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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Form 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ________ to ________
Commission file number 1-10509
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Snyder Oil Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-2306158
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 Main Street 76102
Fort Worth, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (817) 338-4043
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------------- -------------------------------
Common Stock New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the common stock held by non-affiliates of the
registrant as of February 27, 1998.................................$571,824,508
Number of shares of common stock outstanding as of February 27, 1998..33,392,696
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Report is incorporated by reference to the
Registrant's definitive Proxy Statement relating to its Annual Meeting of
Stockholders, which will be filed with the Commission no later than April 30,
1998.
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<PAGE>
SNYDER OIL CORPORATION
Annual Report on Form 10-K
December 31, 1997
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
General
Snyder Oil Corporation (the "Company") is an independent energy company
engaged in the production, development, acquisition and exploration of domestic
oil and gas properties, primarily in the Gulf of Mexico, the Rocky Mountains and
northern Louisiana. During 1997, the Company's revenues were $255.7 million and
cash flow provided by operations was $122.0 million. At December 31, 1997, the
Company's proved reserves totaled 77.3 million barrels of oil equivalent
("BOE"), having a pretax present value, discounted at 10% based on constant
prices and costs ("Pretax PW 10% Value") of $375.3 million. Approximately 78% of
these reserves are natural gas.
During 1997, the Company undertook efforts to simplify its corporate
structure. The simplification and repositioning resulted in the bulk of the
Company's asset value being concentrated in properties the Company owns and
operates directly. Three primary initiatives were completed in 1997 towards
reaching this goal.
Patina Oil & Gas Corporation. In October 1997, the Company
sold its entire 74% stake, or 14 million shares of the common stock, of
Patina Oil & Gas Corporation ("Patina"). The Company sold 10.9 million
shares of Patina stock in a secondary offering, with the remainder
repurchased by Patina. This transaction generated $127 million in cash
while removing approximately $170 million of Patina debt from the
Company's consolidated balance sheet.
SOCO International, Inc. In May 1997, SOCO International, Inc.
("SOCO International") transferred its 90% interest in SOCO
International Operations, Inc. ("Operations"), which held the Company's
investments in Mongolia, Russia and Thailand, to SOCO International plc
("SOCI plc"), a recently formed United Kingdom company, in exchange for
shares of SOCI plc stock. SOCI plc also acquired the interests of a
number of minority investors in Operations' ventures and assets in
Yemen, Tunisia and onshore England from Cairn Energy plc ("Cairn"). At
the time of the acquisitions, SOCI plc, which is listed on the London
Stock Exchange, completed a public offering of its common shares that
raised approximately $75 million of new equity capital to fund its
continuing exploration and development expenditures. The 7.8 million
shares of SOCI plc acquired by the Company represent approximately
15.9% of SOCI plc and had a market value of $45.1 million at February
27, 1998. Under London Stock Exchange rules, the Company will not be
permitted to sell these shares prior to May 1999. Edward T. Story, a
director and former Vice President - International of the Company, is
the chief executive officer of SOCI plc.
Capital Structure. The Company completed a series of
transactions in 1997 to simplify its capital structure and eliminate
the potential dilution to common shareholders. At January 1, 1997, the
Company had 42.0 million common shares on a fully diluted basis. By
December 31, 1997, the Company had 33.3 million common shares
outstanding with no convertible securities outstanding. These
transactions consisted of the following:
* In first quarter 1997, the Company sold 4.5 million
shares, or 28% of its holdings in Cairn. Net proceeds from
the sales were $39.2 million resulting in a $13.0 million
gain. The Company continues to hold 11.7 million shares of
Cairn with a market value of $80.1 million at February 27,
1998. The Company may maintain its investment, sell all or
part of it, either in one transaction or gradually, or
pursue other courses of action. Any decision, when made,
will be made in light of strategic, financial and other
factors deemed appropriate by management.
<PAGE>
* The Company redeployed the cash from the Cairn
transactions into its securities repurchase program,
underscoring management's belief that the Company's common
stock has been undervalued in the market. During the year,
the Company repurchased 2.6 million common shares for
$45.6 million or an average of $17.24 per share.
* In June 1997, the Company issued $175 million of 8.75%
senior subordinated notes due 2007. Following the
issuance, the Company redeemed its convertible
subordinated notes due 2001. The notes were redeemed for a
price of 103.51% of principal plus accrued interest. These
transactions extended the maturity of the indebtedness by
six years and eliminated the potential issuance of 3.6
million shares of common stock on conversion of the old
notes.
* In October 1997, the Company issued 300,000 shares of its
common stock in exchange for warrants held by Union
Pacific Resources to purchase 2.1 million of the Company's
common shares.
* In the fourth quarter 1997, the Company called all of the
depositary shares representing interests in the Company's
$6.00 Convertible Exchangeable Preferred Stock. The calls
resulted in the Company converting a portion of the
preferred shares into approximately 3.6 million shares of
common stock. The Company redeemed the remaining preferred
shares for $30.1 million in cash. The calls of the
preferred shares eliminated 1.4 million common shares of
potential dilution and over $6 million a year in dividend
payments.
As a result of the capital restructuring, all of the Company's growth
potential will benefit its common shareholders. Redeployment of the cash and
marketable securities held by the Company into an acquisition or series of
acquisitions is a strategic objective of the Company.
Operations
The Company's operations are focused on three core areas, each with the
potential to contribute significantly to future growth:
* Offshore. The Company had proved reserves in the Gulf of Mexico of 19.3
million BOE with a Pretax PW 10% Value of $170.5 million at December 31,
1997. These reserves are concentrated in the Pabst, Busch and Ingrid Fields
of the Main Pass area offshore Louisiana and Alabama. Through the end of
1997, production from the Pabst and Busch Fields had often been
restricted to 100 MMcf (42 MMcf net) of gas per day but increased to more
than 150 MMcf (63 MMcf net) per day following the expansion of pipeline
capacity serving these fields in January 1998. The Company intends to
complete installation of a platform and production facilities with total
initial capacity of 150 MMcf per day on its 50%-owned Ingrid Field, with
production commencing by April 1998. The Company plans to expand its
activities in the Gulf of Mexico significantly and has budgeted up to $50
million for development and exploration in this area in 1998.
* North Louisiana. The Company owns over 330,000 net mineral acres, with
leases and lease options covering more than 150,000 additional net
acres, in North Louisiana. The Company has identified a number of
exploration prospects as a result of two 3-D seismic surveys covering
approximately 166 square miles. Two partners earned a one-third interest
each in these prospects by paying all of the costs of these seismic
surveys. Based on these surveys, the Company expects to begin drilling
activities in North Louisiana in the first half of 1998. The Company
expects its expenditures in North Louisiana to total approximately $15
million in 1998.
* Rocky Mountains. The Company had proved reserves in Wyoming, western
Colorado and Utah of 56.5 million BOE with a Pretax PW 10% Value of $193.3
million at December 31, 1997. These reserves are concentrated in gas
development programs in the Washakie, Green River and Piceance Basins, and
in two large, mature non-operated oil fields in northern Wyoming. The
Company has also initiated gas projects in the Wind River and Big Horn
Basins in Wyoming and an oil project in Utah. The Company formed a gas
marketing joint venture with Coastal Corporation, one of the largest gas
marketers in North America, effective January 1, 1997. The Company has
budgeted up to $70 million for continued development and exploration in the
western Rocky Mountains during 1998.
2
<PAGE>
Summary information at December 31, 1997 regarding the Company's projects is set
forth in the following table.
<TABLE>
<CAPTION>
Proved Reserve Quantities
Gross Net --------------------------------------- Pretax PW 10% Value
Producing Undeveloped Crude Oil Natural Oil -------------------------
Wells Acres & Liquids Gas Equivalent Amount Percent
--------- ----------- ---------- ------- ---------- ---------- -----------
(MBbl) (MMcf) (MBOE) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
Offshore
Main Pass Area 18 9,167 1,094 96,433 17,167 $ 161,783 43%
Other 23 - 285 10,994 2,117 8,734 2
------- --------- -------- --------- -------- ---------- ------
Total Offshore 41 9,167 1,379 107,427 19,284 170,517 45
North Louisiana 14(a) 346,773(b) 57 2,041 397 3,313 1
Other 86 1,533 104 6,099 1,120 8,177 2
-------- --------- -------- --------- -------- ---------- ------
Southern Region 141 357,473 1,540 115,567 20,801 182,007 48
-------- --------- -------- --------- -------- ---------- ------
Washakie (WY) 174 75,174 1,341 139,307 24,559 95,766 26
Piceance (CO) 87 42,641 150 33,669 5,761 21,597 6
Deep Green River (WY) 30 41,555 373 48,661 8,483 32,619 9
Wind River (WY) 26 38,626 447 20,999 3,947 13,726 4
Big Horn (WY) - 77,955 - - - - -
Northern Wyoming 902 - 12,313 566 12,407 24,655 6
Uinta (UT) 126 71,244 596 4,399 1,330 4,904 1
-------- --------- -------- --------- -------- ---------- ------
Rocky Mountain Region 1,345 347,195 15,220 247,601 56,487 193,267 52
-------- --------- -------- --------- -------- ---------- ------
Total Company 1,486 704,668 16,760 363,168 77,288 $ 375,274 100%
======== ========= ======== ========= ======== ========== ======
<FN>
(a) Excludes royalty interests in 101 wells.
(b) Excludes 130,000 net acres under option as of February 27, 1998.
</FN>
</TABLE>
Offshore - Gulf of Mexico
The Company believes many areas in the Gulf of Mexico are
under-exploited and, while having greater risks, the potential benefits and
exposure to additional markets complement the Company's onshore activities. The
Company began developing an asset base in the offshore Gulf of Mexico in 1994,
and currently operates 10 platforms accounting for substantially all of the
production from this core area. During 1997, the Company spudded 9 wells, a 28%
increase over the 7 wells drilled in 1996. Since inception, the Company has
recorded a 60% success ratio in its exploratory program (3 out of 5 wells) and a
success ratio of 94% in its development program (17 out of 18 wells).
At year end, total offshore proved reserves were 19.3 million BOE (1.4
million barrels of oil and 107.4 Bcf of gas), up from 17.4 million BOE (2.4
million barrels of oil and 90.0 Bcf of gas) at year end 1996. This represents
approximately 25% of year end reserve quantities, but 45% of Pretax PW 10%
Value. The Company has interests in 41 (17.5 net) wells, 38 (17.2 net) of which
are operated, and 83,000 gross (47,000 net) acres. Production in 1997 was 3.9
million BOE compared to 1.6 million BOE in 1996. Fourth quarter 1997 production
totaled 960 thousand BOE.
In the fourth quarter of 1997, the Company made a major purchase of
seismic data covering approximately 250 offshore blocks, or 2,250 square miles,
in the Main Pass/Viosca Knoll area. The offshore staff of exploration
professionals has doubled in the last six months to facilitate new exploration
and exploitation of existing fields.
The Gulf of Mexico will continue to be a major focus area for the
Company. Estimated 1998 capital expenditures are expected to total $50 million,
including $12 million to install or upgrade platforms and related facilities and
to complete three development wells. The remainder is for the purchase of
additional seismic data and to drill up to twelve exploratory wells. The Company
will continue its acquisition efforts in the area and the evaluation of existing
properties for additional exploratory or development potential.
3
<PAGE>
Pabst/Busch Fields. The Pabst (Main Pass 259) and Busch (Main Pass 255)
Fields are located in the Main Pass/Viosca Knoll area offshore Louisiana and
Alabama. The Company continued development and exploration on and around the
Pabst and Busch fields during 1997. Three development wells were drilled at the
Busch field to the 7,900 foot Miocene sand bringing the total to six wells
producing from this field. Two development wells were drilled from the Pabst
platform and one recompletion and one workover were also conducted during the
year. The 12 wells at the Pabst field produce from a series of Miocene zones
ranging from 7,700 to 11,500 feet. The Company drilled a dry hole in Main Pass
248 during 1997 which is northwest of the Pabst platform.
The Company had firm transportation on Viosca Knoll Gathering System
for 100 MMcf per day gross (41 MMcf per day net) covering both platforms during
1997. The Pabst platform facilities are capable of production rates of 110 MMcf
per day and the Busch platform facilities were capable of 60 MMcf per day before
the upgrade in 1998. As of year end, the 12 wells producing from the Pabst
platform had a combined gross well deliverability of 175 MMcf per day and the
six wells producing from the Busch platform had a combined gross well
deliverability of 120 MMcf per day. During 1997, the Company's production from
the two platforms was limited by both the take away capacity and platform
facilities constraints.
During 1997, the Company generally produced the wells at Main Pass 259
in favor of the wells at Main Pass 255 due to the greater condensate yield at
Main Pass 259, except when additional interruptible space was available on the
Viosca Knoll system. Net production from the two fields averaged 56.2 MMcfe per
day in 1997 compared to 19.7 MMcfe per day in 1996. The increase in net
production was primarily the result of including prior year acquisitions of
additional interests for the full year.
The pipeline take away constraints were improved for existing
deliverability when Viosca Knoll system looped its 20 inch line in December
1997. Effective January 1998, the Company's take away capacity increased to 175
MMcf per day gross (72 MMcf per day net) for the two platforms. In addition, the
Main Pass 255 facilities were upgraded by the installation of compression
increasing the platform production capabilities from 55 MMcf per day to 90 MMcf
per day.
At the end of 1997, proved reserves totaled 62.0 Bcf of gas and 297,000
barrels of oil or 10.6 million BOE, as compared to 52.1 Bcf of gas and 932,000
barrels of oil, or 9.6 million BOE at year end 1996. The Pretax PW 10% Value at
December 31, 1997 was $109.4 million. This increase in reserves is primarily
attributable to better than expected performance and extensions of the fields
resulting from further development work. Two exploratory wells are scheduled to
be drilled during 1998.
Ingrid Field. The Ingrid Field (Main Pass 261) was discovered in 1996,
with a second confirmation well also drilled in the same year. The Company has a
50% working interest and a 37% net revenue interest. Proved reserves from both
wells were discovered in the Tex W sands series at approximately 11,000 to
13,000 feet. During 1997, the Company focused on the installation of a platform
for production operations and arranging for transportation and marketing. The
Main Pass 261 platform facilities are under construction with 150 MMcf per day
capacity. The platform jacket was installed in August 1997 and the deck in
February 1998. Tie in of the facilities is underway and production from the
first two wells is expected to commence in April 1998. Initial transportation
has been arranged on Viosca Knoll system at 75 MMcf per day gross to the
Company's working interest (56 MMcf per day net) until a second pipeline is
available in the second half of 1998. The new pipeline system will connect
onshore Alabama directly to the Main Pass 261 platform. An extension of the line
will then connect the Main Pass 261 platform to the Main Pass 259 platform at
the Pabst field. The Company has firm transport in the new system to cover
projected production volumes from the Main Pass area and will retain 60 MMcf per
day gross of firm transport to the Company's working interest (41 MMcf per day
net) on the Viosca Knoll system.
In the fourth quarter of 1997, two additional wells were spudded and in
progress at year end. Pipe was set on both wells and the Company expects to
complete and further test the wells after initial production begins from the
Ingrid platform. Two additional wells are planned for 1998 at Main Pass 261.
Total proved reserves in the field for the Company's interest were 6.5 million
BOE (34.4 Bcf of gas and 798,000 barrels of oil) at year end, with a Pretax PW
10% Value of $52 million.
Other Gulf of Mexico. The Company has interests and operates in several
other areas in the Gulf of Mexico, with working interests ranging from 14% to
100%. During 1998, the Company will continue to evaluate these blocks for
4
<PAGE>
additional exploratory or development potential using 3-D seismic data. The
Company plans to drill up to four exploratory wells to test these prospects
during 1998 and 1999. The Company also intends to subsea complete the South
Timbalier 231 #1 well and tie it back to an adjacent platform. Production is
expected to begin in third quarter of 1998.
North Louisiana
The Company's focus in North Louisiana in 1998 is to drill and test
several different reef settings that were identified with the 3-D seismic
program. During 1996 and 1997, the Company and its partners conducted two 3-D
seismic surveys covering 166 square miles in three acreage blocks out of the
Company's over 560,000 acres controlled in the area. Merging and interpreting
the two data sets was completed in 1997. The Company is preparing to drill four
exploratory wells targeting different types of reef anomalies at depths between
15,000 and 17,000 feet. The first well is scheduled for second quarter 1998, and
a second rig is expected to begin drilling shortly thereafter. These wells
require approximately 90 to 100 days to drill and an additional 30 to 60 days to
complete and test. Results from the first two wells are expected in late third
or early fourth quarter 1998. If successful, the Company has mapped sufficient
reef anomalies to support a multi-rig drilling program beginning in 1999. The
Company retains a 33% working interest in the current prospects within the area
of the seismic surveys and is the operator of drilling and production
activities.
The Company has over 6,000 miles of 2-D seismic data over its mineral
holdings in North Louisiana and has mapped numerous reef anomalies as well as
untested salt domes and associated drilling prospects in the Cotton Valley
Sands, Hosston Sands and Cretaceous Limes. Additional 3-D surveys to extend the
play are expected to commence late in 1998 pending drilling results. In
addition, the Company retains the option to increase its working interest from
33% to 50% in subsequent 3-D surveys and associated prospects.
Rocky Mountains
The Company's Rocky Mountain Region continues to focus on several
growth areas in the western Rockies. The Company increased its drilling activity
in 1997 by 65%, drilling a total of 71 wells and positioning itself for
continued future growth. The Company's core development projects are in the
Washakie, Green River, and Piceance Basins. These projects continue as the main
thrust of the Region's activity; however, drilling success in the Wind River and
Big Horn Basins in 1997 and additional drilling in 1998 provides the potential
for these areas to add significant future growth in production and reserves.
Washakie Basin. Since the mid-1980's, the Company's properties in the
Barrel Springs Unit, the Blue Gap Field and the North Standard Draw area of the
Washakie Basin in southern Wyoming, together with its gas gathering and
transportation facilities there, have been one of its most significant assets.
During 1997, the Company continued to develop Mesaverde sands in the Washakie
Basin near its existing properties. Nineteen wells were put on sales in 1997 at
depths ranging from 8,000 to 11,500 feet. Five wells were in progress at year
end. Net production of gas, which accounts for approximately 95% of the
reserves, during the year averaged 29.5 MMcf per day, as compared to average
1996 production of 25.4 MMcf per day. Proved reserves at year end totaled 1.3
million barrels of oil and 139.3 Bcf of gas, or 24.6 million BOE, as compared to
1.1 million barrels and 133.1 Bcf, or 23.3 million BOE, at the end of 1996. This
increase in reserves is primarily attributable to better than expected
performance and extensions of the field. The Company expects to accelerate its
activity in this area in 1998, with plans to drill 32 to 36 wells at net costs
expected to range from $500,000 to $775,000 per well. Significant portions of
this area are the subject of a currently pending environmental impact statement.
Pending approval of the statement, which is not expected until 1999, drilling in
the affected areas will be limited.
The Company currently operates 146 wells in the Washakie Basin and
holds hundreds of potential drilling locations, 40 of which were classified as
proved undeveloped at year end 1997. The Company holds interests in
approximately 95,000 gross (75,000 net) undeveloped acres in this area.
Deep Green River. Through the year, the Company continued development
of the fluvial Lance sands in the deep portion of the Green River Basin. The
Company participated in 19 wells during 1997, with five wells in progress at
year end. Year end proved reserves totaled 373,000 barrels of oil and 48.7 Bcf
of gas, or 8.5 million BOE, as compared to 175,000 barrels of oil and 21.7 Bcf
of gas, or 3.8 million BOE, at year end 1996. This increase in reserves is
5
<PAGE>
primarily attributable to better than expected performance and extensions of the
field. With 30 wells, 19 of which are operated by the Company, on sales at year
end, net production averaged 1,733 BOE per day during 1997. This more than
doubled 1996's average production of 829 BOE per day, despite the Company's sale
of 50% of its interest in the project to an industry partner in July 1996. The
Company holds interests in approximately 92,000 gross (42,000 net) undeveloped
acres in this project. At the end of 1997, proved undeveloped reserves were
assigned to 20 locations. The Company expects to participate in drilling 25 to
30 wells in 1998. Further expansion of drilling in this area is awaiting
approval of an environmental impact statement, which if approved as expected in
April 1998, will allow the Company to participate in drilling 30 to 40 wells per
year after 1998.
Piceance Basin. The Company operates the 53,000 acre Hunter Mesa Unit,
the 9,000 acre Grass Mesa Unit and the 26,000 acre Divide Creek Unit in the
southeast portion of the Piceance Basin. At year end, the Company owned
approximately 97,000 gross (43,000 net) undeveloped acres in this area. During
1997, the Company participated in 23 new wells to develop and further delineate
the fields. Twenty-two wells (including one in progress at the beginning of
1997) were put on sales, and two were in progress at year end. Net gas
production averaged 8.8 MMcf per day in 1997. This is down slightly from 9.5
MMcf per day in 1996 reflecting the Company's sale of 45% of its interest in
this project in May 1996. At year end 1997, there were 87 producing wells, 72 of
which are operated by the Company. Proved reserves at year end were 33.7 Bcf of
gas and 150,000 barrels of oil, or 5.8 million BOE, as compared with 32.2 Bcf
and 118,000 barrels, or 5.5 million BOE, at year end 1996. Proved undeveloped
reserves were assigned to 11 locations at year end 1997. During 1998, the
Company plans to drill 30 to 33 wells to further develop the Company's acreage
positions and evaluate the fields. The primary objective of drilling is the
fluvial sands of the Mesaverde formation at depths of 4,500 to 8,500 feet.
Wind River Basin. The Company owns the Riverton Dome field, a 33,000
acre option on Tribal lands north and east of the field, and a 64,000 acre
primarily undeveloped lease block east of the option lands. The Company acquired
a 3-D seismic survey over the option lands in 1997 and plans to acquire one over
the Riverton Dome field and another on the option lands in 1998. The Company has
a 50% working interest in the option lands and in the eastern lease block. In
late 1997, a new Frontier well was completed on the Tribal block with initial
production over 2,000 Mcf per day. The Company plans to drill four 50% owned
Frontier wells in 1998.
The Riverton Dome field produces approximately 5,000 Mcf per day from
the Frontier and Phosphoria formations and 160 BOE per day from the Tensleep
formation. The Company owns 100% working interest in the 26 wells in this field.
Year end reserves total 447,000 barrels of oil and 21.0 Bcf or 3.9 million BOE.
There is one proved, undeveloped location in the field. Sweet gas is processed
at a Company owned plant; sour gas is processed at a third party plant. In late
1997, a new Tensleep well was completed at an initial rate of 100 barrels of oil
per day. The Company plans to drill 3 Frontier wells and one Tensleep well in
1998. The Tensleep/Phosphoria well is on a portion of the lease lands in which
the Company has a 100% interest. The Frontier is located at 8,000 to 10,500 feet
and the Tensleep around 12,000 feet. Frontier wells cost approximately $1.2
million and Tensleep wells cost approximately $1.5 million each.
Big Horn Basin. The Company has assembled a 156,000 gross (78,000 net)
acre undeveloped lease block which is prospective for Frontier, Muddy, and
Lance/Mesaverde formations. The initial well, completed at the beginning of
1998, tested at 550 Mcf per day and 20 barrels of oil per day from the Frontier,
a rate at which the Company believes can be improved with different frac
techniques. In January 1998, casing was set on the second well located 2.5 miles
northeast of the initial well and testing should commence in the first quarter
1998. Two additional wells are planned for 1998 at net costs of approximately
$1.2 million each.
Uinta Basin. In the Uinta Basin, the Company holds interests in
approximately 94,000 gross (71,000 net) acres. During 1997, the Company
participated in drilling one operated and two non-operated wells in the basin. A
pilot waterflood in the Leland Bench field commenced during the third quarter of
1996. The initial response was observed in 1997 and production continues to
improve. Depending on the level of oil prices, development may begin in the
second half of 1998. A second pilot project, in the Horseshoe Bend Field,
received all necessary regulatory approvals, and injection commenced in December
1997. The response of the pilot projects and the ability to select locations and
enhance waterflood efforts through the use of 3-D seismic data will influence
the ultimate success of these projects. The projects are also sensitive to oil
prices. During the last half of 1996, local oil prices, which had historically
been at a premium to West Texas Intermediate prices, deteriorated and now trade
at a significant discount to such prices. Throughout 1997, black wax crude oil
6
<PAGE>
prices remained relatively low with little improvement expected in the near
term. As a result, additional development drilling will likely be curtailed
until oil prices in the area improve.
During 1997, net production from the Uinta Basin averaged 267 barrels
of oil and approximately 1,401 Mcf of gas per day, as compared to 291 barrels
and 1,255 Mcf per day during 1996. At year end, the Company had interests in 126
producing wells, 74 of which were operated by the Company. Proved reserves at
year end were 596,000 barrels of oil and 4.4 Bcf of gas, or 1.3 million BOE, as
compared to 1.2 million barrels and 3.9 Bcf, or 1.8 million BOE, at the end of
1996. The decrease in oil reserves is primarily due to normal field production
decline coupled with significantly lower year end oil prices. Gas reserves
increased primarily due to improved performance following work programs to
increase production during 1997.
Northern Wyoming. The Company holds significant interests in two large,
mature oil fields undergoing waterflood in Northern Wyoming, the Hamilton Dome
and Salt Creek fields. The Company's 1997 production from these fields averaged
3,183 BOE per day. At year end, net proved reserves at these fields totaled 12.4
million BOE, including 12.3 million barrels of oil and 566 MMcf of gas, compared
to 12.2 million BOE (12.1 million barrels of oil and 531 MMcf of gas) at the end
of 1996. In Hamilton Dome, the operator has reduced the production decline in
the field through an accelerated workover program throughout 1997. This work has
replaced the production in 1997 and kept the reserves virtually unchanged.
Hamilton Dome produces sour crude oil primarily from the Tensleep, Madison and
Phosphoria formations at depths of 2,500 to 5,500 feet. Salt Creek produces
sweet crude oil from the Wall Creek formation at depths of 2,000 to 2,900 feet.
7
<PAGE>
Proved Reserves
The following table sets forth estimated year end proved reserves for
each of the years in the three year period ended December 31, 1997 for the
Company and the Company, excluding Patina, as of December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Consolidated Excluding Patina
December 31, December 31,
----------------------------------- ---------------------
1997 1996 1995 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Crude oil and liquids (MBbl)
Developed 16,101 31,869 21,637 16,101 16,070
Undeveloped 659 8,628 2,610 659 1,952
-------- -------- -------- -------- --------
Total 16,760 40,497 24,247 16,760 18,022
======== ======== ======== ======== ========
Natural gas (MMcf)
Developed 297,490 443,441 330,524 297,490 200,664
Undeveloped 65,678 162,195 65,194 65,678 108,313
-------- -------- -------- -------- --------
Total 363,168 605,636 395,718 363,168 308,977
======== ======== ======== ======== ========
Total MBOE 77,288 141,436 90,200 77,288 69,518
======== ======== ======== ======== ========
</TABLE>
The following table sets forth the estimated pretax future net revenues
from the production of proved reserves and the Pretax PW 10% Value of such
revenues.
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------
Developed Undeveloped (a) Total
--------- --------------- ---------
(In thousands)
<S> <C> <C> <C>
1998 $ 98,710 $ (6,143) $ 92,567
1999 76,583 1,472 78,055
2000 56,211 5,967 62,178
Remainder 319,208 61,204 380,412
--------- --------- ---------
Total $ 550,712 $ 62,500 $ 613,212
========= ========= =========
Pretax PW 10% Value (b) $ 351,955 $ 23,318 $ 375,273
========= ========= =========
<FN>
(a) Net of estimated capital costs, including estimated costs of $11.8 million during 1998.
(b) The after tax PW 10% value of proved reserves totaled $291.8 million at year end 1997.
</FN>
</TABLE>
The quantities and values shown in the preceding tables are based on
realized prices in effect at December 31, 1997, averaging $14.42 per barrel of
oil and $2.12 per Mcf of gas. References prices as of December 31, 1997 were
NYMEX oil of $15.50 per barrel, Henry Hub gas of $2.55 per Mcf and CIG index gas
of $1.94 per Mcf. Price reductions decrease reserve values by lowering the
future net revenues attributable to the reserves and also by reducing the
quantities of reserves that are recoverable on an economic basis. Price
increases have the opposite effect. Any significant decline or increase in
prices of oil or gas could have a material effect on the Company's financial
condition and results of operations.
Proved developed reserves are proved reserves that are expected to be
recovered from existing wells with existing equipment and operating methods.
Proved undeveloped reserves are proved reserves that are expected to be
recovered from new wells drilled to known reservoirs on undrilled acreage for
which the existence and recoverability of such reserves can be estimated with
reasonable certainty, or from existing wells where a relatively major
expenditure is required to establish production.
8
<PAGE>
Future prices received for production and future production costs may
vary, perhaps significantly, from the prices and costs assumed for purposes of
these estimates. There can be no assurance that the proved reserves will be
developed within the periods indicated or that prices and costs will remain
constant. With respect to certain properties that historically have experienced
seasonal curtailment, the reserve estimates assume that the seasonal pattern of
such curtailment will continue in the future. There can be no assurance that
actual production will equal the estimated amounts used in the preparation of
reserve projections. See "Risk Factors and Investment Considerations."
Netherland, Sewell & Associates, Inc. ("NSAI"), independent petroleum
consultants, prepared estimates of the Company's proved reserves which
collectively represent 87% of Pretax PW 10% Value as of December 31, 1997. No
estimates of the Company's reserves comparable to those included herein have
been included in reports to any federal agency other than the SEC.
9
<PAGE>
Production, Revenue and Price History
The following table sets forth information regarding net production of
crude oil, liquids and natural gas, revenues and expenses attributable to such
production and to natural gas transportation, processing and marketing and
certain price and cost information for each of the years in the five year period
ended December 31, 1997 for the Company. Also set forth is 1997 and 1996 data
for the Company, excluding Patina.
<TABLE>
<CAPTION>
Consolidated Excluding Patina
-------------------------------------------------------------- -----------------------
1997 1996 1995 1994 1993 1997 1996
--------- --------- --------- ---------- --------- --------- ---------
(Dollars in thousands, except prices and per barrel equivalent information)
<S> <C> <C> <C> <C> <C> <C> <C>
Production
Oil (MBbl) 3,490 3,884 4,278 4,366 3,451 2,050 2,196
Gas (MMcf) 61,638 55,840 53,227 43,809 35,080 41,377 31,893
MBOE (a) 13,763 13,191 13,149 11,668 9,297 8,946 7,512
Revenues
Oil $ 65,886 $ 79,201 $ 72,550 $ 64,625 $ 53,174 $ 37,397 $ 44,661
Gas (b) 141,330 110,126 72,058 73,233 71,467 96,454 62,482
--------- --------- --------- --------- --------- -------- ---------
Subtotal 207,216 189,327 144,608 137,858 124,641 133,851 107,143
Transportation, processing
and marketing 7,004 17,655 38,256 107,247 94,839 7,004 17,655
--------- --------- --------- --------- --------- -------- ---------
Total $ 214,220 $ 206,982 $ 182,864 $ 245,105 $ 219,480 $140,855 $ 124,798
--------- --------- --------- --------- --------- -------- ---------
Operating expenses
Production $ 48,523 $ 49,638 $ 52,486 $ 46,267 $ 41,401 $ 35,016 $ 35,118
Transportation, processing
and marketing 6,692 15,020 29,374 94,177 85,640 6,692 15,020
--------- --------- --------- --------- --------- -------- ---------
$ 55,215 $ 64,658 $ 81,860 $ 140,444 $ 127,041 $ 41,708 $ 50,138
--------- --------- --------- --------- --------- -------- ---------
Direct operating margin $ 159,005 $ 142,324 $ 101,004 $ 104,661 $ 92,439 $ 99,147 $ 74,660
========= ========= ========= ========= ========= ======== =========
Production data
Average sales price (c)
Oil (Bbl) $ 18.88 $ 20.39 $ 16.96 $ 14.80 $ 15.41 $ 18.24 $ 20.34
Gas (Mcf) (b) 2.29 1.97 1.35 1.67 1.94 2.33 1.96
BOE (a) 15.06 14.35 11.00 11.82 13.41 14.96 14.26
Avg. production expense/BOE $ 3.53 $ 3.76 $ 3.99 $ 3.97 $ 4.45 $ 3.91 $ 4.67
Avg. production margin/BOE $ 11.53 $ 10.59 $ 7.01 $ 7.85 $ 8.96 $ 11.05 $ 9.59
<FN>
(a) Gas production is converted to oil equivalents at the rate of 6 Mcf per barrel.
(b) Sales of natural gas liquids are included in gas revenues.
(c) The Company estimates that its composite net wellhead prices at December 31, 1997 were approximately $2.12 per Mcf of
gas and $14.42 per barrel of oil.
</FN>
</TABLE>
10
<PAGE>
Producing Wells
The following table sets forth certain information at December 31, 1997
relating to the producing wells in which the Company owned a working interest.
The Company also held royalty interests in 101 producing wells. Wells are
classified as oil or gas wells according to their predominant production stream.
<TABLE>
<CAPTION>
Predominant Gross Net
Product Stream Wells Wells
-------------- ----- -----
<S> <C> <C>
Crude oil and liquids 1,023 334
Natural gas 463 223
----- -----
1,486 557
===== =====
</TABLE>
Acreage
The following table sets forth certain information at December 31, 1997
relating to domestic acreage held by the Company. Developed acreage is acreage
assigned to producing wells. For offshore blocks, in the Gulf of Mexico, the
entire block is classified as developed if a producing well has been drilled
within its boundries. Such blocks could contain up to 5,000 gross acres. In most
instances, the Company does not consider such blocks to be fully developed.
Undeveloped acreage is acreage held under lease, permit, contract or option that
is not in a spacing unit for a producing well, including leasehold interests
identified for development or exploratory drilling.
<TABLE>
<CAPTION>
Gross Net
--------- ---------
<S> <C> <C>
Developed 176,190 106,015
Undeveloped (a) 1,131,657 704,668
--------- ---------
1,307,847 810,683
========= =========
<FN>
(a) The Company also holds 130,000 net undeveloped acres under option in
North Louisiana as of February 27, 1998.
</FN>
</TABLE>
Drilling Results
The following table sets forth information with respect to wells
drilled during the past three years. The information should not be considered
indicative of future performance, nor should it be assumed that there is
necessarily any correlation between the number of productive wells drilled,
quantities of reserves found or economic value. Productive wells are those that
produce commercial quantities of hydrocarbons whether or not they produce a
reasonable rate of return.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Development wells
Productive
Gross 66.0 69.0 223.0
Net 33.3 38.9 133.1
Dry
Gross 3.0 2.0 5.0
Net 1.3 .5 3.8
Exploratory wells
Productive
Gross 2.0 3.0 -
Net .7 .5 -
Dry
Gross 2.0 2.0 -
Net 1.7 1.6 -
</TABLE>
At December 31, 1997, the Company had 15 gross (7.1 net) development
wells and 3 gross (1.5 net) exploratory wells in progress.
11
<PAGE>
Customers and Marketing
The Company's oil and gas production is principally sold to end users,
marketers and other purchasers having access to pipeline facilities near its
properties. Where there is no access to pipelines, crude oil is trucked to
storage facilities. In 1997, Sonat Marketing Company accounted for approximately
17% of revenues, Engage Energy accounted for approximately 14%, and Duke Power
and Energy, which purchases a significant portion of Patina's gas production,
accounted for approximately 12%. In 1996, Duke Power and Energy accounted for
approximately 11% of revenues. In 1995, Amoco Production Company accounted for
approximately 10% of revenues. The marketing of oil and gas by the Company can
be affected by a number of factors that are beyond its control and whose future
effect cannot be accurately predicted. The Company does not believe, however,
that the loss of any of its customers would have a material adverse effect on
its operations.
The Company's gas marketing strategy focuses on aligning the Company
with substantial marketers that are active in key ares of operation. The Company
also continues to participate in the midstream gas facilities business through
ownership of pipelines and alliances with other companies.
In the Rocky Mountain region, essentially all of the Company's gas is
marketed through contracts with Engage Energy (a partnership between the Coastal
Corporation and Westcoast Energy, Inc.). Under the arrangements, the Company
receives market value for its gas as it is delivered into mainline pipeline
receipt points. The Company also participates in downstream marketing margins
realized by Engage, after recovery of costs, for a broad spectrum of Engage's
marketing activities in Wyoming, Colorado and Utah. The agreements with Engage
extend through March 1999.
Beginning in 1997, the Company pooled its gas transportation facilities
in Wyoming and Colorado with facilities owned by Coastal Field Services to form
Great Divide Gas Services. Great Divide is owned 73% by Coastal Field Services
and 27% by the Company, and encompases over 600 miles of pipeline connected to
more than 650 wells. In addition to expanding existing pipelines in the Uinta,
Piceance and Washakie Basins, Great Divide is working to develop new Rocky
Mountain pipeline and processing opportunities. In 1997, Great Divide was
responsible for the development of a new 16 mile pipeline linking the Company's
gas production in the Piceance Basin directly to Colorado Interstate Gas.
In the Gulf of Mexico, the Company has entered into a new contract with
Williams Energy Services Company ("WESCO") to increase the market access for gas
in this area. In conjunction with the WESCO contract, Transcontinental Gas
Pipeline Corporation ("Transco") and Williams Field Services ("WFS") will be
extending new pipelines into the Main Pass area, with construction expected to
be completed by mid-1998.
As described in "Operations - Offshore - Gulf of Mexico," during 1997
the Company also upgraded its facilities and made arrangements with the major
gathering system in the Main Pass/Viosca Knoll area to remove historical
restraints on production in that area. Since the beginning of 1998, capacity
constraints have increased on pipelines downstream of the gathering system in
southeastern Louisiana. Although the Company cannot predict the extent or
duration of these constraints, it is possible the constraints will depress
realized prices, reduce production, or both. At the present time, the Company
believes that the completion of the new Transco and WFS facilities will allow
the Company's Main Pass gas production to be delivered to markets in the Mobile
Bay area of Alabama, avoiding the pipeline capacity constraints that have
recently developed in southeastern Louisiana.
Title to Properties
Title to the properties is subject to royalty, overriding royalty,
carried and other similar interests and contractual arrangements customary in
the oil and gas industry, to liens incident to operating agreements and for
current taxes not yet due and other comparatively minor encumbrances.
As is customary in the oil and gas industry, only a limited
investigation as to ownership is conducted at the time undeveloped properties
believed to be suitable for drilling are acquired. Prior to the commencement of
drilling on a tract, a detailed title examination is conducted and curative work
is performed with respect to known significant title defects.
12
<PAGE>
Regulation
Regulation of Drilling and Production. The Company's operations are
affected by political developments and federal and state laws and regulations.
Oil and gas industry legislation and administrative regulations are periodically
changed for a variety of political, economic and other reasons. Numerous
departments and agencies, federal, state, local and Indian, issue rules and
regulations binding on the oil and gas industry, some of which carry substantial
penalties for failure to comply. The regulatory burden on the oil and gas
industry increases the Company's cost of doing business, decreases flexibility
in the timing of operations and may adversely affect the economics of capital
projects.
A substantial portion of the Company's oil and gas leases in the Gulf
of Mexico and in the Rocky Mountain area were granted by the U.S. Government and
are administered by two federal agencies, the Bureau of Land Management ("BLM")
and the Minerals Management Service ("MMS"). These leases are issued through
competitive bidding, contain relatively standard terms and require compliance
with detailed BLM and MMS regulations and orders (which are subject to change by
the BLM and MMS). For offshore operations, lessees must obtain MMS approval for
exploration plans and development and production plans before commencement of
operations. In addition to permits required from other agencies (such as the
Coast Guard, the Army Corps of Engineers and the Environmental Protection
Agency), lessees must obtain a permit from the BLM or MMS prior to the
commencement of onshore or offshore drilling.
