<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-13916
UNION PACIFIC RESOURCES GROUP INC.
(Exact name of registrant as specified in its charter)
UTAH 13-2647483
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 CHERRY STREET, FORT WORTH, TEXAS
(Address of principal executive offices)
76102
(Zip Code)
(817) 877-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
As of April 30, 1997, there were 253,778,984 shares of the
registrant's common stock outstanding.
<PAGE> 2
UNION PACIFIC RESOURCES GROUP INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME - For the
Three Months Ended March 31, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . 1
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION -
At December 31, 1996 and March 31, 1997 . . . . . . . . . . . . . . . . . . . . . 2 - 3
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS - For the
Three Months Ended March 31, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 5 - 7
INDEPENDENT ACCOUNTANTS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 - 15
PART II. OTHER INFORMATION
---------------------------
ITEM 1: LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 - 17
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . 17
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 18 - 19
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNION PACIFIC RESOURCES GROUP INC.
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
For the Three Months Ended March 31, 1996 and 1997
(Millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Operating revenues: (Note 2)
Oil and gas operations:
Producing properties . . . . . . . . . . . . . . . . . . . $ 232.0 $ 370.0
Plants, pipelines and marketing . . . . . . . . . . . . . 114.2 124.7
Other oil and gas revenues . . . . . . . . . . . . . . . . 12.3 4.6
-------- -------
Total oil and gas operations . . . . . . . . . . . . . . 358.5 499.3
Minerals . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2 32.4
-------- -------
Total operating revenues . . . . . . . . . . . . . . . . 389.7 531.7
-------- -------
Operating expenses:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . 62.8 73.1
Exploration, including exploratory dry holes . . . . . . . . . 29.7 42.8
Plants, pipelines and marketing . . . . . . . . . . . . . . . 60.6 76.6
Minerals . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 1.3
Depreciation, depletion and amortization . . . . . . . . . . . 123.7 133.0
General and administrative . . . . . . . . . . . . . . . . . . 14.0 18.5
-------- -------
Total operating expenses . . . . . . . . . . . . . . . . 292.4 345.3
-------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . 97.3 186.4
Other income (expense) - net . . . . . . . . . . . . . . . . . . 2.0 (3.0)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (13.0) (10.7)
-------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . 86.3 172.7
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (27.1) (55.5)
-------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59.2 $ 117.2
======== =======
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . $ 0.24 $ 0.47
======== =======
Weighted average shares outstanding . . . . . . . . . . . . . . . 249.9 251.0
Cash dividends per share . . . . . . . . . . . . . . . . . . . . $ 0.05 $ 0.05
</TABLE>
See the notes to the condensed consolidated financial statements (unaudited).
- 1 -
<PAGE> 4
UNION PACIFIC RESOURCES GROUP INC.
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
At December 31, 1996 and March 31, 1997
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments . . . . . . . . . . . . . . . . . . . $ 118.9 $ 200.2
Accounts receivable - net . . . . . . . . . . . . . . . . . . . . . 351.6 282.2
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.4 28.2
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 86.4 27.1
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . 586.3 537.7
-------- --------
Properties (successful efforts method):
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,190.0 6,448.5
Accumulated depreciation, depletion and amortization . . . . . . . . (3,217.6) (3,375.7)
-------- --------
Total properties - net . . . . . . . . . . . . . . . . . . . 2,972.4 3,072.8
Intangible and other assets . . . . . . . . . . . . . . . . . . . . . . 90.2 84.8
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,648.9 $3,695.3
======== ========
</TABLE>
See the notes to the condensed consolidated financial statements (unaudited).
- 2 -
<PAGE> 5
UNION PACIFIC RESOURCES GROUP INC.
CONDENSED STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
At December 31, 1996 and March 31, 1997
(Millions of Dollars)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 407.4 $ 404.2
Accrued taxes payable . . . . . . . . . . . . . . . . . . . 134.1 134.1
Other current liabilities . . . . . . . . . . . . . . . . . 71.3 83.2
-------- --------
Total current liabilities . . . . . . . . . . . . . . . 612.8 621.5
-------- --------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . 670.9 571.3
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 434.7 462.8
Retiree benefits obligations . . . . . . . . . . . . . . . . . . 151.4 152.1
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . 4.9 11.1
Other long-term liabilities (Note 4) . . . . . . . . . . . . . . 259.9 252.5
Shareholders' equity: (Note 3)
Common stock, no par value;
Authorized shares--400,000,000
Issued shares--250,058,019 and 253,936,901 . . . . . . . -- --
Paid-in surplus . . . . . . . . . . . . . . . . . . . . . . 872.9 983.8
Unearned Employee Stock Ownership Plan . . . . . . . . . . . -- (106.1)
Retained earnings . . . . . . . . . . . . . . . . . . . . . 674.4 779.1
Unearned compensation . . . . . . . . . . . . . . . . . . . (17.5) (15.4)
Deferred foreign exchange adjustment . . . . . . . . . . . . (12.0) (13.3)
Treasury stock, at cost;
Shares--154,417 and 158,467 . . . . . . . . . . . . . . . (3.5) (4.1)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . 1,514.3 1,624.0
-------- --------
Total liabilities and shareholders' equity . . . . . . . . . . . $3,648.9 $3,695.3
======== ========
</TABLE>
See the notes to the condensed consolidated financial statements (unaudited).
- 3 -
<PAGE> 6
UNION PACIFIC RESOURCES GROUP INC.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Three Months Ended March 31, 1996 and 1997
(Millions of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Cash flows provided by operations:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59.2 $ 117.2
Non-cash charges to income:
Depreciation, depletion and amortization . . . . . . . . . . . . 123.7 133.0
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 7.4 28.1
Other non-cash charges - net . . . . . . . . . . . . . . . . . 7.6 5.3
Changes in current assets and liabilities . . . . . . . . . . . . . 18.1 138.6
------ -------
Cash provided by operations . . . . . . . . . . . . . . . . . 216.0 422.2
------ -------
Cash flows from investing activities:
Capital and exploratory expenditures . . . . . . . . . . . . . . . (138.3) (284.0)
Proceeds from sales of assets . . . . . . . . . . . . . . . . . . . 22.7 1.3
Other investing activities - net . . . . . . . . . . . . . . . . . -- (0.9)
------ -------
Cash used by investing activities . . . . . . . . . . . . . . (115.6) (283.6)
------ -------
Cash flows from financing activities:
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (12.4) (12.5)
Advances to Union Pacific Corporation . . . . . . . . . . . . . . . (89.8) --
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . -- (99.6)
Other financings - net . . . . . . . . . . . . . . . . . . . . . . 1.2 54.8
------ -------
Cash used by financing activities . . . . . . . . . . . . . . (101.0) (57.3)
------ -------
Net change in cash and temporary investments . . . . . . . . . . . . . (0.6) 81.3
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . 27.6 118.9
------ -------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 27.0 $ 200.2
====== =======
</TABLE>
See the notes to the condensed consolidated financial statements (unaudited).
- 4 -
<PAGE> 7
UNION PACIFIC RESOURCES GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. RESPONSIBILITIES FOR FINANCIAL STATEMENTS - The condensed consolidated
financial statements of Union Pacific Resources Group Inc. and subsidiaries
(the "Company") have been prepared by management and are unaudited. Such
unaudited interim financial statements reflect all adjustments (including
normal recurring adjustments) that are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results of the Company for the interim periods; however, such condensed
statements do not include all of the information and footnotes required by
generally accepted accounting principles to be included in a full set of
financial statements. The report of Deloitte & Touche LLP commenting on
their review accompanies the condensed consolidated financial statements and
is included in Part I, Item 1 in this report. The Condensed Statement of
Consolidated Financial Position at December 31, 1996 is derived from the
audited financial statements as of December 31,1996. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results for the full year ending December 31,
1997.
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 certain 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 each reporting period. Management believes its estimates
and assumptions are reasonable; however, such estimates and assumptions are
subject to a number of risks and uncertainties which may cause actual
results to differ materially from the Company's estimates.
2. PRICE RISK MANAGEMENT - The Company uses hydrocarbon-based derivative
financial instruments from time to time to reduce risks associated with
hydrocarbon price volatility. While the use of these hedging arrangements
may limit the downside risk of adverse price movements, it may also limit
future gains from favorable movements. Hedging generally is accomplished
pursuant to exchange-traded futures contracts or master swap agreements
based on standard forms. Hedging gains and losses are deferred and
recognized at delivery of the commodity. At March 31, 1997, the Company
had margin requirements totaling $7.3 million. Such requirements were met
with $4.6 million in cash deposits and $2.7 million in unrealized gains on
open contracts. Deferred gains on other derivative positions, primarily
representing settled April 1997 hedges deferred as of March 31, 1997, were
$4.6 million. Such margin deposits and deferred gains or losses are included
in other current assets in the Company's Statements of Consolidated
Financial Position.
The Company is exposed to credit losses in the event of nonperformance by
its counterparties. At March 31, 1997, the Company's largest credit risk
associated with any single counterparty, represented by the net fair value
of open contracts with such counterparty, was approximately $2.4 million.
At March 31, 1997, the Company had near-term futures contracts and price
swaps for May through December 1997 with respect to notional natural gas
volumes of 850 MMcfd at $1.94/Mcf. The unrecognized mark-to-market gain
associated with such contracts, representing the price the Company would
receive to close such contracts at the reporting date, was $13.8 million.
Also, at March 31, 1997, the Company had near-term crude oil price swap
contracts for April through June 1997 with respect to notional crude oil
- 5 -
<PAGE> 8
volumes of 25 MBbld at $20.35/Bbl, and for July through September 1997 with
respect to notional crude oil volumes of 15 Mbbld at $20.03/Bbl. At the
reporting date, these swaps had an unrecognized mark-to-market loss of $0.4
million. Additionally, the Company has simultaneously purchased crude oil
put options (floor) and sold crude oil call options (ceiling), the
combination of the two having the effect of establishing minimum and
maximum prices the Company would receive for crude oil. At March 31,
1997, the Company's purchase and sale of such options had established a
minimum price of $19.17/Bbl (including net premium paid) and a maximum
price of $24.67/Bbl (including net premium received) with respect to 25.0
Mbbld of crude oil for April through September 1997; and a minimum price of
$18.97/Bbl and a maximum price of $24.47/Bbl with respect to 40 Mbbld for
October through December 1997. The value of these options at March 31,
1997, was $5.9 million, representing the fair market value of such options
given current market prices using an option pricing model.
Previously, the Company had sold near-term futures contracts and price
swaps for January through December 1998 with respect to notional natural
gas volumes of 37 Mmcfd at $2.21/Mcf. Subsequently, these positions have
been offset by purchasing corresponding quantities of futures contracts and
price swaps for the same delivery periods. The unrecognized gain
associated with these contracts is $0.7 million and will be recorded during
1998.
At March 31, 1997, the Company had outstanding long-term fixed price sales
contracts relating to 73.7 Bcf of natural gas for delivery through December
31, 2008. The Company's marketing subsidiary, Union Pacific Fuels, Inc.,
enters into long-term financial contracts that, in combination with these
long-term fixed price sales agreements, secure a margin on the
corresponding volume positions. At March 31, 1997, long-term fixed price
sales commitments for which corresponding financial positions had not been
entered into totaled 63.4 Bcf at an average price of $2.97/Mcf, with a fair
value of $27.3 million. The remaining commitments for 10.3 Bcf had been
offset with financial contracts for similar volumes. The unrecognized
mark-to-market present value related to such hedged commitments at March
31, 1997, was $0.7 million, consisting of a $0.7 million gain on the
long-term physical fixed price sales commitments and a break even position
on the corresponding financial contracts.
At March 31, 1997, the Company had a total unrecognized mark-to-market
present value gain of $48.0 million related to the financial and fixed
price sales contracts described above. Such gain comprises a $28.0
million net gain on contracts for physical delivery and a $20.0 million net
gain on financial contracts.
3. COMMON STOCK - Effective January 2, 1997, the Company instituted an
employee stock ownership plan ("ESOP"). The ESOP purchased 3.7 million
shares or $107.3 million of newly issued common stock (the "ESOP Shares")
from the Company, which will be used to fund the Company's matching
obligations under its 401(k) Thrift Plan. All regular employees of the
Company were eligible to participate in the ESOP upon its effective date.
The ESOP Shares, which are held in trust, were purchased with the proceeds
from a 30-year loan from the Company. Such shares initially have been
pledged as collateral for the loan. As loan payments are made, shares are
released from collateral, based on the proportion of debt service paid.
Principal and interest requirements are $8.7 million annually, and will be
funded with dividends paid on the unallocated ESOP Shares and with cash
contributions from the Company. Principal or interest prepayments may be
made to ensure that the Company's minimum obligation is met.
Shares held by the ESOP are included in the computation of earnings per
share as such ESOP Shares are released from collateral. Such releases of
ESOP Shares have been allocated to participants' accounts and
- 6 -
<PAGE> 9
have been charged to compensation expense at the fair market value of the
shares on the date of the employer match. Dividends on allocated ESOP
Shares have been recorded as a reduction of retained earnings; dividends on
unallocated ESOP Shares have been recorded as a reduction of the principal
or accrued interest on the loan.
On February 2, 1997, the Board of Directors authorized the repurchase of up
to $50 million in shares of common stock of the Company in any fiscal year.
4. COMMITMENTS AND CONTINGENCIES - The Company is subject to Federal, state,
provincial and local environmental laws and regulations and currently is
participating in the investigation and remediation of a number of sites.
Where the remediation costs reasonably can be determined, and where such
remediation is probable, the Company has recorded a liability. Management
does not expect future environmental obligations to have a material impact
on the results of operations, financial condition or cash flows of the
Company.
In the last ten years, the Company has disposed of significant pipeline,
refining and producing property assets. In disposition agreements in
connection therewith, the Company has made certain representations and
warranties relating to the assets sold and provided certain indemnities
with respect to liabilities associated with such assets. The Company has
been advised of possible claims which may be asserted by the purchasers of
certain of the disposed assets for alleged breaches of such representations
and warranties and under certain indemnities. Certain claims related to
compliance with environmental laws remain pending. In addition, some of
the representations, warranties and indemnities related to some of the
disposed assets continue to survive under such disposition agreements.
Further claims may be made against the Company under such disposition
agreements or otherwise. While no assurance can be given as to the actual
outcome of these claims, the Company does not expect these matters to have
a materially adverse effect on its results of operations, cash flows, or
financial condition.
There are lawsuits pending against the Company and certain of its
subsidiaries which are described in Part I, Item 3 - Legal Proceedings in
the Company's 1996 Annual Report on Form 10-K and in Part II, Item 1 -
Legal Proceedings in this report. While the Company intends to defend
vigorously against the foregoing lawsuits and any similar lawsuits, if such
suits ultimately are resolved against the Company on a widespread basis,
damage awards and a loss of future revenue could result which, in the
aggregate, could be material.
