-----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, TAQh9o0UmYNp3fi/waIvi8gz4RM6ZpkWr006YmKfiuaqgHjsiXAipLQHJMMyFSIS OsDcWd6SjyVrIQvWkLefFw== 0000950134-00-002033.txt : 20000320 0000950134-00-002033.hdr.sgml : 20000320 ACCESSION NUMBER: 0000950134-00-002033 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE AFFILIATES INC CENTRAL INDEX KEY: 0000072207 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 730785597 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-07964 FILM NUMBER: 572143 BUSINESS ADDRESS: STREET 1: 110 W BROADWAY STREET 2: P O BOX 1967 CITY: ARDMORE STATE: OK ZIP: 73402-1967 BUSINESS PHONE: 4052234110 MAIL ADDRESS: STREET 1: P O BOX 1967 STREET 2: 110 WEST BROADWAY CITY: ARDMORE STATE: OK ZIP: 73402-1967 10-K405 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1999 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission file number: 0-7062 NOBLE AFFILIATES, INC. (Exact name of registrant as specified in its charter) Delaware 73-0785597 (State of incorporation) (I.R.S. employer identification number) 110 West Broadway Ardmore, Oklahoma 73401 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (580) 223-4110 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of Each Exchange on Title of Each Class Which Registered ------------------- ----------------- Common Stock, $3.33-1/3 par value New York Stock Exchange, Inc. Preferred Stock Purchase Rights New York Stock Exchange, Inc. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of Common Stock held by nonaffiliates as of February 14, 2000: $1,089,000,000. Number of shares of Common Stock outstanding as of February 14, 2000: 56,328,163 DOCUMENT INCORPORATED BY REFERENCE Portions of the Registrant's definitive proxy statement for the 2000 Annual Meeting of Stockholders to be held on April 25, 2000, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1999, are incorporated by reference into Part III. ================================================================================ 2
TABLE OF CONTENTS PART I. Item 1. Business...................................................................................... 1 General........................................................................................ 1 Oil and Gas.................................................................................... 2 Exploration Activities.................................................................. 2 Production Activities .................................................................. 3 Acquisitions of Oil and Gas Properties, Leases and Concessions.......................... 4 Marketing............................................................................... 4 Regulations and Risks................................................................... 5 Competition............................................................................. 6 Unconsolidated Subsidiary...................................................................... 7 Employees...................................................................................... 7 Item 2. Properties..................................................................................... 7 Offices........................................................................................ 7 Oil and Gas.................................................................................... 7 Item 3. Legal Proceedings.............................................................................. 15 Item 4. Submission of Matters to a Vote of Security Holders............................................ 16 Executive Officers of the Registrant........................................................... 16 PART II. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................... 18 Item 6. Selected Financial Data........................................................................ 20 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 21 Item 7a. Quantitative and Qualitative Disclosures About Market Risk..................................... 30 Item 8. Financial Statements and Supplementary Data.................................................... 33 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........... 58 PART III. Item 10. Directors and Executive Officers of the Registrant............................................. 59 Item 11. Executive Compensation......................................................................... 59 Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 59 Item 13. Certain Relationships and Related Transactions................................................. 59 PART IV Item 14. Financial Statement Schedules, Exhibits and Reports on Form 8-K................................ 59
ii 3 PART I ITEM 1. BUSINESS. Part I and Part II of this Annual Report on Form 10-K include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts included in this Annual Report on Form 10-K and the documents incorporated herein by reference regarding the Company's estimates of oil and gas reserves and the future net cash flows attributable thereto, anticipated capital expenditures, projected timing of planned projects or activities, business strategy, plans and objectives of management of the Company for future operations and industry conditions, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") include without limitation future production levels, future prices and demand for oil and gas, results of future exploration and development activities, future operating and development costs, the effect of existing and future laws and governmental regulations (including those pertaining to the environment) and the political and economic climate of the United States and the foreign countries in which the Company operates from time to time, as discussed in this Annual Report on Form 10-K and the other documents of the Company 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 in their entirety by the Cautionary Statements. GENERAL Noble Affiliates, Inc. is a Delaware corporation organized in 1969, and is principally engaged, through its subsidiaries, in the exploration, production and marketing of oil and gas. In this report, unless otherwise indicated or the context otherwise requires, the "Company" or the "Registrant" refers to Noble Affiliates, Inc. and its subsidiaries, "Samedan" refers to Samedan Oil Corporation and its subsidiaries, "EDC" refers to Energy Development Corporation and its subsidiaries, "NGM" refers to Noble Gas Marketing, Inc. and its subsidiary, and "NTI" refers to Noble Trading, Inc. Samedan's subsidiaries include EDC. In this report, quantities of oil or natural gas liquids are expressed in barrels ("BBLS"); and quantities of natural gas are expressed in thousands of cubic feet ("MCF"), millions of cubic feet ("MMCF"), billions of cubic feet ("BCF"), trillions of cubic feet ("TCF") and million British Thermal Units ("MMBTU"). Equivalent units are expressed in thousand cubic feet of gas equivalents ("MCFe"), million cubic feet of gas equivalents ("MMCFe"), billion cubic feet of gas equivalents ("BCFe"), trillion cubic feet of gas equivalents ("TCFe"), converting oil to gas at one barrel of oil equaling six thousand cubic feet of gas, or barrel of oil equivalents ("BOE") converting gas to oil at six thousand cubic feet of gas to one barrel of oil. The Company's wholly-owned subsidiary, NGM, markets the majority of the Company's natural gas as well as third-party gas. The Company's wholly-owned subsidiary, NTI, markets a portion of the Company's oil as well as third-party oil. For more information regarding NGM's operations and NTI's operations, see "Item 1. Business--Oil and Gas--Marketing" of this Form 10-K. The Company has one unconsolidated subsidiary, Atlantic Methanol Capital Company ("AMCCO"), a 50 percent owned joint venture that indirectly owns 90 percent of Atlantic Methanol Production Company ("AMPCO"), which is constructing a methanol plant in Equatorial Guinea. AMCCO is accounted for using the equity method within the Registrant's wholly-owned subsidiary, Samedan of North Africa, Inc. For more information, see "Item 1. Business--Unconsolidated Subsidiary" of this Form 10-K. 1 4 OIL AND GAS The Company's wholly-owned subsidiary, Samedan, directly or through various arrangements with other companies, investigates potential oil and gas properties, seeks to acquire exploration rights in areas of interest and conducts exploration activities. Exploration activities include geophysical and geological evaluation and exploratory drilling on properties for which the Company has exploration rights. Samedan has been engaged in the exploration, production and marketing of oil and gas since 1932. Samedan has exploration, exploitation and production operations domestically and internationally. The domestic areas consist of: offshore in the Gulf of Mexico and California; the Gulf Coast Region (Louisiana, New Mexico and Texas); the Mid-Continent Region (Oklahoma and Southern Kansas); and the Rocky Mountain Region (Colorado, Montana, North Dakota, Wyoming and California). The international areas of operations include Argentina, China, Denmark, Ecuador, Equatorial Guinea, the Mediterranean Sea, the North Sea and the United Kingdom. For more information regarding Samedan's oil and gas properties, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Exploration Activities Domestic Offshore. Samedan has been actively engaged in exploration, exploitation and development of oil and gas properties in the Gulf of Mexico (offshore Texas, Louisiana, Mississippi and Alabama) and offshore California since 1968. Generally, offshore properties are characterized by prolific reservoirs with high production rates, which therefore tend to deplete more rapidly than the Company's onshore properties. The Company's current offshore production is derived from 241 wells operated by Samedan and 420 wells operated by others. During the past 31 years, Samedan has drilled or participated in the drilling of 922 gross wells offshore. At December 31, 1999, the Company held offshore federal leases covering 1,034,106 gross developed acres and 826,514 gross undeveloped acres on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Domestic Onshore. Samedan has been actively engaged in exploration, exploitation and development of oil and gas properties in three regions. The Gulf Coast Region covers onshore Louisiana, New Mexico and Texas. The Company has been active in this area since the 1930's. Properties in the Gulf Coast Region are characterized by gas reservoirs with strong production rates and oil fields with primary and secondary recovery operations that tend to deplete more gradually than the Company's offshore properties. The Mid-Continent Region covers Oklahoma and Southern Kansas. The Company has been active in this area since 1932. Properties in the Mid-Continent Region tend to be characterized by stable oil and gas production from primary and secondary recovery operations and the reservoirs tend to produce for longer periods compared to the Company's offshore properties. The Rocky Mountain Region covers Colorado, Montana, North Dakota, Wyoming and California. Reservoirs in the Rocky Mountain Region are primarily characterized by oil and gas production from primary, secondary and horizontally drilled wells. The Rocky Mountain Region has two unitized gas fields each with an estimated reserve life of 50 years. Samedan's current onshore production is derived from 1,541 wells operated by Samedan and 1,407 wells operated by others. At December 31,1999, the Company held 627,086 gross developed acres and 306,643 gross undeveloped acres onshore on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this 10-K. Argentina. Samedan, through its subsidiary EDC Argentina, Inc., has been actively engaged in exploration, exploitation and development of oil and gas properties in Argentina since 1996. The Company's producing properties are located in southern Argentina in the El Tordillo field, which is characterized by secondary recovery oil production from a 10,000 acre reservoir. At December 31, 1999, the Company held 28,988 gross developed acres and 1,235,105 gross undeveloped acres in southern and northwestern Argentina on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. 2 5 China. Samedan, through its subsidiary EDC China, Inc., has been actively engaged in exploration, exploitation and development of oil and gas properties in China since 1996. The Company has two concessions in South Bo Hai Bay, offshore China. These concessions, Cheng Dao Xi and Cheng Zi Kou, are contiguous and adjoin non-owned production in the southern portion of Bo Hai Bay. At December 31, 1999, the Company held 229,066 gross undeveloped acres in China, on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Ecuador. Samedan, through its subsidiary EDC Ecuador Ltd., has been actively engaged in exploration, exploitation and development of oil and gas properties in Ecuador since 1996. The Company's objective in Ecuador is to develop a gas market for the Amistad gas field (offshore Ecuador) which was discovered in the late 1970's. The concession covers 864,126 gross undeveloped acres and encompasses the Amistad field. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Equatorial Guinea. Samedan has been actively engaged in exploration, exploitation and development of oil and gas properties offshore Equatorial Guinea (West Africa) since 1990. The primary offshore Equatorial Guinea production is from the Alba field. The field produces gas and condensate. The gas production will be utilized as feedstock by a methanol plant currently under construction. The plant will be owned by AMPCO, in which the Company indirectly owns a 45 percent interest. For more information on the methanol plant, see "Item 1. Business--Unconsolidated Subsidiary" of this Form 10-K. Based on reserve estimates, the Alba field can deliver gas sufficient for the plant to operate for 30 years. At December 31, 1999, the Company held 26,650 gross developed acres and 285,307 gross undeveloped acres offshore Equatorial Guinea, on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. United Kingdom and the North Sea. Samedan, through its subsidiary EDC (Europe) Limited (formerly Brabant Petroleum Limited), has been actively engaged in exploration, exploitation and development of oil and gas properties in the United Kingdom and the North Sea since 1996. The Company's current oil and gas production in the United Kingdom and the North Sea is derived from 158 wells operated by others. Reservoirs in the North Sea tend to have the same attributes as Gulf of Mexico reservoirs. At December 31, 1999, the Company held 128,661 gross developed acres and 404,669 gross undeveloped acres on which the Company currently intends to conduct future exploration activities. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Denmark. Samedan, through its subsidiary EDC Denmark, Inc., owns a 40 percent interest in the offshore Denmark license 13/98 comprising Block 5505/09 and the southwest portion of Block 5505/05. The license encompasses 80,902 gross undeveloped acres with water depths ranging from 115 feet to 180 feet. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Mediterranean Sea. In 1998, the Company, through its subsidiary, Samedan, Mediterranean Sea, entered into a participation agreement with a 40 percent interest covering 11 licenses, permits or leases encompassing 1,062,675 gross undeveloped acres. The acreage is located about 20 miles offshore Israel in water depths ranging from 700 feet to 5,000 feet. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Production Activities Operated Property Statistics. The percentage of oil and gas wells operated and the percentage of sales volume from operated properties are shown in the following table as of December 31:
1999 1998 1997 -------------- --------------- --------------- (in percentages) Oil Gas Oil Gas Oil Gas - ---------------- ---- --- --- --- --- --- Operated well count basis 22.8 61.2 20.7 58.9 15.1 60.8 Operated sales volume basis 48.1 59.8 45.3 59.2 48.8 63.5
3 6 Net Production. The following table sets forth Samedan's net oil and natural gas production including royalty, for the three years ended December 31:
1999 1998 1997 ---- ---- ---- Oil Production (million BBLS) 11.0 13.6 14.0 Gas Production (BCF) 166.1 206.8 206.4
Oil and Gas Equivalents. The following table sets forth Samedan's net production stated in oil and gas equivalent volumes, for the three years ended December 31:
1999 1998 1997 ---- ---- ---- Total Oil Equivalents (million BOE) 38.6 48.1 48.4 Total Gas Equivalents (BCFe) 231.8 288.3 290.3
Acquisitions of Oil and Gas Properties, Leases and Concessions During 1999, Samedan spent approximately $.1 million on the purchase of producing oil and gas properties. Samedan spent approximately $48.4 million in 1998 and $3.9 million in 1997 on producing properties. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. During 1999, Samedan spent approximately $7.9 million on acquisitions of unproved properties. These properties were acquired primarily through various offshore lease sales, domestic onshore lease acquisitions and international concession negotiations. For more information, see "Item 2. Properties--Oil and Gas" of this Form 10-K. Marketing NGM seeks opportunities to enhance the value of the Company's gas by marketing directly to end users and accumulating gas to be sold to gas marketers and pipelines. During 1999, approximately 72 percent of NGM's total sales were to end users. NGM is also actively involved in the purchase and sale of gas from other producers. Such third-party gas may be purchased from non-operators who own working interests in the Company's wells or from other producers' properties in which the Company may not own an interest. NGM, through its wholly-owned subsidiary, Noble Gas Pipeline, Inc., engages in the installation, purchase and operation of gas gathering systems. Samedan and EDC have short-term gas sales contracts with NGM, whereby Samedan and EDC are paid an index price for all gas sold to NGM. Samedan and EDC sold 59 percent of their production to NGM in 1999. Sales, including hedging transactions, are recorded as gathering, marketing and processing revenues. NGM records as cost of sales in gathering, marketing and processing costs, the amount paid to Samedan, EDC and third parties. All intercompany sales and expenses are eliminated in the Company's consolidated financial statements. The Company has a small number of long-term gas contracts representing less than five percent of its total gas sales. Oil produced by the Company is sold to purchasers in the United States and foreign locations at various prices depending on the location and quality of the oil. The Company has no long-term contracts with purchasers of its oil production. Crude oil and condensate are distributed through pipelines and by trucks to gatherers, transportation companies and end users. NTI markets a portion of the Company's oil as well as certain third-party oil. The Company records all of NTI's sales as gathering, marketing and processing revenues and records cost of sales in gathering, marketing and processing costs. All intercompany sales and expenses are eliminated in the Company's consolidated financial statements. 4 7 Oil prices are affected by a variety of factors that are beyond the control of the Company. The principal factors influencing the prices received by producers of domestic crude oil continue to be the pricing and production of the members of the Organization of Petroleum Exporting Countries. The Company's average oil price increased $4.63 from $11.66 per BBL in 1998 to $16.29 per BBL in 1999. Due to the volatility of oil prices, the Company, from time to time, has used derivative hedging and may do so in the future as a means of controlling its exposure to price changes. For additional information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", "Item 7a. Quantitative and Qualitative Disclosure About Market Risk" and "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. Substantial competition in the natural gas marketplace continued in 1999. Gas prices, which were once determined largely by governmental regulations, are now being influenced to a greater extent by the marketplace. The Company's average gas price increased from $2.18 per MCF in 1998 to $2.23 per MCF in 1999. Due to the volatility of gas prices, the Company, from time to time, has used derivative hedging and may do so in the future as a means of controlling its exposure to price changes. For additional information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", "Item 7a. Quantitative and Qualitative Disclosure About Market Risk" and "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. The largest single non-affiliated purchaser of the Company's oil in 1999 was Plains Marketing, L.P., which accounted for approximately 23 percent of the Company's oil sales, representing approximately eight percent of total revenues. The five largest purchasers accounted for approximately 41 percent of total oil sales. The largest single non-affiliated purchaser of the Company's gas in 1999 accounted for approximately six percent of its gas sales. The five largest purchasers accounted for approximately 19 percent of total gas sales. The Company does not believe that its loss of a major oil or gas purchaser would have a material effect on the Company. Regulations and Risks General. Exploration for and production and sale of oil and gas are extensively regulated at the national, state and local levels. Oil and gas development and production activities are subject to various state laws and regulations (and orders of regulatory bodies pursuant thereto) governing a wide variety of matters, including allowable rates of production, prevention of waste and pollution, and protection of the environment. Laws affecting the oil and gas industry are under constant review for amendment or expansion and frequently increase the regulatory burden on companies. Numerous governmental departments and agencies are authorized by statute to issue rules and regulations binding on the oil and gas industry. Many of these governmental bodies have issued rules and regulations that are often difficult and costly to comply with, and that carry substantial penalties for failure to comply. These laws, regulations and orders may restrict the rate of oil and gas production below the rate that would otherwise exist in the absence of such laws, regulations and orders. The regulatory burden on the oil and gas industry increases its costs of doing business and consequently affects the Company's profitability. Certain Risks. In Samedan's exploration operations, losses may occur before any accumulation of oil or gas is found. If oil or gas is discovered, no assurance can be given that sufficient reserves will be developed to enable Samedan to recover the costs incurred in obtaining the reserves or that reserves will be developed at a rate sufficient to replace reserves currently being produced and sold. Samedan's international operations are also subject to certain political, economic and other uncertainties including, among others, risk of war, expropriation, renegotiation or modification of existing contracts, taxation policies, foreign exchange restrictions, international monetary fluctuations and other hazards arising out of foreign governmental sovereignty over areas in which Samedan conducts operations. Environmental Matters. As a developer, owner and operator of oil and gas properties, the Company is subject to various federal, state, local and foreign country laws and regulations relating to the discharge of materials into, and the protection of, the environment. The unauthorized release or discharge of oil or certain other regulated substances from Samedan's domestic onshore or offshore facilities could subject Samedan to liability under federal 5 8 laws and regulations, including the Oil Pollution Act of 1990, the Outer Continental Shelf Lands Act and the Federal Water Pollution Control Act, as amended. These laws, among others, impose liability for such a release or discharge for pollution cleanup costs, damage to natural resources and the environment, various forms of direct and indirect economic losses, civil or criminal penalties, and orders or injunctions, including those that can require the suspension or cessation of operations causing or impacting or potentially impacting such release or discharge. The liability under these laws for a substantial such release or discharge, subject to certain specified limitations on liability, may be extraordinarily large. If any pollution was caused by willful misconduct, willful negligence or gross negligence within the privity and knowledge of Samedan, or was caused primarily by a violation of federal regulations, the Federal Water Pollution Control Act provides that such limitations on liability do not apply. Certain of Samedan's facilities are subject to regulations that require the preparation and implementation of spill prevention control and countermeasure plans relating to the prevention of, and preparation for, the possible discharge of oil into navigable waters. The Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), also known as "Superfund," imposes liability on certain classes of persons that generated a hazardous substance that has been released into the environment or that own or operate facilities or vessels onto or into which hazardous substances are disposed. The Resource Conservation and Recovery Act, as amended, ("RCRA") and regulations promulgated thereunder, regulate hazardous waste, including its generation, treatment, storage and disposal. CERCLA currently exempts crude oil, and RCRA currently exempts certain oil and gas exploration and production drilling materials, such as drilling fluids and produced waters, from the definitions of hazardous substance and hazardous waste, respectively. Samedan's operations, however, may involve the use or handling of other materials that may be classified as hazardous substances and hazardous wastes, and therefore, these statutes and regulations promulgated under them would apply to Samedan's generation, handling and disposal of these materials. In addition, there can be no assurance that such exemptions will be preserved in future amendments of such acts, if any, or that more stringent laws and regulations protecting the environment will not be adopted. Certain of Samedan's facilities may also be subject to other federal environmental laws and regulations, including the Clean Air Act with respect to emissions of air pollutants. Certain state or local laws or regulations and common law may impose liabilities in addition to, or restrictions more stringent than, those described herein. The environmental laws, rules and regulations of foreign countries are generally less stringent than those of the United States, and therefore, the requirements of such jurisdictions do not generally impose an additional compliance burden on Samedan or on its subsidiaries. Samedan has made and will continue to make expenditures in its efforts to comply with environmental requirements. The Company does not believe that it has to date expended material amounts in connection with such activities or that compliance with such requirements will have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company. Although such requirements do have a substantial impact upon the energy industry, generally they do not appear to affect the Company any differently or to any greater or lesser extent than other companies in the industry. Insurance. The Company believes that it has such insurance coverages as are customary in the industry and that it is adequately protected by public liability and physical damage insurance. Competition The oil and gas industry is highly competitive. Since many companies and individuals are engaged in exploring for oil and gas and acquiring oil and gas properties, a high degree of competition for desirable exploratory and producing properties exists. A number of the companies with which Samedan competes are larger and have greater financial resources than Samedan. 6 9 The availability of a ready market for Samedan's oil and gas production depends on numerous factors beyond its control, including the level of consumer demand, the extent of worldwide oil and gas production, the costs and availability of alternative fuels, the costs and proximity of pipelines and other transportation facilities, regulation by state and federal authorities and the costs of complying with applicable environmental regulations. UNCONSOLIDATED SUBSIDIARY The Company has one unconsolidated subsidiary, AMCCO, a 50 percent owned joint venture that owns an indirect 90 percent interest in AMPCO. The Company accounts for its interest in AMCCO using the equity method within the Company's wholly-owned subsidiary, Samedan of North Africa, Inc. For more information, see "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. Samedan is participating with a 50 percent expense interest (45 percent ownership net of a five percent government carried interest) to construct a methanol plant in Equatorial Guinea. The total projected cost of the plant and supporting facilities is estimated to be $423.8 million including various contingencies and capitalized interest, with the Company responsible for $211.9 million. The plant is designed to produce 2,500 metric tons of methanol per day, which equates to approximately 20,000 BBLS per day. At this level of production, the plant would use approximately 120 MMCF of gas per day from the Alba field as feedstock. Reserve estimates indicate the Alba field can deliver sufficient gas for the plant to operate 30 years. The construction contract stipulates that first production should be achieved by the first quarter of 2001. Current marketing plans are to use two tankers, which are under long-term contracts, to transport the methanol to markets in Europe and the United States. During 1999, AMCCO issued $125 million senior secured notes due 2004 that are not included in the Company's balance sheet. For more information, see "Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K. EMPLOYEES During the year, the total number of employees of the Company decreased from 630 at December 31, 1998, to 556 at December 31, 1999. ITEM 2. PROPERTIES. OFFICES The principal executive office of the Registrant is located in Ardmore, Oklahoma. The principal office of Samedan is in Ardmore, Oklahoma. Samedan maintains offices for international, domestic onshore, and domestic offshore operations in Houston, Texas. Samedan also maintains offices in the United Kingdom, China and Ecuador. NGM's office is located in Houston, Texas, and NTI's office is located in Ardmore, Oklahoma. OIL AND GAS Samedan, directly or through various arrangements with others, searches for potential oil and gas properties, seeks to acquire exploration rights in areas of interest and conducts exploratory activities. These activities include geophysical and geological evaluation and exploratory drilling, where appropriate, on properties for which it acquired exploration rights. During 1999, Samedan drilled or participated in the drilling of 113 gross (49.0 net) wells, comprised of 41 gross (7.4 net) international wells and 72 gross (41.6 net) domestic wells. For more information regarding Samedan's oil and gas properties, see "Item 1. Business--Oil and Gas" of this Form 10-K. Domestic Offshore. In the Gulf of Mexico during 1999, Samedan drilled or participated in the drilling of 28 gross wells, of which 11 were exploratory wells (5.7 net) and 17 were development wells (8.7 net) in federal and state waters offshore Texas, Louisiana, Mississippi and Alabama. Of the 28 gross wells, 22 wells (11.8 net) were completed as productive and 6 wells (2.6 net) were abandoned as dry holes. Samedan was high bidder on 19 tracts in the two federal lease sales during the year and was awarded 18 new leases, of which eight are located in water depths greater than 1,000 feet. The Company intends to remain active in these areas of the Gulf of Mexico. 7 10 In 1999, the Company drilled four 100 percent owned wells on its High Island A-517 Block, offshore Texas. At year end, the property was producing approximately 51.1 MMCF of gas per day, compared to .6 MMCF at the beginning of the year. Drilling and completion operations were finalized on Samedan's 25 percent owned Vermilion 379 property, located offshore Louisiana in 347 feet of water. The field commenced production in July and was producing approximately 2,100 BBLS of oil and 20.7 MMCF of gas per day at year end. Samedan drilled a second successful well on Viosca Knoll 251 which will allow the Company to move forward with development plans for the area. The Company expects a four-pile, six-slot drilling and production platform to be installed in the third quarter of 2000. Upon installation of a 32-mile pipeline, sales should commence in the fourth quarter of 2000. Samedan owns a 40 percent working interest in the 69,120 gross acre unit. Samedan mobilized a drilling rig on its Main Pass 305/306 "D" platform in the fourth quarter. Two successful infill oil wells were drilled with four more scheduled to be drilled early in 2000, which should increase production by approximately 1,500 BBLS per day if all six wells are successful. The Company owns 100 percent of the working interest in the field. In late 1999, the Company made three apparent discoveries; West Cameron 613, West Delta 59 and Vermilion 408. West Cameron 613, in which Samedan owns 25 percent, logged 140 feet of gas pay during November. One additional well may be drilled prior to installation of production facilities. At West Delta 59, Samedan encountered approximately 40 feet of oil and 276 feet of gas pay in 11 zones, as determined from electric logs. The well was finalized in December and development plans are being formulated. The field, in which the Company owns 25 percent, is expected to commence production in the third quarter of 2000. Samedan logged 167 feet of oil and gas pay in Vermilion 408 during December. The well is located in 388 feet of water and development options will be evaluated early in 2000. The Company owns a 20 percent interest in the property. Domestic Onshore. Samedan participated in drilling 44 gross (27.2 net) domestic onshore wells during 1999. That compares to 97 gross (56.2 net) wells drilled during the previous year. During 1999, Samedan took advantage of the decreased drilling activity to review its producing property inventory. As a result of the review, the Company sold numerous wells and fields that did not fit its long-term strategy. Samedan received approximately $57.5 million for the 5.1 million BBLS of oil and 34.2 BCF of gas reserves sold. Subsequent to the reduction in onshore producing properties, Samedan consolidated all domestic onshore operations to Houston. The Oklahoma City and Denver offices were closed in the fourth quarter of 1999. The Company believes that the office consolidation will result in improved efficiency and cost reduction. With current product prices, the Company expects to increase onshore drilling activity and exploration expenditures. The Company intends to continue its activities on prospects in the Gulf Coast, Rocky Mountain and the Mid-Continent with larger ownership participation. One such prospect is the Cat Creek #1-19 well located in Beckham County, Oklahoma. The well, in which the Company has a 52 percent participation, is targeted to test the Hunton formation at approximately 25,000 feet. The Company projects potential reserves of 25 BCF of gas and expects the well to cost $7.5 million and take 300 days to drill. Argentina. The Company participated with a 13 percent working interest in 37 exploitation wells drilled in the El Tordillo field during 1999. At 1999 year end, the field was producing approximately 2,400 BBLS of oil per day, net to the Company's interest. The 2000 budget proposed by the field operator consists of approximately 60 additional exploitation wells. 8 11 In October 1999, the Company was awarded exploratory block CCyB-17/A containing approximately 1,150,000 gross undeveloped acres in the Cuyo Basin near Mendosa, Argentina. The Company has a 100 percent working interest and will commence seismic activities in 2000. China. The Company is moving forward with the development of the Cheng Dao Xi oil field, located offshore China in the Bo Hai Bay. The field has been partially delineated by wells drilled by the Company in 1998 and prior to that by the Chinese National Oil Company. Development plans include installation of two 18-slot drilling and production platforms and a five-mile pipeline. Development cost of the field is approximately $122 million, which will be shared 57 percent by the Company and 43 percent by the Chinese National Oil Company. First oil production from the field is projected for the fourth quarter of 2001. The Company drilled an exploratory well on its Cheng Zi Kou permit during the year. The well logged 45 feet of oil pay, but tests were inconclusive. The Company will analyze the well test information, logs and other data in order to formulate a second test program. Ecuador. The Company owns a 100 percent working interest in the Block 3 concession, located offshore Ecuador in the Gulf of Guayaquil. The concession includes 864,126 gross undeveloped acres and encompasses the Amistad gas field. The Company constructed a drilling and production platform for the Amistad gas field, which is scheduled to be installed in March 2000. A platform drilling rig has been contracted to drill four wells which should take approximately five months. In 1999, the Company recorded 87.5 BCF of gas reserves associated with the field. The Company expects the drilling results will add additional gas reserves in 2000. Gas from the field is targeted to supply an electrical power generation facility to be constructed near the city of Machala. While various partners for electrical power generation projects are being evaluated, the Company has made a deposit with General Electric to hold two combined cycle units which will be capable of producing 200 megawatts of electricity. The units would be available for installation in the first quarter of 2001 and ready to receive gas approximately six months later. Equatorial Guinea. Plans to expand the gas and condensate production from the Company's Alba Field are well underway. The overall plan encompasses replacing the existing minimal production platform, installing a second production platform, drilling four development wells and installing gas reinjection and pipeline facilities. The platforms are fabricated and scheduled to be installed in April 2000. Drilling operations are expected to be conducted between May 2000 and April 2001. Overall field expansion is projected to be completed by April 2001. The Company's net share of the expansion cost is approximately $46.8 million, of which $31.1 million is budgeted as a 2000 expenditure. When the expansion is completed, the field should be capable of increasing production by approximately 160 MMCF of gas per day, 10,000 BBLS of condensate per day and 800 BBLS of natural gas liquids per day. The Company owns a 34.8 percent working interest in the field. The Company indirectly owns a 45 percent interest in AMPCO, which is constructing a methanol plant to use gas from the Alba field. The plant is designed to produce 2,500 metric tons of methanol per day, which is the equivalent of approximately 20,000 BBLS per day. The plant is designed to use approximately 120 MMCF of gas per day and is approximately 49 percent complete. It is being built under a turnkey construction contract and is projected to be completed in the second quarter of 2001. For additional information, see "Item 1. Business--Unconsolidated Subsidiary" of this Form 10-K. North Sea. Low oil prices significantly reduced drilling and workover activity on the Company's North Sea properties. The Company participated in two gross (.6 net) wells for the year. The Company acquired approximately 175 square miles of 3-D seismic to evaluate its 28/15 and 29/11 blocks, which the Company will operate with a 40 percent interest. Denmark. The Company owns a 40 percent working interest in license 13/98, located offshore Denmark. The license encompasses 80,902 gross undeveloped acres with water depths ranging from 115 feet to 180 feet. 9 12 In 1999, the Company acquired approximately 686 square miles of 3-D seismic to evaluate the Company's license 13/98. Mediterranean Sea. The Company has an offshore Israel exploration participation agreement, which covers 11 licenses, permits or leases encompassing 1,062,675 gross undeveloped acres. The acreage is located in water depths ranging from 700 feet to 5,000 feet. During 1999, the Company made an exciting gas discovery and has been awarded a lease granting the right to develop and produce hydrocarbons. The Company drilled the Noa #1 well in 2,550 feet of water, approximately 20 miles off the coast. The well logged 64 feet of apparent gas pay in two zones. The well tested gas at the rate of 30 MMCF per day with minimal drawdown of bottom hole pressure. The well was temporarily abandoned pending further delineation drilling in the area. The Company has a three well commitment for a semi-submersible rig, which is currently on location. The Company has shot approximately 3,300 miles of additional seismic lines to assist with selecting drilling locations. It is anticipated that the three well program will delineate sufficient reserves to move forward with field development. Net Exploratory and Developmental Wells. The following table sets forth, for each of the last three years, the number of net exploratory and development wells drilled by or on behalf of Samedan. An exploratory well is a well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. A development well, for purposes of the following table and as defined in the rules and regulations of the Securities and Exchange Commission, is a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. Completion refers to the installation of permanent equipment for the production of oil or gas, or in the case of a dry hole, to the reporting of abandonment to the appropriate agency.
Net Exploratory Wells Net Development Wells -------------------------------------- ---------------------------------------- Productive(1) Dry(2) Productive(1) Dry(2) -------------------------------------- ---------------------------------------- Year Ended December 31, U.S. Int'l U.S. Int'l U.S. Int'l U.S. Int'l - ------------ ----- ----- ----- ----- ------ ----- ---- ----- 1999 6.97 2.00 6.14 .55 26.10 4.82 2.42 .01 1998 15.63 .13 15.16 .33 42.21 3.92 10.71 1997 13.98 .76 25.08 3.79 155.93 3.13 7.89
- --------------- (1) A productive well is an exploratory or a development well that is not a dry hole. (2) A dry hole is an exploratory or development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. At January 31, 2000, Samedan was drilling 10 gross (4.4 net) exploratory wells and 12 gross (2.3 net) development wells. These wells are located in Oklahoma, Texas, Louisiana, the Gulf of Mexico and Argentina. These wells have objectives ranging from approximately 4,800 feet to 25,000 feet. The drilling cost to Samedan of these wells is approximately $13.4 million if all are dry and approximately $19.1 million if all are completed as producing wells. 10 13 Oil and Gas Wells. The number of productive oil and gas wells in which Samedan held an interest as of December 31, were as follows:
1999(1)(2)(3) 1998(1)(3) 1997(1)(3) ------------ ---------- ---------- Gross Net Gross Net Gross Net ------- ----- ------- ------- ------- ------- OIL WELLS United States - Onshore 1,512.5 683.2 4,571.5 895.8 4,614.5 881.4 United States - Offshore 254.5 128.2 344.0 145.9 327.0 140.3 International 1,041.0 122.9 1,019.0 119.2 549.0 58.5 ------- ----- ------- ------- ------- ------- Total 2,808.0 934.3 5,934.5 1,160.9 5,490.5 1,080.2 ======= ===== ======= ======= ======= ======= GAS WELLS United States - Onshore 1,435.5 873.9 1,608.5 944.7 1,568.5 920.9 United States - Offshore 406.5 150.4 410.0 152.2 480.0 176.6 International 27.0 2.5 25.0 2.0 25.0 1.9 ------- ----- ------- ------- ------- ------- Total 1,869.0 1,026.8 2,043.5 1,098.9 2,073.5 1,099.4 ======= ===== ======= ======= ======= =======
(1) Productive wells are producing wells and wells capable of production. A gross well is a well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned. A net well is deemed to exist when the sum of fractional ownership working interests in gross wells equals one. The number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof. (2) During 1999, the Company sold 250 net non-strategic wells contributing to the decreased well count. (3) One or more completions in the same bore hole is counted as one well in this table. The following table summarizes multiple completions and non-producing wells as of December 31 for the years shown. Included in wells not producing are productive wells awaiting additional action, pipeline connections or shut-in for various reasons.
1999 1998 1997 -------------------- ---------------------- ---------------------- Gross Net Gross Net Gross Net ----- ----- ------- ----- ------- ----- MULTIPLE COMPLETIONS Oil 14.0 9.2 21.5 15.5 24.5 18.1 Gas 49.0 23.2 47.5 24.7 48.5 21.6 NOT PRODUCING (SHUT-IN) Oil 857.0 233.5 1,609.5 237.2 1,017.0 127.3 Gas 33.0 4.5 58.5 23.2 79.5 50.1
At year-end 1999, Samedan had less than five percent of its oil and gas sales volumes committed to long-term supply contracts and had no similar agreements with foreign governments or authorities in which Samedan acts as producer. Since January 1, 1999, no oil or gas reserve information has been filed with, or included in any report to any federal authority or agency other than the Securities and Exchange Commission and the Energy Information Administration ("EIA"). Samedan files Form 23, including reserve and other information, with the EIA. 11 14 Average Sales Price. The following table sets forth for each of the last three years the average sales price per unit of oil produced and per unit of natural gas produced, and the average production cost per unit.
