<PAGE>
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 June 30, 1999
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)
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 August 6, 1999
---------------------------- -----------------
Common stock, $.01 par value 18,399,000 shares
<PAGE>
BASIN EXPLORATION, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
December 31, 1998 and June 30, 1999...................... 3
Consolidated Statements of Operations for the
three and six months ended June 30, 1998 and 1999........ 5
Consolidated Statements of Changes in
Stockholders' Equity..................................... 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1999.................. 7
Notes to Consolidated Financial Statements............... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 9
Item 3. Quantitative and Qualitative Disclosures
about Market Risks....................................... 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................ 21
Item 2. Changes in Securities and Use of Proceeds................ 21
Item 3. Defaults Upon Senior Securities.......................... 21
Item 4. Submission of Matters to a Vote of Security Holders...... 22
Item 5. Other Information........................................ 22
Item 6. Exhibits and Reports on Form 8-K......................... 22
SIGNATURES.............................................................. 25
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1999
ASSETS
<TABLE>
<CAPTION>
(In thousands)
December 31, June 30,
1998 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 331 $ 5,243
Accounts receivable 10,036 10,002
Prepaids and other 2,752 4,467
--------- ---------
13,119 19,712
--------- ---------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, under the full
cost method of accounting
Proved 265,826 296,460
Unproved 34,039 30,377
Less accumulated depreciation,
depletion and amortization (113,462) (132,249)
--------- ---------
186,403 194,588
Furniture and equipment, net 1,408 1,442
--------- ---------
187,811 196,030
--------- ---------
OTHER ASSETS 233 499
--------- ---------
$ 201,163 $ 216,241
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands, except share data)
December 31, June 30,
1998 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,465 $ 5,859
Accrued liabilities 13,620 10,812
Current portion of long-term debt 258 82
--------- ---------
26,343 16,753
--------- ---------
LONG-TERM DEBT, net of current portion 80,000 34,000
OTHER LONG-TERM OBLIGATIONS 601 120
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,
14,151,000 and 18,567,000 shares
issued, respectively 142 186
Additional paid-in capital 113,136 181,439
Accumulated deficit (16,488) (13,439)
Common stock held in treasury, at cost,
186,000 and 202,000 shares, respectively
(2,571) (2,818)
--------- ---------
Total stockholders' equity 94,219 165,368
--------- ---------
$ 201,163 $ 216,241
--------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
(In thousands, except per share data) 1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE:
Oil sales $ 2,697 $ 3,248 $ 5,387 $ 5,494
Gas sales 9,219 17,033 16,764 27,829
Interest and other, net (8) 31 13 44
-------- -------- ------- --------
11,908 20,312 22,164 33,367
-------- -------- ------- --------
COSTS AND EXPENSES:
Lease operating expenses 2,450 3,023 4,593 5,478
Production taxes 204 191 438 267
Depreciation, depletion and
amortization 6,741 10,633 12,727 19,179
General and administrative, net 873 1,287 1,783 2,460
Stock compensation, net 117 585 319 839
Interest expense 375 1,146 788 2,095
-------- -------- ------- --------
10,760 16,865 20,648 30,318
-------- -------- ------- --------
INCOME BEFORE INCOME TAXES 1,148 3,447 1,516 3,049
Income tax provision 402 -- 531 --
-------- -------- ------- --------
NET INCOME $ 746 $ 3,447 $ 985 $ 3,049
-------- -------- ------- --------
-------- -------- ------- --------
BASIC:
Earnings per share $ 0.05 $ 0.24 $ 0.07 $ 0.22
-------- -------- ------- --------
-------- -------- ------- --------
Weighted average shares outstanding 13,845 14,373 13,814 14,179
-------- -------- ------- --------
-------- -------- ------- --------
DILUTED:
Earnings per share $ 0.05 $ 0.23 $ 0.07 $ 0.21
-------- -------- ------- --------
-------- -------- ------- --------
Weighted average shares outstanding 14,524 14,780 14,381 14,383
-------- -------- ------- --------
-------- -------- ------- --------
</TABLE>
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, 1998 THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
RETAINED
EARNINGS
ADDITIONAL -------- TOTAL
COMMON STOCK PAID-IN TREASURY STOCK (ACCUM. STOCKHOLDERS'
(In thousands) SHARES AMOUNT CAPITAL SHARES AMOUNT DEFICIT) EQUITY
- -------------------------------------- -------- -------- ---------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1998 13,833 $ 138 $ 110,627 (120) $ (1,412) $ 12,012 $ 121,365
Issuance of common stock 130 2 627 -- -- -- 629
Exercise of warrants for common stock 79 1 1,107 (62) (1,108) -- --
Purchase of treasury stock -- -- -- (4) (51) -- (51)
Issuance and vesting of
restricted stock 109 1 775 -- -- -- 776
Net income (loss) -- -- -- -- -- (28,500) (28,500)
-------- -------- --------- ------- -------- --------- ---------
BALANCES, December 31, 1998 14,151 142 113,136 (186) (2,571) (16,488) 94,219
Issuance of common stock 4,357 44 67,309 -- -- -- 67,353
Common stock offering costs -- -- (465) -- -- -- (465)
Purchase of treasury stock -- -- -- (13) (187) -- (187)
Issuance and vesting of
restricted stock 55 -- 1,399 -- -- -- 1,399
Exercise of warrants for common stock 4 -- 60 (3) (60) -- --
Net income -- -- -- -- -- 3,049 3,049
-------- -------- --------- ------- -------- --------- ---------
BALANCES, June 30, 1999 18,567 $ 186 $ 181,439 (202) (2,818) $(13,439) $ 165,368
-------- -------- --------- ------- -------- --------- ---------
-------- -------- --------- ------- -------- --------- ---------
</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>
For the Six Months Ended
June 30,
(In thousands) 1998 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 985 $ 3,049
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation, depletion and amortization 12,727 19,179
Deferred income tax provision 431 --
Stock compensation expense 319 839
Other 16 7
-------- --------
14,478 23,074
Changes in operating assets and liabilities -
Decrease (increase) in
Receivables 299 (1,417)
Prepaids and other (839) (1,579)
(Decrease) increase in -
Accounts payable and accrued liabilities (663) (2,659)
Ad valorem taxes and other (179) (221)
Income taxes payable (19) --
-------- --------
Net cash provided by operating activities 13,077 17,198
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions (57,877) (41,054)
Proceeds from sale of property and equipment 22 8,682
-------- --------
Net cash used in investing activities (57,855) (32,372)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt 56,000 43,000
Principle payments on notes payable and long-term debt (10,575) (89,176)
Proceeds from sale of stock, net 312 66,712
Purchase of treasury stock (20) (10)
Debt issuance costs and other (6) (440)
-------- --------
Net cash provided by financing activities 45,711 20,086
-------- --------
INCREASE IN CASH AND EQUIVALENTS 933 4,912
CASH AND EQUIVALENTS, beginning of period 531 331
-------- --------
CASH AND EQUIVALENTS, end of period $ 1,464 $ 5,243
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized $ 546 $ 2,242
-------- --------
-------- --------
Cash paid for income taxes $ 119 $ --
-------- --------
-------- --------
</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 June 30, 1999, and the results of operations and cash
flows for the three and six month 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, 1998.
(2) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument including certain
derivative instruments embedded in other contracts be recorded on the balance
sheet as either an asset or liability measured at its fair value and that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Basin is required to adopt
the Statement as of January 1, 2001, but may implement the Statement as of
the beginning of any fiscal quarter prior to that date. Statement 133 cannot
be applied retroactively. Basin has not yet quantified the impacts of
adopting Statement 133 or determined the timing or method of adoption.
However, Statement 133 could increase the volatility of the Company's
earnings and comprehensive income.
(3) ACCOUNTING FOR OIL AND GAS PROPERTIES
Basin follows the full cost method of accounting for oil and gas properties.
Under this method, all costs associated with the acquisition, exploration and
development of oil and gas properties are capitalized. If capitalized costs,
net of amortization and related deferred taxes, exceed the full cost ceiling,
the excess would be expensed in the period such excess occurs. Calculation of
the full cost ceiling includes an estimate of the discounted value of future
net cash flows attributable to proved reserves using various assumptions and
parameters consistent with promulgations of the Securities and Exchange
Commission, and such calculation is sensitive to changes in prevailing oil
and gas sales prices. Oil and gas prices are volatile and reflect seasonal
factors, as well as other supply and demand conditions. A decline in prices
subsequent to June 30, 1999 could result in a requirement that Basin
recognize an impairment expense in a future period.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to assist you in understanding our
results of operations and our present financial condition and should be read
in conjunction with the Consolidated Financial Statements and the Notes
thereto. Statements in this discussion may be forward-looking. Such
forward-looking statements involve risks and uncertainties, including those
discussed below, that could cause actual results to differ significantly from
those expressed. See "Forward Looking Statements."
Basin Exploration, Inc. ("Basin" or the "Company") is a domestic independent
oil and gas company that conducts exploration, acquisition and production
activities in the shallow waters of the Gulf of Mexico and selected areas
onshore.
Basin commenced operations in 1981 and primarily acquired, developed and
exploited properties in the Denver-Julesberg ("D-J") Basin in eastern
Colorado through 1991. In 1992, we began expanding into other areas within
the Rocky Mountain region and initiated exploration activities. In 1996, we
sold our D-J Basin properties, representing approximately two-thirds of our
oil and gas properties at that time, for $123.5 million (the "D-J Sales") and
initiated operations in the Gulf of Mexico.
