service of the Company and to
create in such persons a more direct interest in the future success of the
operations of the Company by relating incentive compensation to increases in
stockholder value. With respect to key management employees, the Plan is
intended to help ensure that the income of these employees is more closely
aligned with the income of the Company's stockholders. The Plan is also designed
to attract key employees and to retain and motivate participants by providing an
opportunity for investment in 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
Basin Exploration, Inc. 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.
(b) "Award" means a grant made under this Plan in the form of
Stock, Options, Restricted Stock, Performance Shares, or Performance Units.
(c) "Board" means the Board of Directors of the Company.
(d) "Effective Date" means the effective date of the Plan,
March 9, 1992.
(e) "Eligible Employees" means full-time key employees
(including, without limitation, officers and directors who are also employees)
of the Company or any Affiliated Corporation or any division thereof, upon whose
judgment, initiative and efforts the Company is, or will be, important to the
successful conduct of its business.
<PAGE>
(f) "Fair Market Value" means the officially quoted closing price
of the Stock on the NASDAQ National Market System 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. If no such prices are reported on the NASDAQ National Market
System, then Fair Market Value shall mean the average of the high and low sale
prices for the Stock (or if no sales prices are reported, the average of the
high and low bid prices) as reported by the principal regional stock exchange,
or if not so reported, as reported by NASDAQ or a quotation system of general
circulation to brokers and dealers. If the Stock is not publicly traded, the
Fair Market Value of the Stock on any date shall be determined in good faith by
the Incentive Plan Committee after such consultation with outside legal,
accounting and other experts as the Incentive Plan Committee may deem advisable,
and the Committee shall maintain a written record of its method of determining
such value.
(g) "Incentive Plan Committee" means a committee consisting of at
least two Non-Employee Directors who are empowered hereunder to take actions in
the administration of the Plan. The Incentive Plan Committee shall be so
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 Incentive Plan 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.
(h) "Incentive Stock Option" means any Option designated as such
and granted in accordance with the requirements of Section 422 of the Internal
Revenue Code.
(i) "Internal Revenue Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
(j) "Non-Employee Director" means any member of the Board who
meets the definition of Non-Employee Director under Rule 16b-3 of the 1934 Act.
(k) "Non-Statutory Option" means any Option other than an
Incentive Stock Option.
(l) "Option" means a right to purchase Stock at a stated price
for a specified period of time.
(m) "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).
(n) "Participant" means an Eligible Employee, Non-Employee
Director or consultant to the Company designated by the Incentive Plan Committee
from time to time during the term of the Plan to receive one or more Awards
under the Plan.
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<PAGE>
(o) "Performance Cycle" means the period of time as specified by
the Incentive Plan Committee over which Performance Share or Performance Units
are to be earned.
(p) "Performance Shares" means an Award made pursuant to Section
9 which entitles a Participant to receive Shares, their cash equivalent or a
combination thereof based on the achievement of performance targets during a
Performance Cycle.
(q) "Performance Units" means an Award made pursuant to Section 9
which entitles a Participant to receive cash, Stock or a combination thereof
based on the achievement of performance targets during a Performance Cycle.
(r) "Plan Year" means each 12-month period beginning April 1 and
ending the following March 31, except that for the first year of the Plan it
shall begin on the Effective Date and extend to March 31 of the following year.
(s) "Restricted Stock" Means Stock granted under Section 8 that
is subject to restrictions imposed pursuant to said Section.
(t) "Share" means a share of Stock.
(u) "Stock" means the common stock, $.01 par value, 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.
