-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MMSTplfUk5cYqc3cUfvUYbUdmDYsJX14NrcjcZC0EpAGV7fSkh8o8yCcRDEE/sUo Ld/lh42wGjRKYUgU/x4hrQ== 0000899243-98-001529.txt : 19980813 0000899243-98-001529.hdr.sgml : 19980813 ACCESSION NUMBER: 0000899243-98-001529 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELLWETHER EXPLORATION CO CENTRAL INDEX KEY: 0000319459 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760437769 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09498 FILM NUMBER: 98683718 BUSINESS ADDRESS: STREET 1: 1331 LAMAR STREET 2: SUITE 1455 CITY: HOUSTON STATE: TX ZIP: 77010 BUSINESS PHONE: 7136501025 MAIL ADDRESS: STREET 1: 1221 LAMAR STREET 2: STE 1600 CITY: HOUSTON STATE: TX ZIP: 77010-3039 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JUNE 30, 1998 or [_] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Transition Period From ______________ to ___________ Commission file number 0-9498 BELLWETHER EXPLORATION COMPANY (Exact name of registrant as specified in its charter) Delaware 74-0437769 (State of incorporation) (IRS Employer Identification Number) 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: (713) 650-1025 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 August 4, 1998, 14,138,818 shares of common stock of Bellwether Exploration Company were outstanding. 1 BELLWETHER EXPLORATION COMPANY INDEX
PART I. FINANCIAL INFORMATION Page # ITEM 1. Financial Statements Condensed Consolidated Balance Sheets: June 30, 1998 (Unaudited) and December 31, 1997............................................ 3 Condensed Consolidated Statements of Operations (Unaudited): Three and six months ended June 30, 1998 and June 30, 1997................................. 5 Condensed Consolidated Statements of Cash Flows (Unaudited): Six months ended June 30, 1998 and June 30, 1997........................................... 6 Notes to Condensed Consolidated Financial Statements (Unaudited)................................ 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................ 12 PART II. OTHER INFORMATION................................................................................... 18
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BELLWETHER EXPLORATION COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) ASSETS
June 30, December 31, 1998 1997 --------- -------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents....................................... $ 10,918 $ 2,699 Accounts receivable and accrued revenues........................ 13,880 18,293 Due from related parties........................................ 249 4,645 Prepaid expenses and other...................................... 3,760 3,240 --------- -------- Total current assets........................................... 28,807 28,877 --------- -------- PROPERTY AND EQUIPMENT, AT COST: Oil and gas properties (full cost method)....................... 273,924 250,227 Gas plant facilities............................................ 16,728 16,717 --------- -------- 290,652 266,944 Accumulated depreciation, depletion and amortization............ (105,034) (86,811) --------- -------- 185,618 180,133 --------- -------- OTHER ASSETS.................................................... 5,422 5,747 --------- -------- $ 219,847 $214,757 ========= ========
See accompanying notes to condensed consolidated financial statements 3 BELLWETHER EXPLORATION COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share information) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31, 1998 1997 -------- -------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities....................... $ 16,302 $ 14,241 Due to related parties......................................... 3,332 672 -------- -------- Total current liabilities..................................... 19,634 14,913 -------- -------- LONG-TERM DEBT................................................. 100,000 100,000 DEFERRED INCOME TAXES.......................................... 6,046 7,106 OTHER LIABILITIES.............................................. 826 1,069 STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued or outstanding at June 30, 1998 and December 31, 1997.................................................... --- --- Common stock, $0.01 par value, 30,000,000 shares authorized, 14,138,791 and 13,891,465 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively............. 141 139 Additional paid-in capital..................................... 80,285 78,470 Retained earnings.............................................. 12,915 13,060 -------- -------- Total stockholders' equity.................................. 93,341 91,669 -------- -------- $219,847 $214,757 ======== ========
See accompanying notes to condensed consolidated financial statements 4 BELLWETHER EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in thousands, except per share information)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1998 1997 1998 1997 -------- -------- -------- -------- REVENUES: Oil and gas revenues............................. $ 20,306 $ 22,729 $ 39,730 $ 29,221 Gas plant operations, net........................ 321 516 547 1,278 Interest and other income........................ 326 268 513 309 -------- -------- -------- -------- 20,953 23,513 40,790 30,808 -------- -------- -------- -------- COST AND EXPENSES: Production expenses.............................. 6,760 7,066 12,893 8,376 Depreciation, depletion and amortization......... 8,821 8,929 17,559 11,407 General and administrative expenses.............. 1,997 1,695 4,608 2,590 Interest expense................................. 2,976 3,648 5,955 3,957 -------- -------- -------- -------- 20,554 21,338 41,015 26,330 -------- -------- -------- -------- Income (loss) before income taxes................. 399 2,175 (225) 4,478 Provision (benefit) for income taxes.............. 152 726 (80) 1,567 -------- -------- -------- -------- NET INCOME (LOSS)................................. $ 247 $ 1,449 $ (145) $ 2,911 ======== ======== ======== ======== Net income (loss) per share....................... $ 0.02 $ 0.11 $ (0.01) $ 0.26 ======== ======== ======== ======== Net income (loss) per share-diluted............... $ 0.02 $ 0.11 $ (0.01) $ 0.26 ======== ======== ======== ======== Weighted average common shares outstanding...................................... 14,138 13,425 14,094 11,302 ======== ======== ======== ======== Weighted average common shares outstanding diluted 14,416 13,834 14,094 11,408 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements 5 BELLWETHER EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands)
Six Months Ended June 30, ----------------------------------- 1998 1997 ----------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS).................................................... $ (145) $ 2,911 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization........................ 17,990 11,736 Deferred income taxes........................................... (775) 1,612 -------- --------- 17,070 16,259 Change in assets and liabilities: Accounts receivable and accrued revenue............................. 4,414 4,247 Accounts payable and other liabilities.............................. 2,092 3,439 Due from (to) related parties....................................... 7,056 4,915 Other............................................................... (839) (6,682) -------- --------- NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES..................... 29,793 22,178 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of oil and gas properties, including working capital acquired................................................. --- (149,914) Additions to properties and facilities.............................. (23,739) (13,508) Proceeds from sales of properties................................... 663 17,110 NET CASH FLOWS USED IN INVESTING ACTIVITIES......................... (23,076) (146,312) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings............................................ --- 144,300 Net proceeds from issuance of common stock.......................... --- 34,725 Payments of long-term debt.......................................... --- (40,000) Exercise of stock options........................................... 1,502 --- -------- --------- NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES..................... 1,502 139,025 -------- --------- Net increase in cash and cash equivalents........................... 8,219 14,891 Cash and cash equivalents at beginning of period.................... 2,699 450 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 10,918 $ 15,341 ======== =========
See accompanying notes to condensed consolidated financial statements 6 BELLWETHER EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED) (Amounts in thousands)
Six Months Ended June 30, ----------------------------------- 1998 1997 ----------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.................................................... $ 5,592 $ 1,182 Income taxes................................................ $ 1,204 $ 135
See accompanying notes to condensed consolidated financial statements 7 BELLWETHER EXPLORATION COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and, therefore, do not include all disclosures required by generally accepted accounting principles. However, in the opinion of management, these statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position at June 30, 1998 and December 31, 1997, and the results of operations and changes in cash flows for the periods ended June 30, 1998 and 1997. These financial statements should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements in the December 31, 1997 Form 10-K of Bellwether Exploration Company ("the Company") that was filed with the Securities and Exchange Commission on March 27, 1998. Certain reclassifications of prior period statements have been made to conform with current reporting practices. In order to prepare these financial statements in conformity with generally accepted accounting principles, management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reserve information. Actual results could differ from those estimates. 2. ACQUISITIONS On April 9 and 15, 1997, the Company closed acquisitions of oil and gas properties (the "Partnership Transactions"), totaling $145.2 million (inclusive of working capital acquired of $13.9 million), from certain partnerships and other entities managed or sponsored by Torch Energy Advisors Incorporated ("Torch"). The acquisitions were financed by the sale of 4.4 million shares of common stock, the sale of $100.0 million of 10-7/8% senior subordinated notes due in 2007 and borrowings under the Company's senior unsecured revolving credit facility. The following table presents the unaudited pro forma results of operations as if the Partnership Transactions had occurred on January 1, 1997. The Partnership Transactions were accounted for as purchases, and their results of operations are included in the Company's results of operations from the date of acquisition. The Company's pro forma results are based on assumptions and estimates and are not necessarily indicative of the Company's results of operations in the future or such results had the transaction occurred as of January 1, 1997 (in thousands, except earnings per share). 