Common use of Supplemental Retirement Plan Clause in Contracts

Supplemental Retirement Plan. Effective April 1, 1992, Xxxxxx adopted a supplemental pension plan, which provides supplemental retirement payments to senior executives of Xxxxxx. The amounts of such payments equals the difference 49 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14. BENEFIT PLANS -- (CONTINUED) between the amounts received under the applicable pension plan, and the amounts that would otherwise be received if pension plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by federal law. Effective December 1994, the supplemental pension plan was frozen. For 1994, the actuarial present value of the projected benefit obligation was based on weighted-average annual increase in salary levels of 2.1%. For fiscal 1996, 1995 and 1994 the discount rate was 7.5%. Net pension expense for fiscal 1996, 1995 and 1994 included the following components: 1996 1995 1994 (IN THOUSANDS) Service cost -- benefits earned during the year................. $-- $-- $ 68 Interest cost on projected benefit obligations.................. 67 67 72 Amortization of prior service cost.............................. -- -- 487 Net pension expense........................................... $67=== $67=== $627==== No contributions to the plan have been required since the plan is unfunded. The plan's funded status and amounts recognized in the Company's balance sheet at September 30, 1996 and 1995 are presented below: 1996 1995 (IN THOUSANDS) Fair value of plan assets........................................... $ -- $ -- Actuarial present value of benefit obligations: Vested benefits................................................... 943 950 Nonvested benefits................................................ -- -- Accumulated benefit obligation.................................... Additional benefits based on projected salary increases........... 943 -- 950 -- Projected benefit obligation...................................... 943 950 Excess of projected benefit obligations over plan assets............ (943) (950) Unrecognized net loss............................................... -- -- Unrecognized prior service costs.................................... -- -- Additional minimum liability........................................ -- -- Unfunded accrued liability.......................................... $(943)===== $(950)===== Qualified Defined Contribution Plan The Company sponsors a defined contribution plan, the Xxxxxx Profit Sharing Plan (the "Plan"), for certain eligible employees of the Company. Effective October 1, 1994, the Company merged a defined contribution plan of Xxxxxx Protein with and into the Plan. The Company's contributions are calculated based on employee contributions and compensation. The Company's combined contributions to these plans totaled $494,347, $673,298 and $577,903 in fiscal 1996, 1995 and 1994, respectively. NOTE 15. RELATED PARTY TRANSACTIONS In August 1995, Xxxxxx acquired 4,189,298 shares of the outstanding common stock of Envirodyne for $18.8 million from a trust controlled by Xxxxxxx Xxxxxx, Chairman of the Board of Xxxxxx and a director of Envirodyne. Xxxxxx paid the purchase price by issuing to the seller a subordinated promissory note bearing interest at prime and maturing in August 1997, subject to prepayment at the Company's option. The Company has since prepaid the promissory note. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED) During fiscal 1996, Xxxxxx and Houlihan's entered into the Houlihan's Merger Agreement. In view of Xxxxxxx X. Xxxxxx'x significant ownership of common stock of both Xxxxxx and Houlihan's, the transaction was negotiated by representatives of special committees of the respective board of directors of both Xxxxxx and Houlihan's. On October 8, 1996, Xxxxxx terminated the Houlihan's Merger Agreement pursuant to a provision of such agreement that gave either party the right to terminate the merger agreement if the Houlihan's Merger was not consummated before October 1, 1996. The termination followed a decision of the Court of the Chancery of Delaware that an 80% supermajority vote of Xxxxxx'x stockholders was required for approval of the proposed transaction. Xxxxxx recorded $2.1 million of merger expenses in connection with the proposed transaction. During fiscal 1995 and 1994, Xxxxxx made purchases totalling $10.4 million and $7.3 million from a company owned by a shareholder and former director of Xxxxxx. Xxxxxx received $7,000 and $317,000 in fiscal 1995 and 1994, respectively, from a former director of the Company for use of the Company's executive aircraft under an arrangement which provided for full recovery of expenses associated with such use. During fiscal 1995 and 1994, Xxxxxx received $24,000 and $104,000, respectively, from Norex in accordance with an administrative services arrangement pursuant to which Xxxxxx provided office