<PAGE> 1
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1995
Commission file number 1-10447
CABOT OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3072771
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15375 MEMORIAL DRIVE, HOUSTON, TEXAS 77079
(Address of principal executive offices including Zip Code)
(713) 589-4600
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
CLASS A COMMON STOCK, PAR VALUE $.10 PER SHARE NEW YORK STOCK EXCHANGE
RIGHTS TO PURCHASE PREFERRED STOCK NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Class A Common Stock, par value $.10 per share
("Common Stock"), held by non-affiliates (based upon the closing sales price on
the New York Stock Exchange on March 1, 1996), was approximately $336,950,000.
As of February 29, 1996, there were 22,796,580 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held May 16, 1996 are incorporated herein by reference in Items 10, 11, 12, and
13 of Part III of this report.
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEMS 1 AND 2 Business and Properties 1
ITEM 3 Legal Proceedings 13
ITEM 4 Submission of Matters to a Vote of Security Holders 14
Executive Officers of the Registrant 14
PART II
ITEM 5 Market for Registrant's Common Equity and Related Stockholder Matters 15
ITEM 6 Selected Historical Financial Data 15
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 16
ITEM 8 Financial Statements and Supplementary Data 26
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 51
PART III
ITEM 10 Directors and Executive Officers of the Registrant 51
ITEM 11 Executive Compensation 51
ITEM 12 Security Ownership of Certain Beneficial Owners and Management 51
ITEM 13 Certain Relationships and Related Transactions 51
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 52
</TABLE>
---------------------
The statements regarding future financial performance and results and the
other statements which are not historical facts contained in this report are
forward-looking statements that involve risks and uncertainties, including, but
not limited to, market factors, market prices of natural gas and oil, results
of future drilling and marketing activity, future production and costs and
other factors detailed herein and in the Company's other Securities and
Exchange Commission filings.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Cabot Oil & Gas Corporation (the "Company") explores for, develops, produces,
stores, transports, purchases and markets natural gas and, to a lesser extent,
produces and sells crude oil. Substantially all of the Company's operations are
in the Appalachian Region of West Virginia, Pennsylvania and New York and in
the Western Region, including the Anadarko Basin of southwestern Kansas,
Oklahoma and the Texas Panhandle, the Green River Basin of Wyoming, and South
Texas. At December 31, 1995, the Company had approximately 922 Bcfe of total
proved reserves, 97% of which was natural gas. A significant portion of the
Company's natural gas reserves is located in long-lived fields with extended
production histories.
The Company, a Delaware corporation, was organized in 1989 as the successor
to the oil and gas business of Cabot Corporation ("Cabot"), which was begun in
1891. In 1990, the Company completed its initial public offering of
approximately 18% of the outstanding common stock held by Cabot. Cabot
distributed the remaining common stock of the Company to the shareholders of
Cabot in 1991. The Company has been publicly traded on the New York Stock
Exchange since its initial public offering.
Unless the context otherwise requires, all references herein to the Company
include Cabot Oil & Gas Corporation, its predecessors and subsidiaries.
Similarly, all references to Cabot include Cabot Corporation and its
affiliates. All references to wells are gross, unless otherwise stated.
The following table summarizes certain information, at December 31, 1995,
regarding the Company's proved reserves, productive wells, developed and
undeveloped acreage and infrastructure.
SUMMARY OF RESERVES, PRODUCTION, ACREAGE AND OTHER INFORMATION BY AREAS OF
OPERATION(1)
<TABLE>
<CAPTION>
Total Appalachian Western
Company Region Region(2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RESERVES/PRODUCTION:
Proved reserves
Developed (Bcfe) 777.1 431.5 345.6
Undeveloped (Bcfe) 144.6 85.4 59.2
-------------------------------------
Total (Bcfe) 921.7 516.9 404.8
=====================================
Daily production (MMcfe) net 170.3 75.7 94.6
Gross productive wells 5,279.0 4,100.0 1,179.0
Net productive wells 4,403.6 3,768.9 634.7
Percent of wells operated 89.4% 97.6% 61.1%
ACREAGE/INFRASTRUCTURE:
Net acreage (thousands of acres)
Developed acreage 983,800 753,427 230,373
Undeveloped acreage 454,596 290,615 163,981
-------------------------------------
Total 1,438,396 1,044,042 394,354
=====================================
</TABLE>
- --------------------------------------------------------------------------------
(1) As of December 31, 1995. For additional information regarding the Company's
estimates of proved reserves and other data, see "Business -- Reserves,"
and the "Supplemental Oil and Gas Information to the Consolidated Financial
Statements."
(2) Includes all properties outside the Appalachian Region, including
properties located in Anadarko, the Rocky Mountains and the Gulf Coast
areas.
1
<PAGE> 4
EXPLORATION, DEVELOPMENT AND PRODUCTION
The Company is one of the largest producers of natural gas in the
Appalachian basin, where it has conducted operations for more than a century.
The Company has had operations in the Anadarko basin for over 50 years. The
Company acquired its operations in the Rocky Mountains and the Gulf Coast
pursuant to the merger of Washington Energy Resources Company with the Company
which was completed in May of 1994. Historically, the Company has maintained
its reserve base through low-risk development drilling and strategic
acquisitions. The Company continues to focus its operations in the Appalachian
and Western Regions through development of undeveloped reserves and acreage,
acquisition of oil and gas producing properties and, to a lesser extent,
exploration.
APPALACHIAN REGION
The Company's exploration, development and production activities in the
Appalachian Region are concentrated in Pennsylvania, Ohio, West Virginia and
New York. Operations are managed by a regional office in Pittsburgh. At
December 31, 1995, the Company had approximately 517 Bcfe of proved reserves
(substantially all natural gas) in the Appalachian Region, constituting 56% of
the Company's total proved reserves.
The Company has 4,100 productive wells (3,768.9 net), of which 4,014 wells
are operated by the Company. There are multiple producing intervals which
include the Medina, Berea, and Big Lime trend formations at depths primarily
ranging from 1,500 to 6,000 feet. Average net daily production in 1995 was 75.7
MMcfe. While natural gas production volumes from Appalachian reservoirs are
relatively low on a per-well basis compared to other areas of the United
States, the productive life of Appalachian reserves is relatively long.
In 1995, the Company drilled 33 wells (24.5 net) in the Appalachian Region,
of which 24 were development wells (21.5 net). Capital and exploration
expenditures, including pipeline expenditures for the year were $10.9 million.
In the 1996 drilling program year, the Company has plans to drill 96.0 net
wells.
At December 31, 1995, the Company had 1,044,042 net acres in the region,
including 753,427 net developed acres. At year end, the Company had identified
259.2 net proved undeveloped drilling locations.
The Company also owns and operates a brine treatment plant near Franklin,
Pennsylvania. The plant, which began operating in 1985, processes and treats
waste fluid generated during the drilling, completion and subsequent production
of oil and gas wells. The plant provides services to the Company and certain
other oil and gas producers in southwestern New York, eastern Ohio and western
Pennsylvania.
The Company believes that it gains operational efficiency in the
Appalachian Region because of its large acreage position, high concentration of
wells, natural gas gathering and pipeline systems and storage capacity.
WESTERN REGION
The Company's exploration, development and production activities in the
Western Region are primarily focused in the Anadarko basin in Kansas, Oklahoma
and the Panhandle of Texas, in the Green River Basin of Wyoming and in South
Texas. Operations for the Western Region are managed from a regional office in
Denver. At December 31, 1995, the Company had approximately 405 Bcfe of proved
reserves (92.5% natural gas) in the Western Region, constituting 44% of the
Company's total proved reserves.
ANADARKO
The Company has 728 productive wells (486.2 net) in the Anadarko area of
which 544 wells are operated by the Company. Principal producing intervals in
Anadarko are in the Chase, Chester and Morrow formations at depths ranging from
1,500 to 11,000 feet. Average net daily production in 1995 was 50.6 MMcfe.
2
<PAGE> 5
In 1995, the Company drilled 31 wells (19.4 net) in Anadarko. Capital and
exploration expenditures for the year were $6.7 million. In the 1996 drilling
program year, the Company has plans to drill 35.4 net wells.
At December 31, 1995, the Company had approximately 197,934 net acres,
including approximately 177,082 net developed acres. At year end, the Company
had identified 40.4 net proved undeveloped drilling locations.
ROCKY MOUNTAIN
The Company has 279 productive wells (96.0 net) in the Rocky Mountain area
of which 141 wells are operated by the Company. Principal producing intervals
in Rocky Mountain are in the Frontier and Dakota formations at depths ranging
from 7,500 to 13,500 feet. Average net daily production in 1995 was 31.4 MMcfe.
In 1995, the Company drilled 19 wells (6.3 net) in the Rocky Mountains.
Capital and exploration expenditures for the year were $6.5 million. In the
1996 drilling program year, the Company has plans to drill 22.3 net wells.
At December 31, 1995, the Company had approximately 172,827 net acres,
including approximately 37,990 net developed acres. At year end, the Company
had identified 15.3 net proved undeveloped drilling locations.
GULF COAST
The Company has 172 productive wells (52.5 net) in the Gulf Coast area of
which 44 wells are operated by the Company. Principal producing intervals in
Gulf Coast are in the Frio, Wilcox and Vicksburg formations at depths ranging
from 2,000 to 14,000 feet. Average net daily production in 1995 was 12.7 MMcfe.
In 1995, the Company drilled 10 wells (5.4 net) in Gulf Coast. Capital and
exploration expenditures for the year were $7.7 million. In the 1996 drilling
program year, the Company has plans to drill 6.9 net wells.
At December 31, 1995, the Company had approximately 23,593 net acres,
including approximately 15,301 net developed acres. At year end, the Company
had identified 3.3 net proved undeveloped drilling locations.
GAS MARKETING
The Company is engaged in a wide array of marketing activities designed to
offer its customers long-term reliable supplies of natural gas. Utilizing its
pipeline and storage facilities, gas procurement ability and transportation and
natural gas risk management expertise, the Company provides a menu of services
that includes gas supply and transportation management, short and long-term
supply contracts, capacity brokering and risk management alternatives. Sales
volumes grew substantially in 1995 as the Company increased the amount of
natural gas purchased for resale. This increase was primarily due to an
increase in gas purchased from producers and marketers in the Rocky Mountain
area and was resold to markets in the Rockies and Pacific Northwest Regions.
Volumes purchased and sold in the Western Region increased from approximately
4.3 Bcf in 1994 to approximately 16.4 Bcf in 1995.
The marketing of natural gas has changed significantly as a result of Order
636 ("Order 636"), which was issued by the Federal Energy Regulatory Commission
in 1992. Order 636 required pipelines to unbundle their gas sales, storage and
transportation services. As a result, local distribution companies and
end-users will separately contract these services from gas marketers and
producers. Order 636 has had the effect of creating greater competition in the
industry and it has also provided the Company the opportunity to reach broader
markets. In 1994 and 1995, there was an increase in the number of third-party
producers that use the Company to market their gas. In addition, the Company
has experienced, as a result of Order 636, increased competition for markets
which has placed pressure on margins.
3
<PAGE> 6
APPALACHIAN REGION
The Company's principal markets for its Appalachian Region natural gas are
in the northeastern United States. The Company's marketing subsidiary purchases
the Company's natural gas production in the Appalachian Region as well as
production from local third-party producers and other suppliers to aggregate
larger volumes of natural gas for resale. This marketing subsidiary sells
natural gas to industrial customers, local distribution companies ("LDCs") and
gas marketers both on and off the Company's pipeline system.
A majority of the Company's natural gas sales volume in the Appalachian
Region is being sold at market responsive prices under contracts with a term of
one year or less. Of these short term sales, spot market sales are made under
month-to-month contracts while industrial and utility sales generally are made
under year-to-year contracts. Approximately 20% of the Appalachian production
is sold on fixed price contracts which typically renew annually.
The Company's Appalachian production is generally sold at a premium price
to production from other producing regions due to its close proximity to
eastern markets. However, that premium has been reduced from historic levels
due to increased competition in the market place resulting in part from changes
in transportation and sales arrangements due to the implementation of pipeline
open access tariffs and Order 636.
The Company operates a number of gas gathering and pipeline systems, made
up of approximately 3,600 miles of pipeline with interconnects to four
interstate pipeline systems and five LDCs. The Company's natural gas gathering
and pipeline systems enable the Company to connect new wells quickly and to
transport natural gas from the wellhead directly to interstate pipelines, LDCs
and industrial end-users. Control of its gathering and pipeline systems also
enables the Company to purchase, transport and sell natural gas produced by
third parties. In addition, the Company can undertake development drilling
operations without relying upon third parties to transport its natural gas
while incurring only the incremental costs of pipeline and compressor additions
to its system.
The Company has two natural gas storage fields located in West Virginia,
with a combined working capacity of approximately 4 Bcf of natural gas. The
Company uses these storage fields to take advantage of the seasonal variations
in the demand for natural gas and the higher prices typically associated with
winter natural gas sales, while maintaining production at a nearly constant
rate throughout the year. The storage fields also enable the Company to
periodically increase the volume of natural gas it can deliver by more than 35%
above the volume that it could deliver solely from its production in the
Appalachian Region. The pipeline systems and storage fields are fully
integrated with the Company's producing operations.
WESTERN REGION
The Company's principal markets for Western Region natural gas are in the
midwest and northwestern United States. The Company's marketing subsidiaries
purchase all of the Company's natural gas production in the Western Region.
These marketing subsidiaries sell the natural gas to cogenerators, natural gas
processors, LDCs, industrial customers and marketing companies.
Currently, a majority of the Company's natural gas production in the
Western Region is being sold primarily under contracts with a term of one year
or less at market-responsive prices. Approximately 25% of the Western Region's
production is sold under a cogeneration contract with 13 years remaining and a
price escalation of 5% per year. The Western Region properties are connected to
the majority of the midwestern and northwestern interstate pipelines, affording
the Company access to multiple markets.
The Company also produces and markets approximately 2,000 barrels a day of
crude oil/condensate in the Western Region at market responsive prices.
4
<PAGE> 7
RISK MANAGEMENT
In 1995, the Company entered into certain transactions to manage price
risks associated with its production and purchase commitments. The Company
utilized certain natural gas price swap agreements ("price swaps") to attempt
to manage price risk more effectively and improve the Company's realized
natural gas prices. These price swaps call for payments to (or to receive
payments from) counterparties based upon the differential between a fixed and a
variable gas price. At December 31, 1995, a majority of the open price swaps
(16,085,000 MMbtu in notional quantity) cover the months of January through
April 1996 and a remaining contract (1,260,000 MMbtu in notional quantity)
covers the production months of November 1996 to February 1997. The Company
plans to continue this strategy in the future. See the Overview section of Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations for further discussion.
RESERVES
CURRENT RESERVES
The following table sets forth information regarding the Company's
estimates of its net proved reserves at December 31, 1995.
<TABLE>
<CAPTION>
Natural Gas (MMcf) Liquids(1) (MBbl) Total(2) (MMcfe)
-------------------------------------------------------------------------------------------------
Developed Undeveloped Total Developed Undeveloped Total Developed Undeveloped Total
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appalachian 430,165 85,391 515,556 219 0 219 431,477 85,391 516,868
Western(3) 317,070 57,224 374,294 4,751 339 5,090 345,579 59,260 404,839
-------------------------------------------------------------------------------------------------
Total 747,235 142,615 889,850 4,970 339 5,309 777,056 144,651 921,707
=================================================================================================
</TABLE>
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(1) Liquids include crude oil, condensate and natural gas liquids (Ngl).
(2) Natural Gas Equivalents are determined using the ratio of 6.0 Mcf of
natural gas to 1.0 Bbl of crude oil or condensate.
(3) Includes proved reserves attributable to Anadarko, Rocky Mountains and the
Gulf Coast Areas.
The reserve estimates presented herein were prepared by the Company's
petroleum engineering staff and reviewed by Miller and Lents, Ltd., independent
petroleum engineers. For additional information regarding the Company's
estimates of proved reserves, the review of such estimates by Miller and Lents,
Ltd. and certain other information regarding the Company's oil and gas
reserves, see the Supplemental Oil and Gas Information to the Consolidated
Financial Statements included in Item 8 hereof. A copy of the review letter by
Miller and Lents, Ltd., has been filed as an exhibit to this Form 10-K. The
Company's estimates of reserves set forth in the foregoing table do not differ
materially from those filed by the Company with other federal agencies. The
Company's reserves are sensitive to natural gas sales prices and their effect
on economic producing rates. The Company's reserves are based on oil and gas
prices in effect at December 31, 1995.
There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company and,
therefore, the reserve information set forth in this Form 10-K represents only
estimates. Reserve engineering is a subjective process of estimating
underground accumulations of crude oil and natural gas that cannot be measured
in an exact manner, and the accuracy of any reserve estimate is a function of
the quality of available data and of engineering and geological interpretation
and judgment. As a result, estimates of different engineers often vary. In
addition, results of drilling, testing and production subsequent to the date of
an estimate may justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities of crude oil and natural gas
that are ultimately recovered. The meaningfulness of such estimates is highly
dependent upon the accuracy of the assumptions upon which they were based. In
general, the volume of production from oil and gas properties owned by the
Company declines as reserves are depleted. Except to the extent the Company
acquires additional properties containing proved reserves or conducts
successful exploration and development activities or both, the proved reserves
of the Company will decline as reserves are produced.
5
<PAGE> 8
HISTORICAL RESERVES
The following table sets forth certain information regarding the Company's
estimated proved reserves for the periods indicated.
<TABLE>
<CAPTION>
Oil, Condensate
Natural Gas (MMcf) & NGLs (MBbl) Total (MMcfe)
- -----------------------------------------------------------------------------------------------------------------------
APP WEST TOTAL APP WEST TOTAL APP WEST TOTAL
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1992 505,264 219,402 724,666 116 1,683 1,799 505,960 229,500 735,460
Revisions of prior estimates (17,621) (649) (18,270) (6) (349) (355) (17,657) (2,743) (20,400)
Extensions, discoveries and
other additions 35,439 22,826 58,265 1 436 437 35,445 25,442 60,887
Production (26,191) (19,859) (46,050) (13) (332) (345) (26,269) (21,851) (48,120)
Purchases of reserves in place 60,508 32,623 93,131 38 1,293 1,331 60,736 40,381 101,117
Sales of reserves in place (1,466) (1,996) (3,462) 0 (41) (41) (1,466) (2,242) (3,708)
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DECEMBER 31, 1993 555,933 252,347 808,280 136 2,690 2,826 556,749 268,487 825,236
------------------------------------------------------------------------------------
Revisions of prior estimates (9,088) (15,539) (24,627) 54 (152) (98) (8,764) (16,451) (25,215)
Extensions, discoveries and
other additions 32,391 32,438 64,829 0 181 181 32,391 33,524 65,915
Production (29,668) (28,651) (58,319) (21) (803) (824) (29,794) (33,469) (63,263)
Purchases of reserves in place 16,963 151,994 168,957 0 5,992 5,992 16,963 187,946 204,909
Sales of reserves in place (6,037) 0 (6,037) (2) (39) (41) (6,049) (234) (6,283)
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DECEMBER 31, 1994 560,494 392,589 953,083 167 7,869 8,036 561,496 439,803 1,001,299
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Revisions of prior estimates 3,699 10,333 14,032 65 (713) (648) 4,086 6,061 10,147
Extensions, discoveries and
other additions 12,333 22,075 34,408 23 151 174 12,471 22,982 35,453
Production (27,530) (30,191) (57,721) (18) (722) (740) (27,637) (34,525) (62,162)
Purchases of reserves in place 576 840 1,416 0 15 15 576 929 1,505
Sales of reserves in place (34,016) (21,352) (55,368) (18) (1,509) (1,527) (34,123) (30,412) (64,535)
------------------------------------------------------------------------------------
DECEMBER 31, 1995 515,556 374,294 889,850 219 5,091 5,310 516,869 404,838 921,707
====================================================================================
PROVED DEVELOPED RESERVES:
December 31, 1992 398,895 184,778 583,673 116 1,394 1,510 399,591 193,142 592,733
December 31, 1993 458,682 210,990 669,672 136 2,210 2,346 459,498 224,250 683,748
December 31, 1994 474,574 331,339 805,913 167 7,537 7,704 475,576 376,561 852,137
December 31, 1995 430,165 317,070 747,235 219 4,751 4,970 431,477 345,579 777,056
</TABLE>
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(1) For the year ended December 31, 1993 and 1992 the Western reserves are
attributable to Anadarko only.
Note: Natural gas equivalents are determined using the ratio of 6.0 Mcf of
natural gas to 1.0 Bbl of crude oil or condensate.
APP = Appalachian Region
WEST = Western Region(1)
6
<PAGE> 9
VOLUMES AND PRICES; PRODUCTION COSTS
The following table sets forth historical information regarding the
Company's sales and production volumes and average sales prices received for,
and average production costs associated with, its sales of natural gas and
crude oil, condensate and natural gas liquids (Ngl) for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Wellhead Sales Volume:
Natural Gas (Bcf)(1)
Appalachian Region 26.4 28.7 23.1
Western Region(2) 29.8 28.3 19.8
Crude/Condensate/Ngl (MBbl)
Appalachian Region 18 20 13
Western Region 722 804 332
Purchased Gas
Volumes (Bcf) 57.1 48.3 21.6
Purchase Cost ($/Mcf) $ 1.51 $ 1.92 $ 2.09
Natural Gas Sales Price ($/Mcf)(3)
Appalachian Region $ 2.18 $ 2.47 $ 2.69
Western Region $ 1.37 $ 1.73 $ 1.94
Weighted Average $ 1.75 $ 2.14 $ 2.40
Crude/Condensate Sales Price ($/Bbl)(3) $ 17.95 $ 16.66 $ 16.58
Production Costs ($/Mcfe)(4) $ 0.55 $ 0.62 $ 0.65
</TABLE>
- --------------------------------------------------------------------------------
(1) Equal to the aggregate of production and the net changes in storage and
exchanges.
(2) Includes information regarding Anadarko, Rocky Mountains and Gulf Coast.
For the year ended December 31, 1993 includes Anadarko only.
(3) Represents the average sales prices for all volumes (including royalty
volumes) sold by the Company during the periods shown.
(4) Production costs include direct lifting costs (labor, repairs and
maintenance, materials and supplies), and the costs of administration of
production offices, insurance and property and severance taxes but is
exclusive of depreciation and depletion applicable to capitalized lease
acquisition, exploration and development expenditures.
ACREAGE
The following tables summarize the Company's gross and net developed and
undeveloped leasehold and mineral acreage at December 31, 1995. Acreage in
which the Company's interest is limited to royalty and overriding royalty
interests is excluded. The undeveloped mineral fee acreage in West Virginia is
unleased.
7
<PAGE> 10
LEASEHOLD ACREAGE
<TABLE>
<CAPTION>
At December 31, 1995
Developed Undeveloped Total
Gross Net Gross Net Gross Net
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATE
Alabama -- -- 2,543 2,402 2,543 2,402
Arkansas -- -- 240 6 240 6
Colorado 14,742 13,406 50,481 44,387 65,223 57,793
Indiana -- -- 42,404 27,696 42,404 27,696
Kansas 32,303 28,965 16,873 5,136 49,176 34,101
Kentucky 2,680 983 15,677 7,655 18,357 8,639
Louisiana 1,571 297 4,267 790 5,838 1,087
Michigan -- -- 231 38 231 38
Montana 157 52 680 303 837 355
New York 21,562 16,080 2,625 2,503 24,187 18,583
North Dakota 160 20 870 96 1,030 116
Ohio 2,581 1,291 38,544 17,626 41,125 18,917
Oklahoma 163,930 106,914 20,983 15,365 184,913 122,279
Pennsylvania 163,004 150,491 90,264 80,378 253,268 230,869
Texas 69,574 42,073 8,250 5,110 77,824 47,183
Utah 1,740 529 27,079 22,271 28,819 22,800
Virginia 3,748 3,095 15,737 15,737 19,485 18,832
West Virginia 551,263 516,083 94,623 80,729 645,886 596,812
Wyoming 46,877 23,895 111,254 66,231 158,131 90,125
------------------------------------------------------------------------
Total 1,075,892 904,174 543,625 394,459 1,619,517 1,298,633
========================================================================
CANADA
Alberta 80 42 1,666 645 1,746 687
British Columbia 83 21 3,235 809 3,318 830
------------------------------------------------------------------------
Total 163 63 4,901 1,454 5,064 1,517
========================================================================
</TABLE>
MINERAL FEE ACREAGE
<TABLE>
<CAPTION>
At December 31, 1995
Developed Undeveloped Total
Gross Net Gross Net Gross Net
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATE
Colorado 174 25 265 21 439 46
Kansas 160 128 -- -- 160 128
Montana -- -- 589 75 589 75
New York -- -- 6,545 1,636 6,545 1,636
Oklahoma 16,581 13,979 160 9 16,741 13,988
Pennsylvania 70 70 1,621 550 1,691 620
Texas 27 27 652 326 679 353
West Virginia 79,100 65,334 56,905 56,066 136,005 121,400
------------------------------------------------------------------------
Total 96,112 79,563 66,737 58,683 162,849 138,246
========================================================================
Aggregate Total 1,172,167 983,800 615,263 454,596 1,787,430 1,438,396
========================================================================
</TABLE>
8
<PAGE> 11
TOTAL NET ACREAGE BY AREA OF OPERATION
<TABLE>
<CAPTION>
At December 31, 1995
Developed Undeveloped Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Appalachian Region 753,427 290,615 1,044,042
Western Region 230,373 163,981 394,354
----------------------------------------------------------
Total 983,800 454,596 1,438,396
==========================================================
</TABLE>
PRODUCTIVE WELL SUMMARY(1)
The following table reflects the Company's ownership at December 31, 1995
in natural gas and oil wells in the Appalachian Region (consisting of various
fields located in West Virginia, Pennsylvania, New York, Ohio, Virginia and
Kentucky), and in the Western Region (consisting of various fields located in
Louisiana, Oklahoma, North Texas, Kansas, North Dakota, Utah, South Texas,
Colorado, Wyoming and Canada).
<TABLE>
<CAPTION>
Natural Gas Oil Total
Gross Net Gross Net Gross Net
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Appalachian Region 4,084.0 3,757.3 16.0 11.6 4,100 3,768.9
Western Region 948.5 549.5 230.5 85.3 1,179 634.7
---------------------------------------------------------------------------
Total 5,032.5 4,306.8 246.5 96.9 5,279 4,403.6
===========================================================================
</TABLE>
- --------------------------------------------------------------------------------
(1) "Productive" wells are producing wells and wells capable of production.
DRILLING ACTIVITY
The Company drilled, participated in the drilling of, or acquired wells
as set forth in the table below for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Gross Net Gross Net Gross Net
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
APPALACHIAN REGION:
Development Wells
Natural Gas 18 16.7 133 128.2 117 114.5
Oil 0 0.0 0 0.0 0 0.0
Dry 6 4.8 7 6.5 5 5.0
Exploratory Wells
Natural Gas 2 0.5 0 0 1 0.3
Oil 2 0.5 0 0 0 0.0
Dry 5 2.0 2 0.5 3 2.3
------------------------------------------------------------
Total 33 24.5 142 135.2 126 122.1
============================================================
Wells Acquired(1)
Natural Gas 3 3.7 9 21.1 396 397.8
Oil 0 0.0 0 0.0 6 6.0
------------------------------------------------------------
Total 3 3.7 9 21.1 402 403.8
============================================================
Wells in Progress at End of Period 3 3.0 2 1.3 0 0.0
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Gross Net Gross Net Gross Net
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Western Region:(2)
Development Wells
Natural Gas 42 21.2 48 24.7 26 19.2
Oil 2 1.9 7 3.1 5 3.6
Dry 7 3.8 8 5.3 5 4.9
Exploratory Wells
Natural Gas 1 0.3 0 0 0 0.0
Oil 0 0 0 0 0 0.0
Dry 8 3.9 3 0.8 0 0.0
------------------------------------------------------------
Total 60 31.1 66 33.9 36 27.7
============================================================
Wells Acquired(1)
Natural Gas 0 2.7 413 115.7 218 106.5
Oil 0 0.1 140 52.3 303 63.6
------------------------------------------------------------
Total 0 2.8 553 168.0 521 170.1
============================================================
Wells in Progress at End of Period 6 5.3 7 1.9 3 3.0
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes the acquisition of net interest in certain wells in the
Appalachian Region and in the Western Region in 1995, 1994 and 1993 in
which the Company already held an ownership interest.
(2) The year ended December 31, 1993 included information for Anadarko only.
COMPETITION
Competition in the Company's primary producing areas is intense. The
Company believes that its competitive position is affected by price, contract
terms and quality of service, including pipeline connection times, distribution
efficiencies and reliable delivery record. The Company believes that its
extensive acreage position and existing natural gas gathering and pipeline
systems and storage fields give it a competitive advantage over certain other
producers in the Appalachian Region which do not have such systems or
facilities in place. The Company also believes that its competitive position in
the Appalachian Region is enhanced by the absence of significant competition
from major oil and gas companies. The Company also actively competes against
some companies with substantially larger financial and other resources,
particularly in the Western Region.
OTHER BUSINESS MATTERS
MAJOR CUSTOMER
The Company had no sales to any customer that exceeded 10% of the Company's
total revenues in 1995.
SEASONALITY
Demand for natural gas has historically been seasonal in nature, with peak
demand and typically higher prices occurring during the colder winter months.
REGULATION OF OIL AND NATURAL GAS PRODUCTION
The Company's oil and gas production and transportation operations are
subject to various types of regulation by federal, state and local authorities.
Legislation affecting the oil and natural gas industry is under constant review
for amendment or expansion. Further, numerous departments and agencies, both
federal and state,
10
<PAGE> 13
have issued rules and regulations affecting the oil and natural gas industry
and its individual members, compliance with which is often difficult and costly
and some of which may carry substantial penalties for non-compliance. The
regulatory burden on the oil and natural gas industry increases its cost of
doing business and, consequently, affects its profitability. Inasmuch as such
laws and regulations are frequently expanded, amended or reinterpreted, the
Company is unable to predict the future cost or impact of complying with such
regulations. However, the Company does not believe that under present
regulations it is affected in a significantly different manner by these
regulations than others in the industry.
EXPLORATION AND PRODUCTION
Exploration and production operations of the Company are subject to various
types of regulation at the federal, state and local levels. Such regulation
includes requiring permits for the drilling of wells, maintaining bonding
requirements in order to drill or operate wells, and regulating the location of
wells, the method of drilling and casing wells, the surface use and restoration
of properties upon which wells are drilled and the plugging and abandoning of
wells. The Company's operations are also subject to various conservation laws
and regulations. These include the regulation of the size of drilling and
spacing units or proration units and the density of wells which may be drilled
and the unitization or pooling of oil and natural gas properties. In this
regard, some states allow the forced pooling or integration of tracts to
facilitate exploration while other states rely on voluntary pooling of lands
and leases. In addition, state conservation laws establish maximum rates or
production from oil and natural gas wells, generally prohibit the venting or
flaring of natural gas and impose certain requirements regarding the ratability
of production. In this regard, such states as Texas, Oklahoma and Louisiana
have in recent years reviewed and substantially revised methods previously used
to gather the necessary information and make monthly determinations of
appropriate field and well allowables. The effect of these regulations is to
limit the amounts of oil and natural gas the Company can produce from its
wells, and to limit the number of wells or the locations at which the Company
can drill.
NATURAL GAS MARKETING, GATHERING AND TRANSPORTATION
Federal legislation and regulatory controls have historically affected the
price of the natural gas produced by the Company and the manner in which such
production is marketed. The Federal Energy Regulatory Commission (the "FERC")
regulates the interstate transportation and sale for resale of natural gas by
interstate and intrastate pipelines. The FERC previously regulated the maximum
selling prices of certain categories of gas sold in "first sales" in interstate
and intrastate commerce under the Natural Gas Policy Act. Effective January 1,
1993, however, the Natural Gas Wellhead Decontrol Act (the "Decontrol Act")
deregulated natural gas prices for all "first sales" of natural gas, which
includes all sales by the Company of its own production. As a result, all sales
of the Company's domestically produced natural gas may be sold at market
prices, unless otherwise committed by contract. The FERC's jurisdiction over
natural gas transportation was unaffected by the Decontrol Act.
The Company's natural gas sales are affected by the regulation of
intrastate and interstate gas transportation. In an attempt to restructure the
interstate pipeline industry with the goal of providing enhanced access to, and
competition among, alternative natural gas suppliers, the FERC, commencing in
April 1992, issued Order Nos. 636, 636-A and 636-B ("Order No. 636") which have
altered significantly the interstate transportation and sale of natural gas.
Among other things, Order No. 636 required pipelines to unbundle the various
services that they had provided in the past, such as sales, transmission and
storage, and to offer these services individually to their customers. By
requiring interstate pipelines to "unbundle" their services and to provide
their customers with direct access to pipeline capacity held by them, Order No.
636 has enabled pipeline customers to choose the levels of transportation and
storage service they require, as well as to purchase natural gas directly from
third-party merchants other than the pipelines and obtain transportation of
such gas on a nondiscriminatory
11
<PAGE> 14
basis. The effect of Order No. 636 has been to enable the Company to market its
natural gas production to a wider variety of potential purchasers. The Company
believes that these changes generally have improved the Company's access to
transportation and have enhanced the marketability of its natural gas
production. To date, Order No. 636 has not had any material adverse effect on
the Company's ability to market and transport its natural gas production.
However, the Company cannot predict what new regulations may be adopted by the
FERC and other regulatory authorities, or what effect subsequent regulations
may have on the Company's activities. Further, even though the implementation
of Order No. 636 on individual interstate pipelines is essentially complete,
many of the individual pipeline restructuring proceedings, as well as Order No.
636 itself and the regulations promulgated thereunder, are subject to pending
appellate review and could possibly be changed as a result of future court
orders.
In recent years the FERC also has pursued a number of other important
policy initiatives which could significantly affect the marketing of natural
gas. Some of the more notable of these regulatory initiatives include (i) a
series of orders in individual pipeline proceedings articulating a policy of
generally approving the voluntary divestiture of interstate pipeline-owned
gathering facilities to the pipeline's nonregulated affiliate, (ii) the
completion of a rulemaking involving the regulation of pipelines with marketing
affiliates under Order No. 497, (iii) FERC's ongoing efforts to promulgate
standards for pipeline electronic bulletin boards and electronic data exchange,
(iv) a generic inquiry into the pricing of interstate pipeline capacity, (v)
efforts to refine FERC's regulations controlling the operation of the secondary
market for released pipeline capacity, and (vi) a policy statement regarding
market-based rates and other non-cost-based rates for interstate pipeline
transmission and storage capacity. Several of these initiatives are intended to
enhance competition in natural gas markets, although some, such as the
so-called "spin-down" of previously regulated gathering facilities by
interstate pipelines to their affiliates, may have the adverse effect on some
in the industry of increasing the cost of doing business as a result of the
monopolization of those facilities by their new, unregulated owners. FERC has
attempted to address some of these concerns in its orders authorizing such
"spin-downs," but it remains to be seen what effect these activities will have
on access to markets and the cost to do business. As to all of these recent
FERC initiatives, the ongoing, or, in some instances, preliminary evolving
nature of these regulatory initiatives makes it impossible at this time to
predict their ultimate impact upon the Company's activities.
The Company's pipeline systems and storage fields are regulated for safety
compliance by the Department of Transportation, the West Virginia Public
Service Commission, the Pennsylvania Department of Natural Resources and the
New York Department of Public Service. The Company's pipeline systems in each
state operate independently and are not interconnected.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to extensive federal, state and local
laws and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Permits are
required for the operation of various facilities of the Company, and these
permits are subject to revocation, modification and renewal by issuing
authorities. Governmental authorities have the power to enforce compliance with
their regulations, and violations are subject to fines, injunctions or both. It
is possible that increasingly strict requirements will be imposed by
environmental laws and enforcement policies thereunder. The Company is also
subject to the Federal Clean Air Act and the Federal Clean Air Act Amendment of
1990 which added significantly to the existing requirements established by the
Federal Clean Air Act. It is not anticipated that the Company will be required
in the near future to expend amounts that are material in relation to its total
capital expenditures program by reason of environmental laws and regulations,
but inas-much as such laws and regulations are frequently changed, the Company
is unable to predict the ultimate cost of such compliance.
12
<PAGE> 15
The Company owns and operates a brine treatment plant in Pennsylvania which
processes fluids generated by drilling and production operations. See
"Exploration, Development and Production -- Appalachian Region." The plant's
operations are regulated by Pennsylvania's Department of Environmental
Regulation.
EMPLOYEES
The Company had approximately 359 active employees as of December 31, 1995.
The Company believes that its relations with its employees are satisfactory.
The Company has not entered into any collective bargaining agreements with its
employees.
OTHER
The Company's profitability depends on certain factors that are beyond its
control, such as natural gas and crude oil prices. The nature of the oil and
gas business involves a variety of risks, including the risk of experiencing
certain operating hazards such as fires, explosions, blowouts, cratering, oil
spills and encountering formations with abnormal pressures, the occurrence of
any of which could result in substantial losses to the Company. The operation
of the Company's natural gas gathering and pipeline systems also involves
certain risks, including the risk of explosions and environmental hazards
caused by pipeline leaks and ruptures. The proximity of pipelines to populated
areas, including residential areas, commercial business centers and industrial
sites, could exacerbate such risks. At December 31, 1995, the Company owned or
operated approximately 3,600 miles of natural gas gathering and pipeline
systems. As part of its normal maintenance program, the Company has identified
certain segments of its pipelines which it believes require repair,
replacement or additional maintenance. In accordance with customary industry
practices, the Company maintains insurance against some, but not all, of such
risks.
ITEM 2. PROPERTIES
See Item 1. Business.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants or parties in numerous
lawsuits or other governmental proceedings arising in the ordinary course of
business. The Company is also involved in other gas contract issues. In the
opinion of the Company, final judgements or settlements, if any, which may be
awarded in connection with any one or more of these suits and claims could be
significant to the results of operations of any period but would not have a
material adverse effect on the Company's financial position.
In February 1993, Barby Energy Corporation and certain other parties filed
suit in Beaver County, Oklahoma against the Company to determine the rights and
interests of the parties in and to the oil, gas and other minerals underlying a
tract of land in Beaver County, Oklahoma, to quiet title to said mineral
estate, and for an accounting and payment of production proceeds attributable
to said mineral estate. Specifically at issue is whether there was continuous
production from an oil and gas well located on the property since July 5, 1965.
Plaintiffs claim there was a cessation of production, and therefore, all right,
title and interest to such property reverted to them and that they are entitled
to all revenues from such production since the date cessation of production
occurred. The Company believes that it holds a valid oil and gas lease covering
the interest claimed by the plaintiffs. The trial commenced on February 6, 1995
and, pursuant to an order entered on February 13, 1995, the judge denied and
overruled all of the plaintiffs' claims. On March 16, 1995, Barby appealed the
decision of the trial court to the Oklahoma Supreme Court. Barby requested that
the Oklahoma Supreme Court retain the case. Subsequently, the Oklahoma Supreme
Court decided not to retain the case and assigned the appeal to the Oklahoma
Court of Appeals. The Barby appeal has been stayed pending settlement
discussions.
13
<PAGE> 16
In September 1995, Barby filed a separate action in state court in
Oklahoma, purporting to represent all similarly situated royalty owners in
Oklahoma, alleging improper calculation of royalties and seeking actual and
punitive damages. The Company has denied the material allegations of the
complaint. No formal discovery has yet been conducted. This action has been
stayed pending settlement discussions.