Since that time, the Company's principal investment activities have related
to property acquisitions, exploratory drilling, and property development in
the shallow waters of the outer continental shelf in the Gulf of Mexico. To a
lesser extent, we have conducted similar activities in the Rocky Mountain
region, primarily in the Green River and Powder River Basins in Wyoming, and,
beginning in 1999, in the onshore Gulf Coast areas of Louisiana and Texas.
During the first six months of 1999, we participated in drilling five
exploratory wells and one development well in the Gulf of Mexico and one
exploratory well in the Green River Basin. Of these, we have completed or
plan to complete two exploratory wells and the development well drilled in
the Gulf and the well drilled in the Green River Basin.
RESULTS OF OPERATIONS
The following operating and financial data, in conjunction with the
discussion below, is provided to assist you in understanding our results of
operations for the periods presented.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- -----------------------
1998 1999 1998 1999
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRODUCTION:
Oil (MBBL) 189 223 372 388
Gas (MMCF) 3,936 7,932 7,336 13,736
Total gas equivalents (MMCFE) 5,070 9,270 9,568 16,064
REVENUE (IN THOUSANDS):
Oil sales $ 2,697 $ 3,248 $ 5,387 $ 5,494
Gas sales $ 9,219 $ 17,033 $ 16,764 $ 27,829
Total oil and gas sales $ 11,916 $ 20,281 $ 22,151 $ 33,323
AVERAGE SALES PRICE:
Oil (PER BBL) $ 14.26 $ 14.57 $ 14.47 $ 14.15
Gas (PER MCF) $ 2.34 $ 2.15 $ 2.29 $ 2.03
Total gas equivalents (PER MCFE) $ 2.35 $ 2.19 $ 2.31 $ 2.07
EXPENSES (PER MCFE):
Lease operating expenses $ 0.48 $ 0.33 $ 0.48 $ 0.34
Production taxes $ 0.04 $ 0.02 $ 0.05 $ 0.02
Depreciation, depletion and
amortization $ 1.33 $ 1.15 $ 1.33 $ 1.19
General and administrative, net $ 0.17 $ 0.14 $ 0.19 $ 0.15
</TABLE>
REVENUE. Oil and gas sales for the three months ended June 30, 1999 totaled
$20.3 million, representing an increase of $8.4 million, or 70%, compared to
the second quarter of 1998. An 83% increase in net oil and gas production was
partially offset by a 7% decline in unit prices, based on net equivalent unit
measures. Oil and gas sales for the six months ended June 30, 1999 totaled
$33.3 million, representing an increase of $11.2 million, or 50%, compared to
the first half of 1998 . A 68% increase in net oil and gas production was
partially offset by a 10% decline in unit prices, based on net equivalent
unit measures. The increases in oil and gas production are attributable to
contributions during the first half of 1999 from 16 Gulf of Mexico properties
compared to ten in the prior-year period. Due to the additional Gulf of
Mexico production, which is predominantly gas, and lower oil production from
onshore properties, on which investments were deferred due to low oil prices,
gas increased from 77% of net equivalent units produced in the first half of
1998 to 86% of the Company's total oil and gas production in the first half
of 1999. Hedging transactions had the effect of decreasing oil and gas sales
by $0.9 million, or $0.09 per Mcfe in the three months ended June 30, 1999,
as compared to increasing oil and gas sales by $0.6 million, or $0.12 per
Mcfe, in the three months ended June 30, 1998. Hedging transactions had the
effect of increasing oil and gas sales by $0.5 million, or $0.03 per Mcfe in
the six months ended June 30, 1999, and $1.0 million, or $0.10 per Mcfe, in
the six months ended June 30, 1998.
LEASE OPERATING EXPENSES. Due to an increased number of producing properties
and higher production levels, lease operating expenses for the three and six
months ended June 30, 1999 increased by $0.6 million, or 23%, and $0.9
million, or 19%, respectively, from the amounts reported for the comparable
periods in the prior year. However, lease operating costs per Mcfe produced
declined by approximately 30%, from $0.48 in the three and six months ended
June 30, 1998, to $0.33 and $0.34 during the three and six months ended June
30, 1999, respectively. These decreases in per-unit costs were due to
increased production in 1999 from Gulf of Mexico wells, which typically have
significantly lower average unit operating costs than our Rocky Mountain
properties.
10
<PAGE>
PRODUCTION TAXES. Production taxes for the three and six months ended June
30, 1999 were $0.2 million and $0.3 million, representing decreases of
$13,000, or 6%, and $0.2 million, or 39%, respectively, from amounts reported
for the comparable periods in 1998. These declines were due to reduced
revenue from onshore properties caused by lower oil and gas prices and a
decline in production from such properties. Production taxes as a percentage
of oil and gas sales for the three and six months ended June 30, 1999 were
0.9 % and 0.8%, compared to 1.7% and 2.0%, respectively in 1998, due to a
greater portion of sales in 1999 attributable to properties in federal waters
offshore, which are generally not subject to production taxes.
DEPRECIATION, DEPLETION AND AMORTIZATION. Depreciation, depletion and
amortization expense for the three and six months ended June 30, 1999 was
$10.6 million and $19.2 million, representing increases of $3.9 million, or
58%, and $6.5 million, or 51%, respectively, compared to 1998. The increases
were attributable to the 83% and 68% increases in production volumes for the
three and six month periods ended June 30, 1999, relative to the comparable
periods in 1998. The depletion rate of $1.17 per Mcfe of production in the
six months ended June 30, 1999 represented a 9% decrease from the $1.28 per
Mcfe average depletion rate during the first half of 1998. The lower rate is
principally due to the effects of a property impairment charge recorded in
the fourth quarter of 1998.
GENERAL AND ADMINISTRATIVE, NET. General and administrative expenses for the
three and six months ended June 30, 1999 were $1.3 million and $2.5 million,
reflecting increases of $0.4 million, or 47%, and $0.7 million, or 38%,
respectively, as compared to 1998. The increases resulted primarily from
incremental costs incurred to manage our expanded operations in the Gulf of
Mexico. Percentage increases in general and administrative expenses were
smaller than increases in production, resulting in declines in general and
administrative expenses per Mcfe produced, from $0.17 and $0.19 during the
three and six month periods ended June 30, 1998, to $0.14 and $0.15,
respectively, in the three and six month periods ended June 30, 1999.
STOCK COMPENSATION, NET. Stock compensation expense for the three and six
months ended June 30, 1999 was $0.6 million and $0.8 million, reflecting an
increase of $0.5 million for both the three and six month periods ended June
30, 1999, compared to the same periods of 1998. Grants of performance shares
under Basin's equity incentive plan are required to be "marked-to-market."
The increased expense reflects, in part, an increase in the price of the
Company's common stock from $12.56 per share at December 31, 1998 to $20.06
per share at June 30, 1999.
INTEREST EXPENSE. Interest expense for the three and six months ended June
30, 1999 totaled $1.1 million and $2.1 million, representing increases of
$0.8 million, or 206%, and $1.3 million, or 166%, respectively, as compared
to 1998. The increases were attributable to higher average borrowings and
interest rates, partially offset by increased amounts capitalized to unproved
property costs in the 1999 periods, in accordance with Statement of Financial
Accounting Standard No. 34. During the three months ended June 30, 1999,
Basin had average outstanding debt of $94.4 million, with an average
effective interest rate of 6.8%, compared to average debt of $46.6 million
and an average interest rate of 6.5% in the comparable 1998 period. During
the six months ended June 30, 1999, Basin had average outstanding debt of
$91.5 million, with an average effective interest rate of 6.8%, compared to
average debt of $34.6 million and an average interest rate of 6.7% in the
comparable 1998 period. Interest of $0.5 million and $1.1 million was
capitalized during the three and six months ended June 30, 1999,
respectively, as compared to $0.4 million for the three and six months ended
June 30, 1998.
11
<PAGE>
INCOME TAX BENEFIT (PROVISION). The income tax provisions for 1998
approximate the amounts that would be calculated by applying statutory income
tax rates to income before income taxes. No income tax provision has been
recorded in 1999 due to an equivalent decrease in the previously established
deferred tax asset valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Basin's principal sources of capital have been cash flow from
operations, a revolving line of credit established with a group of banks (the
"Credit Facility"), proceeds from asset sales, and proceeds from sales of
common stock. Our principal uses of capital have been for acquisition,
exploration and development of oil and gas properties.
During June 1999, Basin realized net proceeds of approximately $66.6 million
from the sale of 4.313 million shares of its common stock through an
underwritten public offering. Initially, proceeds from this equity sale were
used to repay a portion of debt outstanding under the Credit Facility.
However, with the net proceeds from the stock offering and approximately $9
million realized from asset sales in the first half of 1999, we have
increased our 1999 budget for exploration and development from $65 million to
$95 million. We estimate that this budget expansion will enable us to
increase our exploratory drilling activities during the year by approximately
50% compared to planned activities under our initial 1999 budget, and
compared to our drilling activity during 1998. Although acquisitions of
properties with proved and probable reserves are also pursued as an integral
part of our overall business strategy, such transactions are not budgeted. We
plan to continue to monitor and potentially adjust our budget to reflect
changes in the general business environment, variances from assumptions, or
specific business opportunities.
