<PAGE>
As filed with the Securities and Exchange Commission on October 20, 1999
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_________________
PATINA OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2629477
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1625 Broadway, Denver, Colorado 80202
Telephone No. (303) 389-3600
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
_________________
David J. Kornder
1625 Broadway
Denver, Colorado 80202
(303) 389-3600
(Name, address, including zip code and telephone number, including area code, of
agent for service)
_________________
PLEASE SEND COPIES OF COMMUNICATIONS TO:
MICHAEL D. WORTLEY, ESQ.
Vinson & Elkins L.L.P.
3700 Trammel Crow Center, 2001 Ross Avenue
Dallas, Texas 75201-2975
(214) 220-7700
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, please check the following box.
[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
_________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Amount of
Title of each class of securities Proposed maximum Proposed maximum registration
to be registered Amount to be registered offering price per share aggregate offering price/(1)/ fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock..................... 230,000 $8.875 $ 2,041,250
Preferred Stock.................. 1,818,511 $ /(2)/ $42,472,147 $12,375
Common Stock to allow
Conversion of Preferred Stock.... 4,785,594 $ N/A $ N/A
==================================================================================================================================
</TABLE>
(1) We have estimated the proposed maximum aggregate offering price solely to
calculate the registration fee under Rule 457(c) of the Securities Act, for
the Common Stock owned by the Selling Stockholders, and 457(i) of the
Securities Act, for the Preferred Stock owned by the Selling Stockholders
and the Common Stock into which the Preferred Stock may be converted.
(2) Pursuant to Rule 457(a), we have calculated a bona fide estimate of the
maximum offering price for our 8.50% preferred stock based on the current
market price of our common stock of $8.875 per share times the conversion
factor for our 8.50% preferred stock of 2.6316 common shares for each share
of preferred.
We hereby amend this registration statement on such date or dates as
may be necessary to delay its effective date until we file a further amendment
specifically stating that this registration statement is effective in accordance
with Section 8(a) of the Securities Act. Otherwise, this registration statement
becomes effective on the date the Securities and Exchange Commission, acting
pursuant to said Section 8(a), determines.
===============================================================================
Subject to Completion, Dated October 20, 1999
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy them be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
================================================================================
PROSPECTUS
[LOGO]
Common Stock
Preferred Stock
PATINA OIL & GAS CORPORATION
_________________________
We are a publicly traded, independent energy company that acquires,
develops and produces oil and natural gas primarily in the Wattenberg Field of
Colorado's Denver-Julesburg Basin.
This prospectus provides you with a general discussion of our company, our
common stock and our 8.50% preferred stock that may be offered by the selling
stockholders (see "Selling Stockholders" on page 6 of this prospectus). If
required by law, we will provide you a prospectus supplement that will contain
specific information about the terms of a particular offering under this
prospectus. We will not receive any of the proceeds from the sale of our common
stock or 8.50% preferred stock by the selling stockholders. The holders of our
8.50% preferred stock being offered hereby may convert all or a portion of their
preferred shares into common shares prior to any sale under this prospectus.
We currently have 16,060,402 shares of our common stock, 1,247,301 shares
of our 7.125% preferred stock and 1,818,511 shares of our 8.50% preferred stock
outstanding. Our common stock trades on the New York Stock Exchange under the
symbol "POG." Our 7.125% preferred stock trades on the New York Stock Exchange
under the symbol "POGPr." Our 8.50% preferred stock was privately placed and
does not publicly trade. Our $12.50 warrants also trade on the New York Stock
Exchange under the symbol "POGWT."
_________________________
You should read this prospectus and any supplement to this prospectus
carefully before you invest. In particular, read the section of this prospectus
entitled "Risk Factors" on pages 3-5 to understand the risks that may be
associated with the purchase of our securities. You should also read the
documents we have referred you to in the "Where You Can Find More Information"
section of this prospectus for information about us and to find our financial
statements. Together, these documents will provide you with the specific terms
of the offerings.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities. This means that neither the SEC nor any state
securities commission has passed upon the accuracy, adequacy or completeness of
this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is October 20, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
ABOUT THIS PROSPECTUS............................................................ 1
WHERE YOU CAN FIND MORE INFORMATION.............................................. 1
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS........................ 1
OUR COMPANY AND OUR BUSINESS..................................................... 2
RISK FACTORS..................................................................... 3
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS........ 5
DESCRIPTION OF COMMON STOCK...................................................... 5
DESCRIPTION OF PREFERRED STOCK................................................... 5
SELLING STOCKHOLDERS............................................................. 6
USE OF PROCEEDS.................................................................. 6
PLAN OF DISTRIBUTION............................................................. 7
LEGAL MATTERS.................................................................... 7
EXPERTS.......................................................................... 7
</TABLE>
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement (No. 333- ) that we
filed with the SEC using a "shelf" registration process. Under this shelf
process, the selling stockholders may offer from time to time any combination of
the securities described in this prospectus up to the amount listed on the cover
page of our registration statement. If required by law, when the selling
stockholders offer our securities we will provide you with a prospectus
supplement that will describe, among other things, the specific amounts and
prices of the securities being offered and the terms of the offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. Therefore, before you invest in our securities, you should read
this prospectus, any prospectus supplements and all additional information
referenced in the next section.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with
the SEC. You may read and copy any document we file at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's public reference rooms in New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on their public reference rooms. In addition, the SEC maintains a
web site at http:\\www.sec.gov that contains reports, information statements and
other information regarding issuers that file electronically. Our SEC filings
are also available on this web site.
The SEC allows us to incorporate by reference information we file with it
into this prospectus. This procedure means that we can disclose important
information to you by referring you to documents on file or to be filed with the
SEC. The information we incorporate by reference is part of this prospectus, and
later information that we file with the SEC, will automatically update and
supersede this information. Therefore, before you decide to invest in a
particular offering under this shelf registration, you should always check for
SEC reports we may have filed after the date of this prospectus. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") until all offerings under this shelf registration are
completed:
. Annual Report on Form 10-K for the year ended December 31, 1998;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999;
. The description of our common stock, our 7.125% preferred stock and our
$12.50 warrants set forth in the Patina Oil & Gas Corporation and Gerrity
Oil & Gas Corporation Proxy Statement/Prospectus dated April 2, 1996; and
. The description of our 8.50% preferred stock set forth in the Patina Oil &
Gas Corporation Proxy Statement dated September 19, 1997.
You may request a copy of these filings at no cost, by making written or
telephone requests for such copies to:
David J. Kornder
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Telephone: (303) 389-3600
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with any information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of each document.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains statements that constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. In general, any statement other than a statement of
historical fact is a forward looking statement. These statements appear in a
number of places in this prospectus and include statements regarding our plans,
beliefs and expectations with respect to, among other things:
. Estimates of oil and natural gas reserves and future production;
. Future acquisitions;
. Future oil and natural gas prices;
. Expected future development and operating costs;
1
<PAGE>
. Future capital expenditures;
. Trends affecting our future financial condition or results of operation;
and
. Our business strategy regarding future operations.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may differ
materially from anticipated results for a number of reasons, including:
. Industry conditions;
. Future demand for oil and natural gas;
. Economic, political and administrative developments that impact federal,
state and local departments and agencies that regulate the oil and natural
gas industry;
. Competitive developments in the oil and gas industry;
. Conditions of the capital markets;
. Our ability to successfully acquire and efficiently integrate new
properties into our exploration and development activities; and
. Our ability to successfully implement our Year 2000 readiness program.
The information we set forth under the heading "Risk Factors" details these
and other facts that could affect our operating results. You should carefully
consider all this information before you invest.
OUR COMPANY AND OUR BUSINESS
We are an independent energy company that acquires, develops, exploits and
produces oil and natural gas primarily in the Wattenberg Field ("Wattenberg" or
the "Field") of Colorado's Denver-Julesburg Basin. We were formed in May 1996 to
hold the Wattenberg assets of Snyder Oil Corporation ("SOCO") and facilitate the
acquisition of Gerrity Oil & Gas Corporation in May 1996, which owned other
Wattenberg assets. At that time, SOCO owned 70% of our 20.0 million common
shares. In October 1997, SOCO sold 10.9 million common shares of its Patina
common stock and then we repurchased the remaining 3.0 million of our common
shares owned by SOCO. We financed this transaction through the issuance of $40.0
million of 8.50% convertible preferred stock and the issuance of 160,000 of our
common shares to certain institutional investors.
We are one of the largest producers in the Wattenberg Field and currently
account for over 30% of the Field's total production. The Wattenberg Field,
discovered in the early 1970's, is located approximately 35 miles northeast of
Denver. It stretches over portions of Adams, Boulder and Weld counties in
Colorado. As of December 31, 1998, we had $351.5 million in assets and interests
in 3,600 wells with net proved reserves of 372 billion cubic feet of gas
equivalent having an estimated pre-tax present value of $225.1 million based on
unescalated year-end prices. Approximately 77% of these reserves were natural
gas and 95% of the reserve value was attributed to proved developed reserves.
Our average daily production during 1998 consisted of 4,654 barrels of oil and
69,923 Mcfs of gas, or 97.8 Mmcfe per day on an equivalent basis.
We believe our sizeable asset base and cash flow, along with our low
production costs and efficient operating structure, provide us with a
competitive advantage in Wattenberg and other analogous basins. We believe that
our operational economies of scale and solid financial condition, combined with
our management team's acquisition experience, positions us to increase our
reserves, production and cash flow in a cost-efficient manner through:
. Further development and exploitation of our Wattenberg properties;
. Selectively pursuing consolidation and acquisition opportunities; and
. The generation of drilling prospects with the potential to add significant
reserves and production.
Our executive offices and operating headquarters are located at 1625
Broadway, Denver, Colorado 80202 and our telephone number is (303) 389-3600.
2
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider and evaluate all of the information relating to risk factors
set forth below.
Demand for Our Oil and Natural Gas from Our Customer Base
We sell our oil and natural gas production to end-users, marketers and
refiners and other similarly situated purchasers that have access to natural gas
pipeline facilities near our properties or the ability to truck oil to local
refineries or pipeline delivery points. The demand for oil and natural gas
production and our ability to market it to our customers may be affected by a
number of factors that are beyond our control and that we cannot accurately
predict at this time. These factors include:
. The performance of the U.S. and world economies;
. Retail customers demand for oil and natural gas;
. The competitive position of alternative energy sources;
. The price of our oil and natural gas production as compared to that for
similar product grades from other producing basins;
. The availability of pipeline and other transportation facilities that may
make oil and natural gas production from other producing areas competitive
for our customers to use; and
. Our ability to maintain and increase our current level of production over
the long term.
Fluctuations in Profitability of the Oil and Natural Gas Industry
The oil and natural gas industry is highly cyclical and historically has
experienced severe downturns characterized by oversupply and weak demand. Many
factors affect our industry, including general economic conditions, consumer
preferences, personal discretionary spending levels, interest rates and the
availability of credit and capital to pursue new production opportunities. We
cannot guarantee that our industry will not experience sustained periods of
decline in the future. Any such decline could have a material adverse affect on
our business.
Competition for the Acquisition of New Properties
The oil and natural gas industry is very competitive. Other exploration and
production companies compete with us for the acquisition of new properties.
Among them are some of the largest oil companies in the United States and other
substantial independent oil and natural gas companies. Many of these companies
have greater financial and other resources than we do. Our ability to increase
our reserves in the future will depend upon our ability to select and acquire
suitable oil and gas properties in this competitive environment.
Operating Risks of Oil and Natural Gas Operations
The oil and natural gas business involves certain operating hazards such as
well blowouts, cratering, explosions, uncontrollable flows of oil, natural gas
or well fluids, fires, formations with abnormal pressures, pollution, releases
of toxic gas and other environmental hazards and risks. As customary with
industry practice, we maintain insurance against some, but not all, of these
hazards and risks. The occurrence of such an event or events not fully covered
by insurance could have a material adverse affect on our business.
The Effect of Regulation
Our business is heavily regulated by federal, state and local agencies.
This regulation increases our cost of doing business, decreases our flexibility
to respond to changes in the market and lengthens the time it may take for us to
gain approval of and complete capital projects. We may be subject to substantial
penalties if we fail to comply with any regulation. In particular, the Colorado
Oil & Gas Conservation Commission has promulgated regulations to protect ground
water, conserve soil, provide for site reclamation, ensure setbacks in urban
areas, generally promote safety concerns and mandate financial assurance for
companies in the industry. To date, these rules and regulations have not
adversely affected us. We continue to take an active role in the development of
rules and regulations that directly impact our operations. However, we cannot
assure you that regulatory changes enacted by the Colorado Oil & Gas
Conservation Commission or other regulatory agencies that have jurisdiction over
us will not increase our operating costs or otherwise negatively impact the
results of our operations.
3
<PAGE>
The Potential for Environmental Liabilities
We are subject to numerous laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental
protection. We currently own or lease numerous properties that have been used
for many years for oil and natural gas production. Although we believe that we
and previous owners used operating and disposal practices that were standard in
the industry at the time, hydrocarbons and other waste products may have been
disposed of or released on or under the properties owned or leased by us. In
connection with our most significant acquisitions, we have conducted
environmental assessments and have found no instances of material environmental
non-compliance or any material clean-up liabilities requiring action in the near
future. However, we have not performed such environmental assessments on all of
our properties. As to all of our properties, we cannot assure you that past
disposal practices, including those that were state-of-the-art at the time
employed, will not result in significant future environmental liabilities. In
addition, we cannot assure you that in the future regulatory agencies with
jurisdiction over us will not enact additional environmental regulations that
will negatively affect properties we currently own or acquire in the future.
We also operate exploration and production waste management facilities that
enable us to treat, bioremediate and otherwise dispose of tank sludge and
contaminated soil generated from our operations. We cannot assure you that these
facilities or other commercial disposal facilities operated by third parties
that we have used from time to time will not in the future give rise to
environmental liabilities for which we will be responsible. The trend toward
stricter standards in environmental regulation could have a significant adverse
impact on our operating costs as well as our industry in general.
Hedging of Oil and Natural Gas Prices
From time to time, we hedge a portion of our oil and natural gas production
using a variety of instruments, including fixed price swaps and options and
exchange-traded futures contracts and options thereon. These activities, while
intended to reduce our sensitivity to changes in market prices of oil and
natural gas, are subject to a number of risks including (i) our production is
less than we expected; (ii) there is a widening of price differentials between
delivery points required by fixed price delivery contracts, to the extent they
differ from those points we typically deliver our production; or (iii) our
customers or the counterparties fail to purchase or deliver the contracted
quantities of oil or natural gas. Also, fixed price sales and hedging contracts
limit the benefits we will realize if actual prices rise above the hedging
contract prices.
Short Length of Our Operating History and Reliance on Key Personnel
As discussed above, we were formed in 1996. We do not have a long track
record of operation as an independent company. We believe we have in place
efficient and effective management controls. Particularly in light of our short
operating history, we cannot provide you with any assurance that our success
will continue over the long term.
By industry standards, we are a small, independent company. We depend to a
large extent on the abilities and continued efforts of our executive officers
and senior management. We believe we have in place a strong management team
that is committed to us over the long term. However, we cannot assure you that
the departure of one or more of our key personnel would not adversely affect our
business.
Year 2000
Year 2000 issues result from the inability of computer programs or
computerized equipment to accurately calculate, store or use date sensitive
information. The Year 2000 problem arises because computers and embedded chips
in other devices use two digit rather than four digit codes. Therefore, computer
devices may interpret "00" as 1900 rather than 2000. This error could result in
a system failure or miscalculations causing disruptions in operations, including
among other things, the failure of our operations and production equipment and
interference with our ability to market our oil and natural gas.
We have recognized the need to ensure that our internal computer systems
and equipment relying on embedded chips are not adversely impacted by the Year
2000 problem. We have taken steps to identify potential areas of risk and have
begun addressing these in our planning and daily operations. The total costs
incurred to date in the assessment, evaluation and remediation of the Year 2000
compliance matters have been nominal and we estimate that total future third
party, software and equipment costs, based upon information developed to date,
will be less than $100,000. In connection with acquisitions of future
properties, we may need to review and address those properties' Year 2000
readiness.
We are currently reviewing the potential adverse impact on us of the
failure of our third party service providers or vendors to address their Year
2000 issues through written inquiries. While we do not believe that any one
third party service provider or vendor's failure to become Year 2000 compliant
would have a material adverse affect on our business, in the aggregate the Year
2000 problem could materially and adversely affect our business because we are
dependent on our third party service providers and vendors
4
<PAGE>
for the successful operation of our business. Although we have no reason to
believe that our third party service providers and vendors will not be Year 2000
ready, at this time we have not obtained written assurance from all of our
significant third parties that their systems are Year 2000 compliant. If the
follow-up assessment of any significant third party responses indicates that
they will not be Year 2000 compliant, we may find it necessary to develop
contingency plans to minimize disruption of our business.