Although no assurances can be given, the Company believes that the ultimate
outcome of the above litigation will not have a material adverse effect on the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
period from October 1, 1995 to December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table shows certain information about the executive officers
of the Company as of March 1, 1996, as such term is defined in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, and certain other
officers of the Company.
<TABLE>
<CAPTION>
Name Age Position Officer Since
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles P. Siess, Jr. 69 Chairman of the Board, Chief Executive 1995
Officer and President
Jim L. Batt 60 Vice President, Land 1988
Jeff W. Hutton 40 Vice President, Marketing 1995
Gerald F. Reiger 43 Vice President and Regional Manager 1994
Ray R. Seegmiller 60 Vice President, Chief Financial Officer 1995
and Treasurer
James M. Trimble 47 Vice President, Business Development 1987
and Engineering
H. Baird Whitehead 45 Vice President and Regional Manager 1987
Frank A. Pici 40 Controller 1994
Lisa A. Machesney 40 Corporate Secretary and Managing Counsel 1995
</TABLE>
With the exception of the following, all executive officers of the Company
have been employed by the Company for at least the last five years.
Charles P. Siess, Jr. has been Chairman of the Board, Chief Executive
Officer and President of the Company since May 1995. From February 1993 until
January 1994, Mr. Siess served as Acting General Manager of Bridas S.A.P.I.C.
(oil exploration Argentina). Prior thereto, Mr. Siess served as Chairman of the
Board, Chief Executive Officer and President of the Company from December 1989
to December 1992.
Gerald F. Reiger has been Vice President, Regional Manager of the Company
since February 1995. From May 1994 until February 1995, Mr. Reiger served as
Regional Manager of the Company. Prior thereto, Mr. Reiger was associated with
Washington Energy Resources Company, a subsidiary of Washington Energy Company,
from 1992 to 1994. Prior thereto, Mr. Reiger served as U.S. Operations Manager
of DeKalb Energy Company.
Ray R. Seegmiller has been Vice President, Chief Financial Officer and
Treasurer of the Company since August 1995. From May 1988 until 1993, Mr.
Seegmiller served as President and Chief Executive of Terry Petroleum Company.
Prior thereto, Mr. Seegmiller held various officer positions with Marathon
Manufacturing Company.
14
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed and principally traded on the New York Stock
Exchange under the ticker symbol "COG". The following table sets forth for the
periods indicated the high and low sales prices per share of the Common Stock,
as reported in the consolidated transaction reporting system, and the cash
dividends paid per share of the Common Stock:
<TABLE>
<CAPTION>
Cash
High Low Dividends
--------------------------------------------------------
<S> <C> <C> <C> <C>
1995
First Quarter $ 16.00 $ 12.38 $ 0.04
Second Quarter 17.00 13.63 0.04
Third Quarter 15.38 13.00 0.04
Fourth Quarter 15.75 13.13 0.04
1994
First Quarter $ 23.50 $ 19.13 $ 0.04
Second Quarter 23.25 18.75 0.04
Third Quarter 22.25 18.38 0.04
Fourth Quarter 19.88 13.38 0.04
</TABLE>
As of January 31, 1996, there were 1,302 registered holders of the Common
Stock. Shareholders include individuals, brokers, nominees, custodians,
trustees and institutions such as banks, insurance companies and pension funds.
Many of these hold large blocks of stock on behalf of other individuals or
firms.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth a summary of selected consolidated financial
data for the Company for the periods indicated. This information should be read
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Consolidated Financial Statements and related
Notes thereto.
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 213,923 $ 237,067 $ 164,295 $ 147,608 $ 140,484
Income (Loss) from Operations (116,758) 15,013 20,007 17,983 13,707
Net Income (Loss) Applicable to
All Common Stockholders (92,171) (5,444) 2,088 2,227 229
EARNINGS (LOSS) PER SHARE APPLICABLE
TO ALL COMMON STOCKHOLDERS(1) $ (4.05) $ (0.25) $ 0.10 $ 0.11 $ 0.01
DIVIDENDS PER COMMON SHARE $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.16
BALANCE SHEET DATA:
Oil and Gas Properties $ 399,984 $ 554,137 $ 322,163 $ 229,778 $ 229,538
Total Assets 528,155 688,352 445,001 348,696 334,311
Long-Term Debt 249,000 268,363 169,000 120,000 105,000
Stockholders' Equity 147,856 243,082 153,529 118,313 119,241
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Earnings (Loss) Per Common Share" under Note 1 of the Notes to the
Consolidated Financial Statements.
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following review of operations should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere.
OVERVIEW
Due to the difficult industry conditions of 1995, the Company was in an
economic squeeze, caught between depressed natural gas prices, the lowest on
Company record since going public in 1990, and high operating costs.
Compounding the problem were increased financing costs from the 1994 and 1993
acquisitions, made when gas prices were significantly higher. This squeeze
caused a net loss for the year and reduced cash flow below the level needed to
sustain drilling and, in turn, maintain reserves and production. In order to
meet the challenges of 1995 and strive to return the Company to profitability
in 1996 and beyond, the Company took the following actions in 1995:
o Implemented a cost reduction program which reduced the total workforce
by 115 employees, resulting in a $6.8 million charge in the first
quarter. Combined with an additional reduction of 20 managers and
employees in October, the reduction in annual payroll and fringe
benefit expenses is expected to exceed $7 million, or 25%, in 1996.
o Monetized its Section 29 tight sands tax credits, receiving $2.8
million in 1995 and projected cash inflows of $3 million in 1996 and
another $17 million over the remaining six years.
o Sold over 580 non-core and marginal wells in the Western Region,
generating $7.6 million in proceeds as part of an ongoing company-wide
asset rationalization program, which will carry into 1996.
o Completed a valuation adjustment on the 1994 WERCO acquisition,
receiving a cash payment of $8.4 million.
o Monetized settlement claims for $4.3 million in connection with the
remaining value of gas sales contracts terminated by Columbia Gas
Transmission Corporation as part of its 1991 bankruptcy filing.
These actions improved cash flow in 1995 by reducing costs or increasing
cash inflows, and allowed the Company to reduce the debt level to $249 million
at year end, substantially below the $268 million at the beginning of the year,
while expanding the drilling program in the fourth quarter by $9 million.
During 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, relating to the impairment of long-lived assets, recording
a $113.8 million charge ($69.2 million after-tax, or $3.04 per share) in the
third quarter. While the charge has no affect on cash flow, it is expected to
reduce future DD&A expense by approximately 15% or $0.13 per Mcfe produced.
The Company drilled 55 net wells with a drilling success rate of 75%,
compared to 169 net wells drilled in 1994 at a success rate of 92%. After
drilling only 23 net wells in the first three quarters, the Company stepped up
its program in the fourth quarter, drilling 32 net wells. The 1995 drilling
program was the smallest in its history as a public company. In 1996, the
Company plans to drill 161 net wells.
Natural gas production remained virtually flat at 57.7 Bcf compared to
58.3 Bcf in 1994. While a full year of production from the WERCO properties
increased production by 3.2 Bcf, production declines in the Appalachian Region
and Anadarko area, primarily due to the reduced drilling program and the asset
rationalization program, more than offset the increase.
Natural gas sales exceeded 112 Bcf in 1995, an increase of 10 Bcf, or
10%, over 1994. This increase was the result of an expanded marketing program
with respect to third-party natural gas purchased for resale ("brokered gas").
16
<PAGE> 19
The Company's expanded marketing effort increased purchase and resale
volumes of third-party natural gas by 8.7 Bcf, or 18%, from 1994. The most
significant part of this increase was in natural gas purchased and resold in
brokered arrangements which increased from 23.7 Bcf in 1994 to 31.2 Bcf in
1995. The Company realized a contribution to operating income from these
brokered arrangements of approximately 3 cents per Mcf in 1995, compared with
approximately 5 cents per Mcf in 1994.
As a hedging strategy to manage commodity price risk associated with its
production and purchase commitments, from time to time the Company enters into
commodity derivative contracts, such as natural gas price swaps and options. At
year end the Company had a number of price swaps in place to hedge a
significant portion of its production in the first quarter of 1996. Due to an
unprecedented decoupling of the Nymex price from realizable sales prices
outside of the northeastern markets, many producers' hedges were left
uncovered, including the Company's hedges of its Western Region production.
Accordingly, the Company recorded a $3.2 million pre-tax charge at year end
when these uncovered hedges were marked to market (see Notes 1 and 13 of the
Notes to the Consolidated Financial Statements). By changing the terms of the
hedges, management has taken the necessary steps to prevent future hedge
contracts from becoming 'uncovered' and, when opportunities arise, will
continue to use hedging instruments to reduce downside price risk on its
production and purchase commitments.
The Company's strategic pursuits are sensitive to energy commodity prices,
particularly the price of natural gas. The average natural gas price realized
by the Company in 1995 was approximately 18% lower than 1994 and was the lowest
average price realized since the Company became publicly traded. Excluding the
SFAS 121 long-lived asset impairment of $69.2 million (after tax), lower
natural gas prices and increased financing costs related to the 1994 and 1993
acquisitions were the primary factors that caused the net loss and reduced cash
flows for the year. While gas prices in certain regions of the U.S. have moved
up sharply in 1996 and some industry analysts predict improvements in 1996
pricing compared to 1995, the gas market has continued to demonstrate
significant price volatility during the months of January and February 1996.
Consequently, there is still considerable uncertainty among industry analysts
about future gas prices for the rest of 1996 and beyond.
Because of this challenging price environment, the Company is focused on
the following goals:
o Increase cash flows, using a balance of increased production and
reduced costs. Significant progress has been made toward this goal,
and the Company expects to be profitable in 1996 if the Henry Hub
average price is $1.80 or more and assuming a traditional correlation
between Henry Hub prices and prices in the physical markets.
o Maintain reserves per share while increasing production to protect
long-term shareholder value. The expanded 1995 drilling program and an
aggressive 1996 program are designed to result in 1996 production
exceeding 1995, while reserves are also expected to increase.
o Reduce debt as a percentage of total capitalization without diluting
existing shareholder value. To achieve this goal, project returns will
be compared with the marginal cost of debt when deciding whether to
reinvest or pay down debt. Other financing alternatives will also be
reviewed.
The Company believes that progress toward these goals is appropriate in the
current price environment, and should enable the Company to pursue its
strategic objectives over the long term.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
The Company's capital resources consist primarily of cash flows from oil
and gas properties and asset-based borrowing supported by its oil and gas
reserves. The Company's level of earnings and cash flow depends on many
factors, including the price of natural gas and oil and its ability to control
or reduce costs. Demand for oil
17
<PAGE> 20
and gas has historically been subject to seasonal influences characterized by
peak demand and higher prices in the winter heating season. During 1995, the
Company did not experience significant curtailments of production due to market
conditions. However, during the months of August and September 1995, the
Company elected to withhold approximately 12 MMcf per day of natural gas from
markets, or about 7% of its productive capacity, due to low prices, which had
the effect of reducing cash flows for the month.
Primary sources of cash for the Company during the three-year period ended
December 31, 1995 were funds generated from operations and bank borrowing.
Primary uses of cash for the same period were funds used in operations,
exploration and development expenditures, acquisitions, repayment of debt and
dividends.
The Company had a net cash outflow of $0.7 million in 1995. Net cash
inflow from operating and financing activities totalled $13.3 million, funding
in most part the capital and exploration expenditures of $14.0 million, net of
the $8.4 million valuation adjustment on the WERCO acquisition and $10.3
million in proceeds for the sale of assets.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities $ 41.5 $ 67.3 $ 55.4
================================
</TABLE>
Cash flows provided by operating activities in 1995 were lower by $25.8
million compared with 1994 primarily due to lower gas prices and higher
interest costs attributable to the 1994 and 1993 acquisitions.
Cash flows provided by operating activities in 1994 were higher by $11.9
million compared with 1993 primarily due to the cash flows generated from the
oil and gas properties acquired in the WERCO acquisition.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows Used by Investing Activities $ 14.0 $ 158.8 $ 98.9
================================
</TABLE>
Cash flows used by investing activities in 1995 were $144.8 million lower
than in 1994 primarily due to a $48.0 million decrease in capital expenditures
and the lack of a major acquisition in 1995 compared to the $78.5 million
capital outlay for the WERCO acquisition in 1994. The 1995 capital expenditures
were offset in part by proceeds of $8.4 million for a valuation adjustment on
the WERCO acquisition and $10.3 million in proceeds from the sale of
assets.
Cash flows used by investing activities in 1994 were $59.9 million higher
than in 1993 primarily due to $52.9 million of increased capital expenditures
from development drilling activity and the WERCO acquisition.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows Provided (Used) by Financing Activities $ (28.2) $ 92.4 $ 45.3
================================
</TABLE>
Cash flows provided by financing activities from 1993 to 1995 were
primarily borrowings from or payments on the Company's revolving credit
facility. In 1995 the Company reduced its debt under this facility by $19.0
million. In 1994 the Company's debt under this facility increased $99 million,
including $78.5 million to partially fund the WERCO acquisition, $6.2 million
to purchase additional drilling locations in connection with the 1993
acquisition of proved properties from Emax Oil Company ("Emax"), and $7.1
million for other property acquisitions and capital expenditures.
During 1995, the Company's the available credit line under the revolving
credit facility was reduced to $235 million, or $25 million lower than 1994.
This brought the credit line to a level more consistent with the Company's
needs and lowered the annual commitments fees paid on the unused portion of the
credit line. The available credit line is subject to adjustment on the basis of
the projected present value of estimated future net cash flows from proved oil
and gas reserves (as determined by an independent petroleum engineer's report
incorporating certain assumptions provided by the lender) and other assets. The
Company's outstanding indebtedness under the revolving credit facility was $169
million at December 31, 1995.
18
<PAGE> 21
The Company's 1996 debt service is projected to be approximately $19
million. No principal payments are due in 1996, assuming the continued renewal
of the revolving facility.
During 1995, the Company had recorded charges totaling $1.8 million to
interest expense in connection with the net payments made on interest rate swap
agreements. In December 1995, the Company closed all interest rate swap
agreements, resulting in an additional charge to interest expense of $2.6
million.
Capitalization information on the Company is as follows:
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Long-Term Debt $ 249.0 $ 268.3 $ 169.0
Stockholders' Equity
Common Stock 56.6 151.8 118.9
Preferred Stock 91.3 91.3 34.6
------------------------------------
Total 147.9 243.1 153.5
------------------------------------
Total Capitalization $ 396.9 $ 511.4 $ 322.5
====================================
Debt to Capitalization 62.7% 52.5% 52.4%
====================================
</TABLE>
The Company's capitalization reflects the non-cash impact to equity of the
$69.2 million SFAS 121 impairment of long-lived assets. (See Note 15 of the
Notes to the Consolidated Financial Statements for further discussion.)
CAPITAL AND EXPLORATION EXPENDITURES
The following table presents major components of capital and exploration
expenditures for the three years ended December 31, 1995.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Expenditures:
Drilling and Facilities $ 19.3 $ 47.9 $ 34.6
Leasehold Acquisitions 2.0 4.7 3.9
Pipeline and Gathering 2.2 8.9 6.8
Other 1.2 2.3 1.3
------------------------------------
24.7 63.8 46.6
------------------------------------
Proved Property Acquisitions -- 8.9 82.4(1)
WERCO Acquisition (8.4)(3) 216.2(2) --
------------------------------------
(8.4) 225.1 82.4
------------------------------------
Exploration Expenses 8.0 8.0 6.9
------------------------------------
Total $ 24.3 $ 296.9 $ 135.9
====================================
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes $34.6 million of non-cash consideration for the purchase of
properties from the Harken Anadarko Partners, L.P. ("Harken").
(2) Included in capital expenditures for the WERCO acquisition was $97.5
million in common and preferred stock of the Company and a $40.2 million
non-cash component relating to deferred taxes for the difference between
the tax and book bases of the acquired properties, as required by SFAS 109,
"Accounting for Income Taxes".
(3) A net cash payment received in connection with a valuation adjustment on
the 1994 WERCO acquisition.
The substantial reduction in capital and exploration expenditures in 1995
resulted from the downsized capital expenditures program resulting from
depressed gas prices and the absence of a major acquisition.
19
<PAGE> 22
The Company generally funds its capital and exploration activities,
excluding oil and gas property acquisitions, with cash generated from
operations and budgets such capital expenditures based upon projected cash
flows, exclusive of acquisitions.
Planned expenditures for 1996 have been significantly increased compared
with 1995. Depending on the level of future natural gas prices, the Company
intends to review and adjust the capital and exploration expenditures planned
for 1996 as industry conditions dictate. Presently, the Company projects $69
million in capital and exploration expenditures for 1996. The Company plans to
drill 220 (161 net), compared with 93 wells (55 net) drilled in 1995. Capital
dedicated to the drilling program for 1996 is $41 million.
Other 1996 capital expenditures are planned primarily for producing
property acquisitions and for gathering and pipeline infrastructure maintenance
and construction.
During 1995, dividends were paid on the Company's common stock totalling
$3.6 million, on the $3.125 convertible preferred stock totalling $2.2 million,
and on the 6% convertible redeemable preferred stock totalling $3.4 million.
The Company has paid quarterly common stock dividends of $0.04 per share since
becoming publicly traded in 1990. The amount of future dividends is determined
by the Board of Directors and is dependent upon a number of factors, including
future earnings, financial condition, and capital requirements.
OTHER ISSUES AND CONTINGENCIES
Barby Lawsuit. In February 1993, Barby Energy Corporation and certain other
parties filed suit in Beaver County, Oklahoma against the Company to determine
the rights and interests of the parties in and to the oil, gas and other
minerals underlying a tract of land in Beaver County, Oklahoma, to quiet title
to said mineral estate, and for an accounting and payment of production
proceeds attributable to said mineral estate. Specifically at issue was whether
there was continuous production from an oil and gas well located on the
property at issue since July 5, 1965. Plaintiffs claimed there was a cessation
of production, and therefore, all right, title and interest to such property
reverted to them and they were entitled to all revenues from such production
since the date cessation of production occurred. The Company maintained that it
holds a valid oil and gas lease covering the interest claimed by the
plaintiffs. The trial commenced on February 6, 1995 and, pursuant to an order
entered on February 13, 1995, the judge denied and overruled all of the
plaintiffs' claims. On March 16, 1995, Barby appealed the decision of the trial
court to the Oklahoma Supreme Court. Barby requested that the Oklahoma Supreme
Court retain the case. Subsequently, the Oklahoma Supreme Court decided not to
retain the case and assigned the appeal to the Oklahoma Court of Appeals. The
Barby appeal has been stayed pending settlement discussions.
In September 1995, Barby filed a separate action in state court in
Oklahoma, purporting to represent all similarly situated royalty owners in
Oklahoma, alleging improper calculation of royalties and seeking actual and
punitive damages. The Company has denied the material allegations of the
complaint. No formal discovery has yet been conducted. The action has been
stayed pending settlement discussions.
Although no assurances can be given, the Company believes that the ultimate
outcome of the above litigation will not have a material adverse effect on the
Company's financial position.
Corporate Income Tax. The Company generates tax credits for the production
of certain qualified fuels, including natural gas produced from tight
formations and Devonian Shale. The credit for natural gas from a tight
formation ("tight gas sands") amounts to $0.52 per MMbtu for natural gas sold
prior to 2003 from qualified wells drilled in 1991 and 1992. A number of wells
drilled in the Appalachian Region during 1991 and 1992 qualified for the tight
gas sands tax credit. The credit for natural gas produced from Devonian Shale
is approximately $1.00 per MMbtu in 1995. As a result of the WERCO acquisition,
certain production from qualifying formations in the Rocky Mountains also
qualifies for the tight gas sands tax credit. However, the benefits of all such
credits have been lost in recent years due to the Company's regular net
operating loss positions. As such, the Company
20
<PAGE> 23
completed two transactions in 1995 to monetize the value of these tax credits,
resulting in future revenues of $3 million in 1996 and approximately $17
million over the remaining six years (See Note 18 of the Notes to the
Consolidated Financial Statements for further discussion).
The Company may benefit in the future from the alternative minimum tax
("AMT") relief granted under the Comprehensive National Energy Policy Act of
1992. The Act repealed provisions of the AMT requiring a taxpayer's alternative
minimum taxable income to be increased on account of certain intangible
drilling costs ("IDCs") and percentage depletion deductions. The repeal of
these provisions generally applies to taxable years beginning after 1992. The
repeal of the excess IDC preference cannot reduce a taxpayer's alternative
minimum taxable income by more than 40% (30% for 1993) of the amount of such
income determined without regard to the repeal of such preference.
Regulations. The Company's operations are subject to various types of
regulation by federal, state and local authorities. See "Regulation of Oil and
Natural Gas Production and Transportation" and "Environmental Regulations" in
the Other Business Matters section of Item 1. Business for a discussion of
these regulations.
Restrictive Covenants. The Company's ability to incur debt, to pay
dividends on its common and preferred stock, and to make certain types of
investments is dependent upon certain restrictive debt covenants in the
Company's various debt instruments. Among other requirements, the Company's
revolving credit facility specifies a minimum cash flow to debt service
coverage ratio of 1.2 to 1.0, projected for the next two years utilizing the
banks assumptions. At December 31, 1995, the calculated ratio for 1996 and 1997
was 2.7 to 1, assuming the continued renewal of the revolving facility.
CONCLUSION
The Company's financial results depend upon many factors, particularly the
price of natural gas and its ability to market its production on economically
attractive terms. The Company's average 1995 natural gas price decreased 18%
compared with the average natural gas price received in 1994. The deterioration
of gas prices during 1995 has negatively impacted the Company's earnings and
cash flows and has contributed significantly to the net loss recorded in 1995.
While prices in certain regions of the U.S. have moved up sharply in the first
two months of 1996, the volatility of natural gas prices in recent years
remains prevalent in 1996 with wide price swings in day-to-day trading on the
Nymex futures market and the recent decoupling of the Nymex from the markets
outside the Northeast. Given this continued price volatility, management cannot
predict with certainty what pricing levels will be for the remainder of 1996.
Because future cash flows and earnings are subject to such variables, there can
be no assurance that the Company's operations will provide cash sufficient to
fully fund its capital requirements if prices should return to the depressed
levels of 1995.
While the Company's 1996 plans include a significant increase in capital
spending, potentially negative changes in industry conditions might require the
Company to adjust its 1996 spending plan to ensure the availability of capital,
including, among other things, reductions in capital expenditures or common
stock dividends.
The Company believes that higher production volumes and natural gas prices
over time coupled with the Company's continuing efforts to reduce costs and
invest in projects with high rates of return will return the Company to
profitability. Furthermore, the Company believes its capital resources,
supplemented, if necessary, with external financing, are adequate to meet its
capital requirements.
21
<PAGE> 24
RESULTS OF OPERATIONS
For the purpose of reviewing the Company's results of operations, "Net
Income (Loss)" is defined as net income (loss) applicable to common
stockholders. The Company merged its acquired holdings from the WERCO
acquisition, located in the Rocky Mountains and the onshore Gulf Coast, with
the Company's holdings in the Anadarko Region to form the "Western Region" in
1994.
SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
(In millions except where specified) 1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 213.9 $ 237.1 $ 164.3
Costs and Expenses 330.1 222.1 145.6
Interest Expense 24.9 16.7 10.3
Net Income (Loss) (92.2) (5.4) 2.1
Earnings (Loss) Per Share $ (4.05) $ (0.25) $ 0.10
Natural Gas Sales (Bcf)
Appalachia 52.6 56.9 39.9
West 59.7 45.6 24.5
---------------------------------
Total Company 112.3 102.5 64.4
=================================
Natural Gas Production (Bcf)
Appalachia 27.5 29.7 26.2
West 30.2 28.6 19.8
---------------------------------
Total Company 57.7 58.3 46.0
=================================
Natural Gas Prices ($/Mcf)
Appalachia $ 2.18 $ 2.47 $ 2.69
West $ 1.37 $ 1.73 $ 1.94
Total Company $ 1.75 $ 2.14 $ 2.40
Crude/Condensate
Volume (MBbl) 618 687 345
Price ($/Bbl) $ 17.95 $ 16.66 $ 16.58
</TABLE>
The table below presents the effects of certain selected items ("selected
items") on the Company's results of operations for the three years ended
December 31, 1995.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income (Loss) Before Selected Items $ (17.3) $ (5.4) $ 5.1
SFAS 121 impairment (69.2)
Cost reduction program (4.7)
Columbia settlement 2.6
Decoupled gas price hedges (2.0)
Terminated interest rate swaps (1.6)
Early adoption of SFAS 112 (0.4)
Consolidation of office space (0.3)
Deferred tax adjustment due to federal
rate change (2.3)
---------------------------------
Net Income (Loss) $ (92.2) $ (5.4) $ 2.1
=================================
</TABLE>
22
<PAGE> 25
1995 AND 1994 COMPARED
Net Income (Loss) and Revenues. The Company reported a net loss in 1995 of
$17.3 million, or $0.76 per share, down $11.9 million, or $0.52, compared with
1994, excluding the impact of the selected items. The $74.9 million from
special items, or $3.29 per share, consisted of a $113.8 million charge ($69.2
million after tax) related to the adoption of SFAS 121, $7.7 million ($4.7
million after tax) for the cost reduction program and other severance costs,
$3.2 million ($2.0 million after tax) loss related to uncovered gas price
hedges and a $2.6 million charge ($1.6 million after tax) to interest expense
to close interest rate swap contracts, offset in part by other revenue of $4.3
million ($2.6 million after tax) in connection with the sale of a Columbia
bankruptcy claim. Excluding the pre-tax effects of the selected items,
operating income and operating revenues decreased $8.7 million and $24.3
million, respectively. Natural gas sales comprised 92%, or $196.6 million, of
total revenue in 1995. The decrease in total revenues was driven primarily by
an 18% decrease in the average natural gas price, partially offset by a 9%
increase in natural gas sales volumes due to higher gas purchased for resale
(up 18%) as discussed below. Net income (loss) and operating income (loss),
excluding selected items, were similarly impacted by the decline in the average
natural gas price, as well as higher financing costs in connection with the
1994 WERCO and 1993 Emax acquisitions.
Natural gas sales volumes were down 4.3 Bcf to 52.6 Bcf in the Appalachian
Region due to a decrease in gas purchased for resale. Production volume in the
Appalachian Region was down 2.1 Bcf, or 7%, to 27.5 Bcf due in part to higher
pipeline curtailments and normal production declines not fully replaced by new
production due primarily to reduced drilling activity in 1995. The reduction
in sales due to the production decline in Appalachia was primarily offset by
net changes in gas storage and exchanges. Natural gas sales volumes were up
13.6 Bcf to 64.0 Bcf in the Western Region due primarily to higher production
volume (up 1.5 Bcf) and gas purchased for resale (up 13.1 Bcf), all of which
are primarily due to a full year of operating results from the WERCO
acquisition.
The average Appalachian natural gas sales price decreased $0.29 per Mcf, or
12%, to $2.18, decreasing operating revenues by approximately $15.4 million.
In the Western Region, the average natural gas sales price decreased $0.36 per
Mcf, or 21%, to $1.37, decreasing operating revenues by approximately $21.4
million. Because the proportion of lower priced Western Region sales volume
relative to total Company sales volume was up significantly, the weighted
average natural gas price for the total Company decreased $0.39 per Mcf, or
18%, to $1.75.
Crude oil and condensate sales were virtually unchanged at 618 MBbl.
Costs and Expenses. Total costs and expenses, excluding the selected items,
decreased $13.5 million, or 6%, due primarily to the following:
o The costs of natural gas decreased $3.9 million to $92.8 million. The
decrease was primarily due to a $0.42 per Mcf decrease in the average
price of gas purchased for resale, partially offset by a 10.4 Bcf
increase in gas purchased for resale (including gas exchanges and
storage).
o Direct operations expense decreased $5.0 million, or 15%, due in large
part to reductions in (1) lease maintenance work and workovers, (2)
field and regional office expenses due primarily to the cost reduction
program, and (3) compressor rental and overhaul expenses.
o Depreciation, depletion, amortization and impairment expense,
excluding the $113.8 million impairment of long-lived assets in
connection with SFAS 121, decreased $2.3 million due primarily to the
decrease in the DD&A rate in the fourth quarter resulting from the
SFAS 121 impairment. Due to the adoption of SFAS 121, the Company's
DD&A rate is expected to decrease in future years by $0.13 per Mcfe.
o General and administrative expense decreased $1.4 million, or 8%, due
largely to costs savings realized from the cost reduction program.
23
<PAGE> 26
o The cost reduction program, recorded in the first quarter, consisted
primarily of a 23% staff reduction, achieved through early retirement
and involuntary termination programs. The pre-tax charges related to
this action totalled $6.8 million, comprised of $3.8 million in salary
and other severance related expense ($3.6 million paid during the nine
months) and a $3.0 million non-cash charge for the impact of the staff
reduction to the pension and postretirement benefits plans.
o Taxes other than income decreased $0.9 million, or 7.6%, due primarily
to the decline in gas revenue.
Interest expense was up $8.2 million, or 49%, due to the increase in debt
primarily attributable to the WERCO acquisition in 1994 and the Emax
acquisition in 1993.
Income tax benefit was up $54.4 million due to the comparable decrease in
earnings before income tax. The Company's effective tax rate was virtually
unchanged.
1994 AND 1993 COMPARED
Net Income (Loss) and Revenues. The Company recorded a net loss in 1994 of
$5.4 million, down $10.5 million, or $0.48 per share, compared with 1993,
excluding the impact of the selected items. Excluding the pre-tax effects of
the selected items in the table above, operating income decreased $6.2 million
and revenues increased $72.8 million. Natural gas sales comprised 93%, or
$219.7 million, of total revenue in 1994. The increase in revenues was
primarily due to the WERCO acquisition ($42.1 million), an increase in natural
gas purchased for resale ($32.3 million) and an increase in core production
volumes ($5.9 million). Net income and operating income, however, were
negatively impacted in 1994 by an 11% decline in the average natural gas price
and higher depreciation expense and additional financing cost associated with
the WERCO acquisition.
The Company added two new operating areas through the WERCO acquisition in
the Rocky Mountains and onshore Gulf Coast. The WERCO acquisition provides the
Company with development and exploration opportunities in the Green River Basin
of the Rocky Mountains and in the onshore Gulf Coast; an increase in reserves
which exceeded one trillion cubic feet equivalent of natural gas; and the
expansion of the Company's production base by approximately 40% annualized.
Operating results from the WERCO acquisition for the eight months ended
December 31, 1994 were as follows: 9.5 Bcf of natural gas production, 19.4 Bcf
of natural gas sales, 357 MBbl of oil production and $42.1 million of revenues.
Total natural gas and oil revenues from the acquired properties were $33.7
million and $6.0 million, respectively. The average natural gas price received
on the WERCO acquisition in 1994 was $1.74 per Mcf.
Natural gas sales volumes were up 17.0 Bcf to 56.9 Bcf in the Appalachian
Region primarily attributable to an increase in natural gas purchased for
resale and, to a lesser extent, increased production. Production volume was up
3.5 Bcf to 29.7 Bcf in the Appalachian Region primarily due to expanded
production associated with the Emax acquisition. Production volume in the
Western Region was up 8.8 Bcf to 28.6 Bcf due to increased production
associated with the WERCO acquisition. Natural gas sales volumes in the Western
Region were up 21 Bcf primarily due to the increased production and, to a
lesser extent, increased volumes of natural gas purchased for resale.
The average Appalachian natural gas sales price decreased $0.22 per Mcf, or
8%, to $2.47, reducing operating revenues by approximately $12.3 million. In
the Western Region, the average natural gas sales price also decreased $0.21
per Mcf, or 11%, to $1.73, reducing operating revenues by approximately $9.6
million. Lower spot market gas prices, both for Company production and the
increased volume of natural gas purchased for resale, along with a change in
the weighted mix of sales volumes due to sales from new operating areas, were
the primary reasons the Company's overall weighted average natural gas sales
price decreased $0.26 per Mcf to $2.14 compared with 1993.
Crude oil and condensate sales increased 342 MBbl to 687 MBbl due primarily
to the Harken acquisition (89 MBbl) and the WERCO acquisition (357 MBbl).
24
<PAGE> 27
Costs and Expenses. Total costs and expenses increased $76.5 million, or
53%, to $222.1 million primarily due to expanded operations associated with the
WERCO acquisition and an increase in natural gas purchased for resale:
o The cost of natural gas purchases increased $48.3 million to $96.8
million. The WERCO acquisition increased this cost by $18.0 million.
The remaining $30.3 million primarily was due to a 15.1 Bcf increase
in natural gas purchased for resale, net of storage.
o Direct operations expenses increased $4.7 million, or 16%, primarily
due to $3.7 million of operating expenses attributable to the WERCO
acquisition and $1.6 million increased operating expenses attributable
to the first full year of operations on the Emax and Harken
acquisitions. Direct operations expense per Mcfe of production
decreased $0.07, or 12%, to $0.53 due to increased production
primarily attributable to the WERCO acquisition.
o Exploration expense increased $1.1 million due to the WERCO
acquisition.
o Depreciation, depletion, amortization and impairment expense increased
$20.1 million, or 58%, primarily due to the Harken, Emax and WERCO
acquisitions. DD&A and impairment expense per Mcfe of production
increased $0.15, or 21%, to $0.86 due primarily to the acquisitions in
general and further affected by the required accounting treatment of
the tax free nature of the WERCO acquisition.
o General and administrative expenses decreased $0.7 million, or 4%,
excluding $0.4 million attributable to the WERCO acquisition,
primarily due to reduced fringe benefit and employee-related expenses.
General and administrative expenses per Mcfe of production decreased
$0.09, or 25%, to $0.27 due to the expanded production base, primarily
from the WERCO acquisition.
o Taxes other than income increased $2.7 million, or 28%, primarily due
to the WERCO acquisition. This expense remained virtually unchanged on
a unit of production basis.
Interest expense increased $6.3 million, or 61%, primarily due to a $99
million debt increase and an increase in the interest rate attributable to the
Company's revolving credit facility. The WERCO acquisition and the purchase of
additional drilling locations in connection with the Emax acquisition accounted
for $84.7 million, or 86%, of the debt increase.
Income tax expense decreased $6.8 million (to a $0.6 million benefit) due
to the decrease in 1994 earnings before income taxes and a $2.9 million charge
in the third quarter of 1993 to record an increase in the federal income tax
rate.
The dividend requirement on preferred stock increased $3.0 million due
primarily to the $2.3 million associated with the 6% convertible redeemable
preferred stock issued in connection with the WERCO acquisition. The remaining
$0.7 million increase was attributable to the $3.125 cumulative convertible
preferred stock, issued May 3, 1993, for which only 8 months of dividends were
reflected in the corresponding period of 1993.
25
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
---------------------------------------------------------------------------
<S> <C>
Report of Independent Accountants 27
Consolidated Statement of Operations 28
Consolidated Balance Sheet 29
Consolidated Statement of Cash Flows 30
Consolidated Statement of Stockholders' Equity 31
Notes to Consolidated Financial Statements 32
Supplemental Oil & Gas Information 47
Quarterly Financial Information (Unaudited) 51
</TABLE>
REPORT OF MANAGEMENT
The management of Cabot Oil & Gas Corporation is responsible for the
preparation and integrity of all information contained in the annual report.
The consolidated financial statements and other financial information are
prepared in conformity with generally accepted accounting principles and,
accordingly, include certain informed judgements and estimates of management.
Management maintains a system of internal accounting and managerial
controls and engages internal audit representatives who monitor and test the
operation of these controls. Although no system can ensure the elimination of
all errors and irregularities, the system is designed to provide reasonable
assurance that assets are safeguarded, transactions are executed in accordance
with management's authorization and accounting records are reliable for
financial statement preparation.
An Audit Committee of the Board of Directors, consisting of directors who
are not employees of the Company, meets periodically with management, the
independent accountants and internal audit representatives to obtain assurances
to the integrity of the Company's accounting and financial reporting and to
affirm the adequacy of the system of accounting and managerial controls in
place. The independent accountants and internal audit representatives have full
and free access to the Audit Committee to discuss all appropriate matters.
We believe that the Company's policies and system of accounting and
managerial controls reasonably assure the integrity of the information in the
consolidated financial statements and in the other sections of the annual
report.
March 1, 1996 Charles P. Siess, Jr.
Chairman of the Board,
Chief Executive Officer and President
26
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF CABOT OIL & GAS CORPORATION:
We have audited the accompanying consolidated balance sheet of Cabot Oil &
Gas Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cabot Oil &
Gas Corporation as of December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 14 and 15 to the consolidated financial statements,
in 1995 the Company changed its method of applying the unit-of-production
method to calculate depreciation and depletion on producing oil and gas
properties, and accounting for the impairment of long-lived assets.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 1, 1996
27
<PAGE> 30
CABOT OIL & GAS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except per share amounts) 1995 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Natural Gas $ 196,609 $ 219,650 $ 154,792
Crude Oil and Condensate 11,089 11,445 5,715
Other 6,225 5,972 3,788
---------------------------------
213,923 237,067 164,295
COSTS AND EXPENSES
Costs of Natural Gas 92,840 96,772 48,479
Direct Operations 28,328 33,332 28,681
Exploration 8,031 8,014 6,943
Depreciation, Depletion and Amortization 47,206 51,040 31,621
Impairment of Long-Lived Assets (Note 15) 113,795 -- --
Impairment of Unproved Properties 5,047 3,556 2,834
General and Administrative 16,785 17,278 17,539
Cost Reduction Program (Note 12) 6,820 -- --
Taxes Other Than Income 11,215 12,141 9,490
---------------------------------
330,067 222,133 145,587
GAIN (LOSS) ON SALE OF ASSETS (614) 79 1,299
---------------------------------
INCOME (LOSS) FROM OPERATIONS (116,758) 15,013 20,007
Interest Expense 24,885 16,651 10,328
---------------------------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (141,643) (1,638) 9,679
Income Tax Expense (Benefit) (55,025) (643) 6,159
---------------------------------
NET INCOME (LOSS) (86,618) (995) 3,520
Dividend Requirement on Preferred Stock 5,553 4,449 1,432
---------------------------------
Net Income (Loss) Applicable to
Common Stockholders $ (92,171) $ (5,444) $ 2,088
=================================
Earnings (Loss) Per Share Applicable
to Common Stockholders $ (4.05) $ (0.25) $ 0.10
=================================
Average Common Shares Outstanding 22,775 22,018 20,507
=================================
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 31
CABOT OIL & GAS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 3,029 $ 3,773
Accounts Receivable 42,014 38,166
Inventories 5,596 8,384
Other 1,709 1,696
---------------------
Total Current Assets 52,348 52,019
PROPERTIES AND EQUIPMENT (Successful Efforts Method) 474,371 634,934
OTHER ASSETS 1,436 1,399
---------------------
$ 528,155 $ 688,352
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 48,122 $ 39,990
Accrued Liabilities 12,759 13,750
---------------------
Total Current Liabilities 60,881 53,740
LONG-TERM DEBT 249,000 268,363
DEFERRED INCOME TAXES 62,752 117,807
OTHER LIABILITIES 7,666 5,360
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY
Preferred Stock:
Authorized -- 5,000,000 Shares of $0.10 Par Value
Issued and Outstanding -- $3.125 Cumulative
Convertible Preferred; $50 Stated Value;
692,439 Shares in 1995 and 1994 -- 6% Convertible
Redeemable Preferred; $50 Stated Value; 1,134,000
Shares in 1995 and 1994 183 183
Common Stock:
Authorized -- 40,000,000 Shares of $0.10 Par Value
Issued and Outstanding -- 22,783,319 Shares and
22,757,007 Shares at December 31, 1995 and 1994,
respectively 2,278 2,275
Class B Common Stock:
Authorized -- 800,000 Shares of $0.10 Par Value
No Shares Issued -- --
Additional Paid-in Capital 242,058 241,471
Accumulated Deficit (96,663) (847)
---------------------
Total Stockholders' Equity 147,856 243,082
---------------------
$ 528,155 $ 688,352
=====================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 32
CABOT OIL & GAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (86,618) $ (995) $ 3,520
Adjustments to Reconcile Net Income (Loss)
to Cash Provided by Operations:
Depletion, Depreciation, and Amortization 47,206 51,040 31,621
Impairment of Long-Lived Assets 113,795 -- --
Impairment of Unproved Properties 5,047 3,556 2,834
Deferred Income Tax Expense (Benefit) (55,055) (796) 7,058
Loss (Gain) on Sale of Assets 614 (79) (1,299)
Exploration Expense 8,031 8,014 6,943
Postretirement Benefits Other than Pension 1,742 (866) (339)
Other, Net 1,436 (669) (67)
Changes in Assets and Liabilities:
Accounts Receivable (3,848) (2,870) (780)
Inventories 2,788 (2,691) 65
Other Current Assets (13) (944) (395)
Other Assets (37) (1,306) 147
Accounts Payable and Accrued Liabilities 5,838 16,167 5,591
Other Liabilities 565 (258) 551
---------------------------------
Net Cash Provided by Operations 41,491 67,303 55,450
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (24,672) (72,684) (94,377)
Cost of Major Acquisition(1) 8,402 (78,525) --
Proceeds from Sale of Assets 10,291 400 2,410
Exploration Expense (8,031) (8,014) (6,943)
---------------------------------
Net Cash Used by Investing (14,010) (158,823) (98,910)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Debt 16,000 125,833 67,720
Decrease in Debt (35,363) (27,000) (20,000)
Exercise of Stock Options 348 654 1,742
Dividends Paid (9,210) (7,091) (4,207)
---------------------------------
Net Cash Provided (Used) by Financing (28,225) 92,396 45,255
---------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents (744) 876 1,795
Cash and Cash Equivalents, Beginning of Year 3,773 2,897 1,102
---------------------------------
Cash and Cash Equivalents, End of Year $ 3,029 $ 3,773 $ 2,897
=================================
</TABLE>
- -----------------------------------------------------------------------------
(1) Excludes non-cash consideration of $97.5 million of the Company's common
and preferred stock issued in connection with the WERCO acquisition.