Year Ended December 31, --------------------------------------------- 1999 1998 1997 ---- ---- ---- Average sales price per BBL of oil (1): United States $ 16.37 $ 11.98 $ 18.49 International $ 16.01 $ 10.28 $ 15.55 Combined (2) $ 16.29 $ 11.66 $ 17.86 Average sales price per MCF of natural gas (1): United States $ 2.30 $ 2.18 $ 2.48 International $ 1.38 $ 2.13 $ 2.29 Combined (3) $ 2.23 $ 2.18 $ 2.48 Average production (lifting) cost per unit of oil and natural gas production, excluding depreciation (MCFe) (4): United States $ .51 $ .50 $ .53 International $ .49 $ .66 $ .85 Combined $ .50 $ .52 $ .55
(1) Net production amounts used in this calculation include royalties. (2) Reflects a reduction of $.19 per BBL in 1997 from hedging. (3) Reflects a reduction of $.12 per MCF in 1997 from hedging. (4) Oil production is converted to gas equivalents (MCFe) based on one BBL of oil equals six MCF of gas. 12 15 [GRAPH] SIGNIFICANT OFFSHORE UNDEVELOPED LEASE HOLDINGS (interests rounded to nearest whole percent)
Net Working Block Interest (%) - ----- ------------ East Breaks - ----------- 279 33 420* 50 421* 50 464* 50 465* 50 475* 100 510* 33 519* 100 563* 100 588* 100 589* 100 632* 100 633* 100 Green Canyon - ------------ 23* 50 24* 43 25* 43 27* 43 85* 50 227* 50 228* 50 303* 40 955* 7 Galveston - --------- 249-L 50 250-L 50 274-L 50 275-L 50 340-S 50 341-S 50 349-S 50 Ship Shoal - ---------- 313 40 South Marsh Island - ------------------ 62 67 63 67 64 67 65 67 70 50 104 100 167 100 179 35 180 35 185 35 186 35 191 50 195 50 Mississippi Canyon - ------------------ 524* 50 573 100 583* 50 595* 25 618* 50 639* 25 661* 25 665* 50 705* 25 849* 50 South Timbalier - --------------- 98 50 156 67 315 30 West Cameron - ------------ 136 40 583 100 602 100 614 25 Brazos - ------ A-2 17 A-5 17 A-6 17 308-L 50 336-L 50 337-L 50 542 17 543 100 Ewing Bank - ---------- 833* 14 834* 14 993 50 995 43 996 43 Vermilion - --------- 232 50 278 50 280 50 283 50 285 50 286 100 300 50 312 100 345 75 349 75 360 67 361 67 365 50 366 75 377 100 394 75 Eugene Island - ------------- 300 67 317 67 High Island - ----------- A-232 100 A-426 33 A-435 33 A-516 100 South Pass - ---------- 41 50 Garden Banks - ------------ 25 100 34 100 35 100 62 25 63 25 64 25 78 100 107 25 116 100 122 100 154 100 163 100 326* 100 751* 100 795* 100 841* 40 Viosca Knoll - ------------ 344 100 697 50 820 50 Main Pass - --------- 192 100 Atwater Valley - -------------- 327* 40 533* 40
13 16 The developed and undeveloped acreage (including both leases and concessions) that Samedan held as of December 31, 1999, is as follows:
Developed Acreage (1)(2) Undeveloped Acreage (2)(3) ---------------------------- ---------------------------- Location Gross Acres Net Acres Gross Acres Net Acres ----------- --------- ----------- --------- United States Onshore Alabama 2,396 506 California 5,542 2,318 3,155 867 Colorado 65,408 61,968 25,305 20,780 Kansas 92,601 53,073 20,042 11,908 Louisiana 18,435 6,221 2,748 1,039 Mississippi 878 34 1,884 51 Montana 172,844 119,234 26,435 8,353 New Mexico 3,117 1,766 3,785 2,246 North Dakota 9,376 3,983 15,791 11,413 Oklahoma 144,252 56,466 56,224 21,766 Texas 84,470 37,714 86,046 51,745 Wyoming 24,963 12,004 58,709 36,458 Other 5,200 2,443 4,123 1,327 --------- ------- --------- --------- Total United States Onshore 627,086 357,224 306,643 168,459 --------- ------- --------- --------- United States Offshore (Federal Waters) Alabama 69,120 27,648 42,883 23,458 California 33,074 5,727 63,884 6,283 Florida 11,520 2,304 Louisiana 634,800 277,290 429,081 223,010 Mississippi 33,931 24,061 51,840 22,560 Texas 263,181 105,584 227,306 156,376 --------- ------- --------- --------- Total United States Offshore (Federal Waters) 1,034,106 440,310 826,514 433,991 --------- ------- --------- --------- International Argentina 28,988 3,977 1,235,105 1,162,339 Australia 938,999 373,252 China 229,066 178,327 Denmark 80,902 32,361 Ecuador 864,126 864,126 Equatorial Guinea 26,650 9,272 285,307 99,263 Ireland 296,797 169,174 Israel 1,062,675 425,070 United Kingdom 128,661 4,168 404,669 141,592 ------- ----- ------- ------- Total International 184,299 17,417 5,397,646 3,445,504 ------- ------ --------- --------- Total 1,845,491 814,951 6,530,803 4,047,954 ========= ======= ========= =========
(1) Developed acreage is acreage spaced or assignable to productive wells. (2) A gross acre is an acre in which a working interest is owned. A net acre is deemed to exist when the sum of fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof. (3) Undeveloped acreage is considered to be those leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether or not such acreage contains proved reserves. Included within undeveloped acreage are those leased acres (held by production under the terms of a lease) that are not within the spacing unit containing, or acreage assigned to, the productive well so holding such lease. 14 17 ITEM 3. LEGAL PROCEEDINGS. Noble Drilling Corp., Noble Drilling Services Inc., and Noble Drilling (U.S.) Inc. (the "Plaintiffs") filed suit on January 6, 2000 in Harris County State Court, Texas against Samedan. The Plaintiffs claim that a contract existed between one of the Plaintiffs and Samedan regarding the alleged commitment by Samedan to use the semi-submersible rig known as the Noble Homer Ferrington for a period of two and one half years at a set rate of $158,500 per day. Thus, the Plaintiffs seek to have the court recognize the alleged agreement as enforceable. The Plaintiffs further claim that Samedan has breached the alleged agreement by requesting assurances from the Plaintiffs that the Noble Homer Ferrington rig will have certain performance characteristics, which characteristics the Plaintiffs allege exceed the agreed characteristics under the alleged agreement. The Plaintiffs claim that Samedan's breach has caused them unspecified damages. Alternatively, the Plaintiffs claim that if there was no valid and binding agreement whereby Samedan would use the rig at the stated amount, then the Plaintiffs believed that Samedan represented and promised that it would pay the stated amount for the use of the rig. Under this alternative claim, Plaintiffs allege that they built the rig in justifiable reliance on Samedan's representations and promises, thus allowing the Plaintiffs to recover the costs of the rig's construction (which the Plaintiffs claim is in excess of $176,000,000) from Samedan and an unrelated co-defendant. Finally, the Plaintiffs seek to recover their attorneys fees incurred in connection with this matter. Samedan claims that the alleged agreement is no more than a letter of intent that did not materialize into an agreement requiring Samedan to use the Noble Homer Ferrington rig and pay the daily rate, including based on the Plaintiffs' characterization of the alleged agreement as a letter of intent that was not a final agreement. Further, Samedan claims that the letter of intent expired by its own terms in May 1998. Samedan further claims that the Noble Homer Ferrington rig does not conform to the representations of operating efficiency that the Plaintiffs advised Samedan that the Noble Homer Ferrington rig would be able to achieve. Thus, Samedan believes it is not obligated to accept the rig or pay the Plaintiffs and intends to vigorously defend this matter. 15 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of 1999. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information, as of March 13, 2000, with respect to the executive officers of the Registrant.
Name Age Position - ---------------- --- -------------------------------------------------------------------- Robert Kelley (1) 54 Chairman of the Board, President, Chief Executive Officer, Director Dan O. Dinges (2) 46 Senior Vice President and Operating Committee Member of Samedan James L. McElvany (3) 46 Vice President-Finance and Treasurer of the Registrant and Operating Committee Member of Samedan W. A. Poillion (4) 50 Senior Vice President and Operating Committee Member of Samedan Orville Walraven (5) 55 Corporate Secretary of the Registrant and Senior Vice President and Operating Committee Member of Samedan James C. Woodson (6) 57 Senior Vice President and Operating Committee Member of Samedan
- ----------------------- (1) Robert Kelley has served as President and Chief Executive Officer of the Registrant since August 1, 1986, and as Chairman of the Board since October 27, 1992. Prior to August 1986, he had served as Executive Vice President of the Registrant from January 1986. Mr. Kelley also serves as President and Chief Executive Officer of Samedan, positions he has held since 1984. For more than five years prior thereto, Mr. Kelley served as an officer of Samedan. He has served as a director of the Company since 1986. (2) Dan O. Dinges was promoted to Senior Vice President and Division General Manager, Offshore Division of Samedan on January 1, 1998. Prior thereto, he had served as Vice President and General Manager Offshore Division of Samedan since January 1989. Mr. Dinges has been a member of the Operating Committee of Samedan since January 31, 1995. (3) James L. McElvany has served as Vice President-Finance and Treasurer of the Registrant since July 1, 1999. Prior to July 1999, he had served as Vice President-Controller of the Registrant since December 1997. Prior thereto, he served as Controller of the Registrant since December 1983. He has been a member of the Operating Committee of Samedan since July 1, 1999. (4) W. A. Poillion was promoted to Senior Vice President-Production and Drilling of Samedan on January 1, 1998. Prior thereto, he had served as Vice President-Production and Drilling of Samedan since November 1990. He has been a member of the Operating Committee of Samedan since November 1, 1990. From March 1, 1985 to October 31, 1990, he served as Manager of Offshore Production and Drilling for Samedan. (5) Orville Walraven has served as Corporate Secretary of the Registrant since January 1, 1989. He was promoted to Senior Vice President-Land of Samedan on January 1, 1998. Prior thereto, he had served as Vice President-Land of Samedan since January 1, 1989. He has been a member of the Operating Committee of Samedan since January 1, 1989. 16 19 (6) James C. Woodson was promoted to Senior Vice President-Exploration of Samedan on January 1, 1998. Prior thereto, he had served as Vice President-Exploration since September 1, 1983. Mr. Woodson has been a member of the Operating Committee of Samedan since August 1, 1986. The terms of office for the officers of the Registrant continue until their successors are chosen and qualified. No officer or executive officer of the Registrant has an employment agreement with the Registrant or any of its subsidiaries. There are no family relationships between any of the Registrant's officers. 17 20 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Common Stock. The Registrant's Common Stock, $3.33 1/3 par value ("Common Stock"), is listed and traded on the New York Stock Exchange under the symbol "NBL." The declaration and payment of dividends are at the discretion of the Board of Directors of the Registrant and the amount thereof will depend on the Registrant's results of operations, financial condition, contractual restrictions, cash requirements, future prospects and other factors deemed relevant by the Board of Directors. Stock Prices and Dividends by Quarters. The following table sets forth, for the periods indicated, the high and low sales price per share of Common Stock on the New York Stock Exchange and quarterly dividends paid per share.
Dividends High Low Per Share ---- --- ---------- 1999 - ---- First quarter $31 7/16 $19 1/4 $.04 Second quarter $35 $24 7/8 $.04 Third quarter $33 7/8 $27 $.04 Fourth quarter $29 3/16 $19 1/8 $.04 1998 - ---- First quarter $46 3/16 $32 3/4 $.04 Second quarter $44 3/4 $35 5/16 $.04 Third quarter $38 1/4 $22 5/8 $.04 Fourth quarter $35 7/16 $21 15/16 $.04
Transfer Agent and Registrar. The transfer agent and registrar for the Common Stock is First Chicago Trust Company, 525 Washington Boulevard, Jersey City, New Jersey 07310. Stockholders' Profile. As of December 31, 1999, the number of holders of record of Common Stock was 1,295. The following chart indicates the common stockholders by category.
Shares December 31, 1999 Outstanding - ----------------- ----------- Individuals 417,368 Joint accounts 71,343 Fiduciaries 159,301 Institutions 2,513,874 Nominees 53,878,134 Foreign 5,043 ---------- Total 57,045,063 ==========
Recent Sales of Unregistered Securities. The Company's unconsolidated subsidiary, Atlantic Methanol Capital Company ("AMCCO"), is a 50 percent owned joint venture that indirectly owns 90 percent of Atlantic Methanol Production Company ("AMPCO"), which is constructing a methanol plant in Equatorial Guinea. On November 10, 1999, AMCCO issued $125 million of 8.95% Series A-2 Senior Secured Notes Due 2004, which are not included in the Company's balance sheet (the "Series A-2 Notes") to fund the Company's portion of the remaining construction payments. The Company has guaranteed the payment of interest on the Series A-2 Notes. In addition, the Company established a new series of preferred stock, Series B Mandatorily Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred"). The Company issued, in a private placement pursuant to Section 4(2) of the Securities Act, 125,000 shares of the Series B Preferred to Noble Share Trust, which is a Delaware statutory business trust, in exchange for all of the beneficial ownership interests in Noble Share Trust. 18 21 Noble Share Trust holds the 125,000 shares of Series B Preferred for the benefit of the holders of the Series A-2 Notes. The Series A-2 indenture trustee, and the holders of 25% of the outstanding principal amount of the Series A-2 Notes, would have the right to require a public offering of the Series B Preferred to generate proceeds sufficient to repay the Series A-2 Notes, upon the occurrence of certain events ("Trigger Dates"), including (i) defaults under the Indenture governing the Series A-2 Notes, (ii) a default and acceleration of the Company's debt exceeding 5% of the Company's consolidated net tangible assets, and (iii) the simultaneous occurrence of a downgrade of the Company's unsecured senior debt rating to "Ba1" or below by Moody's or "BB+" or below by Standard & Poor's and a decline in the closing price of the Company's common stock for three consecutive trading days to below $17.50. The exercise of this mandatory remarketing right is subject to certain forbearance provisions that would allow the Company the opportunity to obtain funds for the repayment of the Series A-2 Notes by alternative means for a specified period of time. The terms of the Series B Preferred, including dividend and conversion features, would be reset at the time of the remarketing, based on the recommendation of Donaldson, Lufkin & Jenrette, as Remarketing Agent, as to the terms necessary to generate proceeds to repay the Series A-2 Notes. If the Remarketing Agent is not able to complete a registered public offering of the Series B Preferred, it may under certain circumstances conduct a private placement of such stock. If it is impossible for legal reasons to remarket the Series B Preferred, the Company would be obligated to repay the Series A-2 Notes. The Series B Preferred stock would be mandatorily convertible into the Company's common stock three years after remarketing (or failed remarketing). Generally, each share of Series B Preferred would then be mandatorily convertible at the "Mandatory Conversion Rate," which is equal to the following number of shares of the Company's common stock: (a) if the Mandatory Conversion Date Market Price is greater than or equal to the Threshold Appreciation Price, the quotient of (i) $1,000 divided by (ii) the Threshold Appreciation Price; (b) if the Mandatory Conversion Date Market Price is less than the Threshold Appreciation Price but is greater than the Reset Price, the quotient of $1,000 divided by the Mandatory Conversion Date Market Price; and (c) if the Mandatory Conversion Date Market Price is less than or equal to the Reset Price, the quotient of $1,000 divided by the Reset Price. "Mandatory Conversion Date Market Price" means the average closing price per share of the Company's common stock for the 20 consecutive trading days immediately prior to, but not including, the mandatory conversion date. "Threshold Appreciation Price" means the product of (i) the Reset Price (as the same may be adjusted from time to time) and (ii) 110 percent. "Reset Price" means the higher of (i) the closing price of a share of the Company's common stock on the Trigger Date or (ii) the quotient (rounded up to the nearest cent) of $125,000,000 divided by the number, as of the Trigger Date, of the authorized but unissued shares of common stock that have not been reserved as of the Trigger Date by the Company's Board of Directors for other purposes. In addition to the mandatory conversion discussed above, each share of the Series B Preferred is generally convertible, at the option of the holder thereof at any time before the mandatory conversion date, into 36.364 shares of the Company's common stock (the "Optional Conversion Rate"); provided, however, that the Optional Conversion Rate shall adjust, as of the earlier to occur of remarketing or failed remarketing, to the quotient of (i) $1,000 divided by (ii) the Threshold Appreciation Price. 19 22 ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31, -------------------------------------------------------------- (in thousands, except per share amounts and ratios) 1999 1998 1997 1996 1995 ---------- ----------- ---------- ---------- -------- REVENUES AND INCOME Revenues $ 909,842 $ 911,616 $1,116,623 $ 887,203 $487,018 Net cash provided by operating activities 347,103 324,275 445,571 380,945 238,920 Net income 49,461 (164,025) 99,278 83,880 4,086 PER SHARE DATA Basic earnings per share $ .87 $ (2.88) $ 1.75 $ 1.63 $ .08 Cash dividends $ .16 $ .16 $ .16 $ .16 $ .16 Year-end stock price $ 21.44 $ 24.63 $ 35.25 $ 47.88 $ 29.88 Basic weighted average shares outstanding 57,005 56,955 56,872 51,414 50,046 FINANCIAL POSITION (at year end) Property, plant and equipment, net: Oil and gas mineral interests, equipment and facilities $1,242,370 $ 1,429,667 $1,546,426 $1,559,691 $831,827 Total assets 1,450,351 1,686,080 1,852,782 1,956,938 989,176 Long-term obligations: Long-term debt, net of current portion 445,319 745,143 644,967 798,028 376,992 Deferred income taxes 83,075 106,823 144,083 108,434 69,445 Other 53,877 52,868 56,425 50,603 33,650 Shareholders' equity 683,609 642,080 812,989 720,067 411,911 Ratio of debt to book capital .39 .54 .44 .54 .48 CAPITAL EXPENDITURES Oil and gas mineral interests, equipment and facilities $ 121,077 $ 445,910 $ 320,561 $ 982,499 $252,977 Other 1,410 2,733 8,499 3,485 6,265 ----------- ----------- ---------- ---------- -------- Total capital expenditures $ 122,487 $ 448,643 $ 329,060 $ 985,984 $259,242 =========== =========== ========== ========== ========
For additional information, see "Item 8. Financial Statements and Supplementary Data" of this Form 10-K. OPERATING STATISTICS
Year Ended December 31, -------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ----------- ---------- ---------- --------- GAS Sales (in millions) $ 359.8 $ 441.8 $ 499.4 $ 365.4 $ 167.4 Production (MMCF per day) 455.1 566.6 565.4 469.4 272.2 Average price (per MCF) $ 2.23 $ 2.18 $ 2.48 $ 2.17 $ 1.72 OIL Sales (in millions) $ 174.9 $ 154.3 $ 243.6 $ 225.2 $ 153.5 Production (BBLS per day) 30,003 37,217 38,345 34,520 25,617 Average price (per BBL) $ 16.29 $ 11.66 $ 17.86 $ 18.28 $ 16.78 Royalty sales (in millions) $ 14.0 $ 13.1 $ 18.1 $ 13.9 $ 7.2
20 23 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY The Company's net cash provided from operations in 1999 was essentially flat with 1998, due to lower average daily oil and gas production offset by significantly higher commodity prices during the second half of the year for crude oil and natural gas. The decrease in 1998 compared to 1997 was a result of lower commodity prices and sales volumes. The oil price received by the Company in 1999 increased 40 percent from 1998 and the gas price received by the Company increased two percent in 1999 over the price received in 1998. In 1998, the Company's oil price declined 35 percent and the natural gas price declined 12 percent compared to 1997.
CASH PROVIDED FROM OPERATIONS (MILLIONS OF DOLLARS) 1997 $445.6 1998 324.3 1999 323.9
AVERAGE OIL PRICES (PER BBL) 1997 $ 17.86 1998 11.66 1999 16.29
AVERAGE GAS PRICES (PER MCF) 1997 $ 2.48 1998 2.18 1999 2.23
The Company's unconsolidated subsidiary, Atlantic Methanol Capital Company ("AMCCO"), is a 50 percent owned joint venture that indirectly owns 90 percent of Atlantic Methanol Production Company ("AMPCO"), which is constructing a methanol plant in Equatorial Guinea. During 1999, AMCCO issued $125 million senior secured notes due 2004 net to the Company's interest (which are not included in the Company's balance sheet) to fund the remaining construction payments. The plant construction started during 1998 and commercial production is expected during the second quarter of 2001. The construction cost of the turnkey contract is $322.5 million. Other associated expenditures required to complete the project and produce marketable supplies of methanol are projected to be $101.3 million. The total cost of the methanol project is estimated to be $423.8 million including various contingencies and capitalized interest, with the Company responsible for $211.9 million. Payments are due upon the completion of specific phases of the construction. During 1999, the Company paid $89.6 million toward the project including $86.9 million in construction contract payments. The Company has construction contract phase payments totaling $61.1 million due in 2000. During 1999, $125.4 million was spent on exploration and development projects and $89.6 million on the methanol project, for total expenditures of $215.0 million. The 2000 exploration and development budget is $459.9 million, $72.6 million for the methanol project and $387.3 million for other projects. The Company's current ratio (current assets divided by current liabilities) was .80:1 at December 31, 1999, compared with 1.35:1 at December 31, 1998. The decrease in the current ratio was due in part to debt reduction of $225 million in the fourth quarter of 1999. The Company's cash and short-term investments decreased from $19.1 million at December 31, 1998, to $2.9 million at December 31, 1999. 21 24 FINANCING The Company's total long-term debt, net of unamortized discount, at December 31, 1999, was $445 million compared to $745 million at December 31, 1998. The ratio of debt to book capital (defined as the Company's debt plus its equity) was 39 percent at December 31, 1999, compared with 54 percent at December 31, 1998. The Company's long-term debt is comprised of: $100 million of 7 1/4% Notes Due 2023, $250 million of 8% Senior Notes Due 2027, and $100 million of 7 1/4% Senior Debentures Due 2097. There is no principal payment due on long term debt during the next five years. The Company has a $300 million credit facility which exposes the Company to the risk of earnings or cash flow loss due to changes in market interest rates. At December 31, 1999, there was no borrowing against the credit facility which has a maturity date of December 24, 2002. The interest rate is based upon a Eurodollar rate plus a range of 17.5 to 50 basis points. At year-end 1998, the Company had $300 million outstanding on this facility which was repaid during 1999. On June 17, 1999, the Company entered into a new $100 million 364 day credit agreement with certain commercial lending institutions. There is no balance outstanding on this agreement which is based upon a Eurodollar rate plus 37.5 to 87.5 basis points depending upon the percentage of utilization. On November 11, 1999, the Company announced that AMCCO had sold $125 million principal amount, net to the Company's interest, of its senior secured notes due 2004, without registration rights, in a private offering to institutional investors. Donaldson, Lufkin and Jenrette was the placement agent for the offering. Approximately $63 million of the proceeds, minus transaction expenses, were used to fund a portion of the Company's obligations to pay the costs of construction of the methanol plant and related facilities in Equatorial Guinea. The remainder of the proceeds was used by AMCCO to acquire from the Company, at book value, its subsidiary that held the Company's ownership interest in the project. The Company has guaranteed payment of interest on the notes and provided certain other credit support. On December 31, 1999, the Company had $23 million outstanding on its note payable with AMCCO, an unconsolidated subsidiary. The note payable will be repaid by the second quarter of 2000 and has an interest rate of 8.95 percent. The note payable is included in other current liabilities. OTHER The Company has paid quarterly cash dividends of $.04 per share since 1989, and currently anticipates it will continue to pay quarterly dividends of $.04 per share. The Company has sold a number of non-strategic oil and gas properties over the past three years. Total amounts of oil and gas reserves associated with the 1999, 1998 and 1997 dispositions were 5.1 million BBLS of oil and 34.2 BCF of gas, .2 million BBLS of oil and 2.2 BCF of gas and 5.0 million BBLS of oil and 29.2 BCF of gas, respectively. The Company believes the disposition of non-strategic properties furthers the goal of concentrating its efforts on strategic properties. The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" in June 1998. The Statement establishes accounting and reporting standards requiring every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met wherein gains and losses are reflected in stockholder equity until the hedged item is recognized. Special accounting for qualifying hedges allows a derivative's gains and losses to offset 22 25 related results on the hedged item in the income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting. Due to the issuance of SFAS No. 137, which deferred the effective date of SFAS No. 133, the Company is required to adopt the statement for fiscal year beginning after June 15, 2000. A company may also implement the statement as of the beginning of any fiscal quarter after the statement's issuance (that is, fiscal quarters beginning June 16, 1998, and thereafter). SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the Company's election, before January 1, 1998). The Company has not quantified the impact of adopting SFAS No. 133 but plans on adopting the statement by January 1, 2001. UNCONSOLIDATED SUBSIDIARY The Company has one unconsolidated subsidiary, AMCCO, a 50 percent owned joint venture that indirectly owns 90 percent of AMPCO, which is constructing a methanol plant in Equatorial Guinea. AMCCO is accounted for using the equity method within the Company's wholly-owned subsidiary, Samedan of North Africa, Inc. The Company's net equity investment in the unconsolidated subsidiary was $15.6 million at December 31, 1999. RESULTS OF OPERATIONS NET INCOME AND REVENUES The Company's net income for 1999 of $49.5 million was primarily the result of a 40 percent and two percent increase in the average oil and gas price to $16.29 per BBL and $2.23 per MCF, respectively, compared to 1998. The impact of the increased oil price was approximately $51 million in additional oil revenues compared to 1998. The impact of the increase in the 1999 average natural gas price was approximately eight million dollars in additional gas revenues compared to 1998. The decrease in net income for 1998 compared to 1997, is due to the $143.0 million charge for SFAS No. 121 coupled with dramatically lower crude oil prices and lower natural gas prices. NET INCOME (LOSS) (MILLIONS OF DOLLARS) 1997 $ 99.3 1998 (164.0) 1999 49.5
NATURAL GAS REVENUES (MILLIONS OF DOLLARS) 1997 $ 499.4 1998 441.8 1999 359.8
CRUDE OIL REVENUES (MILLIONS OF DOLLARS) 1997 $ 243.6 1998 154.3 1999 174.9
23 26 NATURAL GAS INFORMATION Natural gas revenues declined in 1999, despite a slight increase in the Company's average price. Revenues were down because natural gas production declined 20 percent compared to the historic high set in 1998. The natural gas production decline is due in part to the Company's decision to defer drilling activity during the first half of the year due to low natural gas prices. Natural gas accounted for 67 percent of the Company's total gas and oil revenues in 1999. Gas sales and average daily production for 1998 decreased 12 percent and increased less than one percent, respectively from 1997. The average gas price in 1998 decreased 12 percent from 1997. AVERAGE DAILY GAS PRODUCTION [PIE CHART] [PIE CHART] [PIE CHART]
OFFSHORE ONSHORE INT'L 1997-565.4 MMCF 66.3% 28.0% 3.7% 1998-566.6 MMCF 71.4% 24.6% 4.0% 1999-455.1 MMCF 67.0% 25.7% 7.3%
CRUDE OIL INFORMATION Crude oil revenues increased during 1999 due to significantly stronger oil prices. The 40 percent increase in the average price received for the Company's 1999 oil production offset a decline of 19 percent in the average daily production. The crude oil production decline is due in part to the Company's decision to defer drilling activity during the first half of the year due to low crude oil prices. Crude oil accounted for 33 percent of the Company's total oil and gas revenues in 1999. Oil sales and average daily production for 1998 decreased 37 percent and three percent, respectively from 1997. The average oil price in 1998 decreased 35 percent from 1997. AVERAGE DAILY OIL PRODUCTION [PIE CHART] [PIE CHART] [PIE CHART]
OFFSHORE ONSHORE INT'L 1997-38,345 BBLS 44.9% 33.7% 21.4% 1998-37,217 BBLS 47.2% 33.6% 19.2% 1999-30,003 BBLS 45.0% 33.0% 22.0%
24 27 HEDGING ACTIVITY The Company, through its subsidiaries, from time to time, uses various hedging arrangements in connection with anticipated crude oil and natural gas sales to minimize the impact of product price fluctuations. Such arrangements include fixed price hedges, costless collars, and other contractual arrangements. Although these hedging arrangements expose the Company to credit risk, the Company monitors the creditworthiness of its counterparties, which generally are major financial institutions, and believes that losses from nonperformance are unlikely to occur. Hedging gains and losses related to the Company's oil and gas production are recorded in oil and gas sales and royalties. The swap component of the contracts discussed in the following paragraphs was treated as a hedge for accounting purposes only. There was no payment obligation in 1999. The Company has entered into three crude oil premium swap contracts related to its production for calendar year 2000. Two of the contracts provide for payments based on daily NYMEX settlement prices. These contracts relate to 2,500 BBLS per day and 2,000 BBLS per day and have trigger prices of $21.73 per BBL and $22.45 per BBL, respectively, and both have knockout prices of $17.00 per BBL. These two contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the settlement price for each NYMEX trading day is less than the trigger price, provided the NYMEX price is also greater than the $17.00 per BBL knockout price. If a daily settlement price is $17.00 per BBL or less, then neither party will have any liability to the other for that day. If a daily settlement price is above the applicable trigger price, then the Company will owe the counterparty for the excess of the settlement price over the trigger price for that day. Payment is made monthly under each of these contracts, in an amount equal to the net amount due to either party based on the sum of the daily amounts determined as described in this paragraph for that month. The third contract relates to 2,500 BBLS per day and provides for payments based on monthly average NYMEX settlement prices. The contract entitles the Company to receive monthly settlements from the counterparty in an amount, if any, by which the arithmetic average of the daily NYMEX settlement prices for the month is less than the trigger price, which is $21.73 per BBL, multiplied by the number of days in the month, provided such average NYMEX price is also greater than the $17.00 per BBL knockout price. If the average NYMEX settlement price for the month is $17.00 per BBL or less, then neither party will have any liability to the other for that month. If the average NYMEX settlement price for the month is above the trigger price, then the Company will pay the counterparty an amount equal to the excess of the average settlement price over the trigger price, multiplied by the number of days in the month. The Company has treated the swap component of these contracts as a hedge (for accounting purposes only), at swap prices ranging from $19.40 per BBL to $20.20 per BBL, which existed at the dates it entered into these contracts. In addition, the Company has separately accounted for the premium component of these contracts by marking them to market, resulting in a gain of $2,990,000 recorded in other income for the year ended December 31, 1999. In addition to the premium swap crude oil hedging contracts, the Company has entered into crude oil costless collar hedges from January 1, 2000, to April 30, 2000, for volumes of 2,000 BBLS per day. These costless collars have a floor price ranging from $21.53 per BBL to $23.27 per BBL and a cap price ranging from $25.83 per BBL to $27.31 per BBL. These costless collar contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the monthly average settlement price for each NYMEX trading day during a contract month is less than the floor price. If the monthly average settlement price is above the applicable cap price, then the Company will owe the counterparties for the excess of the monthly average settlement price over the applicable cap price. If the monthly average settlement price falls between the applicable floor and cap price, then neither party will have any liability to the other party for that month. Payment, if any, is made monthly under each of the contracts in an amount equal to the net amount due either party based on the volumes per day multiplied by the difference between the NYMEX average price and the cap, if the NYMEX average price exceeds the cap price, or if the NYMEX average price is less than the floor price, then the volumes per day multiplied by the difference between the floor price and the NYMEX average price. 25 28 During 1999 and 1998, the Company had no oil or gas hedging transactions for its production. During 1997, the Company had natural gas hedging contracts that ranged from 20 percent to 32 percent of its average daily natural gas production. Natural gas hedges were in the price range of $1.88 per MMBTU to $3.30 per MMBTU. The net effect of these 1997 hedges was a $.12 per MCF reduction in the average natural gas price realized by the Company. At December 31, 1997, the Company had no natural gas hedging contracts for its production. During 1997, the Company had crude oil hedging contracts that ranged from 19 percent to 50 percent of its average daily oil production. Crude oil hedges were in the price range of $16.81 per BBL to $24.35 per BBL. The net effect of these 1997 hedges was a $.19 per BBL reduction in the average crude oil price realized by the Company. At December 31, 1997, the Company had no crude oil hedging contracts for its production. In addition to the hedging arrangements pertaining to the Company's production as described above, Noble Gas Marketing, Inc. ("NGM") employs various hedging arrangements in connection with its purchases and sales of third party production to lock in profits or limit exposure to gas price risk. Most of the purchases made by NGM are on an index basis; however, purchasers in the markets in which NGM sells often require fixed or NYMEX related pricing. NGM may use a hedge to convert the fixed or NYMEX sale to an index basis thereby determining the margin and minimizing the risk of price volatility. During 1999, NGM had hedging transactions with broker-dealers that ranged from 146,000 MMBTU's to 815,000 MMBTU's of gas per day. At December 31, 1999, NGM had in place hedges ranging from approximately 10,000 MMBTU's to 776,000 MMBTU's of gas per day for January 2000 to March 2001 for future physical transactions. In 1998, NGM had hedging transactions with broker-dealers that ranged from 508,811 MMBTU's to 1,061,536 MMBTU's of gas per day. During 1997, NGM had hedging transactions with broker-dealers that ranged from 317,693 MMBTU's to 768,599 MMBTU's of gas per day. NGM records hedging gains or losses relating to fixed term sales as gathering, marketing and processing revenues in the periods in which the related contract is completed. COSTS AND EXPENSES Oil and gas operations expense, consisting of lease operating expense, production taxes and other related lifting costs decreased 22 percent in 1999 from 1998 and seven percent in 1998 compared to 1997. The chart below depicts total operating expenses and operating expenses per MCFe, converting oil to gas on a 1:6 basis for the last three years. OPERATING EXPENSES (MILLIONS OF DOLLARS) 1997 $160.8 1998 $149.0 1999 $116.7
OPERATING EXPENSES PER MCFE 1997 $0.55 1998 $0.52 1999 $0.50
26 29 Oil and gas exploration expense consists of dry hole expense, undeveloped lease amortization, abandoned assets, seismic and other miscellaneous exploration expense. The chart below depicts the exploration expense for the last three years.
(in thousands) 1997 1998 1999 - ------------------------------- -------- -------- -------- Dry hole expense $ 46,902 $ 57,736 $ 19,204 Undeveloped lease amortization 8,146 7,953 9,645 Abandoned assets 4,923 15,325 2,483 Seismic 19,095 15,754 7,797 Other 7,632 13,390 7,655 -------- -------- -------- Total Exploration Expense $ 86,698 $110,158 $ 46,784 -------- -------- --------
In 1999, depreciation, depletion and amortization ("DD&A") expense decreased 19 percent, compared to last year, due to lower oil and gas production volumes coupled with the impairment of operating assets in 1998. This decrease reflects a 19 percent decrease in oil volumes and a 20 percent decrease in natural gas production volumes. In 1998 DD&A expense increased four percent compared to 1997, due to recording additional development costs and downward reserve revisions related to certain producing properties. The chart below depicts total DD&A expense and DD&A expense per MCFe, converting oil to gas on a 1:6 basis for the last three years.
DD&A EXPENSE ------------ DD&A Expenses DD&A Expenses per MCFe ------------- ---------------------- (millions of dollars) 1997 $300 $1.03 1998 $313 $1.09 1999 $255 $1.10
The Company provides for the cost of future liabilities related to restoration and dismantlement costs for offshore facilities. This provision is based on the Company's best estimate of such costs to be incurred in future years based on information from the Company's engineers. These estimated costs are provided through charging DD&A expense using a ratio of production divided by reserves multiplied by the estimated costs to dismantle and restore. The Company's accumulated provision for future dismantlement and restoration cost was $83.0 million at December 31, 1999, $68.8 million at December 31, 1998 and $59.5 million at December 31, 1997. Total estimated future dismantlement and restoration costs of $123.1 million are included in future production and development costs for purposes of estimating the future net revenues relating to the Company's proved reserves. IMPAIRMENT OF OPERATING ASSETS The Company recorded no asset impairments under SFAS No. 121 during 1999 or 1997. In the fourth quarter of 1998, the Company recorded a $223.3 million pre-tax charge for the write-down of properties due to downward reserve revisions. The write-down was taken under SFAS No. 121. The assets impaired under SFAS No. 121 are oil and gas properties maintained under the successful efforts method of accounting. The excess of the net book value over the projected discounted future net revenue of the impaired properties was charged to "Impairment of Operating Assets" expense. 27 30 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") The increase in the SG&A per MCFe rate in 1999 is due to the decreased oil and natural gas production volumes coupled with approximately $2 million of non-recurring charges associated with the closing of the Company's Denver, Colorado and Oklahoma City, Oklahoma offices. The SG&A decrease in 1998 is due in part to lower overall salaries and wages incurred in 1998 compared to 1997. The chart below illustrates SG&A costs for the last three years.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ----------------------- SG&A Expenses SG&E Expenses per MCFe ------------- ---------------------- (millions of dollars) 1997 $0.17 $50.5 1998 $0.17 $48.1 1999 $0.21 $47.9
GATHERING, MARKETING AND PROCESSING NGM markets the majority of the Company's natural gas, as well as certain third-party gas. NGM sells gas directly to end-users, gas marketers, industrial users, interstate and intrastate pipelines, and local distribution companies. NTI markets a portion of the Company's oil, as well as certain third-party oil. The Company records all of NGM's and NTI's sales and expenses as gathering, marketing and processing revenues and expenses. All intercompany sales and expenses have been eliminated in the Company's consolidated financial statements.