The Company is a defendant in a number of other lawsuits and is involved in
governmental proceedings arising in the ordinary course of business in
addition to those described above. The Company also has entered into
commitments and provided guarantees for specific financial and contractual
obligations of its subsidiaries and affiliates. The Company does not
expect that these lawsuits, commitments or guarantees will have a
materially adverse effect on its results of operations or financial
condition.
- 7 -
<PAGE> 10
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Union Pacific Resources Group Inc.
Fort Worth, Texas
We have reviewed the accompanying condensed statement of consolidated financial
position of Union Pacific Resources Group Inc. (the "Company") as of March 31,
1997, and the related condensed statements of consolidated income and cash
flows for the three-month periods ended March 31, 1996 and 1997. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position of Union Pacific
Resources Group Inc. as of December 31, 1996, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
year then ended (not presented herein); and in our report dated January 29,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed statement of consolidated financial position as of December 31, 1996
is fairly stated, in all material respects, in relation to the statement of
consolidated financial position from which it has been derived.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
April 16, 1997
- 8 -
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
UNION PACIFIC RESOURCES GROUP INC.
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996 COMPARED TO MARCH 31, 1997
OVERVIEW
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---- ----
(Millions of dollars)
<S> <C> <C>
Selected financial data:
Total operating revenues . . . . . . . . . . . . . . . . $ 389.7 $ 531.7
Total operating expenses . . . . . . . . . . . . . . . . 292.4 345.3
Operating income . . . . . . . . . . . . . . . . . . . . 97.3 186.4
Net income . . . . . . . . . . . . . . . . . . . . . . . 59.2 117.2
</TABLE>
OPERATING INCOME increased for the first quarter 1997 by $89.1 million (92%)
over the first quarter 1996, as a result of higher product price realizations
(up 37% to $2.53/Mcfe) and higher volumes (up 16% to 1,882.8 MMcfed). This
increase was partially offset by lower marketing income related to lower gas
margins and by cost increases associated with expanded exploration activity.
Concerns over tight natural gas supply related to low storage inventories and
cooler temperatures supported prices during the first quarter 1997. Volume
growth has been achieved primarily through drilling and ethane recovery.
NET INCOME of $117.2 million for the first quarter 1997 was up by $58.0 million
(98%) from the same period in 1996, as improved operating results were offset by
increased income taxes.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---- ----
(Millions of dollars)
<S> <C> <C>
Operating income:
Oil and gas operations . . . . . . . . . . . . . . . . . $ 82.8 $ 175.2
Minerals . . . . . . . . . . . . . . . . . . . . . . . . 29.5 30.6
General and administrative . . . . . . . . . . . . . . . (15.0) (19.4)
</TABLE>
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<PAGE> 12
OIL AND GAS OPERATIONS
OPERATING REVENUES
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---- ----
(Millions of dollars)
<S> <C> <C>
Operating revenues:
Producing properties . . . . . . . . . . . . . . . . . . $ 232.0 $ 370.0
Plants, pipelines and marketing . . . . . . . . . . . . 114.2 124.7
Other oil and gas revenues . . . . . . . . . . . . . . . 12.3 4.6
</TABLE>
PRODUCING PROPERTY REVENUES increased by $138.0 million (59%). Production
volume increases of 236.2 Mmcfed (17%) added $31.4 million to revenues, while
higher product prices of $0.70/Mcfe (38%) added $106.6 million to revenues.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---- ----
<S> <C> <C>
Production volumes - producing properties:
Natural gas (Mmcfd) . . . . . . . . . . . . . . . . . . 930.5 1,118.2
Natural gas liquids (Mbbld) . . . . . . . . . . . . . . 24.7 30.8
Crude oil (Mbbld) . . . . . . . . . . . . . . . . . . . 49.5 51.4
Total (Mmcfed) . . . . . . . . . . . . . . . . . . . . . 1,375.7 1,611.9
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997 1996 1997
---- ---- ---- ----
(without Hedging) (with Hedging)
<S> <C> <C> <C> <C>
Average product price realizations -
producing properties:
Natural gas (per Mcf) . . . . . . . . . . . . $ 1.73 $ 2.54 $ 1.59 $ 2.41
Natural gas liquids (per Bbl) . . . . . . . . 9.68 13.23 9.68 13.20
Crude oil (per Bbl) . . . . . . . . . . . . . 17.54 20.83 16.70 19.51
Average (per Mcfe) . . . . . . . . . . . . . . 1.97 2.68 1.85 2.55
</TABLE>
Natural gas volumes increased by 187.7 Mmcfd (20%) to 1,118.2 Mmcfd with
increases from drilling successes in the Austin Chalk (89.5 Mmcfd), West Texas
(25.1 Mmcfd), and Gulf Onshore/Offshore (17.5 Mmcfd), and elimination of
preferential distribution of Section 29 partnership volumes (57.2 Mmcfd).
Natural gas liquids (NGL) volumes from producing properties increased by 6.1
Mbbld (25%) to 30.8 Mbbld primarily due to ethane recovery in the Rockies (4.7
Mbbld).
Crude oil volumes were 1.9 Mbbld higher as a result of property acquisitions
and drilling in the Austin Chalk and the Gulf Onshore/Offshore. This volume
increase was partially offset by production declines in Plains/Canada.
PLANTS, PIPELINES AND MARKETING REVENUES for the first quarter 1997 increased
by $10.5 million (9%). Higher plant product prices of $0.55/Mcfe (30%)
contributed $13.4 million toward higher plant revenues. Pipeline revenues
increased by $10.3 million to $52.7 million primarily due to increased prices
and throughput at an Austin Chalk pipeline ($18.2 million), partially offset by
reclassification of certain sales from pipeline revenue to plant
- 10 -
<PAGE> 13
revenue ($8.1 mm). Marketing revenues decreased by $15.8 million to $9.2
million primarily due to lower gas margins.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
1996 1997
---- ----
<S> <C> <C>
Sales volumes - plants:
Natural gas (Mmcfd) . . . . . . . . . . . . . . . . . . . . . 25.0 21.4
Natural gas liquids (Mbbld) . . . . . . . . . . . . . . . . . 38.1 41.6
Total (Mmcfed) . . . . . . . . . . . . . . . . . . . . . . . . 253.6 270.9
Average product price realizations - plants:
Natural gas (per Mcf) . . . . . . . . . . . . . . . . . . . . $ 1.72 $ 2.81
Natural gas liquids (per Bbl) . . . . . . . . . . . . . . . . 11.13 14.12
Average (per Mcfe) . . . . . . . . . . . . . . . . . . . . . . 1.84 2.39
</TABLE>
Natural gas volumes decreased by 3.6 Mmcfd (14%) due to ethane recovery at a
Rockies plant and weather-related plant throughput decreases at an East/South
Texas plant.
Natural gas liquids volumes increased by 3.5 Mbbld (9%) as a result of
reclassification of certain volumes from pipelines to plants.
OTHER OIL AND GAS REVENUES in the first period of 1997 were lower by $7.7
million (63%) primarily due to the absence of the 1996 gain on the sale of the
West Texas Eastern shelf property and a 1996 take-or-pay reserve release.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
---- ----
(Millions of dollars)
<S> <C> <C>
Operating expenses:
Production . . . . . . . . . . . . . . . . . . . . . . . . . $ 62.8 $ 73.1
Exploration . . . . . . . . . . . . . . . . . . . . . . . . 29.7 42.8
Plants, pipelines and marketing . . . . . . . . . . . . . . 60.6 76.6
Depreciation, depletion and amortization . . . . . . . . . . 123.7 133.0
</TABLE>
PRODUCTION EXPENSES increased by $10.3 million (16%), largely due to higher
production taxes and higher lease operating costs. An increase of $4.5 million
in production taxes was incurred as a result of greater producing property
revenues. Lease operating costs were up $5.0 million due to workover costs in
the Rockies and the Austin Chalk. Production expenses on a per unit basis were
flat at $0.50/Mcfe.
EXPLORATION EXPENSES increased by $13.1 million (44%), primarily attributable to
increased dry hole and surrendered lease expense. The dry hole expense was up
$4.2 million due to increases in exploratory drilling in East/South Texas and in
the Gulf Onshore/Offshore. The surrendered lease expense was up $7.9 million
reflecting increased leasing activity in East/South Texas and Austin Chalk.
Geological and geophysical expenses were up $1.2 million with increased seismic
costs in East/South Texas.
OPERATING EXPENSES FOR PLANTS, PIPELINES AND MARKETING increased by $16.0
million to $76.6 million primarily due to increased plants and pipelines gas
purchase costs caused by higher gas prices. Other operating expenses were
down $3.1 million due to lower lease payments.
- 11 -
<PAGE> 14
DEPRECIATION, DEPLETION, AND AMORTIZATION (DD&A) increased by $9.3 million (8%)
to $133.0 million primarily as a result of higher producing property volumes
($17.2 million), offset by a favorable unit of production rate ($8.6 million).
In addition, writedowns to fair value were recorded in 1997 relating to Yellow
Creek ($2.7 million), and in 1996 relating to an offshore property in the Gulf
of Mexico ($5.0 million). Costs on a unit of production basis, adjusted for
write-downs, decreased by $0.04/Mcfe to $0.78/Mcfe.
OIL AND GAS OPERATING INCOME
Total oil and gas operating income for the first quarter 1997 increased by
$92.4 million (112%) to $175.2 million. Higher producing property operating
income of $98.4 million was partially offset by decreased plants, pipelines and
marketing operating income of $6.0 million.
GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased by $4.5 million (32%) to $18.5 million principally reflecting employee
stock ownership program expense. On a per unit basis, general and administrative
expenses increased by $0.01/Mcfe to $0.11/Mcfe.
INTEREST AND OTHER INCOME - NET - Interest expense decreased by $2.3 million to
$10.7 million, while other income/expense decreased by $5.0 million to a net
expense of $3.0 million. The decrease in interest expense was attributable to
lower interest rates achieved through debt restructuring in October 1996. The
other income/expenses change primarily reflects the writeoff of mine development
costs ($3.6 million) in 1997 and the absence of a 1996 gain on the sale of land
in Corpus Christi, Texas ($4.4 million).
INCOME TAXES - Income taxes increased by $28.4 million to $55.5 million
resulting from higher income before taxes and a higher effective tax rate. The
effective tax rate for 1997 was 32.1% (including Section 29 tax credits of $4.8
million) compared with 31.4% in 1996 (including $3.9 million of Section 29 tax
credits).
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash during the first three months of 1997 was
its cash from operations. Cash outflows included capital expenditures for oil
and gas operations, repayment of commercial paper and dividends. Cash flows
provided by operations for the first quarter of 1997 increased 95% to $422.2
million compared to the $216.0 million cash from operations during the first
quarter 1996. Increased cash operating income from producing properties,
primarily resulting from higher prices, contributed to the increased cash flows
from operations. In addition, favorable working capital changes reflect a
reduction in accounts receivable ($69.4 million) during the first quarter 1997
resulting from the collection of accounts receivable which were recorded at the
end of the prior quarter when prices were higher than the end of the first
quarter 1997. Reductions in other current assets, associated with the Company's
hedging activities ($52.6 million), further contributed to the favorable working
capital change.
Capital and exploratory expenditures for the first three months of 1997 were
$284.0 million, an increase of $145.7 million (105%) compared to the first
three months of 1996. Capital and exploratory expenditures are summarized as
follows:
- 12 -
<PAGE> 15
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1997
------ ------
(Millions of dollars)
<S> <C> <C>
Capital and exploratory expenditures:
Exploration and production . . . . . . . . . . . . . . . . . $ 122.0 $ 247.8
Plants, pipelines and marketing . . . . . . . . . . . . . . 15.9 31.1
Minerals and other . . . . . . . . . . . . . . . . . . . . . .4 5.1
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138.3 $ 284.0
======= =======
</TABLE>
Exploration and production capital spending was up by $125.8 million (103%) as
a result of higher lease acquisition activity of $50.4 million, primarily in
East/South Texas ($36.1 million) and Austin Chalk ($6.1 million). Higher
property acquisitions of $28.1 million, primarily in the Cotton Valley Reef area
in East/South Texas ($16.3 million) and Austin Chalk ($7.0 million) further
contributed to increased spending.
The Company's total debt at March 31, 1997 of $571.3 million compares to
December 31, 1996 total debt of $670.9 million. During the first quarter of
1997, the Company repaid $99.6 million of commercial paper outstanding, all of
which was issued in 1996. Commercial paper was classified as long-term debt
based on the Company's intent and ability to maintain these short-term
borrowings on a long-term basis either through the continued issuance of
commercial paper and/or through new long-term financings, or by using its
currently available bank credit facility.
The Company has a $600 million revolving credit agreement which expires in
August 2001. Borrowings under the agreement, at the Company's election, bear
interest either at a spread over London Interbank Offered Rate or at a spread
over domestic certificate of deposit rates, in each case depending on the
Company's senior debt rating. The Company is required to pay facility fees on
the aggregate amount of the commitment ranging from .06% to .15% also depending
on the Company's senior debt rating. There are no outstanding borrowings under
the revolving credit agreement at March 31, 1997.
The Company has filed a registration statement providing for the issuance, from
time to time, of up to $900 million of common stock, preferred stock,
warranties and debt securities (collectively, the "Securities"), in amounts, at
prices and on terms to be determined by market conditions at the time of each
offering. Currently, no securities have been issued under such registration
statement.
The Company paid a $0.05 per share ($12.5 million) quarterly cash dividend on
its outstanding shares of common stock in January 1997. In addition, on
February 6, 1997 and April 3, 1997, the Board of Directors declared a cash
dividend of $0.05 per share payable in the second and third quarter of 1997,
respectively.
The Company has spent $284.0 million in capital and exploratory expenditures
during the first three months of 1997 and currently expects to spend
approximately $1.0 billion in total capital and exploratory expenditures during
1997. Such capital spending is expected to focus on drilling, lease
acquisitions, gas value chain assets and property purchases. The extent and
timing of such expected spending, however, may be affected by changes in
business and operating conditions as well as by the timing and availability of
investment opportunities. The Company expects to remain one of the most active
drillers in the United States in 1997 based on the number of active drilling
rigs. Drilling is expected to concentrate in the Austin Chalk, Gulf
Onshore/Offshore, West Texas and East/South Texas. The Company also expects to
increase its total annual sales volumes in 1997 by approximately 10% over 1996
levels while increasing its hydrocarbon reserves. This sales volume growth will
be achieved through drilling, property purchases and plant expansion.
- 13 -
<PAGE> 16
This sales volume growth is anticipated primarily in the Austin Chalk, Gulf
Onshore/Offshore and West Texas. The Company will continue to aggressively
pursue acquisition opportunities and expansion of its plants, pipelines and
marketing business. The Company also plans to evaluate international venture
opportunities where its technological expertise and experience can be utilized.
Cash from operations and available financing should adequately enable the
Company to fund its future capital expenditures, dividends and working capital
requirements.