See Note 11 WERCO Acquisition.
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 33
CABOT OIL & GAS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained
Common Preferred Paid-In Earnings
(In thousands) Stock Stock Capital (Deficit) Total
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 2,046 -- 106,936 9,331 118,313
Net Income 3,520 3,520
Exercise of Stock Options 12 1,730 1,742
Issuance of Preferred Stock 69 34,552 34,621
Preferred Stock Dividends
at $2.07 Per Share (1,432) (1,432)
Common Stock Dividends at
$0.16 Per Share (3,281) (3,281)
Other 46 46
------------------------------------------------------------
Balance at December 31, 1993 2,058 69 143,264 8,138 153,529
------------------------------------------------------------
Net Loss (995) (995)
Exercise of Stock Options 4 650 654
Issuance of Common Stock 213 40,546 40,759
Issuance of Preferred Stock 114 56,586 56,700
Preferred Stock Dividends
at $2.44 Per Share (4,449) (4,449)
Common Stock Dividends
at $0.16 Per Share (3,551) (3,551)
Tax Benefit of Stock Options 425 425
Other 10 10
------------------------------------------------------------
Balance at December 31, 1994 2,275 183 241,471 (847) 243,082
------------------------------------------------------------
Net Loss (86,618) (86,618)
Exercise of Stock Options 3 345 348
Preferred Stock Dividends
at $3.04 Per Share (5,566) (5,566)
Common Stock Dividends
at $0.16 Per Share (3,631) (3,631)
Stock Grant Vesting 242 242
Other (1) (1)
------------------------------------------------------------
Balance at December 31, 1995 $ 2,278 $ 183 $ 242,058 $ (96,663) $ 147,856
============================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE> 34
CABOT OIL & GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
Cabot Oil & Gas Corporation and subsidiaries (the "Company") are engaged in
the exploration, development, production and marketing of natural gas and, to a
lesser extent, crude oil and natural gas liquids. The Company also transports,
stores, gathers and purchases natural gas for resale.
The consolidated financial statements contain the accounts of the Company
after elimination of all significant intercompany balances and transactions.
The results of operations of oil and gas properties purchased in the
acquisition of Washington Energy Resources Company ("WERCO") have been
included with those of the Company since May 2, 1994.
PIPELINE EXCHANGES
Natural gas gathering and pipeline operations normally include exchange
arrangements with customers and suppliers. The volumes of natural gas due to
or from the Company under exchange agreements are recorded at average selling
or purchase prices, as the case may be, and are adjusted monthly to reflect
market changes. The net value of exchanged natural gas is included in
inventories in the consolidated balance sheet.
PROPERTIES AND EQUIPMENT
The Company uses the successful efforts method of accounting for oil and
gas producing activities. Under this method, acquisition costs for proved and
unproved properties are capitalized when incurred. Exploration costs, including
geological and geophysical costs, the costs of carrying and retaining unproved
properties and exploratory dry hole drilling costs, are expensed. Development
costs, including the costs to drill and equip development wells, and successful
exploratory drilling costs that locate proved reserves, are capitalized. In
addition, the Company limits the total amount of unamortized capitalized costs
to the value of future net revenues, based on current prices and costs.
Before the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 121 on September 1, 1995, the Company limited the total amount of
unamortized capitalized costs to the value of future net revenues, based on
current prices and costs. Under SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the unamortized
capital costs at a lease level are reduced to fair value if the sum of expected
future net cash flows is less than the net book value (See Note 15 Accounting
For Long-Lived Assets).
Capitalized costs of proved oil and gas properties, after considering
estimated dismantlement, restoration and abandonment costs, net of estimated
salvage values, are depreciated and depleted on a field basis by the unit-of-
production method using proved developed reserves (See Note 14 Accounting
Change). The costs of unproved oil and gas properties are generally aggregated
and amortized over a period that is based on the average holding period for
such properties and the Company's experience of successful drilling. Properties
related to gathering and pipeline systems and equipment are depreciated using
the straight-line method based on estimated useful lives ranging from 10 to 25
years. Certain other assets are also depreciated on a straight-line basis.
Future estimated plug and abandonment cost is accrued over the productive
life of the oil and gas properties. The accrued liability for plug and
abandonment cost is included in accumulated depreciation, depletion and
amortization.
32
<PAGE> 35
Costs of retired, sold or abandoned properties, constituting a part of an
amortization base, are charged to accumulated depreciation, depletion, and
amortization. Accordingly, gain or loss, if any, is recognized only when a
group of proved properties (or field), constituting the amortization base, has
been retired, abandoned or sold.
REVENUE RECOGNITION AND GAS IMBALANCES
The Company applies the sales method of accounting for natural gas revenue.
Under this method, revenues are recognized based on the actual volume of
natural gas sold to purchasers. Natural gas production operations may include
joint owners who take more or less than the production volumes entitled to them
on certain properties. Volumetric production is monitored to minimize these
natural gas imbalances. A natural gas imbalance liability is recorded in other
liabilities in the consolidated balance sheet if the Company's excess takes of
natural gas exceed its estimated remaining recoverable reserves for such
properties.
INCOME TAXES
The Company follows the asset and liability method in accounting for income
taxes. Under this method, deferred tax assets and liabilities are recorded for
the estimated future tax consequences attributable to the differences between
the financial carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
the tax rate in effect for the year in which those temporary differences are
expected to turn around. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the year of the enacted rate change.
NATURAL GAS MEASUREMENT
The Company records estimated amounts for natural gas revenues and natural
gas purchase costs based on volumetric calculations under its natural gas sales
and purchase contracts. Variances or imbalances resulting from such
calculations are inherent in natural gas sales, production, operation,
measurement, and administration. Management does not believe that differences
between actual and estimated natural gas revenues or purchase costs
attributable to the unresolved variances or imbalances are material.
ACCOUNTS PAYABLE
This account includes credit balances to the extent that checks issued have
not been presented to the Company's bank for payment. These credit balances
included in accounts payable were approximately $6.2 million and $6.9 million
at December 31, 1995 and 1994, respectively.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed by dividing net income (loss),
as adjusted for dividends on preferred stock, by the weighted average number of
shares of common stock ("Common Stock") outstanding during the respective
periods. The dilutive effect of stock options on earnings per common share is
insignificant for all periods and is not included in the computation of
earnings per common share.
Both the $3.125 cumulative convertible preferred stock and the 6%
convertible redeemable preferred stock ("preferred stock"), issued May 1993 and
May 1994, respectively, had an antidilutive effect on earnings per common
share. The preferred stock was determined not to be a common stock equivalent
at the time of issuance.
33
<PAGE> 36
RISK MANAGEMENT ACTIVITIES
From time to time, the Company enters into certain commodity derivative
contracts as a hedging strategy to manage commodity price risk associated with
its inventories, production or other contractual commitments. The natural gas
price swap is the type of derivative instrument utilized by the Company. A
natural gas price swap is an agreement between two parties to exchange periodic
payments, usually on a monthly basis. One party pays a fixed price while the
other party typically pays a variable price. Notional quantities of natural gas
are used in each agreement, as the agreements do not involve the physical
exchange or delivery of natural gas. Gains or losses on these hedging
activities are generally recognized over the period that the inventory,
production or other underlying commitment is hedged. Unrealized gains or losses
associated with any natural gas price swap contracts not considered to be a
hedge are recognized currently in the results of operations. The Company had
certain hedge natural gas price swap contracts in December 1995 that were left
'uncovered' due to an unprecedented decoupling of the Nymex gas price from
realizable sales prices in the physical markets. The unrealized loss
attributable to these contracts was recorded currently. See Note 13 Financial
Instruments for further discussion.
CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with
original maturities of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PROPERTIES AND EQUIPMENT
Properties and equipment are comprised of the following:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
----------------------------------------------------------------------------
<S> <C> <C>
Unproved Oil and Gas Properties $ 12,488 $ 20,847
Proved Oil and Gas Properties 800,373 796,390
Gathering and Pipeline Systems 146,330 146,131
Land, Building and Improvements 5,551 5,533
Other 15,243 13,875
---------------------
979,985 982,776
Accumulated Depreciation,
Depletion and Amortization (505,614) (347,842)
---------------------
$ 474,371 $ 634,934
=====================
</TABLE>
As a component of accumulated depreciation, depletion and amortization,
total accrued future plug and abandonment cost was $15.0 million and $14.4
million at December 31, 1995 and 1994, respectively. The Company believes that
this accrual adequately provides for its estimated future plug and abandonment
cost.
34
<PAGE> 37
3. ADDITIONAL BALANCE SHEET INFORMATION
Certain balance sheet amounts are comprised of the following:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Accounts Receivable
Trade Accounts $ 38,119 $ 36,246
Other Accounts 5,138 3,245
---------------------
43,257 39,491
Allowance for Doubtful Accounts (1,243) (1,325)
---------------------
$ 42,014 $ 38,166
=====================
Accounts Payable
Trade Accounts $ 9,312 $ 10,818
Natural Gas Purchases 12,523 7,938
Royalty and Other Owners 10,842 12,691
Capital Costs 6,518 4,097
Dividends Payable 1,391 1,404
Taxes Other Than Income 749 690
Gas Price Swaps (Note 13) 3,205 --
Other Accounts 3,582 2,352
---------------------
$ 48,122 $ 39,990
=====================
Accrued Liabilities
Employee Benefits $ 2,506 $ 3,182
Taxes Other Than Income 7,633 7,886
Interest Payable 1,883 1,742
Other Accrued 737 940
---------------------
$ 12,759 $ 13,750
=====================
Other Liabilities
Postretirement Benefits Other Than Pension $ 2,640 $ 898
Accrued Pension Cost 3,144 2,299
Taxes Other Than Income 1,482 1,593
Other 400 570
---------------------
$ 7,666 $ 5,360
=====================
</TABLE>
4. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Natural Gas in Storage $ 4,058 $ 5,777
Tubular Goods and Well Equipment 1,485 2,120
Pipeline Exchange Balances 53 487
---------------------
$ 5,596 $ 8,384
=====================
</TABLE>
35
<PAGE> 38
5. DEBT AND CREDIT AGREEMENTS
SHORT-TERM DEBT
The Company has a $5.0 million unsecured short-term line of credit with a
bank which it uses as part of its cash management program. The interest rate on
the line of credit is at the bank's prime rate. At December 31, 1995 and 1994,
no debt was outstanding under the line.
10.18% NOTES
In May 1990, the Company issued an aggregate principal amount of $80
million of its 12-year 10.18% Notes (the "10.18% Notes") to a group of nine
institutional investors in a private placement offering. The 10.18% Notes
require five equal annual principal payments beginning in 1998. The Company may
prepay all or any portion of the indebtedness on any date with a prepayment
premium. Excluding the $2.6 million charge in December 1995 to terminate the
remaining interest rate swaps, the Company's effective interest rates for the
10.18% Notes in the two years ended December 31, 1995 and 1994 were 12.6% and
10.65%, respectively, due to the impact of the interest rate swap instruments
obtained in 1993 (see "Interest Rate Swap Agreements" under Note 13 Financial
Instruments). The 10.18% Notes contain restrictions on the merger of the
Company or any subsidiary with a third party other than under certain limited
conditions, as well as various other restrictive covenants customarily found in
such debt instruments, including a restriction on the payment of dividends or
the repurchase of equity securities. Such covenants about dividends and equity
securities are less restrictive than the covenants contained in the Credit
Facility referred to below.
REVOLVING CREDIT AGREEMENT
In January 1990, the Company entered into an $85 million Revolving Credit
Agreement (the "Credit Facility") with a bank (later expanded to five banks and
a $260 million available line of credit). In 1995, the Company amended its
Credit Facility decreasing the available credit line to $235 million. The
available credit line is subject to adjustment from time-to-time on the basis
of the projected present value (as determined by a petroleum engineer's report
incorporating certain assumptions provided by the lender) of estimated future
net cash flows from certain proved oil and gas reserves and other assets of the
Company. As of February 1996, the Company's available borrowing capacity is
$315 million. Interest rates are principally based on a reference rate of
either the rate for certificates of deposit ("CD rate") or LIBOR, plus a
margin, or the prime rate. The margin above the reference rate is presently
equal to 3/4 of 1% for the LIBOR based rate, or 7/8 of 1% for the CD based
rate. The Credit Facility provides for a commitment fee on the unused available
balance at an annual rate of 3/8 of 1% and a commitment fee on the unavailable
balance of the credit line at an annual rate of 1/4 of 1%. The Company's
effective interest rates for the Credit Facility in the years ended December
31, 1995, 1994 and 1993 were 6.8%, 5.7% and 4.6%, respectively. Although the
revolving term of the Credit Facility expires in June 1996, it may be extended
with the banks' approval. If such term is not extended, the indebtedness
outstanding will be payable in 24 quarterly installments. Interest rates and
commitment fees are subject to increase if the indebtedness is greater than 80%
of the Company's debt limit of $315 million, as noted below. The Credit
Facility contains various restrictive covenants customarily found in such
facilities, including restrictions (i) prohibiting the merger of the Company or
any subsidiary with a third party other than under certain limited conditions,
(ii) prohibiting the sale of all or substantially all of the Company's or any
subsidiary's assets to a third party, and (iii) restricting certain payments
associated with repurchasing equity securities of the Company or declaring
dividends ("Restricted Payments", as defined in the Credit Facility), if
immediately prior to or after giving effect to such payments, the aggregate of
such Restricted Payments exceeds 15% of cash flows available for debt service,
as defined in the Credit Facility, or an event of default has occurred under
the Credit Facility. In addition, the Credit Facility prohibits the Company
from incurring recourse indebtedness (determined on a consolidated basis) in
excess of the debt limit (presently $315 million) subject to certain
adjustments, including adjustments for sales or acquisitions of oil and gas
properties and other changes in projected cash flows available for debt
service.
36
<PAGE> 39
6. EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company has a non-contributory, defined benefit pension plan covering
all full-time employees. The benefits for this plan are based primarily on
years of service and pay near retirement. Plan assets consist principally of
fixed income investments and equity securities. The Company funds the plan in
accordance with the Employee Retirement Income Security Act of 1974 and
Internal Revenue Code limitations.
The Company has a non-qualified equalization plan to ensure payments to
certain executive officers of amounts to which they are already entitled under
the provisions of the pension plan, but which are subject to limitations
imposed by federal tax laws. This plan is unfunded.
Net periodic pension cost of the Company for the years ended December 31,
1995, 1994 and 1993 are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
QUALIFIED:
Current Year Service Cost $ 722 $ 901 $ 816
Interest Accrued on Pension Obligation 742 652 578
Actual Return on Plan Assets (1,327) (428) (366)
Net Amortization 934 102 118
Curtailment Gain (376) - -
Special Termination Benefit 766 - -
--------------------------------------
Net Periodic Pension Cost $ 1,461 1,227 1,146
======================================
NON-QUALIFIED:
Current Year Service Cost $ 63 $ 134 $ 84
Interest Accrued on Pension Obligation 23 32 5
Net Amortization 39 49 33
Curtailment Loss 37 - -
Settlement Charge 174 - -
--------------------------------------
Net Periodic Pension Cost $ 336 $ 215 $ 122
======================================
</TABLE>
The following table sets forth the funded status of the Company's pension
plans at December 31, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
1995 1994
(In thousands) Qualified Non-Qualified Qualified Non-Qualified
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial Present Value of:
Vested Benefit Obligation $ 6,281 $ 65 $ 3,680 $ 68
Accumulated Benefit Obligation 6,864 83 4,258 182
Projected Benefit Obligation $ 10,069 $ 83 $ 8,395 $ 385
Plan Assets at Fair Value 6,417 - 4,861 -
------------------------------------------------
Projected Benefit Obligation in Excess
of Plan Assets 3,652 83 3,534 385
Unrecognized Net Gain 1,232 44 972 70
Unrecognized Prior Service Cost (1,037) (423) (1,316) (537)
------------------------------------------------
Accrued (Prepaid) Pension Cost $ 3,847 $ (296) $ 3,190 $ (82)
================================================
</TABLE>
37
<PAGE> 40
Assumptions used to determine benefit obligations and pension costs are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount Rate 7.50%(1) 8.50% 7.50%
Rate of Increase in Compensation Levels 4.50%(1) 5.50% 5.50%
Long-Term Rate of Return on Plan Assets 9.00% 9.00% 9.00%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Represents the rates used to determine the benefit obligation.
An 8.5% discount rate and 5.5% rate of increase in compensation
levels were used to compute pension costs.
SAVINGS INVESTMENT PLAN
The Company has a Savings Investment Plan (the "SIP") which is a defined
contribution plan. The Company matches a portion of employees' contributions.
Participation in the SIP is voluntary and all regular employees of the Company
are eligible to participate. The Company charged to expense plan contributions
of $0.8 million, $0.9 million and $0.7 million in 1995, 1994, and 1993,
respectively. Effective February 1, 1994, the Company's common stock was added
as an investment option within the SIP.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits ("postretirement benefits") for retired
employees, including their spouses, eligible dependents and surviving spouses
("retirees"). Substantially all employees become eligible for these benefits if
they meet certain age and service requirements at retirement. The Company was
providing postretirement benefits to 273 retirees and 234 retirees at the end
of 1995 and 1994, respectively.
The Company adopted SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", in 1992 and elected to amortize the accumulated
postretirement benefit obligation at January 1, 1992 (the "Transition
Obligation") over 20 years.
The amortization benefit of the unrecognized Transition Obligation in 1995,
1994 and 1993, presented in the table below, is due to a cost-cutting amendment
to the postretirement medical benefits in 1993. The amendment prospectively
reduced the unrecognized Transition Obligation by $9.8 million and is amortized
over a 5.75 year period beginning in 1993.
Postretirement benefit costs recognized in the years ended December 31,
1995, 1994 and 1993 are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Cost of Benefits Earned During the Year $ 140 $ 152 $ 210
Interest Cost on the Accumulated Postretirement Benefit Obligation 517 470 667
Amortization Benefit of the Unrecognized Gain (249) (207) -
Amortization Cost (Benefit) of the Unrecognized Transition Obligation (821) (859) (858)
Curtailment Loss 2,074 - -
Special Termination 503 - -
----------------------------
Total Postretirement Benefit Cost (Benefit) $ 2,164 $ (444) $ 19
============================
</TABLE>
The health care cost trend rate used to measure the expected cost in 1996
for medical benefits to retirees over age 65 was 8.4%, graded down to a trend
rate of 0% in 2001. The health care cost trend rate used to measure the
expected cost in 1996 for retirees under age 65 was 9.5%, graded down to a
trend rate of 0% in 2001. Provisions of the plan should prevent further
increases in employer cost after 2001.
38
<PAGE> 41
The weighted average discount rate used in determining the actuarial present
value of the benefit obligation at December 31, 1995 and 1994 was 7.5% and
8.5%, respectively.
A one-percentage-point increase in health care cost trend rates for future
periods would increase the accumulated net postretirement benefit obligation by
approximately $265 thousand and, accordingly, the total postretirement benefit
cost recognized in 1995 would have also increased by approximately $25
thousand.
The funded status of the Company's postretirement benefit obligation at
December 31, 1995 and 1994 is comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan Assets at Fair Value $ - $ -
Accumulated Postretirement Benefits Other Than Pensions
Retirees 5,512 4,007
Active Participants 1,722 1,503
----------------------------
7,234 5,510
Unrecognized Cumulative Net Gain 2,546 3,735
Unrecognized Transition Obligation (6,779) (7,990)
----------------------------
Accrued Postretirement Benefit Liability $ 3,001 $ 1,255
============================
</TABLE>
7. INCOME TAXES
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal $ - $ - $ (796)
State 30 153 (103)
--------------------------------------
Total 30 153 (899)
--------------------------------------
DEFERRED:
Federal (46,430) (1,987) 4,909
State (8,625) 1,191 2,149
--------------------------------------
Total (55,055) (796) 7,058
--------------------------------------
Total Income Tax Expense (Benefit) $ (55,025) $ (643) $ 6,159
======================================
</TABLE>
Total income taxes were different than the amounts computed by applying the
statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal Income Tax Rate 35% 35% 35%
Computed "Expected" Federal Income Tax $ (49,575) $ (574) $ 3,388
State Income Tax, Net of Federal Income Tax (5,586) 873 1,330
Other, Net 136 (942) 1,441
----------------------------------------
Total Income Tax Expense (Benefit) $ (55,025) $ (643) $ 6,159
========================================
</TABLE>
39
<PAGE> 42
Income taxes for the year ended December 31, 1993 were increased by $2.3
million due to a change in the federal income tax rate.
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax liabilities and deferred tax assets as of December
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property, Plant and Equipment $ 110,582 $ 138,287
---------------------------
DEFERRED TAX ASSETS:
Alternative Minimum Tax Credit Carryforwards 4,614 5,108
Net Operating Loss Carryforwards 22,620 11,748
Note Receivable on Section 29 Monetization(1) 15,048 -
Items Accrued for Financial Reporting Purposes 5,548 3,624
---------------------------
47,830 20,480
---------------------------
Net Deferred Tax Liabilities $ 62,752 $ 117,807
===========================
</TABLE>
- --------------------------------------------------------------------------------
(1) As a result of the monetization of Section 29 tax credits, the Company
recorded an asset sale for tax purposes in exchange for a long-term
note receivable which will be repaid through 100% working and royalty
interest in the production from the sold properties.
At December 31, 1995, the Company has a net operating loss carryforward for
regular income tax reporting purposes of $59.5 million which will begin
expiring in 2006. In addition, the Company has an alternative minimum tax
credit carryforward of $4.6 million which does not expire and is available to
offset regular income taxes in future years to the extent that regular income
taxes exceed the alternative minimum tax in any such year.
8. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain transportation vehicles, warehouse facilities,
office space and machinery and equipment under cancelable and non-cancelable
leases, most of which expire within five years and may be renewed by the
Company. Rent expense under such arrangements totalled $4.9 million, $5.5
million and $5.0 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Future minimum rental commitments under non-cancelable leases in
effect at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands)
---------------------------------------
<S> <C>
1996 $ 3,381
1997 2,958
1998 2,280
1999 1,614
2000 835
Thereafter 1,914
---------
$ 12,982
=========
</TABLE>
Minimum rental commitments are not reduced by minimum sublease rental income
of $2.1 million due in the future under non-cancelable subleases.
40
<PAGE> 43
CONTINGENCIES
The Company is a defendant in various lawsuits and is involved in other gas
contract issues. In the opinion of the Company, final judgements or
settlements, if any, which may be awarded in connection with any one or more of
these suits and claims could be significant to the results of operations of any
period but would not have a material adverse effect on the Company's financial
position.
In February 1993, Barby Energy Corporation and certain other parties filed
suit in Beaver County, Oklahoma against the Company to determine the rights and
interests of the parties in and to the oil, gas and other minerals underlying a
tract of land in Beaver County, Oklahoma, to quiet title to said mineral
estate, and for an accounting and payment of production proceeds attributable
to said mineral estate. Specifically at issue is whether there was continuous
production from an oil and gas well located on the property since July 5, 1965.
Plaintiffs claim there was a cessation of production, and therefore, all right,
title and interest to such property reverted to them and that they are entitled
to all revenues from such production since the date cessation of production
occurred. The Company believes that it holds a valid oil and gas lease covering
the interest claimed by the plaintiffs. The trial commenced on February 6, 1995
and, pursuant to an order entered on February 13, 1995, the judge denied and
overruled all of the plaintiffs' claims. Barby requested that the Oklahoma
Supreme Court retain the case. Subsequently, the Oklahoma Supreme Court decided
not to retain the case and assigned the appeal to the Oklahoma Court of
Appeals. The Barby appeal has been stayed pending settlement discussions.
In September 1995, Barby filed a separate action in state court in Oklahoma,
purporting to represent all similarly situated royalty owners in Oklahoma,
alleging improper calculation of royalties and seeking actual and punitive
damages. The Company has denied the material allegations of the complaint. No
formal discovery has yet been conducted. The action has been stayed pending
settlement discussions.
Although no assurances can be given, the Company believes that the ultimate
outcome of the above litigation will not have a material adverse effect on the
Company's financial position.
9. CASH FLOW INFORMATION
Cash paid for interest and income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $ 24,744 $ 16,002 $ 10,536
Income Taxes $ 197 $ 210 $ 1,282
</TABLE>
At December 31, 1995 and 1994, the majority of cash and cash equivalents is
concentrated in one financial institution. Additionally, the Company has
accounts receivable that are subject to credit risk.
10. CAPITAL STOCK
INCENTIVE PLANS
On May 20, 1994, the 1994 Long-Term Incentive Plan and the 1994 Non-Employee
Director Stock Option Plan were approved by the shareholders. The Company has
two other stock option plans - the Incentive Stock Option Plan, adopted in
1989, and the 1990 Non-Employee Director Stock Option Plan. Under these four
plans (the "Incentive Plans"), incentive and non-statutory stock options,
stock appreciation rights ("SARs") and stock awards may be granted to key
employees and officers of the Company, and non-statutory stock options may be
granted to non-employee directors of the Company. A maximum of 2,660,000 shares
of Common Stock, par value $0.10 per share, are subject to issuance under the
Incentive Plans. All stock options have a maximum term of five or ten years
from the date of grant and vest over time. The options are issued at market
value on
41
<PAGE> 44
the date of grant. The minimum exercise period for stock options is from the
date of grant. No SARs have been granted under the Incentive Plans. Information
regarding the Company's Incentive Plans is summarized below:
<TABLE>
<CAPTION>
December 31,
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares Under Option at
Beginning of Period 953,775 684,525 639,200
Granted 565,750 301,900 197,300
Exercised 2,400 12,050 126,835
Surrendered or Expired 206,807 20,600 25,140
------------------------------------------
Shares Under Option at
End of Period 1,310,318 953,775 684,525
==========================================
Option Price Range per Share
at End of Period $ 13.25 - $ 13.25 - $ 13.25 -
$ 26.00 $ 26.00 $ 26.00
Options Exercisable at End
of Period 852,692 447,907 236,120
==========================================
</TABLE>
Management is reviewing the newly issued Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", which
will be effective for the Company's 1996 calendar year. The new pronouncement
outlines a fair value based method of accounting for stock options or similar
equity instruments. While the adoption of this fair value method is encouraged,
it allows the Company to continue using the in intrinsic value based method, as
prescribed by Accounting Principles Board ("APB") Opinion No. 25, to measure
compensation cost for its stock option plans. Should the Company elect to
remain with the intrinsic value method, pro forma disclosures of net income and
earnings per share, using the fair value based method, must be presented. The
Company is currently evaluating the impact, if any, of SFAS 123 on its future
earnings and financial position and, accordingly, has not yet determined if it
will adopt the new accounting method.
DIVIDEND RESTRICTIONS
The determination of the amount of future cash dividends, if any, to be
declared and paid on the Common Stock will be subject to the discretion of the
Board of Directors of the Company and will depend upon, among other things, the
Company's financial condition, funds from operations, the level of its capital
and exploration expenditures, and its future business prospects. The Company's
credit agreements restrict certain payments ("Restricted Payments," as defined
in the credit agreements) associated with (i) purchasing, redeeming, retiring
or otherwise acquiring any capital stock of the Company or any option, warrant
or other right to acquire such capital stock or (ii) declaring any dividend, if
immediately prior to or after giving effect to such payments, the aggregate of
such Restricted Payments exceeds 15% of cash flows available for debt service,
as defined in the Credit Facility, or an event of default has occurred under
the credit agreements. Furthermore, the Credit Facility specifies a minimum
cash flow to debt service coverage ratio. As of December 31, 1995, such
restrictions had no adverse impact on the Company's ability to pay regular
dividends.
PURCHASE RIGHTS
On January 21, 1991, the Board of Directors adopted the Preferred Stock
Purchase Rights Plan and declared a dividend distribution of one right for each
outstanding share of Common Stock. Each right becomes exercisable, at a price
of $55, when any person or group has acquired, obtained the right to acquire or
made a tender or exchange offer for beneficial ownership of 15 percent or more
of the Company's outstanding Common Stock, except pursuant to a tender or
exchange offer for all outstanding shares of Common Stock deemed to be fair and
in the best interests of the Company and its stockholders by a majority of the
independent Continuing
42
<PAGE> 45
Directors (as defined in the plan). Each right entitles the holder, other than
the acquiring person or group, to purchase one one-hundredth of a share of
Series A Junior Participating Preferred Stock ("Junior Preferred Stock"), or to
receive, after certain triggering events, Common Stock or other property having
a market value (as defined in the plan) of twice the exercise price of each
right. After the rights become exercisable, if the Company is acquired in a
merger or other business combination in which it is not the survivor or 50
percent or more of the Company's assets or earning power are sold or
transferred, each right entitles the holder to purchase common stock of the
acquiring company with a market value (as defined in the plan) equal to twice
the exercise price of each right. At December 31, 1995, there were no shares of
Junior Preferred Stock issued.
The rights, which expire on January 21, 2001, and the exercise price are
subject to adjustment and may be redeemed by the Company for $0.01 per right at
any time before they become exercisable. Under certain circumstances, the
Continuing Directors may opt to exchange one share of Common Stock for each
exercisable right.
PREFERRED STOCK
At December 31, 1995 and 1994, 692,439 shares of the Company's $3.125
cumulative convertible preferred stock ("$3.125 preferred stock") were issued
and outstanding. Each share has a stated value of $50 and is convertible any
time by the holder into Common Stock at a conversion price of $21 per share,
subject to adjustment. The $3.125 preferred stock is redeemable by the Company
for a stated redemption price per share, starting at $55 per share in 1993 and
declining to $50 per share in 2003, plus accrued dividends. Prior to May 31,
1997, the Company's option to redeem the $3.125 preferred stock is subject to a
provision that the Common Stock closing price must equal at least 130% of the
conversion price for 20 of 30 consecutive trade days. The Company also has the
option to convert the $3.125 preferred stock to Common Stock at the conversion
price provided the Company has the right to redeem the $3.125 preferred stock,
as described above, and the closing price of the Common Stock is at least equal
to the conversion price for 20 consecutive trading days.
At December 31, 1995 and 1994 1,134,000 shares of 6% convertible redeemable
preferred stock ("6% preferred stock") were issued and outstanding (See Note 11
WERCO Acquisition). Each share has voting rights equal to approximately 1.7
shares of Common Stock, a stated value of $50 and is convertible at any time by
the holder into Common Stock at a conversion price of $28.75 per share, subject
to adjustment. Starting on the fourth anniversary of the date of issuance, the
6% preferred stock is redeemable, in whole or in part, at the Company's option
price of $50 per share. During the period between the fourth and fifth
anniversary dates, the Company may opt to redeem the 6% preferred stock in
shares of Common Stock, using the market price of the Common Stock on the date
redeemed, plus a cash payment for the accrued dividends due on the shares
redeemed. On or after the fifth anniversary date, the $50 per share redemption
price is payable in cash, plus a cash payment for accrued dividends due on the
shares redeemed.
11. WERCO ACQUISITION
On May 2, 1994, the Company completed the merger between a Company
subsidiary and Washington Energy Resources Company ("WERCO"), a wholly-owned
subsidiary of Washington Energy Company. The Company acquired the stock of
WERCO in a tax-free exchange. Total capitalized costs related to the acquisition
were $207.8 million, comprised of cash and stock consideration of $167.6
million (net of an $8.4 million post-closing adjustment in 1995) and a $40.2
million non-cash component relating to the deferred income taxes attributable
to the differences between the tax and book bases of the acquired properties,
as required by SFAS 109, "Accounting for Income Taxes". The acquisition was
recorded using the purchase method. The oil and gas properties are located in
the Green River Basin of Wyoming and in the Gulf Coast.
43
<PAGE> 46
The Company issued 2,133,000 shares of 6% convertible redeemable preferred
stock ($50 per share stated value) to Washington Energy Company in exchange for
the capital stock of WERCO.
The $8.4 million post-closing adjustment was a net cash payment received in
1995 related to a valuation adjustment and was recorded as a reduction to the
net book value of certain of the oil and gas properties acquired.
The pro forma results of operations in 1994, had the WERCO acquisition
occurred at the beginning of 1994, were total revenue of $259.1 million, net
loss applicable to common shareholders of $7.3 million and net loss per common
share of $0.32. These pro forma results do not purport to be indicative of the
results of future operations, nor the results of historical operations had the
acquisition occurred as of the assumed date.
12. COST REDUCTION PROGRAM
In January 1995, the Company announced a cost reduction program which
included a voluntary early retirement program, a 15% targeted reduction in
workforce and a consolidation of management in the Rocky Mountain, Anadarko and
onshore Gulf Coast areas into a single Western Region. Accordingly, the Company
recognized a liability and charged to expense $6.8 million in termination
benefits for 115 employees, or 23% of the total workforce, including 24
employees who elected early retirement. The employee terminations were made in
virtually all departments both at the Company's corporate headquarters and each
of the operating region/area offices. The termination benefits included $3.8
million for severance and related costs, which were paid out by year end and a
$3.0 million non-cash charge for curtailments to the Company's pension ($0.4
million) and postretirement ($2.6 million) benefits plans.
13. FINANCIAL INSTRUMENTS
The following disclosures on the estimated fair value of financial
instruments are presented in accordance with SFAS 107, "Disclosures about Fair
Value of Financial Instruments". Fair value, as defined in SFAS 107, is the
amount at which the instrument could be exchanged currently between willing
parties. The Company uses available marketing data and valuation methodologies
to estimate fair value of debt.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Carrying Estimated Carrying Estimated
(In thousands) Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEBT:
10.18% Notes $ 80,000 $ 89,258 $ 80,000 $ 84,700
Credit Facility 169,000 169,000 188,000 188,000
Other Note Payable - - 363 386
------------------------------------------------------------
$ 249,000 $ 258,258 $ 268,363 $ 273,086
============================================================
OTHER FINANCIAL INSTRUMENTS:
Interest Rate Swaps $ - $ - $ - $ (5,296)
Gas Price Swaps - (4,176) - (1,010)
</TABLE>
LONG-TERM DEBT
The fair value of long-term debt is the estimated cost to acquire the debt,
including a premium or discount for the differential between the issue rate and
the year-end market rate. The fair value of the 10.18% Notes is based upon
interest rates available to the Company. The Credit Facility and the short-term
line approximate fair value because these instruments bear interest at rates
based on current market rates.
44
<PAGE> 47
INTEREST RATE SWAP AGREEMENTS
In November 1993, the Company executed reverse interest rate swap agreements
with four banks that effectively converted the Company's $80 million fixed rate
notes into variable rate notes. Under the swap agreements, the Company paid a
variable rate of interest that was based on the six-month LIBOR. The banks paid
the Company fixed rates of interest that average 5.00%. The four agreements had
notional principal of $20 million each with terms of two, three, four and five
years. The fair value was determined by obtaining termination values from third
parties (see "Risk Management Activities" under Note 1).
In January 1995, the Company entered into four additional swap agreements
which effectively fixed interest payments on the original interest rate swaps
until May 1997. In 1995, the Company recorded $4.5 million of interest expense
related to these swap agreements including a $2.6 million charge in December
1995 when cash payments were made to close out the remaining swap positions.
GAS PRICE SWAPS
The Company has entered into several price swap agreements with six
counterparties. In a majority of the natural gas price swap agreements, the
Company receives a fixed price ("fixed price swap contracts") for a notional
quantity of natural gas in exchange for its paying a variable price based on a
market based index, such as the Nymex gas futures. The fixed price swap
contracts are used to hedge price risk associated with the Company's
production. During 1995, the fixed prices received on closed contracts ranged
from $1.61 to $2.27 per MMbtu on total notional quantities of 3,565,000 MMbtu.
Eight fixed price swap contracts were open at December 31, 1995 with fixed
prices from $1.82 to $2.54 per MMbtu, contract periods extending to April 1996
and open notional quantities totaling 16,085,000 MMbtu. In the other natural
gas price swap contract closed in 1995, the Company received the variable price
and paid a fixed price ("variable price swap contract") of $1.60 per MMbtu on
total notional quantities of 5,475,000 MMbtu. The Company used this variable
price swap contract to partially hedge the price of third-party purchased gas
used to supply a long-term, fixed price contract.
Certain of the fixed price swap contracts, open at December 31, 1995, became
'uncovered' due to an unprecedented decoupling of the Nymex gas prices from
realizable sales prices in the physical markets. These 'uncovered' hedge
contracts had notional quantities totalling 5,480,000 MMbtu and covered the
contract months of January to April 1996. Accordingly, the Company recorded a
$3.2 million unrealized loss at December 31, 1995 and will continue to mark
these 'uncovered' hedge contracts to market until they are closed. Excluding
the 'uncovered' hedge contracts, the estimated fair value of price swaps in the
table above are for hedged transactions in which gains or losses are recognized
in results of operations over the periods that production or purchased gas is
hedged (see "Risk Management Activities" under Note 1).
After entering into certain fixed price sales contracts to meet the needs of
its customers, the Company opened gas swap agreements to convert these fixed
price contracts to market-sensitive price contracts. During 1995, these
agreements had total notional quantities of 1,925,000 MMbtu in closed contracts
and another 1,260,000 MMbtu in open contracts at December 31, 1995.
The Company is exposed to market risk on these open contracts to the extent
of changes in market prices for natural gas. However, the market risk exposure
on these hedged contracts is generally offset by the gain or loss recognized
upon the ultimate sale of the natural gas that is hedged.