space and certain administrative services to Norex. See Note 8 and Note 10 for discussions of additional transactions with Norex. NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) The following information concerning Xxxxxx'x oil and gas operations has been prepared in accordance with Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" ("SFAS No. 69"), and applicable Securities and Exchange Commission (the "SEC") regulations. In September 1994, Xxxxxx'x Board of Directors announced that the Company would immediately undertake efforts to sell its U.S. natural gas producing properties. The six properties in the Gulf of Mexico, representing Xxxxxx'x domestic oil and gas producing operations, were sold during fiscal 1995. The Company is considering the disposition of its Bolivian oil and gas operations. The information concerning capitalized costs of oil and gas properties, costs incurred in property acquisition, exploration and development, and operating results from oil and gas producing activities is taken from Xxxxxx'x accounting records with the exception of income taxes. Income tax provisions are calculated using statutory tax rates and reflect permanent differences and tax credits and allowances relating to oil and gas operations that are reflected in the Company's consolidated income tax provision for each period. The pretax income from oil and gas producing activities does not agree with the oil and gas operations operating income in the industry segment information in Note 17 due to the exclusion of certain nonoperating expenses from the information shown as required by SFAS No. 69. 51 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) CAPITALIZED COSTS OF OIL AND GAS PROPERTIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Capitalized costs Evaluated properties................................. $ -- $ 5,938 $ 5,938 Accumulated depreciation, depletion and amortization... -- (485) (485) Net capitalized costs.................................. 1995 $ --======== $ 5,453 ====== $ 5,453======== Capitalized costs Evaluated properties................................. $ -- $ 3,359 $ 3,359 Accumulated depreciation, depletion and amortization... -- (245) (245) Net capitalized costs.................................. 1994 $ --======== $ 3,114 ====== $ 3,114======== Capitalized costs Evaluated properties................................. $ 74,872 $ 2,194 $ 77,066 Accumulated depreciation, depletion and amortization... (60,794) (55) (60,849) Net capitalized costs.................................. $ 14,078======== $ 2,139 ====== $ 16,217======== COSTS INCURRED IN PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Expenditures: Development.......................................... $ -- $ 2,580 $ 2,580 ======== ====== ======== 1995 Expenditures: Acquisition of unproved properties................... $ -- $ 103 $ 103 Development.......................................... 335 1,061 1,396 Sale of proved properties............................ (11,732) -- (11,732) $(11,397) $ 1,164 $(10,233) ======== ====== ======== 1994 Expenditures: Development.......................................... $ 9,598 $ 2,194 $ 11,792 ======== ====== ======== 49 52 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Revenues............................................... $ 42 $ 2,027 $ 2,069 Production costs....................................... -- 1,080 1,080 Depreciation, depletion and amortization............... -- 240 240 Income before income taxes*............................ 42 707 749 Income taxes........................................... 14 241 255 Net income (loss)*..................................... $ 28 $ 466 $ 494 ======== ====== ======== 1995 Revenues............................................... $ 5,400 $ 2,709 $ 8,109 Production costs....................................... 3,156 1,097 4,253 Depreciation, depletion and amortization............... 2,666 190 2,856 Income before income taxes*............................ (422) 1,422 1,000 Income taxes........................................... (143) 483 340 Net income (loss)*..................................... $ (279) $ 939 $ 660 ======== ====== ======== 1994 Revenues............................................... $ 8,432 $ 4,117 $ 12,549 Production costs....................................... 5,750 518 6,268 Depreciation, depletion and amortization............... 33,715 55 33,770 Income before income taxes*............................ (31,033) 3,544 (27,489) Income taxes........................................... (10,551) 1,205 (9,346) Net income (loss)*..................................... $(20,482) $ 2,339 $(18,143) ======== ====== ======== - --------------- * Before deducting selling, general, administrative and interest expenses. Oil and gas reserves During fiscal 1995, the Company sold its U.S. oil and gas properties in the Gulf of Mexico. The following table contains estimates of proved oil and gas reserves attributable to Xxxxxx'x interest in oil and gas properties, which were prepared primarily by independent petroleum reserve engineers (Xxxxxxxxxx & Co., Inc.). Proved reserves are the estimated quantities of natural gas and liquids (crude oil and condensate) which, based on analysis of geological and engineering data, appear with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Reservoirs are considered proved if economic productivity is supported by actual production or conclusive formation testing. Proved developed reserves are reserves that can be expected to be recovered through existing xxxxx with existing equipment and operating methods. It should be stressed that these reserve quantities are estimates and may be subject to substantial upward or downward revisions as indicated by past experience. The estimates are based on the most current and reliable information available; however, additional information obtained through future production experience and additional development of existing reservoirs may significantly alter previous estimates of proved reserves. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) Future changes in the level of hydrocarbon prices relative to the costs to develop and produce reserves can also result in substantial revisions to proved reserve estimates. These estimates relate only to those reserves which meet the SEC's definition of proved reserves and do not consider probable reserves and the likelihood of their recovery which, if considered, could result in substantial increases in reported reserves. Future secondary recovery efforts could also yield additional reserves. NATURAL GAS AND LIQUIDS RESERVES UNITED STATES BOLIVIA TOTAL ---------------- --------------- ---------------- LIQUIDS GAS LIQUIDS GAS LIQUIDS GAS ----- ------- ---- ------- ----- (LIQUIDS IN MILLIONS OF BARRELS, GAS IN BILLIONS OF CUBIC FEET) Proved reserves as of September 30, 1993............................ .4 40.8 .7 22.5 1.1 63.3 Revisions of previous estimates............... .1 (2.8) .1 6.7 .2 3.9 Production.................................... (.1) (3.3) (.1) (1.9) (.2) (5.2) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1994............................ .4 34.7 .7 27.3 1.1 62.0 Revisions of previous estimates............... -- -- -- 3.9 -- 3.9 Production.................................... (.1) (3.0) -- (1.7) (.1) (4.7) Sale of reserves in place..................... (.3) (31.7) -- -- (.3) (31.7) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1995............................ -- -- .7 29.5 .7 29.5 Extensions and discoveries.................... -- -- -- 2.1 -- 2.1 Revisions of previous estimates............... -- -- -- .7 -- .7

Supplemental Retirement Plan. Effective April 1, 1992, Xxxxxx adopted a supplemental pension plan, which provides supplemental retirement payments to certain former senior executives of Xxxxxx. The amounts of such payments equals equal the difference 49 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14. BENEFIT PLANS -- (CONTINUED) between the amounts received under the applicable pension plan, plan and the amounts that would otherwise be received if pension plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by federal law. Effective December 1994, the supplemental pension plan was frozen. Components of net periodic benefit cost are as follows: YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 ------------ 2000 ------------ (IN THOUSANDS) 1999 ------------ Service cost............................................ $-- $-- $-- Interest cost........................................... 60 62 60 Amortization of prior service cost...................... Net pension benefit..................................... 10 --- $70 === 3 --- $65 === 4 --- $64 === No contributions to the plan have been required. For 19942001 and 2000, the actuarial present value of the projected benefit obligation was based on weighted-average annual increase in salary levels of 2.1%. For fiscal 1996a 6.75% and 7.5% discount rate, 1995 and 1994 the discount rate was 7.5%. Net pension expense for fiscal 1996, 1995 and 1994 included the following components: 1996 1995 1994 (IN THOUSANDS) Service cost -- benefits earned during the year................. $-- $-- $ 68 Interest cost on projected benefit obligations.................. 67 67 72 Amortization of prior service cost.............................. -- -- 487 Net pension expense........................................... $67=== $67=== $627==== No contributions to the plan have been required since the plan is unfundedrespectively. The plan's funded status and amounts recognized in the Company's balance sheet at September 30December 31, 1996 2001 and 1995 2000 are presented below: 1996 1995 YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2001 2000 (IN THOUSANDS) CHANGE IN BENEFIT OBLIGATION Benefit Obligation at beginning of year..................... $852 $876 Interest Cost............................................... 60 62 Actuarial Loss.............................................. 58 18 Benefits Paid............................................... (104) (104) Benefit Obligation at end of year........................... 866 852 CHANGE IN PLAN ASSETS Contributions............................................... 