FORWARD LOOKING INFORMATION
Certain information included in this report contains, 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 Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as
amended. Such forward looking statements may be or may concern, among other
things, capital expenditures, drilling activity, acquisitions and dispositions,
development activities, cost savings, production efforts and volumes,
hydrocarbon reserves, hydrocarbon prices, hedging activities and the results
thereof, liquidity, regulatory matters, competition and the Company's ability
to realize significant improvements with the change to a more adaptive
corporate culture. Such forward looking statements generally are accompanied
by words such as "estimate," "expect," "predict," "anticipate," "goal,"
"should," "assume," "believe" or other words that convey the uncertainty of
future events or outcomes.
Such forward looking information is based upon management's current plans,
expectations, estimates and assumptions and is subject to a number of risks and
uncertainties that could significantly affect current plans, anticipated
actions, the timing of such actions and the Company's financial condition and
results of operations. As a consequence, actual results may differ materially
from expectations, estimates or assumptions expressed in or implied by any
forward looking statements made by or on behalf of the Company. The risks and
uncertainties include generally the volatility of oil, gas prices and
hydrocarbon-based financial derivative prices; basis risk and counterparty
credit risk in executing hydrocarbon price risk management activities;
economic, political, judicial and regulatory developments; competition in the
oil and gas industry as well as competition from other sources of energy; the
economics of producing certain reserves; demand and supply of oil and gas; the
ability to find or acquire and develop reserves of natural gas and crude oil;
and the actions of customers and competitors. Additionally, unpredictable or
unknown factors not discussed herein could have material adverse effects on
actual results related to matters which are the subject of forward looking
information. The Company does not intend to update these cautionary
statements.
With respect to expected capital expenditures and drilling activity, additional
factors such as the extent of the Company's success in acquiring oil and gas
properties and in identifying prospects for drilling, the availability of
acquisition opportunities which meet the Company's objectives as well as
competition for such opportunities, exploration and operating risks, the
success of management's cost reduction efforts and the availability of
technology may affect the amount and timing of such capital expenditures and
drilling activity. With respect to expected growth in production and sales
volumes and estimated reserve quantities, factors such as the extent of the
Company's success in finding, developing and producing reserves, the timing of
capital spending and acquisition programs, uncertainties inherent in estimating
reserve quantities and the availability of technology may affect such
production volumes and reserve estimates. With respect to liquidity, factors
such as the state of domestic capital markets, credit availability from banks
or other lenders and the Company's results of operations may affect
management's plans or ability to incur additional indebtedness. With respect
to cash flow, factors such as changes in oil and gas prices, the Company's
success in acquiring producing properties,
- 14 -
<PAGE> 17
environmental matters and other contingencies, hedging activities, the
Company's credit rating and debt levels, and the state of domestic capital
markets may affect the Company's ability to generate expected cash flows. With
respect to contingencies, factors such as changes in environmental and other
governmental regulation, and uncertainties with respect to legal matters may
affect the Company's expectations regarding the potential impact of
contingencies on the operating results or financial condition of the Company.
Certain factors, such as changes in oil and gas prices and underlying demand
and the extent of the Company's success in exploiting its current reserves and
acquiring or finding additional reserves may have pervasive effects on many
aspects of the Company's business in addition to those outlined above.
- 15 -
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1994, the surface owners (McCormick, et al.) of portions of five
sections of Colorado land that are subject to mineral reservations made by the
Company's predecessor in title brought suit against the Company in the state
District Court, Weld County, Colorado, to quiet title to minerals, including
crude oil (in some of the lands) and natural gas. In September 1994, the case
was removed to Federal court (the U. S. District Court for the District of
Colorado), where the Company filed a motion for summary judgment asking the
court to rule as a matter of law that it owns the oil and gas and all minerals
that are part of a severed mineral estate. In February, 1997 the Federal court
remanded the case back to the state court. The Company's motion for summary
judgment is scheduled for hearing in the state court on May 23, 1997. No trial
date currently is set. Similar claims were made under identical mineral
reservations by Utah and Wyoming surface owners in cases litigated in the
Federal courts of Utah and Wyoming between 1979 and 1987. In those cases, the
Federal courts held as a matter of law that, under the laws of Utah and Wyoming,
these mineral reservations unambiguously reserved oil and gas to Union Pacific
Railroad Company and its successors. These holdings were affirmed by the United
States Court of Appeals for the Tenth Circuit. While the Company believes that
the rule of law applied by the Federal courts in Utah and Wyoming also should be
applied under Colorado law, there are Colorado court decisions that could
provide a basis for an alternative interpretation. The value of the disputed
reserves in the properties subject to the lawsuit is estimated to be
approximately $5 million. Approximately 400,000 acres of other lands in Weld
County, Colorado, are subject to mineral reservations that are in the same form
as the reservations at issue in the present suit. An adverse interpretation of
the reservations at issue is likely to implicate the mineral title in these
other lands as well. In addition, over two million acres of lands elsewhere in
Colorado are subject to the same forms of mineral reservations. Depending on
the grounds of an adverse decision in the case, title to minerals held by the
Company in some or all of these lands also could be affected, which might have
the effect of significantly reducing the Company's interest in the Las Animas
area of southeastern Colorado and the Denver-Julesburg Basin in eastern
Colorado.
The Company is a defendant in three suits now pending in Fayette County (filed
August 1995, 155th District Court), Lee County (filed August 1995, 235th
District Court) and Harris County (filed August 1995, transferred from Calhoun
County to 11th District Court), Texas, in which the plaintiffs allege that the
Company underpaid their royalties for crude oil production in Texas.
Plaintiffs seek certification as a class action in each suit. Plaintiffs
include the Texas General Land Office in the Fayette County suit, Lee County in
the Lee County suit, and Martin, et al., in the Harris County suit. Generally,
the allegations are premised upon plaintiffs' theory that the defendants
(including the Company) use "posted prices" to determine the amounts payable as
royalties for crude oil production. Plaintiffs allege that the defendants "set"
these posted prices, that posted prices are consistently below "market value,"
and that this practice has resulted in the underpayment of royalties to
plaintiffs. In addition to the allegations couched in terms of breaches of
contract and/or implied covenants, the Lee County case also alleges that the
Company has engaged (and conspired WITH others) in discriminatory practices in
the sales of crude oil in violation of numerous state statutes. Further, the
Harris County case: (i) adds claims with respect to natural gas, including
claims that the Company discriminated against plaintiffs in the sale of natural
gas and natural gas liquids, in the deductions for transportation and other
services and in the prices used to account to the plaintiffs for their
royalties; and (ii) adds claims (regarding both crude and gas) for alleged
breaches of alleged fiduciary duties and intentional misrepresentation.
The Company is also one of the defendants in an antitrust suit filed in
September 1996 in state court, (the Circuit Court of Escambia County, Alabama)
against a number of crude oil producers alleging that the use of posted prices
by defendants to pay royalties on crude oil produced in the United States
arises from a combination, conspiracy or agreement designed to fix, depress and
maintain such crude prices at artificially low levels. The plaintiffs
(Lovelace, et al.) allege that such practices violate the Alabama antitrust
laws and the antitrust laws of every other state.
- 16 -
<PAGE> 19
The plaintiffs obtained, on an ex parte basis, a "conditional" certification of
a class consisting of all working and royalty interest owners of crude oil
produced in the United States since 1986 who have been paid by defendants based
on posted prices. The suit was removed to Federal court on October 17, 1996,
but then was remanded back to the state court on April 1, 1997. Defendants have
filed a motion to vacate the conditional class certification order and all
parties anticipate a full hearing on the class certification issue. The date
of such hearing, as well as the timing and scope of anticipated motions to
dismiss and discovery, are presently under consideration by the Court as part
of a case scheduling order.
Union Pacific Corporation has been named as a defendant in a suit brought in
state District Court, Salt Lake County, Utah in March 1996. Though not named in
the suit, the Company believes that it may ultimately be named as a defendant in
place of Union Pacific Corporation. Plaintiffs (Burton, et al.) allege that the
defendants have underpaid royalty or overriding royalty payments on crude oil
and condensate. The claims are similar to those in the Texas cases described
above. Plaintiffs argue that posted prices are less than the "best and highest
prices reasonably available and less than the full fair market value received
by defendants" for the crude oil upon which the royalties are paid to
plaintiffs. Like the Texas cases, the plaintiffs seek certification of a
plaintiff class, which in this case is a class defined as "all persons to whom
Defendants have underpaid royalty or overriding royalty payments on crude oil
during the period January 1, 1986 to the present."
None of these suits described above articulate a theory of recovery or a
specific amount of damages. This litigation activity against the Company and
others in the oil and gas industry suggests that more suits of this type may be
filed against the Company including, perhaps, suits by other types of interest
owners and suits in jurisdictions other than those set forth above. The
Company intends to defend vigorously against the foregoing, as well as any
similar suits. If such suits ultimately are resolved against the Company on a
widespread basis, however, damage awards and a loss of future revenue could
result which, in the aggregate, could be materially adverse to the Company.
The Company is a defendant in a number of lawsuits and is involved in
governmental proceedings arising in the ordinary course of business in addition
to those described above, including contract claims, personal injury claims and
environmental claims. While the Company cannot predict the outcome of such
litigation and other proceedings, it does not expect those matters to have a
materially adverse effect on its results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1997, the Annual Meeting of the Shareholders of the Company was held
in Fort Worth, Texas for the purpose of electing a Board of Directors and voting
on the proposals described below. There was no solicitation in opposition to
management's nominees for director as listed in the proxy statement.
Each of the directors nominated by the Board (which number constitutes the
entire Board of the Company) and listed in the proxy statement was elected with
the votes as follows:
- 17 -
<PAGE> 20
<TABLE>
<CAPTION>
Nominee Shares For Shares Withheld
------- ------------ ---------------
<S> <C> <C>
H. Jesse Arnelle 215,274,901 641,488
Lynne V. Cheney 215,279,315 637,074
Preston M. Geren III 215,324,010 592,379
Lawrence M. Jones 215,326,404 589,985
Drew Lewis 214,987,441 928,948
Claudine B. Malone 215,275,927 640,462
Jack L. Messman 215,310,131 606,258
John W. Poduska, Sr., Ph.D. 215,321,898 594,491
Samuel K. Skinner 215,300,025 616,364
James R. Thompson 215,303,731 612,658
</TABLE>
The Company's 1995 Stock Option and Retention Stock Plan, as amended and
restated, which was originally adopted in September 1995 and provides for the
grant of non-qualified stock options, incentive stock options, stock
appreciation rights and awards of retention stock, was approved by the
following vote: 204,603,335 shares for; 9,950,887 shares against; and 1,362,166
shares abstaining. The amendments would allow the Company's officers to
transfer stock options to members of their immediate families and would exclude
Rollover Options and Rollover Retention Stock from the calculation of the 10%
limitation applicable to the grant of stock options and awards of Retention
Stock to individual participants.
The Company's Executive Incentive Plan, as amended and restated, was approved by
the following vote: 209,438,906 shares for; 4,868,704 shares against; and
1,608,778 shares abstaining. The Executive Incentive Plan, is a bonus program
designed to tie executive pay specifically to Company performance and to provide
supplementary annual cash compensation to the Company's key employees in order
to motivate and retain them and to assist the Company in attaining its financial
and strategic objectives.
Amendments to the Executive Incentive Plan would apply to three features:
(1) the timing of participant deferral elections; (2) the application of
specific percentage limitations with respect to awards to certain executives,
and (3) the Compensation and Corporate Governance Committee's right to
accelerate the payment of deferral awards in cases of undue hardship.
The Company's 1995 Directors Stock Option Plan, as amended and restated, would
(1) increase the number of authorized shares from 200,000 to 1,000,000;
(2) substantially change the manner in which options are granted and become
exercisable; and (3) allow for the transfer of options to immediate family
members, was approved with the following vote: 191,589,407 shares for;
22,198,971 share against; and 2,128,010 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 1995 Stock Option and Retention Stock Plan, as amended and restated
(June 1, 1997)
10.2 Executive Incentive Plan, as amended and restated (June 1, 1997)
10.3 1995 Directors Stock Option Plan, as amended and restated (March 5, 1997)
10.4 Deferred Compensation Plan for the Board of Directors, as amended and
restated (June 1, 1997)
11 Computation of earnings per share
12 Computation of ratio of earnings to fixed charges
- 18 -
<PAGE> 21
15 Awareness letter of Deloitte & Touche LLP dated as of May 14, 1997
27 Financial data schedule
(b) REPORTS ON FORM 8-K
None
- 19 -
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1997
UNION PACIFIC RESOURCES GROUP INC.
(Registrant)
/s/ Morris B. Smith
----------------------------------
Morris B. Smith,
Vice President and Chief Financial
Officer
(Chief Financial Officer and
Duly Authorized Officer)
- 20 -
<PAGE> 23
UNION PACIFIC RESOURCES GROUP INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 1995 Stock Option and Retention Stock Plan, as amended and
restated (June 1, 1997)
10.2 Executive Incentive Plan, as amended and restated
(June 1, 1997)
10.3 1995 Directors Stock Option Plan, as amended and restated
(March 5, 1997)
10.4 Deferred Compensation Plan for the Board of Directors, as
amended and restated (June 1, 1997)
11 Computation of earnings per share
12 Computation of ratio of earnings to fixed charges
15 Awareness letter of Deloitte & Touche LLP dated as of
May 14, 1997
27 Financial data schedule
</TABLE>
<PAGE> 1
Exhibit 10.1
1995 STOCK OPTION AND RETENTION STOCK PLAN
OF UNION PACIFIC RESOURCES GROUP INC.
(AS AMENDED AND RESTATED EFFECTIVE JUNE 1, 1997)
================================================================================
1. PURPOSE
This 1995 Stock Option and Retention Stock Plan of Union Pacific Resources
Group Inc. is to promote and closely align the interests of officers and
employees with those of the shareholders of Union Pacific Resources Group Inc.
by providing stock based compensation. The Plan is intended to strengthen
Union Pacific Resources Group Inc.'s ability to reward performance which
enhances long term shareholder value; to increase employee stock ownership
through performance based compensation plans; and to strengthen the company's
ability to attract and retain an outstanding employee and executive team.
================================================================================
2. DEFINITIONS
The following terms shall have the following meanings:
"Act" means the Securities Exchange Act of 1934, as amended.
"Approved Leave of Absence" means a leave of absence of definite
length approved by the Vice President - People of the Company, or by any other
officer of the Company to whom the Committee delegates such authority.
"Award" means an award of Retention Shares pursuant to the Plan.
"Beneficiary" means any person or persons designated in writing by a
Participant to the Committee on a form prescribed by it for that purpose, which
designation shall be revocable at any time by the Participant prior to his or
her death, provided that, in the absence of such a designation or the failure
of the person or persons so designated to survive the Participant,
"Beneficiary" shall mean such Participant's estate; and further provided that
no designation of Beneficiary shall be effective unless it is received by the
Company before the Participant's death.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, or the
corresponding provisions of any successor statute.
<PAGE> 2
"Committee" means the Committee designated by the Board to administer
the Plan pursuant to Section 3.
"Common Stock" means the Common Stock of the Company.
"Company" means Union Pacific Resources Group Inc., a Utah
corporation, or any successor corporation.