CREDIT RISK
Although notional contract amounts are used to express the volume of gas
price and interest rate swap agreements, the amounts potentially subject to
credit risk, in the event of non-performance by third parties, are
substantially smaller. The Company does not anticipate any material impact to
its financial results due to non-performance by the third parties.
45
<PAGE> 48
14. ACCOUNTING CHANGE
Effective January 1, 1995, the Company changed from the property-by-property
basis to the field basis of applying the unit-of-production method to calculate
depreciation and depletion on producing oil and gas properties. The field basis
provides for the aggregation of wells that have a common geological reservoir
or field. The field basis provides a better matching of expenses with revenues
over the productive life of the properties, and, therefore, the Company
believes the new method is preferable to the property-by-property basis.
Because the cumulative effect of the change in method from prior periods was
insignificant, a pre-tax charge of $303 thousand, such amount ("pre-1995
amount") was included with depreciation, depletion and amortization ("DD&A")
expense in 1995. The net effect of the change in method resulted in a $3,967
thousand decrease in DD&A expense and a $2,428 thousand increase in net
earnings in 1995, including the impact of the pre-1995 amount. The pro forma
impact on the results of operations in 1994, had the change in method been
implemented at the beginning of 1994, would have been a decrease in DD&A
expense of approximately $2,378 thousand and a $1,446 thousand increase in net
earnings. The reduction in DD&A expense for 1995 due to the change in method
was offset by higher levels of DD&A expense primarily due to reserve revisions.
15. ACCOUNTING FOR LONG-LIVED ASSETS
Effective September 30, 1995, the Company adopted SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". SFAS 121 requires that an impairment loss be recognized when the
carrying amount of an asset exceeds the sum of the undiscounted estimated
future cash flow of the asset. Under SFAS 121, the Company reviewed the
impairment of oil and gas properties and related assets on an economic unit
basis. For each economic unit determined to be impaired, an impairment loss
equal to the difference between the carrying value and the fair value of the
economic unit was recognized. Fair value, on an economic unit basis, was
estimated to be the present value of expected future net cash flows over the
economic lives of the reserves. As a result of the adoption of SFAS 121, the
Company recognized a non-cash charge during the third quarter of $113.8 million
($69.2 million after tax).
16. SALE OF NON-CORE OIL AND GAS PROPERTIES
The Company sold various non-core oil and gas properties in the Western
Region, obtaining proceeds of $7.6 million.
17. OTHER REVENUE
The Company recorded $4.6 million ($4.3 million net of severance taxes) in
other revenue in connection with the sale of certain Columbia Gas Transmission
Corporation ("Columbia") bankruptcy claims. The claims related to the remaining
value of gas sales in contracts terminated by Columbia as part of its
bankruptcy filing in 1991.
18. MONETIZATION OF SECTION 29 TAX CREDITS
In September and November 1995, the Company completed two transactions to
monetize the value of Section 29 tax credits from most of its qualifying
Appalachian and Rocky Mountain properties. The transactions provided up-front
cash of $2.8 million which was recorded as a reduction to the net book value of
natural gas properties, and will generate additional revenues through 2002
estimated at $20 million ($3.0 million projected in 1996) related to the value
of future Section 29 tax credits attributable to these properties. Employing a
volumetric production payment structure, the production, revenues, expenses and
proved reserves related to these properties will continue to be reported by the
Company until the production payment is satisfied.
46
<PAGE> 49
CABOT OIL & GAS CORPORATION
SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)
OIL AND GAS RESERVES
Users of this information should be aware that the process of estimating
quantities of "proved" and "proved developed" natural gas and crude oil
reserves is very complex, requiring significant subjective decisions in the
evaluation of all available geological, engineering and economic data for each
reservoir. The data for a given reservoir may also change substantially over
time as a result of numerous factors including, but not limited to, additional
development activity, evolving production history and continual reassessment of
the viability of production under varying economic conditions. Consequently,
material revisions to existing reserve estimates may occur from time to time.
Although every reasonable effort is made to ensure that reserve estimates
reported represent the most accurate assessments possible, the significance of
the subjective decisions required and variances in available data for various
reservoirs make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
Proved reserves represent estimated quantities of natural gas, crude oil and
condensate that geological and engineering data demonstrate, with reasonable
certainty, to be recoverable in future years from known reservoirs under
economic and operating conditions existing at the time the estimates were made.
Proved developed reserves are proved reserves expected to be recovered
through wells and equipment in place and under operating methods being utilized
at the time the estimates were made.
Estimates of proved and proved developed reserves at December 31, 1995, 1994
and 1993 were based on studies performed by the Company's petroleum engineering
staff. The estimates prepared by the Company's engineering staff were reviewed
by Miller and Lents, Ltd., who indicated in their recent letter dated February
8, 1996 that, based on their investigation and subject to the limitations
described in such letter, it was their judgement that the results of those
estimates and projections for 1995 were reasonable in the aggregate.
No major discovery or other favorable or adverse event subsequent to
December 31, 1995 is believed to have caused a material change in the estimates
of proved or proved developed reserves as of that date.
The following table sets forth the Company's net proved reserves, including
changes therein, and proved developed reserves for the periods indicated, as
estimated by the Company's engineering staff. All reserves are located in the
United States (more than 99%) or Canada.
<TABLE>
<CAPTION>
Natural Gas
------------------------------------
December 31,
(Millions of cubic feet) 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROVED RESERVES
Beginning of Year 953,083 808,280 724,666
Revisions of Prior Estimates 14,032 (24,627) (18,270)
Extensions, Discoveries and Other Additions 34,408 64,829 58,265
Production (57,721) (58,319) (46,050)
Purchases of Reserves in Place 1,416 168,957 93,131
Sales of Reserves in Place (55,368) (6,037) (3,462)
------------------------------------
End of Year 889,850 953,083 808,280
====================================
PROVED DEVELOPED RESERVES 747,235 805,913 669,672
====================================
</TABLE>
47
<PAGE> 50
<TABLE>
<CAPTION>
Liquids
------------------------------------
December 31,
(Thousands of barrels) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROVED RESERVES
Beginning of Year 8,036 2,826 1,799
Revisions of Prior Estimates (648) (98) (355)
Extensions, Discoveries and Other Additions 174 181 437
Production (740) (824) (345)
Purchases of Reserves in Place 15 5,992 1,331
Sales of Reserves in Place (1,527) (41) (41)
------------------------------------
End of Year 5,310 8,036 2,826
====================================
PROVED DEVELOPED RESERVES 4,970 7,704 2,346
====================================
</TABLE>
CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
The following table sets forth the aggregate amount of capitalized costs
relating to natural gas and crude oil producing activities and the aggregate
amount of related accumulated depreciation, depletion and amortization.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Capitalized Costs Relating
to Oil and Gas Producing Activities $ 977,885 $ 980,676 $ 696,520
==========================================
Aggregate Accumulated Depreciation,
Depletion and Amortization $ 503,757 $ 346,080 $ 296,764
==========================================
</TABLE>
COSTS INCURRED IN OIL AND GAS PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT
ACTIVITIES AND FINDING AND DEVELOPMENT COSTS OF PROVED RESERVES
Costs incurred in property acquisition, exploration and development
activities were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property Acquisition Costs - Proved $ 33 $ 184,835 $ 82,364
Property Acquisition Costs - Unproved 2,006 4,685 3,893
Exploration and Extension Well Costs 8,670 9,402 7,487
Development Costs 18,610 46,463 34,183
-----------------------------------------
Total costs $ 29,319 $ 245,385 $ 127,927
=========================================
(A) Proved Reserves of Additions and
Revisions, MMcfe 45,600 40,700 40,500
-----------------------------------------
(B) Proved Reserves of (A) Above,
Plus Purchases of Reserves in
Place, MMcfe 47,100 245,600 141,600
-----------------------------------------
Calculated Finding and Development
Cost of Proved Reserves,
(A) Above, $/Mcfe(1) $ 0.55 $ 1.04 $ 0.96
-----------------------------------------
Calculated Finding and Development
Cost of Proved Reserves,
(B) Above, $/Mcfe(1) $ 0.53 $ 0.98 $ 0.88
-----------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Exploration expenses that are administrative in nature are excluded
from the finding and development cost calculation.
48
<PAGE> 51
HISTORICAL RESULTS OF OPERATIONS FROM OIL AND GAS PRODUCING ACTIVITIES
The results of operations for the Company's oil and gas producing activities
were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $ 110,418 $ 126,307 $ 105,247
Costs and Expenses
Production 34,062 39,114 31,065
Other Operating 22,783 16,787 17,476
Exploration 8,031 8,014 6,943
Depreciation, Depletion and
Amortization 161,886 48,075 31,648
-----------------------------------------
Total Cost and Expenses 226,762 111,990 87,132
-----------------------------------------
Income (Loss) Before Income Taxes (116,344) 14,317 18,115
Provision for Income Taxes
Expense (Benefit) (40,720) 5,011 6,340
-----------------------------------------
Results of Operations $ (75,624) $ 9,306 $ 11,775
=========================================
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES
The following information has been developed utilizing procedures
prescribed by SFAS 69 and based on natural gas and crude oil reserve and
production volumes estimated by the Company's engineering staff. It may be
useful for certain comparison purposes, but should not be solely relied upon in
evaluating the Company or its performance. Further, information contained in
the following table should not be considered as representative of realistic
assessments of future cash flows, nor should the Standardized Measure of
Discounted Future Net Cash Flows be viewed as representative of the current
value of the Company.
The Company believes that the following factors should be taken into
account in reviewing the following information: (i) future costs and selling
prices will probably differ from those required to be used in these
calculations; (ii) due to future market conditions and governmental
regulations, actual rates of production achieved in future years may vary
significantly from the rate of production assumed in the calculations;
(iii) selection of a 10% discount rate is arbitrary and may not be
reasonable as a measure of the relative risk inherent in realizing future net
oil and gas revenues; and (iv) future net revenues may be subject to different
rates of income taxation.
Under the Standardized Measure, future cash inflows were estimated by
applying year-end oil and gas prices adjusted for fixed and determinable
escalations, to the estimated future production of year-end proved reserves.
The average prices related to proved reserves at December 31, 1995, 1994
and 1993 were for oil ($/Bbl) $17.06, $18.34 and $16.20, respectively, and for
natural gas ($/Mcf) $2.06, $1.88 and $2.40, respectively. Future cash inflows
were reduced by estimated future development and production costs based on
year-end costs in order to arrive at net cash flow before tax. Future income
tax expense has been computed by applying year-end statutory tax rates to
future pretax net cash flows, reduced by the tax basis of the properties
involved. Use of a 10% discount rate is required by SFAS 69.
Management does not rely solely upon the following information in making
investment and operating decisions. Such decisions are based upon a wide range
of factors, including estimates of probable as well as proved reserves, and
varying price and cost assumptions considered more representative of a range of
possible economic conditions that may be anticipated.
49
<PAGE> 52
Standardized Measure is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995(1) 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Future Cash Inflows $ 2,194,751 $ 2,219,559 $ 2,190,400
Future Production and
Development Costs (644,586) (723,767) (670,390)
-----------------------------------------------
Future Net Cash Flows Before
Income Taxes 1,550,165 1,495,792 1,520,010
10% Annual Discount for
Estimated Timing of Cash Flows (884,861) (880,130) (878,912)
-----------------------------------------------
Standardized Measure of
Discounted Future Net Cash Flows
Before Income Taxes 665,304 615,662 641,098
Future Income Tax Expenses,
Net of 10% Annual Discount(2) (152,356) (125,167) (173,198)
-----------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows $ 512,948 $ 490,495 $ 467,900
===============================================
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Includes the future cash inflows, production costs and development
costs, as well as the tax basis, relating to the properties included
in the transactions to monetize the value of Section 29 tax credits.
See Note 18 of the Notes to the Consolidated Financial Statements.
(2) Future income taxes before discount were $462,058, $433,212 and
$480,817 for the years ended December 31, 1995, 1994 and 1993,
respectively.
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
The following is an analysis of the changes in the Standardized Measure:
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning of Year $ 490,495 $ 467,900 $ 404,577
Discoveries and Extensions,
Net of Related Future Costs 21,881 24,188 48,183
Net Changes in Prices and
Production Costs 57,057 (133,750) (53,822)
Accretion of Discount 61,566 64,110 57,989
Revisions of Previous Quantity
Estimates, Timing and Other 1,707 (32,654) (33,731)
Development Costs Incurred 5,665 16,631 18,617
Sales and Transfers, Net of
Production Costs (76,356) (87,193) (74,182)
Net Purchases (Sales) of
Reserves in Place (21,878) 123,232 98,159
Net Change in Income Taxes (27,189) 48,031 2,110
-----------------------------------------------
End of Year $ 512,948 $ 490,495 $ 467,900
===============================================
</TABLE>
50
<PAGE> 53
CABOT OIL & GAS CORPORATION
SELECTED DATA (UNAUDITED)
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands except per share amounts) First Second Third Fourth Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Total Revenues $ 58,122 $ 51,352 $ 47,982 $ 56,467 $ 213,923
Operating Income (Loss) (5,366) (680) (111,708)(1) 996 (116,758)
Net Loss (8,200) (5,291) (73,309)(1) (5,371) (92,171)
Loss Per Share $ (0.36) $ (0.23) $ (3.22) $ (0.24) $ (4.05)
1994
Total Revenues $ 65,840 $ 56,453 $ 55,758 $ 59,016 237,067
Operating Income 11,580 1,513 (423) 2,343 15,013
Net Income (Loss) 4,682 (2,480) (4,441) (3,205) (5,444)
Earnings (Loss) Per Share $ 0.23 $ (0.11) $ (0.20) $ (0.14) $ (0.25)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes a $113.8 million charge ($69.2 million after tax) for the
impairment of long-lived assets resulting from the adoption of SFAS
121.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information to be set forth under the caption "Election of Directors" in
the Company's definitive proxy statement ("Proxy Statement") in connection with
the 1996 annual stockholders meeting is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the captions "Executive Compensation" and
"Severance Arrangements" in the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Beneficial Ownership of Over
Five Percent of Common Stock" and "Beneficial Ownership of Directors and
Executive Officers" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
51
<PAGE> 54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
A. INDEX
1. CONSOLIDATED FINANCIAL STATEMENTS
See Index on page 26
2. FINANCIAL STATEMENT SCHEDULES
None
3. EXHIBITS
The following instruments are included as exhibits to this report. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, copies of the instrument have been included herewith.
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of the Company (Registration
Statement No. 33-32553).
3.2 Amended and Restated Bylaws of the Company adopted August 5,
1994.
4.1 Form of Certificate of Common Stock of the Company
(Registration Statement No. 33-32553).
4.2 Certificate of Designation for Series A Junior Participating
Preferred Stock (Form 10-K for 1994).
4.3 Rights Agreement dated as of March 28, 1991 between the Company
and The First National Bank of Boston, as Rights Agent, which
includes as Exhibit A the form of Certificate of Designation of
Series A Junior Participating Preferred Stock (Form 8-A, File
No. 1-10477).
(a) Amendment No. 1 to the Rights Agreement dated February 24,
1994 (Form 10-K for 1994).
4.4 Certificate of Designation for $3.125 Convertible Preferred
Stock (Form 10-K for 1993).
4.5 Amended and Restated Credit Agreement dated as of May 30, 1995
among the Company, Morgan Guaranty Trust Company, as agent and
the banks named therein.
(a) Amendment No. 1 to Credit Agreement dated September 15,
1995.
4.6 Note Purchase Agreement dated May 11, 1990 among the Company
and certain insurance companies parties thereto (Form 10-Q for
the quarter ended June 30, 1990).
(a) First Amendment dated June 28, 1991 (Form 10-K for 1994).
(b) Second Amendment dated July 6, 1994 (Form 10-K for 1994).
4.7 Certificate of Designation for 6% Convertible Redeemable
Preferred Stock (Form 10-K for 1994).
10.1 Supplemental Executive Retirement Agreement between the Company
and Charles P. Siess, Jr.
10.2 Form of Change in Control Agreement between the Company and
Certain Officers.
10.3 Letter Agreement dated January 11, 1990 between Morgan Guaranty
Trust Company of New York and the Company (Registration
Statement No. 33-32553).
10.4 Form of Annual Target Cash Incentive Plan of the Company
(Registration Statement No. 33-32553).
</TABLE>
52
<PAGE> 55
<TABLE>
<S> <C>
10.5 Form of Incentive Stock Option Plan of the Company
(Registration Statement No. 33-32553).
(a) First Amendment to the Incentive Stock Option Plan
(Post-Effective Amendment No. 1 to S-8 dated April 26,
1993).
10.6 Form of Stock Subscription Agreement between the Company and
certain executive officers and directors of the Company
(Registration Statement No. 33-32553).
10.7 Transaction Agreement between Cabot Corporation and the Company
dated February 1, 1991 (Registration Statement No. 33-37455).
10.8 Tax Sharing Agreement between Cabot Corporation and the Company
dated February 1, 1991 (Registration Statement No. 33-37455).
10.9 Amendment Agreement (amending the Transaction Agreement and the
Tax Sharing Agreement) dated March 25, 1991. (incorp. by ref.
from Cabot Corporation's Schedule 13E-4, Am. No. 6, File No.
5-30636).
10.10 Savings Investment Plan & Trust Agreement of the Company (Form
10-K for 1991).
(a) First Amendment to the Savings Investment Plan dated May
21, 1993 (Form S-8 dated November 1, 1993).
(b) Second Amendment to the Savings Investment Plan dated May
21, 1993 (Form S-8 dated November 1, 1993).
(c) First through Fifth Amendments to the Trust Agreement.
10.11 Supplemental Executive Retirement Agreements of the Company
(Form 10-K for 1991).
10.12 Settlement Agreement and Mutual Release (Tax Issues) between
Cabot Corporation and the Company dated July 7, 1992 (Form 10-Q
for the quarter ended June 30, 1992).
10.13 Agreement of Merger dated February 25, 1994 among Washington
Energy Company, Washington Energy Resources Company, the
Company and COG Acquisition Company (Form 10-K for 1993).
10.14 1990 Nonemployee Director Stock Option Plan of the Company
(Form S-8 dated June 23, 1990)
(a) First Amendment to 1990 Nonemployee Director Stock Option
Plan (Post-Effective Amendment No. 2 to Form S-8 dated
March 7, 1994).
(b) Second Amendment to 1990 Nonemployee Director Stock Option
Plan.
10.15 1994 Long-Term Incentive Plan of the Company (Form S-8 dated
May 20, 1994 - Registration Statement No. 33-53723).
10.16 1994 Nonemployee Director Stock Option Plan (Form S-8 dated May
20, 1994 - Registration Statement No. 33-53723).
10.17 Employment Agreement between the Company and Ray R. Seegmiller
dated September 25, 1995.
21.1 Subsidiaries of Cabot Oil & Gas Corporation.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Miller and Lents, Ltd.
27 Financial Data Schedule.
28.1 Miller and Lents, Ltd. Review Letter dated February 8, 1996.
</TABLE>
B. REPORTS ON FORM 8-K
None
53
<PAGE> 56
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, in the City of Houston, State of Texas,
on the 23rd day of February 1996.
CABOT OIL & GAS CORPORATION
By: /s/ Charles P. Siess, Jr.
-----------------------------------
Charles P. Siess, Jr.
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Charles P. Siess, Jr. Chairman of the Board, February 23, 1996
- ---------------------------------- Chief Executive Officer and President
Charles P. Siess, Jr. (Principal Executive Officer)
/s/ Ray R. Seegmiller Vice President, Chief Financial Officer February 23, 1996
- ---------------------------------- and Treasurer
Ray R. Seegmiller
/s/ Frank A. Pici Controller (Principal Accounting Officer) February 23, 1996
- ----------------------------------
Frank A. Pici
/s/ Robert F. Bailey Director February 23, 1996
- ----------------------------------
Robert F. Bailey
/s/ Samuel W. Bodman Director February 23, 1996
- ----------------------------------
Samuel W. Bodman
/s/ Henry O. Boswell Director February 23, 1996
- ----------------------------------
Henry O. Boswell
/s/ John G. L. Cabot Director February 23, 1996
- ----------------------------------
John G. L. Cabot
/s/ William R. Esler Director February 23, 1996
- ----------------------------------
William R. Esler
/s/ William H. Knoell Director February 23, 1996
- ----------------------------------
William H. Knoell
/s/ Carl M. Mueller Director February 28, 1996
- ----------------------------------
Carl M. Mueller
/s/ C. Wayne Nance Director February 23, 1996
- ----------------------------------
C. Wayne Nance
/s/ William P. Vititoe Director February 23, 1996
- ----------------------------------
William P. Vititoe
</TABLE>
54
<PAGE> 57
EXHIBIT INDEX
Exhibit
Number Description
- --------------------------------------------------------------------------------
3.2 Amended and Restated Bylaws of the Company adopted August 5,
1994.
4.3 (a) Amendment No. 1 to the Rights Agreement dated February 24,
1994.
4.5 Amended and Restated Credit Agreement dated as of May 30, 1995
among the Company, Morgan Guaranty Trust Company, as agent and
the banks named therein.
(a) Amendment No. 1 to Credit Agreement dated September 15,
1995.
10.1 Supplemental Executive Retirement Agreement between the Company
and Charles P. Siess, Jr.
10.2 Form of Change in Control Agreement between the Company and
Certain Officers.
10.10 (c) First through Fifth Amendments to the Trust Agreement.
10.14 (b) Second Amendment to 1990 Nonemployee Director Stock Option
Plan.
10.17 Employment Agreement between the Company and Ray R. Seegmiller
dated September 25, 1995.
21.1 Subsidiaries of Cabot Oil & Gas Corporation.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Miller and Lents, Ltd.
27 Financial Data Schedule.
28.1 Miller and Lents, Ltd. Review Letter dated February 8, 1996.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CABOT OIL & GAS CORPORATION
Adopted August 5, 1994
<PAGE> 2
INDEX OF AMENDED AND RESTATED BY-LAWS
CABOT OIL & GAS CORPORATION
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
I. Certificate of Incorporation . . . . . . . . . . . . . . . . . . 1
II. Annual Meeting of Stockholders . . . . . . . . . . . . . . . . . 2
III. Special Meetings of Stockholders . . . . . . . . . . . . . . . . 3
IV. Place of Stockholders' Meetings . . . . . . . . . . . . . . . . 3
V. Notice of Stockholders' Meetings . . . . . . . . . . . . . . . . 3
VI. Quorum and Action of Stockholders . . . . . . . . . . . . . . . . 8
VII. Proxies and Voting . . . . . . . . . . . . . . . . . . . . . . . 9
VIII. Action by Written Consent . . . . . . . . . . . . . . . . . . . . 10
IX. Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 13
X. Powers of the Board of Directors . . . . . . . . . . . . . . . . 14
XI. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . 14
XII. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
XIII. Meetings of the Board of Directors . . . . . . . . . . . . . . . 17
XIV. Quorum and Action of Directors . . . . . . . . . . . . . . . . . 18
XV. Restrictions on Stock Transfer . . . . . . . . . . . . . . . . . 19
XVI. Compensation of Directors . . . . . . . . . . . . . . . . . . . . 19
XVII. Officers and Agents . . . . . . . . . . . . . . . . . . . . . . . 19
XVIII. Chairman of the Board of Directors . . . . . . . . . . . . . . . . 20
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C>
XIX. President . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
XX. Executive Vice Presidents,
Senior Vice Presidents . . . . . . . . . . . . . . . . . . . 21
XXI. Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . 22
XXII. Secretary and Assistant Secretaries . . . . . . . . . . . . . . . 22
XXIII. Treasurer and Assistant Treasurers . . . . . . . . . . . . . . . 23
XXIV. General Counsel and Assistant
General Counsels . . . . . . . . . . . . . . . . . . . . . . . 24
XXV. Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
XXVI. Resignations and Removals . . . . . . . . . . . . . . . . . . . 27
XXVII. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
XXVIII. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . 29
XXIX. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . 29
XXX. Transfer of Shares of Stock . . . . . . . . . . . . . . . . . . . 30
XXXI. Transfer Books: Record Date . . . . . . . . . . . . . . . . . . . 31
XXXII. Loss of Certificates . . . . . . . . . . . . . . . . . . . . . . 32
XXXIII. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
XXXIV. Execution of Papers . . . . . . . . . . . . . . . . . . . . . . 32
XXXV. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
XXXVI. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
XXXVII. Respecting Certain Contracts . . . . . . . . . . . . . . . . . . 34
XXXVIII. Indemnification of Directors,
Officers and Employees . . . . . . . . . . . . . . . . . . . . 35
XXXIX. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED
BY-LAWS
OF
CABOT OIL & GAS CORPORATION
(THE "CORPORATION")
ARTICLE I
Certificate of Incorporation
The name, location of the principal office or place of business in
Delaware, and the objects or purposes of the Corporation shall be as set forth
in its Certificate of Incorporation. These By-laws, the powers of the
Corporation and of its directors and stockholders, and all matters concerning
the management of the business and conduct of the affairs of the Corporation
shall be subject to such provisions in regard thereto, if any, as are set forth
in the Certificate of Incorporation; and the Certificate of Incorporation is
hereby made a part of these By-laws. In these By-laws, references to the
Certificate of Incorporation mean the provisions of the Certificate of
Incorporation (as that term is defined in the General Corporation Law of the
State of Delaware) of the Corporation as from time to time in effect, and
references to these By-laws or to any requirement or provision of law mean these
By-laws or such requirement or provision of law as from time to time in effect.
<PAGE> 5
ARTICLE II
Annual Meeting of Stockholders
The annual meeting of stockholders shall be held at such date and time as
the Board of Directors may designate. Purposes for which the annual meeting is
to be held, in addition to those prescribed by law, by the Certificate of
Incorporation and by these By-laws, may be specified by the chairman of the
board of directors, the president or by the board of directors.
If the election of directors shall not be held on the day provided for by
these By-laws, the directors shall cause the election to be held as soon
thereafter as convenient, and to that end, if the election of directors shall
not be held at the annual meeting, a special meeting of the stockholders may be
held in place of such omitted meeting or election, and any business transacted
or election held at such special meeting shall have the same effect as if
transacted or held at the annual meeting, and in such cases all references in
these By-laws, except in this Article II and in Article IV to the annual meeting
of the stockholders, or to the annual election of directors, shall be deemed to
refer to or include such special meeting. Any such special meeting shall be
called, and the purposes thereof shall be specified in the call, as provided in
Article III.
The Chairman of a meeting of stockholders may adjourn the meeting from
time to time. No notice of the time and place of adjourned meetings need be
given except as required by law. The stockholders present at a duly called
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum. Any previously scheduled meeting of the stockholders
-2-
<PAGE> 6
may be postponed, by resolution of the Board of Directors upon public notice
given prior to the date previously scheduled for such meeting of stockholders.
ARTICLE III
Special Meetings of Stockholders
A special meeting of the stockholders may be called at any time by the
chairman of the board of directors, the president or by the board of directors.
Such call shall state the time, place and purposes of the meeting.
ARTICLE IV
Place of Stockholders' Meetings
The annual election of directors, whether at the original or any
adjourned session of the annual meeting of the stockholders or of a special
meeting held in place thereof, shall be held at such place as the board of
directors shall fix for each such meeting. Sessions of such meetings for any
other purposes, and the original or any adjourned session of any other special
meeting of the stockholders, shall be held at such place within or without the
State of Delaware as shall be stated in the call or in the vote of adjournment,
as the case may be.
ARTICLE V
Notice of Stockholders' Meetings, Business and Nominations
A. Notice of Meetings.
Except as may be otherwise required by law, by the Certificate
of Incorporation or by other provisions of these By-laws, a written notice of
each meeting of stockholders, stating the place, day and hour thereof and the
purposes for which the meeting is called, shall be given,
-3-
<PAGE> 7
at least ten days but no more than sixty days before the date of the meeting, to
each stockholder entitled to vote thereat by leaving such notice with him or her
or at his or her residence or usual place of business, or by mailing it, postage
prepaid, addressed to such stockholder at his or her address as it appears upon
the books of the Corporation. Such notice shall be given by the secretary or an
assistant secretary or in case of their death, absence, incapacity or refusal,
by some other officer or by a person designated by the board of directors.
B. Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of
Directors of the Company and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Company's notice of meeting, (b) by or at the direction of the of Directors
or (c) by any stockholder of the Company who was a stockholder of record at the
time of giving of notice provided for in this By-law, who is entitled to vote at
the meeting and who complies with the notice procedures set forth in this
By-law.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(B)(1) of this By-law, the stockholder must have given timely notice thereof in
writing to the Secretary of the Company and such other busin must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on the 60th day nor earlier than the close
of business on the 90th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days
-4-
<PAGE> 8
before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Company. In no event shall the public announcement
of an adjournment of an annual meeting commence a new time period for the giving
of a stockholder's notice as described above. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder (including such person's written
consent to be named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial owner
and (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner.
-5-
<PAGE> 9
(3) Notwithstanding anything in the second sentence of paragraph (B)(2)
of this By-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Company is increased and there is no
public announcement by the Company naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this By-law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on the 10th day following the day on which
such public announcement is first made by the Company.
C. Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Company's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Company's
notice of meeting (a) by or at the direction of the Board of Directors or (b)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any stockholder of the Company who is a stockholder
of record at the time of giving of notice provided for in this By-law, who shall
be entitled to vote at the meeting and who complies with the notice procedures
set forth in this By-law. In the event the Company calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may
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be), for election to such position(s) as specified in the Company's notice of
meeting, if the stockholder's notice required by paragraph (B)(2) of this By-law
shall be delivered to the Secretary at the principal executive offices of the
Company not earlier than the close of business on the 90th day prior to such
special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the 10th day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
D. General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this By-law shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this By-law. Except as otherwise provided by Law, the Certificate of
Incorporation or these By-laws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this By-law and, if any proposed
nomination or business is not in compliance with this By-law, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this By-law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable
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national news service or in a document publicly filed by the Company with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-law. Nothing in this By-law shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Company's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE VI
Quorum and Action of Stockholders
At any meeting of the stockholders, a quorum for the election of any
director or for the consideration of any question shall consist of a majority in
interest of all stock issued and outstanding and entitled to vote for the
election of such director or upon such question, respectively, except in any
case where a larger quorum is required by law, by the Certificate of
Incorporation or by these By-laws. Stock owned by the Corporation, if any, shall
not be deemed outstanding for this purpose. In any case, any meeting may be
adjourned from time to time by a majority of the votes properly cast upon the
question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
When a quorum for an election is present at any meeting, the affirmative
vote of the holders of a plurality of the voting power of the stock of the
Company which is present at the meeting shall elect to such office. When a
quorum for the consideration of a question is present at any meeting, the
affirmative vote of the holders of a majority of the voting power of
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the stock of the Company which is present at the meeting shall decide the
quorum, except in any case where a larger vote is required by law, by the
Certificate of Incorporation or by these By-laws.
ARTICLE VII
Proxies and Voting
Except as otherwise may be provided in the Certificate of Incorporation
and subject to the provisions of Article XXXI of these By-laws, each stockholder
at every meeting of the stockholders shall be entitled to one vote in person or
by proxy for each share of the capital stock held by such stockholder, but no
proxy shall be voted after six months from its date, unless the proxy provides
for a longer period; and except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date for the
determination of the stockholders entitled to vote, as provided in Article XXXI,
no share of stock shall be voted at any election for directors which has been
transferred on the books of the Corporation within the twenty days preceding
such election of directors. Shares of the capital stock of the Corporation
belonging to the Corporation shall not be voted upon directly or indirectly.
Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held, or to give any consent permitted by law, and persons whose
stock is pledged shall be entitled to vote, or to give any consent permitted by
law, unless in the transfer by the pledgor on the books of the Corporation he or
she shall have expressly empowered the pledgee to vote
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thereon, in which case only the pledgee or his or her proxy may represent said
stock and vote thereon or give any such consent.
The secretary shall prepare or cause to be prepared, at least ten days
before every election of directors, a complete list of the stockholders entitled
to vote at said election, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder
during ordinary business hours, at the place where such election meeting is to
be held, or such other place as may be specified in the notice of the meeting,
within the city, town or village where the election meeting is to be held, for
said ten days, and shall be produced and kept at the time and place of the
election meeting for the duration of the election meeting, and be subject to the
inspection of any stockholder who may be present. The original or duplicate
stock ledger shall conclusively list and identify the stockholders entitled to
examine such list or to vote in person or by proxy at such election.
ARTICLE VIII
Action by Written Consent
A. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take
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corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within 10 days after the date on which such a
request is received, adopt a resolution fixing the record date. If no record
date has been fixed by the Board of Directors within 10 days of the date on
which such a request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the corporation by delivery to its
principal place of business or to any officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action.
B. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
record date established in accordance with paragraph (A) of this Article VIII, a
written consent or consents signed by a sufficient number
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of holders to take such action are delivered to the corporation in the manner
prescribed in paragraph (A) of this Article.
C. In the event of the delivery, in the manner provided by this Article,
to the corporation of the requisite written consent or consents to take
corporate action and/or any related revocation or revocations, the corporation
shall engage nationally recognized independent inspectors of elections for the
purpose of promptly performing a ministerial review of the validity of the
consents and revocations. For the purpose of permitting a prompt ministerial
review by the independent inspectors, no action by written consent without a
meeting shall be effective until the earlier of (i) five business days following
delivery to the corporation of consents signed by the holders of the requisite
minimum number of votes that would be necessary to take such action, which
delivery shall be accompanied by a certification by the stockholder of record
(or his or her designee) who delivered, in accordance with paragraph (A) above,
the written notice to the Secretary requesting the Board of Directors to fix a
record date or (ii) such date as the independent inspectors certify to the
corporation that the consents delivered to the corporation in accordance with
this Article represent at least the minimum number of votes that would be
necessary to take the corporate action. Nothing contained in this paragraph
shall in any way be construed to suggest or imply that the Board of Directors or
any stockholder shall not be entitled to contest the validity of any consent or
revocation thereof, whether during or after such five business day period, or to
take any other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect thereto).
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ARTICLE IX
Board of Directors
The number of directors which constitute the whole board of directors
shall be not less than three nor more than twenty. Within the limits above
specified, the number of directors shall be determined by resolution of the
board of directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided elsewhere in these By-laws, and each director
elected shall hold office until a successor is elected and qualified, or until
he or she sooner dies, resigns or is removed or replaced. Directors need not be
stockholders. Newly-created directorships resulting from any increase in the
authorized number of directors voted by the board of directors between annual
meetings may be filled, at the discretion of the board, by an election at a
meeting of stockholders held for that purpose, or by an election at a meeting of
the board of directors, by vote of a majority of the directors then in office
though less than a quorum, and each director so chosen shall hold office until
the next annual election of the class of directors to which such director is
assigned and until his or her successor is duly elected and shall qualify,
unless he or she sooner dies, resigns, or is removed or replaced.
The board of directors shall be divided into three classes as designated
by the initial members of the board of directors. Each class shall be as nearly
equal in number as possible to the other classes so designated. The term of
office of the first class shall expire at the first annual meeting of
stockholders; of the second class one year thereafter; and of the third class
two years thereafter. Each subsequent class of directors shall be elected for a
full term of office of three years. At all subsequent annual meetings
thereafter, the number of directors
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equal to the number constituting the class whose term expires at the time of
such meeting shall be elected to hold office for the full term of office of
three years. Upon the creation of any new directorships resulting from any
increase in the authorized number of directors voted by the board of directors
between annual meetings, such new directors shall be assigned to one of the
aforementioned three classes by the vote of a majority of the directors then in
office, provided that after such appointment to a class, each class shall be as
nearly equal in number as possible to the other classes of the board of
directors.
The provisions of the foregoing paragraph of this Article IX may not be
altered, amended or repealed except by the vote of the holders of a majority of
the voting power of the issued and outstanding stock of the Corporation at any
annual, regular or special stockholders' meeting called for that purpose, the
notice of which shall specify the subject matter of the proposed alteration,
amendment or repeal of this Article IX.
ARTICLE X
Powers of the Board of Directors
The board of directors shall have and may exercise all the powers of the
Corporation, except such as are conferred exclusively upon the stockholders by
law, by the Certificate of Incorporation or by these By-laws.
ARTICLE XI
Executive Committee
The board of directors, by a resolution adopted by a majority of the
whole board, may from its own number elect an executive committee of the board
of directors, to consist of
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not less than two members in addition to the president, and may from time to
time designate or alter, within the limits permitted by this article, the duties
and powers of such committee, or change its membership. The chairman of the
board of directors shall be an ex officio member of the executive committee.
Such executive committee shall be vested with power to take any action
which the board itself could take, except as hereinafter provided, with respect
to the conduct and management of the business of the Corporation, including
declaring dividends, designating and altering the duties, powers and
compensation of the officers and agents of the Corporation, electing or
appointing the officers and agents other than the chairman of the board of
directors, president, treasurer and secretary, filling vacancies other than
those vacancies occurring within the board of directors and executive committee,
and authorizing or ratifying all purchases, sales, contracts, offers,
conveyances, transfers, negotiable instruments, powers of attorney, bonds, and
other transactions and instruments of every kind, as well as authorizing the
seal of the Corporation to be affixed to all papers which may require it.
If an executive committee is elected, each member of such executive
committee shall hold office until the first meeting of the board of directors
following the next annual meeting of the stockholders and until his or her
successor is elected and qualified, or until he or she sooner dies, resigns, is
removed, is replaced by change of membership or becomes disqualified by ceasing
to be a director.
One-third of the members of the executive committee then in office, but
in no case less than two members, shall constitute a quorum for the transaction
of business, but any
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meeting may be adjourned from time to time by affirmative vote of a majority of
the votes cast upon the question, whether or not a quorum is present, and upon
such majority consent to adjourn, the meeting may be adjourned without further
notice. All minutes of proceedings of the executive committee shall be kept by
the secretary or an assistant secretary and shall be available to the board of
directors upon its verbal or written request. The executive committee may make
rules not inconsistent herewith for the holding and conducting of its meetings,
but unless otherwise provided in such rules, its meetings shall be held and
conducted in the same manner, as nearly as may be, as is provided in these
By-laws for meetings of the board of directors. The board of directors shall
have power and authority to rescind any vote or resolution of the executive
committee, but no such rescission shall have retroactive effect.
ARTICLE XII
Committees
The board of directors may at any time and from time to time, by
resolution adopted by a majority of the whole board of directors, appoint,
designate, change the membership of or terminate the existence of one or more
committees (other than the executive committee provided for in Article XI), each
committee to consist of two or more of the directors of the Corporation. Each
such committee shall have such name as may be determined from time to time by
resolution adopted by the board of directors and shall have and may exercise
such powers of the board of directors in the management of the business and
affairs of the Corporation, including the power to authorize the seal of the
Corporation to be affixed to all papers which may require it, as may be
determined from time to time by resolution adopted by
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a majority of the whole board. All minutes of proceedings of committees shall be
kept by the secretary or an assistant secretary and shall be available to the
board of directors upon its verbal or written request.
ARTICLE XIII
Meetings of the Board of Directors
Regular meetings of the board of directors may be held without call or
formal notice at such places either within or without the State of Delaware and
at such times as the board may from time to time determine. A regular meeting of
the board of directors may be held without call or formal notice immediately
after and at the same place as the annual meeting of the stockholders.