104 104 Benefits Paid............................................... (104) (104) Plan Assets at Fair value Value at end of plan assets........................................... $ -- $ -- Actuarial present value of benefit obligations: Vested benefits................................................... 943 950 Nonvested benefits................................................ year.................... -- -- Accumulated benefit obligation.................................... Additional benefits based on projected salary increases........... 943 -- 950 -- Projected benefit obligation...................................... 943 950 Excess of projected benefit obligations over plan assets............ (943) (950) Unrecognized net loss............................................... -- -- Unrecognized prior service costs.................................... -- -- Additional minimum liability........................................ -- -- Unfunded accrued liability.......................................... $(943)===== $(950)===== Qualified Defined Contribution Plan The Company sponsors a defined contribution plan, the Xxxxxx Profit Sharing Plan (the "Plan"), for certain eligible employees of the Company. Effective October 1, 1994, the Company merged a defined contribution plan of Xxxxxx Protein with and into the Plan. The Company's contributions are calculated based on employee contributions and compensation. The Company's combined contributions to these plans totaled $494,347, $673,298 and $577,903 in fiscal 1996, 1995 and 1994, respectively. NOTE 15. RELATED PARTY TRANSACTIONS In August 1995, Xxxxxx acquired 4,189,298 shares of the outstanding common stock of Envirodyne for $18.8 million from a trust controlled by Xxxxxxx Xxxxxx, Chairman of the Board of Xxxxxx and a director of Envirodyne. Xxxxxx paid the purchase price by issuing to the seller a subordinated promissory note bearing interest at prime and maturing in August 1997, subject to prepayment at the Company's option. The Company has since prepaid the promissory note. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED) During fiscal 1996YEAR ENDED YEAR ENDED DECEMBER 31, Xxxxxx and Houlihan's entered into the Houlihan's Merger Agreement. In view of Xxxxxxx X. Xxxxxx'x significant ownership of common stock of both Xxxxxx and Houlihan'sDECEMBER 31, the transaction was negotiated by representatives of special committees of the respective board of directors of both Xxxxxx and Houlihan's. On October 8, 1996, Xxxxxx terminated the Houlihan's Merger Agreement pursuant to a provision of such agreement that gave either party the right to terminate the merger agreement if the Houlihan's Merger was not consummated before October 1, 1996. The termination followed a decision of the Court of the Chancery of Delaware that an 80% supermajority vote of Xxxxxx'x stockholders was required for approval of the proposed transaction. Xxxxxx recorded $2.1 million of merger expenses in connection with the proposed transaction. During fiscal 1995 and 1994, Xxxxxx made purchases totalling $10.4 million and $7.3 million from a company owned by a shareholder and former director of Xxxxxx. Xxxxxx received $7,000 and $317,000 in fiscal 1995 and 1994, respectively, from a former director of the Company for use of the Company's executive aircraft under an arrangement which provided for full recovery of expenses associated with such use. During fiscal 1995 and 1994, Xxxxxx received $24,000 and $104,000, respectively, from Norex in accordance with an administrative services arrangement pursuant to which Xxxxxx provided office space and certain administrative services to Norex. See Note 8 and Note 10 for discussions of additional transactions with Norex. NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) The following information concerning Xxxxxx'x oil and gas operations has been prepared in accordance with Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" ("SFAS No. 69"), and applicable Securities and Exchange Commission (the "SEC") regulations. In September 1994, Xxxxxx'x Board of Directors announced that the Company would immediately undertake efforts to sell its U.S. natural gas producing properties. The six properties in the Gulf of Mexico, representing Xxxxxx'x domestic oil and gas producing operations, were sold during fiscal 1995. The Company is considering the disposition of its Bolivian oil and gas operations. The information concerning capitalized costs of oil and gas properties, costs incurred in property acquisition, exploration and development, and operating results from oil and gas producing activities is taken from Xxxxxx'x accounting records with the exception of income taxes. Income tax provisions are calculated using statutory tax rates and reflect permanent differences and tax credits and allowances relating to oil and gas operations that are reflected in the Company's consolidated income tax provision for each period. The pretax income from oil and gas producing activities does not agree with the oil and gas operations operating income in the industry segment information in Note 17 due to the exclusion of certain nonoperating expenses from the information shown as required by SFAS No. 69. 