"Option" means each non-qualified stock option, incentive stock option
and stock appreciation right granted under the Plan, including a Rollover
Option.
"Optionee" means the Chairman of the Board or any employee of the
Company or a Subsidiary (including directors who are also such employees) who
is granted an Option under the Plan.
"Participant" means the Chairman of the Board or any employee of the
Company or a Subsidiary (including directors who are also such employees) who
is granted an Award under the Plan.
"Plan" means this 1995 Stock Option and Retention Stock Plan of Union
Pacific Resources Group Inc., as amended from time to time.
"Retention Shares" means shares of Common Stock subject to an Award
granted under the Plan, including Rollover Retention Shares.
"Restriction Period" means the period defined in Section 9(a).
"Rollover Option" means an Option granted under the Plan in exchange
for UPC Stock Options.
"Rollover Retention Shares" means shares of Common Stock subject to an
Award granted under the Plan in exchange for UPC Retention Shares.
"Subsidiary" means any corporation, partnership, or limited liability
company of which the Company owns directly or indirectly at least a majority of
the outstanding shares of voting stock or other voting interest.
"UPC" means Union Pacific Corporation, a Utah corporation.
"UPC Plans" mean the 1993 Stock Option and Retention Stock Plan of
Union Pacific Corporation, the 1990 Retention Stock Plan of Union Pacific
Corporation, the 1988 Stock Option and Restricted Stock Plan of Union Pacific
Corporation and the 1982 Stock Option and Restricted Stock Plan of Union
Pacific Corporation.
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"UPC Stock Option" means any option granted under any UPC Plan.
"UPC Retention Shares" means shares of common stock of UPC granted and
subject to restrictions under the UPC Plans.
"Vesting Condition" means any condition to the vesting of Retention
Shares established by the Committee pursuant to Section 9.
================================================================================
3. ADMINISTRATION
The Plan shall be administered by the Committee which shall comprise not less
than three persons, who shall be members of the Board, none of whom shall be
employees of the Company or any Subsidiary. Any actions taken with respect to
a "covered employee" within the meaning of Code section 162(m) shall be taken
by two or more "outside directors" as required by Code section 162(m). The
Committee shall (i) grant Options to Optionees and make Awards of Retention
Shares to Participants, and (ii) determine the terms and conditions of such
Options and Awards of Retention Shares, all in accordance with the provisions
of the Plan. The Committee shall have full authority to construe and interpret
the Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to administer the Plan, and to take all such steps and make all such
determinations in connection with the Plan and Options and Awards granted
thereunder as it may deem necessary or advisable. The Committee may delegate
its authority under the Plan to one or more officers or employees of the
Company or a Subsidiary, provided, however, that no delegation shall be made of
authority to take an action which is required by Rule 16b-3 promulgated under
the Act to be taken by "non-employee directors" in order that the Plan and
transactions thereunder meet the requirements of such Rule. Each Option and
grant of Retention Shares shall, if required by the Committee, be evidenced by
an agreement to be executed by the Company and the Optionee or Participant,
respectively, and contain provisions not inconsistent with the Plan. All
determinations of the Committee shall be by a majority of its members and shall
be evidenced by resolution, written consent or other appropriate action, and
the Committee's determinations shall be final. Each member of the Committee,
while serving as such, shall be considered to be acting in his or her capacity
as a director of the Company.
================================================================================
4. ELIGIBILITY
To be eligible for selection by the Committee to participate in the Plan an
individual must be an employee of the Company or a Subsidiary, provided, that
the Chairman of the Board shall be eligible to receive Rollover Options.
Directors other than the Chairman of the Board who
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<PAGE> 4
are not full-time salaried employees shall not be eligible. In granting
Options or Awards of Retention Shares to eligible persons, the Committee shall
take into account their duties, their present and potential contributions to
the success of the Company or a Subsidiary, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purpose of
the Plan.
================================================================================
5. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 11 hereof, the maximum number and kind of
shares as to which Options or Retention Shares may at any time be granted under
the Plan are 16 million shares of Common Stock. No Participant may receive
Options (excluding Rollover Options) or Awards (excluding Rollover Retention
Shares) aggregating more than 10% of the shares of Common Stock available under
the Plan. Shares of Common Stock subject to Options or Awards under the Plan
may be either authorized but unissued shares or shares previously issued and
reacquired by the Company. Upon the expiration, termination or cancellation (in
whole or in part) of unexercised Options, shares of Common Stock subject
thereto shall again be available for option or grant as Retention Shares under
the Plan. Shares of Common Stock covered by an Option, or portion thereof,
which is surrendered upon the exercise of a stock appreciation right, shall
thereafter be unavailable for option or grant as Retention Shares under the
Plan. Upon the forfeiture (in whole or in part) of a grant of Retention
Shares, the shares of Common Stock subject to such forfeiture shall again be
available for option or grant as Retention Shares under the Plan if no
dividends have been paid on the forfeited shares, and otherwise shall be
unavailable for such an option or grant.
================================================================================
6. TERMS AND CONDITIONS OF NON-QUALIFIED OPTIONS
All non-qualified options under the Plan shall be granted subject to the
following terms and conditions:
(a) OPTION PRICE. The option price per share with respect to each
option, other than Rollover Options, shall be determined by the Committee but
shall not be less than 100% of the fair market value of the Common Stock on the
date the option is granted, such fair market value to be determined in
accordance with the procedures to be established by the Committee. Rollover
Options shall each have an option price per share determined by the Committee,
provided that, unless the Committee determines otherwise in a specific case,
the aggregate gain or loss, as determined by the Committee, implicit in the
Rollover Options granted to each Optionee shall be equal to the aggregate gain
or loss implicit in the UPC Stock Options surrendered in exchange for such
Rollover Options.
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<PAGE> 5
(b) DURATION OF OPTIONS. Options shall be exercisable at such
time or times and under such conditions as set forth in the written agreement
evidencing such option, but in no event shall any option be exercisable
subsequent to the tenth anniversary of the date on which the option is granted
or, in the case of Rollover Options, of the date of grant of the UPC Stock
Option for which such Rollover Option was exchanged.
(c) EXERCISE OF OPTION. Except as provided in Section 6(h), 6(i)
or 8(c), the shares of Common Stock covered by an option may not be purchased
prior to the first anniversary of the date on which the option is granted or,
in the case of Rollover Options, prior to the date of exercise of the UPC Stock
Option for which such Rollover Option was exchanged (unless the Committee shall
determine otherwise), or such longer period or periods, and subject to such
conditions, as the Committee may determine, but thereafter may be purchased at
one time or in such installments over the balance of the option period as may
be provided in the option, provided, however, that no option (other than
Rollover Options) shall be exercisable before the earlier of (i) December 31,
1997, or (ii) one year after UPC no longer owns at least 50% of the voting
power of all shares of the Company entitled to vote generally in the election
of directors. Any shares not purchased on the applicable installment date may,
unless the Committee shall have determined otherwise, be purchased thereafter
at any time prior to the final expiration of the option. To the extent that
the right to purchase shares has accrued thereunder, options may be exercised
from time to time by written notice to the Company stating the number of shares
with respect to which the option is being exercised.
(d) PAYMENT. Shares of Common Stock purchased under options
shall, at the time of purchase, be paid for in full. All, or any portion, of
the option exercise price may, at the discretion of the Committee, be paid by
the surrender to the Company, at the time of exercise, of shares of previously
acquired Common Stock owned by the Optionee, to the extent that such payment
does not require the surrender of a fractional share of such previously
acquired Common Stock. In addition, to the extent permitted by the Committee,
the option exercise price may be paid by authorizing the Company to withhold
Common Stock otherwise issuable on exercise of the option. Such shares
previously acquired or shares withheld to pay the option exercise price shall
be valued at fair market value on the date the option is exercised in
accordance with the procedures to be established by the Committee. A holder of
an option shall have none of the rights of a stockholder until the shares of
Common Stock are issued to him or her. If an amount is payable by an Optionee
to the Company or a Subsidiary under applicable withholding tax laws in
connection with the exercise of non- qualified options, the Committee may, in
its discretion and subject to such rules as it may adopt, permit the Optionee
to make such payment, in whole or in part, by electing to authorize the Company
to withhold or accept shares of Common Stock having a fair market value equal
to the amount to be paid under such withholding tax laws.
(e) RESTRICTIONS. The Committee shall determine, with respect to
each option, the nature and extent of the restrictions, if any, to be imposed
on the shares of Common Stock which may be purchased thereunder including
restrictions on the transferability of such shares
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<PAGE> 6
acquired through the exercise of such option. Without limiting the generality
of the foregoing, the Committee may impose conditions restricting absolutely or
conditionally the transferability of shares acquired through the exercise of
options for such periods, and subject to such conditions, including continued
employment of the Optionee by the Company or a Subsidiary, as the Committee may
determine.
(f) PURCHASE FOR INVESTMENT. The Committee shall have the right
to require that each Optionee or other person who shall exercise an option
under the Plan represent and agree that any shares of Common Stock purchased
pursuant to such option will be purchased for investment and not with a view to
the distribution or resale thereof or that such shares will not be sold except
in accordance with such restrictions or limitations as may be set forth in the
written agreement granting such option.
(g) NON-TRANSFERABILITY OF OPTIONS. During an Optionee's
lifetime, the option may be exercised only by the Optionee. Options shall not
be transferable, except for exercise by the Optionee's legal representatives or
heirs. An officer of the Company may, with prior approval from the Committee
(or its designee) as to form, transfer an exercisable non-qualified Option or
Rollover Option to (a) a member or members of the officer's immediate family
(spouse, children and grandchildren, including step and adopted children and
grandchildren), (b) a trust, the beneficiaries of which consist exclusively of
members of the officer's immediate family, (c) a partnership, the partners of
which consist exclusively of members of the officer's immediate family, or (d)
any similar entity created for the exclusive benefit of members of the
officer's immediate family. The Committee or its designee must approve the
form of any transfer of a Grant to or for the benefit of any immediate family
member or members before such transfer shall be recognized as valid hereunder.
For purposes of the preceding sentence, any remote, contingent interest of
persons other than a member of the officer's immediate family shall be
disregarded. For purposes of this Section 6(g), the term "officer" shall have
the same meaning as that term is defined in Rule 16a-1(f) of the Act. A
person's status as an officer shall be determined at the time of the intended
transfer.
(h) TERMINATION OF EMPLOYMENT. Upon the termination of an
Optionee's employment, for any reason other than death, the option shall be
exercisable only as to those shares of Common Stock which were then subject to
the exercise of such option, provided that (I) in the case of disability as
described below, any holding period required by Section 6(c) shall
automatically be deemed to be satisfied and (II) the Committee may determine
that particular limitations and restrictions under the Plan shall not apply,
and such option shall expire according to the following schedule (unless the
Committee shall provide for shorter periods at the time the option is granted):
(i) RETIREMENT. Option shall expire, unless exercised, five
(5) years after the Optionee's retirement from the Company or any
Subsidiary under the provisions of the Company's or a Subsidiary's
pension plan.
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<PAGE> 7
(ii) DISABILITY. Option shall expire, unless exercised, five
(5) years after the date the Optionee is eligible to receive
disability benefits under the provisions of the Company's or a
Subsidiary's long-term disability plan.
(iii) GROSS MISCONDUCT. Option shall expire upon receipt by
the Optionee of the notice of termination if he or she is terminated
for deliberate, willful or gross misconduct as determined by the
Company.
(iv) ALL OTHER TERMINATIONS. Option shall expire, unless
exercised, three (3) months after the date of such termination.
(i) DEATH OF OPTIONEE. Upon the death of an Optionee during his
or her period of employment, the option shall be exercisable only as to those
shares of Common Stock which were subject to the exercise of such option at the
time of his or her death, provided that (I) any holding period required by
Section 6(c) shall automatically be deemed to be satisfied and (II) the
Committee may determine that particular limitations and restrictions under the
Plan shall not apply, and such option shall expire, unless exercised by the
Optionee's legal representatives or heirs, five (5) years after the date of
death (unless the Committee shall provide for a shorter period at the time the
option is granted).
In no event, however, shall any option be exercisable pursuant
to Sections 6(h) or (i) subsequent to the tenth anniversary of the date on
which it is granted or, in the case of a Rollover Option, of the date of grant
of the UPC Stock Option(s) for which such Rollover Option was exchanged.
(j) ROLLOVER OPTIONS. Rollover Options may be granted only in
exchange for UPC Stock Options and only during the period prior to 90 days
after UPC no longer owns at least 50% of the voting power of all of the shares
of the Company entitled to vote generally in the election of directors. The
ratio for such exchange shall be determined by the Committee, provided that the
requirements of Section 6(a) are met.
================================================================================
7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
(a) GENERAL. The Committee may also grant a stock appreciation
right in connection with a non-qualified option, either at the time of grant or
by amendment. Such stock appreciation right shall cover the same shares
covered by such option (or such lesser number of shares of Common Stock as the
Committee may determine) and shall, except for the provisions of Section 6(d)
hereof, be subject to the same terms and conditions as the related
non-qualified option.
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<PAGE> 8
(b) EXERCISE AND PAYMENT. Each stock appreciation right shall
entitle the Optionee to surrender to the Company unexercised the related
option, or any portion thereof, and to receive from the Company in exchange
therefor an amount equal to the excess of the fair market value of one share of
Common Stock over the option price per share times the number of shares covered
by the option, or portion thereof, which is surrendered. Payment shall be made
in shares of Common Stock valued at fair market value, or in cash, or partly in
shares and partly in cash, all as shall be determined by the Committee. The
fair market value shall be the value determined in accordance with procedures
established by the Committee. Stock appreciation rights may be exercised from
time to time upon actual receipt by the Company of written notice stating the
number of shares of Common Stock with respect to which the stock appreciation
right is being exercised, provided that if a stock appreciation right expires
unexercised, it shall be deemed exercised on the expiration date if any amount
would be payable with respect thereto. No fractional shares shall be issued
but instead cash shall be paid for a fraction or, if the Committee should so
determine, the number of shares shall be rounded downward to the next whole
share. If an amount is payable by an Optionee to the Company or a Subsidiary
under applicable withholding tax laws in connection with the exercise of stock
appreciation rights, the Committee may, in its discretion and subject to such
rules as it may adopt, permit the Optionee to make such payment, in whole or in
part, by electing to authorize the Company to withhold or accept shares of
Common Stock having a fair market value equal to the amount to be paid under
such withholding tax laws.
(c) RESTRICTIONS. The obligation of the Company to satisfy any
stock appreciation right exercised by an Optionee subject to Section 16 of the
Act shall be conditioned upon the prior receipt by the Company of an opinion of
counsel to the Company that any such satisfaction will not create an obligation
on the part of such Optionee pursuant to Section 16(b) of the Act to reimburse
the Company for any statutory profit which might be held to result from such
satisfaction.