SECTION 3
PLAN ADMINISTRATION
The Plan shall be administered by the Board which may from time to
time delegate all or part of its authority under this Plan to the Incentive Plan
Committee. References herein to the Plan Administrator refer to the Board or, to
the extent the Board delegates its authority to the Incentive Plan Committee, to
the Incentive Plan Committee. In accordance with the provisions of the Plan, the
Plan Administrator shall, in its sole discretion and except as specifically set
forth at Section 7.1(b), select Participants to whom Awards will be granted, the
form of each Award, the amount of each Award and any other terms and conditions
of each Award as the Plan Administrator may deem necessary or desirable and
consistent with the terms of the Plan. The Plan Administrator 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 Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein. The Plan
Administrator 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 Plan Administrator may correct
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<PAGE>
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 Plan Administrator shall be liable for any action or determination
made in good faith, and all members of the Plan Administrator shall, in addition
to their rights as directors, be fully protected by the Company with respect to
any such action, determination or interpretation. The determination,
interpretations and other actions of the Plan Administrator 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. Initially, 1,421,488 Shares 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 Plan Administrator may
from time to time deem necessary. This authorization shall be increased
automatically on each succeeding annual anniversary of July 1, 1996 (the
"Amendment Effective Date") by an amount equal to that number of Shares equal to
one-half of one percent of the Company's then issued and outstanding Shares. The
Shares may be divided among the various Plan components as the Plan
Administrator shall determine, except that (i) no more than 1,150,000 Shares
shall be cumulatively available for the grant of Incentive Stock Options under
the Plan, (ii) no more than 25,000 Shares or the equivalent thereof shall be
cumulatively available for discretionary grants to Non-Employee Directors of
Non-Statutory Options under Section 7.1(a), Restricted Stock under Section 8,
and Performance Shares or Performance Units under Section 9, and (iii) no more
than 150,000 Shares shall be cumulatively available for non-discretionary grants
to Non-Employee Directors of Non-Statutory Options under Section 7.1(b). Any
portion of the Shares added on each succeeding anniversary of the Amendment
Effective Date which are unused during the Plan Year beginning on such
anniversary date shall be carried forward and be available for grant and
issuance in subsequent Plan Years, while up to 100% of the Shares to be added in
the next succeeding Plan Year (calculated on the basis of the current Plan
Year's allocation) may be borrowed for use in the current Plan Year. Shares
which may be issued upon the exercise of Options shall be applied to reduce the
maximum number of Shares 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 UNUSED AND FORFEITED STOCK. Any Shares that are subject to an
Award under this Plan which are not used because the terms and conditions of the
Award are not met, including any Shares that are subject to an Option which
expires or is terminated for any reason, any Shares which are used for full or
partial payment of the purchase price of Shares with respect to which an Option
is exercised and any Shares retained by the Company pursuant to Section 15.2
shall automatically become available for use under the Plan. Notwithstanding the
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<PAGE>
foregoing, any Shares used for full or partial payment of the purchase price of
the Shares with respect to which an Option is exercised and any Shares retained
by the Company pursuant to Section 15.2 that were originally Incentive Stock
Option Shares must still be considered as having been granted for purposes of
determining whether the 1,150,000 Share limitation on Incentive Stock Option
grants provided for in Section 4.1 has been reached.
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 Awards may be granted under the Plan; and (ii) the Shares of Stock then
included in each outstanding Option, Performance Share or Performance Unit
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 of another corporation 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 Award for the
particular type of Stock for which the dividend or other distribution was made,
upon exercise thereof in the case of Options, and the vesting thereof in the
case of other Awards. 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 Award
is not exercised or otherwise vested, 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
Plan Administrator shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of Shares subject to outstanding
Awards or which have been reserved for issuance pursuant to the Plan but are not
then subject to an Award, then such adjustments shall be made by the Plan
Administrator and shall be effective for all purposes of the Plan and on each
outstanding Award that involves the particular type of stock for which a change
was effected.