Net cash provided by operations before changes in working capital totaled
$23.1 million during the six months ended June 30, 1999, including $14.7
million related to the most recent fiscal quarter. Other sources of funds
during the first half of 1999 included $66.7 million of proceeds from
issuance of common stock and $8.7 million of asset sales. Funds were utilized
for accrual-basis capital expenditures of $35.5 million, net repayment of
$46.2 million of debt, and a $16.2 million increase in net working capital.
The Company closed the first half of 1999 with working capital of
approximately $3.0 million, long-term debt of $34.0 million, and
stockholders' equity of $165.4 million. The borrowing base presently
established under our Credit Facility is $90 million, of which $56 million
was unutilized as of June 30, 1999.
PRODUCTION. Our cash flow from operations is generally determined by our
production level and oil and gas prices. Since 1996, we have made significant
investments to initiate and then expand our operations in the Gulf of Mexico.
These investments have resulted in an increase in our production from an
average of 11.2 MMcfe per day in the second quarter of 1997, prior to
commencement of Gulf of Mexico production, to an average of 101.9 MMcfe per
day in the second quarter of 1999.
As of August 1, 1999, we owned interests in 16 producing properties in the
Gulf of Mexico and in five properties in the Gulf that were under development
for first production. We do not anticipate initial production from any of the
five properties presently under development during the quarter ending
September 30, 1999 but project that four of these properties will commence
production
12
<PAGE>
during the fourth quarter of this year. Although we believe these projections
are reasonable, there is no assurance that they will be met. See "Forward
Looking Statements" for a description of certain risks that may impact our
ability to achieve projected results.
MARKETING AND HEDGING TRANSACTIONS. Basin's production is generally sold
under month-to-month contracts at prevailing prices. From time to time,
however, as conditions are deemed to warrant, we have entered into hedging
transactions or fixed price sales contracts for a portion of our oil and gas
production. The purposes of these transactions are to limit Basin's exposure
to future oil and gas price declines and achieve a more predictable cash
flow. However, such contracts may also limit the benefits we would realize if
prices increase. Hedging transactions had the effect of decreasing oil and
gas sales by $0.9 million, or $0.09 per Mcfe, in the three months ended June
30, 1999, as compared to increasing oil and gas sales by $0.6 million, or
$0.12 per Mcfe, in the three months ended June 30, 1998. Hedging transactions
had the effect of increasing oil and gas sales by $0.5 million, or $0.03 per
Mcfe, in the six months ended June 30, 1999, and by $1.0 million, or $0.10
per Mcfe, in the six months ended June 30, 1998.
Through August 5, 1999, Basin had entered into the following fixed price swap
and collar arrangements covering the period beginning July 1, 1999 (one MMBtu
approximates one Mcf of gas). The positions shown are net of hedging
contracts entered into that contractually offset certain previously
established swap arrangements at price levels that will reduce revenue in
each of the third and fourth quarters of 1999 by approximately $0.3 million.
<TABLE>
<CAPTION>
GAS SWAPS OIL COLLARS
--------------------------------- -----------------------------------------
Average Daily Average NYMEX Average NYMEX NYMEX
Time Period Volume (MMBtu) Price/MMBtu Daily Floor Ceiling
Volume (Bbl) Price/Bbl Price/Bbl
- ---------------- --------------- -------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
7/1/99-9/30/99 30,000 2.10 1,000 14.00 16.00
10/1/99-12/31/99 18,300 2.09 1,000 14.00 16.00
1/1/00-12/31/00 3,300 2.15
1/1/01-12/31/03 10,000 2.15
</TABLE>
In addition, we have periodically entered into spread trades or options
transactions related to oil or gas futures markets. Under a spread trade,
fixed prices under a hedging contract are determined in the future by
reference to the price of an underlying contract. Such positions may enable
us to lock in favorable fixed prices for future hedging positions, but can
also result in unfavorable fixed price contracts if the reference price
declines. As of August 6, 1999, Basin had an outstanding gas spread trade
that provides for a fixed price for 10,000 MMBtu per day for the period of
March 2000 through October 2000 to be established in the future, when so
elected by Basin, at a price equal to the New York Mercantile Exchange
February 2000 contract price less $0.41. As of August 5, 1999, we had also
sold the following call options: 20,000 MMBtu of gas per day for the period
from July 1999 through November 1999, at a strike price of $1.95 per MMBtu;
10,000 MMBtu of gas per day for the period from July 1999 through December
2001, at an average strike price of $2.50 per MMBtu; and 1,000 barrels of oil
per day for the period from July 1999 through December 1999, at a strike
price of $16.75 per barrel.
REVOLVING LINE OF CREDIT. Effective January 1, 1999, we entered into the
Credit Facility with our existing bank group that provided for borrowings of
up to $110 million under two combined facilities. Facility A, currently
established at $90 million, represents the borrowing base that is considered
to be "conforming" based upon the banks' customary practices and standards in
making conventional borrowing base determinations for oil and gas producers.
Facility B, which was initially established at $20 million, was a
shorter-term supplemental line of credit which terminated upon the
consummation of the June 1999 offering of common stock. Interest rates
13
<PAGE>
applied to borrowings under the Credit Facility are determined by reference
to the prime rate or LIBOR, at our election. Facility A provides for a
varying spread of 0% to 0.25% to be added to the prime rate, or 0.75% to 1.5%
to be applied to LIBOR, based upon our facility usage ratio.
Our Credit Facility provides for borrowings to be revolving loans until
November 30, 2001, at which time the outstanding balance will be converted
into a four-year amortizing term loan unless the Credit Facility is amended.
The borrowing base under the Credit Facility is scheduled to be re-determined
at six-month intervals until the revolving loan is converted into a term
loan. The next re-determination is scheduled to occur as of October 1, 1999.
Our Credit Facility contains various covenants, including limitations on our
ability to incur other debt, dispose of assets, pay dividends, or repurchase
stock. Pursuant to our Credit Facility, substantially all of our producing
properties are subject to mortgages in favor of the banks and our remaining
properties are subject to a negative pledge.
The weighted average interest rate on borrowings outstanding under the Credit
Facility at June 30, 1999 was 5.7%. Our annual interest costs will fluctuate
based upon changes in short-term interest rates and borrowings outstanding.
Assuming debt outstanding remained unchanged from the amount outstanding at
June 30, 1999, the annual impact on interest expense of a ten percent change
in the average interest rate would be approximately $0.2 million, before
amounts capitalized. As the interest rate is variable and is reflective of
current market conditions, the carrying value of Basin's debt approximates
its fair value.
Borrowing base re-determinations conducted by the bank group reflect a number
of estimates and assumptions including, but not limited to, future production
from Basin's proved properties, risk factors for estimates of proved
reserves, future oil and gas prices, future operating and development costs,
and future interest rates. Changes in such estimates and assumptions can
significantly impact the size of the borrowing base established by the banks.
Because these factors will be influenced by future events that cannot be
forecast with certitude, we cannot predict what level of borrowing base will
be established at any future determination date.
CAPITAL EXPENDITURES. Since the beginning of 1996, our primary exploration
activities have been focused in the shallow waters of the Gulf of Mexico,
predominantly off the coast of Louisiana. During the second half of 1998, we
began to direct a small portion of our exploration budget toward onshore
opportunities. We also pursue acquisition and development opportunities in
the vicinity of our Gulf of Mexico exploration operations, in the Rocky
Mountain region where we have an existing base of proved reserves and
producing wells, and in certain other major domestic producing basins where
we believe significant upside potential exists. Our capital expenditures are
generally discretionary and activity levels are determined by a number of
factors, including oil and gas prices, availability of funds, quantity and
character of identified investment projects, availability of service
providers, and competition.
Basin's initial budget for 1999 provided for capital investments of
approximately $65 million, subject to an increase for proceeds from
anticipated asset sales. With the net proceeds from the offering and
approximately $9 million from asset sales to date in 1999, we have increased
our 1999 budget to $95 million. We estimate that this budget expansion will
enable us to increase our exploratory drilling activities during the year by
approximately 50% compared to planned activities under our initial 1999
budget. Given the prevailing lower cost of oil field services today compared
to 1998, and lower planned current year investment to acquire prospect
leaseholds, we
14
<PAGE>
believe our expanded 1999 budget will result in significantly greater
drilling activity than our $107 million of capital expenditures in 1998. Our
current 1999 budget primarily provides for:
- - development of seven Gulf of Mexico properties with one or more discovery
wells yet to commence sustained production as of the end of 1998;
- - acquisitions of seismic data and exploratory prospect leaseholds;
- - participation in approximately nine net (18 to 20 gross) exploratory wells
in the Gulf of Mexico;
- - participation in four to eight onshore exploration opportunities, primarily
in the Greater Green River Basin in Wyoming and the onshore Gulf Coast
area;
- - development of projected 1999 exploratory discoveries; and
- - continued exploitation of our other offshore and onshore properties.
We also intend to pursue acquisitions of properties with proved and probable
reserves as an integral part of our overall business strategy, with the
expectation that these efforts will result in significant investment activity
over time. At this time, no portion of our 1999 budget has been specifically
allocated for acquisitions of proved properties. If such a transaction is
executed, it may require a re-allocation of funds from other planned
activities and/or external financing.