Although we currently anticipate that minimal business disruption will
occur as a result of Year 2000 issues, in the event our computer based programs
and embedded technology equipment, or that owned and operated by third parties,
should fail to function properly, possible consequences include, but are not
limited to, loss of communication links, inability to produce and transport oil
and natural gas, loss of electric power and the inability to engage in normal
automated or computerized activities.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31,
-------------------------------------------------------------------------------
6/30/99/(a)/ 1998/(a)/ 1997/(a)/ 1996 1995/(a)/ 1994
--------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
combined fixed charges
and preferred stock
dividends................. 0.61 0.43 (0.05) 1.08 0.40 2.17
</TABLE>
_______________________________
(a) The ratio indicates a less than one-to-one coverage because the earnings
were inadequate to cover the fixed charges for the period. Our historical
earnings for the years ended December 31, 1995, 1997 and 1998 and the six
months ended June 30, 1999 were insufficient to cover our fixed charges.
The amounts of the deficiencies were $3.2 million, $20.2 million, $10.9
million and $3.6 million, respectively, for the ratio of earnings to
combined fixed charges and preferred stock dividends.
__________
For an explanation of the computation of these ratios, please see Exhibit
12.1 attached to this prospectus.
DESCRIPTION OF COMMON STOCK
For a full description of our common stock, please see the documents
identified in the section "Where You Can Find More Information" in this
registration statement. As of the date of this prospectus, we are authorized to
issue up to 100,000,000 shares of our common stock. As of October 20, 1999, we
had 16,060,402 shares of common stock issued and had reserved an additional
14,927,000 shares of common stock for issuance under our various stock and
compensation incentive plans, upon conversion of our 7.125% preferred stock and
8.50% preferred stock and exercise of our $12.50 warrants. Each share of common
stock is entitled to one vote in the election of directors and other matters.
DESCRIPTION OF PREFERRED STOCK
For a full description of our 8.50% preferred stock, please see the
documents identified in the section "Where You Can Find More Information" in
this registration statement. Our 8.50% preferred stock is subject to certain
transfer restrictions as set forth in the Stock Purchase Agreement among Patina
Oil & Gas Corporation and certain Investors dated July 31, 1997, attached as
Exhibit 4.1 to the registration statement and incorporated into this prospectus.
As of the date of this prospectus, we are authorized to issue up to 5,000,000
shares of our preferred stock. As of October 20, 1999, we had issued and
outstanding 1,247,301 shares of our 7.125% preferred stock and 1,818,511 shares
of our 8.50% preferred stock. Our 7.125% preferred stock is convertible into
common stock at $8.61 per share, or 2.9036 common shares while the 8.50%
preferred stock is convertible into common stock at $9.50 per share, or 2.6316
common shares. Each preferred issue has a $25.00 per share liquidation
preference, plus accrued and unpaid dividends. The holders of the 7.125%
preferred stock are not generally entitled to vote, while holders of the 8.50%
preferred stock are entitled to vote together with the common stock as a single
class, based upon the number of shares of common stock into which the shares of
the 8.50% preferred stock are convertible.
5
<PAGE>
SELLING STOCKHOLDERS
On July 31, 1997, we entered into a stock purchase agreement with certain
investors. Pursuant to that agreement, as amended, we sold those investors
1,600,000 shares of our 8.50% preferred stock and 160,000 shares of our common
stock. In addition, the investors purchased 70,000 shares of common stock from
SOCO. The increase in the number of 8.50% preferred shares to 1,818,511 was due
to the Pay-In-Kind ("PIK") feature with respect to the quarterly dividend. The
PIK dividend extended through October 17, 1999, and converted to a cash dividend
thereafter. In the stock purchase agreement, we gave those investors the right
to demand that we register the securities they acquired from SOCO or us. These
investors are identified as selling stockholders in this registration statement.
The table below sets forth the following information with respect to each
selling stockholder: (1) the number of shares of common stock or 8.50%
preferred stock and the percentage of the outstanding shares of each class of
securities owned of record; (2) the number of shares of common stock and/or
8.50% preferred stock being offered hereby; and (3) the number of shares of
common stock and/or 8.50% preferred stock to be owned of record upon completion
of the offerings under this registration statement.
<TABLE>
<CAPTION>
Common
Stock
Relationship Owned % of Common Stock Common Stock
To Us, Prior to Class of Shares to be Owned After the
Name If Any the Offering Stock Sold Offering
- ----------------------------------------- -------------- ----------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
First Reserve Fund VII, Limited
Partnership Director 118,651 * 118,651 ---
Chase Venture Capital Associates, L.P. Director 82,143 * 82,143 ---
Highbridge International LDC --- 17,341 * 17,341 ---
Bedford Falls Investors, LP --- 9,127 * 9,127 ---
Anthony V. Dub --- 1,460 * 1,460 ---
Allen Finkelson --- 365 * 365 ---
William P. Nicoletti --- 365 * 365 ---
Irik P. Sevin --- 365 * 365 ---
Peter Seaman --- 183 * 183 ---
------- -------
Total 230,000 * 230,000
</TABLE>
<TABLE>
<CAPTION>
8.50%
Preferred Underlying
Stock % of Common 8.50% Underlying
Relationship Owned Prior Class Stock Preferred Common
To Us, to the of As Stock Stock
Name If Any Offering Stock Converted to be Sold to be Sold
- ----------------------------------------- -------------- -------------- -------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
First Reserve Fund VII, Limited
Partnership Director 976,903 53.7 2,570,818 976,903 2,570,818
Chase Venture Capital Associates, L.P. Director 676,317 37.2 1,779,796 676,317 1,779,796
Highbridge International LDC --- 142,774 7.9 375,724 142,774 375,724
Anthony V. Dub --- 12,018 * 31,626 12,018 31,626
Allen Finkelson --- 3,000 * 7,895 3,000 7,895
William P. Nicoletti --- 3,000 * 7,895 3,000 7,895
Irik P. Sevin --- 3,000 * 7,895 3,000 7,895
Peter Seaman --- 1,499 * 3,945 1,499 3,945
--------- -------- --------- --------- ---------
Total 1,818,511 100.0 4,785,594 1,818,511 4,785,594
</TABLE>
*Less than 1%.
USE OF PROCEEDS
All net proceeds from the sale of the shares of our securities covered by
this shelf registration will go to the selling stockholders.
6
<PAGE>
PLAN OF DISTRIBUTION
Under this prospectus, the selling stockholders intend to offer our
securities to the public:
. Through one or more broker-dealers acting as either principal or
agent;
. Through underwriters; or
. Directly to investors.
The selling stockholders will fix a price or prices, and they may change
the price, of the securities offered from time to time at:
. Market prices prevailing at the time of any sale under this shelf
registration statement;
. Prices related to such market prices; or
. Negotiated prices.
The selling stockholders will pay or allow distributors' or sellers'
commissions that will not exceed those customary in the types of transactions
involved. Broker-dealers may act as agent or may purchase securities as
principal and thereafter resell such securities from time to time:
. In or through one or more transactions (which may involve crosses and
block transactions) or distributions;
. On the New York Stock Exchange;
. In the over-the-counter market; or
. In private transactions.
Broker-dealers or underwriters may receive compensation in the form of
underwriting discounts or commissions and may receive commissions from
purchasers of the securities for whom they may act as agents. If any broker-
dealer purchases the securities as principal, it may effect resales of the
securities from time to time to or through other broker-dealers, and other
broker-dealers may receive compensation in the form of concessions or
commissions from the purchasers of securities for whom they may act as agents.
To the extent required, the names of the specific managing underwriter
or underwriters, if any, as well as other important information, will be set
forth in prospectus supplements. In such event, the discounts and commissions we
will allow or pay to the underwriters, if any, and the discounts and commissions
the underwriters may allow or pay to dealers or agents, if any, will be set
forth in, or may be calculated from, the prospectus supplements.
Any underwriters, brokers, dealers and agents who participate in any
sale of the securities may also engage in transactions with, or perform services
for, us or our affiliates in the ordinary course of their businesses.
In connection with offerings under this shelf registration,
underwriters, brokers or dealers may over-allot or effect transactions that
stabilize or maintain the market place of the securities at levels above those
which might otherwise prevail in the open market. Such transactions may be
effected on the New York Stock Exchange, in the over-the-counter market or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
Vinson & Elkins L.L.P. will pass upon the validity of the common stock
necessary to allow conversion of our 8.50% preferred stock.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1997
and for each of the three years in the period ended December 31, 1998,
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report thereto, and are included herein in
reliance upon their authority as experts in accounting and auditing in giving
their report.
7
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
Common Stock
Preferred Stock
Patina Oil & Gas Corporation
--------------
PROSPECTUS
--------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
We estimate that we will incur the following expenses in connection with
the issuance and distribution of the securities registered.
<TABLE>
<CAPTION>
<S> <C>
Filing Fee for Registration Statement $12,375
Legal Fees and Expenses 10,000
Accounting Fees and Expenses 5,000
Printing Expenses 5,000
Miscellaneous 10,000
-------
Total $42,375
</TABLE>
Item 15. Indemnification of Officers and Directors
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
Delaware corporation has the power, under specified circumstances, to indemnify
its directors, officers, employees and agents in connection with threatened,
pending or completed actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in right of the
corporation), brought against them by reason of the fact that they were or are
such directors, officers, employees or agents, against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred in any
such action, suit or proceeding because such person is or was an officer or
director of the company or is a person who is or was serving at the request of
the company as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
relating to employee benefit plans, to the fullest extent permitted by the DGCL
as it existed at the time the indemnification provisions of a company's
certificate of incorporation and the bylaws were adopted or as may be thereafter
amended. Each of Article VI of our Bylaws and Article Nine of our Certificate
of Incorporation expressly provide that it is not the exclusive method of
indemnification.
Article VI of our Bylaws also provides that we may maintain insurance, at
our expense, to protect us and any director, officer, employee or agent of ours
or of another entity against any expense, liability or loss, regardless of
whether we would have the power to indemnify such person against such expense,
liability or loss under the DGCL.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) or
(iv) for any transaction from which the director derived an improper personal
benefit. Article Eight of our Certificate of Incorporation contains such a
provision.
We have entered into indemnification agreements with each of our officers
and directors and may in the future enter into such indemnification agreements
with our directors, officers, employees and agents. These indemnification
agreements provide a contractual right to indemnification, to the extent
permitted by law, for expenses (including attorneys' fees and disbursements),
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by the person to be indemnified in connection with any
proceeding (including, to the extent permitted by law, any derivative action) to
which they are, or are threatened to be made, a party by reason of their status
in such positions. These indemnification agreements do not change the basic
legal standards for indemnification set forth in the DGCL or in our Certificate
of Incorporation. We have furthered, not limited, the general right to
indemnification provided in our Certificate of Incorporation and Bylaws.
Item 16. Exhibits.
*4.1 Stock Purchase Agreement among Patina Oil & Gas Corporation and
Certain Investors dated July 31, 1997
*4.2 First Amendment to the Preferred Stock Purchase Agreement dated
September 19, 1997
*4.3 Patina Oil & Gas Corporation Certificate of Designation of 8.50%
Convertible Pay-In-Kind Preferred Stock dated July 31, 1997
<PAGE>
*5.1 Legal Opinion of Vinson & Elkins L.L.P.
*12.1 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
*23.1 Consent of Arthur Anderson LLP
23.2 Consent of Vinson & Elkins L.L.P. (included in the opinion filed
as Exhibit 5.1 to this registration statement)
24.1 Powers of Attorney of Directors and Officers of Patina Oil & Gas
Corporation (included in signature page to this registration
statement)
___________________
*Filed herewith.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the "Plan
of Distribution" not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by Patina Oil & Gas
Corporation pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of Patina Oil & Gas Corporation's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Denver, Colorado, on
the 19th day of October, 1999.
PATINA OIL & GAS CORPORATION
(A Delaware Corporation)
By: /s/ Thomas J. Edelman
----------------------------
Name: Thomas J. Edelman
--------------------------
Title: Chairman of the Board
-------------------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David J. Kornder his true and lawful attorney-in-
fact and agent, with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign this registration statement and
any and all amendments (including post-effective amendments) to this
registration statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Thomas J. Edelman Chairman of the Board October 19, 1999
- ---------------------------------------------- (Principal Executive Officer)
Thomas J. Edelman
/s/ Jay W. Decker President and Director October 19, 1999
- ----------------------------------------------
Jay W. Decker
/s/ David J. Kornder Vice President and Chief Financial Officer October 19, 1999
- ----------------------------------------------
David J. Kornder
/s/ Christopher C. Behrens Director October 19, 1999
- ----------------------------------------------
Christopher C. Behrens
/s/ Robert J. Clark Director October 19, 1999
- ----------------------------------------------
Robert J. Clark
/s/ Thomas R. Denison Director October 19, 1999
- ----------------------------------------------
Thomas R. Denison
/s/ Elizabeth K. Lanier Director October 19, 1999
- ----------------------------------------------
Elizabeth K. Lanier
/s/ Alexander P. Lynch Director October 19, 1999
- ----------------------------------------------
Alexander P. Lynch
</TABLE>
<PAGE>
Index To Exhibits
*4.1 Stock Purchase Agreement among Patina Oil & Gas Corporation and
Certain Investors dated July 31, 1997
*4.2 First Amendment to the Preferred Stock Purchase Agreement dated
September 19, 1997
*4.3 Patina Oil & Gas Corporation Certificate of Designation of 8.50%
Convertible Pay-In-Kind Preferred Stock dated July 31, 1997
*5.1 Legal Opinion of Vinson & Elkins L.L.P.
*12.1 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
*23.1 Consent of Arthur Anderson LLP
23.2 Consent of Vinson & Elkins L.L.P. (included in the opinion filed
as Exhibit 5.1 to this registration statement)
24.1 Powers of Attorney of Directors and Officers of Patina Oil & Gas
Corporation (included in signature page to this registration
statement)
___________________
*Filed herewith.
<PAGE>
EXHIBIT 4.1
STOCK PURCHASE AGREEMENT
Among
PATINA OIL & GAS CORPORATION
and
THE INVESTORS NAMED HEREIN
Dated as of July 31, 1997
and as amended and restated as of September __, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
Definitions
Section 1.01. Definitions................................................... 2
ARTICLE II.
Sale and Purchase of the 8.5% Convertible Preferred
Stock, Common Stock and Related Transactions
Section 2.01. Sale and Purchase of the Preferred Stock and Common Stock..... 6
Section 2.02. Closing....................................................... 7
ARTICLE III.
Representations and Warranties
Section 3.01. Representations and Warranties of the Company................. 8
Section 3.02. Representations and Warranties of Investors................... 15
ARTICLE IV.
Additional Agreements of the Parties
Section 4.01. Taking of Necessary Action.................................... 17
Section 4.02. Conduct of Business........................................... 17
Section 4.03. Notification of Certain Matters............................... 18
Section 4.04. Access to Information......................................... 18
Section 4.05. Restrictions on Sale or Transfer; Legend...................... 18
Section 4.06. Designated Directors.......................................... 19
Section 4.07. New York Stock Exchange Listing............................... 20
Section 4.08. Use of Proceeds............................................... 20
Section 4.09. Approval by Company's Stockholders............................ 20
Section 4.10. No Additional Shares.......................................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V.
Conditions Precedent
Section 5.01. Conditions to Each Party's Obligations to Effect each
Closing...................................................... 21
Section 5.02. Conditions to the Investors' Obligations...................... 21
Section 5.03. Conditions to the Company's Obligations to any Closing........ 23
ARTICLE VI.
Registration Rights
Section 6.01. Definition of Registrable Shares.............................. 23
Section 6.02. Demand Registration........................................... 24
Section 6.03. Piggyback Registration........................................ 25
Section 6.04. Registration Procedures....................................... 26
Section 6.05. Conditions and Limitations.................................... 29
Section 6.06. Information from and Certain Covenant of Holders of
Registrable Shares........................................... 30
Section 6.07. Registration Expenses......................................... 30
Section 6.08. Indemnification; Contributions................................ 31
ARTICLE VII.
Standstill and Confidentiality Provisions
Section 7.01. Certain Definitions........................................... 33
Section 7.02. Confidentiality Covenants..................................... 35
Section 7.03. Acquisition of Company Voting Securities...................... 36
Section 7.04. Distribution of the Company Voting Securities................. 37
Section 7.05. Proxy Solicitations, etc...................................... 37
Section 7.06. No Voting Trusts, Pooling Agreements, or Formation of
"Groups"..................................................... 38
Section 7.07. Limitation on Various Other Actions........................... 38
Section 7.08. Acquisition Proposals......................................... 38
Section 7.09. Term of Standstill and Confidentiality Provisions............. 39
ARTICLE VIII.
Term
Section 8.01. Termination................................................... 40
Section 8.02. Effect of Termination......................................... 40
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IX.