-5-
<PAGE>
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 subject to an Award held by
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,
or otherwise vested in his entire Award. If, upon exercise of any such Option or
the vesting of any other Award, the Participant subscribes for the additional
Stock or other securities, the Participant shall pay to the Company the price
that is payable by the Participant for such Stock or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or substitution
provided for in this Section 4 shall result in the creation of a fractional
Share under any Award, the Company shall, in lieu of selling or otherwise
issuing such fractional Share, pay to the Participant a cash sum in an amount
equal to the product of such fraction multiplied by the Fair Market Value of a
Share on the date the fractional Share would otherwise have been issued. In the
case of any such substitution or adjustment affecting an Option, the total
Option Price for the shares of Stock then subject to an Option shall remain
unchanged but the Option Price per share under each such Option shall be
equitably adjusted by the Plan Administrator 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 PLAN ADMINISTRATOR, ETC. Adjustments under this
Section 4 shall be made by the Plan Administrator, 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 (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by any
other corporation, business entity or person (other than a sale or conveyance in
which the Company continues as a holding company of an entity or entities that
conduct the business or businesses formerly conducted by the Company), 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
10 do not apply, the Plan Administrator, or the board of directors of any
corporation assuming the obligations of the Company, shall have the power and
discretion to prescribe the terms and conditions for the exercise of, or
modification of, any outstanding Awards granted hereunder. By way of
illustration, and not by way of limitation, the Plan Administrator may provide
for the complete or partial acceleration of the dates of exercise of the
Options, or may provide that such Options will be exchanged or converted into
options to acquire securities of the surviving or acquiring corporation, or may
provide for a payment or
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<PAGE>
distribution in respect of outstanding Options (or the portion thereof that is
currently exercisable) in cancellation thereof. The Plan Administrator may
remove restrictions on Restricted Stock and may modify the performance
requirements for any other Awards. The Plan Administrator may provide that Stock
or other Awards granted hereunder must be exercised in connection with the
closing of such transaction, and that if not so exercised such Awards will
expire. Any such determinations by the Plan Administrator may be made generally
with respect to all Participants, or may be made on a case-by-case basis with
respect to particular Participants. The provisions of this Section 5 shall not
apply to any transaction undertaken for the purpose of reincorporating the
Company under the laws of another jurisdiction, if such transaction does not
materially affect the beneficial ownership of the Company's capital stock.
SECTION 6
PARTICIPATION
Participants in the Plan shall be those Eligible Employees,
Non-Employee Directors or consultants who, in the judgment of the Plan
Administrator, are performing, or during the term of their incentive arrangement
will perform, important services in the management, operation and development of
the Company, and significantly contribute, or are expected to significantly
contribute, to the achievement of long-term corporate economic objectives, or
who are otherwise granted Awards pursuant to the automatic grant provisions of
Section 7.1(b). Participants may be granted from time to time one or more
Awards; provided, however, that except as to Options granted pursuant to Section
7.1(b), the grant of each such Award shall be separately approved by the Plan
Administrator, receipt of one such Award shall not result in automatic receipt
of any other Award, and written notice shall be given to such person, specifying
the terms, conditions, rights and duties related thereto; and further provided
that Incentive Stock Options shall not be granted to (i) consultants, (ii)
Non-Employee Directors or (iii) Eligible Employees of any partnership which is
included within the definition of an Affiliated Corporation but whose employees
are not permitted to receive Incentive Stock Options under the Internal Revenue
Code. Each Participant shall enter into an agreement with the Company, in such
form as the Plan Administrator shall determine and which is consistent with the
provisions of the Plan, specifying such terms, conditions, rights and duties.
Awards shall be deemed to be granted as of the date specified in the grant
resolution of the Plan Administrator, 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 (a) DISCRETIONARY GRANT OF OPTIONS. Coincident with the following
designation for participation in the Plan, and notwithstanding the receipt of an
Award or Awards pursuant to Section 7.1(b), a Participant may be granted one or
more Options. Notwithstanding
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<PAGE>
any other provision of the Plan, Non-Employee Directors granted an award under
this Section 7.1(a) may only be awarded Non-Statutory Options. The Board must
approve each such Award and the interested Non-Employee Director must abstain
from voting on the Award. Eligible Employees may be awarded Non-Statutory
Options, Incentive Stock Options, or both in the Plan Administrator's sole
discretion. The Plan Administrator may grant both an Incentive Stock Option and
a Non-Statutory Option to the same Participant at the same time or at different
times. Incentive Stock Options and Non-Statutory Options, whether granted at the
same or different times, shall be deemed to have been awarded in separate
grants, shall be clearly identified, and in no event shall the exercise of one
Option affect the right to exercise any other Option or affect the number of
Shares for which any other Option may be exercised.