During the first half of 1999, Basin's accrual-basis capital expenditures
totaled approximately $35.5 million. Such investments were primarily for
development of several Gulf of Mexico properties on which discovery wells
were drilled during the prior year, participation in drilling five (2.5 net)
Gulf of Mexico exploratory wells and one (0.6 net) onshore exploratory well,
related completion costs on two (0.8 net) of the Gulf of Mexico exploratory
wells and the onshore well, and acquisitions of additional Gulf of Mexico 3-D
seismic data and leasehold interests.
We expect to be able to fund our planned exploration and development
activities during the second half of 1999 primarily utilizing cash flow,
working capital, and additional borrowings under the Credit Facility.
However, the amount and allocation of future capital expenditures will depend
on a number of factors that are not entirely within Basin's control or
ability to forecast, including drilling results, scheduling of activities by
other operators, availability of service providers, success in acquiring
prospect leaseholds, and success in consummating acquisitions of proved
properties. Basin's planned capital expenditures are also based on estimates
regarding availability of capital that depend on assumptions and estimates
regarding production, oil and gas prices, and borrowing base
re-determinations under our revolving line of credit. Due to these
uncertainties, actual capital expenditures may vary significantly and funding
sources may differ from current expectations. See "Forward Looking
Statements."
15
<PAGE>
YEAR 2000 READINESS DISCLOSURE AND STATEMENT
Readers are cautioned that the forward-looking statements contained in the
following Year 2000 discussion should be read in conjunction with Basin's
disclosures under the heading "Forward-Looking Statements" in this Quarterly
Report on Form 10-Q.
Year 2000 issues result from the inability of many computer programs to
accurately calculate, store or use a date subsequent to December 31, 1999.
The date can be erroneously interpreted in a number of different ways;
typically the year 2000 is interpreted as the year 1900. This could result in
a system failure or miscalculations causing disruptions of or errors in
operations. Systems potentially affected include not only information
technology systems--computer systems controlling a company's accounting,
land, operations, seismic processing, and other specialized functions--but
also non-information technology systems controlled by embedded chips, which
include many common and specialized machines and support systems. The effects
of the Year 2000 problem can be exacerbated by the interdependence of
computer and telecommunications systems in the United States and throughout
the world. This interdependence can affect us and the parties with whom we do
business.
STATE OF READINESS. We have created an internal committee to assess our Year
2000 readiness and to lead our remediation efforts. The committee is composed
of the general counsel, chief financial officer, controller, and manager of
information systems. The committee's objective is to prevent loss or
impairment of those functions material to Basin's operations and business
continuity or to avoid potential liability to third parties. At the direction
of the committee, department heads and managers have assessed and remediated
our information technology and non-information technology systems, and have
communicated with our business partners regarding the status of their
assessment and remediation efforts, with the results summarized below.
We have completed an assessment of our information technology systems to
determine whether they are Year 2000 compliant. The licensors of both our
core financial, land and operations software system and the underlying
operating system have certified that such software is Year 2000 compliant.
Our Gulf of Mexico seismic data interpretation software system has been
upgraded to software that is Year 2000 compliant. Basin will be upgrading and
testing our reservoir economics software to make it Year 2000 compliant and
expect to be completed with this upgrade by October 1999. Additionally, we
have assessed other less critical information technology systems and we
believe them to be compliant.
We also rely on non-information technology systems, such as office
telephones, facsimile machines, HVAC systems and elevators in our leased
offices, security systems, and automated measuring equipment on platforms and
other production facilities, which may have embedded technology such as
micro-controllers. Department heads and managers have identified those
non-information technology systems that may be susceptible to failure or
impairment by reason of Year 2000 problems and that are potentially critical
to our operations and business continuity. Based on that review, Basin has
sent written inquiries to the suppliers of those systems to determine the
status of their Year 2000 compliance. Our communications systems vendors, and
the property managers of the buildings in which our Houston and Denver
offices are situated, have certified their systems to be Year 2000 compliant.
We are still receiving and analyzing responses from vendors of
non-information technology systems that may affect our production
16
<PAGE>
operations. The operations department is following up those inquiries with
telephone interviews to assess the status of such systems. Assessment and
remediation of non-information technology systems should be completed by
September 1999.
We have sent written inquiries to our significant suppliers, customers (i.e.,
production purchasers and transporters), banks, government agencies, benefit
plan providers, and others with whom we have significant business
relationships to determine the extent to which we are vulnerable to those
third parties' failure to correct their own Year 2000 issues. For Gulf of
Mexico and onshore operations these include representative vendors and
suppliers who could supply necessary goods and services to maintain our
production operations and continue any ongoing or planned drilling
activities. As of the date of this report, the following summarizes the
responses we have received:
(a) We sent inquiries for Gulf of Mexico operations to 117 vendors and
103 have responded with written confirmation that they are Year
2000 compliant. We will contact the remaining 14 vendors to assess
their compliance. The Minerals Management Service of the United
States Department of the Interior, which is the primary permitting
and supervisory agency over our Gulf of Mexico operations, has
reported that it is Year 2000 compliant.
(b) For onshore operations we sent inquiries to 24 representative
vendors and suppliers and 21 have responded with confirmation that
they are Year 2000 compliant. We will contact the remaining three
vendors to assess their compliance. We are continuing to inquire
of various government agencies having jurisdiction over our
operations to confirm their compliance.
(c) We sent 30 inquiries to production purchasers and pipeline
companies with whom we are currently doing business or expect to
do business with respect to the gathering, treatment, processing,
and marketing of our production, and we have received 12 responses
confirming either current Year 2000 compliant or anticipated
compliance by late 1999. We will contact the remaining 18
customers to assess their compliance.
(d) With respect to our corporate and administrative operations, our
bank group, service providers (such as payroll processing),
insurance agents and underwriters, and benefit plan providers have
confirmed their Year 2000 compliance or their expectation that
they will be compliant by year end 1999. We will continue to
monitor their compliance efforts.
ESTIMATED COMPLIANCE COSTS. We have relied primarily on our internal staff to
assess our current Year 2000 readiness and do not anticipate extensive use of
external resources to complete our assessment or remediation. We have not
separately quantified our costs of internal resources on this project but do
not expect that we will incur material costs in remediating our information
technology systems to be Year 2000 compliant. Costs incurred for the purchase
of new software and hardware are capitalized and all other costs are expensed
as incurred. We have not incurred, and do not anticipate that we will incur,
costs for external resources in excess of $100,000 relating to the assessment
and remediation of Year 2000 issues. That estimate does not include the cost
of remediating problems caused by third-party vendors, customers, or other
business partners, which Basin will not be able to fairly estimate until the
extent, if any, of their Year 2000 non-compliance is known.
17
<PAGE>
RISKS OF NON-COMPLIANCE AND CONTINGENCY PLANS. As indicated above, the only
critical information technology system that we believe to be not yet Year
2000 compliant is our reservoir economics system, which should be compliant
by October 1999. Accordingly, we do not expect Year 2000 issues to cause our
information technology systems to have any material adverse impact on our
business, operations or financial condition. We believe that the potential
impact, if any, of our non-critical information technology systems not being
Year 2000 compliant will at most require employees to manually complete
otherwise automated tasks or calculations and should not impact our ability
to continue exploration, drilling, production or sales activities. We are not
able to predict at this time what the impact could be of non-information
technology system failures but do not believe that there will be a material
disruption of our operations.
In light of the responses we have received to date from our business
partners, we do not believe there is a likelihood of a material impact on our
operations, business, or financial condition from the failure of a business
partner to be Year 2000 compliant. The most reasonably likely "worst case"
impacts could be impairment of our ability to deliver our production to, or
receive payment from, third parties gathering and/or purchasing our
production from individual affected facilities; impairment of the ability of
third-party suppliers or service companies to provide needed materials or
services to our planned or ongoing operations, thereby necessitating deferral
or shut-in of exploration, development or production operations; inability to
execute financial transactions with our banks or other third parties whose
systems fail or misfunction; or inability to process permit applications or
operations plans with government agencies that may delay our ability to
conduct planned activities. We have no reason to believe that any of these
contingencies will occur or that our principal vendors, customers, and
business partners will not be Year 2000 compliant.
Basin does not currently have a contingency plan under development or in
place to address these potential problems. We do intend to develop
contingency plans in response to testing our information technology and
non-information technology systems and in response to the results of our
third-party inquiries. These contingency plans may include installing back-up
computer systems or equipment, temporarily replacing systems or equipment
with manual processes, and switching to alternate suppliers, service
companies and purchasers that have already certified their Year 2000
compliance. Basin expects these plans to be complete by October 1999.
Basin's Year 2000 program is a continuing process that may result in changes
to cost estimates and schedules as testing and business partner assessment
progresses. Unexpected Year 2000 compliance problems of either Basin or our
vendors, customers, service providers, or other entities with whom we do
business could have a material adverse impact on our business, financial
condition or operating results.
18
<PAGE>
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that are not
historical facts but 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, estimates, plans or anticipates
will, should, could or may occur, including such matters as:
- - amount and nature of capital expenditures,
- - drilling of wells,
- - estimated reserves,
- - timing and amount of future production of oil and gas,
- - business strategies,
- - operating costs and other expenses,
- - cash flow and anticipated liquidity,
- - prospect development and property acquisitions,
- - marketing of oil and gas, and
- - Year 2000 compliance activities.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, we cannot assure you that any of
these expectations will prove correct or that we will take any actions that
may have been planned. Factors that could cause actual results to differ
materially are described in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of this report and
also include, among others:
- - general economic conditions,
- - oil and gas price volatility,
- - our ability to find, acquire, market, develop and produce new properties,
- - the risks associated with acquisitions and exploration,
- - operating hazards attendant to the oil and gas business,
- - downhole drilling and completion risks that are generally not recoverable
from third parties or insurance,
- - uncertainties in the estimation of proved reserves and in the projection of
future rates of production and timing of development expenditures,
- - potential mechanical failure or underperformance of individually
significant wells,
- - the strength and financial resources of our competitors,
- - Basin's ability to find and retain skilled personnel,
- - climatic conditions,
- - availability of capital,
- - availability and cost of material and equipment,
- - delays in anticipated start-up dates,
- - environmental risks,
- - actions or inactions of third-party operators of the basin's properties,
- - regulatory developments, and
- - third-party Year 2000 compliance actions.