Miscellaneous
Section 9.01. Survival of Representations, Warranties and Agreements........ 40
Section 9.02. Notices....................................................... 40
Section 9.03. Entire Agreement; Amendment................................... 41
Section 9.04. Counterparts.................................................. 42
Section 9.05. Governing Law................................................. 42
Section 9.06. Public Announcements.......................................... 42
Section 9.07. Expenses...................................................... 42
Section 9.08. Indemnification............................................... 42
Section 9.09. Successors and Assigns........................................ 44
Section 9.10. No Third Party Rights......................................... 45
Section 9.11. Specific Performance.......................................... 45
Section 9.12. Captions...................................................... 45
Section 9.13. Severability.................................................. 45
Section 9.14. Mutual Waiver of Jury Trial................................... 45
Section 9.15. Jurisdiction.................................................. 45
Section 9.16. References to Other Agreements................................ 45
</TABLE>
EXHIBITS
A - Form of Share Repurchase Agreement
B - Form of SOCO Option Agreement
C - Form of Notice of Issuance
D - Form of Certificate of Designations
SCHEDULES
I - Schedule of Investors' Commitments
II - Company's Disclosure Schedules
5.02 - Additional Certificates, Opinions, Etc.
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July 31, 1997
---------
and as amended and restated as of September __, 1997, among Patina Oil & Gas
Corporation, a Delaware corporation (the "Company"), Snyder Oil Corporation,
-------
the majority stockholder of the Company ("SOCO"), and each of the investors who
----
execute signature pages hereto (each an "Investor" and collectively, the
--------
"Investors").
---------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, each of the Investors has severally agreed to purchase in up
to two purchases, and the Company has agreed to sell, subject to the terms and
conditions of this Agreement, up to the aggregate number of shares of the
Company's 8.5% Convertible Preferred Stock, par value $.01 per share (the "8.5%
----
Convertible Preferred Stock"), set forth opposite such Investor's name on
- ---------------------------
Schedule I hereto, and an aggregate of 160,000 shares of the Company's Common
Stock, par value $.01 per share ("Common Stock"), and, concurrently with the
------------
initial closing hereunder, SOCO has agreed to deliver, in consideration of the
consummation of the related transactions herein described, an aggregate of
70,000 shares of Common Stock to the Investors;
WHEREAS, prior to or at about the time of the execution and delivery
of this Agreement, the Company shall have filed a Registration Statement on Form
S-3 in connection with the registration and sale on behalf of SOCO of up to
8,625,000 shares of the Company's Common Stock, owned by SOCO (such registration
and sale, the "Secondary Stock Offering"), and the consummation of the sale of
------------------------
Common Stock by SOCO pursuant to the Secondary Stock Offering shall be a
condition precedent to the initial issuance and sale by the Company of shares of
8.5% Convertible Preferred Stock hereunder;
WHEREAS, substantially simultaneously with the execution and delivery
of this Agreement, the Company and SOCO shall have entered into a Share
Repurchase Agreement (as the same may be amended or modified, the "Share
-----
Repurchase Agreement"), a copy of which is attached hereto as Exhibit A,
- --------------------
pursuant to which the Company has agreed to repurchase from SOCO all of the
remaining shares of Common Stock owned by SOCO which have not been sold by SOCO
in the Secondary Stock Offering (other than the 70,000 shares delivered by SOCO
to the Investors hereunder) at a purchase price per share equal to the net
offering price (after deduction of the underwriters' commissions and discounts)
(such price, the "Net Offering Price") of the shares of Common Stock sold in
------------------
the Secondary Stock Offering (such redemption, the "SOCO Stock Redemption");
---------------------
WHEREAS, substantially simultaneously with the execution and delivery
of this Agreement, SOCO, the Company and each of the Investors (or one of such
Investor's affiliates) and Thomas J. Edelman, Chairman, Chief Executive Officer
and President of the Company ("Edelman"), shall have entered into one or more
-------
Option Agreements (collectively, the "SOCO Option Agreement"), a form of which
---------------------
is attached hereto as Exhibit B, pursuant to which SOCO has granted to the
Investors (or their affiliates) and Edelman one or more options (collectively,
the "Option on SOCO Shares") to purchase, on the terms and conditions set forth
---------------------
in the SOCO Option Agreement, up to 4,000,000 of the shares of Common Stock
owned by SOCO if the
<PAGE>
Secondary Stock Offering and the SOCO Stock Redemption do not occur or if this
Agreement terminates under circumstances set forth in Section 8.03 hereof;
WHEREAS, the Company contemplates that the proceeds (or a portion
thereof) from the issuance of the 8.5% Convertible Preferred Stock sold
hereunder, together with the proceeds of new borrowings under the Company's
existing senior credit facility and restricted stock sales, will be used to pay
the purchase price for the shares redeemed in the SOCO Stock Redemption, and the
Company shall be entitled under and subject to the terms and conditions of this
Agreement to determine, in its sole discretion, the aggregate number of shares
of 8.5% Convertible Preferred Stock to be ultimately issued and sold hereunder
to fund a portion of such purchase price;
WHEREAS, in connection with the consummation of the Secondary Stock
Offering, the SOCO Stock Redemption and issuance and sale of the 8.5%
Convertible Preferred Stock hereunder, the Company contemplates issuing
additional shares of Common Stock and granting shares of restricted Common Stock
to certain senior executives of the Company as follows (collectively, such
transactions are referred to herein as the "Management Stock Issuances"): (i)
--------------------------
to Edelman, (A) the issuance and sale of $2,000,000 of shares of Common Stock to
be purchased at a price per share equal to the gross offering price in the
Secondary Stock Offering and (B) the grant of 350,000 shares of restricted
Common Stock and (ii) to the Company's other senior executives, (A) the issuance
and sale of an aggregate of $1,000,000 of shares of Common Stock to be purchased
at a price per share equal to the gross offering price in the Secondary Stock
Offering and (B) the grant of an aggregate of 150,000 shares of restricted
Common Stock;
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I.
Definitions
-----------
Section 1.011. Definitions. As used in this Agreement, the
-----------
following terms shall have the meanings set forth below:
"Affiliate" or "affiliate" shall mean, with respect to any
--------- ---------
person (the "target person"), any other person (the "affiliated
person") which directly or indirectly controls or is controlled
by or is under common control with such target person. As used in
this definition, "control" (including its correlative meanings,
"controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause
the direction of management or policies
<PAGE>
(whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"Agreement" shall have the meaning set forth in the recitals hereto.
---------
"Certificate of Designations" shall have the meaning set
---------------------------
forth in Section 2.01.
"Closing" shall mean the Initial Closing or the Second
-------
Closing, as the context may require.
"Closing Date" shall mean the Initial Closing Date or the
------------
Second Closing Date, as the context may require.
"Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
"Common Stock" shall have the meaning set forth in the
------------
recitals hereto.
"Company" shall have the meaning set forth in the recitals
-------
hereto.
"Company Plans" shall have the meaning set forth in Section
-------------
3.01(k).
"Company Reports" shall have the meaning set forth in
---------------
Section 3.01(i).
"Company Stockholders' Approval" shall have the meaning set
------------------------------
forth in Section 4.09(a).
"Company's Disclosure Schedules" shall have the meaning set
------------------------------
forth in Section 3.01.
"Damages" shall have the meaning set forth in Section
-------
9.08(a).
"Demand Registration" shall have the meaning set forth in
-------------------
Section 6.02.
"Edelman" shall have the meaning set forth in the recitals
-------
hereto.
"ERISA" shall have the meaning set forth in Section 3.01(k).
-----
"Exchange Act" shall mean the Securities Exchange Act of
------------
1934, as amended.
"Excluded Registration Statement" shall have the meaning set
-------------------------------
forth in Section 6.03.
"Final Determination" shall have the meaning set forth in
-------------------
Section 9.08(f).
"Fund VII" shall have the meaning set forth in Section
--------
2.01(a).
<PAGE>
"Fund VII Amount" shall have the meaning set forth in
---------------
Section 2.01(a).
"GAAP" shall mean generally accepted accounting principles
----
in the United States of America in effect from time to time.
"Holder" or "Holders" shall have the meaning set forth in
------ -------
Section 6.01.
"HSR Act" shall have the meaning set forth in Section
-------
3.01(g).
"Indemnified Persons" shall have the meaning set forth in
-------------------
Section 9.08(a).
"Initial Closing" or "Initial Closing Date" shall have the
--------------- --------------------
meaning set forth in Section 2.02(a).
"Investor" or "Investors" shall have the meaning set forth in the
-------- ---------
recitals hereto.
"knowledge" or "best knowledge" shall mean, with respect to
--------- --------------
any Person, the actual knowledge of the officers of such Person
making such statement, assuming reasonable inquiry into the
matter.
"Management Stock Issuances" shall have the meaning set forth in the
--------------------------
recitals hereto.
"Material Adverse Effect" shall mean a material adverse
-----------------------
effect on (a) the business, assets, liabilities, results of
operations or financial condition of the Company and its
subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations under this Agreement or (c) the validity
or enforceability of this Agreement or the rights or remedies of
the Investors hereunder.
"Material Contracts" shall have the meaning set forth in
------------------
Section 3.01(n).
"Net Offering Price" shall have the meaning set forth in the
------------------
recitals hereto.
"Notice of Issuance" shall mean the notice of issuance certificate
------------------
which may be delivered by the Company to the Investors in accordance with
the provisions of Section 2.01, which shall be in the form attached hereto
as Exhibit C.
"NYSE" shall have the meaning set forth in Section 3.01(f).
----
"Option on SOCO Shares" shall have the meaning set forth in the
---------------------
recitals hereto.
"Person" or "person" shall mean an individual, corporation,
------ ------
association, partnership, trust, joint venture, business trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
<PAGE>
"PIK Period" shall mean, with respect to the 8.5% Convertible
----------
Preferred Stock, the two-year mandatory period during which the Company
shall be obligated to issue pay-in-kind dividends on such stock.
"Proxy Statement" shall have the meaning set forth in
---------------
Section 4.09(b).
"Registrable Shares" shall have the meaning set forth in
------------------
Section 6.01.
"Registration Expenses" shall have the meaning set forth in
------------------
Section 6.07.
"SEC" shall mean the United States Securities and Exchange
---
Commission.
"Second Closing" or "Second Closing Date" shall have the
-------------- -------------------
meaning set forth in Section 2.02(a).
"Secondary Stock Offering" shall have the meaning set forth in the
------------------------
recitals hereto.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
"Share Repurchase Agreement" shall have the meaning set forth in the
--------------------------
recitals hereto.
"SOCO Option Agreement" shall have the meaning set forth in
---------------------
the recitals hereto.
"SOCO Stock Redemption" shall have the meaning set forth in
---------------------
the recitals hereto.
"SOCO" shall have the meaning set forth in the recitals
----
hereto.
"Subsidiary" or "subsidiary" shall mean, with respect to any
---------- ----------
corporation (the "parent") any other corporation, association or
------
other business entity of which more than 50% of the shares of the
voting stock are owned or controlled, directly or indirectly, by
the parent or one or more Subsidiaries of the parent, or by the
parent and one or more of its Subsidiaries.
"Tax Returns" means any return, amended return or other report
-----------
required to be filed with respect to any Tax, including declaration of
estimated tax and information returns.
"Taxes" means any federal, state, local or foreign taxes, including
-----
but not limited to income, gross receipts, windfall profits, value added,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, together with any interest,
additions or penalties with respect thereto and any interest in respect of
such penalties.
<PAGE>
"Transfer" shall have the meaning set forth in Section 4.05.
--------
"8.5% Convertible Preferred Stock" shall have the meaning
--------------------------------
set forth in the recitals hereto.
ARTICLE II.
Sale and Purchase of the 8.5% Convertible Preferred
---------------------------------------------------
Stock, Common Stock and Related Transactions
--------------------------------------------
Section 1.021. Sale and Purchase of the Preferred Stock and Common
---------------------------------------------------
Stock. Subject to all of the terms and conditions of this Agreement, and in
- -----
reliance upon the representations and warranties hereinafter set forth, at the
Initial Closing provided for in Section 2.02 hereof, the Company will sell to
each Investor, and each Investor will purchase from the Company, up to the
aggregate number of shares of 8.5% Convertible Preferred Stock set forth
opposite such Investor's name on Schedule I hereto that is designated to be sold
by the Company to such Investor, plus that number (and no less than that number)
of shares of Common Stock opposite such Investor's name on Schedule I hereto,
for a purchase price of $25 per share of 8.5% Convertible Preferred Stock
purchased. The Company shall deliver to each Investor, not less than three
business days prior to the Initial Closing Date, a Notice of Issuance which sets
forth the number of shares of 8.5% Convertible Preferred Stock to be sold to,
and purchased by, each Investor; provided that the aggregate number of shares of
--------
8.5% Convertible Preferred Stock to be issued and sold at the Initial Closing
shall not be less than 1,600,000. To the extent the Initial Closing involves the
sale of less than 2,520,000 shares of 8.5% Convertible Preferred Stock, then the
shares purchased at such Closing shall be purchased pro rata by the Investors
according to the amounts set forth in Schedule I. The 8.5% Convertible Preferred
Stock will have the designations, relative rights, preferences and limitations
set forth in the Company's Certificate of Incorporation and the Certificate of
Designations in the form attached hereto as Exhibit D (the "Certificate of
--------------
Designations"). If the Notice of Issuance is delivered to First Reserve Fund
- ------------
VII, Limited Partnership ("Fund VII") less than ten business days prior to any
Closing, Fund VII shall not be required to fund its portion of the purchase
price to be paid at such Closing (the "Fund VII Amount") until ten business days
after delivery of such Notice of Issuance, provided that (A) Fund VII
irrevocably and unconditionally commits to fund the Fund VII Amount at the same
time as other Investors fund such Closing and (B) the Company shall place in
escrow with counsel to the Company the securities to be purchased with the Fund
VII Amount and other Closing documents delivered at such Closing until Fund VII
pays to the Company the Fund VII Amount as set forth above.
(b) Subject to all of the terms and conditions of this Agreement, and
in reliance upon the representations and warranties hereinafter set forth, at
the Second Closing (if any) provided for in Section 2.02 hereof, the Company
will sell to each Investor, and each Investor will purchase from the Company,
for a purchase price of $25 per share, a number of shares of 8.5% Convertible
Preferred Stock not to exceed the difference of (i) the aggregate number of
shares of
<PAGE>
8.5% Convertible Preferred Stock set forth opposite such Investor's name on
Schedule I hereto minus (ii) the aggregate number of shares of 8.5% Convertible
-----
Preferred Stock issued and sold to such Investor at the Initial Closing. The
Company shall deliver to each Investor, not less than ten business days prior to
any the Second Closing Date, a Notice of Issuance which sets forth the number of
shares of 8.5% Convertible Preferred Stock to be sold to, and purchased by, each
Investor. Notwithstanding the foregoing, if the beneficial ownership of Common
Stock by Highbridge International LDC ("HIL"), after giving effect to the shares
---
of 8.5% Convertible Preferred Stock proposed to be issued at the Second Closing,
would exceed 5% of the total outstanding shares of the Common Stock of the
Company, HIL shall only be required to purchase shares of 8.5% Convertible
Preferred Stock to the extent that the ownership of such shares by HIL does not
exceed such 5% threshold (it being the intent that such threshold be calculated
in accordance with the "FIRPTA" regulations under the Internal Revenue Code). To
the extent the shares to be purchased by HIL are reduced pursuant to the
foregoing sentence, such shares may be purchased by the remaining Investors pro
rata according to the amounts set forth on Schedule I.
(c) Subject to all of the terms and conditions of this Agreement, and
in consideration of the consummation of all of the related transactions herein
described, at the Initial Closing provided for in Section 2.02 hereof, SOCO will
deliver to each Investor the number (and no less than that number) of shares of
Common Stock opposite such Investor's name on Schedule I hereto that is
designated to be delivered by SOCO to such Investor. SOCO represents and
warrants to each Investor that, upon delivery of the shares of Common Stock by
SOCO to such Investor hereunder, such Investor will acquire such shares free and
clear of all claims, liens, charges, encumbrances and security interests of any
nature whatsoever.
Section 1.022 Closing. Subject to the satisfaction or waiver of the
-------
conditions set forth in this Agreement, each sale and purchase of the 8.5%
Convertible Preferred Stock pursuant to Section 2.01 (the first such sale and
purchase, together with the purchase and sale of Common Stock and the Delivery
of Common Stock, shall be referred to herein as the "Initial Closing"; and the
---------------
second sale and purchase shall be referred to herein as the "Second Closing")
--------------
shall take place no later than December 31, 1997, at the offices of Simpson
Thacher & Bartlett, counsel to the Company, at 425 Lexington Avenue, New York,
New York 10017, on the first business day following the date on which the
conditions in Article V are satisfied (or waived by the Investors or the
Company, as the case may be) (the date of the Initial Closing, the "Initial
-------
Closing Date"; and the date of the Second Closing, the "Second Closing Date")
- ------------- -------------------
or at such other time and place as may be mutually agreed upon by the Investors
and the Company.