================================================================================
8. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
(a) GENERAL. The Committee may also grant incentive stock options
as defined under section 422 of the Code. All incentive stock options issued
under the Plan shall, except for the provisions of Sections 6(g) (to the extent
it allows the Committee to permit options to be transferred to, or for the
benefit of, the Optionee's immediate family members), 6(h) and (i) and Section
7 hereof, be subject to the same terms and conditions as the non-qualified
options granted under the Plan, and may be Rollover Options subject to Section
6(j) hereof; provided, however, that no incentive stock option which is a
Rollover Option shall confer additional benefits (within the meaning of section
424(h)(3) of the Code) upon the Optionee which the Optionee did not have under
the UPC Stock Option surrendered in exchange therefor. In addition, incentive
stock options shall be subject to the conditions of Sections 8(b), (c), (d) and
(e).
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<PAGE> 9
(b) LIMITATION OF EXERCISE. The aggregate fair market value
(determined as of the date the incentive stock option is granted) of the shares
of stock with respect to which incentive stock options are exercisable for the
first time by such Optionee during any calendar year, under this Plan or any
other stock option plans adopted by the Company, its Subsidiaries or any
predecessor companies thereof, other than Rollover Options issued in exchange
for UPC Options which were exercisable by the Optionee at the time of exchange,
shall not exceed $100,000. If any incentive stock options become exercisable
in any year in excess of the $100,000 limitation, options representing such
excess shall become non-qualified options exercisable pursuant to the terms of
Section 6 hereof and shall not be exercisable as incentive stock options.
(c) TERMINATION OF EMPLOYMENT. Upon the termination of an
Optionee's employment, for any reason other than death, his or her incentive
stock option shall be exercisable only as to those shares of Common Stock which
were then subject to the exercise of such option provided that (I) in the case
of disability as described below, any holding period required by Section 6(c)
shall automatically be deemed to be satisfied and (II) the Committee may
determine that particular limitations and restrictions under the Plan shall not
apply, and such option shall expire as an incentive stock option (but shall
become a non-qualified option exercisable pursuant to the terms of Section 6
hereof less the period already elapsed under such Section), according to the
following schedule (unless the Committee shall provide for shorter periods at
the time the incentive stock option is granted):
(i) RETIREMENT. An incentive stock option shall expire,
unless exercised, three (3) months after the Optionee's retirement
from the Company or any Subsidiary under the provisions of the
Company's or a Subsidiary's pension plan.
(ii) DISABILITY. In the case of an Optionee who is disabled
within the meaning of section 22(e)(3) of the Code, an incentive stock
option shall expire, unless exercised, one (1) year after the earlier
of the date the Optionee terminates employment or the date the
Optionee is eligible to receive disability benefits under the
provisions of the Company's or a Subsidiary's long-term disability
plan.
(iii) GROSS MISCONDUCT. An incentive stock option shall
expire upon receipt by the Optionee of the notice of termination if he
or she is terminated for deliberate, willful or gross misconduct as
determined by the Company.
(iv) ALL OTHER TERMINATIONS. An incentive stock option shall
expire, unless exercised, three (3) months after the date of such
termination.
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<PAGE> 10
(d) DEATH OF OPTIONEE. Upon the death of an Optionee during his
or her period of employment, the incentive stock option shall be exercisable as
an incentive stock option only as to those shares of Common Stock which were
subject to the exercise of such option at the time of death, provided that (I)
any holding period required by Section 6(c) shall automatically be deemed to be
satisfied, and (II) the Committee may determine that particular limitations and
restrictions under the Plan shall not apply, and such option shall expire,
unless exercised by the Optionee's legal representatives or heirs, five (5)
years after the date of death (unless the Committee shall provide for a shorter
period at the time the option is granted).
(e) LEAVE OF ABSENCE. A leave of absence, whether or not an
Approved Leave of Absence, shall be deemed a termination of employment for
purposes of Section 8.
In no event, however, shall any incentive stock option be
exercisable pursuant to Sections 8(c) or (d) subsequent to the tenth
anniversary of the date on which it was granted or, in the case of a Rollover
Option, of the date of grant of the UPC Stock Option(s) for which such Rollover
Option was exchanged.
================================================================================
9. TERMS AND CONDITIONS OF AWARDS OF RETENTION STOCK
(a) GENERAL. Retention Shares (other than Rollover Retention
Shares) may be granted to reward the attainment of individual, Company or
Subsidiary goals, or to attract or retain officers or other employees of the
Company or any Subsidiary. With respect to each grant of Retention Shares
under the Plan, the Committee shall determine the period or periods, including
any conditions for determining such period or periods, during which the
restrictions set forth in Section 9(b) shall apply, provided that in no event,
other than as provided in Section 9(c), shall such restrictions terminate prior
to 1 year after the date of grant, except for Rollover Retention Shares, in
which case such restrictions shall not terminate prior to 3 years after the
date of grant of the UPC Retention Shares for which such Rollover Retention
Shares are exchanged (the "Restriction Period"), and may also specify any other
terms or conditions to the right of the Participant to receive such Retention
Shares ("Vesting Conditions"). Subject to Section 9(c) and any such Vesting
Condition, a grant of Retention Shares shall be effective for the Restriction
Period and may not be revoked.
(b) RESTRICTIONS. At the time of grant of Retention Shares to a
Participant, a certificate representing the number of shares of Common Stock
granted shall be registered in the Participant's name but shall be held by the
Company for his or her account. The Participant shall have the entire
beneficial ownership interest in, and all rights and privileges of a
stockholder as to, such Retention Shares, including the right to vote such
Retention Shares and, unless the Committee shall determine otherwise, the right
to receive dividends thereon, subject to the following: (i) subject to Section
9(c), the Participant shall not be entitled to
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<PAGE> 11
delivery of the stock certificate until the expiration of the Restriction
Period and the satisfaction of any Vesting Conditions; (ii) none of the
Retention Shares may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restriction Period or prior to the
satisfaction of any Vesting Conditions; and (iii) all of the Retention Shares
shall be forfeited and all rights of the Participant to such Retention Shares
shall terminate without further obligation on the part of the Company unless
the Participant remains in the continuous employment of the Company or a
Subsidiary for the entire Restriction Period, except as provided by Sections
9(a) and 9(c), and any applicable Vesting Conditions have been satisfied. Any
shares of Common Stock or other securities or property received as a result of
a transaction listed in Section 11 shall be subject to the same restrictions as
such Retention Shares unless the Committee shall determine otherwise.
(c) TERMINATION OF EMPLOYMENT.
(i) DISABILITY AND RETIREMENT. Unless the Committee shall
determine otherwise at the time of grant of Retention Shares, if (A) a
Participant ceases to be an employee of the Company or a Subsidiary
prior to the end of a Restriction Period, by reason of disability
under the provisions of the Company's or a Subsidiary's long- term
disability plan or retirement under the provisions of the Company's or
a Subsidiary's pension plan either (i) at age 65 or (ii) prior to age
65 at the request of the Company or a Subsidiary, and (B) all Vesting
Conditions have been satisfied, the Retention Shares granted to such
Participant shall immediately vest and all restrictions applicable to
such shares shall lapse. A certificate for such shares shall be
delivered to the Participant in accordance with the provisions of
Section 9(d).
(ii) DEATH. Unless the Committee shall determine otherwise
at the time of grant of Retention Shares, if (A) a Participant ceases
to be an employee of the Company or a Subsidiary prior to the end of a
Restriction Period by reason of death, and (B) all Vesting Conditions
have been satisfied, the Retention Shares granted to such Participant
shall immediately vest in his or her Beneficiary, and all restrictions
applicable to such shares shall lapse. A certificate for such shares
shall be delivered to the Participant's Beneficiary in accordance with
the provisions of Section 9(d).
(iii) ALL OTHER TERMINATIONS. If a Participant ceases to be
an employee of the Company or a Subsidiary prior to the end of a
Restriction Period for any reason other than death, disability or
retirement as provided in Section 9(c)(i) and (ii), the Participant
shall immediately forfeit all Retention Shares then subject to the
restrictions of Section 9(b) in accordance with the provisions
thereof, except that the Committee may, if it finds that the
circumstances in the particular case so warrant, allow a Participant
whose employment has so terminated to retain any or all of the
Retention Shares then subject to the restrictions of Section 9(b) and
all restrictions applicable to such retained shares shall lapse. A
certificate for such retained shares shall be delivered to the
Participant in accordance with the provisions of Section 9(d).
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<PAGE> 12
(iv) VESTING CONDITIONS. Unless the Committee shall
determine otherwise at the time of grant of Retention Shares, if a
Participant ceases to be an employee of the Company or a Subsidiary
for any reason prior to the satisfaction of any Vesting Conditions,
the Participant shall immediately forfeit all Retention Shares then
subject to the restrictions of Section 9(b) in accordance with the
provisions thereof, except that the Committee may, if it finds that
the circumstances in the particular case so warrant, allow a
Participant whose employment has so terminated to retain any or all of
the Retention Shares then subject to the restrictions of Section 9(b)
and all restrictions applicable to such retained shares shall lapse.
A certificate for such retained shares shall be delivered to the
Participant in accordance with the provisions of Section 9(d).
(d) PAYMENT OF RETENTION SHARES. At the end of the Restriction
Period and after all Vesting Conditions have been satisfied, or at such earlier
time as provided for in Section 9(c) or as the Committee, in its sole
discretion, may otherwise determine, all restrictions applicable to the
Retention Shares shall lapse, and a stock certificate for a number of shares of
Common Stock equal to the number of Retention Shares, free of all restrictions,
shall be delivered to the Participant or his or her Beneficiary, as the case
may be. If an amount is payable by a Participant to the Company or a
Subsidiary under applicable withholding tax laws in connection with the lapse
of such restrictions, the Committee, in its sole discretion, may permit the
Participant to make such payment, in whole or in part, by authorizing the
Company to transfer to the Company Retention Shares otherwise deliverable to
the Participant having a fair market value equal to the amount to be paid under
such withholding tax laws.
(e) ROLLOVER RETENTION SHARES. Rollover Retention Shares may be
granted only in exchange for shares of UPC Retention Stock granted and subject
to restrictions under a UPC Plan and only during the period prior to 90 days
after UPC no longer owns at least 50% of the voting power of all of the shares
of the Company entitled to vote generally in the election of directors. Unless
the Committee shall determine otherwise in a specific case, the Rollover
Retention Shares shall, on the date of exchange, have the same value, as
determined by the Committee, as the shares of UPC surrendered in exchange for
such Rollover Retention Shares.
================================================================================
10. REGULATORY APPROVALS AND LISTING
The Company shall not be required to issue to an Optionee, Participant or a
Beneficiary, as the case may be, any certificate for any shares of Common Stock
upon exercise of an option or for any Retention Shares granted under the Plan
prior to (i) the obtaining of any approval from any governmental agency which
the Company, in its sole discretion, shall determine to be necessary or
advisable, (ii) the admission of such shares to listing on any stock exchange
on which the Common Stock may then be listed, and (iii) the completion of any
registration or other qualification of such shares under any state or Federal
law or rulings or regulations of any governmental body which the Company, in
its sole discretion, shall determine to be necessary or advisable.
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<PAGE> 13
================================================================================
11. ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
In the event of a recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation, rights offering, separation,
spin-off, reorganization or liquidation, or any other change in the corporate
structure or shares of the Company, the Board, upon recommendation of the
Committee, may make such equitable adjustments as it may deem appropriate in
the number and kind of shares authorized by the Plan, in the option price of
outstanding Options, and in the number and kind of shares or other securities
or property subject to Options or covered by outstanding Awards.
================================================================================
12. TERM OF THE PLAN
No Options or Retention Shares shall be granted pursuant to the Plan after
September 27, 2005 but grants of Options and Retention Shares theretofore
granted may extend beyond that date and the terms and conditions of the Plan
shall continue to apply thereto.
================================================================================
13. TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time terminate the Plan with respect to any shares of
Common Stock not at that time subject to outstanding Options or Awards, and may
from time to time alter or amend the Plan or any part thereof (including, but
without limiting the generality of the foregoing, any amendment deemed
necessary to ensure that the Company may obtain any approval referred to in
Section 10 or to ensure that the grant of Options or Awards, the exercise of
Options or payment of Retention Shares or any other provision or the Plan
complies with Section 16(b) of the Act), provided that no change with respect
to any Options or Retention Shares theretofore granted may be made which would
impair the rights of an Optionee or Participant without the consent of such
Optionee or Participant and, further, that without the approval of
stockholders, no alteration or amendment may be made which would (i) increase
the maximum number of shares of Common Stock subject to the Plan as set forth
in Section 5 (except by operation of Section 11), (ii) extend the term of the
Plan, (iii) change the class of eligible persons who may receive Options or
Awards of Retention Shares under the Plan or (iv) increase the limitation set
forth in Section 5 on the maximum number of shares that any Participant may
receive under the Plan.
- 13 -
<PAGE> 14
================================================================================
14. LEAVE OF ABSENCE
Unless the Committee shall determine otherwise, a leave of absence other than
an Approved Leave of Absence shall be deemed a termination of employment for
purposes of the Plan. An Approved Leave of Absence shall not be deemed a
termination of employment for purposes of the Plan (except for purposes of
Section 8), but the period of such Leave of Absence shall not be counted toward
satisfaction of any Restriction Period or any holding period described in
Section 6(c).
================================================================================
15. GENERAL PROVISIONS
(a) Neither the Plan nor the grant of any Option or Award nor any
action by the Company, any Subsidiary or the Committee shall be held or
construed to confer upon any person any right to be continued in the employ of
the Company or a Subsidiary. The Company and each Subsidiary expressly reserve
the right to discharge, without liability but subject to his or her rights
under the Plan, any Optionee or Participant whenever in the sole discretion of
the Company or a Subsidiary, as the case may be, its interest may so require.
(b) All questions pertaining to the construction, regulation,
validity and effect of the Plan shall be determined in accordance with the laws
of the State of Utah, without regard to conflict of laws doctrine.
================================================================================
16. EFFECTIVE DATE
The Plan shall become effective June 1, 1997, upon prior approval of the
stockholders of the Company. All Options and Awards granted under the Plan as
written prior to June 1, 1997 shall be subject to the terms and conditions of
such prior Plan and grant; provided, however, that an officer of the Company
may transfer exercisable Options and Rollover Options, granted to him or her
prior to June 1, 1997, to or for the benefit of immediate family members
pursuant to Section 6(g).
- 14 -
<PAGE> 1
Exhibit 10.2
EXECUTIVE INCENTIVE PLAN OF UNION PACIFIC RESOURCES GROUP INC.
AND SUBSIDIARIES
Amended and Restated
Effective June 1, 1997
================================================================================
PURPOSE OF PLAN
The Committee establishes this Plan and the performance of goals hereunder for
the purpose of promoting the success of Union Pacific Resources Group Inc. and
Subsidiaries by providing the incentive of additional compensation for services
rendered during any year by key executives who contribute in a significant
manner to the operations and business of the Company and such Subsidiaries.
================================================================================
1. DEFINITIONS
SECTION 1.01. The following terms shall have the following meanings:
"ACCOUNTHOLDER" means any person who has received a Deferred Award.