State regulatory authorities have also established rules and
regulations requiring permits for drilling, reclamation and plugging bonds and
reports concerning operations, among other matters. Many states also have
statutes and regulations governing a number of environmental and conservation
matters.
In the past, the federal government has regulated the prices at which
oil and gas could be sold. Prices of oil and gas sold by the Company are not
currently regulated. In recent years, the Federal Energy Regulatory Commission
("FERC") has taken significant steps to increase competition in the sale,
purchase, storage and transportation of natural gas. Under these orders, FERC
has caused pipelines to open up access to transportation, essentially
eliminating pipelines from the role of natural gas merchant and "unbundled"
transportation services so that a buyer can purchase just those services it
needs. FERC's regulatory programs generally allow more accurate and timely price
signals from the consumer to the producer and, on the whole, have helped gas
become more responsive to changing market conditions. To date, the Company
believes it has not experienced any material adverse effect as the result of
these programs. Nonetheless, increased competition in gas markets can and does
add to price volatility and inter-fuel competition, which increases the pressure
on the Company to manage its exposure to changing conditions and position itself
to take advantage of changing market forces.
Environmental Regulations. The operations of the Company are subject to
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. These laws and
regulations may require the acquisition of a permit before drilling commences,
prohibit drilling activities on certain lands lying within wilderness and other
protected areas and impose remediation obligations and substantial liabilities
for pollution resulting from drilling operations. Such laws and regulations also
restrict air or other pollution and disposal of wastes resulting from the
operation of gas processing plants, pipeline systems and other facilities owned
directly or indirectly by the Company. Drilling and other projects on federal
leases may also require preparation of an environmental assessment or
environmental impact statement, which could delay the commencement of operations
and could limit the extent to which the leases may be developed. See "Risk
Factors and Investment Considerations - Environmental and Other Government
Regulation."
The Company currently owns or leases numerous properties that have been
used for many years for natural gas and crude oil production. Although the
Company believes that it and other previous owners have utilized operating and
disposal practices that were standard in the industry at the time, hydrocarbons
or other wastes may have been disposed of or released on or under the properties
owned or leased by the Company. In connection with its most significant
acquisitions, the Company has performed environmental assessments and found no
material environmental noncompliance or clean-up liabilities requiring action in
the near or intermediate future, although some matters identified in the
environmental assessments are subject to ongoing review. The Company has assumed
responsibility for some of the matters identified. Some of the Company's
properties, particularly larger units that have been in operation for several
decades, may require significant costs for reclamation and restoration when they
13
<PAGE>
are divested or when operations eventually cease. Environmental assessments have
not been performed on all of the Company's properties. To date, expenditures for
environmental control facilities and for remediation have not been material to
the Company, and the Company does not expect that, under current regulations,
future expenditures will have a material adverse impact on the Company.
Under the Oil Pollution Act of 1990 ("OPA"), owners and operators of
onshore facilities and pipelines and lessees or permittees of an area in which
an offshore facility is located ("Responsible Parties") are strictly liable on a
joint and several basis for removal costs and damages that result from a
discharge of oil into United States waters. These damages include natural
resource damages, real and personal property damages and economic losses. OPA
limits the strict liability of Responsible Parties for removal costs and damages
that result from a discharge of oil to $350 million in the case of onshore
facilities and $75 million plus removal costs in the case of offshore
facilities, except that no limits apply if the discharge was caused by gross
negligence or willful misconduct, or by the violation of an applicable federal
safety, construction or operating regulation by the Responsible Party, its agent
or subcontractor.
States in which the Company operates have also adopted regulations to
implement the Federal Clean Air Act. These new regulations are not expected to
have a significant impact on the Company or its operations. In the longer term,
regulations under the Federal Clean Air Act may increase the number and type of
the Company's facilities that require permits, which could increase the
Company's cost of operations and restrict its activities in certain areas.
Risk Factors and Investment Considerations
Price Fluctuations and Markets. The Company's results of operations are
highly dependent upon the prices received for the Company's oil and natural gas
production. The majority of the Company's sales of oil and natural gas are made
in the spot market, or pursuant to contracts based on spot market prices, and
not pursuant to long-term, fixed-price contracts. Accordingly, the prices
received by the Company for its oil and natural gas production are dependent
upon numerous factors beyond the control of the Company. These factors include,
but are not limited to, the level of consumer product demand, governmental
regulations and taxes, the price and availability of alternative fuels, the
level of foreign imports of oil and natural gas, and the overall economic
environment. Significant declines in prices for oil and natural gas could have a
material adverse effect on the Company's financial condition, results of
operations and quantities of reserves recoverable on an economic basis. Should
the industry experience significant price declines from current levels or other
adverse market conditions, the Company may not be able to generate sufficient
cash flow from operations to meet its obligations and make planned capital
expenditures.
Price reductions decrease reserve values by lowering the future net
revenues attributable to the reserves and also by reducing the quantities of
reserves that are recoverable on an economic basis. Price increases have the
opposite effect. Prices in effect at December 31, 1997 averaged $14.42 per
barrel of oil and $2.12 per Mcf of gas. Reference prices as of December 31, 1997
were NYMEX oil of $15.50 per barrel, Henry Hub gas of $2.55 per Mcf and CIG
index gas of $1.94 per Mcf. Any significant decline in prices of oil or gas
could have a material adverse effect on the Company's financial condition and
results of operations.
The availability of a ready market for the Company's oil and natural
gas production also depends on a number of factors, including the demand for and
supply of oil and natural gas and the proximity of reserves to, and the capacity
of, oil and gas gathering systems, pipelines or trucking and terminal
facilities. Wells may be shut-in or constrained for lack of a market or due to
inadequacy or unavailability of pipeline or gathering system capacity. See
"Customers and Marketing."
Replacement of Reserves. In general, the volume of production from oil
and natural gas properties declines as reserves are depleted. Except to the
extent the Company acquires properties containing proved reserves or conducts
successful development and exploration activities, or both, the proved reserves
of the Company will decline as reserves are produced. The Company's future oil
and gas production is, therefore, highly dependent upon its level of success in
finding or acquiring additional reserves at attractive rates of return. In order
to increase reserves and production, the Company must continue its development
drilling and recompletion programs, pursue its exploration drilling programs or
undertake other replacement activities. The Company's current strategy includes
increasing its reserve base by continuing to exploit its existing properties, by
pursuing exploration opportunities and acquiring producing properties. There can
be no assurance, however, that the Company's planned development and exploration
14
<PAGE>
projects and acquisition activities will result in significant additional
reserves or that the Company will have continuing success drilling productive
wells at favorable finding costs.
Substantial Capital Requirements. The Company makes, and will continue
to make, substantial capital expenditures for the acquisition, development,
exploration, production and abandonment of oil and natural gas reserves. The
Company intends to finance such capital expenditures primarily with funds
provided by operations and borrowings under its bank credit facility. During
1997, the Company's capital expenditures totaled $116.0 million, including
$106.7 million for development, exploration and gas transportation facilities
and $9.3 million for acquisitions. During 1998, the Company expects to increase
its capital expenditures, excluding acquisitions, to $130 to $140 million.
The Company believes that, after debt service, it will have sufficient
cash provided by operating activities and capital resources to fund planned
capital expenditures for exploration and development activities for the
foreseeable future. However, if revenues decrease as a result of lower oil or
gas prices or otherwise or if the Company incurs substantial additional
indebtedness to finance acquisitions or for other purposes, the Company may have
limited ability to expend the capital necessary to replace its reserves or to
maintain production at current levels, resulting in a decrease in production
over time. If the Company's cash flow from operations is not sufficient to
satisfy its capital expenditure requirements, there can be no assurance that
additional debt or equity financing will be available to meet these
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Financial Condition and Capital Resources."
Acquisition Risks. The Company continually evaluates acquisition
opportunities and frequently engages in bidding and negotiation for
acquisitions, many of which are substantial. If successful in this process, the
Company may be required to alter or increase substantially its capitalization to
finance these acquisitions through the issuance of additional debt or equity
securities, the sale of production payments or otherwise (although the Company's
credit facility and the Indenture for its subordinated notes include covenants
that limit the Company's ability to incur additional indebtedness). Changes in
capitalization may significantly affect the risk profile of the Company.
Significant acquisitions can change the nature of the operations and business of
the Company depending upon the character of the acquired properties, which may
be substantially different in operating or geologic characteristics or
geographic location from existing properties. While the Company intends to
concentrate on acquiring producing properties with development and exploration
potential located in its current areas of operation, the Company may decide to
pursue acquisitions of properties located in other geographic regions. There can
be no assurance that the Company will be successful in the acquisition of any
material property interests.
Drilling Risks. Drilling activities are subject to many risks,
including the risk that no commercially productive reservoirs will be
encountered. There can be no assurance that new wells drilled by the Company
will be productive or that the Company will recover all or any portion of its
investment. Drilling for oil and natural gas may involve unprofitable efforts,
not only from dry wells, but from wells that are productive but that do not
produce sufficient net revenues to return a profit after drilling, operating and
other costs. The cost of drilling, completing and operating wells is often
uncertain. The Company's drilling operations may be curtailed, delayed or
canceled as a result of numerous factors, many of which are beyond the Company's
control, including title problems, weather conditions, compliance with
environmental and other governmental requirements and shortages or delays in the
delivery of equipment and services.
Operating Hazards and Uninsured Risks. The Company's operations are
subject to hazards and risks inherent in drilling for, producing and
transporting oil and natural gas, such as fires, natural disasters, explosions,
formations with abnormal pressures, blowouts, cratering, pipeline ruptures and
spills, any of which can result in loss of hydrocarbons, environmental
pollution, personal injury claims and other damage to properties of the Company
and others. As protection against operating hazards, the Company maintains
insurance coverage against some, but not all, potential losses. The Company's
coverages include, but are not limited to, operator's extra expense, physical
damage on certain assets, comprehensive general liability, automobile and
workers' compensation insurance. The Company believes that its insurance is
adequate and customary for companies of a similar size engaged in operations
similar to those of the Company, but losses could occur for uninsurable or
uninsured risks or in amounts in excess of existing insurance coverage. The
occurrence of an event that is not fully covered by insurance could have a
material and adverse impact on the Company's financial condition and results of
operations.
15
<PAGE>
Uncertainty of Estimates of Reserves and Future Net Revenues. There are
numerous uncertainties inherent in estimating quantities of proved reserves,
including many factors beyond the control of the Company. The reserve
information included in this annual report represents estimates based on reports
prepared by the Company's independent petroleum engineers. Petroleum engineering
is not an exact science. Estimates of economically recoverable oil and natural
gas reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulation by governmental agencies and assumptions concerning future oil and
natural gas prices, future operating costs, severance and excise taxes, capital
expenditures and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of
classifications of such reserves based on risk of recovery and estimates of
expected future net cash flows prepared by different engineers or by the same
engineers at different times may vary substantially. Actual production, revenues
and expenditures with respect to the Company's reserves will likely vary from
estimates, and the variances may be material.
The present values of future net cash flows referred to in this annual
report should not be construed as either the current market value of the
estimated oil and gas reserves attributable to the Company's properties or a
prediction of the future net cash flows from those properties. In accordance
with applicable requirements of the Securities and Exchange Commission (the
"Commission"), the discounted future net cash flows from proved reserves are
determined in accordance with certain rules designed to facilitate uniform
presentation by different companies. The present values and future cash flows
are generally based on prices and costs as of the date of the estimate, whereas
actual future prices and costs may be materially higher or lower. Future net
cash flows also will be affected by factors such as the amount and timing of
actual production and expenses, supply and demand for oil and gas, curtailments
or increases in consumption by gas purchasers and changes in governmental
regulations or taxation. In addition, the 10% discount factor, which is required
by the Commission to be used to calculate discounted future net cash flows for
reporting purposes, is not necessarily the most appropriate discount factor
based on interest rates in effect from time to time and risks associated with
the Company or the oil and gas industry in general.
Environmental and Other Governmental Regulation. The Company's
operations are affected by extensive regulation pursuant to various federal,
state and local laws and regulations relating to the exploration for, and the
development, production, transportation and marketing of, oil and natural gas
and the release of materials into the environment or otherwise relating to
protection of the environment. In particular, the Company's oil and natural gas
exploration, development and production, and its activities in connection with
the storage and transportation of liquid hydrocarbons, are subject to stringent
environmental regulations by governmental authorities. Such regulations have
increased the costs of planning, designing, drilling, installing, operating and
abandoning oil and natural gas wells and other related facilities.
The Company is required to expend significant resources, both financial
and managerial, to comply with environmental regulations and permitting
requirements. Although the Company believes that its operations are in general
compliance with all such laws and regulations, risks of substantial costs and
liabilities are inherent in oil and natural gas operations, and there can be no
assurance that significant costs and liabilities will not be incurred in the
future. Moreover, it is possible that other developments, such as increasingly
strict environmental laws and regulations and enforcement policies thereunder,
and claims for damages to property, employees, other persons and the environment
resulting from the Company's operations, could result in substantial costs and
liabilities in the future.
The Company expects to maintain customary insurance coverage for its
operations, including coverage for sudden environmental damages, but does not
believe that insurance coverage that explicitly covers environmental damages
that occur over time will be available at a reasonable cost. The Company does
not believe that insurance coverage against the full potential liability that
could be caused by environmental damages is currently available at a reasonable
cost. Accordingly, the Company might be subject to uninsured or only partially
insured liability because of the prohibitive premium costs of insuring against
certain hazards.
Drilling and other projects on federal leases may also require
preparation of an environmental assessment or environmental impact statement,
which could delay the commencement of operations and could limit the extent to
which the leases may be developed. Environmental impact statements are currently
pending in two significant areas of the Company's operations, the Deep Green
River Basin and the northern part of the Washakie Basin. Approval of new
drilling in these areas is limited until the statements receive final approval.
While the timing of final approval, and terms of conditions placed on
development in the affected areas, is uncertain, the Company currently does not
16
<PAGE>
expect the statements to significantly impact plans to develop these two areas.
However, delays in approving the statements or the inclusion of unexpected
conditions, could limit or delay development plans in these areas in 1998, and
possibly beyond.
Competition. The oil and gas industry is highly competitive. The
Company will compete in the acquisition, development, production and marketing
of oil and natural gas with major oil companies, other independent oil and
natural gas concerns and individual producers and operators. There is also
competition in the hiring of experienced personnel. Many of the Company's
competitors have substantially greater financial and other resources than the
Company. Furthermore, the oil and natural gas industry competes with other
industries in supplying the energy and fuel needs of industrial, commercial and
other consumers.
Forward-looking Information
All statements other than statements of historical fact contained in
this Annual Report on Form 10-K and other materials filed or to be filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain or will contain or include forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may be or may concern, among other things, capital
expenditures, drilling activity, acquisitions and dispositions, development or
exploratory activities, cost savings efforts, production activities and volumes,
hydrocarbon reserves, hydrocarbon prices, hedging activities and the results
thereof, financing plans, liquidity, regulatory matters, competition and the
Company's ability to realize efficiencies related to certain transactions or
organizational changes.
Forward-looking statements generally are accompanied by words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan," "project,"
"potential" or similar statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove correct. Factors that
could cause the Company's results to differ materially from the results
discussed in such forward-looking statements include the risks described under
"Risk Factors and Investment Considerations," such as the fluctuations of the
prices received or demand for the Company's oil and gas, the ability to replace
depleting reserves, potential additional indebtedness, the requirements for
capital, drilling risks, operating hazards, the cost and availability of
drilling rigs, acquisition risks, the uncertainty of reserve estimates,
competition and the effects of governmental and environmental regulation. All
forward-looking statements are expressly qualified in their entirety by the
cautionary statements in this section.
Officers
Listed below are the officers of the Company and a summary of their
business experience.
<TABLE>
<CAPTION>
Name Position
- ------------------------ -------------------------------------------------
<S> <C>
John C. Snyder Chairman
William G. Hargett President and Chief Operating Officer
Charles A. Brown Senior Vice President - Rocky Mountain Region
Mark A. Jackson Senior Vice President and Chief Financial Officer
Jay H. Smith Senior Vice President - Southern Region
Steven M. Burr Vice President - Engineering and Planning
Peter E. Lorenzen Vice President - General Counsel
H. Richard Pate Vice President - Rocky Mountain Region, Operations and Engineering
David M. Posner Vice President - Gas Management
Roger B. Rice Vice President - Human Resources
Rodney L. Waller Vice President - Treasurer
</TABLE>
John C. Snyder (55), Chairman and a director, founded a predecessor of
the Company in 1978. From 1973 to 1977, Mr. Snyder was an independent oil
operator in Texas and Oklahoma. Previously, he was a director and the Executive
Vice President of May Petroleum, Inc. where he served from 1971 to 1973. From
1969 to 1971, Mr. Snyder was with Canadian-American Resources Fund, Inc., which
he founded. From 1964 to 1966, Mr. Snyder was employed by Humble Oil and
17
<PAGE>
Refining Company (currently Exxon Co., USA) as a petroleum engineer. Mr. Snyder
received his Bachelor of Science degree in Petroleum Engineering from the
University of Oklahoma and his Masters degree in Business Administration from
the Harvard University Graduate School of Business Administration. In 1995, Mr.
Snyder was named Wildcatter of the Year by the Independent Petroleum Association
of Mountain States. He currently serves as a director of SOCI plc and is a
member of the National Petroleum Council.
William G. Hargett (48), President, Chief Operating Officer and a
director, has been with the Company since April 1997. Prior to joining the
Company, Mr. Hargett served as President of Greenhill Petroleum Corporation from
1994 to 1997, Amax Oil & Gas, Inc. from 1993 to 1994 and North Central Oil
Corporation from 1988 to 1993 and in various exploration capacities at Tenneco
Oil Company from 1974 to 1988 and Amoco Production Company from 1973 to 1974.
Mr. Hargett earned Bachelor of Science and Master of Science degrees from the
University of Alabama.
Charles A. Brown (50), Senior Vice President - Rocky Mountain Region,
joined the Company in 1987. He was a petroleum engineering consultant from 1986
to 1987. He served as President of CBW Services, Inc., a petroleum engineering
consulting firm, from 1979 to 1986 and was employed by Kansas Nebraska Natural
Gas Company from 1971 to 1979 and Amerada Hess Corporation from 1969 to 1971.
Mr. Brown received his Bachelor of Science degree in Petroleum Engineering from
the Colorado School of Mines.
Mark A. Jackson (42), Senior Vice President and Chief Financial
Officer, joined the Company in August, 1997. Prior to joining the Company, Mr.
Jackson served in various executive capacities at Apache Corporation including
Vice President and Controller from 1988, Vice President, Finance from 1994 and
Chief Financial Officer from 1996. From 1984 until 1988, Mr. Jackson served as
Assistant Controller of Diamond Shamrock and Maxus Energy Company. Mr. Jackson
began his career with the certified public accounting firm of Ernst & Ernst,
specializing in the oil and gas industry. Mr. Jackson received his Bachelor of
Science degree in Accounting from Oklahoma Christian University.
Jay H. Smith (51), Senior Vice President - Southern Region, joined
the Company in February 1998. From 1993 until he joined the Company, Mr. Smith
served as Executive Vice President of Sonat Exploration Company. From 1983 until
1993, Mr. Smith served in a variety of positions with BP Exploration and Sohio
Petroleum Company, most recently as Chief of Staff, Western Hemisphere North.
From 1981 to 1983, Mr. Smith was Vice President - Operations of Spectrum Oil and
Gas Company. Mr. Smith began his career with Shell Oil Company in 1968. Mr.
Smith received his Bachelor of Science degree from Syracuse University.
Steven M. Burr (41), Vice President - Engineering and Planning, joined
the Company in 1987. From 1982 to 1987, he was a Vice President with the
petroleum engineering consulting firm of Netherland, Sewell & Associates, Inc.
From 1978 to 1982, Mr. Burr was employed by Exxon Company, USA in the Production
Department. Mr. Burr received his Bachelor of Science degree in Civil
Engineering from Tulane University and attended the Program for Management
Development at the Harvard University School of Business Administration.
Peter E. Lorenzen (48), Vice President - General Counsel and Secretary,
joined the Company in 1991. From 1983 through 1991, he was a shareholder in the
Dallas law firm of Johnson & Gibbs, P.C. Prior to that, Mr. Lorenzen was an
associate with Cravath, Swaine & Moore. Mr. Lorenzen received his law degree
from New York University School of Law and his Bachelor of Arts degree from The
Johns Hopkins University.
H. Richard Pate (44), Vice President - Rocky Mountain Region,
Operations and Engineering, joined the Company in 1988. From 1981 to 1988, Mr.
Pate held various positions with Mitchell Energy Corporation, including Region
Engineer and Production Manager. He was employed by Champlin Petroleum Company
from 1979 to 1981 and Atlantic Richfield Corporation from 1975 to 1979. Mr. Pate
received his Bachelor of Science degree in Chemical Engineering from the
University of Wyoming.
David M. Posner (44), Vice President - Gas Management, joined the
Company in 1991. From 1980 to 1991 he held various positions with Ladd Petroleum
Corporation (a subsidiary of the General Electric Company) including Vice
President of Gas Gathering, Processing and Marketing. Mr. Posner received his
Bachelor of Arts degree from Brown University and his Master of Science in
Mineral Economics from the Colorado School of Mines.
Roger B. Rice (53), Vice President - Human Resources, joined the
Company in 1997. From 1992 to 1997, Mr. Rice was Vice President Human Resources
18
<PAGE>
and Administration with Apache Corporation. From 1989 to 1992, he was Managing
Consultant with Barton Raben, Inc., an executive search and consulting firm
specializing in the energy industry. Previously, Mr. Rice was Vice President
Administration for The Superior Oil Company and held various management
positions with Shell Oil Company. He earned his Bachelor of Arts degree and
Masters Degree in Business Administration from Texas Technological University.
Rodney L. Waller (48), Vice President - Treasurer, joined the Company
in 1977 as an officer. Since that time, Mr. Waller has performed various
corporate, operational and finance functions. Previously, Mr. Waller was
employed by Arthur Andersen & Co. Mr. Waller received his Bachelor of Arts
degree from Harding University.
ITEM 3. LEGAL PROCEEDINGS
In September 1996, the Company and other interest owners in a lease in
southern Texas were sued by the royalty owners in Texas state court in Brooks
County, Texas. The Company's working interest in the lease is approximately 20%.
The complaint alleges, among other things, that the defendants have failed to
pay proper royalties under the lease, have unlawfully comingled production with
production from other leases and have breached their duties to reasonably
develop the lease. The plaintiffs also claim damages for fraud, trespass and
similar matters, and demand actual and punitive damages. Although the complaint
does not specify the amount of damages claimed, plaintiffs have submitted
calculations showing total damages against all owners in excess of $100 million.
The Company and the other interest owners have filed an answer denying the
claims and intend to contest the suit vigorously. The suit is currently in
discovery.
At this time, the Company is unable to estimate the range of potential
loss, if any, from the foregoing uncertainty. However, the Company believes that
resolution should not have a material adverse effect on the Company's financial
position, although an unfavorable outcome in any reporting period could have a
material impact on the Company's results of operations for that period.
The Company and its subsidiaries and affiliates are named defendants in
lawsuits and involved from time to time in governmental proceedings, all arising
in the ordinary course of business. Although the outcome of these lawsuits and
proceedings cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on the financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted for a vote of security holders during the
fourth quarter of 1997.
19
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
The Company's stock is listed on the New York Stock Exchange and trades
under the symbol "SNY." The following table sets forth, for 1997 and 1996, the
high and low closing prices for the Company's securities for New York Stock
Exchange composite transactions, as reported by The Wall Street Journal.
-----------------------
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter $19-1/8 $14-5/8 $12-1/8 $ 7-1/4
Second Quarter 19 15-1/4 10-1/4 7-5/8
Third Quarter 23-5/8 18-3/16 12 9-3/8
Fourth Quarter 24-7/8 16-3/4 17-3/4 11-3/4
</TABLE>
On February 27, 1998, the closing price of the common stock was
$18-5/8. Quarterly dividends were paid at the rate of $.065 per share during
1997 and 1996. For federal income tax purposes, 100% of common dividends paid
during 1996 were a non-taxable return of capital. The Company's dividend
payments in 1997 were taxable for federal income tax purposes. Shares of common
stock receive dividends as, if and when declared by the Board of Directors. The
amount of future dividends will depend on debt service requirements, capital
expenditures and other factors. On December 31, 1997, there were approximately
2,300 holders of record of the common stock and 33.3 million shares outstanding.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial and operating
information for each of the years in the five year period ended December 31,
1997. Share and per share amounts refer to common shares. The following
information should be read in conjunction with the consolidated financial
statements presented elsewhere herein.
<TABLE>
<CAPTION>
(In thousands, except per share data) As of or for the Year Ended December 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement
Revenues $ 255,728 $ 285,111 $ 197,301 $ 262,328 $ 228,852
Income (loss) before extraordinary items 35,465 62,950 (39,831) 12,372 22,538
Per share .96 1.81 (1.53) .07 .58
Net income (loss) 32,617 62,950 (39,831) 12,372 19,545
Per share .87 1.81 (1.53) .07 .45
Dividends per share .26 .26 .26 .25 .22
Weighted average shares outstanding 30,588 31,308 30,186 23,704 23,096
Cash Flow
Net cash provided by operations $ 122,041 $ 101,730 $ 69,121 $ 86,397 $ 68,728
Net cash realized (used) by investing 31,808 (62,356) 32,421 (245,503) (207,933)
Net cash realized (used) by financing (92,328) (38,715) (96,012) 169,926 129,633
Balance Sheet
Working capital $ 56,326 $ 9,168 $ 5,842 $ 708 $ 491
Oil and gas properties, net 274,304 635,387 435,217 472,239 316,406
Total assets 546,088 879,459 555,493 673,259 453,301
Senior debt 1 188,231(a) 150,001 234,857 114,952
Subordinated notes 173,635 183,842(b) 84,058 83,650 -
Stockholders' equity 263,756 294,668 235,368 274,086 274,734
<FN>
(a) Includes $93.7 million of SOCO senior debt and $94.5 million of Patina senior debt.
(b) Includes $80.7 million of SOCO convertible subordinated notes and $103.1 million of Patina subordinated notes.
</FN>
</TABLE>
20
<PAGE>
The following table sets forth unaudited summary financial results on a
quarterly basis for the two most recent years.
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997
-----------------------------------------------
First Second Third Fourth
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues $ 87,664 $ 73,187 $ 56,299 $ 38,578
Depletion, depreciation and amortization and property impairments 23,208 23,389 26,802 13,738
Gross profit 30,637 13,960 16,791 17,755
Income before extraordinary items 19,926 5,992 3,633 5,914
Per share .59 .15 .07 .14
Net income 19,926 3,144 3,633 5,914
Per share .59 .05 .07 .14
</TABLE>
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996
-----------------------------------------------
First Second Third Fourth
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 40,960 $ 54,604 $ 59,960 $129,587
Depletion, depreciation and amortization and property impairments 16,771 22,745 24,673 23,111
Gross profit 9,376 11,099 10,835 26,467
Income (loss) before extraordinary items 1,777 (9,983) 5,560 65,596
Per share .01 (.37) .13 2.06
Net income (loss) 1,777 (9,983) 5,560 65,596
Per share .01 (.37) .13 2.06
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Snyder Oil Corporation (the "Company") is engaged in the production,
development, acquisition and exploration of domestic oil and gas properties,
primarily in the Gulf of Mexico, the Rocky Mountains and northern Louisiana. The
Company also has investments in two international exploration and production
companies, SOCO International plc ("SOCI plc") and Cairn Energy plc ("Cairn"),
both listed on the London Stock Exchange.
During 1997, the Company consummated several transactions to simplify
its operating and capital structure.
* The Company exchanged its international operational holdings for stock
in SOCI plc, which simultaneously completed an initial public offering
of its stock on the London Stock Exchange to raise capital to fund its
ongoing exploration and development efforts. This transaction
effectively replaced the Company's equity investments in various
international ventures with one marketable security.
* The Company issued $175 million in ten-year, 8.75% subordinated debt
and used the proceeds to redeem the outstanding 7% convertible
subordinated debt and to pay down its revolving credit facility. These
transactions provided the capacity for the Company to enter into a
large acquisition from existing credit sources, extended the maturity
of subordinated debt at an attractive rate for the next ten years and
eliminated the potential dilution of common shareholders from the
convertible subordinated debt.
* The Company sold its 74% interest in Patina Oil and Gas Corporation
("Patina") for approximately $127 million in cash and the elimination
of approximately $170 million in debt. This transaction provided cash
and additional acquisition capacity while simplifying the capital
structure of the Company. Patina was restricted by its debt covenants
from paying dividends to its shareholders; thus the Company did not
directly benefit from the cash flow of Patina.
* The Company issued 300,000 common shares in exchange for 2.1 million
outstanding warrants, which also reduced the potential dilution of the
common shareholders of the Company.
* The Company called its preferred stock for redemption with 72%
converting to common (3.6 million shares issued) and the remainder
being redeemed for $30.1 million of cash. This transaction eliminated
1.4 million shares of additional potential dilution to the common
shareholders of the Company and over $6 million per year in dividend
payments.
21
<PAGE>
The aforementioned transactions simplified the Company's capital
structure and, together with the sale of nonstrategic assets during 1995 and
1996, positioned the Company to focus on its core growth areas with all future
increases in value going to the common shareholders of the Company.
Unless indicated otherwise, amounts in this discussion reflect the
consolidated results of the Company, including Patina. References to the Company
"excluding Patina" refer to the Company on a consolidated basis but after
excluding amounts attributable to Patina.
Results of Operations
Comparison of 1997 results to 1996. Net income for 1997 was $32.6
million as compared to $63.0 million in 1996. During 1997, the Company
recognized a $13.0 million gain on the sale of 4.5 million shares of Cairn stock
and a $19.8 million gain on the formation of SOCI plc. Net income in 1996
benefited from a $65.5 million gain on the exchange of the Company's stock held
in Command Petroleum Limited ("Command"), for stock in Cairn, a United Kingdom
based company.
The following table sets forth certain operating information of the
Company for the periods presented.
<TABLE>
<CAPTION>
Excluding Patina Consolidated
----------------------- Increase ----------------------- Increase
1997 1996 (Decrease) 1997 1996 (Decrease)
-------- -------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Oil and gas sales (in thousands) $133,851 $107,143 25% $207,216 $189,327 9%
Production margin (in thousands) $ 98,835 $ 72,025 37% $158,693 $139,689 14%
Daily production:
Oil (Bbls) 5,617 6,000 (6%) 9,561 10,611 (10%)
Gas (Mcf) 113,361 87,139 30% 168,873 152,570 11%
Equivalent barrels (BOE) 24,510 20,525 19% 37,707 36,040 5%
Average Prices:
Oil ($/Bbl) $ 18.24 $ 20.34 (10%) $ 18.88 $ 20.39 (7%)
Gas ($/Mcf) $ 2.33 $ 1.96 19% $ 2.29 $ 1.97 16%
Equivalent barrel ($/BOE) $ 14.96 $ 14.26 5% $ 15.06 $ 14.35 5%
DD&A per BOE $ 4.87 $ 5.29 (10%) $ 5.80 $ 6.41 (10%)
</TABLE>
Oil and gas sales, excluding Patina, increased 25% due to a significant
increase in gas production along with higher gas prices. Production in the Gulf
of Mexico more than doubled due to two fourth quarter 1996 acquisitions and the
Company's drilling efforts beginning to come on stream. The Rocky Mountain
Region also increased production due to successful development drilling
primarily in the second and third quarters of 1997, but the increase was
partially offset by sales of nonstrategic properties during 1996. The Company
expects increasing production from exploratory and development drilling during
1997 and 1998 to largely replace Patina's 1997 production contribution by the
end of 1998. The largest contributor to increased production in 1998 is expected
to be the commencement of production from the Ingrid Field in the Gulf of Mexico
by April 1998.
Production margin (oil and gas sales less direct operating expenses)
for 1997, excluding Patina, increased 37% compared to 1996 as direct operating
expenses decreased in spite of the significant increase in production. This is
primarily due to the sale of noncore properties which had high operating costs,
increased production in the Gulf of Mexico which has much lower operating costs
per BOE produced, and an increased emphasis on operating efficiencies. Operating
costs per BOE, excluding Patina, were $3.91 compared to $4.67 in 1996.
Gains on sales of properties of $8.7 million in 1997 and $8.8 million
in 1996 were a result of the Company's ongoing plan to divest of nonstrategic
assets. The most significant items in 1997 were the sales of two noncore
properties in the Gulf of Mexico for a $5.1 million gain. The most significant
item during 1996 was a $7.4 million gain on the sale of a 50% interest in the
Green River Basin holdings.
General and administrative expenses, net of reimbursements, for 1997
were $20.4 million, a $3.2 million increase compared to 1996 as several of the
22
<PAGE>
properties sold during 1996, while having high operating costs and depletion,
depreciation and amortization rates, provided significant general and
administrative expense reimbursements. Net general and administrative costs have
declined three to six percent each quarter since the fourth quarter of 1996.
There was a 16% decrease in the fourth quarter of 1997 attributable to the
disposition of Patina.
Interest expense, net of interest income, was $23.0 million in 1997,
$12.5 million of which was incurred by Patina. In 1996, interest expense, net of
interest income, was $22.9 million, $14.3 million of which was incurred by
Patina. The majority of the increase was the result of higher average interest
rates, as subordinated notes represented a higher percentage of total debt.
Interest income in 1997 was $2.4 million compared to $664,000 in 1996 as the
Company had a higher average cash balance, particularly in the fourth quarter of
1997, due to the proceeds from the disposition of Patina.
Depletion, depreciation and amortization expense for 1997 decreased
$4.7 million to $79.9 million in spite of higher production levels. The decrease
is primarily due to higher 1996 amortization costs on a noncompete agreement at
Patina, but was also the result of lower production depletion, depreciation and
amortization rates. Production depletion, depreciation and amortization per BOE,
excluding Patina, was $4.44 in 1997 compared to $4.70 in 1996. The lower rates
were the result of upward revisions in reserve quantities at year end 1996
primarily in proved undeveloped reserves which became economic at year end 1996
prices.
Property impairments in 1997 included a $4.5 million impairment
recorded on the Uinta Field. At the end of 1996, Uinta prices benefited from a
tight local oil supply and very high Rocky Mountain area oil prices. Since then,
new supplies have depressed the oil market and prices in the area have returned
to more normal levels. Additionally, a $2.2 million impairment was recorded on a
Gulf of Mexico oil well after it did not respond to workover attempts.
Comparison of 1996 results to 1995. Total revenues for 1996 were $285.1
million, a $87.8 million increase from 1995. The increase was in large part due
to a $67.2 million increase in gains on sales of investments which was primarily
due to a $65.5 million gain recognized in the fourth quarter related to an
exchange of the Company's stock held in Command for stock in Cairn. An increase
in oil and gas sales of $44.7 million was also experienced in 1996 as a result
of a 31% rise in the price received per BOE while production remained relatively
stable compared to 1995. Natural gas prices rebounded in 1996 to $1.97 per Mcf
from $1.35 per Mcf in 1995, a 46% increase. Oil prices improved 20% to average
$20.39 per barrel during 1996. Partially offsetting these increases was a
decrease in gas transportation, processing and marketing revenues of $20.6
million primarily as a result of the sale of the Company's Wattenberg gas
facilities in 1995.
Net income for 1996 was $63.0 million, compared to a net loss in 1995
of $39.8 million. The 1996 income was boosted by the net effect of the Command
transaction ($57.2 million after minority interest expense and deferred tax
expense). However, the Company also recorded a noncash charge of $15.5 million
in the second quarter related to the contribution of the Company's Wattenberg
oil and gas properties to a newly formed public company, Patina, in return for a
70% stake in Patina. The 1995 loss was primarily due to $27.4 million in noncash
property impairment charges and almost $11 million in combined losses resulting
from a litigation settlement, losses on marketable securities, as well as
severance and restructuring costs. Absent these special non-recurring items,
there was an increase in net income from 1995 to 1996 of approximately $23
million. This increase can be attributed primarily to the 31% increase in
average price received per BOE which increased revenues $44.7 million offset
partially by a decrease in gas management margin of $6.2 million and an increase
in depreciation, depletion and amortization expense of $8.2 million.
Revenues from production operations, less direct operating expenses,
for 1996 were $139.7 million, an increase of 52% from 1995 net revenue. Average
daily production during 1996 was 36,040 BOE, almost exactly what it was in 1995
(36,024 BOE). However, the average product price received increased by 31% to
$14.35 per BOE. Production remained relatively constant from 1995 to 1996 which
can be attributed to additional interests acquired in four Gulf of Mexico
acquisitions in late 1995 and during 1996 and the properties acquired in the
Patina transaction offset by decreased production related to numerous sales of
noncore properties in 1995 and 1996 and the reduction of development drilling.
Total operating expenses for 1996 decreased by $2.8 million in line with the
Company's efforts of divesting of marginal properties with high operating costs
and acquiring incremental interests in offshore properties which have
historically had lower operating costs per BOE. Operating costs per BOE were
$3.76 compared to $3.99 in 1995.
23
<PAGE>
Direct operating margin from gas transportation, processing and
marketing for 1996 was $2.6 million compared to $8.9 million in 1995. The
decrease resulted primarily from a reduction in processing margins due to the
sale of the Company's Wattenberg gas processing facilities which was completed
in the third quarter of 1995. The Company realized almost $80 million in sales
proceeds during 1995 on these facilities and recognized a total of $8.7 million
in gains.
Gains on sales of investments were $69.3 million in 1996, compared to
$2.2 million in 1995. The $65.5 million gain on the Command exchange accounted
for the bulk of the increase. The remaining gains are primarily due to sales of
a portion of the Company's interests in Russia and Mongolia. In January 1997,
the Company's interest in Mongolia was further reduced.
Gains on sales of properties were $8.8 million in 1996, compared to
$12.3 million in 1995. The most significant gain during 1996 was a $7.4 million
gain on the sale of a 50% interest in the Green River Basin holdings for $16.9
million. The most significant gain during 1995 was the $8.7 million gain
recognized as part of the sale of the Company's Wattenberg gas processing
facilities for almost $80 million.
Other income, net of other expense, increased $1.8 million from 1995.
The increase can be primarily attributed to equity in earnings of Command
increasing $1.9 million from the equity in losses recorded in 1995.
Exploration expenses for 1996 were $4.2 million, down $3.8 million from
1995. The decrease was due primarily to a writeoff of $4.1 million of acreage
costs in 1995 that was not incurred in 1996. Included in the 1996 expenditures
of $4.2 million was a $1.2 million dry hole drilled in the Gulf of Mexico in the
third quarter on an unexplored block adjacent to one of the Company's current
producing blocks.
General and administrative expenses, net of reimbursements, for 1996
were $17.1 million as compared to $17.7 million in 1995. The slight decrease is
the result of ongoing expense reduction efforts and reductions in personnel due
to the property divestitures that have taken place over the past two years
offset somewhat by increased expenses related to the Patina transaction.
Net financing costs were $22.9 million compared to $21.7 million in
1995. The majority of the increase is the result of a higher average interest
rate primarily due to Patina's subordinated notes which have an effective
interest rate of 11.1%.
Depletion, depreciation and amortization expense in 1996 increased to
$84.5 million from $76.4 million in 1995. The increase reflects an increase in
the overall depletion, depreciation and amortization rate per equivalent barrel
from $5.80 to $6.41. This increase can be attributed to downward revisions in
reserve quantities at year end 1995 primarily in proved undeveloped reserves
which became uneconomic at year end 1995 prices and the growing impact of the
Gulf of Mexico operations which are typically more capital intensive thus having
a higher depletion rate.
Acquisition, Exploration and Development
During 1997, the Company, excluding Patina incurred $103.9 million in
capital expenditures, including $74.7 million for development, $17.2 million for
exploration, $8.9 million for property acquisitions, $2.2 million for field and
office equipment and $900,000 for gas facility expansion.