19
<PAGE>
All written and oral forward-looking statements attributable to the Company
or persons acting on its behalf are qualified in their entirety by the
factors outlined above. The Company disclaims any obligation to update or
revise any forward-looking statement in light of actual results or future
events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's exposure to interest rate risk and commodity price risk is
discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations under the headings "Liquidity and Capital Resources
Marketing and hedging transactions" and "Liquidity and Capital Resources
Revolving line of credit". The Company has no exposure to foreign currency
exchange rate risks or to any other market risks.
20
<PAGE>
BASIN EXPLORATION, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) NONE
(b) NONE
(c) During the period covered by this report, Basin had no sales of
securities that were not registered under the Securities Act of 1933.
Through the date of this report, Basin has issued 53,311 shares of
common stock pursuant to cashless exercises of warrants issued by us
on November 30, 1994 to former stockholders of Sterling Energy
Corporation pursuant to the merger of Sterling with a subsidiary of
Basin on November 22, 1994. Those warrants covered a total of 300,000
shares of Basin common stock at an exercise price of $14.00 per share.
The warrants expire on December 31, 1999. Of the 300,000 shares
covered by the warrants, 198,917 were covered by the cashless
exercises, in which the market value of the warrants at the date of
exercise (average market price for a 20-day period preceding exercise
less the exercise price) was multiplied by the number of shares
covered by the respective warrants to determine the number of shares
to be issued to the warrant holders. Basin accordingly received no
cash from these exercises. Warrants covering a total of 101,083 shares
of Basin common stock remain outstanding. The warrants (and the shares
issued pursuant to exercise of the warrants) were issued in reliance
upon the exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended, relative to sales by an issuer not
involving a public offering.
(d) NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
21
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxies for the Company's annual meeting of shareholders held on May 12,
1999, were solicited pursuant to Regulation 14A during the quarter ended June
30, 1999. There was no solicitation in opposition to the nominees listed in
the proxy statement and all such nominees were elected. The following is a
summary of the matters voted upon at such meeting and the number of votes
cast for, against and absententions:
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
<S> <C> <C> <C>
Election of Directors
John F. Greene 12,572,267 - 983,969
Michael A. Nicolais 12,572,267 - 983,969
Neil L. Stenbuck 12,572,267 - 983,969
Ratify selection of Arthur Andersen LLP 13,511,694 37,942 6,600
as auditors
Amend Equity Incentive Plan for 11,637,459 1,915,087 3,690
"performance-based compensation"
Increase Equity Incentive Plan by 200,000 shares 8,399,347 5,155,539 1,350
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<S> <C>
2.1 Agreement and Plan of Merger between Sterling Energy
Corporation, Basin Energy, Inc. and Basin Exploration, Inc.
dated October 13, 1994.(5)
2.2 Plan of Merger between Basin Sterling, Inc. and Basin
Exploration, Inc. dated November 22, 1994.(5)
2.3 Plan of Merger between Basin Operating Company and Basin
Exploration, Inc. dated December 14, 1994.(7)
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 May 12, 1999.(1)
10.2 Key Employee Participation Plan.(2)
10.3 Employment Agreement dated March 31, 1992 by and between Basin
and Michael S. Smith.(3)
10.4 Gulf Coast Geoscientist Overriding Royalty Interest Plan dated
November 30, 1995.(9)
10.5 Form of Rights Agreement dated as of February 24, 1996, between
Basin Exploration, Inc. and Corporate Stock Transfer, Inc. as
Rights Agent.(8)
10.6 Performance Shares Plan approved February 4, 1997.(10)
10.7 Change of Control Employment Agreement dated October 13, 1995
between Basin Exploration, Inc. and Howard L. Boigon.(9)
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
10.8 Amendment to Change of Control Employment Agreement dated June
2, 1999 between Basin Exploration, Inc. and Howard L. Boigon.(1)
10.9 Employment Agreement dated August 28, 1995 between Basin
Exploration, Inc. and Samuel D. Winegrad.(9)
10.10 Change of Control Agreement dated August 28, 1997 between Basin
Exploration, Inc. and Samuel D. Winegrad.(1)
10.11 Employment Agreement dated June 28, 1995 between Basin
Exploration, Inc. and Neil L. Stenbuck.(9)
10.12 Employment Agreement dated November 10, 1995 between Basin
Exploration, Inc. and David A. Pustka.(9)
10.13 Employment Agreement dated February 1, 1999, between Basin
Exploration, Inc. and David A. Pustka.(16)
10.14 Employment Agreement dated February 23, 1996 between Basin
Exploration, Inc. and Thomas J. Corley.(10)
10.15 Employment Agreement dated January 28, 1999, between Basin
Exploration, Inc. and Patrick A. Jackson.(16)
10.16 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, LP, as
Landlord.(8)
10.17 Lease of Office Space dated September 25, 1992, between
Brookfield Republic Inc. and Basin Operating Company, as
amended.(4)+
10.18 First Lease of Additional Office Space dated as of December 1,
1994, between Brookfield Republic, Inc. and Basin Operating
Company.(6)+
10.19 Order of the United States Bankruptcy Court for the Southern
District of Texas Corpus Christi Division, dated November 18,
1997, with exhibits, including the Agreement of Purchase and
Sale.(12)
10.20 Second Amendment of 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.
dated November 1, 1997.(12)
10.21 Third Amendment of Amended and Restated Credit Agreement dated
August 6, 1996 between the Company and U.S. Bank National
Association, Union Bank of California, N.A. and NationsBank of
Texas, N.A. dated April 30, 1998.(14)
10.22 Fourth Amendment of Amended and Restated Credit Agreement dated
August 6, 1996 between the Company and U.S. Bank National
Association, Union Bank of California, N.A. and NationsBank,
N.A., dated August 20, 1998.(15)
10.23 Amended and Restated Credit Agreement dated January 1, 1999
among the Company and NationsBank, N.A., U.S. Bank National
Association and Union Bank of California, N.A.(16)
10.24 First Amendment of Amended and Restated Credit Agreement dated
July 1, 1999 among the Company, NationsBank, N.A., U.S. Bank
National Association and Union Bank of California, N.A.(1)
27 Financial Data Schedule.(1)
</TABLE>
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 10-K filed on March 28, 1995, and
incorporated herein by reference.
8 Filed as an Exhibit to Form 8-K filed on February 26, 1996, and
incorporated herein by reference.
9 Filed as an Exhibit to Form 10-K filed on March 28, 1996, and
incorporated herein by reference.
10 Filed as an Exhibit to Form 10-K filed on March 31, 1997, and
incorporated herein by reference.
12 Filed as an Exhibit to Form 8-K filed on December 11, 1997, and
incorporated herein by reference.
13 Filed as an Exhibit to Form 10-K filed on March 31, 1998, and
incorporated herein by reference.
23
<PAGE>
14 Filed as an Exhibit to Form 10-Q filed on May 14, 1998, and
incorporated herein by reference.
15 Filed as an Exhibit to Form 10-Q filed on November 13, 1998, and
incorporated herein by reference.
16 Filed as an Exhibit to Form 10-K filed on March 30, 1999, and
incorporated herein by reference.
+ Confidential treatment has been granted for portions of these
Exhibits.
(b) REPORTS ON FORM 8-K
Basin filed the following reports on Form 8-K during the period covered by
this report:
<TABLE>
<CAPTION>
Date of Report Filed on Item # Topic
- -------------- -------- ------ -----
<S> <C> <C> <C>
May 28, 1999 May 28, 1999 7 Consents and opinions of experts
June 17, 1999 June 18, 1999 7 Form of Underwriting Agreement and
Company Indemnity Agreement
June 22, 1999 June 23, 1999 5 Exercise of over-allotment
option by underwriters
</TABLE>
24
<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: August 13, 1999 By: /s/ Neil L. Stenbuck
-----------------------
Neil L. Stenbuck
Chief Financial Officer
Date: August 13, 1999 By: /s/ James A. Tuell
-----------------------
James A. Tuell
Controller and
Chief Accounting Officer
25
<PAGE>
BASIN EXPLORATION, INC.
EQUITY INCENTIVE PLAN
(as amended May 12, 1999)
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.
(f) "EMPLOYEE COMMITTEE" means a committee that may be
established by the Board and composed of one or more members of the Board of
Directors who may, but need not be,
<PAGE>
Non-Employee Directors. The Employee Committee may be empowered by the Board
to grant Awards to Eligible Employees who are not directors or "officers" of
the Company as that term is defined in Rule 16a-1(f), promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), and to establish the terms
of such Awards at the time of grant, but shall have no other authority with
respect to the Plan or outstanding Awards except as expressly set forth
herein.
(g) "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.
(h) "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 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.