(b) At each Closing: (i) the Company will deliver to each Investor a
certificate or certificates for the 8.5% Convertible Preferred Stock (A) to be
sold to such Investor in accordance with the provisions of Section 2.01 and (B)
in the case of the Initial Closing, Common Stock to be sold to such Investor
pursuant to Section 2.01, in each case registered in the respective name(s) and
proportions as such Investor shall have specified to the Company at least two
business days prior to such Closing; (ii) each Investor, in full payment for the
8.5% Convertible Preferred Stock (and, in the case of the Initial Closing,
Common Stock) to be purchased pursuant to Section 2.01 on the related Closing
Date, will deliver to the Company immediately available funds, by
<PAGE>
wire transfer to such account as the Company shall specify at least two business
days prior to such Closing, in the amount of the purchase price to be paid
hereunder pursuant to Section 2.01; RIDER B5-B and (iv) each party shall take or
cause to happen such other actions, and shall execute and deliver such other
instruments or documents, as shall be required under Article V hereof.
ARTICLE III.
Representations and Warranties
------------------------------
Section 1.031. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to, and agrees with, the Investors as follows
(it being understood that, in addition to any exceptions or qualifications
contained herein, the following representations and warranties shall be further
qualified by the disclosures contained in the Company's disclosure schedules
that have been previously delivered to the Investors and copies of which are
attached hereto as Schedule II (the "Company's Disclosure Schedules")):
------------------------------
(a) Organization and Good Standing of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted. The Company is duly licensed or qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, except where the
failure to be so licensed or qualified in any such jurisdiction, individually or
in the aggregate, would not have a Material Adverse Effect.
(b) Organization and Good Standing of Company's Subsidiaries.
--------------------------------------------------------
Section 3.01(b) of the Company's Disclosure Schedules lists all subsidiaries of
the Company and their respective jurisdictions of incorporation. Except as set
forth in Section 3.01(b) of the Company's Disclosure Schedules, (i) the Company
owns, directly or indirectly, all the shares of outstanding capital stock of
each of its subsidiaries, free and clear of any claim, lien, encumbrance,
agreement or preemptive rights with respect thereto, (ii) no equity securities
of any of the Company's subsidiaries are or may become required to be issued by
reason of any options, warrants, calls or commitments of any character
whatsoever, (iii) there are outstanding no securities or rights convertible into
or exchangeable for shares of any capital stock of any of the Company's
subsidiaries and (iv) there are no contracts, commitments, understandings or
arrangements by which any of the Company's subsidiaries is bound to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Each of the
Company's subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and has all
requisite corporate power and authority and governmental authorizations to own,
operate and lease its
<PAGE>
properties and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to require such
qualification, except where the failure to be so licensed or qualified in any
such jurisdiction, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) Authorization. The Company has full corporate power and
-------------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has been duly
authorized by the Board of Directors of the Company. No other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and this Agreement constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, by general
equity principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of good faith and
fair dealing.
(d) Capitalization. Section 3.01(d) of the Company's Disclosure
--------------
Schedules sets forth (i) the authorized capital stock of the Company, the number
of shares of each class of capital stock issued and outstanding and the number
of shares of Common Stock reserved for issuance in connection with employee
benefit and stock option plans in each case as of the date hereof, and (ii) all
options, warrants, calls or commitments to issue which may result in the
issuance of equity securities of the Company, in each case setting forth the
identity of the holder thereof, the exercise or similar price and the date of
expiration or termination thereof. All of the issued and outstanding shares of
the Company's capital stock have been duly and validly authorized and issued and
are fully paid and non-assessable and are not subject to any preemptive rights.
Except as set forth in Section 3.01(d) of the Company's Disclosure Schedules,
(A) no equity securities of the Company are or may become required to be issued
by reason of any options, warrants, calls or commitments of any character
whatsoever, (B) there are outstanding no securities or rights convertible into
or exchangeable for shares of any capital stock of the Company and (C) there are
no contracts, commitments, understandings or arrangements by which the Company
is bound to issue additional shares of its capital stock or options, warrants or
rights to purchase or acquire any additional shares of its capital stock.
(e) 8.5% Convertible Preferred Stock. The 8.5% Convertible
--------------------------------
Preferred Stock has been duly authorized by all necessary corporate action. When
issued and sold against receipt of the consideration therefor, the 8.5%
Convertible Preferred Stock will be validly issued, fully paid and
nonassessable, will not subject the holders thereof to any personal liability
and will not be subject to any preemptive rights of any other stockholder of the
Company. A total of up to 10,000,000 shares of Common Stock have been duly
reserved
<PAGE>
for issuance upon the conversion of the 8.5% Convertible Preferred Stock. The
shares of Common Stock issuable upon conversion of the 8.5% Convertible
Preferred Stock and the shares of 8.5% Convertible Preferred Stock issuable as
dividends thereon have been duly and validly authorized and, if and when issued,
will be validly issued, fully paid and non-assessable and will not be subject to
any preemptive rights except as contemplated by this Agreement and the
Certificate of Designations. At each Closing, the Investors will receive valid
title to the 8.5% Convertible Preferred Stock to be purchased on such date, free
and clear of any claim, lien, security interest or other encumbrance (except as
created by this Agreement or the Certificate of Designations).
(f) No Conflicts. Except as set forth in Section 3.01(f) of the
------------
Company's Disclosure Schedules, the execution, delivery and performance of this
Agreement, the consummation of the transactions by the Company contemplated
hereby and the compliance by the Company with any of the provisions hereof will
not conflict with, violate or result in a breach of any provision of, require a
consent under, or constitute a default under (i) any provision of the
certificate of incorporation, by-laws or other governing instrument of the
Company or the Certificate of Designations (when filed with the Secretary of
State of Delaware), or the certificate of incorporation, charter, by-laws or
other governing instrument of the Company's subsidiaries, (ii) (A) any mortgage,
note, indenture, lease, loan agreement, warrant or other agreement or instrument
or (B) assuming that the clearances, filings, consents and approvals specified
in Section 3.01(g) of the Company's Disclosure Schedules have been obtained or
made, any permit, concession, license, judgment, order, injunction, statute,
law, rule or regulation of any governmental entity, securities exchange or any
other Person, in the case of (A) or (B), binding on or otherwise applicable to
the Company, the Company's subsidiaries or their respective properties or
assets, or (iii) any rules and regulations of the New York Stock Exchange, Inc.
(the "NYSE") (other than in connection with the Company Stockholders' Approval).
----
(g) No Consents. Except as set forth in Section 3.01(g) of the
-----------
Company's Disclosure Schedules, no consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental entity is required
in connection with the execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions by the Company hereunder.
The Company does not own "non-exempt assets" (within the meaning contemplated by
Section 802.4 under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), with an aggregate fair market value (as determined in
-------
accordance with the HSR Act) of more than $15 million.
(h) Financial Statements. The Company has previously delivered to
--------------------
the Investors copies of (i) the consolidated balance sheet of the Company and
its subsidiaries as of December 31 for the fiscal years 1995 and 1996, and the
related consolidated statements of operations, statements of stockholders'
equity and cash flows for the fiscal years 1994, 1995 and 1996, as reported in
the Company's Annual Report on Form 10-K for the fiscal
<PAGE>
year ended December 31, 1996, filed by the Company with the SEC under the
Exchange Act, in each case accompanied by the audit report of Arthur
Andersen LLP, independent public accountants with respect to the Company,
and (ii) the unaudited consolidated balance sheet of the Company and the
Company Subsidiaries as of June 30, 1997 and the related unaudited
consolidated statement of operations, statements of stockholders' equity
and cash flows for the three-month periods then ended as reported in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, filed with the SEC under the Exchange Act. All of such financial
statements fairly present the consolidated financial position of the
Company and its subsidiaries as of the dates shown and the results of the
consolidated operations, statements of stockholders' equity and cash flows
of the Company and its subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth, in each case subject, as to
interim statements, to changes resulting from year-end adjustments (none of
which will be material in amount and effect). All of such financial
statements have been prepared in accordance with GAAP consistently applied
during the periods involved, except as otherwise set forth in the notes
thereto, and the Company and its subsidiaries have no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise)
which are not fully reflected or reserved against in the balance sheet as
of June 30, 1997, included in such financial statements, except for
liabilities that may have arisen in the ordinary and usual course of
business and consistent with past practice and that, individually or in the
aggregate, would not have a Material Adverse Effect.
(i) Reports. The Company has timely filed, and will timely file,
-------
all reports, registration statements, proxy statements and other materials,
together with any amendments required to be made with respect thereto, that
were required to be filed, at any time prior to any Closing, with the SEC
under the Securities Act or the Exchange Act or with the NYSE (all such
reports and statements are collectively referred to herein as the "Company
-------
Reports"). As of their respective dates, the Company Reports, including
-------
the financial statements contained therein, complied in all material
respects with all of the statutes and published rules and regulations
enforced or promulgated by the regulatory authority or exchange with which
they were filed, did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and were complete and accurate
in all material respects.
(j) Legal Proceedings. Except as set forth in Section 3.01(j),
-----------------
there are no legal, administrative, arbitration or other proceedings,
claims, actions or governmental investigations of any nature pending
against the Company or its subsidiaries or to which the Company or its
subsidiaries or any of their assets are subject, and, to the best knowledge
of the Company, there has not been threatened any such proceeding, claim,
action or governmental investigation against the Company or its
subsidiaries, in each case which individually or in the aggregate would, if
adversely determined, have a Material Adverse Effect. As of the date
hereof, neither the Company nor any of its subsidiaries is subject to any
order, writ, judgment, injunction or decree having, or which would have,
<PAGE>
a Material Adverse Effect or which would interfere with the consummation of
the transactions contemplated by this Agreement.
(k) Employee Benefits. (i) Each "employee benefit plan" (within
-----------------
the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and any other material employee plan,
-----
agreement or arrangement that is or has been maintained or otherwise
contributed to by the Company or its subsidiaries for the benefit of their
employees (collectively, "Company Plans") has been administered and is in
-------------
material compliance with the terms of such plan and all applicable laws,
rules and regulations.
(ii) There are no pending or, to the best knowledge of the Company,
threatened, actions, claims or lawsuits which have been asserted or
instituted involving or arising out of the Company Plans, with respect to
the operation or administration of such plans (other than routine benefit
claims).
(iii) The Company has not incurred, and no event has occurred which
would be reasonably likely to result in, (A) any liability under ERISA or
the Code, including but not limited to liability resulting from a complete
or partial withdrawal from a "multiemployer plan" (as such term is defined
in section 3(37) of ERISA) or a termination of a Company Plan which is
covered by Title IV of ERISA, but which is not a multiemployer plan or (B)
any liability to or with respect to any Company Plan except for
contributions heretofore properly paid or accrued or not due to be paid or
accrued.
(iv) No Company Plan exists which could result in the payment to any
employee of the Company or its Subsidiaries of any money or other property
or rights or accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this Agreement,
including the Management Stock Issuances, whether or not such payment would
constitute a parachute payment within the meaning of Section 280G of the
Code.
(l) Compliance with Applicable Law. The business of the Company
------------------------------
and its subsidiaries are in compliance in all material respects with all
applicable Federal, state, local and foreign governments' laws and
regulations, except where any failures to be so in compliance, either
individually or in the aggregate, would not have a Material Adverse Effect;
provided that to the extent oil and gas properties owned by the Company or
--------
its subsidiaries are operated by operators other than the Company or its
subsidiaries, the Company does not have any knowledge of non-compliance and
the appropriate Person has diligently enforced all contractual obligations
of such operators to insure compliance.
(m) Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement and as described in Section 3.01(m) of the Company's Disclosure
Schedules, since June 30, 1997, the Company and its subsidiaries have
conducted their respective businesses in the ordinary and usual course and,
since such date, (i) there has not been any condition, event
<PAGE>
or occurrence which had or will have a Material Adverse Effect and (ii)
neither the Company nor any of its subsidiaries has taken any of the
actions prohibited by Section 4.02.
(n) Material Contracts. Except as set forth in Section 3.01(n) of
------------------
the Company's Disclosure Schedules, the Company has provided or made
available to the Investors true and complete copies of all written
contracts, agreements, leases, commitments and other instruments to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound (i) which require payments to be made
in excess of $1,000,000 per year for goods and/or services), (ii) which do
not by their terms expire and are not subject to termination (without
penalty to the Company or its subsidiaries as the case may be) within six
months from the date of the execution and delivery thereof, (iii) to which
any director, officer or holder of more than 5% of the outstanding shares
of Common Stock are a party or (iv) the termination of which would have a
Material Adverse Effect (the agreements set forth in clauses (i), (ii),
(iii) and (iv), the "Material Contracts"). Except as set forth in Section
------------------
3.01(n) of the Company's Disclosure Schedules, each of the Material
Contracts is a valid, binding and enforceable agreement of the Company or
its subsidiaries and, to the best of the Company's knowledge, each other
party thereto, and no breach, default or condition exists with respect
thereto which, either individually or in the aggregate, would have a
Material Adverse Effect.
(o) Taxes and Filing of Tax Returns. Except as disclosed on Section
-------------------------------
3.01(o) of the Company's Disclosure Schedules, the Company, its
subsidiaries and its predecessors have been accurately prepared and timely
filed all material tax returns required to have been filed and have paid
all Taxes shown to be due and payable on such returns, including interest
and penalties, and all other Taxes which are payable by such party, to the
extent the same have become due and payable other than Taxes with respect
to which a failure to pay, in the aggregate, would not have a Material
Adverse Effect. Except as disclosed on Section 3.01(o) of the Company's
Disclosure Schedules, (i) the Company does not know of any proposed
material Tax assessment against the Company or its subsidiaries, and all
Tax liabilities of the Company, its subsidiaries and its predecessors are
adequately provided for and (ii) no material Tax liability of the Company,
its subsidiaries or its predecessors has been asserted for Taxes in excess
of those already paid.
(p) Title to Properties; Liens. The Company and its subsidiaries
--------------------------
have good and valid title to all material assets purported to be owned by
it subject only to (i) liens granted in favor the Company's senior lenders
pursuant to the Company's existing credit facility and (ii) claims, liens,
security interests or other encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect.
(q) Licenses, Permits, Etc. The Company and its subsidiaries
-----------------------
possess such valid franchises, certificates of convenience and necessity,
operating rights, licenses, permits, consents, authorizations, exemptions
and orders of tribunals or regulatory authorities, as
<PAGE>
are necessary or customary to carry on its business as now being conducted,
except to the extent a failure to obtain any such item would not have a
Material Adverse Effect; provided that to the extent oil and gas properties
--------
owned by the Company or its subsidiaries are operated by operators other
than the Company or its subsidiaries, the Company does not have any
knowledge of non-compliance and the appropriate Person has diligently
enforced all contractual obligations of such operators to insure
compliance.
(r) Environmental Matters. No real or personal property owned or
---------------------
leased by the Company (including without limitation, oil and gas
properties) and no operations conducted thereon, and to the Company's
knowledge, no operations of any prior owner, lease or operators of any such
properties, is or has been in violation of any Applicable Environmental Law
other than violations which individually and in the aggregate would not
have, or could not reasonably be expected to have in the future, a Material
Adverse Effect, nor is any such property or operation the subject of any
existing, pending or, to the Company's knowledge, threatened action, suit,
investigation, inquiry or preceding with respect to Applicable
Environmental Laws which, individually or in the aggregate, would have, or
could not reasonably be expected to have in the future, a Material Adverse
Effect. All notices, permits, licenses, and similar authorizations, if any,
required to be obtained or filed in connection with the ownership or
operation of any and all real and personal property owned, leased or
operated by the Company or its subsidiaries, including, without limitation,
notices, licenses, orders, permits and authorizations required in
connection with any past or present treatment, storage, disposal, or
release, by the Company or its predecessors of hazardous substances,
petroleums, or solid waste into the environment, have been duly obtained or
filed except to the extent the failure to obtain or file such notices,
licenses, permits and authorizations would not have a Material Adverse
Effect at the present time or in the future. To the Company's knowledge,
all hazardous substances, if any, generated at any and all real and
personal property operated by the Company or its subsidiaries have been
transported, treated, and disposed of only by carriers maintaining valid
permits under RCRA and any other Applicable Environmental Laws. Except as
disclosed in the Section 3.01(r) of the Company's Disclosure Schedules,
there has been no release or threatened release of any quantity of any
hazardous substances or petroleum on, to or from any real or personal
property owned, leased, or operated by the Company or its subsidiaries or
predecessors which was not in compliance with Applicable Environmental Laws
other than releases which, individually or in the aggregate, would not have
a Material Adverse Effect at the present time or in the future.