Of the total development expenditures, $36.4 million was concentrated
in the Gulf of Mexico where five wells were placed on sales with two in progress
at year end. The Company expended $13.0 million in the East Washakie Basin of
southern Wyoming to place 19 wells on sales with five in progress at year end.
In the Green River Basin of southern Wyoming, $10.1 million was incurred to
place 16 wells on sales with five in progress at year end. The Company expended
$6.2 million in the Piceance Basin of western Colorado to place 22 wells on
sales with two in progress at year end.
Exploration expenditures for 1997 totaled $17.2 million, including $8.0
million for two exploratory dry holes drilled in the Gulf of Mexico. The Company
has been successful on two of four exploratory wells in the Gulf of Mexico. The
balance is primarily the cost of 3-D seismic in the Gulf of Mexico ($4.5
million), in northern Louisiana ($2.3 million) and in the Rocky Mountain region
($2.2 million).
24
<PAGE>
The Company, excluding Patina, expended $8.9 million relating to
property acquisitions during 1997. Of this amount, $3.3 million was for
producing properties and $5.6 million was for unevaluated properties.
Financial Condition and Capital Resources
During 1997, net cash provided by operations was $122.0 million, an
increase of 20% compared to 1996. As of December 31, 1997, commitments for
capital expenditures totaled $10.3 million. The Company anticipates that 1998
expenditures for exploration and development will approximate $130 to $140
million. The level of these and other future expenditures is largely
discretionary, and the amount of funds devoted to any particular activity may
increase or decrease significantly, depending on available opportunities and
market conditions. The Company plans to finance its ongoing development,
acquisition and exploration expenditures using internally generated cash flow,
available cash, marketable securities and existing credit facilities.
At December 31, 1997, the Company had total assets of $546.1 million.
Total capitalization was $437.4 million, of which 60% was represented by
stockholders' equity and 40% by subordinated debt. At December 31, 1997, the
Company had $89.4 million in cash, and marketable securities with a market value
of $143.1 million for its shares of Cairn and SOCI plc. The Patina disposition
generated cash proceeds of approximately $127 million, of which $30.1 million
was used in the fourth quarter to redeem the preferred stock.
The Company maintains a $500 million revolving credit facility (the
"SOCO Facility"). The SOCO Facility is divided into a $100 million short-term
portion and a $400 million long-term portion that expires on December 31, 2000.
Management's policy is to renew the facility on a regular basis. Credit
availability is adjusted semiannually to reflect changes in reserves and asset
values. The borrowing base available under the facility at December 31, 1997 was
$120 million. During 1997, the average interest rate under the facility was
6.5%. At December 31, 1997, the Company had $1,000 outstanding under the
facility. Covenants, in addition to other requirements, require maintenance of a
current working capital ratio of 1 to 1 as defined, limit the incurrence of
additional debt and restrict dividends, stock repurchases, certain investments,
other indebtedness and unrelated business activities. Such restricted payments
are limited by a formula that includes proceeds from certain securities, cash
flow and other items. Based on such limitations, more than $120 million was
available for the payment of dividends and other restricted payments at December
31, 1997.
In June 1997, SOCO issued $175.0 million of 8.75% Senior Subordinated
Notes ("Notes") due June 15, 2007. The net proceeds of the offering were $168.3
million which were used to redeem the Company's convertible subordinated notes
due May 15, 2001, and reduce the balance outstanding under the SOCO Facility.
Through the issuance of the new Notes and the redemption of the old notes, the
Company has effectively extended its debt maturity by over six years. The Notes
contain covenants that, among other things, limit the ability of SOCO to incur
additional indebtedness, pay dividends, engage in transactions with shareholders
and affiliates, create liens, sell assets, engage in mergers and consolidations
and make investments in unrestricred subsidiaries. Such restricted payments are
limited by a formula that includes proceeds from certain securities, cash flow
and other items. Based on such limitations, more than $100 million was available
for the payment of dividends and other restricted payments at December 31, 1997.
The Company seeks to diversify its exploration and development risks by
attracting partners for its significant development projects and maintaining a
program to divest of marginal properties and assets which do not fit its long
range plans. During 1997, the Company received $10.7 million in proceeds from
sales of properties which were used primarily to fund development expenditures.
None of the sales were individually significant.
The Board has authorized, at management's discretion, the repurchase of
up to $70 million of the Company's securities. During 1996 and 1997, the Company
repurchased 3.4 million common shares for $52.6 million under this plan. During
1997, the Company redeemed its preferred depositary shares by issuing 3.6
million shares of common stock and paying $30.1 million in cash. As a result, a
$1.0 million redemption premium is included in preferred dividends in the 1997
consolidated statement of operations.
The Company has developed a plan to ensure its systems are compliant
with the requirements to process transactions in the year 2000 and beyond. The
25
<PAGE>
majority of the Company's systems are already compliant, with a detailed plan
for the remaining systems scheduled to be modified or replaced within one year.
The costs associated with final compliance are not considered material.
The Company believes that its capital resources are adequate to meet
the requirements of its business. However, future cash flows are subject to a
number of variables including the level of production and oil and gas prices,
and there can be no assurance that operations and other capital resources will
provide cash in sufficient amounts to maintain planned levels of capital
expenditures or that increased capital expenditures will not be undertaken.
Inflation and Changes in Prices
While certain of the Company's costs are affected by the general level
of inflation, factors unique to the petroleum industry result in independent
price fluctuations. Over the past five years, significant fluctuations have
occurred in oil and gas prices. In addition, changing prices often cause costs
of equipment and supplies to vary as industry activity levels increase and
decrease to reflect perceptions of future price levels. Although it is difficult
to estimate future prices of oil and gas, price fluctuations have had, and will
continue to have, a material effect on the Company.
The following table indicates the average oil and gas prices received
over the last five years and highlights the price fluctuations by quarter for
1997 and 1996. Average gas prices for 1997 and 1996 were increased by $.05 and
$.08 per Mcf, respectively, by the benefit of the Company's hedging activities.
Average price computations exclude contract settlements and other nonrecurring
items to provide comparability. Average prices per equivalent barrel indicate
the composite impact of changes in oil and gas prices. Natural gas production is
converted to oil equivalents at the rate of 6 Mcf per barrel.
<TABLE>
<CAPTION>
Average Prices
--------------------------------------------
Crude Oil
and Natural Equivalent
Liquids Gas Barrels
--------- --------- ---------
(Per Bbl) (Per Mcf) (Per BOE)
<S> <C> <C> <C>
Annual
------
1997 $ 18.88 $ 2.29 $ 15.06
1996 20.39 1.97 14.35
1995 16.96 1.35 11.00
1994 14.80 1.67 11.82
1993 15.41 1.94 13.41
Quarterly
---------
1997
----
First $ 21.18 $ 2.83 $ 18.10
Second 18.33 1.85 13.09
Third 18.09 1.97 13.38
Fourth 16.86 2.65 16.09
1996
----
First $ 17.95 $ 1.78 $ 12.80
Second 20.52 1.62 12.90
Third 20.25 1.78 13.60
Fourth 22.26 2.64 17.69
</TABLE>
In December 1997, the Company received an average of $15.37 per barrel
and $2.43 per Mcf for its production.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Reference is made to the Index to Consolidated Financial Statements on
page 28 for the Company's consolidated financial statements and notes thereto.
Quarterly financial data for the Company is presented on page 21 of this Form
10-K. Supplementary schedules for the Company have been omitted as not required
or not applicable because the information required to be presented is included
in the financial statements and related notes.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None
27
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants......................................29
Consolidated Balance Sheets as of December 31, 1997 and 1996..................30
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995.....................31
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995.....................32
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995.....................33
Notes to Consolidated Financial Statements....................................34
28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders of Snyder Oil Corporation:
We have audited the accompanying consolidated balance sheets of Snyder
Oil Corporation (a Delaware corporation) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. 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 financial position of Snyder Oil
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
As explained in Note 2 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" in
1995.
ARTHUR ANDERSEN LLP
Fort Worth, Texas,
February 10, 1998
29
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31,
--------------------------------
1997 1996
---------- -----------
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 89,443 $ 27,922
Accounts receivable 21,521 58,944
Inventory and other 2,911 11,212
---------- -----------
113,875 98,078
---------- -----------
Investments 143,066 129,681
---------- -----------
Oil and gas properties, successful efforts method 410,973 887,721
Accumulated depletion, depreciation and amortization (136,669) (252,334)
---------- -----------
274,304 635,387
---------- -----------
Gas facilities and other 21,317 28,111
Accumulated depreciation and amortization (6,474) (11,798)
---------- -----------
14,843 16,313
---------- -----------
$ 546,088 $ 879,459
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 23,278 $ 51,867
Accrued liabilities 34,271 37,043
---------- -----------
57,549 88,910
---------- -----------
Senior debt 1 188,231
Subordinated notes 173,635 103,094
Convertible subordinated notes - 80,748
Deferred taxes payable 31,649 9,034
Other noncurrent liabilities 19,498 28,064
Minority interest - 86,710
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par, 10,000,000 shares authorized,
6% Convertible preferred stock, zero and 1,033,500
shares issued and outstanding - 10
Common stock, $.01 par, 75,000,000 shares authorized,
35,696,213 and 31,456,027 issued 357 315
Capital in excess of par value 234,118 260,221
Retained earnings 44,390 25,711
Common stock held in treasury, 2,366,891 and 250,000 shares at cost (40,461) (3,510)
Unrealized gain on investments 25,352 11,921
---------- -----------
263,756 294,668
---------- -----------
$ 546,088 $ 879,459
========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
30
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
<CAPTION>
Year Ended December 31,
--------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Oil and gas sales $ 207,216 $ 189,327 $ 144,608
Gas transportation, processing and marketing 7,004 17,655 38,256
Gains on sales of equity interests in investees 32,800 69,343 2,183
Gains on sales of properties 8,708 8,786 12,254
---------- ----------- -----------
255,728 285,111 197,301
---------- ----------- -----------
Expenses
Direct operating 48,523 49,638 52,486
Cost of gas and transportation 6,692 15,020 29,374
Exploration 17,046 4,232 8,033
General and administrative 20,363 17,143 17,680
Financing costs, net 23,029 22,923 21,679
Other expense (income) 935 (1,327) 463
Litigation settlement - - 4,400
(Gain) loss on sale of subsidiary interest (5,437) 15,481 -
Depletion, depreciation and amortization 79,862 84,547 76,378
Property impairments 7,275 2,753 27,412
---------- ----------- -----------
Income (loss) before income taxes, minority interest
and extraordinary item 57,440 74,701 (40,604)
---------- ----------- -----------
Provision (benefit) for income taxes
Current 975 33 25
Deferred 16,881 4,313 (1,370)
---------- ----------- -----------
17,856 4,346 (1,345)
---------- ----------- -----------
Minority interest in subsidiaries 4,119 7,405 572
---------- ----------- -----------
Income (loss) before extraordinary item 35,465 62,950 (39,831)
Extraordinary item - loss on early extinguishment of debt,
net of income tax benefit of $1,533 2,848 - -
---------- ----------- -----------
Net income (loss) 32,617 62,950 (39,831)
---------- ----------- -----------
Preferred dividends 5,978 6,210 6,210
---------- ----------- -----------
Income (loss) applicable to common $ 26,639 $ 56,740 $ (46,041)
========== =========== ===========
Income (loss) per common share before extraordinary item $ .96 $ 1.81 $ (1.53)
========== =========== ===========
Net income (loss) per common share $ .87 $ 1.81 $ (1.53)
========== =========== ===========
Income (loss) per common share before extraordinary
item - assuming dilution $ .95 $ 1.72 $ (1.53)
========== =========== ===========
Net income (loss) per common share - assuming dilution $ .86 $ 1.72 $ (1.53)
========== =========== ===========
Weighted average shares outstanding 30,588 31,308 30,186
========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
31
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Preferred Stock Common Stock Capital in Retained
------------------ ------------------- Excess of Earnings Treasury
Shares Amount Shares Amount Par Value (Deficit) Stock
------ ------ ------ -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,035 $ 10 30,209 $ 302 $ 255,961 $ 20,959 $ (2,288)
Common stock grants and
exercise of options - - 138 1 856 - (169)
Issuance of common - - 1,083 11 13,021 - -
Dividends - - - - (3,927) (10,129) -
Net loss - - - - - (39,831) -
------- -------- ------- -------- --------- --------- ---------
Balance, December 31, 1995 1,035 10 31,430 314 265,911 (29,001) (2,457)
Common stock grants and
exercise of options - - 267 3 3,179 - (258)
Issuance of common - - 399 4 3,689 - -
Repurchase of common - - (640) (6) (6,243) - (795)
Repurchase of preferred (1) - - - (142) - -
Dividends - - - - (6,173) (8,238) -
Net income - - - - - 62,950 -
------- -------- ------- -------- --------- --------- ---------
Balance, December 31, 1996 1,034 10 31,456 315 260,221 25,711 (3,510)
Common stock grants and
exercise of options - - 607 6 2,951 - -
Issuance of treasury - - - - - - 8,655
Conversion of subordinated
notes into common - - 1 - 25 - -
Repurchase of common - - - - - - (45,606)
Redemption of preferred (291) (3) - - (29,050) (1,049) -
Conversion of preferred (743) (7) 3,632 36 (29) - -
Dividends - - - - - (12,889) -
Net income - - - - - 32,617 -
------- -------- ------- -------- --------- --------- ---------
Balance, December 31, 1997 - - 35,696 $ 357 $ 234,118 $ 44,390 $ (40,461)
======= ======== ======= ======== ========= ========= =========
The accompanying notes are an integral part of these statements.
32
</TABLE>
<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Year Ended December 31,
---------------------------------------------
1997 1996 1995
------------ ----------- ----------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 32,617 $ 62,950 $ (39,831)
Adjustments to reconcile net income (loss) to net
cash provided by operations
Amortization of deferred credits - (1,052) (2,511)
Gains on sales of investments (32,800) (68,343) (809)
Gains on sales of properties (8,708) (8,786) (12,254)
Exploration expense 17,046 4,232 8,033
Equity in (earnings) losses of unconsolidated subsidiaries (760) (421) 1,319
(Gain) loss on sale of subsidiary interest (5,437) 15,481 -
Depletion, depreciation and amortization 79,862 84,547 76,378
Property impairments 7,275 2,753 27,412
Deferred taxes 15,348 4,313 (1,370)
Minority interest 4,119 7,405 572
Loss on early extinguishment of debt 4,381 - -
Changes in current and other assets and liabilities
Decrease (increase) in
Accounts receivable 24,612 (15,869) 7,142
Inventory and other 426 5,175 3,617
Increase (decrease) in
Accounts payable (8,688) 2,771 (8,521)
Accrued liabilities (9,497) (316) 5,165
Other liabilities 2,245 6,890 4,779
----------- ----------- ----------
Net cash provided by operations 122,041 101,730 69,121
----------- ----------- ----------
Investing activities
Acquisition, development and exploration (135,901) (128,598) (92,353)
Proceeds from sales of investments 156,969 1,635 14,786
Outlays for investments - (9,013) -
Proceeds from sales of properties 10,740 73,620 109,988
----------- ----------- ----------
Net cash realized (used) by investing 31,808 (62,356) 32,421
----------- ----------- ----------
Financing activities
Issuance of common 2,982 1,523 688
Issuance of subordinated notes 168,261 - -
Increase (decrease) in senior indebtedness (89,775) (13,289) (86,193)
Early extinguishment of convertible subordinated notes (85,199) - -
Dividends (12,889) (14,411) (14,056)
Deferred credits - (120) 3,549
Redemption of preferred (30,102) - -
Repurchase of stock (45,606) (7,186) -
Repurchase of subordinated notes - (5,232) -
----------- ----------- ----------
Net cash used by financing (92,328) (38,715) (96,012)
----------- ----------- ----------
Increase in cash 61,521 659 5,530
Cash and equivalents, beginning of year 27,922 27,263 21,733
----------- ----------- ----------
Cash and equivalents, end of year $ 89,443 $ 27,922 $ 27,263
=========== =========== ==========
Noncash investing and financing activities
Acquisition of properties and stock via stock issuances $ 8,655 $ 3,693 $ 13,032
Acquisition of properties recorded as senior debt - 31,730 -
Acquisition via subsidiary stock issuance - 115,067 -
Exchange of subsidiary stock for stock of investee 30,923 - -
The accompanying notes are an integral part of these statements.
</TABLE>
33
<PAGE>
SNYDER OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
Snyder Oil Corporation ("SOCO") and its subsidiaries (collectively, the
"Company") are engaged in the production, development, acquisition and
exploration of domestic oil and gas properties, primarily in the Gulf of Mexico,
the Rocky Mountains and northern Louisiana. The Company also has investments in
two international exploration and production companies, SOCO International plc
("SOCI plc") and Cairn Energy plc ("Cairn"). The Company, a Delaware
corporation, is the successor to a company formed in 1978.
In October 1997, the Company sold its 74% interest in Patina Oil and
Gas Corporation ("Patina"). Net proceeds from the sale were approximately $127
million resulting in a $2.8 million gain, net of tax. The following table
represents the Company's condensed statements of operations, excluding Patina.
Had the disposition of Patina been consummated on January 1, 1997 and 1996,
financing costs, net of tax, would have been reduced by $3.3 million in 1997,
and $4.5 million in 1996, from the amounts shown in the following schedule.
Future results may differ substantially from these condensed statements or pro
forma results due to changes in oil and gas prices, production declines and
other factors. Therefore, such statements cannot be considered indicative of
future operations.
<TABLE>
<CAPTION>
(In thousands, except per share and production data) For the Year Ended December 31,
-----------------------------------
1997 1996
----------- -----------
Unaudited
<S> <C> <C>
Revenues
Oil and gas sales $ 133,851 $ 107,143
Other 48,512 95,784
----------- -----------
182,363 202,927
Expenses
Direct operating 35,016 35,118
Exploration 16,926 4,008
General and administrative 16,566 10,993
Financing costs, net 10,556 8,619
Depletion, depreciation and amortization 43,599 39,725
Other 10,143 32,930
----------- -----------
Income before taxes, minority interest and extraordinary item 49,557 71,534
Provision for income taxes 17,856 4,740
Minority interest 616 4,866
Extraordinary item, net of tax 2,848 -
----------- -----------
Net income $ 28,237 $ 61,928
=========== ===========
Net income per common share $ .73 $ 1.78
=========== ===========
Weighted average shares outstanding 30,588 31,308
=========== ===========
Daily Production
Oil (Bbls) 5,617 6,000
Gas (Mcf) 113,361 87,139
</TABLE>
34
<PAGE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company. Affiliates in which the Company owns more than 50% but less than 100%
are fully consolidated, with the related minority interest being deducted from
subsidiary earnings and stockholders' equity. Affiliates in which the Company
owns between 20% and 50% are accounted for using the equity method. Affiliates
in which the Company owns less than 20% are accounted for using the cost method.
At December 31, 1997, affiliates accounted for under this method included Cairn
and SOCI plc. The Company accounts for its interest in joint ventures and
partnerships using the proportionate consolidation method, whereby its
proportionate share of assets, liabilities, revenues and expenses are
consolidated.
Risks and Uncertainties
Historically, the market for oil and gas has experienced significant
price fluctuations. Prices for gas in the Rocky Mountain region, where the
Company produces a substantial portion of its natural gas, have traditionally
been particularly volatile. Prices are significantly impacted by the local
weather, supply in the area, seasonal variations in local demand and limited
transportation capacity to other regions of the country. Increases or decreases
in prices received, particularly in the Rocky Mountains, could have a
significant impact on the Company's future results of operations.
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.
Producing Activities
The Company utilizes the successful efforts method of accounting for
its oil and gas properties. Consequently, leasehold costs are capitalized when
incurred. Unproved properties are assessed periodically within specific
geographic areas and impairments in value are charged to expense. During 1997
and 1996, the Company provided unproved property impairments of $700,000 and
$2.8 million, respectively. Exploratory expenses, including geological and
geophysical expenses and delay rentals, are charged to expense as incurred.
Exploratory drilling costs are initially capitalized, but charged to expense if
and when the well is determined to be unsuccessful. Costs of productive wells,
unsuccessful developmental wells and productive leases are capitalized and
amortized on a unit-of-production basis over the life of the remaining proved or
proved developed reserves, as applicable. Gas is converted to equivalent barrels
at the rate of 6 Mcf to 1 barrel. Amortization of capitalized costs is generally
provided on a property-by-property basis. Estimated future abandonment costs
(net of salvage values) are accrued at unit-of-production rates and taken into
account in determining depletion, depreciation and amortization.
The Company follows Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS 121 requires the Company to assess
the need for an impairment of capitalized costs of oil and gas properties and
other assets. Oil and gas properties are generally assessed on a
property-by-property basis. If an impairment is indicated based on undiscounted
expected future net cash flows, then it is recognized to the extent that net
capitalized costs exceed discounted expected future net cash flows. Accordingly,
during 1997 and 1995, the Company provided for $6.6 million and $27.4 million,
respectively, for such impairments. During 1996, the Company did not provide for
any such impairments.
Section 29 Tax Credits
The Company from time to time enters into arrangements to monetize its
Section 29 tax credits. These arrangements result in revenue increases of
approximately $.40 per Mcf on production volumes from qualified Section 29
properties. As a result of such arrangements, the Company recognized additional
gas revenues of $2.4 million during 1997 and $2.5 million during each of 1996
and 1995. Of these amounts, $1.3 million in 1997 and $1.5 million in 1996 were
35
<PAGE>
recognized by Patina. These arrangements, excluding Patina, are expected to
continue through 2002.
Gas Imbalances
The Company uses the sales method to account for gas imbalances. Under
this method, revenue is recognized based on the cash received rather than the
proportionate share of gas produced. Gas imbalances at December 31, 1997 and
1996 were not significant.
Financial Instruments
The following table sets forth the book value and estimated fair values
of financial instruments:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
---------------------- ----------------------
Book Fair Book Fair
Value Value Value Value
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
SOCO
Cash and equivalents $ 89,443 $ 89,443 $ 21,769 $ 21,769
Investments 143,066 143,066 129,681 163,477
Senior debt (1) (1) (93,731) (93,731)
Subordinated notes (173,635) (178,063) - -
Convertible subordinated notes - - (80,748) (82,866)
Long-term commodity contracts - 7,318 - 5,040
Interest rate swap - - - (19)
Patina
Cash and equivalents - - 6,153 6,153
Senior debt - - (94,500) (94,500)
Subordinated notes - - (103,094) (105,650)
</TABLE>
The book value of cash and equivalents approximates fair value because
of the short maturity of those instruments. See Note (3) for a discussion of the
Company's investments. The fair value of senior debt is presented at face value
given its floating rate structure. The fair value of the subordinated notes and
convertible subordinated notes are estimated based on their December 31, 1997
and 1996 closing prices on the New York Stock Exchange.
From time to time, the Company enters into commodity contracts to hedge
the price risk of a portion of its production. Gains and losses on such
contracts are deferred and recognized in income as an adjustment to oil and gas
sales in the period to which the contracts relate.
In 1994, the Company entered into a long-term gas swap arrangement in
order to lock in the price differential between the Rocky Mountain and Henry Hub
prices on a portion of its Rocky Mountain gas production. The contract covers
20,000 MMBtu's per day through 2004. At December 31, 1997, that volume
represented approximately 30% of the Company's Rocky Mountain gas production.
The fair value of the contract was based on the market price quoted for a
similar instrument.
At December 31, 1997, the Company had entered into various swap sales
contracts with a weighted average price (NYMEX based) of $2.62 for contract
volumes of 4,205,000 MMBtu's of natural gas for January 1998 through May 1998.
Also, the Company had entered into various swap sales contracts with a weighted
average price (CIG-Inside FERC based) of $2.14 for contract volumes of 2,250,000
MMBtu's of natural gas for January 1998 through March 1998. The unrecognized
gain on these contracts totaled $2.4 million based on December 31, 1997 market
values.
Subsequent to December 31, 1997, the Company has entered into
additional swap sales contracts with a weighted average price (NYMEX based) of
$2.30 for contract volumes of 17,120,000 MMBtu's of natural gas for April 1998
36
<PAGE>
through October 1998. Also, the Company has entered into additional swap sales
contracts with a weighted average price (CIG-Inside FERC based) of $1.71 for
contract volumes of 3,638,000 MMBtu's of natural gas for April 1998 through
October 1998.
In September 1995, the Company entered into an interest rate swap
covering $50 million of its bank debt. The agreement required payment to a
counterparty based on a fixed rate of 5.585% and required the counterparty to
pay the Company interest at the then current 30 day LIBOR rate. Accounts
receivable or payable under this agreement were recorded as adjustments to
financing costs and settled on a monthly basis. The agreement matured in
September 1997. At December 31, 1996, the fair value of the agreement was
estimated at the net present value discounted at 10%.
Other
All liquid investments with an original maturity of three months or
less are considered to be cash equivalents. Certain amounts in prior years
consolidated financial statements have been reclassified to conform with current
classification.
(3) INVESTMENTS
The Company has investments in foreign energy companies and long-term
notes receivable. The following table sets forth the book values and estimated
fair values of these investments:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-------------------------- --------------------------
Book Fair Book Fair
Value Value Value Value
----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Marketable securities $ 143,066 $ 143,066 $ 115,558 $ 115,558
Equity method investments - - 8,789 42,585
Long-term notes receivable - - 5,334 5,334
----------- ----------- ----------- -----------
$ 143,066 $ 143,066 $ 129,681 $ 163,477
=========== =========== =========== ===========
</TABLE>
The Company follows SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," which requires that investments in marketable
securities accounted for using the cost method and long-term notes receivable be
adjusted to their market value with a corresponding increase or decrease to
stockholders' equity. The pronouncement does not apply to investments accounted
for using the equity method.
Cairn
From May 1993 to November 1996, the Company had an investment in
Command Petroleum Limited ("Command"), an Australian oil company, which was
accounted for using the equity method. In November 1996, the Company exchanged
its interest in Command for 16.2 million shares of freely marketable common
stock of Cairn, an international independent oil company based in Edinburgh,
Scotland whose shares are listed on the London Stock Exchange. The Company
recognized a gain of $65.5 million in 1996 as a result of this exchange.
SOCI plc
In 1993, SOCO Perm Russia, Inc. ("SOCO Perm"), was organized by the
Company and a U.S. industry participant. SOCO Perm and a Russian partner formed
the Permtex joint venture to develop proven oil fields in the Volga-Urals Basin
of Russia. A private placement in April 1996 reduced the Company's interest to
34.91%. The Company recognized a gain of $2.6 million as a result of this
transaction.
In 1994, the Company formed a consortium to explore the Tamtsag Basin
of eastern Mongolia, SOCO Tamtsag Mongolia, Inc. ("SOCO Tamtsag"). In 1996, the
Company completed the exchange of a portion of its interest to an industry
participant for consulting services valued at $1.5 million. As a result of this
transaction, the Company's ownership was reduced to 42% and an $832,000 gain was
recognized.
37
<PAGE>
In May 1997, a newly formed entity, SOCI plc, completed an initial
public offering of its shares on the London Stock Exchange. Simultaneously with
the offering, the Company exchanged its shares of SOCO International Operations,
Inc., which included the Company's interests in SOCO Perm, SOCO Tamtsag and
certain Thailand properties, for shares of SOCI plc. Certain minority interest
owners in these ventures also contributed their interests. As part of the
listing, SOCI plc acquired Cairn's UK onshore company as well as certain assets
in Yemen and Tunisia that were formerly owned by Command. The offering raised
approximately $75 million of new equity capital for SOCI plc. The Company
received 7.8 million shares (15.9% of the total) of SOCI plc, which it has
agreed not to sell for the two-year period following the listing. The Company
recognized a gain of $19.8 million as a result of this exchange.
Marketable Securities
As a result of the transactions described above, the Company has
investments in equity securities of two publicly traded foreign energy
companies, Cairn and SOCI plc. Both investments are accounted for using the cost
method. In the first quarter of 1997, the Company sold 4.5 million Cairn shares
at an average price of $8.81 per share realizing $39.2 million in proceeds
resulting in a gain of $13.0 million. The Company's carrying cost in the Cairn
and SOCI plc shares was $73.1 million and $30.9 million, respectively, at
December 31, 1997. The market value of the Cairn and SOCI plc shares
approximated $96.1 million and $47.0 million, respectively, at December 31,
1997. In accordance with SFAS 115, at December 31, 1997 and 1996, respectively,
investments were increased by $39.0 million and $20.4 million in gross
unrealized holding gains, stockholders' equity was increased by $25.3 million
and $11.9 million and deferred taxes payable were increased by $13.7 million and
$7.2 million. In addition, minority interest liability was increased by $1.3
million at December 31, 1996.
Notes Receivable
The Company held notes receivable due from a director at December 31,
1997 and 1996. At December 31, 1996, the Company also held a long-term note
receivable due from SOCO Tamtsag, a Mongolian affiliate, with a book value of
$4.7 million which was contributed to SOCI plc along with the Company's interest
in SOCO Tamtsag in May 1997. The notes from a director, which originated in
connection with an option to purchase 10% of the Company's international
affiliates are due April 10, 1998, and are secured by shares of the Company
which are owned by the director. At December 31, 1997, the notes were classified
as current assets in the accompanying financial statements and had a book value
of $647,000. At December 31, 1997 and 1996, the fair value of the notes
receivable, based on existing market conditions and the anticipated future net
cash flow related to the notes, approximated their carrying cost.
38
<PAGE>
(4) OIL AND GAS PROPERTIES AND GAS FACILITIES
The cost of oil and gas properties at December 31, 1997 and 1996
includes $21.3 million and $32.7 million of unevaluated leasehold. Such
properties are held for exploration, development or resale. The following table
sets forth costs incurred related to oil and gas properties and gas processing
and transportation facilities:
<TABLE>
<CAPTION>
Excluding Patina
--------------------------------------------------
1997 1996 1995
----------- ------------ -----------
(In thousands)
<S> <C> <C> <C>
Proved acquisitions $ 3,338 $ 54,708 $ 13,025
Acreage acquisitions 5,609 24,589 7,388
Development 74,676 34,774 50,437
Exploration 17,217 4,364 7,798
Gas processing, transportation and other 3,096 3,612 7,873
----------- ------------ -----------
$ 103,936 $ 122,047 $ 86,521
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Patina
--------------------------------------------------
1997 1996 1995
------------ ------------ -----------
(In thousands)
<S> <C> <C> <C>
Proved acquisitions $ 338 $ 218,380 $ 650
Development 11,322 8,301 12,141
Exploration 121 224 416
Gas processing, transportation and other 329 - 13
------------ ------------ -----------
$ 12,110 $ 226,905 $ 13,220
============ ============ ===========
</TABLE>
Excluding Patina, the 1997 development expenditures of $74.7 million
were concentrated in the Gulf of Mexico and Rocky Mountains. During 1997, the
Company placed 72 wells on sales with 24 wells in progress at year end. 1997
exploration costs include the costs of two exploratory dry holes in the Gulf of
Mexico and continuing seismic programs in the Gulf of Mexico, northern Louisiana
and the Rocky Mountains.
Proved acquisitions during 1996 included $218.4 million related to the
formation of Patina including the acquisition of Gerrity Oil & Gas Corporation
("GOG"). In October 1997, the Company sold its interest in Patina. Net proceeds
from the sale were approximately $127 million.
(5) INDEBTEDNESS
The following indebtedness was outstanding on the respective dates:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
SOCO subordinated notes $ 173,635 $ -
SOCO bank facility 1 93,731
SOCO convertible subordinated notes - 80,748
----------- ---------
173,636 174,479
Patina subordinated notes - 103,094
Patina bank facilities - 94,500
----------- ---------
$ 173,636 $ 372,073
=========== =========
</TABLE>
SOCO maintains a $500 million revolving credit facility ("SOCO
Facility"). The SOCO Facility is divided into a $400 million long-term portion
and a $100 million short-term portion. Credit availability is adjusted
semiannually to reflect changes in reserves and asset values. The borrowing base
available under the facility was $120 million at December 31, 1997. Borrowings
under the facility generally bear interest at prime, with an option to select
39
<PAGE>
LIBOR plus .75% or CD plus .75%. The margin on LIBOR or CD increases to 1% when
the Company's consolidated senior debt becomes greater than 80% of its
consolidated tangible net worth, as defined. During 1997, the average interest
rate under the facility was 6.5%. The Company pays certain fees based on the
unused portion of the borrowing base. Covenants, in addition to other
requirements, require maintenance of a current working capital ratio of 1 to 1
as defined, limit the incurrence of additional debt and restrict dividends,
stock repurchases, certain investments, other indebtedness and unrelated
business activities. Such restricted payments are limited by a formula that
includes proceeds from certain securities, cash flow and other items. Based on
such limitations, more than $120 million was available for the payment of
dividends and other restricted payments at December 31, 1997.
In June 1997, SOCO issued $175.0 million of 8.75% Senior Subordinated
Notes ("Notes") due June 15, 2007. The Notes were sold at a discount resulting
in an 8.875% effective interest rate. The net proceeds of the offering were
$168.3 million which were used to redeem convertible subordinated notes and pay
down the balance outstanding under the credit facility. The Notes are redeemable
at the option of the Company on or after June 15, 2002, initially at 104.375% of
principal, and at prices declining to 100% of principal on or after June 15,
2005. Upon the occurrence of a change of control, as defined in the Notes, SOCO
would be obligated to make an offer to purchase all outstanding Notes at a price
of 101% of the principal amount thereof. In addition, SOCO would be obligated,
subject to certain conditions, to make offers to purchase the Notes with the net
cash proceeds of certain asset sales or other dispositions of assets at a price
of 100% of the principal amount thereof. The Notes are unsecured general
obligations of SOCO and are subordinated to the SOCO Facility and to any
existing and future indebtedness of SOCO's subsidiaries. The Notes contain
covenants that, among other things, limit the ability of SOCO to incur
additional indebtedness, pay dividends, engage in transactions with shareholders
and affiliates, create liens, sell assets, engage in mergers and consolidations
and make investments in unrestricted subsidiaries. Such restricted payments are
limited by a formula that includes proceeds from certain securities, cash flow
and other items. Based on such limitations, more than $100 million was available
for the payment of dividends and other restricted payments at December 31, 1997.
The Company's international subsidiaries and Patina are considered unrestricted
subsidiaries. As such, their activities and the proceeds realized from any
disposition of these interests are not restricted by the Note convenants.
In 1994, SOCO issued $86.3 million of 7% convertible subordinated notes
due May 15, 2001. The net proceeds were $83.4 million. The notes were
convertible into common stock at $22.57 per share. During 1996 and the first six
months of 1997, the Company repurchased $3.8 million and $824,000, respectively,
of these notes in accordance with a repurchase program. The notes were redeemed
by the Company in June 1997 at 103.51% of principal. As a result of the note
redemption, the Company incurred a loss of $4.4 million or $2.8 million net of
tax ($.09 per common share) which has been recorded as an extraordinary item in
the accompanying financial statements.
As a result of the disposition of Patina in October 1997, Patina's
indebtedness is no longer included in the Company's consolidated financial
statements.
Scheduled maturities of indebtedness for the next five years are zero
in 1998 and 1999, $1,000 in 2000 and zero in 2001 and 2002. The long-term
portion of the SOCO Facility is scheduled to expire in 2000. However, it is
management's policy to renew both the short-term and long-term facilities and
extend their maturities on a regular basis.
Consolidated cash payments for interest were $28.6 million, $21.9
million and $22.1 million, respectively, for 1997, 1996 and 1995.
40
<PAGE>
(6) FEDERAL INCOME TAXES
At December 31, 1997, the Company had no liability for foreign taxes. A
reconciliation of the United States federal statutory rate to the Company's
effective income tax rate for 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Federal statutory rate 35% 35% (35%)
Net change in valuation allowance (3%) (29%) -
Tax effect of cumulative earnings of subsidiary 1% - -
Loss in excess of net deferred tax liability - - 32%
---------- ---------- ---------
Effective income tax rate 33% 6% (3%)
========== ========== =========
</TABLE>
For book purposes, the components of the net deferred tax asset and
liability at December 31, 1997 and 1996, respectively, were:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(In thousands)
<S> <C> <C>
Deferred tax assets
NOL and capital loss carryforwards $ 27,307 $ 65,126
AMT credit carryforwards 1,401 644
Production payment receivables 5,557 32,654
Reserves and other 6,031 5,613
----------- -----------
40,296 104,037
----------- -----------
Deferred tax liabilities
Depreciable and depletable property (30,964) (59,865)
Investments and other (25,884) (42,252)
Unrealized investments gains (15,097) (7,131)
------------ -----------
(71,945) (109,248)
----------- -----------
Deferred tax liability (31,649) (5,211)
Valuation allowance - (3,823)
----------- -----------
Net deferred tax liability $ (31,649) $ (9,034)
=========== ===========
</TABLE>
The Company had regular net operating loss carryforwards of $78.0
million at December 31, 1997. The majority of these carryforwards expire between
2006 and 2010 with a minimal amount expiring between 1998 and 2005. At December
31, 1997, the Company also had alternative minimum tax credit carryforwards of
$1.4 million which are available indefinitely. Cash payments for income taxes
were $500,000 in 1997 and $245,000 in 1995. No cash payments were made for
income taxes in 1996.
(7) STOCKHOLDERS' EQUITY
A total of 75 million common shares, $.01 par value, are authorized of
which 35.7 million were issued and 33.3 million were outstanding at December 31,
1997. In 1997, the Company issued a total of 4.2 million shares of common stock
as follows: 3.6 million for the conversion of preferred shares, 300,000 in
exchange for 2.1 million of outstanding warrants and 308,000 primarily for the
exercise of stock options. The Company also issued 530,000 shares of treasury
stock in exchange for a director's 10% interest in SOCO International Holdings,
Inc. During 1997, the Company repurchased 2.6 million shares of common stock for
$45.6 million. In 1996, the Company issued 666,000 shares of common stock, with
399,000 shares issued in exchange for the remaining outstanding stock of SOCO
Offshore, Inc. (formerly DelMar Operating, Inc.) and 267,000 shares issued
primarily for the exercise of stock options and repurchased 725,000 shares of
common stock for $7.0 million. Quarterly dividends of $.065 per share were paid
in 1997 and 1996. For book purposes, for the period between June 1995 and
September 1996, common stock dividends were in excess of retained earnings and,
as such, were treated as distributions of capital.
41
<PAGE>
A total of 10 million preferred shares, $.01 par value, have been
authorized. In 1993, 4.1 million depositary shares (each representing a quarter
interest in a share of $100 liquidation value stock) of 6% preferred stock were
sold through an underwriting. The net proceeds were $99.3 million. During 1996,
the Company repurchased 6,000 shares for $142,000. During 1997, the Company
called the preferred stock for redemption. The preferred stock was convertible
into common stock at $20.46 per share or the liquidation preference was $25.00
per depositary share, plus accrued and unpaid dividends. As a result of the
call, 72% of the preferred shares were converted into 3.6 million shares of
common stock. The remaining preferred shares were redeemed for $29.1 million
before accrued dividends and a redemption premium. The Company paid $5.0 million
and $6.2 million ($1.50 per 6% convertible depositary share per annum) in
preferred dividends during 1997 and 1996, respectively. A $1.0 million
redemption premium for the preferred shares is also included in the 1997
preferred dividend amount in the statement of operations.
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share" which prescribes
standards for computing and presenting earnings per share and supersedes APB
Opinion No. 15, "Earnings per Share." In accordance with SFAS 128, income
applicable to common has been calculated based on the weighted average shares
outstanding during the year and income applicable to common-assuming dilution
has been calculated assuming the exercise or conversion of all dilutive
securities as of January 1, 1997 and 1996, or as of the date of issuance if
later. The following table illustrates the calculation of earnings per share for
income from continuing operations.