GATHERING, MARKETING AND PROCESSING GROSS MARGINS (millions of dollars) --------------------- NGM NTI --- --- 1997 $9.6 $6.5 1998 $7.0 $6.6 1999 $7.3 $7.4
28 31 The gathering, marketing and processing revenues less expenses for both NGM and NTI are reflected in the chart on the previous page. The margins for NGM on a per MMBTU basis were $.026 for 1999, $.049 for 1998 and $.031 for 1997. The decrease in NGM's margin on a per MMBTU basis for each of the years presented is due primarily to increased transportation expenses. The margins for NTI on a per BBL basis were $.87 for 1999, $.63 for 1998 and $.63 for 1997. The increase in NTI's margin on a per BBL basis for each of the years presented is due primarily to improved crude oil prices coupled with lower transportation costs. FUTURE TRENDS The Company expects flat oil and gas volumes in 2000 compared to 1999, with increasing volumes in 2001 and 2002. The 2001 volume increase would be primarily due to the Alba field condensate production and gas feedstock for the methanol plant in Equatorial Guinea and the Amistad gas field production in Ecuador along with domestic exploitation. The 2002 volume increase would be primarily due to oil production in China. The Company recently set its 2000 exploration and development budget at $459.9 million. Such expenditures are planned to be funded through internally generated cash flows and $61.6 million of borrowings from the $300 million credit facility to complete the methanol project. The Company believes that it is well positioned to take advantage of strategic acquisitions as they become available, through internally generated cash flows or borrowings. Management believes that the Company is well positioned with its balanced reserves of oil and gas to take advantage of future price increases that may occur. However, the uncertainty of oil and gas prices continues to affect the oil and gas industry. The Company can not predict the extent to which its revenues will be affected by inflation, government regulation or changing prices. The Company's Board of Directors authorized a repurchase of up to $50 million in the Company's common stock. As of March 1, 2000, the Company had completed 60.5 percent of the repurchase plan. The repurchase of 1,385,900 shares at an average cost of $21.84 per share was funded from the Company's current cash flow. The Year 2000 issue is a result of computer programs being written using two digits rather than four to define the applicable year. Computer equipment, software and devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather than the year 2000. This can result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company took various initiatives intended to ensure that its computer equipment and software would function properly with respect to dates in the year 2000 and thereafter. For this purpose, the term "computer equipment and software" includes systems that are commonly thought of as information technology ("IT") systems, including accounting, data processing, telephone/PBX systems, and other miscellaneous systems, as well as systems that are not commonly thought of as IT systems, such as field operations equipment, alarm systems, sprinkler systems, fax machines, or other miscellaneous systems. Both IT and non-IT systems may contain imbedded technology, which complicates the Company's Year 2000 identification, assessment, remediation, and testing efforts. In addition, in the ordinary course of replacing computer equipment and software, the Company attempted to obtain replacements that it believed were Year 2000 compliant. Utilizing internal resources to identify and assess needed Year 2000 remediation, the Company completed its Year 2000 identification, assessment, remediation, and testing efforts, which began in 29 32 January 1998. As of December 31, 1999, the Company had completed 100 percent of the initiatives necessary to fully address potential Year 2000 issues relating to its computer equipment and software.
Percent Year 2000 Initiative Time Frame Complete - -------------------- ------------------------------------------ Identification and assessment of IT systems March 31, 1999 100% (Company and subsidiaries) Identification and assessment of critical non-IT systems October 31, 1999 100% (Company and subsidiaries) Remediation and testing of IT and non-IT systems of December 31, 1998 100% subsidiaries other than Samedan and subsidiaries Remediation and testing of IT and non-IT systems of September 30, 1999 100% Samedan and subsidiaries Remediation and testing of Company's central IT June 30, 1999 100% and non-IT systems Replacement and testing of third party software December 31, 1999 100% Identification and assessment of field equipment used in October 31, 1999 100% oil and gas producing operations Remediation and testing of field equipment October 31, 1999 100%
The Company mailed letters to its significant vendors and service providers and verbally communicated with many strategic customers to determine the extent to which interfaces with such entities were vulnerable to Year 2000 issues and whether the products and services purchased from or by such entities were Year 2000 compliant. The Company funded its Year 2000 efforts primarily with internal resources and does not anticipate making any expenditures in connection therewith except for the purchase of third party software that it otherwise would not have purchased or would have purchased at a later date. Although the Company did not separately track its internal costs related to Year 2000 efforts, which included compensation of employees working on Year 2000 projects, it believes that such costs did not exceed $80,000. The Company believes that these internal and external costs represented less than five percent of total IT-related costs for 1998 and 1999 and that none of the Company's IT initiatives that were not related to the Year 2000 issue were materially delayed or impacted by Year 2000 efforts. The Company believes that the Year 2000 issue did not pose significant operational problems for the Company. However, if all Year 2000 issues were not properly identified, or assessment, remediation, and testing were not fully effected, there can be no assurance that the Year 2000 issue will not materially impact the Company's results of operations or adversely affect the Company's relationships with customers, vendors, or others. Additionally, there can be no assurance that the Year 2000 issues of other entities will not have a material adverse impact on the Company's systems or results of operations. In addition, variability of definitions of "compliance with Year 2000" may lead to claims on the Company, the impact of which is not currently estimable. No assurance can be given that the aggregate cost of defending and resolving such claims, if any, will not materially affect the Company's results of operations. As of February 29, 2000, the Company has encountered no significant Year 2000 problems. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to market risk in the normal course of its business operations. Management believes that the Company is well positioned with its mix of oil and gas reserves to take advantage of future price increases that may occur. However, the uncertainty of oil and gas prices continues to impact the domestic oil and gas industry. Due to the volatility of oil and gas prices, the Company, from time to time, has used derivative hedging and may do so in the future as a means of controlling its exposure to price changes. The Company had no crude oil or natural gas hedges for its production in 1999. The swap component of the contracts discussed in the following paragraphs was treated as a hedge for accounting purposes only. There was no payment obligation in 1999. 30 33 The Company has entered into three crude oil premium swap contracts related to its production for calendar year 2000. Two of the contracts provide for payments based on daily NYMEX settlement prices. These contracts relate to 2,500 BBLS per day and 2,000 BBLS per day and have trigger prices of $21.73 per BBL and $22.45 per BBL, respectively, and both have knockout prices of $17.00 per BBL. These two contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the settlement price for each NYMEX trading day is less than the trigger price, provided the NYMEX price is also greater than the $17.00 per BBL knockout price. If a daily settlement price is $17.00 per BBL or less, then neither party will have any liability to the other for that day. If a daily settlement price is above the applicable trigger price, then the Company will owe the counterparty for the excess of the settlement price over the trigger price for that day. Payment is made monthly under each of these contracts, in an amount equal to the net amount due to either party based on the sum of the daily amounts determined as described in this paragraph for that month. The third contract relates to 2,500 BBLS per day and provides for payments based on monthly average NYMEX settlement prices. The contract entitles the Company to receive monthly settlements from the counterparty in an amount, if any, by which the arithmetic average of the daily NYMEX settlement prices for the month is less than the trigger price, which is $21.73 per BBL, multiplied by the number of days in the month, provided such average NYMEX price is also greater than the $17.00 per BBL knockout price. If the average NYMEX settlement price for the month is $17.00 per BBL or less, then neither party will have any liability to the other for that month. If the average NYMEX settlement price for the month is above the trigger price, then the Company will pay the counterparty an amount equal to the excess of the average settlement price over the trigger price, multiplied by the number of days in the month. The Company has treated the swap component of these contracts as a hedge (for accounting purposes only), at swap prices ranging from $19.40 per BBL to $20.20 per BBL, which existed at the dates it entered into these contracts. In addition, the Company has separately accounted for the premium component of these contracts by marking them to market, resulting in a gain of $2,990,000 recorded in other income for the year ended December 31, 1999. In addition to the premium swap crude oil hedging contracts, the Company has entered into crude oil costless collar hedges from January 1, 2000, to April 30, 2000, for volumes of 2,000 BBLS per day. These costless collars have a floor price ranging from $21.53 per BBL to $23.27 per BBL and a cap price ranging from $25.83 per BBL to $27.31 per BBL. These costless collar contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the monthly average settlement price for each NYMEX trading day during a contract month is less than the floor price. If the monthly average settlement price is above the applicable cap price, then the Company will owe the counterparties for the excess of the monthly average settlement price over the applicable cap price. If the monthly average settlement price falls between the applicable floor and cap price, then neither party will have any liability to the other party for that month. Payment, if any, is made monthly under each of the contracts in an amount equal to the net amount due either party based on the volumes per day multiplied by the difference between the NYMEX average price and the cap, if the NYMEX average price exceeds the cap price, or if the NYMEX average price is less than the floor price, then the volumes per day multiplied by the difference between the floor price and the NYMEX average price. NGM, from time to time, employs hedging arrangements in connection with its purchases and sales of production. While most of NGM's purchases are made for an index-based price, NGM's customers often require prices that are either fixed or related to NYMEX. In order to establish a fixed margin and mitigate the risk of price volatility, NGM may convert a fixed or NYMEX sale to an index-based sales price (such as by purchasing an index-based futures contract obligating NGM for delivery of production). Due to the size of such transactions and certain restraints imposed by contract and by Company guidelines, as of December 31, 1999, the Company had no material market risk exposure from NGM's hedging activity. 31 34 The Company has a $300 million credit agreement (see Note 3 - Debt, to the Consolidated Financial Statements) which exposes the Company to the risk of earnings or cash flow loss due to changes in market interest rates. At December 31, 1999, there was no borrowing against the credit facility which has a maturity date of December 24, 2002. The interest rate is based upon a Eurodollar rate plus a range of 17.5 to 50 basis points. All other Company long-term debt is fixed-rate and, therefore, does not expose the Company to the risk of earnings or cash flow loss due to changes in market interest rates. On June 17, 1999, the Company entered into a new $100 million 364 day credit agreement with certain commercial lending institutions. There is no balance outstanding on this agreement which is based upon a Eurodollar rate plus 37.5 to 87.5 basis points depending upon the percentage of utilization. The Company does not invest in foreign currency derivatives. The U.S. dollar is considered the primary currency for each of the Company's international operations. Transactions that are completed in a foreign currency are translated into U.S. dollars and recorded in the financial statements. Translation gains or losses were not material in any of the periods presented and the Company does not believe it is currently exposed to any material risk of loss on this basis. Such gains or losses are included in other expense on the income statement. However, certain sales transactions are concluded in foreign currencies and the Company therefore is exposed to potential risk of loss based on fluctuation in exchange rates from time to time. 32 35 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants................................................................ 34 Consolidated Balance Sheet as of December 31, 1999 and 1998............................................. 35 Consolidated Statement of Operations for each of the three years in the period ended December 31, 1999..................................................................................... 36 Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 1999..................................................................................... 37 Consolidated Statement of Shareholders' Equity for each of the three years in the period ended December 31, 1999..................................................................................... 38 Notes to Consolidated Financial Statements.............................................................. 39 Supplemental Oil and Gas Information (Unaudited)........................................................ 52 Interim Financial Information (Unaudited)............................................................... 58
All financial statement schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements, including the notes thereto. 33 36 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Noble Affiliates, Inc.: We have audited the accompanying consolidated balance sheet of Noble Affiliates, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Noble Affiliates, Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma January 28, 2000 34 37 CONSOLIDATED BALANCE SHEET NOBLE AFFILIATES, INC. AND SUBSIDIARIES
December 31, ------------------------------ (in thousands, except share amounts) 1999 1998 ------------- ------------- ASSETS CURRENT ASSETS: Cash and short-term cash investments $ 2,925 $ 19,100 Accounts receivable - trade 98,794 106,513 Materials and supplies inventories 5,517 3,006 Other current assets 40,678 59,670 ------------- ------------- Total current assets 147,914 188,289 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT, AT COST: Oil and gas mineral interests, equipment and facilities (successful efforts method of accounting) 2,786,848 2,873,076 Other 43,945 42,841 ------------- ------------- 2,830,793 2,915,917 Accumulated depreciation, depletion and amortization (1,588,423) (1,486,250) ------------- ------------- Total property, plant and equipment, net 1,242,370 1,429,667 ------------- ------------- INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 15,625 25,061 ------------- ------------- OTHER ASSETS 44,442 43,063 ------------- ------------- TOTAL ASSETS $ 1,450,351 $ 1,686,080 ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 103,753 $ 108,538 Other current liabilities 48,215 28,815 Income taxes - current 32,503 1,813 ------------- ------------- Total current liabilities 184,471 139,166 ------------- ------------- DEFERRED INCOME TAXES 83,075 106,823 ------------- ------------- OTHER DEFERRED CREDITS AND NONCURRENT LIABILITIES 53,877 52,868 ------------- ------------- LONG-TERM DEBT 445,319 745,143 ------------- ------------- SHAREHOLDERS' EQUITY: Preferred stock - par value $1.00; 4,000,000 shares authorized, none issued Common stock - par value $3.33 1/3; 100,000,000 shares authorized; 58,569,963 and 58,505,908 shares issued in 1999 and 1998, respectively 195,231 195,018 Capital in excess of par value 360,983 360,008 Retained earnings 142,813 102,472 ------------- ------------- 699,027 657,498 Less common stock in treasury, at cost (1999 and 1998, 1,524,900 shares) (15,418) (15,418) ------------- ------------- Total shareholders' equity 683,609 642,080 ------------- ------------- TOTAL LIABILITIES AND EQUITY $ 1,450,351 $ 1,686,080 ------------- -------------
See accompanying Notes to Consolidated Financial Statements. 35 38 CONSOLIDATED STATEMENT OF OPERATIONS NOBLE AFFILIATES, INC. AND SUBSIDIARIES
Year ended December 31, ----------------------------------------- (in thousands, except per share amounts) 1999 1998 1997 ----------- ----------- ----------- REVENUES: Oil and gas sales and royalties $ 548,733 $ 609,164 $ 761,145 Gathering, marketing and processing 338,046 284,407 329,868 Other income 23,063 18,045 25,610 ----------- ----------- ----------- Total Revenue 909,842 911,616 1,116,623 ----------- ----------- ----------- COSTS AND EXPENSES: Oil and gas exploration 46,784 110,158 86,698 Oil and gas operations 116,698 149,030 160,765 Gathering, marketing and processing 323,314 270,826 313,807 Depreciation, depletion and amortization 254,515 313,191 300,354 Impairment of operating assets 223,251 Selling, general and administrative 47,859 48,110 50,545 Interest 48,935 50,511 53,008 Interest capitalized (5,894) (6,753) (6,239) ----------- ----------- ----------- Total Expenses 832,211 1,158,324 958,938 ----------- ----------- ----------- INCOME (LOSS) BEFORE TAXES 77,631 (246,708) 157,685 ----------- ----------- ----------- INCOME TAX PROVISION (BENEFIT): Current 24,508 (19,679) 25,569 Deferred 3,662 (63,004) 32,838 ----------- ----------- ----------- Total Tax Provision (Benefit) 28,170 (82,683) 58,407 ----------- ----------- ----------- NET INCOME (LOSS) $ 49,461 $ (164,025) $ 99,278 ----------- ----------- ----------- BASIC EARNINGS (LOSS) PER SHARE $ .87 $ (2.88) $ 1.75 ----------- ----------- ----------- DILUTED EARNINGS (LOSS) PER SHARE $ .86 $ (2.88) $ 1.73 ----------- ----------- ----------- WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 57,005 56,955 56,872 Diluted 57,349 56,955 57,421 ----------- ----------- -----------
See accompanying Notes to Consolidated Financial Statements. 36 39 CONSOLIDATED STATEMENT OF CASH FLOWS NOBLE AFFILIATES, INC. AND SUBSIDIARIES
Year ended December 31, -------------------------------------------- (in thousands) 1999 1998 1997 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 49,461 $ (164,025) $ 99,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 254,515 313,191 300,354 Impairment of operating assets 223,251 Amortization of undeveloped leasehold costs, net 9,645 7,953 8,146 (Gain) loss on disposal of assets (12,079) 15,434 (11,007) Noncurrent deferred income taxes (23,749) (37,260) 35,650 (Income) loss from unconsolidated subsidiary 37 Increase (decrease) in other deferred credits 1,011 (3,558) 5,822 (Increase) decrease in other (1,296) 12,709 1,684 Changes in working capital, not including cash: (Increase) decrease in accounts receivable 7,719 56,154 43,484 (Increase) decrease in other current assets 16,571 (44,423) (25,053) Increase (decrease) in accounts payable (4,785) (55,025) (29,845) Increase (decrease) in other current liabilities 26,845 (126) 17,058 ------------ ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 323,895 324,275 445,571 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (122,920) (431,716) (326,958) Investment in unconsolidated subsidiary (51,962) (25,061) Proceeds from the transfer of our interest to unconsolidated subsidiary 61,987 Proceeds from sale of property, plant and equipment 58,137 3,412 54,543 ------------ ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (54,758) (453,365) (272,415) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Exercise of stock options 1,189 2,228 2,744 Cash dividends paid (9,120) (9,113) (9,100) Repayment of bank debt (300,000) (549,000) Repayment of notes payable - unconsolidated subsidiary (38,101) Proceeds from notes payable - unconsolidated subsidiary 60,720 Proceeds from issuance of long-term debt 100,000 342,507 ------------ ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (285,312) 93,115 (212,849) ------------ ------------ ------------ INCREASE (DECREASE) IN CASH AND SHORT-TERM CASH INVESTMENTS (16,175) (35,975) (39,693) CASH AND SHORT-TERM CASH INVESTMENTS AT BEGINNING OF YEAR 19,100 55,075 94,768 ------------ ------------ ------------ CASH AND SHORT-TERM CASH INVESTMENTS AT END OF YEAR $ 2,925 $ 19,100 $ 55,075 ------------ ------------ ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest (net of amount capitalized) $ 44,845 $ 43,368 $ 46,140 Income taxes $ 30,000 $ 4,276 $ 32,415
See accompanying Notes to Consolidated Financial Statements. 37 40 NOBLE AFFILIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Capital in Treasury Common Stock Excess of Stock at Retained (in thousands, except shares issued) Shares Issued Amount Par Value Cost Earnings ------------- ------------- ------------- ------------- ------------- JANUARY 1, 1997 58,321,297 $ 194,402 $ 355,651 $ (15,418) $ 185,432 Net Income 99,278 Exercise of stock options 102,141 341 2,403 Cash dividends ($.16 per share) (9,100) ------------ ------------- ------------- ------------- ------------- DECEMBER 31, 1997 58,423,438 $ 194,743 $ 358,054 $ (15,418) $ 275,610 ------------ ------------- ------------- ------------- ------------- Net Loss (164,025) Exercise of stock options 82,470 275 1,954 Cash dividends ($.16 per share) (9,113) ------------ ------------- ------------- ------------- ------------- DECEMBER 31, 1998 58,505,908 $ 195,018 $ 360,008 $ (15,418) $ 102,472 ------------ ------------- ------------- ------------- ------------- Net Income 49,461 Exercise of stock options 64,055 213 975 Cash dividends ($.16 per share) (9,120) ------------ ------------- ------------- ------------- ------------- DECEMBER 31, 1999 58,569,963 $ 195,231 $ 360,983 $ (15,418) $ 142,813 ------------ ------------- ------------- ------------- -------------
See accompanying Notes to Consolidated Financial Statements. 38 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in tables, unless otherwise indicated, are in thousands, except per share amounts) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated accounts include Noble Affiliates, Inc. (the "Company") and the consolidated accounts of its wholly-owned subsidiaries: Noble Gas Marketing, Inc. ("NGM"); Noble Trading, Inc. ("NTI"); NPM, Inc.; and Samedan Oil Corporation ("Samedan"). Listed below are consolidated entities at December 31, 1999. NOBLE AFFILIATES, INC. Noble Gas Marketing, Inc. Noble Gas Pipeline, Inc. Noble Trading, Inc. NPM, Inc. Samedan Oil Corporation Samedan of North Africa, Inc. Samedan International Samedan Transfer Sub Samedan, Mediterranean Sea Samedan Power . Samedan Pipe Line Corporation Samedan Royalty Corporation Samedan of Tunisia, Inc. Energy Development Corporation ("EDC") EDC Argentina, Inc. EDC Australia, Ltd. EDC China, Inc. EDC Denmark, Inc. EDC Ecuador Ltd. EDC (Europe) Limited EDC HIPS, Inc. EDC Portugal Ltd. Gasdel Pipeline System Incorporated HGC, Inc. Producers Service, Inc. NATURE OF OPERATIONS The Company is an independent energy company engaged through its subsidiaries in the exploration, development, production and marketing of oil and gas. Samedan operates throughout the major basins in the United States, including the Gulf of Mexico, as well as international operations in Argentina, China, Ecuador, Equatorial Guinea, the Mediterranean, the North Sea and the United Kingdom. The Company markets its oil and gas production through NGM, NTI and Samedan. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Such estimates and assumptions also affect the disclosure of contingent assets and liabilities at the date of the financial statements as well as amounts of revenues and expenses recognized during the reporting period. Of the estimates and assumptions that affect reported results, the estimate of the Company's oil and gas reserves is the most significant. 39 42 FOREIGN CURRENCY TRANSLATION The U.S. dollar is considered the primary currency for each of the Company's international operations. Transactions that are completed in a foreign currency are translated into U.S. dollars and recorded in the financial statements. Translation gains or losses were not material in any of the periods presented and are included in other expense on the income statement. INVENTORIES Materials and supplies inventories, consisting principally of tubular goods and production equipment, are stated at the lower of cost or market, with cost being determined by the first-in, first-out method. PROPERTY, PLANT AND EQUIPMENT The Company accounts for its oil and gas properties under the successful efforts method of accounting. Under this method, costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells that find proved reserves and to drill and equip development wells are capitalized. Capitalized costs of producing oil and gas properties are amortized to operations by the unit-of-production method based on proved developed oil and gas reserves on a property by property basis as estimated by Company engineers. Estimated future restoration and abandonment costs are recorded by charges to depreciation, depletion and amortization ("DD&A") expense over the productive lives of the related properties. The Company has provided $83.0 million for such future costs classified with accumulated DD&A in the December 31, 1999, balance sheet. The total estimated future dismantlement and restoration costs of $123.1 million are included in future production and development costs for purposes of estimating the future net revenues relating to the Company's proved reserves. Upon sale or retirement of depreciable or depletable property, the cost and related accumulated DD&A are eliminated from the accounts and the resulting gain or loss is recognized. Individually significant undeveloped oil and gas properties are periodically assessed for impairment of value and a loss is recognized at the time of impairment by providing an impairment allowance. Other undeveloped properties are amortized on a composite method based on the Company's experience of successful drilling and average holding period. Geological and geophysical costs, delay rentals and costs to drill exploratory wells which do not find proved reserves are expensed. Repairs and maintenance are charged to expense as incurred. Developed oil and gas properties and other long-lived assets are periodically assessed to determine if circumstances indicate that the carrying amount of an asset may not be recoverable. The Company performs this review of recoverability by estimating future cash flows. If the sum of the expected future cash flows is less than the carrying amount of the asset, an impairment is recognized based on the discounted amount of such cash flows. INCOME TAXES The Company files a consolidated federal income tax return. Deferred income taxes are provided for temporary differences between the financial reporting and tax bases of the Company's assets and liabilities. CAPITALIZATION OF INTEREST The Company capitalizes interest costs associated with the development and construction of significant properties or projects. 40 43 STATEMENT OF CASH FLOWS For purposes of reporting cash flows, cash and short-term investments include cash on hand and investments purchased with original maturities of three months or less. BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE Basic income per share of common stock has been computed on the basis of the weighted average number of shares outstanding during each period. The diluted net income per share of common stock includes the effect of outstanding stock options. The following table summarizes the calculation of basic earnings per share ("EPS") and diluted EPS components required by SFAS No. 128, as of December 31:
1999 1998(1) 1997 --------------------------- ------------------------- --------------------------- (in thousands Income Shares Income Shares Income Shares except per share amounts) (Numerator) (Denominator) (Numerator) (Denominator) (Numerator) (Denominator) ----------- ------------- ----------- ------------ ----------- ------------- Net income/shares $49,461 57,005 $(164,025) 56,955 $99,278 56,872 BASIC EPS $.87 $(2.88) $1.75 Net income/shares $49,461 57,005 $(164,025) 56,955 $99,278 56,872 Effect of Diluted Securities Stock options 344 549 Adjusted net income and shares $49,461 57,349 $(164,025) 56,955 $99,278 57,421 DILUTED EPS $.86 $(2.88) $1.73
(1) In 1998, the diluted EPS is antidilutive as a result of the net operating loss; therefore, the basic EPS and diluted EPS are the same. REVENUE RECOGNITION AND GAS IMBALANCES Samedan and EDC have gas sales contracts with NGM, whereby Samedan and EDC are paid an index price for all gas sold to NGM. NGM records sales, including hedging transactions, as gathering, marketing and processing revenues. NGM records as cost of sales in gathering, marketing and processing costs, the amount paid to Samedan, EDC and third parties. All intercompany sales and costs have been eliminated. The Company follows an entitlements method of accounting for its gas imbalances. Gas imbalances occur when the Company sells more or less gas than its entitled ownership percentage of total gas production. Any excess amount received above the Company's share is treated as a liability. If less than the Company's entitlement is received, the underproduction is recorded as a receivable. The Company records the noncurrent liability in Other Deferred Credits and Noncurrent Liabilities, and the current liability in Other Current Liabilities. The Company's gas imbalance liabilities were $12.0 million and $14.8 million for 1999 and 1998, respectively. The Company records the noncurrent receivable in Other Assets, and the current receivable in Other Current Assets. The Company's gas imbalance receivables were $17.9 million and $19.1 million for 1999 and 1998, respectively, and are valued at the amount which is expected to be received. TAKE-OR-PAY SETTLEMENTS The Company records gas contract settlements which are not subject to recoupment in Other Income when the settlement is received. 41 44 TRADING AND HEDGING ACTIVITIES The Company, through its subsidiaries, from time to time, uses various hedging arrangements in connection with anticipated crude oil and natural gas sales to minimize the impact of product price fluctuations. Such arrangements include fixed price hedges, costless collars, and other contractual arrangements. Although these hedging arrangements expose the Company to credit risk, the Company monitors the creditworthiness of its counterparties, which generally are major financial institutions, and believes that losses from nonperformance are unlikely to occur. Hedging gains and losses related to the Company's oil and gas production are recorded in oil and gas sales and royalties. The swap component of the contracts discussed in the following paragraphs was treated as a hedge for accounting purposes only. There was no payment obligation in 1999. The Company has entered into three crude oil premium swap contracts related to its production for calendar year 2000. Two of the contracts provide for payments based on daily NYMEX settlement prices. These contracts relate to 2,500 BBLS per day and 2,000 BBLS per day and have trigger prices of $21.73 per BBL and $22.45 per BBL, respectively, and both have knockout prices of $17.00 per BBL. These two contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the settlement price for each NYMEX trading day is less than the trigger price, provided the NYMEX price is also greater than the $17.00 per BBL knockout price. If a daily settlement price is $17.00 per BBL or less, then neither party will have any liability to the other for that day. If a daily settlement price is above the applicable trigger price, then the Company will owe the counterparty for the excess of the settlement price over the trigger price for that day. Payment is made monthly under each of these contracts, in an amount equal to the net amount due to either party based on the sum of the daily amounts determined as described in this paragraph for that month. The third contract relates to 2,500 BBLS per day and provides for payments based on monthly average NYMEX settlement prices. The contract entitles the Company to receive monthly settlements from the counterparty in an amount, if any, by which the arithmetic average of the daily NYMEX settlement prices for the month is less than the trigger price, which is $21.73 per BBL, multiplied by the number of days in the month, provided such average NYMEX price is also greater than the $17.00 per BBL knockout price. If the average NYMEX settlement price for the month is $17.00 per BBL or less, then neither party will have any liability to the other for that month. If the average NYMEX settlement price for the month is above the trigger price, then the Company will pay the counterparty an amount equal to the excess of the average settlement price over the trigger price, multiplied by the number of days in the month. The Company has treated the swap component of these contracts as a hedge (for accounting purposes only), at swap prices ranging from $19.40 per BBL to $20.20 per BBL, which existed at the dates it entered into these contracts. In addition, the Company has separately accounted for the premium component of these contracts by marking them to market, resulting in a gain of $2,990,000 recorded in other income for the year ended December 31, 1999. In addition to the premium swap crude oil hedging contracts, the Company has entered into crude oil costless collar hedges from January 1, 2000, to April 30, 2000, for volumes of 2,000 BBLS per day. These costless collars have a floor price ranging from $21.53 per BBL to $23.27 per BBL and a cap price ranging from $25.83 per BBL to $27.31 per BBL. These costless collar contracts entitle the Company to receive settlements from the counterparties in amounts, if any, by which the monthly average settlement price for each NYMEX trading day during a contract month is less than the floor price. If the monthly average settlement price is above the applicable cap price, then the Company will owe the counterparties for the excess of the monthly average settlement price over the applicable cap price. If the monthly average settlement price falls between the applicable floor and cap price, then neither party will have any liability to the other party for that month. Payment, if any, is made monthly under each of the contracts in an amount equal to the net amount due either party based on the volumes per day multiplied by the difference between the NYMEX average price and the cap, if the NYMEX average price exceeds the cap price, or if the NYMEX average price is less than the floor price, then the volumes per day multiplied by the difference between the floor price and the NYMEX average price. 42 45 During 1999 and 1998, the Company had no oil or gas hedging transactions for its production. During 1997, the Company had natural gas hedging contracts that ranged from 20 percent to 32 percent of its average daily natural gas production. Natural gas hedges were in the price range of $1.88 per MMBTU to $3.30 per MMBTU. The net effect of these 1997 hedges was a $.12 per MCF reduction in the average natural gas price realized by the Company. At December 31, 1997, the Company had no natural gas hedging contracts for its production. During 1997, the Company had crude oil hedging contracts that ranged from 19 percent to 50 percent of its average daily oil production. Crude oil hedges were in the price range of $16.81 per BBL to $24.35 per BBL. The net effect of these 1997 hedges was a $.19 per BBL reduction in the average crude oil price realized by the Company. At December 31, 1997, the Company had no crude oil hedging contracts for its production. In addition to the hedging arrangements pertaining to the Company's production as described above, Noble Gas Marketing, Inc. ("NGM") employs various hedging arrangements in connection with its purchases and sales of third party production to lock in profits or limit exposure to gas price risk. Most of the purchases made by NGM are on an index basis; however, purchasers in the markets in which NGM sells often require fixed or NYMEX related pricing. NGM may use a hedge to convert the fixed or NYMEX sale to an index basis thereby determining the margin and minimizing the risk of price volatility. During 1999, NGM had hedging transactions with broker-dealers that ranged from 146,000 MMBTU's to 815,000 MMBTU's of gas per day. At December 31, 1999, NGM had in place hedges ranging from approximately 10,000 MMBTU's to 776,000 MMBTU's of gas per day for January 2000 to March 2001 for future physical transactions. In 1998, NGM had hedging transactions with broker-dealers that ranged from 508,811 MMBTU's to 1,061,536 MMBTU's of gas per day. During 1997, NGM had hedging transactions with broker-dealers that ranged from 317,693 MMBTU's to 768,599 MMBTU's of gas per day. NGM records hedging gains or losses relating to fixed term sales as gathering, marketing and processing revenues in the periods in which the related contract is completed. SELF-INSURANCE The Company self-insures the medical and dental coverage provided to certain of its employees, certain workers' compensation and the first $200,000 of its general liability coverage. A provision for self-insured claims is recorded when sufficient information is available to reasonably estimate the amount of the loss. UNCONSOLIDATED SUBSIDIARY The Company has one unconsolidated subsidiary, Atlantic Methanol Capital Company ("AMCCO"), a 50 percent owned joint venture that indirectly owns 90 percent of Atlantic Methanol Production Company ("AMPCO"), which is constructing a methanol plant in Equatorial Guinea. AMCCO is accounted for using the equity method within the Company's wholly-owned subsidiary, Samedan of North Africa, Inc. The plant construction started during 1998 and is scheduled to be completed during the second quarter of 2001. The Company's net equity investment in the unconsolidated subsidiary was $15.6 million at December 31, 1999. RECLASSIFICATION Certain reclassifications have been made to the 1997 and 1998 consolidated financial statements to conform to the 1999 presentation. RECENTLY ISSUED PRONOUNCEMENTS The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" in June 1998. The Statement establishes 43 46 accounting and reporting standards requiring every derivative instrument (including certain derivative instruments embedded in other contracts) to be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met wherein gains and losses are reflected in stockholder equity until the hedged item is recognized. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting. Due to the issuance of SFAS No. 137, which deferred the effective date of SFAS No. 133, the Company is required to adopt the statement for fiscal year beginning after June 15, 2000. A company may also implement the statement as of the beginning of any fiscal quarter after the statement's issuance (that is, fiscal quarters beginning June 16, 1998, and thereafter). SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the Company's election, before January 1, 1998). The Company has not quantified the impact of adopting SFAS No. 133 but plans on adopting the statement by January 1, 2001. NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments pursuant to the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." CASH AND SHORT-TERM INVESTMENTS The carrying amount approximates fair value due to the short maturity of the instruments. OIL AND GAS PRICE HEDGE AGREEMENTS The fair value of oil and gas price hedges is the estimated amount the Company would receive or pay to terminate the hedge agreements at the reporting date taking into account creditworthiness of the hedging parties. LONG-TERM DEBT The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying amounts and estimated fair values of the Company's financial instruments as of December 31, for each of the years are as follows:
1999 1998 ---------------------------- --------------------------- Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value - -------------- ---------- ---------- ----------- ----------- Cash and short-term investments $ 2,925 $ 2,925 $ 19,100 $ 19,100 Long-term debt (including current portion) $ 445,319 $ 407,500 $ 745,143 $ 760,750 Oil hedge agreements $ $ (7,879) $ $
44 47 NOTE 3 - DEBT A summary of debt at December 31 follows:
(in thousands) 1999 1998 - -------------- ---------- ---------- $300 million Credit Agreement $ $ 300,000 7 1/4% Notes Due 2023 100,000 100,000 8% Senior Notes Due 2027 250,000 250,000 7 1/4% Senior Debentures Due 2097 100,000 100,000 ---------- ---------- Outstanding debt 450,000 750,000 ---------- ---------- Less: unamortized discount 4,681 4,857 ---------- ---------- Long-term debt $ 445,319 $ 745,143 ---------- ----------
The Company's total long-term debt, net of unamortized discount, at December 31, 1999, was $445 million compared to $745 million at December 31, 1998. The ratio of debt to book capital (defined as the Company's debt plus its equity) was 39 percent at December 31, 1999, compared with 54 percent at December 31, 1998. The Company's long-term debt is comprised of: $100 million of 7 1/4% Notes Due 2023, $250 million of 8% Senior Notes Due 2027, and $100 million of 7 1/4% Senior Debentures Due 2097. There is no principal payment due on long term debt during the next five years. The Company has a $300 million credit facility which exposes the Company to the risk of earnings or cash flow loss due to changes in market interest rates. At December 31, 1999, there was no borrowing against the credit facility which has a maturity date of December 24, 2002. The interest rate is based upon a Eurodollar rate plus a range of 17.5 to 50 basis points. At year-end 1998, the Company had $300 million outstanding on this facility which was repaid during 1999. On June 17, 1999, the Company entered into a new $100 million 364 day credit agreement with certain commercial lending institutions. There is no balance outstanding on this agreement which is based upon a Eurodollar rate plus 37.5 to 87.5 basis points depending upon the percentage of utilization. On November 11, 1999, the Company announced that AMCCO had sold $125 million principal amount of its senior secured notes due 2004, without registration rights, in a private offering to institutional investors. Donaldson, Lufkin and Jenrette was the placement agent for the offering. Approximately $63 million of the proceeds, minus transaction expenses, were used to fund a portion of the Company's obligations to pay the costs of construction of the methanol plant and related facilities in Equatorial Guinea. The remainder of the proceeds was used by AMCCO to acquire from the Company, at book value, its subsidiary that held the Company's ownership interest in the methanol plant project. The Company has guaranteed payment of interest on the notes and provided certain other credit support. In addition, the Company established a new series of preferred stock, Series B Mandatory Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred"). The Company issued, in a private placement pursuant to Section 4(2) of the Securities Act, 125,000 shares of the Series B Preferred to Noble Share Trust, which is a Delaware statutory business trust, in exchange for all of the beneficial ownership interests in Noble Share Trust. Noble Share Trust holds the 125,000 shares of Series B Preferred for the benefit of the holders of the Series A-2 Notes. On December 31, 1999, the Company had $23 million outstanding on its note payable with AMCCO, an unconsolidated subsidiary. The note payable will be repaid by the second quarter of 2000 and has an interest rate of 8.95 percent. The note payable is included in other current liabilities. 45 48 NOTE 4 - INCOME TAXES The following table details the difference between the federal statutory tax rate and the effective tax rate for the years ended December 31:
(amounts expressed in percentages) 1999 1998 1997 - ---------------------------------- ------ ------ ----- Statutory rate (benefit) 35.0 (35.0) 35.0 Effect of: Percentage depletion (.1) State taxes (.2) Foreign taxes 1.8 .4 .8 Losses from international operations 1.3 .9 1.4 Other, net (1.8) .4 (.1) ------ ------ ----- Effective rate 36.3 (33.5) 37.0 ------ ------ -----
The net current deferred tax asset (liability) in the following table is classified as Other Current Assets in the Consolidated Balance Sheet. The tax effects of temporary differences which gave rise to deferred tax assets and liabilities as of December 31 were:
(in thousands) 1999 1998 - -------------- ----------- ----------- U.S. and State Current Deferred Tax Assets: Accrued expenses $ 525 $ 1,684 Deferred income 36 1,386 Minimum tax 17,939 Allowance for doubtful accounts 284 304 Net operating loss carryforward 6,710 Other 14 436 ----------- ----------- Net current deferred tax asset 859 28,459 ----------- ----------- U.S. and State Non-current Deferred Tax Liabilities: Property, plant and equipment, principally due to differences in depreciation, amortization, lease impairment and abandonments (84,969) (104,691) Accrued expenses 8,041 6,449 Deferred income 2,748 3,306 Allowance for doubtful accounts 4,865 3,930 Income tax accruals 9,244 10,465 Other 2,552 2,448 ----------- ----------- Net non-current deferred liability (57,519) (78,093) ----------- ----------- U.S. and state net deferred tax liability (56,660) (49,634) ----------- ----------- Foreign Deferred Tax Liabilities: Property, plant and equipment of foreign operations (25,556) (28,730) ----------- ----------- Deferred tax liability (25,556) (28,730) ----------- ----------- Total net deferred tax liability $ (82,216) $ (78,364) ----------- -----------
The components of income from operations before income taxes for each year are as follows:
(in thousands) 1999 1998 1997 - -------------- --------- --------- --------- Domestic $ 83,439 $(225,692) $ 159,535 Foreign (5,808) (21,016) (1,850) --------- --------- --------- $ 77,631 $(246,708) $ 157,685 --------- --------- ---------
46 49 The income tax provisions (benefit) relating to operations for each year consist of the following:
(in thousands) 1999 1998 1997 - -------------- ----------- ----------- ----------- U.S. current $ 18,962 $ (20,842) $ 22,146 U.S. deferred 7,151 (62,366) 34,344 State current 313 236 587 State deferred (313) (1,080) (622) Foreign current 5,232 927 2,836 Foreign deferred (3,175) 442 (884) ----------- ----------- ----------- $ 28,170 $ (82,683) $ 58,407 ----------- ----------- -----------
NOTE 5 - COMMON STOCK, STOCK OPTIONS AND STOCKHOLDER RIGHTS The Company has two stock option plans, the 1992 Stock Option and Restricted Stock Plan ("1992 Plan") and the 1988 Non-Employee Director Stock Option Plan ("1988 Plan"). The Company accounts for these plans under APB Opinion 25, under which no compensation cost has been recognized in the accompanying financial statements. Under the Company's 1992 Plan, the Board of Directors may grant stock options and award restricted stock. No restricted stock has been issued under the 1992 Plan. Since the adoption of the 1992 Plan, stock options have been issued at the market price on the date of grant. The earliest the granted options may be exercised is over a three year period at the rate of 33 1/3% each year commencing on the first anniversary of the grant date. The options expire ten years from the grant date. The 1992 Plan was amended in 1997, by a vote of the shareholders, to increase the maximum number of shares of common stock that may be issued under the 1992 Plan to 4,000,000 shares. At December 31, 1999, the Company had reserved 3,789,180 shares of common stock for issuance, including 487,945 shares available for grant, under its 1992 Plan. The Company's 1988 Plan allows stock options to be issued to certain non-employee directors at the market price on the date of grant. The options may be exercised one year after issue and expire ten years from the grant date. The 1988 Plan provides for the grant of options to purchase a maximum of 550,000 shares of the Company's authorized but unissued common stock. At December 31, 1999, the Company had reserved 419,000 shares of common stock for issuance, including 195,500 shares available for grant, under its 1988 Plan. The Company adopted a stockholder rights plan on August 27, 1997, designed to assure that the Company's stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers and other abusive takeover tactics to gain control of the Company without paying all stockholders a fair price. The rights plan was not adopted in response to any specific takeover proposal. Under the rights plan, the Company declared a dividend of one right ("Right") on each share of Noble Affiliates, Inc. common stock. Each Right will entitle the holder to purchase one one-hundredth of a share of a new Series A Junior Participating Preferred Stock, par value $1.00 per share, at an exercise price of $150.00. The Rights are not currently exercisable and will become exercisable only in the event a person or group acquires beneficial ownership of 15 percent or more of Noble Affiliates, Inc. common stock. The dividend distribution was made on September 8, 1997, to stockholders of record at the close of business on that date. The Rights will expire on September 8, 2007. 47 50 Stock options outstanding under the plans mentioned above and two previously terminated plans are presented for the periods indicated.