"BENEFICIARY" means any person or persons designated in writing by an
Accountholder to the Committee on a form prescribed by it for that purpose,
which designation shall be revocable at any time by the Accountholder prior to
his or her death, provided that, in the absence of such a designation or the
failure of the person or persons so designated to survive the Accountholder,
payments or distributions shall be made to the Accountholder's estate and
provided further that no payment or distribution shall be made during the
lifetime of the Accountholder to his or her Beneficiary.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, or the
corresponding provisions of any successor statute.
"COMMITTEE" means the Committee provided for in Section 2.01.
"COMPANY" means Union Pacific Resources Group Inc., a Utah corporation, or any
successor corporation.
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<PAGE> 2
"COMPANY STOCK" means Common Stock of the Company.
"DEFERRED AWARD" means an award under the Plan which an Executive to whom the
award is made shall have elected to defer in accordance with Section 4.01 and
which until paid shall, subject to paragraph (1) of Section 7.01, be
represented by Investment Accounts maintained for such Executive in accordance
with Section 5.01.
"EXECUTIVE" means the Chairman of the Board and any person who was a regular
employee of the Company or a Subsidiary (including directors who are also such
employees) for all or part of the Year in respect of which awards are made
under the Plan and who, in the judgment of the Committee, contributed in a
significant manner to the operations and business of the Company or a
Subsidiary for such Year.
"IMMEDIATE CASH AWARD" means an award under the Plan payable in cash pursuant
to Section 4.02 as promptly as practicable after the close of the Year for
which the award is made or, in the sole discretion of the Committee, in
December of the year for which the award is made.
"INCENTIVE RESERVE ACCOUNT" means the account established by the Company
pursuant to Section 3.01.
"INVESTMENT ACCOUNT" means one of the accounts established by the Company
pursuant to Section 5.01.
"PLAN" means this Executive Incentive Plan as amended from time to time.
"PRIOR PLAN" means the Plan as written prior to June 1,1997. All awards made
under the Prior Plan shall remain subject to the terms and conditions of the
Prior Plan unless otherwise provided herein.
"SUBSIDIARY" means any corporation of which the Company owns directly or
indirectly at least a majority of the outstanding shares of voting stock and
which by action of its board of directors has adopted the Plan.
"TERMINATION" means termination of employment with the Company and its
Subsidiaries, for any reason, including retirement and death.
"UNDUE HARDSHIP" means a severe financial hardship to the Executive resulting
from a sudden and unexpected illness or accident of the Executive or of a
dependent (as defined in Code section 152(a)) of the Executive, loss of the
Executive's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Executive. The circumstances that will constitute an Undue Hardship will
depend upon the facts of each case, but, in any case, payment may not be made
to the extent that such hardship is or may be relieved through reimbursement or
compensation by insurance
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<PAGE> 3
or otherwise, by liquidation of the Executive's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship, or
by cessation of deferrals under the Plan. An Undue Hardship shall not include
the need to send an Executive's child to college or the desire to purchase a
home.
"VALUATION DATE" means the last business day of each calendar quarter and each
other interim date on which the Committee determines that a valuation of
Investment Accounts shall be made.
"YEAR" means a calendar year.
================================================================================
2. ADMINISTRATION OF THE PLAN
SECTION 2.01. The Plan shall be administered by a Committee which shall
consist of at least three members designated by the Board to serve at its
pleasure. Such members shall be members of the Board and shall not be officers
or employees of the Company or any Subsidiary. The Committee shall determine
the Executives to whom awards are granted under the Plan and the amounts of
awards payable to such Executives out of the Incentive Reserve Account, and
shall otherwise be responsible for the administration and interpretation of the
Plan. The Committee shall supervise and be responsible for the maintenance of
the various accounts under the Plan and for determining the amounts and,
subject to Sections 4.02 and 6.01, the times of payments or distributions of
awards. The Committee may delegate its authority under the Plan to one or more
officers or employees of the Company or a Subsidiary. All determinations of
the Committee shall be by a majority of its members, and its determinations
shall be final. Each member of the Committee, while serving as such, shall be
considered to be acting in his or her capacity as a Director of the Company.
Notwithstanding the foregoing, the Plan shall at all times be administered in a
manner consistent to meet the requirements of Section 162(m) of the Code.
================================================================================
3. INCENTIVE RESERVE ACCOUNT
SECTION 3.01. The Company shall establish an Incentive Reserve Account to
which amounts available for awards to Executives shall be credited and which
shall be debited as such awards are made by the Committee. The Board may cause
to be credited to such Incentive Reserve Account such amount for each Year,
beginning with 1995, during which the Plan remains in effect as it, in its
discretion, may determine provided that the amount so credited for any Year
shall not exceed the following limitation: The maximum amount that may be
credited to the Incentive Reserve Account for any Year is 0.25% of earnings
before interest, taxes, depreciation, depletion and
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<PAGE> 4
amortization and expensed exploration costs excluding exploration overhead
("Incentive Income") when the Incentive Income Return on Average Annual Assets
("Incentive Return") is 16.0%, and 0.5% of Incentive Income when the Incentive
Return is 20.0% or more. At intermediate levels of Incentive Return (between
16.0% and 20.0%), the maximum percentage of Incentive Income that may be
credited to the Incentive Reserve Account will increase 0.0125% for each
incremental 0.2% increase in the Incentive Return. Average Annual Assets is
calculated as the average of (i) total assets as shown on the consolidated
financial statements of the Company at the beginning of each year and (ii)
total assets as shown on the consolidated financial statements of the Company
at the end of such year. Incentive Income is determined in accordance with
generally accepted accounting principles, before giving effect to provision for
amounts to be credited to the Incentive Reserve Account. Incentive Income
excludes results of discontinued operations and the cumulative effects of
changes in accounting principles. The amount of Incentive Income and the
Incentive Return shall be computed and reported to the Board and the Committee
at the end of each Year by the Company. The Committee shall certify to the
Board, based upon a report from the Company's independent certified public
accountants stating that the computation of the amount credited to the
Incentive Reserve Account at the end of the Plan Year was made in accordance
with the provisions of the Plan and their report shall be final and binding.
Any amounts credited to the Incentive Reserve Account which are not awarded
with respect to such Year may, on direction of the Committee, be awarded in
future Years during which the Plan remains in effect. An initial credit of
$3.5 million shall be made to the Incentive Reserve Account on the effective
date of this Plan.
================================================================================
4. AWARDS UNDER THE PLAN
SECTION 4.01. At least 90 days prior to the grant of an award, but in no event
later than the close of the year with respect to which an award is to be made
(the "Election Deadline"), an Executive shall file with the Committee an
election on a form prescribed by the Committee for such purpose specifying the
percent in multiples of 10% of any award which may be granted to him or her
with respect to such Year and later Years to be in the form of an Immediate
Cash Award or a Deferred Award in one or more Investment Accounts. Deferral
and investment elections shall be continuing elections for all awards under the
Plan except that:
(i) Deferral elections shall be subject to change on or before the
Election Deadline on a form prescribed by the Committee for such
purpose with respect to any awards which may be granted to him or her
for such Year and later Years; and
(ii) an Accountholder, whether or not currently employed by the
Company or a Subsidiary, may elect to convert, in multiples of 10%,
the value of his or her account, if any, in any Investment Account to
equivalent value accounts in any other Investment Accounts as of a
Valuation Date, provided that the Committee has received such notice
of
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<PAGE> 5
the conversion as the Committee may require, and provided further
that, unless the Committee shall in its sole discretion determine
otherwise, an Accountholder may make conversions only in such amounts
and at such times as are allowable for changes in investment elections
under the terms of the Union Pacific Resources Company Employees'
Thrift Plan. The Committee shall cause such conversions to be
effected by transferring equivalent amounts from the one such account
to the other, all as of such Valuation Date; otherwise, such deferral
and investment elections, and such changes therein, shall be
irrevocable.
In addition, an Executive may also specify on a form prescribed by the
Committee for such purpose whether he or she wishes payment of Deferred Awards
to be made on the earlier of either (i) date or dates certain in any year or
years prior to Termination (but in no event more often than once in each such
year or years), such payment to be in full in cash on such date or dates, or
(ii) upon Termination in accordance with the provisions of Sections 6.01
through 6.04. Elections made as to dates for the payment of Deferred Awards
shall be subject to change by such Executive on or before the Election Deadline
on a form prescribed by the Committee for such purpose with respect to any
awards made for such Year and later Years; otherwise such elections, and such
changes therein, shall be irrevocable.
Designation, election or change in election shall not entitle an Executive to
any award for any Year but the form of award, if any, for any Year to such
Executive shall be in accordance with such election. If an Executive has not
been so designated as eligible for Deferred Awards, or an election for Deferred
Awards is not in effect for him, any award granted to him or her for any Year
shall be in the form of an Immediate Cash Award.
SECTION 4.02. As soon as practicable after the close of each Year, or in
December of any Year if so determined by the Committee, the Committee may grant
awards payable out of the Incentive Reserve Account to such Executives in such
dollar amounts as it in its sole discretion shall determine, subject to Section
4.03, and the amount of each such award shall be debited to the Incentive
Reserve Account. Except to the extent that Deferred Awards are elected
pursuant to Section 4.01, any award under the Plan granted to an Executive for
any Year shall be paid to him or her or to his or her Beneficiary in a lump sum
in cash as promptly as practicable after such award is granted.
SECTION 4.03. No Covered Executive shall receive an award for any Year in
excess of (i) .125% of Covered Incentive Income for such Year, in the case of
the Chief Executive Officer of the Company, or (ii) 0.0625% of Covered
Incentive Income for such Year, in the case of any other Covered Executive.
Covered Executive means an Executive whose compensation is subject to the
limitations on deductibility set forth in Section 162(m) of the Code. Covered
Incentive Income for a Year is the greater of (a) Incentive Income for such
Year or (b) such Incentive Income for the first eleven months of such Year.
The .125% and 0.0625% limitations (the "Percentage Limitations") shall be
adjusted annually to reflect changes in the Consumer Price Index for all Urban
Consumers (U.S. City Average for All Items); provided, however, that the
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<PAGE> 6
Percentage Limitations, as so adjusted, shall never fall outside the following
ranges: 0.125%-0.25% for the Chief Executive Officer of the Company and 0.0625%
- - 0.125% for any other Covered Executive.
5. DEFERRED AWARDS
SECTION 5.01. (1) The Company shall from time to time establish on its books
one or more Investment Accounts. In the case of each Executive, if and when a
Deferred Award is granted to him, the Committee shall credit to an account
maintained for him or her in one or more Investment Accounts the equivalent
amount of such award in accordance with his or her election. Each Investment
Account shall have such name, and be charged or credited pursuant to such
method, as the Committee shall determine upon establishment of such Investment
Account, provided such method is consistent with the requirements of Section
162(m) of the Code for performance-based compensation. The Committee may
change such names or methods for any Investment Account, but no such change
shall reduce any amount previously accrued in an Accountholder's account. The
Committee shall cause each Investment Account to be valued as of each Valuation
Date by such person or persons as it in its sole discretion shall determine and
such valuation shall be conclusive for all purposes of the Plan. The value of
any Investment Account for the purpose of making payment of a Deferred Award
shall be the value of such Investment Account as of the Valuation Date last
preceding such payment. Compensation paid in respect of any Investment Account
shall result in corresponding reduction in the value of such accounts. The
amounts credited in Investment Accounts shall represent general liabilities of
the Company and shall not constitute a trust fund or otherwise create any
property interest in any Accountholder or his or her Beneficiary.
(2) The Plan will accept a transfer of an Investment Account
from the Executive Incentive Plan of Union Pacific Corporation and Subsidiaries
(the "UP EIP") of an Executive or his or her Beneficiary who was an
Accountholder under the UP EIP. The Plan will assign each transferred
Investment Account to a like investment option as that investment option which
had been elected under the UP EIP. Such amount shall be subject to the terms
and conditions of this Plan.
================================================================================
6. PAYMENT OR DELIVERY OF DEFERRED AWARDS
SECTION 6.01. Upon Termination of an Executive, the Committee shall cause cash
in respect of any balances in the accounts maintained for such Executive in any
Investment Account to be paid or delivered to him or her or his or her
Beneficiary in the sole discretion of the Committee as follows:
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<PAGE> 7
(i) in a single distribution, an amount in cash equal to
the value of the accounts maintained for him or her in all Investment Accounts,
all such cash being paid in the Year of his or her Termination or in January of
the following Year, as determined by the Committee; or
(ii) over such number of Years as are fixed by the
Committee but not exceeding fifteen, in annual installments of an aggregate
amount of cash equal in value at the time of each installment payment to the
value of the accounts maintained for him or her in all Investment Accounts at
the Valuation Date next preceding payment divided by the remaining number of
such annual installments, the first of such installments to be paid or
delivered in the month following the month of his or her termination, or at the
discretion of the Committee not later than 12 months following the date of
Termination and subsequent installments to be paid or delivered in January of
each subsequent Year; or
(iii) in the event of retirement or death of a currently
employed Executive, at a specified future date not to exceed 15 years from the
date of such retirement or death in a single distribution, an amount of cash
equal to the value of the accounts maintained for him or her in all Investment
Accounts. Income in respect of Investment Accounts would be paid in cash
quarterly to such Executive or his or her Beneficiary commencing with the first
day of the month subsequent to such Executive's retirement or death. In the
case of retirement, the single distribution referred to above will be paid on
the date specified or upon death, whichever occurs first.
All payments or distributions attributable to each Deferred Award of an
Executive after his or her Termination shall be made by the Company on its
behalf or on behalf of the Subsidiary or Subsidiaries by which he or she was
employed during the Year in which such Deferred Award was earned. The
Subsidiary shall reimburse the Company in the amount of such paid Deferred
Awards.
SECTION 6.02. Deferred Awards elected to be paid on a date or dates certain in
any year or years prior to Termination shall be paid to the Executive in full
in cash on such date or dates.
SECTION 6.03. At any time before or after Termination of an Executive who
shall have elected to receive one or more Deferred Awards, the Committee, if it
finds in its sole discretion that continued deferral of such Awards would
result in undue hardship to such Executive or his or her Beneficiary, may
accelerate and pay in cash all or any part of such Deferred Award or Deferred
Awards by converting the value of the accounts maintained for him or her in
Investment Accounts into the cash equivalent thereof on the same basis as if a
payment in cash were being made as provided in Section 6.01. On the death of
an Executive after his or her Termination, the Committee, in its sole
discretion, may accelerate one or more installments, and change the form of
payment or distribution in accordance with Section 6.01, of any balance of his
or her Deferred Awards and, in the event of relevant changes in the Federal
income tax laws, regulations and rulings or on termination of the Plan, the
Committee may, in its sole discretion, so accelerate or change the form of
payment or distribution of any or all Deferred Awards.
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<PAGE> 8
SECTION 6.04. The provisions of Sections 6.01, 6.02, and 6.03 shall be subject
to provisions to paragraph (1) of Section 7.01.