<TABLE>
<CAPTION>
Income Shares Per-Share
------------ -------- ------------
For the Year Ended December 31, 1997
------------------------------------
<S> <C> <C> <C>
Income before extraordinary item $ 35,465
Preferred dividends (5,978)
-----------
Income applicable to common
Income available to common shareholders 29,487 30,588 $ .96
Effect of Dilutive Securities
Stock options 513
----------- -----------
Income applicable to common-assuming dilution
Income available to common shareholders +
assumed conversions $ 29,487 31,101 $ .95
=========== =========== ===========
For the Year Ended December 31, 1996
------------------------------------
Income before extraordinary item $ 62,950
Preferred dividends (6,210)
-----------
Income applicable to common
Income available to common shareholders 56,740 31,308 $ 1.81
Effect of Dilutive Securities
Stock options 153
Convertible preferred stock 6,210 5,052
----------- -----------
Income applicable to common-assuming dilution
Income available to common shareholders +
assumed conversions $ 62,950 36,513 $ 1.72
=========== =========== ===========
</TABLE>
As of December 31, 1997, the only potentially dilutive securities
outstanding were stock options that have yet to be exercised.
The Company maintains a stock option plan for certain employees
providing for the issuance of options at prices not less than fair market value.
Options to acquire up to three million shares of common stock may be outstanding
at any given time. The specific terms of grant and exercise are determined by a
42
<PAGE>
committee of independent members of the Board. A stock grant and option plan is
also maintained by the Company whereby each nonemployee Director receives 500
common shares quarterly in payment of their annual retainer. It also provides
for 2,500 options to be granted annually to each nonemployee Director. The
majority of currently outstanding options vest over a three year period (30%,
60%, 100%) and expire five years from the date of grant.
At December 31, 1997, the Company has two fixed stock option
compensation plans, which are described above. The Company applies APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
in accounting for the plans. Accordingly, no compensation cost has been
recognized for these fixed stock option plans. Had compensation cost for the
Company's fixed stock option compensation plans been determined consistent with
the method established by SFAS 123, "Accounting for Stock-Based Compensation,"
the Company's net income (in thousands) and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Net income (loss) As Reported $ 32,617 $ 62,950 $(39,831)
Pro forma $ 29,260 $ 61,936 $(40,567)
Net income (loss) per common As Reported $ .87 $ 1.81 $(1.53)
share Pro forma $ .76 $ 1.78 $(1.55)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Sholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995, respectively: dividend yield
of 1.6%, 2.8% and 1.9%; expected volatility of 41%, 44% and 46%; risk-free
interest rates of 6.1%, 5.7% and 7.2%; and an expected life of 4.5 years.
A summary of the status of the Company's two fixed stock option plans
as of December 31, 1997, 1996 and 1995 and changes during the years ended on
those dates is presented below (shares are in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- ------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,674 $12.72 1,711 $13.21 1,484 $12.96
Granted 1,013 16.82 519 9.50 610 14.06
Exercised (295) 11.27 (255) 6.69 (124) 7.34
Forfeited (65) 14.88 (301) 14.71 (259) 16.62
------ ------ -------
Outstanding at end of year 2,327 14.64 1,674 12.72 1,711 13.21
====== ====== =======
Options exercisable at
year end 1,105 772 743
Weighted-average fair
value of options
granted during
the year $5.96 $3.27 $5.78
</TABLE>
43
<PAGE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- --------------------------------
Weighted-
Number Average Number
Range Outstanding at Remaining Weighted- Exercisable at Weighted-
of December 31, Contractual Life Average December 31, Average
Exercise Prices 1997 (in years) Exercise Price 1997 Exercise Price
- ----------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 6.00 to 9.75 443,000 3.0 $ 8.64 232,000 $ 7.96
10.63 to 14.13 585,000 2.1 13.58 427,000 13.55
16.13 to 17.50 858,000 4.0 16.24 176,000 16.37
18.13 to 23.81 441,000 2.9 18.93 270,000 18.27
------------- -------------
$ 6.00 to 23.81 2,327,000 3.1 $14.64 1,105,000 $13.97
------------- -------------
</TABLE>
(8) MAJOR CUSTOMERS
In 1997, Sonat Marketing Company accounted for approximately 17% of
revenues, Engage Energy accounted for approximately 14%, and Duke Power and
Energy accounted for approximately 12%. In 1996, Duke Power and Energy accounted
for approximately 11% of revenues. In 1995, Amoco Production Company accounted
for approximately 10% of revenues. Management believes that the loss of any
individual purchaser would not have a material adverse impact on the financial
position or results of operations of the Company.
(9) EMPLOYEE RETIREMENT PLAN
The Company has a defined contribution plan pursuant to Section 401(k)
of the Internal Revenue Code. Substantially all employees are eligible to
participate after the completion of four months of service and may contribute up
to 15% of their compensation. The Board of Directors elected to contribute an
amount equal to at least 7% of each employee's pretax salary for the years ended
December 31, 1997, 1996 and 1995 resulting in total Company contributions of
$766,000, $1.2 million and $1.0 million, respectively.
(10) GUARANTOR CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Pursuant to the Notes, all of the Company's subsidiaries except Patina
and SOCO International (the "Unrestricted Subsidiaries") would be guarantors of
the Notes (the "Restricted Group"). The condensed consolidating financial
information below shows the impact of the guarantors and the Unrestricted
Subsidiaries to the Company's consolidated position as of and for the year ended
December 31, 1997. "SOCO" includes all subsidiaries other than SOCO Offshore and
the Unrestricted Subsidiaries. In the aggregate, the subsidiaries other than
SOCO Offshore and the Unrestricted Subsidiaries hold less than 10% of the total
assets and revenues included in SOCO.
44
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1997
(In thousands)
<CAPTION>
Restricted Group
----------------------------
SOCO Unrestricted
SOCO Offshore Subsidiaries Eliminations Consolidated
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets $ 87,843 $ 21,671 $ 4,361 $ - $ 113,875
Investments 141,501 - 143,066 (141,501) 143,066
Oil and gas properties, net 174,160 100,144 - - 274,304
Gas facilities and other, net 14,843 - - - 14,843
----------- ----------- ----------- ----------- -----------
Total assets $ 418,347 $ 121,815 $ 147,427 $ (141,501) $ 546,088
=========== =========== =========== =========== ===========
Current liabilities $ 52,201 $ 5,348 $ - $ - $ 57,549
Senior debt 1 - - - 1
Subordinated notes 173,635 - - - 173,635
Deferred taxes payable (15,832) - 47,481 - 31,649
Other noncurrent liabilities 7,413 12,085 - - 19,498
Total stockholders' equity 200,929 104,382 99,946 (141,501) 263,756
----------- ----------- ----------- ----------- -----------
Liabilities and stockholders'
equity $ 418,347 $ 121,815 $ 147,427 $ (141,501) $ 546,088
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Year Ended December 31, 1997
(In thousands)
<CAPTION>
Restricted Group
-----------------------------
SOCO Unrestricted
SOCO Offshore Subsidiaries Consolidated
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 90,015 $ 59,549 $ 106,164 $ 255,728
Expenses 86,029 44,117 68,142 198,288
----------- ------------ ----------- ------------
Income before taxes, minority interest
and extraordinary item 3,986 15,432 38,022 57,440
Income taxes 5,504 - 12,352 17,856
Minority interest - - 4,119 4,119
Extraordinary item 2,848 - - 2,848
----------- ----------- ----------- -----------
Net income $ (4,366) $ 15,432 $ 21,551 $ 32,617
=========== =========== =========== ===========
</TABLE>
45
<PAGE>
(11) COMMITMENTS AND CONTINGENCIES
The Company rents offices at various locations under noncancelable
operating leases. Minimum future payments under such leases approximate $2.4
million for 1998, $2.6 million for 1999 and 2000, $1.7 million for 2001 and
$153,000 for 2002.
In September 1996, the Company and other interest owners in a lease in
southern Texas were sued by the royalty owners in Texas state court in Brooks
County, Texas. The Company's working interest in the lease is approximately 20%.
The complaint alleges, among other things, that the defendants have failed to
pay proper royalties under the lease, have unlawfully comingled production with
production from other leases and have breached their duties to reasonably
develop the lease. The plaintiffs also claim damages for fraud, co-mingling,
trespass and similar matters, and demand actual and punitive damages. Although
the complaint does not specify the amount of damages claimed, plaintiffs have
submitted calculations showing total damages against all owners in excess of
$100 million. The Company and the other interest owners have filed an answer
denying the claims and intend to contest the suit vigorously. The suit is
currently in discovery.
At this time, the Company is unable to estimate the range of potential
loss, if any, from the foregoing uncertainty. However, the Company believes that
resolution should not have a material adverse effect on the Company's financial
position, although an unfavorable outcome in any reporting period could have a
material impact on the Company's results of operations for that period.
The Company and its subsidiaries and affiliates are named defendants in
lawsuits and involved from time to time in governmental proceedings, all arising
in the ordinary course of business. Although the outcome of these lawsuits and
proceedings cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on the financial position of the
Company.
In April 1995, the Company settled a lawsuit in Harris County, Texas
filed by certain landowners relating to certain alleged problems at a Company
well site. The Company recorded a charge of $4.4 million during 1995 to reflect
the cost of the settlement. A primary insurer honored its commitments in full
and participated in the settlement. The Company's excess carriers have declined,
to date, to honor indemnification for the loss. Based on the advice of counsel,
the Company has brought suit against the non-participating carriers for the
great majority of the cost of settlement.
In the second quarter of 1996, the Company received $1.5 million in
proceeds related to a judgment involving a pipeline dispute.
The Company's operations are affected by political developments and
federal and state laws and regulations. Oil and gas industry legislation and
administrative regulations are periodically changed for a variety of political,
economic and other reasons. Numerous departments and agencies, federal, state,
local and Indian, issue rules and regulations binding on the oil and gas
industry, some of which carry substantial penalties for failure to comply. The
regulatory burden on the oil and gas industry increases the Company's cost of
doing business, decreases flexibility in the timing of operations and may
adversely affect the economics of capital projects.
The financial statements reflect favorable legal proceedings only upon
receipt of cash, final judicial determination or execution of a settlement
agreement. The Company is a party to various other lawsuits incidental to its
business, none of which are anticipated to have a material adverse impact on its
financial position or results of operations.
(12) UNAUDITED SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION
Independent petroleum consultants directly evaluated 87%, 99%, and 81%
of proved reserves at December 31, 1997, 1996 and 1995, respectively. All
reserve estimates are based on economic and operating conditions at that time.
Future net cash flows as of each year end were computed by applying then current
prices to estimated future production less estimated future expenditures (based
on current costs) to be incurred in producing and developing the reserves.
46
<PAGE>
Future prices received for production and future production costs may
vary, perhaps significantly, from the prices and costs assumed for purposes of
these estimates. There can be no assurance that the proved reserves will be
developed within the periods indicated or that prices and costs will remain
constant. With respect to certain properties that historically have experienced
seasonal curtailment, the reserve estimates assume that the seasonal pattern of
such curtailment will continue in the future. There can be no assurance that
actual production will equal the estimated amounts used in the preparation of
reserve projections.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures. The data in the tables below represent estimates only.
Oil and gas reserve engineering must be recognized as a process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
way, and estimates of other engineers might differ materially from those shown
below. The accuracy of any reserve estimate is a function of the quality of
available data and engineering and geological interpretation and judgment.
Results of drilling, testing and production after the date of the estimate may
justify revisions. Accordingly, reserve estimates are often materially different
from the quantities of oil and gas that are ultimately recovered.
All reserves included in the tables below are located onshore in the
United States and in the waters of the Gulf of Mexico. The first set of tables
reflects the Company, excluding Patina (including Wattenberg area reserves of
the Company prior to formation of Patina in May 1996), and the second set of
tables shows consolidated Company totals.
47
<PAGE>
EXCLUDING PATINA
<TABLE>
<CAPTION>
Quantities of Proved Reserves - Crude Oil Natural Gas
--------- -----------
(MBbl) (MMcf)
<S> <C> <C>
Balance, December 31, 1995 16,826 256,861
Revisions 3,407 42,699
Extensions, discoveries and additions 845 60,479
Production (2,196) (31,893)
Purchases 891 41,606
Sales (1,751) (60,775)
--------- ---------
Balance, December 31, 1996 18,022 308,977
Revisions (266) (6,649)
Extensions, discoveries and additions 1,790 100,874
Production (2,049) (41,377)
Purchases 11 1,568
Sales (748) (225)
--------- ---------
Balance, December 31, 1997 16,760 363,168
========= =========
</TABLE>
<TABLE>
<CAPTION>
Proved Developed Reserves - Crude Oil Natural Gas
--------- -----------
(MBbl) (MMcf)
<S> <C> <C>
December 31, 1995 14,682 197,436
========= ==========
December 31, 1996 16,070 200,664
========= ==========
December 31, 1997 16,101 297,490
========= ==========
</TABLE>
48
<PAGE>
EXCLUDING PATINA
<TABLE>
<CAPTION>
Standardized Measure - December 31,
--------------------------------
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
Future cash inflows $ 1,016,597 $ 1,476,338
Future costs:
Production (339,147) (442,798)
Development (64,237) (72,761)
------------ ------------
Future net cash flows 613,213 960,779
Undiscounted income taxes (148,049) (246,113)
------------ ------------
After tax net cash flows 465,164 714,666
10% discount factor (173,346) (276,010)
------------ ------------
Standardized measure $ 291,818 $ 438,656
============ ============
</TABLE>
<TABLE>
<CAPTION>
Changes in Standardized Measure -
Year Ended December 31,
-------------------------------
1997 1996
----------- ------------
(In thousands)
<S> <C> <C>
Standardized measure, beginning of year $ 438,656 $ 203,590
Revisions:
Prices and costs (284,824) 176,801
Quantities 2,676 10,414
Development costs (9,241) (2,003)
Accretion of discount 43,866 18,426
Income taxes 70,050 (112,924)
Production rates and other (31,871) 14,758
----------- ------------
Net revisions (209,344) 105,472
Extensions, discoveries and additions 142,209 108,006
Production (104,465) (78,591)
Future development costs incurred 21,250 10,494
Purchases 2,374 136,227
Sales 1,138 (46,542)
----------- ------------
Standardized measure, end of year $ 291,818 $ 438,656
=========== ============
</TABLE>
49
<PAGE>
<TABLE>
CONSOLIDATED
<CAPTION>
Quantities of Proved Reserves - Crude Oil Natural Gas
--------- -----------
(MBbl) (MMcf)
<S> <C> <C>
Balance, December 31, 1994 34,977 511,251
Revisions (3,633) (89,455)
Extensions, discoveries and additions 782 32,835
Production (4,278) (53,227)
Purchases 2,002 13,449
Sales (5,603) (19,135)
----------- -----------
Balance, December 31, 1995 24,247 395,718
Revisions 4,127 41,385
Extensions, discoveries and additions 1,039 61,821
Production (3,884) (55,840)
Purchases 16,725 225,335
Sales (1,757) (62,783)
----------- -----------
Balance, December 31, 1996 40,497 605,636
Revisions (3,829) (34,334)
Extensions, discoveries and additions 1,790 100,874
Production (3,490) (61,638)
Purchases 11 1,568
Sales (18,219) (248,938)
----------- -----------
Balance, December 31, 1997 16,760 363,168
=========== ===========
</TABLE>
The quantities of proved reserves above at December 31, 1996 include
5.8 MBbl and 77.1 MMcf related to the minority interest owners of Patina which
was sold in October 1997.
<TABLE>
<CAPTION>
Proved Developed Reserves - Crude Oil Natural Gas
--------- -----------
(MBbl) (MMcf)
<S> <C> <C>
December 31, 1994 26,104 353,930
=========== ===========
December 31, 1995 21,637 330,524
=========== ===========
December 31, 1996 31,869 443,441
=========== ===========
December 31, 1997 16,101 297,490
=========== ===========
</TABLE>
50
<PAGE>
<TABLE>
CONSOLIDATED
<CAPTION>
Standardized Measure - December 31,
------------------------------
1997 1996
------------- -------------
(In thousands)
<S> <C> <C>
Future cash inflows $ 1,016,597 $ 3,144,813
Future costs:
Production (339,147) (781,550)
Development (64,237) (233,617)
------------ ------------
Future net cash flows 613,213 2,129,646
Undiscounted income taxes (148,049) (540,520)
------------ ------------
After tax net cash flows 465,164 1,589,126
10% discount factor (173,346) (650,534)
------------ ------------
Standardized measure $ 291,818 $ 938,592
============ ============
</TABLE>
The table above includes standardized measure attributable to minority
interests of $129.5 million at December 31, 1996.
<TABLE>
Changes in Standardized Measure -
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1996 1995
------------ ----------- -----------
(In thousands)
<S> <C> <C> <C>
Standardized measure, beginning of year $ 938,592 $ 331,106 $ 361,682
Revisions:
Prices and costs (609,467) 528,525 18,975
Quantities 2,676 10,915 (30,495)
Development costs (9,241) (13,027) (2,806)
Accretion of discount 81,361 (a) 46,045 (b) 36,168
Income taxes 230,075 (242,536) 16,249
Production rates and other (31,871) 11,052 (29,991)
----------- ----------- -----------
Net revisions (336,467) 340,974 8,100
Extensions, discoveries and additions 142,209 111,797 18,171
Production (164,330) (146,257) (96,232)
Future development costs incurred 21,250 18,400 43,551
Purchases 2,374 330,225 (b) 31,142
Sales (311,810) (a) (47,653) (35,308)
----------- ----------- -----------
Standardized measure, end of year $ 291,818 $ 938,592 $ 331,106
=========== =========== ===========
<FN>
(a) In 1997, $12.5 million in "Accretion of Discount" was included in "Sales" due to the sale of Patina
in October 1997.
(b) In 1996, $12.9 million in "Purchases" were included in "Accretion of
Discount" due to the significance of the accretion related to the
reserves purchased in the acquisition of GOG.
</FN>
</TABLE>
51
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Reference is made to Item 8 on page 27.
2. Schedules otherwise required by Item 8 have been omitted as
not required or not applicable.
3. Exhibits.
3.1 - Certificate of Incorporation of Registrant -- incorporated
by reference from Exhibit 3.1 to the Registrant's
Registration Statement on Form S-4(Registration No.33-33455).
3.1.1 - Certificate of Amendment to Certificate of Incorporation of
Registrant filed February 9, 1990 --incorporated by reference
from Exhibit 3.1.1 to the Registrant's Registration Statement
on Form S-4 (Registration No. 33-33455).
3.1.2 - Certificate of Amendment to Certificate of Incorporation of
Registrant filed May 22, 1991 -- incorporated by reference
from Exhibit 3.1.2 to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-43106).
3.1.3 - Certificate of Amendment to Certificate of Incorporation of
Registrant filed May 24, 1993 -- incorporated by reference
from Exhibit 3.1.5 to the Registrant's Quarterly Report on
Form 10-Q for the quarter-ended June 30, 1993 (File No.
1-10509).
3.2 - By-laws of the Registrant, as amended.*
4.1 - Indenture dated as of June 10, 1997 between the Registrant
and Texas Commerce Bank National Association relating to
Registrant's 8 3/4% Senior Subordinated Notes due 2007 --
incorporated by reference from Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated June 10, 1997
(File No. 1-10509).
4.1.1 - First Supplemental Indenture dated as of June 10, 1997 to
Exhibit 4.1.5 -- incorporated by reference from Exhibit 4.2
to the Registrant's Current Report on Form 8-K dated June 10,
1997 (File No. 1-10509).
4.1.2 - Second Supplemental Indenture dated as of June 10, 1997 to
Exhibit 4.1.5 -- incorporated by reference from Exhibit 4.3
to the Registrant's Current Report on Form 8-K dated June 10,
1997 (File No. 1-10509).
4.2 - Rights Agreement, dated as of May 27, 1997, between the
Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, specifying the terms of the Rights, which
includes the form of Certificate of Designation of Junior
Participating Preferred Stock as Exhibit A and the form of
Right Certificate as Exhibit B -- incorporated by reference
from Exhibit 1 to the Registrant's Current Report on Form 8-K
dated June 2, 1997 (File No. 1-10509).
4.3 - Form of Certificate of Designation of Junior Participating
Preferred Stock setting forth the terms of the Junior
Participating Preferred Stock, par value $.01 per share --
incorporated by reference from Exhibit A to Exhibit 1 to the
Registrant's Current Report on Form 8-K dated June 2, 1997
(File No.1-10509).
52
<PAGE>
10.1 - Snyder Oil Corporation 1990 Stock Option Plan for
Non-Employee Directors -- incorporated by reference from
Exhibit 10.4 to the Registrant's Registration Statement on
Form S-4 (Registration No. 33-33455).
10.1.1 - Amendment dated May 20, 1992 to the Registrant's 1990 Stock
Plan for Non-Employee Directors -- incorporated by reference
from Exhibit 10.1.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter-ended June 30, 1993 (File No.
1-10509).
10.2 - Registrant's Amended and Restated 1989 Stock Option Plan.*
10.3 - Registrant's Deferred Compensation Plan for Select Employees,
adopted effective June 1, 1994, as amended.*
10.4 - Registrant's Profit Sharing & Savings Plan and Trust as
amended and restated effective October 1, 1993 --incorporated
by reference from Exhibit 10.12 to the Registrant's Quarterly
Report on Form 10-Q for the quarter-ended September 30, 1993
(File No. 1-10509).
10.5 - Form of Indemnification Agreement --incorporated by reference
from Exhibit 10.15 to the Registrant's Registration Statement
on Form S-4 (Registration No. 33-33455).
10.6 - Form of Change in Control Protection Agreement --incorporated
by reference from Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1(Registration No.33-43106).
10.7 - Long-term Retention and Incentive Plan and Agreement
between the Registrant and Charles A. Brown --incorporated by
reference from Exhibit 10.1.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter-ended June 30, 1993 (File
No. 1-10509).
10.8 - Agreement dated as of April 30, 1993 between the Registrant
and Edward T. Story --incorporated by reference from Exhibit
10.8 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 (File No. 1-10509).
10.9 - Formation and Capitalization Agreement dated as of December
30, 1996 among Registrant, SOCO International, Inc., SOCO
International Holdings, Inc., SOCO International Operations,
Inc. and Edward T. Story. -- incorporated by reference from
Exhibit 10.9 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 1-10509).
10.9.1 - Promissory Note dated December 30, 1996 from Edward T.
Story payable to the order of SOCO International Holdings,
Inc. -- incorporated by reference from Exhibit 10.9.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 1-10509).
10.9.2 - Promissory Note dated December 30, 1996 from Edward T.
Story payable to the order of SOCO International Operations,
Inc. -- incorporated by reference from Exhibit 10.9.2 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 1-10509).
10.9.3 - Exchange Agreement dated July 10, 1997 between SOCO
International, Inc. and Edward T. Story, Jr. *
10.10 - Amended and Restated Stock Repurchase Agreement dated as of
July 31, 1997 and amended and restated as of September 18,
1997 among the Registrant and Patina Oil & Gas Corporation --
incorporated by reference to Exhibit 10.12 to Amendment No. 2
to the Registration Statement on Form S-3 of Patina Oil & Gas
Corporation (Commission File No. 333-32671).
10.11 - Fifth Restated Credit Agreement dated as of June 30, 1994
among the Registrant and the banks party thereto --
incorporated by reference from Exhibit 10.11 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter-ended June 30, 1994 (File No. 1-10509).
53
<PAGE>
10.11.1 - First Amendment dated as of May 1, 1995 to Fifth Restated
Credit Agreement -- incorporated by reference from Exhibit
10.11.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter-ended June 30, 1995 (File No. 1-10509).
10.11.2 - Second Amendment dated as of June 30, 1995 to Fifth
Restated Credit Agreement -- incorporated by reference from
Exhibit 10.12.2 to Registrant's Quarterly Report on Form 10-Q
for the quarter-ended June 30, 1995 (File No. 1-10509).
10.11.3 - Third Amendment dated as of November 1, 1995 to Fifth
Restated Credit Agreement -- incorporated by reference from
Exhibit 10.11.3 to Registrant's Annual Report on Form 10-K of
the year ended December 31, 1995 (File No. 1-10509).
10.11.4 - Fourth Amendment dated as of April 4, 1996 to Fifth
Restated Credit Agreement -- incorporated by reference to
Registrant's Quarterly Report on Form 10-Q for the
quarter-ended March 31, 1996 (File No. 1-10509).
10.11.5 - Fifth Amendment dated as of November 1, 1996 to Fifth
Restated Credit Agreement -- incorporated by reference from
Exhibit 10.11.5 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996 (File No. 1-10509).
10.11.6 - Sixth Amendment dated as of May 19, 1997 to Fifth Restated
Credit Agreement -- incorporated by reference from Exhibit
10.11.6 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 (File No. 1-10509).
10.11.7 - Seventh Amendment dated as of October 13, 1997 to Fifth
Restated Credit Agreement. *
10.12 - Directors Deferral Plan for Independent Directors of the
Registrant. *
10.13 - Amended and Restated Agreement and Plan of Merger dated as
of March 20, 1996 among Registrant, Patina Oil & Gas
Corporation, Patina Merger Corporation and Gerrity Oil & Gas
Corporation -- incorporated by reference from Exhibit 2.1 to
Amendment No. 1 to the Registration Statement on Form S-4 of
Patina Oil & Gas Corporation (Registration No. 333-572).
10.14 - Employment Agreement effective as of May 2, 1997 between
Snyder Oil Corporation and William G. Hargett -- incorporated
by reference from Exhibit 1 to the Registrant's Current
Report on Form 8-K dated April 24, 1997 (File No. 1-10509).
10.15 - Indemnification Agreement dated as of May 2, 1997 between
Snyder Oil Corporation and William G. Hargett -- incorporated
by reference from Exhibit 2 to the Registrant's Current
Report on Form 8-K dated April 24, 1997 (File No. 1-10509).
10.16 - Severance Agreement dated as of April 17, 1997 between
Snyder Oil Corporation and Thomas J. Edelman -- incorporated
by reference from Exhibit 3 to the Registrant's Current
Report on Form 8-K dated April 24, 1997 (File No. 1-10509).
10.17 - Advisory Agreement entered into effective as of May 1, 1997
between Snyder Oil Corporation and Thomas J. Edelman --
incorporated by reference from Exhibit 4 to the Registrant's
Current Report on Form 8-K dated April 24, 1997 (File No.
1-10509).
11.1 - Computation of Per Share Earnings.*
12 - Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.*
22.1 - Subsidiaries of the Registrant.*
54
<PAGE>
23.1 - Consent of Arthur Andersen LLP.*
23.2 - Consent of Netherland, Sewell & Associates, Inc.*
27 - Financial Data Schedule.*
99.1 - Reserve letter from Netherland, Sewell & Associates, Inc.
dated February 5, 1998 to the Snyder Oil Corporation interest
as of December 31, 1997.*
(b) The following report on Form 8-K was filed during the quarter
ended December 31, 1997:
October 22, 1997 - Item 2. Acquisition or Disposition of Assets;
Item 5. Other Events; Item 7.
* Filed herewith.
55
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
/s/ John C. Snyder Director and Chairman of the Board February 27, 1998
- ---------------------- (Principal Executive Officer)
John C. Snyder
/s/ William G. Hargett Director, President and Chief February 27, 1998
- ---------------------- Operating Officer
William G. Hargett
/s/ Roger W. Brittain Director February 27, 1998
- ----------------------
Roger W. Brittain
/s/ John A. Hill Director February 27, 1998
- ----------------------
John A. Hill
/s/ William J. Johnson Director February 27, 1998
- ----------------------
William J. Johnson
/s/ B. J. Kellenberger Director February 27, 1998
- ----------------------
B. J. Kellenberger
/s/ Harold R.Logan, Jr. Director February 27, 1998
- ----------------------
Harold R. Logan, Jr.
/s/ James E. McCormick Director February 27, 1998
- ----------------------
James E. McCormick
/s/ Edward T. Story Director February 27, 1998
- ----------------------
Edward T. Story
/s/ Mark A. Jackson Senior Vice President and Chief February 27, 1998
- ---------------------- Financial Officer (Principal Financial
Mark A. Jackson and Accounting Officer)
56
EXHIBIT 3.2
SNYDER OIL CORPORATION
Incorporated under the laws
of the State of Delaware
BY LAWS
As amended through September 16, 1997.
- --------------------------------------------------------------------------------
SNYDER OIL CORPORATION - BY-LAWS
-1-
<PAGE>
BY-LAWS OF SNYDER OIL CORPORATION
ARTICLE I
OFFICES
1.01. Registered Office. The registered office of Snyder Oil Corporation
(hereinafter called the Corporation) in the State of Delaware shall be at 1013
Centre Road, City of Wilmington, County of New Castle, and the registered agent
in charge thereof shall be The Corporation Service Company.
1.02. Other Offices. The Corporation may also have an office or offices at
any other place or places within or without the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS: STOCKHOLDERS'
CONSENT IN LIEU OF MEETING
2.01. Annual Meeting. The annual meeting of the stockholders for the
election of directors, and for the transaction of such other business as may,
subject to the provisions of Section 2.04, properly come before the meeting,
shall be held at such place, date and hour as shall be fixed by the Board of
Directors (hereinafter called the Board) and designated in the notice or waiver
of notice thereof; except that no annual meeting need be held if all actions,
including the election of directors, required by the General Corporation Law of
the State of Delaware to be taken at a stockholders' annual meeting are taken by
written consent in lieu of meeting pursuant to Section 2.03.
2.02. Special Meetings. A special meeting of the stockholders for any
purpose or purposes may be called by the Board, the Chairman, the Vice Chairman,
the President or the Secretary of the Corporation or the recordholders of at
least a majority of the shares of Common Stock of the Corporation issued and
outstanding, to be held at such place, date and hour as shall be designated in
the notice or waiver of notice thereof.
2.03. Stockholders' Consent in Lieu of Meeting. Any action required by the
General Corporation Law of the State of Delaware to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
required to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
such action by less than unanimous consent shall be given to those stockholders
who have not consented in writing.
2.04 Business to be Brought Before the Annual Meeting. To be properly
brought before the annual meeting of stockholders, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 2.04, who shall be entitled to vote at such meeting and who complies
with the notice procedures set forth in this Section 2.04. In addition to any
other applicable requirements, for business to be brought before an annual
SNYDER OIL CORPORATION - BY-LAWS
-2-
<PAGE>
meeting by a stockholder of the Corporation, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 120 days prior
to the anniversary date of the proxy statement for the preceding annual meeting
of stockholders of the Corporation. A stockholder's notice to the Secretary
shall set forth as to each matter (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and address, as they appear
on the Corporation's books, of the stockholder proposing such business, (iii)
the acquisition date, the class and the number of shares of voting stock of the
Corporation which are owned beneficially by the stockholder, (iv) any material
interest of the stockholder in such business, and (v) a representation that the
stockholder intends to appear in person or by proxy at the meeting to bring the
proposed business before the meeting.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 2.04.
The chairman of the annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 2.04, and if the
chairman should so determine, the chairman shall so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
Notwithstanding the foregoing provisions of this Section 2.04, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder with respect
to the matters set forth in this Section 12. Notwithstanding any provision to
the contrary set forth above, the provisions of this Section 2.04 shall be
effective only with respect to meetings of stockholders held after December 31,
1997.
ARTICLE III
BOARD OF DIRECTORS
3.01. General Powers. The business and affairs of the Corporation shall be
managed by the Board, which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law or by the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
3.02. Number and Term of Office. The number of directors shall be one or
such other number as shall be fixed from time to time by the Board. The Board
may designate alternate directors. Such alternate directors shall be given
notice of all meetings of the Board, but will be entitled to vote only in the
absence of the director for whom they are an alternate. Directors need not be
stockholders. Each director shall hold office until his successor is elected and
qualified, or until his earlier death or resignation or removal in the manner
hereinafter provided.
3.03. Resignation. Removal and Vacancies. Any director may resign at any
time by giving written notice to the Board, the Chief Executive Officer or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Any director or the entire Board may be removed, with or without cause, at
any time by vote of the holders of a majority of the shares then entitled to
vote at an election of directors, or by written consent of the stockholders
pursuant to Section 2.03.
SNYDER OIL CORPORATION - BY-LAWS
-3-
<PAGE>
Other vacancies occurring in the Board for any reason may be filled by vote
of the stockholders or by their written consent pursuant to Section 2.03 or by
vote of the Board or by the directors' written consent pursuant to Section 3.06.
If the number of directors then in office is less than a quorum, such other
vacancies may be filled by vote of a majority of the directors then in office.
3.04. Special Board Designation..
(a) Chairman of the Board. There shall be a Chairman of the Board, who shall
be a director and who shall serve as chairman of any meeting of the Board. The
Chairman of the Board shall be elected by the Board at its annual meeting or by
written consent pursuant to Section 3.06, and shall serve until his successor is
elected and qualified, or until his earlier death or resignation or removal as
Chairman of the Board or his ceasing to be a director. The Chairman of the Board
may resign at any time by giving written notice to the Board or the Secretary.
Such resignation shall take effect at the time specified therein or, if the time
is not specified, upon receipt thereof; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
The Chairman of the Board may be removed at any time as Chairman of the Board by
the Board.
(b) Vice Chairman of the Board. There shall be elected at the Board's
discretion a Vice Chairman of the Board, who shall be a director and who shall
serve as chairman of any meeting of the Board when the Chairman of the Board is
unable to attend. The Vice Chairman of the Board shall be elected by the Board
at its annual meeting or by written consent pursuant to Section 3.06, and shall
serve until his successor is elected and qualified, or until his earlier death
or resignation or removal as Vice Chairman of the Board or his ceasing to be a
director. The Vice Chairman of the Board may resign at any time by giving
written notice to the Chairman of the Board or the Secretary. Such resignation
shall take effect at the time specified therein or, if the time is not
specified, upon receipt thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. The
Vice Chairman of the Board may be removed at any time as Vice Chairman of the
Board by the Board.
3.05. Meetings.
(a) Annual Meetings. As soon as practicable after each annual election of
directors, the Board shall meet for the purpose of organization and the
transaction of other business, unless it shall have transacted ail such business
by written consent pursuant to Section 3.06.
(b) Other Meetings. Other meetings of the Board shall be held at such times
and places as -the Board or the Chairman of the Board shall from time to time
determine.
(c) Notice of Meetings. The Secretary shall give notice to each director of
each meeting, including the time, place and purpose of such meeting. Notice of
each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days before the day on which
such meeting is to be held, or shall be sent to him at such place by telegraph,
cable, wireless or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held, but notice need not be given to any director who shall
attend such meeting. A written waiver of notice, signed by the person entitled
thereto, whether before or after the time of the meeting stated therein, shall
be deemed equivalent to notice.
(d) Place of Meetings. The Board may hold its meetings at such place or
places within or without the State of Delaware as the Board may from time to
time determine, or as shall be designated in the respective
SNYDER OIL CORPORATION - BY-LAWS
-4-
<PAGE>
notices or waivers of notice thereof.
(e) Quorum and Manner of Acting. One-third of the total number of directors
then in office (but not less two if the number of directors is greater than one)
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and the vote of a
majority of those directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law or these By-laws. In the
absence of a quorum for any such meeting, a majority of the directors present
thereat may adjourn such meeting from time to time until a quorum shall be
present.
(f) Organization. At each meeting of the Board, the Chairman of the Board
shall act as chairman of the meeting or, in his absence, any director chosen by
a majority of the directors present. The Secretary or, in his absence, any
person (who shall be an Assistant Secretary, if an Assistant Secretary is
present) whom the chairman of the meeting shall appoint shall act as secretary
of such meeting and keep the minutes thereof.
3.06. Directors' Consent In Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all the directors and such
consent is filed with the minutes of the proceedings of the Board.
3.07. Action by Means of Conference Telephone or Similar Communications
Equipment. Any one or more members of the Board, or of any committee designated
by the Board, may participate in a meeting of the Board or any such committee by
means of conference telephone or similar communications equipment by means of
which ail persons participating in the meeting can bear each other, and
anticipation in a meeting by such means shall constitute presence in person at
such meeting.
3.08. Committees.
(a) There shall be an Executive Committee, and Audit Committee and a
Compensation Committee. The Board shall elect by the affirmative vote of a
majority of the whole Board the members of each committee, who shall be
directors of the Corporation, and shall designate for each committee a Chairman
who shall continue at the pleasure of the Board. The number of members of each
committee shall be determined from time to time by the Board.
(b) Each committee shall fix its own rules of procedure and shall meet where
and as provided by such rules. A majority of a committee shall constitute a
quorum.
(c) In the absence or disqualification of a member of any committee, the
members of such committee present at any meeting, and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.
(d) All completed actions by each committee shall be reported to the Board
at the next succeeding Board meeting and shall be subject to revision or
alteration by the Board; provided, however, that no acts or rights of third
parties shall be affected by any such revision or alteration.
3.09. Executive Committee. Between the meetings of the Board, the
Executive Committee shall possess and may exercise all the powers of the Board
in the management and direction of all the business and affairs
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of the Corporation (except the matters reserved by law to the whole Board and
matters hereinafter assigned to the Compensation Committee), in such manner as
the Executive Committee shall deem best for the interests of the Corporation in
all cases in which specific directions shall not have been given by the Board.
3.10. Audit Committee. A majority of the members of the Audit Committee
shall be independent directors. The Audit Committee shall have the power (I) to
review the financial affairs and controls of the Corporation, (ii) to recommend
each year to the Board of Directors independent auditor to audit the annual
financial statements of the Corporation and its subsidiaries, (iii) to meet with
the Corporation's auditors, (iv) to review the scope of the audit plan, (v) to
discuss with the auditors the results of the Corporation's annual audit and any
related matters, (vi) to review transactions posing a potential conflict of
interest among the Corporation and its directors, officers and affiliates, and
(vii) to perform any other functions delegated to it by the Board of Directors
in compliance with the By-laws of the Corporation.
3.11. Compensation Committee. The Compensation Committee shall have the
power to fix and determine the compensation of officers, directors and employees
and create any compensation or benefit plan for officers, directors and
employees, and shall have the power and authority vested in it by any
compensation or benefit plan of the Corporation.
3.12. Other Committees. The Board of Directors may, on resolution adopted by
the affirmative vote of a majority of the number of directors constituting the
entire Board of Directors, designate one or more directors (with such
alternatives, if any, as may be deemed desirable) to constitute a committee or
committees (in addition to the Executive, Audit and Compensation Committees) for
any purpose and with such authority (except the matters reserved by law to the
whole Board) as may be determined from time to time by resolution adopted by the
Board of Directors. Actions by and meetings of any such committee shall be
governed by Section 3.08 of these by-laws.
3.13. Special Meetings. Special meetings of the executive committee may be
called by the chairman of the executive committee or any member thereof at any
time provided that a good faith effort has been made to give notice to each
member, either personally or by mail, telephone or telegram.
3.14 Nominations for Election as a Director. Only persons who are nominated
in accordance with the procedures set forth in these bylaws and qualify for
nomination pursuant to Section 3.01 shall be eligible for election by
stockholders as, and to serve as, directors. Nominations of persons for election
to the Board of Directors of the Corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 3.14, who shall be entitled to
vote for the election of directors at the meeting and who complies with the
notice procedures set forth in this Section 3.14. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation (i) with respect
to an election to be held at the annual meeting of the stockholders of the
Corporation, not less than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders of the Corporation, and
(ii) with respect to an election to be held at a special meeting of stockholders
of the Corporation for the election of directors not later than the close of
business on the tenth day following the day on which notice of the date of the
special meeting was mailed to stockholders of the Corporation as provided in
Section 3.14 or public disclosure of the date of the special meeting was made,
whichever first occurs.
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Such stockholder's notice to the Secretary shall set forth:
(x) as to each person whom the stockholder proposes to nominate for election
or re-election as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a
nominee and to serve as a director if elected), and
(y) as to the stockholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such stockholder and (ii) the
class and number of shares of voting stock of the Corporation which are
beneficially owned by such stockholder.