Special meetings of the board of directors may be held at any time and
at any place either within or without the State of Delaware when called by the
chairman of the board, the president, the chief financial officer or two or more
directors, reasonable notice thereof being given to each director by the
secretary or an assistant secretary, or in the case of the death, absence,
incapacity or refusal of the secretary or an assistant secretary, by the officer
or directors calling the meeting, or without call or formal notice if each
director then in office is either present at the special meeting or waives
notice before or after such meeting. A waiver of notice in writing, signed by a
director entitled to such notice shall be deemed to satisfy such notice
requirement whether such written waiver of notice were signed before or after
the time of the meeting. In any case it shall be deemed sufficient notice to a
director to send notice addressed to him or her at his or her usual or last
known business or residence address by
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postage paid mail at least forty-eight hours before the meeting, or by telegram,
telex or facsimile transmission at least twenty-four hours before the meeting,
or to give notice to him or her in person at least twenty-four hours before the
meeting either by telephone, or by handing him or her a written notice.
ARTICLE XIV
Quorum and Action of Directors
At any meeting of the board of directors, except in any case where a
larger quorum or the vote of a larger number of directors is required by law, by
the Certificate of Incorporation or by these By-laws, a quorum for any election
or for the consideration of any question shall consist of one-third of the
directors then in office, but in no case less than two directors, but any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and upon such majority consent
to adjournment, the meeting may be adjourned without further notice. When a
quorum is present at any meeting, the votes of a majority of the directors
present and voting shall be requisite and sufficient to elect any officer, and a
majority of the directors present and voting shall decide any questions brought
before such meeting, except in any case where a larger vote is required by law,
by the Certificate of Incorporation or by these By-laws.
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ARTICLE XV
Restrictions on Stock Transfer
The board of directors by resolution or resolutions may from time to
time, in connection with any employee stock option or purchase plan, fix
limitations and restrictions on the transfer of any or all of the authorized but
unissued shares or treasury shares of the Corporation made available for such
stock option or purchase plan, such restrictions to take effect upon the issue,
sale or transfer of such shares. No such limitation or restriction shall be
valid unless notice thereof is given on the certificate or certificates
representing such shares.
ARTICLE XVI
Compensation of Directors
The directors may be paid their expenses, if any, of attendance at each
meeting of the board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be paid like compensation for attending committee meetings.
ARTICLE XVII
Officers and Agents
The officers of the Corporation shall be chosen by the board of
directors and shall consist of a chairman of the board, a president, one or more
vice presidents, a secretary, a treasurer and such other officers as the board
shall deem necessary or appropriate. The board
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of directors, in its discretion, may choose a chief financial officer, one or
more executive vice presidents, senior vice presidents, assistant secretaries
and assistant treasurers. Two or more offices may be held by the same person,
except that when one person holds the offices of both president and secretary
such person shall not hold any other office.
The board of directors at its first meeting after each annual meeting of
stockholders shall choose the corporate officers, of whom only the chairman of
the board and the president must be board members. At any time as it shall deem
necessary, the board of directors may choose any other officers and agents, who
shall hold their offices for such terms, and shall exercise such powers, and
perform such duties, as the board shall determine from time to time.
Any vacancies occurring in any office of the Corporation shall be filled
by the board of directors.
ARTICLE XVIII
Chairman of the Board of Directors
The chairman of the board shall be the chief executive officer of the
Corporation and shall have general and active management authority of corporate
business. He or she shall ensure that all orders and resolutions of the board of
directors are carried into effect, shall perform all duties commonly incident to
his or her office and shall perform such other duties as the board of directors
shall from time to time designate. The chairman of the board shall preside at
all meetings of the stockholders and of the board of directors at which he or
she is present, except as otherwise voted by the board of directors.
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ARTICLE XIX
President
The president shall be the chief operating officer of the Corporation
and shall have general responsibility for the daily operations of the
Corporation and shall have such duties and powers as shall be designated from
time to time by the chairman of the board or the board of directors. The
president shall have all the powers and shall discharge all the duties, other
than those as a director, of the chairman of the board during his or her absence
or his or her inability or incapacity to act. The president shall preside at all
meetings of the stockholders and the board of directors, except when the
chairman of the board is present at such meetings.
ARTICLE XX
Executive Vice Presidents, Senior Vice Presidents
and Vice Presidents
Any executive vice president, any senior vice president or, if they are
not available, any available vice president, shall have all the powers and shall
discharge all the duties of the president during his or her absence or his or
her inability or incapacity to act, and each such vice president shall further
have such powers and discharge such duties as are imposed upon them by these
By-laws or may be from time to time conferred or imposed upon them by the
chairman of the board, the president or the board of directors.
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ARTICLE XXI
Chief Financial Officer
The chief financial officer, if such officer is appointed, or if not,
the treasurer, shall be responsible for developing, recommending and
implementing financial policies of the Corporation and shall have general
responsibility for protecting the Corporation's financial position. He or she
shall keep and maintain or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses capital, retained earnings and shares. He or she
shall represent the Corporation in its transactions with banks and other
financial institutions.
ARTICLE XXII
Secretary and Assistant Secretaries
The secretary or an assistant secretary shall attend all meetings of the
stockholders and all meetings of the board of directors and its committees, and
shall record all the proceedings of the meetings of the stockholders and of the
board of directors and its committees in a book or books to be kept for that
purpose. He or she shall give, or cause to be given, notice of all meetings of
the stockholders and meetings of the board of directors and shall perform such
other duties as may be prescribed by the chairman of the board, the president or
by the board of directors, under whose supervision the secretary shall work. The
secretary shall keep in safe custody the seal of the Corporation and when
authorized by the chairman of the board, the president, the board of directors,
or these By-laws, affix the same to any
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instrument requiring it and, when so affixed, the secretary or an assistant
secretary shall attest the seal by signing his or her name to the sealed
document. The secretary shall be responsible for the stock ledger (which may,
however, be kept by any transfer agent or agents of the Corporation under the
direction of the secretary).
The assistant secretary, or if there are more than one, the assistant
secretaries, in the order determined by the secretary, shall in the absence or
disability of the secretary perform the duties and exercise the powers of the
secretary, and shall perform such other duties and have such other powers as the
chairman of the board, the president, the board of directors and the secretary
may from time to time prescribe.
ARTICLE XXIII
Treasurer and Assistant Treasurers
The treasurer shall have custody of the corporate funds and securities
and shall keep, or cause to be kept, full and accurate account of receipts and
disbursements in books belonging to the Corporation, and shall deposit or cause
to be deposited all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the board
of directors. The treasurer shall invest surplus funds in such investments as he
or she shall deem appropriate in consultation with the chief financial officer
and pursuant to this authority may buy and sell securities on behalf of the
Corporation from time to time. He or she shall disburse or cause to be disbursed
the funds of the Corporation as may be ordered by the board of directors, the
chairman of the board or such other officer as the chairman of the board may
from time to time designate, taking proper vouchers for such
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disbursements. The treasurer shall work under the supervision of the chief
financial officer, if the board of directors has appointed such an officer.
If required by the board of directors, the treasurer shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of his or her office and for the restoration to the
Corporation in case of his or her death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his or her possession or under his or her control belonging to the
Corporation. The assistant treasurer, if any, shall in the absence or disability
of the treasurer, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the chairman
of the board, the president, the board of directors and the treasurer may from
time to time prescribe and shall be responsible to and shall report to the
treasurer.
ARTICLE XXIV
General Counsel and Assistant General Counsels
The general counsel, if the board of directors appoints such an officer,
shall be the chief counseling officer of the Corporation in all legal matters,
and, subject to the control by the board of directors, he or she shall have
charge of all matters of legal import to the Corporation. His or her
relationship to the Corporation shall in all respects be that of an attorney to
a client. The general counsel shall have charge of all litigation of the
Corporation and keep himself or herself advised of the progress of all legal
proceedings and claims by and against the Corporation, or in which the
Corporation is interested by reason of its ownership and
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control of other Corporations. The general counsel shall maintain records of all
lawsuits and actions of every nature in which the Corporation may be a party, or
in which it is interested, with sufficient data to show the nature of the case
and the proceedings therein, and such records and the papers relating thereto
shall be open at all times to the inspection of the directors and the executive
officers of the Corporation.
The general counsel shall give to the board of directors and to any
officer of the Corporation, whenever requested to do so, his or her opinion upon
any question affecting the interests of the Corporation and when requested by
the chairman of the board, the president, a vice president, or by the board of
directors or the executive committee, give his or her opinion upon any subject
that may be referred to him or her.
The general counsel may, in his or her discretion, on behalf of the
Corporation, retain such independent attorneys, or law firms, in any and all
parts of the world, as he or she may deem necessary to assist him or her in the
performance of his or her duties and to protect and further the interests of the
Corporation.
The general counsel shall have power and authority to execute in the
name of the Corporation any and all bonds or stipulations for costs or other
purposes connected with legal proceedings in any of the courts of justice, for
the protection or enforcement of the rights and interests of this Corporation;
and, by instrument in writing, he or she may delegate to any such authority
appropriate power and authority to execute such bonds or stipulations.
The assistant general counsel, or, if there are more than one, the
assistant general counsels, shall, in the order determined by the general
counsel, in the absence or disability of
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the general counsel, perform his or her duties and exercise his or her powers
and shall perform such other duties and have such other powers as the chairman
of the board, the president, the board of directors and the general counsel may
from time to time prescribe.
ARTICLE XXV
Controller
The controller, if the board of directors elects such an officer, shall
be the chief accounting officer of the Corporation, shall keep its books of
account and accounting records, and shall be in charge of the Corporation's
accounting policies and procedures. The controller shall work under the
supervision of the chief financial officer. The controller shall, with the
approval of the board of directors, arrange for annual audits by independent
public accountants.
If required by the board of directors, the controller shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of his or her office and for the restoration to the
Corporation in case of his or her death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his or her possession or under his or her control belonging to the
Corporation.
The assistant controller, if any, shall in the absence or disability of
the controller perform the duties and exercise the powers of the controller, and
shall perform such other duties and have such other powers as the chairman of
the board, the president, the board of directors
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and the controller may from time to time prescribe, and shall be responsible to
and shall report to the controller.
ARTICLE XXVI
Resignations and Removals
Any director or officer may resign at any time by delivering his or her
resignation in writing to the chairman of the board, the president or the
secretary, or to a meeting of the board of directors. Such resignation shall
take effect at the time stated in the resignation, or if no time be so stated
therein, immediately upon its delivery, and without the necessity of its being
accepted unless the resignation shall so state.
The stockholders may remove any director from office, by vote of a
majority in interest of the stock issued and outstanding and entitled to vote
for such removal, at any meeting called for that purpose. The board of directors
may at any time, by vote of a majority of the directors then in office, remove
from office the chairman of the board, the president, any executive vice
president, any vice president, the chief financial officer, the treasurer, the
secretary, the general counsel or the controller at a special meeting called for
that purpose. Any other officer, agent or employee may be removed from office,
agency or employment by (i) vote of the board of directors at any meeting
thereof, or (ii) in the case of any officer, agent or employee not elected to
his or her position by the board of directors, by any committee or officer upon
whom such power may be conferred by the board of directors.
No director or officer resigning, and (except where a right to receive
compensation for a definite future period shall be expressly provided in a
written agreement with
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<PAGE> 31
the Corporation duly approved by the board of directors) no director or officer
being removed shall have any right to any compensation as such director or
officer for any period following his or her resignation or removal, or any right
to damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise.
ARTICLE XXVII
Vacancies
If the office of any director becomes vacant, by reason of death,
resignation or removal, a successor may be elected by the board of directors by
vote of a majority of the remaining directors then in office whether or not the
remaining directors constitute a quorum. If the office of any officer becomes
vacant, by reason of death, resignation, removal or disqualification, a
successor may be elected or appointed by the board of directors by vote of a
majority of the directors present and voting. Each such successor shall hold
office for the unexpired terms, and until his or her successor shall be elected
or appointed and qualified, or until he or she sooner dies, resigns, is removed
or replaced or becomes disqualified. The board of directors shall have and may
exercise all its powers notwithstanding the existence of one or more vacancies
in its number as fixed by the stockholders, subject to any requirements of law
or of these By-laws as to the number of directors required for a quorum or for
any vote, resolution or other action.
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<PAGE> 32
ARTICLE XXVIII
Waiver of Notice
Whenever any notice is required to be given by law or under the
provisions of the Certificate of Incorporation or of these By-laws, a written
waiver of notice, signed by the person or persons entitled to such notice shall
be deemed to satisfy such notice requirement, whether such waiver was signed and
delivered before or after the meeting or other event for which notice is waived.
ARTICLE XXIX
Certificates of Stock
Every holder of stock in the Corporation shall be entitled to have a
certificate, signed in the name of the Corporation, by the chairman of the
board, the president or a vice president and by the treasurer or an assistant
treasurer or the secretary or an assistant secretary of the Corporation,
certifying the number of shares owned by him or her in the Corporation;
provided, however, that where any such certificate is countersigned by a
transfer agent, other than the Corporation or its employee, or by a registrar,
other than the Corporation or its employee, any other signature on such
certificate may be a facsimile, engraved, stamped or printed. In case any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as
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<PAGE> 33
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the Corporation, and any such issue and delivery
shall be regarded as an adoption by the Corporation of such certificate or
certificates. Certificates of stock shall be in such form as shall, in
conformity to law, be prescribed from time to time by the board of directors.
ARTICLE XXX
Transfer of Shares of Stock
Subject to applicable restrictions upon transfer, if any, title to a
certificate of stock and to the shares represented thereby shall be transferred
only by delivery of the certificate properly endorsed, or by delivery of the
certificate accompanied by a written assignment of the same, or a written power
of attorney to sell, assign or transfer the same or the shares represented
thereby, properly executed; but the person registered on the books of the
Corporation as the owner of shares shall have the exclusive right to receive
dividends thereon and, except as provided in Article VII with respect to stock
which has been pledged, to vote thereon as such owner or to give any consent
permitted by law, and shall be held liable for such calls and assessments, if
any, as may lawfully be made thereon, and except only as may be required by law,
may in all respects be treated by the Corporation as the exclusive owner
thereof. It shall be the duty of each stockholder to notify the Corporation of
his or her post office or mailing address and to furnish to the Corporation such
other information as the Corporation may by law be required to obtain.
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<PAGE> 34
ARTICLE XXXI
Transfer Books: Record Date
The board of directors shall have power to close the stock transfer
books of the Corporation for a period not exceeding sixty days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for the allotment of rights or the date when any change or conversion
or exchange of capital stock shall go into effect or for a period of not
exceeding sixty days in connection with obtaining the consent of stockholders
for any purpose; provided, however, that in lieu of closing the stock transfer
books as aforesaid, the board of directors may fix in advance a date, not
exceeding sixty days preceding the date of any meeting of stockholders, or any
other of the above-mentioned events, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect to any such change, conversion or
exchange of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
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<PAGE> 35
ARTICLE XXXII
Loss of Certificates
In the case of the alleged loss or destruction or the mutilation of a
certificate of stock, a duplicate certificate may be issued in place
thereof upon such terms in conformity with law as the board of directors
may prescribe.
ARTICLE XXXIII
Seal
The corporate seal of the Corporation shall, subject to alteration by
the board of directors, consist of a flat-faced circular die with the word
"Delaware", together with the name of the Corporation and the year of its
organization, cut or engraved thereon. The corporate seal of the Corporation may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE XXXIV
Execution of Papers
Unless the board of directors generally or in particular cases
authorizes the execution thereof in some other manner, all deeds, leases,
transfers, sales of securities, contracts, proxies, bonds, notes, checks, drafts
and other obligations, agreements and undertakings made, accepted or endorsed by
the Corporation, shall be signed by the chairman of the board, the president or
by one of the vice presidents, and, if such papers require a seal, the seal of
the Corporation shall be affixed thereto and attested by the secretary or an
assistant secretary.
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<PAGE> 36
ARTICLE XXXV
Fiscal Year
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the Corporation shall commence on the first day of
January of each year, commencing January 1, 1991.
ARTICLE XXXVI
Dividends
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the Certificate of Incorporation. Before payment of any
dividend, there may be set aside, out of any funds of the Corporation available
for dividends, such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interests of the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
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<PAGE> 37
ARTICLE XXXVII
Respecting Certain Contracts
The directors of the Corporation are likely to be connected with other
corporations, partnerships, associations or firms with which from time to time
this Corporation may have business dealings. No contract or other transaction
between the Corporation and any other corporation, partnership, association or
firm and no act of the Corporation shall be affected by the fact that directors
of this Corporation are pecuniarily or otherwise interested in, or are
directors, members or officers of such other corporation, partnership,
association or firm. Any director individually, or any firm of which such
director may be a member, may be a party to or may be pecuniarily or otherwise
interested in any contract or transaction of the Corporation, provided that the
fact that he or she or such firm is so interested shall be disclosed or shall
have been known to the board of directors or a majority thereof that approves
such contract or transaction. Every contract, act or transaction which at any
annual meeting of the stockholders, or at any meeting of the stockholders called
for that purpose, among others, of considering such contract, act or
transaction, shall be authorized, approved or ratified by vote of the holders of
a majority of the shares in the capital stock of the Corporation present in
person or represented by proxy at such meeting (provided that a quorum of
stockholders be there present or represented by proxy) shall be as valid and
binding upon the Corporation and upon all its stockholders as though such a
contract, act or transaction had been expressly authorized, approved and
ratified by every stockholder of the Corporation.
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<PAGE> 38
ARTICLE XXXVIII
Indemnification of Directors, Officers and Employees
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(and whether or not by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another company, partnership, joint venture, trust or other
enterprise or is or was serving as a fiduciary of any employee benefit plan,
fund or program sponsored by the Corporation or such other company, partnership,
joint venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, to the
extent and under the circumstances permitted by the General Corporation Law of
the State of Delaware as amended from time to time. Such indemnification (unless
ordered by a court) shall be made as authorized in a specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standards of
conduct set forth in the General Corporation Law of the State of Delaware. Such
determination shall be made (1) by the board of directors by vote of a majority
of a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or even if obtainable a
quorum of disinterested directors so directs by independent legal counsel in a
written opinion, or (3) by the
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<PAGE> 39
stockholders. The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE XXXIX
Amendments
Except as provided in Article IX, these By-laws may be altered, amended
or repealed by (i) the affirmative vote of the holders of a majority of the
voting power of the issued and outstanding stock of the Corporation or (ii) the
affirmative vote of the majority of the directors then holding office at any
annual, regular or special stockholders or directors meeting, called for that
purpose, the notice of which shall specify the subject matter of the proposed
alteration, amendment or repeal and the articles to be affected thereby. Any
by-law, whether made, altered, amended or repealed by the stockholders or
directors, may be repealed, amended, further amended or reinstated, as the case
may be, by either the stockholders or the directors as aforesaid.
The foregoing represents a true and correct copy of the Amended and
Restated By-laws of the Corporation adopted by the board of directors on August
5, 1994.
/s/ MOLLY S. WILLIAMS
-------------------------------
Molly S. Williams
Secretary
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<PAGE> 1
EXHIBIT 4.3 (a)
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 (this "Amendment No. 1") to the Rights Agreement
dated as of March 28, 1991 (the "Rights Agreement"), between Cabot Oil & Gas
Corporation, a Delaware corporation (the "Company"), and The First National
Bank of Boston, a national banking association (the "Rights Agent").
WITNESSETH:
WHEREAS, the Company and the Rights Agent previously entered into the
Rights Agreement; and
WHEREAS, the Company and the Rights Agent have agreed to amend the
Rights Agreement as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. Definitions of Terms. Terms contained in this Amendment No. 1 to
the Rights Agreement that are defined in the Rights Agreement shall for all
purposes have the meanings ascribed to such terms in the Rights Agreement as
from time to time supplemented, modified or amended, unless the context
otherwise specifies or clearly requires.
2. Definition of Acquiring Person. The definition of "Acquiring
Person" contained in Section 1 of the Rights Agreement is hereby amended in its
entirety to read as follows:
"Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such person, shall be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include any Exempt Person; provided that a
Person shall not become an Acquiring Person if such Person, together
with its Affiliates and Associates, shall become the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding
solely as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any Affiliate
or Associate of such Person shall purchase or otherwise become the
Beneficial Owner of any additional shares of Common Stock or any other
Person who is the Beneficial Owner of any shares of Common Stock shall
become an Affiliate or Associate of such Person; and provided further,
that Washington Energy Company, a Washington corporation ("WECO"),
shall not be an Acquiring Person solely (i) as a result of the
receipt of 2,133,000 shares of Common Stock and 1,134,000 shares of
6% Convertible Redeemable Preferred Stock ("6% Preferred Stock") of
the Company
<PAGE> 2
to be issued pursuant to the Agreement of Merger dated February ,
1994 (the "WECO Merger Agreement"), among the Company, COG Acquisition
Company, a Delaware corporation and a wholly owned subsidiary of the
Company, Washington Energy Resources Company, a Washington corporation
and a wholly owned subsidiary of WECO, and WECO, (ii) as a result of
the conversion of the 6% Preferred Stock or the redemption of any
shares of the 6% Preferred Stock for Common Stock or (iii) as a result
of the purchase of a number of shares of Common Stock which will
result in WECO being the Beneficial Owner of 20% of the voting stock
of the Company (as determined in accordance with generally accepted
accounting principles) (or such lesser number of shares as would then
entitle WECO to equity accounting treatment with respect to its
investment in the Company), unless WECO shall sell or otherwise
dispose of any securities of the Company received by it pursuant to
the WECO Merger Agreement, at which time clause (iii) of this proviso
shall cease to have any effect, and WECO shall be deemed to be an
Acquiring Person if it, or any of its Affiliates or Associates,
thereafter becomes the Beneficial Owner of any additional shares of
Common Stock (other than pursuant to a stock split, stock dividend or
similar recapitalization) such that WECO, together with its Affiliates
and Associates, would be the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding.
3. No Modification. Except as otherwise provided herein, this
Amendment No. 1 to the Rights Agreement shall not alter or modify the terms of
the Rights Agreement.
4. Section and Paragraph Headings. The section and paragraph
headings in this Amendment No. 1 to the Rights Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Amendment No. 1 to the Rights Agreement.
5. Counterparts. This Amendment No. 1 to the Rights Agreement may be
executed in two counterparts, each of which shall be deemed an original, but
both of which together shall constitute one and the same instrument.
6. Governing Law. This Amendment No. 1 to the Rights Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware.
- 2 -
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to the Rights Agreement to be duly executed as of the 23rd day of February,
1994.
CABOT OIL & GAS CORPORATION
By: /s/ JOHN U. CLARKE
---------------------------------
Name: John U. Clarke
----------------------------
Title: Executive Vice President
---------------------------
ATTEST:
/s/ LISA A. MACHESNEY
- ------------------------------
Name: Lisa A. Machesney
-------------------------
Title: Secretary
-----------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ JEANNE ROSS
---------------------------------
Name: Jeanne Ross
----------------------------
Title: Administration Manager
---------------------------
ATTEST:
/s/ ANDREW MARCH
- ------------------------------
Name: Andrew March
-------------------------
Title: Account Manager
------------------------
- 3 -
<PAGE> 1
EXHIBIT 4.5
$235,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
May 30, 1995
among
Cabot Oil & Gas Corporation,
The Banks Parties Hereto
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
TABLE OF CONTENTS (1)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.......................... 1
1.02 Accounting Terms and Determinations.. 15
1.03 Types of Borrowings.................. 15
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend.................. 15
2.02 Notice of Borrowings................. 16
2.03 Notes................................ 17
2.04 Maturity of Loans.................... 18
2.05 Interest Rates....................... 18
2.06 Fees................................. 21
2.07 Termination or Reduction of
Commitments........................ 22
2.08 Method of Electing Interest Rates.... 22
2.09 Optional Prepayments................. 24
2.10 General Provisions as to Payments.... 24
2.11 Funding Losses....................... 25
2.12 Computation of Interest and Fees..... 25
2.13 Extension of Revolving Credit
Period............................. 25
2.14 Withholding Tax Exemption............ 26
2.15 Regulation D Compensation............ 26
2.16 Maximum Interest Rate................ 27
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness........................ 28
3.02 Borrowings........................... 29
</TABLE>
- -----------------
(1) The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power........ 30
4.02 Corporate and Governmental
Authorization; No Contravention.... 30
4.03 Binding Effect....................... 30
4.04 Financial and Other Information...... 30
4.05 Full Disclosure...................... 31
4.06 Litigation........................... 32
4.07 Compliance with ERISA................ 32
4.08 Environmental Matters................ 32
4.09 Taxes................................ 33
4.10 Titles, etc.......................... 33
4.11 Casualties; Taking of Properties..... 33
4.12 Use of Proceeds...................... 33
ARTICLE V
COVENANTS
SECTION 5.01 Information.......................... 34
5.02 Payment of Obligations............... 36
5.03 Maintenance of Property.............. 36
5.04 Conduct of Business and
Maintenance of Existence........... 37
5.05 Compliance with Laws................. 37
5.06 Inspection of Property, Books
and Records........................ 37
5.07 Insurance............................ 37
5.08 Covenant to Secure Indebtedness
Equally............................ 38
5.09 Engineering Reports.................. 38
5.10 Debt................................. 39
5.11 Liens................................ 41
5.12 Sales of Petroleum Properties........ 42
5.13 Annual Coverage Ratio................ 42
5.14 Restricted Payments.................. 43
5.15 Consolidations, Mergers and Sales
of Assets........................... 43
5.16 Subsidiary Debt...................... 43
5.17 Subsidiaries......................... 44
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE VI
DEFAULTS
PAGE
<S> <C>
SECTION 6.01 Events of Default.................... 44
6.02 Notice of Default.................... 47
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization........ 47
7.02 Agent and Affiliates................. 47
7.03 Action by Agent...................... 47
7.04 Consultation with Experts............ 48
7.05 Liability of Agent................... 48
7.06 Indemnification...................... 48
7.07 Credit Decision...................... 48
7.08 Successor Agent...................... 49
7.09 Agent's Fees......................... 49
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair.......... 49
8.02 Illegality........................... 50
8.03 Increased Cost and Reduced Return.... 50
8.04 Base Rate Loans Substituted for
Affected Fixed Rate Loans.......... 52
8.05 Substitution of Bank................. 53
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices.............................. 53
9.02 No Waivers........................... 53
9.03 Expenses; Documentary Taxes;
Indemnification.................... 54
9.04 Sharing of Set-Offs.................. 54
9.05 Amendments and Waivers............... 55
9.06 Successors and Assigns............... 55
9.07 Collateral........................... 57
9.08 New York Law; Submission to
Jurisdiction....................... 57
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.09 Counterparts......................... 57
9.10 Confidentiality...................... 57
9.11 No Unwritten Agreements.............. 58
Exhibit A - Note
Exhibit B - Extension Agreement
Exhibit C-1 - Opinion of Counsel for
the Borrower
Exhibit C-2 - Opinion of Lisa A. Machesney, Esq.
Exhibit D - Opinion of Special Counsel for
the Agent
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 30, 1995 among
CABOT OIL & GAS CORPORATION, the BANKS from time to time parties hereto and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, Cabot Oil & Gas Corporation, the Banks and Morgan Guaranty
Trust Company of New York, as agent, are parties to a Credit Agreement dated as
of January 15, 1990 (as heretofore amended and/or restated, the "Original
Agreement"); and
WHEREAS, the parties to the Original Agreement desire to amend and
restate the Original Agreement as hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as
used herein, have the following meanings:
"Adjusted CD Rate" has the meaning set forth in Section
2.05(b).
"Administrative Questionnaire" means, with respect to each Bank, the
administrative questionnaire in the form submitted to such Bank by the Agent and
submitted to the Agent (with a copy to the Borrower) duly completed by such
Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Agreement" means the Original Agreement, as amended and restated by
this Amended Agreement and as the same may be further amended or restated from
time to time in accordance with the terms hereof.
"Amended Agreement" means this Amended and Restated Credit Agreement
dated as of May 30, 1995 among Cabot Oil & Gas
1
<PAGE> 7
Corporation, the Banks and Morgan Guaranty Trust Company of New York, as Agent.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in Section
2.05(b).
"Assignee" has the meaning set forth in Section
9.06(c).
"Available Commitment" means, at any time with respect to any Bank, an
amount (not to exceed such Bank's Commitment at such time) equal to the product
of (i) a fraction, the numerator of which shall be such Bank's Commitment and
the denominator of which shall be the aggregate Commitments of the Banks, times
(ii) the amount by which the Debt Limit in effect at such time exceeds the
aggregate principal amount of COGC Notes and, to the extent not excluded from
Borrower's Consolidated Debt at such time, Subordinated Debt outstanding at such
time.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means, at any time, a Loan which bears interest at
such time at a rate determined pursuant to Section 2.05(a) in accordance with
the applicable Notice of Borrowing or Notice of Interest Rate Election or
pursuant to Article VIII.
"Borrower" means Cabot Oil & Gas Corporation, a Delaware corporation,
and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"Borrower's Consolidated Debt" means, at any date, the aggregate
outstanding principal amount of Debt of the Borrower and its Subsidiaries,
determined on a consolidated basis as of such date (not including any
Non-Recourse Debt in an aggregate principal amount not to exceed $150,000,000 at
any such date incurred by the Borrower and its Subsidiaries to finance the
acquisition of Properties (other than Petroleum Properties)); provided that the
Borrower may request from time to time the exclusion from Borrower's
Consolidated Debt of any Subordinated
2
<PAGE> 8
Debt proposed to be incurred at such time by written notice to the Agent setting
forth the terms of such Subordinated Debt (such terms to include, without
limitation, the aggregate principal amount of such Subordinated Debt, the rate,
if any, at which interest is to accrue thereon, the dates of any scheduled
repayments thereof and the final maturity thereof), and the Agent shall promptly
thereafter notify each Bank of such request. The Borrower shall also furnish
each Bank with such other information with respect to such Subordinated Debt as
any Bank may reasonably request. Within 30 days of receipt of notice of such
request from the Agent, the Banks shall consult with one another to determine
the percentage, if any, acceptable to the Required Banks of the aggregate
principal amount of such Subordinated Debt which is to be excluded from
Borrower's Consolidated Debt. Such percentage as so determined by the Required
Banks shall be promptly notified in writing by the Agent to the Borrower, and
upon such notification, and for all purposes thereafter, an amount equal to such
percentage of the aggregate outstanding principal amount of such Subordinated
Debt shall be excluded from Borrower's Consolidated Debt until such Subordinated
Debt is repaid in full or, if applicable, converted into capital stock of the
Borrower.
"Borrower's 1994 Form 10-K" means the Borrower's annual report on Form
10-K for the fiscal year ended December 31, 1994, as filed with the Securities
and Exchange Commission.
"CD Base Rate" has the meaning set forth in Section
2.05(b).
"CD Loan" means, at any time, a Loan which bears interest at such time
at a rate determined pursuant to Section 2.05(b) in accordance with the
applicable Notice of Borrowing or Notice of Interest Rate Election.
"CD Margin" has the meaning set forth in Section
2.05(b).
"CD Reference Banks" means Morgan Guaranty Trust Company of New York
and any other Bank selected by the Agent to serve in such capacity and not
disapproved by the Borrower or the Required Banks.
"CFADS" or "Cash Flow Available for Debt Service" means, for any
period, gross cash operating revenues properly allocable to (i) Proved Reserves
and other assets consisting primarily of gas gathering and transmission
pipelines that are directly owned by the Borrower or its Subsidiaries or (ii)
any Section 29 Transaction PPI in Proved Reserves or other assets, which Proved
Reserves or other assets are in each case not subject to any Non-Recourse Debt
or any Lien except Excepted
3
<PAGE> 9
Liens and Liens permitted under Section 5.11(e) and located in the United States
of America or in Canada for such period, less (in the case of clause (i)) the
following cash items: royalties, operating costs, severance, wellhead taxes,
general and administrative expenses and current income and other taxes properly
allocable to such period and cash capital expenditures made during such period
and properly allocable to Petroleum Properties and such other assets. CFADS
shall be determined based on the most recent Reserve Report and financial
statements (and supplemental information) furnished to the Banks, subject to
approval of such Reserve Report and financial statements (and supplemental
information) by the Required Banks and, with respect to pipeline assets, shall
take into account the Borrower's end product sales value of natural gas as most
recently furnished by the Borrower in writing to the Banks (together with a
description of the applicable period of sales data from which such end product
sales value was derived) and derived from information set forth in financial
statements furnished to the Banks and shall be determined based on an assumption
that, for so long as substantially all of the natural gas moving through such
pipeline assets are produced from reserves (i) owned by the Borrower or any
Subsidiary or (ii) in which the Borrower has a Section 29 Transaction PPI, the
volumes of natural gas transported by such pipelines positively correlate with
the rate at which natural gas is produced from Proved Developed Producing
Reserves as determined according to such Reserve Report and financial statements
(and supplemental information). CFADS shall exclude amounts attributable to any
Subsidiary to the extent of any minority interest in such Subsidiary.
"COGC Notes" means the 10.18% Notes due 2002 issued by the Borrower
pursuant to the Note Purchase Agreement dated as of May 11, 1990 among the
Borrower and the purchasers listed on the signature pages thereof, as such notes
and agreement may be amended from time to time.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof as its Commitment,
as such amount may be reduced from time to time pursuant to Section 2.07, or the
obligation of such Bank to make Loans pursuant to Section 2.01(a) not to exceed
such amount, as the context may require, and "Commitments" means the aggregate
Commitments of all of the Banks.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements as if such statements were prepared as of
such date.
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<PAGE> 10
"Conversion Date" means June 1, 1997, or a subsequent anniversary of
such date to which the Revolving Credit Period shall have been extended pursuant
to Section 2.13, or if any such date is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar Business Day.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all Debt of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, and (vi) all Debt of others directly or
indirectly guaranteed by such Person or in respect of which such Person is
otherwise liable, contingently or otherwise.
"Debt Limit" means that dollar amount determined and periodically
adjusted in accordance with Section 5.10(b).
A "Debt Limit Excession" exists at any date if and to the extent that
Consolidated Debt at such date exceeds the Debt Limit at such date.
"Debt Percentage" means, at any date, the percentage equivalent of a
fraction the numerator of which is Borrower's Consolidated Debt at such date and
the denominator of which is the Debt Limit at such date and shall be determined
based on the certificate of the chief financial officer or chief accounting
officer of the Borrower furnished to the Banks as provided in Section 5.01(h).
"Default" means the occurrence of any of the events specified in
Section 6.01, whether or not any requirement for notice or lapse of time or
other condition precedent has been satisfied.
"Domestic Borrowing" means any Borrowing comprised of
Domestic Loans.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice
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<PAGE> 11
to the Borrower and the Agent; provided that any Bank may so designate separate
Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD
Loans, on the other hand, in which case all references herein to the Domestic
Lending Office of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or
both.
"Domestic Reserve Percentage" has the meaning set forth
in Section 2.05(b).
"Effective Date" means the date this Amended Agreement becomes
effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may
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<PAGE> 12
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Agent.
"Euro-Dollar Loan" means, at any time, a Loan which bears interest at
such time at a rate determined pursuant to Section 2.05(c) or (d) in accordance
with the applicable Notice of Borrowing or Notice of Interest Rate Election.
"Euro-Dollar Margin" has the meaning set forth in
Section 2.05(c).
"Euro-Dollar Reference Banks" means the principal London offices of
Morgan Guaranty Trust Company of New York and any other Bank selected by the
Agent to serve in such capacity and not disapproved by the Borrower or the
Required Banks.
"Euro-Dollar Reserve Percentage" means, with respect to any Bank, for
any day that percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for such Bank in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Event of Default" means any of the events specified in
Section 6.01.
"Excepted Liens" means: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action; (ii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations; (iii) legal or equitable encumbrances deemed to
exist by reason of the existence of any litigation or other legal proceeding or
arising out of a judgment or award with respect to which an appeal is being
prosecuted, but only so long as execution of such judgment and enforcement of
such Lien is effectively stayed and the amount thereof (in excess of applicable
insurance coverage) does not exceed, individually or in the aggregate,
$5,000,000; (iv) vendors', carriers', warehousemen's, repairmen's, mechanics',
workmen's, materialmen's, construction or other like Liens (including, without
limitation, Liens arising in favor of sellers of hydrocarbons) arising by
operation of law in the ordinary course of business incident to obligations
which are not yet due or which are being contested in good faith by appropriate
proceedings by or on behalf of the Borrower or a Subsidiary; (v)
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<PAGE> 13
Liens arising in the ordinary course of business under farm-out agreements, gas
sales contracts, operating agreements, unitization and pooling agreements, and
such other documents as are customarily found in connection with comparable
drilling and producing operations; (vi) letters of credit, pledges or deposits,
including bonds, required in the ordinary course of business to secure public or
statutory obligations or to secure performance in connection with bids or
contracts related to the exploration or development of Petroleum Properties, to
the extent that payment of the underlying obligations is not yet due or is being
contested in good faith by appropriate proceedings by or on behalf of the
Borrower or a Subsidiary and with respect to which appropriate reserves have
been established; and (vii) minor irregularities in title which do not
materially interfere with the occupation, use and enjoyment by the Borrower and
its Subsidiaries of their respective Properties in the normal course of business
as presently conducted or materially impair the value thereof for such business.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute. For purposes of Section 6.01(k), unless otherwise
defined in such Section, the terms enclosed in quotation marks as used therein
have the meanings ascribed to such terms under the Exchange Act and the rules
and regulations promulgated by the Securities and Exchange Commission
thereunder.
"Executive Officer" means, with respect to any Person, the president,
any vice president, the treasurer, the chief financial officer, the chief
accounting officer, the controller or the general counsel or any other person
performing similar functions.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Financing Documents" means this Agreement and the
Notes.
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<PAGE> 14
"Fixed Rate Borrowing" means any Borrowing comprised of
Fixed Rate Loans.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans
or both.
"Group of Loans" means at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time (other than Base Rate Loans
arising under Section 8.02 or 8.04, which shall be included in the related Group
of Fixed Rate Loans) or (ii) all Loans which are the same Type of Fixed Rate
Loans having the same Interest Period at such time.
"Indebtedness" means any and all Loans and all other liabilities of
the Borrower to the Banks from time to time existing under the Financing
Documents and all renewals, extensions, rearrangements, amendments or
supplements to such documents.
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, a
period beginning on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, three or six months thereafter, as the Borrower may
elect in the applicable Notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clauses (c) and (d) below, end on the last Euro-Dollar
Business Day of a calendar month;
(c) any Interest Period applicable to any Revolving Credit Loan which
begins before the Conversion Date and would otherwise end after the Conversion
Date shall end on the Conversion Date; and
(d) if any Interest Period for a Euro-Dollar Loan includes a date on
which a payment of principal of such Loan is required to be made but does not
end on such date, then (i) the principal amount of such Loan required to be
repaid on such date shall have an Interest Period ending on such date
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<PAGE> 15
and (ii) the remainder (if any) of such Loan shall have an Interest Period
determined as set forth above.
(2) with respect to each CD Loan, a period beginning on the date of borrowing
specified in the applicable Notice of Borrowing or on the date specified in the
applicable Notice of Interest Rate Election and ending 30, 90 or 180 days
thereafter, as the Borrower may elect in the applicable Notice; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (c)(i) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day;
(b) any Interest Period applicable to any Revolving Credit Loan which
begins before the Conversion Date and would otherwise end after the Conversion
Date shall end on the Conversion Date; and
(c) if any Interest Period for a CD Loan includes a date on which a
payment of principal of such Loan is required to be made but does not end on
such date, then (i) the principal amount of such Loan required to be repaid on
such date shall have an Interest Period ending on such date and (ii) the
remainder (if any) of such Loan shall have an Interest Period determined as
set forth above;
Notwithstanding the foregoing (x) all Interest Periods at any one time
outstanding with respect to Term Loans (exclusive of Interest Periods determined
solely pursuant to clause (1)(d)(i) or (2)(c)(i) above) shall end on not more
than four different dates and (y) the duration of any Interest Period which
would otherwise violate the limitation in clause (x) shall be adjusted to
coincide with the remaining term of such other then current Interest Period with
respect to a Fixed Rate Loan of the same Type as the Borrower shall specify in
the related Notice of Borrowing or Notice of Interest Rate Election.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including without limitation any Production Payment, advance payment, gas
imbalances, take or pay or similar arrangement with respect to minerals in
place) or any other arrangement the economic effect of which is to give a
creditor preferential access to such asset to satisfy its claim, whether or not
filed, recorded or otherwise perfected under applicable law. For the purposes of
this Agreement, the Borrower
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<PAGE> 16
or any Subsidiary shall be deemed to own subject to a Lien (i) any asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset or any capitalized lease obligation or (ii) any account
receivable transferred by it with recourse (including any such transfer subject
to a holdback or similar arrangement which effectively imposes the risk of
collectibility upon the transferor).