51 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) CAPITALIZED COSTS OF OIL AND GAS PROPERTIES UNITED STATES BOLIVIA TOTAL 2001 2000 (IN THOUSANDS) 1996 Capitalized costs Evaluated properties................................. $ -- $ 5,938 $ 5,938 Accumulated depreciation, depletion and amortization... -- RECONCILIATION OF ACCRUED PENSION COST AND TOTAL AMOUNT RECOGNIZED Funded Status of Plan....................................... (485866) (485852) Unrecognized Net capitalized costs.................................. 1995 $ --======== $ 5,453 ====== $ 5,453======== Capitalized costs Evaluated properties................................. $ -- $ 3,359 $ 3,359 Accumulated depreciation, depletion and amortization... -- Loss....................................... 201 153 Accrued Pension Cost........................................ (245665) (245) Net capitalized costs.................................. 1994 $ --======== $ 3,114 ====== $ 3,114======== Capitalized costs Evaluated properties................................. $ 74,872 $ 2,194 $ 77,066 Accumulated depreciation, depletion and amortization... (60,794) (55) (60,849) Net capitalized costs.................................. $ 14,078======== $ 2,139 ====== $ 16,217======== COSTS INCURRED IN PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Expenditures: Development.......................................... $ -- $ 2,580 $ 2,580 ======== ====== ======== 1995 Expenditures: Acquisition of unproved properties................... $ -- $ 103 $ 103 Development.......................................... 335 1,061 1,396 Sale of proved properties............................ (11,732) -- (11,732) $(11,397) $ 1,164 $(10,233) ======== ====== ======== 1994 Expenditures: Development.......................................... $ 9,598 $ 2,194 $ 11,792 ======== ====== ======== 49 52 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Revenues............................................... $ 42 $ 2,027 $ 2,069 Production costs....................................... -- 1,080 1,080 Depreciation, depletion and amortization............... -- 240 240 Income before income taxes*............................ 42 707 749 Income taxes........................................... 14 241 255 Net income (loss699)*..................................... $ 28 $ 466 $ 494 ======== ====== ======== 1995 Revenues............................................... $ 5,400 $ 2,709 $ 8,109 Production costs....................................... 3,156 1,097 4,253 Depreciation, depletion and amortization............... 2,666 190 2,856 Income before income taxes*............................ (422) 1,422 1,000 Income taxes........................................... (143) 483 340 Net income (loss)*..................................... $ (279) $ 939 $ 660 ======== ====== ======== 1994 Revenues............................................... $ 8,432 $ 4,117 $ 12,549 Production costs....................................... 5,750 518 6,268 Depreciation, depletion and amortization............... 33,715 55 33,770 Income before income taxes*............................ (31,033) 3,544 (27,489) Income taxes........................................... (10,551) 1,205 (9,346) Net income (loss)*..................................... $(20,482) $ 2,339 $(18,143) ======== ====== ======== - --------------- * Before deducting selling, general, administrative and interest expenses. Oil and gas reserves During fiscal 1995, the Company sold its U.S. oil and gas properties in the Gulf of Mexico. The following table contains estimates of proved oil and gas reserves attributable to Xxxxxx'x interest in oil and gas properties, which were prepared primarily by independent petroleum reserve engineers (Xxxxxxxxxx & Co., Inc.). Proved reserves are the estimated quantities of natural gas and liquids (crude oil and condensate) which, based on analysis of geological and engineering data, appear with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Reservoirs are considered proved if economic productivity is supported by actual production or conclusive formation testing. Proved developed reserves are reserves that can be expected to be recovered through existing xxxxx with existing equipment and operating methods. It should be stressed that these reserve quantities are estimates and may be subject to substantial upward or downward revisions as indicated by past experience. The estimates are based on the most current and reliable information available; however, additional information obtained through future production experience and additional development of existing reservoirs may significantly alter previous estimates of proved reserves. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) Future changes in the level of hydrocarbon prices relative to the costs to develop and produce reserves can also result in substantial revisions to proved reserve estimates. These estimates relate only to those reserves which meet the SEC's definition of proved reserves and do not consider probable reserves and the likelihood of their recovery which, if considered, could result in substantial increases in reported reserves. Future secondary recovery efforts could also yield additional reserves. NATURAL GAS AND LIQUIDS RESERVES UNITED STATES BOLIVIA TOTAL ---------------- --------------- ---------------- LIQUIDS GAS LIQUIDS GAS LIQUIDS GAS ----- ------- ---- ------- ----- (LIQUIDS IN MILLIONS OF BARRELS, GAS IN BILLIONS OF CUBIC FEET) Proved reserves as of September 30, 1993............................ .4 40.8 .7 22.5 1.1 63.3 Revisions of previous estimates............... .1 (2.8) .1 6.7 .2 3.9 Production.................................... (.1) (3.3) (.1) (1.9) (.2) (5.2) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1994............................ .4 34.7 .7 27.3 1.1 62.0 Revisions of previous estimates............... -- -- -- 3.9 -- 3.9 Production.................................... (.1) (3.0) -- (1.7) (.1) (4.7) Sale of reserves in place..................... (.3) (31.7) -- -- (.3) (31.7) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1995............................ -- -- .7 29.5 .7 29.5 Extensions and discoveries.................... -- -- -- 2.1 -- 2.1 Revisions of previous estimates............... -- -- -- .7 -- .7

Supplemental Retirement Plan. Effective April 1, 1992, Xxxxxx adopted a supplemental pension plan, which provides supplemental retirement payments to senior executives of Xxxxxx. The amounts of such payments equals the difference 49 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14. BENEFIT PLANS -- (CONTINUED) between the amounts received under the applicable pension plan, and the amounts that would otherwise be received if pension plan payments were not reduced as the result of the limitations upon compensation and benefits imposed by federal law. Effective December 1994, the supplemental pension plan was frozen. For 1994, the actuarial present value of the projected benefit obligation was based on weighted-average annual increase in salary levels of 2.1%. For fiscal 1996, 1995 and 1994 the discount rate was 7.5%. Net pension expense for fiscal 1996, 1995 and 1994 included the following components: 1996 1995 1994 (IN THOUSANDS) Service cost -- benefits earned during the year................. $-- $-- $ 68 Interest cost on projected benefit obligations.................. 67 67 72 Amortization of prior service cost.............................. -- -- 487 Net pension expense........................................... $67=== 67 $67=== 67 $627==== 627 === === ==== No contributions to the plan have been required since the plan is unfunded. The plan's funded status and amounts recognized in the Company's balance sheet at September 30, 1996 and 1995 are presented below: 1996 1995 (IN THOUSANDS) Fair value of plan assets........................................... $ -- $ -- Actuarial present value of benefit obligations: Vested benefits................................................... 943 950 Nonvested benefits................................................ -- -- Accumulated benefit obligation.................................... Additional benefits based on projected salary increases........... 943 -- 950 -- Projected benefit obligation...................................... 943 950 Excess of projected benefit obligations over plan assets............ (943) (950) Unrecognized net loss............................................... (943) -- (950) -- Unrecognized prior service costs.................................... -- -- Additional minimum liability........................................ -- -- Unfunded accrued liability.......................................... $(943)===== 943) $(950)===== 950) ===== ===== Qualified Defined Contribution Plan The Company sponsors a defined contribution plan, the Xxxxxx Profit Sharing Plan (the "Plan"), for certain eligible employees of the Company. Effective October 1, 1994, the Company merged a defined contribution plan of Xxxxxx Protein with and into the Plan. The Company's contributions are calculated based on employee contributions and compensation. The Company's combined contributions to these plans totaled $494,347, $673,298 and $577,903 in fiscal 1996, 1995 and 1994, respectively. NOTE 15. RELATED PARTY TRANSACTIONS In August 1995, Xxxxxx acquired 4,189,298 shares of the outstanding common stock of Envirodyne for $18.8 million from a trust controlled by Xxxxxxx Xxxxxx, Chairman of the Board of Xxxxxx and a director of Envirodyne. Xxxxxx paid the purchase price by issuing to the seller a subordinated promissory note bearing interest at prime and maturing in August 1997, subject to prepayment at the Company's option. The Company has since prepaid the promissory note. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. RELATED PARTY TRANSACTIONS -- (CONTINUED) During fiscal 1996, Xxxxxx and Houlihan's entered into the Houlihan's Merger Agreement. In view of Xxxxxxx X. Xxxxxx'x significant ownership of common stock of both Xxxxxx and Houlihan's, the transaction was negotiated by representatives of special committees of the respective board of directors of both Xxxxxx and Houlihan's. On October 8, 1996, Xxxxxx terminated the Houlihan's Merger Agreement pursuant to a provision of such agreement that gave either party the right to terminate the merger agreement if the Houlihan's Merger was not consummated before October 1, 1996. The termination followed a decision of the Court of the Chancery of Delaware that an 80% supermajority vote of Xxxxxx'x stockholders was required for approval of the proposed transaction. Xxxxxx recorded $2.1 million of merger expenses in connection with the proposed transaction. During fiscal 1995 and 1994, Xxxxxx made purchases totalling $10.4 million and $7.3 million from a company owned by a shareholder and former director of Xxxxxx. Xxxxxx received $7,000 and $317,000 in fiscal 1995 and 1994, respectively, from a former director of the Company for use of the Company's executive aircraft under an arrangement which provided for full recovery of expenses associated with such use. During fiscal 1995 and 1994, Xxxxxx received $24,000 and $104,000, respectively, from Norex in accordance with an administrative services arrangement pursuant to which Xxxxxx provided office space and certain administrative services to Norex. See Note 8 and Note 10 for discussions of additional transactions with Norex. NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) The following information concerning Xxxxxx'x oil and gas operations has been prepared in accordance with Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities" ("SFAS No. 69"), and applicable Securities and Exchange Commission (the "SEC") regulations. In September 1994, Xxxxxx'x Board of Directors announced that the Company would immediately undertake efforts to sell its U.S. natural gas producing properties. The six properties in the Gulf of Mexico, representing Xxxxxx'x domestic oil and gas producing operations, were sold during fiscal 1995. The Company is considering the disposition of its Bolivian oil and gas operations. The information concerning capitalized costs of oil and gas properties, costs incurred in property acquisition, exploration and development, and operating results from oil and gas producing activities is taken from Xxxxxx'x accounting records with the exception of income taxes. Income tax provisions are calculated using statutory tax rates and reflect permanent differences and tax credits and allowances relating to oil and gas operations that are reflected in the Company's consolidated income tax provision for each period. The pretax income from oil and gas producing activities does not agree with the oil and gas operations operating income in the industry segment information in Note 17 due to the exclusion of certain nonoperating expenses from the information shown as required by SFAS No. 69. 51 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) CAPITALIZED COSTS OF OIL AND GAS PROPERTIES UNITED STATES BOLIVIA TOTAL (IN BOLIVIA THOUSANDS) TOTAL 1996 Capitalized costs Evaluated properties................................. $ -- $ 5,938 $ 5,938 Accumulated depreciation, depletion and amortization... -- (485) (485) Net capitalized costs.................................. 1995 $ --======== $ 5,453 ====== $ 5,453======== Capitalized costs Evaluated properties................................. $ -- $ 3,359 $ 3,359 Accumulated depreciation, depletion and amortization... -- (245) (245) Net capitalized costs.................................. 1994 $ --======== $ 3,114 ====== $ 3,114======== Capitalized costs Evaluated properties................................. $ 74,872 $ 2,194 $ 77,066 Accumulated depreciation, depletion and amortization... (60,794) (55) (60,849) Net capitalized costs.................................. $ 14,078======== $ 2,139 ====== $ 16,217======== COSTS INCURRED IN PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Expenditures: Development.......................................... $ -- $ 2,580 $ 2,580 ======== ====== ======== 1995 Expenditures: Acquisition of unproved properties................... $ -- $ 103 $ 103 Development.......................................... 