At the request of the Board of Directors, any person nominated by the Board
of Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination that pertains to the nominee. In the event that a person is
validly designated as a nominee to the Board of Directors in accordance with the
procedures set forth in this Section 3.14 and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the stockholder who proposed such nominee, as the case may be, may
designate a substitute nominee. Other than directors chosen pursuant to the
provisions of Section 3.03, no person shall be eligible to serve as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 3.14. The presiding officer of the meeting of stockholders
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by these
bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 3.14, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder with respect
to the matters set forth in this Section 3.14. Notwithstanding any provision to
the contrary set forth above, the provisions of this Section 3.14 shall be
effective only with respect to meetings of stockholders held after December 31,
1997.
ARTICLE IV
OFFICERS
4.01. Number; Title; Term of Office. The officers of the Corporation shall
be a Chairman, a Vice Chairman, a Chief Executive Officer and a Chief Operating
Officer (if the Board of Directors shall determine the election of any of the
preceding four officers to be appropriate), a President, one or more Vice
Presidents (and, in the case of each Vice President, with such descriptive
title, if any, as the Board shall determine), a Secretary, one or more Assistant
Secretaries, a Treasurer and such other officers as the Board may from time to
time elect or appoint. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified, until his death, or until he
shall resign or shall have been removed in the manner hereinafter provided. Any
two or more offices may be held by the same person. None of the officers need be
a stockholder or a director of the Corporation, or a resident of the State of
Delaware.
4.02. Authority and Duties. All officers, as between themselves and the
Corporation, shall have such authority and perform such duties in the management
of the Corporation as may be provided in these By-laws or, to the extent not so
provided, by the Board.
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4.03. Term of Office, Resignation and Removal. All officers shall be elected
or appointed by the Board and shall hold office for such term Is may be
prescribed by the Board. Each officer shall hold office until his successor has
been elected or appointed and qualified or his earlier death or resignation in
the manner hereinafter provided. The Board may require any officer to give
security for the faithful performance of his dudes.
Any officer may resign at any time by giving written notice to the Board or
to the President or the Secretary of the Corporation, and such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, at the time it is accepted by action of the
Board. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
All officers and agents elected or appointed by the Board shall be subject
to removal at any tame by the Board or by the stockholders of the Corporation
with or without cause.
4.04. Vacancies. If the office of President, Secretary or Treasurer becomes
vacant for any reason, the Board shall fill such vacancy, and if any other
office becomes vacant, the Board may fill such vacancy. Any officer so appointed
or elected by the Board shall serve only until such time as the unexpired term
of his predecessor shall have expired unless reelected or reappointed by the
Board.
4.05. Chairman, Vice Chairman, Chief Executive Officer and Chief Operating
Officer. The Chairman, if one is elected by the Board, shall have charge of the
actual day to day operations and management of the Corporation and its property
with all such powers with respect to such properties and operations as may be
reasonably incident to such responsibilities, subject to the Board. He shall
also have such further authority and powers as may be prescribed by the Board or
these By-laws. The Vice Chairman, if one is elected by the Board, shall have
such powers and duties as may be assigned to him by the Board or the Chairman
and shall exercise the powers of the Chairman during that officer's absence or
inability to act. As between the Corporation and third parties, any action taken
by the Vice Chairman in the performance of the duties of the Chairman shall be
conclusive evidence of the absence or inability to act of the Chairman at the
time such action was taken. The Chief Executive Officer and Chief Operating
Officer, if either is elected by the Board, shall have such powers and duties as
may be assigned to him by the Board or the Chairman. The Chairman and the Vice
Chairman shall have the authority to assign any of their powers to any other
officers of the Corporation with respect to such matters as the Chairman or Vice
Chairman may deem appropriate. Any such assignment may be oral or written and
may be specific or general.
4.06. President. The President shall have such authority, powers and duties
as may be prescribed by the Board, or the Chairman or these By-laws. If the
Board has not elected a Chairman, the President shall exercise all of the powers
and discharge all of the duties of the Chairman, including any power of the
Chairman to assign any of his powers. As between the Corporation and third
parties, any action taken by the President in the performance of the duties of
the Chairman shall be conclusive evidence that there is no Chairman.
4.07. Vice Presidents.
(a) Executive Vice President. The Executive Vice President shall have such
authority, powers and duties as may be prescribed by the Board, the Chairman or
the President or these By-laws, and shall exercise the powers of the President
during that officer's absence or inability to act. As between the Corporation
and third parties, any action taken by the Executive Vice President in the
performance of the duties of the President shall be conclusive evidence of the
absence or inability to act of the President at the time such action was taken.
(b) Senior Vice Presidents. Each Senior Vice President shall have such power
and duties as may be assigned to him by the Board, the Chairman, the Vice
Chairman, the President or the Executive Vice President,
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and (in order of their seniority as determined by the length of time they have
held the office of Senior Vice President) shall exercise the powers of the
Executive Vice President during that officer's absence or inability to act. As
between the Corporation and third parties, any action taken by a Senior Vice
President in the performance of the duties of the Executive Vice President shall
be conclusive evidence of the absence or inability to act of the Executive Vice
President at the time such action was taken.
(c) Vice President. Each Vice President shall have such powers and duties as
may be assigned to him by the Board, the Chairman, the Vice Chairman, the
President, the Executive Vice President or a Senior Vice President.
4.08. Treasurer. The Treasurer shall have custody of the Corporation's funds
and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the Board, and shall perform such other duties as may be
prescribed by the Board, the Chairman, the President or the Executive Vice
President.
4.09. Assistant Treasurers. Each Assistant Treasurer shall have such powers
and duties as may be assigned to him by the Board, the Chairman, the President
or the Executive Vice President. The Assistant Treasurers (in the order of their
seniority as determined by the Board or, in the absence of such a determination,
as determined by the length of time they have held the office of Assistant
Treasurer) shall exercise the powers of the Treasurer during that officer's
absence or inability to act.
4.10. Secretary. The Secretary shall keep the minutes of all meetings of the
Board and of the shareholders in books provided for that purpose, and he shall
attend to the giving and service of all notices..He may sign with the Chairman
or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with the
President all certificates for shares of stock of the Corporation, and he shall
have charge of the certificate books, transfer books, and stock papers as the
Board of Directors may direct, all of which shall at all reasonable times be
open to inspection by any director upon application at the office of the
Corporation during business hours. He shall in general perform all duties
incident to the office of the Secretary, subject to the control of the Board.
4.11. Assistant Secretaries. Each Assistant Secretary shall have such powers
and duties as may be assigned to him by the Board, the Chairman, the President
or the Executive Vice President. The Assistant Secretaries (in the order of
their seniority as determined by the Board or, in the absence of such a
determination, as determined by the length of time they have held the office of
Assistant Secretary) shall exercise the powers of the Secretary during that
officer's absence or inability to act.
ARTICLE V
CONTRACTS. CHECKS. DRAFTS. BANK ACCOUNTS. ETC.
5.01. Execution of Documents. The Board shall designate the officers,
employees and agents of the Corporation who shall have power to execute and
deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other
orders for the payment of money and other documents for and in the name of the
Corporation, and may authorize such officers, employees and agents to delegate
such power (including authority to redelegate) by written instrument to other
officers, employees of agents of the Corporation; and, unless so designated or
expressly authorized by these By-laws, no officer or agent or employee shall
have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable pecuniarily for any
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purpose or to any amount.
5.02. Deposits. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation or otherwise as the
Board or Treasurer, or any other officer of the Corporation to whom power in
this respect shall have been given by the Board, shall select.
ARTICLE VI
SHARES AND THEIR TRANSFER FIXING RECORD DATE
6.01. Certificates for Shares. Every owner of stock of the Corporation shall
be entitled to have a certificate certifying the number and class of shares
owned by him in the Corporation, which shall otherwise be in such form as shall
be prescribed by the Board. Certificates shall be issued in consecutive order
and shall be numbered in the order of their issue, and shall be signed by, or in
the name of, the Corporation by the Chief Executive Officer, the President or a
Senior Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary.
6.02. Record. A record (herein called the stock record) in one or more
counterparts shall be kept of the name of the person, firm or corporation owning
the shares represented by each certificate for stock of the Corporation issued,
the number of shares represented by each such certificate, the date thereof and,
in the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name shares of stock stand on the
stock record of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation.
6.03. Transfer and Registration of Stock.
(a) The transfer of stock and certificates of stock which represent the
stock of the Corporation shall be governed by Article 8 of Subtitle I of Title 6
of the Delaware Code (the Uniform Commercial Code), as amended from time to
time.
(b) Registration of transfers of shares of the Corporation shall be made
only on the books of the Corporation upon request of the registered holder
thereof, or of his attorney "hereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and upon the surrender
of the certificate or certificates for such shares properly endorsed or
accompanied by a stock power duly executed.
6.04. Addresses of Stockholders. Each stockholder shall designate to the
Secretary of the Corporation an address at which notices of meetings and all
other corporate notices may be served or mailed to him, and, if any stockholder
shall fail to designate such address, corporate notices may be served upon him
by mail directed to him at his post office address, if any, as the same appears
on the stock record books of the Corporation or at his last known post office
address.
6.05. Lost, Destroyed and Mutilated Certificates. The holder of any shares
of the Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of the certificate therefor, and the Board may, in its
discretion, cause to be issued to him a new certificate or certificates for
shares, upon the surrender of the mutilated certificates or, in the case of loss
or destruction of the certificate, upon satisfactory proof of such loss or
destruction, and the Board may, in its discretion, require the owner of the lost
or destroyed certificate or his legal representation to give the Corporation a
bond in such sum and with such surety or sureties as it may direct to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss or destruction of any such certificate.
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6.06. Regulations. The Board may make such rules and regulations as it may
deem expedient, not inconsistent with these By-laws, concerning the issue,
transfer and registration of certificates for stock of the Corporation.
6.07. Fixing Date for Determination of Stockholders of Record. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders' or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor, in the case of consent to corporate action
in writing, more than 10 days after the date upon which the resolution fixing
the record date was adopted by the Board, not more than 60 days prior to any
other action. A determination of stockholders entitled to notice of or to vote
at a meeting of the stockholders shall apply to any adjournment of the meeting;
provided. however. that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VII
SEAL
7.01. Seal. The Board may provide a corporate seal, which shall be in the
form of a circle and shall bear the full name of the Corporation and the words
and figures "Corporate Seal 1989 Delaware".
ARTICLE VIII
FISCAL YEAR
8.01. Fiscal Year. The fiscal year of the Corporation shall end on the
thirty-first day of December in each year unless changed by resolution of the
Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
9.01. Indemnification
(a) Any person made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigate, by the reason of the fact that he, his testator
or intestate is or was a director, officer, employee or agent of the Corporation
shall be indemnified by the Corporation 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, or in
connection with any appeal therein; provided, that such person acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation, or with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct unlawful; except, in
the case of an action, suit or
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proceeding by or in the right of the Corporation in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
director, officer, employee or agent is liable for negligence or misconduct in
the performance of his duties, unless a court having jurisdiction shall
determine that, despite such adjudication, such person is fairly and reasonably
entitled to indemnification.
(b) Without limitation of any right conferred by paragraph (a) of this
Section, any person made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a director, officer, employee or agent of the Corporation,
and is or was serving as a fiduciary of, or otherwise rendering services to, any
employee benefit plan of or relating to the Corporation, shall be indemnified by
the Corporation against expenses (including attorney's fees), judgments, fines,
excise taxes and amounts paid in settlement actually and reasonably incurred by
him in connection with which action, suit or proceeding, or in connection with
any appeal therein; provided, that such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, or with respect to a criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; except in the case of an
action, suit or proceeding by or in the right of the Corporation in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such director, officer, employee or agent is liable for negligence or misconduct
in the performance of his duties, unless a court having jurisdiction shall
determine that, despite such adjudication, such person is fairly and reasonably
entitled to indemnification.
(c) The foregoing rights of indemnification shall not be deemed exclusive of
any other rights to which any director, officer, employee or agent may be
entitled or of any power of the Corporation apart from the provisions of this
Section.
9.02. Insurance for Indemnification. The Corporation may purchase and
maintain insurance for the indemnification of the Corporation and the directors,
officers, employees and agents of the Corporation to the full extent and in the
manner permitted by the applicable laws of the United States and the State of
Delaware from time to time in effect.
ARTICLE X
AMENDMENTS
10.01. Amendments. Any by-law (including these By-laws) may be adopted,
amended or repealed by the vote of the holders of a majority of the shares then
entitled to vote at an election of directors or by consent of the stockholders
pursuant to Section 2.03, or by vote of the Board or by the directors' written
consent pursuant to Section 3.06.
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EXHIBIT 10.2
Snyder Oil Corporation
AMENDED AND RESTATED 1989 STOCK OPTION PLAN
(as amended through September 16, 1997)
This Snyder Oil Corporation 1989 Stock Option Plan (the "Plan") provides
for the granting of
(a) Incentive Options (hereinafter defined) to certain key
employees of Snyder Oil Corporation, a Delaware
corporation (the "Corporation"), or of its Affiliates
(hereinafter defined), and
(b) Nonstatutory Stock Options (hereinafter defined) to
certain key employees of the Corporation or of its
Affiliates and to certain individuals who are not
employees of the Corporation or of its Affiliates.
The purpose of the Plan is to provide an incentive for key employees
and directors of the Corporation or its Affiliates and for individuals who are
not employees or directors of the Corporation of its Affiliates, but who from
time to time provide substantial advice or other assistance or services to the
Corporation or its Affiliates, to remain in the service of the Corporation or
its Affiliates, to extend to them the opportunity to acquire a proprietary
interest in the Corporation so that they will apply their best efforts for the
benefit of the Corporation, and to aid the Corporation in attracting able
persons to enter the service of the Corporation and its Affiliates.
SECTION 1. Definitions.
1.1. "Act" shall mean the Securities Exchange Act of 1934, as amended.
1.2. "Affiliates" shall mean (a) any corporation, other than the
Corporation, in an unbroken chain of corporations ending with the Corporation if
each of the corporations, other than the Corporation, owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain and (b) any corporation,
other than the Corporation, in an unbroken chain of corporations beginning with
the Corporation if each of the corporations, other than the last corporation in
the unbroken chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.3. "Agreement" shall mean the written agreement between the
Corporation and a Holder evidencing the Option granted by the Company and the
understanding of the parties with respect thereto.
1
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1.4. "Board of Directors" shall mean the board of directors of the
Corporation.
1.5. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6. "Committee" shall mean the committee appointed pursuant to Section
3 hereof by the Board of Directors to administer this Plan.
1.7. "Disinterested Person" means a person who qualifies as both (i) a
"non-employee director" under Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and (ii) an "outside director" under Treasury Regulations
Section 1.162-27 promulgated under Section 162(m) of the Internal Revenue Code
of 1986, as amended, or any successor provision.
1.8. "Eligible Individuals" shall mean (a) key employees, including
officers and directors who are also employees of the Corporation or of any of
its Affiliates, and (b) individuals who are not employees or directors of the
Corporation of its Affiliates, but who from time to time provide substantial
advice or other assistance or services to the Corporation or its Affiliates.
1.7. "Fair Market Value" shall mean the closing price of the Stock
reported on the composite tape or other reporting medium (for securities listed
on the New York Stock Exchange or other primary market or exchange on which the
Stock is traded) as of the date the Fair Market Value is to be determined,
provided that if no such sales were made on such date, such price as reported
for the next preceding date on which such sales occurred. For purposes of
valuing Incentive Options, the Fair Market Value of Stock shall be determined
without regard to any restriction other than one which, by its terms, will never
lapse.
1.8. "Holder" shall mean an Eligible Individual to whom an Option has
been granted.
1.9. "Incentive Options" shall mean stock options that are intended to
satisfy the requirements of section 422A of the Code.
1.10."Nonstatutory Options" shall mean stock options that are not
intended to be or are not denominated as Incentive Options.
1.11."Options" shall mean either Incentive Options or Nonstatutory
Options, or both.
1.12. "Stock" shall mean the Corporation's authorized $.01 par value
common stock together with any other securities with respect to which Options
granted hereunder may become exercisable.
SECTION 2. Stock and Maximum Number of Shares Subject to the Plan.
2
<PAGE>
2.1. Description of Stock and Maximum Shares Allocated. The Stock which
Options granted hereunder give a Holder the right to purchase may be unissued or
reacquired shares of Stock, as the Board of Directors may, in its sole and
absolute discretion, from time to time determine.
Subject to the adjustments in Paragraph 6.6 hereof, the aggregate
number of shares of Stock to be issued pursuant to the exercise of all Options
granted hereunder may equal, but shall not exceed, 3,000,000 shares of Snyder
Oil Corporation Stock.
2.2. Restoration of Shares. If an Option hereunder expires, terminates,
or is exercised for any reason during the term of this Plan, the shares of Stock
which were subject to such Option shall be "restored" to the Plan by again being
available for Options granted after the shares' restoration, effective as of the
first day of the calendar quarter following such expiration, termination, or
exercise.
2.3. Maximum Number of Options Granted to One Person. Subject to the
adjustments in Paragraph 6.6 hereof, the maximum number of Options that may be
granted to any one person hereunder during any calendar year is 450,000.
SECTION 3. Administration of the Plan.
3.1. Stock Option Committee. The Plan shall be administered by the
Committee. The Committee shall consist of not less than three (3) members of the
Board of Directors. Only Disinterested Persons shall be eligible to serve as
members of the Committee.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at
the pleasure of the Board of Directors, which shall have the power, at any time
and from time to time, to remove members from the Committee or to add members
thereto. Vacancies on the Committee, however caused, shall be filled by action
of the Board of Directors.
3.3 Meetings and Actions of Committee. The Committee shall elect one of
its members as its Chairman and shall hold its meetings at such times and places
as it may determine. All decisions and determinations of the Committee shall be
made by the majority vote or decision of all of its members present at a
meeting; provided, however, that any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting duly called and held. The
Committee may make any rules and regulations for the conduct of its business
that are not inconsistent with the provisions hereof and with the bylaws of the
Corporation as it may deem advisable.
3.4 Committee's Powers. Subject to the express provisions hereof, the
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend, and rescind administrative and interpretive rules and regulations
relating to the Plan; (b) to determine the terms and provisions of the
respective Agreements (which need not be identical), including provisions
defining or otherwise relating to (i) subject to Section 6 of the Plan, the term
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and the period or periods and extent of exercisability of the Options, (ii) the
extent to which the transferability of shares of Stock issued upon exercise of
Options is restricted, (iii) the effect of termination of employment upon the
exercisability of the Options, and (iv) the effect of approved leaves of absence
(consistent with any applicable regulations of the Internal Revenue Service);
(c) to accelerate the time of exercisability of any Option that has been
granted; (d) to construe the respective Option Agreements and the Plan; and (e)
to make all other determinations and perform all other acts necessary or
advisable for administering the Plan, including the delegation of such
ministerial acts and responsibilities as the Committee deems appropriate. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Agreement in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The determinations of the Committee on the matters
referred to in this Paragraph 3.4 shall be final and conclusive.
SECTION 4. Eligibility and Participation.
4.1. Eligible Individuals. Options may be granted hereunder only to
persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a person shall
not be eligible to receive an Incentive Option hereunder unless he is an
employee of the Corporation or an Affiliate, nor shall a person be eligible to
receive an Incentive Option hereunder if he, at the time such Option is granted,
would own (within the meaning of sections 422A and 425 of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Corporation or an Affiliate unless at the
time such Incentive Option is granted the exercise price per share of Stock is
at least one hundred and ten percent (110%) of the Fair Market Value of each
share of Stock to which the Incentive Option relates and the Incentive Option is
not exercisable after the expiration of five (5) years from the date it is
granted.
4.2. No Right to Option. The adoption of the Plan shall not be deemed
to give any person a right to be granted an Option.
SECTION 5. Grant of Options and Certain Terms of the Agreements.
Subject to the express provisions hereof, the Committee shall determine
which Eligible Individuals shall be granted Options hereunder from time to time.
In making grants, the Committee shall take into consideration the contribution
the potential Holder has made or may make to the success of the Company or its
Affiliates and such other considerations as the Board of Directors may from time
to time specify. The Committee shall also determine the number of shares subject
to each of such Options, and shall authorize and cause the Corporation to grant
Options in accordance with such determinations.
The date on which the Committee completes all action constituting an
offer of an Option to an individual, including the specification of the number
of shares of Stock to be subject to the Option, shall be the date on which the
Option covered by an Agreement is granted, even though certain terms of the
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Agreement may not be at such time determined and even though the Agreement may
not be executed until a later time. For purposes of the preceding sentence, an
offer shall be deemed made if the Committee has completed all such action and
has communicated the grant thereof to the potential Holder. In no event,
however, shall an Optionee gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Option and the actual execution of the Agreement by the Company and the
Optionee.
Each option granted hereunder shall be evidenced by an Agreement,
executed by the Corporation and the Eligible Individual to whom the Option is
granted, incorporating such terms as the Committee shall deem necessary or
desirable. More than one Option may be granted hereunder to the same Eligible
Individual and be outstanding concurrently hereunder. In the event an Eligible
Individual is granted both one or more Incentive Options and one or more
Nonstatutory Options, such grants shall be evidenced by separate Agreements, one
for each of the Incentive Option grants and one for each of the Nonstatutory
Option grants.
Each Agreement may contain or otherwise provide for conditions giving
rise to the forfeiture of the Stock acquired pursuant to an Option granted
hereunder or otherwise and such restrictions on the transferability of shares of
the Stock acquired pursuant to an Option granted hereunder or otherwise as the
Committee in its sole and absolute discretion shall deem proper or advisable.
Such conditions giving rise to forfeiture may include, but need not be limited
to, the requirement that the Holder render substantial services to the
Corporation or its Affiliates for a specified period of time. Such restrictions
on transferability may include, but need not be limited to, options and rights
of first refusal in favor of the Corporation and shareholders of the Corporation
other than the Holder of such share of Stock who is a party to the particular
Agreement or a subsequent holder of the shares of Stock who is bound by such
Agreement.
In addition, the Board of Directors may authorize the Committee to
grant cash awards payable in connection with the exercise of an Option, upon
such terms and conditions as are specified by the Board of Directors; provided
that no such cash award shall be effective unless it can comply and does comply
with any applicable requirements for exemption from liability pursuant to Rule
16b-3 promulgated under the Act.
SECTION 6. Terms and Conditions of Options.
All Options granted hereunder shall comply with, be deemed to include,
and shall be subject to the following terms and conditions:
6.1. Number of Shares. Each Agreement shall state the number of
shares of Stock to which it relates.
6.2. Exercise Price. Each Agreement shall state the exercise price per
share of Stock. The exercise price per share of Stock subject to an Incentive
Option shall not be less than the greater of (a) the par value per share of the
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Stock or (b) 100% of the Fair Market Value per share of the Stock on the date of
the grant of the Option. The exercise price per share of Stock subject to a
Nonstatutory Option shall not be less than fifty percent (50%) of the Fair
Market Value per share of the Stock on the date of the grant of the Option.
6.3. Medium and Time of Payment, Method of Exercise, and Withholding
Taxes. The exercise price of an Option shall be payable upon the exercise of the
Option in cash, by certified or cashier's check, or, with the consent of the
Committee, with shares of Stock of the Corporation owned by the Holder which
have been held by the Holder for at least six (6) months prior to the date of
exercise, or with the consent of the Committee, by a combination of cash and
such shares. Exercise of an Option shall not be effective until the Corporation
has received written notice of exercise. Such notice must specify the number of
whole shares to be purchased and be accompanied by payment in full of the
aggregate Option price of the number of shares purchased. The Corporation shall
not in any case be required to sell, issue, or deliver a fractional share with
respect to any Option.
In the event that a Holder pays the exercise price of his Option, in
whole or in part, with previously owned shares of Stock, pursuant to the rules
specified above, then, if and to the extent approved by the Committee, in
addition to the shares of Stock purchased pursuant to the Option exercise, such
Holder shall also receive a new Option, subject to the terms and conditions set
forth below and in the Holder's individual Stock Option Agreement. Upon exercise
of the Option with payment in the form of either shares of Stock or a
combination of cash and shares of Stock, the Committee may, at its sole and
absolute discretion, grant the Holder a new Option for shares of Stock equal to
the number of shares that were delivered by the Holder to the Corporation to
pay, in whole or in part, the exercise price of the previous Option. The
exercise price of the new Option shall be equal to at least 100% of the Fair
Market Value per share of the Stock on the date of the exercise of the previous
Option. Provided, however, the new Option cannot be exercised by the Holder
until the later of (a) the exercisability dates specified in the individual
Option Agreement, or (b) six (6) months after the date of grant. As a further
condition on the exercisability of the new Option, the shares of Stock received
by the Holder upon exercise of his previous Option must be held by the Holder
for at least six (6) months prior to any sale of such shares by the Holder. Any
sale of such shares by a Holder prior to the expiration of the six (6) month
holding period shall render the new Option non-exercisable. Nothing in this
paragraph shall prevent the Committee from granting a Holder another new Option
in the future when the previous new Option is exercised by the Holder with the
payment of previously owned shares of Stock.
The Committee may, in its discretion, require a Holder to pay to the
Corporation at the time of exercise of an Option or portion thereof the amount
that the Corporation deems necessary to
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satisfy its obligation to withhold Federal, state or local income or other taxes
incurred by reason of the exercise. Upon the exercise of an Option requiring tax
withholding a Holder may make a written request to have shares of Stock withheld
by the Corporation from the shares otherwise to be received. The number of
shares so withheld shall have an aggregate Fair Market Value on the date of
exercise sufficient to satisfy the applicable withholding taxes. The acceptance
of any such request by a Holder shall be at the sole discretion of the
Committee, including, if deemed necessary by the Committee, approval by the
Securities and Exchange Commission and the satisfaction of any additional
requirements necessary to obtain such approval.
Where the exercise of an Option does not give rise to an obligation to
withhold Federal income or other taxes on the date of exercise, the Corporation
may, in its discretion, require a Holder to place shares of Stock purchased
under the Option in escrow for the benefit of the Corporation until such time as
Federal income or other tax withholding is no longer required with respect to
such shares or until such withholding is required on amounts included in the
gross income of the Holder as a result of the exercise of an Option or the
disposition of shares of Stock acquired pursuant thereto. At such later time,
the Corporation in its discretion, may require a Holder to pay to the
Corporation the amount that the Corporation deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred by
reason of the exercise of the Option or the disposition of shares of Stock, in
which case the shares of Stock shall be released from escrow to the Holder.
Alternatively, subject to acceptance by the Committee, in its sole discretion, a
Holder may make a written request to have shares of Stock held in escrow applied
toward the Corporation's obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option or the
disposition of shares of Stock, based on the Fair Market Value of the shares on
the date of the termination of the escrow arrangement. Upon application of such
shares toward the Corporation's withholding obligation, any shares of Stock held
in escrow and not, in the judgment of the Committee, necessary to satisfy such
obligation shall be released from escrow to the Holder.
6.4. Term, Time of Exercise, and Transferability of Options. In
addition to such other terms and conditions as may be included in a particular
Agreement granting an Option, an Option shall be exercisable during a Holder's
lifetime only by him or by his guardian or legal representative. An Option shall
not be transferrable other than by will or the laws of descent and distribution.
Each Option shall also be subject to the following terms and conditions:
(a) Termination of Employment or Directorship. The provisions of this Paragraph
----------------------------------------- 6.4(a) shall apply to the extent
a Holder's Agreement does not expressly provide otherwise. If a Holder
ceases to be employed by at least one of the employers in the group of
employers consisting of the Corporation and its Affiliates because the
Holder voluntarily terminates employment with such group of employers and
the Holder does not remain or thereupon become a director of the
Corporation or one or more of it's Affiliates, or if a Holder ceases to be
a director of at least one of the corporations in the group of corporations
consisting of the Corporation and its Affiliates and the Holder does not
remain or thereupon become an employee of the Corporation or one or more of
it's Affiliates, the portion, if any, of an Option
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that remains unexercised, including that portion, if any, that pursuant to
the Agreement is not yet exercisable, on the date of the Holder's
termination of employment or ceasing to be a director, whichever occurs
later, shall terminate and cease to be exercisable as of such date. If a
Holder ceases to be employed by at least one of the employers in the group
of employers consisting of the Corporation and its Affiliate because any of
such entities terminates the Holder's employment for cause, the portion, if
any, of an Option that remains unexercised, including that portion, if any,
that pursuant to the Agreement is not yet exercisable, at the time of the
Holder's termination of employment, shall terminate and cease to be
exercisable immediately upon his termination of employment. A Holder's
employment shall be deemed terminated "for cause" if terminated by the
Board of Directors of the Corporation or the board of directors of an
Affiliate because of incompetence, insubordination, dishonesty, other acts
detrimental to the interest of the Corporation or its Affiliates, or any
material breach by the Holder of any employment, nondisclosure,
noncompetition, or other contract with the Corporation or one of its
Affiliates. Whether cause exists shall be determined by such board of
directors in its sole discretion and in good faith. If a Holder ceases to
be employed by at least one of the employers in the group of employers
consisting of the Corporation and its Affiliates because one or more of
such entities terminates the employment of the Holder but not for cause,
and the Holder does not remain or thereupon become a director of the
Corporation or one or more of it's Affiliates, the Holder shall have the
right for thirty (30) days after such termination of employment to exercise
the Option with respect to that portion thereof that has become exercisable
pursuant to Holder's Agreement as of the date of the Holder's termination
of employment, and thereafter the Option shall terminate and cease to be
exercisable.
(b) Disability. The provisions of this Paragraph 6.4(b) shall apply to the
extent a ---------- Holder's Agreement does not expressly provide
otherwise. If a Holder ceases to be employed by at least one of the
employers in the group of employers consisting of the Corporation and its
Affiliates by reason of disability (as defined in section 22(e)(3) of the
Code) and does not remain or thereupon become a director of the Corporation
or one or more of it's Affiliates, or if the Holder ceases by reason of
such disability to be a director of at least one of the corporations in the
group of corporations consisting of the Corporation and its Affiliates, the
Holder shall have the right for ninety (90) days after the date of
termination of employment with or cessation of directorship of such group
of employers by reason of disability, whichever occurs later, to exercise
an Option to the extent such Option is exercisable on the date of his
termination of employment, and thereafter the Option shall terminate and
cease to be exercisable.
(c) Death. The provisions of this Paragraph 6.4(c) shall apply to the extent a
Holder's Agreement does not expressly provide otherwise. If a Holder dies
while in the
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employ of the Corporation or an Affiliate or dies while a director of the
Corporation or an Affiliate, an Option shall be exercisable by the Holder's
legal representatives, legatees, or distributees for ninety (90) days
following the date of the Holder's death to the extent such Option is
exercisable on the Holder's date of death, and thereafter the Option shall
terminate and cease to be exercisable.
Notwithstanding any other provision of this Plan, including the
provisions of items (a), (b), and (c) of this Paragraph 6.4, no Incentive Option
shall be exercisable after the expiration of ten (10) years from the date it is
granted, or the period specified in Paragraph 4.1, if applicable. The Committee
shall have authority to prescribe in any Agreement that the Option evidenced
thereby may be exercised in full or in part as to any number of shares subject
thereto at any time or from time to time during the term of the Option, or in
such installments at such times during said term as the Committee may prescribe.
Except as provided above and unless otherwise provided in any Agreement, an
Option may be exercised at any time or from time to time during the term of the
Option. Such exercise may be as to any or all whole (but no fractional) shares
which have become purchasable under the Option.
Within a reasonable time or such time as may be permitted by law after
the Corporation receives written notice that the Holder has elected to exercise
all or a portion of an Option, such notice to be accompanied by payment in full
of the aggregate Option price of the number of shares purchased, the Corporation
shall issue and deliver a certificate representing the shares acquired in
consequence of the exercise and any other amounts payable in consequence of such
exercise. In the event that a Holder exercises both an Incentive Option, or
portion thereof, and a Nonstatutory Stock Option, or a portion thereof, separate
Stock certificates shall be issued, one for the Stock subject to the Incentive
Option and one for the Stock subject to the Nonstatutory Stock Option. The
number of the shares of Stock transferrable due to an exercise of an Option
under this Plan shall not be increased due to the passage of time, except as may
be provided in an Agreement.
Nothing herein or in any Option granted hereunder shall require the
Corporation to issue any shares upon exercise of any Option if such issuance
would, in the opinion of counsel for the Corporation, constitute a violation of
the Securities Act of 1933, as amended, or any similar or superseding statute or
statutes, or any other applicable statute or regulation, as then in effect. At
the time of any exercise of an Option, the Corporation may, as a condition
precedent to the exercise of such Option, require from the Holder of the Option
(or in the event of his death, his legal representatives, legatees, or
distributees) such written representations, if any, concerning his intentions
with regard to the retention or disposition of the shares being acquired by
exercise of such Option and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such Holder (or
in the event of his death, his legal representatives, legatees, or
distributees), will not involve a violation of the Securities Act of 1933, as
amended, or any similar or superseding statute or statutes, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following legend, or
statements of other applicable restrictions, endorsed thereon, and may not be
immediately transferable:
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The shares of Stock evidenced by this certificate have been issued to
the registered owner in reliance upon written representations that
these shares have been purchased for investment. These shares may not
be sold, transferred, or assigned unless, in the opinion of the
Corporation and its legal counsel, such sale, transfer, or assignment
will not be in violation of the Securities Act of 1933, as amended,
applicable rules and regulations of the Securities and Exchange
Commission, and any applicable state securities laws.
6.5. Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. With respect to
any Incentive Option granted under this Plan, to the extent that the aggregate
Fair Market Value of shares of Stock subject to such Incentive Option
(determined as of the date the Incentive Option is granted), and the aggregate
Fair Market Value of shares of Stock or stock of any Affiliate (or a predecessor
of the Corporation or an Affiliate) subject to any other incentive stock option
(within the meaning of section 422A of the Code) of the Corporation or its
Affiliates (or a predecessor corporation of any such corporation), that first
become purchasable in any calendar year under such Option (with respect to any
Holder), exceed $100,000, then such excess over $100,000 shall not be considered
as subject to an Incentive Option, but rather shall be considered as subject to
a Nonstatutory Option. This rule shall be applied by taking shares of Stock
subject to Incentive Options that are purchaseable for the first time in the
calendar year into account in the order in which such Incentive Options were
granted. For purposes of this Paragraph 6.5, "predecessor corporation" means a
corporation that was a party to a transaction described in section 425(a) of the
Code (or which would be so described if a substitution or assumption under such
section had been effected) with the Corporation, or a corporation which, at the
time the new incentive stock option (within the meaning of section 422A of the
Code) is granted, is an Affiliate of the Corporation or a predecessor
corporation of any such corporations, or a predecessor corporation of any such
corporations.
6.6. Adjustments Upon Changes in Capitalization, Merger, Etc. The
Committee, in its discretion, may make such adjustments in the option price and
the number of shares covered by outstanding options which are required to
prevent any dilution or enlargement of the rights of holders of such options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, issuance of
rights or any other change in the capital structure of the Corporation. The
Committee, in its discretion, may also make such adjustments in the aggregate
number of options which are appropriate to reflect any transaction or event
described in the preceding sentence.
The following provisions of this Paragraph 6.6 shall apply unless a
Holder's Agreement provides otherwise. A dissolution or liquidation of the
Corporation; a sale of all or substantially all of the assets of the Corporation
where it is contemplated that within a reasonable period of time thereafter the
Corporation will either be liquidated or converted into a nonoperating company
or an extraordinary dividend will be declared resulting in a partial liquidation
of the Corporation (but in all cases only with respect to those employees whom
it is anticipated will lose their employment with
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the Corporation and its Affiliates as a result of such sale of assets); a merger
or consolidation (other than a merger effecting a reincorporation of the
Corporation in another state or any other merger or a consolidation in which the
shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of the Corporation and their proportionate
interests therein immediately prior to the merger or consolidation) in which the
Corporation is not the surviving corporation (or survives only as a subsidiary
of another corporation in a transaction in which the shareholders of the parent
of the Corporation and their proportionate interests therein immediately after
the transaction are not substantially identical to the shareholders of the
Corporation and their proportionate interests therein immediately prior to the
transaction; provided that the Board of Directors may at any time prior to such
a merger or consolidation provide by resolution that the foregoing provisions of
this parenthetical shall not apply if a majority of the board of directors of
such parent immediately after the transaction consists of individuals who
constituted a majority of the Board of Directors immediately prior to the
transaction); or a transaction in which another corporation becomes the owner of
50% or more of the total combined voting power of all classes of stock of the
Corporation (provided that the Board of Directors may at any time prior to such
transaction provide by resolution that the provision immediately preceding this
parenthetical and following the immediately preceding semi-colon shall not apply
if a majority of the board of directors of the acquiring corporation immediately
after the transaction consists of individuals who constituted a majority of the
Board of Directors immediately prior to the acquisition of such 50% or more
total combined voting power) shall cause every Option then outstanding to
terminate, but the Holders of each such then outstanding Options shall, in any
event, have the right, immediately prior to such dissolution, liquidation, sale
of assets, merger, consolidation, or transaction, to exercise such Options, to
the extent not theretofore exercised, without regard to the determination as to
the periods and installments of exercisability made pursuant to a Holder's
Agreement if (and only if) such Options have not at that time expired or been
terminated.
6.7. Rights as a Shareholder. A Holder shall have no right as a
shareholder with respect to any shares covered by his Option until a certificate
representing such shares is issued to him. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Paragraph 6.6 hereof.
6.8. Modification, Extension and Renewal of Options. Subject to the
terms and conditions of and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding Options granted under the Plan, or
accept the surrender of Options outstanding hereunder (to the extent not
theretofore exercised) and authorize the granting of new Options hereunder in
substitution therefor (to the extent not theretofore exercised). The Committee
may not, however, without the consent of the Holder, modify any outstanding
Incentive Options so as to specify a lower exercise price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a lower option price. In addition,
no modification of an Option granted hereunder shall, without the consent of the
Holder, alter or impair any rights or obligations under any Option theretofore
granted hereunder to such Holder under the
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Plan, except as may be necessary, with respect to Incentive Options, to satisfy
the requirements of section 422A of the Code.
6.9. Furnish Information. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
6.10. Obligation to Exercise; Termination of Employment. The granting
of an Option hereunder shall impose no obligation upon the Holder to exercise
the same or any part thereof. In the event of a Holder's termination of
employment with the Corporation or an Affiliate, the unexercised portion of an
Option granted hereunder shall terminate in accordance with Paragraph 6.4
hereof.
6.11. Agreement Provisions. The Agreements authorized under the Plan
shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee shall deem advisable. Each Agreement shall identify
the Option evidenced thereby as an Incentive Option or Nonstatutory Option, as
the case may be, and no Agreement shall cover both an Incentive Option and
Nonstatutory Option. Except as provided by the second paragraph of Section 6.6,
each Agreement relating to an Incentive Option granted hereunder shall contain
such limitations and restrictions upon the exercise of the Incentive Option to
which it relates as shall be necessary for the Incentive Option to which such
Agreement relates to constitute an incentive stock option, as defined in section
422A of the Code.
6.12. Redemption. At such time that the Stock is not registered under
section 12 of the Act, if a Holder or any other holder of the Stock received
upon exercise of an Option proposes to sell, give, pledge, exchange or otherwise
transfer or dispose of any of the Stock received upon exercise of an Option, or
of any interests therein owned by him, whether for cash or other consideration,
the Holder or such other holder shall promptly give notice (the "Redemption
Notice") to the Committee setting forth in detail the circumstances of such
event. The Redemption Notice shall state the name and address of the proposed
transferee and the proposed consideration for and terms of the transfer. The
Corporation shall have an option to purchase such Stock within ten (10) days
after receipt by the Committee of the Redemption Notice, on the terms
hereinafter set forth and as may be set forth in the Agreement. The Corporation
shall exercise such option by giving the Holder or such other holder notice
thereof. Such option may be exercised by the Corporation as to all, but not less
than all, of such Stock, and such option shall expire to the extent not
exercised by the Corporation within ten (10) days after receipt by the Committee
of the Redemption Notice. The price per share for the Stock purchased by the
Corporation pursuant to this Paragraph 6.12 shall be:
(a) the Fair Market Value per share of such Stock on the date
the Committee receives the Redemption Notice, if the
proposed transfer is a gift, or
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(b) the price per share for which the Holder has received a
bona fide offer, as described in the Redemption Notice, if
the proposed transfer is other than a gift.