(i) "INCENTIVE STOCK OPTION" means any Option designated as such
and granted in accordance with the requirements of Section 422 of the
Internal Revenue Code.
(j) "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as it may be amended from time to time.
(k) "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.
(l) "NON-STATUTORY OPTION" means any Option other than an
Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock at a stated price
for a specified period of time.
(n) "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).
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(o) "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.
(p) "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.
(q) "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.
(r) "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.
(s) "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.
(t) "RESTRICTED STOCK" Means Stock granted under Section 8 that
is subject to restrictions imposed pursuant to said Section.
(u) "SHARE" means a share of Stock.
(v) "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 and delegate part of its authority under this Plan with respect to
Employees who are not directors or "officers" of the Company (as that term is
defined in Rule 16a-1(f), promulgated under the 1934 Act) to the Employee
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,
each of the Plan Administrator and the Employee Committee, as applicable, shall,
in its sole discretion and except as specifically set forth at Section 7.1(b)
and Section 9, select Participants to whom Awards will be granted, the form of
each Award, the amount of each
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Award and any other terms and conditions of each Award as the Plan
Administrator or the Employee Committee, as applicable, may deem necessary or
desirable and consistent with the terms of the Plan. The Plan Administrator
or the Employee Committee, as applicable, 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 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 or the Employee Committee shall be liable
for any action or determination made in good faith, and all members of the
Plan Administrator and the Employee Committee 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 and the Employee
Committee pursuant to the provisions of the Plan shall be binding and
conclusive for all purposes and on all persons.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Initially, 2,275,344 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 May 12, 1999 (the
"Adjustment 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 1,750,000 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,
(iii) no more than 175,000 Shares shall be cumulatively available for
non-discretionary grants to Non-Employee Directors of Non-Statutory Options
under Section 7.1(b), (iv) no more than 150,000 options may be granted to an
employee in a calendar year, (v) 200,000 shares are expressly reserved for
the grant of performance shares, and (vi) the maximum amount of any award of
performance shares that can be paid to any employee in any calendar year is
30,000 shares, or the equivalent in dollars, determined on the basis of the
market price of the shares as of the effective date of the award. Any portion
of the Shares added on each succeeding anniversary of the Adjustment 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
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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 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 1,750,000 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.
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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.
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
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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 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
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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 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
3,000 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
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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 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.
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(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 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
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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.
(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
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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.
(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
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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 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
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(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 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, and which may not exceed 30,000 shares, or the equivalent
amount in cash, determined on the basis of the market price as of the
effective date of the award, to be paid to any employee in any calendar year.
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 Incentive Plan Committee shall
establish maximum and minimum performance targets to be achieved during the
applicable Performance Cycle, subject to the limitation set forth in 9.2.
Performance targets established by the Incentive Plan Committee shall be
limited exclusively to the following business criteria: earnings, growth in
earnings, ratio of earnings to equity or assets, cash flow, growth in cash
flow, ratio of cash flow to equity or assets, growth in proved reserves
quantities or values, stockholder return vs. peer group returns, levels of
costs per unit of production, finding and development costs per unit, and
levels of debt per proved reserves quantities or values. In establishing the
performance targets, components of 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 Incentive Plan
Committee 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
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performance target. The Incentive Plan Committee 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 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.
9.6 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
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all restrictions with respect to Restricted Stock and deliver Shares free of
restrictive legends to any Participant.
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.
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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
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service with the Company. The acceleration of time or times 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 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:
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(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.
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
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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: May 12, 1999 BASIN EXPLORATION, INC.
By /s/ MICHAEL S. SMITH
---------------------------
Michael S. Smith, President
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AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into this 2nd day of June,
1999, between BASIN EXPLORATION, INC., a Delaware corporation (the
"Corporation"), and HOWARD L. BOIGON (the "Officer").
The Corporation and the Officer have previously entered into a Change of
Control Employment Agreement dated as of October 13, 1995 (the "Employment
Agreement") and desire to amend the Employment Agreement to clarify certain
provisions regarding compensation payable to the Officer in the event of a
Change of Control as defined in the Employment Agreement.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. DEFINED TERMS. All terms used and not defined herein shall have
the meaning given them in the Employment Agreement.
2. AMENDMENT OF SECTION 6(a). The last sentence of Section 6(a) of
the Employment Agreement is amended to read as follows:
Any restrictions on restricted stock grants and performance share grants
shall also be eliminated.
3. AMENDMENT OF SECTION 9. Section 9 is amended to read as follows:
LIMITATION ON AMOUNT OF PAYMENT.
(a) LIMITATION. Notwithstanding anything else in this Agreement,
solely in the event of a termination by the Company without Cause
or a termination by the Officer for Good Reason, and except as
provided in subsection (i) below, the aggregate of the payments
of benefits to which the Officer will be entitled under Section
6(a) will be reduced to the extent necessary so that the Officer
will not be liable for the federal excise tax levied on certain
"excess parachute payments" under section 4999 of the Internal
Revenue Code.
(i) The limitation of Section 9(a) will not apply if the
difference between (w) the present value of all payments to
which the Officer is entitled under paragraph 6(a)
determined without regard to Section 9(a) less (x) the
present value of all federal, state and other income and
excise taxes for which the Officer is liable as a result of
such payments exceeds the difference between (y) the present
value of all payments to which the Officer is entitled under
Section 6(a)
<PAGE>
calculated as if the limitation of Section 9(a)
applies less (z) the present value of all federal, state and
other income and excise taxes for which the Officer is
liable as a result of such reduced payments. Present values
will be determined using the interest rate specified in
section 280G of the Internal Revenue Code and will be the
present values as of the date on which the Officer's
employment terminates (unless it is necessary to use a
different date in order to avoid adverse consequences under
section 280G).
(b) DETERMINATION BY OFFICER. Whether payments to the Officer are to
be reduced pursuant to Section 9(a), and the extent to which they
are to be so reduced, will be determined by the Officer. The
Officer may, at the expense of the Company, hire an accounting
firm, law firm or employment consulting firm selected by the
Officer to assist him in such determination. If a reduction is
made pursuant to Section 9(a), the Officer will have the right to
determine which payments and benefits will be reduced.
(c) ADDITIONAL BENEFIT. The Officer shall receive the benefit of any
change made by the Company in the calculation or entitlement of
severance compensation following a Change of Control for any
other officer of the Company, such as an agreement by the Company
to "gross up" the compensation paid to an officer by paying the
excise tax imposed by Section 280G of the Internal Revenue Code .
4. EFFECT OF AMENDMENT. As amended hereby, the Employment Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Employment Agreement on the day and year first above entered.
BASIN EXPLORATION, INC.
By
----------------------------
President
-------------------------------
HOWARD L. BOIGON
<PAGE>
BASIN EXPLORATION, INC.
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between BASIN EXPLORATION, INC. a Delaware
corporation (the "Company") and SAM D. WINEGRAD (the "Officer"), dated as of
August 28, 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to
assure that the Company will have the continued dedication of the Officer,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Officer by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Officer's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control,
and to provide the Officer with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits
expectations of the Officer will be satisfied and which are competitive with
those of other corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Officer's
employment with the Company is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the Officer
that such termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination of
employment. For purposes of this Agreement, the Committee (as described
below) may clarify the date as of which a Change of Control shall be deemed
to have occurred.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date (and prior to the Effective
Date) the Company shall give notice to the Officer that the Change of Control
Period shall not be so extended.
<PAGE>
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) Any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (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 thirty-three and one-third percent
(33-1/3%) of the then outstanding voting stock of the Company; or
(b) Individuals who, as of the date hereof, 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 as
of the date hereof 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 51% 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; provided, however, that if the merger, plan of liquidation or sale of
substantially all assets is not consummated following such stockholder
approval and the transaction is abandoned, then the Change of Control shall
be deemed not to have occurred.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Officer in its employ, and the Officer hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary
of such date (the "Employment Period").
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(a) During the Employment Period, (A) the Officer's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be
at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective
Date and (B) the
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Officer's services shall be performed at the location where
the Officer was employed 120 days immediately preceding the
Effective Date or any office or location less than 30 miles
from such location.
(b) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Officer is
entitled, the Officer agrees to devote reasonable attention
and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Officer
hereunder, to use the Officer's reasonable best efforts to
perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of
this Agreement for the Officer to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as
such activities do not significantly interfere with the
performance of the Officer's responsibilities as an employee
of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any
such activities have been conducted by the Officer prior to
the Effective Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter
be deemed to interfere with the performance of the Officer's
responsibilities to the Company.
(b) COMPENSATION.
(a) BASE SALARY. During the Employment Period, the
Officer shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least
equal to 12 times the highest monthly base salary paid or
payable, including any base salary which has been earned but
deferred, to the Officer by the Company and its affiliated
companies in respect of the 12-month period immediately
preceding the month in which the Effective Date occurs. During
the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase
awarded to the Officer prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation
to the Officer under this Agreement. Annual Base Salary shall
not be reduced after any such increase and the term Annual
Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement,
the term "affiliated companies" shall
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include any company controlled by, controlling or under
common control with the Company.
(b) ANNUAL BONUS. In addition to Annual Base Salary,
the Officer shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Officer's
bonuses over the last three fiscal years, or such lesser
number of years as the Officer may have been employed by the
Company, prior to the Effective Date (annualized in the event
that the Officer was not employed by the Company for an entire
fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month
of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Officer shall elect to
defer the receipt of such Annual Bonus.