(b) NON-DISCRETIONARY GRANT OF OPTIONS. Upon the initial election
or appointment of a Non-Employee Director to the Company's Board, the
Non-Employee Director shall automatically be granted an Option to purchase
10,000 Shares (subject to adjustment pursuant to Section 10 hereof) effective as
of the date such person is elected or appointed to the Board, which shall vest
in equal installments on the first, second and third anniversaries of election
or appointment to the Board. In addition, each Non-Employee Director shall
automatically be granted an Option to purchase 2,500 Shares (subject to
adjustment pursuant to Section 4.3 hereof) effective as of each anniversary date
of such Non-Employee Directors' election to the Board, which Option shall vest
one year from the date of grant. The purchase price per Share for the Shares
subject to any Option granted under this Section 7.1(b) shall be 100% of the
Fair Market Value of a Share of Stock on the date on which the Option is
granted. Subject to the provisions of Section 7.2(d)(i), each Option granted
under this Section 7.1(b) shall expire ten years after the date on which it was
granted.
7.2 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 Plan Administrator
may consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option agreement shall state
that it covers a specified number of Shares, as determined by the Plan
Administrator. Notwithstanding any other provision of the Plan, the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by an Option Holder in any calendar year,
under the Plan or otherwise, shall not exceed $100,000. For this purpose, the
Fair Market Value of the Shares shall be determined as of the time an Option is
granted.
(b) PRICE. The price at which each Share covered by an Option may
be purchased shall be determined in each case by the Plan Administrator and set
forth in the stock option agreement, but in no event shall the Option Price for
each Share covered by an Incentive Stock Option be less than the Fair Market
Value of the Stock on the date the Option is granted; provided that the Option
Price for each Share covered by a Non-Statutory Option may be granted at any
price less than Fair Market Value, in the sole discretion of the Plan
-8-
<PAGE>
Administrator. In addition, the Option Price for each Share covered by an
Incentive Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company must
be at least 110% of the Fair Market Value of the Stock subject to the Incentive
Stock Option on the date the Option is granted.
(c) DURATION OF OPTIONS. Each stock option agreement shall state
the period of time, determined by the Plan Administrator, within which the
Option may be exercised by the Option Holder (the "Option Period"). The Option
Period must expire, in all cases, not more than ten years from the date an
Option is granted; provided, however, that the Option Period of an Incentive
Stock Option granted to an Eligible Employee who then owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company must expire not
more than five years from the date such an Option is granted. Each stock option
agreement shall also state the periods of time, if any, as determined by the
Plan Administrator, when incremental portions of each Option shall vest. Except
as provided in Sections 5 and 10, no portion of any Option shall vest before six
months after the date of grant of the Option. If any Option is not exercised
during its Option Period, it shall be deemed to have been forfeited and of no
further force or effect.
(d) TERMINATION OF EMPLOYMENT, DEATH, DISABILITY, ETC. Except as
otherwise determined by the Plan Administrator, each stock option agreement
shall provide as follows with respect to the exercise of the Option upon
termination of the directorship, employment, consultancy or the death of the
Option Holder:
(i) TERMINATION OF DIRECTORSHIP OF NON-EMPLOYEE DIRECTORS.
(A) If a Non-Employee Director's term as a director of
the Company shall terminate for any reason other than death or disability, any
Options held by the Option Holder, to the extent exercisable under the
applicable stock option agreement(s), shall remain exercisable after termination
of his director status for a period of three months, but in no event beyond the
applicable Option Period.
(B) If a Non-Employee Director's term as a director of
the Company terminates because the Participant dies or is disabled within the
meaning of Section 22(e)(3) of the Code while, or within three months after,
serving as a director, any Options then held by the Participant, to the extent
then exercisable under the applicable stock option agreement(s), shall remain
exercisable after the termination of his directorship for a period of twelve
months, but in no event beyond the applicable Option Period.