8 BELLWETHER EXPLORATION COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (UNAUDITED) ---------------- SIX MONTHS ENDED JUNE 30, 1997 ---------------- Revenues............................................... $ 57,073 Expenses............................................... 41,408 -------- Income before income taxes............................. 15,665 Income taxes........................................... 5,706 -------- Net earnings........................................... $ 9,959 ======== Net earnings per common share.......................... $ 0.72 ======== Net earnings per common share-diluted.................. $ 0.72 ======== 3. LONG TERM DEBT In April 1997, the Company entered into a senior unsecured revolving credit facility ("Senior Credit Facility") in an amount up to $90.0 million, with an initial borrowing base of $90.0 million to be redetermined annually, and a maturity date of March 31, 2002. The Company may elect an interest rate based either on a margin plus LIBOR or the higher of the prime rate or the sum of 1/2 of 1% plus the Federal Funds Rate. For LIBOR borrowings, the interest rate will vary from LIBOR plus 0.875% to LIBOR plus 1.25% based upon the borrowing base usage. In connection with the acquisition of oil and gas properties, $33.3 million was drawn under this facility ($22 million of which was used to retire outstandings under the previous bank credit facility). As of June 30, 1998 the borrowing base was $75 million and there were no balances outstanding under the Senior Credit Facility. The Senior Credit Facility contains various covenants including certain required financial measurements for current ratio, consolidated tangible net worth and interest coverage ratio. In addition, the Senior Credit Facility includes certain limitations on restricted payments, dividends, incurrence of additional funded indebtedness and asset sales. In April 1997, the Company issued $100.0 million of 10-7/8% senior subordinated notes ("Notes") that mature April 1, 2007. Interest on the Notes is payable semi-annually on April 1 and October 1. The Notes are guaranteed by the Company's wholly-owned subsidiaries, Odyssey Petroleum Company, Black Hawk Oil Company and 1989-I TEAI Limited Partnership. The Notes contain certain covenants, including limitations on indebtedness, liens, dividends and other payment restrictions affecting restricted subsidiaries, issuance and sales of restricted subsidiary stock, dispositions of proceeds of asset sales and restrictions on mergers and consolidations or sales of assets. 4. NEW ACCOUNTING PRONOUNCEMENTS Effective December 1997, the Company retroactively adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 introduces the concept of basic earnings per share, which represents net income divided by the weighted average common shares outstanding without the dilutive effects of common stock equivalents (options, warrants, etc.). 9 BELLWETHER EXPLORATION COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Additionally, SFAS No. 128 replaces fully diluted EPS with diluted EPS. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The Company's dilutive securities include stock options and warrants. The assumed conversion of these securities is anti-dilutive for a period if the option or warrant exercise price exceeds the average market price for the periods. In accordance with SFAS No. 128, the Company retroactively restated all prior period EPS data (including interim EPS) included in these financial statements and footnotes. The impact of adopting SFAS 128 is immaterial. SFAS No. 128 also requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. For the six months ended June 30, 1998, diluted earnings per common share are not calculated below since the issuance or conversion of additional securities would have an anti-dilutive effect. SFAS NO. 128 RECONCILIATION (AMOUNTS IN THOUSANDS):
For the Six Months Ended For the Six Months Ended June 30, 1998 June 30, 1997 ----------------------------------------- -------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- ---------- EARNINGS (LOSS) PER COMMON SHARE: Income (loss) available to common stockholders................... $ (145) 14,094 $ (0.01) $ 2,911 11,302 $ .26 ======= ====== EFFECT OF DILUTIVE SECURITIES: Options and Warrants............ $ --- --- $ --- 106 ------ ------ ------- ------ EARNINGS (LOSS) PER COMMON SHARE-DILUTED: Income (loss) available to common stockholders and assumed conversions.................... $ (145) 14,094 $ (0.01) $ 2,911 11,408 $ .26 ====== ====== ======= ======= ====== ======
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes standards of accounting for and disclosures of derivative instruments and hedging activities. This statement is effective for fiscal years beginning after June 15, 1999. The Company has not yet determined the impact of this statement on the Company's financial condition or results of operations. 10 BELLWETHER EXPLORATION COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 5. NATURAL GAS AND CRUDE OIL HEDGING Commodity derivatives utilized as hedges include swap contracts. In order to qualify as a hedge, price movements in the underlying commodity derivative must be sufficiently correlated with the hedged commodity. Settlement of gains and losses on price swap contracts are realized monthly, generally based upon the difference between the contract price and the average closing New York Mercantile Exchange ("NYMEX") price and are reported as a component of oil and gas revenues and operating cash flows in the period realized. Gains and losses attributable to the termination of a swap contract are deferred on the balance sheet and recognized in revenue when the hedged crude oil and natural gas is sold. There were no such deferred gains or losses at June 30, 1998 or 1997. Oil and gas revenues increased $438,000 and $962,000, in the three and six months ended June 30, 1998, respectively, decreased revenues by $212,000 in the three month period in 1997, and increased revenues by $10,000 in the six month period of 1997 as a result of such hedging activity. 11 BELLWETHER EXPLORATION COMPANY ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company's strategy is to maximize long-term shareholder value through aggressive growth in reserves and cash flow using advanced technologies, implementation of a low cost structure and maintenance of a capital structure supportive of growth. The Company intends to apply an integrated interdisciplinary team approach to a balanced program of strategic acquisitions of producing oil and gas properties and an increased emphasis on technology driven development and exploration activities. The funding of these activities has historically been provided by operating cash flows, bank financing, equity placements and sale of non-core assets. The Company invested $23.7 million in oil and gas properties for the six months ended June 30, 1998 versus $13.5 million in 1997. Cash flows from operations before changes in assets and liabilities were $17.1 million for the six months ended June 30, 1998 compared to $16.3 million provided by operating activities in the same period of 1997. At June 30, 1998, the Company had $75 million of available debt capacity under the Senior Credit Facility. Partnership Transactions In April 1997, the Company purchased oil and gas properties and $13.9 million of working capital from affiliates of Torch for an adjusted purchase price at closing of $141.8 million, plus a contingent payment of $3.4 million, the amount of which was based on 1997 gas prices. The acquisitions were recorded effective April 1, 1997 and the operations of the Company include the Partnership Transactions from that date. The Partnership Transactions were financed with $34.1 million of the net of proceeds of a Common Stock offering, $97.0 million from the net proceeds of 10 7/8% Senior Subordinated Notes due 2007 (the "Offerings") and borrowings under the Senior Credit Facility. In addition, Torch was issued 150,000 shares of the Company's common stock and a warrant to purchase an additional 100,000 shares at $9.90 per share for advisory services rendered in connection with the Partnership Transactions. The warrant and shares were valued at $1.5 million and recorded as a cost of the Partnership Transactions. Change in Fiscal Year Effective July 1, 1997 the Company changed its fiscal year to the calendar year. As a result, the Company reported a six month transition period ended December 31, 1997. Fiscal 1998 Capital Expenditures During fiscal 1998, the Company anticipates investing approximately $42.0 million, primarily for development and exploratory drilling activities and leasehold and seismic acquisitions. The Company believes its cash flow provided by operating activities and the proceeds from credit facilities will be sufficient to meet these projected capital investments (See Notes 2 and 3 of the Notes to Condensed Consolidated Financial Statements). The Company continues to seek acquisition opportunities and the consummation of such a transaction will directly impact anticipated capital expenditures. 12 BELLWETHER EXPLORATION COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Gas Balancing It is customary in the industry for various working interest partners to sell more or less than their entitled share of natural gas. The settlement or disposition of existing gas balancing positions is not anticipated to materially impact the financial condition of the Company. Derivative Financial Instruments The Company periodically uses derivative financial instruments to manage oil and gas price risk. The Company has current contracts to hedge a total of 7,158,000 MMBTU of gas during the months of July through November 1998 at a weighted average NYMEX quoted price of $2.33 per MMBTU. In addition, the Company has sold calls options on 1,000 barrels of oil per day for the months of July through December 1998 at a strike price of $18.50 for a premium of $1.00 per barrel. Such call options do not qualify as hedges for accounting purposes and, therefore, will be marked to market. Oil and Gas Property Accounting The Company utilizes the full cost method of accounting for its investment in oil and gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and gas reserves are capitalized as incurred. To the extent that capitalized costs of oil and gas properties, net of accumulated depreciation, depletion and amortization, exceed the discounted future net revenues of proved oil and gas reserves net of deferred taxes, such excess capitalized costs would be charged to operations. While no such charges to operations were required at June 30, 1998 or 1997, the continuing decline in oil prices could result in discounted future net revenues below the capitalized costs of the Company's oil and gas properties. In such event, a provision for impairment of oil and gas properties could be required. 13 BELLWETHER EXPLORATION COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Results of Operations The following table sets forth certain operating information of the Company for the periods presented:
Three Months Ended Six Months Ended June 30, June 30, ---------------------- ----------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Production: Oil and condensate (MBBLs)...................... 605 633 1,177 711 Natural gas (MMCF).............................. 6,025 5,993 11,756 7,738 Average sales price: (1) Oil and condensate (per BBL).................... $ 11.29 $ 15.94 $ 11.93 $ 16.52 Natural gas (per MCF).......................... $ 2.17 $ 2.14 $ 2.10 $ 2.26 Average costs: Production expenses (per BOE)................... $ 4.21 $ 4.33 $ 4.11 $ 4.19 General and administrative expense (per BOE)(2)................................. $ 1.24 $ 1.04 $ 1.47 $ 1.29 Depreciation, depletion and amortization (per BOE)(3)................................. $ 5.42 $ 5.34 $ 5.42 $ 5.48
(1) Average sales prices exclude the effect of hedges, which increased revenues by $438,000 and $962,000 in the three and six month periods in 1998, respectively, decreased revenues by $213,000 in the three month period in 1997 and increased revenues $10,000 in the six month period in 1997. (2) Exclusive of general and administrative expenses allocated to gas plant and gas gathering facilities. (3) Excludes depreciation, depletion and amortization on gas plants of $102,000 and $561,000 in the three and six month periods in 1998, respectively and by $221,000 and $442,000 in the three and six months periods in 1997, respectively. Three Months Ended June 30, 1998 and 1997 Oil and gas revenues for the three months ended June 30, 1998 were $20.3 million, as compared to $22.7 million for the respective period in 1997. The 11% decrease in oil and gas revenues is directly related to the decline in oil prices for the three month period ended June 30, 1998. Oil prices averaged $11.29 per barrel in the three month period ended June 30, 1998 as compared to $15.94 per barrel in the comparable period of 1997. This represents a 29% decline in oil prices and translates into a $2.8 million decrease in oil revenues. Production from producing properties sold June 30, 1997 for $24 million has essentially been replaced by production from exploration and development drilling increases from recompletions and workovers of existing wells. As a result production volumes have remained flat at 605,000 and 633,000 barrels for the three month periods ended June 30, 1998 and 1997, respectively, and 6,025,000 and 5,993,000 million cubic feet (Mcf) for the three month periods ended June 30, 1998 and 1997, respectively. Gas prices increased $.03 per Mcf to $2.17 per Mcf for the three month period ended June 30, 1998 as compared to $2.14 per Mcf for the comparable period of 1997. 14 BELLWETHER EXPLORATION COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Net gas plant operating profit was $321,000 in the three months ended June 30, 1998 and $516,000 in the same period of 1997. Throughput was lower than anticipated due to reduced production volumes from the North Unit SACROC. Tertiary recovery projects which have been expanded to increase such North Unit SACROC production have begun to increase the Snyder gas plant throughput. Production expenses for the three months ended June 30, 1998 totaled $6.8 million, or 4% below the $7.1 million for the three months ended June 30, 1997. Depreciation, depletion and amortization was $8.8 million for the three months ended June 30, 1998 and $8.9 million for the three month period ended June 30, 1997. General and administrative expenses totaled $2.0 million in the three months ended June 30, 1998 as compared to $1.7 million for the comparable period of fiscal 1997. Interest expense decreased to $3.0 million for the three months ended June 30, 1998 from $3.6 million in the same period of 1997 as a result of lower average outstandings in 1998 on Bellwether's credit facility as compared to 1997. The provision for federal and state income taxes for the three months ended June 30, 1998 and 1997 are based upon a 38%, and 33% effective tax rate, respectively. Net income for the three months ended June 30, 1998 is approximately $.2 million as compared to net income of $1.4 million for the respective period of 1997. Six Months Ended June 30, 1998 and 1997 Oil and gas revenues for the six months ended June 30, 1998 were $39.7 million, as compared to $29.2 million for the respective period in 1997. The increase in revenues of 36% is attributable primarily to the 1.1 million equivalent barrel increase in production from properties acquired in the Partnership Transactions. Partially offsetting the revenue increases were unfavorable price variances. Oil prices have declined 28% from $16.52 per barrel in the six months ended June 30, 1997 to $11.93 per barrel in the current period. Natural gas prices declined 7% from $2.26 per Mcf in the six months ended June 30, 1997 to $2.10 per Mcf for the six months ended June 30, 1998. Net gas plant operating profit was $547,000 in the six months ended June 30, 1998 and $1,278,000 in the same period of 1997. The Snyder gas plant was temporarily shut in 5 days in January for work attributable to a small accident in an adjacent plant and 3 days in February to tie in new equipment. In addition, throughput was lower than anticipated due to reduced production volumes from the North Unit SACROC. Tertiary recovery projects which have been expanded to increase such North Unit SACROC production have begun to increase the Snyder gas plant throughput. 15 BELLWETHER EXPLORATION COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Production expenses for the six months ended June 30, 1998 totaled $12.9 million, or 54% over the $8.4 million for the six months ended June 30, 1997, due primarily to the effect of the Partnership Transactions. Depreciation, depletion and amortization was $17.6 million for the six months ended June 30, 1998. This amount reflects a 54% increase over the $11.4 million recorded in the comparable period in 1997 resulting from a 57% increase in oil and gas production attributable primarily to the Partnership Transactions. General and administrative expenses totaled $4.6 million in the six months ended June 30, 1998 as compared to $2.6 million for the comparable period of fiscal 1997 reflecting higher management fees and fixed costs resulting from the increase in assets and cash flows. In addition, $.3 million of costs were incurred in March 1998 as a result of the Company closing its Dallas exploration office. Interest expense increased to $6.0 million for the six months ended June 30, 1998 from $4.0 million in the same period of 1997 due to debt incurred in financing of the Partnership Transactions in April 1997. The provision (benefit) for federal and state income taxes for the six months ended June 30, 1998 and 1997 are based upon a 36% and 35% effective tax rate, respectively. Net loss for the six months ended June 30, 1998 is approximately $145,000 as compared to net income of $2.9 million for the respective period of 1997. Year 2000 The Company's technical services provider, Torch, plans to upgrade all major financial and administrative systems to ensure that such systems are Year 2000 compliant. The Year 2000 problem results from data storage of date information truncating to two places, i.e. 1998 stored as 98. Currently all programs storing year information as such recognize the year 2000 as 00 (or 1900). Torch is approaching the Year 2000 project in three steps: 1) awareness and assessment, 2) conversion or implementation and 3) validation and testing. Management does not believe that costs incurred to address the Year 2000 issue with respect to its financial and administrative systems will have a material impact on the Company's future financial results or operations. At this time, the Company is uncertain as to the impact that the Year 2000 issue will have on its operational information systems and as to how the Company will be indirectly affected by the impact that the Year 2000 issue will have on the companies with which it conducts business. 16 BELLWETHER EXPLORATION COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Forward Looking Statements This Form 10-Q contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included herein, including without limitation, statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the notes to the financial statements regarding the Company's financial position, capital budget, intent to acquire oil and gas properties, estimated quantities and net present values of reserves, business strategy, plans and objectives of management of the Company for future operations, and the effect of gas balancing, are forward-looking statements. There can be no assurances that such forward looking statements will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") include the volatility of oil and gas prices, operating hazards, government regulations, exploration risks and other factors described in the Company's Form 10-K filed with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified by the Cautionary Statements. 17 BELLWETHER EXPLORATION COMPANY PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A Proxy statement was sent to all shareholders of record as of April 9, 1998 for the following matters which were voted on at the annual meeting of shareholders held on May 22, 1998: 1. J.P. Bryan, Habib Kairouz, A.K. McLanahan, Vincent H. Buckley, Dr. Jack Birks, and Townes Pressler were elected as directors with 10,138,197 shares voting in favor, 54,166 shares abstaining and no shares voting against. J. Darby Sere' was elected with 10,135,306 shares voting in favor, 43,044 shares abstaining and no shares voting against. 2. The shareholders approved the proposal to ratify the selection of KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year ending December 31, 1998 with a total of 10,135,082 shares voting in favor, a total of 57,057 shares voting against and a total of 13,937 shares abstaining. No other matters were brought up at the meeting. A copy of the Proxy Statement was filed with the Securities and Exchange Commission on April 24, 1998 and is incorporated herein by reference. ITEM 5. OTHER INFORMATION None. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits The following exhibits are filed with this Form 10-Q and they are identified by the number indicated. 10.1 Employment contract dated June 1, 1998 between the Company and J. Darby Sere' 10.2 Employment contract dated June 1, 1998 between the Company and William C. Rankin 27 Financial Data Schedule b. Reports on Form 8-K. None. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BELLWETHER EXPLORATION COMPANY ------------------------------ (Registrant) Date: August 13, 1998 By: /s/ J. Darby Sere' ------------------------------ J. Darby Sere' Chairman and Chief Executive Officer Date: August 13, 1998 By: /s/ William C. Rankin ------------------------------ William C. Rankin Senior Vice President and Chief Financial Officer 20 EX-10.1 2 EMPLOYMENT CONTRACT - J. DARBY SERE' EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") entered into effective as of June 1, 1998, by and between J. Darby Sere (the "Executive"), and Bellwether Exploration Company, a Delaware corporation having its principal place of business at 1331 Lamar, Suite 1455, Houston, Texas 77010-3039 (the "Company"); W I T N E S S E T H: -------------------- WHEREAS, the Company wishes to employ the Executive as the President and Chief Executive Officer and to perform services incident to such position for the Company, and the Executive wishes to be so employed by the Company, all upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the premises and mutual covenants and obligations herein set forth and for other good and valuable consideration, the receipt, sufficiency and adequacy of which is hereby acknowledged, accepted and agreed to, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Term. The Company hereby employs the Executive to serve as the President and Chief Executive Officer of the Company. The term of this Agreement (the "term of this Agreement") shall be effective as of the date first above written and shall terminate thirty-six (36) months from the date hereof (the "Termination Date"), unless earlier terminated by either party hereto in accordance with the provisions of Section 5 hereof; provided, however, that upon the occurrence of a Change of Control (as such term is defined in Section 5(g) hereof ), the Termination Date shall automatically extend to a date 36 months following the date of such Change in Control without any further action by the Company or the Executive. During the term of this Agreement, the terms of employment shall be as set forth herein unless modified by the Executive and the Company in accordance with the provisions of Section 11 hereof. The Executive hereby agrees to accept such employment and to perform the services specified herein, all upon the terms and conditions hereinafter set forth. 2. Position and Responsibilities. The Executive shall serve as the President and Chief Executive Officer of the Company and shall report to, and be subject to the general direction and control of, the Board of Directors of the Company. The Executive shall have other obligations, duties, authority and power to do all acts and things as are customarily done by a person holding the same or equivalent position or performing duties similar to those to be performed by executives in corporations of similar size to the Company and shall perform such managerial duties and responsibilities for the Company as may reasonably be assigned to him by the Board of Directors of the Company and, at no additional remuneration, shall serve in such other comparable positions with any subsidiary corporation of the Company, or any partnership, limited liability company or other entity in which the Company has an interest (herein collectively called "affiliates"), as the Board of Directors of the Company may from time to time determine. Unless otherwise agreed to by the Executive, the Executive shall be based at the Company's principal executive offices located in the greater Houston, Texas metropolitan area. 3. Extent of Service. The Executive shall devote his full business time and attention to the business of the Company, and, except as may be specifically permitted by the Company, shall not be engaged in any other business activity during the term of this Agreement. The foregoing shall not be construed as preventing the Executive from making passive investments in other businesses or enterprises, provided, however, that such investments will not require services on the part of the Executive which would in any way impair the performance of his duties under this Agreement. 4. Compensation. (a) In consideration of the services to be rendered by the Executive to the Company, the Company will pay the Executive a salary ("Salary") of $228,000 per year during the Term of this Agreement. Such Salary shall be payable in conformity with the Company's prevailing practice for executives' compensation as such practice shall be established or modified from time to time. Salary payments shall be subject to all applicable federal and state withholding, payroll and other taxes. From time to time during the Term of this Agreement, the amount of the Executive's Salary may be increased by, and at the sole discretion of, the Compensation Committee of the Company's Board of Directors, which shall review the Executive's Salary no less regularly than annually. (b) Any cash or stock bonuses paid to the Executive shall be based on performance and be at the sole discretion of the Compensation Committee of the Company's Board of Directors. (c) The Company agrees to reimburse the Executive for the monthly dues incurred by him in maintaining a membership in the following clubs: The Petroleum Club of Houston, and The Houston Metropolitan Racquet Club/Houston Society. (d) During the term of this Agreement, the Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses for travel, meals, hotel accommodations, entertainment and the like incurred by him in connection with the business of the Company upon submission by him of an appropriate statement documenting such expenses as required by the Internal Revenue Code of 1986, as amended (the "Code"). (e) The Executive shall be entitled to five weeks of paid vacation during each calendar year during the term of this Agreement. Vacation shall accrue on the first day of each calendar year. The Company shall pay the Executive for any unused portion of vacation and any such unused portion of vacation shall not be carried forward to the next year. (f) During the term of this Agreement, the Company shall continue to furnish the Executive with his current company car or furnish the Executive with a lease car equivalent to the 2 car presently owned by the Company and used by the Executive. The Company shall pay the cost of insurance for such car and reimburse the Executive for the reasonable costs and expenses incurred in connection with the operation or maintenance of such automobile. (g) During the term of this Agreement, the Company shall continue to maintain and pay its share of the cost of the split dollar life insurance policy currently provided to the Executive and shall continue, at its sole cost and expense, the individual disability insurance currently provided to the Executive. In addition, the Executive shall be entitled to participate in and to receive all rights and benefits under any life, disability, medical and dental, health and accident and profit sharing or deferred compensation plans and such other plan or plans as may be implemented by the Company during the term of this Agreement. The Executive shall also be entitled to participate in and to receive all rights and benefits under any plan or program adopted by the Company for any other or group of other executive employees of the Company, including without limitation, the rights and benefits under the directors' and officers' liability insurance currently in place under the Company's insurance program for the directors and officers of the Company. 5. Termination. (a) Termination by Company; Discharge for Cause. The Company shall be entitled to terminate this Agreement and the Executive's employment with the Company at any time and for whatever reason; or at any time for "Cause" (as defined below) by written notice to the Executive. Termination of the Executive's employment by the Company shall constitute a termination for "Cause" if such termination is for one or more of the following reasons: (i) the willful failure or refusal of the Executive to render services to the Company in accordance with his obligations under this Agreement, including, without limitation, the failure or refusal of the Executive to comply with the work rules, policies, procedures, and directives as established by the Board of Directors and consistent with this Agreement; such failure or refusal to be uncured and continuing for a period of not less than fifteen (15) days after notice outlining the situation is given by the Company to the Executive; (ii) the commission by the Executive of an act of fraud or embezzlement; (iii) the commission by the Executive of any other action with the intent to injure the Company; (iv) the Executive having been convicted of a felony or a crime involving moral turpitude; (v) the Executive having misappropriated the property of the Company; (vi) the Executive having engaged in personal misconduct which materially injures the Company; or (vii) the Executive having wilfully violated any law or regulation relating to the business of the Company which results in material injury to the Company. In the event of the Executive's termination by the Company for Cause hereunder, the Executive shall be entitled to no severance or other termination benefits except for any unpaid Salary accrued through the date of termination. A termination of this Agreement by the Company without Cause pursuant to this Section 5(a) shall entitle the Executive to the Severance Payment and other benefits specified in Section 5(f) hereof. (b) Death. If the Executive dies during the term of this Agreement and while in the employ of the Company, this Agreement shall automatically terminate and the Company shall 3 have no further obligation to the Executive or his estate except that the Company shall pay to the Executive's estate that portion of his Salary and benefits accrued through the date of death. All such payments to the Executive's estate shall be made in the same manner and at the same time as the Executive's Salary. (c) Disability. If during the term of this Agreement, the Executive shall be prevented from performing his duties hereunder by reason of disability, then the Company, on 30 days' prior notice to the Executive, may terminate this Agreement. For purposes of this Agreement, the Executive shall be deemed to have become disabled when the Board of Directors of the Company, upon verification by a physician designated by the Company, shall have determined that the Executive has become