The value of any noncash consideration included in such bona fide offer shall be
determined in good faith by the Board of Directors, with the assistance of a
third party to the extent the Board of Directors deems appropriate.
Upon exercise of its option pursuant to this Paragraph 6.12, the Corporation
shall pay the Holder or such other holder the purchase price (i) within 60 days
after receipt of the Redemption Notice by the Committee in the manner provided
in the Agreement between Corporation and the Holder or (ii) at the election of
the Corporation, in accordance with the terms embodied in any bona fide offer
received by the Holder or such other holder and described in the Redemption
Notice. Any Stock that the Corporation does not purchase as herein provided may
be transferred by the Holder or such other holder to the persons and upon terms
and conditions no more favorable to the purchasers than those set forth in the
Redemption Notice, such transfer to be consummated within ninety (90) days after
receipt of the Redemption Notice by the Committee, and not otherwise.
SECTION 7. Remedies and Legend
7.1. Remedies. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
7.2. Legend. Each certificate representing shares issued to a Holder
upon exercise of an Option granted under the Plan may, if such share is subject
to any transfer restriction, including a right of first refusal, provided for
under this Plan or an Agreement, bear a legend that complies with applicable law
with respect to the restrictions on transferability referenced in this Paragraph
7.2, such as:
The shares represented by this certificate are subject to restrictions
on transferability imposed by that certain instrument entitled "Snyder
Oil Corporation 1989 Stock Option Plan" dated _______________, 19__,
and an agreement thereunder between and [Holder] dated _______________,
19__, which grants to the Corporation an option to purchase such shares
in certain instances. A copy of such plan and agreement is on file at
the principal office of the Corporation, and is subject to the same
right of examination by a shareholder of the Corporation (in person or
by agent, attorney, or accountant) as are the books and records of the
Corporation.
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SECTION 8. Duration of Plan.
No Incentive Options may be granted hereunder after the date that is
ten (10) years from the earlier of (i) the date the Plan is adopted by the Board
of Directors or (ii) the date the Plan is approved by the shareholders of the
Corporation. In addition, with respect to shares of Stock not currently covered
by an outstanding Option, this Plan may be terminated at any time by the Board
of Directors.
SECTION 9. Amendment of Plan.
The Board of Directors may, insofar as permitted by law, with respect
to any shares at the time are not subject to Options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever; provided, however, that,
without the approval of the holders of a majority of the outstanding shares of
voting stock of all classes of the Corporation, no such revision or amendment
shall (a) change the number of shares of the Stock subject to the Plan, (b)
change the designation of the class of employees eligible to receive Options,
(c) decrease the price at which Incentive Options may be granted, (d) remove the
administration of the Plan from the Committee, (e) render the members of the
Committee eligible to receive Options under the Plan while serving as such, or
(f) without the consent of the affected Holder, cause the Incentive Options
granted hereunder and outstanding at such time that satisfied the requirements
of section 422A of the Code to no longer satisfy such requirements.
SECTION 10. General.
10.1. Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to Options shall be used for general corporate
purposes.
10.2. Right of the Corporation and Affiliates to Terminate Employment.
Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder
the right to continue in the employ of the Corporation or any Affiliate, or
interfere in any way with the rights of the Corporation or any Affiliate to
terminate his employment at any time.
10.3. No Liability for Good Faith Determinations. Neither the members
of the Board of Directors nor any member of the Committee shall be liable for
any act, omission, or determination taken or made in good faith with respect to
the Plan or any Option granted under it, and members of the Board of Directors
and the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect.
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10.4. Information Confidential. As partial consideration for the
granting of each Option hereunder, the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax and financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration such breach, in determining whether
to recommend the grant of any future Option to such Holder, as a factor
militating against the advisability of granting any such future Option to such
individual.
10.5. Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock option plan of the Corporation or any
Affiliate or any old age benefit, insurance, pension, profit sharing retirement,
bonus, or other extra compensation plans which the Corporation or any Affiliate
has adopted, or may, at any time, adopt for the benefit of its employees.
10.6. Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, issuance, or transfer, to execute a release and receipt therefor in
such form as it shall determine.
10.7. No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
10.8. Payment of Expenses. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Affiliates; provided,
however, the Corporation or an Affiliate may recover any and all damages, fees,
expenses, and/or costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under Paragraph 6.12 hereof.
10.9. Corporation Records. Records of the Corporation or its Affiliates
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
10.10. Information. The Corporation and its Affiliates shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
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10.11. No Liability of Corporation. The Corporation assumes no
obligation or responsibility to the Holder or his personal representatives,
heirs, legatees, or distributees for any act of, or failure to act on the part
of, the Committee.
10.12. Corporation Action. Any action required of the Corporation shall be
by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
10.13. Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but such provision shall be fully severable and
the Plan shall be construed and enforced as if the illegal or invalid provision
had never been included herein.
10.14. Notices. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered, or, whether actually
received or not, on the third business day after it is deposited in the United
States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith. The Corporation or a Holder
may change, at any time and from time to time, by written notice to the other,
the address which it or he had theretofore specified for receiving notices.
Until changed in accordance herewith, the Corporation and each Holder shall
specify as its and his address for receiving notices the address set forth in
the Agreement pertaining to the shares to which such notice relates.
10.15. Waiver of Notice. Any person entitled to notice hereunder may
waive such notice.
10.16. Successors. The Plan shall be binding upon the Holder, his
heirs, legatees, and legal representatives, upon the Corporation, its
successors, and assigns, and upon the Committee, and its successors.
10.17. Headings. The titles and headings of Sections and Paragraphs
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
10.18. Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Delaware except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Agreement, except to the e{went Delaware corporate law conflicts with the
contract law of such state, in which event Delaware corporate law shall govern.
The obligation of the Corporation to sell and deliver Stock hereunder is subject
to applicable laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Stock.
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10.19. Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
SECTION 11. Approval of Shareholders.
The Plan shall take effect on the date it is adopted by the Board of
Directors. However, if this Plan is not approved by the holders of a majority of
the outstanding shares of common stock, par value $.01 per share, of the
Corporation, within the period beginning on the date the Board of Directors
adopts the Plan and ending twelve (12) months after the date the Plan is adopted
by the Board of Directors, none of the Options granted hereunder shall
constitute Incentive Options; and in the event that the Plan is not so approved
on or before the first annual meeting of stockholders of the Corporation
following the date the Board of Directors adopts the Plan, if any Options are
granted under the Plan before the date such stockholders do approve the Plan to
individuals subject to suit under Section 16b of the Act at the time of grant,
such Options shall be null, void, and of no force and effect as of their grant
date.
17
EXHIBIT 10.3
SNYDER OIL CORPORATION
DEFERRED COMPENSATION PLAN
FOR SELECT EMPLOYEES
AS ADOPTED FEBRUARY 23, 1994, AS AMENDED THROUGH APRIL 2, 1997
ARTICLE 1 -- INTRODUCTION
1.1 PURPOSE OF THE PLAN
The Employer has adopted the Plan set forth herein to provide a means by which
certain employees may elect to defer receipt of designated percentages or
amounts of their Compensation and to provide a means for certain other deferrals
of compensation.
1.2 STATUS OF PLAN
The Plan is intended to be a "plan which is unfunded and is maintained by an
employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and shall be interpreted and administered to the extent
possible in a manner consistent with that intent.
ARTICLE 2 -- DEFINITIONS
Whenever used herein, the following terms have the meanings set forth below,
unless a different meaning is clearly required by the context:
2.1 ACCOUNT means, for each Participant, the account established for his or her
benefit under Section 5.1.
2.2 CHANGE OF CONTROL means (a) the purchase or other acquisition in one or more
transactions other than from the Employer, by any individual, entity or group of
persons within the meaning of Section 13(d)(3) or 14(d) of the Securities
Exchange Act of 1934 or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d- 3 of the Securities Exchange Act) of
50 percent or more of either that outstanding shares of common stock or the
combined voting power of Employer's then outstanding voting securities entitled
to vote generally or (b) in connection or as a result of any tender offer,
exchange offer, merger or other business combination or proxy contest the
directors prior to such event no longer constitute a majority of the directors
of Employer, or (c) the approval by stockholders of the Employer of a
reorganization, merger, consolidation or other business combination, in each
case, with respect to which persons who were stockholders of the Employer
immediately prior to such event do not immediately thereafter own more than 50%
of the combined voting power of the reorganized, merged, consolidated or
combined Employer's then outstanding securities that are entitled to vote
generally in the election of directors or (d) the liquidiation or dissolution of
Employer or sale of all or substantially all of the Employer's assets.
2.3 CODE means the Internal Revenue Code of 1986, as amended, from time to time.
Reference to any section or subsection of the Code included reference to any
comparable or succeeding provisions of any legislation which amends, supplements
or replaces such section or subsection.
2.4 COMPENSATION means the regular or base salary and cash bonuses payable by
the Employer or an Affiliate to an individual. For purposes of the Plan,
Compensation will be determined before giving effect to Elective Deferrals and
other salary reduction amounts which are not included in the Participant's gross
income under Sections 125, 401(k), 402(h) or 403(b) of the Code.
For purposes of the Plan, bonuses shall be deemed to have been earned during the
Plan Year in which the Employer accrues such bonuses for federal income tax
reporting purposes. Under the Employer's present method of federal income tax
reporting, regular bonuses paid in March of a given year are accrued ratably
during the prior year. Regular salary and special bonuses, as designated by the
Board of Directors or the Compensation Committee of the Board of Directors of
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Employer, are included in Compensation at the time paid to the employee. Thus,
for example, Compensation for the Plan Year ending December 31, 1995 includes
regular salary paid during 1995 and any regular bonus paid during March 1996. As
a result an Elective Deferral to defer, say, 10% of a Participant's 1995
Compensation will result in the deferral hereunder of 10% of the Participant's
1995 salary and 10% of any regular bonus paid to the Participant in March 1996
(any regular bonus payable in March 1995 would not be affected to an election to
defer a portion of 1995 Compensation, since such bonus would be included in 1994
Compensation).
2.5 DISABILITY means a Participant's total and permanent mental or physical
disability resulting in termination of employment as evidenced by presentation
of medical evidence satisfactory to the Administrator.
2.6 EFFECTIVE DATE means June 1, 1994.
2.7 ELECTION FORM means the participation election form as approved and
prescribed by the Plan Administrator.
2.8 ELECTIVE DEFERRAL means the portion of Compensation during a Plan Year which
is deferred by a Participant under Section 4.1.
2.9 ELIGIBLE EMPLOYEE means, on the Effective Date or on any Entry Date
thereafter, those employees of the Employer selected by the Compensation
Committee of the Board of Directors of Employer or by such persons as the
Compensation Committee may authorize to select employees entitled to participate
in the Plan.
2.10 ENTRY DATE means, for each Participant, the date deferrals commence in
accordance with Section 4.1.
2.11 EMPLOYER means Snyder Oil Corporation, any successor to all or a major
portion of its assets or business which assumes the obligations of Employer, and
each other entity that is affiliated with the Employer that adopts the Plan with
the consent of the Employer, provided that Snyder Oil Corporation shall have the
sole power to amend this Plan and shall be the Plan Administrator if no other
person or entity is so serving at any time.
2.12 ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to any section or subsection of ERISA includes
reference to any comparable or succeeding provisions of any legislation which
amends, supplements or replaces such section or subsection.
2.13 INCENTIVE CONTRIBUTION means a discretionary additional contribution made
by Employer as described in Section 4.3.
2.14 INSOLVENT means either (1) the Employer is unable to pay its debts as they
become due or (2) the Employer is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
2.15 MATCHING DEFERRAL means a deferral for the benefit of a Participant as
described in Section 4.2.
2.16 MATCHING DEFERRAL LIMITATION means, with respect to Elective Deferrals of
Compensation for any Plan Year made by any Participant, $75,000 multiplied by
the Matching Deferral Rate applicable to that Participant for such Plan Year.
The Compensation Committee may change the Matching Deferral Limitation for any
Participant or all Participants at any time, provided that the Matching Deferral
Limitation applicable to Elective Deferrals of Compensation for any Plan Year
made by any Participant may not be reduced unless the Plan Administrator has
given written notice of such reduction to the Participant not less than 10 days
prior to the commencement of such Plan Year.
2.17 MATCHING DEFERRAL RATE means, with respect to Elective Deferrals of
Compensation for any Plan Year made by any Participant, 33-1/3%. The
Compensation Committee may change the Matching Deferral Rate for any Participant
or all Participants at any time, provided that the Matching Deferral Rate
applicable to Elective Deferrals of Compensation for any Plan Year made by any
Participant may not be reduced unless the Plan Administrator has given written
notice of such reduction to the Participant not less than 10 days prior to the
commencement of such Plan Year.
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2.18 PARTICIPANT means any individual who participates in the Plan in accordance
with Article 3.
2.19 PLAN means the Snyder Oil Corporation Deferred Compensation Plan for Select
Employees as amended from time to time.
2.20 PLAN ADMINISTRATOR means the person, persons or entity designated by the
Employer to administer the Plan and to serve as agent for the Employer with
respect to the Trust. If no such person or entity is serving as Plan
Administrator at any time, the Employer shall be Plan Administrator.
2.21 PLAN YEAR means, in the case of the first Plan Year, the period from the
Effective Date through December 31, 1994 and, for each Plan Year thereafter, the
12-month period ending December 31.
2.22 RETIREMENT AGE means the age of 55 or such other age as shall be determined
as the normal retirement age for purposes of the Employer's welfare and
retirement plans as determined by the Employer's Board of Directors or the
Compensation Committee thereof. No determination to increase the Retirement Age
shall be effective with respect to amounts credited to the Account of a
Participant with respect to Plan Years commencing prior to the time of such
determination.
2.23 TRUST means the rabbi trust or trusts established by the Employer that
identifies the Plan as a plan with respect to which assets are to be held by the
Trustee.
2.24 TRUSTEE means the trustee or trustees under the Trust.
ARTICLE 3 -- PARTICIPATION
3.1 COMMENCEMENT OF PARTICIPATION
Any Eligible Employee who elects to defer part of his or her Compensation in
accordance with Section 4.1 shall become a participant in the Plan as of the
date such deferrals commence in accordance with Section 4.1. Any individual who
is not already a Participant and whose account is credited with an Incentive
Contribution shall become a Participant as of the date such amount is credited.
3.2 CONTINUED PARTICIPATION
A Participant in the Plan shall continue to be a Participant so long as any
amount remains credited to his or her Account.
3.3 CERTAIN TERMINATED PARTICIPANTS.
At the sole and continuing discretion of the Compensation Committee, an employee
of Employer who is an Eligible Employee at the time such employee's employment
by Employer is terminated and who, as a result of such termination, becomes
entitled to receive severance payments shall continue as a Participant and shall
be permitted to defer all or a portion of such severance payments as Elective
Deferrals by completing an Election Form and filing it with the Plan
Administrator prior to the time Employer finally determines that the employee
will receive the severance payments. Section 4.2 (relating to "Matching
Deferrals") will not apply to Elective Deferrals under this Section. In lieu of
an Election Form, the election by the employee may be reflected in the severance
or similar agreement providing for such severance payments. For purposes of this
Section, "severance payments" shall mean cash payments which, in accordance with
federal tax regulations, would, but for any election hereunder, be reported by
Employer as compensation income and which are subject to withholding for federal
income tax purposes.
ARTICLE 4 -- DEFERRALS AND INCENTIVE CONTRIBUTIONS
4.1 ELECTIVE DEFERRALS.
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Any Eligible Employee may elect to defer a percentage or dollar amount of one or
more payments of Compensation for the next succeeding Plan Year, on such terms
as the Plan Administrator may permit, by completing an Election Form and filing
it with the Plan Administrator prior to the first day of such succeeding Plan
Year (or any such earlier date as the Plan Administrator may prescribe),
provided that (1) an individual who is an Eligible Employee on the Effective
Date may, by completing an Election Form and filing it with the Plan
Administrator within 30 days following the Effective Date, elect to defer a
percentage or dollar amount of one or more payments of Compensation for the 1994
Plan Year, on such terms as the Plan Administrator may permit, which are payable
to the Participant after the date on which the Eligible Employee files the
Election Form and (2) an Eligible Employee who is a new employee of Employer
may, by completing an Election Form and filing it with the Plan Administrator
within 30 days of the date such employment commences, elect to defer a
percentage or dollar amount of one or more payments of Compensation for the Plan
Year in which such employment commences, on such terms as the Plan Administrator
may permit, which are payable to the Participant after the date on which the
Eligible Employee files the Election Form.
An election to defer a percentage or dollar amount of Compensation for any Plan
Year shall apply only to that Plan Year, unless the Participant elects otherwise
on the Election Form.
In addition, a Participant may elect to defer all or part of the amount of any
elective deferral contributions that were made on his or her behalf to the
Employer's 401(k) plan for the prior Plan Year but which were treated as an
excess deferral, an excess contribution or otherwise limited by the application
of the limitations of Sections 401(k), 401(m), 415 or 402(q) of the Code, so
long as the Participant so indicates on an Election Form.
A Participant's Compensation shall be reduced in accordance with the
Participant's election hereunder and amounts deferred hereunder shall be paid by
the Employer to the Trust as soon as administratively feasible and credited to
the Participant's Accounts as of the date the amounts are received by the
Trustee.
4.2 MATCHING DEFERRALS
After each payroll period, the Employer shall contribute to the Trust Matching
Deferrals equal to the Matching Deferral Rate multiplied by the amount of the
Elective Deferrals credited to the Participants' Accounts for such period under
Section 4.1. Each Matching Deferral will be credited as of the date it is
received by the Trustee pro rata in accordance with the amount of Elective
Deferrals of each Participant which are taken into account in calculating the
Matching Deferral. The amount of Matching Contributions credited to the Account
of any Participant with respect to Elective Deferrals of Compensation for any
Plan Year may not exceed the Matching Deferral Limitation applicable to that
Participant for such Plan Year.
Notwithstanding the foregoing or anything in Section 7.1, if the amount of
"Employee Deferral Contributions" (as defined in the Employer's 401(k) Plan)
made by a Participant during a Plan Year is less than the maximum amount of
Employee Elective Deferrals the Participant is permitted to make to the
Employer's 401(k) Plan (after taking into account the employer's contribution
allocated to the Participant's account and any limitations imposed by the 401(k)
Plan or the Code), all Matching Deferrals, and any income and gain thereon,
credited to the Account of the Participant with respect to Elective Deferrals of
Compensation for such Plan Year shall be forfeited and applied as provided in
Section 7.7, unless the Plan Administrator, in its sole discretion determines
that the failure to contribute such maximum amount to the Employer's 401(k) Plan
is the result of an administrative error by the Employer or other reasons beyond
the Control of the Participant.
4.3 INCENTIVE CONTRIBUTIONS
In addition to other contributions provided for under the Plan, the Employer
may, in its sole discretion, select one or more Eligible Employees to receive an
Incentive Contribution to his or her account on such terms as the Employer shall
specify at the time it makes the contribution. For example, the Employer may
contribute an amount to the Participant's Account and condition the payment of
such amount and accrued earnings thereon upon the Participant's remaining
employed by the Employer for an additional specified period of time. The terms
specified by the Employer shall supersede any other
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provision of this Plan as regards Incentive Contributions and earnings with
respect thereto, provided that if the Employer does not specify (a) the terms on
which such Incentive Contribution will vest, the Incentive Contribution and
earnings thereon will vest in the same manner as Matching Deferrals or (b) a
method of distribution, the Incentive Contribution and earnings thereon will be
distributed in a manner consistent with the election last made by the
Participant prior to the Plan Year in which the Incentive Contribution is made.
The Employer, in its discretion, may permit the Participant to designate a
distribution schedule for a particular Incentive Contribution provided the
designation is made before the Employer finally determines that the Participant
will receive the Incentive Contribution.
ARTICLE 5 -- ACCOUNTS
5.1 ACCOUNTS
The Plan Administrator shall establish an Account for each Participant
reflecting Elective Deferrals, Matching Deferrals and Incentive Contributions
made for the Participant's benefit together with any adjustments for income,
gain or loss and any payments from the Account. The Plan Administrator shall
establish sub-accounts for each Participant that has more than one election in
effect under Section 7.1 and such other sub-accounts as are necessary for the
proper administration of the Plan. As of the last business day of each calendar
quarter, the Plan Administrator shall provide the Participant with a statement
of his or her Account reflecting the income, gains and losses (realized and
unrealized), amounts of deferrals and distributions of such Account since the
prior statement.
5.2 INVESTMENTS
a. Each Participant shall designate, in accordance with the procedures
established from time to time by the Plan Administrator, the manner in which the
amounts allocated to his or her Account shall be deemed to be invested from
among the Funds (as such term is hereinafter defined) made available from time
to time for such purpose by the Plan Administrator. Such Participant may
designate one of such Funds for the deemed investment of all the amounts
allocated to his or her account or such Participant may split the deemed
investment of the amounts allocated to his or her Account between such Funds in
such increments as the Plan administrator may prescribe. If a Participant fails
to make a proper designation, then his or her Account shall be deemed to be
invested in the Fund or Funds designated by the Plan Administrator from time to
time in a uniform and nondiscriminatory manner. For purposes of the Section 5.2
and Section 7.9 the term "Funds" shall mean the investment funds designated from
time to time by the Plan Administrator for the deemed investment of Accounts
pursuant to this Section 5.2
b. A Participant may change his or her deemed investment designation for
future amounts to be allocated to such Participant's Account. Any such change
shall be made in accordance with the procedures established by the Plan
Administrator, and the frequency of such changes may be limited by the Plan
Administrator.
c. A Participant may elect to convert his or her deemed investment
designation with respect to the amounts already allocated to such Participant's
Account. Any such conversion shall be made in accordance with the procedures
established by the Plan Administrator, and the frequency of such conversions may
be limited by the Plan Administrator.
d. The preceding provisions of the Section 5.2 notwithstanding, the Plan
Administrator may, in its sole discretion, permit a Participant to designate
that all or a portion of his or her Account (with such portion to be determined
by the Plan Administrator) shall be deemed to be invested in assets other than
the Funds; provided, however, that no portion of Trust assets may be invested in
securities issued by the Employer. If a portion of a Participant's Account is
deemed to be invested in an asset other than the Funds (a "Deemed Asset"), than
such Participant may at any time request, in accordance with the procedures
prescribed by the Plan Administrator, that such deemed investment in such Deemed
Asset be converted into a deemed investment in one or more of the Funds;
provided, however, that if the Deemed Asset is an asset actually held by the
Trust at the time such conversion request is made, then such conversion shall be
permitted only at the times and to the extent that such Deemed Asset may be sold
or otherwise disposed of by the Trust in compliance with all applicable laws.
The Accounts that are deemed to be invested in a Deemed Asset shall be reduced
by the aggregate amount of the costs and expenses incurred by the Plan, the
Employer, the Plan
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Administrator, the Trust, and/or the Trustee in connection with such Deemed
Asset, including, without limitation, the costs and expenses associated with the
acquisition, maintenance, and sale or exchange of such Deemed Asset.
e. All deemed investments under the Plan shall be valued at the times
and in the manner determined by the Plan Administrator in its sole discretion.
The Plan Administrator may at any time and for any reason, without any liability
to any Participant, determine in its sole discretion that a particular Fund (or
asset under paragraph d. above) shall no longer be available for the deemed
investment of an Account under the Plan. In such case, the deemed investment in
such Fund (or asset) shall be deemed to have been liquidated on the date
selected by the Plan Administrator in its sole discretion. None of the Plan, the
Employer, the Plan Administrator, the Trust, or the Trustee shall be responsible
or liable for any loss resulting form (1) a Participant's exercise of any
control or discretion over the deemed investment or his or her Account and/or
(2) any actions taken by the Plan Administrator pursuant to this Section 5.2.
Actions by the Plan Administrator pursuant to this Section 5.2 may vary among
Participants.
ARTICLE 6 -- VESTING
6.1 GENERAL
A Participant will be immediately vested in, i.e., shall have a nonforfeitable
right to, all Elective Deferrals, and to all income and gain attributable
thereto, credited to his or her Account. Subject to earlier vesting in
accordance with this Article 6, a Participant shall become vested in the portion
of his or her Account attributable to Matching Deferrals made with respect to
Elective Deferrals of Compensation for a given Plan Year as follows:
(a) 33-1/3% at the end of the Plan Year with respect to which the Matching
Deferrals are made;
(b) 33-1/3% at the end of the first Plan Year following the Plan Year with
respect to which the Matching Deferrals are made; and
(c) 33-1/3% at the end of the second Plan Year following the Plan Year with
respect to which the Matching Deferrals are made,
or in such other manner as the Compensation Committee shall provide
prospectively with respect to any Plan Year. Any portion of a Participant's
Account that have not vested on the date that a Participant's employment with
Employer terminates shall, except as provided in this Article 6, shall be
forfeited and applied as provided in Section 7.7.
6.2 CHANGE OF CONTROL
A Participant shall become fully vested in his or her Account immediately prior
to a Change of Control of the Employer.
6.3 DEATH, RETIREMENT OR DISABILITY
A Participant shall become fully vested in his or her Account immediately prior
to termination of the Participant's employment by reason of Participant's death,
retirement at or after the attainment of the Retirement Age or Disability.
Whether a Participant's termination of employment is by reason of Participant's
Disability or retirement shall be determined by the Plan Administrator in its
sole discretion.
6.4 DISCRETIONARY VESTING
The Employer may, in its sole discretion, accelerate the vesting of all or any
portion of the Accounts of any Participant or all Participants.
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6.5 INSOLVENCY
A Participant shall become fully vested in his or her Account immediately prior
to the Employer's becoming Insolvent, in which case the Participant will have
the same rights as a general creditor of the Employer with respect to his or her
Account Balance.
ARTICLE 7 - PAYMENTS
7.1 ELECTION AS TO TIME AND FORM OF PAYMENT
A Participant shall elect (on the Election Form used to elect to defer
Compensation under Section 4.1) the date at which the Elective Deferrals and
vested Matching Deferrals (including any earnings attributable thereto) will
commence to be paid to the Participant. The Participant shall also elect thereon
for payments to be paid in either:
a: a single lump-sum payment; or
b. annual or monthly installments over a period elected by the Participant
up to 10 years, the amount of each installment to equal the balance of
his or her Account immediately prior to the installment divided by the
number of installments remaining to be paid.
Each such election will be effective for the Plan Year for which it is made and
succeeding Plan Years, unless changed by the Participant. Any change will be
effective only for Elective Deferrals and Matching Deferrals made for the first
Plan Year beginning after the date on which the Election Form containing the
change is filed with the Plan Administrator. Except as provided in Sections 7.2,
7.3, 7.4, or 7.5, payment of a Participant's Account shall be made in accordance
with the Participant's elections under this Section 7.1.
7.2 CHANGE OF CONTROL
A Participant may elect on the Election Form that, in the event of a Change of
Control, the Participant's entire Account balance (including any amount vested
pursuant to Section 6.2) will either (a) be paid to the Participant in a single
lump sum as soon as possible following any Change of Control of the Employer or
(b) be paid to the Participant in a single lump sum as soon as possible
following a Change of Control of the Employer unless, prior to the Change of
Control, a majority of the members of the Board of Directors of the Employer who
are not Participants in the Plan determines that the Change of Control would not
reasonably be expected to increase materially the economic risk of Participants
who remain in the Plan or (c) be paid in accordance with the other provisions of
the Plan without regard to any Change of Control. Unless the Participant shall
have elected otherwise on the Election Form, as soon as possible following a
Change of Control of the Employer, each Participant shall be paid his or her
entire Account balance (including any amount vested pursuant to Section 6.2) in
a single lump sum.
7.3 TERMINATION OF EMPLOYMENT
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Unless the Plan Administrator, in its sole discretion, determines otherwise,
upon termination of a Participant's employment for any reason other than death,
Disability and retirement after attainment of the Retirement Age, the vested
portion of the Participant's Account shall be paid to the Participant in a
single lump sum as soon as practicable following the date of such termination.
If the Plan Administrator does determine not to make a lump sum payment to a
Participant under this Section, the Plan Administrator may, in its sole
discretion, determine to pay the vested portion of such Participant's Account in
a single lump sum at any time thereafter.
7.4 DISABILITY
If the Participant's employment terminates by the reason of the Participant's
Disability, the amounts credited to a Participant's Account with respect to any
Plan Year shall be paid out in accordance with the election made in accordance
with Section 7.1 unless the Plan Administrator, in its sole discretion,
determines to pay such amounts in one lump sum or the Participant shall have
elected in such Election Form to receive payment of the remaining balance of
such amounts in one lump sum if his or her employment terminates by reason of
Disability.
7.5 DEATH
If a Participant dies prior to the complete distribution of his or her Account,
the balance of the Account shall be paid as soon as practicable to the
Participant's designated beneficiary or beneficiaries, in the form elected by
the Participant under either of the following options:
a. a single lump-sum payment; or
b. annual or monthly installments over a period elected by the
Participant up to 10 years, the amount of each installment to
equal the balance of the Account immediately prior to the
installment divided by the number of installments remaining to be
paid.
Any designation of beneficiary and form of payment to such beneficiary shall be
made by the Participant on an Election Form filed with the Plan Administrator
and may be changed by the Participant at any time by filing another Election
Form containing the revised instructions. If no beneficiary is designated or no
designated beneficiary survives the Participant, payment shall be made to the
Participant's surviving spouse or, if none, to his or her issue per stirpes, in
a single payment. If no spouse or issue survives the Participant, payment shall
be made in a single lump sum to the Participant's estate.
7.6 UNFORESEEN EMERGENCY
If a Participant suffers an unforeseen emergency, as defined herein, the Plan
Administrator, in its sole discretion, may pay to the Participant only that
portion, if any, of the vested portion of his or her Account which the Plan
Administrator determines is necessary to satisfy the emergency need, including
any amounts necessary to pay any federal, state or local income taxes reasonably
anticipated to result from the distribution. A Participant requesting an
emergency payment shall apply for the payment in writing in a form approved by
the Plan Administrator and shall provide such additional information as the Plan
Administrator may require. For purposes of this paragraph, "unforeseen
emergency" means an immediate and heavy financial need resulting from either of
the following:
a. expenses which are not covered by insurance and which the Participant
or his or her spouse or dependent has incurred as a result of, or is
required to incur in order to receive, medical care; or
b. any circumstance that is determined by the Plan Administrator in its
sole discretion to constitute an unforeseen emergency which is not
covered by insurance and which cannot reasonably be relieved by the
liquidation of the Participant's assets.
7.7 FORFEITURE OF NON-VESTED AMOUNTS
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To the extent that any amounts credited to a Participant's Account are not
vested at the time such amounts are otherwise payable under Sections 7.1 or 7.3,
such amounts shall be forfeited and shall, at the option of the Employer, either
be paid to the Employer or used to satisfy the Employer's obligation to make
contributions to the Trust under the Plan.
7.8 TAXES
All federal, state or local taxes that the Plan Administrator determines are
required to be withheld from any payments made pursuant to this Article 7 shall
be withheld.
7.9 FORM OF DISTRIBUTIONS
The Plan Administrator shall determine in its sole discretion the extent
to which any distribution under the Plan (whether payable in a single
lump sum or installments) shall be paid in cash, in kind, or both in
cash and in kind. Without limiting the scope of the Plan Administrator's
discretion pursuant to the preceding sentence, the Plan Administrator
may in its sole discretion direct that all or any portion of a
Participant's Account be distributed in kind to such Participant or such
Participant's designated beneficiaries based upon the Funds and/or
assets in which such Account is deemed to be invested pursuant to
Section 5.2 immediately prior to the date of such distribution. No
participant or beneficiary of a Participant shall have the right to
demand a distribution in cash, in kind, or any combination thereof.
ARTICLE 8 - PLAN ADMINISTRATOR
8.1 PLAN ADMINISTRATION AND INTERPRETATION
The Plan Administrator shall oversee the administration of the Plan. The Plan
Administrator shall have complete control and authority to determine the rights
and benefits and all claims, demands and actions arising out of the provisions
of the Plan of any Participant, beneficiary, deceased Participant, or other
person having or claiming to have any interest under the Plan. The Plan
Administrator shall have complete discretion to interpret the Plan to decide all
matters under the Plan. Such interpretation and decision shall be final,
conclusive and binding on all Participants and any person claiming under or
through any Participant, in the absence of clear and convincing evidence that
the Plan Administrator acted arbitrarily and capriciously. Any individual(s)
serving as Plan Administrator who is a Participant will not vote or act on any
matter relating solely to himself or herself. When making a determination or
calculation, the Plan Administrator shall be entitled to rely on information
furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan
Administrator shall have the responsibility for complying with any reporting and
disclosure requirements or ERISA.
8.2 POWERS, DUTIES, PROCEDURES, ETC.
The Plan Administrator shall have such powers and duties, may adopt such rules
and tables, may act in accordance with such procedures, may appoint such
officers or agents, may delegate such powers and duties, may receive such
reimbursements and compensation, and shall follow such claims and appeal
procedures with respect to the Plan as it may establish.
8.3 INFORMATION
To enable the Plan Administrator to perform its functions, the Employer shall
supply full and timely information to the Plan Administrator on all matters
relating to the compensation of Participants, their employment, retirement,
death, termination or employment, and such other pertinent facts as the Plan
Administrator may require.
8.4 INDEMNIFICATION OF PLAN ADMINISTRATOR
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The Employer agrees to indemnify and to defend to the fullest extent permitted
by law any officer(s) or employee(s) who serve as Plan Administrator (including
any such individual who formerly served as Plan Administrator) against all
liabilities, damages, costs and expenses (including attorneys' fees and amounts
paid in settlement of any claims approved by the Employer) occasioned by any act
or omission to act in connection with the Plan, if such act or omission is in
good faith.
ARTICLE 9 - AMENDMENT AND TERMINATION
9.1 AMENDMENTS
The Employer, upon action of its Board of Directors or an authorized committee
thereof, shall have the right to amend the Plan from time to time, subject to
Section 9.3, by an instrument in writing which has been executed on the
Employer's behalf by its duly authorized officer.
9.2 TERMINATION OF PLAN
This Plan is strictly a voluntary undertaking on the part of the Employer and
shall not be deemed to constitute a contract between the Employer and any
Eligible Employee (or any other employee) or a consideration for, or an
inducement or condition of employment for, the performance of the services by
any Eligible Employee (or other employee). The Employer reserves the right to
terminate the Plan at any time, subject to Section 9.3, by an instrument in
writing which has been executed on the Employer's behalf by its duly authorized
officer. Upon termination, the Employer may (a) elect to continue to maintain
the Trust to pay benefits hereunder as they become due as if the Plan had not
terminated or (b) direct the Trustee to pay promptly to Participants (or their
beneficiaries) the vested balance of their Accounts. For purposes of the
preceding sentence, in the event the Employer chooses to implement clause (b),
the Account balances of all Participants who are in the employ of the Employer
at the time the Trustee is directed to pay such balances shall become fully
vested and nonforfeitable. After Participants and their beneficiaries are paid
all Plan benefits to which they are entitled, all remaining assets of the Trust
attributable to Participants who terminated employment with the Employer prior
to termination of the Plan who were not fully vested in their Accounts under
Article 6 at that time, shall be returned to the Employer.
9.3 EXISTING RIGHTS
No amendment or termination of the Plan shall adversely affect the rights of any
Participant with respect to amounts that have been credited to his or her
Account prior to the date of such amendment or termination.
ARTICLE 10 - MISCELLANEOUS
10.1 NO FUNDING
The Plan constitutes a mere promise by the Employer to make payments in
accordance with the terms of the Plan and Participants and beneficiaries shall
have the status of general unsecured creditors of the Employer. Nothing in the
Plan will be construed to give any employee or any other person rights to any
specific assets of the Employer or of any other person. In all events, it is the
intent of the Employer that the Plan be treated as unfunded for tax purposes and
for purposes of Title 1 of ERISA.
10.2 NON-ASSIGNABILITY
None of the benefits, payments, proceeds or claims of any Participant or
beneficiary shall be subject to any claim of any creditor of any Participant or
beneficiary and, in particular, the same shall not be subject to attachment or
garnishment or other legal process by any creditor of such Participant or
beneficiary, nor shall any Participant or beneficiary have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits or
payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
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10.3 LIMITATION OF PARTICIPANTS' RIGHTS
Nothing contained in the Plan shall confer upon any person a right to be
employed or to continue in the employ of the Employer, or interfere in any way
with the right of the Employer to terminate the employment of an Participant in
the Plan any time, with or without cause.
10.4 PARTICIPANTS BOUND
Any action with respect to the Plan taken by the Plan Administrator or the
Employer or the Trustee or any action authorized by or taken at the direction of
the Plan Administrator, the Employer or the Trustee shall be conclusive upon all
Participants and beneficiaries entitled to benefits under the Plan.
10.5 RECEIPT AND RELEASE
Any payment to any Participant or beneficiary in accordance with the provisions
of the Plan shall, to the extent thereof, be in full satisfaction of all claims
against the Employer, the Plan Administrator and the Trustee under the Plan, and
the Plan Administrator amy require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect. If any Participant or beneficiary is determined by the Plan
Administrator to be incompetent by reason or physical or mental disability
(including minority) to give a valid receipt and release, the Plan Administrator
may cause the payment or payments becoming due to such person to be made to
another person for his or her benefit without responsibility on the part of the
Plan Administrator, the Employer or the Trustee to follow the application of
such funds.
10.6 PLAN DOES NOT AFFECT EMPLOYMENT RIGHTS
The Plan does not provide any employment rights to any Eligible Employee or
Participant. The Employer expressly reserves the right to discharge an Employee
at any time, with or without cause and with or without prior notice, without
regard to the effect such discharge would have on the Employee's interest in the
Plan.
10.7 GOVERNING LAW
The Plan shall be construed, administered, and governed in all respects under
and by the laws of the state of Texas. If any provision shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective.
10.8 HEADINGS AND SUBHEADINGS
Headings and subheadings in this Plan are inserted for convenience only and are
not to be considered in the construction of the provisions hereof.
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EXHIBIT 10.9.3
EXCHANGE AGREEMENT
THIS AGREEMENT, dated as of July 10, 1997, is made by SOCO INTERNATIONAL,
INC., a Delaware corporation ("Purchaser"), and EDWARD T. STORY, JR. ("Seller").
Purchaser and Seller own 900 shares and 100 shares, respectively, or
the common stock of SOCO International Holdings, Inc., a Delaware corporation
("Holdings"), such shares constituting all the outstanding shares of capital
stock of Holdings. Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the 100 shares of common stock owned by Seller ("Seller's
Shares") on the terms and conditions set forth in this Agreement. This Agreement
contemplates a nontaxable exchange of Seller's Shares by the Seller for shares
of common stock, par value $.01 per share, of Snyder Oil Corporation, a Delaware
corporation, ("SOCO Stock"), the sole stockholder of the Purchaser, currently
owned by Purchaser. Therefore, for and in consideration of the agreements set
forth herein, Purchaser and Seller agree to the provisions hereof.
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale. Seller agrees to sell and and Purchaser agrees
to purchase, for the consideration hereinafter set forth, and subject to the
terms and provisions herein contained, the Seller's Shares.
1.02 Purchase Price. The Purchase Price for the Seller's Shares shall
be 530,000 shares of SOCO Stock, which shares are currrently outstanding and
owned by Purchaser.
1.03 Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall be held on a date agreed upon by the parties
that shall be as soon as the appropriate documentation can be prepared, agreed
to by the parties, and finalized, and all appropriate consents are obtained
(such date referred to herein as the "Closing Date") and shall be held at the
offices of Purchaser, 777 Main Street, Fort Worth, Texas.
1.04 Delivery of the Purchase Price. Purchaser shall deliver to Seller
two certificates, registered in the name of Seller, representing the SOCO Stock.