(ii) TERMINATION OF EMPLOYMENT OR CONSULTANCY.
(A) If the employment or consultancy 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
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<PAGE>
mean a gross violation, as determined by the Company, of the Company's
established policies and procedures. The effect of this subsection 7.2(d)(ii)
shall be limited to determining the consequences of a termination, and nothing
in this subsection 7.2(d)(ii) shall restrict or otherwise interfere with the
Company's discretion with respect to the termination of any employee or
consultant.
(B) If the Option Holder terminates his employment or
consultancy with the Company in a manner determined by the Board, in its sole
discretion, to constitute retirement (which determination shall be communicated
to the Option Holder within 10 days of such termination), the Option may be
exercised by the Option Holder, or in the case of death by the persons specified
in subsection (C) of this subsection 7.2(d)(ii), within three months following
his or her retirement if the Option is an Incentive Stock Option or within
twelve months following his or her retirement if the Option is a Non-Statutory
Stock Option (provided in each case that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the Shares as to which the Option had become exercisable on
or before the date of the Option Holder's termination of employment or
consultancy.
(C) If the Option Holder dies, or if the Option Holder
becomes disabled (within the meaning of Section 22(e) of the Internal Revenue
Code), during the Option Period while still employed or consulting, or within
the three-month period referred to in (D) below, or within the three or
twelve-month period referred to in (B) above, the Option may be exercised by
those entitled to do so under the Option Holder's will or by the laws of descent
and distribution within twelve months following the Option Holder's death or
disability (provided in each case that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the Shares as to which the Option had become exercisable on
or before the date of the Option Holder's death or disability.
(D) If the employment or consultancy 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 as provided in (B) above, 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 or consultancy.
(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 or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code,
Title I of the Employee Retirement Income Security Act ("ERISA"), 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.
-10-
<PAGE>
(f) 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 (which must be in an
amount evenly divisible by 100) and payment of the Option Price. Such notice
shall be in a form satisfactory to the Plan Administrator 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 Option shall be deemed effective upon receipt of such notice by the
Corporate Secretary and payment to the Company. 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 Option 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.
(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 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 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 Plan
Administrator; for purposes of this Plan, the Fair Market Value of any Shares
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 the 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.
-11-
<PAGE>
(iii) In the discretion of the Plan Administrator, the
Company may guaranty a third-party loan obtained by a Participant to pay part or
all of the Option Price of the Shares provided that such loan or the Company's
guaranty is secured by the Shares.
(g) DATE OF GRANT. Except as provided in Section 7.1(b), an
option shall be considered as having been granted on the date specified in the
grant resolution of the Plan Administrator.
(h) WITHHOLDING.
(A) NON-STATUTORY OPTIONS. Each stock option agreement
covering Non-Statutory Options 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 applicable federal
and state income tax laws, including payment of such taxes through delivery of
Stock or by withholding Stock to be issued under the Option, as provided in
Section 15.
(B) INCENTIVE OPTIONS. In the event that a Participant
makes a disposition (as defined in Section 424(c) of the Internal Revenue Code)
of any Stock acquired pursuant to the exercise of an Incentive Stock Option
prior to the expiration of two years from the date on which the Incentive Stock
Option was granted or prior to the expiration of one year from the date on which
the Option was exercised, the Participant shall send written notice to the
Company at its principal office in Denver, Colorado (Attention: Corporate
Secretary) of the date of such disposition, the number of shares disposed of,
the amount of proceeds received from such disposition, and any other information
relating to such disposition as the Company may reasonably request. The
Participant shall, in the event of such a disposition, make appropriate
arrangements with the Company to provide for the amount of additional
withholding, if any, required by applicable federal and state income tax laws.