physically or mentally unable (excluding infrequent and temporary absences due to ordinary illness) to perform the essential functions of his duties under this Agreement with reasonable accommodation. In the event of a termination pursuant to this paragraph (c), the Company shall be relieved of all its obligations under this Agreement, except that the Company shall pay to the Executive or his estate in the event of his subsequent death, that portion of the Executive's Salary and benefits accrued through the date of such termination. All such payments to the Executive or his estate shall be made in the same manner and at the same time as his Salary and would have been paid to him had he not become disabled. (d) Termination for Good Reason. The Executive shall be entitled to terminate this Agreement and his employment with the Company at any time upon thirty (30) days written notice to the Company for "Good Reason" (as defined below). The Executive's termination of employment shall be for "Good Reason" if such termination is a result of any of the following events: (i) the Executive is assigned any responsibilities or duties materially and adversely inconsistent with his position, duties, responsibilities and status with the Company as in effect at the date of this Agreement or as may be assigned to the Executive pursuant to Section 2 hereof, or his title or offices as in effect at the date of this Agreement or as the Executive may be appointed or elected to in accordance with Section 2 are materially and adversely changed; (ii) there is a Change in Control of the Company; (iii) there is a reduction in the Salary (as such Salary shall have been increased from time to time) payable to the Executive pursuant to Section 4(a) hereof; (iv) failure by the Company or any successor to the Company or its assets to continue to provide to the Executive any material benefit, bonus, profit sharing, incentive, remuneration or compensation plan, stock ownership or purchase plan, stock option plan, life insurance, disability plan, pension plan or retirement plan in which the Executive was entitled to participate in as at the date of this Agreement or subsequent thereto, or the taking by the Company of any action that materially and adversely affects the Executive's participation in or materially reduces his rights or benefits under or pursuant to any such plan or the failure by the Company to 4 increase or improve such rights or benefits on a basis consistent with practices in effect prior to the date of this Agreement or with practices implemented and subsequent to the date of this Agreement with respect to the executive employees of the Company generally, whichever is more favorable to the Executive, but excluding such action that is required by law; (v) without Executive's consent, the Company requires the Executive to relocate to any city or community other than one within the greater Houston, Texas metropolitan area, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations under this Agreement; or (vi) there is any material breach by the Company of any provision of this Agreement. Upon the Executive's termination of this Agreement for Good Reason, the Executive shall be entitled to the Severance Payment and other benefits specified in Section 5(f) hereof. (e) Voluntary Termination. Notwithstanding anything to the contrary herein, the Executive shall be entitled to voluntarily terminate this Agreement and his employment with the Company at his pleasure upon sixty (60) days written notice to such effect. In such event, the Executive shall not be entitled to any further compensation other than any unpaid Salary and benefits accrued through the date of termination. At the Company's option, the Company may pay to the Executive the salary and benefits that the Executive would have received during such sixty (60) day period in lieu of requiring the Executive to remain in the employment of the Company for such sixty (60) day period. (f) Termination Benefits Upon Involuntary Termination or Termination for Good Reason. In the event that (i) the Company terminates this Agreement and the Executive's employment with the Company for any reason other than for Cause (as defined in Section 5(a) hereof) or the death or disability of the Executive, or (ii) the Executive terminates this Agreement and his employment with the Company for Good Reason (as set forth in Section 5(d) hereof), then the Company shall pay the Executive, within thirty (30) days after the date of termination, an amount (the "Severance Payment") equal to one and one-half (1- 1/2) times the sum of (x) the Executive's highest annual Salary during the last two (2) years of employment immediately preceding the date of termination, plus (y) the highest annual bonus paid to the Executive during such two-year period (the "Severance Payment"). In addition, following other such termination, the Executive shall be entitled to the following benefits (collectively, the "Additional Benefits"): (i) immediate vesting of any of the Executive's options to purchase securities of the Company which were not vested by their own terms on the date of termination and the extension of the Executive's right to exercise all the Executive's options to purchase securities of the Company for a period equal to the lesser of (A) one year following the date of termination or (B) the remaining term of the applicable option; 5 (ii) immediate vesting and lapse of restrictions on any restricted stock grants outstanding at the time of such termination; (iii) continued coverage, at the Company's cost, under the Company's medical, dental and health benefits (but not life or disability insurance) set forth in Section 3(g) hereof for a period of eighteen (18) months from the date of termination; (iv) outplacement assistance in an amount not to exceed (15%) of the Executive's annual Salary in effect on the date of a Change in Control; (v) within 30 days following the date of termination and to the extent permitted by law, the Company shall contribute to the Executive's 401(k) or substitute equivalent plan an amount equal to the aggregate amount contributed by the Executive to such plan during the year in which the termination occurs plus any profit sharing contribution in a proportionate amount to the amount paid in the year prior to termination, and shall contribute to the deferred compensation plan any matching contributions to which Executive would have been entitled through the date of termination; and (vi) an amount, in cash, equal to the sum of (A) any unreimbursed expenses incurred by the Executive in the performance of his duties hereunder through the date of termination, plus (B) any accrued and unused vacation time or other unpaid benefits as of the date of termination. The parties agree that, because there can be no exact measure of the damages which would occur to the Executive as a result of termination of employment, such payments contemplated in this Section 5(f) shall be deemed to constitute liquidated damages and not a penalty and the Company agrees that the Executive shall not be required to mitigate his damages. The termination compensation in this Section 5(f) shall be paid only if the Executive executes a termination agreement releasing all legally waivable claims arising from the Executive's employment. (g) Termination and Benefits upon a Change in Control. In the event that (i) the Company terminates this Agreement and the Executive's employment with the Company for any reason other than for Cause (as defined in Section 5(a) hereof) or the death or disability of the Executive or (ii) the Executive terminates this Agreement and his employment with the Company for Good Reason (as defined in Section 5(d) hereof), within twenty four months following a Change in Control (as defined in this Section 5(g)), then in lieu of the Severance Payment contained in Section 5(f) hereof, the Company shall pay to the Executive an amount equal to three (3) times the sum of: (x) the Executive's highest annual Salary during the last two (2) years immediately preceding the termination, plus (y) the highest annual bonus paid to the Executive in such period. In the event that the excise tax relating to "parachute payments" under Section 280G of the Code applies to the Severance Payment, then the Company shall pay the Executive an additional payment in an amount such that, after payment of federal income taxes (but not the excise tax) on such additional payment, the Executive retains an amount equal to the excise tax originally imposed on 6 the Severance Payment. The Executive shall also be entitled to receive the Additional Benefits. "Change of Control" means or shall be deemed to have occurred if and when: (a) the acquisition, by whatever means (including without limitation, amalgamation, consolidation, liquidation, arrangement or merger), by a person (or two or more persons who in such acquisition have acted jointly or in concert or intend to exercise jointly or in concert any voting rights attaching to the securities acquired), directly or indirectly, of the beneficial ownership of such number of voting securities or rights to voting securities of the Company, which together with such person's then owned voting securities and rights to voting securities, if any, represent (assuming the full exercise of such rights to voting securities) more than 20% of the combined voting power of the Company's then outstanding voting securities, together with the voting securities that would be outstanding on the full exercise of the rights to voting securities acquired and such person's previously owned rights to voting securities; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, or (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company; or (b) individuals who were members of the board of directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for or on an item of business relating to the election of directors shall not constitute a majority of the board of directors following such election. (h) Survival. Notwithstanding the termination of this Agreement under this Section 5, the provisions of Sections 7 and 8 of this Agreement, and all other provisions hereof which by their terms are to be performed following the termination hereof shall survive such termination and be continuing obligations. 6. Consent and Waiver by Third Parties. The Executive hereby represents and warrants that he has obtained all necessary waivers and/or consents from third parties as to enable him to accept employment with the Company on the terms and conditions set forth herein and to execute and perform this Agreement without being in conflict with any other agreement, obligations or understanding with any such third party. 