Number Option of Shares Price Range ----------- -------------- OUTSTANDING DECEMBER 31, 1996 1,602,098 $ 10.63-$40.38 ----------- -------------- Granted 707,307 $ 39.63-$39.88 Exercised (102,141) $ 10.63-$40.38 Canceled (1,929) $ 24.25-$27.25 ----------- -------------- OUTSTANDING DECEMBER 31, 1997 2,205,335 $ 11.63-$40.38 ----------- -------------- Granted 722,604 $ 35.94-$37.75 Exercised (82,470) $ 11.63-$40.38 Canceled (28,227) $ 24.25-$40.38 ----------- -------------- OUTSTANDING DECEMBER 31, 1998 2,817,242 $ 13.38-$40.38 ----------- -------------- Granted 810,895 $ 20.06-$27,50 Exercised (64,055) $ 13.38-$24.25 Canceled (85,812) $ 20.06-$40.38 ----------- -------------- OUTSTANDING DECEMBER 31, 1999 3,478,270 $ 13.50-$40.38 ----------- -------------- EXERCISABLE AT DECEMBER 31, 1999 2,207,545 $ 13.50-$40.38 ----------- --------------
The SFAS No. 123 method of accounting is based on several assumptions and should not be viewed as indicative of the operations of the Company in future periods. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1999, 1998 and 1997, respectively as follows:
(amounts expressed in percentages) 1999 1998 1997 - ---------------------------------- -------- -------- ------- Interest rate 5.50 5.75 6.03 Dividend yield .40 .40 .40 Expected volatility 42.95 32.66 32.97 Expected life 8.80 9.74 7.00
The weighted average fair value of options granted using the Black-Scholes option pricing model for 1999, 1998 and 1997, respectively is as follows:
(amounts expressed in dollars) 1999 1998 1997 - ------------------------------ -------- -------- ------- Black-Scholes model weighted average fair value option price $10.01 $19.02 $18.28
The Company applies APB Opinion No. 25 in accounting for its fixed price stock options. Accordingly, no compensation cost for options has been recognized in the financial statements. The chart below sets forth the Company's net income and earnings per share for each of the years ended December 31, as reported and on a pro forma basis as if the compensation cost of stock options had been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation."
(in thousands except per share amounts) 1999 1998 1997 - --------------------------------------- ------- ---------- -------- Net Income: As Reported $49,461 $ (164,025) $ 99,278 Pro Forma $41,176 $ (171,741) $ 95,591 Basic Earnings Per Share: As Reported $ .87 $ (2.88) $ 1.75 Pro Forma $ .72 $ (3.02) $ 1.68 Diluted Earnings Per Share: As Reported $ .86 $ (2.88) $ 1.73 Pro Forma $ .72 $ (3.02) $ 1.66
48 51 NOTE 6 - EMPLOYEE BENEFIT PLANS PENSION PLAN AND OTHER POSTRETIREMENT BENEFIT PLANS The Company has a non-contributory defined benefit pension plan covering substantially all of its domestic employees. The benefits are based on an employee's years of service and average earnings for the 60 consecutive calendar months of highest compensation. The Company also has an unfunded restoration plan to ensure payments of amounts for which employees are entitled under the provisions of the pension plan, but which are subject to limitations imposed by federal tax laws. The Company's funding policy has been to make annual contributions equal to the actuarially computed liability to the extent such amounts are deductible for income tax purposes. Plan assets consist of equity securities and fixed income investments. The Company sponsors other plans for the benefit of its employees and retirees. These plans include health care and life insurance benefits. The following table reflects the required SFAS No. 132, "Employers' Disclosures About Pension and Other Postretirement Benefits," disclosures at December 31:
Pension Benefits Other Benefits --------------------------- -------------------------- (in thousands) 1999 1998 1999 1998 - -------------- --------- --------- -------- -------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 82,823 $ 62,487 $ 3,187 $ 2,384 Service cost 3,802 3,811 294 268 Interest cost 4,720 4,704 188 185 Plan participants' contributions 38 22 Amendments 489 (363) Actuarial (gain) loss (24,294) 14,059 (533) 358 Benefit paid (2,857) (2,727) (72) (30) --------- --------- -------- -------- Benefit obligation at year end $ 64,194 $ 82,823 $ 2,739 $ 3,187 --------- --------- -------- -------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 60,559 $ 55,611 $ $ Actual return on plan assets 1,083 7,322 Employer contribution 383 351 72 30 Benefit paid (2,857) (2,725) (72) (30) --------- --------- -------- -------- Fair value of plan at end of year $ 59,168 $ 60,559 $ $ --------- --------- -------- -------- Fund status $ (5,026) $ (22,264) $ (2,738) $ (3,187) Unrecognized net actuarial loss (gain) (18,989) 2,157 222 790 Unrecognized prior service cost 3,035 3,327 (334) Unrecognized net transition obligation (assets) 1,239 1,263 --------- --------- -------- -------- Prepaid (accrued) benefit costs $ (19,741) $ (15,517) $ (2,850) $ (2,397) --------- --------- -------- -------- COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 3,802 $ 3,811 $ 294 $ 268 Interest cost 4,720 4,704 188 185 Expected return on plan assets (4,264) (3,908) Transition (assets) obligation recognition 24 24 Amortization of prior service cost 291 291 (30) Recognized net actuarial loss 35 286 34 23 --------- --------- -------- -------- Net periodic benefit cost $ 4,608 $ 5,208 $ 486 $ 476 --------- --------- -------- -------- WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31, Discount rate 8.00% 6.75% 8.00% 6.75% Expected return on plan assets 8.50% 8.50% Rate of compensation increase 5.50% 5.50% 5.50% 5.50%
49 52 The following table reflects the aggregate pension obligation components required by SFAS No. 132 for the defined benefit pension plan and the restoration benefit plan, which are aggregated in the previous tables, at December 31:
Defined Benefit Restoration Pension Plan Benefit Plan ------------------- -------------------- (in thousands) 1999 1998 1999 1998 - ------------- -------- -------- -------- -------- AGGREGATED PENSION BENEFITS Aggregate fair value of plan assets $59,168 $60,559 $ $ Aggregate accumulated benefit obligation 56,092 68,283 8,102 14,540 ------- ------- ------- -------- Fund status of net periodic benefit assets (obligation) $ 3,076 $(7,724) $(8,102) $(14,540) ------- ------- ------- --------
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following results:
1-Percentage- 1-Percentage- (in thousands) Point increase Point decrease - -------------- -------------- -------------- Total service and interest cost components $ 544 $ 429 Total postretirement benefit obligation $3,048 $2,474
EMPLOYEE SAVINGS PLAN ("ESP") The Company has an ESP which is a defined contribution plan. Participation in the ESP is voluntary and all regular employees of the Company are eligible to participate. The Company may match up to 100 percent of the participant's contribution not to exceed six percent of the employee's base compensation. The following table indicates the Company's contribution for the years ended December 31:
(in thousands) 1999 1998 1997 - -------------- ------ ------ ------ Employers' plan contribution $1,823 $1,938 $1,369
NOTE 7 - ADDITIONAL BALANCE SHEET AND STATEMENT OF OPERATIONS INFORMATION Included in accounts receivable-trade is an allowance for doubtful accounts at December 31:
(in thousands) 1999 1998 - -------------- ------ ------ Allowance for doubtful accounts $1,237 $1,146
Other current assets include the following at December 31:
(in thousands) 1999 1998 - -------------- ------- ------- Deferred tax asset $ 859 $28,459 Prepaid federal income taxes $30,000 $ 4,276
Other current liabilities include the following at December 31:
(in thousands) 1999 1998 - -------------- ------- ------- Gas imbalance liabilities $ 2,604 $ 4,761 Note payable unconsolidated subsidiary $23,245 $ Accrued interest payable $10,897 $12,251 Louisiana workers compensation $ 4,751 $ 4,345
Oil and gas operations expense included the following for the years ended December 31:
(in thousands) 1999 1998 1997 - -------------- --------- --------- --------- Lease operating expense $ 112,997 $ 142,673 $ 151,712 Production taxes 6,679 8,436 11,947 Other (2,978) (2,079) (2,894) --------- --------- --------- Total operations expense $ 116,698 $ 149,030 $ 160,765 --------- --------- ---------
50 53 Oil and gas exploration expense included the following for the years ended December 31:
(in thousands) 1999 1998 1997 - -------------- -------- -------- -------- Dry hole expense $19,204 $ 57,736 $46,902 Undeveloped lease amortization 9,645 7,953 8,146 Abandoned assets 2,483 15,325 4,923 Seismic 7,797 15,754 19,095 Other 7,655 13,390 7,632 ------- -------- ------- Total exploration expense $46,784 $110,158 $86,698 ------- -------- -------
During the past three years, there was no purchaser that accounted for more than ten percent of total oil and gas sales and royalties. NOTE 8 - IMPAIRMENT OF LONG-LIVED ASSETS The Company follows SFAS No. 121 and any assets impaired are oil and gas properties maintained under the successful efforts method of accounting. The excess of the net book value over the projected discounted future net revenue of the impaired properties is charged to "Impairment of Operating Assets." The Company recorded no asset impairments under SFAS No. 121 during 1999 or 1997. In December 1998, the Company recorded a $223.3 million pre-tax charge for the write-down under SFAS No. 121 of properties due to downward reserve revisions. 51 54 SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited) There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves. Oil and gas reserve engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be precisely measured, and estimates of engineers other than Samedan's might differ materially from the estimates set forth herein. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered. PROVED GAS RESERVES (Unaudited) The following reserve schedule was developed by the Company's reserve engineers and sets forth the changes in estimated quantities of proved gas reserves of the Company during each of the three years presented.
Natural Gas and Casinghead Gas (MMCF) --------------------------------------------------------------------------------------- United Other Equatorial United PROVED RESERVES AS OF: States Int'l Guinea Ecuador Argentina Kingdom Total - --------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- JANUARY 1, 1999 873,222 321,642 5,386 39,056 1,239,306 Revisions of previous estimates (15,700) 63,478 482 (2,392) 45,868 Extensions, discoveries and other additions 87,293 87,500 192 174,985 Production (150,871) (1,018) (647) (10,404) (162,940) Sale of minerals in place (34,165) (34,165) Purchase of minerals in place 2 2 - ----------------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- DECEMBER 31, 1999 759,781 384,102 87,500 5,221 26,452 1,263,056 - ----------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- PROVED RESERVES AS OF: - --------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- JANUARY 1, 1998 1,107,158 322,205 5,565 47,287 1,482,215 Revisions of previous estimates (155,314) 396 27 (1,030) (155,921) Extensions, discoveries and other additions 71,061 71,061 Production (196,220) (959) (206) (7,201) (204,586) Sale of minerals in place (2,232) (2,232) Purchase of minerals in place 48,769 48,769 - ----------------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- DECEMBER 31, 1998 873,222 321,642 5,386 39,056 1,239,306 - ----------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- PROVED RESERVES AS OF: - --------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- JANUARY 1, 1997 1,079,607 26,601 5,676 44,366 1,156,250 Revisions of previous estimates (1,228) (2,554) 545 (5) 904 (2,338) Extensions, discoveries and other additions 226,546 322,205 7,025 555,776 Production (195,085) (1,892) (545) (106) (5,008) (202,636) Sale of minerals in place (6,934) (22,299) (29,233) Purchase of minerals in place 4,252 144 4,396 - ----------------------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- DECEMBER 31, 1997 1,107,158 322,205 5,565 47,287 1,482,215 - ----------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- PROVED DEVELOPED GAS RESERVES AS OF: - ------------------------------------ January 1, 2000 703,166 11,687 5,221 26,452 746,526 January 1, 1999 818,787 12,862 5,386 39,056 876,091 January 1, 1998 1,022,192 13,425 5,565 47,287 1,088,469 January 1, 1997 1,010,837 26,601 5,676 17,981 1,061,095
52 55 PROVED OIL RESERVES (Unaudited) The following reserve schedule was developed by the Company's reserve engineers and sets forth the changes in estimated quantities of proved oil reserves of the Company during each of the three years presented.
Crude Oil and Condensate (BBLS in thousands) ------------------------------------------------------------------------------ United Other Equatorial United PROVED RESERVES AS OF: States Int'l Guinea Argentina Kingdom Total - ---------------------- -------- -------- ---------- --------- -------- -------- JANUARY 1, 1999 77,306 22,001 11,128 6,146 116,581 Revisions of previous estimates (1,394) 9,617 (24) (57) 8,142 Extensions, discoveries and other additions 3,687 9,768 354 13,809 Production (8,952) (934) (819) (657) (11,362) Sale of minerals in place (5,125) (5,125) Purchase of minerals in place 1 1 -------- -------- -------- -------- -------- -------- DECEMBER 31, 1999 65,523 9,768 30,684 10,285 5,786 122,046 -------- -------- -------- -------- -------- -------- PROVED RESERVES AS OF: - ---------------------- JANUARY 1, 1998 89,065 22,766 11,997 7,035 130,863 Revisions of previous estimates (5,935) 166 16 (129) (5,882) Extensions, discoveries and other additions 4,802 35 4,837 Production (11,540) (931) (885) (795) (14,151) Sale of minerals in place (155) (155) Purchase of minerals in place 1,069 1,069 -------- -------- -------- -------- -------- -------- DECEMBER 31, 1998 77,306 22,001 11,128 6,146 116,581 -------- -------- -------- -------- -------- -------- PROVED RESERVES AS OF: - ---------------------- JANUARY 1, 1997 82,317 3,435 8,276 13,007 8,712 115,747 Revisions of previous estimates 1,516 1,676 117 (133) (795) 2,381 Extensions, discoveries and other additions 16,501 (1) 15,212 31,712 Production (11,450) (426) (839) (877) (882) (14,474) Sale of minerals in place (184) (4,797) (4,981) Purchase of minerals in place 365 113 478 -------- -------- -------- -------- -------- -------- DECEMBER 31, 1997 89,065 22,766 11,997 7,035 130,863 -------- -------- -------- -------- -------- -------- PROVED DEVELOPED OIL RESERVES AS OF: - ------------------------------------ January 1, 2000 60,618 9,768 14,743 10,285 3,986 99,400 January 1, 1999 72,949 11,425 11,128 4,346 99,848 January 1, 1998 82,713 12,191 11,997 5,234 112,135 January 1, 1997 78,564 3,322 6,956 13,007 6,049 107,898
- ------------------ Proved Reserves. Proved reserves are estimated quantities of crude oil, natural gas, natural gas liquids and condensate liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved Developed Reserves. Proved developed reserves are proved reserves which are expected to be recovered through existing wells with existing equipment and operating methods. 53 56 OIL AND GAS OPERATIONS (Unaudited) Aggregate results of operations for each period ended December 31, in connection with the Company's oil and gas producing activities are shown below. Amounts are presented in accordance with SFAS No. 19, and may not agree with amounts determined using traditional industry definitions.
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- --------- --------- ---------- ---------- --------- --------- --------- Revenues $ 493,718 $ $ 16,036 $ $ 14,302 $ 24,677 $ 548,733 Production costs 125,803 3,183 4,640 7,106 140,732 Exploration expenses 45,461 2,779 196 130 542 4,270 53,378 DD&A and valuation provision 231,157 849 3,212 16 6,401 19,687 261,322 --------- --------- ---------- --------- --------- --------- --------- Income (loss) 91,297 (3,628) 9,445 (146) 2,719 (6,386) 93,301 Income tax expense (benefit) 31,646 (1,094) 4,428 1,651 (733) 35,898 --------- --------- ---------- --------- --------- --------- --------- Result of operations from producing activities (excluding corporate overhead and interest costs) $ 59,651 $ (2,534) $ 5,017 $ (146) $ 1,068 $ (5,653) $ 57,403 --------- --------- ---------- --------- --------- --------- ---------
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- --------- --------- ---------- ---------- --------- --------- --------- Revenues $ 564,771 $ $ 10,282 $ $ 9,105 $ 25,006 $ 609,164 Production costs 154,594 2,962 6,274 9,044 172,874 Exploration expenses 90,614 9,987 658 87 5,828 107,174 DD&A and valuation provision 513,725 46 2,998 6,083 13,869 536,721* --------- --------- ---------- --------- --------- --------- --------- Income (loss) (194,162) (10,033) 3,664 (3,339) (3,735) (207,605) Income tax expense (benefit) (68,764) (2,489) 1,786 (1,822) (794) (72,083) --------- --------- ---------- --------- --------- --------- --------- Result of operations from producing activities (excluding corporate overhead and interest costs) $(125,398) $ (7,544) $ 1,878 $ $ (1,517) $ (2,941) $(135,522) --------- --------- ---------- --------- --------- --------- ---------
*Includes a pre-tax charge of $223.3 million pursuant to SFAS No. 121.
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ----------------------------------- -------- -------- ---------- ---------- --------- -------- -------- Revenues $696,882 $ 9,944 $ 14,824 $ $ 14,777 $ 24,718 $761,145 Production costs 164,441 4,778 3,600 5,555 8,220 186,594 Exploration expenses 56,177 12,345 3,464 804 7,942 80,732 DD&A and valuation provision 280,862 2,642 1,889 5,037 12,399 302,829 -------- -------- -------- ---------- -------- -------- -------- Income (loss) 195,402 (9,821) 5,871 3,381 (3,843) 190,990 Income tax expense (benefit) 67,934 (4,470) 4,654 2,680 (3,047) 67,751 -------- -------- -------- ---------- -------- -------- -------- Result of operations from producing activities (excluding corporate overhead and interest costs) $127,468 $ (5,351) $ 1,217 $ $ 701 $ (796) $123,239 -------- -------- -------- ---------- -------- -------- --------
54 57 COSTS INCURRED IN OIL AND GAS ACTIVITIES (Unaudited) Costs incurred in connection with the Company's oil and gas acquisition, exploration and development activities for each of the years are shown below. Amounts are presented in accordance with SFAS No. 19, and may not agree with amounts determined using traditional industry definitions.
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Property acquisition costs Proved $ 69 $ $ $ $ $ $ 69 Unproved 7,280 620 7,900 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 7,349 $ 620 $ $ $ $ $ 7,969 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Exploration costs $ 43,999 $ 7,382 $ 123 $ 130 $ 340 $ 3,229 $ 55,203 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Development costs $ 48,042 $ 1,012 $ 1,748 $ 2,569 $ 3,851 $ 4,972 $ 62,194 ---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Property acquisition costs Proved $ 48,444 $ $ $ $ $ $ 48,444 Unproved 36,760 500 311 37,571 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 85,204 $ 500 $ $ $ $ 311 $ 86,015 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Exploration costs $ 132,958 $ 9,663 $ 465 $ $ 473 $ 5,328 $ 148,887 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Development costs $ 242,838 $ 10,251 $ 10,977 $ $ 7,918 $ 9,761 $ 281,745 ---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands) - -------------- United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Property acquisition costs Proved $ 3,884 $ 28 $ $ $ $ $ 3,912 Unproved 16,668 3,178 19,846 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 20,552 $ 3,206 $ $ $ $ $ 23,758 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Exploration costs $ 81,141 $ 14,528 $ 9,907 $ $ $ 11,588 $ 117,164 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Development costs $ 201,788 $ 1,538 $ 2,871 $ $ 5,558 $ 4,213 $ 215,968 ---------- ---------- ---------- ---------- ---------- ---------- ----------
AGGREGATE CAPITALIZED COSTS (Unaudited) Aggregate capitalized costs relating to the Company's oil and gas producing activities, and related accumulated DD&A, as of December 31 are shown below:
1999 1998 --------------------------------------------- --------------------------------------------- (in thousands) U. S. Int'l TOTAL U. S. Int'l TOTAL - ------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- Unproved oil and gas properties $ 79,823 $ 13,288 $ 93,111 $ 86,844 $ 15,302 $ 102,146 Proved oil and gas properties 2,389,937 303,800 2,693,737 2,507,767 263,163 2,770,930 ----------- ----------- ----------- ----------- ----------- ----------- 2,469,760 317,088 2,786,848 2,594,611 278,465 2,873,076 Accumulated DD&A (1,471,889) (88,154) (1,560,043) (1,401,218) (59,357) (1,460,575) ----------- ----------- ----------- ----------- ----------- ----------- Net capitalized costs $ 997,871 $ 228,934 $ 1,226,805 $ 1,193,393 $ 219,108 $ 1,412,501 ----------- ----------- ----------- ----------- ----------- -----------
55 58 STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND GAS RESERVES (Unaudited) The following information is based on the Company's best estimate of the required data for the Standardized Measure of Discounted Future Net Cash Flows as of December 31, 1999, 1998 and 1997 in accordance with SFAS No. 69. The Standard requires the use of a 10 percent discount rate. This information is not the fair market value nor does it represent the expected present value of future cash flows of the Company's proved oil and gas reserves.
United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (in millions of dollars) Future cash inflows $ 3,565 $ 220 $ 779 $ 320 $ 243 $ 181 $ 5,308 Future production and development costs 1,566 105 189 73 102 85 2,120 Future income tax expenses 376 22 111 46 27 18 600 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Future net cash flows 1,623 93 479 201 114 78 2,588 10% annual discount for estimated timing of cash flows 686 39 203 85 49 33 1,095 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Standardized measure of discounted future net cash flows $ 937 $ 54 $ 276 $ 116 $ 65 $ 45 $ 1,493 ---------- ---------- ---------- ---------- ---------- ---------- ----------
United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (in millions of dollars) Future cash inflows $ 2,647 $ $ 301 $ $ 96 $ 113 $ 3,157 Future production and development costs 1,146 140 30 62 1,378 Future income tax expenses 182 19 8 6 215 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Future net cash flows 1,319 142 58 45 1,564 10% annual discount for estimated timing of cash flows 490 53 22 17 582 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Standardized measure of discounted future net cash flows $ 829 $ $ 89 $ $ 36 $ 28 $ 982 ---------- ---------- ---------- ---------- ---------- ---------- ----------
United Other Equatorial United DECEMBER 31, 1999 States Int'l Guinea Ecuador Argentina Kingdom Total - ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (in millions of dollars) Future cash inflows $ 4,330 $ $ 498 $ $ 196 $ 259 $ 5,283 Future production and development costs 2,040 148 121 61 2,370 Future income tax expenses 612 93 20 53 778 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Future net cash flows 1,678 257 55 145 2,135 10% annual discount for estimated timing of cash flows 615 95 20 53 783 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Standardized measure of discounted future net cash flows $ 1,063 $ $ 162 $ $ 35 $ 92 $ 1,352 ---------- ---------- ---------- ---------- ---------- ---------- ----------
Construction of AMPCO's Equatorial Guinea methanol plant is scheduled to be completed in the second quarter of 2001. The future net cash inflows for 1998 and 1999 do not include cash flows relating to the Company's anticipated future methanol sales. For more information regarding Samedan's methanol plant, see Item 1. "Business--Unconsolidated Subsidiary" and Item 2. "Properties--Oil and Gas" of this Form 10-K. 56 59 Future cash inflows are estimated by applying year-end prices of oil and gas relating to the Company's proved reserves to the year-end quantities of those reserves, with consideration given to the effect of existing hedging contracts, if any. The year-end weighted average oil market price utilized in the computation of future cash inflows was approximately $23.62 per BBL. West Texas intermediate crude oil price in mid February was approximately $27.25 per BBL, an increase of $3.63 per BBL compared to year-end 1999. The Company estimates that a $1.00 per BBL change in the average oil price from the year-end price would change discounted future net cash flows before income taxes by approximately $67 million. The year-end weighted average gas market price utilized in the computation of future cash inflows was approximately $2.15 per MCF. Natural gas index prices at Henry Hub have increased approximately $.41 per MCF to $2.56 per MCF in mid February compared with the year-end price. The Company estimates that a $.10 per MCF change in the average gas price from the year-end price would change discounted future net cash flows before income taxes by approximately $68 million. Future production and development costs, which include dismantlement and restoration expense, are computed by estimating the expenditures to be incurred in developing and producing the Company's proved oil and gas reserves at the end of the year, based on year-end costs, and assuming continuation of existing economic conditions. Future income tax expenses are computed by applying the appropriate year-end statutory tax rates to the estimated future pretax net cash flows relating to the Company's proved oil and gas reserves, less the tax bases of the properties involved. The future income tax expenses give effect to tax credits and allowances, but do not reflect the impact of general and administrative costs and exploration expenses of ongoing operations relating to the Company's proved oil and gas reserves. At December 31, 1999, the Company had estimated gas imbalance receivables of $17.9 million and estimated gas imbalance liabilities of $12.0 million; at year-end 1998, $19.1 million in receivables and $14.8 million in liabilities; and at year-end 1997, $18.5 million in receivables and $21.6 million in liabilities. Neither the gas imbalance receivables nor gas imbalance liabilities have been included in the standardized measure of discounted future net cash flows as of each of the three years ended December 31, 1999, 1998 and 1997. 57 60 SOURCES OF CHANGES IN DISCOUNTED FUTURE NET CASH FLOWS (Unaudited) Principal changes in the aggregate standardized measure of discounted future net cash flows attributable to the Company's proved oil and gas reserves, as required by Financial Accounting Standards Board's SFAS No. 69, at year end are shown below.
(in millions of dollars) 1999 1998 1997 - ------------------------------------------ ------- ------- ------- Standardized measure of discounted future net cash flows at the beginning of the year $ 982 $ 1,352 $ 2,222 Extensions, discoveries and improved recovery, less related costs 410 39 501 Revisions of previous quantity estimates 89 (132) 13 Changes in estimated future development costs (202) (17) (15) Purchases (sales) of minerals in place (58) 46 (45) Net changes in prices and production costs 673 (443) (1,259) Accretion of discount 102 189 310 Sales of oil and gas produced, net of production costs (425) (454) (594) Development costs incurred during the period 21 127 38 Net change in income taxes (317) 503 332 Change in timing of estimated future production, and other 218 (228) (151) ------- ------- ------- Standardized measure of discounted future net cash flows at the end of the year $ 1,493 $ 982 $ 1,352 - ------------------------------------------ ------- ------- -------
INTERIM FINANCIAL INFORMATION (Unaudited) Interim financial information for the years ended December 31, 1999 and 1998 is as follows:
Quarter Ended ---------------------------------------------------------- (in thousands except per share amounts) Mar. 31, June 30, Sept. 30, Dec. 31,(1) - --------------------------------------- ---------- ---------- ---------- ----------- 1999 Revenues $ 175,865 $ 216,245 $ 241,971 $ 252,698 Gross profit from operations $ 128 $ 22,959 $ 41,453 $ 38,087 Net income $ (8,901) $ 9,179 $ 27,654 $ 21,529 Basic earnings per share $ (.16) $ .16 $ .49 $ .38 Diluted earnings per share $ (.16) $ .16 $ .48 $ .38 1998 Revenues $ 246,535 $ 237,392 $ 205,803 $ 203,841 Gross profit (loss) from operations $ 31,838 $ 27,326 $ (25,616) $ (235,922) Net income $ 13,718 $ 12,135 $ (25,150) $ (164,728) Basic earnings per share $ .24 $ .21 $ (.44) $ (2.89) Diluted earnings per share $ .24 $ .21 $ (.44) $ (2.89)
(1) During the fourth quarters of 1999 and 1998, DD&A expense increased $7.6 million and $9.8 million, respectively, relating to the cumulative effect of oil and gas reserve revisions on the DD&A provision for the preceding three quarters. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 58 61 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The section entitled "Election of Directors" in the Registrant's proxy statement for the 2000 annual meeting of stockholders sets forth certain information with respect to the directors of the Registrant and is incorporated herein by reference. Certain information with respect to the executive officers of the Registrant is set forth under the caption "Executive Officers of the Registrant" in Part I of this report. The section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's proxy statement for the 2000 annual meeting of stockholders sets forth certain information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The section entitled "Executive Compensation" in the Registrant's proxy statement for the 2000 annual meeting of stockholders sets forth certain information with respect to the compensation of management of the Registrant, and except for the report of the Compensation and Benefits Committee and Stock Option Committee of the Board of Directors and the information therein under "Executive Compensation--Performance Graph" is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The sections entitled "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Directors and Executive Officers" in the Registrant's proxy statement for the 2000 annual meeting of stockholders set forth certain information with respect to the ownership of the Registrant's common stock and are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The section entitled "Certain Transactions" in the Registrant's proxy statement for the 2000 annual meeting of stockholders sets forth certain information with respect to certain relationships and related transactions, and is incorporated herein by reference. PART IV ITEM 14. FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: (1) Financial Statements and Financial Statement Schedules and Supplementary Data: These documents are listed in the Index to Consolidated Financial Statements in Item 8 hereof. (2) Exhibits: The exhibits required to be filed by this Item 14 are set forth in the Index to Exhibits accompanying this report. (b) The Registrant made no filings on Form 8-K during 1999. 59 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOBLE AFFILIATES, INC. Date: March 13, 2000 By: /s/ James L. McElvany --------------------------------------------- James L. McElvany, Vice President-Finance and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity in which signed Date - --------- ------------------------ ---- /s/ Robert Kelley Chairman of the Board, President, March 13, 2000 - ------------------------------------ Chief Executive Officer and Robert Kelley Director (Principal Executive Officer) /s/ James L. McElvany Vice President-Finance and Treasurer March 13, 2000 - ------------------------------------ (Principal Financial and Accounting James L. McElvany Officer) /s/ Alan A. Baker Director March 13, 2000 - ------------------------------------ Alan A. Baker /s/ Michael A. Cawley Director March 13, 2000 - ------------------------------------ Michael A. Cawley /s/ Edward F. Cox Director March 13, 2000 - ------------------ Edward F. Cox /s/ Thomas E. Hassen Director March 13, 2000 - ------------------------------------ Thomas E. Hassen /s/ Dale P. Jones Director March 13, 2000 - ------------------------------------ Dale P. Jones /s/ Harold F. Kleinman Director March 13, 2000 - ------------------------------------ Harold F. Kleinman /s/ T. Don Stacy Director March 13, 2000 - ------------------------------------ T. Don Stacy
60 63 INDEX TO EXHIBITS
Exhibit Number Exhibit ** - ------ ---------- 3.1 -- Certificate of Incorporation, as amended, of the Registrant as currently in effect (filed as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference). 3.2 -- Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant dated August 27, 1997 (filed Exhibit A of Exhibit 4.1 to the Registrant's Registration Statement on Form 8-A filed on August 28, 1997 and incorporated herein by reference). 3.3 -- Composite copy of Bylaws of the Registrant as currently in effect (filed as Exhibit 3.4 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). 3.4 -- Certificate of Designations of Series B Mandatorily Convertible Preferred Stock of the Registrant dated November 9, 1999. 4.1 -- Indenture dated as of October 14, 1993 between the Registrant and U.S. Trust Company of Texas, N.A., as Trustee, relating to the Registrant's 7 1/4% Notes Due 2023, including form of the Registrant's 7 1/4% Notes Due 2023 (filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference). 4.2 -- Indenture relating to Senior Debt Securities dated as of April 1, 1997 between the Registrant and U.S. Trust Company of Texas, N.A., as Trustee (filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference). 4.3 -- First Indenture Supplement relating to $250 million of the Registrant's 8% Senior Notes Due 2027 dated as of April 1, 1997 between the Registrant and U.S. Trust Company of Texas, N.A., as Trustee (filed as Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference). 4.4 -- Second Indenture Supplement, between the Company and U.S. Trust Company of Texas, N.A. as trustee, relating to $100 million of the Registrant's 7 1/4% Senior Debentures Due 2097 dated as of August 1, 1997 (filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference). 4.5 -- Rights Agreement, dated as of August 27, 1997, between the Registrant and Liberty Bank and Trust Company of Oklahoma City, N.A., as Right's Agent (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form 8-A filed on August 28, 1997 and incorporated herein by reference). 4.6 -- Amendment No. 1 to Rights Agreement dated as of December 8, 1998, between the Registrant and Bank One Trust Company, as successor Rights Agent to Liberty Bank and Trust Company of Oklahoma City, N.A. (filed as Exhibit 4.2 to the Registrant's Registration Statement on Form 8-A/A (Amendment No. 1) filed on December 14, 1998 and incorporated herein by reference). 10.1* -- Samedan Oil Corporation Bonus Plan, as amended and restated on September 24, 1996 (filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference). 10.2* -- Restoration of Retirement Income Plan for certain participants in the Noble Affiliates Retirement Plan dated September 21, 1994, effective as of May 19, 1994 (filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.3 * -- Noble Affiliates Thrift Restoration Plan dated May 9, 1994 (filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference).