(i) ADJUSTMENT OF OPTIONS. Subject to the limitations contained
in Sections 7 and 14, the Plan Administrator may make any adjustment in the
Option 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 re-grant may result in
terms and conditions (including Option Price, number of shares covered, vesting
schedule or exercise period) that differ from the terms and conditions of the
original Option. The Plan Administrator may not, however, adversely affect the
rights of any Participant to previously granted Options without the consent of
such Participant. If such action is affected by amendment, the effective date of
such amendment shall be the date of the original grant.
7.3 STOCKHOLDER PRIVILEGES. No Option Holder shall have any rights as
a stockholder with respect to any Shares 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
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<PAGE>
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
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY PLAN ADMINISTRATOR. Coincident with or following
designation for participation in the Plan, a Participant may be granted one or
more Restricted Stock Awards consisting of Shares. The number of Shares granted
as a Restricted Stock Award shall be determined by the Plan Administrator.
8.2 RESTRICTIONS. A Participant's right to retain a Restricted Stock
Award granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuous employment by the Company for a
restriction period specified by the Plan Administrator, or the attainment of
specified performance goals and objectives, as may be established by the Plan
Administrator with respect to such award. The Plan Administrator may in its sole
discretion require different periods of employment or different performance
goals and objectives with respect to different Participants, to different
Restricted Stock Awards or to separate, designated portions of the Shares
constituting a Restricted Stock Award.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A Participant shall
have all voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under this
Section 8 upon his becoming the holder of record of such Stock; provided,
however, that the Participant's right to sell, encumber or otherwise transfer
such Stock shall be subject to the limitations of Section 11.2 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Plan Administrator may in its
sole discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) Placing a legend on the stock certificates referring to the
restrictions;
(b) Requiring the Participant to keep the stock certificates,
duly endorsed, in the custody of the Company while the restrictions remain in
effect; or
(c) Requiring that the stock certificates, duly endorsed, be held
in the custody of a third party while the restrictions remain in effect.
8.5 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY, ETC. In the event of
the death or disability (within the meaning of Section 22(e) of the Internal
Revenue Code) of a Participant, or the retirement of a Participant as provided
in Section 7.2(d)(ii)(B), all employment period and other restrictions
applicable to Restricted Stock Awards then held by
-13-
<PAGE>
him shall lapse, and such awards shall become fully nonforfeitable. Subject to
Sections 5 and 10, in the event of a Participant's termination of services for
any other reason, any Restricted Stock Awards as to which the employment period
or other restrictions have not been satisfied shall be forfeited.
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 AWARDS GRANTED BY PLAN ADMINISTRATOR. Coincident with or following
designation for participation in the Plan, a Participant may be granted
Performance Shares or Performance Units.
9.2 AMOUNT OF AWARD. The Plan Administrator shall establish a maximum
amount of a Participant's Award, which amount shall be denominated in Shares in
the case of Performance Shares or in dollars in the case of Performance Units.
9.3 COMMUNICATION OF AWARD. Written notice of the maximum amount of a
Participant's Award and the Performance Cycle determined by the Plan
Administrator shall be given to a Participant as soon as practicable after
approval of the Award by the Plan Administrator.
9.4 AMOUNT OF AWARD PAYABLE. The Plan Administrator shall establish
maximum and minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the Plan Administrator
shall relate to corporate, group, unit or individual performance and may be
established in terms of earnings, growth in earnings, ratios of earnings to
equity or assets, or such other measures or standards determined by the Plan
Administrator. Multiple performance targets may be used and the components of
multiple performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to absolute
performance or relative performance measured against other groups, units,
individuals or entities. Achievement of the maximum performance target shall
entitle the Participant to payment (subject to Section 9.6) at the full or
maximum amount specified with respect to the Award; provided, however, that
notwithstanding any other provisions of this Plan, in the case of an Award of
Performance Shares the Plan Administrator in its discretion may establish an
upper limit on the amount payable (whether in cash or Stock) as a result of the
achievement of the maximum performance target. The Plan Administrator may also
establish that a portion of a full or maximum amount of a Participant's Award
will be paid (subject to Section 9.6) for performance which exceeds the minimum
performance target but falls below the maximum performance target applicable to
such Award.