"Loan" means any loan made or to be made by a Bank hereunder, which
will be (i) either a Domestic Loan (i.e., a Base Rate Loan or a CD Loan) or a
Euro-Dollar Loan and (ii) either a Revolving Credit Loan or a Term Loan. "Loans"
means all or any combination of the foregoing, as the context may require.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).
"Material Debt" means Debt (other than Non-Recourse Debt) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal amount exceeding
$7,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $3,000,000.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Non-Recourse Debt" of any Person means Debt of such Person in respect
of which (i) the recourse of the holder of such Debt, whether direct or indirect
and whether contingent or otherwise, is effectively limited to the assets
directly securing such Debt; (ii) such holder may not collect by levy of
execution against assets of such Person generally (other than the assets
directly securing such Debt) if such Person fails to pay such Debt when due and
the holder obtains a judgment with respect thereto; and (iii) such holder has
waived, to the extent such holder may effectively do so, such holder's right to
elect recourse treatment under 11 U.S.C. { 1111(b).
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
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"Notice of Borrowing" has the meaning set forth in
Section 2.02.
"Notice of Interest Rate Election" has the meaning set
forth in Section 2.08.
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section
9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Petroleum Property" means (i) any interest of the Borrower or any
Subsidiary in oil and gas reserves and assets consisting primarily of gas
gathering and transmission pipelines which is, or is to be, taken into account
in the determination of the Debt Limit pursuant to Section 5.10 or the annual
coverage ratio pursuant to Section 5.13 and (ii) any Section 29 Transaction PPI
provided that (a) such Section 29 Transaction PPI constitutes a production
payment within the meaning of the Bankruptcy Reform Act of 1994 and (b) such
Section 29 Transaction PPI is filed, recorded or otherwise perfected under
applicable law so as to be fully protected from all creditors and transferees of
the grantor thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Production Payment" means an interest in a Petroleum Property that
(i) is not subject to the costs of production and
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<PAGE> 18
(ii) terminates at such time as the interest-holder has realized a specified sum
from the sale of oil or gas attributable to such interest.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proved Reserves" means "proved oil and gas reserves" as specified
under Rule 4-10(a)(2) of Regulation S-X of the Securities and Exchange
Commission.
"Quarterly Date" means the first day of each March, June, September
and December or if any such date is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar
Business Day.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments then in effect, or, if the Commitments
shall have been terminated, holding Notes evidencing at least 66 2/3% of the
aggregate principal amount of the Loans then outstanding.
"Reserve Report" means a report delivered by the
Borrower pursuant to Section 5.09(a), Section 5.09(b) or Section
5.09(c).
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to acquire shares of the
Borrower's capital stock.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Conversion Date.
"Revolving Credit Loan" means a loan made by a Bank pursuant to
Section 2.01(a)(i).
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"Section 29 Transaction" means the transaction outlined in the letter
dated March 20, 1995 from State Street Bank and Trust Company to the Borrower,
copies of which have heretofore been delivered to the Banks.
"Section 29 Transaction PPI" means a volumetric production payment
interest arising from the Section 29 Transaction.
"Subordinated Debt" means indebtedness of the Borrower for borrowed money
which (i) is not guaranteed by any other Person, (ii) requires no payment of
principal to be made prior to the seventh anniversary of the Conversion Date (as
in effect at the time such Subordinated Debt is incurred or as requested to be
extended by the Borrower and approved by the banks at such time, and without
giving effect to any extensions of the Conversion Date agreed to by the Banks
after the incurrence of such Subordinated Debt) and (iii) is subordinated in
right of payment to the Indebtedness by subordination provisions in form and
substance satisfactory to the Required Banks.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Tenor" refers to the determination whether a Loan is a Revolving
Credit Loan or a Term Loan.
"Term Loan" means a loan made by a Bank pursuant to
Section 2.01(a)(ii).
"Type" refers to the determination whether a Loan is a Base Rate
Loan, a CD Loan or a Euro-Dollar Loan (or a Borrowing comprised of such Loans).
"Unavailable Commitment" means, at any time with respect to any Bank,
the amount, if any, by which such Bank's Commitment at such time exceeds the
greater of (i) its Available Commitment at such time and (ii) the aggregate
outstanding principal amount of such Bank's Loans at such time.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefits under such
Plan exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of the Borrower or any Subsidiary
(whether direct or joint and several
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<PAGE> 20
with one or more affiliates) to the PBGC or any other Person under Title IV of
ERISA.
"Wholly-Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used in this Agreement shall be
interpreted, all accounting determinations hereunder shall be made and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the
Agent that the Borrower wishes to amend any covenant in Article V to eliminate
the effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Agent notifies the Borrower that the
Required Banks wish to amend Article V for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" means a
borrowing of the same Tenor and Type by the Borrower from one or more Banks
pursuant to Article II on a given date and, in the case of Fixed Rate Loans, for
the same Interest Period. Borrowings are classified for purposes of this
Agreement by Type (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend.
(a) Loans.
(i) Revolving Credit Loans. During the Revolving Credit Period each
Bank severally agrees, on the terms and
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<PAGE> 21
conditions set forth in this Agreement, to make Loans to the Borrower pursuant
to this subsection (a)(i) from time to time in amounts such that the aggregate
principal amount of Revolving Credit Loans by such Bank at any one time
outstanding shall not exceed the amount of its Commitment at such time. Within
the foregoing limits, the Borrower may borrow under this subsection (a)(i),
prepay Revolving Credit Loans and reborrow at any time during the Revolving
Credit Period under this subsection (a)(i).
(ii) Term Loans. On the Conversion Date, each Bank severally agrees,
on the terms and conditions set forth in this Agreement, to make a Loan or Loans
to the Borrower pursuant to this subsection (a)(ii) in an aggregate amount up to
but not exceeding the amount of its Commitment on such date.
(b) Borrowings Ratable. Each Borrowing under this Section shall be
made from the several Banks ratably in proportion to their respective
Commitments.
SECTION 2.02. Notice of Borrowings. (a) The Borrower shall give the
Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (New York City
time) on (x) the Domestic Business Day of each Base Rate Borrowing, (y) the
second Domestic Business Day next preceding each CD Borrowing and (z) the third
Euro-Dollar Business Day next preceding each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing, which shall be $3,000,000
or any larger multiple of $1,000,000 (except that any Borrowing may be in the
aggregate amount available hereunder in accordance with Section 3.01(b)),
(iii) whether the Loans comprising such Borrowing are initially to be
CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
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(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address specified in or pursuant to Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available to
the Borrower at the Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsection (c) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.05 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement. The
failure of any Bank to make the Loan to be made by it as part of any Borrowing
shall not relieve any other Bank of its obligation, if any, hereunder to make
its Loan, and no Bank shall be responsible for the failure of any other Bank to
make any Loan to be made by such other Bank hereunder.
SECTION 2.03. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount and type of each Loan made by it and the date and amount of each payment
of principal made by the Borrower with respect thereto, and may, if such Bank so
elects in connection with any transfer or enforcement of its Note, endorse on
the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Loan then outstanding; provided
that the failure of any
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Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.04. Maturity of Loans. The Revolving Credit Loans of each
Bank shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the Conversion Date. The Term Loan of
each Bank shall mature, and the principal amount thereof shall be due and
payable, together with accrued interest thereon, in twenty-four equal quarterly
installments on each Quarterly Date from and including the first such date
following the Conversion Date to and including the Quarterly Date coinciding
with the sixth anniversary of the Conversion Date.
SECTION 2.05. Interest Rates. (a) Subject to Section 2.16, each Base
Rate Loan shall bear interest on the outstanding principal amount thereof, for
each day from the date such Loan is made until it becomes due, at a rate per
annum equal to the Base Rate for such day. Such interest shall be payable
quarterly in arrears on each Quarterly Date and, in the case of any Base Rate
Loan converted to a Fixed Rate Loan, on the date of such conversion. Subject to
Section 2.16, any overdue principal of and overdue interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Subject to Section 2.16, each CD Loan shall bear interest on the
outstanding principal amount thereof, for each Interest Period applicable
thereto, at a rate per annum equal to the sum of the CD Margin plus the
applicable Adjusted CD Rate; provided that if any CD Loan or any portion thereof
shall, as a result of clause (2)(b) or (2)(c)(i) of the definition of Interest
Period, have an Interest Period of less than 30 days, such portion shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than 90 days, 90
days after the first day thereof. Subject to Section 2.16, any overdue principal
of and overdue interest on any CD Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the CD Margin plus the Adjusted CD Rate applicable to
such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means 0.875%.
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The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The amount in brackets being rounded upwards, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
unpaid principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4(a) (or any successor provision) to the
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<PAGE> 25
Federal Deposit Insurance Corporation (or any successor) for such Corporation's
(or such successor's) insuring time deposits at offices of such institution in
the United States. The Adjusted CD Rate shall be adjusted automatically on and
as of the effective date of any change in the Assessment Rate.
(c) Subject to Section 2.16, each Euro-Dollar Loan shall bear interest
on the outstanding principal amount thereof, for each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin plus the
applicable London Interbank Offered Rate. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than three months, three months after the first day thereof.
"Euro-Dollar Margin" means 0.75%
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Subject to Section 2.16, any overdue principal of and overdue
interest on any Euro-Dollar Loan shall bear interest, payable on demand, for
each day from and including the date payment thereof was due to but excluding
the date of actual payment, at a rate per annum equal to the sum of 2% plus the
higher of (i) the sum of the Euro-Dollar Margin plus the London Interbank
Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the
quotient obtained (rounded upwards, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than six months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
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(e) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.06. Fees.
(a) Commitment Fees. The Borrower shall pay to the Agent for the
account of each Bank a commitment fee at the rate of 3/8 of 1% per annum on the
daily average unused amount of its Available Commitment and an additional
commitment fee at the rate of 1/4 of 1% per annum on the daily average amount of
its Unavailable Commitment. Such commitment fees shall accrue from and including
the Effective Date to but excluding the date of termination of the Commitments
in their entirety. Accrued fees under this subsection (a) shall be payable
quarterly in arrears on each Quarterly Date and upon the date of termination of
the Commitments in their entirety.
(b) Additional Interest. (i) Except as otherwise provided herein, if
the Debt Percentage exceeds 80% for a period of 30 consecutive calendar days (as
determined on the basis of a certificate of the chief financial officer or the
chief accounting officer of the Borrower prepared in accordance with Section
5.01(h) and delivered to the Agent), the Borrower shall pay to the Agent subject
to Section 2.16, additional interest on all Loans at the rate of 1/4 of 1% per
annum, for the respective accounts of the Banks ratably in proportion to the
respective principal amounts of Loans made by them outstanding during the period
specified below. Such additional interest and fees shall accrue from and
including the first day of the 30-day period referred to above to but excluding
the date on which the Agent receives a certificate of the chief financial
officer or the chief accounting officer of the Borrower stating that the Debt
Percentage has not exceeded 80% during a subsequent period of 30 consecutive
calendar days and which certificate has been prepared in accordance with Section
5.01(h), and shall be payable in arrears on each Quarterly Date, starting with
the first such date more than 30 days after the commencement of the period first
referred to above in this subsection (b), upon termination of the Commitments in
their entirety and upon repayment of all
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outstanding Term Loans in their entirety. The additional interest under this
subsection (b)(i) shall cease to accrue from and including such date on which
the Agent receives such certificate.
SECTION 2.07. Termination or Reduction of Commitments.
(a) Mandatory. The Commitments shall terminate at the
close of business on the Conversion Date.
(b) Optional. The Borrower may, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Commitments at any time, if no
Loans are outstanding at such time or (ii) ratably reduce from time to time by
an aggregate amount of $5,000,000 or any larger multiple thereof, the aggregate
amount of the Commitments in excess of the aggregate outstanding principal
amount of the Revolving Credit Loans.
SECTION 2.08. Method of Electing Interest Rates. (a) The Loans
comprising each Borrowing shall bear interest initially at the Type of rate
specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the
Borrower may from time to time elect to change or continue the type of interest
rate borne by each Group of Loans (subject in each case to the provisions of
Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar
Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans, or may elect to continue
such Loans as CD Loans for an additional Interest Period, in each case beginning
on the last day of the then current Interest Period applicable to such Loans;
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans, or may elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, in each case
beginning on the last day of the then current Interest Period applicable to such
Loans;
(iv) if such Loans are Base Rate Loans, the Borrower may elect to
designate such Loans as any combination of Base Rate Loans, CD Loans or
Euro-Dollar Loans as of any Domestic Business Day in the case of CD Loans and as
of any Euro-Dollar Business Day in the case of Euro-Dollar Loans (subject to the
definition of Interest Period); and
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<PAGE> 28
(v) if such Loans are Fixed Rate Loans, the Borrower may elect to
designate such Loans as any combination of Base Rate Loans, CD Loans or
Euro-Dollar Loans as of the last day of the then current Interest Period
applicable to such Loans (subject to the definition of Interest Period).
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent at least three Domestic Business Days before the
conversion or continuation selected in such notice is to be effective (unless
any of such Loans are to be continued as or converted into Euro-Dollar Loans, in
which case such notice shall be delivered to the Agent at least three
Euro-Dollar Business Days before the Interest Period selected in such notice is
to begin).
A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably among the Loans comprising
such Group and (ii) after giving effect to all Notices of Borrowing and other
Notices of Interest Rate Election delivered on such date, all Interest Periods
at any time outstanding with respect to Term Loans (exclusive of Interest
Periods determined pursuant to clauses (1)(d)(i) or (2)(c)(i) of the definition
of Interest Period) shall end on not more than four different dates.
(b) Each Notice of Interest Rate Election shall specify with respect
to the outstanding Borrowing to which such notice applies:
(i) the Group of Loans (or portion thereof) to which
such notice applies);
(ii) the date on which conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if such Group of Loans (or portion thereof) are to be converted,
the new type of Loans and, if such new Loans are CD Loans or Euro-Dollar Loans,
the duration of the initial Interest Period applicable thereto after such
conversion; and
(iv) if such Group of Loans (or portion thereof) are to be continued
as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration
of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
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(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such notice shall not thereafter be revocable
by the Borrower. If the Borrower fails to deliver a timely Notice of Interest
Rate Election to the Agent for any Borrowing comprised of Fixed Rate Loans, such
Loans shall be converted into Base Rate Loans on the last day of the then
current Interest Period applicable thereto.
SECTION 2.09. Optional Prepayments.
(a) Subject in the case of Fixed Rate Loans to the provisions of
Section 2.11, the Borrower may, upon at least three Domestic Business Days'
notice to the Agent, prepay any Group of Domestic Loans and upon at least three
Euro-Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans,
in whole at any time, or from time to time in part in amounts aggregating
$3,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Group.
(b) Upon receipt of a notice of prepayment pursuant to this Section
2.09(a), the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.10. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
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(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.11. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a Base Rate Loan (whether pursuant to this Article II or Article VI
or VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the end of an applicable period fixed pursuant to Section
2.05(d), or if the Borrower fails to borrow or prepay any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.02(b) or 2.09(a),
the Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred with respect to such Loans, including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period after
any such payment or conversion or failure to borrow or prepay, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.12. Computation of Interest and Fees. Interest based on the
Prime Rate and commitment fees hereunder shall be computed on the basis of a
year of 365 days (or 366 days in a leap year) and paid for the actual number of
days elapsed (including the first day but excluding the last day). All other
interest shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.13. Extension of Revolving Credit Period. The Revolving
Credit Period may be extended, in the manner set forth in this Section 2.13, on
June 1, 1996 and on each anniversary of such date occurring on or prior to the
Conversion Date (an "Extension Date") to the date that is the second anniversary
of such Extension Date. If the Borrower wishes to request an extension of the
Revolving Credit Period on any Extension Date it shall give notice to that
effect to the Agent not less than 60 days prior to such Extension Date,
whereupon the
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Agent shall notify each of the Banks of such request. Each Bank will use its
best efforts to respond to such request, whether affirmatively or negatively,
within 30 days prior to such Extension Date. If all Banks respond affirmatively,
then, subject to receipt by the Agent prior to such Extension Date of
counterparts of an Extension Agreement in substantially the form of Exhibit B
duly completed and signed by the Borrower, the Agent and all such Banks, the
Revolving Credit Period shall be extended, effective on such Extension Date, to
the second anniversary of such Extension Date.
SECTION 2.14. Withholding Tax Exemption. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated under
the laws of the United States of America or a state thereof agrees that it will
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Agent two additional copies of such form
(or a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Bank is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank advises the Borrower and the Agent that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax.
SECTION 2.15. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Bank to United
States residents), then such Bank may require the Borrower to pay,
contemporaneously with each payment of interest on the Euro-Dollar Loans,
additional interest on the related Euro-Dollar Loan of such Bank at a rate per
annum up to but not
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exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Bank wishing to require payment of
such additional interest (x) shall so notify the Borrower and the Agent, in
which case such additional interest on the Euro-Dollar Loans of such Bank shall
be payable to such Bank at the place indicated in such notice with respect to
each Interest Period commencing at least five Euro-Dollar Business Days after
the giving of such notice and (y) shall notify the Borrower at least five
Euro-Dollar Business Days prior to each date on which interest is payable on the
Euro-Dollar Loans of the amount to which such Bank is then entitled under this
Section.
SECTION 2.16. Maximum Interest Rate. (a) Nothing contained in this
Agreement or the Notes shall require the Borrower to pay interest at a rate
exceeding the maximum rate permitted by law.
(b) If the amount of interest, including amounts that would be deemed
to constitute interest under applicable law, payable for the account of any
Bank, would at any time exceed the maximum amount permitted by applicable law to
be charged by such Bank, the amount of interest payable for its account shall
ipso facto be automatically reduced to such maximum permissible amount, and any
amount constituting interest received by such Bank in excess of the maximum
permissible amount of interest which, under applicable law, could then be
collected by such Bank shall be credited by such Bank against and to the extent
of the unpaid principal amount of the Loans of such Bank outstanding at such
time, first against any Base Rate Loans and next against any Fixed Rate Loans as
selected by such Bank, with the remaining excess, if any, being promptly
refunded to the Borrower.
(c) If the amount of interest, including amounts that would be deemed
to constitute interest under applicable law, payable for the account of any Bank
in respect of any applicable computation period is reduced pursuant to clause
(b) of this Section and the amount of interest payable for its account in
respect of any subsequent computation period would be less than the maximum
amount permitted by applicable law to be charged by such Bank, then the amount
of interest payable for its account in respect of such subsequent computation
period shall be automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of any Bank has been increased pursuant to this clause (c) exceed
the aggregate amount by which interest paid for its account has theretofore been
reduced pursuant to clause (b) of this Section.
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ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. (a) This Amended Agreement shall become
effective on the date that each of the following conditions shall have
been satisfied (or waived in accordance with Section 9.05):
(i) receipt by the Agent of counterparts, signed by each of the
parties hereto (or, in the case of any party as to which any executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party);
(ii) receipt by the Agent as provided in Section 3.01(b) for the
account of each Bank of a Note duly executed on behalf of the Borrower and dated
on or before the Effective Date, complying with the provisions of Section 2.03;
(iii) receipt by the Agent of an opinion of Baker & Botts, counsel for
the Borrower, substantially in the form of Exhibit C-1 hereto;
(iv) receipt by the Agent of an opinion of Lisa A.
Machesney, Corporate Attorney and Assistant Secretary of the
Borrower, substantially in the form of Exhibit C-2 hereto;
(v) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit D hereto;
(vi) receipt by the Agent of a certificate signed by the chief
financial officer, chief accounting officer or the treasurer of the Borrower, to
the effect set forth in clauses (b), (c) and (d) of Section 3.02; and
(vii) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower, the corporate authority for and the
validity of the Financing Documents, and any other matters relevant hereto, all
in form and substance satisfactory to the Agent.
The certificate and opinions referred to in clauses (iii), (iv), (v) and (vi)
above shall be dated the Effective Date.
(b) Any Loans outstanding under the Original Agreement on the
Effective Date shall remain outstanding under this Amended Agreement and shall
bear interest for the balance of any Interest
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Period applicable thereto under the Original Agreement at the rate
determined under the Original Agreement with respect thereto; provided that the
applicable Euro-Dollar Margin or CD Margin shall from and after the Effective
Date be that specified in Section 2.05 of this Amended Agreement.
(c) On the Effective Date, this Agreement shall supersede, amend and
restate the Original Credit Agreement. The parties hereto agree that all rights
that may have accrued under the Original Credit Agreement prior to the Effective
Date, to the extent not previously extinguished through payment, shall continue
in full force and effect under this Agreement.
SECTION 3.02. Borrowings. The obligation of each
Bank to make a Loan to the Borrower on the occasion of any
Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of notice of such Borrowing
as required by Section 2.02;
(b) the fact that, immediately after such Borrowing,
Borrower's Consolidated Debt will not exceed the Debt Limit;
(c) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement (except, in the case of any Borrowing occurring
subsequent to the first Borrowing after the Effective Date, the representations
and warranties covering historical information in Sections 4.04(a) and (b) and
the first sentence of Section 4.05, and except to the extent the representations
and warranties would cover price and other economic assumptions furnished by the
Required Banks under Section 5.09(d)) shall be true and correct on and as of the
date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
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SECTION 4.01. Corporate Existence and Power. The Borrower and each
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to own its assets and to carry on its business as now
conducted and is duly qualified as a foreign corporation in good standing in
each jurisdiction where the nature of its business or the ownership or leasing
of its Properties requires such qualification, except where the failure to
qualify would not materially and adversely affect the conduct of its business or
the enforceability of contractual obligations of the Borrower. Neither the
Borrower nor any Subsidiary is subject to regulation under the Public Utility
Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate
Commerce Act or any other law or regulation the application of which limits the
incurrence by the Borrower of Debt hereunder, including, but not limited to,
laws relating to common or contract carriers or the sale of electricity, gas,
steam, water or other public utility services.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of the
Financing Documents are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or (except as contemplated by the Registration Statement) filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower or of any agreement or
instrument evidencing or governing Debt of the Borrower or any Subsidiary or any
other agreement, instrument, judgment, injunction, order or decree binding upon
the Borrower or any Subsidiary or result in the creation or imposition of any
Lien on any asset of the Borrower pursuant to any such agreement, instrument,
judgment, injunction, order or decree.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each of the other Financing Documents,
when executed and delivered in accordance with this Agreement, will constitute
valid and binding obligations of the Borrower, in each case enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
SECTION 4.04. Financial and Other Information.
(a)(i) The combined balance sheet of the Borrower and its Subsidiaries
as of December 31, 1994 and the related combined
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statements of income and cash flows for the fiscal year then ended, reported on
by Coopers & Lybrand and incorporated by reference in the Borrower's 1994 Form
10-K, a copy of which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles, the combined
financial position of the Borrower and its Subsidiaries as of such date and
their combined results of operations and cash flows for such fiscal year.
(ii) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of March 31, 1995 and the related unaudited
consolidated statements of income and cash flows for the three months then
ended, set forth in the Borrower's quarterly report for the fiscal quarter ended
March 31, 1995 as filed with the Securities and Exchange Commission on Form
10-Q, a copy of which has been delivered to each of the Banks fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such
three-month period (subject to normal year-end adjustments).
(b) There are no statements or conclusions in the Cabot Oil & Gas
Corporation Reserve Summary as of January 1, 1995, a copy of which has been
delivered to each of the Banks (the "Reserve Report"), which are based upon or
include misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that such statements
and conclusions are necessarily based upon professional opinions, estimates and
forecasts, and the Borrower does not warrant that such opinions, estimates and
forecasts will ultimately prove to have been accurate.
(c) Since March 31, 1995, there has been no material adverse change in
the business, Properties, financial position, results of operations or prospects
of the Borrower or of the Borrower and its Subsidiaries, considered as a whole.
SECTION 4.05. Full Disclosure. None of the financial statements and
other financial or factual information included in the financial statements
described in Section 4.04(a) or in the Reserve Report (excluding estimates,
financial projections and pro forma financial statements) contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained therein not misleading. All other financial and
reserve information, financial statements and other documents, estimates,
projections and pro forma financial information furnished by the Borrower to the
Banks in connection with the Financing Documents do not and will not contain any
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements contained
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therein not misleading. The Borrower has disclosed to the Banks in writing any
and all facts which materially and adversely affect the business, properties,
operations or condition, financial or otherwise, of the Borrower or of the
Borrower and its Subsidiaries, considered as a whole, or the Borrower's ability
to perform its obligations under the Financing Documents.
SECTION 4.06. Litigation. Except as set forth in the Borrower's Form
10-K, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, Properties,
financial position, results of operations or prospects of the Borrower or of the
Borrower and its Subsidiaries, considered as a whole, or which in any manner
draws into question the validity of any Financing Document.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which, in either case, has resulted or could result in the
imposition of a Lien on Property of the Borrower or any Subsidiary or the
posting of a bond or other security by the Borrower or any Subsidiary under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA (other than a liability to the PBGC for premiums under Section 4007
of ERISA) which could cause the Borrower or any Subsidiary (whether directly or
jointly and severally with one or more affiliates) to incur any liability.
SECTION 4.08. Environmental Matters. In the ordinary course of its
business, the Borrower considers the effect of all existing and applicable
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law or
as a condition of any license, permit or contract, any related
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constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat and any actual or potential liabilities to third
parties, including employees, and any related costs and expenses). The Borrower
has reasonably concluded that existing and applicable Environmental Laws are
unlikely to have a material adverse effect on the business, Properties,
financial condition, results of operations or prospects of the Borrower or of
the Borrower and its Subsidiaries, considered as a whole.
SECTION 4.09. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are adequate.
SECTION 4.10. Titles, etc. The Borrower and each Subsidiary has good,
valid and defensible title to its material (individually or in the aggregate)
Properties (including valid and defensible title to all of the oil and gas
Properties which such Borrower has identified to the Banks for use in
determining the Debt Limit and good title to other material Properties which are
not oil and gas Properties) free and clear of all Liens except (i) Excepted
Liens or (ii) Liens otherwise expressly permitted by Section 5.11.
SECTION 4.11. Casualties; Taking of Properties. Since the date of the
most recent Reserve Report, neither the business nor the Petroleum Properties of
the Borrower have been affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy, the occurrence
of which would have a material adverse effect on the business, Properties,
financial condition, results of operations or prospects of the Borrower or of
the Borrower and its Subsidiaries, considered as a whole.
SECTION 4.12. Use of Proceeds. The proceeds of the Loans will be used
for the Borrower's general corporate purposes, including without limitation the
payment of dividends as permitted hereunder and the financing of the
acquisition, exploration and development of Petroleum Properties, provided,
however, that such proceeds shall not be used by the Borrower to repurchase
shares of its Class A Common Stock as permitted under clause (iii) of the last
sentence of Section 5.14 at such time as
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any Default exists or is continuing. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, which violates or which would be inconsistent with Regulation U.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid, it will perform
and comply with each of the following covenants, unless such performance and
compliance shall have been specifically waived in writing by the Required Banks.
SECTION 5.01. Information. The Borrower will deliver
to each of the Banks:
(a) as soon as available and in any event within 95 days after the end
of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and
the related consolidated statements of income and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable to the Securities
and Exchange Commission by Coopers & Lybrand or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income and
cash flows for such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in each case in comparative form
the figures for the corresponding quarter and the corresponding portion of the
Borrower's previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Section
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5.10 and Section 5.13 on the date of such financial statements, and (ii) stating
whether any Default exists on the date of such certificate and, if any Default
then exists, setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(d) within five days after any Executive Officer of the Borrower
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(g) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or any Executive Officer of
the Borrower or any Subsidiary knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal Revenue Code,
a copy of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other information
filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any
required payment or contribution to any Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or could result in the imposition of a
Lien on Property of the Borrower or any Subsidiary or the posting of a bond or
other security by the
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Borrower or any Subsidiary, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take;
(h) (i) as soon as available and in any event within five days after
any Executive Officer of the Borrower obtains knowledge that the Debt Percentage
has exceeded 80% for a period of 30 consecutive calendar days, a certificate of
the chief financial officer or the chief accounting officer of the Borrower
setting forth the dates on which the Debt Percentage exceeded 80% and in
reasonable detail the calculations, including the basis therefor, used in
determining the Debt Percentage in effect on such dates and (ii) if the notice
specified in clause (i) hereof has been previously delivered to the Banks, then
as soon as possible and in any event within five days after any Executive
Officer of the Borrower obtains knowledge that the Debt Percentage has been 80%
or less for a period of 30 consecutive calendar days, a certificate of the chief
financial officer or the chief accounting officer of the Borrower setting forth
the dates on which the Debt Percentage was 80% or less and in reasonable detail
the calculations, including the basis therefor, used in determining the Debt
Percentage in effect on such dates; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as any Bank
may reasonably request; provided that, to the extent practicable (as determined
by the Agent in its sole discretion), requests from the Banks for written
reports shall be delivered to the Borrower by the Agent.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property. The Borrower will keep, and
will cause each Subsidiary to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
The Borrower will operate, or will use its best efforts to cause a third party
operator to operate, all Petroleum Properties in a prudent manner, and will
market or will cause to be marketed the
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production therefrom at the best price reasonably obtainable at the time the
applicable sales contract is executed. The Borrower will not abandon any
Petroleum Property capable of production in paying quantities.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Borrower and its
Subsidiaries, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section shall prohibit (i) the merger of a Wholly-Owned
Subsidiary into the Borrower or the merger or consolidation of a Wholly-Owned
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Wholly-Owned Subsidiary and if, in each case, after
giving effect thereto, no Default shall have occurred and be continuing or (ii)
the termination of the corporate existence of any Subsidiary if the Borrower in
good faith determines that such termination is in the best interest of the
Borrower and is not materially disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respective Properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
SECTION 5.07. Insurance. The Borrower and each Subsidiary now
maintains and will cause to be maintained with insurers which the Borrower
believes to be financially sound and reputable, insurance with respect to its
Properties and business
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against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated. Upon request of any Bank, the
Borrower will furnish or cause to be furnished to such Bank from time to time a
summary of the insurance coverage of the Borrower and its Subsidiaries in form
and substance satisfactory to the Required Banks. In the case of any fire,
accident or other casualty causing loss or damage to any Properties of the
Borrower, the proceeds of such policies shall be used to repair or replace the
damaged Property, or to prepay the Indebtedness.
SECTION 5.08. Covenant to Secure Indebtedness Equally.
If the Borrower or any Subsidiary shall create or assume any
Lien upon any of its Property, whether now owned or hereafter acquired, other
than Liens permitted by Section 5.11, the Borrower and such Subsidiary, if
applicable, shall make effective provision whereby the Indebtedness will be
concurrently secured by such Lien equally and ratably with any and all other
Debt thereby secured as long as any other Debt shall be so secured. The remedy
provided in this Section 5.08 shall not be exclusive and shall have no effect on
the availability or exercise of any other remedy that may be available to any
Bank under the Financing Documents.
SECTION 5.09. Engineering Reports.
(a) By April 1 and October 1 of each year, commencing October 1, 1995,
the Borrower shall furnish to each of the Banks a report in form and substance
reasonably satisfactory to the Required Banks which may be prepared by or under
the supervision of a petroleum engineer who may be an employee of the Borrower,
which shall evaluate all Proved Reserves owned by the Borrower and its
Subsidiaries as of the preceding December 31 or June 30, respectively (provided,
that each such report evaluating such Proved Reserves as of the preceding June
30 of each year shall be based upon the geologic and well data set forth in the
immediately preceding Reserve Report), and which shall, together with any other
information reasonably requested by any Bank, set forth the information
necessary to determine the Debt Limit as of such date.
(b) Together with the Reserve Report furnished pursuant to subsection
(a) as of December 31 of any year, the Borrower shall furnish to each of the
Banks a review report thereon in form and substance reasonably satisfactory to
the Required Banks by Miller & Lents, Ltd. or other independent petroleum
engineers acceptable to the Required Banks (provided that such review report
shall not be required to comment on any price or other economic assumptions
furnished by the Required Banks to the Borrower under subsection (d) below).
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(c) At any time and upon request by the Required Banks, the Borrower
shall furnish to each of the Banks, within 30 days of such request, a report
which shall evaluate all Proved Reserves owned by the Borrower and its
Subsidiaries as of the date of the most recent Reserve Report or as of such
other date as the Required Banks specify, in form and substance reasonably
satisfactory to the Required Banks (a "Special Engineering Report"), together
with any other information reasonably requested by any Bank; provided, that such
evaluation shall be based upon the geologic and well data set forth in the
Reserve Report furnished as of the immediately preceding Reserve Report for
which a review report has been furnished under subsection (b). The Special
Engineering Report shall use production and cost profiles from the most recent
Reserve Report with such other information as supplied by the Required Banks.
(d) The reports contemplated by this Section shall be prepared on the
basis of price and other economic assumptions specified by the Required Banks to
the Borrower not less than 60 days prior to the date the related report is due
and in accordance with their customary oil and gas lending practices for Persons
engaged in the same or similar businesses and similarly situated as the
Borrower; provided that the natural gas price assumptions shall take into
account the Borrower's end product sales value for natural gas as most recently
furnished by the Borrower in writing to the Banks (together with a description
of the applicable period of sales data from which such end product sales value
was derived) and derived from the financial statements furnished to the Banks.
SECTION 5.10. Debt. (a) The Borrower's Consolidated Debt will at no
time exceed the Debt Limit; provided that if a Debt Limit Excession exists
solely by reason of a reduction of the Debt Limit pursuant to a redetermination
under subsection (b)(ii) below, no Default will arise hereunder until 180 days
following the date of such redetermination (during which time the Borrower or
any Subsidiary may reduce Debt or acquire additional Petroleum Properties so as
to restore compliance hereunder; provided further that the Debt Limit Excession
shall be reduced by an amount equal to 50% of such Debt Limit Excession no later
than 90 days following such redetermination).
(b) The Debt Limit will be determined and adjusted periodically as
follows:
(i) Prior to a determination pursuant to subsection (b)(ii) below on
the basis of the Reserve Report delivered as of December 31, 1995, and subject
to adjustment in accordance with subsections (b)(iii) and (b)(iv) below, the
Debt Limit shall be $315,000,000.
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(ii) The Agent will determine a proposed Debt limit in accordance with
its customary oil and gas lending practices (A) within 60 days of delivery of
each Reserve Report pursuant to Section 5.09, commencing January 1, 1996 or (B)
at any time if the Required Banks so elect by notice to the Borrower and the
Agent and, in either such case, notify such proposed Debt Limit to each of the
other Banks. Unless the Banks having more than 33 1/3% of the aggregate amount
of Commitments then in effect (or, if the Commitments have been terminated,
holding Notes evidencing more than 33 1/3% of the aggregate principal amount of
the Loans then outstanding) notify the Borrower and Agent that they disapprove
such proposed Debt Limit within 30 days of notice by the Agent as aforesaid,
such Debt Limit shall become effective on such 30th day. If the Debt Limit is so
disapproved, then the Banks shall consult with one another to determine a Debt
Limit acceptable to the Required Banks. The Debt Limit so determined by the
Required Banks shall be promptly notified in writing by the Agent to the
Borrower, and upon such notification shall be binding on all parties.
(iii) Upon any sale by the Borrower or any Subsidiary of any Petroleum
Property (other than (i) the sale of hydrocarbons after severance occurring in
the ordinary course of the Borrower's business as presently conducted, (ii) the
sale of any Petroleum Property pursuant to the Section 29 Transaction or (iii)
the sale of the Section 29 Transaction PPIs by reason of the rescission of the
Section 29 Transaction) or any direct or indirect transfer or other disposition
to any third party of a direct or indirect interest in any Subsidiary whose
assets were included in the most recent determination of the Debt Limit, the
Debt Limit shall be reduced, effective on the date of consummation of the sale
of such Petroleum Property or transfer of such interest in such Subsidiary, by
an amount equal to 60% of the net proceeds of or consideration for (whether
received in cash or otherwise) such sale or transfer; provided that no such
reduction shall be required with respect to aggregate net sales proceeds or
consideration received of up to $10,000,000 in any calendar year; and provided,
further, that all such sales of Petroleum Properties and transfers of interests
in Subsidiaries are subject to the provisions of Sections 5.12 and 5.15.
(iv) If the Debt Limit shall have been reduced pursuant to subsection
(b)(ii) or (b)(iii) above, then prior to the next redetermination of the Debt
Limit pursuant to subsection (b)(ii) above, and immediately upon notification by
the Borrower to the Agent of the development by the Borrower or any Subsidiary
of any Proved Reserves and other assets consisting primarily of gas gathering
and transmission pipelines located in the United States of America or in Canada
owned directly by the Borrower or any Subsidiary and not reflected in the most
recent Reserve
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Report, the Debt Limit shall be increased up to but not in excess of the amount
thereof prior to such reductions, by an amount equal to 50% of the net present
value of projected CFADS, determined on the basis of the price and other
economic assumptions reflected in the most recent Reserve Report, applicable to
such Proved Reserves (to the extent permitted to be included in the
determination of CFADS) and other assets.
(v) If prior to the next preparation of the Reserve Report pursuant to
Section 5.09 the Borrower notifies the Agent of the acquisition by the Borrower
or any Subsidiary of any Proved Reserves (to the extent permitted to be included
in the determination of CFADS) and other assets consisting primarily of gas
gathering and transmission pipelines located in the United States of America or
in Canada, the Agent shall promptly thereafter notify each Bank of such
acquisition and the Borrower shall as promptly as practicable thereafter deliver
to each of the Banks a report prepared by or under the supervision of a
petroleum engineer (who may be an employee of the Borrower) evaluating such
Proved Reserves and other assets. Within 60 days of delivery of such evaluation
report, the Agent, after consultation with the Borrower, will determine a
proposed increase in the Debt Limit and notify such proposed increase to each of
the Banks. Unless the Banks having more than 33 1/3% of the aggregate amount of
Commitments then in effect (or, if the Commitments have been terminated, holding
Notes evidencing more than 33 1/3% of the aggregate principal amount of the
Loans then outstanding) notify the Borrower and the Agent that they disapprove
such proposed increase within 30 days of notice by the Agent as aforesaid, the
Debt Limit as proposed to be increased shall become effective on such 30th day.
If such proposed increase in the Debt Limit is so disapproved, then the Banks
shall consult with one another to determine an increase in the Debt Limit
acceptable to the Required Banks. The Debt Limit as increased by the amount so
determined by the Required Banks shall be promptly notified in writing by the
Agent to the Borrower, and upon such notification shall be binding on all
parties.
(vi) The Borrower shall notify each Bank at the earliest practicable
time in advance of any transactions which entail a reasonable likelihood of an
adjustment to the Debt Limit pursuant to subsection (b)(iii), (b)(iv) or (b)(v)
above, and shall furnish each Bank with such information with respect thereto as
any Bank may reasonably request.