61 64
Exhibit Number Exhibit ** - ------ ---------- 10.4* -- Noble Affiliates Restoration Trust dated September 21, 1994, effective as of October 1, 1994 (filed as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference). 10.5* -- Noble Affiliates, Inc. 1992 Stock Option and Restricted Stock Plan, as amended and restated, dated November 2, 1992 (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (Registration No. 33-54084) and incorporated herein by reference). 10.6* -- 1982 Stock Option Plan of the Registrant (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (Registration No. 2-81590) and incorporated herein by reference). 10.7* -- Amendment No. 1 to the 1982 Stock Option Plan of the Registrant (filed as Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (Registration No. 2-81590) and incorporated herein by reference). 10.8* -- Amendment No. 2 to the 1982 Stock Option Plan of the Registrant (filed as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.9* -- 1988 Nonqualified Stock Option Plan for Non-Employee Directors of the Registrant, as amended and restated, effective as of January 30, 1996 (filed as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). 10.10* -- Form of Indemnity Agreement entered into between the Registrant and each of the Registrant's directors and bylaw officers (filed as Exhibit 10.18 to the Registrant's Annual Report of Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.11 -- Guaranty of the Registrant dated October 28, 1982, guaranteeing certain obligations of Samedan (filed as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). 10.12 -- Stock Purchase Agreement dated as of July 1, 1996, between Samedan Oil Corporation and Enterprise Diversified Holdings Incorporated (filed as Exhibit 2.1 to the Registrant's Current Report on Form8-K (Date of Event: July 31, 1996) dated August 13, 1996 and incorporated herein by reference). 10.13* -- Noble Affiliates, Inc. 1992 Stock Option and Restricted Stock Plan, as amended and restated on December 10, 1996, subject to the approval of stockholders (filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). 10.14 -- Amended and Restated Credit Agreement dated as of December 24, 1997 among the Registrant, as borrower, and Union Bank of Switzerland, Houston agency, as the agent for the lender, and NationsBank of Texas, N.A. and Texas Commerce Bank National Association, as managing agents, and Bank of Montreal, CIBC Inc., The First National Bank of Chicago, Royal Bank of Canada, and Societe Generale, Southwest agency, as co-agents, and certain commercial lending institutions, as lenders (filed as Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference).
62 65
Exhibit Number Exhibit ** - ------ ---------- 10.15 -- Noble Preferred Stock Remarketing and Registration Rights Agreement dated as of November 10, 1999 by and among the Registrant, Noble Share Trust, The Chase Manhattan Bank, and Donaldson, Lufkin & Jenrette Securities Corporation. 21 -- Subsidiaries 23 -- Consent of Arthur Andersen LLP. 27 -- Financial Data Schedule. * Management contract or compensatory plan or arrangement required to be filed as an exhibit hereto. ** Copies of exhibits will be furnished upon prepayment of 25 cents per page. Requests should be addressed to the Vice President-Finance and Treasurer, Noble Affiliates, Inc., Post Office Box 1967, Ardmore, Oklahoma 73402.
63 66 DIRECTORS DIRECTORS EMERITI ROBERT KELLEY EDGAR HOLT Chairman of the Board, GEORGE J. MCLEOD President and Chief Executive Officer, JOHN F. SNODGRASS Noble Affiliates, Inc. JACK D. WILKES ALAN A. BAKER EXECUTIVE OFFICERS Consultant and former Chairman and Chief Executive Officer, ROBERT KELLEY Halliburton Energy Services Chairman of the Board, President and Chief Executive Officer, MICHAEL A. CAWLEY Noble Affiliates, Inc. Trustee, President and Chief Executive Officer, The Samuel Roberts Noble Foundation, Inc. DAN O. DINGES Senior Vice President and EDWARD F. COX Division General Manager of Partner, law firm of Samedan Oil Corporation Patterson, Belknap, Webb and Tyler JAMES L. MCELVANY THOMAS E. HASSEN Vice President-Finance Managing Director, Co-head and Treasurer, Noble Affiliates, Inc. Global Energy Resources Group, Credit Suisse First Boston Corporation W. A. POILLION Senior Vice President-Production and Drilling DALE P. JONES of Samedan Oil Corporation Consultant and former Vice Chairman and President, Halliburton Company ORVILLE WALRAVEN Corporate Secretary of Noble Affiliates, Inc. and HAROLD F. KLEINMAN Senior Vice President-Land of Partner, law firm of Samedan Oil Corporation Thompson & Knight L.L.P. JAMES C. WOODSON T. DON STACY Senior Vice President-Exploration of Former Chairman and Samedan Oil Corporation President of Amoco Eurasia Petroleum Co.
64 67 CORPORATE AND SUBSIDIARY OFFICES OPERATIONAL OFFICES NOBLE AFFILIATES, INC. DOMESTIC OFFSHORE CORPORATE HEADQUARTERS Samedan Oil Corporation 110 West Broadway 350 Glenborough Post Office Box 1967 Suite 240 Ardmore, Oklahoma 73402 Houston, Texas 77067 (580) 223-4110 DOMESTIC ONSHORE INVESTOR RELATIONS Samedan Oil Corporation William R. McKown III 12600 Northborough Assistant Treasurer Suite 250 (580) 221-1235 Houston, Texas 77067 investor_relations@samedan.com INTERNATIONAL Samedan Oil Corporation SUBSIDIARY HEADQUARTERS 350 Glenborough Suite 300 SAMEDAN OIL CORPORATION Houston, Texas 77067 110 West Broadway Post Office Box 909 INDEPENDENT PUBLIC ACCOUNTANTS Ardmore, Oklahoma 73402 Arthur Andersen LLP Oklahoma City, Oklahoma ENERGY DEVELOPMENT CORPORATION 110 West Broadway TRANSFER AGENT AND REGISTRAR Post Office Box 786 First Chicago Trust Company Ardmore, Oklahoma 73402 525 Washington Boulevard Jersey City, New Jersey 07310 NOBLE GAS MARKETING, INC. 350 Glenborough COMMON STOCK LISTED Suite 180 New York Stock Exchange Houston, Texas 77067 Symbol - NBL NOBLE TRADING, INC. 110 West Broadway Post Office Box 909 Ardmore, Oklahoma 73402
Annual Meeting The Annual Meeting of Stockholders of Noble Affiliates, Inc. will be held on Tuesday, April 25, 2000, at 10:00 a.m. at the Charles B. Goddard Center located at "D" Street and First Avenue S.W. in Ardmore, Oklahoma. All stockholders are cordially invited to attend. Form 10-K The Company's Annual Report on Form 10-K for the year ended December 31, 1999, as filed with the Securities and Exchange Commission, is included in this report. Additional copies are available without charge upon request by writing to the Vice President-Finance and Treasurer, Noble Affiliates, Inc., P. O. Box 1967, Ardmore, Oklahoma 73402, or via the Securities and Exchange Commission's Internet website: http://www.sec.gov. 65 EX-3.4 2 CERT. OF DESIGNATIONS OF SERIES B STOCK - 11/9/99 1 EXHIBIT 3.4 CERTIFICATE OF DESIGNATIONS OF SERIES B MANDATORILY CONVERTIBLE PREFERRED STOCK OF NOBLE AFFILIATES, INC. ---------------------------------- PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ---------------------------------- NOBLE AFFILIATES, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "CORPORATION"), does hereby certify that, pursuant to the authority conferred on the Board of Directors of the Corporation by the Certificate of Incorporation, as amended, of the Corporation (the "CERTIFICATE OF INCORPORATION") and in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation on October 26, 1999, adopted the following resolution (in relevant part) establishing and creating a series of Preferred Stock, $1.00 par value, of the Corporation designated as Series B Mandatorily Convertible Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, a series of convertible preferred stock, par value $1.00 per share, of the Corporation is hereby created, and that there is hereby established a special committee of this Board of Directors (the "Special Committee") consisting of Robert Kelley, Thomas E. Hassen and Harold F. Kleinman, and the Special Committee is hereby delegated full authority to fix the designation, preferences and rights (including without limitation rights relating to voting, dividends, redemption, dissolution, distribution of assets of the Corporation in respect thereof or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation) and to fix the number of shares of such series of Preferred Stock (and to increase or decrease such number from time to time). Pursuant to the authority delegated to it by the Board of Directors, and in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Special Committee of the Board of Directors of the Corporation adopted the following resolution (in relevant part): RESOLVED, that, pursuant to the authority vested in the Special Committee by resolutions duly adopted by the Board of Directors of the Corporation in accordance with the provisions of the Certificate of Incorporation, as amended, of the Corporation, the designation and number of shares of the new series of Preferred Stock and the voting and other powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof, are as follows: 2 SERIES B MANDATORILY CONVERTIBLE PREFERRED STOCK Section 1. Definitions. Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Certificate of Incorporation. In addition, the following terms shall have the following meanings when used herein: "Average Trading Price" for any given period, including a single day, means, for a security, an amount equal to (i) the sum of the Closing Price for such security on each Trading Day in such period divided by (ii) the total number of Trading Days in such period. "Board of Directors" shall mean the Board of Directors of the Corporation. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which commercial banking institutions in New York, New York, Wilmington, Delaware or the State of Oklahoma are authorized or obligated by law or executive order to close. "Closing Price" means, for a security, the closing price for such security on the Trading Day in question (or if such day is not a Trading Day then as of the Trading Day next preceding such day) as reported by Bloomberg L.P., or if not so reported by Bloomberg L.P., as reported by another recognized source selected by the Board of Directors of the Corporation. "Common Stock" shall have the meaning specified in Section 6(i) hereof. "Dividend Payment Date" shall have the meaning specified in Section 3(a) hereof. "Failed Remarketing" shall have the meaning assigned to such term in the Remarketing Agreement. "Final Sale Date" shall have the meaning assigned to such term in the Remarketing Agreement. "junior stock" shall mean (and references to shares ranking "junior to" the Mandatorily Convertible Preferred Stock shall refer to), with respect to Sections 3 and 7, Common Stock, the Series A Junior Participating Preferred Stock of the Corporation and any other class or series of stock of the Corporation which by its terms is not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Mandatorily Convertible Preferred Stock shall have been so paid or declared and, with respect to Sections 4 and 7, Common Stock, the Series A Junior Participating Preferred Stock of the Corporation and any other class or series of stock of the Corporation which by its terms is not entitled to receive any assets upon the liquidation, dissolution or winding up of the affairs of the Corporation until the Mandatorily Convertible Preferred Stock shall have received the entire amount to which such stock is entitled upon liquidation, dissolution or winding up. "Mandatory Conversion" shall have the meaning specified in Section 6(a) hereof. 3 "Mandatory Conversion Date" means the third anniversary of the Rate Reset Date. "Mandatory Conversion Date Market Price" shall have the meaning specified in Section 6(a) hereof. "Mandatory Conversion Rate" shall have the meaning specified in Section 6(a) hereof. "Noble Remarketing Agent" shall have the meaning assigned to such term in the Remarketing Agreement. "Optional Conversion" shall have the meaning specified in Section 6(b) hereof. "Optional Conversion Rate" shall have the meaning specified in Section 6(b) hereof. "parity stock" shall mean (and references to shares ranking "on a parity with" the Mandatorily Convertible Preferred Stock shall refer to), with respect to Sections 3 and 7, any class or series of stock of the Corporation which by its terms is entitled to receive payment of dividends on a parity with the Mandatorily Convertible Preferred Stock and, with respect to Sections 4 and 7, any class or series of stock of the Corporation which by its terms is entitled to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation on a parity with the Mandatorily Convertible Preferred Stock. "Principal Market" means the principal exchange on which the security in question is traded or the principal market on which such security is quoted, as determined by the Board of Directors of the Corporation. "Pro Rata Repurchase" means any purchase of shares of Common Stock by the Corporation or any affiliate thereof (as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act")) pursuant to any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or pursuant to any other offer available to substantially all holders of Common Stock, whether for cash, shares of capital stock of the Corporation, other securities of the Corporation, evidences of indebtedness of the Corporation or any other person or any other property (including, without limitation, shares of capital stock, other securities or evidences of indebtedness of a Subsidiary), or any combination thereof, effected while any of the shares of Mandatorily Convertible Preferred Stock are outstanding; provided, however, that "Pro Rata Repurchase" shall not include any purchase of shares by the Corporation or any affiliate thereof made in open market transactions substantially in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act or on such other terms and conditions as the Board of Directors shall have determined are reasonably designed to prevent such purchases from having a material effect on the trading market for the Common Stock. A Pro Rata Repurchase shall be deemed to be effective on the date of acceptance of shares for purchase or exchange under any tender or exchange offer which is a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata Repurchase that is not a tender or exchange offer. "Rate Reset Date" shall have the meaning assigned to such term in the Remarketing Agreement. 4 "Redemption Event" means the occurrence of any of the following: (i) any consolidation or merger of the Corporation with or into another corporation or entity or the statutory exchange of securities with another corporation or entity, unless in connection with such consolidation, merger or exchange the outstanding shares of Common Stock immediately preceding the consummation of such consolidation, merger or exchange are converted into, exchanged for or otherwise represent at least a majority of the outstanding shares of common stock of the surviving or resulting corporation or entity immediately succeeding the consummation of such consolidation, merger or exchange; or (ii) the Corporation sells or conveys to another entity (other than a Subsidiary) all or substantially all of the assets of the Corporation. "Remarketing Agreement" shall mean the Noble Preferred Stock Remarketing and Registration Rights Agreement dated as of November 10, 1999 among the Corporation, the Noble Share Trust, The Chase Manhattan Bank, as Series A-2 Indenture Trustee, and Donaldson, Lufkin & Jenrette Securities Corporation, as Remarketing Agent. "Reset Common Yield" shall mean the quotient of (i) the product of (x) 4 and (y) the amount of the ordinary quarterly cash dividend on one share of Common Stock most recently declared prior to the Series A-2 Note Trigger Date (as appropriately adjusted for the events referred to in Section 6(c)(1)), unless subsequent to such declaration and prior to the Series A-2 Note Trigger Date, the Corporation has publicly announced a change to, or elimination of, its ordinary quarterly cash dividend and filed with the Securities and Exchange Commission a document including such change or elimination, in which case the amount of such proposed ordinary quarterly cash dividend or $0.00 if such dividend is to be eliminated, divided by (ii) the Reset Price (provided, however, that if as of the Series A-2 Note Trigger Date there is more than one class of Common Stock, then the Reset Common Yield shall be calculated with respect to each then outstanding class of Common Stock, and the Reset Common Yield as used herein shall be the amount calculated with respect to the class of Common Stock resulting in the greatest Reset Common Yield). "Reset Dividend Rate" shall mean an amount per share per annum equal to the product of (i) $1,000 and (ii) the sum of (x) the Reset Common Yield (expressed as a percentage), plus (y) 7.0% (rounded to the nearest cent). "Reset Price" shall mean the higher of (i) the Closing Price of a share of Common Stock on the Series A-2 Note Trigger Date or (ii) the quotient (rounded up to the nearest cent) of $125,000,000 divided by the number, as of the Series A-2 Note Trigger Date, of the authorized but unissued shares of Common Stock that have not been reserved as of the Series A-2 Note Trigger Date by the Board of Directors for other purposes subject to adjustment as provided in Section 6. "Rights" means rights or warrants distributed by the Corporation under a shareholder rights plan or agreement to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Corporation's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Rights Events"): (i) are deemed to be transferred with such shares of Common Stock, 5 (ii) are not exercisable, and (iii) are also issued in respect of future issuances of Common Stock. "Rights Events" shall have the meaning assigned to such term in the definition of Rights. "senior stock" shall mean (and references to shares ranking "senior to" or "prior to" the Mandatorily Convertible Preferred Stock shall refer to), with respect to Sections 3 and 7, any class or series of stock of the Corporation ranking senior to the Mandatorily Convertible Preferred Stock in respect of the right to receive dividends and, with respect to Sections 4 and 7, any class or series of stock of the Corporation ranking senior to the Mandatorily Convertible Preferred Stock with respect to the right to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation. All classes or series of stock of the Corporation other than junior stock or parity stock shall be senior stock with respect to the Mandatorily Convertible Preferred Stock, except to the extent expressly provided otherwise in the Certificate of Incorporation, including any Certificate of Designations Establishing a Series of Preferred Stock. "Series A-2 Notes" shall have the meaning assigned to such term in the Remarketing Agreement. "Series A-2 Note Trigger Date" shall mean the earlier of (A) the Successful Repricing Date or (B) the date of a Failed Remarketing. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors, or other individuals performing similar functions, are at the time directly or indirectly owned by the Corporation. "Successful Repricing Date" shall have the meaning assigned to such term in the Remarketing Agreement. "Threshold Appreciation Price" means the product of (i) the Reset Price (as the same may be adjusted from time to time) and (ii) 1.1. "Trading Day" means a day on which the Principal Market with respect to the security in question is regularly scheduled to be open for trading. For purposes of this definition, a day on which any such exchange is scheduled to close (as opposed to unexpectedly closing) prior to its regular closing time shall not constitute a Trading Day. Section 2. Designation and Amount. The distinctive designation of the series of Preferred Stock created by this Certificate of Designations shall be the "Series B Mandatorily Convertible Preferred Stock." The number of shares that shall constitute such series shall be 125,000 shares. Section 3. Dividends. 6 (a) The holders of the Mandatorily Convertible Preferred Stock shall not be entitled to receive any dividends prior to, or with respect to any period ending prior to, the Rate Reset Date. The holders of the Mandatorily Convertible Preferred Stock, in preference to the rights of holders of any junior stock but subject to the rights of holders of any senior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of any funds legally available therefor, cumulative cash dividends from the Rate Reset Date at the Reset Dividend Rate, and no more, payable on the dates as set forth in this Section 3. Dividends shall accrue on any given share of Mandatorily Convertible Preferred Stock from the Rate Reset Date. Dividends shall be payable quarterly in arrears on each January 1, April 1, July 1, and October 1 commencing on the first such date following the Rate Reset Date (each such date being hereinafter referred to as a "DIVIDEND PAYMENT DATE"), or, if any Dividend Payment Date is not a Business Day, then the Dividend Payment Date shall be the next succeeding Business Day. Each such dividend shall be payable to holders of record as they appear on the books of the Corporation or any transfer agent for the Mandatorily Convertible Preferred Stock on such record dates as shall be fixed by the Board of Directors subject to applicable law (which record date shall be no more than 60 days prior to the date fixed for the payment thereof). Dividends on the Mandatorily Convertible Preferred Stock shall accrue on a daily basis commencing on and including the Rate Reset Date, and accrued dividends for each dividend period or portion thereof shall cumulate, to the extent not paid, as of the date on which they were to have been paid. A dividend period shall commence on a Dividend Payment Date or the Rate Reset Date, as the case may be, and continue to the day next preceding the next succeeding Dividend Payment Date. Accumulated unpaid dividends shall not accrue interest. Dividends (or cash amounts equal to accrued and unpaid dividends) payable on the Mandatorily Convertible Preferred Stock for any period less than or more than a full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in any period less than one month. Dividends on the Mandatorily Convertible Preferred Stock shall accrue whether or not the Corporation has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared. Dividends in arrears for any past dividend periods or portions thereof may be declared and paid at any time without reference to any regular Dividend Payment Date to holders of record on such date as shall be fixed by the Board of Directors subject to applicable law. Dividends on the Mandatorily Convertible Preferred Stock shall cease to accrue on the earlier of (i) the day immediately preceding the Mandatory Conversion Date, or (ii) the day immediately prior to their earlier conversion. (b) As long as any shares of Mandatorily Convertible Preferred Stock are outstanding, no dividends or other distributions for any dividend period (other than dividends or other distributions payable in shares of, or warrants, rights or options exercisable for or convertible into, junior stock, and cash in lieu of fractional shares of such junior stock in connection with any such dividend or distribution) will be paid on any junior stock unless: (i) full dividends, if any, on all outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the payment date of such junior stock dividend or distribution, to the extent such dividends on senior stock, parity stock or Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is not in default on any of its 7 obligations to redeem any outstanding shares of senior stock, parity stock or Mandatorily Convertible Preferred Stock. In addition, as long as any Mandatorily Convertible Preferred Stock is outstanding, no shares of any junior stock may be purchased, redeemed, or otherwise acquired by the Corporation or any Subsidiary (except in connection with a reclassification or exchange of any junior stock through the issuance of other junior stock (and cash in lieu of fractional shares of such junior stock in connection therewith) and except for the acquisition of shares of any junior stock pursuant to contractual obligations binding against the Corporation or any Subsidiary that were entered into prior to the date of the first issuance of shares of Mandatorily Convertible Preferred Stock or pursuant to contractual obligations that are entered into at a time subsequent thereto when such acquisitions of shares could be made pursuant to this Subsection 3(b)) nor may any funds be set aside or made available for any sinking fund for the purchase or redemption of any junior stock unless: (i) full dividends, if any, on all outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such purchase, redemption or acquisition, to the extent dividends on such senior stock, parity stock or Mandatorily Convertible Preferred Stock dividends are cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is not in default on any of its obligations to redeem any outstanding shares of senior stock, parity stock or Mandatorily Convertible Preferred Stock. Subject to the provisions described above, such dividends or other distributions (payable in cash, property, or junior stock) as may be determined from time to time by the Board of Directors may be declared and paid on the shares of any junior stock and from time to time junior stock may be purchased, redeemed or otherwise acquired by the Corporation or any Subsidiary. In the event of the declaration and payment of any such dividends or other distributions, the holders of such junior stock will be entitled, to the exclusion of holders of any outstanding senior stock or parity stock, to share therein according to their respective interests. (c) As long as any Mandatorily Convertible Preferred Stock is outstanding, dividends or other distributions for any dividend period may not be paid on any outstanding shares of parity stock (other than dividends or other distributions payable in shares of, or warrants, rights or options exercisable for or convertible into, parity stock or junior stock and cash in lieu of fractional shares of such parity stock or junior stock in connection with any such dividend), unless either: (a) (i) full dividends, if any, on all outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the payment date of such senior stock, parity stock or Mandatorily Convertible Preferred Stock dividend or distribution, to the extent dividends on such senior stock, parity stock or Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement and sinking funds, if any, for any outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is not in default on any of its obligations to redeem any outstanding shares of senior stock, parity stock or Mandatorily Convertible Preferred Stock; or (b) any such dividends are declared and paid pro rata so that the amounts of any dividends declared and paid per share on outstanding Mandatorily Convertible Preferred Stock and each share of such parity stock will in all cases bear to each other the same ratio that accrued and 8 unpaid dividends (including any accumulation with respect to unpaid dividends for prior dividend periods, if such dividends are cumulative), if any, per share of outstanding Mandatorily Convertible Preferred Stock and such outstanding shares of parity stock bear to each other. In addition, as long as any Mandatorily Convertible Preferred Stock is outstanding, no shares of any parity stock may be purchased, redeemed or otherwise acquired by the Corporation or any Subsidiary (except with any junior stock and cash in lieu of fractional shares of such junior stock in connection therewith and except for the acquisition of shares of any parity stock pursuant to contractual obligations binding against the Corporation or any Subsidiary that were entered into prior to the date of the first issuance of shares of Mandatorily Convertible Preferred Stock or pursuant to contractual obligations that are entered into at a time subsequent thereto when such acquisitions of shares could be made pursuant to this Subsection 3(c)) unless: (i) full dividends, if any, on all outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock have been paid, or declared and set aside for payment, for all dividend periods terminating on or prior to the date of such purchase, redemption or other acquisition, to the extent dividends on such senior stock, parity stock or Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then or theretofore required to be paid or set aside for all purchase, retirement, and sinking funds, if any, for any outstanding shares of senior stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is not in default of any of its obligations to redeem any outstanding shares of senior stock, parity stock or Mandatorily Convertible Preferred Stock, unless all parity stock and Mandatorily Convertible Preferred Stock as to which such a default exists is purchased or redeemed on a pro rata basis. (d) Any dividend payment made on the Mandatorily Convertible Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to the Mandatorily Convertible Preferred Stock. (e) All dividends paid with respect to the Mandatorily Convertible Preferred Stock shall be paid pro rata to the holders entitled thereto. (f) Holders of the Mandatorily Convertible Preferred Stock shall be entitled to receive dividends in preference to and in priority over any dividends upon any shares of the Corporation ranking junior to the Mandatorily Convertible Preferred Stock as to dividends, but subject to the rights of holders of any senior stock or parity stock. Section 4. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, then, before any distribution or payments shall be made to the holders of any junior stock, but subject to the rights of holders of any senior stock or parity stock, the holders of the Mandatorily Convertible Preferred Stock shall be entitled to be paid in full in cash the amount of $1,000 per share, together with accrued dividends to the date of such distribution or payment, whether or not earned or declared. If such payment shall have been made in full to the holders of the Mandatorily Convertible Preferred Stock and all preferential payments or distributions to be made with respect to senior stock and parity stock have been made in full, the remaining assets and funds of the Corporation shall be distributed among the holders of the junior stock, according to their respective rights and preferences and in each case according to their respective shares. If, upon any liquidation, dissolution or winding up of the affairs 9 of the Corporation, the amounts so payable are not paid in full to the holders of all shares of the Mandatorily Convertible Preferred Stock and parity stock, the holders of the Mandatorily Convertible Preferred Stock, together with holders of parity stock, shall share ratably in any distribution of assets in proportion to the full amounts to which they would otherwise be respectively entitled. Neither the consolidation or merger of the Corporation or the statutory exchange of securities with another entity, nor the sale, lease, transfer, exchange or conveyance of all or a part of its assets, shall be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of the foregoing provisions of this Section 4. Section 5. Redemption. The Corporation shall have the right to redeem all, but not part, of the outstanding Mandatorily Convertible Preferred Stock at any time following a Redemption Event and prior to a Rate Reset Date at the redemption price of $1,000 per share, together with accrued but unpaid dividends to the date of payment, whether or not earned or declared (the "REDEMPTION PRICE"). The Corporation shall not have the right to redeem any or all of the Mandatorily Convertible Preferred Stock at any other time. Notice of a redemption of the Mandatorily Convertible Preferred Stock shall be mailed, addressed to the holder or holders of record of such shares at their respective addresses as they shall appear on the books of the Corporation, such mailing to be at least two Business Days and not more than 60 days prior to the date fixed for redemption. Each such notice of redemption shall specify the date fixed for redemption and the Redemption Price. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation and shall thereupon be entitled to receive payment of the Redemption Price. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefor and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the date fixed for redemption, the shares shall no longer be deemed outstanding, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefor) shall terminate. Section 6. Conversion. (a) Unless previously converted at the option of the holder in accordance with the provisions hereof, on the Mandatory Conversion Date each outstanding share of Mandatorily Convertible Preferred Stock shall, without additional notice to holders thereof, convert automatically (the "MANDATORY CONVERSION") into (i) a number of fully paid and non-assessable shares of Common Stock at the Mandatory Conversion Rate (as defined herein) in effect on the Mandatory Conversion Date; and (ii) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share of Mandatorily Convertible Preferred Stock (other than previously declared dividends payable to a holder of record as of a prior date) to and including the day immediately prior to the Mandatory Conversion Date, whether or not earned or declared, out of funds legally available therefor (and if sufficient funds are not then legally available therefor, the Corporation shall pay such amount, if any, pro rata (based on the amounts so owing) to the holders of the Mandatorily Convertible Preferred Stock and any parity stock then entitled to similar payment as is then legally available therefor and shall pay any deficiency thereafter as soon as funds are legally available therefor). The "MANDATORY CONVERSION RATE" is equal to the following number of shares of 10 Common Stock per share of Mandatorily Convertible Preferred Stock: (a) if the Mandatory Conversion Date Market Price is greater than or equal to the Threshold Appreciation Price, the quotient of (i) $1,000 divided by (ii) the Threshold Appreciation Price; (b) if the Mandatory Conversion Date Market Price is less than the Threshold Appreciation Price but is greater than the Reset Price, the quotient of $1,000 divided by the Mandatory Conversion Date Market Price; and (c) if the Mandatory Conversion Date Market Price is less than or equal to the Reset Price, the quotient of $1,000 divided by the Reset Price, subject to adjustment as provided in this Section 6. "MANDATORY CONVERSION DATE MARKET PRICE" shall mean the Average Trading Price per share of Common Stock for the 20 consecutive Trading Days immediately prior to, but not including, the Mandatory Conversion Date; provided, however, that if an event occurs during such 20 consecutive Trading Days that would require an adjustment to the Mandatory Conversion Rate pursuant to Section 6(c) or 6(e), the Board of Directors may make such adjustments to the Average Trading Price for shares of Common Stock for such 20 Trading Day period as it reasonably deems appropriate to effectuate the intent of the adjustments in Sections 6(c) and 6(e), in which case any such determination by the Board of Directors shall be set forth in a resolution of the Board of Directors and shall be conclusive absent manifest error. Dividends on the Mandatorily Convertible Preferred Stock shall cease to accrue, and Mandatorily Convertible Preferred Stock shall cease to be outstanding, on the Mandatory Conversion Date. The Corporation shall make such arrangements as it deems appropriate for the issuance of certificates representing Common Stock and for the payment of cash in respect of such accrued and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in exchange for and contingent upon surrender of certificates representing the Mandatorily Convertible Preferred Stock, and the Corporation may defer the payment of dividends on such Common Stock and the voting thereof until, and make such payment and voting contingent upon, the surrender of such certificates representing the Mandatorily Convertible Preferred Stock, provided that the Corporation shall give the holders of the Mandatorily Convertible Preferred Stock such notice of any such actions as the Corporation deems appropriate and upon such surrender such holders shall be entitled to receive such dividends declared and paid on such Common Stock subsequent to the Mandatory Conversion Date. Amounts payable in cash in respect of the Mandatorily Convertible Preferred Stock or in respect of such Common Stock shall not bear interest. (b) Shares of Mandatorily Convertible Preferred Stock are convertible, at the option of the holders thereof ("OPTIONAL CONVERSION") at any time after the date hereof and before the Mandatory Conversion Date, into Common Stock at a rate equal to 36.364 shares of Common Stock per share of Mandatorily Convertible Preferred Stock (the "OPTIONAL CONVERSION RATE"), subject to adjustment as set forth in this Section 6; provided, however, that the Optional Conversion Rate shall adjust as of the Rate Reset Date (regardless of the adjustments made to the Optional Conversion Rate after the issuance of the shares of Mandatorily Convertible Preferred Stock and prior to the Rate Reset Date) to the following number of shares of Common Stock per share of Mandatorily Convertible Preferred Stock: the quotient of (i) $1,000 divided by (ii) the Threshold Appreciation Price, subject to further adjustment as set forth in this Section 6. An Optional Conversion of shares of Mandatorily Convertible Preferred Stock may be effected by delivering certificates evidencing such shares of Mandatorily Convertible Preferred Stock, together with written notice of conversion and, if required by the Corporation, a proper assignment of such certificates to the Corporation or in blank (and, if applicable as provided in the following paragraph, cash payment of an amount equal to the 11 dividends attributable to the current dividend period payable on such shares), to the office of the transfer agent for the shares of Mandatorily Convertible Preferred Stock or to any other office or agency maintained by the Corporation for that purpose and otherwise in accordance with Optional Conversion procedures established by the Corporation. Each Optional Conversion shall be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements shall have been satisfied. The Optional Conversion shall be at the Optional Conversion Rate in effect at such time and on such date. Holders of shares of Mandatorily Convertible Preferred Stock at the close of business on a record date for any payment of declared dividends shall be entitled to receive the dividend attributable to the current dividend period payable on such shares on the corresponding Dividend Payment Date notwithstanding the Optional Conversion of such shares following such record date and on or prior to such Dividend Payment Date. However, shares of Mandatorily Convertible Preferred Stock surrendered for Optional Conversion after the close of business on a record date for any payment of declared dividends and before the opening of business on the next succeeding Dividend Payment Date must be accompanied by payment in cash of an amount equal to the dividends attributable to the current dividend period payable on such shares on such next succeeding Dividend Payment Date. Except as provided above, upon any Optional Conversion, the Corporation shall make no payment of or allowance for unpaid dividends, whether or not in arrears, on such converted shares of Mandatorily Convertible Preferred Stock as to which Optional Conversion has been effected or for previously declared dividends or distributions on the shares of Common Stock issued upon such Optional Conversion. (c) The Optional Conversion Rate shall be adjusted from time to time, and the Mandatory Conversion Rate shall be adjusted from time to time after the Rate Reset Date, as follows: (1) In case the Corporation shall (i) pay a dividend on its Common Stock in other Common Stock, (ii) subdivide or split its outstanding Common Stock into a greater number of shares, (iii) combine its outstanding Common Stock into a smaller number of shares, or (iv) issue by reclassification of its Common Stock any other Common Stock (including in connection with a merger in which the Corporation is a surviving corporation), then, in any such event, (1) the Mandatory Conversion Rate in effect immediately prior to such event shall be adjusted such that the Reset Price shall be adjusted by multiplying it by a fraction (the "RECAPITALIZATION ADJUSTMENT RATIO") (which fraction and all other fractions referred to herein may be improper fractions), the numerator of which is one and the denominator of which is the number of shares of Common Stock that a holder of one share of Common Stock prior to any event described above would hold after such event (assuming the issuance of fractional shares), and (2) the Optional Conversion Rate in effect immediately prior to such event shall be adjusted by multiplying it by a fraction, the numerator of which is one and the denominator of which is the Recapitalization Adjustment Ratio. Such adjustments shall become effective immediately after the effective date of any such event (or the earlier record date in the case of any such dividend) whenever any of the events listed above shall occur. (2) In case the Corporation shall issue rights or warrants to all holders of its Common Stock entitling them (for a period, except in the case of Rights, expiring within 45 days after the record date for determination of the shareholders entitled to receive such rights 12 or warrants) to subscribe for or purchase Common Stock at a price per share of Common Stock less than the current market price per share of Common Stock (as defined in Section 6(d) below) on such record date, then in each such case the Mandatory Conversion Rate on the date of such issuance shall be adjusted such that the Reset Price shall be adjusted by multiplying it by a fraction (the "ANTI-DILUTION ADJUSTMENT RATIO"), the numerator of which shall be the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (y) the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at the Average Trading Price for a share of Common Stock for the record date for such issuance, and the denominator of which shall be the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (y) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants and (B) the Optional Conversion Rate in effect on the record date described below shall be adjusted by multiplying it by a fraction, the numerator of which is one and the denominator of which is the Anti-Dilution Adjustment Ratio. For the purposes of this Subsection (2): the issuance of rights or warrants to subscribe for or purchase securities exercisable for, convertible into, or exchangeable for, shares of Common Stock shall be deemed to be the issuance of rights or warrants to purchase the shares of Common Stock into which such securities are exercisable, convertible or exchangeable at an aggregate offering price equal to the aggregate offering price of such securities plus the minimum aggregate amount (if any) payable upon the exercise, conversion or exchange of such securities. Such adjustment shall become effective at the opening of business on the Business Day next following the record date for such rights or warrants. To the extent that any shares of Common Stock, or securities exercisable for, convertible into, or exchangeable for, shares of Common Stock so offered for subscription or purchase are not so subscribed or purchased by the expiration of such rights or warrants, the Mandatory Conversion Rate, the Reset Price and the Optional Conversion Rate shall each be readjusted to the rates or amounts, respectively, which would then be in effect, had the adjustment made upon the issuance of such rights or warrants been made upon the basis of the issuance of rights or warrants in respect of only the number of shares of Common Stock and securities exercisable for, convertible into, or exchangeable for, shares of Common Stock actually issued upon exercise of such rights or warrants. (3) If the Corporation shall pay a dividend or make a distribution to all holders of its Common Stock consisting of evidences of its indebtedness or other assets (including capital shares of the Corporation other than Common Stock but excluding any Ordinary Cash Dividends (as defined below)), or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in Subsection (2) above), then in each such case the Mandatory Conversion Rate in effect immediately prior to such event shall be adjusted such that the Reset Price shall be adjusted by multiplying it by a fraction (the "DISTRIBUTION ADJUSTMENT RATIO"), the numerator of which shall be the Average Trading Price for a share of Common Stock on the record date for such dividend, distribution or issuance, minus the fair market value as of such record date of the portion of evidences of indebtedness or other assets so distributed, or of such subscription rights or warrants, applicable to one share of Common Stock (provided that such numerator shall never be less than $1.00) and the denominator of which shall be the Average 13 Trading Price for a share of Common Stock on such record date and (B) the Optional Conversation Rate in effect immediately prior to such event shall be adjusted by multiplying it by a fraction, the numerator of which is one and the denominator of which is the Distribution Adjustment Ratio. Such adjustment shall become effective on the opening of business on the Business Day next following the record date for such dividend, distribution or issuance or the determination of shareholders entitled to receive such dividend, distribution or rights or warrants, as the case may be. "ORDINARY CASH DIVIDENDS" shall mean (i) any regular cash dividend on the Common Stock that does not exceed the per share amount of the immediately preceding regular cash dividend on the Common Stock (as adjusted to appropriately reflect any of the events referred to in Section 6(c)(1)) and (ii) any other cash dividend or distribution which, when combined on a per share basis with the per share amount of all other cash dividends and distributions paid on the Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution (as adjusted to appropriately reflect any of the events referred to in Section 6(c)(1) and excluding cash dividends or distributions that resulted in an adjustment to the Mandatory Conversion Rate or the Optional Conversion Rate), does not exceed 10% of the current market price per share of Common Stock (determined pursuant to Section 6(d)) on the Trading Day immediately preceding the date of declaration of such dividend or distribution. (d) For the purpose of any computation under Section 6(c) above, the "CURRENT MARKET PRICE PER SHARE OF COMMON STOCK" on any date in question shall mean the Average Trading Price for shares of Common Stock for the 15 consecutive Trading Days ending on the earlier of the day in question and, if applicable, the day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if another event occurs that would require an adjustment pursuant to Section 6(c), the Board of Directors of the Corporation may make such adjustments to the Average Trading Price for shares of Common Stock during such 15 Trading Day period as it reasonably deems appropriate to effectuate the intent of the adjustments in Section 6(c), in which case any such determination by the Board of Directors of the Corporation shall be set forth in a Board resolution and shall be conclusive absent manifest error. For purposes of this paragraph, the term "'EX' DATE", when used with respect to any issuance or distribution, means the first date on which the shares of Common Stock trade regular way on the relevant exchange or in the relevant market from which the Average Trading Price was obtained without the right to receive such issuance or distribution. For the purpose of any computation under Section 6(c) above, the "FAIR MARKET VALUE" of any assets, evidences of indebtedness, subscription rights or warrants on any date in question: (i) in the event any such item is a publicly traded security ("PUBLICLY TRADED SECURITY"), shall be determined for such date pursuant to the provisions of this Section 6(d) for determination of the "current market price per share of Common Stock", except that (x) each reference therein to "Common Stock" shall be deemed to mean such Publicly Traded Security, and (y) if such Publicly Traded Security does not trade on a "when issued" basis for the 15 consecutive Trading Days preceding the "ex" date, such determination shall be made for the period of 15 consecutive Trading Days commencing on the "ex" date; and (ii) in the event any such item is not a Publicly Traded Security, shall be reasonably determined in good faith for such date by the Board of Directors of the Corporation, as evidenced by a resolution of the Board, whose determination shall be conclusive absent manifest error. 