9.5 ADJUSTMENTS. At any time prior to payment of a Performance Share
or Performance Unit Award, the Plan Administrator may adjust previously
established performance targets or other terms and conditions to reflect events
such as changes in laws, regulations, or accounting practice, or mergers,
acquisitions or divestitures.
-14-
<PAGE>
9.6 PAYMENTS OF AWARDS. Following the conclusion of each Performance
Cycle, the Plan Administrator shall determine the extent to which performance
targets have been attained, and the satisfaction of any other terms and
conditions with respect to an Award relating to such Performance Cycle. The Plan
Administrator shall determine what, if any, payment is due with respect to an
Award and whether such payment shall be made in cash, Stock or some combination
thereof. Payment shall be made in a lump sum or installments, as determined by
the Plan Administrator, commencing as promptly as practicable following the end
of the applicable Performance Cycle, subject to such terms and conditions and in
such form as may be prescribed by the Plan Administrator.
9.7 TERMINATION OF EMPLOYMENT, DIRECTORSHIP OR CONSULTANCY. If a
Participant ceases to be an Eligible Employee, Non-Employee Director, or
consultant before the end of a Performance Cycle by reason of his death,
permanent disability or retirement as provided in Section 7.2(d)(ii)(B), the
Performance Cycle for such Participant for the purpose of determining the amount
of the Award payable shall end at the end of the calendar quarter immediately
preceding the date on which such Participant ceased to be an Eligible Employee,
Non-Employee Director or consultant. The amount of an Award payable to a
Participant to whom the preceding sentence is applicable shall be paid at the
end of the Performance Cycle and shall be that fraction of the Award computed
pursuant to the preceding sentence the numerator of which is the number of
calendar quarters during the Performance Cycle during all of which said
Participant was an Eligible Employee, Non-Employee Director or consultant and
the denominator of which is the number of full calendar quarters in the
Performance Cycle. Upon any other termination of services of a Participant
during a Performance Cycle, participation in the Plan shall cease and all
outstanding Awards of Performance Shares or Performance Units to such
Participant shall be canceled.
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in control of
the Company as defined in Section 10.3, then the Plan Administrator may, in its
sole discretion, without obtaining stockholder approval, to the extent permitted
in Section 14, 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 Option 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
different 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; (d) make any other adjustments or
amendments to the outstanding Options and (e) eliminate all restrictions with
respect to Restricted Stock and deliver Shares free of restrictive legends to
any Participant.
-15-
<PAGE>
10.2 PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the circumstances
described in Section 10.1, the Plan Administrator may, in its sole discretion,
and without obtaining stockholder approval, to the extent permitted in Section
14, provide for payment of outstanding Performance Shares and Performance Units
at the maximum award level or any percentage thereof.
10.3 DEFINITION. For purposes of the Plan, a "change in control" shall
be deemed to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the 1934 Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
Mr. Michael Smith is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of more than 33-1/3 percent of the
then outstanding voting stock of the Company; or (b) at any time during any
period of three consecutive years (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
SECTION 11
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 EMPLOYMENT; TENURE. Nothing contained in the Plan or in any Award
granted under the Plan shall confer upon any Participant any right with respect
to the continuation of his or her employment or consultancy by the Company or
tenure as a Non-Employee Director of the Company, or interfere in any way with
the right of the Company, subject to the terms of any separate agreement to the
contrary, at any time to terminate such employment or consultancy or to increase
or decrease the compensation of the Participant from the rate in existence at
the time of the grant of an Award. Whether an authorized leave of absence, or
absence in military or government service, shall constitute a termination of
services shall be determined by the Plan Administrator at the time. Nothing in
this Plan shall interfere in any way with the right of the stockholders of the
Company to remove a Participant Non-Employee Director from the Board pursuant
to the Delaware General Corporation Law and the Company's Certificate of
Incorporation and Bylaws.