SECTION 5.11. Liens. The Borrower will not, and not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:
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(a) Excepted Liens;
(b) Liens existing on Property owned by the Borrower or any Subsidiary
on the Effective Date, but not any renewals and extensions thereof; provided
that the aggregate amount of Debt secured by such Liens shall not exceed
$5,000,000;
(c) subject to Section 5.10, a Lien existing on any asset (other than
any Petroleum Property) prior to the acquisition thereof by a Borrower, but not
created in contemplation of such acquisition;
(d) subject to Section 5.10, a Lien on any asset securing Debt
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such asset (other than any Petroleum Property), provided that such
Lien attaches to such asset concurrently with or within 90 days after the
acquisition thereof;
(e) Liens representing gas imbalances, take or pay or other
prepayments in the ordinary course of business with respect to any Petroleum
Properties which would require the Borrower or any Subsidiary to deliver
hydrocarbons produced from any Petroleum Properties at some future time without
then or thereafter receiving full payment therefor, which in the aggregate would
not exceed 3% of the Debt Limit and as adjusted to reflect any subsequent
adjustment of the Debt Limit pursuant to Section 5.10(b)(iii), (iv) or (v), all
as notified in writing by the Agent to the Borrower; and
(f) Liens securing other Debt of the Borrower or any Subsidiary the
aggregate principal amount of which does not exceed $3,000,000 at any time.
SECTION 5.12. Sales of Petroleum Properties. The Borrower will not,
and will not permit any Subsidiary to, sell, transfer or otherwise dispose of
any Petroleum Property for less than the fair market value of such Property
(other than (i) the sale of any Petroleum Property pursuant to the Section 29
Transaction or (ii) the sale of the Section 29 Transaction PPIs by reason of the
rescission of the Section 29 Transaction) and if, after giving effect thereto,
to any concurrent reduction in the Debt Limit pursuant to Section 5.10 and to
application of the proceeds of such disposition, Borrower's Consolidated Debt
would exceed the Debt Limit.
SECTION 5.13. Annual Coverage Ratio. The annual projected CFADS,
determined on the basis of each Reserve Report delivered pursuant to Section
5.09, will not be less than 120% of scheduled interest and principal payments on
all Borrower's
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Consolidated Debt during each of (i) the period from and excluding the date as
of which such Reserve Report is prepared to and including the first anniversary
of such date and (ii) the first succeeding one-year period ending on the second
anniversary of such date. No Default will arise under this Section 5.13 for a
period of 90 days after the delivery of the related Reserve Report, during which
time the Borrower or any Subsidiary may reschedule maturities of Debt or acquire
additional Petroleum Properties so as to restore compliance hereunder.
SECTION 5.14. Restricted Payments. The Borrower will not, and will not
permit any Subsidiary to, declare or make any Restricted Payment if, immediately
prior to or after giving effect to such Restricted Payment, (i) an Event of
Default shall have occurred and be continuing or (ii) the sum of all Restricted
Payments during the period from and excluding the date as of which the most
recent Reserve Report (for which a review report reasonably satisfactory to the
Required Banks was prepared by Miller & Lents, Ltd. or other independent
petroleum engineers acceptable to the Required Banks) delivered pursuant to
Section 5.09 was prepared to and including the first anniversary of such date
would exceed 20% of the annual projected CFADS for such period, determined on
the basis of such Reserve Report or such other basis as determined by the
Required Banks and notified in writing by the Agent to the Borrower. Nothing in
this Section shall prohibit (i) the payment of any other dividend or
distribution within 45 days after the declaration thereof if such declaration
was not prohibited by this Section and (ii) any payments by the Borrower in
connection with its repurchase of up to an aggregate of 151,938 shares of Class
A Common Stock of the Borrower upon a "change of control" (as defined in certain
stock subscription agreements between the Borrower and certain of its executive
officers) in accordance with such agreements as described in the Registration
Statement, provided that any such payments made by the Borrower under this
clause (ii) on and after January 15, 1995 do not exceed $5,000,000 in the
aggregate.
SECTION 5.15. Consolidations, Mergers and Sales of Assets. The
Borrower will not, and will not permit any Subsidiary to, consolidate or merge
with or into any other Person or sell, lease or otherwise transfer, directly or
indirectly, all or substantially all of its assets to any other Person except as
otherwise permitted by Section 5.04.
SECTION 5.16. Subsidiary Debt. The Borrower will not permit any of its
Subsidiaries to incur, create, assume, guarantee or in any other manner become
liable with respect to, or extend the maturity of or become responsible for the
payment of any Debt other than (i) Debt owing to the Borrower or a Wholly-Owned
Subsidiary, (ii) Non-Recourse Debt in an aggregate principal amount not to
exceed $150,000,000 (together with any
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such Non-Recourse Debt incurred by the Borrower) at any time incurred to finance
the acquisition of Properties (other than Petroleum Properties) and (iii) other
Debt in an aggregate principal amount not to exceed at any time an amount equal
to 3% of the Debt Limit and as adjusted to reflect any subsequent adjustment of
the Debt Limit pursuant to Section 5.10(b)(iii), (iv) or (v), all as notified in
writing by the Agent to the Borrower.
SECTION 5.17. Subsidiaries. The Borrower will not, and will not permit
any Subsidiary to, directly or indirectly, create, incur, assume or suffer to
exist any restriction (other than any restriction imposed by applicable
corporate law) on (i) the ability of such Subsidiary to make intercompany
payments or advances to the Borrower or (ii) the ability of the Borrower to
direct the actions of such Subsidiary or to otherwise maintain or exercise
control over such Subsidiary's actions, subject to any fiduciary responsibility
under applicable law to any minority stockholders of such Subsidiary.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events not specifically waived in writing by the Required Banks shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
or shall fail to pay within five Business Days of the due date thereof any
interest, fees or other amount payable under the Financing Documents;
(b) the Borrower shall fail to observe or perform any covenant or
agreement contained in Section 5.16 for 10 days after it shall have become aware
of such failure or any covenant or agreement contained in Sections 5.10 through
5.15;
(c) the Borrower shall fail to observe or perform any of its covenants
or agreements contained in any of the Financing Documents (other than those
covered by clause (a) or (b) above) for 30 days after it shall have become aware
of such failure;
(d) any representation, warranty, certification or statement made by
the Borrower in any of the Financing Documents or in any certificate, financial
statement or other document delivered pursuant to any of the Financing Documents
shall prove to have been incorrect in any material respect when made (or deemed
made);
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(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Debt (other than the Notes) when due or within any
applicable grace period and such default has not been effectively waived by the
holders of such Debt;
(f) any event or condition shall occur which, after the expiration of
any applicable grace period with respect thereto, results in the acceleration of
the maturity of any Material Debt (other than the Notes) or enables the holder
of such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof and such default has not been effectively waived by the holders
of such Debt (provided, that prior to the expiration of such grace period, the
occurrence of such event or condition shall constitute a Default hereunder);
(g) the Borrower or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $500,000 which it shall have become liable
to pay under Title IV of ERISA which failure to pay could cause the Borrower or
any Subsidiary (whether directly or jointly and severally with one or more
affiliates) to incur a liability in respect of such amount or amounts, except
for any such failure which is being contested in good faith through appropriate
proceedings, so long as such
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proceedings are diligently prosecuted and no Lien has been imposed on any
Property of the Borrower or any Subsidiary as a consequence of such failure; or
notice of intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multi-employer Plans which could cause the
Borrower or any Subsidiary (whether directly or jointly and severally with one
or more affiliates) of the ERISA Group to incur a current payment obligation in
excess of $500,000;
(j) a judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed pending appeal for a
period of 30 days or;
(k) (i) any "person" or "group" of persons shall have acquired
"beneficial ownership" of 35% or more of the outstanding shares of common stock
of the Borrower or (ii) during any period of 24 consecutive calendar months,
individuals who were directors of the Borrower on the first day of such period
and individuals who are "Qualifying Directors", in the aggregate, shall cease to
constitute a majority of the board of directors of the Borrower; for purposes of
this Section (k), a "Qualifying Director" shall mean any director who (a) is
elected by a majority of the members of the board of directors of the Borrower
who were directors immediately prior to the event that caused the change in
directorships and (b) is not a "person" or member of a "group" of persons, or an
"affiliate" or "associate" of any "person" or "group" member, or an "associate"
of an "affiliate" of any such "person" or "group" member, which "person" or
"group" of persons, together with all of their respective "affiliates" and
"associates" and all "associates" of their respective "affiliates" (other than a
"person" or "group" of persons or an "affiliate" or "associate" of such "person"
or "group" of persons or an "associate" of such "affiliate", in each case which
is affiliated with the Borrower or any Subsidiary comprise a majority of the
board of directors of the Borrower; or
then, and in every such event, the Agent shall (i) if requested by the Banks
holding 50% or more of the aggregate amount of the Commitments then in effect,
by notice to the Borrower terminate
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the Commitments and they shall thereupon terminate, and (ii) if requested by the
Banks holding 50% or more of the aggregate principal amount of the Loans then
outstanding, by notice to the Borrower declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest, notice of intent to accelerate
or other notice of any kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of Default specified in Section
6.01(g) or Section 6.01(h) with respect to the Borrower, without any notice to
the Borrower or any other act by the Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other notice of any kind, all
of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower of a Default under Section 6.01(d) promptly upon being requested to do
so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article VI.
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SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable to the Banks for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct.
Neither the Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with this Agreement or any Borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of the Borrower; (iii) the satisfaction of any condition specified in
Article III, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes or
any other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement or other writing (which may be a bank wire, telex or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees, gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any action taken or omitted
by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right, with the consent of the
Borrower, to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
SECTION 7.09. Agent's Fees. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Group of
Fixed Rate Loans:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) Banks holding Notes evidencing 50% or more of the aggregate
principal amount of the Loans comprising such Group advise the Agent that
the Adjusted CD Rate or the London Interbank Offered Rate, as the case
may be, as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as
the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist,
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(a) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the
case may be, or to convert outstanding Loans into CD Loans or Euro-Dollar Loans,
as the case may be, shall be suspended and (b) unless the Agent shall have
received a timely Notice of Interest Rate Election from the Borrower in
accordance with Section 2.08 requesting the conversion of CD Loans or
Euro-Dollar Loans, as the case may be, into a different Type of Fixed Rate
Loans, each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall
be converted into a Base Rate Loan on the last day of the then current Interest
Period applicable thereto. Unless the Borrower notifies the Agent at least one
Domestic Business Day before the date of any Fixed Rate Borrowing for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to
convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such notice is given, all Euro-Dollar
Loans of such Bank then outstanding shall be converted to Base Rate Loans either
(a) on the last day of the then current Interest Period applicable to such
Euro-Dollar Loans if such Bank may lawfully continue to maintain and fund such
Loans to such day or (b) immediately if such Bank may not lawfully continue to
maintain and fund such Loans to such day.
SECTION 8.03 Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
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bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans, or shall change the basis of taxation of
payments to any Bank (or its Applicable Lending Office) of the principal of or
interest on its Fixed Rate Loans or any other amounts due under this Agreement
in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans
(except for any increase in franchise taxes imposed or changes in the rate of
tax on the overall net income of such Bank or its Applicable Lending Office
imposed by the jurisdiction in which such Bank's principal executive office or
Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding (A) with respect to any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage and (B) with respect to any Euro-Dollar
Loan any such requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate
Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
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bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such law, rule, regulation, change or compliance (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction; provided that the Borrower will not be obligated to
compensate any Bank for any such reduction attributable to a period commencing
more than 120 days prior to the giving of notice by such Bank to the Borrower of
its intention to seek compensation under this paragraph (b) and the making of
demand by such Bank for payment thereof in accordance herewith (except for any
period during which, because of the retroactive application of such statute,
regulation or other basis upon which the claimed compensation is based, such
Bank did not know that the amount of such reduction would arise or accrue).
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03(a) and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or
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Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans, and
(b) after each of its outstanding CD Loans or Euro-Dollar Loans, as
the case may be, has been repaid (or converted), all payments of principal which
would otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the Borrower shall elect that the principal amount of
each such Base Rate Loan shall be converted into a CD Loan or a Euro-Dollar
Loan, as the case may be, on the first day of the next succeeding Interest
Period applicable to the related CD Loans or Euro-Dollar Loans of the other
Banks.
SECTION 8.05. Substitution of Bank. If (i) the obligation of any Bank
to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03, the Borrower shall have
the right, with the assistance of the Agent, to seek a mutually satisfactory
substitute bank or banks (which may be one or more of the Banks) to purchase the
Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address, facsimile number or
telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address, facsimile
number or telex number as such party may hereafter specify for the purpose by
notice to the Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received (ii) or if given by any other means, when received;
provided that notices given by telex to the Agent under Article II or Article
VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege
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under any Financing Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies therein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent,
including fees and disbursements of special counsel for the Agent, in connection
with the preparation of the Financing Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent or any Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify each Bank against
any transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of any Financing
Document.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) relating to or arising out
of this Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified hereunder for
such Indemnitees own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest due with
respect to any Note held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of principal and interest due
with respect to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Notes held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall
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impair the right of any Bank to exercise any right of set-off or counterclaim it
may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note acquired pursuant to the
foregoing arrangements may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for any reduction or termination
of any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement. Without limiting the
generality of the foregoing, this Agreement may be amended by the Borrower and
the Required Banks to permit the inclusion of assets owned by an entity other
than a Subsidiary in the calculation of CFADS, upon such terms and conditions as
agreed at such time.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks. Any assignment or transfer hereunder shall
be made in accordance with applicable law, including without limitation federal
and/or state securities laws, if applicable.
(b) Any Bank may at any time grant to one or more banks or other
financial institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a Bank
of a participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with
55
<PAGE> 61
such Bank in connection with such Bank's rights and obligations under this
Agreement. The rights and entitlements of any Bank under Sections 2.11 and 2.15
and Article VIII shall be determined for purposes of this Agreement on the basis
of what such Bank would be entitled to receive under this Agreement had it not
granted any participating interest to any Participant, whether or not such Bank
has in fact done so. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 9.05 without the consent of the Participant and may contain any other
provisions, or such participation may take place on such other terms, as such
Bank deems appropriate. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
financial institutions (each an "Assignee") all or a portion of its rights and
obligations under the Financing Documents, and such Assignee shall assume such
rights and obligations, pursuant to an instrument executed by such Assignee and
such transferor Bank, with (and subject to) notice to, and the consent of, the
Borrower and the Agent; provided that if an Assignee is an affiliate of such
transferor Bank, such notice shall be given but no such consent shall be
required; and provided, further, that no assignment representing less than
$5,000,000 in Commitments shall be permitted. Upon execution and delivery of
such an instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, new Notes are issued
to the Assignee. In connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing such assignment in
the amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are
56
<PAGE> 62
payable hereunder for its account, deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 2.14.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee or other transferee of any Bank's rights (not
including Participants) shall be entitled to receive any greater payment under
Section 8.03 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02 or 8.03 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. NEW YORK LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. THE BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION 9.09. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 9.10. Confidentiality. Each of the Agent and the Banks agrees
to maintain the confidentiality of any information of a confidential nature
which it has or shall acquire during the term of this Agreement relating to the
business, operations and financial or other condition of the Borrower or its
Subsidiaries or, with respect to ERISA matters, any other
57
<PAGE> 63
member of the ERISA Group, except and to the extent that (i) the Agent or such
Bank may be required to disclose such information (a) at the request of a bank
regulatory agency or in connection with an examination of the Agent or such Bank
by bank examiners, (b) pursuant to subpoena or other court process, (c) at the
express direction of any other authorized government agency, (d) to its
independent auditors or (e) otherwise as required by law or (ii) such
information is disclosed in connection with the prospective or actual
assignment, grant of a participation interest or other transfer by a Bank of or
in any of its interests in this Agreement, the Notes or the other Financing
Documents, provided that such prospective or actual Assignee, Participant or
other transferee shall have agreed to keep such information confidential on the
terms and conditions set forth herein.
SECTION 9.11. No Unwritten Agreements. THIS AGREEMENT AND THE NOTES
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO, SUPERSEDING ANY AND
ALL PRIOR AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER HEREOF,
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ORAL AGREEMENTS OF THE PARTIES
HERETO, WHETHER MADE BEFORE, ON OR AFTER THE DATE OF THIS AGREEMENT. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.
58
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CABOT OIL & GAS CORPORATION
By /s/ Steven W. Tholen
Title: Treasurer
59
<PAGE> 65
Commitments:
$39,166,666.67 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ John Kowalczuk
Title: Vice President
$39,166,666.67 TEXAS COMMERCE BANK, N.A.
By /s/ Lori Vetters
Title: Vice President
$39,166,666.67 NATIONSBANK OF TEXAS, N.A.
By /s/ W. Keith Buchanan
Title: Vice President
$39,166,666.67 THE FIRST NATIONAL BANK OF BOSTON
By /s/ Michael Kane
Title: Managing Director
$39,166,666.66 THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By /s/ Bettylou J. Robert
Title: Vice President
60
<PAGE> 66
$39,166,666.66 CITIBANK, N.A.
By /s/ Mark Lyons
Title: Vice President
- ------------
Total Commitments
$235,000,000
============
61
<PAGE> 67
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ John Kowalczuk
Title: Vice President
62
<PAGE> 68
EXHIBIT A
NOTE
New York, New York
May 30, 1995
For value received, Cabot Oil & Gas Corporation, a Delaware
corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for
the account of its Applicable Lending Office, the unpaid principal amount of
each Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the date or dates provided for in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of each such
Loan on the dates and at the rate or rates provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
Morgan Guaranty Trust Company of New York, 23 Wall Street, New York, New York.
All Loans made by the Bank, the respective Tenors and Types thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of May 30, 1995 among the Borrower, the banks parties
thereto and Morgan Guaranty Trust Company of New York, as Agent (as the same may
be amended from time to time, the "Credit Agreement"). Terms
1
<PAGE> 69
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
CABOT OIL & GAS CORPORATION
By________________________
Title:
2
<PAGE> 70
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------
Tenor Amount of
Amount of and Type Principal Notation
Date Loan of Loan Repaid Made By
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
3
<PAGE> 71
EXHIBIT B
EXTENSION AGREEMENT
Cabot Oil & Gas Corporation
15375 Memorial Drive
Houston, Texas 77079
Morgan Guaranty Trust Company
of New York, as Agent
under the Credit Agreement
referred to below
60 Wall Street
New York, NY 10260
Gentlemen:
The undersigned hereby agree to extend, effective [Extension Date],
the Revolving Credit Period under the Amended and Restated Credit Agreement
dated as of May 30, 1995 among, the Banks parties thereto and Morgan Guaranty
Trust Company of New York, as Agent (the "Credit Agreement") for one year to
[date to which the Revolving Credit Period is extended]. Terms defined in the
Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance with and
governed by the law of the State of New York.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By___________________________
Title:
[NAME OF BANK]
By___________________________
Title:
1
<PAGE> 72
Agreed and accepted:
CABOT OIL & GAS CORPORATION
By_________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By_________________________
Title:
2
<PAGE> 73
EXHIBIT C-1
OPINION OF
COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel for Cabot Oil & Gas Corporation (the
"Borrower") in connection with the Amended and Restated Credit Agreement (the
"Credit Agreement") dated as of May 30, 1995 among the Borrower, the banks
parties thereto and Morgan Guaranty Trust Company of New York, as
Agent.
This opinion is delivered to you pursuant to Section 3.01(a)(iii) of
the Credit Agreement. Unless otherwise defined herein, capitalized terms used
in this opinion are used as defined in, or by reference in, the Credit
Agreement.
In connection with this opinion, we have examined copies of the
following documents:
i. The Credit Agreement;
ii. The Notes; and
iii. The certificate of incorporation and bylaws,
as amended or restated to the date hereof, of the
Borrower.
The documents described in Paragraphs (i) and (ii)
above are herein called the "Loan Documents."
<PAGE> 74
In addition, we have reviewed the originals or copies, certified or
otherwise identified to our satisfaction, of such documents and corporate
records furnished to us by the Borrower, certificates of public officials and
of representatives of the Borrower, statutes and other instruments and
documents and (except as otherwise stated herein) have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion. In giving such opinion, we have relied upon
certificates of officers of the Borrower with respect to the accuracy of the
factual matters contained in such certificates copies of which are attached
hereto.
In our examination of the Loan Documents, we have assumed, without
independent investigation, (i) the genuineness of all signatures of, and the
authority of, all Persons signing all documents examined by us in connection
with this opinion on behalf of parties thereto, other than the Borrower, (ii)
the capacity of each signing party, and (iii) the authenticity of all
documents submitted to us as originals and the conformity to authentic
original documents of all copies submitted to us as certified, conformed or
photostatic copies.
Based upon and subject to the foregoing and other qualifications and
assumptions set forth below and upon such other matters as we deem
appropriate, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers and to our knowledge after due inquiry has all material
governmental licenses, authorizations and consents required to carry on its
business as now conducted and is in good standing and is duly qualified as a
foreign corporation in the jurisdictions set forth on Schedule I attached
hereto. Neither the Borrower nor any Subsidiary is subject to regulation under
the Public Utility Holding Company Act of 1935, the Investment Company Act of
1940 or the Interstate Commerce Act, in each case such that the application
thereof would limit the incurrence by the Borrower of Debt under the Credit
Agreement.
2. The Borrower has taken all necessary corporate action to
authorize the execution, delivery and performance of each of the Loan
Documents. The Borrower has corporate power and authority to execute and
deliver the Loan Documents and to perform its obligations thereunder.
3. The execution and delivery by the Borrower of the Loan Documents,
and the performance of its obligations thereunder do not and will not conflict
with any of the terms,
2
<PAGE> 75
conditions or provisions of the certificate of incorporation or bylaws of the
Borrower; or to our knowledge after due inquiry, (A) require any action by or
in respect of, or filing with, any Texas or United States federal governmental
body, agency or official other than the filing of the Credit Agreement with
the Securities and Exchange Commission as contemplated by the Registration
Statement, (B) violate any provision of any existing Texas, Delaware corporate
or United States federal law or regulation applicable to the Borrower, or
conflict with or result in a breach of any order, judgment, injunction or
decree which is binding upon the Borrower, (C) create (with or without the
giving of notice or the lapse of time, or both) a default under or a breach of
any instrument or document evidencing indebtedness for borrowed money to which
the Borrower is a party or by which it is bound or any other material
agreement listed on Schedule II attached hereto, or (D) result in the creation
or imposition of any Lien on any asset of the Borrower pursuant to any such
agreement or instrument. We call to your attention the fact that in the event
the Borrower or a Subsidiary grants liens to its creditors, it may be required
to grant equal and ratable liens to creditors of Cabot Corporation under
provisions governing indebtedness of Cabot Corporation which require the
granting of equal and ratable liens to creditors of Cabot Corporation.
4. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and the Notes constitute valid and binding obligations of the
Borrower, in each case enforceable in accordance with their respective terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
The foregoing opinions are subject to the following additional
assumptions and qualifications:
A. Our opinion in paragraph 1 as to the qualification and good
standing of the Borrower is based solely on a review of certificates of the
public officials of the jurisdictions listed on Schedule I.
B. We have not been called upon to, and accordingly do not, express
any opinion as to the various state and Federal Laws (other than Regulations
G, U or X promulgated by the Board of Governors of the Federal Reserve System,
as in effect on the date hereof) regulating banks or the conduct of their
business that may relate to the Loan Documents and the transactions
contemplated thereby.
3
<PAGE> 76
C. We express no opinion in paragraph 3 above as to whether the conduct
of the Borrower's business in the ordinary course is in compliance with the
laws, rules and regulations governing the same.
D. For purposes of our opinion in paragraph (4) above, we have with
your consent (i) assumed that a court would apply the substantive laws of
either Texas or New York and (ii) assumed (without examining the laws of New
York) that the substantive laws of New York do not differ in any material
respect from the substantive laws of Texas.
E. We express no opinion as to the enforceability under Texas law of
(i) Section 6.01 of the Credit Agreement to the extent it purports to waive
any defense to the performance of contract obligations which cannot, as a
matter of law, be effectively waived, or (ii) any indemnity provisions
contained in the Credit Agreement or the Notes.
F. In rendering the opinions herein we have assumed that any transfer
of an interest in the Notes, or in subsequent Notes issued by the Borrower in
replacement and substitution thereof, will be made in compliance with any
federal and state securities laws which may be applicable.
G. For the purpose of rendering the opinions expressed in Paragraph 4
above we have assumed that the Agent and each Bank will at all times comply
strictly with the provisions of Section 2.16 of the Credit Agreement. If any
Bank fails to comply with the usury savings clause provisions under Section
2.16 of the Credit Agreement prohibiting the collections of amounts
constituting interest payable under or in connection with the Credit Agreement
and the Notes in excess of the highest lawful rate, we express no opinion as
to whether the refunding of such amounts, or the crediting of any outstanding
principal as provided in Section 2.16 of the Credit Agreement with such amount
which has been contracted for, charged or collected in violation of any
applicable usury laws is sufficient to avoid violation of such laws.
We are qualified to practice law in the State of Texas only and do not
hold ourselves out as experts on, or express any opinion herein concerning,
the laws of any jurisdiction other than the laws of the State of Texas, the
General Corporation Law of the State of Delaware and applicable federal law of
the United States. This opinion is being furnished to the Banks and the Agent
for the use of their counsel. No other use or distribution of this opinion may
be made without our prior written consent.
Very truly yours,
4
<PAGE> 77
EXHIBIT C-2
OPINION OF
LISA A. MACHESNEY, ESQ.
[Effective Date]
To the Banks and The Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am Corporate Attorney and Assistant Secretary of Cabot Oil & Gas
Corporation (the "Borrower") and am familiar with the Amended and Restated
Credit Agreement (the "Credit Agreement") dated as of May 30, 1995 among the
Borrower, the banks parties thereto and Morgan Guaranty Trust Company of New
York, as Agent.
This opinion is delivered to you pursuant to Section 3.01(a)(iv) of
the Credit Agreement. Unless otherwise defined herein, capitalized terms used
in this opinion are used as defined in, or by reference in, the Credit
Agreement.
In Connection with this opinion, I have examined copies of the
following documents:
i. The Credit Agreement; and
ii. The Notes.
The documents described in Paragraphs (i) and (ii)
above are herein called the "Loan Documents."
In addition, I have reviewed the originals or copies, certified or
otherwise identified to my satisfaction, of such documents and corporate
records furnished to me by the
<PAGE> 78
Borrower, certificates of public officials and of representatives of the
Borrower, statutes and other instruments and documents and (except as
otherwise stated herein) have conducted such other investigations of fact and
law as I have deemed necessary or advisable for purposes of this opinion. In
giving such opinion, I have relied upon certificates of officers of the
Borrower with respect to the accuracy of the factual matters contained in such
certificates copies of which are attached hereto.
In my examination of the Loan Documents, I have assumed, without
independent investigation, (i) the genuineness of all signatures of, and the
authority of, all Persons signing all documents examined by me in connection
with this opinion on behalf of parties thereto, (ii) the capacity of each
signing party, and (iii) the authenticity of all documents submitted to me as
certified, conformed or photostatic copies.
I have not been requested to opine, and I have not opined, as to any
issues other than those expressly set forth herein. It is my understanding
that as to such other matters, you are relying on the respective opinions of
even date herewith of Baker & Botts, counsel for the Borrower; and Davis, Polk
& Wardwell, special counsel for the Agent.
Based upon and subject to the foregoing, I am of the opinion that:
1. Except as described in the Registration Statement, there is not
action, suit or proceeding pending against, or to my knowledge threatened
against or affecting, the Borrower or any of its Subsidiaries of Affiliates
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, Properties, financial position,
results of operations or prospects of the Borrower or of the Borrower and its
Subsidiaries, taken as a whole, or which in any manner draws into question the
validity of any of the Loan Documents.
I am qualified to practice law in the State of Texas only and I do
not hold myself out as an expert on, or express any opinion herein concerning,
the laws of any jurisdiction other than the laws of the State of Texas and
applicable federal law of the United States. This opinion is being furnished
to the Banks and the Agent for their use of their counsel. No other use or
distribution of this opinion may be made without my prior written consent.
Very truly yours,
2
<PAGE> 79
EXHIBIT D
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
May 30, 1995
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have participated in the preparation of the Amended and Restated
Credit Agreement (the "Credit Agreement") dated as of May 30, 1995 among Cabot
Oil & Gas Corporation, a Delaware corporation (the "Borrower"), the banks
parties thereto and Morgan Guaranty Trust Company of New York, as Agent (the
"Agent"), and have acted as special counsel for the Agent for the purpose of
rendering this opinion pursuant to Section 3.01 of the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1
<PAGE> 80
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 1
EXHIBIT 4.5(a)
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of September 15, 1995 to the Amended and Restated
Credit Agreement dated as of May 30, 1995 (the "Agreement") among Cabot Oil &
Gas Corporation, the Banks listed on the signature pages thereof and Morgan
Guaranty Trust Company of New York, as Agent.
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Agreement to add the
New Bank as a party to the Agreement as amended hereby and to provide for
changes in the respective Commitments of the Banks;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions, References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference
therein to "this Agreement", "hereof", "hereunder", "herein" and "hereby" and
each similar reference contained in the Agreement shall from and after the
date hereof refer to the Agreement as amended hereby.
SECTION 2. New Bank; Changes in Commitments. With effect from and
including the date this Amendment becomes effective in accordance with Section
5 hereof, (i) each Person listed on the signature pages hereof which is not a
party to the Agreement (a "New Bank") shall become a Bank party to the
Agreement and (ii) the Commitment of each Bank shall be the amount set forth
on the signature pages hereof. Any Bank whose Commitment is changed to zero
shall upon such effectiveness cease to be a Bank party to the Agreement (a
"Departing Bank"), and all accrued fees and other amounts payable under the
Agreement for the account of such Bank shall be due and payable on such date;
provided that the provisions of Section 9.03 of the Agreement shall continue
to inure to the benefit of each such Bank. Each Departing Bank agrees that
upon the effectiveness of this Amendment, the Note dated May 30, 1995 payable
to such Departing Bank shall be cancelled and such Departing Bank shall
promptly deliver such Note to the Borrower.
<PAGE> 2
SECTION 3. Transition Mechanics. To facilitate the changes in the
Commitments effected hereby, the parties agree as follows:
(i) any Interest Period under the Agreement commencing on or after
August 21, 1995 and prior to September 15, 1995 which would otherwise
end after September 15, 1995 shall instead end on September 15, 1995;
(ii) subject to Section 2.11 of the Agreement, the Borrower shall
prepay all outstanding Loans under the Agreement, together with accrued
interest thereon, on September 15, 1995; and
(iii) subject to the applicable conditions in Section 3.02 of the
Agreement, the Borrower may to the extent it determines necessary
borrow from the Banks in proportion to their Commitments as modified
hereby to fund such prepayment.
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts; Effectiveness. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
(i) the Agent shall have received duly executed counterparts hereof signed by
each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party) and (ii) the Agent shall have
received a duly executed Note for each New Bank (a "New Note"), dated on or
before the date of effectiveness hereof and otherwise in compliance with
Section 2.05 of the Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
CABOT OIL & GAS CORPORATION
By /s/ Ray R. Seegmiller
---------------------------
Title: Vice President and
Chief Financial Officer
Commitments:
$47,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ John G. Kowalczuk
---------------------------
Title: Vice President
$47,000,000 TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By /s/ Lori H. Vetters
---------------------------
Title: Vice President
$47,000,000 NATIONSBANK OF TEXAS, N.A.
By /s/ Kristin B. Palmer
---------------------------
Title: Vice President
$47,000,000 THE FIRST NATIONAL BANK OF
BOSTON
By /s/ Michael Kane
---------------------------
Title: Managing Director
$47,000,000 THE BANK OF MONTREAL
By /s/ Shana L. Sloas
---------------------------
Title: Director
3
<PAGE> 4
$0 THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By /s/ Kevin S. Keaton
---------------------------
Title: Vice President
$0 CITIBANK, N.A.
By /s/ Arezoo Jafari
---------------------------
Title: Assistant Vice President
Total Commitments
$235,000,000
============
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ John G. Kowalczuk
---------------------------
Title: Vice President
4
<PAGE> 1
EXHIBIT 10.1
[CABOT OIL & GAS CORPORATION LETTERHEAD]
December 13, 1995
Cabot Oil & Gas Corporation
Houston, Texas
Dear Mr. Siess:
The purpose of this letter is to set forth the terms and conditions
applicable to certain supplemental pension benefits the Company has agreed to
pay you, your spouse or beneficiary.
In consideration of your service with the Company, the Company shall
provide you with supplemental pension benefits in the form of an annuity or
lump sum, at your option, upon termination of employment for reasons other than
death in an amount equal to the pension benefits that would have been payable
to you under the Cabot Oil & Gas Corporation Pension Plan ("the Pension Plan")
determined: (i) without regard to maximum payment restrictions imposed under
the Pension Plan by reason of Sections 401(a)(17) or 415 of the Internal
Revenue Code of 1986, as amended ("Code"); (ii) as if each month of your
service with the Company were treated as two months of service for purposes of
eligibility, vesting and benefit accrual under the Pension Plan; and (iii) less
both of the following; the actual pension benefits payable under the Pension
Plan and the value of prior distributions to you under the prior supplemental
pension agreement between you and the Company (the "Prior Agreement"). If
within two years of the date hereof you unilaterally terminate your employment,
without the agreement of the Company, or if your employment with the Company is
terminated for cause, you will not be entitled to any supplemental pension
benefits.
The Company shall provide in consideration of your service a
supplemental spousal death benefit in the form of an annuity or lump sum, at
your spouse's option, upon your death in an amount equal to the spousal death
benefit that would have been payable to your spouse under the Pension Plan
determined: (i) without regard to maximum payment restrictions imposed by the
Pension Plan by reason of Sections 401(a)(17) or 415 of the Internal Revenue
Code; (ii) as if each month of your service with the Company were treated as
two months of service for purposes of eligibility, vesting and benefit accrual
under the Pension Plan; and (iii) less the actual spousal death benefits
payable under the Pension Plan. No spousal death benefit will be paid if,
within two years of the date hereof you unilaterally terminate your employment
without the agreement of the Company or if your employment with the Company is
terminated for cause. In addition, should your death occur while actively
employed by the Company, the supplemental spousal death benefit will be
payable, if greater than the amount payable pursuant to the preceding sentence,
in an amount determined: (i) as if you had retired on the day prior
<PAGE> 2
Mr. Charles P. Siess, Jr. - 2 - December 13, 1995
to the date of your death; (ii) without regard to maximum payment restrictions
imposed by the Pension Plan by reason of Section 401(a)(17) and 415 of the
Code; (iii) as if each month of your service with the Company were treated as
two months of service for purposes of eligibility, vesting and benefit accrual;
(iv) reduced by 0.25% for each month by which your death precedes your
attainment of age 62, and (v) less the actual spousal death benefit payable
under the Pension Plan.
Fidelity Investments or any successor trustee of the Cabot Oil & Gas
Savings Investment Plan (the "Savings Plan") will set up a separate, unfunded
account ("Account") which will reflect the value of a phantom contribution made
by the Company on your behalf as if the limitations included therein for the
purpose of satisfying Sections 415 and 401(a)(17) of the Code, and OBRA, had
not been applicable. The amount of funds shown in your Account have not been
contributed to your Account. These amounts represent a promise to pay on the
part of the Company, subject to the terms of this agreement. This contribution
will be the lesser of the current employer matching contribution or the current
401(k) salary reduction limit established annually by the Internal Revenue
Service. This Account will have the same investment options as the Savings
Plan with the exception that the Cabot Oil & Gas Stock Fund will not be an
investment option in your Account. Unless instructed differently by you, the
investment of the matching contribution made by the Company to your Account
will be allocated among those investment options offered in the Savings Plan,
excluding the option of the Cabot Oil & Gas Stock Fund, in a manner
proportionate to your other investment elections. If you have elected only the
Cabot Oil & Gas Stock Fund, the Company's matching contribution will be
invested in the Cash Reserve Fund.
You will receive a quarterly statement from Fidelity Investments (or
any successor trustee under the Savings Plan) reflecting the phantom balance in
your Account. This statement will show the Company contribution made on your
behalf resulting from the limitations satisfying Sections 415 and 401(a)(17) of
the Code and OBRA, and earnings or losses incurred on the balance in your
Account during the quarter. Your Account will be valued on a daily basis.
You will not be able to make any in-service withdrawals or take a loan
on the balance in your Account. Your beneficiary designated under the Savings
Plan (or any successor thereto) shall be deemed your beneficiary for the
Account.
Following your termination or retirement from the Company, the actual
amount of your account shall be distributed to you at the time or times
("Distribution Date") such amount would have been distributed to you if such
amount had been held under and subject to all the terms of the Savings Plan.
The foregoing will be valued as of the regularly scheduled
<PAGE> 3
Mr. Charles P. Siess, Jr. - 3 - December 13, 1995
valuation date under the Savings Plan next preceding the Distribution Date and
will be paid in cash, to you, or if you are deceased, to your beneficiary.
This Agreement supersedes any prior agreement between you and the
Company with respect to payment restrictions imposed under the Pension Plan by
reason of Sections 401(a)(17) or 415 of the Code. The right to receive
benefits under this Agreement may not be assigned, transferred, pledged or
encumbered in any way.
If you find that this Agreement accurately describes the agreement
between you and the Company concerning your unfunded deferred compensation
described herein, please sign two copies of this letter and return one to the
Company, whereupon this letter shall constitute a binding agreement between
Cabot Oil & Gas Corporation and you.
This Agreement shall be effective ___________________, 1995.
Very truly yours,
CABOT OIL & GAS CORPORATION
By: /s/ Carl M. Mueller
-------------------------------
------------------,Director and
Compensation Committee Chairman
Accepted and Agreed to this 20th
day of December, 1995.
/s/ C.P. SIESS, JR.
- --------------------------------
Charles P. Siess, Jr.
<PAGE> 1
EXHIBIT 10.2
AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of
February, 1996 by and between CABOT OIL & GAS CORPORATION, with its principal
office at 15375 Memorial Drive, Houston, Texas 77079 (together with its
successors and assigns permitted under this Agreement, the "Company"), and
_____________________________ (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the Effective Date (as defined below) the Compensation
Committee of the Board of Directors of the Company authorized and adopted a
Change in Control Program to provide for certain benefits to the Executive in
the event of certain terminations of employment, and determined that such
program would be in the best interests of the Company; and
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of the Company to provide for certain benefits
to the Executive in the event of certain terminations of employment, upon the
terms and conditions provided in this Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions:
(a) "Annual Compensation" shall mean the sum of (I) the Executive's
Base Salary in effect immediately prior to the Change in Control or, if
greater, immediately prior to the Executive's termination and (II) the
greater of (1) 80% of the Executive's target Bonus with respect to the
fiscal year during which the Change in Control occurred or, if greater,
the fiscal year during which the Executive's termination occurred and (2)
the Executive's actual Bonus with respect to the fiscal year immediately
preceding the Change in Control.
(b) "Base Salary" shall mean the Executive's annualized base rate of
pay with the Company.
(c) "Beneficiary" shall mean the person or persons named by the
<PAGE> 2
Executive pursuant to Section 10 hereof or, in the event no such person is
named or survives the Executive, his estate.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Bonus" shall mean the cash amount, excluding any amount relating
to the vesting of options or granting of performance shares or vesting of
restricted stock or any other long-term incentive award, in excess of the
Executive's Base Salary, awarded to the Executive in any year.
(f) "Cause" shall mean:
(I) dishonesty by Executive which results in significant
loss to the Company and significant personal enrichment to the
Executive;
(II) a material failure of Executive to perform his
obligations under this Agreement; or
(III) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one
of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the
Executive's duties.