14 (e) In any case of any reclassification of Common Stock (other than a reclassification of the Common Stock referred to in Section 6(c)(1)); any consolidation or merger of the Corporation with or into another corporation or other entity (other than a merger resulting in a reclassification of the Common Stock referred to in Section 6(c)(1)); any sale or conveyance to another entity (other than a Subsidiary) of all or substantially all of the assets of the Corporation; or the statutory exchange of securities with another corporation or entity (other than in connection with a merger or acquisition) (any such event referred to herein as a "TRANSACTION"), then the Optional Conversion Rate and Mandatory Conversion Rate shall be adjusted so that after consummation of such a Transaction the holders of shares of Mandatory Convertible Preferred Stock will receive, in lieu of the number of shares of Common Stock which such holder would have received upon conversion but for such Transaction, the kind and amount of securities, cash or other property receivable upon consummation of such Transaction by a holder of such number of shares of Common Stock, subject to further adjustment as provided in this Section 6, including without limitation, an adjustment to the Optional Conversion Rate on the Rate Reset Date if such Transaction occurs prior to the Rate Reset Date. On and after the consummation of any such Transaction, the Mandatory Conversion Date Market Price, which shall be used for purposes of the determination as to which of clauses (a), (b) or (c) of the definition of Mandatory Conversion Rate applies, shall mean the sum of (i) the product of the Average Trading Price of any Publicly Traded Security received upon consummation of such Transaction for the 20 consecutive Trading Days immediately prior to, but not including, the Mandatory Conversion Date multiplied by the fraction of such security received in such Transaction per share of Common Stock (assuming the issuance of fractional shares) plus (ii) the fair market value of the cash and other property received upon consummation of such Transaction per share of Common Stock as of the day preceding the Mandatory Conversion Date as determined in accordance with Subsection 6(d). In determining the kind and amount of securities, cash or other property receivable upon consummation of such Transaction by a holder of shares of Common Stock, it shall be assumed that such holder is not a person or entity with which the Corporation consolidated or into which the Corporation was merged or which merged into the Corporation or with which such statutory exchange occurred, as the case may be, or an affiliate of any such person or entity and that such holder of Common Stock failed to exercise rights of election, if any, as to the kind or amount of securities, cash, or other property receivable upon consummation of such transaction (provided that, if the kind or amount of securities, cash, or other property receivable upon consummation of such Transaction is not the same for each non-electing share, then the kind and amount of securities, cash or other property receivable upon consummation of such transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). In the event of such a reclassification, consolidation, merger, sale, conveyance or exchange, effective provision shall be made in the certificate of incorporation or similar document of the resulting or surviving corporation or entity so that the conversion rate applicable to any securities or property into which the shares of the Mandatorily Convertible Preferred Stock shall then be convertible shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) to (3) of Section 6(c) inclusive, above, and the other provisions of this Section 6 with respect to the Common Stock shall apply on terms as nearly equivalent as practicable to any such other securities and property deliverable upon conversion of shares of Mandatorily Convertible Preferred Stock. 15 (f) Whenever any adjustments are required in the shares of Common Stock into which each share of Mandatorily Convertible Preferred Stock is convertible, the Corporation shall forthwith (a) compute the adjusted Mandatory Conversation Rate and Optional Conversion Rate in accordance herewith and prepare a certificate signed by an officer of the Corporation setting forth the adjusted Mandatory Conversion Rate and the Optional Conversion Rate, describing in reasonable detail the method of calculation used and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment and file with the transfer agent of the Mandatorily Convertible Preferred Stock such certificate and (b) cause a copy of such certificate to be mailed to each holder of record of the Mandatorily Convertible Preferred Stock as of or promptly after the effective date of such adjustment and, with respect to adjustments applicable after the Rate Reset Date, make a prompt public announcement of such adjustment. (g) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued shares of Common Stock for the purpose of issuance upon conversion of the Mandatorily Convertible Preferred Stock a number of shares of Common Stock at least equal to the product of (i) the number of shares of Common Stock then deliverable at such time upon an Optional Conversion of all shares of the Mandatorily Convertible Preferred Stock multiplied by (ii) 1.1. (h) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of the Mandatorily Convertible Preferred Stock pursuant to Section 6. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involving the issue and delivery of shares of Common Stock in a name other than that in which the shares of Mandatorily Convertible Preferred Stock so converted were registered and no such issue and delivery shall be made unless and until the person requesting such issue has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. (i) For the purpose of this Section 6, the term "COMMON STOCK" shall include any shares of the Corporation of any class or series which has no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which is not subject to redemption by the Corporation. However, Common Stock issuable upon conversion of the Mandatorily Convertible Preferred Stock shall include only shares of the class designated as Common Stock as of the original date of issuance of the Mandatorily Convertible Preferred Stock, or shares of the Corporation of any classes or series resulting from any reclassification or reclassifications thereof (including reclassifications referred to in clause (iv) of Subsection 6(c)(1)) and which have no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that, if at any time, there shall be more than one such resulting class or series, the shares of such class and series then so issuable shall be in the same proportion, if possible, or if not possible, in substantially the same proportion which the total number of shares of such class and series resulting from all such reclassifications bears to the total number of shares of all classes and series resulting from all such reclassifications. 16 (j) No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Mandatorily Convertible Preferred Stock. If any such conversion would otherwise require the issuance of a fractional share, an amount equal to such fraction multiplied by the current market price per share of Common Stock (determined as provided in Section 6(d)) on the date of conversion shall be paid to the holder in cash by the Corporation. If on such date there is no current market price per share of Common Stock, the fair market value of a share of Common Stock (determined as provided in Section 6(d)) on such date, shall be used. If more than one share of Mandatorily Convertible Preferred Stock shall be surrendered for conversion at one time by or for the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Mandatorily Convertible Preferred Stock so surrendered. (k) All shares of the Mandatorily Convertible Preferred Stock purchased or otherwise acquired by the Corporation (including shares surrendered for conversion) shall be canceled and thereupon restored to the status of authorized but unissued shares of Preferred Stock undesignated as to series. (l) No adjustment in the Mandatory Conversion Rate and the Optional Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of this Section 6(l)) would require an increase or decrease of at least 1% in the number of shares of Common Stock into which each share of the Mandatorily Convertible Preferred Stock is then convertible; provided, however, that any adjustments which by reason of this Section 6(l) are not required to be made shall be carried forward and taken into account in any subsequent adjustment and provided further that any adjustment shall be required and made in accordance with the provisions of Section 6(c) not later than such time as may be required in order to preserve the tax free nature of a distribution to the holders of shares of Common Stock. If any action or transaction would require adjustment to the Mandatory Conversion Rate or the Optional Conversion Rate pursuant to this Section 6, only one adjustment shall be made and such adjustment shall be the amount of the adjustment that has the highest absolute value. All calculations under this Section 6 shall be made to the nearest one-thousandth of a share of Common Stock. (m) The Board of Directors may make such upward adjustments in the Mandatory Conversion Rate and the Optional Conversion Rate, in addition to those required by this Section 6, as shall be determined by the Board of Directors, as evidenced by a resolution of the Board of Directors, to be advisable in order that any stock dividends, subdivisions of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction that could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) made by the Corporation to its stockholders after the Rate Reset Date shall not be taxable. The determination of the Board of Directors as to whether an adjustment should be made pursuant to the provisions of this Subsection (m), and if so, as to what adjustment should be made and when, shall be conclusive, final and binding on the Corporation and all stockholders of the Corporation. (n) In any case in which Section 6 shall require that an adjustment as a result of any event become effective at the opening of business on the Business Day next following a record date and the 17 date fixed for conversion occurs after such record date, but before the occurrence of such event, the Corporation may, in its sole discretion, elect to defer the following until after the occurrence of such event: (A) issuing to the holder of any converted Mandatorily Convertible Preferred Stock the additional shares of Common Stock issuable upon such conversion over the shares of Common Stock issuable before giving effect to such adjustments and (B) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to Section 6(j). (o) Notwithstanding the foregoing provisions of this Section 6, no adjustment of the Optional Conversion Rate or the Mandatory Conversion Rate shall be required to be made upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Corporation and the investment of additional optional amounts in shares of Common Stock under any such plan. (p) Notwithstanding any other provision of this Section 6, the issuance or distribution of Rights shall not be deemed to constitute an issuance or a distribution or dividend of rights, warrants, or other securities to which any of the adjustment provisions described above applies until the occurrence of the earliest Rights Event. (q) For purposes of this Section 6, shares of Common Stock owned by, or held for the account of, the Corporation, a Subsidiary or another entity of which a majority of the common stock or common equity interests are owned, directly or indirectly, by the Corporation shall be deemed not to be outstanding. Section 7. Voting Rights. The holders of Mandatorily Convertible Preferred Stock shall have no right to vote except as otherwise specifically provided herein, in the Certificate of Incorporation, or as required by statute. (a) So long as any shares of Mandatorily Convertible Preferred Stock are outstanding, in addition to any other vote or consent of shareholders required in the Certificate of Incorporation or by law, the consent of the holders of at least a majority of the Mandatorily Convertible Preferred Stock, given in person or by proxy, either in writing without a meeting (if permitted by law) or by vote at any meeting called for the purpose, shall be necessary for effecting or validating: (1) any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, which affects adversely the powers, rights or preferences of the holders of the Mandatorily Convertible Preferred Stock or reduces the minimum time required for any notice to which holders of Mandatorily Convertible Preferred Stock then outstanding may be entitled; provided, that the amendment of the provisions of the Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any junior stock or parity stock shall not be deemed to affect adversely the powers, rights or preferences of the holders of the Mandatorily Convertible Preferred Stock and shall not be subject to approval by the holders of the Mandatorily Convertible Preferred Stock and such holders shall not be entitled to vote thereon to the fullest extent permitted by law; 18 (2) the authorization, creation or issuance of, or the increase in the authorized amount of, any stock of any class or series, or any security convertible into stock of any class or series, ranking senior to the Mandatorily Convertible Preferred Stock; or (3) the merger or consolidation of the Corporation with or into any other corporation or other entity or a statutory share exchange with another corporation or entity, unless in connection with such merger, consolidation or statutory share exchange each holder of shares of Mandatorily Convertible Preferred Stock immediately preceding such merger, consolidation or share exchange shall either (I) with respect to a merger, consolidation or statutory share exchange consummated prior to, on or after the Rate Reset Date, receive or continue to hold in the surviving or resulting corporation or other corporation or entity the same number of shares, with substantially the same rights and preferences (except as contemplated by Subsection 6(e) and except for those rights and preferences that could be affected without the vote of the holders of the Mandatorily Convertible Preferred Stock, such as the authorization and issuance of junior stock), as correspond to the shares of Mandatorily Convertible Preferred Stock held immediately prior to such merger or consolidation or (II) with respect to a merger, consolidation or statutory share exchange consummated after the Rate Reset Date, receive the kind and amount of securities, cash and other property that would have been receivable upon consummation of such merger, consolidation or share exchange by such holder (subject to the assumptions set forth in Section 6(e)) if the Mandatory Conversion had occurred immediately prior to the consummation of such merger, consolidation or share exchange and the Mandatory Conversion Rate was determined as of such time (and if clause (I) or (II) is applicable, then such merger, consolidation or statutory share exchange shall not be subject to approval by the holders of the Mandatorily Convertible Preferred Stock and such holders shall not be entitled to vote thereon). (b) Holders of Mandatorily Convertible Preferred Stock shall not be entitled to receive notice of any meeting of shareholders at which they are not entitled to vote or consent except as otherwise required by applicable law. Section 8. Other Rights. Shares of Mandatorily Convertible Preferred Stock shall not have any relative, participating, optional or other special rights or powers other than as set forth herein, in the Certificate of Incorporation or as required by law. Section 9. Notices. In case, at any time while any shares of Mandatorily Convertible Preferred Stock are outstanding, (i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock, excluding any cash dividends, (ii) the Corporation shall authorize the issuance to all holders of its Common Stock of rights or warrants to subscribe for or purchase shares of Common Stock or of securities exercisable for, convertible into, or exchangeable for, shares of Common Stock, (iii) the Corporation shall authorize any reclassification of its Common Stock (other than a subdivision or combination thereof) or any consolidation or merger or statutory share exchange to which the Corporation is a party and for which approval of any stockholders of the Corporation is required (except for a merger of the Corporation into one of its Subsidiaries solely for the purpose of changing the corporate name or corporate domicile of the Corporation to another state of the United States and in connection with which there is no substantive change in the rights or privileges of any securities of the Corporation other than changes resulting from differences in the 19 corporate statutes of the then existing and the new state of domicile), or the sale or transfer to another corporation of the property of the Corporation as an entirety or substantially as an entirety, (iv) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the Corporation, or (v) there shall occur any Pro Rata Repurchase, then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Mandatorily Convertible Preferred Stock, and shall cause to be mailed to the holders of Mandatorily Convertible Preferred Stock at their last addresses as they shall appear on the stock register, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (B) the date on which any such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation, winding up or Pro Rata Repurchase is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up or Pro Rata Repurchase; provided, however, that if any such action requiring such notice is to occur prior to the Rate Reset Date, then such notice need only be given on or before the date of such action. The failure to give or receive the notice required hereby or any defect therein shall not affect the legality or validity of such dividend, distribution, right or warrant or other action. 20 IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be duly executed in its corporate name on this 9th day of November, 1999. NOBLE AFFILIATES, INC. By: /s/ James L. McElvany ---------------------------------------- James L. McElvany Vice President - Finance and Treasurer EX-10.15 3 NOBEL STOCK AND REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.15 EXECUTION COPY NOBLE AFFILIATES, INC. (a Delaware Corporation) NOBLE SHARE TRUST (a Delaware Trust) THE CHASE MANHATTAN BANK, as Series A-2 Indenture Trustee and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION as Noble Remarketing Agent NOBLE PREFERRED STOCK REMARKETING AND REGISTRATION RIGHTS AGREEMENT Dated as of November 10, 1999 2 TABLE OF CONTENTS
Page ---- SECTION 1. Definitions............................................................... 2 SECTION 2. Appointment of Noble Remarketing Agent.................................... 7 SECTION 3. Agreement to Register Noble Preferred Stock............................... 8 SECTION 4. Additional Covenants of Noble............................................. 10 SECTION 5. Representations and Warranties of the Noble Offerors...................... 12 SECTION 6. Registration Procedures................................................... 15 SECTION 7. New Series; Remarketing Events............................................ 18 SECTION 8. Remarketing Procedures.................................................... 20 SECTION 9. Fees and Expenses......................................................... 23 SECTION 10. Resignation and Removal of the Noble Remarketing Agent; Additional Agents.................................................. 23 SECTION 11. Dealing in Noble Securities; Redemption of Noble Remarketing Agent's Shares..................................................... 24 SECTION 12. Conditions to Noble Remarketing Agent's Obligations....................... 25 SECTION 13. Indemnification........................................................... 27 SECTION 14. Termination of Obligations of Noble Remarketing Agent..................... 30 SECTION 15. Noble Remarketing Agent's Performance; Duty of Care; Liability............ 30 SECTION 16. GOVERNING LAW............................................................. 31 SECTION 17. Term of Agreement......................................................... 31 SECTION 18. Successors and Assigns.................................................... 32 SECTION 19. Headings.................................................................. 32 SECTION 20. Severability.............................................................. 32 SECTION 21. Noble Remarketing Agent Not Acting as Underwriter......................... 32 SECTION 22. Amendments................................................................ 33 SECTION 23. Notices................................................................... 33 SECTION 24. Counterparts.............................................................. 35 SECTION 25. Regarding the Series A-2 Indenture Trustee................................ 35 SECTION 26. Limitation of Liability of Noble Share Trustee............................ 35
Schedule I - Certain transactions described in Section 3(e) Schedule II - Registration rights described in Section 5(l) Schedule III - Eligible Noble Remarketing Agents i 3 NOBLE PREFERRED STOCK REMARKETING AND REGISTRATION RIGHTS AGREEMENT, dated as of November 10, 1999 (this "Agreement"), among Noble Affiliates, Inc., a Delaware corporation ("Noble"); the Noble Share Trust, a statutory business trust formed under the Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Business Code, 12 Del. C. ss. 3801 et seq.) (the "Noble Share Trust" and, together with Noble, the "Noble Offerors"); The Chase Manhattan Bank, not in its individual capacity but solely as trustee (the "Series A-2 Indenture Trustee") under a Series A-2 Indenture dated as of November 10, 1999 between AMCCO and the Series A-2 Indenture Trustee (the "Series A-2 Indenture"); and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" or the "Noble Remarketing Agent"). Capitalized terms used herein without definition have the meanings assigned to such terms in Section 1 hereof. WHEREAS, Noble has sold, assigned, transferred, conveyed and set over 125,000 shares of Noble Preferred Stock, with an initial aggregate liquidation preference of $125,000,000, to the Noble Share Trust in exchange for Noble Share Trust Certificates pursuant to the Noble Share Trust Agreement, and has reserved for issuance 10,000,000 shares of Noble Common Stock for issuance upon conversion of such Noble Preferred Stock; WHEREAS, each share of Noble Preferred Stock has been issued with an initial liquidation preference of $1,000 plus accrued and unpaid dividends thereon, if any, and an initial optional conversion rate of 36.364 shares of Noble Common Stock per share of Noble Preferred Stock with mandatory conversion provisions as provided in the Noble Preferred Stock Certificate of Designations, which conversion provisions adjust in certain circumstances and upon the Rate Reset Date; WHEREAS, Noble and the Noble Share Trust have requested DLJ to act as Noble Remarketing Agent with respect to the Noble Preferred Stock under this Agreement for the purpose of (i) using its commercially reasonable efforts upon a Series A-2 Note Trigger Event to recommend to Noble the terms and quantity of shares of Noble Mandatorily Convertible Preferred Stock or shares of Noble Common Stock which, if sold by Noble, would generate net proceeds at least equal to the Series A-2 Repayment Amount, and (ii) using its commercially reasonable efforts following a Remarketing Event to remarket a sufficient amount of the Noble Preferred Stock held by the Noble Share Trust to generate net proceeds at least equal to the Series A-2 Repayment Amount (to the extent not discharged following the offering of the New Series), including receiving payment of the purchase price for the Noble Preferred Stock subject to such remarketing and paying such purchase price to the Series A-2 Indenture Trustee; WHEREAS, the parties hereto agree that it is advisable, in connection with the remarketing activities to be undertaken by the Noble Remarketing Agent, for the resale of the Noble Preferred Stock held by the Noble Share Trust to be registered with the Commission under the Securities Act; WHEREAS, AMCCO has issued the Series A-2 Notes as of the date hereof, and is pledging its rights hereunder to the Series A-2 Indenture Trustee to secure AMCCO's repayment obligations with respect to the Series A-2 Notes; 4 WHEREAS, each of the parties herein is willing to assume the duties ascribed to it hereunder on the terms and conditions expressly set forth herein; and WHEREAS, this Agreement is being entered into pursuant to the terms of the Participation Agreement; NOW, THEREFORE, for and in consideration of the covenants herein made, and subject to the conditions herein set forth, the parties hereto agree as follows: SECTION 1. Definitions. Capitalized terms used and not defined in this Agreement shall have the meanings assigned to them in Appendix A to the Participation Agreement dated as of November 10, 1999 among Noble, AMCCO, the Noble Share Trust and the Series A-2 Indenture Trustee (each, as defined therein). In addition, as used herein: "Capital Requirements" has the meaning set forth in Section 7(a)(ii) hereof. "Closing Price" for any Trading Day, means, for a security, an amount equal to the closing price for such security on such Trading Day as reported by Bloomberg L.P., another recognized source or the Noble Remarketing Agent. "Conditions Precedent" has the meaning set forth in Section 12 hereof. "Distribution Agreement" means an underwriting, purchase, distribution or placement agency agreement to be entered into among Noble, the Noble Share Trust, the Noble Remarketing Agent and any other Persons engaged by the Noble Share Trust or the Noble Remarketing Agent to remarket or distribute the Noble Preferred Stock pursuant to the provisions hereof (such agreement to be in a form customary for a firm commitment underwritten public offering (in the case of an underwriting agreement), a firm commitment underwritten private offering (in the case of a purchase or distribution agreement) or a best efforts private placement (in the case of a placement agency agreement), including without limitation, representations and warranties, covenants, conditions precedent, indemnification and other provisions as are then customary for such agreements), and to be prepared, executed and delivered by Noble and the Noble Share Trust to the Noble Remarketing Agent on or prior to the Successful Repricing Date, as set forth in Section 12 hereof. "Effectiveness Period" has the meaning set forth in Section 3(b) hereof. "Eligible Noble Remarketing Agent" means any nationally or internationally recognized investment banking firm listed on Schedule III hereto; provided that Schedule III hereto may be amended by Noble at any time and from time to time to add any investment banking firm that is ranked among the top ten placement agents for all domestic equity-related securities offerings (by either aggregate dollar value of such offerings or by number of issues credited to the lead manager) according to the rankings most recently published by Investment Dealers' Digest or any equivalent publication or to subtract any investment banking firm that does not make a market in Noble Common Stock at such time. "Failed Registration" means a failure (i) by Noble to file a Registration Statement no later than 21 days following a Series A-2 Note Trigger Event (unless a Shelf Registration 2 5 Statement is then not legally permitted, in which case a failure by Noble to provide no later than 21 days following a Series A-2 Note Trigger Event to the Noble Remarketing Agent written assurance, reasonably acceptable to the Noble Remarketing Agent, that the Registration Statement will be declared, or will otherwise become, effective promptly after a Pricing of the Noble Preferred Stock) or otherwise have an effective Registration Statement available in accordance with Section 3(a) hereof; (ii) by Noble to use its reasonable best efforts to diligently pursue the registration of the Noble Preferred Stock (and the underlying Noble Common Stock) when so required by this Agreement; (iii) of the Registration Statement to be declared effective no later than 90 days following a Series A-2 Note Trigger Event; or (iv) by Noble to satisfy the applicable Conditions Precedent specified in Section 12 within the time periods set forth therein. "Failed Remarketing" means a failure to remarket the Noble Preferred Stock or Noble Additional Shares required to be issued hereunder because of a Legal Impossibility. "Failed Repricing" means a failure to establish a Remarketed Rate on any Repricing Date, including due to any events set forth in Section 12. "Failed Repricing Date" means any Repricing Date on which a Failed Repricing occurs. "Filed Documents" means all documents filed by Noble with the Commission under the Securities Act or the Exchange Act that are, or are required to be, incorporated by reference into the Registration Statement or Prospectus or any applicable private placement memorandum. "Final Sale Date" means the date that the Noble Share Trust has sold all of the Noble Preferred Stock. "Initial Repricing Date" means, (a) with respect to a public offering of the Noble Preferred Stock, the later of (i) the date on which the Registration Statement is declared effective (or if a Shelf Registration Statement is then not legally permitted, the first date on which Noble provides the Noble Remarketing Agent written assurance, reasonably acceptable to the Noble Remarketing Agent, that the Registration Statement will be declared, or will otherwise become, effective promptly after a Pricing of the Noble Preferred Stock) and (ii) the tenth Trading Day following the Remarketing Notification Date, and (b) if a Failed Registration has occurred, the earliest date upon which Milbank, Tweed, Hadley & McCloy LLP, or other national or international securities counsel selected by the Noble Remarketing Agent and approved by Noble, advises, in writing, that a private placement of the Noble Preferred Stock may be commenced in compliance with applicable securities laws. "Legal Impossibility" means (i) with respect to the remarketing of Noble Preferred Stock, (A) upon or at any time after the Initial Repricing Date it is impossible for legal reasons to remarket the Noble Preferred Stock or (B) on or after a Series A-2 Note Trigger Event a material breach by Noble of its obligations hereunder has occurred, including without limitation, due to the failure of Noble to satisfy the Conditions Precedent specified in paragraphs (b) and (c) of Section 12 within the time periods set forth therein except for any breach by Noble which pursuant to the terms hereof would result in a Failed Registration and 3 6 (ii) with respect to the remarketing of Noble Additional Shares, (A) upon or at any time after the Rate Reset Date it is impossible for legal reasons to remarket the Noble Additional Shares, including without limitation, due to the failure of Noble to have a sufficient number of additional shares of authorized but unissued Noble Common Stock that have not been reserved for other purposes as of any date on which any Noble Additional Shares are sold or (B) the Noble Remarketing Agent is unable to sell sufficient Noble Additional Shares as contemplated by Section 8(g) within 180 days following the Rate Reset Date. "Majority Holders" has the meaning assigned to such term in the Series A-2 Indenture. "Marketed Amount" has the meaning set forth in Section 7(a)(ii) hereof. "Minimum Amount" has the meaning set forth in Section 7(a)(ii) hereof. "NASD" means the National Association of Securities Dealers, Inc. "New Series" has the meaning set forth in Section 2(a) hereof. "New Series Distribution Agreement" means an underwriting, purchase, distribution or placement agency agreement to be entered into among Noble, the Noble Remarketing Agent and any other Persons engaged by Noble (including the lead underwriters if Noble elects not to have the Noble Remarketing Agent serve as the lead underwriter) or the Noble Remarketing Agent (with the approval of Noble, such approval not to be unreasonably withheld or delayed) to market and sell the New Series as contemplated herein (such agreement to be in a form customary for a firm commitment underwritten public offering (in the case of an underwriting agreement), a firm commitment underwritten private offering (in the case of a purchase or distribution agreement) or a best efforts private placement (in the case of a placement agency agreement), including without limitation, representations and warranties, covenants, conditions precedent, indemnification and other provisions as are then customary for such agreements), and to be prepared, executed and delivered by Noble to the Noble Remarketing Agent on or prior to the Pricing of the New Series. "Noble Additional Shares" means shares of Noble Common Stock or, if authorized by the Board of Directors of Noble, Noble Mandatorily Convertible Preferred Stock, in each case to be issued by Noble following a Partial Remarketing pursuant to Section 8(g) hereof. "Noble Mandatorily Convertible Preferred Stock" means preferred stock of Noble similar to the Noble Preferred Stock or Noble equity securities (within the meaning of Rule 16a-1(d) under the Exchange Act) which contemplate the mandatory issuance of shares of Noble Common Stock. "Partial Remarketing" means a remarketing of all of the Noble Preferred Stock as to which, although a Failed Remarketing has not occurred, net proceeds at least equal to the Series A-2 Repayment Amount are not generated. 4 7 "Pricing" means, with respect to any security, the determination of the price at which the underwriter(s) (in a firm commitment underwriting arrangement) or the purchaser(s) are willing to purchase, and the holder of such security (or issuer thereof, if such security is being newly issued) is willing to sell, such security. "Prospectus" means any preliminary or final prospectus or prospectus supplement or other offering document to be used by the Noble Remarketing Agent in connection with a public offering of the Noble Preferred Stock. "Rate Reset Date" means the earlier of (i) the date of the consummation of the remarketing of the Noble Preferred Stock (which is expected to be on or about the third Trading Day following the Successful Repricing Date) or (ii) the date a Failed Remarketing is declared. "Records" has the meaning set forth in Section 6(i) hereof. "Registration Expenses" means any and all expenses incident to the performance of or compliance by Noble and the Noble Share Trust with this Agreement, including without limitation: (i) all Commission, stock exchange or NASD registration and filing fees, (ii) all necessary fees and expenses not exceeding $5,000 in the aggregate incurred in connection with compliance with state securities or "blue sky" laws (including reasonable fees and disbursements of counsel for the Noble Remarketing Agent in connection with blue sky qualification of any of the Noble Preferred Stock, Noble Mandatorily Convertible Preferred Stock or Noble Common Stock) and compliance with the rules of the NASD, (iii) all expenses authorized by Noble or the Noble Share Trust of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Remarketing Documents and any amendments or supplements thereto, and in preparing or assisting in preparing, printing and distributing the Distribution Agreement and any other agreements or documents relating to the performance and compliance by the Noble Remarketing Agent with this Agreement, (iv) all rating agency fees incurred in connection with the remarketing process, (v) the fees and disbursements of counsel for Noble and the Noble Share Trust and of the independent certified public accountants of Noble and the Noble Share Trust, including the expenses of any "comfort letters" required by or incident to such performance and compliance, (vi) the fees and expenses of the Noble Share Trustee, and any transfer agent or custodian, (vii) all fees and expenses incurred in connection with the listing, if any, of any of the Noble Preferred Stock, the Noble Mandatorily Convertible Preferred Stock or the Noble Common Stock into which the Noble Preferred Stock and the Noble Mandatorily Convertible Preferred Stock are convertible on any securities exchange or quotation system and (viii) the reasonable fees and expenses of any special experts retained by Noble or the Noble Share Trust in connection with any Shelf Registration Statement, including fees of counsel to the Noble Remarketing Agent. "Registration Statement" means any registration statement of Noble for the registration of the Noble Preferred Stock (and the underlying Noble Common Stock) with the Commission pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, and in each case including the Prospectus contained therein (if any), all exhibits thereto and all information incorporated by reference therein, and if no Prospectus is required to be delivered at the time of 5 8 such registration, any term sheet or other document prescribed by the Commission to describe the securities to be sold thereunder. "Remarketed Rate" means the price at which the Noble Remarketing Agent can sell the fewest number of shares of Noble Preferred Stock that will generate net proceeds which are at least equal to the Series A-2 Repayment Amount or if the Noble Remarketing Agent cannot generate net proceeds which are at least equal to the Series A-2 Repayment Amount through the sale of all of the Noble Preferred Stock, then the highest price at which the Noble Remarketing Agent can sell all of the Noble Preferred Stock. "Remarketing Conditions" has the meaning set forth in Section 8 hereof. "Remarketing Documents" means any documents prepared by or at the direction of or in conjunction with Noble and/or the Noble Share Trust that are intended to be used by the Noble Remarketing Agent in the remarketing of the Noble Preferred Stock, including without limitation, (i) in the case of a public offering, the Registration Statement and all exhibits thereto, (ii) any Prospectus or private placement memoranda, and (iii) any Filed Document incorporated by reference therein. "Remarketing Event" has the meaning set forth in Section 7(b) hereof. "Remarketing Notification Date" means the date on which the Noble Remarketing Agent receives notice pursuant to Section 8(a) hereof from the Noble Share Trustee, AMCCO or the Series A-2 Indenture Trustee of its obligation to commence the remarketing of the Noble Preferred Stock. "Remarketing Period" means the period beginning on and including the Remarketing Notification Date and continuing until and including the Rate Reset Date. "Repricing Date" means the Initial Repricing Date and each Trading Day thereafter until the Rate Reset Date. "Series A-2 Note Trigger Event" has the meaning assigned to such term in the Series A-2 Indenture. "Series A-2 Notes" means the 8.95% Senior Secured Notes due 2004 issued by AMCCO pursuant to the Series A-2 Indenture in the original aggregate principal amount of $125,000,000. "Shares" means the Noble Preferred Stock, Noble Additional Shares and Noble Mandatorily Convertible Preferred Stock, or the portion thereof that is then required to be issued or available for marketing as the context requires. "Shelf Registration Statement" means a "shelf" Registration Statement of Noble pursuant to the provisions of Section 3 of this Agreement which registers the continuous offer and sale by the Noble Share Trust and, to the extent required, Noble of all of the Noble Preferred Stock (and the underlying Noble Common Stock) on an appropriate form under Rule 415 under the Securities Act or any similar or successor rule that may be adopted by the Commission, and 6 9 all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein (if any), all exhibits thereto and all information incorporated by reference therein. "Subsequent Shelf Registration Statement" has the meaning set forth in Section 3(c) hereof. "Successful Repricing Date" means the Repricing Date on which the Pricing by the Noble Remarketing Agent of the Noble Preferred Stock at the Remarketed Rate occurs. SECTION 2. Appointment of Noble Remarketing Agent. (a) Noble hereby appoints DLJ and DLJ hereby accepts such appointment, as Noble Remarketing Agent (subject to Section 10), for the purpose of (i) using its commercially reasonable efforts upon a Series A-2 Note Trigger Event to recommend to Noble the terms and quantity of shares of Noble Mandatorily Convertible Preferred Stock or shares of Noble Common Stock (each, a "New Series") which would generate net proceeds at least equal to the Series A-2 Repayment Amount, and, if requested by Noble, to market and sell such New Series pursuant to the New Series Distribution Agreement, and/or (ii) using its commercially reasonable efforts following a Remarketing