7. Confidential Information. The Executive acknowledges that in the course of his employment with the Company, he has received and will receive access to confidential information of a special and unique value concerning the Company and its business, including, without limitation, trade secrets, know- how, lists of customers, employee records, books and records relating to operations, costs of providing service and equipment, operating and maintenance costs, pricing criteria and other confidential information and knowledge concerning the business of the Company and its affiliates (hereinafter collectively referred to as "information") which the Company desires to protect. The Executive acknowledges that such information is confidential and the protection of such confidential information against unauthorized use or disclosure is of critical importance to the Company. The Executive agrees that he will not reveal such information to anyone outside the Company. The Executive further agrees that during the term of this Agreement and thereafter he will not use or disclose such information. Upon termination of his employment hereunder, the Executive shall surrender to the Company all papers, documents, writings and other property produced by him 7 or coming into his possession by or through his employment hereunder and relating to the information referred to in this Section 7, and the Executive agrees that all such materials will at all times remain the property of the Company. The obligation of confidentiality, non-use and non-disclosure of know- how set forth in this Section 7 shall not extend to know-how (i) which was in the public domain prior to disclosure by the disclosing party, (ii) which comes into the public domain other than through a breach of this Agreement, (iii) which is disclosed to the Executive after the termination of this Agreement by a third party having legitimate possession thereof and the unrestricted right to make such disclosure, or (iv) which is necessarily disclosed in the course of the Executive's performance of his duties to the Company as contemplated in this Agreement. The agreements in this Section 7 shall survive the termination of this Agreement. 8. No Solicitation. To support the agreements contained in Section 7 hereof, from the date hereof and for a period of twelve (12) months after the Executive's employment with the Company is terminated for any reason, the Executive shall not, either directly or indirectly, through any person, firm, association or corporation with which the Executive is now or may hereafter become associated, (i) hire, employ, solicit or engage any then current employee of the Company or its affiliates, or (ii) use in any competition, solicitation or marketing effort any information as to which the Executive has a duty of confidential treatment under paragraph 7 above. 9. Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed if addressed to the respective parties as follows: If to the Executive: J. Darby Sere 3618 Robinhood Houston, Texas 77005 If to the Company: Bellwether Exploration Company 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Attention: Chairman, Compensation Committee Either party hereto may designate a different address by providing written notice of such new address to the other party hereto. 10. Specific Performance. The Executive acknowledges that a remedy at law for any breach or attempted breach of Section 7 or 8 of this Agreement will be inadequate, agrees that the Company shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing 8 or posting of any bond in connection with the obtaining of any such injunctive or any other equitable relief. 11. Waivers and Modifications. This Agreement may be modified, and the rights and remedies of any provision hereof may be waived, only in accordance with this Section 11. No modification or waiver by the Company shall be effective without the consent of at least a majority of the Compensation Committee of the Board of Directors then in office at the time of such modification or waiver. No waiver by either party of any breach by the other or any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement sets forth all of the terms of the understandings between the parties with reference to the subject matter set forth herein and may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. 12. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas. 13. Severability. In case of one or more of the provisions contained in this Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 14. Arbitration. In the event that a dispute or controversy should arise between the Executive and the Company as to the meaning or application of any provision, term or condition of this Agreement, such dispute or controversy shall be settled by binding arbitration in Houston, Texas and for said purpose each of the parties hereto hereby expressly consents to such arbitration in such place. Such arbitration shall be conducted in accordance with the then existing rules and regulations of the American Arbitration Association governing commercial transactions. The expense of the arbitrator shall be borne by the Company. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date and year first above written. BELLWETHER EXPLORATION COMPANY By: /s/ VINCENT H. BUCKLEY ---------------------------------- Name: Vincent H. Buckley Title: Director--Chairman, Compensation Committee EXECUTIVE: /s/ J. DARBY SERE ----------------------------------------- J. Darby Sere 9 EX-10.2 3 EMPLOYMENT CONTRACT - WILLIAM C. RANKIN EXHIBIT 10.2 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") entered into effective as of June 1, 1998, by and between William C. Rankin (the "Executive"), and Bellwether Exploration Company, a Delaware corporation having its principal place of business at 1331 Lamar, Suite 1455, Houston, Texas 77010-3039 (the "Company"); W I T N E S S E T H: -------------------- WHEREAS, the Company wishes to employ the Executive as the Senior Vice President and Chief Financial Officer and to perform services incident to such position for the Company, and the Executive wishes to be so employed by the Company, all upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the premises and mutual covenants and obligations herein set forth and for other good and valuable consideration, the receipt, sufficiency and adequacy of which is hereby acknowledged, accepted and agreed to, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Employment and Term. The Company hereby employs the Executive to serve as the Senior Vice President and Chief Financial Officer of the Company. The term of this Agreement (the "term of this Agreement") shall be effective as of the date first above written and shall terminate twenty-four (24) months from the date hereof (the "Termination Date"), unless earlier terminated by either party hereto in accordance with the provisions of Section 5 hereof, provided, however, that upon the occurrence of a Change in Control (as such term is defined in Section 5(g) hereof) the Termination Date shall automatically extend to a date twenty-four months following the date of such Change in Control without further action by the Company or the Executive. During the term of this Agreement, the terms of employment shall be as set forth herein unless modified by the Executive and the Company in accordance with the provisions of Section 11 hereof. The Executive hereby agrees to accept such employment and to perform the services specified herein, all upon the terms and conditions hereinafter set forth. 2. Position and Responsibilities. The Executive shall serve as the Senior Vice President and Chief Financial Officer of the Company and shall report to, and be subject to the general direction and control of, the Board of Directors of the Company and the Chief Executive Officer of the Company. The Executive shall have obligations, duties, authority and power to do all acts and things as are customarily done by a person holding the same or equivalent position or performing duties similar to those to be performed by the chief financial officers in corporations of similar size to the Company and shall perform such managerial and administrative duties and responsibilities for the Company as may be reasonably assigned to him by the Board of Directors of the Company and, at no additional remuneration, shall serve in such other comparable positions with any subsidiary corporation of the Company, or any partnership, limited liability company or other entity in which the Company has an interest (herein collectively called "affiliates"), as the Board of Directors of the Company may from time to time determine. Unless otherwise agreed to by the Executive, the Executive shall be based at the Company's principal executive offices located in the greater Houston, Texas metropolitan area. 3. Extent of Service. The Executive shall devote his full business time and attention to the business of the Company, and, except as may be specifically permitted by the Company, shall not be engaged in any other business activity during the term of this Agreement. The foregoing shall not be construed as preventing the Executive from making passive investments in other businesses or enterprises, provided, however, that such investments will not require services on the part of the Executive which would in any way impair the performance of his duties under this Agreement. 4. Compensation. (a) In consideration of the services to be rendered by the Executive to the Company, the Company will pay the Executive a salary ("Salary") of $174,000 per year during the Term of this Agreement. Such Salary shall be payable in conformity with the Company's prevailing practice for executives' compensation as such practice shall be established or reasonably modified from time to time. Salary payments shall be subject to all applicable federal and state withholding, payroll and other taxes. From time to time during the Term of this Agreement, the amount of the Executive's Salary may be increased by, and at the sole discretion of, the Compensation Committee of the Company's Board of Directors, which shall review the Executive's Salary no less regularly than annually. (b) Any cash or stock bonuses paid to the Executive shall be based on performance and be at the sole discretion of the Compensation Committee of the Company's Board of Directors or pursuant to a plan adopted by the Compensation Committee. (c) The Company agrees to reimburse the Executive for the monthly dues incurred by him in maintaining a membership in the following clubs: The Houston Center Club/Houston Society. (d) During the term of this Agreement, the Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses for travel, meals, hotel accommodations, entertainment and the like incurred by him in connection with the business of the Company upon submission by him of an appropriate statement documenting such expenses as required by the Internal Revenue Code of 1986, as amended (the "Code"). (e) The Executive shall be entitled to four (4) weeks of paid vacation for the first year of his employment hereunder and five (5) weeks of paid vacation for each year thereafter during the term of this Agreement. Vacation shall accrue on the first day of each calendar year. The Company shall pay the Executive for any unused portion of vacation and any such unused portion of vacation shall not be carried forward to the next year. 2 (f) During the term of this Agreement, the Company shall pay to the Executive an automobile allowance of $500 per month. (g) During the term of this Agreement, the Company shall continue to maintain, at its sole cost and expense, the individual disability insurance currently provided to the Executive. In addition, the Executive shall be entitled to participate in and to receive all rights and benefits under any life, disability, medical and dental, health and accident and profit sharing or deferred compensation plans and such other plan or plans as may be implemented by the Company during the term of this Agreement. The Executive shall also be entitled to participate in and to receive all rights and benefits under any plan or program adopted by the Company for any other or group of other executive employees of the Company, including without limitation, the rights and benefits under the directors' and officers' liability insurance currently in place under the Company's insurance program for the directors and officers of the Company. 