(ii) "Applicable Environmental Law" shall mean any law, statute,
----------------------------
ordinance, rule, regulation, order or determination of any governmental
authority or any board of fire underwriters (or other body exercising
similar functions), affecting any real or personal property owned, operated
or leased by the Company or its subsidiaries or any other operation of the
Company or its subsidiaries in any way pertaining to health, safety or the
environment, including, without limitation, all applicable zoning
ordinances and building codes, flood disaster laws and health, safety and
environmental laws and regulations, and further including without
limitation, (A) the Comprehensive Environmental Response,
<PAGE>
Compensation, and Liability Act of 1980, as amended by the Superfund
Response, Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, herein collectively referred to as "CERCLA"), (B) the Resource
------
Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling
Act of 1980, the Solid Waste Recovery Act of 1976, as amended by the Solid
Waste Disposal Act of 1980, and the Hazardous and Solid Waste Amendments of
1984 (as amended from time to time, herein referred to as "RCRA"), (C) the
----
Safe Drinking Water Act, as amended, (D) the Toxic Substances Control Act,
as amended, (E) the Clean Air Act, as amended, (F) Emergency Planning and
Community Right-to-Know Act, (G) the Clean Water Act, (H) the Occupational
Safety and Health Act of 1970, as amended, (I) the laws, rules and
regulations of any state having jurisdiction over any real or personal
property owned, operated or leased by the Company or its subsidiaries or
any other operation of the Company or its subsidiaries which relate to
health, safety or the environment, as each may be amended from time to
time, and (H) any federal, state, county or municipal laws, ordinance or
regulations which may now or hereafter require removal of asbestos or other
hazardous substances or impose any liability related to asbestos or other
hazardous substances. The terms hazardous substance, petroleum, release and
threatened release have the meanings specified in CERCLA, and the terms
solid waste and disposal (or disposed) have the meanings specified in RCRA;
provided, however, in the event either CERCLA or RCRA is amended so as to
-------- -------
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment with respect to
all provisions of this Agreement; and provided further that, to the extent
-------- -------
the laws of the state in which any real or personal property owned,
operated or leased by the Company or its subsidiaries is located establish
a meaning for hazardous substance, petroleum, release, solid waste or
disposal which is broader than that specified in either CERCLA or RCRA,
such broader meaning shall apply in so far as such broader meaning is
applicable to the real or personal property owned, operated or leased by
the Company or its subsidiaries and located in such state.
(s) Brokers and Finders. Neither the Company nor any of its
-------------------
subsidiaries nor any of their respective officers, directors, employees or
agents has utilized any broker, finder, placement agent or financial
advisor or incurred any liability for any fees or commissions in connection
with any of the transactions contemplated hereby, except that the special
committee of the Company's Board of Directors has engaged A.G. Edward &
Sons, Inc. to deliver a fairness opinion in connection with this Agreement.
(t) DGCL Section 203. The Board of Directors of the Company has
----------------
taken all action necessary to exempt from the provisions of Section 203 of
the Delaware General Corporation Law ("Section 203"), to the extent
-----------
applicable, this Agreement, any acquisition by the Investors of 8.5%
Convertible Preferred Stock pursuant to this Agreement and the Certificate
of Designations and any conversion by the Investors of 8.5% Convertible
Preferred Stock into Common Stock.
<PAGE>
(u) Accuracy of Information in Proxy Statement and Prospectus. Each
---------------------------------------------------------
of the Proxy Statement and the Company's Prospectus prepared in connection
with the Secondary Stock Offering (and any amendments or supplements
thereto), on the date filed with the SEC and on the date declared effective
by the SEC (in the case of the Prospectus), will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 1.032. Representations and Warranties of Investors. Each
-------------------------------------------
Investor represents and warrants to, and agrees with, the Company as follows:
(a) Organization and Good Standing. Each Investor is duly organized,
------------------------------
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to enter into this
Agreement and to carry out its obligations hereunder.
(b) Authorization. The execution, delivery and performance of this
-------------
Agreement and the consummation of the transactions contemplated hereby have
been authorized by all necessary action on behalf of such Investor. No
other proceedings on the part of such Investor are necessary to authorize
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Investor and this Agreement constitutes a
valid and binding obligation of such Investor enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and by an implied covenant of good faith and fair
dealing.
(c) No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of the transactions by such Investor
contemplated hereby and the compliance by such Investor with any of the
provisions hereof will not conflict with, violate or result in a breach of
any provision of, require a consent under, or constitute a default under,
(i) in the case of any Investor that is not a natural person, any provision
of the limited partnership agreement, certificate of incorporation, by-laws
or other governing instrument of such Investor, as the case may be, or (ii)
(A) any mortgage, note, indenture, lease, loan agreement, warrant or other
agreement or instrument or (B) any permit, concession, license, judgment,
order, injunction, statute, law, rule or regulation of any governmental
entity, securities exchange or any other Person, in the case of (A) or (B),
binding on or otherwise applicable to such Investor or its or his
properties or assets.
(d) No Consents. No consent, approval, order or authorization of, or
-----------
registration, declaration or filing with, any governmental entity is
required in connection with the execution, delivery and performance of this
Agreement by such Investor and the
<PAGE>
consummation of the transactions by such Investor hereunder, except for any
filings with the SEC required to be made by it or him after any Closing.
(e) Legal Proceedings. There are no legal, administrative,
-----------------
arbitration or other proceedings, claims, actions or governmental
investigations of any nature pending against such Investor or to which such
Investor or any of its or his assets are subject, and, to the best
knowledge of such Investor, there has not been threatened any such
proceeding, claim, action or governmental investigation against such
Investor in each case which, if adversely determined, would interfere with
the consummation of the transactions contemplated by this Agreement. As of
the date hereof, such Investor is not subject to any order, writ, judgment,
injunction or decree which would interfere with the consummation of the
transactions contemplated by this Agreement.
(f) Securities Act. Such Investor is acquiring the 8.5%
--------------
Convertible Preferred Stock solely for the purpose of investment and not
with a view to, or for resale in connection with, any distribution thereof
in violation of the Securities Act.
(g) Brokers and Finders. Neither such Investor nor (if applicable)
-------------------
any of its officers, directors, employees or agents has utilized any
broker, finder, placement agent or financial advisor or incurred any
liability for any fees or commissions in connection with any of the
transactions contemplated hereby.
ARTICLE IV.
Additional Agreements of the Parties
------------------------------------
Section 1.041. Taking of Necessary Action. Each of the parties hereto
--------------------------
agrees to use all reasonable efforts promptly to take or cause to be taken all
action and promptly to do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to fulfill the conditions,
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the foregoing, the Company and the Investors will, and the
Company shall cause its subsidiaries to, each use all reasonable efforts to make
all filings and obtain all consents of governmental entities or other persons
relating to such party which may be necessary or, in the opinion of the Company
or the Investors, as the case may be, advisable for the consummation of the
transactions contemplated by this Agreement.
Section 1.042. Conduct of Business. Except as otherwise required to
-------------------
perform its obligations under this Agreement or any agreement or arrangement
contemplated herein, from the date hereof to the Initial Closing Date, the
Company shall, and shall cause each of its subsidiaries to:
(a) conduct its operations in accordance with its ordinary course of
business and consistent with past practice;
<PAGE>
(b) unless required pursuant to the terms of this Agreement, or
consented to in writing by the Investors, not amend or in any way alter its
certificate of incorporation or by-laws;
(c) not engage in any other act, other than in the ordinary course of
business and consistent with past practice, that would have a Material
Adverse Effect or in any way delay or impair consummation of the
transactions contemplated by this Agreement;
(d) not change the number of shares of the authorized or issued
capital stock of the Company, issue or grant any security, option, warrant,
call, commitment, subscription, or agreement of any character relating to
the authorized or issued capital stock of the Company or any of its
subsidiaries, or any securities convertible into shares of such stock
(except for grants of options to purchase Common Stock previously approved
by the Company's Board of Directors to be granted pursuant to existing
employee benefit plans of the Company and except in connection with any
transaction permitted by Section 4.02(g) below), split, combine or
reclassify any shares of the capital stock of the Company, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of the capital stock of the
Company, or redeem or otherwise acquire any shares of such capital stock;
(e) not increase the number of directors of the Board of Directors of
the Company without the express written consent of the Investors;
(f) not change its accounting policies or procedures;
(g) not acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, except for such transactions which in the aggregate involve
consideration of less than $10,000,000 (or, with the consent of the
Investors holding a majority of the aggregate commitments hereunder,
$15,000,000);
(h) not sell, lease, encumber or otherwise dispose of, or agree to
sell, lease (whether such lease is an operating or capital lease), encumber
or otherwise dispose of, any of its assets other than dispositions in the
ordinary course of business consistent with past practice which are not
material, individually or in the aggregate, to the Company and its
subsidiaries taken as a whole and except for any other such transactions
which are on market terms and which involve aggregate consideration of less
than $1,000,000;
(i) not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any of its subsidiaries; and
<PAGE>
(j) not do any other act which would cause any representation or
warranty in this Agreement to be or become untrue in any material respect.
Section 1.043. Notification of Certain Matters. The Company shall
-------------------------------
promptly provide the Investors with copies of all filings made by the Company
with the SEC, any other governmental authority or stock exchange in connection
with this Agreement and the transactions contemplated hereby.
Section 1.044. Access to Information. Subject to any applicable
---------------------
confidentiality restrictions, between the date hereof and the Initial Closing
Date, the Company will give each Investor and its authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records of the Company and its subsidiaries,
will permit each Investor and its authorized representatives to make such
inspections as such Investor may reasonably request and will cause the Company's
and its subsidiaries' officers to furnish such Investor or its representatives
with such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as such Investor may
from time to time reasonably request.
Section 1.045. Restrictions on Sale or Transfer; Legend. The
----------------------------------------
Investors hereby acknowledge and agree that shares of 8.5% Convertible Preferred
Stock will be, upon the sale and purchase of such shares in accordance with the
terms hereof, "restricted securities" under the Securities Act. The Investors
further agree that they will not, directly or indirectly, offer, sell, transfer,
assign, pledge, hypothecate or otherwise dispose, including through the use of
any derivative instrument or arrangement, of the beneficial ownership of (any
such act, a "Transfer") any 8.5% Convertible Preferred Stock or Common Stock
--------
issued or issuable upon conversion of the 8.5% Convertible Preferred Stock or
any shares of Common Stock otherwise acquired hereunder, except in accordance
with the provisions contained in Article VII hereof. In addition, prior to the
end of the PIK Period, the Investors will not engage in any "short sales" of
Common Stock or any other securities of the Company, including through the use
of any derivative instrument or arrangement.
(b) The Investors acknowledge and agree that as of the date hereof
neither the 8.5% Convertible Preferred Stock nor the shares of Common Stock
issuable upon conversion thereof or any shares of Common Stock otherwise
acquired hereunder have been nor will be registered under the Securities Act or
the securities laws of any state and that they may be sold or otherwise disposed
of only in one or more transactions registered under the Securities Act (and,
where applicable, such laws) or as to which an exemption from the registration
requirements of the Securities Act (and, where applicable, such laws) is
available. The Investors acknowledge that, except as provided in this Agreement,
the Investors have no right to require the Company to register the 8.5%
Convertible Preferred Stock or such Common Stock. The Investors further
acknowledge and agree that each certificate for the 8.5% Convertible Preferred
Stock and such Common Stock shall bear the following legend:
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A REGISTRATION IS
IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THIS CERTIFICATE IS
ISSUED PURSUANT TO AND SUBJECT TO THE RESTRICTIONS ON TRANSFER, VOTING AND OTHER
PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS OF JULY 31, 1997 AS AMENDED
AND RESTATED AS OF SEPTEMBER __, 1997 AMONG THE COMPANY, SOCO AND THE INVESTORS
REFERRED TO THEREIN A COPY OF WHICH IS ON FILE WITH THE COMPANY. EXCEPT AS
PROVIDED IN SUCH STOCK PURCHASE AGREEMENT, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE NOT TRANSFERABLE AND ANY PURPORTED TRANSFER IN VIOLATION OF THE
PROVISIONS OF SUCH STOCK PURCHASE AGREEMENT SHALL BE VOID AND OF NO FORCE AND
EFFECT.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Investor holding such
certificate shall have delivered to the Company a copy of a letter from the
staff of the SEC, or an opinion of counsel, in form and substance satisfactory
to the Company, to the effect that such legend is not required for purposes of
the Securities Act; (ii) the reference to the provisions to this Agreement in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the proceeding clauses (i) and (ii) are
both satisfied. In addition, such certificates shall bear any other legend as
may be required by law.
Section 1.046. Designated Directors. The Company hereby agrees to
--------------------
cause Arnold L. Chavkin and William E. Macaulay to be elected to the Company's
Board of Directors as of the Initial Closing Date to fill vacancies on the Board
that will exist at that date.
Section 1.047. New York Stock Exchange Listing. As promptly as
-------------------------------
practicable following the Initial Closing Date, the Company will apply to the
New York Stock Exchange to list the shares of Common Stock into which the 8.5%
Convertible Preferred Stock may be converted and the other shares of Common
Stock acquired hereunder, and the Company will use its reasonable efforts to
cause such shares to be listed on the New York Stock Exchange as promptly
thereafter as practicable. At any time during which the 8.5% Convertible
Preferred Stock is outstanding, the Company agrees that it shall not, without
the consent of the Investors that own at least 97% of the outstanding 8.5%
Convertible Preferred Stock, register the 8.5% Convertible Preferred Stock under
Section 12 of the Exchange Act.
Section 1.048. Use of Proceeds. The Company will use the net proceeds
---------------
derived by it from the issuance of the shares of 8.5% Convertible Preferred
Stock and the Common Stock in the Initial Closing to pay a portion of the
purchase price of the shares of Common Stock to be
<PAGE>
redeemed pursuant to the SOCO Stock Redemption. The Company will use the net
proceeds derived by it from the issuance of the shares of 8.5% Convertible
Preferred Stock in the Second Closing in the manner approved by the Company's
Board of Directors.
Section 1.049. Approval by Company's Stockholders. (a) The Company
----------------------------------
shall take all action required by the NYSE's rules and regulations to obtain the
approval of the Company's stockholders of the issuance and sale of 8.5%
Convertible Preferred Stock to the Investors hereunder, which consent may be
obtained (subject to the applicable rules and regulations of the NYSE, the
Exchange Act and other applicable laws) via the written consent of the requisite
percentage of the Company's stockholders (the "Company Stockholders' Approval").
------------------------------
Subject to its fiduciary duties under applicable law, the Company's Board of
Directors shall recommend that the Company's stockholders approve the issuance
and sale of 8.5% Convertible Preferred Stock hereunder.
(b) Promptly following the date hereof, the Company will prepare and
file with the SEC a proxy statement to be distributed to the Company's
stockholders in connection with the issuance and sale of the 8.5% Convertible
Preferred Stock hereunder, including any amendments or supplements thereto (the
"Proxy Statement"). The Company will use all reasonable efforts to have or
---------------
cause the Proxy Statement to be declared effective as promptly as practicable.
The Company agrees to provide the Investors and their respective counsel with
any written comments the Company or its counsel may receive from the SEC with
respect to the Proxy Statement promptly after the receipt of such comments. The
form and substance of the Proxy Statement shall be determined by the Company, in
its reasonable discretion. The Company will use all reasonable efforts to cause
the Proxy Statement (i) not to contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading and (ii) to comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder.
Section 4.10. No Additional Shares. The Company shall not issue or
--------------------
sell shares of 8.5% Convertible Preferred Stock except as contemplated under
this Agreement.
ARTICLE V.
Conditions Precedent
--------------------
Section 1.051. Conditions to Each Party's Obligations to Effect each
-----------------------------------------------------
Closing. The obligation of each party hereto to consummate each Closing
- -------
hereunder shall be subject to the satisfaction on the related Closing Date of
each of the following conditions:
(a) No Injunction. There shall not be in effect any order, decree,
-------------
ruling or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby.
<PAGE>
(b) Regulatory Approvals and Company Stockholders' Approval. All
-------------------------------------------------------
regulatory approvals necessary for the consummation of the issuance of the
8.5% Convertible Preferred Stock to be issued and sold hereunder on such
Closing Date and the other transactions contemplated hereby to occur by
such Closing Date shall have been obtained and there shall have been no
material modification to the terms of the transactions contemplated by this
Agreement. The Company Stockholders' Approval shall have been obtained.
(c) Related Transactions. Prior to or simultaneously with the
--------------------
Initial Closing, (i) the Secondary Stock Offering shall be consummated in
the manner contemplated by the Prospectus contained in the Company's
Registration Statement on Form S-3 filed with the SEC, and (ii) the SOCO
Stock Redemption shall be consummated in accordance with the terms of the
Share Repurchase Agreement.
Section 1.052. Conditions to the Investors' Obligations. The
----------------------------------------
obligation of each Investor to consummate each Closing hereunder shall be
subject to the satisfaction on the related Closing Date of each of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement which are qualified
as to materiality or refer to a Material Adverse Effect shall be true and
correct, and which are not so qualified shall be true and correct in all
material respects, in each case, as of the date of this Agreement and on
and as of such Closing Date with the same effect as though made on and as
of such dates.
(b) Covenants. The Company shall have performed in all material
---------
respects all obligations and complied with all agreements, undertakings,
covenants and conditions required by it to be performed at or prior to such
Closing.
(c) Officer's Certificate. The Investors shall have received from
---------------------
the Company a certificate, signed by an executive officer of the Company,
to the effect that the conditions set forth in the foregoing clauses (a)
and (b) have been satisfied with respect to it.