335 1,061 1,396 Sale of proved properties............................ (11,732) -- (11,732) $(11,397) $ 1,164 $(10,233) ======== ====== ======== 1994 Expenditures: Development.......................................... $ 9,598 $ 2,194 $ 11,792 ======== ====== ======== 49 52 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES UNITED STATES BOLIVIA TOTAL (IN THOUSANDS) 1996 Revenues............................................... $ 42 $ 2,027 $ 2,069 Production costs....................................... -- 1,080 1,080 Depreciation, depletion and amortization............... -- 240 240 Income before income taxes*............................ 42 707 749 Income taxes........................................... 14 241 255 Net income (loss)*..................................... $ 28 $ 466 $ 494 ======== ====== ======== 1995 Revenues............................................... $ 5,400 $ 2,709 $ 8,109 Production costs....................................... 3,156 1,097 4,253 Depreciation, depletion and amortization............... 2,666 190 2,856 Income before income taxes*............................ (422) 1,422 1,000 Income taxes........................................... (143) 483 340 Net income (loss)*..................................... $ (279) $ 939 $ 660 ======== ====== ======== 1994 Revenues............................................... $ 8,432 $ 4,117 $ 12,549 Production costs....................................... 5,750 518 6,268 Depreciation, depletion and amortization............... 33,715 55 33,770 Income before income taxes*............................ (31,033) 3,544 (27,489) Income taxes........................................... (10,551) 1,205 (9,346) Net income (loss)*..................................... $(20,482) $ 2,339 $(18,143) ======== ====== ======== - --------------- * Before deducting selling, general, administrative and interest expenses. Oil and gas reserves During fiscal 1995, the Company sold its U.S. oil and gas properties in the Gulf of Mexico. The following table contains estimates of proved oil and gas reserves attributable to Xxxxxx'x interest in oil and gas properties, which were prepared primarily by independent petroleum reserve engineers (Xxxxxxxxxx & Co., Inc.). Proved reserves are the estimated quantities of natural gas and liquids (crude oil and condensate) which, based on analysis of geological and engineering data, appear with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Reservoirs are considered proved if economic productivity is supported by actual production or conclusive formation testing. Proved developed reserves are reserves that can be expected to be recovered through existing xxxxx with existing equipment and operating methods. It should be stressed that these reserve quantities are estimates and may be subject to substantial upward or downward revisions as indicated by past experience. The estimates are based on the most current and reliable information available; however, additional information obtained through future production experience and additional development of existing reservoirs may significantly alter previous estimates of proved reserves. 50 XXXXXX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 16. OIL AND GAS OPERATIONS (UNAUDITED) -- (CONTINUED) Future changes in the level of hydrocarbon prices relative to the costs to develop and produce reserves can also result in substantial revisions to proved reserve estimates. These estimates relate only to those reserves which meet the SEC's definition of proved reserves and do not consider probable reserves and the likelihood of their recovery which, if considered, could result in substantial increases in reported reserves. Future secondary recovery efforts could also yield additional reserves. NATURAL GAS AND LIQUIDS RESERVES UNITED STATES BOLIVIA TOTAL ---------------- --------------- ---------------- LIQUIDS GAS LIQUIDS GAS LIQUIDS GAS ----- ------- ---- ------- ----- (LIQUIDS IN MILLIONS OF BARRELS, GAS IN BILLIONS OF CUBIC FEET) Proved reserves as of September 30, 1993............................ .4 40.8 .7 22.5 1.1 63.3 Revisions of previous estimates............... .1 (2.8) .1 6.7 .2 3.9 Production.................................... (.1) (3.3) (.1) (1.9) (.2) (5.2) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1994............................ .4 34.7 .7 27.3 1.1 62.0 Revisions of previous estimates............... -- -- -- 3.9 -- 3.9 Production.................................... (.1) (3.0) -- (1.7) (.1) (4.7) Sale of reserves in place..................... (.3) (31.7) -- -- (.3) (31.7) Proved reserves as of --- ----- --- ---- --- ----- September 30, 1995............................ -- -- .7 29.5 .7 29.5 Extensions and discoveries.................... -- -- -- 2.1 -- 2.1 Revisions of previous estimates............... -- -- -- .7 -- .7