Event to remarket and sell a sufficient amount of the Noble Preferred Stock held by the Noble Share Trust and any Noble Additional Shares to generate net proceeds at least equal to the Series A-2 Repayment Amount (to the extent not discharged following the offering of the New Series), in each case subject to the terms and conditions herein, including receiving payment of the purchase price for the New Series or the Noble Preferred Stock and any Noble Additional Shares subject to such remarketing and paying such purchase price to the Series A-2 Indenture Trustee. (b) The Noble Remarketing Agent agrees, in consultation with the other Eligible Noble Remarketing Agent(s), if any: (i) to use its commercially reasonable efforts to recommend the applicable terms of the New Series and the Pricing thereof in order to generate net proceeds at least equal to the Series A-2 Repayment Amount and, if requested by Noble, to market such New Series in accordance with the New Series Distribution Agreement; (ii) to use its commercially reasonable efforts to remarket the Noble Preferred Stock during the Remarketing Period; (iii) to use its commercially reasonable efforts to establish the Remarketed Rate on each Repricing Date until (and including) the Successful Repricing Date; (iv) to notify Noble, the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee promptly of the Remarketed Rate and to notify Noble, the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee of a Failed Remarketing; (v) to use its commercially reasonable efforts to remarket any Noble Additional Shares to be issued by Noble following a Partial Remarketing pursuant to Section 8(g) hereof; and 7 10 (vi) to accept Shares for remarketing and receive payment of the purchase price for remarketed Shares and pay such purchase price in respect of each such remarketed Share to the Series A-2 Indenture Trustee. (c) The Noble Remarketing Agent may appoint a co-marketing agent or agents or authorize any broker-dealer to assist in the remarketing of the Noble Preferred Stock, in each case with the consent of Noble, which consent shall not be unreasonably withheld or delayed. Noble may appoint another Eligible Noble Remarketing Agent to market the New Series pursuant to a New Series Distribution Agreement, acting alone or together with the Noble Remarketing Agent or other Eligible Noble Remarketing Agents appointed by Noble. SECTION 3. Agreement to Register Noble Preferred Stock. (a) Unless an effective Registration Statement of Noble would permit the remarketing and resale of Noble Preferred Stock hereunder, Noble shall prepare and file with the Commission, as soon as practicable (taking into account the legal requirements for registration at such time) but in any event no later than 21 days following a Series A-2 Note Trigger Event, a Shelf Registration Statement for an offering to be made by the Noble Share Trust on a continuous basis covering all of the Noble Preferred Stock and the Noble Common Stock into which the Noble Preferred Stock is convertible (unless a Shelf Registration Statement is then not legally permitted, in which case Noble shall provide no later than 21 days following a Series A-2 Note Trigger Event to the Noble Remarketing Agent written assurance, reasonably acceptable to the Noble Remarketing Agent, that the Registration Statement will be declared, or will otherwise become, effective promptly after a Pricing of the Noble Preferred Stock). The Shelf Registration Statement shall be filed on Form S-3 or another appropriate form permitting registration of the offer and sale of such Noble Preferred Stock by the Noble Share Trust for remarketing in the manner designated herein. Noble and the Noble Share Trust shall undertake no offer or sale of Noble Preferred Stock under such outstanding Shelf Registration Statement such that the Noble Remarketing Agent can no longer rely on such outstanding Shelf Registration Statement to remarket and resell the Noble Preferred Stock. (b) Noble shall use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as soon as practicable (taking into account the legal requirements for registration at such time) but in any event no later than 90 days following a Series A-2 Note Trigger Event, and to keep the Shelf Registration Statement continuously effective under the Securities Act during the period (the "Effectiveness Period") that begins on the date of effectiveness of the Shelf Registration Statement and extends to the earlier of (i) the date on which all shares of Noble Preferred Stock have been remarketed under such initial Shelf Registration Statement or (ii) the date on which all of the Series A-2 Notes cease to be outstanding. (c) If the Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period, Noble shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf 8 11 Registration Statement (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, Noble shall use its reasonable best efforts to cause its effectiveness as soon as practicable after such filing and to keep the Subsequent Shelf Registration Statement continuously effective during the Effectiveness Period. As used herein, the term "Shelf Registration Statement" means the initial Shelf Registration Statement and any Subsequent Shelf Registration Statements. (d) A Shelf Registration Statement pursuant to this Section 3 will be deemed effective when declared effective by the Commission; provided that, if, after it has been declared effective, the offering of Noble Preferred Stock pursuant to a Shelf Registration Statement is subject to any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have been effective during the period of such interference until the offering of Noble Preferred Stock pursuant to such Shelf Registration Statement may legally resume. Noble will be deemed not to have used its reasonable best efforts to cause the Shelf Registration Statement to become or to remain effective during the requisite period if Noble voluntarily takes any action knowing that it would result in any such Shelf Registration Statement not being declared effective or in the Noble Remarketing Agent not being able to remarket such Noble Preferred Stock during the applicable period unless such action is required by applicable law or governmental order. (e) Noble and the Noble Share Trust agree not to issue, sell or offer for sale (or permit the offer or sale in any manner that would require the consent or participation of Noble), or engage in marketing efforts in respect of, securities that are exchangeable for or convertible into equity securities of Noble (whether as a term of any such security, or by means of a unit or combination of any one or more securities or financial instruments or otherwise) or permit the issue, offer or sale of, or marketing efforts in respect of, any security of any trust in which Noble or any subsidiary of Noble (collectively, the "Noble Group") has an interest that is guaranteed by any member of the Noble Group that is exchangeable for or convertible into an equity security of Noble, from the date of any Series A-2 Note Trigger Event to not less than 10 days after the Rate Reset Date (the "Restriction Termination Date"), without the prior written consent of the Series A-2 Indenture Trustee, given at the direction of the Majority Holders; provided, however, that the foregoing shall not restrict any of the following: (i) the issue, offer, sale or marketing efforts in respect of the New Series, Noble Preferred Stock or Noble Additional Shares in accordance with this Agreement, (ii) the issue, offer, sale or marketing efforts in respect of securities of any member of the Noble Group that are not exchangeable for or convertible into equity securities of Noble, (iii) any member of the Noble Group from complying with any of its obligations pursuant to arrangements entered into before the Closing Date described on Schedule I hereto, (iv) any member of the Noble Group or any third party from consummating a sale or issuance (or any related offer or marketing efforts) of any such securities if the Pricing of such securities has occurred prior to the date of any Series A-2 Note Trigger Event, (v) the offer, issuance or sale of a security, including any related marketing efforts, consisting of the conversion, exercise or exchange of another security in accordance with its terms, which original security has been issued either in a registered public offering or as consideration for an acquisition or merger, (vi) any sale, offer, issuance or marketing effort in connection with any employee benefit plan of any member of the Noble Group or any dividend reinvestment plan of any member of the Noble Group, or (vii) any filing or processing of any registration statement in respect of any security with the Commission or any state securities regulator that does not involve the issuance, sale or 9 12 marketing efforts by any member of the Noble Group of (or in respect of) any equity security (other than Noble Common Stock) prior to the Restriction Termination Date or (viii) any issuance, sale or offer in connection with a shareholder rights plan, as such term is commonly used. Noble further agrees that it shall not enter into any agreement that would require it or permit any third party to contravene the provisions of this Section 3(e). (f) In the event that, at any time a Shelf Registration Statement is required to be effective hereunder, the shelf registration procedures set forth in Rule 415 or any successor rule are not available to Noble and the Noble Share Trust, Noble shall use its reasonable best efforts to cause another appropriate Registration Statement with regard to all Noble Preferred Stock and the remarketing thereof hereunder to be effective on each subsequent Repricing Date. (g) Noble shall, to the extent required by the remarketing of the Noble Preferred Stock hereunder and by any listing or quotation of the Noble Preferred Stock reasonably requested by the Noble Remarketing Agent, file a Registration Statement with the Commission under the Exchange Act. (h) Noble shall, to the extent permitted by law, upon a Partial Remarketing register and issue such amount of Noble Additional Shares as shall be necessary to discharge in full the Series A-2 Indenture, in accordance with Section 8(g) hereof; provided that Noble's obligation to issue Noble Additional Shares shall be limited to the number of the then authorized but unissued shares of Noble Common Stock that have not been reserved for other purposes. (i) Noble shall maintain the reservation of 10,000,000 shares of Noble Common Stock into which the Noble Preferred Stock may be convertible until the Rate Reset Date at which time Noble shall increase or decrease such share reservation so as to at least equal the number of shares of Noble Common Stock into which the Noble Preferred Stock is then convertible; provided that the reservation of shares of Noble Common Stock issuable upon conversion of the Noble Preferred Stock may be revoked by the Board of Directors of Noble effective upon the consummation of the sale of the New Series and the application of the proceeds thereof to satisfy the Series A-2 Indenture, if such proceeds are at least equal to the Series A-2 Repayment Amount. Noble shall also reserve for issuance such shares of Noble Common Stock issuable upon conversion or exercise of the New Series and Noble Additional Shares (other than Noble Common Stock) in connection with the issuance of such New Series or Noble Additional Shares. SECTION 4. Additional Covenants of Noble. Noble covenants with the Noble Remarketing Agent as follows: (a) Noble will provide prompt notice to the Noble Remarketing Agent of any notification by a Rating Agency to Noble of any change downwards, or the placing on credit watch with negative implications (or comparable status), with respect to the ratings of Noble's senior unsecured long-term debt. (b) Noble will, as promptly as reasonably possible after a Series A-2 Note Trigger Event, furnish to the Noble Remarketing Agent: 10 13 (i) after the same have been prepared by Noble, the Remarketing Documents (including in each case any amendment or supplement thereto and each document incorporated therein by reference); (ii) each Filed Document filed after the date hereof; (iii) notice of the occurrence of any events that would reasonably be expected to cause the conditions precedent set forth herein or in the Distribution Agreement not to be fulfilled within the time period specified herein or therein, or if no time period is specified, then within a reasonable period of time; and (iv) in connection with the remarketing of Noble Preferred Stock, such other information as the Noble Remarketing Agent may reasonably request from time to time. Noble agrees to provide the Noble Remarketing Agent with as many copies of the foregoing written materials referred to in (i) and (ii) and other information as the Noble Remarketing Agent may reasonably request for use in connection with the remarketing of Noble Preferred Stock and consents to the use thereof for such purpose. (c) If, at any time after a Series A-2 Note Trigger Event and during which the Noble Remarketing Agent would be obligated to take any action under this Agreement, any event or condition known to Noble relating to or affecting Noble, any subsidiary thereof or the Noble Preferred Stock shall occur that could reasonably be expected to affect the accuracy or completeness of any statement of a material fact contained in the Remarketing Documents, Noble shall promptly notify the Noble Remarketing Agent in writing of the circumstances and details of such event or condition. (d) If, at any time when the Prospectus is required by the Securities Act to be delivered in connection with remarketing of the Noble Preferred Stock, any event shall occur or condition exist as a result of which it is necessary, in the reasonable view of counsel for the Noble Remarketing Agent or counsel for Noble, further to amend or supplement the Prospectus in order that the Prospectus not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in the light of circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the reasonable view of such counsel or the Noble Remarketing Agent, at any such time to amend or supplement the Remarketing Documents in order to comply with the requirements of the Securities Act or the rules and regulations thereunder, Noble will promptly prepare and, to the extent applicable, file with the Commission such amendment or supplement, whether by filing documents pursuant to the Exchange Act or otherwise, as may be necessary to correct such untrue statement or omission or to make the Remarketing Documents comply with such requirements. (e) Noble will notify the Noble Remarketing Agent of its intention to file or prepare any amendment or supplement to any Remarketing Document (including any post-effective amendment and any revised prospectus which Noble proposes for use by the Noble Remarketing Agent in connection with the remarketing of the Noble Preferred Stock which differs from the prospectus on file at the Commission at the time the Registration 11 14 Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) under the Securities Act) other than Filed Documents, and will not file or use any such amendment or supplement or other documents in a form to which the Noble Remarketing Agent or counsel to the Noble Remarketing Agent shall reasonably object. (f) Noble, during the period when the Prospectus is required to be delivered under the Securities Act, will file promptly all documents required to be filed with the Commission pursuant to Section 13 or 14 of the Exchange Act. (g) Noble will provide to the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee copies of all notices and reports and all other information received by it from the Noble Remarketing Agent in connection with the remarketing process under this Agreement. (h) Noble will not grant on or after the date hereof registration rights to any Person under which such Person could request registration of its securities on any Registration Statement used to register the Noble Preferred Stock. SECTION 5. Representations and Warranties of the Noble Offerors. Noble and the Noble Share Trust jointly and severally represent and warrant to, and agree with, the Noble Remarketing Agent as follows: (a) Any Filed Documents will, when they are filed, conform in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations thereunder; and no such document, when it is filed, will contain an untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading. (b) The shares of Noble Preferred Stock have been duly authorized for issuance and sale and are validly issued and fully paid and non-assessable securities of Noble, were not issued in violation of any preemptive or similar rights and conform as to legal matters to the description thereof contained in the Offering Memorandum and any amendment or supplement thereto; the issuance of the Noble Preferred Stock is not subject to preemptive or other similar rights; holders of Noble Preferred Stock will be entitled to the same limitation of personal liability extended to shareholders of corporations under the Delaware Business Corporation Act. (c) Each of the Noble Share Trust Agreement and this Agreement has been duly authorized by all necessary corporate or trust action, as applicable, by each of Noble and the Noble Share Trust, other than the issuance of the New Series which will require future approval by the Board of Directors of Noble, and has been duly executed and delivered by Noble and the Noble Share Trustee, and each is a legal, valid and binding obligation of Noble and the Noble Share Trust, enforceable against Noble and the Noble Share Trust in accordance with its terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). 12 15 (d) The Noble Share Trust has been duly organized and is validly existing and in good standing as a business trust under the Delaware Act with all requisite trust power and authority to own property and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement and the Noble Share Trust Agreement and to own the Noble Preferred Stock; the Noble Share Trust is duly qualified to transact business as a foreign trust and is in good standing in each jurisdiction in which such qualification is necessary; the Noble Share Trust is not a party to any agreement other than the Transaction Documents described in the Offering Memorandum and any amendment or supplement thereto and has not engaged in any activities since its organization (other than those incidental to its organization and other appropriate steps including the issuance of certificates of beneficial interest, the execution of the Transaction Documents to which it is a party executed on or prior to the date hereof and the activities referred to in or contemplated by such Transaction Documents), and has not made any distributions since its organization; and the Noble Share Trust is and will be, under current law, disregarded as an entity separate from Noble for United States federal, state and local income tax purposes. (e) Noble has been duly incorporated, is validly existing as a corporation under the laws of the State of Delaware and has the corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted and as described in the Offering Memorandum (including any documents incorporated by reference therein) and to enter into and perform its obligations under, or as contemplated under, this Agreement, the Noble Share Trust Agreement and the other Transaction Documents, and to purchase, own and hold the trust certificate of beneficial interest issued by the Noble Share Trust. Noble is duly qualified and is in good standing as a foreign corporation authorized to do business in each jurisdiction in which the nature of its business or ownership or leasing of property requires such qualification, except where the failure to be so qualified would not result in a Material Adverse Effect on Noble. (f) (i) Neither the execution or delivery by Noble of, nor the performance by Noble of its obligations under, this Agreement will conflict with or result in a breach of any terms or provisions of its articles of incorporation or bylaws; (ii) neither the execution or delivery by the Noble Share Trust of, nor the performance by the Noble Share Trust of its obligations under, this Agreement will conflict with or result in a breach of any terms or provisions of the Noble Share Trust Agreement or its certificate of trust filed with the State of Delaware on November 8, 1999; and (iii) neither Noble nor the Noble Share Trust is in default in the performance of any obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument to which Noble or the Noble Share Trust is a party or by which either of them or any of their respective properties is bound, except where any such violation or default would not have a Material Adverse Effect on Noble or the Noble Share Trust, as the case may be. (g) None of the offer, sale or delivery of the Noble Preferred Stock by the Noble Share Trust, the issuance of the Noble Preferred Stock by Noble, the execution, delivery or performance of this Agreement by the Noble Offerors or the consummation by the Noble Offerors of the transactions contemplated hereby and compliance by the Noble Offerors with their respective obligations hereunder (i) requires any consent, approval, authorization or other order of, or qualification, registration or filing with, any court or governmental body, agency or 13 16 official, except, with respect to the Noble Share Trust, the filing of a certificate of trust with the State of Delaware, and except such as have been obtained and made under the federal or state securities laws and such as may be required under federal or state securities or blue sky laws in connection with the sale of the Noble Preferred Stock, the Noble Additional Shares or the New Series, or under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with a private placement of any such shares, or conflicts or will conflict with or constitutes or will constitute a breach of any of the terms or provisions of, or a default under, the articles of incorporation or bylaws of Noble or the Noble Share Trust Agreement or certificate of trust of the Noble Share Trust, or (ii) conflicts or will conflict with or constitutes or will constitute a breach of any of the terms or provisions of, or a default under, any indenture, loan agreement, mortgage, lease or other agreement or instrument to which Noble or the Noble Share Trust is a party or by which either of them or any of their respective properties is bound, or (iii) violates or will violate or conflicts or will conflict with any applicable law, rule, regulation, judgment, order or decree of any court or any governmental body or agency having jurisdiction over Noble or the Noble Share Trust or any of their respective properties as such law, rule, regulation, judgment, order or decree is in effect as of the date hereof, or (iv) will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of Noble or the Noble Share Trust pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject, or (v) result in the suspension, termination or revocation of any material Permit of the Noble Share Trust or Noble or any other impairment of the rights of the holder of any such material Permit as such Permit and such rights are in effect as of the date hereof; except, in the case of clauses (ii) through (v), as would not have a Material Adverse Effect on Noble or the Noble Share Trust, as the case may be. (h) Noble is not, and after giving effect to the issuance of the Noble Preferred Stock to the Noble Share Trust will not be, and the Noble Share Trust is not, and after giving effect to the issuance of the Noble Preferred Stock to the Noble Share Trust will not be required to register as, an "investment company", in each case as such term is defined under the Investment Company Act of 1940, as amended. (i) Neither the Noble Share Trust nor Noble is subject to regulation by the Commission or by any state as a "holding company", a "subsidiary company" of a "holding company", an "affiliate" or an "associate company" of a "holding company" or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. (j) The Noble Share Trust is the beneficial owner of the Noble Preferred Stock, free and clear of any lien or claims of any Person, except as otherwise provided in the Transaction Documents. (k) Except as disclosed in Noble's Form 10-K for the year ended December 31, 1998, Noble's Forms 10-Q for the quarters ended March 31, 1999 and June 30, 1999, or Noble's Forms 8-K, if any, filed since December 31, 1998, which were delivered to the Noble Remarketing Agent prior to the date hereof, there is no action, suit or proceeding pending against Noble, or to the knowledge of Noble, threatened against Noble, before any Governmental 14 17 Authority in which there is a reasonable possibility of an adverse decision which could have a Material Adverse Effect. (l) Other than as disclosed in Schedule II hereto, there are no contracts, agreements or understandings (other than this Agreement) between Noble and any Person granting such Person the right to register any securities of Noble pursuant to any Registration Statement used to register the Noble Preferred Stock. (m) Other than as disclosed in Schedule I hereto, there are no contracts, agreements or understandings between Noble and any Person which, if entered into after the date of this Agreement, would cause Noble or a third party to contravene the provisions of Section 3(e) hereof (without giving effect to clause (iii) of such Section 3(e)). SECTION 6. Registration Procedures. In connection with the obligations of Noble with respect to any Shelf Registration Statement pursuant to Sections 3(a), 3(b) and 3(c) hereof, Noble shall after any Series A-2 Note Trigger Event: (a) as far in advance as practical before filing any Registration Statement or any amendment thereto, provide the Noble Remarketing Agent and its counsel with reasonably complete drafts of all such documents proposed to be filed (including exhibits), and the Noble Remarketing Agent shall have the opportunity to object to any information pertaining to the Noble Remarketing Agent that is contained therein and to make comments and suggestions as to the presentation of the information therein, and Noble will make the corrections and other changes reasonably requested by the Noble Remarketing Agent with respect to such information regarding the Noble Remarketing Agent prior to filing any such Registration Statement (including any amendment thereto) unless it has a reasonable basis not to do so; (b) prepare and file with the Commission such amendments and supplements to each Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement continuously effective for the Effectiveness Period and to any Prospectus used in connection therewith as may be necessary to maintain the effectiveness of such Shelf Registration Statement or the veracity, accurateness or completeness of the information contained therein, and to comply with the provisions of the Securities Act with respect to the disposition of all Noble Preferred Stock covered by such Shelf Registration Statement in accordance with the remarketing procedures set forth herein, until the end of the Effectiveness Period; (c) promptly notify the Noble Remarketing Agent and its counsel: (i) when any Registration Statement or any Prospectus to be used hereunder, or any amendment or supplement thereto, has been filed and, with respect to such Registration Statement or any post-effective amendment thereto, when the same has become effective; (ii) of any written comments from the Commission with respect to any filing referred to in clause (i) and of any written request by the Commission for amendments or supplements to such Registration Statement or Prospectus; 15 18 (iii) of the notification to Noble by the Commission of (x) its initiation of any proceeding with respect to the issuance by the Commission, or (y) the issuance by the Commission, of any stop order suspending the effectiveness of such Registration Statement; (iv) of the receipt by Noble of any notification with respect to the suspension of the qualification of the Noble Preferred Stock for sale under the applicable securities or blue sky laws of any jurisdiction; (v) of the happening of any event that makes any statement made in such Registration Statement or related Prospectus, or any document incorporated or deemed to be incorporated therein by reference, untrue in any material respect or that requires the making of any changes in such Registration Statement, Prospectus or related documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (vi) the reasonable determination of Noble or the Noble Share Trust that a post-effective amendment to the Registration Statement would be appropriate. (d) register or qualify all Noble Preferred Stock under such other securities or blue sky laws of such jurisdictions as the Noble Remarketing Agent shall reasonably request, to keep such registration or qualification in effect for so long as any Registration Statement under the Securities Act remains effective, and take any other action which may be reasonably necessary or advisable to enable the Noble Remarketing Agent to remarket the Noble Preferred Stock in any jurisdiction it may reasonably request, except that Noble and the Noble Share Trust shall not for any such purpose be required (except to the extent required by the Commission or by the explicit terms of this Agreement) (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (d) be obligated to be so qualified, (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any jurisdiction; (e) use its reasonable best efforts to cause all Noble Preferred Stock to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Noble Remarketing Agent to remarket the Noble Preferred Stock in accordance with the remarketing procedures set forth herein, except that Noble and the Noble Share Trust shall not for any such purpose be required (except to the extent required by the Commission or by the explicit terms of this Agreement) (i) to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph (e) be obligated to be so qualified, (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any jurisdiction; 16 19 (f) use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement and to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as soon as practicable; (g) cooperate with the Noble Share Trustee to facilitate the timely preparation and delivery of certificates representing Noble Preferred Stock to be remarketed that do not bear any restrictive legends (to the extent appropriate), and cause such Noble Preferred Stock to be issued in such denominations and registered in such names as the Noble Remarketing Agent may reasonably request at least two Business Days prior to the Rate Reset Date; (h) upon the occurrence of any circumstance contemplated by Section 3(c), 6(c)(iii), 6(c)(v) or 6(c)(vi) hereof, use its reasonable best efforts to prepare a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Noble Preferred Stock, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and Noble agrees to notify the Noble Remarketing Agent as promptly as practicable after the occurrence of such an event; and the Noble Remarketing Agent agrees that, following such notice, it will suspend use of the Prospectus until Noble has amended or supplemented the Prospectus to correct such misstatement or omission; (i) furnish to the Noble Remarketing Agent: (a) copies of each report or other document filed by Noble with the Commission including any Registration Statement and the Remarketing Document relating to the Noble Preferred Stock (including in each case any documents incorporated therein by reference), (b) notice of the occurrence of any of the events set forth in Section 12(d) hereof, and (c) in connection with each remarketing of Noble Preferred Stock, such other information as the Noble Remarketing Agent may reasonably request from time to time, in such form as the Noble Remarketing Agent may reasonably request, including but not limited to information regarding the financial condition of Noble; provided, however, that information referred to in clause (c) which Noble and the Noble Share Trust determine, in good faith, to be confidential and which they notify the Noble Remarketing Agent is confidential shall not be disclosed by the Noble Remarketing Agent; provided that the Noble Remarketing Agent may disclose any such information (i) as has become generally available to the public through no fault of the Noble Remarketing Agent, (ii) as may be required in any report, statement or testimony submitted to any municipal, state, federal or foreign regulatory or supervisory body or agency having or claiming to have jurisdiction over the Noble Remarketing Agent, (iii) as may be required in response to any summons or subpoena or in connection with any litigation, (iv) in order to comply with any law, order, regulation or ruling applicable to the Noble Remarketing Agent, and (v) as may be necessary for the Noble Remarketing Agent to comply with the Transaction Documents. Upon learning that disclosure of such information identified by Noble as confidential is sought or required pursuant to clauses (ii), (iii) or (iv) above, the Noble Remarketing Agent shall give notice to Noble and the Noble Share Trust as soon as reasonably practicable and allow them at their expense to undertake appropriate action to prevent disclosure of the information determined, or notified by, Noble to be confidential and the Noble Remarketing Agent shall cooperate with Noble in such action undertaken by Noble to the extent reasonably requested by Noble. Noble agrees to provide the Noble Remarketing Agent with as 17 20 many copies of the foregoing materials and information as the Noble Remarketing Agent may reasonably request for use in connection with each remarketing of Noble Preferred Stock and Noble Mandatorily Convertible Preferred Stock and consents to the use thereof for such purpose. If, at any time during the term of this Agreement, any event or condition known to Noble relating to or affecting Noble, or the Noble Preferred Stock or Noble Mandatorily Convertible Preferred Stock shall occur which might affect the accuracy or completeness of any statement of a material fact contained in any Remarketing Document, Noble shall promptly notify the Noble Remarketing Agent in writing of the circumstances and details of such event or condition; (j) make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing at the end of the fiscal quarter in which the Rate Reset Date occurs; (k) cooperate with the Noble Remarketing Agent and any other Person, if any, participating in the remarketing and/or the disposition of the Noble Preferred Stock and their respective counsel in connection with filings, if any, required to be made with the NASD; (l) use their respective reasonable best efforts to take all other steps necessary to effect the registration of the Noble Preferred Stock in connection with the remarketing thereof as contemplated herein. The Noble Remarketing Agent hereby agrees that, upon receipt of any notice from Noble or the Noble Share Trust of the happening of any event of the kind described in Section 6(c), the Noble Remarketing Agent will forthwith discontinue its remarketing of Noble Preferred Stock pursuant to the Registration Statement relating thereto until the Noble Remarketing Agent shall have received copies of the supplemented or amended Prospectus contemplated by Section 6(h) and, if so directed by Noble, will deliver to Noble (at the expense of Noble) all copies, other than permanent file copies, then in its possession of the Prospectus relating to the Noble Preferred Stock that was current at the time of receipt of such notice. SECTION 7. New Series; Remarketing Events. (a) If a Series A-2 Note Trigger Event (whatever the reason for such Series A-2 Note Trigger Event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing, (i) (A) Subject to further approval by the Board of Directors of Noble, if required, Noble shall have the right to offer and sell as soon as practicable such number of shares of the New Series in accordance with the New Series Distribution Agreement in order to generate net proceeds at least equal to the Series A-2 Repayment Amount and (B) to the extent permitted under law, Noble and the Noble Share Trust shall comply with the provisions of this Agreement with respect to the registration of the Noble Preferred Stock. 18 21 (ii) The Noble Remarketing Agent shall use its commercially reasonable efforts to recommend to Noble the terms and quantity of shares of the New Series (the "Minimum Amount") which would generate net proceeds at least equal to the Series A-2 Repayment Amount or, if in the reasonable judgment of such Remarketing Agent shares of the New Series cannot be marketed for net proceeds at least equal to the Series A-2 Repayment Amount, then the amount of the net proceeds which the Noble Remarketing Agent believes may be received from the marketing of the New Series. Noble may choose to market the New Series whether or not the Noble Remarketing Agent believes the New Series can be marketed for net proceeds at least equal to the Series A-2 Repayment Amount, or Noble may choose to market the New Series in an amount in excess of such Minimum Amount, in which case Noble shall deliver to the Noble Remarketing Agent an irrevocable written notice executed by its treasurer or chief financial officer (A) specifying such amount of the New Series which Noble chooses to market (the "Marketed Amount"), (B) stating in reasonable detail the amount and intended use of the anticipated net proceeds of such Marketed Amount other than the repayment of the Series A-2 Notes (the "Capital Requirements") and (C) certifying why Noble deems it necessary in good faith to market such Marketed Amount in accordance with its corporate requirements. If the Noble Remarketing Agent advises Noble in writing that in its opinion the shares of the New Series cannot be marketed to receive net proceeds at least equal to the Series A-2 Repayment Amount or the aggregate of the Minimum Amount plus the Marketed Amount exceeds the amount of shares that can be sold without a material reduction in the selling price of such shares and would generate net proceeds less than the aggregate of the Series A-2 Repayment Amount and the Capital Requirements, the Noble Remarketing Agent will have no obligation to market the New Series or to enter into the New Series Distribution Agreement. In the event the Noble Remarketing Agent so advises Noble, Noble shall have the right to appoint one or more Eligible Noble Remarketing Agents to market the New Series on its behalf, and each such replacement Eligible Noble Remarketing Agent shall enter into the New Series Distribution Agreement or a similar distribution agreement with respect to the offering and sale of the New Series, but shall not become a Remarketing Agent for any other purpose under this Agreement. (iii) Upon the sale of the New Series, Noble shall cause (A) if clause (iv) of this Section 7(a) is applicable, all of the net proceeds thereof to be deposited by AMCCO or the Series A-2 Indenture Trustee, as the case may be, in the Distribution Account created under the Series A-2 Indenture to be applied to the repayment of the Series A-2 Notes in accordance with the Series A-2 Indenture, and (B) in any other case, all or a portion of the net proceeds thereof up to the Series A-2 Repayment Amount to be deposited by AMCCO or the Series A-2 Indenture Trustee, as the case may be, in the Distribution Account to be applied to the repayment of the Series A-2 Notes in accordance with the Series A-2 Indenture; provided, that in the case of this clause (B), if the amount of net proceeds of the New Series actually received is less than aggregate of the Series A-2 Repayment Amount and the Capital Requirements and Noble had notified the Noble Remarketing Agent of its Capital Requirements in accordance with Section 7(a)(ii) hereof, the amount of net proceeds actually deposited in the Distribution Account shall equal the proportion that the Series A-2 Repayment Amount bears to the aggregate of the 19 22 Series A-2 Repayment Amount plus the Capital Requirements intended to be generated by such sale of the New Series. (iv) If the amount of net proceeds of the marketing of the New Series is at least equal to the Series A-2 Repayment Amount, the Noble Share Trust shall be authorized to release and, if requested, shall release all or a portion of the Noble Preferred Stock to the Noble Remarketing Agent to permit the sale of such amount of the New Series to be settled by delivery of such amount of Noble Preferred Stock, but only if the New Series Distribution Agreement or similar distribution agreement with respect to the offering of the New Series requires a firm commitment underwriting and provides that net proceeds at least equal to the Series A-2 Repayment Amount shall be paid directly to the Noble Share Trust; and the Share Trust hereby agrees to deposit the net proceeds thereof immediately upon receipt in the Distribution Account created under the Series A-2 Indenture and the Series A-2 Indenture Trustee hereby agrees to apply such net proceeds to the repayment of the Series A-2 Notes in accordance with the Series A-2 Indenture. (b) If Noble fails to consummate the sale of the New Series in accordance with its obligations under Section 7(a)(i) hereof within 60 days following such Series A-2 Note Trigger Event, or if within 21 days after such Series A-2 Note Trigger Event Noble fails to file a registration statement for, or fails to demonstrate that it is diligently pursuing the registration of, a New Series (a "Remarketing Event"), (i) the Noble Share Trust hereby agrees to cause the Noble Remarketing Agent to offer and sell all or a portion of the Noble Preferred Stock held by the Noble Share Trust through the remarketing procedures set forth herein; (ii) the Noble Remarketing Agent shall notify the Series A-2 Indenture Trustee and AMCCO of such Remarketing Event; (iii) the Series A-2 Indenture Trustee in accordance with the Series A-2 Indenture shall cause AMCCO to exercise AMCCO's rights under this Agreement to cause the Noble Share Trust to remarket the Noble Preferred Stock held by the Noble Share Trust through the remarketing procedures set forth herein; and (iv) upon any such remarketing, the net proceeds thereof shall be deposited by AMCCO or the Series A-2 Indenture Trustee, as the case may be, in the Distribution Account created under the Series A-2 Indenture and shall be applied to the repayment of the Series A-2 Notes as a mandatory redemption in accordance with the Series A-2 Indenture. SECTION 8. Remarketing Procedures. (a) Upon a Remarketing Event, the Noble Share Trust, AMCCO or the Series A-2 Indenture Trustee, as the case may be, shall deliver to Noble and the Noble Remarketing Agent a written notice to commence the process of remarketing the Noble Preferred Stock. (b) If the conditions precedent to a public offering of the Noble Preferred Stock have been met pursuant to Section 12 hereof, the Noble Remarketing Agent shall be obligated to commence such public offering in accordance with the following remarketing procedures. If a Failed Registration has occurred, then any actions undertaken with respect to a public offering of the Noble Preferred Stock shall cease, and the Noble Remarketing Agent shall be obligated to commence a private placement of the Noble Preferred Stock in accordance with the following remarketing procedures; provided that (x) no actions shall be undertaken by the Noble Remarketing Agent with respect to such private placement until the earliest date upon which 20 23 Milbank, Tweed, Hadley & McCloy LLP, or other national or international securities counsel selected by the Noble Remarketing Agent and approved by Noble, advises, in writing, that a private placement of the Noble Preferred Stock may be commenced in compliance with applicable securities law and (y) the Noble Share Trust and the Noble Remarketing Agent shall cause such private placement to be consummated as and upon the terms directed by the Series A-2 Indenture Trustee. (c) In determining the Remarketed Rate for the Noble Preferred Stock, the Noble Remarketing Agent will, after taking into account market conditions as reflected in the prevailing yields on mandatorily convertible preferred stock of other comparable issuers: (i) consider (A) short-term and long-term market rates and indices of such short-term and long-term rates, (B) market supply and demand for short-term and long-term securities, (C) yield curves for short-term and long-term securities comparable to the Noble Preferred Stock (considering the terms applicable thereto on and after the Rate Reset Date), (D) industry and financial conditions that may affect the Noble Preferred Stock, including without limitation the condition (financial or otherwise), results of operations, business affairs, management and prospects of Noble as described in the Remarketing Documents (including any Filed Documents incorporated by reference therein), as applicable, relating to the offering of Noble Preferred Stock, (E) the number of shares of Noble Preferred Stock to be remarketed, (F) the number of potential purchasers, (G) the current ratings by nationally recognized statistical rating organizations of long-term subordinated debt and preferred securities of Noble, (H) the market price of the Noble Common Stock, (I) the discount appropriate for a private placement of the Noble Preferred Stock, if applicable and (J) the terms and Pricing of the New Series and the market reactions to the marketing of the New Series, if applicable (collectively, the "Remarketing Conditions") and (ii) contact, by telephone or otherwise, prospective purchasers and ascertain the prices at which they would be willing to hold or purchase such Noble Preferred Stock. (d) The following remarketing procedures shall be subject to the right of the Noble Remarketing Agent under Section 12 hereof to declare in good faith a Failed Remarketing, with the consequences set forth in said Section 12. (e) On or prior to the Initial Repricing Date, the Series A-2 Indenture Trustee, upon the written request of the Noble Remarketing Agent, shall deliver to the Noble Remarketing Agent, AMCCO and Noble an Officer's Certificate setting forth the amounts available in the Collection Account and the Distribution Account to be used in determining the Series A-2 Repayment Amount, and shall undertake to notify the Noble Remarketing Agent, AMCCO and Noble if any such amount should change prior to the Rate Reset Date. (f) By approximately 1:00 p.m., New York City time, on the Initial Repricing Date, the Noble Remarketing Agent will notify Noble, the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee by telephone, confirmed in writing, of (i) whether the Noble Remarketing Agent was able to establish a Remarketed Rate and (ii) if so, the Remarketed Rate, the Rate Reset Date and the number of shares of Noble Preferred Stock to be remarketed. If on 21 24 such Repricing Date, a Failed Repricing has occurred but there has not occurred a Failed Remarketing, then the Noble Remarketing Agent will continue to seek to establish a Remarketed Rate on the next succeeding Repricing Date. Noble, the Noble Share Trust and the Noble Remarketing Agent shall enter into the Distribution Agreement upon a Successful Repricing Date. (g) Upon a Partial Remarketing, to the extent permitted by law, Noble shall issue Noble Additional Shares in an amount which, when remarketed by the Noble Remarketing Agent pursuant to this Agreement, shall be sufficient to generate net proceeds which, together with the net proceeds of such Partial Remarketing, are at least equal to the Series A-2 Repayment Amount; provided that Noble's obligation to issue Noble Additional Shares shall be limited to the number of the then authorized but unissued shares of Noble Common Stock that have not been reserved for issuance by the Board of Directors of Noble for other purposes. The Noble Remarketing Agent shall use its commercially reasonable efforts to remarket such Noble Additional Shares as soon as practicable upon such terms as will result in the generation of such proceeds, or the largest portion thereof as shall be practicable. (h) In the event of a Failed Remarketing, the Noble Remarketing Agent shall promptly notify Noble, the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee in writing of such Failed Remarketing. The Noble Remarketing Agent may consult with counsel in making such determination and may conclusively rely on the advice or opinion of any such counsel with respect thereto. In the event of a Failed Remarketing, (i) Noble shall pay to the Series A-2 Indenture Trustee the Series A-2 Repayment Amount (minus the net proceeds of any remarketing of Noble Preferred Stock and Noble Additional Shares, if any, used to satisfy a portion of the Series A-2 Notes and any amounts due and owing under the Series A-2 Indenture) to release the lien on the Samedan Methanol stock constituting Security for the Series A-2 Notes and (ii) until Noble has complied with clause (i) above, the Noble Remarketing Agent shall, upon the direction of the Series A-2 Indenture Trustee, continue to seek a Pricing of the Noble Preferred Stock at the Remarketed Rate, and consummate the sale of such shares as soon as practicable in accordance with such direction. (i) On the date of the consummation of any sale of Noble Preferred Stock and Noble Additional Shares, if any, the Noble Remarketing Agent will make payment (or arrange for payment to be made in accordance with the Distribution Agreement) of the purchase price for the Noble Preferred Stock or Noble Additional Shares, if any, that have been sold in the remarketing to the Series A-2 Indenture Trustee or to its order by the close of business on such date, against delivery through DTC of such shares. The Series A-2 Indenture Trustee shall cause such purchase price to be deposited in the Distribution Account and applied to the repayment of the Series A-2 Notes in accordance with the Series A-2 Indenture. (j) In the event of a private placement of the Noble Preferred Stock, the offer and sale of the Noble Preferred Stock shall be done in a manner that will not require approval by the shareholders of Noble pursuant to the provisions of Rule 312 of the rules published in the New York Stock Exchange Listed Company Manual or any successor rule or other requirement of the New York Stock Exchange, if applicable at the time of such private placement. 