One certificate shall be in the amount of 480,000 shares and shall be delivered
to Purchaser. The second certificate will be in the amount of 50,000 shares and
will be delivered directly to Holdings as provided in Section 1.08. All SOCO
Stock so delivered shall bear the legend specified in Section 1.06.
1.05 Delivery of the Seller's Shares. At the Closing Seller shall
deliver to the Purchaser certificates representing the Seller's Shares, duly
endorsed in blank for transfer or accompanied by appropriate stock powers in
blank.
1.06. Transfer of SOCO Stock. Unless a registration statement is
effective with respect thereto, the shares of SOCO Stock delivered to Seller
pursuant to Article I will not have been registered under the Securities Act of
1933, as amended (the "Securities Act"). The certificates for shares of SOCO
Stock issued pursuant to this Agreement (other than shares which are at the time
the subject of an effective registration statement under the Securities Act)
shall bear a legend applicable to the
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disposition of those shares, provided that forthwith upon any disposition
pursuant to the registration statement filed under the Securities Act of 1933,
Purchaser and/or SOCO shall substitute therefor, at its expense, new
certificates not bearing that legend. The legend shall read substantially as
follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and such shares
cannot be sold or transferred unless they are so registered or
an exemption from registration is then available."
1.07. Registration Rights Agreement. At the Closing SOCO and Seller
shall enter into the Registration Rights Agreement (the "Registration Rights
Agreement") in the form of Exhibit A hereto.
1.08 Pledge Agreement At the Closing Seller shall enter into the Pledge
Agreement with Holdings (the "Pledge Agrement") in the form of Exhibit B hereto
and shall have delivered to Holdings 50,000 shares of SOCO Stock, together with
duly executed stock powers in blank, to hold as security thereunder as provided
in the Pledge Agreement.
1.09. Resignation. At the Closing, and without any further action on
the part of Seller, Seller shall resign as an officer and director of SOCO
International Holdings, Inc.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represent and warrants to Seller that:
2.01 Organization, Existence and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to own and lease
the assets it currently owns and leases and to carry on its business as such
business is currently conducted.
2.02 Authority. Purchaser has all requisite corporate power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. The execution and delivery of this Agreement by Purchaser, the
performance by it of its obligations hereunder and the consummation of the
transactions contemplated hereby (a) have been duly authorized by all necessary
corporate action on the part of Purchaser and do not require the consent or
approval of any governmental or other regulatory body and (b) do not violate any
provision of any federal or state law or regulation or any judgment, order or
decree of any federal or state court or governmental agency applicable to or
binding on Purchaser. This Agreement constitutes the valid and binding
obligation of Purchaser enforceable in accordance with its terms, except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency or other
laws relating to or affecting generally creditors' rights, (ii) by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and (iii) by the power of a court to deny
enforcement of remedies generally based upon public policy.
2.03 SOCO Stock. The SOCO Stock to be delivered to Seller pursuant
hereto is in due and proper form, is duly authorized and outstanding, fully paid
and non-assessable and listed on the New York Stock Exchange. When delivered by
Purchaser pursuant to this Agreement against payment of
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the consideration therefor set forth herein, Seller will receive good and
marketable title to such SOCO Stock free and clear of all liabilities, liens,
charges, security interests or encumbrances of any nature whatsoever.
2.04 No Representation as to Tax Treatment. Purchaser makes no
representation or warranty to Seller as to the federal income or other tax
treatment of the transaction contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that:
3.01 Authority. Seller has the requisite power to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform all the terms and conditions hereof to be performed by it. The execution
and delivery of this Agreement by Seller, the performance by it of all the terms
and conditions hereof to be performed by it and the consummation of the
transactions contemplated hereby do not violate any provision of any federal or
state law or regulation or any judgment, order or decree of any federal or state
court or governmental agency applicable to or binding on Seller. This Agreement
and the instruments to be delivered at the Closing constitute the valid and
binding obligation of Seller, enforceable in accordance with their terms, except
as the enforceability thereof may be limited by (i) bankruptcy, insolvency or
other laws relating to or affecting generally creditors' rights, (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and (iii) the power of a court to deny
enforcement of remedies generally based upon public policy.
3.02 Title. Upon delivery to Purchaser of the certificates representing
the shares of Seller's Stock to Purchaser hereunder and delivery of the
consideration therefore set forth herein, Purchaser will receive good and
marketable title to such Seller's Stock free and clear of all liabilities,
liens, charges, security interests or encumbrances of any nature whatsoever.
ARTICLE IV
CONDITIONS TO CLOSING
4.01 Conditions to the Obligations of Each Party. The obligations of
Purchaser and Seller to consummate the Closing are subject to the satisfaction
of the condition that no judgment, injunction, order or decree of any court,
arbitrator or governmental entity shall restrain or prohibit the consummation of
the Closing.
4.02 Conditions to Obligation of Purchaser. The obligation of Purchaser
to consummate the Closing is subject, at the option of Purchaser, to the
satisfaction of the following further conditions:
(a) Each of the representations and warranties of Seller in this
Agreement shall be true and correct in all respects material to the transactions
contemplated by this Agreement as of the date hereof and as of the Closing Date
with the same effect as though such representations and warranties had been made
on the Closing Date.
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(b) Seller shall have performed in all material respects all
obligations and complied in all material respects with all covenants required to
be performed or complied with by it under this Agreement and the Pledge
Agreement at or prior to the Closing.
4.03 Conditions to Obligation of Seller. The obligation of Seller to
consummate the Closing is subject, at the option of Seller, to the satisfaction
of the following further conditions:
(a) The representations and warranties of Purchaser in this Agreement
shall be true and correct as of the date hereof and as of the Closing Date with
the same effect as though such representations and warranties had been made on
the Closing Date.
(b) Purchaser shall have performed in all material respects all
obligations and complied in all material respects with all covenants required to
be performed or complied with by it under this Agreement at or prior to the
Closing.
(c) SOCO shall have executed and delivered the Registration Rights
Agreement to Seller.
ARTICLE V
MISCELLANEOUS
5.01 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when received by a party at the address set
forth below the name of that party on the signature page hereof or at such
subsequent address as is provided by one party to the other in writing.
5.02 Exclusive Agreement. This Agreement supersedes all prior
agreements between the parties relating to the subject matter hereof (written or
oral) and is intended as a complete and exclusive statement of the terms of the
agreement between the parties.
5.03 Choice of Law; Amendments; Headings. This agreement shall be
governed by and construed and enforced in accordance with the laws of the state
of Texas. This agreement may not be changed or amended orally. The headings
contained in this agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this agreement.
5.04 Assignments and Third Parties. No party hereto shall assign this
Agreement or any part hereof without the prior written consent of the other
party, except that (a) Purchaser may assign any or all its rights hereunder to
SOCO or to any subsidiary of Purchaser or SOCO, provided that no assignment by
Purchaser (whether before or after the Closing in whole or in part) shall
release Purchaser from any obligation under this Agreement, and (b) Seller and
its successors and assigns may assign any or all rights and obligations
hereunder to any Affiliate of Seller (as defined below) to which Seller or any
such successor or assignee of Seller also transfers, assigns, or sells by
liquidation or otherwise some or all of the SOCO Stock acquired by Seller under
this Agreement. For these purposes, the term "Affiliate of Seller" means any
member of the immediate family of Seller, and trust solely for the benefit of
one or more members of Seller's immediate family or any entity currently
existing or to be formed that is Controlled by, Seller and/or one or more
members of Seller's immediate family. The term "Control" means the power to
determine, direct, or decide matters relating to an entity, whether by direct or
indirect ownership of voting securities, contractual arrangement, or otherwise.
Except as otherwise provided herein, this Agreement shall be binding upon and
inure to the
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benefit of the parties hereto and their successors and assigns. Nothing in this
Agreement shall entitle any person other than the parties hereto, or their
successors and assigns permitted hereby to any claim, cause of action, remedy or
right of any kind.
5.05 Counterparts. This agreement may be executed in counterparts, each
of which shall be deemed to be an original, but both of which together shall
constitute but one and the same agreement.
5.06 Good Faith. The obligation to act in good faith is an integral
term of this Agreement and each party hereto covenants to the other that it will
in good faith carry out each and all terms, provisions and conditions of this
Agreement applicable to or binding on such party. The parties hereto agree that
the exercise of any option, right or privilege as provided for in this Agreement
or as permitted by applicable regulations or statutes or other agreement(s)
between the parties regardless of the effect, economic or otherwise, on the
other party or parties is deemed, for purposes of this Agreement, as "acting in
good faith".
5.07 Expenses. Except as otherwise expressly provided in this
Agreement, all costs and expenses incurred by each party hereto in connection
with all things required to be done by it hereunder, including attorney's fees
and accountant fees, shall be borne by the party incurring same.
5.08 Attorneys' Fees. The prevailing party in any legal proceeding
brought under or to enforce this Agreement shall be additionally entitled to
recover court costs and reasonable attorneys' fees from the nonprevailing party.
5.09 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
5.10 Survival. The representations, warranties, covenants, and
agreements set forth in this Agreement and in any certificate or instrument
delivered in connection herewith shall survive Closing.
5.11 Public Announcements. Each party agrees not to issue any press
release or make any other public announcement relating to this Agreement or the
transactions described in this Agreement, or to permit any agent or affiliate of
it to issue any such press release or make any such announcement, without the
prior written consent of the other party, except where such release or statement
is deemed in good faith by the releasing party to be required by law or any
national securities exchange, in which case the releasing party will provide a
copy to the other party at least three full business days prior to any release
or statement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
SOCO INTERNATIONAL, INC. EDWARD T. STORY, JR.
/s/ John C. Snyder /s/ Edward T. Story, JR.
By __________________________ _________________________
John C. Snyder,
Chairman
Address: Address:
777 Main Street P.O. Box 1523
Fort Worth, Texas 76102 Centerpoint, Texas 78010
Attn: General Counsel
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EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, dated as of July 10, 1997, is made by SNYDER OIL
CORPORATION, a Delaware corporation ("SOCO") and EDWARD T.STORY, JR. ("Holder").
Pursuant to that certain Exchange Agreement dated as of July 10, 1997
(the "Exchange Agreement") between SOCO International, Inc. ("SOCO Inc.") and
Holder, Holder has transferred to SOCO Inc. 100 shares of common stock, par
value $.01 per share, in exchange for 530,000 shares of common stock, par value
$.01 per share, of SOCO (the "Registrable Stock").
Pursuant to the Exchange Agreement, SOCO is entering into this Agreement
providing for the registration of the Registrable Stock with such stockholder.
Therefore, for and in consideration of the agreements set forth herein, SOCO and
Holder agree to the provisions hereof.
1. Transfer of SOCO Stock. Unless a registration statement is effective
with respect thereto, the shares of Registrable Stock delivered to Holder
pursuant to the Exchange Agreement will not have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). SOCO shall cause to
be placed upon certificates for shares of Registrable Stock issued pursuant to
the Exchange Agreement (other than shares which are at the time the subject of
an effective registration statement under the Securities Act) a legend
applicable to the disposition of those shares, provided that forthwith upon any
disposition pursuant to the registration statement filed under this Agreement or
otherwise, SOCO shall substitute therefor, at its expense, new certificates not
bearing that legend. The legend shall read substantially as follows:
The securities represented by this certificate have not been
registered under the securities act of 1933 and may not be
sold or transferred unless they are so registered or an
exemption from registration is then available.
2. Registration on Request. Upon written notice of Holder requesting
that SOCO effect the registration under the Securities Act of 1933, as amended
(the "Securities Act"), of all or part of the shares of Registrable Stock, which
notice shall specify the intended method or methods of disposition of such
Registrable Stock, SOCO will file a registration statement with the Securities
and Exchange Commission ("SEC") (at the earliest possible date and, except as
provided herein, no later than 30 days following receipt of such notice) and use
its reasonable best efforts to effect the registration, under the Securities
Act, of such Registrable Stock for disposition in accordance with the intended
method or methods of disposition stated in such request, provided that:
(1) if, upon receipt of a registration request pursuant to
this Section 2.01, SOCO is advised in writing (with a copy to Holder)
by a recognized independent investment banking firm selected by the
Board of Directors of SOCO that, in such firm's opinion, a registration
at the time and on the terms requested would adversely affect any
public offering of securities by SOCO (other than in connection with
employee benefit and similar plans) (a "Public Offering") for which a
registration statement had been filed by SOCO prior to receiving such
registration request,
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SOCO shall not be required to effect a registration pursuant to this
Section 2 until the earlier of (i) three months after the completion of
such Public Offering, (ii) the termination of any "black out" period
required by the underwriters, if any, to be applicable to such Holder
in connection with such Public Offering, (iii) promptly after
abandonment of such Public Offering or (iv) 135 days after the date of
written notice of Holder requesting registration; and
(2) if a registration request is made while a merger,
consolidation, acquisition, disposition or other material development
involving SOCO is pending, and the general counsel of SOCO determines
in writing that the filing of a registration statement would require
the disclosure of information that is material to such transaction or
material development which SOCO has a bona fide business purpose for
preserving as confidential, and SOCO promptly provides Holder a copy of
such determination, SOCO shall not be required to effect a registration
pursuant to this Section 2.02 until the earlier of (i) the date upon
which such material information is disclosed to the public or ceases to
be material or (ii) 135 days after the date of written notice by Holder
requesting registration.
3. Registration Expenses. SOCO shall be responsible for the payment of
all Registration Expenses (as defined below) in connection with the registration
pursuant to this Agreement. With respect to such registration Holder shall bear
its own legal costs and any underwriting commissions or discounts charged to the
Holder.
"Registration Expenses," means all expenses incident to SOCO's
performance of or compliance with the registration requirements set forth in
this Section 2 including, without limitation, the following: (i) the fees,
disbursements and expenses of SOCO's counsel(s) (United States and foreign) and
accountants in connection with any such registration; (ii) all costs and
expenses in connection with the preparation, printing and filing of the
registration statement, each prospectus, and all amendments and supplements
thereto; (iii) the costs incurred in connection with the qualification of the
securities under the laws of various jurisdictions (including fees and
disbursements of counsel); (iv) the cost of furnishing to the Holder copies of
any such registration statement, each preliminary prospectus, the final
prospectus and each amendment and supplement thereof; and (v) all fees and
expenses incurred in listing the Registrable Stock on any stock exchange and any
transfer agent or registrar fees.
4. Registration Procedures. If and whenever SOCO is required to use its
reasonable best efforts to effect the registration of any Registrable Stock
under the Securities Act as provided in Section 2, SOCO will as promptly as is
practicable:
(a) prepare, file and use its reasonable best efforts to cause
to become effective a registration statement on Form S-3 or such other form as
SOCO reasonably selects under the Securities Act or update by amendment or
supplement a previously filed registration statement regarding the Registrable
Stock to be offered;
(b) prepare and file with the SEC such amendments and
supplements to the registration statement and the prospectus used in connection
therewith as may be necessary to keep the registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock until the earlier of such time as all
Registrable Stock has been disposed of in accordance with the intended methods
of disposition by Holder set forth in the registration statement or until the
earlier of three years after the registration statement becomes
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effective or such earlier date upon which the Registrable Stock may be sold
under Rule 144(k) under the Securities Act;
(c) furnish to Holder the number of conformed copies of the
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), the number of copies of the prospectus included in
such registration statement (including each preliminary prospectus and any
summary prospectus), in each case the number to be in conformity with the
requirements of the Securities Act, those documents incorporated by reference in
the registration statement or prospectus, and such other documents as Holder may
reasonably request;
(d) use its reasonable best efforts to register or qualify all
Registrable Stock covered by the registration statement under securities or blue
sky laws of other jurisdictions as Holder shall reasonably request, and do any
and all other acts and things which may be necessary or advisable to enable
Holder to consummate the disposition in those jurisdictions of its Registrable
Stock covered by the registration statement, except that SOCO shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction; and
(e) immediately notify Holder at any time when a prospectus
relating to a registration pursuant to this Agreement is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in the registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
and at the request of Holder prepare and furnish to Holder and any underwriter
of the Registrable Stock a reasonable number of copies of a supplement to or an
amendment of the prospectus as may be necessary so that, as thereafter delivered
to the purchasers of the Registrable Stock, the prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SOCO may require that Holder furnish such information regarding Holder
and the distribution of such securities as SOCO may from time to time reasonably
request in writing and as shall be required by law or by the SEC in connection
with any registration.
5. Blackout Periods. Upon written notice from SOCO to Holder that
either:
(a) SOCO has determined to engage in a financing and has been
advised in writing (with a copy to Holder) by a recognized independent
investment banking firm selected by the Board of Directors of SOCO that, in that
firm's opinion, SOCO's sale of Registrable Stock pursuant to the registration
statement would adversely affect SOCO's own immediately planned financing (a
"Transaction Blackout"); or
(b) the general counsel of SOCO determines in good faith in
writing (with a copy to Holder) that Seller's sale of Registrable Stock pursuant
to the registration statement would require disclosure of material information
which SOCO has a bona fide business purpose for preserving as
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confidential as a result of a pending merger, consolidation, acquisition,
disposition or other material development involving SOCO (an "Information
Blackout");
Holder shall suspend sales of Registrable Stock pursuant to such registration
statement until the earlier of (X)(i) in the case of a Transaction Blackout, the
earliest of (A) three months after the completion of the financing, (B) the
termination of any "blackout" period required by the underwriters to be
applicable to SOCO, if any, in connection with the financing, (C) abandonment of
such financing and (D) 135 days after the date of SOCO's written notice of a
Transaction Blackout, or (ii) in the case of an Information Blackout, the
earlier of (A) the date upon which the material information is disclosed to the
public or ceases to be material or (B) 135 days after SOCO's written notice of
an Information Blackout, and (Y) such time as SOCO notifies Holder that sales
pursuant to such registration statement may be resumed.
6. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the registration statement registering Registrable
Stock under the Securities Act, SOCO shall give Holder and its counsel
reasonable and customary access to its books and records and opportunities to
discuss the business of SOCO with its officers and the independent public
accountants who have audited its financial statements.
7. Indemnification and Contribution.
(a) SOCO hereby indemnifies and agrees to hold harmless
Holder, its directors and officers, and each person, if any, who controls Holder
within the meaning of the Securities Act against any losses, claims, damages,
liabilities and expenses, joint or several, to which that person may be subject
under the Securities Act or otherwise, insofar as those losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which the
Registrable Stock is registered under the Securities Act, any preliminary
prospectus or final prospectus included therein, or any amendment or supplement
thereto, or any document incorporated by reference therein, or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and SOCO
shall reimburse each such person for any legal or any other expenses reasonably
incurred by that person in connection with investigating or defending any such
loss, claim, liability, action or proceeding; provided that SOCO shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission
made in reliance upon and in conformity with written information furnished by
the indemnified person to SOCO. This indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of SOCO or any
director, officer or controlling person and shall survive the transfer of the
registered securities by Holder.
(b) Holder hereby indemnifies and agrees to hold harmless (in
the same manner and to the same extent as set forth in Subsection 7(a)) each
director of SOCO, each officer of SOCO who shall sign the registration
statement, and each person, if any, who controls SOCO within the meaning of the
Securities Act, with respect to any statement in or omission from the
registration statement, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, if the statement or omission
was made in reliance upon and in conformity with written information furnished
by it to SOCO. This indemnity shall remain in full force and effect
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regardless of any investigation made by or on behalf of SOCO or any director,
officer or controlling person and shall survive the transfer of the registered
securities by Holder.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for as set forth in this
Section 7 is for any reason held to be unenforceable by the indemnified parties,
although applicable in accordance with its terms, SOCO and Holder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by SOCO and Holder,
as incurred, as between SOCO on the one hand and Holder on the other, in such
proportion as is appropriate to reflect the relative fault of SOCO on the one
hand and of Holder on the other in connection with the statements or omissions
which result in the losses, liabilities, claims, damages or expenses, as well as
any other relative equitable considerations. The relative fault of SOCO on the
one hand and of Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state material fact relates to
information supplied by SOCO or by Holder.
8. Miscellaneous.
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when received by a party at the
address set forth below the name of that party on the signature page hereof or
at such subsequent address as is provided by one party to the other in writing.
(b) Exclusive Agreement. This Agreement supersedes all prior
agreements between the parties relating to the subject matter hereof (written or
oral) and is intended as a complete and exclusive statement of the terms of the
agreement between the parties.
(c) Choice of Law; Amendments; Headings. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas. This Agreement may not be changed or amended orally. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
(d) Assignments and Third Parties. No party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other party, except that Holder and its successors and assigns may assign
any or all rights and obligations hereunder to any Affiliate of Holder (as
defined below) to which Holder or any such successor or assignee of Holder also
transfers, assigns, or sells by liquidation or otherwise some or all of the
Registrable Stock acquired by Holder pursuant to the Exchange Agreement. For
these purposes, the term "Affiliate of Holder" means any member of the immediate
family of Holder, and trust solely for the benefit of one or more members of
Holder's immediate family or any entity currently existing or to be formed that
is Controlled by, Holder and/or one or more members of Holder's immediate
family. The term "Control" means the power to determine, direct, or decide
matters relating to an entity, whether by direct or indirect ownership of voting
securities, contractual arrangement, or otherwise. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and assigns. Except as specified in Section
7, which is intended to benefit and to be enforceable by any of the Indemnified
Parties, nothing in this Agreement shall entitle any person other than the
parties hereto,
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or their successors and assigns permitted hereby to any claim, cause of action,
remedy or right of any kind.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute but one and the same agreement.
(f) Expenses. Except as otherwise expressly provided in this
Agreement, all costs and expenses incurred by each party hereto in connection
with all things required to be done by it hereunder, including attorney's fees
and accountant fees, shall be borne by the party incurring same.
(g) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
SNYDER OIL CORPORATION EDWARD T. STORY, JR.
/s/ John C. Snyder /s/ Edward T. Story, JR.
By __________________________ ________________________
John C. Snyder
Chairman
Address: Address:
777 Main Street P.O. Box 1523
Fort Worth, Texas 76102 Centerpoint, Texas 78010
Attn: General Counsel
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EXHIBIT B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is executed and
effective as of the 10th day of July, 1997, by and between EDWARD T. STORY,JR.
("Pledgor") and SOCO INTERNATIONAL HOLDINGS, INC., a Delaware corporation
("Pledgee").
Pursuant to an Exchange Agreement dated as of July 10, 1997 between
Pledgor and Snyder Oil Corporation ("SOCO"), Pledgor has on this day transferred
100 shares of common stock of Pledgee to SOCO in exchange for 530,000 shares of
common stock, par value $.01 per share, of SOCO. In addition, Pledgor has as of
this day resigned as a director and officer of Pledgee.
Pledgee is the holder of two Notes (the "Notes") of Pledgor, each dated
December 30, 1996 and in the principal amounts of $269,563.25 and $320,936.74.
Pledgor and Pledgee wish to secure the obligations of Pledgor under the Notes.
Effective March 15, 1997 the interest notes of the Notes was reduced from 1% per
month to a floating rate equal to the average rate paid by SOCO on borrowings
under ist bank credit agreement.
NOW, THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged and confessed, Pledgor agrees with Pledgee as follows:
1. Pledge. Upon the terms hereof, Pledgor hereby grants to Pledgee a
security interest in and to the rights, titles and interests of Pledgor in and
to all of the following rights, interests and property (all of the following
being herein sometimes called the "Pledged Shares"): (a) 50,000 shares of common
stock, par value $.01 per share, of SOCO; (b) any and all proceeds or other sums
arising from or by virtue of, and all dividends and distributions (cash or
otherwise) payable and/or distributable with respect to, all or any of the
Pledged Shares described in clause (a) preceding; and (c) all cash, securities,
dividends, and other property at any time and from time to time receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares described in clause (a) hereof and any other property substituted or
exchanged therefor.
2. Secured Obligation. The security interest herein granted (the
"Security Interest") shall secure payment and performance of Pledgor's
obligations under the Notes (the "Obligations").
3. Representations and Warranties: Related Covenants. Pledgor
represents, warrants, covenants and agrees to and with Pledgee that: (a) Pledgor
is the legal and beneficial owner of the Pledged Shares; (b) no dispute right of
setoff, counterclaim or defense exists with respect to all or any part of the
Pledged Shares; (c) the Pledged Shares are free and clear of all liens, options,
warrants, puts, calls or other rights of third persons, and restrictions
(collectively, "Liens"), other than (I) those Liens arising under this Pledge
Agreement and (ii) restrictions on transferability imposed by applicable state
and federal securities laws; (d) Pledgor has full right and authority to pledge
the Pledged Shares for the purposes and upon the terms set out herein; and (e)
certificates representing the Pledged Shares have been delivered to Pledgee,
together with a duly executed blank stock power with signatures guaranteed, for
each certificate.
4. Covenants. (a) Pledgor covenants and agrees to from time to time
promptly execute and deliver to Pledgee all such other assignments,
certificates, supplemental writings and financing statements as Pledgee
reasonably requests in order to perfect or evidence the Security Interest.
Pledgor further agrees that if Pledgor shall at any time acquire any additional
shares of the capital stock of any class of SOCO by reclassification of or
dividend on the Pledged Shares, Pledgor shall forthwith (and without the
necessity for
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any request or demand by Pledgee) deliver the certificates representing such
shares to Pledgee. Upon delivery, such shares shall thereupon constitute
"Pledged Shares" and shall be subject to the Liens herein created, for the
purposes and upon the terms and conditions set forth in this Pledge Agreement.
Pledgor further covenants and agrees that, without the prior written consent of
Pledgee, Pledgor shall not (I) transfer any of Pledgor's rights, titles or
interests in and to the Pledged Shares; or (ii) create any other Lien or
otherwise encumber any of the Pledged Shares, or permit any of the Pledged
Shares to ever be or become subject to any Lien, attachment, execution,
sequestration, other legal or equitable process or any Lien or encumbrance of
any kind, except the Security Interest.
(b) Pledgor will promptly execute and deliver or cause the execution
and delivery of, all applications, certificates, instruments, registration
statements, and all other documents and papers Pledgee may reasonably request in
connection with the obtaining of any consent, approval, registration,
qualification, or authorization of any other Person necessary or appropriate for
the effective exercise of any rights under this Pledge Agreement. Without
limiting the generality of the foregoing, Pledgor agrees that in the event
Pledgee shall exercise any rights to sell, transfer, or otherwise dispose of, or
vote, consent, or take any other action in connection with any of the Pledged
Shares pursuant to this Pledge Agreement, Pledgor shall execute and deliver all
applications, certificates, and other documents as Pledgee may reasonably
request and shall otherwise promptly, fully and diligently cooperate with
Pledgee and any other necessary persons, in making any application for the prior
consent or approval of any other person to the exercise by Pledgee of any rights
relating to all or any of the Pledged Shares. Furthermore, because Pledgor
agrees that Pledgee's remedies at law for failure of Pledgor to comply with the
provisions of this Paragraph 4(b) would be inadequate and that such failure
would not be adequately compensable in damages, Pledgor agrees that the
covenants of this Paragraph 4(b) may be specifically enforced.
(c) Pledgor will preserve, warrant, and defend the Liens created hereby
in the Pledged Shares against the claims of all Persons whomsoever; will
maintain and preserve such Liens; will not at any time assign, transfer, or
otherwise dispose of its right, title and interest in and to any of the Pledged
Shares; will not at any time directly or indirectly create, assume, or suffer to
exist any Lien, warrant, put, option, or other rights of third persons and
restrictions, other than the Liens created by this Pledge Agreement in and to
the Pledged Shares or any part thereof; and will not do or suffer any matter or
thing whereby the Liens created by this Pledge Agreement in and to the Pledged
Shares might or could be impaired.
5. Conversions: etc. Should the Pledged Shares, or any part thereof,
ever be in any manner converted into another property of the same or another
type or any money or other proceeds ever be paid or delivered to Pledgor as a
result of Pledgor's rights in the Pledged Shares, then in any such event (except
as otherwise provided herein), all such property, money and other proceeds shall
be and/or become part of the Pledged Shares, and Pledgor covenants forthwith to
pay or deliver to Pledgee all of the same which is susceptible of delivery; and
at the same time, if Pledgee so requests, Pledgor will properly endorse or
assign the same to Pledgee. Without limiting the generality of the foregoing,
Pledgor hereby agrees that the shares of capital stock of the surviving
corporation in any merger or consolidation involving SOCO shall be deemed to
constitute the same property as the Pledged Shares. With respect to any such
property of a kind requiring an additional security agreement, financing
statement or other writing to perfect a security interest therein in favor of
Pledge, Pledgor will forthwith execute and deliver to Pledgee whatever Pledgee
shall deem necessary or proper for such purpose.
6. No Duty to Fix or Preserve Rights. Pledgee shall not have any duty
to fix or preserve rights against prior parties to the Pledged Shares and shall
not be liable for failure to use diligence to collect any
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amount payable with respect to the Pledged Shares, or any part thereof, but
shall be liable only to account to Pledgor for what Pledgee may actually collect
or receive thereon.
7. Rights of Parties Before and After the Occurrence of an Event of
Default.
(a) Exercising Shareholder Rights Prior to an Event of Default.
Unless and until an Event of Default (as defined in the Notes) shall occur,
(I) Pledgor shall be entitled to receive all cash dividends paid to
Pledgor in respect of or attributable to the Pledged Shares. Notwithstanding the
foregoing, Pledgee shall be entitled to receive, whether or not an Event of
Default has occurred, (A) any and all other Distributions, including, but not
limited to, stock dividends or Distributions in property made on or with respect
to the Pledged Shares and any proceeds of Pledged Shares, whether resulting from
subdivision, combination, or reclassification of the outstanding capital stock
of SOCO or a result of any merger, consolidation, acquisition, or other exchange
of assets to which SOCO is a party, and (B) all sums paid on any Pledged Shares
upon liquidation or dissolution or reduction of capital, repurchase, retirement,
or redemption. All such sums, dividends, distributions, proceeds, or other
property described in clauses (A) and (B) preceding shall if received by any
entity other than Pledgee, be held in trust for the benefit of Pledgee and shall
forthwith be delivered to Pledgee (accompanied by proper instruments of
assignment and/or stock and/or bond powers executed by Pledgor in accordance
with Pledgee's instructions) to be held subject to the terms of this Pledge
Agreement. Any cash proceeds of the Pledged Shares, other than cash dividends
which Pledgor is then permitted to receive and retain hereunder, which come into
the possession of Pledgee may, at Pledgee's option, be applied in whole or in
part to the Obligations (to the extent then due), be released in whole or in
part to or on the written instructions of Pledgor, or be retained in whole or in
part by Pledgee as additional security for the payment and performance of the
Obligations. Any cash proceeds in the possession of Pledgee shall be invested by
Pledgee in securities or obligations issued or guaranteed by the United States
of America or any agency thereof. Pledgee shall never be obligated to make any
such investment and shall never have any liability to Pledgor for any loss which
may result therefrom. All interest and other amounts earned from any investment
of such proceeds may be dealt with by Pledgee in the same manner as other cash
proceeds.
(ii) Pledgor shall have the right to vote and give consents with
respect to all of the Pledged Shares and to consent to, ratify, or waive notice
of any and all meetings; provided that such right shall in no case be exercised
for any purpose contrary to, or in violation of, any of the terms or the
provisions of this Pledge Agreement.
(b) Exercising Shareholder Rights After the Occurrence of an
Event of Default.
Upon the occurrence and during the continuance of an Event of Default, Pledgee,
without the consent of Pledgor, may:
(I) At any time vote or consent in respect of any of the Pledged Shares
and authorize any Pledged Shares to be voted and such consents to be given,
ratify and waive notice of any and all meetings, and take such other action as
shall seem desirable to Pledgee, in its discretion, to protect or further the
interests of Pledgee in respect of any of the Pledged Shares as though it were
the outright owner thereof, and, Pledgor hereby irrevocably constitutes and
appoints Pledgee its sole proxy and attorney-in-fact, with full power of
substitution to vote and act with respect to any and all Pledged Shares standing
in the name of Pledgor or with respect to which Pledgor is entitled to vote and
act. The proxy and power of
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attorney herein granted are coupled with interests, are irrevocable, and shall
continue throughout the term of this Pledge Agreement;
(ii) In respect of any Pledged Shares, join in and become a party to
any plan of recapitalization, reorganization, or readjustment (whether voluntary
or involuntary) as shall seem desirable to Pledgee in respect of any such
Pledged Shares, and deposit any such Pledged Shares under any such plan; make
any exchange, substitution, cancellation, or surrender of such Pledged Shares
required by any such plan and take such action with respect to any such Pledged
Shares as may be required by any such plan or for the accomplishment thereof;
and no such disposition, exchange, substitution, cancellation, or surrender
shall be deemed to constitute a release of Pledged Shares from the Lien of this
Pledge Agreement;
(iii) Receive all payments of whatever kind made upon or with respect
to any Pledged Shares; and
(vi) Transfer into its name, or into the name or names of its nominee
or nominees, all or any of the Pledged Shares.
(c) Right of Sale After the Occurrence of an Event of Default. Upon the
occurrence and during the continuance of an Event of Default, Pledgee may sell,
without recourse to judicial proceedings, with the right (except at private
sale) to bid for and buy, free from any right of redemption, the Pledged Shares
or any part thereof, upon five days' notice (which notice is agreed to be
reasonable notice for the purposes hereof) to Pledgor of the time and place of
sale, for cash, upon credit or for future delivery, at Pledgee's option and in
Pledgee's complete discretion:
(I) At public sale, including a sale at any broker's board or exchange; and
(ii) At private sale in any manner which will not require the Pledged
Shares, or any part thereof, to be registered in accordance with The Securities
Act of 1933, as amended (the "Act"), or the rules and regulations promulgated
thereunder, or any other law or regulation, at the best price reasonably
obtainable by Pledgee at any such private sale or other disposition in the
manner mentioned above. Pledgee is also hereby authorized, but not obligated, to
take such actions, give such notices, obtain such consents, and do such other
things as Pledgee may deem required or appropriate in the event of sale or
disposition of any of the Pledged Shares. Pledgor understands that Pledgee may
in its discretion approach a restricted number of potential purchasers and that
a sale under such circumstances may yield a lower price for the Pledged Shares,
or any portion thereof, than would otherwise be obtainable if the same were
registered and sold in the open market. Pledgor agrees (a) that in the event
Pledgee shall so sell the Pledged Shares, or any portion thereof, at such
private sale or sales, Pledgee shall have the right to rely upon the advice and
opinion of any member firm of a national securities exchange as to the best
price reasonably obtainable upon such a private sale thereof (any expense borne
by Pledgee in obtaining such advise to be paid by Pledgor as an expense related
to the exercise by Pledgee of its rights hereunder), and (b) that such reliance
shall be conclusive evidence that Pledgee handled such matter in a commercially
reasonable manner.
In case of any sale by the Pledgee of the Pledged Shares on credit or
for future delivery, the Pledged Shares sold may be retained by Pledgee until
the selling price is paid by the purchaser, but Pledgee shall incur no liability
in case of failure of the purchaser to take up and pay for the Pledged Shares so
sold. In case of any such failure, such Pledged Shares so sold may be again
similarly sold.
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In connection with the sale of the Pledged Shares, Pledgee is
authorized, but not obligated, to limit prospective purchasers to the extent
deemed necessary or desirable by Pledgee to render such sale exempt from the
registration requirements of the Act and any applicable state securities laws,
and no sale so made in good faith by Pledgee shall be deemed not to be
"commercially reasonable" because so made. If Pledgee determines to exercise its
right to sell all or any of the Pledged Shares, and if in the opinion of any
reputable law firm selected by Pledgee ("Law Firm"), it is necessary or
advisable to have such securities registered under the provisions of such Act,
or any similar law relating to the registration of securities, Pledgor agrees,
at its own expense, to (I) execute and deliver all such instruments and
documents, and to do or cause to be done other such acts and things as may be
necessary or, in the opinion of Law Firm, advisable to register such securities
under the provisions of such Act or any applicable similar law relating to the
registration of securities, and Pledgor will use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for such period as Pledgee shall reasonably request, and to make all
amendments thereof and/or to the related prospectus which, in the opinion of Law
Firm, are necessary or desirable, all in conformity with the requirements of
such Act and the rules and regulations of the Securities and Exchange Commission
applicable thereto; (ii) use its best efforts to qualify such securities under
state "blue sky" or securities laws and to obtain the necessary approval of any
tribunal to the sale of such securities, all as reasonably requested by Pledge;
(iii) at the request of Pledgee, indemnify and hold harmless, and to cause the
Issuers to agree to indemnify and hold harmless, Pledgee, any underwriters (and
any person controlling any of the foregoing), and their respective employees,
officers, agents, attorneys, and accountants (collectively, the "Indemnified
Parties") from and against any loss, liability, claim, damage and expense
(including without limitation, reasonable fees of counsel incurred in connection
therewith) under such Act or otherwise, insofar as such loss, liability, claim,
damage or expense arises out of or is based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under such Act or other securities
laws, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon any omission
or any alleged omission to state therein a material fact required to be stated
or necessary to make the statements therein not misleading, such indemnification
to remain operative regardless of any investigation made by or on behalf of any
Indemnified Party; provided that Pledgor shall not be liable in any case to the
extent that any such loss, liability, claim, damage, or expense arises out of or
is based upon any untrue statement or alleged untrue statement or an omission or
an alleged omission made in reliance upon and in conformity with written
information furnished to Pledgor and/or SOCO or, with respect to any particular
Indemnified Party, by such Indemnified Party.
(d) Other Rights After a Default. Upon the occurrence and during the
continuance of an Event of Default, Pledgee, at its election may exercise any
and all rights available to a secured party under the Uniform Commercial Code as
enacted in the State of Texas or other applicable jurisdiction, as amended in
addition to any and all other rights afforded by the Loan Papers, at law, in
equity, or otherwise.
(e) Application of Proceeds. Pledgee shall apply the proceeds of any
sale or other disposition of the Pledged Shares, first, to reimburse Pledgee for
any expenses incurred in enforcing the Obligations and in selling the Pledged
Shares, second, to accrued but unpaid interest on the Notes and, third, to
principal of the Notes.
8. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when received by a party at the address set
forth below the name of that party on the signature page hereof or at such
subsequent address as is provided by one party to the other in writing.
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9. Right to File as Financing Statement. Agent shall have the right at
any time to execute and file this Pledge Agreement as a financing statement, but
the failure of Pledgee to do so shall not impair the validity or enforceability
of this agreement.
10. Waiver of Certain Rights. (a) To the full extent that it may
lawfully so agree Pledgor agrees that it will not at any time plead, claim or
take the benefit of any appraisement, valuation, stay, extension, moratorium or
redemption law nor or hereafter in force in order to prevent or delay the
enforcement of this Pledge Agreement, or the absolute sale of all or any part of
the Pledges Shares or the possession thereof by any purchaser at any sale
hereunder, and Pledgor hereby waives the benefit of all such laws to the extent
it lawfully may. Each right, power and remedy of Pledgee provided for in this
Pledge Agreement or now or hereafter existing at law or in equity or by statute
or otherwise shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy provided for in this Pledge Agreement or now
or hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by Pledgee of any one or more of such
rights, power or remedies shall not preclude the simultaneous or later exercise
by Pledgee of any or all such other rights, powers or remedies. No failure or
delay on the part of Pledgee to exercise any such right, power or remedy and no
notice or demand which may be given to or made upon Pledgor by Pledgee with
respect to any such remedies shall operate as a waiver thereof, or limit or
impair Pledgee's right to take any action or to exercise any power or remedy
hereunder, without notice or demand, or prejudice its rights as against Pledgor
in any respect.
(b) Pledgor hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever in respect of the Notes, as well as any
requirement that the Pledgee or any holder of any of the Notes exhaust any right
or remedy or take any action in connection with the Notes before exercising any
right or remedy under this Pledge Agreement. The obligations of Pledgor
hereunder shall not be affected or impaired by reason of the happening from time
to time of any of the following, although without notice to or the consent of
Pledgor:
(I) the waiver by Pledgee or any of the holders of Notes of the
performance or observance by Pledgor of any of its agreements, covenants, terms
or conditions contained in any Note;
(ii) the voluntary of involuntary liquidation, dissolution, sale of all
or substantially all of the assets, marshalling of assets and liabilities,
receivership, conservatorship, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, winding up, or other similar
proceedings affecting Pledgor or SOCO; or
(iii) the release of any security for the Notes.