-16-
<PAGE>
11.2 NONTRANSFERABILITY. No right or interest of any Participant in an
Award granted pursuant to the Plan shall be assignable or transferable during
the lifetime of the Participant except pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code, Title I of ERISA,
either voluntarily or involuntarily, or be subjected to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge or bankruptcy. In the event or 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 Plan Administrator
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 Plan Administrator with evidence satisfactory
to the Plan Administrator of such status.
SECTION 12
GENERAL RESTRICTIONS
12.1 INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an Option or other Award is granted, as a condition of exercising such
Option or receiving Stock under the Award, 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 or the Award 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. Legends evidencing such restrictions may be placed on the
certificates evidencing the Stock.
12.2 COMPLIANCE WITH SECURITIES LAWS. Each Award 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 Award
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
Award 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 Plan Administrator. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
12.3 STOCK RESTRICTION AGREEMENT. The Plan Administrator may provide
that shares of Stock issuable upon the exercise of an Option shall, under
certain conditions, be subject to restrictions whereby the Company has a right
of first refusal with respect to such shares or a right or obligation to
repurchase all or a portion of such shares, which restrictions may survive a
Participant's term of service with the Company. The acceleration of time or
times
-17-
<PAGE>
at which an Option becomes exercisable may be conditioned upon the Participant's
agreement to such restrictions.
SECTION 13
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant
as a result of the exercise of an Option or the grant or vesting of any other
Award 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 14 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
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 Awards theretofore granted under the Plan, without
the consent of the Participant holding such Awards.
SECTION 15
WITHHOLDING
15.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver
Shares upon the exercise of an Option, or upon the vesting of any other Award,
shall be subject to the Participant's satisfaction of all applicable federal,
state and local income and other tax withholding requirements.
15.2 WITHHOLDING WITH STOCK. At the time the Plan Administrator grants
an Award, 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 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 Plan
Administrator. The value of Shares to be withheld shall be based on the Fair
Market Value of
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<PAGE>
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 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 16
BROKERAGE ARRANGEMENTS
The Plan Administrator, in its discretion, may enter into arrangements
with one or more banks, brokers or other financial institutions to facilitate
the disposition of shares acquired upon exercise of Stock Options, including,
without limitation, arrangements for the simultaneous exercise of Stock Options
and sale of the Shares acquired upon such exercise.
SECTION 17
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of
the Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board may deem necessary or desirable or preclude or limit the
continuation of any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any class or group
of employees, which the Company or any Affiliated Corporation now has lawfully
put into effect, including, without limitation, any retirement, pension, savings
and stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
SECTION 18
REQUIREMENTS OF LAW
18.1 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.
-19-
<PAGE>
18.2 FEDERAL SECURITIES LAW REQUIREMENTS. If a Participant is an
officer or director of the Company within the meaning of Section 16 of the 1934
Act, Awards 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
Award 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 Award.
18.3 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Delaware.
SECTION 19
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the
Board of Directors, and no Award shall be granted after such termination. If not
sooner terminated under the preceding sentence, the Plan shall fully cease and
expire at midnight on March 9, 2002. Awards outstanding at the time of the Plan
termination may continue to be exercised or earned in accordance with their
terms.
Amended: April 28, 1997
BASIN EXPLORATION, INC.
By /S/ MICHAEL S. SMITH
----------------------------
Michael S. Smith, President
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 461
<SECURITIES> 0
<RECEIVABLES> 4,868
<ALLOWANCES> 0
<INVENTORY> 115
<CURRENT-ASSETS> 8,946
<PP&E> 117,352
<DEPRECIATION> (40,814)
<TOTAL-ASSETS> 85,697
<CURRENT-LIABILITIES> 11,485
<BONDS> 169
0
0
<COMMON> 108
<OTHER-SE> 68,717
<TOTAL-LIABILITY-AND-EQUITY> 85,697
<SALES> 3,237
<TOTAL-REVENUES> 3,412
<CGS> 1,423
<TOTAL-COSTS> 3,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 14
<INCOME-TAX> 5
<INCOME-CONTINUING> 9
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1> Per share
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