22 25 SECTION 9. Fees and Expenses. (a) For its services in performing its duties set forth hereunder with respect to remarketing the Shares, on the Rate Reset Date and on the closing of any remarketing of Noble Additional Shares (if applicable), the Noble Remarketing Agent will receive from Noble a commission of 2-3/4% of the gross sales proceeds of Noble Preferred Stock or Noble Additional Shares, respectively, actually remarketed by it and sold, payable by wire transfer in same day funds. (b) In addition to its obligation under Section 9(a), and in addition to its obligations under Section 13 hereof, Noble shall, from time to time upon the request of the Noble Remarketing Agent, pay the reasonable fees and expenses of counsel incurred by the Noble Remarketing Agent after a Series A-2 Note Trigger Event in connection with the performance of its duties hereunder. The obligations of Noble to make the payments required by this Section 9 shall survive the termination of this Agreement or the termination of the obligations of the Noble Remarketing Agent hereunder and remain in full force and effect until all such payments shall have been made in full. (c) Without limiting the effect of the foregoing, Noble shall pay all Registration Expenses in connection with the registration pursuant to Section 3 hereof and will reimburse the Noble Remarketing Agent for the reasonable fees and disbursements of its counsel incurred in connection with a Shelf Registration Statement hereunder. SECTION 10. Resignation and Removal of the Noble Remarketing Agent; Additional Agents. (a) The Noble Remarketing Agent may resign and be discharged from its duties and obligations hereunder at any time, such resignation to be effective 30 days after delivery of notice to Noble, the Noble Share Trustee, AMCCO and the Series A-2 Indenture Trustee of such resignation, subject to clause (d) of this Section 10. In such case, Noble will use its reasonable best efforts to appoint a successor Noble Remarketing Agent from among the Eligible Noble Remarketing Agents and to enter into a new remarketing agreement with such Person and the Noble Share Trust as soon as reasonably practicable, such agreement to be substantially in the form of this Agreement in which such Person has agreed to conduct the remarketing in accordance with the terms and conditions described herein. It shall be the sole obligation of Noble to appoint a successor Noble Remarketing Agent, but the resigning Noble Remarketing Agent will reasonably cooperate in handing over the responsibilities of Noble Remarketing Agent to such successor. (b) The Series A-2 Indenture Trustee may replace the Noble Remarketing Agent for cause upon the direction of the Majority Holders, with the successor Noble Remarketing Agent to be an Eligible Noble Remarketing Agent. For purposes of this Section 10(b), "cause" means the failure of the Noble Remarketing Agent to comply with its obligations under clauses (ii) and (iii) of Section 2(b) following the Remarketing Notification Date. (c) Following any notice of removal or resignation of the Noble Remarketing Agent, Noble or the Series A-2 Indenture Trustee, as the case may be, shall endeavor to cause an 23 26 Eligible Noble Remarketing Agent to be appointed as a replacement within 60 days of the delivery of such notice. (d) No resignation or removal of the Noble Remarketing Agent hereunder shall become effective until Noble or the Series A-2 Indenture Trustee, as the case may be, shall have appointed an Eligible Noble Remarketing Agent as successor Noble Remarketing Agent and such successor Noble Remarketing Agent shall have become a party to this Agreement or entered into a new remarketing agreement substantially in the form of this Agreement in which it has agreed to conduct the remarketing in accordance with the terms and conditions described herein. (e) The Noble Remarketing Agent may, at its discretion and expense, make arrangements to be assisted by any broker-dealer or underwriting firm reasonably acceptable to Noble in connection with the remarketing of the Noble Preferred Stock (and if appropriate, to have such Persons become parties to the Distribution Agreement), with such compensation therefor, if any, as may be agreed between the Noble Remarketing Agent and such Person. In addition, if so requested by the Series A-2 Indenture Trustee, one or more additional Noble Remarketing Agents may be appointed hereunder and may be made parties to the Distribution Agreement with the Noble Remarketing Agent to be given responsibility for remarketing a specified liquidation amount of Noble Preferred Stock as the Noble Remarketing Agents may decide in consultation with Noble and the Series A-2 Indenture Trustee (or failing agreement between the Noble Remarketing Agents, by the Series A-2 Indenture Trustee), in which case all references herein shall be deemed to apply, mutatis mutandis, to all Noble Remarketing Agents severally but not jointly and in such case the compensation to be paid by Noble to the Noble Remarketing Agents hereunder shall be split among all the Noble Remarketing Agents in the manner agreed to by the Noble Remarketing Agents. (f) If so requested by Noble, one or more Eligible Noble Remarketing Agents (including the lead underwriters if Noble elects not to have the Noble Remarketing Agent serve as the lead underwriter) may be appointed hereunder solely for the purpose of recommending the terms of and marketing the New Series in conjunction with the Noble Remarketing Agent originally appointed hereunder and shall be made parties to the New Series Distribution Agreement, with the Noble Remarketing Agent to be given responsibility for marketing a specified amount of the New Series as the Noble Remarketing Agents may decide in consultation with Noble (or failing agreement between the Noble Remarketing Agents, by Noble), in which case all references herein shall be deemed to apply, mutatis mutandis, to all Noble Remarketing Agents severally but not jointly (to the extent applicable). SECTION 11. Dealing in Noble Securities; Redemption of Noble Remarketing Agent's Shares. DLJ, when acting as the Noble Remarketing Agent or in its individual or any other capacity, may, to the extent permitted by law, buy, sell, hold and deal in any of the Noble Preferred Stock, the New Series or the Noble Additional Shares. Notwithstanding the foregoing, the Noble Remarketing Agent is not obligated to purchase any Noble Preferred Stock that would otherwise remain unsold in a remarketing. The Noble Remarketing Agent, as a holder of the Noble Preferred Stock, the New Series, or the Noble Additional Shares, may exercise any vote or join as a holder in any action which any holder of such securities may be entitled to exercise or take pursuant to the terms thereof with like effect as if it were not acting in any capacity 24 27 hereunder. The Noble Remarketing Agent, in its capacity either as principal or agent, may also engage in or have an interest in any financial or other transaction with Noble as freely as if it were not acting in any capacity hereunder to the extent permitted by law. SECTION 12. Conditions to Noble Remarketing Agent's Obligations. The obligations of the Noble Remarketing Agent under this Agreement have been undertaken in reliance on, and shall be subject to, compliance with the conditions precedent set forth in the following paragraphs (a) through (d) (the "Conditions Precedent") on or prior to the indicated dates. (a) On or prior to the Initial Repricing Date, and upon each successive Repricing Date: (i) Noble and the Noble Share Trust shall have complied in all material respects with their respective obligations and agreements as set forth in this Agreement; and (ii) with respect to a public offering of the Noble Preferred Stock, Noble and the Noble Share Trust shall have filed a Registration Statement covering the Noble Preferred Stock (and the Noble Common Stock into which such Noble Preferred Stock is convertible) and the remarketing thereof, which Registration Statement shall have been declared effective by the Commission, and no stop order suspending the effectiveness thereof shall have been issued and not withdrawn or revoked under the Securities Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Noble Remarketing Agent. If the Noble Remarketing Agent shall reasonably determine without any obligation to consult with any other party to this Agreement that the Conditions Precedent set forth in this paragraph (a) are not fulfilled, the Noble Remarketing Agent shall declare a Failed Repricing with regard to such Repricing Date and shall not be obligated to remarket the Noble Preferred Stock until the next succeeding Repricing Date in accordance with the provisions of paragraph (f) of Section 8; provided that if such a Failed Repricing has occurred and continues for a period of five Trading Days thereafter, then the Noble Remarketing Agent shall declare a Failed Registration with regard to such Repricing Date and shall not be obligated to remarket the Noble Preferred Stock until such time as a private placement of such shares may be commenced in accordance with the provisions of paragraph (b) of Section 8. (b) On any Repricing Date on which the Noble Remarketing Agent has established a Remarketed Rate: (i) Noble and the Noble Share Trust shall enter into the Distribution Agreement; (ii) Noble and the Noble Share Trust shall have complied in all material respects with their respective obligations and agreements set forth herein and in the Distribution Agreement; and 25 28 (iii) the representations and warranties contained herein and in the Distribution Agreement shall be true, complete and correct in all material respects as if made on such date except as otherwise disclosed in the Remarketing Documents. If the Noble Remarketing Agent shall reasonably determine without any obligation to consult with any other party to this Agreement that the Conditions Precedent set forth in this paragraph (b) are not fulfilled, then the Noble Remarketing Agent shall declare a Failed Repricing with regard to such Repricing Date and shall not be obligated to remarket the Noble Preferred Stock until the next succeeding Repricing Date in accordance with the provisions of paragraph (d) of Section 8; provided that if such a Failed Repricing has occurred and continues for a period of five Trading Days thereafter or if Noble intentionally fails to comply with the Conditions Precedent set forth in this paragraph (b), then the Noble Remarketing Agent shall declare a Failed Remarketing, with the consequences set forth in paragraph (h) of Section 8. (c) Following the execution of any Distribution Agreement, in addition to the Conditions Precedent set forth in paragraph (b) above, the conditions precedent set forth in the Distribution Agreement shall have been fulfilled and the sale of the Noble Preferred Stock thereunder shall have been consummated on the closing date set forth in the Distribution Agreement. If the Noble Remarketing Agent shall reasonably determine without any obligation to consult with any other party to this Agreement that the Conditions Precedent set forth in this paragraph (c) are not fulfilled, then the Noble Remarketing Agent shall declare a Failed Remarketing, with the consequences set forth in paragraph (h) of Section 8. (d) (i) Promptly upon request following a Series A-2 Note Trigger Event, Noble and the Noble Share Trust shall deliver to the Noble Remarketing Agent such current or updated Remarketing Documents and other current information and other materials as the Noble Remarketing Agent shall reasonably request, and (ii) at all times during the Remarketing Period and prior to the Successful Repricing Date and at all times during any remarketing of Noble Additional Shares, none of the following events shall have occurred: (x) trading in any securities of Noble shall have been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices shall have been required, by any of said exchanges or by such system or by order of the Commission, the NASD or any other governmental authority, or if a banking moratorium shall have been declared by either Federal or New York authorities; or (y) there shall have occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Noble Remarketing Agent, impracticable to remarket the Noble Preferred Stock or Noble Additional Shares, as the case may 26 29 be, or to enforce contracts for the sale of the Noble Preferred Stock or Noble Additional Shares, as the case may be. If, on any Repricing Date the Noble Remarketing Agent shall reasonably determine without any obligation to consult with any other party to this Agreement that the Conditions Precedent set forth in this paragraph (d) are not fulfilled, then the Noble Remarketing Agent shall declare a Failed Repricing with regard to such Repricing Date and shall not be obligated to remarket the Noble Preferred Stock until the next succeeding Repricing Date in accordance with the provisions of paragraph (f) of Section 8; provided that if all Conditions Precedent other than those set forth in this paragraph (d) are met by the fifth Repricing Date after the Initial Repricing Date, the Conditions Precedent set forth in this paragraph (d) shall no longer be applicable and shall not prevent the establishment of a Remarketed Rate. (e) The Noble Remarketing Agent may consult with counsel in making any determination which may be made by it pursuant to this Section 12 and may conclusively rely on the advice or opinion of any such counsel with respect thereto. SECTION 13. Indemnification. (a) Each of the Noble Share Trust and Noble jointly and severally agrees, to the extent permitted by law, to indemnify and hold harmless the Noble Remarketing Agent, its directors, its officers and each Person, if any, who controls the Noble Remarketing Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages, liabilities and judgments, joint or several (including, without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action, that could give rise to any such losses, claims, damages, liabilities or judgments) arising out of or based upon (i) all remarketing activity undertaken by the Noble Remarketing Agent or any of its respective officers, employees and agents in respect of the Noble Preferred Stock, and any other action taken by the Noble Remarketing Agent or any of its respective officers, employees and agents in furtherance of this Agreement or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Remarketing Document or in any Filed Document, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments arise solely out of or are based solely upon (x) the gross negligence or willful misconduct of the Noble Remarketing Agent in connection with clause (i) or (y) any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with information furnished in writing to the Noble Offerors by or on behalf of the Noble Remarketing Agent expressly for use therein; provided, however, that the indemnification contained in this paragraph (a) with respect to any preliminary Remarketing Document shall not inure to the benefit of any Noble Remarketing Agent (or to the benefit of any Person controlling the Noble Remarketing Agent) on account of any such loss, claim, damage, liability or judgment arising from the sale of the Noble Preferred Stock by the Noble Remarketing Agent to any Person if the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such preliminary Remarketing Document was corrected in a final Remarketing Document and the Noble Remarketing Agent sold Noble Preferred Stock to that Person without sending or giving at or prior to the written confirmation of such sale, a copy of 27 30 the final Remarketing Documents (as then amended or supplemented) if Noble has previously complied with Section 4(d) of this Agreement. (b) The Noble Remarketing Agent agrees to indemnify and hold harmless the Noble Share Trust, the Noble Share Trustee on behalf of the Noble Share Trust, Noble, Noble's directors and officers and any Person who controls Noble within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Noble Share Trust and Noble to the Noble Remarketing Agent, but only with reference to information furnished in writing by or on behalf of the Noble Remarketing Agent expressly for use in a Remarketing Document or Filed Document in connection with the remarketing of the Noble Preferred Stock hereunder, or any amendment or supplement thereto. (c) If any action shall be commenced against the Noble Remarketing Agent or any Person controlling the Noble Remarketing Agent in respect of which indemnity may be sought against the Noble Share Trust and Noble, the Noble Remarketing Agent or such controlling Person shall promptly notify Noble and the Noble Share Trust, and Noble shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the indemnified party and payment of all fees and expenses of such counsel, as incurred (and in the case of any action in respect of which indemnity may be sought pursuant to both Sections 13(a) and 13(b) hereof, the Noble Remarketing Agent shall not be required to assume the defense thereof, but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the Noble Remarketing Agent's expense). The Noble Remarketing Agent or any such controlling Person shall have the right to employ separate counsel in any such action, but the fees and expenses of such counsel shall be at the expense of the Noble Remarketing Agent or such controlling Person unless (i) the employment of such counsel has been specifically authorized in writing by Noble, (ii) Noble shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party, or (iii) the named parties to any such action (including any impleaded parties) include both the Noble Remarketing Agent or such controlling Person and the Noble Share Trust or Noble, and the Noble Remarketing Agent or such controlling Person shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case Noble shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the Noble Share Trust and Noble together shall not, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for the Noble Remarketing Agent and controlling Persons, which firm shall be designated in writing by the Noble Remarketing Agent, and all such fees and expenses shall be reimbursed as they are incurred. Noble and the Noble Share Trust shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with Noble's written consent or (ii) effected without Noble's written consent if (and only if) the settlement is entered into more than twenty business days after Noble and the Noble Share Trust shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of Noble and the Noble Share Trust) and, prior to the date of such settlement, Noble and the Noble Share Trust 28 31 shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent relating to any pending or threatened action, suit or proceeding in respect of which any indemnified party is a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (ii) does not include a statement as to or an admission of fault or culpability by or on behalf of such indemnified party. (d) If the indemnification provided for in this Section 13 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Noble Share Trust and Noble on the one hand and the Noble Remarketing Agent on the other hand from the offering of the Noble Preferred Stock, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Noble Share Trust and Noble on the one hand and the Noble Remarketing Agent on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Noble Share Trust and Noble on the one hand and the Noble Remarketing Agent on the other shall, if a remarketing of the Noble Preferred Stock hereunder has occurred, be deemed to be in the same proportion as the total net proceeds from the offering of Noble Preferred Stock (after deducting underwriting discounts and commissions, but before deducting expenses) received by the Noble Share Trust bear to the total compensation received by the Noble Remarketing Agent under Section 9(a) hereof. The relative fault of the Noble Share Trust and Noble on the one hand and the Noble Remarketing Agent on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Noble Offerors on the one hand or by the Noble Remarketing Agent on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Noble Share Trust, Noble and the Noble Remarketing Agent agree that it would not be just and equitable if contribution pursuant to this Section 13 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 13, the Noble Remarketing Agent shall not be required to contribute any amount in excess of the amount by which the total sales proceeds of the Noble Preferred Stock underwritten or distributed by it exceeds the amount of any damages which the Noble 29 32 Remarketing Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnity and contribution agreements contained in this Section 13 and the representations and warranties of the Noble Share Trust and Noble set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Noble Remarketing Agent or any Person controlling the Noble Remarketing Agent, the Noble Share Trust, the Noble Share Trustee on behalf of the Noble Share Trust, Noble, Noble's directors or officers, or any Person controlling Noble, (ii) acceptance of any Noble Preferred Stock and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Noble Remarketing Agent or any Person controlling the Noble Remarketing Agent, or to the Noble Share Trust, the Noble Share Trustee on behalf of the Noble Share Trust, Noble, Noble's directors or officers, or any Person controlling Noble, shall be entitled to the benefits of the indemnity, contribution, and reimbursement agreements contained in this Section 13. (g) The remedies provided for in this Section 13 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. SECTION 14. Termination of Obligations of Noble Remarketing Agent. The obligations of the Noble Remarketing Agent shall terminate upon the removal or resignation of the Noble Remarketing Agent and the appointment of a successor Noble Remarketing Agent in accordance with the provisions of Section 10 hereof; provided that, in any such case, the rights of the Noble Remarketing Agent under Sections 9 and 13 and the obligations of the Noble Remarketing Agent under Sections 6(i) and 13 with regard to remarketing activity already carried out in accordance with the terms of this Agreement shall continue and remain in full force and effect. SECTION 15. Noble Remarketing Agent's Performance; Duty of Care; Liability. (a) The duties and obligations of the Noble Remarketing Agent shall be determined solely by the express provisions of this Agreement and the Noble Share Trust Agreement. No implied covenants or obligations of or against the Noble Remarketing Agent shall be read into this Agreement or the Noble Share Trust Agreement. In the absence of bad faith on the part of the Noble Remarketing Agent, the Noble Remarketing Agent may conclusively rely upon any document furnished to it, which purports to conform to the requirements of this Agreement or the Noble Share Trust Agreement, as to the truth of the statements expressed in any of such documents. The Noble Remarketing Agent shall be protected in acting upon any document or communication believed by it to have been signed, presented or made by the proper party or parties. The Noble Remarketing Agent shall incur no liability to any of Noble, the Noble Share Trust, AMCCO, the Series A-2 Indenture Trustee or the purchasers of Noble Preferred Stock in its individual capacity or as Noble Remarketing Agent for any action or failure to act in connection with a remarketing or otherwise, except as a 30 33 result of gross negligence, willful misconduct or willful breach of this Agreement on its part and as provided in Section 13. (b) The Noble Remarketing Agent may consult with counsel, accountants and other skilled Persons to be selected and employed by it, and it shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled Persons. The Noble Remarketing Agent shall not be required to take any action under this Agreement if the Noble Remarketing Agent shall reasonably determine or shall have been advised by counsel that such action is contrary to applicable law, rules or regulations. The Noble Remarketing Agent shall incur no liability if, by reason of any provision of any future law or regulation thereunder, the Noble Remarketing Agent shall be prevented or forbidden from doing or performing any act or thing which the terms of this Agreement provide shall or may be done or performed by it. (c) Except as otherwise provided in Section 13 hereof, the Noble Remarketing Agent shall be under no obligation to appear in, prosecute or defend any action or take, suffer or omit from taking any action under this Agreement which in its opinion may require it to incur any out-of-pocket expense or any liability, unless it shall be furnished with security and indemnity reasonably satisfactory to it against such expense or liability as it may require, and any reasonable out-of-pocket cost of the Noble Remarketing Agent as a result of such actions shall be paid by Noble. (d) The parties hereto acknowledge that any sale of the Noble Preferred Stock (and the Noble Additional Shares, if any) pursuant to this Agreement and the Distribution Agreement may be at prices and on terms less favorable to Noble than those obtainable in a public or private offering by Noble under different circumstances. Except as provided in Section 13, the Noble Remarketing Agent shall incur no liability as a result of the sale of the Noble Preferred Stock (and the Noble Additional Shares, if any), including any Partial Remarketing, made in accordance with this Agreement and the Distribution Agreement. SECTION 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE. SECTION 17. Term of Agreement. Unless otherwise terminated in accordance with the provisions hereof, this Agreement shall remain in full force and effect until the earliest to occur of the following events: (i) the Noble Preferred Stock shall have been successfully remarketed on the Rate Reset Date and a Partial Remarketing has not occurred, (ii) Noble shall have delivered the Series A-2 Repayment Amount in accordance with Section 8(h) hereof or (iii) no Series A-2 Notes shall remain outstanding. Regardless of any termination of this Agreement pursuant to any of the provisions hereof, the obligations of Noble pursuant to Section 9, the obligations of the Noble Remarketing Agent pursuant to Section 6(i) and the obligations of all parties pursuant to Section 13 hereof shall remain operative and in full force and effect until fully satisfied. 31 34 SECTION 18. Successors and Assigns. The rights and obligations of Noble hereunder may not be assigned or delegated to any other Person without the prior written consent of the Noble Remarketing Agent. The rights and obligations of the Noble Remarketing Agent hereunder may not be assigned or delegated to any other Person without the prior written consent of Noble, the Noble Share Trustee on behalf of the Noble Share Trust and AMCCO. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, and will not confer any benefit upon any other Person other than Persons, if any, controlling the Noble Remarketing Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or any Person entitled to indemnity or contribution to the extent provided in Section 13 hereof. The terms "successors" and "assigns" shall not include any purchaser of any Noble Preferred Stock merely because of such purchase. SECTION 19. Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. SECTION 20. Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any or all jurisdictions because it conflicts with any provision of any constitution, statute, rule or public policy or for any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case, circumstance or jurisdiction, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever. SECTION 21. Noble Remarketing Agent Not Acting as Underwriter. (a) It is expressly understood and agreed by all parties hereto that the Noble Remarketing Agent's only obligations hereunder are as set forth in Sections 2(b), 6(i), 8, 10, 12, 13 and 22 of this Agreement. When engaged in remarketing any Noble Preferred Stock, the Noble Remarketing Agent shall act only as agent for and on behalf of the Noble Share Trust. The Noble Remarketing Agent shall not act as underwriter for the Noble Preferred Stock (except if and to the extent otherwise agreed in the Distribution Agreement) and shall in no way be obligated to advance or use its own funds to purchase any Noble Preferred Stock (except in its individual capacity as purchaser of those Noble Preferred Stock it shall elect, in accordance with Section 11 hereof, to purchase, in its sole discretion) or to otherwise expend or risk its own funds or incur or become exposed to financial liability in the performance of its duties hereunder. (b) It is expressly understood and agreed by all parties hereto that the obligation of the Noble Remarketing Agent with respect to the New Series are limited to those set forth in Section 2(b)(i) hereof and those expressly set forth in the New Series Distribution Agreement. The Noble Remarketing Agent shall not act as underwriter for the New Series (except if and to the extent otherwise agreed in the Distribution Agreement) and shall in no way be obligated to advance or use its own funds to purchase any shares of the New Series (except in its individual capacity as purchaser of those shares of the New Series it shall elect, in accordance with Section 32 35 11 hereof, to purchase, in its sole discretion) or to otherwise expend or risk its own funds or incur or become exposed to financial liability in the performance of its duties hereunder. (c) It is expressly understood and agreed by all parties hereto that the obligation of the Noble Remarketing Agent to remarket the Noble Preferred Stock or market the New Series is undertaken on a "best-efforts" basis only (except if and to the extent otherwise agreed in the Distribution Agreement or the New Series Distribution Agreement, respectively), and the Noble Remarketing Agent shall incur no liability to any Person in connection with a failure to remarket the Noble Preferred Stock or market the New Series if the Noble Remarketing Agent has acted in accordance with the provisions of this Agreement. SECTION 22. Amendments. This Agreement may be amended by any instrument in writing signed by all of the parties hereto so long as this Agreement as amended is not inconsistent with the Noble Share Trust Agreement or the Participation Agreement in effect as of the date of any such amendment. SECTION 23. Notices. Except as otherwise expressly provided herein in any particular case, all notices, approvals, consents, requests and other communications hereunder shall be in writing and shall, if addressed as provided in the following sentence, be deemed to have been given, (i) when delivered by hand, (ii) one Business Day after being sent by a private nationally or internationally recognized overnight courier service, or (iii) when sent by telecopy, if immediately after transmission the sender's facsimile machine records in writing the correct answer back. Actual receipt at the address of an addressee, regardless of whether in compliance with the foregoing, is effective notice hereunder. Until otherwise so notified by the respective parties, all notices, approvals, consents, requests and other communications shall be addressed to the following addresses: If to Noble: Noble Affiliates, Inc. P.O. Box 1967 Ardmore, OK 73402 Attention: Treasurer Telecopier No.: 580-221-1386 Telephone No.: 580-223-4110 with a copy to: Thompson & Knight L.L.P. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Attention: Kenn W. Webb Telecopier No.: (214) 969-1751 Telephone No.: (214) 969-1700 33 36 If to AMCCO: Atlantic Methanol Capital Company c/o Maples and Calder P.O. Box 309, Ugland House South Church Street, George Town Grand Cayman, Cayman Islands Attention: Gareth Griffiths Telecopier No.: (345) 949-8080 Telephone No.: (345) 949-8066 with a copy to: Noble Affiliates, Inc. P.O. Box 1967 Ardmore, OK 73402 Attention: Treasurer Telecopier No.: 580-221-1386 Telephone No.: 580-223-4110 If to the Noble Share Trust or the Noble Share Trustee: c/o Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration Telecopier No.: 302-651-8882 Telephone No.: 302-651-1000 If to the Series A-2 Indenture Trustee: The Chase Manhattan Bank c/o Chase Bank of Texas, National Association 600 Travis Street, Suite 1150 Houston, TX 77210-4717 Attention: Corporate Trust Administration Telecopier No.: (713) 216-4100 Telephone No.: (713) 216-6686 34 37 If to the Noble Remarketing Agent: Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, NY 10172 Attention: Dominic Capolongo Telecopier No.: (212) 892-7272 Telephone No.: (212) 892-3000 with a copy to: Milbank, Tweed, Hadley & McCloy LLP 1 Chase Manhattan Plaza New York, NY 10005 Attention: Trayton M. Davis; Elizabeth A. Besio Telecopier No.: (212) 530-5219 Telephone No.: (212) 530-5000 A duplicate copy of each notice, approval, consent, request or other communication given hereunder by each of the Parties to any one of the others shall also be given to all of the others. However, failure to give notice to any Party shall not affect effectiveness of notice to Parties as to whom notice has been given in accordance with the first two sentences of this Section 23. Each of the Parties may, by notice given hereunder, designate any further or different addresses to which subsequent notices, approvals, consents, requests or other communications shall be sent or persons to whose attention the same shall be directed. SECTION 24. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute one and the same document. SECTION 25. Regarding the Series A-2 Indenture Trustee. The Series A-2 Indenture Trustee shall be afforded all of the rights, powers, immunities and indemnities set forth in the Series A-2 Indenture and the Participation Agreement as if such rights, powers, immunities and indemnities were specifically set forth herein. SECTION 26. Limitation of Liability of Noble Share Trustee. It is expressly understood and agreed by the parties hereto with respect to the Noble Share Trust that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as trustee of the Noble Share Trust, in the exercise of the powers and authority conferred and vested in it under the Noble Share Trust Agreement, respectively, (b) each of the representations, undertakings and agreements herein made on the part of the Noble Share Trust is made and intended not as personal representations, undertaking and agreements by Wilmington Trust Company but is made and intended for the purpose of binding only the Noble Share Trust, and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Noble Share Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Noble Share Trust under this Agreement or the other related documents; provided, 35 38 however, this Section shall not limit the liability expressly assumed by Wilmington Trust Company under the Noble Share Trust Agreement. [signature pages follow] 36 39 IN WITNESS WHEREOF, each of Noble, the Noble Share Trust, the Series A-2 Indenture Trustee and the Noble Remarketing Agent has caused this Agreement to be executed in its name and on its behalf by one of its duly authorized officers as of the date first above written. NOBLE AFFILIATES, INC. By -------------------------------------------------- Name: Title: NOBLE SHARE TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely in its capacity as trustee By -------------------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, not in its individual capacity, but solely as Series A-2 Indenture Trustee, solely for purposes of Sections 7, 8, 10 and 25 hereof By -------------------------------------------------- Name: Title: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By -------------------------------------------------- Name: Title: 37 40 Schedule I Certain transactions described in Section 3(e) None. 38 41 Schedule II Registration Rights described in Section 5(1) None. 39 42 Schedule III Eligible Noble Remarketing Agents Goldman Sachs & Co Morgan Stanley Dean Witter Merrill Lynch & Co Inc Salomon Smith Barney Credit Suisse First Boston JP Morgan & Co Inc Donaldson Lufkin & Jenrette Deutsche Bank Lehman Brothers Bear Stearns 40 EX-21 4 SUBSIDIARIES 1 EXHIBIT 21 TO FORM 10-K SUBSIDIARIES
State or Jurisdiction of Name Organization Ref - -------------------------------------------------------------- ------------------------ --- Samedan Oil Corporation Delaware (1) Samedan Oil of Canada, Inc. Delaware (3) Samedan of North Africa, Inc. Delaware (3) Samedan North Sea, Inc. Delaware (3) Samedan Oil of Indonesia, Inc. Delaware (3) Samedan Pipe Line Corporation Delaware (3) Samedan Royalty Corporation Delaware (3) Samedan of Tunisia, Inc. Delaware (3) Samedan, Mediterranean Sea Cayman Islands (5) Samedan, Mediterranean Sea, Inc. Delaware (3) Noble Gas Marketing, Inc. Delaware (1) Noble Gas Pipeline, Inc. Delaware (2) Noble Trading, Inc. Delaware (1) NPM, Inc. Delaware (1) Samedan International Cayman Islands (4) Samedan Transfer Sub Cayman Islands (5) Atlantic Methanol Capital Company Cayman Islands (7) Samedan Methanol Cayman Islands (8) Atlantic Methanol Associates LLC Cayman Islands (9) Atlantic Methanol Production Company LLC Cayman Islands (10) AMPCO Marketing LLC Michigan (11) AMPCO Services LLC Michigan (11) Samedan Power Cayman Islands (5) Alba Associates LLC Cayman Islands (12) Alba Plant LLC Cayman Islands (13) Energy Development Corporation New Jersey (3) Energy Development Corporation (Argentina), Inc. Delaware (6) Energy Development Corporation (China), Inc. Delaware (6) Energy Development Corporation (HIPS), Inc. Delaware (6) EDC Ecuador Ltd. Delaware (6) EDC Ecuador Limited Cayman Islands (17) EDC (Denmark) Inc. Delaware (6) EDC Australia Ltd. Delaware (6) EDC Portugal Ltd. Delaware (6) Gasdel Pipeline System Incorporated New Jersey (6) Producers Services, Inc. New Jersey (6) HGC, Inc. Delaware (6) EDC (UK) Ltd Delaware (6) EDC (Europe) Limited United Kingdom (14) Industrial Scotland Energy Ltd. United Kingdom (15) Brabant Oil Ltd. United Kingdom (15) Brabant Oilex Ltd. United Kingdom (15) Burnside Overseas Exploration Limited United Kingdom (16) (1) 100% owned by Noble Affiliates, Inc. (Registrant) (2) 100% owned by Noble Gas Marketing, Inc. (3) 100% owned by Samedan Oil Corporation (4) 100% owned by Samedan of North Africa, Inc. (5) 100% owned by Samedan International (6) 100% owned by Energy Development Corporation (7) 50% owned by Samedan North Africa, Inc. (8) 100% owned by Atlantic Methanol Capital Company (9) 50% owned by Samedan Methanol (10) 90% owned by Atlantic Methanol Associates LLC (11) 50% owned by Samedan North Africa, Inc. (12) 34.7% owned by Samedan International (13) 50% owned by Alba Associates LLC (14) 100% owned by EDC (UK) Ltd (15) 100% owned by EDC (Europe) Limited (16) 100% owned by Brabant Oil Ltd. (17) 100% owned by EDC Ecuador
EX-23 5 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated January 28, 2000, included on page 32 of the Company's 1999 Form 10-K, into the previously filed registration statements on Form S-3 (File Nos. 333-18929 and 333-82953) and on Form S-8 (File Nos. 333-39299, 2-64600, 2-81590, 33-32692, 2-66654 and 33-54084). /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Oklahoma City, Oklahoma March 13, 2000 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 2,925 0 98,794 0 5,517 147,914 2,830,793 1,588,423 1,450,351 184,471 445,319 0 0 195,231 503,796 1,450,351 548,733 909,842 0 783,276 0 0 48,935 77,631 28,170 49,461 0 0 0 49,461 .87 .86
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