(d) Certificate of Designations. The Certificate of Designations
---------------------------
shall have been duly filed with the Secretary of State of Delaware.
(e) Board of Directors. The nominees designated by the Investor to
------------------
be directors in accordance with Section 4.06 shall have been duly elected
or appointed, effective as of the Initial Closing, to the Board of
Directors of the Company.
(f) No Change of Control. There shall not have occurred, on or
--------------------
prior to such Closing, an acquisition (by tender offer, exchange offer,
merger consolidation, share exchange or otherwise) by a third party of the
Company (or its shares or assets) in which
<PAGE>
such third party acquires, directly or indirectly, at least a majority of
the combined voting power of the outstanding capital stock of the Company.
(g) Minimum and Maximum Drawdowns. In the case of the Initial
-----------------------------
Closing, the aggregate number of shares of 8.5% Convertible Preferred Stock
to be issued and sold at the Initial Closing shall not be less than
1,600,000, and, in the case of the Second Closing, the aggregate number of
shares of 8.5% Convertible Preferred Stock to be issued and sold at the
Second Closing shall not exceed the difference of (i) 2,520,000 minus (ii)
-----
the aggregate number of shares of 8.5% Convertible Preferred Stock issued
and sold to the Investors at the Initial Closing.
(h) Additional Conditions to Second Closing. In the case of the
---------------------------------------
Second Closing, each of the following shall have occurred: (i) the
Company's Board of Directors shall have approved of the Company's proposed
use of the net proceeds derived by the Company from the issuance of the
shares of 8.5% Convertible Preferred Stock in the Second Closing; (ii) the
average closing sales price of a share of the Company's Common Stock for
the ten NYSE trading days ending prior to the date the Notice of Issuance
for such Second Closing Date is delivered shall equal or exceed 90% of the
public offering price of shares of Common Stock in the Secondary Stock
Offering; and (iii) the Second Closing Date shall occur on or prior to
December 31, 1997.
(i) Additional Certificates, Opinions Etc. The Company shall have
-------------------------------------
executed and delivered, or caused to be executed and delivered, to the
Investors, such certificates and other documents related to the
consummation of the transactions contemplated hereby as may be reasonably
requested by the Investors, including (i) an opinion of Simpson Thacher &
Bartlett, counsel to the Company, reasonably satisfactory to counsel for
the Investors, as to (A) validity of, and due authorization by the
Company's Board of, this Agreement and the transactions contemplated
herein, (B) compliance by the Company with Section 7.24 of the Amended and
Restated Agreement and Plan of Merger, dated as of March 20, 1996, among
SOCO, the Company and Gerrity Oil & Gas Corporation, (C) due issuance of
the 8.5% Convertible Preferred Stock and the Common Stock issued hereunder
at the Initial Closing and (D) other issues reasonably requested by the
Investors, and (ii) the agreements and certificates set forth in Schedule
5.02 hereof.
Section 1.053. Conditions to the Company's Obligations to any Closing.
------------------------------------------------------
The obligation of the Company to consummate each Closing hereunder shall be
subject to the satisfaction on the related Closing Date of each of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in this Agreement which are qualified
as to materiality shall be true and correct, and which are not so qualified
shall be true and correct in all material respects, in each case, as of the
date of this Agreement and on and as of such Closing Date with the same
effect as though made on and as of such dates.
<PAGE>
(b) Covenants. The Investors shall have performed in all material
---------
respects all obligations and complied with all agreements, undertakings,
covenants and conditions required by it to be performed at or prior to such
Closing.
(c) Officer's Certificate. The Company shall have received from
---------------------
each of the Investors, a certificate, signed by such Investor to the effect
that the conditions set forth in the foregoing clauses (a) and (b) have
been satisfied with respect to such Investor.
(d) Additional Certificates, Etc. Each of the Investors shall have
----------------------------
executed and delivered, or caused to be executed and delivered, to the
Company such certificates and other documents related to the consummation
of the transactions contemplated hereby as may be reasonably requested by
the Company.
ARTICLE VI.
Registration Rights
-------------------
Section 1.061. Definition of Registrable Shares. As used in this
--------------------------------
Agreement, "Registrable Shares" shall mean all shares of 8.5% Convertible
------------------
Preferred Stock (and/or the shares of Common Stock into which such shares of
Preferred Stock are convertible) and the shares of Common Stock acquired
hereunder by the Investors at or after any Closing Date, together with any
securities issued or issuable with respect to any such 8.5% Convertible
Preferred Stock (or such Common Stock) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular shares of
Registrable Shares, such securities shall cease to be Registrable Shares when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) such
securities shall have been distributed pursuant to Rule 144 (or any successor
provision) under the Securities Act (provided that if all Registrable Shares are
then eligible for sale pursuant to Rule 144 at the same time, without limitation
as to volume, then all such Registrable Shares shall cease to be Registrable
Shares), (iii) such securities shall have been otherwise transferred, new
certificates representing such securities not bearing a legend restricting
transfer shall have been delivered by the Company and subsequent disposition of
such securities shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in force, (iv)
such securities shall have ceased to be outstanding, or (v) the holder or
holders thereof shall agree in writing that such Registrable Shares shall no
longer be Registrable Shares (the Investors and any permitted assignee of the
Investors' rights and duties hereunder are referred to herein as the "Holders"
-------
or individually as a "Holder").
------
<PAGE>
Section 1.062. Demand Registration. (a) Request for Registration.
------------------- ------------------------
Subject to the conditions and limitations set forth in Section 6.05, at any time
after the PIK Period, the Holder or Holders of not less than one-third of
Registrable Shares then outstanding may make a written request for registration
under the Securities Act of all or part of its or their Registrable Shares
pursuant to this Section 6.02 (a "Demand Registration"); provided that the
------------------- --------
number of shares of Registrable Shares proposed to be sold shall be at least 25%
of the aggregate number of shares of Registrable Shares then outstanding
(subject to appropriate adjustment for any stock dividend, stock split,
combination, recapitalization, merger, consolidation, reorganization or similar
occurrence); and provided further that the Holders shall be entitled to no more
-------- -------
than three demands in the aggregate. Such request will specify the aggregate
number of shares of Registrable Shares proposed to be sold and will also specify
the intended method of disposition thereof. Within ten days after receipt of
such request, the Company will give written notice of such registration request
to all other Holders of Registrable Shares and include in such registration all
Registrable Shares with regard to which the Company has received written
requests for inclusion therein within fifteen business days after the receipt by
the applicable Holders of the Company's notice. Each such request will also
specify the aggregate number of shares of Registrable Shares to be registered
and the intended method of disposition thereof.
(b) Priority on Demand Registration. If the Holders of a majority
-------------------------------
in number of shares of the Registrable Shares to be registered in a Demand
Registration so elect, the offering of such Registrable Shares pursuant to such
Demand Registration shall be in the form of an underwritten offering. In such
event, if the managing underwriter or underwriters of such offering deliver a
written opinion to the Company and the Holders that either because of (A) the
kind of securities that the Holders, the Company and any other persons or
entities intend to include in such offering, or (B) the size of the offering
that the Holders, the Company and other persons or entities intend to make, the
success of the offering would be materially and adversely affected by inclusion
of the Registrable Shares requested to be included, then (i) in the event that
the size of the offering is the basis of such managing underwriter's opinion,
the number of shares to be offered shall be reduced in the following order to
achieve the amount recommended by such managing underwriter: (x) first, shares
proposed to be offered by persons or entities other than the Holders and the
Company shall be reduced or eliminated to achieve the recommended amount, (y)
next, shares proposed to be offered by the Company shall be reduced or
eliminated to achieve the recommended amount, and (z) finally, shares proposed
to be offered by the Holders shall be reduced on a pro rata basis among the
Holders on the basis of the number of Registrable Shares owned by the Holders;
and (ii) in the event that the combination of securities to be offered is the
basis of such managing underwriter's opinion, then shares will be excluded from
such offering in the order specified in the preceding clause (i). To the extent
Registrable Shares so requested to be registered are excluded from such
offering, then the Holders shall have the right to one additional Demand
Registration under this Section 6.02 with respect to such Registrable Shares,
provided that the failure of such Registrable Shares to be registered is through
no fault of such Holder. In connection with any Demand Registration, the Company
agrees that it shall not, without the consent of the Holders of a majority in
number of shares of the Registrable Shares to be registered in such Demand
Registration and the manager of the underwriting, transfer or sell
<PAGE>
Common Stock in a public distribution prior to 90 days (or such other shorter
period of time as the manager of the underwriting may require) after the
effective date of the registration statement.
(c) Selection of Underwriters and Counsel. If any Demand
-------------------------------------
Registration is in the form of an underwritten offering, the Holders of a
majority in number of the shares of Registrable Shares to be registered will
select and obtain the services of the investment banker or investment bankers
and manager or managers that will administer the offering and the counsel to
such investment bankers and managers; provided that such investment bankers,
--------
managers and counsel are reasonably acceptable to the Company.
Section 1.063. Piggyback Registration. If the Company proposes to
----------------------
file a registration statement under the Securities Act with respect to an
offering for its own account of any class of its equity securities (other than a
registration statement on Form S-8 (or any successor form) or any other
registration statement relating solely to director and/or employee benefit plans
or filed in connection with an exchange offer, a transaction to which Rule 145
(or any successor rule) under the Securities Act applies or an offering of
securities solely to the Company's existing stockholders) (each, an "Excluded
--------
Registration Statement"), then the Company shall in each case give written
- ----------------------
notice of such proposed filing to the Holders of Registrable Shares as soon as
practicable (but no later than ten business days) before the anticipated filing
date, and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Shares as each such Holder may request. Each
Holder of Registrable Shares desiring to have such holder's Registrable Shares
included in such registration statement shall so advise the Company in writing
within five business days after the date of the Company's notice, setting forth
the amount of such Holder's Registrable Shares for which registration is
requested. If the Company's offering is to be an underwritten offering, the
Company shall, subject to the further provisions of this Agreement, use its
reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Holders of the Registrable Shares
requested to be included in the registration for such offering to include such
securities in such offering on the same terms and conditions as any similar
securities of the Company included therein. Moreover, if the registration of
which the Company gives notice involves an underwriting, the right of each
Holder to registration pursuant to this Section 6.03 shall, unless the Company
otherwise agrees, be conditioned upon such Holder's participation as a seller in
such underwriting and its execution of an underwriting agreement with the
managing underwriter or underwriters selected by the Company. Notwithstanding
the foregoing, if the managing underwriter or underwriters of such offering
deliver a written opinion to the Holders of Registrable Shares that either
because of (A) the kind of securities that the Holders, the Company and any
other persons or entities intend to include in such offering or (B) the size of
the offering that the Holders, the Company and other persons or entities intend
to make, the success of the offering would be materially and adversely affected
by inclusion of the Registrable Shares requested to be included, then (i) in the
event that the size of the offering is the basis of such managing underwriter's
opinion, the number of shares to be offered shall be reduced in the following
order to achieve the amount recommended by such managing underwriter: (w) first,
shares proposed to be offered by persons or entities other than the Holders, the
Company and persons or entities exercising demand registration rights shall be
reduced or eliminated to achieve the recommended amount, (x) next, shares
proposed to be
<PAGE>
offered by the Holders shall be reduced (or eliminated) on a pro rata basis
among the Holders on the basis of the number of Registrable Shares owned by the
Holders, (y) next, shares proposed to be offered by the Company shall be reduced
or eliminated, and (z) finally, shares proposed to be offered by persons or
entities exercising demand registration rights shall be reduced; and (ii) in the
event that the combination of securities to be offered is the basis of such
managing underwriter's opinion, then shares will be excluded from such offering
in the order specified in the preceding clause (i). Any Registrable Shares
excluded from an underwriting shall be withdrawn from registration and shall
not, without the consent of the Company and the manager of the underwriting, be
transferred in a public distribution prior to the earlier of 90 days (or such
other shorter period of time as the manager of the underwriting may require)
after the effective date of the registration statement or 120 days after the
date the Holders of such Registrable Shares are notified of such exclusion;
provided that any shares of Holders excluded from an underwriting shall, to the
- --------
extent practicable in the discretion of the managing underwriter and the
Company, be the first shares sold in an over-allotment sale for the related
offering.
Section 1.064. Registration Procedures. Whenever, pursuant to Section
-----------------------
6.02 or 6.03, any of the Holders of Registrable Shares has requested that any
Registrable Shares be registered, the Company will, subject to the provisions of
Section 6.05, use reasonable best efforts to effect the registration and the
sale of such Registrable Shares in accordance with the intended method of
disposition thereof as promptly as practicable, and in connection with any such
request, the Company will:
(a) in connection with a request pursuant to Section 6.02, prepare
and file with the SEC, as promptly as practicable (and not later than 30
days (if a Form S-2 or S-3 is to be used) or 60 days (if a Form S-1 is to
be used) after receipt of a request to file a registration statement with
respect to Registrable Shares), a registration statement on any form for
which the Company then qualified and which counsel for the Company shall
deem appropriate and which form shall be available for the sale of such
Registrable Shares in accordance with the intended method of distribution
thereof, and use its reasonable best efforts to cause such registration
statement to become effective; provided that if the Company shall furnish
--------
to the Holders making such a request a certificate signed by either the
chief financial officer or the chief accounting officer of the Company
stating that in such officer's good faith judgment it would be
significantly disadvantageous to the Company for such a registration
statement to be filed on or before the date filing would be required
(including without limitation the required disclosure of material non-
public information prior to the time that it would otherwise be required by
applicable law or securities exchange regulation to be disclosed), the
Company shall have an additional period of not more than 90 days within
which to file such registration statement and provided further (i) that,
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to one counsel selected by
the Holders of a majority in number of shares of the Registrable Shares
covered by such registration statement copies of all such documents
proposed to be filed, which documents will be subject to the review of such
counsel, and (ii) that after the filing of the registration statement, the
Company will promptly notify each of the selling Holders of Registrable
<PAGE>
Shares of any stop order issued or, to the knowledge of the Company,
threatened by the SEC and take all reasonable actions to prevent the entry
of such stop order or to remove it if entered;
(b) in connection with a registration pursuant to Section 6.02,
prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period
of not less than 60 days or such shorter period as shall terminate when all
shares of Registrable Shares covered by such registration statement have
been sold (but not before the expiration of the 90-day period referred to
in Section 4(3) of the Securities Act and Rule 174 thereunder, if
applicable), and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the selling Holders thereof set forth in such registration
statement;
(c) as soon as reasonably practicable, furnish to each of the selling
Holders, prior to filing a registration statement, copies of such
registration statement as proposed to be filed, and thereafter furnish to
such selling Holders such number of copies of such registration statement,
each amendment and supplement thereto (in each case, if specified by such
Holder including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as a selling Holder may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by such selling
Holder;
(d) with reasonable promptness, use its reasonable best efforts to
register or qualify (or cause to be registered or qualified) such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions within the United States as any selling Holder (or managing
underwriter in the case of an underwriting offering) reasonably (in light
of such selling Holder's or managing underwriter's intended plan of
distribution) requests and do any and all other acts and things that may be
reasonably necessary or advisable to enable such selling Holder to
consummate the disposition in such jurisdictions of the Registrable Shares
owned by such selling Holder; provided that the Company will not be
--------
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 6.04(d),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction;
(e) with reasonable promptness, use its reasonable best efforts to
cause the Registrable Shares covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the selling Holder or Holders thereof to consummate
the disposition of such Registrable Shares;
<PAGE>
(f) promptly notify each selling Holder of such Registrable Shares,
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the occurrence of any event known to the
Company requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated
therein as necessary to make statements therein not misleading and promptly
make available to each selling Holder any such supplement or amendment;
(g) in connection with a request pursuant to Section 6.02, enter into
an underwriting agreement in customary form, the form and substance of such
underwriting agreement being subject to the reasonable satisfaction of the
Company;
(h) with reasonable promptness make available for inspection by any
selling Holder, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by any such selling Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
-----------
documents and properties of the Company (collectively, the "Records"), as
-------
well as access at reasonable times to the Company's executive officers, key
employees, independent accountants and independent reserve engineers as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested for such purpose by any such
Inspector in connection with such registration statement; provided,
--------
however, that the selection of any Inspector other than a selling Holder
-------
shall be subject to the consent of the Company, which shall not be
unreasonably withheld. Each Inspector that actually reviews Records
supplied by the Company that include information that the Company
determines, in good faith, to be confidential ("Confidential Information")
------------------------
shall be required, prior to any such review, to execute an agreement with
the Company providing that such Inspector shall not disclose any
Confidential Information unless such disclosure is required by applicable
law or legal process. Each selling Holder of Registrable Shares agrees
that Confidential Information obtained by it as a result of such
inspections shall not be used by it as the basis for any transactions in
securities of the Company unless and until such information is made
generally available to the public. Each selling Holder of Registrable
Shares further agrees that it will, upon learning that disclosure of
Confidential Information is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of the Confidential
Information. Each selling Holder also agrees that the due diligence
investigation made by the Inspectors shall be conducted in a manner that
will not unreasonably disrupt the operations of the Company or the work
performed by the Company's officers and employees;
<PAGE>
(i) in the event such sale is pursuant to an underwriting offering,
use its reasonable best efforts to obtain a comfort letter or letters from
the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by comfort letters as the
managing underwriter reasonably requests;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve months, beginning within two months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(k) with reasonable promptness, use its reasonable best efforts to
cause all such Registrable Shares to be listed on each securities exchange
on which the Common Stock of the Company is then listed, provided that the
applicable listing requirements are satisfied.