================================================================================
7. GENERAL PROVISIONS
SECTION 7.01. (1) Anything in the Plan otherwise to the contrary
notwithstanding, the Board may at any time under such circumstances as it in
its sole discretion may determine, convert all the accounts of Accountholders
in the Investment Accounts into cash credits, with future credits to the
accounts of Accountholders being made solely in cash. Accounts shall be so
converted on the basis of the value thereof as of the last preceding Valuation
Date. Any such cash credits to the accounts of Accountholders shall, after
such conversion, solely bear interest until paid to the Accountholder or his or
her Beneficiary compounded annually at such annual rate of interest as may be
fixed by the Board. The granting and payment of Deferred Awards in respect of
such cash credits shall otherwise be in accordance with the other provisions of
the Plan with such adjustments therein as the Committee may deem appropriate.
(2) Neither the Plan nor the payment of benefits hereunder
nor any action by the Company, any Subsidiary or the Committee shall be held or
construed to confer upon any person any right to be continued in the employ of
the Company or of a Subsidiary and the Company and each Subsidiary expressly
reserves the right to discharge, without liability, any Executive whenever in
its sole discretion its interest may so require.
(3) No member of the Board or the Board of Directors of any
Subsidiary or of the Committee or any person to whom the Committee has
delegated its authority hereunder shall be liable for any action, or action
hereunder, whether of commission or omission, except in circumstances involving
his or her bad faith, for anything done or omitted to be done by himself.
(4) The Company or any Subsidiary shall not be required to
segregate cash for any Investment Account.
(5) Notwithstanding the fact that an Investment Account may
use Company Stock to determine amounts credited or debited thereto, no
Executive shall have voting or other rights with respect to shares of such
Company Stock.
(6) The Company or any Subsidiary shall not, by virtue of any
provisions of this Plan or by any action by any person hereunder, be deemed to
be a trustee or other fiduciary of any property for any Accountholder or any
Beneficiary of an Accountholder and the liabilities of the Company or of any
Subsidiary to any Accountholder or his or her Beneficiary pursuant to the Plan
shall be those of a debtor only pursuant to such contractual obligations as are
created by the Plan, and no such obligation of the Company or of any Subsidiary
shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company or of any Subsidiary.
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<PAGE> 9
(7) Except to the extent of the rights of the Beneficiary of
an Accountholder, no benefit payable under, or interest in, the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action shall be void; and
no such benefit or interest shall be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of any Accountholder,
former Accountholder or his or her Beneficiary. If any Accountholder, former
Accountholder or Beneficiary shall become bankrupt or shall attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
benefit payable under, or interest in, the Plan, then the Committee in its
discretion may hold or apply such benefit or interest or any part thereof to or
for the benefit of such Accountholder, former Accountholder, or his or her
Beneficiary, his or her spouse, children, blood relatives or other dependents,
or any of them, in such manner and in such proportions as the Committee may
consider proper.
(8) The Company shall on its behalf and on behalf of its
Subsidiaries withhold from payment of distribution of the Awards the required
amounts of income and other taxes.
(9) No member of the Committee shall be eligible for an award under the Plan.
(10) All questions pertaining to the construction,
regulation, validity and effect of the Plan shall be determined in accordance
with the laws of the State of Texas.
================================================================================
8. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
SECTION 8.01. The Board may from time to time amend, suspend or terminate the
Plan in whole or in part, and, if suspended or terminated, may reinstate any of
or all of its provisions, except that without the consent of the Executive, or,
if he or she is not living, his or her Beneficiary, no amendment, suspension or
termination of the Plan shall be made which materially adversely affects his or
her rights with respect to awards previously made to him or her and except that
the limitations set forth in Section 3.01 with respect to the amount of awards
which may be granted under the Plan may be increased only with the approval of
a majority of the stockholders of the Company present, in person or by proxy,
at a meeting of such stockholders at which a quorum is present. In the absence
of action by the stockholders of the Company, no awards shall be made under the
Plan with respect to years after the calendar year 2005 and the Plan shall
automatically terminate after all Deferred Awards made prior thereto shall have
been paid or distributed. Notwithstanding the foregoing, no amendment which is
material for purposes of the shareholder approval requirement of Section 162(m)
of the Code shall be effective in the absence of action by the stockholders of
the Company.
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<PAGE> 1
Exhibit 10.3
UNION PACIFIC RESOURCES GROUP INC.
1995 DIRECTORS STOCK OPTION PLAN
(amended and restated effective March 5, 1997)
The purposes of the Union Pacific Resources Group Inc. 1995 Directors Stock
Option Plan, as amended and restated effective March 5, 1997, (the "Plan") are
to foster and promote the long term financial success of Union Pacific
Resources Group Inc. (the "Company") by (a) attracting and retaining directors
who are not employees of the Company or any of its subsidiaries ("Non-Employee
Directors") of outstanding ability by providing for the grant of nonqualified
stock options; (b) providing Non-Employee Directors with compensation
opportunities which are competitive with other corporations; and (c) enabling
such Directors to participate in such financial success of the Company by
encouraging them to become owners of the common stock of the Company. The
Company believes that the Plan will cause the participants to contribute
materially to the growth of the Company, thereby benefitting the Company's
stockholders, and will align the economic interests of the participants with
those of the stockholders.
1. ADMINISTRATION.
Administration of this Plan is intended to be self-executing in
accordance with the express terms and conditions of the Plan.
However, to the extent that determinations are required with respect
to matters under the Plan, such determinations shall be made by the
Compensation and Corporate Governance Committee (the "Committee")
consisting of not less than three persons appointed by the Board of
Directors of the Company. Subject to the foregoing, the Committee's
interpretations of the Plan, including factual determinations and all
determinations made by the Committee pursuant to the powers vested in
it hereunder shall be conclusive and binding.
2. ELIGIBILITY FOR PARTICIPATION.
Only Non-Employee Directors shall be eligible to participate in the
Plan ("Participants").
3. GRANTS.
Incentives under the Plan shall consist of nonqualified stock options
("Grants"). All Grants shall be subject to the terms and conditions
set forth herein and to those other terms and conditions consistent
with this Plan as the Committee deems appropriate and as are specified
in writing by the Committee to the Participant (the "Grant Letter").
The Committee shall approve the form and provisions of each Grant
Letter to each Participant; provided, however, that Grants to
Participants shall be made only in accordance with the provisions of
Section 5.
<PAGE> 2
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the adjustment specified below, the aggregate
number of shares of common stock of the Company ("Company
Stock") that have been or may be issued or transferred under
the Plan is 1,000,000 shares. The shares may be authorized
but unissued shares of Company Stock or reacquired shares of
Company Stock, including shares repurchased by the Company on
the open market. If and to the extent options granted under
the Plan terminate, expire, or are canceled without having
been exercised, the shares subject to such option shall again
be available for purposes of the Plan.
(b) In the event of a recapitalization, stock split, stock
dividend, combination or exchange of shares, merger,
consolidation, rights offering, separation, spin-off,
reorganization or liquidation, or any other change in the
corporate structure or shares of the Company, the Board, upon
recommendation of the Committee, shall make such equitable
adjustments as it may deem appropriate in the number and kind
of shares authorized by the Plan, in the option price of
outstanding Grants, and in the number and kind of shares or
other securities or property subject to Grants or covered by
outstanding Grants.
5. GRANTS TO PARTICIPANTS.
(a) NUMBER OF SHARES.
(i) INITIAL GRANT -- Each Non-Employee Director who is a
Participant as of March 5, 1997, (the "Date of
Initial Grant") shall receive a Grant to purchase
52,000 shares of Company stock.
(ii) SUBSEQUENT GRANTS -- Each Non-Employee Director who
becomes a Participant subsequent to the Date of
Initial Grant shall receive as of the date he or she
is elected to the Board (the "Date of Subsequent
Grant"), a Grant to purchase shares of Company Stock
in an amount equal to the product (rounded to the
nearest full share) of 52,000 shares multiplied by a
fraction. The numerator of the fraction shall be the
lesser number of years (including partial years)
between the Participant's Date of Subsequent Grant
and (A) March 5, 2007, or (B) the date the
Non-Employee Director would be required to retire
from the Board in accordance with the Company's
retirement policy for Directors. The denominator of
the fraction shall be 10. The number of years in the
numerator shall be determined by counting the number
of full and partial 12-month periods between the
Participant's Date of Subsequent Grant and the
relevant date in (A) or (B), with any partial
12-month period determined by rounding any partial
month to a full month.
- 2 -
<PAGE> 3
(iii) DATE OF GRANT -- With respect to a Grant made to an
individual Participant, the date as of which such
Grant was made shall, for purposes of this Plan, be
considered the Participant's "Date of Grant".
(b) OPTION PRICE AND OPTION EXERCISE PERIOD. The purchase price
of Company Stock subject to such Grants shall be the fair
market value of a share of such stock as of the Participant's
Date of Grant (the "Option Price"). The "fair market value"
of Company Stock shall be the average of the high and low
trading prices of a share of Company Stock on that date as
reported in The Wall Street Journal listing for consolidated
trading for New York Stock Exchange issues. Each Grant shall
have an exercise period commencing with the Participant's Date
of Grant and ending with March 5, 2008 (the "Option Exercise
Period").
(c) VESTING OF OPTIONS.
(i) (A) With respect to Participants who received
options on the Date of Initial Grant, their
Grants shall vest (and the options thereunder
shall become exercisable) at the rate of
5,200 shares per year, commencing with the
first anniversary of the Initial Date of
Grant.
(B) With respect to a Participant who received
options on a Date of Subsequent Grant, the
Grant shall vest (and the options thereunder
shall become exercisable) as follows: The
first vesting date with respect to such Grant
shall be the second March 5th following the
Participant's Date of Subsequent Grant and,
on such date, the Participant shall be
entitled to exercise options on the following
number of shares: the sum of (I) 5,200 plus
(II) the product (rounded to full shares) of
433.33 shares multiplied by the number of
months (rounding any partial month to a full
month) between his or her Date of Subsequent
Grant and the March 5th immediately following
his or her Date of Subsequent Grant.
Thereafter, on each March 5th subsequent to
the Participant's first vesting date, the
Participant's Grant shall vest at the rate of
5,200 shares per year.
(ii) Notwithstanding (c)(i), the following special
exceptions shall apply: A Participant's Grant shall
immediately vest (and the options thereunder shall
become exercisable) if any of the following occurs
while the Participant is a member of the Board: the
Participant dies, the Participant suffers a major
disability which results in his or her departure or
removal from the Board, the Company undergoes a
change of control (as defined in the Participant's
Grant Letter), or the Participant is required to
retire from the Board in accordance with the
Company's retirement policy for directors.
- 3 -
<PAGE> 4
(d) MANNER OF EXERCISE. A Participant may exercise a Grant by
delivering a notice of exercise to the Secretary of the
Company with accompanying payment of the Option Price. Such
notice may instruct the Company to deliver shares of Company
Stock due upon the exercise of the Grant to any registered
broker or dealer designated by the grantee ("Designated
Broker") in lieu of delivery to the grantee. Such instruction
must designate the account into which the shares are to be
deposited.
(e) SATISFACTION OF OPTION PRICE. A Participant shall pay the
Option Price in cash or previously acquired Company Stock.
Shares of Company Stock shall not be issued or transferred
upon exercise of a Grant until the Option Price is fully paid.
(f) TERMINATION OF RELATIONSHIP WITH THE COMPANY OR DEATH.
(i) In the event a Participant ceases to serve as a
Non-Employee Director for any reason other than death
or major disability, any Grant made pursuant to this
Section which is otherwise exercisable by the
Participant shall terminate, unless exercised within
180 days (or, if the Participant is required to
retire from the Board in accordance with the
Company's retirement policy for Directors, five
years) of the date on which the Participant ceases to
serve as a Non-Employee Director, but in any event no
later than the date of expiration of the Option
Exercise Period. All other Grants shall be
immediately forfeited.
(ii) In the event of the death or major disability of the
Participant while serving as a Non- Employee
Director, any Grant made pursuant to this Section
which was otherwise exercisable by the Participant at
the date of death or major disability may be
exercised by the individual's personal representative
at any time prior to the expiration of five years
from the date of death or major disability, but in
any event no later than the date of expiration of the
Option Exercise Period. In the event of the death of
the Participant after the date on which the
individual ceases to be a Non-Employee Director, any
Grant made pursuant to this Section which was
otherwise exercisable by the Participant at the date
of death may be exercised by the individual's
personal representative at any time prior to the
expiration of the remainder of the applicable period
set forth in Section 5(f)(i) above.
(iii) In the event a Participant suffers a major disability
which results in his or her departure or removal from
the Board, any Grant made pursuant to this Section
which was otherwise exercisable by the Participant at
the date of such disability may be exercised by the
Participant (or, if the Participant is not legally
competent, by his or her personal representative) at
any time prior to the expiration of five years from
the date of such disability, but in
- 4 -
<PAGE> 5
any event no later than the date of expiration of the
Option Exercise Period. In the event the Participant
suffers a major disability after the date on which
the individual ceases to be a Non-Employee Director,
any Grant made pursuant to this Section which was
otherwise exercisable by the Participant at the date
of such disability may be exercisable by the
Participant (or, if the Participant is not legally
competent, by his or her personal representative) at
any time prior to the expiration of the remainder of
the applicable period set forth in Section 5(f)(i)
above.
6. TRANSFERABILITY OF OPTIONS.
Only a Participant or the Participant's authorized legal
representative may exercise rights under a Grant. Such persons may
not transfer those rights except by will or by the laws of
descent and distribution or, if permitted under Rule 16b-3 of the
Exchange Act and if permitted in any specific case by the Committee in
their sole discretion, pursuant to a domestic relations order as
defined under the Code or Title I of ERISA or the regulations
thereunder. When a Participant dies, the personal representative or
other person entitled to succeed to the rights of the Participant (a
"Successor Grantee") may exercise such rights. A Successor Grantee
must furnish proof satisfactory to the Company of his or her right to
receive the Grant under the Participant's will or under the applicable
laws of descent and distribution. Notwithstanding the foregoing, a
Participant shall be permitted to transfer a Grant of options (whether
or not then exercisable) to (a) any member or members of his or her
immediate family (spouse, children or grandchildren, including step
and adopted children and grandchildren), (b) a trust, the
beneficiaries of which consist exclusively of members of the
Participant's immediate family, (c) a partnership, the partners of
which consist exclusively of the Participant's immediate family, or
(d) any similar entity created for the exclusive benefit of the
Participant's immediate family. For purposes of the preceding
sentence, any remote, contingent interests of persons other than
members of the Participant's immediate family shall be disregarded.
The Committee or its designee must approve the form of any transfer of
a Grant to or for the benefit of any immediate family member or
members before such transfer shall be recognized as valid hereunder.
7. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT. The Board of Directors of the Company, by written
resolution, may amend or terminate the Plan at any time;
provided, however, that the Board of Directors shall not amend
the Plan without the approval of the stockholders of the
Company, if such amendment would cause the Plan or any Grant,
or the exercise of any right under the Plan to fail to comply
with the requirements of Rule 16b-3 under the Exchange Act.