5. Termination. (a) Termination by Company; Discharge for Cause. The Company shall be entitled to terminate this Agreement and the Executive's employment with the Company at any time and for whatever reason; or at any time for "Cause" (as defined below) by written notice to the Executive. Termination of the Executive's employment by the Company shall constitute a termination for "Cause" if such termination is for one or more of the following reasons: (i) the willful failure or refusal of the Executive to render services to the Company in accordance with his obligations under this Agreement, including, without limitation, the failure or refusal of the Executive to comply with the work rules, policies, procedures, and directives as established by the Board of Directors and consistent with the Agreement; such failure or refusal to be uncured and continuing for a period of not less than fifteen (15) days after notice outlining the situation is given by the Company to the Executive; (ii) the commission by the Executive of an act of fraud or embezzlement; (iii) the commission by the Executive of any other action with the intent to injure the Company; (iv) the Executive having been convicted of a felony or a crime involving moral turpitude; (v) the Executive having misappropriated the property of the Company; (vi) the Executive having engaged in personal misconduct which materially injures the Company; or (vii) the Executive having wilfully violated any law or regulation relating to the business of the Company which results in material injury to the Company. In the event of the Executive's termination by the Company for Cause hereunder, the Executive shall be entitled to no severance or other termination benefits except for any unpaid Salary accrued through the date of termination. A termination of this Agreement by the Company without Cause pursuant to this Section 5(a) shall entitle the Executive to the Severance Payment and other benefits specified in Section 5(f) hereof. (b) Death. If the Executive dies during the term of this Agreement and while in the employ of the Company, this Agreement shall automatically terminate and the Company shall have no further obligation to the Executive or his estate except that the Company shall pay to the Executive's estate that portion of his Salary and benefits accrued through the date of death. All such 3 payments to the Executive's estate shall be made in the same manner and at the same time as the Executive's Salary. (c) Disability. If during the term of this Agreement, the Executive shall be prevented from performing his duties hereunder by reason of disability, then the Company, on 30 days' prior notice to the Executive, may terminate this Agreement. For purposes of this Agreement, the Executive shall be deemed to have become disabled when the Board of Directors of the Company, verified by a physician designated by the Company, shall have determined that the Executive has become physically or mentally unable (excluding infrequent and temporary absences due to ordinary illness) to perform the essential functions of his duties under this Agreement with reasonable accommodation. In the event of a termination pursuant to this paragraph (c), the Company shall be relieved of all its obligations under this Agreement, except that the Company shall pay to the Executive or his estate in the event of his subsequent death, that portion of the Executive's Salary and benefits accrued through the date of such termination. All such payments to the Executive or his estate shall be made in the same manner and at the same time as his Salary and would have been paid to him had he not become disabled. (d) Termination for Good Reason. The Executive shall be entitled to terminate this Agreement and his employment with the Company at any time upon thirty (30) days written notice to the Company for "Good Reason" (as defined below). The Executive's termination of employment shall be for "Good Reason" if such termination is a result of any of the following events which is not cured: (i) the Executive is assigned any responsibilities or duties materially and adversely inconsistent with his position, duties, responsibilities and status with the Company as in effect at the date of this Agreement or as may be assigned to the Executive pursuant to Section 2 hereof, or his title or offices as in effect at the date of this Agreement or as the Executive may be appointed or elected to in accordance with Section 2 are materially and adversely changed; (ii) there is a Change in Control of the Company; (iii) there is a reduction in the Salary (as such Salary shall have been increased from time to time) payable to the Executive pursuant to Section 4(a) hereof; (iv) failure by the Company or any successor to the Company or its assets to continue to provide to the Executive any material benefit, bonus, profit sharing, incentive, remuneration or compensation plan, stock ownership or purchase plan, stock option plan, life insurance, disability plan, pension plan or retirement plan in which the Executive was entitled to participate in as at the date of this Agreement or subsequent thereto, or the taking by the Company of any action that materially and adversely affects the Executive's participation in or materially reduces his rights or benefits under or pursuant to any such plan or the failure by the Company to increase or improve such rights or benefits on a basis consistent with practices in effect prior to the date of this Agreement or with practices implemented and subsequent to the date of this Agreement 4 with respect to the executive employees of the Company generally, whichever is more favorable to the Executive, but excluding such action that is required by law; (v) without Executive's consent, the Company requires the Executive to relocate to any city or community other than one within the greater Houston, Texas metropolitan area, except for required travel on the Company's business to an extent substantially consistent with the Executive's business obligations under this Agreement; or (vi) there is any material breach by the Company of any provision of this Agreement. Upon the Executive's termination of this Agreement for Good Reason, the Executive shall be entitled to the Severance Payment and other benefits specified in Section 5(f) hereof. (e) Voluntary Termination. Notwithstanding anything to the contrary herein, the Executive shall be entitled to voluntarily terminate this Agreement and his employment with the Company at his pleasure upon sixty (60) days written notice to such effect. In such event, the Executive shall not be entitled to any further compensation other than any unpaid Salary and benefits accrued through the date of termination. At the Company's option, the Company may pay to the Executive the salary and benefits that the Executive would have received during such sixty (60) day period in lieu of requiring the Executive to remain in the employment of the Company for such sixty (60) day period. (f) Termination Benefits Upon Involuntary Termination or Termination for Good Reason. In the event that (i) the Company terminates this Agreement and the Executive's employment with the Company for any reason other than for Cause (as defined in Section 5(a) hereof) or the death or disability of the Executive, or (ii) the Executive terminates this Agreement and his employment with the Company for Good Reason (as set forth in Section 5(d) hereof), then the Company shall pay the Executive, within thirty (30) days after the date of termination, an amount (the "Severance Payment") equal to the sum of (x) the Executive's highest annual Salary during the last two (2) years of employment immediately preceding the date of termination, plus (y) the highest annual bonus paid to the Executive during such two-year period (or, in the event such termination occurs during the first year of the term of this Agreement, an amount equal to the greater of the annualized amount of any bonus paid during such year or 25% of his annualized Salary). In addition, following such termination, the Executive shall be entitled to the following benefits (collectively, the "Additional Benefits"): (i) immediate vesting of any of the Executive's options to purchase securities of the Company which were not vested by their own terms on the date of termination and the extension of the Executive's right to exercise all of the Executive's options to purchase securities of the Company for a period equal to the lesser of (A) one year following the date of termination or (B) the remaining term of the applicable option; 5 (ii) immediate vesting and lapse of restrictions on any restricted stock grants outstanding at the time of such termination; (iii) continued coverage, at the Company's cost, under the Company's medical, dental and health benefits (but not life or disability insurance) set forth in Section 3(g) hereof for a period of eighteen (18) months from the date of termination; (iv) outplacement assistance in an amount not to exceed (15%) of the Executive's annual Salary in effect on the date of a Change in Control; (v) within 30 days following the date of termination and to the extent permitted by law, the Company shall contribute to the Executive's 401(k) or substitute equivalent plan an amount equal to the aggregate amount contributed by the Executive to such plan during the year