Each selling Holder of Registrable Shares agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 6.04(f), such selling Holder will forthwith discontinue disposition of
Registrable Shares pursuant to the registration statement covering such
Registrable Shares until such selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6.04(f) hereof, and,
if so directed by the Company, each selling Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
such selling Holder's possession, of the prospectus covering such Registrable
Shares current at the time of receipt of such notice. In the event the Company
shall give any such notice, the Company shall extend the period during which
such registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in Section 6.04(b)) by the greater
of 30 days or by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 6.04(f) hereof to and
including the date when each selling Holder of Registrable Shares covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 6.04(f) hereof. Each selling
Holder also agrees to notify the Company if any event relating to such selling
Holder occurs that would require the preparation of a supplement or amendment to
the prospectus so that such prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Section 1.065. Conditions and Limitations. (a) The Company's
--------------------------
obligations under Section 6.02 shall be subject to the following limitations:
(i) the Company need not file a registration statement either (i)
during the period starting with the date 60 days prior to the Company's
estimated date of filing of, and ending 90 days after the effective date
of, any registration statement pertaining to securities of the Company
(other than an Excluded Registration Statement), provided that if such
--------
Company registration statement is not filed within 90 days after the first
date on
<PAGE>
which the Company notifies a Holder of Registrable Shares that it will
delay a Demand Registration pursuant to this clause (i), the Company may
not further postpone such Demand Registration pursuant to this clause; or
(ii) during the period specified in the first proviso of Section 6.04(a);
(ii) the Company shall not be required to furnish any audited
financial statements other than those audited statements customarily
prepared at the end of its fiscal year, or to furnish any unaudited
financial information with respect to any period other than its regularly
reported interim quarterly periods unless in the absence of such other
unaudited financial information the registration statement would contain an
untrue statement of material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(iii) except as provided in Section 6.02(b), the Company shall not be
required to file more than three Demand Registrations. A registration
statement will not count as a Demand Registration until it has become
effective; and
(iv) the Company shall have received the information and documents
specified in Section 6.06 and each selling Holder shall have observed or
performed its other covenants and conditions contained in such section.
(b) The Company's obligation under Section 6.03 shall be subject to
the limitations and conditions specified in such Section and in Section
6.05(a) above, and to the condition that the Company may at any time
terminate its proposal to register its shares and discontinue its efforts
to cause a registration statement to become or remain effective.
Section 1.066. Information from and Certain Covenant of Holders of
---------------------------------------------------
Registrable Shares. The Holders for whom Registrable Shares are to be
- ------------------
registered pursuant to this Agreement shall provide to the Company such
information regarding the Registrable Shares to be so registered, the Holder and
the intended method of disposition of each Registrable Shares as shall
reasonably be required in connection with the action to be taken. Any Holder
whose Registrable Shares is included in a registration statement pursuant to
this Agreement shall execute all consents, powers of attorney, registration
statements and other documents reasonably required to be signed by it in order
to cause such registration statement to become effective. Each selling Holder
covenants that, in disposing of such Holder's shares, each Holder will comply
with all applicable Rules of the SEC adopted pursuant to the Exchange Act.
Section 1.067. Registration Expenses. All Registration Expenses (as
---------------------
defined herein) will be borne by the Company. Underwriting discounts and
commissions applicable to the sale of Registrable Shares shall be borne by each
selling Holder of the Registrable Shares to which such discount or commission
relates, and each selling Holder shall be responsible for the fees and expenses
of any legal counsel, accountants or other agents retained by such selling
Holder and all other out-of-pocket expenses incurred by such selling Holder in
connection with
<PAGE>
any registration under this Agreement. All of the expenses referred to in the
preceding sentence will be excluded from the term "Registration Expenses".
As used herein, the term "Registration Expenses" means all expenses
---------------------
incident to the Company's performance of or compliance with the obligations
imposed upon it in this Article VI (whether or not the registration in
connection with which such expenses are incurred ultimately becomes effective),
including without limitation all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Shares), rating agency fees, printing expenses, messenger and
delivery expenses incurred by the Company, internal expenses incurred by the
Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed, and fees and disbursements of counsel for the Company
and its independent certified public accountants (including the expenses of any
comfort letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company and
the fees and expenses of other persons retained by the Company in connection
with such registration.
Section 1.068. Indemnification; Contributions. (a) Indemnification by
------------------------------ ------------------
the Company. The Company agrees to indemnify and hold harmless each selling
- -----------
Holder of Registrable Shares, its officers, directors and agents and each
person, if any, who controls such selling Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Shares or in
any amendment or supplement thereto or in any preliminary prospectus relating to
the Registrable Shares, or arising out of or based upon 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 expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such selling Holder or on
such selling Holder's behalf expressly for use therein and provided further,
----------------
that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus for which such selling
Holder had the primary responsibility to distribute, the indemnity agreement
contained in this Section 6.08(a) shall not apply to the extent that any such
loss, claim, damage, liability or expense results from the fact that a copy of
the final prospectus was not sent or given to the person asserting any such
losses, claims, damages, liabilities or expenses at or prior to the written
confirmation of the sale of the Registrable Shares concerned to such person if a
final prospectus is made available by the Company on a timely basis. The Company
also agrees to include in any underwriting agreement with any underwriters of
the Registrable Shares provisions indemnifying and providing for contribution to
such underwriters, their officers and directors and each person who controls
such
<PAGE>
underwriters on substantially the same basis as the provisions of this Section
6.08 indemnifying and providing for contribution to the selling Holders.
(b) Indemnification by Holders of Registrable Shares. Each selling
------------------------------------------------
agrees to indemnify and hold harmless the Company, its officers, directors and
agents and each person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Shares or in
any amendment or supplement thereto or in any preliminary prospectus relating to
the Registrable Shares, or arising out of or based upon 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, provided (i) that such
--------
such losses, claims, damages, liabilities or expenses arise out of, or, are
based upon any such untrue statement or omission or allegation thereof based
upon information furnished in writing to the Company by such selling Holder or
on such selling Holder's behalf expressly for use therein, (ii) that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, the indemnity agreement contained
in this Section 6.08(b) shall not apply to the extent that any such loss, claim,
damage, liability or expense results from the fact that a copy of the final
prospectus was not sent or given to the person asserting any such losses,
claims, damages, liabilities or expenses at or prior to the written confirmation
of the sale of the Registrable Shares concerned to such person, and (iii) that
no selling Holder shall be liable for any indemnification under this Section
6.08 in an aggregate amount that exceeds the total net proceeds (before
deducting expenses other than underwriting discounts or commissions) received by
such selling Holder from the offering. Each selling Holder also agrees to
include in any underwriting agreement with underwriters of the Registrable
Shares provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who controls such
underwriters on substantially the same basis as the provisions of this Section
6.08 indemnifying and providing for contribution to the Company.
(c) Conduct of Indemnification Proceedings. If any action or
--------------------------------------
proceeding (including any governmental investigation) shall be brought or
asserted against any indemnified party hereunder in respect of which indemnity
may be sought from an indemnifying party, the indemnifying party shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such indemnified party, and shall assume the payment of all expenses. Such
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory to such indemnified party,
or (iii) the named parties to any such action or proceeding (including any
impleaded parties) include both such indemnified party and such indemnifying
party and such indemnified party shall have been advised by counsel in writing
that there may be one or more legal defenses available to such indemnified party
that are different from or additional to those available to the indemnifying
party,
<PAGE>
in which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel reasonably acceptable to the
indemnifying party at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action of
proceeding on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for such
indemnified party, which firm shall be designated in writing by such indemnified
party. The indemnifying party shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if settled with
its written consent, or if there is a final judgment for the plaintiff in any
such action or proceeding, the indemnifying party agrees to indemnify and hold
harmless such indemnified party from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
(d) Contribution. If the indemnification provided for in this
------------
Section 6.08 is unavailable to the Company or the selling Holders in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
the 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 and judgments, in such proportion
as is appropriate to reflect the relative fault of each such party in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative fault of each such party 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 such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 6.08(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by each indemnified
party in connection with investigation or defending any such action or claim.
Notwithstanding the provisions of this Section 6.08(d), no selling Holder shall
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Shares of such selling Holder were offered to the
public exceeds the amount of any damages which such selling Holder 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(i) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
<PAGE>
ARTICLE VII.
Standstill and Confidentiality Provisions
-----------------------------------------
Section 1.071. Certain Definitions. As used in this Article VII, the
-------------------
following terms shall have the following meanings:
(a) "Company Voting Securities" shall mean, collectively, Common
-------------------------
Stock, any preferred stock of the Company that is entitled to vote
generally for the election of directors, any other class or series of
Company securities that is entitled to vote generally for the election of
directors and any other securities, warrants or options or rights of any
nature (whether or not issued by the Company) that are convertible into,
exchangeable for, or exercisable for the purchase of, or otherwise give the
holder thereof any rights in respect of, Common Stock, Company preferred
stock that is entitled to vote generally for the election of directors, or
any other class or series of Company securities that is entitled to vote
generally for the election of directors.
(b) "Effective Date" shall mean the date hereof.
--------------
(c) The "Combined Voting Power" at any measurement date shall mean
---------------------
the total number of votes which could have been cast in an election of
directors of the Company had a meeting of the shareholders of the Company
been duly held based upon a record date as of the measurement date if all
Company Voting Securities then outstanding and entitled to vote at such
meeting were present and voted to the fullest extent possible at such
meeting.
(d) The terms "beneficial ownership" and "group" shall have the
-------------------- -----
respective meanings ascribed to such terms pursuant to Regulation 13D-G
adopted by the SEC under the Exchange Act, as in effect on the date hereof.
(e) "Independent Committee" shall mean the special committee of the
---------------------
Board of Directors of the Company which has been formed to consider a
possible transaction between SOCO and the Company and related matters, the
membership of which committee shall initially consist of Robert J. Clark,
Jay W. Decker and Alexander Lynch, it being understood that any changes in
the membership of such committee shall be effective only if they are
unanimously approved by the Board of Directors of the Company prior to such
change.
(f) "Prior Approval" of (i) the Independent Committee shall mean the
--------------
due adoption by a majority of the members of the Independent Committee of a
resolution setting forth the Independent Committee's approval of a
particular action or matter, which resolution shall have been recorded in
the minutes of meetings of the Independent Committee, or (ii) the Board of
Directors of the Company shall mean the due adoption by a majority of the
members of the Board of Directors in accordance with the Bylaws of the
Company of a
<PAGE>
resolution setting forth the approval of the Board of Directors of a
particular action or matter, which resolution shall have been recorded in
the minutes of meetings of the Board of Directors of the Company.
(g) The term "Approval Body" shall mean the Independent Committee;
-------------
provided, however, that with respect to any transaction (i) proposed by or
-------- -------
on behalf of any Investor prior to the time that such Investor beneficially
owns more than 20% of the outstanding Company Voting Securities and (ii) in
which the proposed consideration to be offered to all holders of Common
Stock is identical on a per share basis, the Approval Body for such
transaction shall be the Board of Directors of the Company.
(h) The term "Limitation Period" shall mean a period of two years
-----------------
after the Effective Date; provided, however, that if during such two-year
-------- -------
period any Investor has either (i) acquired any amount of the Company
Voting Securities pursuant to this Agreement, (ii) acquired more than 5.0%
of the Combined Voting Power in any other manner, or (iii) acquired any
Company Voting Securities in any other manner which, when added to Company
Voting Securities previously held by such Investor, gives such Investor
more than 10.0% of the Combined Voting Power, then in any such event the
Limitation Period shall mean a period of five years after the Effective
Date.
(i) The term "affiliate" shall mean, with respect to any Investor
---------
and its managing partner, any other person (the "affiliated person") which
directly or indirectly is controlled by such Investor (or its managing
partner), provided that no affiliated person that is a portfolio company of
such Investor (or its managing partner) shall be considered an affiliate of
any such Investor and its managing partner for purposes of this Article
VII.
Section 1.072. Confidentiality Covenants. (a) Evaluation Material. (i)
------------------------- -------------------
Each Investor hereby agrees to treat any information concerning the Company
(whether prepared by the Company, SOCO, their advisors or otherwise) which
will be furnished to such Investor by or on behalf of the Company, SOCO or
their advisors in accordance with the provisions of this Section 7.02
(herein referred to as the "Evaluation Material") and to take or abstain
-------------------
from taking certain other actions herein set forth. The term "Evaluation
----------
Material" includes all non-public information in any form concerning the
--------
Company and its subsidiaries and affiliates that is provided to each
Investor or its directors, officers, employees, agents or advisors by or on
behalf of the Company. The term "Evaluation Material" does not include
-------------------
information which an Investor can demonstrate (A) is already in such
Investor's possession, provided that such information is not known by such
Investor after reasonable inquiry to be subject to another confidentiality
agreement with or other obligation of secrecy to the Company or another
party, (B) becomes generally available to the public other than as a result
of a disclosure by such Investor or its directors, officers, employees,
agents or advisors, or (C) becomes available to such Investor, or is
independently developed by such Investor, on a non-confidential basis from
a source other than the Company, SOCO or their advisors, provided that such
source is not known by such Investor, after reasonable inquiry, to be bound
by a confidentiality agreement with or other obligation of secrecy to the
Company or another party.
<PAGE>
(ii) Each Investor hereby agrees that the Evaluation Material will
be used solely for the purpose of evaluating a possible transaction between the
Company and such Investor (and/or, if applicable, SOCO), and that such
information will be kept confidential by such Investor and its advisors;
provided, however, that (A) any of such information may be disclosed to such
- -------- -------
Investor's directors, officers, employees, advisors and potential financing
sources and representatives of such Investor's advisors and potential financing
sources (collectively, "Representatives") who need to know such information for
---------------
the purpose of evaluating any such possible transaction between the Company and
such Investor (and/or, if applicable, SOCO) (it being understood that such
Representatives shall be informed by such Investor of the confidential nature of
such information and shall be directed by such Investor to treat such
information confidentially), and (B) any disclosure of such information may be
made to which the Company consents in writing.
(iii) If any Investor or any of its Representatives are requested to
disclose any Evaluation Material, such Investor shall promptly notify the
Company to permit the Company to seek a protective order or to take other
appropriate action. Each Investor shall also cooperate in the Company's efforts
to obtain a protective order or other reasonable assurance that the confidential
treatment shall be accorded the Evaluation Material. If, in the absence of a
protective order, any Investor or any of its Representatives are, in the written
opinion of such Investor's counsel addressed to the Company, compelled as a
matter of law to disclose the Evaluation Material, such Investor may disclose to
the party compelling disclosure only such part of the Evaluation Material as is
required by law to be disclosed and such Investor shall use its reasonable best
efforts to obtain confidential treatment therefor.
(iv) Each Investor hereby acknowledges that it is aware, and that it
will advise such Representatives who are informed as to the matters which are
the subject of this Section 7.02, that the United States securities laws
prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this Section 7.02
from purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
(b) Treatment of Materials. In the event that no Closing occurs
----------------------
hereunder prior to the termination of this Agreement, each Investor shall, upon
request, promptly redeliver to the Company all written Evaluation Material and
any other written material containing or reflecting any information in the
Evaluation Material (whether prepared by or on behalf of the Company, its
advisors or otherwise) and will not retain any copies, extracts or other
reproductions in whole or in part of such written material, and, upon request by
the Company, all documents, memoranda, notes and other writings whatsoever
prepared by such Investor or its Representatives based on the information in the
Evaluation Material shall be destroyed.
Section 1.073. Acquisition of Company Voting Securities. If an
----------------------------------------
Investor has acquired Company Voting Securities pursuant to this Agreement or
the SOCO Option Agreement, including any conversion of the 8.5% Convertible
Preferred Stock into Common Stock (an
<PAGE>
"Authorized Purchase") during the Limitation Period without the Prior Approval
-------------------
of the Approval Body, neither such Investor nor any of its affiliates shall
thereafter, directly or indirectly, acquire, offer to acquire, agree to acquire,
become the beneficial owner of or obtain any rights in respect of any additional
Company Voting Securities, by purchase or otherwise, or take any action in
furtherance thereof, if the effect of such acquisition, agreement or other
action would be (either immediately or upon consummation of any such
acquisition, agreement or other action, or expiration of any period of time
provided in any such acquisition, agreement or other action) to increase the
aggregate beneficial ownership of Company Voting Securities by such Investor and
its affiliates to such number of Company Voting Securities that represents or
possesses greater than 20.0% of the Combined Voting Power of Company Voting
Securities. Notwithstanding the foregoing maximum percentage limitations, (i) an
Investor shall not be obligated to dispose of any Company Voting Securities
beneficially owned in violation of such maximum percentage limitations if, and
solely to the extent that, its beneficial ownership is or will be increased
solely as a result of a repurchase of any Company Voting Securities by the
Company or any of its subsidiaries if such repurchase shall have received the
Prior Approval of the Board of Directors, and (ii) the foregoing shall not
prohibit any purchase of Company Voting Securities directly from the Company
(including pursuant to the exercise of rights, oversubscription rights or
standby purchase obligations in connection with rights offerings by the
Company). For purposes of calculating the maximum percentage limitations, all
Company Voting Securities that are the subject of a right, option, agreement,
arrangement or understanding pursuant to which an Investor or any of its
affiliates has the right to obtain beneficial ownership of such securities in
the future shall also be deemed to be beneficially owned by such Investor or its
affiliate.