11. Amendments. This Pledge Agreement may be amended only by an
instrument in writing executed jointly by Pledgor and Pledgee and supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
12. Multiple Counterparts. This Pledge Agreement may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which shall constitute, collectively, one agreement;
but, in making proof of this agreement, it shall not be necessary to produce or
account for more than one such counterpart.
13. Parties Bound. This Pledge Agreement shall be binding on Pledgor
and Pledgor's successors and assigns and shall inure to the benefit of Pledgee
and Pledgee's successor and assigns.
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14. Invalid Provisions. If any provision of this Pledge Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable, this
Pledge Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of this Pledge Agreement
a provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
15. Consent to Jurisdiction. (a) Except to the extent required for e
exercise of the remedies provided in the other security instruments, Pledgor
hereby irrevocably submits to the jurisdiction of any Texas State or Federal
court sitting in the Northern District of Texas over any action or proceeding
arising out o or relating to this Pledge Agreement or the Notes, and Pledgor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined such Texas State or Federal court.
Pledgor hereby irrevocably appoints Prentice-Hall Corporation System, Inc. (the
"Process Agent"), with an office on the date hereof at 400 N. St. Paul, Dallas,
Texas 75201, as its agent to receive on behalf of Pledgor proper service of
copies of the sermons and complaint and any other process which may be made by
mailing or delivering a copy of such process to Pledgor (as applicable) in care
of the Process Agent at the Process Agent's above address, and Pledgor hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. Such appointment and authorization shall be automatically and
immediately effective without the necessity of any further action on the part of
Pledgor or the Pledge in the event Pledgor ceases to maintain his principal
residence in the Comfort, Texas area. As an alternative method of service,
Pledgor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Pledgor's residence at P.O. Box 1523, Centerpoint, Texas 78010. Pledgor agrees
that a final judgment on any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner; provided by law.
(b) Nothing in this Paragraph 15 shall affect arty right of the Pledgee
to serve legal process in any other manner permitted by law or affect the right
of Pledgee to bring any action or proceeding against Pledgor in the courts of
any other jurisdictions.
16. Complete Agreement. This Pledge Agreement and the Notes
collectively represent the final agreement by and among Pledgee and Pledgor and
may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements of Pledgor and the Pledgee. There are no unwritten oral
agreements relating to this Pledge Agreement or the Notes between Pledgor and
Pledgee.
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17. Texas Law. This Pledge Agreement shall be construed in accordance
with and governed by the laws of the State of Texas.
EXECUTED effective as of July 10, 1997.
PLEDGOR:
/s/ Edward T. Story
- ------------------------------
Edward T. Story
ACCEPTED AND AGREED as of July 10, 1997,
PLEDGEE:
SOCO INTERNATIONAL HOLDINGS, INC.
/s/ Peter E. Lorenzen
By ___________________________
Vice President
8
EXHIBIT 10.11.7
SEVENTH AMENDMENT TO FIFTH RESTATED CREDIT AGREEMENT
This Seventh Amendment to Fifth Restated Credit Agreement (this
"Seventh Amendment") is entered into as of the 13th day of October, 1997, by and
among Snyder Oil Corporation ("Borrower"), NationsBank of Texas, N.A., as Agent
("Agent"), and NationsBank of Texas, N.A. ("NationsBank"), Bank One, Texas, N.A.
("Bank One"), Wells Fargo Bank, N.A. ("Wells Fargo"), Texas Commerce Bank
National Association ("TCB," and together with NationsBank, Bank One and Wells
Fargo, collectively referred to herein as the "Original Banks") and Credit
Lyonnais New York Branch, as Banks (the "Banks").
W I T N E S E T H:
WHEREAS, the Banks, Borrower and Agent are parties to that certain
Fifth Restated Credit Agreement dated as of June 30, 1994, as amended by that
certain (i) letter agreement by and among Borrower and the Original Banks dated
as of May 1, 1995, (ii) Second Amendment to Fifth Restated Credit Agreement by
and among Borrower, Agent and the Original Banks dated as of June 30, 1995,
(iii) Third Amendment to Fifth Restated Credit Agreement by and among Borrower,
Agent and the Original Banks dated as of November 1, 1995, (iv) Fourth Amendment
to Fifth Restated Credit Agreement by and among Borrower, Agent and Original
Banks dated as of April 4, 1996, (v) Fifth Amendment to Fifth Restated Credit
Agreement by and among Borrower, Agent and the Original Banks dated as of
November 1, 1996, and (vi) Sixth Amendment to Fifth Restated Credit Agreement by
and among Borrower, Agent and Banks dated as of May 19, 1997 (as amended, the
"Credit Agreement") (unless otherwise defined herein, all terms used herein with
their initial letter capitalized shall have the meaning given such terms in the
Credit Agreement); and
WHEREAS, pursuant to the Credit Agreement, the Banks have made certain
Loans to Borrower, and Agent has issued certain Letters of Credit on behalf of
Borrower; and
WHEREAS, Borrower has advised the Banks that Borrower intends, pursuant
to a series of transactions, to sell all of the 14,000,000 shares of common
stock of Patina Oil & Gas Corporation, a Delaware corporation, held by Borrower
(the "Patina Stock Sale"); and
WHEREAS, Borrower has requested that (i) the Credit Agreement be
amended in certain respects in connection with the Patina Stock Sale, and (ii)
the November 1, 1997 Determination Date be postponed until December 1, 1997; and
WHEREAS, subject to the terms and conditions herein contained, the
Banks have agreed to Borrower's request.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed,
Borrower, Agent and each Bank hereby agree as follows:
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SECTION 1. Amendments. Subject to the satisfaction of each condition
precedent set forth in Section 4 hereof and in reliance on the representations,
warranties, covenants and agreements contained in this Seventh Amendment, the
Credit Agreement shall be amended effective upon the consummation of the sale of
at least 10,000,000 shares of common stock of Patina Oil & Gas Corporation held
by Borrower as provided in Section 2 hereof (the "Effective Date") in the manner
provided in this Section 1.
1.1. Amendment to Definition. The definition of "Loan Papers" contained
in Section 1.1 of the Credit Agreement shall be amended to read in full as
follows:
"Loan Papers" means this Agreement, the Letter Agreement, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, the Sixth Amendment, the Seventh Amendment, the Notes, the
Mortgages, the Restricted Subsidiary Guarantees and all other
certificates, documents or instruments delivered in connection with
this Agreement, as the foregoing may be amended from time to time.
1.2. Additional Definitions. Section 1.1 of the Credit Agreement shall be
amended to add the following definition to such Section:
"Seventh Amendment" means that certain Seventh Amendment to
Fifth Restated Credit Agreement dated as of October 13, 1997, by and
among Borrower, Agent and the Banks.
1.3. Restricted Payments Covenant. Section 9.2 of the Credit Agreement
shall be amended to read in full as follows:
"SECTION 9.2. Restricted Payments. Neither Borrower nor any
Restricted Subsidiary will declare or make any Restricted Payment;
provided, that, so long as no Default or Event of Default, Borrowing
Base Deficiency or non-compliance with Section 10.4 exists (without
giving effect to the cure periods provided by Section 4.4 or 10.4), and
provided further that no Default or Event of Default, Borrowing Base
Deficiency or non-compliance with Section 10.4 would result from such
Restricted Payment (without giving effect to the cure periods provided
by Section 4.4 or 10.4), Borrower and Restricted Subsidiaries may (a)
make Restricted Payments in an aggregate amount (measured, cumulatively
from January 1, 1996) not to exceed the sum of the following (i)
$75,000,000, plus (ii) the net cash proceeds to Borrower from all
equity offerings completed by Borrower of Borrower's equity securities
after January 1, 1996, plus (iii) all cash Distributions actually
received by Borrower or any Restricted Subsidiary from Unrestricted
Subsidiaries after January 1, 1996, plus (iv) the net cash proceeds to
Borrower from the sale or other disposition of Borrower's Investment in
any Unrestricted Subsidiary after January 1, 1996, plus (v) fifty
percent (50%) of Borrower's Consolidated Cash Flow
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earned on or after January 1, 1996 to the date of determination, (b)
declare and make a Qualified Redemption of the Second Issue, (c) issue
the Second Convertible Debentures in exchange for the Second Preferred
Stock, and (d) redeem the Third Convertible Debentures with the
proceeds of the issuance of the Fourth Debentures.
SECTION 2. Amendments Effective Upon Consummation of Sale of Stock.
Subject to the satisfaction of each condition precedent set forth in Section 4
hereof, upon the consummation of the sale of at least 10,000,000 shares of
common stock of Patina Oil & Gas Corporation held by Borrower, and provided that
such sale or series of sales is consummated on or before November 1, 1997, the
Credit Agreement shall be automatically amended without the necessity of any
further act by Borrower, Agent or any Bank to (a) delete the following
definitions (the "Patina Defined Terms") from Section 1.1 of the Credit
Agreement: "Patina," "Patina Ancillary Agreements" and "Patina Transaction
Documents," and (b) delete each reference in the Credit Agreement and the other
Loan Papers to each Patina Defined Term, such that, from and after the
consummation of the sale of at least 10,000,000 shares of common stock of Patina
Oil & Gas Corporation held by Borrower, each provision of the Credit Agreement
shall be read and interpreted without giving effect to the Patina Defined Terms.
SECTION 3. Determination of Borrowing Base. Agent and Banks hereby
waive the Periodic Determination of the Total Borrowing Base scheduled to occur
on November 1, 1997, and Borrower, Agent and Banks agree that, subject to
Required Banks' rights under Section 4.3 of the Credit Agreement to make a
Special Determination of the Total Borrowing Base at any time prior to December
1, 1997, the Total Borrowing Base shall be redetermined in accordance with
Article IV of the Credit Agreement on or about December 1, 1997. Borrower, Agent
and Banks further agree that (a) such Determination on or about December 1, 1997
shall not be deemed a Special Determination, and accordingly, shall not reduce
the number of Special Determinations Required Banks are permitted under Section
4.3 of the Credit Agreement, and (b) after December 1, 1997, the dates for
Periodic Determinations shall continue to be each May 1 and November 1,
commencing May 1, 1998.
SECTION 4. Conditions Precedent to Effectiveness of Amendments. The
amendments to the Credit Agreement contained in Section 1 and Section 2 of this
Seventh Amendment shall be effective only upon, and are conditioned upon, the
delivery to Agent and each Bank of such resolutions, certificates and other
documents as Agent or any Bank shall request relative to the Patina Stock Sale
and the authorization, execution and delivery by Borrower of this Seventh
Amendment (and, in the case of the amendments set forth in Section 2, the
further condition that the sale of at least 10,000,000 shares of common stock of
Patina Oil & Gas Corporation held by Borrower shall have been consummated on or
before November 1, 1997). If the foregoing conditions have not been satisfied by
the Effective Date, this Seventh Amendment and all obligations of the Banks and
Agent contained herein shall, at the option of Majority Banks, terminate.
SECTION 5. Representations and Warranties of Borrower. To induce the
Banks and Agent to enter into this Seventh Amendment, Borrower hereby represents
and warrants to Agent as follows:
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5.1 Each representation and warranty of Borrower and each Restricted
Subsidiary contained in the Credit Agreement and the other Loan Papers is true
and correct on the date hereof and will be true and correct after giving effect
to the amendments set forth in Section 1 and Section 2 hereof.
5.2 The execution, delivery and performance by Borrower of this Seventh
Amendment are within the Borrower's corporate powers, have been duly authorized
by necessary action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not violate or constitute a default
under any provision of applicable law or any Material Agreement binding upon
Borrower or the Subsidiaries of Borrower or result in the creation or imposition
of any Lien upon any of the assets of Borrower or the Subsidiaries of Borrower
except Permitted Encumbrances.
5.3 This Seventh Amendment constitutes the valid and binding obligation
of Borrower enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditor's rights generally, and (ii) the availability of equitable
remedies may be limited by equitable principles of general application.
SECTION 6. Miscellaneous.
6.1 No Defenses. Borrower hereby represents and warrants to the Banks
that there are no defenses to payment, counterclaims or rights of set-off with
respect to the Loans existing on the date hereof.
6.2 Reaffirmation of Loan Papers; Extension of Liens. Any and all of
the terms and provisions of the Credit Agreement and the Loan Papers shall,
except as amended and modified hereby, remain in full force and effect. Borrower
hereby extends the Liens securing the Obligations until the Obligations have
been paid in full, and agrees that the amendments and modifications herein
contained shall in no manner affect or impair the Obligations or the Liens
securing payment and performance thereof.
6.3 Parties in Interest. All of the terms and provisions of this
Seventh Amendment shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
6.4 Legal Expenses. Borrower hereby agrees to pay on demand all
reasonable fees and expenses of counsel to Agent incurred by Agent, in
connection with the preparation, negotiation and execution of this Seventh
Amendment and all related documents.
6.5 Counterparts. This Seventh Amendment may be executed in
counterparts, and all parties need not execute the same counterpart; however, no
party shall be bound by this Seventh Amendment until all parties have executed a
counterpart. Facsimiles shall be effective as originals.
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6.6 Complete Agreement. THIS SEVENTH AMENDMENT, THE CREDIT AGREEMENT
AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6.7 Headings. The headings, captions and arrangements used in this
Seventh Amendment are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify or modify the terms of this Seventh
Amendment, nor affect the meaning thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Seventh
Amendment to be duly executed by their respective authorized officers on the
date and year first above written.
BORROWER:
SNYDER OIL CORPORATION,
a Delaware corporation
By:/s/Peter E. Lorenzen
Name:Peter E. Lorenzen
Title:Vice President
AGENT:
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. Scott Fowler
J. Scott Fowler,
Vice President
BANKS:
NATIONSBANK OF TEXAS, N.A.
By:/s/ J. Scott Fowler
J. Scott Fowler,
Vice President
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TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:/s/ Lee E. Beckelman
Name: Lee E. Beckelman
Title:
BANK ONE, TEXAS, N.A.
By: /s/ Bradley D. Bartek
Name:Bradley D. Bartek
Title:Senior Vice President
WELLS FARGO BANK, N.A.
By:/s/Charles P. Kirkham
Name:Charles P. Kirkham
Title:Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:/s/Pascal Poupelle
Name:Pascal Poupelle
Title:Executive Vice President
6
EXHIBIT 10.12
SNYDER OIL CORPORATION
DIRECTORS DEFERRAL PLAN
1. PURPOSES OF THE PLAN.
The purposes of this Plan are to attract and retain qualified Directors
and to provide incentives to these Directors through the ability to defer their
receipt of Director Fees.
2. DEFINITIONS.
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means (i) the purchase or other acquisition
in one or more transactions other than from the Company, by any
individual, entity or group of persons within the meaning of Section
13(d)(3) or 14(d) of the Securities Exchange Act of 1934 or any
comparable successor provisions, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act) of 50 percent
or more of either that outstanding shares of common stock or the
combined voting power of the Company's then outstanding voting
securities entitled to vote generally or (ii) in connection or as a
result of any tender offer, exchange offer, merger or other business
combination or proxy contest the directors prior to such event no
longer constitute a majority of the directors of the Company, or
(iii) the approval by stockholders of the Company of a
reorganization, merger, consolidation or other business combination,
in each case, with respect to which persons who were stockholders of
the Company immediately prior to such event do not immediately
thereafter own more than 50% of the combined voting power of the
reorganized, merged, consolidated or combined Company's then
outstanding securities that are entitled to vote generally in the
election of directors or (iv) the liquidation or dissolution of the
Company or sale of all or substantially all of the Company's assets.
(c) "Common Shares" means units equivalent in value and dividend
rights to Common Shares, $ 0.01 par value, of the Company.
(d) "Company" means Snyder Oil Corporation, a Delaware corporation.
(e) "Deferred Account" means the account established by the Company
for each Director who elects to defer the Fees payable to him as a
Director.
(f) "Director" means any director of the Company who is not an
employee of the Company or any subsidiary of the Company.
(g) "Election Agreement" means the written election to defer Fees
signed by the Director and in the form provided by the Plan
Administrator.
(h) "Fees" means the fees payable to a Director by reason of his
serving on the Board either (i) as a retainer (without regard to
attendance at meetings) or (ii) on a per meeting basis. "Retainer
Fees" means those Fees which are payable to a Director by reason of
his serving on the Board as a retainer (without regard to attendance
at meetings). Fees do not include reimbursement of expenses.
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(i) "Market Price" means the average of the high and low price at which
a share of the Company's Common Stock, $ 0.01 par value, is traded on
the New York Stock Exchange on a given date.
(j) "Member" means any Director who has at any time deferred the receipt
of Fees in accordance with this Plan.
(k) "Plan" means The Snyder Oil Corporation Directors Deferral Plan.
(l) "Plan Administrator" means the person, persons or entity designated
by the Company to administer the Plan and to serve as agent for the
Company with respect to the Trust. If no such person or entity is
serving as Plan Administrator at any time, the Company shall be Plan
Administrator.
(m) "Trust" means the rabbi trust or trusts established by the Company
that identifies the Plan as a plan with respect to which assets are to
be held by the Trustee.
(n) "Trustee" means the trustee or trustees under the Trust.
(o) "Year" means the calendar year.
3. ELECTION TO DEFER DIRECTOR FEES.
(a) ELIGIBILITY.
A Director may elect to defer receipt of all or a portion of his
Fees for any Year in accordance with Paragraph 3(b) hereof.
(b) TIME OF ELECTION.
A Director desiring to defer all or a portion of his Fees for the
upcoming Year must submit an Election Agreement to the Plan
Administrator no later than the last day of the Year prior to the Year
for which the election is to be effective; provided, however, that for
1997, each Director shall be permitted to elect to defer all or a
portion of the Fees earned after the Company's adoption of the Plan and
before December 31, 1997, provided such Director delivers an Election
Agreement to the Plan Administrator within ten (10) days after adoption
of the Plan.
Any Director who was not a Director during the previous Year may
make an election to defer all or a portion of the Fees for the Year in
which the Director is elected to the Board by delivering an Election
Agreement to the Plan Administrator within thirty (30) days of such
election to the Board. A Director fulfilling the above requirements
shall be considered a "Member" for purposes of this Plan.
(c) DURATION AND NATURE OF ELECTION.
A Member's election to defer Fees shall continue in effect from
Year to Year unless modified or revoked by the Member through written
notice to the Plan Administrator prior to the
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beginning of the Year for which the revocation or modification is to
apply. Modifications or revocations shall not apply retroactively, and
once a Member has made, or is deemed to have made, an election to defer
all or a portion of his Fees for a given Year, such election may not be
modified or revoked.
4. DEFERRAL ACCOUNTS.
(a) ACCOUNTS.
The Company shall establish one or more Deferred Accounts for
each Member reflecting deferrals made for the Member's benefit together
with any adjustments for income, gain or loss and any payments from the
Deferred Account. If a Member elects to defer all or part of a Retainer
Fee (otherwise payable in the form of Company Common Shares), there
shall be credited to a Member's Deferred Account, on each day on which
the Retainer Fee would otherwise be paid in the form of Common Shares,
units of Common Shares equal to the portion of the number of Common
Shares payable as the Retainer Fee on such day which the Member elected
to defer. The Plan Administrator shall establish sub-accounts for each
Member that has more than one election in effect under Section 6 and
such other sub-accounts as are necessary for the proper administration
of the Plan. A sub-account valued on the basis of the Company's Common
Shares shall be known as a "Stock Account." As of the last day of each
Year, the Plan Administrator shall provide the Member with a statement
of his or her Deferred Account reflecting the income, gains and losses
(realized and unrealized), amounts of deferrals and distributions of
such Deferred Account since the prior statement.
5. INVESTMENTS
(a) Deferral Accounts arising from a Member's election to defer all or a
portion of a Retainer Fee payable in the form of Common Stock shall be held and
invested in a Stock Account, and valued on the basis of the Company's Common
Shares. Any dividends paid in cash on such Common Shares in the Stock Account
shall be invested at the direction of the Member from among a selection of
Funds, as described in paragraph (b) hereof. A Member may direct that all or a
portion of the Common Shares held in his or her Stock Account shall be sold, in
which case the proceeds of the sale shall then be invested in accordance with
the Member's direction under paragraph (b) hereof.
(b) Each Member shall designate, in accordance with the procedures
established from time to time by the Plan Administrator, the manner in which the
amounts allocated to his or her Deferred Account (other than the Stock Account)
shall be deemed to be invested from among the Funds (as such term is hereinafter
defined) made available from time to time for such purpose by the Plan
Administrator. Such Member may designate one of such Funds for the deemed
investment of the amounts allocated to his or her account or such Member may
split the deemed investment of the amounts allocated to his or her Deferred
Account between such Funds in such increments as the Plan Administrator may
prescribe. If a Member fails to make a proper designation, then his or her
Deferred Account shall be deemed to be invested in the Fund or Funds designated
by the Plan Administrator from time to time in a uniform and nondiscriminatory
manner. The term "Funds" shall mean the investment funds designated from time to
time by the Plan Administrator for the deemed investment of Deferred Accounts
pursuant to this Section 5.
(c) A Member may change his or her deemed investment designation for
future amounts to be allocated to such Member's Deferred Account (other than the
Stock Account). Any such change shall be
3
<PAGE>
made in accordance with the procedures established by the Plan Administrator,
and the frequency of such changes may be limited by the Plan Administrator.
(d) A Member may elect to convert his or her deemed investment
designation with respect to the amounts already allocated to such Member's
Deferred Account (other than the Stock Account). Any such conversion shall be
made in accordance with the procedures established by the Plan Administrator,
and the frequency of such conversions may be limited by the Plan Administrator.
(e) All deemed investments under the Plan shall be valued at the times
and in the manner determined by the Plan Administrator in its sole discretion.
The Plan Administrator may at any time and for any reason, without liability to
any Member, determine in its sole discretion that a particular Fund (or asset
under paragraph d. above) shall no longer be available for the deemed investment
of an Deferred Account under the Plan. In such case, the deemed investment in
such Fund (or asset) shall be deemed to have been liquidated on the date
selected by the Plan Administrator in its sole discretion. None of the Plan, the
Company, the Plan Administrator, the Trust, or the Trustee shall be responsible
or liable for any loss resulting from (i) a Member's exercise of any control or
discretion over the deemed investment of his or her Deferred Account and/or (ii)
any actions taken by the Plan Administrator pursuant to this Section 5. Actions
by the Plan Administrator pursuant to this Section 5 may vary among Members.
6. CLAIMS OF GENERAL CREDITORS.
All compensation deferred and amounts credited to the Deferred Accounts
under this Plan shall remain a part of the general assets of the Company.
Accordingly, the compensation deferred under this Plan is subject to the claims
of the Company's general creditors.
7. PAYMENT OF DEFERRED ACCOUNTS.
A Member shall elect (in the Election Agreement used to elect to defer
Fees under Section 3) the date at which the Deferral Accounts (including any
earnings attributable thereto) will commence to be paid to the Member. The
Member shall also elect thereon for payments to be paid in either:
(a) a single lump-sum payment; or
(b) annual or monthly installments over a period elected by the
Member up to 10 years, the amount of each installment to equal
the balance of his or her Deferred Account immediately prior to
the installment divided by the number of installments remaining
to be paid.
Each such election will be effective for the Year for which it is made and
succeeding Years, unless changed by the Member. Any change will be effective
only for Deferrals made for the first Year beginning after the date on which the
Election Agreement containing the change is filed with the Plan Administrator.
Except as provided in Section 8, payment of a Member's Account shall be made in
accordance with the Member's elections under this Section 7.
With respect to all distributions to be made under the Plan, the
following rules shall apply:
4
<PAGE>
(i) All distributions from a Stock Account shall be paid in the
form of Common Shares, and all other distributions from Deferral Accounts shall
be paid in cash, subject to withholding or deduction by the Company of any
taxes, contributions, payments and assessments which the Company is now or may
hereafter be required or authorized by law to withhold or deduct from
distributions; and
(ii) The amount of the distribution from the Deferred Account
shall be valued at the times and in the manner determined by the Plan
Administrator in its sole discretion.
8. CHANGE OF CONTROL
In the event of a Change of Control, the Member's entire Deferred
Account balance will be paid to the Member in a single lump sum as soon as
possible following any Change of Control of the Company, unless provision is
otherwise made in writing by the Board incident to the transaction.
9. DEATH OF MEMBER.
If a Member dies prior to the complete distribution of his or her
Deferred Account, the balance of the Deferred Account shall be paid as soon as
practicable to the Member's designated beneficiary or beneficiaries, in the form
elected by the Member under either of the following options:
(a) a single lump-sum payment; or
(b) annual or monthly installments over a period elected by the
Member up to 10 years, the amount of each installment to equal
the balance of the Account immediately prior to the installment
divided by the number of installments remaining to be paid.
Any designation of beneficiary and form of payment to such beneficiary shall be
made by the Member on an Election Agreement filed with the Plan Administrator
and may be changed by the Member at any time by filing another Election
Agreement containing the revised instructions. If no beneficiary is designated
or no designated beneficiary survives the Member, payment shall be made to the
Member's surviving spouse or, if none, to his or her issue per stirpes, in a
single payment. If no spouse or issue survives the Member, payment shall be made
in a single lump sum to the Member's estate.
10. ADMINISTRATION.
(a) PLAN ADMINISTRATION AND INTERPRETATION.
The Plan Administrator shall oversee the administration of the Plan.
The Plan Administrator shall have complete control and authority to determine
the rights and benefits and all claims, demands and actions arising out of the
provisions of the Plan of any Member, beneficiary, deceased Member, or other
person having or claiming to have any interest under the Plan. The Plan
Administrator shall have complete discretion to interpret the Plan to decide all
matters under the Plan. Such interpretation and decision shall be final,
conclusive and binding on all Members and any person claiming under or through
any Member, in the absence of clear and convincing evidence that the Plan
Administrator acted arbitrarily and capriciously. Any individual(s) serving as
Plan Administrator who is a Member will not vote or act on any matter relating
solely to himself or herself. When making a determination or
5
<PAGE>
calculation, the Plan Administrator shall be entitled to rely on information
furnished by a Member, a beneficiary, the Company or the Trustee.
(b) POWERS, DUTIES, PROCEDURES, ETC.
The Plan Administrator shall have such powers and duties, may adopt such
rules, may act in accordance with such procedures, may appoint such officers or
agents, may delegate such powers and duties, may receive such reimbursements and
compensation, and shall follow such claims and appeal procedures with respect to
the Plan as it may establish.
(c) INFORMATION
To enable the Plan Administrator to perform its functions, the Company
shall supply full and timely information to the Plan Administrator on all
matters relating to Members' Fees and such other pertinent facts as the Plan
Administrator may require.
(d) INDEMNIFICATION OF PLAN ADMINISTRATOR
The Company agrees to indemnify and to defend to the fullest extent
permitted by law any officer(s) or employee(s) who serve as Plan Administrator
(including any such individual who formerly served as Plan Administrator)
against all liabilities, damages, costs and expenses (including attorneys' fees
and amounts paid in settlement of any claims approved by the Company) occasioned
by any act or omission to act in connection with the Plan, if such act or
omission is in good faith.
11. TERMINATION OR MODIFICATION OF PLAN.
This Plan may be terminated, modified, or amended at the sole discretion
of the Board. If this Plan is terminated, the remaining Deferred Account
balances will be distributed pursuant to the terms of this Plan and no
additional deferrals will be permitted.
12. NON-ALIENATION.
The amounts credited to any Deferred Accounts maintained under the Plan
may not be pledged, assigned, or transferred by the Director for whom such
Account is maintained or by any other individual, and any purported pledge,
assignment, or transfer shall be void and unenforceable.
13. CLAIMS OF OTHER PERSONS.
The provisions of the Plan shall in no event be construed as giving any
person, firm or corporation any legal or equitable right as against the Company
or any subsidiary, or the officers, employees, or directors of the Company or
any subsidiary, except any such rights as are specifically provided for in the
Plan or are hereafter created in accordance with the terms and provisions of the
Plan.
14. SEVERABILITY.
The invalidity and unenforceability of any particular provision of the
Plan shall not affect any other provision hereof, and the Plan shall be
construed in all respects as if each invalid or unenforceable provisions were
omitted herefrom.
6
<PAGE>
15. GOVERNING LAW.
The provisions of the Plan shall be governed by and construed in
accordance with the laws of the State of Texas.
7
<TABLE>
EXHIBIT 11.1
SNYDER OIL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
------------ ------------ ------------
(In thousands, except share data)
<S> <C> <C> <C>
Income (loss) applicable to common before extraordinary item $29,487 $56,740 ($46,041)
Extraordinary item (2,848) - -
------------ ----------- ------------
Net income (loss) applicable to common 26,639 56,740 (46,041)
------------ ----------- ------------
Effect of dilutive securities assuming conversion - 6,210 -
------------ ----------- ------------
Net income (loss) applicable to common - assuming conversion $26,639 $62,950 ($46,041)
============ =========== ===========
Weighted average shares outstanding 30,588 31,308 30,186
Assumed exercise of vested common stock options
net of treasury shares repurchased 513 153 -
Assumed conversion of 6% preferred stock - 5,052 -
------------ ----------- ------------
Weighted average shares outstanding - assuming dilution 31,101 36,513 30,186
============ =========== ============
Basic earnings per share:
Income (loss) per common share before extraordinary item $.96 $1.81 ($1.53)
Extraordinary item (.09) - -
------------ ----------- ------------
Net income (loss) per common share $.87 $1.81 ($1.53)
============ =========== ============
Diluted earnings per share:
Income (loss) per common share before extraordinary item - assuming dilution $.95 $1.72 ($1.53)
Extraordinary item (.09) - -
------------ ----------- ------------
Net income (loss) per common share - assuming dilution $.86 $1.72 ($1.53)
============ =========== ============
</TABLE>
<TABLE>
EXHIBIT 12
SNYDER OIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ -------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Income (loss) before taxes, minority
interest and extraordinary item $57,440 $74,701 ($40,604) $13,510 $22,538
Interest expense 25,472 23,587 21,679 10,337 5,315
------------- ------------- ------------ ------------ -------------
Earnings before taxes, minority
interest, extraordinary item and
interest expense $82,912 $98,288 ($18,925) $23,847 $27,853
============= ============= ============ ============ =============
Interest expense $25,472 $23,587 $21,679 $10,337 $5,315
Preferred stock dividends of
majority owned subsidiary 1,474 1,520 - - -
------------- ------------- ------------ ------------ -------------
Total fixed charges $26,946 $25,107 $21,679 $10,337 $5,315
============= ============= ============ ============ =============
Ratio of earnings to fixed charges 3.08 3.91 N/A(1) 2.31 5.24
============= ============= ============ ============ =============
<FN>
(1) Earnings were inadequate to cover fixed charges by $40.6 million.
</FN>
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 12
SNYDER OIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(Unaudited)
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------ ------------ -------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C>
Income (loss) before taxes, minority
interest and extraordinary item $57,440 $74,701 ($40,604) $13,510 $22,538
Interest expense 25,472 23,587 21,679 10,337 5,315
------------- ------------- ------------ ------------ -------------
Earnings before taxes, minority
interest, extraordinary item and
interest expense $82,912 $98,288 ($18,925) $23,847 $27,853
============= ============= ============ ============ =============
Interest expense $25,472 $23,587 $21,679 $10,337 $5,315
Preferred stock dividends 4,929(2) 6,210 6,210 10,806 9,100
Adjustment to tax effect preferred
stock dividends 2,428 429 - - -
Preferred stock dividends of
majority owned subsidiary 1,474 1,520 - - -
------------- ------------- ------------ ------------ -------------
Total fixed charges $34,303 $31,746 $27,889 $21,143 $14,415
============= ============= ============ ============ =============
Ratio of earnings
to combined fixed charges
and preferred dividends 2.42 3.10 N/A(1) 1.13 1.93
============= ============= ============ ============ =============
<FN>
(1) Earnings were inadequate to cover combined fixed charges and preferred dividends by $46.8 million.
(2) Excludes redemption premium of $1.0 million.
</FN>
</TABLE>
EXHIBIT 22.1
SNYDER OIL CORPORATION
Subsidiaries as of February 27, 1998
State of
Name of Subsidiary Organization
------------------ -------------
SOCO Offshore, Inc. Delaware
The names of other subsidiaries are omitted in accordance with Item
601(b)(22)(ii) of Regulation S-K.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 10,1998 on the financial statements of Snyder Oil
Corporation included in this Form 10-K, into Snyder Oil Corporation's previously
filed Registration Statement File Nos. 33-34446, 33-45213, 33-54809, 33-64219
and 333-09877.
ARTHUR ANDERSEN LLP
Fort Worth, Texas,
February 27, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
As independent petroleum consultants, we hereby consent to the
incorporation of our Reports included in this Form 10-K into Snyder Oil
Corporation's Registration Statements Nos. 33-34446, 33-45213, 33-54809,
33-64219, and 33-09877.
NETHERLAND, SEWELL & ASSOCIATES, Inc.
BY /s/ Clarence M. Netherland
----------------------------
Clarence M. Netherland
President
Dallas, Texas
February 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000860713
<NAME> Snyder Oil Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 89,443
<SECURITIES> 0
<RECEIVABLES> 21,521
<ALLOWANCES> 0
<INVENTORY> 1,775
<CURRENT-ASSETS> 113,875
<PP&E> 426,981
<DEPRECIATION> 142,846
<TOTAL-ASSETS> 546,088
<CURRENT-LIABILITIES> 57,549
<BONDS> 173,636
0
0
<COMMON> 357
<OTHER-SE> 263,399
<TOTAL-LIABILITY-AND-EQUITY> 546,088
<SALES> 214,220
<TOTAL-REVENUES> 255,728
<CGS> 122,209
<TOTAL-COSTS> 162,715
<OTHER-EXPENSES> 12,544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,029
<INCOME-PRETAX> 57,440
<INCOME-TAX> 17,856
<INCOME-CONTINUING> 35,465
<DISCONTINUED> 0
<EXTRAORDINARY> 2,848
<CHANGES> 0
<NET-INCOME> 32,617
<EPS-PRIMARY> .87
<EPS-DILUTED> .86
</TABLE>
EXHIBIT 99.1
February 3, 1998
Snyder Oil Corporation
Suite 2500
777 Main Street
Fort Worth, Texas 76102
Gentlemen:
In accordance with your request, we have estimated the proved reserves and
future revenue, as of December 31, 1997, to the Snyder Oil Corporation (SOCO)
interest in certain oil and gas properties located in the United States and in
federal waters offshore Louisiana and Texas as listed in the accompanying
tabulations. As requested, lease and well operating costs do not include the
per-well overhead expenses allowed under joint operating agreements for those
properties operated by SOCO. This report has been prepared using constant prices
and costs and conforms to the guidelines of the Securities and Exchange
Commission (SEC).
As presented in the accompanying summary projections, Tables I through IV,
we estimate the net reserves and future net revenue to the SOCO interest, as of
December 31, 1997, to be:
<TABLE>
<CAPTION>
Net Reserves Future Net Revenue
-------------------------- ---------------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- --------------------------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Proved Developed
Producing 6,485,719 198,844,328 $329,204,500 $212,339,000
Non-Producing 1,027,884 55,469,307 126,347,000 81,955,500
Proved Undeveloped 512,747 64,668,474 60,158,600 23,454,100
---------- ----------- ------------ ------------
Total Proved 8,026,350 318,982,109 $515,710,100 $317,748,600
</TABLE>
The oil reserves shown include crude oil and condensate. Oil volumes are
expressed in barrels which are equivalent to 42 United States gallons. Gas
volumes are expressed in thousands of standard cubic feet (MCF) at the contract
temperature and pressure bases.
As shown in the Table of Contents, the properties in this report have been
subdivided into significant property groups and project areas behind the
appropriate division tabs. Included for each significant property group are
summary projections of reserves and revenue by reserve category. Included for
each project area are summary projections of reserves and revenue by reserve
category along with one-line summaries of reserves, economics, and basic data by
lease. For the purposes of this report, the term "lease" refers to a single
economic projection.
The estimated reserves and future revenue shown in this report are for
proved developed producing, proved developed non-producing, and proved
undeveloped reserves. In accordance with SEC guidelines, our estimates do not
include any value for probable or possible reserves which may
<PAGE>
exist for these properties. This report does not include any value which could
be attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.
Future gross revenue to the SOCO interest is prior to deducting state
production taxes and ad valorem taxes. Future net revenue is after deducting
these taxes, future capital costs, and operating expenses, but before
consideration of federal income taxes; future net revenue for the offshore
properties is also after deducting abandonment costs. In accordance with SEC
guidelines, the future net revenue has been discounted at an annual rate of 10
percent to determine its "present worth. " The present worth is shown to
indicate the effect of time on the value of money and should not be construed as
being the fair market value of the properties.
For the purposes of this report, a field inspection of the properties has
not been performed nor has the mechanical operation or condition of the wells
and their related facilities been examined. We have not investigated possible
environmental liability related to the properties; therefore, our estimates do
not include any costs which may be incurred due to such possible liability. Our
estimates of future revenue do not include any salvage value for the lease and
well equipment nor the cost of abandoning the onshore properties. Future revenue
estimates for offshore properties also do not include any salvage value for the
lease and well equipment, but do include our estimates of the costs to abandon
the wells, platforms, and production facilities. Abandonment costs for offshore
properties are included with other capital investments.
Oil prices used in this report are based on a December 31, 1997 West Texas
Intermediate posted price of $15.50 per barrel, adjusted by significant property
group for regional posted price differentials. Gas prices used in this report
are based on average December 1997 prices by pipeline for each significant
property group. Oil and gas prices are held constant in accordance with SEC
guidelines.
Lease and well operating costs are based on operating expense records of
SOCO. For non- operated properties, these costs include the per-well overhead
expenses allowed under joint operating agreements along with costs estimated to
be incurred at and below the district and field levels. As requested, lease and
well operating costs for the operated properties include only direct lease and
field level costs. Headquarters general and administrative overhead expenses of
SOCO are not included. Lease and well operating costs are held constant in
accordance with SEC guidelines. Capital costs are included as required for
workovers, new development wells, and production equipment.
We have made no investigation of potential gas volume and value imbalances
which may have resulted from overdelivery or underdelivery to the SOCO interest.
Therefore, our estimates of reserves and future revenue do not include
adjustments for the settlement of any such imbalances; our projections are based
on SOCO receiving its net revenue interest share of estimated future gross gas
production.
The reserves included in this report are estimates only and should not be
construed as exact quantities. They may or may not be recovered; if recovered,
the revenues therefrom and the costs
<PAGE>
related thereto could be more or less than the estimated amounts. The sales
rates, prices received for the reserves, and costs incurred in recovering such
reserves may vary from assumptions included in this report due to governmental
policies and uncertainties of supply and demand. Also, estimates of reserves may
increase or decrease as a result of future operations.
In evaluating the information at our disposal concerning this report, we
have excluded from our consideration all matters as to which legal or
accounting, rather than engineering and geological, interpretation may be
controlling. As in all aspects of oil and gas evaluation, there are
uncertainties inherent in the interpretation of engineering and geological data;
therefore, our conclusions necessarily represent only informed professional
judgments.
The titles to the properties have not been examined by Netherland, Sewell
& Associates, Inc., nor has the actual degree or type of interest owned been
independently confirmed. The data used in our estimates were obtained from
Snyder Oil Corporation and the nonconfidential files of Netherland, Sewell &
Associates, Inc. and were accepted as accurate. We are independent petroleum
engineers, geologists, and geophysicists; we do not own an interest in these
properties and are not employed on a contingent basis. Basic geologic and field
performance data together with our engineering work sheets are maintained on
file in our office.
Very truly yours,
/s/ Frederic D. Sewell
RKG:AKC