- 5 -
<PAGE> 6
(b) TERMINATION OF PLAN. The Plan shall terminate on March 5,
2008, unless terminated earlier by the Board of Directors of
the Company or unless extended by the Board.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A
termination or amendment of the Plan that occurs after a Grant
is made shall not result in the termination or amendment of
the Grant unless the grantee consents or unless the Committee
acts under Section 13(a). The termination of the Plan shall
not impair the power and authority of the Committee with
respect to an outstanding Grant. Whether or not the Plan has
terminated, an outstanding Grant may be terminated or amended
under Section 13(a) or may be amended by agreement of the
Company and the grantee consistent with the Plan.
8. FUNDING OF THE PLAN.
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Grants under this
Plan. In no event shall interest be paid or accrued on any Grant,
including unpaid installments of Grants.
9. RIGHTS OF NON-EMPLOYEE DIRECTORS.
Nothing in this Plan shall entitle any individual or other person to
any claim or right to a Grant under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual
any rights to be retained by or in the employ of the Company.
10. REQUIREMENTS FOR ISSUANCE OF SHARES.
No Company Stock shall be issued or transferred upon exercise of any
Grant hereunder unless and until all legal requirements applicable to
the issuance or transfer of such Company Stock have been complied with
to the satisfaction of the Committee. The Committee shall have the
right to condition any Grant made to any Non- Employee Director
hereunder on such Director's undertaking in writing to comply with
such restrictions on subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable as a result
of any applicable law, regulation or official interpretation thereof,
and certificates representing such shares may be legended to reflect
any such restrictions.
- 6 -
<PAGE> 7
11. HEADINGS.
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the
Section shall control.
12. EFFECTIVE DATE.
Subject to the approval of the Company's stockholders, this Plan shall
be effective as of March 5, 1997 (the "Effective Date"). All Grants
issued under the Plan as written prior to the Effective Date shall
remain subject to the terms and conditions of such prior Plan;
provided, however, that options covered by Grants under such prior
Plan may be transferred to or for the benefit of the optionee's
immediate family members pursuant to Section 6.
13. MISCELLANEOUS.
(a) COMPLIANCE WITH LAW. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of
Company Stock under Grants shall be subject to all applicable
laws and to approvals by a governmental or regulatory agency
as may be required. With respect to persons subject to
Section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan
comply with all applicable provisions of Rule 16b-3 or its
successors under the Exchange Act. The Committee may revoke
any Grant if it is contrary to law or modify a Grant to bring
it into compliance with any valid and mandatory government
regulation. The Committee may, in its sole discretion, agree
to limit its authority under this Section.
(b) OWNERSHIP OF STOCK. A grantee or Successor Grantee shall have
no rights as a stockholder with respect to any shares of
Company Stock covered by a Grant until the shares are issued
or transferred to the grantee or Successor Grantee on the
stock transfer records of the Company.
- 7 -
<PAGE> 1
EXHIBIT 10.4
UNION PACIFIC RESOURCES GROUP INC.
DEFERRED COMPENSATION PLAN
FOR THE BOARD OF DIRECTORS
AMENDED AND RESTATED
EFFECTIVE JUNE 1, 1997
1. PURPOSE
The purpose of this Plan is to provide a means for deferring payment
of all or a portion of any cash compensation, excluding expenses,
payable to Directors for their service on the Board of Directors (the
"Board") of Union Pacific Resources Group Inc. (the "Company") in
accordance with the By-Laws of the Company. Such compensation
eligible to be deferred is referred to herein as "Compensation".
2. ELIGIBILITY
Any individual serving as a member of the Board as of the effective
date of this Plan or who subsequently becomes a member is eligible
under this Plan, provided that no member who is an employee of the
Company or any of its subsidiaries shall be eligible under this Plan.
3. PRIOR PLAN
Any person who terminated service as a Director prior to the effective
date of this Plan and who participated in and is entitled to benefits
under the Union Pacific Resources Group Inc. Stock Unit Grant and
Deferred Compensation Plan for the Board of Directors, effective
September 28, 1995 (the "Prior Plan") shall continue to have such
rights and be subject to such restrictions as would pertain to him or
her under the Prior Plan. Any person who is a Director on the
effective date of this Plan and who participated in and is entitled to
benefits under the Prior Plan shall now have such rights and be
subject to such restrictions as would pertain to him or her under this
Plan; provided, however, that under no circumstances shall any
benefits or rights under the Prior Plan be diminished or impaired by
this Plan.
4. ELECTION
Election to defer Compensation is to be made on or before December 31
of any year for Compensation for services as a member of the Board for
the following and later calendar years.
Election to defer is a continuing election until changed by the
Director on or before December 31 of any year for the then following
and later calendar years. However, once an election is made (and
effective), subsequent elections will have no effect on the amounts,
timing and manner of payment covered by the previous election.
- 1 -
<PAGE> 2
Any newly elected Director who was not a Director on the preceding
December 31 may elect, before his or her term begins, to defer
Compensation for services as a member of the Board for the balance of
the calendar year in which such election is made.
Any Director who has not previously made a deferral election because
such Director was not eligible to participate in this Plan, may elect,
prior to the calendar quarter for which Compensation will initially be
paid, to defer Compensation for services as a member of the Board for
the balance of the calendar year in which such election is made.
Forms shall be made available to Directors each year for the purpose
of making or changing their election.
5. AMOUNT
All or any portion, in multiples of 10%, of a Director's Compensation
may be deferred.
6. DEFERRED ACCOUNTS
Each Director shall have a Stock Unit Account and a Fixed Income
Account (together, the "Accounts"). Amounts deferred pursuant to
paragraph 4 may be credited to either Account, at the election of the
Director made at the time of the deferral election, in multiples of
10% of such Director's Compensation.
(a) STOCK UNIT ACCOUNT
(i) Amounts deferred and credited to the Stock Unit
Account shall be converted into whole Stock Units on
the basis of the Fair Market Value of the Company's
Common Stock on the first business day of the month
following the quarter in which the Compensation was
earned, and cash shall be credited to the Stock Unit
Account in lieu of any fractional Stock Unit. "Fair
Market Value" on a date means the average of the high
and low trading prices per share on that date, as
reported in The Wall Street Journal listing of
consolidation trading for New York Stock Exchange
issues.
(ii) On the payment date for each cash dividend or other
cash distribution with respect to the Company's
Common Stock, each Director's Stock Unit Account
shall be credited with an amount equal to the amount
of the per share dividend or distribution, multiplied
by the number of Stock Units in such Account, and, if
such Director is then serving as a member of the
Board, shall be converted into whole Stock Units on
the basis of the Fair Market Value of the Company's
Common Stock on the payment date for such dividend or
distribution, and cash shall be credited to the Stock
Unit Account in lieu of any fractional Stock Units.
If a Director is no longer serving as a member of
-2-
<PAGE> 3
the Board on the payment date for such dividend or
distribution, the amount representing such dividend
or distribution shall be paid out of the Stock Unit
Account to such Director as soon as practicable after
the payment date for such dividend or distribution.
Except as provided in the preceding sentence, any
cash credited to a Director's Stock Unit Account
shall be added to other cash credited to such Account
and converted into a whole Stock Unit on the date
sufficient cash exists to purchase a whole Stock
Unit, based on the Fair Market Value of the Company's
Common Stock on such date.
(iii) In the event of a subdivision or combination of
shares of Company Stock, the number of Stock Units
credited to the Stock Unit Accounts on the effective
date of such subdivision or combination shall be
proportionately subdivided or combined as the case
may be. No adjustment shall be made in Stock Units
in connection with the issuance by the Company of any
rights or options to acquire additional shares of
Company Common Stock or securities convertible into
Company Common Stock. In the event of any stock
dividend or reclassification of Company Common Stock,
any merger or consolidation to which the Company is a
party, or any spinoff of shares or distribution of
property other than cash with respect to the Company
Common Stock, the Committee shall cause appropriate
adjustments, if any, to be made in the Stock Units to
reflect such stock dividend, reclassification, merger
or consolidation, spinoff or distribution of
property.
(b) FIXED INCOME ACCOUNT. Amounts credited to the Fixed Income
Account shall earn interest compounded quarterly, from the
date the Compensation would otherwise have been paid until it
is actually paid in full. The rate of interest shall be set
at an annual rate equal to the average for the previous four
years of the interest rates for the months of December in each
such years on Moody's A Public Utility Bond Yields and Moody's
A Corporate Bond Yields.
7. DISTRIBUTION
All distribution from Accounts shall be made in cash. For purposes of
distributions from the Stock Unit Account, each Stock Unit shall be
converted into an amount of cash equal to the Fair Market Value of one
share of the Company's Common Stock on the first business day of the
month in which such distribution is made. The Director must elect, at
the same time and on the same form provided to elect a deferral of
Compensation, the timing and manner of payment of such Compensation.
- TIMING OF PAYMENT: Distributions from the Accounts shall begin
following termination from the Board for any reason, provided
that in the case of distributions from the Fixed Income
Account, the Director may elect that distributions begin
following retirement from the Director's principal occupation.
-3-
<PAGE> 4
- MANNER OF PAYMENT: The Director may elect to receive payment
from the Accounts in a lump sum or in a number of annual
installments of an aggregate amount of cash equal to the value
of the accounts maintained for the Director in the Accounts at
the Valuation Date next preceding the installment payment
divided by the remaining number of such annual installments.
The installments may be paid over a period of either 5 or 10
years.
The lump sum or first installment is to be paid in January of the year
following the year of termination or retirement, as elected by the
Director, and any remaining installments in January of each succeeding
year until the total balance is paid.
Distributions from the Stock Unit Account in installments shall be
based on equal numbers of Stock Units in each installment.
In the event of the death of a Director then serving as a member of
the Board or a terminated or retired Director entitled to a
distribution under this Plan, the balance of theAccounts shall be
payable to the estate or designated beneficiary in full during the
January of the year following the year of such Director's, terminated
Director's or retired Director's death.
The Director may designate his or her beneficiary at the same time he
or she elects deferral of Compensation. However, the latest
designated beneficiary will be the beneficiary or beneficiaries for
the total of all distributions from the Accounts. The designated
beneficiary may be changed at any time on a form provided by the
Secretary of the Company, provided that no designation will be
effective unless it is filed with the Secretary of the Company prior
to the Director's death.
8. UNFUNDED PLAN
The liability of the Company to any Director, terminated Director,
retired Director or his or her estate or designated beneficiary under
the Plan shall be that of a debtor only pursuant to such contractual
obligations as are created by the Plan, and no such obligation of the
Company shall be deemed to be secured by any assets, pledges, or other
encumbrances on any property of the Company.
9. INALIENABILITY OF DEFERRED COMPENSATION
Except to the extent of the rights of a designated beneficiary, no
distribution pursuant to, or interest in, the Plan may be transferred,
assigned, pledged or otherwise alienated and no such distribution or
interest shall be subject to legal process or attachment for the
payment of any claims against any individual entitled to receive the
same.
-4-
<PAGE> 5
10. CONTROLLING STATE LAW
All questions pertaining to the construction, regulation, validity and
effect of the Plan shall be determined in accordance with the laws of
the State of Texas.
11. AMENDMENT
The Board of Directors of the Company in its sole discretion may
amend, suspend or terminate the Plan at any time. However, any such
amendment, suspension or termination of the Plan may not adversely
affect any Director's or his or her beneficiary's rights with respect
to Compensation previously deferred.
12. ADMINISTRATION
Administration of the Plan will be coordinated by the Finance
Department of the Company. Administration will include, but not be
limited to, crediting of deferred compensation, dividends and accrued
interest to individual Director accounts and ultimate disbursement of
deferred amounts.
13. EFFECTIVE DATE
This Plan shall become effective June 1, 1997, applicable only to
compensation for services rendered on or after that date.
-5-
<PAGE> 1
EXHIBIT 11
UNION PACIFIC RESOURCES GROUP INC.
COMPUTATION OF EARNINGS PER SHARE
(Shares in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1996 1997
---- ----
<S> <C> <C>
Average number of shares outstanding . . . . . . . . . . . . . . . . . . 248,923 250,096
Average shares issuable on exercise of stock
options less shares repurchasable from proceeds . . . . . . . . . . 928 890
------- --------
Total average number of common and common
equivalent shares . . . . . . . . . . . . . . . . . . . . . . . . . 249,851 250,986
======= =======
Net income (millions) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59.2 $ 117.2
======= =======
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.24 $ 0.47
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 12
UNION PACIFIC RESOURCES GROUP INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in Thousands, Except Ratios)
(Unaudited)
<TABLE>
<CAPTION> Three Months
Ended March 31,
---------------
1996 1997
---- ----
<S> <C> <C>
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 86,281 $172,677
Add (deduct) distributions greater (less) than
income of unconsolidated affiliates . . . . . . . . . . . . . . . . 2,642 (1,055)
Fixed charges from below . . . . . . . . . . . . . . . . . . . . . . . . 15,101 12,505
Capitalized interest included in fixed charges . . . . . . . . . . . . . (122) (114)
-------- -----------
Earnings available for fixed charges . . . . . . . . . . . . . . $103,902 $184,013
======== ========
Fixed charges:
Interest expense, including amortization of debt expense/discount . $ 13,038 $ 10,676
Portion of rentals representing an interest factor . . . . . . . . . 1,941 1,715
Interest capitalized . . . . . . . . . . . . . . . . . . . . . . . . 122 114
-------- ----------
Total fixed charges . . . . . . . . . . . . . . . . . . . . . . $ 15,101 $ 12,505
======== ========
Ratio of earnings to fixed charges . . . . . . . . . . . . . . . . . . . 6.9 14.7
==== =====
</TABLE>
<PAGE> 1
EXHIBIT 15
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS
May 14, 1997
Union Pacific Resources Group Inc.
801 Cherry Street
Fort Worth, Texas 76102
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Union Pacific Resources Group Inc. for the periods ended March
31, 1996 and 1997, as indicated in our report dated April 16, 1997; because we
did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in this
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, is
incorporated by reference in Registration Statements No. 333-22655 on Form S-3
and No. 333- 22613 on Form S-8.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Fort Worth, Texas
- 24 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNION
PACIFIC RESOURCES GROUP, INC. CONDENSED STATEMENT OF CONSOLIDATED FINANCIAL
POSITION AT MARCH 31, 1997 (UNAUDITED) AND THE RELATED CONDENSED STATEMENT OF
CONSOLIDATED INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 282
<ALLOWANCES> 0
<INVENTORY> 28
<CURRENT-ASSETS> 538
<PP&E> 6,449
<DEPRECIATION> 3,376
<TOTAL-ASSETS> 3,695
<CURRENT-LIABILITIES> 622
<BONDS> 571
0
0
<COMMON> 0
<OTHER-SE> 1,624
<TOTAL-LIABILITY-AND-EQUITY> 3,695
<SALES> 527
<TOTAL-REVENUES> 532
<CGS> 0
<TOTAL-COSTS> 345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 173
<INCOME-TAX> 56
<INCOME-CONTINUING> 117
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0
</TABLE>