(c) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During
the Employment Period, the Officer shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies
but in no event shall such plans, practices, policies and
programs provide the Officer with incentive opportunities
(measured with respect to both regular and special incentive
opportunities to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate,
than the most favorable of those provided by the Company and
its affiliated companies for the Officer under such plans,
practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective
Date or if more favorable to the Officer, those provided
generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(d) WELFARE BENEFIT PLANS. During the Employment
Period, the Officer and/or the Officer's family, as the case
may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other peer executives of the Company
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and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Officer
with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies
and programs in effect for the Officer at any time during
the 120-day period immediately preceding the Effective Date
or, if more favorable to the Officer, those provided generally
at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.
(e) EXPENSES. During the Employment Period, the
Officer shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Officer in accordance
with the most favorable policies, practices, and procedures of
the Company and its affiliated companies in effect for the
Officer at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Officer, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
(f) FRINGE BENEFITS. During the Employment Period,
the Officer shall be entitled to fringe benefits, including,
without limitation, in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Officer at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Officer, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(g) VACATION. During the Employment Period, the Officer
shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of
the Company and its affiliated companies as in effect for
the Officer at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Officer, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Officer's employment shall
terminate automatically upon the Officer's death during the Employment
Period. If the Company determines in good faith that the Disability of the
Officer has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Officer written
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notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Officer's employment. In such event, the Officer's employment
with the Company shall terminate effective on the 30th day after receipt of
such notice by the Officer (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Officer shall not have returned to
full-time performance of the Officer's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Officer from the
Officer's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Officer or the Officer's legal
representative.
(b) CAUSE. The Company may terminate the Officer's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(a) the Officer's gross violation of the terms of
this Agreement, if such violation has not been substantially
cured within thirty (30) days following written notice to the
Officer from the Company of such violation setting forth with
specificity the nature of the violation or, if cure cannot
reasonably be effected within such 30-day period, if the
Officer does not commence such cure within such 30-day period
and thereafter pursue such cure continuously and with due
diligence until cure has been effected;
(b) the Officer's willful dishonesty towards, fraud
upon, felony crime against, deliberate material injury or
material bad faith action with respect to, or deliberate or
attempted injury to the Company; or
(c) the Officer's conviction for any felony crime
(whether in connection with the Company's affairs or
otherwise).
(c) GOOD REASON; WINDOW PERIOD. The Officer's employment may be
terminated (i) during the Employment Period by the Officer for Good Reason or
(ii) during the Window Period by the Officer without any reason. For purposes
of this Agreement, "Window Period" shall mean the 30-day period immediately
following the Effective Date. For purposes of this Agreement, any termination
by the Officer during the Window Period shall be deemed a termination by the
Officer for Good Reason and, in addition, "Good Reason" shall mean:
(a) the assignment to the Officer by the Company
following the Effective Date of any duties inconsistent with,
or a substantial alteration in the nature or status of, the
Officer's responsibilities as in effect during the 120-day
period prior to the Effective Date, including a change in the
Officer's title or the level of supervisor to whom the
Officer is required to report;
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(b) a failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Officer;
(c) a relocation of the Company's principal offices
to a location outside a 30-mile radius of Denver, Colorado,
or the Officer's relocation to any place other than the
offices of the Company located in Denver, Colorado or
within 30 miles of Denver, Colorado, except for reasonably
required travel by the Officer on the Company's business to
an extent substantially consistent with the Officer's
business travel obligations immediately preceding the
Effective Date;
(d) any material breach by the Company of any
provision of this Agreement, if such material breach has
not been cured within thirty (30) days following written
notice by the Officer to the Company of such breach setting
forth with specificity the nature of the breach;
(e) any failure by the Company to obtain the
assumption and performance of this Agreement by any
successor (by merger, consolidation or otherwise) or assign
of the Company; or
(f) the voluntary termination by Michael S. Smith of
his employment as Chief Executive Officer of the Company or
the termination of his employment as Chief Executive
Officer in the event of a Change of Control; provided that
such termination shall constitute Good Reason only for a
period of 120 days from the date of termination of Mr.
Smith's employment as Chief Executive Officer.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Officer shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Officer for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Officer's employment under the provision so indicated and
(iii) if the Date of Termination (as
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defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 30 days after the
giving of such notice). The failure by the Officer or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Officer
or the Company, respectively, hereunder or preclude the Officer or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Officer's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Officer's employment is terminated by the Company for Cause, or by the
Officer for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Officer's
employment is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company notifies the
Officer of such termination, (iii) if the Officer's employment is terminated
by reason of Disability, the Date of Termination shall be the Disability
Effective Date, and (iv) if the Officer's employment is terminated by reason
of his death, the Date of Termination shall be the last day of the month
during which his death occurs.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If,
during the Employment Period, the Company shall terminate the Officer's
employment other than for Cause or Disability or the Officer shall terminate
employment for Good Reason, the parties acknowledge that the Officer will
sustain actual damages, the amount of which is indefinite, uncertain and
difficult of exact ascertainment because of the uncertainties of successfully
relocating and seeking a comparable position. In order to avoid dispute as to
the amount of such damages and the mutual expense and inconvenience such
dispute would entail, the Company and the Officer have agreed hereby that the
Company shall pay to the Officer compensation as provided below. It is hereby
agreed that in the event of such termination by the Company, the Officer
shall receive such amounts as herein provided, not as a penalty, but as the
Officer's agreed compensation and sole damages for the termination of this
Agreement, in lieu of the Officer's proof of his actual damages on that
account. If, during the Employment Period, the Company shall terminate the
Officer's employment other than for Cause or Disability or the Officer shall
terminate employment for Good Reason, the Company shall pay to the Officer in
a lump sum in cash within 5 days after the Date of Termination the aggregate
of the following amounts:
(a) the sum of (1) the Officer's Annual Base Salary
through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I)
the Recent Annual Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has
been earned but deferred (and annualized for any fiscal
year consisting of less than 12 full months or during which
the Officer was employed for less than 12 full months), for
the most recently completed fiscal year during the
Employment Period, if any (such higher amount being
referred to
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as the "Highest Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Officer (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
(b) the amount equal to the product of (1) three and
(2) the sum of (x) the Officer's Annual Base Salary and (y)
the Highest Annual Bonus.
To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Officer any other amounts or benefits
required to be paid or provided or which the Officer is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
In addition, any options to purchase shares of the
Company's common stock shall immediately vest and become exercisable as of
the Date of Termination and, notwithstanding anything to the contrary in the
Officer's option agreements with the Company, the options shall be
exercisable for a period of 12 months after the Date of Termination (but in
no event beyond the expiration date applicable to such options). Any
restrictions on restricted stock grants and performance share grants shall
also be eliminated.
(b) DEATH. If the Officer's employment is terminated by reason
of the Officer's death during the Employment Period, this Agreement shall
terminate without further obligations to the Officer's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Officer's estate or beneficiary, as applicable, in a lump sum in
cash within 5 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Officer's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the
most favorable benefits provided by the Company and affiliated companies to
the estates and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Officer's estate and/or the Officer's beneficiaries, as in effect on the date
of the Officer's death with respect to other peer executives of the Company
and its affiliated companies and their beneficiaries.
(c) DISABILITY. If the Officer's employment is terminated by
reason of the Officer's Disability during the Employment Period, this
Agreement shall terminate without
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further obligations to the Officer, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Officer in a lump sum in cash within 5 days
of the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 6(c) shall include, and
the Officer shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable of those
generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Officer and/or the Officer's family, as in effect at any
time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Officer's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Officer other
than the obligation to pay to the Officer (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Officer, and (z) Other Benefits, in each case to the extent
theretofore unpaid. If the Officer voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this
Agreement shall terminate without further obligations to the Officer, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the Officer
in a lump sum in cash within 5 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Except as provided in Sections
6(a)(ii), 6(b) and 6(c), nothing in this Agreement shall prevent or limit the
Officer's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Officer may qualify, nor, subject to Section 12(f), shall anything
herein limit or otherwise affect such rights as the Officer may have under
any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Officer is
otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Officer or others. In no event shall the Officer be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Officer under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Officer obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Officer may
reasonably incur as a result of any contest (regardless of the outcome
thereof but not in the case of fees incurred with
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respect to a claim brought in bad faith) by the Company, the Officer or
others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Officer about the amount of any
payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
9. LIMITATION ON AMOUNT OF PAYMENT.
(a) LIMITATION. Notwithstanding anything else in this
Agreement, solely in the event of a termination by the Company without Cause
or a termination by the Officer for Good Reason, and except as provided in
subsection (i) below, the aggregate of the payments of benefits to which the
Officer will be entitled under Section 6(a) will be reduced to the extent
necessary so that the Officer will not be liable for the federal excise tax
levied on certain "excess parachute payments" under section 4999 of the
Internal Revenue Code.
(i) The limitation of Section 9(a) will not apply if
the difference between (w) the present value of all
payments to which the Officer is entitled under paragraph
6(a) determined without regard to Section 9(a) less (x) the
present value of all federal, state and other income and
excise taxes for which the Officer is liable as a result of
such payments exceeds the difference between (y) the
present value of all payments to which the Officer is
entitled under Section 6(a) calculated as if the limitation
of Section 9(a) applies less (z) the present value of all
federal, state and other income and excise taxes for which
the Officer is liable as a result of such reduced payments.