(g) "Change in Control" shall mean the occurrence of any of the
following: (1) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended, but excluding
any Company employee stock ownership plan) becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the Company's
then outstanding securities, (2) during any period of 12 months,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at
least a majority of the directors then still in office who were directors
at the beginning of the period or (3) the Company sells or otherwise
disposes of, in one transaction or a series of transactions, in a single
12-month period, assets or properties of the Company representing 50% or
more of the total proved reserves (on a volumetric basis) of the Company
as of the beginning of such 12-month period.
<PAGE> 3
(h) "Confidential Information" shall mean information about the
Company or any of its Subsidiaries or their respective businesses,
products and practices, disclosed to or known or obtained by Executive as
a direct or indirect consequence of or through the Executive's employment
with the Company, which information is not generally known in the business
in which the Company or such Subsidiaries are or may be engaged. However,
Confidential Information shall not include under any circumstances any
information with respect to the foregoing matters which is (I) available
to the public from a source other than the Executive, (II) released in
writing by the Company to the public or to persons who are not under a
similar obligation of confidentiality to the Company and who are not
parties to this Agreement, (III) obtained by the Company from a third
party not under a similar obligation of confidentiality to the Company,
(IV) required to be disclosed by any court process or any government or
agency or department of any government, or (V) the subject of a written
waiver executed by the Company for the benefit of the Executive.
(i) "Constructive Termination Without Cause" shall mean a termination
of the Executive's employment at his initiative as provided in Section 2
within 30 days following the occurrence, without the Executive's prior
written consent, of one or more of the following events:
(I) any material loss of the Executive's titles or positions
in effect at the time of a Change in Control or any materially adverse
change in the position to which the Executive reports or the principal
departmental functions that report to the Executive at the time of a
Change in Control (reporting relationships) that in any case results
in a material diminution of the Executive's responsibility or the
Executive's access to the Chief Executive Officer of the Company;
(II) the assignment to the Executive of any duties substantially
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting relationships), authority,
duties or responsibilities as in effect on the date of a Change in
Control, or any other action by the Company which results in a
material diminution in such position, authority, duties or
responsibilities, excluding action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(III) any material reduction in total aggregate compensation,
including the aggregate benefits of all fringe benefits, performance
shares, Bonus opportunity, long-term incentives or perquisites
applicable to the Executive immediately prior to a Change in Control,
provided that any reduction in Base Salary or Bonus opportunity from
that immediately preceding a Change in Control shall be deemed a
material reduction;
<PAGE> 4
(IV) the relocation of the Executive's office location as
assigned to him by the Company to a location more than 35 miles from
his office location at the time of a Change in Control;
(V) any failure by the Company to comply with any of the
provisions of this Agreement, other than a failure not occurring in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(VI) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement for
Cause; or
(VII) any failure by the Company to comply with and satisfy
Section 5 of this Agreement, provided that the successor contemplated
by Section 5 has received, at least 10 days prior to the giving of
notice of constructive termination by the Executive, written notice
from the Company or the Executive of the requirements of Section 5 of
the Agreement.
For purposes of clauses (I) and (II), (i) the Executive's titles,
positions, authority, duties and responsibilities with respect to the
Company shall mean such only with respect to (a) the Company if it
continues as a separate entity substantially unchanged after the Change in
Control or (b) the business unit, including an unincorporated division of
a larger entity, that succeeds to the largest part of the Company's assets
and (ii) the status of the Company as a public or private company or as a
parent or subsidiary of another entity shall be disregarded.
(j) "Effective Date" shall mean November 3, 1995.
(k) "Initial Term" shall mean the three-year period commencing on the
Effective Date.
(l) "Subsidiary" shall mean any corporation in which the Company
either (I) controls more than 50% of the voting power of all securities of
such corporation or (II) owns more than 50% of the total value of all
equity securities of such corporation.
(m) "Termination Benefits" shall mean:
(I) an amount equal to the product of (A) Annual
Compensation times (B) three; and
(II) payment with respect to any performance shares granted to
Executive, such payment to be prorated based on actual service
completed at the time of the Executive's termination without
<PAGE> 5
Cause or Constructive Termination Without Cause, and valued according
to the percentage of goal attainment on the date of termination,
notwithstanding any contrary provisions of such grants or any plans
pursuant to which they are granted; and
(III) immediate vesting and exercisability of all of the
Executive's options to purchase securities of the Company, and
immediate vesting and lapse of restrictions on any restricted stock
grants, outstanding at the time of the Executive's termination without
Cause or Constructive Termination Without Cause, whether or not such
would be the result under the provisions of such options or stock
grants or any plans pursuant to which they are granted; and
(IV) at Executive's election, and subject to Executive's
payment of the applicable premiums set forth on Schedule A, continued
medical, dental and life insurance coverage (or reimbursement for the
premiums for such coverage or reimbursement for covered expenses, at
the Company's election) in each case for three years following the
date of the Executive's termination without Cause or Constructive
Termination Without Cause as though the Executive's employment were
continued in effect during such time and without regard to any benefit
reductions implemented after the date of such termination; provided
that Executive may elect to receive one or more of such coverages and
not the others; and
(V) immediate crediting of an additional three years of
service in the Company's nonqualified retirement plans in which the
Executive is participating at the time of the Change in Control, and
payments under a non-qualified plan equal to the additional benefits
that would be attributable to a crediting of an additional three years
of service in the Company's qualified plans in which the Executive is
participating at the time of the Change in Control; and
(VI) outplacement assistance in an amount not to exceed 15%
of Executive's Base Salary in effect on the date of a Change in
Control.
Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any Gross-up Payment required
under this paragraph) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and
<PAGE> 6
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-up Payment") in an amount such that after payment by the Executive
of all income taxes (and any interest and penalties imposed with respect
thereto), but excluding any Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(n) "Term" shall mean the term of this Agreement as described in
Section 17, consisting of the Initial Term and any extensions thereof.
2. Events Triggering Termination Benefits: In the event, within two
years following a Change in Control occurring during the Term, the Executive's
employment is terminated by the Company without Cause or there is a
Constructive Termination Without Cause, then the Executive shall be entitled to
receive the Termination Benefits. The Termination Benefit described in clauses
(I) and (II) of the definition of Termination Benefits shall be paid
immediately upon such termination in a cash lump sum. Except as otherwise
provided in the definition of Constructive Termination Without Cause, the
failure of the Executive to effect a Constructive Termination Without Cause as
to any one event described in such definition shall not affect his entitlement
to effect a Constructive Termination Without Cause as to any other such event.
If (i) the Executive's employment is terminated for Cause, (ii) the Executive
voluntarily terminates his employment and such does not institute a
Constructive Termination Without Cause, or (iii) the Executive's employment is
terminated by death or disability, then the Executive shall not be entitled to
receive the Termination Benefits.
3. No Mitigation; No Offset: In the event of a termination of
employment under Section 2 of this Agreement, the Executive shall be under no
obligation to seek other employment,and there shall be no offset against the
Termination Benefits due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment that he may obtain.
4. Effect of Agreement on Other Benefits and Rights of Executive:
[Except as otherwise provided in this Section 4] [for executives with
employment contracts only], nothing in this Agreement shall prevent or limit
the Executive'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 Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive 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 any termination
pursuant to Section 2 shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement. [Notwithstanding the foregoing or any provision to the
contrary in the employment agreement described below, in the event of a
termination of employment as described in Section 2 hereof, the Executive may
elect between receiving the Termination Benefits or the amounts payable to the
Executive under that certain employment agreement between the Executive and the
Company dated _______________, 19___ as a consequence of such termination but
shall not be entitled to both] [for executives with employment
<PAGE> 7
contracts only].
5. Assignability; Binding Nature: This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors,
heirs (in the case of the Executive) and assigns. No obligations of the
Company under this Agreement may be assigned or transferred by the Company
except that such obligations shall be assigned or transferred (as described
below) pursuant to a merger or consolidation in which the Company is not the
continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
surviving entity or successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations
and duties of the Company, as contained in this Agreement, either contractually
or as a matter of law. 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 herein before 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.
6. Representation: The Company represents and warrants that it is
fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between the Company and any other person or entity.
7. Entire Agreement: Except to the extent otherwise provided
herein, this Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof and supersedes any prior
agreement.
8. Amendment or Waiver: No provision in this Agreement may be
amended unless such amendment is agreed to in writing and signed by both the
Executive and an authorized officer of the Company. No waiver by either Party
of any breach by the other Party of any condition or provision contained in
this Agreement to be performed by such other Party shall be deemed a waiver of
a similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or
an authorized representative of the Company, as the case may be. The Company
will advise the Compensation Committee of the Board of any waivers under, or
amendments to, this Agreement.
9. Severability: In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
10. Beneficiaries/References: The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death by giving the Company written notice
thereof. In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to
<PAGE> 8
refer to his beneficiary, estate or other legal representative.
11. Governing Law/Jurisdiction: This Agreement shall be governed by
and construed and interpreted in accordance with the laws of Texas without
reference to principles of conflict of laws.
12. Disputes:
(a) In the event of any dispute concerning this Agreement, either
Executive or the Company may compel the resolution of such dispute by
binding arbitration pursuant to the commercial arbitration rules of the
American Arbitration Association. The location of such arbitration shall
be city in which the Executive's principal office with the Company is
located. Upon receipt of a written demand for arbitration, a hearing
shall be scheduled to be held within 60 days of receiving such demand.
All costs, fees and expenses, including attorney fees of both the
Executive and the Company, of any arbitration in connection with this
Agreement which results in any decision or settlement requiring the
Company to make a payment or provide any form of compensation to the
Executive in excess of any amount agreed to be paid by the Company shall
be borne by, and be the obligation of, the Company. In the event the
arbitration does not result in such a decision or settlement, each party
shall bear its own expenses and 50% of the costs and expenses of the
arbitration. The obligation of the Company under this Section 12 shall
survive the termination for any reason of this Agreement (whether such
termination is by the Company, by the Executive, upon the expiration of
this Agreement or otherwise).
(b) In the event that any person asserts that any of the
payments or benefits provided to or in respect of Executive pursuant
to this Agreement or otherwise, by or on behalf of the Company, are
subject to excise taxes under Section 4999 of the Code, the
Company shall assume, and pay the costs of, the dispute with such
person but may settle such dispute in its discretion.
(c) Pending the outcome or resolution of any arbitration, the Company
shall continue payment of all amounts due the Executive without regard to
any dispute but only if Executive agrees in writing that if and to the
extent that the Company prevails he will promptly repay to the Company
(or, regardless of the existence of such agreement, the Company may set
off against any amounts due to the Executive) appropriate amounts plus
interest at the applicable Federal Rate provided for in Section
7872(f)(2)(A) of the Code from date any amount was paid by Company to
Executive.
13. Notices: Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid,return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give such notice of:
If to the Company or the Board:
<PAGE> 9
Cabot Oil & Gas Corporation
15375 Memorial Drive
Houston, Texas 77079
Attention: Secretary
If to the Executive:
[Name]
[Address]
14. Confidential Information:
(a) Non-Disclosure: During the Term or at any time
thereafter, irrespective of the time, manner or cause of the
expiration of the Term, Executive will not directly or indirectly
reveal, divulge, disclose or communicate to any person or entity,
other than authorized officers, directors and employees of the
Company, in any manner whatsoever, any Confidential Information
without the prior written consent of the Board.
(b) Return of Property: Upon the Executive's termination of
employment, Executive will surrender to the Company all Confidential
Information, including without limitation, all lists, charts,
schedules, reports, financial statements, books and records of the
Company or any Subsidiary, and all copies thereof, and all other
property belonging to the Company or any Subsidiary, provided
Executive shall be accorded reasonable access to such Confidential
Information subsequent to the Executive's termination of employment
for any proper purpose as determined in the reasonable judgment of
the Company.
15. Headings: The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
16. Counterparts: This Agreement may be executed in two or more
counterparts.
17. Term of Agreement: This Agreement shall remain in effect for the
Initial Term, for any extensions of the Term as set forth herein and thereafter
to the extent necessary to maintain this Agreement in effect for a period of 24
months following any Change in Control during the Term. On the second
anniversary of the Effective Date and on each succeeding anniversary
thereafter, the Term shall be automatically extended by one year from the date
upon which it would otherwise expire, unless prior to such anniversary the
Company shall have given written notice to the Executive that the Term shall
not be so extended. In addition, the respective rights and obligations of the
Parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the
<PAGE> 10
date first written above.
CABOT OIL & GAS CORPORATION
Date: February ___, 1996 By ____________________________
Name:
Title:
EXECUTIVE
Date: ______________, 1996 By ____________________________
Name:
<PAGE> 11
The following is a list of the officers who entered into a Change in
Control Agreement with the Company:
<TABLE>
<S> <C>
J. L. Batt Vice President, Land
J. W. Hutton Vice President, Marketing
L. A. Machesney Corporate Secretary and Managing Counsel
F. A. Pici Controller
G. F. Reiger Vice President, Regional Manager
R. R. Seegmiller Vice President, Chief Financial Officer and Treasurer
(also has an employment agreement, dated September 25,
1995 and, accordingly, Section 4 is modified to
reflect that agreement)
J. M. Trimble Vice President, Business Development and Engineering
H. B. Whitehead Vice President, Regional Manager
</TABLE>
<PAGE> 1
EXHIBIT 10.10 (C)
FIRST AMENDMENT TO TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
CABOT OIL & GAS CORPORATION
THIS FIRST AMENDMENT, dated as of the fifteenth day of August, 1991,
by and between Fidelity Management Trust Company (the "Trustee") and Cabot Oil
& Gas Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a trust
agreement dated June 1, 1991, with regard to the Cabot Oil & Gas Savings
Investment Plan (the "Plan"); and
WHEREAS, Cabot Corporation, a Delaware corporation, is a former
affiliate of the Sponsor and the Sponsor hereby represents that Cabot
Corporation is not a "party in interest" to the Plan (for purposes of ERISA);
and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 13 thereof;
Now therefore, in consideration of the above premises the trustee and
the Sponsor hereby amend the trust agreement by:
(1) Amending Schedule "G", Sponsor Stock, to read as follows:
Exchanges from Sponsor Stock to Mutual Funds
Participants who wish to exchange out of Sponsor Stock into
mutual funds may call between the 1st and the 15th of the
month. No calls will be accepted after 4:00 p.m. (ET) on the
15th (or previous business day if the 15th is not a business
day).
The Sponsor Stock is sold within two (2) business days and the
subsequent purchase into mutual funds will take place five (5)
business days after the sale date. This allows for settlement
of the stock trade at the custodian and the corresponding
transfer to Fidelity. Orders for sales of Sponsor Stock must
indicate the security to be sold and must be share specific.
(2) Adding a Section 4(c)(iii)(C) as follows:
(C) Sales to Cabot Corporation. The Trustee may sell
Sponsor Stock to Cabot Corporation, as hereby directed by the Sponsor, if the
sale is for adequate consideration (within the meaning of section 3(18) of
ERISA) and no commission is changed. For the purposes of this Section
4(c)(iii)(C), "Sponsor Stock" shall mean only Cabot Corporation common stock.
(i) Prior to the sale of any shares of Sponsor
Stock on the open market, the Trustee shall first offer to sell such shares to
Cabot Corporation at the average of the high and low price, on the date that
the shares would have been sold on the open market, as such average price shall
be reported on the New York Stock Exchange Composite Transaction List. Any
such offer to Cabot Corporation by the Trustee shall be nonassignable.
(ii) The Trustee shall notify Cabot Corporation by
1:00 p.m. (eastern standard time "EST") of any shares of Sponsor Stock
available for sale on the day following the close of the calling window for
Sponsor Stock as detailed on Schedule "G" (the 15th or previous business day if
the 15th is not a business day or the day a
<PAGE> 2
withdrawal is scheduled to be processed). If the Trustee is unable to
determine, by 1:00 p.m. EST (on the day following the close of the calling
window or the day a withdrawal is scheduled to be processed), the number of
shares of Sponsor Stock available for sale, such offer to Cabot Corporation
shall be postponed and offered by 1:00 p.m. EST on the following business day.
This notification shall be via telephone, confirmed via facsimile transmission.
Cabot Corporation shall respond to the Trustee, in writing via facsimile
transmission, by 2:00 p.m. EST, on the day such offer is received, if Cabot
Corporation is to accept the offer. The offer to sell to Cabot Corporation
shall lapse if not accepted by Cabot Corporation by the 2:00 p.m. EST deadline.
Upon notification by Cabot Corporation to the Trustee that it accepts the
Trustee's offer, the Trustee and Cabot Corporation shall have a binding
agreement to sell and purchase, respectively, such shares of Sponsor Stock.
In all cases, Sponsor Stock shall be sold within two (2) business days from the
close of the calling window or on the day a withdrawal is scheduled to be
processed.
(iii) Cabot Corporation shall wire funds, equal to the
purchase price, in accordance with this Section 4(c)(iii)(C) to the Trustee on
the fifth business day following the trade date. The Trustee shall transfer
the shares of Sponsor Stock sold to Cabot Corporation on the day that such
funds from the sale are received by the Trustee.
(iv) Cabot Corporation's representatives for purposes of
this Section 4(c)(iii)(C) shall be J. Scott Esler, Cheryl L. McIntosh, Jason P.
Smith or John D. Curtin, Jr., or such other person or persons as Cabot
Corporation shall designate in writing from time to time.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this First
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
CABOT OIL & GAS CORPORATION FIDELITY MANAGEMENT
TRUST COMPANY
By /s/ ROGER J. KLATT 10/18/91 By /s/ CLARE S. RICHER 11/6/91
---------------------------- ------------------------------
Date Senior Vice President Date
<PAGE> 3
SECOND AMENDMENT TO TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
CABOT OIL & GAS CORPORATION
THIS SECOND AMENDMENT, dated as of the fifteenth day of August, 1991,
by and between Fidelity Management Trust Company (the "Trustee") and Cabot Oil
& Gas Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a trust
agreement dated June 1, 1991, with regard to the Cabot Oil & Gas Savings
Investment Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 13 thereof;
Now therefore, in consideration of the above premises the TRUSTEE and
the Sponsor hereby amend the trust agreement by:
(1) Amending Schedule "A", by adding a ninth money classification
entitled: "ESOP."
(2) Adding the following sentence to the end of Section 4(c)(iii)
Execution of Purchases and Sales:
No purchase or sale of Sponsor Stock, including
reinvestment of dividends, will be allowed into or
out of the ESOP money classification. Sponsor Stock
may only be sold from the ESOP money classification
due to a total withdrawal of the participant's
account from the Plan.
(3) Amending Schedule "G" by adding the following at the end of
Exchanges from Sponsor Stock to Mutual Funds:
No exchanges of Sponsor Stock will be allowed from
the ESOP money classification.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this
Second Amendment to be executed by their duly authorized officers effective as
of the day and year first above written.
CABOT OIL & GAS CORPORATION FIDELITY MANAGEMENT
TRUST COMPANY
By /s/ ROGER J. KLATT 8/21/91 By /s/ CLARE S. RICHER 9/5/91
-------------------------- -------------------------------
Date Senior Vice President Date
<PAGE> 4
THIRD AMENDMENT TO THE TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
CABOT OIL & GAS CORPORATION
THIS THIRD AMENDMENT, dated as of the first day of July, 1993, by and
between Fidelity Management Trust Company (the "Trustee") and Cabot Oil & Gas
Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a trust
agreement dated June 1, 1991, with regard to the Cabot Oil & Gas Savings
Investment Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 13 thereof;
NOW THEREFORE, in consideration of the above premises the TRUSTEE and
the Sponsor hereby amend the trust agreement by:
(1) Amending Schedules "A" and "C" to reflect the addition of the
following plan investment options:
Fidelity Asset Manager
Fidelity Asset Manager: Growth
Fidelity Asset Manager: Income
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Third
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
CABOT OIL & GAS CORPORATION FIDELITY MANAGEMENT
TRUST COMPANY
By /s/ ROGER J. KLATT 3/25/93 By /s/ JOHN P. OREILLY, JR. 4/26/93
---------------------------- --------------------------------------
Date Senior Vice President Date
<PAGE> 5
FOURTH AMENDMENT TO TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
CABOT OIL & GAS CORPORATION
THIS FOURTH AMENDMENT, dated as of the first day of November, 1993, by
and between Fidelity Management Trust Company (the "Trustee") and Cabot Oil &
Gas Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a trust
agreement dated June 1, 1991, with regard to the Cabot Oil & Gas Savings
Investment Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 13 thereof;
NOW THEREFORE, in consideration of the above premises the TRUSTEE and
the Sponsor hereby amend the trust agreement by:
(1) Amending and restating the Sponsor Stock section of the
Telephone Exchange Procedures, Schedules "G", as follows:
Sponsor Stock
Exchanges from Sponsor Stock to Mutual Funds
Sponsor Stock exchanges are processed on a monthly cycle.
Participants who wish to exchange out of Sponsor Stock into a mutual
fund may call between the 1st and the 15th of the month. No calls
will be accepted after 4:00 p.m. (ET) on the 15th (or previous
business day if the 15th is not a business day).
The Sponsor Stock is sold on the 16th (or next business day if the
16th is not a business day) and the subsequent purchase into mutual
funds will take place five (5) business days after the sale date.
This allows for settlement of the stock trade at the custodian and the
corresponding transfer to Fidelity. Orders for sales of Sponsor Stock
must be share specific.
Exchanges from Mutual Funds to Sponsor Stock
Participants who wish to exchange out of a mutual fund into Sponsor
Stock may call between the 1st and the 15th of the month. No calls
will be accepted after 4:00 p.m. (ET) on the 15th (or previous
business day if the 15th is not a business day).
Mutual fund shares are sold on the 15th of the month (or the previous
business day if the 15th is not a business day) and the Sponsor Stock
is purchased within two (2) business days after the date on which the
mutual fund shares are sold.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Fourth
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
CABOT OIL & GAS CORPORATION FIDELITY MANAGEMENT
TRUST COMPANY
By /s/ GILLIAN L. PAYNE 10/13/93 By /s/ JOHN P. OREILLY, JR. 10/20/93
--------------------------------- ------------------------------------
Date Senior Vice President Date
<PAGE> 6
FIFTH AMENDMENT TO TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
CABOT OIL & GAS CORPORATION
THIS FIFTH AMENDMENT, dated as of the first day of February, 1994, by
and between Fidelity Management Trust Company (the "Trustee") and Cabot Oil &
Gas Corporation (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor hereby entered into a trust
agreement dated June 1, 1991, with regard to Cabot Oil & Gas Savings Investment
(the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 13 thereof;
NOW THEREFORE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the trust agreement by:
(1) Amending Section 4(b) in its entirety as follows:
(b) Available Investment Options.The Named
Fiduciary shall direct the Trustee as to what investment
options Plan participants may invest in as indicated on
Schedule "C" attached hereto, subject to the terms of the Plan
and to the following limitations. The Named Fiduciary may
determine to offer as investment options only (i) securities
issued by the investment companies advised by Fidelity
Management & Research Company ("Mutual Funds"), (ii) equity
securities issued by Cabot Corporation ("Cabot Stock"), (iii)
Equity securities of the Sponsor or an affiliate of the
Sponsor which are publicly traded and which are "qualifying
employer securities" within the meaning of Section 407(d)(5)
of ERISA ("Sponsor Stock") and (iv) notes evidencing loans to
Plan participants in accordance with the terms of the Plan.
(2) Amending the first paragraph in Section 4(e) in its entirety
as follows:
(e) Sponsor Stock and Cabot Stock. Trust
investments in Cabot Stock and Sponsor Stock shall be subject
to the following limitations:
(3) Amending Sections 4(e)(i), 4(e)(ii), 4(e)(iii)(A) and (B) to
add "and Cabot Stock" in each place after the term "Sponsor
Stock" appears.
(4) Amending Section 4(e)(iii)(C) to replace the term "Sponsor
Stock" with the term "Cabot Stock" and deleting the last
sentence in the first paragraph of Section 4(e)(iii)(C).
(5) Amending Sections 4(e)(v), 4(e)(vi), 4(e)(vii) and 4(e)(viii)
to add "and Cabot Stock" in each place after the term "Sponsor
Stock" appears.
(6) Amending the Annual Participant Fee on Schedule "B" to read as
follows:
TO BE EFFECTIVE JANUARY 1, 1994:
Annual Participant Fee $88.50 per participant*,
subject to a $39,500 per year
minimum, billed and payable
quarterly.
1
<PAGE> 7
TO BE EFFECTIVE JANUARY 1, 1995:
Annual Participant Fee $152.00 per participant*,
subject to a $68,500 per year
minimum, billed and payable
quarterly.
(7) Amending and restating the Sponsor Stock section of the
Telephone Exchange Procedures, Schedule "G", as follows:
Sponsor Stock
Exchanges From Sponsor Stock/Cabot Stock to Mutual Funds
Sponsor Stock exchanges are processed on a monthly cycle.
Participants who wish to exchange out of Sponsor Stock into a
mutual fund may call between the 1st and the 14th of the
month. No calls will be accepted after 4 p.m. (EST) on the
14th (or previous business day if the 14th is not a business
day).
The Sponsor Stock is sold on the 15th (or next business day if
the 15th is not a business day) and the subsequent purchase
into mutual funds will take place five (5) business days after
the sale date. This allows for settlement of the stock trade
at the custodian and the corresponding transfer to Fidelity.
Orders for sales of Sponsor Stock must be share specific.
Exchanges from Mutual Funds to Sponsor Stock
Participants who wish to exchange out of a mutual fund into
Sponsor Stock may call between the 1st and the 14th of the
month. No calls will be accepted after 4 p.m. (EST) on the
14th (or the previous business day if the 14th is not a
business day).
Mutual fund shares are sold on the 14th of the month (or the
previous business day if the 14th is not a business day) and
the Sponsor Stock is purchased within two(2) business days
after the date on which the mutual fund shares are sold.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Fifth
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
CABOT OIL & GAS CORPORATION FIDELITY MANAGEMENT
TRUST COMPANY
By /s/ JOHN U. CLARKE By /s/ JOHN P. OREILLY, JR. 2/9/94
-------------------------- -----------------------------------
Date Senior Vice President Date
2
<PAGE> 1
EXHIBIT 10.14(b)
CABOT OIL & GAS CORPORATION
1990 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Second Amendment
Cabot Oil & Gas Corporation, a Delaware corporation (the "Company"), has
previously established the Cabot Oil & Gas Corporation 1990 Nonemployee
Director Stock Option Plan, which was approved by the Company's Board of
Directors on April 6, 1990 and approved by its stockholders on February 22,
1991 and which was amended by the Company's Board of Directors by the First
Amendment to the 1990 Nonemployee Director Stock Option Plan effective as of
July 1, 1993 (the "Plan"). Subject to stockholder approval, the Board of
Directors of the Company hereby amends Section 6 Option Period of the Plan
effective as of May 16, 1996, as follows:
(i) Section 6 of the Plan is deleted in its entirety and is
replaced by the following:
6. Option Period.
Each Option granted under this Plan shall terminate
and be of no force and effect with respect to any
shares of class A Stock not previously purchased by
the Optionee upon the earliest to occur of the
following: (a) the expiration of ten (10) years from
the date the Option became exercisable; (b) one (1)
year after the Optionee ceases to be a Director of
the Company by reason of death, disability or
mandatory retirement of the Optionee or (c) three
months after the date on which the Optionee ceases to
be a Director of the Company for any reason other
than death, disability or mandatory retirement.
(ii) The Amendment made hereby shall be effective May 16, 1996.
CABOT OIL & GAS CORPORATION
<PAGE> 1
EXHIBIT 10.17
[CABOT OIL & GAS CORPORATION LETTERHEAD]
Mr. Ray R. Seegmiller
5524 Woodway
Houston, Tx. 77056 September 25, 1995
Dear Ray:
The following reflects your compensation package with respect to your joining
the Company:
* On August 3, 1995, the Board of Directors of Cabot Oil & Gas
Corporation elected you Vice President, Chief Financial Officer and
Treasurer.
* You will receive a base annual salary of $175,000 beginning August 1,
1995. Effective June 28, 1995, you received compensation based on an
annual salary of $87,500 through July 31, 1995.
* You will be eligible to receive an annual incentive bonus according to
the terms of the Annual Target Cash Incentive Plan, such amount to be
reviewed by the Compensation Committee of the Board of Directors.
Your annual target bonus is 35% of your base salary and the bonus
amount may range from zero percent to 70 percent of your base salary
depending on your performance, the performance of the Company as
defined in the Annual Target Cash Incentive Plan and other factors as
deemed relevant by the Compensation Committee of the Board of
Directors.
* If your employment is terminated by the Company for any reason other
than Cause, or if you terminate your employment for Good Reason, you
shall be entitled to the following:
If you terminate your employment for Good Reason or the
Company terminates your employment for any reason other than
Cause prior to August 1, 1996, you are guaranteed payment of
your base salary through July 31, 1997 as salary continuation
which also includes continuation of applicable benefits
programs.
If you terminate your employment for Good Reason, or the
Company terminates your employment for any reason other than
Cause after August 1, 1996 you are guaranteed payment of your
base salary for an
<PAGE> 2
additional 12 months as salary continuation which also
includes continuation of applicable benefit programs.
For purposes hereof, the term Cause means (i) a dishonest or
other act of material misconduct that results in your
substantial personal enrichment, results in a substantial
economic loss to the Company, or, is otherwise materially
contrary to the best interest of the Company, or (ii) willful
repeated refusals by you to perform the duties of your
position.
For purposes hereof, the term Good Reason means the Company's
assignment to you of any duties materially inconsistent with
your position, or any other act by the Company that results in
a diminution in your position, authority, duties or
responsibilities, or any reduction in your base salary or
bonus opportunity, or, any reduction in other benefits (other
than a reduction in those benefits applicable to executive
officers generally).
* On August 3, 1995 you were granted a five (5) year option to purchase
20,000 shares of Company Common Stock at a grant price of $13.5625 per
share, 10,000 of which shall vest on the first anniversary of the
award, with the remaining 10,000 vesting on the second anniversary of
the award.
* On August 3, 1995 you were granted an award of 5,000 shares of
restricted Company Common Stock, the restrictions on which will lapse
on the second anniversary of the award, August 3, 1997.
* If your employment is terminated by the Company other than for Cause,
or if you terminate your employment for Good Reason, the stock option
award and the restricted stock grant made on August 3, 1995 will vest
on the date of termination.
* You will be entitled to participate in all benefit programs offered by
the Company to executive officers according to the terms of the plans.
* The Company will provide to you term life insurance coverage equal to
twice your annual salary following its standard program for
executives.
* You will be entitled to participate in the Company's pension plan and
a supplemental executive retirement agreement providing you with
double service credit to equalize the retirement benefit and remove
the limits imposed by Sections 401(a)17 and 415 of the IRC. Such
supplemental benefits will vest after completion of two years service.
<PAGE> 3
* The Company will pay the dues for one membership in a club of your
choice.
* You agree to abide by all Company policies, including execution of a
confidentiality agreement and passing a drug test (as have all
employees).
If you are in agreement with the terms and conditions contained in this letter,
please sign one copy in the space provided below and return it to the
undersigned.
On behalf of Cabot Oil & Gas Corporation: /s/ CHARLES P. SIESS, JR.
-------------------------------------
Charles P. Siess, Jr.
Chairman, President and
Chief Executive Officer
September 26, 1995
-------------------------------------
Date
Accepted by: /s/ RAY R. SEEGMILLER
-------------------------------------
Ray R. Seegmiller
October 6, 1995
-------------------------------------
Date
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF CABOT OIL & GAS CORPORATION
Big Sandy Gas Company *
Cabot Oil & Gas Marketing Corporation *
Cabot Oil & Gas Production Corporation *
Cabot Oil & Gas Trading Corporation *
Cabot Oil & Gas U.K. Limited
Cabot Oil & Gas Western Corporation *
Cabot Petroleum North Sea, Ltd.
Cranberry Pipeline Corporation *
Franklin Brine Treatment Corporation
* Denotes significant subsidiary.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Cabot Oil & Gas Corporation on Form S-8 filed on June 23, 1991 and on October
29, 1993 of our reports dated March 1, 1996, on our audits of the consolidated
financial statements and financial statement schedules of Cabot Oil & Gas
Corporation as of December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, which reports are included in this Annual
Report on Form 10-K.
Our report refers to a change in 1995 in the method of applying the
unit-of-production method to calculate depreciation and depletion on producing
oil and gas properties, and accounting for the impairment of long-lived assets.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 13, 1996
<PAGE> 1
Exhibit 23.2
[MILLER AND LENTS, LTD. LETTERHEAD]
Cabot Oil & Gas Corporation
15375 Memorial Drive
Houston, Texas 77079
Re: Securities and Exchange Commission
Form 10-K of Cabot Oil & Gas Corporation
Gentlemen:
The firm of Miller and Lents, Ltd. consents to the use of its name and
to the use of its report dated February 8, 1996 regarding the Cabot Oil & Gas
Corporation Proved Reserves and Future Net Revenues as of January 1, 1996,
which report is to be included by reference in Form 10-K to be filed by Cabot
Oil & Gas Corporation with the Securities and Exchange Commission.
Miller and Lents, Ltd. has no interest in Cabot Oil & Gas Corporation,
or in any of its affiliated companies or subsidiaries and is not to receive any
such interest as payment for such report and has no director, officer, or
employee employed or otherwise connected with Cabot Oil & Gas Corporation. We
are not employed by Cabot Oil & Gas Corporation on a contingent basis.
Very truly yours,
MILLER AND LENTS, LTD.
By /s/ JAMES A. COLE
----------------------
James A. Cole
Vice President
JAC/psh
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,029
<SECURITIES> 0
<RECEIVABLES> 43,257
<ALLOWANCES> (1,243)
<INVENTORY> 5,596
<CURRENT-ASSETS> 52,348
<PP&E> 979,985
<DEPRECIATION> (505,614)
<TOTAL-ASSETS> 528,155
<CURRENT-LIABILITIES> 60,881
<BONDS> 249,000
<COMMON> 153,198
0
91,321
<OTHER-SE> (96,663)
<TOTAL-LIABILITY-AND-EQUITY> 528,155
<SALES> 209,349
<TOTAL-REVENUES> 213,923
<CGS> 330,067
<TOTAL-COSTS> 330,067
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,885
<INCOME-PRETAX> (141,643)
<INCOME-TAX> (55,025)
<INCOME-CONTINUING> (92,171)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,171)
<EPS-PRIMARY> (4.05)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 28.1
February 8, 1996
Cabot Oil & Gas Corporation
15375 Memorial Drive
Houston, Texas 77079
Re: Review of Proved Reserves And
Future Net Revenues
As of January 1, 1996
Gentlemen:
At your request, we reviewed the estimates of Proved Reserves of oil
and gas and the Future Net Revenues associated with these reserves that Cabot
Oil & Gas Corporation, hereinafter Cabot, attributes to its net interests in
oil and gas properties as of January 1, 1996. Cabot's estimates, shown below,
are in accordance with the definitions contained in Securities and Exchange
Commission Regulation S-X, Rule 4-10(a).
<TABLE>
<CAPTION>
Proved Reserves
-------------------------------------------------
Developed Undeveloped Total
------------ ----------- ---------------
<S> <C> <C> <C>
Net Oil, MBbls. 4,970.2 339.4 5,309.6
Net Gas, MMcf 747,234.6 142,614.8 889,849.4
Future Net Revenues
Undiscounted, M$ 1,368,628.0 181,537.8 1,550,165.8
Discounted at 10 Percent, M$ 616,885.1 48,418.9 665,304.0
</TABLE>
Based on our investigations and subject to the limitations described
hereinafter, it is our judgment that (1) Cabot has an effective system for
gathering data and documenting information required to estimate its Proved
Reserves and to project its Future Net Revenues, (2) in making its estimates
and projections, Cabot used appropriate engineering, geologic, and evaluation
principles and techniques that are in accordance with practices generally
accepted in the petroleum industry, and (3) the results of those estimates and
projections are, in the aggregate, reasonable.
All of the reserves discussed herein are located within the
continental United States and Canada. Gas volumes were estimated at the
appropriate pressure base and temperature base that are established for each
well or field by the applicable sales contract or regulatory body. Total gas
reserves were obtained by summing the reserves for all the individual
properties and are
<PAGE> 2
Cabot Oil & Gas Corporation
February 8, 1996
Page 2
therefore stated herein at a mixed pressure base.
Cabot represents that the future net revenues reported herein were
computed based on prices being received for oil and gas as of Cabot's fiscal
year end, December 31, 1995, and are in accordance with Securities and Exchange
Commission guidelines. The Present Value of Future Net Revenues was computed
by discounting the Future Net Revenues at ten percent per annum. Estimates of
Future Net Revenues and the Present Value of Future Net Revenues are not
intended and should not be interpreted to represent fair market values for the
estimated reserves.
In conducting our investigations, we reviewed the pertinent available
engineering, geological and accounting information for each well or designated
property to satisfy ourselves that Cabot's estimates of reserves and future
production forecasts and economic projections are, in the aggregate,
reasonable. We independently selected a sampling of properties in each region
and reviewed the direct operating expenses and product prices used in the
economic projections.
In its estimates of Proved Reserves and Future Net Revenues associated
with its Proved Reserves, Cabot has considered that a portion of its facilities
associated with the movement of its gas in the Appalachian Region to its
markets are unusual in that the construction and operation of these facilities
are highly dependent on its producing operations. Cabot has deemed the portion
of the cost of these facilities associated with its revenue interest gas are
costs that are attributable to its oil and gas producing activities, and
accordingly, has included these costs in its computation of the Future Net
Revenues associated with its Proved Reserves.
Reserve estimates were based on decline curve extrapolations, material
balance calculations, volumetric calculations, analogies, or combinations of
these methods for each well, reservoir, or field. Reserve estimates from
volumetric calculations and from analogies are often less certain than reserve
estimates based on well performance obtained over a period during which a
substantial portion of the reserves were produced.
In making its projections, Cabot estimated yearly well abandonment
costs except where salvage values were assumed to offset these expenses. Costs
for possible future environmental claims were not included. Cabot's estimates
include no adjustments for production prepayments, exchange agreements, gas
balancing, or similar arrangements. We were provided with no information
concerning these conditions and we have made no investigations of these matters
as such was beyond the scope of this investigation.
The evaluations presented in this report, with the exceptions of those
parameters specified by others, reflect our informed judgments based on
accepted standards of professional investigation but are subject to those
generally recognized uncertainties associated with interpretation of
geological, geophysical, and engineering information. Government policies and
market conditions different from those employed in this study may cause the
total quantity of oil or gas to be recovered, actual production rates, prices
received, or operating and capital costs to vary from those presented in this
report.
In conducting these evaluations, we relied upon production histories,
accounting and cost data, and other financial, operating, engineering, and
geological data supplied by Cabot. To a lesser extent, non-proprietary data
existing in the files of Miller and Lents, Ltd., and data obtained from
commercial services were used. We also relied, without independent
verification, upon Cabot's representation of its ownership interests, payout
balances and reversionary interests, the current prices, and the transportation
fees applicable to each property.
Miller and Lents, Ltd. is an independent oil and gas consulting firm.
None of the principals of this firm have any financial interests in Cabot or
any of its affiliated companies.
<PAGE> 3
Cabot Oil & Gas Corporation
February 8, 1996
Page 3
Our fee is not contingent upon the results of our work or report, and we have
not performed other services for Cabot that would affect our objectivity.
Very truly yours,
MILLER AND LENTS, LTD.
By /s/ JAMES A. COLE
------------------------
James A. Cole
Vice President
JAC/psh