in which the termination occurs plus any profit sharing contribution in a proportionate amount to the amount paid in the year prior to termination, and shall contribute to the deferred compensation plan any matching contributions to which Executive would have been entitled through the date of termination; and (vi) an amount, in cash, equal to the sum of (A) any unreimbursed expenses incurred by the Executive in the performance of his duties hereunder through the date of termination, plus (B) any accrued and unused vacation time or other unpaid benefits as of the date of termination. The parties agree that, because there can be no exact measure of the damages which would occur to the Executive as a result of termination of employment, such payments contemplated in this Section 5(f) shall be deemed to constitute liquidated damages and not a penalty and the Company agrees that the Executive shall not be required to mitigate his damages. The termination compensation in this Section 5(f) shall be paid only if the Executive executes a termination agreement releasing all legally waivable claims arising from the Executive's employment. (g) Termination and Benefits upon a Change in Control. In the event that (i) the Company terminates this Agreement and the Executive's employment with the Company for any reason other than for Cause (as defined in Section 5(a) hereof) or the death or disability of the Executive or (ii) the Executive terminates this Agreement and his employment with the Company for Good Reason (as defined in Section 5(d) hereof), within twenty four months following a Change in Control (as defined in this Section 5(g)), then in lieu of the Severance Payment contained in Section 5(f) hereof, the Company shall pay to the Executive an amount equal to two (2) times the sum of: (x) the Executive's highest annual Salary during the last two (2) years immediately preceding the termination, plus (y) the highest annual bonus paid to the Executive in such period (or, in the event such termination occurs during the first year of the term of this Agreement, an amount equal to the greater of the annualized amount of any bonus paid during such year or 25% of his annualized Salary). In the event that the excise tax relating to "parachute payments" under Section 280G of the Code applies to the Severance Payment, then the Company shall pay the Executive an 6 additional payment in an amount such that, after payment of federal income taxes (but not the excise tax) on such additional payment, the Executive retains an amount equal to the excise tax originally imposed on the Severance Payment. The Executive shall also be entitled to receive the Additional Benefits. "Change of Control" means or shall be deemed to have occurred if and when: (a) the acquisition, by whatever means (including without limitation, amalgamation, consolidation, liquidation, arrangement or merger), by a person (or two or more persons who in such acquisition have acted jointly or in concert or intend to exercise jointly or in concert any voting rights attaching to the securities acquired), directly or indirectly, of the beneficial ownership of such number of voting securities or rights to voting securities of the Company, which together with such person's then owned voting securities and rights to voting securities, if any, represent (assuming the full exercise of such rights to voting securities) more than 20% of the combined voting power of the Company's then outstanding voting securities, together with the voting securities that would be outstanding on the full exercise of the rights to voting securities acquired and such person's previously owned rights to voting securities; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, or (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company; or (b) individuals who were members of the board of directors of the Company immediately prior to a meeting of the shareholders of the Company involving a contest for or on an item of business relating to the election of directors shall not constitute a majority of the board of directors following such election. (h) Survival. Notwithstanding the termination of this Agreement under this Section 5, the provisions of Sections 7 and 8 of this Agreement, and all other provisions hereof which by their terms are to be performed following the termination hereof shall survive such termination and be continuing obligations. 6. Consent and Waiver by Third Parties. The Executive hereby represents and warrants that he has obtained all necessary waivers and/or consents from third parties as to enable him to accept employment with the Company on the terms and conditions set forth herein and to execute and perform this Agreement without being in conflict with any other agreement, obligations or understanding with any such third party. 7. Confidential Information. The Executive acknowledges that in the course of his employment with the Company, he has received and will receive access to confidential information of a special and unique value concerning the Company and its business, including, without limitation, trade secrets, know- how, lists of customers, employee records, books and records relating to operations, costs of providing service and equipment, operating and maintenance costs, pricing criteria and other confidential information and knowledge concerning the business of the Company and its affiliates (hereinafter collectively referred to as "information") which the Company desires to protect. The Executive acknowledges that such information is confidential and the protection of such confidential information against unauthorized use or disclosure is of critical importance to the Company. The Executive agrees that he will not reveal such information to anyone outside the Company. The Executive further agrees that during the term of this Agreement and thereafter he will 7 not use or disclose such information. Upon termination of his employment hereunder, the Executive shall surrender to the Company all papers, documents, writings and other property produced by him or coming into his possession by or through his employment hereunder and relating to the information referred to in this Section 7, and the Executive agrees that all such materials will at all times remain the property of the Company. The obligation of confidentiality, non-use and non-disclosure of know-how set forth in this Section 7 shall not extend to know-how (i) which was in the public domain prior to disclosure by the disclosing party, (ii) which comes into the public domain other than through a breach of this Agreement, (iii) which is disclosed to the Executive after the termination of this Agreement by a third party having legitimate possession thereof and the unrestricted right to make such disclosure, or (iv) which is necessarily disclosed in the course of the Executive's performance of his duties to the Company as contemplated in this Agreement. The agreements in this Section 7 shall survive the termination of this Agreement. 8. No Solicitation. To support the agreements contained in Section 7 hereof, from the date hereof and for a period of twelve (12) months after the Executive's employment with the Company is terminated for any reason, the Executive shall not, either directly or indirectly, through any person, firm, association or corporation with which the Executive is now or may hereafter become associated, (i) hire, employ, solicit or engage any then current employee of the Company or its affiliates, or (ii) use in any competition, solicitation or marketing effort any information as to which the Executive has a duty of confidential treatment under paragraph 7 above. 9. Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed if addressed to the respective parties as follows: If to the Executive: William C. Rankin 16314 Wimbledon Forest Drive Spring, Texas 77379 If to the Company: Bellwether Exploration Company 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Attention: Chairman, Compensation Committee Either party hereto may designate a different address by providing written notice of such new address to the other party hereto. 10. Specific Performance. The Executive acknowledges that a remedy at law for any breach or attempted breach of Section 7 or 8 of this Agreement will be inadequate, agrees that the Company shall be entitled to specific performance and injunctive and other equitable relief in case 8 of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or any other equitable relief. 11. Waivers and Modifications. This Agreement may be modified, and the rights and remedies of any provision hereof may be waived, only in accordance with this Section 11. No modification or waiver by the Company shall be effective without the consent of at least a majority of the Compensation Committee of the Board of Directors then in office at the time of such modification or waiver. No waiver by either party of any breach by the other or any provision hereof shall be deemed to be a waiver of any later or other breach thereof or as a waiver of any other provision of this Agreement. This Agreement sets forth all of the terms of the understandings between the parties with reference to the subject matter set forth herein and may not be waived, changed, discharged or terminated orally or by any course of dealing between the parties, but only by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. 12. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas. 13. Severability. In case of one or more of the provisions contained in this Agreement for any reason shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. 14. Arbitration. In the event that a dispute or controversy should arise between the Executive and the Company as to the meaning or application of any provision, term or condition of this Agreement, such dispute or controversy shall be settled by binding arbitration in Houston, Texas and for said purpose each of the parties hereto hereby expressly consents to such arbitration in such place. Such arbitration shall be conducted in accordance with the then existing rules and regulations of the American Arbitration Association governing commercial transactions. The expense of the arbitrator shall be borne by the Company. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date and year first above written. BELLWETHER EXPLORATION COMPANY By: /s/ J. DARBY SERE ------------------------------------ Name: J. Darby Sere Title: Chairman, President & Chief Executive Officer EXECUTIVE: /s/ WILLIAM C. RANKIN ---------------------------------------- William C. Rankin 9 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 10,918 0 14,129 0 0 28,807 290,652 (105,034) 219,847 19,634 100,000 0 0 141 93,200 219,847 39,730 40,790 30,452 41,015 4,608 0 5,955 (225) (80) (145) 0 0 0 (145) (0.01) (0.01)
-----END PRIVACY-ENHANCED MESSAGE-----