Present values will be determined using the interest rate
specified in section 280G of the Internal Revenue Code and
will be the present values as of the date on which the
Officer's employment terminates (unless it is necessary to
use a different date in order to avoid adverse consequences
under section 280G).
(b) DETERMINATION BY OFFICER. Whether payments to the Officer
are to be reduced pursuant to Section 9(a), and the extent to which they are
to be so reduced, will be determined by the Officer. The Officer may, at the
expense of the Company, hire an accounting firm, law firm or employment
consulting firm selected by the Officer to assist him in such determination.
If a reduction is made pursuant to Section 9(a), the Officer will have the
right to determine which payments and benefits will be reduced.
(c) ADDITIONAL BENEFIT. The Officer shall receive the benefit
of any change made by the Company in the calculation or entitlement of
severance compensation following a Change of Control for any other officer of
the Company, such as an agreement by the Company to "gross up" the
compensation paid to an officer by paying the excise tax imposed by Section
280G of the Internal Revenue Code.
10. CONFIDENTIAL INFORMATION. The Officer shall not, during his
employment by the Company or at any time thereafter, directly or indirectly
use, divulge, furnish or make accessible to anyone other than the Company,
its directors or officers (otherwise than in the
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regular course of the business of the Company), any knowledge or information
regarding any confidential or secret activities, prospects, technical data,
analysis and interpretations, projects, plans, reports, investor or
co-venturer names or lists, financial or marketing information or documentary
material relating to the existing, planned or contemplated business or
activities of the Company. The Officer, upon leaving the employ of the
Company, shall not take with him or retain any books, records, data, reports,
letters, memoranda, notes or other writings or documents whatsoever, or
copies thereof, which reflect or deal with any secret, proprietary or
confidential information or material relating to the business or activities
of the Company. The obligations of the Officer under this Section 10 shall
not apply to (i) information which at the time of disclosure is readily
available to the public; (ii) information which is or becomes available to
the general public other than through acts or omissions attributable to the
Officer; or (iii) information obtained from a third party who is lawfully in
possession of the same other than through breach of a confidentiality or
nonuse obligation owed to the Company or others with respect to that
information.
11. SUCCESSORS.
(a) This Agreement is personal to the Officer and, without the
prior written consent of the Company, shall not be assignable by the Officer
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Officer's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
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(b) NOTICES. All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Officer:
Sam D. Winegrad
7086 E. Costilla Dr.
Englewood, Colorado 80012
If to the Company:
Basin Exploration, Inc.
370 Seventeenth Street, Suite 3400
Denver, Colorado 80002
Attention: General Counsel or President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) WITHHOLDINGS. The Company may withhold from any amounts
payable under this Agreement the minimum amounts of any such Federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) MODIFICATIONS. The Officer's or the Company's failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Officer or the Company may have hereunder,
including, without limitation, the right of the Officer to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) ACKNOWLEDGMENT OF EMPLOYMENT AT WILL. The Officer and the
Company acknowledge that, except as may otherwise be provided under any other
written agreement between the Officer and the Company, the employment of the
Officer by the Company is "at will" and, subject to Section 1(a) hereof,
prior to the Effective Date, the Officer's employment and/or this Agreement
may be terminated by either the Officer or the Company at any time prior to
the Effective Date, in which case the Officer shall have no further rights
under this Agreement. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
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IN WITNESS WHEREOF, the Officer has hereunto set the
Officer's hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be executed in its name
on its behalf, all as of the day and year first above written.
------------------------------
Sam D. Winegrad
BASIN EXPLORATION, INC.
By:
---------------------------
Michael S. Smith, President
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FIRST AMENDMENT OF
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT OF AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of July 1, 1999, is by and among BASIN EXPLORATION,
INC., a Delaware corporation ("Borrower"), U.S. BANK NATIONAL ASSOCIATION
f/k/a COLORADO NATIONAL BANK ("USB"), UNION BANK OF CALIFORNIA, N.A.
("Union"), and NATIONSBANK, N.A. f/k/a NATIONSBANK OF TEXAS, N.A. ("NBT"), in
its capacity as a Lender and as Agent for Lenders. USB, Union and NBT are
herein collectively referred to as "Lenders."
RECITALS
A. Borrower and Lenders entered into an Amended and Restated Credit
Agreement dated as of January 1, 1999 (the "Credit Agreement"), in order to
set forth the terms upon which Lenders would make loans to Borrower and issue
letters of credit at the request of Borrower and by which such loans and
letters of credit would be governed. Capitalized terms used herein without
definition shall have the same meanings as set forth in the Credit Agreement.
B. The parties hereto wish to enter into this Amendment in order to
amend certain terms and provisions of the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of $10.00 and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
1. CREDIT AGREEMENT. Effective as of the date of this Amendment, the
Credit Agreement shall be, and hereby is, amended as follows:
(a) The definition of "Borrowing Base (Supplemental)" in
Section 1.1 on page 3 of the Credit Agreement shall be deleted, and the
following shall be substituted therefor:
BORROWING BASE (SUPPLEMENTAL) means that portion of the Borrowing
Base attributable to Facility B, which shall be: (a) at any time prior
to July 1, 1999, the supplemental loan value attributable to the
Borrowing Base Properties, as determined by Lenders in their sole and
absolute discretion, in accordance with the procedures for
supplemental oil and gas borrowing base loans set forth in Section 3.2
below; and (b) at any time on or after July 1, 1999, zero.
<PAGE>
(b) The definition of "Commitment Expiration Date (Facility
B)" in Section 1.1 on page 4 of the Credit Agreement shall be deleted, and
the following shall be substituted therefor:
"COMMITMENT EXPIRATION DATE (FACILITY B)" means the date after
which no further Advances under Facility B are to be made hereunder,
which shall be the close of business on June 30, 1999.
(c) Section 3.2(a) on page 26 of the Credit Agreement shall be
deleted, and the following shall be substituted therefor:
(a) regular semi-annual determinations, as of approximately
April 1 and October 1 of each year;
2. LOAN DOCUMENT. All references in any document to the Credit
Agreement shall refer to the Credit Agreement, as amended and supplemented
pursuant to this Amendment.
3. CONDITIONS PRECEDENT. The obligations of the parties under
this Amendment are subject, at the option of Lenders, to the prior
satisfaction of the condition that Borrower shall have executed and/or
delivered, or caused to have been executed and/or delivered, to or for the
benefit of Lenders, the following (all documents to be satisfactory in form
and substance to Lenders):
(a) This Amendment.
(b) Such certificates of officers of Borrower as may be
required by Lenders.
(c) Any and all other Loan Documents required by Lenders,
including without limitation any and all Security Documents required by
Lenders.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby certifies to
Lenders that as of the date of (and after giving effect to) this Amendment,
except as heretofore disclosed to and waived by Lenders: (a) all of
Borrower's representations and warranties contained in the Credit Agreement
are true, accurate and complete in all material respects, and (b) no Default
or Event of Default has occurred and is continuing under the Credit Agreement.
2
<PAGE>
5. CONTINUATION OF THE CREDIT AGREEMENT. Except as specified in
this Amendment, the provisions of the Credit Agreement shall remain in full
force and effect, and if there is a conflict between the terms of this
Amendment and those of the Credit Agreement, the terms of this Amendment
shall control. Borrower hereby ratifies, confirms and adopts the Credit
Agreement, as amended hereby.
6. EXPENSES. Borrower shall pay all reasonable expenses
incurred in connection with the transactions contemplated by this Amendment,
including without limitation all reasonable fees and reasonable expenses of
Lenders' attorneys and all recording and filing fees, charges and expenses.
7. MISCELLANEOUS. This Amendment shall be governed by and
construed under the laws of the State of Colorado and shall be binding upon
and inure to the benefit of the parties hereto and their successors and
assigns. This Amendment may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one
instrument. Delivery of this Amendment and any and all documents to be
delivered in connection herewith by any party may be effected, without
limitation, by faxing a signed counterpart of this Amendment to NBT (any
party that effects delivery in such manner hereby agreeing to transmit
promptly to NBT an actual signed counterpart).
EXECUTED as of the date first above written.
BASIN EXPLORATION, INC.
By:
--------------------------------
Vice President/Chief Financial Officer
NATIONSBANK, N.A. f/k/a NATIONSBANK
OF TEXAS, N.A., in its capacity as
Lender and as Agent for Lenders
By:
--------------------------------
Managing Director
U.S. BANK NATIONAL ASSOCIATION f/k/a
COLORADO NATIONAL BANK
By:
--------------------------------
Vice President
3
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
--------------------------------
Vice President
By:
--------------------------------
Senior Vice President
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,243
<SECURITIES> 0
<RECEIVABLES> 10,002
<ALLOWANCES> 0
<INVENTORY> 205
<CURRENT-ASSETS> 19,712
<PP&E> 333,467
<DEPRECIATION> 137,437
<TOTAL-ASSETS> 216,241
<CURRENT-LIABILITIES> 16,753
<BONDS> 34,000
0
0
<COMMON> 186
<OTHER-SE> 165,182
<TOTAL-LIABILITY-AND-EQUITY> 216,241
<SALES> 33,323
<TOTAL-REVENUES> 33,367
<CGS> 5,745
<TOTAL-COSTS> 28,223
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,095
<INCOME-PRETAX> 3,049
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,049
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,049
<EPS-BASIC> .22
<EPS-DILUTED> .21
</TABLE>