Section 1.074. Distribution of the Company Voting Securities. (a)
---------------------------------------------
Each Investor hereby agrees that (subject to the last sentence of this Section
7.04(a)), (i) prior to the first anniversary of the Initial Closing Date,
neither such Investor nor any of its affiliates shall, directly or indirectly,
Transfer any Company Voting Security to any person, (ii) during the period
commencing on the first anniversary of the Initial Closing Date until the second
anniversary thereof, neither such Investor nor any of its affiliates shall,
directly or indirectly, Transfer any Company Voting Security to any person,
except as permitted under applicable securities laws and (except for Transfers
pursuant to Rule 144 under the Securities Act) with the Prior Approval of the
Approval Body (which approval will not be unreasonably withheld) (and any
permitted transferee of such Transfer (except Transfers pursuant to Rule 144
under the Securities Act) shall agree to be bound by the provisions in this
subsection, and (iii) on and after the second anniversary of the Initial Closing
Date, such Investor shall be entitled to Transfer any Company Voting Security to
any person, subject solely to any applicable securities law restrictions. In
addition to the foregoing Transfer provisions, during the Limitation Period,
neither an Investor nor any of its affiliates shall, directly or indirectly,
Transfer any Company Voting Security in a transaction that would result in a
Transfer to any person or group that, to the knowledge of such Investor, upon
consummation of such Transfer, would, directly or indirectly, have beneficial
ownership of or the right to acquire beneficial ownership of such number of
Company Voting Securities as represent greater than 7.5% of the Combined Voting
Power, except in response to a Qualifying Offer (as defined in Section
<PAGE>
7.04(b)(i)) or to a Qualified Buyer (as defined in Section 7.04(b)(ii)) or
pursuant to an underwritten public offering or pursuant to Rule 144 under the
Securities Act.
(b) Notwithstanding Section 7.04(a), (i) on and after the eleventh
business day after commencement of a tender or exchange offer made by a person
who is not an affiliate of an Investor for outstanding Company Voting
Securities, such Investor may tender or exchange any Company Voting Securities
beneficially owned by it pursuant to such offer if such offer shall have
received the Prior Approval of the Independent Committee (or the Independent
Committee shall not have made a recommendation to reject such offer) (a
"Qualifying Offer"), and/or (ii) such Investor may sell Company
----------------
who would thereafter own Voting Securities to a buyer (a "Qualified Buyer")
---------------
Company Voting Securities representing greater than 20.0% of the Combined Voting
Power if such buyer shall have executed a confidentiality and standstill
agreement having substantially the same terms as are contained in this Article
VII.
Section 1.075. Proxy Solicitations, etc. During the Limitation Period,
-------------------------
neither an Investor nor any of its affiliates shall solicit proxies, assist any
other person in any way, directly or indirectly, in the solicitation of proxies,
become a "participant" in a "solicitation," or assist any "participant" in a
"solicitation" (as such terms are defined in Rule 14a-1 of Regulation 14A under
the Exchange Act) in opposition to the recommendation of the Independent
Committee, or submit any proposal for the vote of shareholders of the Company,
or recommend or request or induce or attempt to induce any other person to take
any such actions, or seek to advise, encourage or influence any other person
with respect to the voting of Company Voting Securities, in each case without
the Prior Approval of the Independent Committee. Nothing in this Section 7.05
shall restrict any Investor or its affiliates from otherwise voting its shares
of Company Voting Securities.
Section 1.076. No Voting Trusts, Pooling Agreements, or Formation of
-----------------------------------------------------
"Groups". During the Limitation Period, neither an Investor nor any of its
- --------
affiliates shall form, join in or in any other way participate in a partnership,
pooling agreement, syndicate, voting trust or other "group" with respect to
Company Voting Securities, or enter into any agreement or arrangement or
otherwise act in concert with any other person, for the purpose of acquiring,
holding, voting or disposing of Company Voting Securities, in each case without
the Prior Approval of the Independent Committee. Notwithstanding the foregoing
provisions of this Section 7.06, nothing in this Section 7.06 shall in any way
limit the ability of an Investor to pursue or consummate an Authorized Purchase
in compliance with Section 7.03 or to exercise its rights under this Agreement.
Section 1.077. Limitation on Various Other Actions. During the
-----------------------------------
Limitation Period, neither an Investor nor any of its affiliates shall take any
action, alone or in concert with any other person, to seek to effect a change in
control of the Company or otherwise seek to circumvent the limitations of the
provisions of this Article VII. Without limiting the generality of the
foregoing, without the Prior Approval of the Independent Committee, neither an
Investor nor any of its affiliates shall (i) present to the Company, its
stockholders or any third party any proposal that can reasonably be expected to
result in a change of control of the Company or in an
<PAGE>
increase in the Combined Voting Power of Company Voting Securities beneficially
owned in the aggregate by such Investor and its affiliates beyond the percentage
beneficially owned by them as of the date on which such proposal is made (except
in full compliance with the terms of Section 7.08), (ii) publicly suggest or
announce its willingness or desire to engage in a transaction or group of
transactions or have another person engage in a transaction or group of
transactions that would result in a change of control of the Company or in an
increase in the Combined Voting Power of Company Voting Securities beneficially
owned in the aggregate by such Investor and its affiliates beyond the percentage
beneficially owned by them as of the date on which such announcement is made, or
(iii) initiate, request, induce, encourage or attempt to induce or give
encouragement to any other person to initiate any proposal that can reasonably
be expected to result in a change of control of the Company or in an increase in
the Combined Voting Power of Company Voting Securities beneficially owned in the
aggregate by such Investor and its affiliates beyond the percentage beneficially
owned by them as of the date of such action. Notwithstanding the foregoing
provisions of this Section 7.07, nothing in this Section 7.07 shall in any way
limit the ability of such Investor to pursue or consummate an Authorized
Purchase in compliance with Section 7.03.
Section 1.078. Acquisition Proposals. (a) During the Limitation Period,
---------------------
notwithstanding any provision in this Article VII to the contrary, if an
Investor desires to submit a proposal to acquire control of the Company or to
increase its percentage ownership of Company Voting Securities beyond its
percentage ownership as of the date on which such proposal is submitted, it may
do so only by notifying the chairman of the Approval Body and complying with all
of the following procedures:
(i) such Investor may only submit to the Company a proposal having
the following terms (the "Proposal"):
--------
(A) the Proposal entails either (1) a tender offer for all
outstanding Company Voting Securities not owned by such Investor and
its affiliates which offer is conditioned upon a majority of the
outstanding Company Voting Securities not owned by such Investor and
its affiliates having been tendered, followed by a merger transaction,
or (2) a merger transaction which is conditioned on the approval of
stockholders holding a majority of the outstanding Company Voting
Securities not owned by such Investor and its affiliates; and
(B) the Proposal provides that the same consideration will be
paid to all of the Company's stockholders (other than such Investor
and its affiliates) in the tender offer and/or merger transaction.
(ii) The Approval Body shall retain a reputable investment banking
firm to advise the Approval Body with respect to the fairness of the
Proposal to the stockholders of the Company other than such Investor and
its affiliates from a financial point of view, and the Approval Body shall
retain independent counsel to advise it with respect to the Proposal.
<PAGE>
(iii) The Proposal shall have received the Prior Approval of the
Approval Body, which shall not give its approval unless it has received an
opinion from such investment banking firm, in form and substance reasonably
acceptable to the Approval Body, that the Proposal is fair to the
stockholders of the Company other than such Investor and its affiliates
from a financial point of view.
(b) Unless all of the preconditions set forth in Sections 7.08(a)(i),
7.08(a)(ii) and 7.08(a)(iii) have been satisfied, the Proposal shall not be
presented to the Company's stockholders and such Investor shall withdraw the
Proposal.
(c) Each Investor shall not, and shall direct its Representatives not
to, disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction as contemplated by the Proposal
or any of the terms or other facts with respect to any such possible
transaction, in each case without the Prior Approval of the Approval Body.
(d) Notwithstanding the foregoing provisions of this Section 7.08,
nothing in this Section 7.08 shall in any way limit the ability of an Investor
to pursue or consummate an Authorized Purchase in compliance with Section 7.03
without complying with the procedures set forth in this Section 3.6.
Section 1.079. Term of Standstill and Confidentiality Provisions.
-------------------------------------------------
Unless the provisions contained in this Article VII specifically provide for
earlier termination with respect to any particular right or obligation, the
provisions contained in this Article VII shall terminate on the last day of the
Limitation Period notwithstanding an earlier termination of this Agreement
pursuant to Article VIII.
ARTICLE VIII.
Term
----
Section 1.081. Termination. This Agreement may be terminated on or
-----------
any time prior to the Initial Closing (provided that no such termination shall
be effective if (i) such termination is for the sole purpose of removing one or
more Investors from this Agreement and (ii) the Company and the remaining
Investors contemplate, as of the date of such termination, to enter into a
transaction comparable to the transaction provided for by this Agreement):
(a) by the mutual written consent of the Investors and the Company;
or
(b) by either the Company or the Investors, if the Initial Closing
shall not have occurred or is not capable of occurring (and the party
claiming that such Closing is incapable of occurring demonstrates such fact
beyond a reasonable doubt) on or prior to December 31, 1997, unless the
failure of such occurrence shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe its agreements set forth
<PAGE>
herein required to be performed or observed by such party on or before the
Initial Closing, provided that, if a non-defaulting Investor is otherwise
--------
entitled to terminate this Agreement but such termination is prohibited
because of a default by another Investor, such non-defaulting Investor may
terminate its commitment hereunder following 10 days' prior written notice
to the Company, unless during such 10-day period the Company has replaced
or otherwise terminated the commitment of each defaulting Investor.
Section 1.082. Effect of Termination. In the event of the
---------------------
termination of this Agreement as provided in Section 8.01, this Agreement shall
forthwith become void except for the obligations set forth in Article VII and
Sections 9.02 through 9.15 and there shall be no liability or obligation on the
part of the parties hereto except as otherwise provided in this Agreement. The
termination of this Agreement under Section 8.01(b) shall not relieve either
party of any liability for breach of this Agreement prior to the date of
termination.
ARTICLE IX.
Miscellaneous
-------------
Section 1.091. Survival of Representations, Warranties and
-------------------------------------------
Agreements. All representations, warranties and agreements made herein or in any
- ----------
certificates delivered in connection with any Closing shall survive such
Closing.
Section 1.092. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by overnight courier as follows:
(a) If to the Investors, to the address or telecopy number set forth
below their name on the signature pages hereto;
(b) If to the Company, to:
Patina Oil & Gas Corporation
1625 Broadway, Suite 2000
Denver, Colorado 80202
Phone: (303) 389-3600
Fax: (303) 595-7407
Attention: General Counsel
With copies to:
Thomas J. Edelman,
Chairman of Patina Oil & Gas Corporation
667 Madison Avenue, 22nd Floor
<PAGE>
New York, New York 10021
Phone: (212) 371-1117
Fax: (212) 888-6877
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Phone: (212) 455-2000
Fax: (212) 455-2502
Attention: Robert L. Friedman, Esq.
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 1.093. Entire Agreement; Amendment. This Agreement and the
---------------------------
Certificate of Designations and the documents described herein and therein or
attached or delivered pursuant hereto or thereto or contemporaneously herewith
set forth the entire agreement among the parties hereto with respect to the
transactions contemplated by this Agreement. Any provision of this Agreement may
be amended or modified in whole or in part at any time by an agreement in
writing among the parties hereto executed in the same manner as this Agreement;
provided that any amendment, modification or waiver to be delivered hereunder on
- --------
behalf of the Investors shall be effective against all of the Investors if
Investors holding 65% or more of the aggregate commitments hereunder shall agree
to such amendment, modification or waiver; provided, however that no such
-------- -------
amendment, modification or waiver (i) shall disproportionately disadvantage an
Investor, (ii) shall reduce or increase any Investor's commitment hereunder or
(iii) reduce the dividend rate or other principal economic terms of the 8.5%
Convertible Preferred Stock to be purchased hereunder, in each case without the
consent of the Investor affected thereby. No failure on the part of any party to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof nor shall any single or partial exercise by any party of any right
preclude any other or future exercise thereof or the exercise of any other
right. No investigation by the Investors of the Company prior to or after the
date hereof shall prevent the Investors from exercising any right hereunder or
be deemed to be a waiver of any such right.
Section 1.094. Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same documents.
SECTION 1.095. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
Section 1.096. Public Announcements. Each of the parties hereto
--------------------
agrees to hold in strict confidence and not to disclose to others the status of
any discussions among the parties
<PAGE>
with respect to the subject matter of this Agreement until such time as the
parties mutually agree to publicly disclose such information or are legally
obligated to disclose such information. Subject to the provisions of the
previous sentence, the parties hereto will cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement and any of the transactions
contemplated hereby, and no party hereto will make any news releases or other
information disclosures with respect to the subject matter of this Agreement
without the prior consent of the other parties hereto.
Section 1.097. Expenses. (a) Except as provided in Sections 6.07
--------
and 9.07(b), each of the parties hereto will pay its own expenses incurred or to
be incurred in connection with this Agreement and the transactions contemplated
hereby. None of the parties hereto shall engage any broker, finder or agent or
agree to pay to any person any broker's fee, finder's fee, commission or other
similar form of compensation in connection with this Agreement or the
transactions contemplated hereby, except as provided in Section 3.01(s) hereof.
(b) At or following the Initial Closing (or the termination of this
Agreement, as the case may be), the Company shall promptly pay the Investors for
all reasonable costs and out-of-pocket expenses incurred by them in connection
with the negotiation of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation the reasonable fees and
expenses of the Investors' counsel up to a maximum expense reimbursement
pursuant to this Section 9.07(b) of $100,000.
Section 1.098. Indemnification. (a) Indemnification and Payment of
--------------- ------------------------------
Damages by the Company. The Company will indemnify and hold harmless the
- ----------------------
Investors and its controlling persons and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
-------------------
of, any loss, liability, claim, damage or expense (including reasonable
attorneys' fees and expenses) (collectively, "Damages") actually incurred by the
-------
Indemnified Persons, arising, directly or indirectly, from or in connection
with: (i) any representation or warranty specifically made by the Company in
this Agreement which is qualified as to materiality not being true and correct
as of the date hereof and any Closing Date, and any representation or warranty
specifically made by the Company in this Agreement which is not so qualified not
being true and correct in all material respects as of the date hereof and any
Closing Date, or (ii) any breach by the Company of any covenant or obligation of
the Company specifically contained in this Agreement. The remedies provided in
this Section 9.08 will be the sole remedies available to the Investors and the
other Indemnified Persons with respect to the matters referred to in this
Section 9.08, provided that the foregoing shall not limit any right to
--------
terminate this Agreement, specific performance or injunctive relief that a party
may otherwise have.
(b) Indemnification and Payment of Damages by the Investors. Each
-------------------------------------------------------
Investor severally, but not jointly, will indemnify and hold harmless the
Company, and will pay to the Company the amount of any Damages actually incurred
by the Company, arising, directly or indirectly, from or in connection with (i)
any representation or warranty specifically made by such Investor in this
Agreement which is qualified as to materiality not being true and correct as of
the
<PAGE>
date hereof and any Closing Date, and any representation or warranty
specifically made by such Investor in this Agreement which is not so qualified
not being true and correct in all material respects as of the date hereof or any
Closing Date, or (ii) any breach by the Investors of any covenant or obligation
of such Investor specifically contained in this Agreement. The remedies provided
in this Section 9.08 will be the sole remedies available to the Company with
respect to the matters referred to in this Section 9.08, provided that the
--------
foregoing shall not limit any right to terminate this Agreement, specific
performance or injunctive relief that a party may otherwise have.
(c) Time Limitations. The Company will have no liability (for
----------------
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to any Closing
Date, other than those in Section 3.01(a), (c), (e), (o) or (r), unless on or
before the first anniversary of the last Closing Date to occur, the Investors
notify the Company of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by the Investors; a claim with
respect to Section 3.01(o) or (r) may be brought at any time on or before the
third anniversary of the last Closing Date; and a claim with respect to Section
3.01(a), (c) or (e) will survive indefinitely. The Investors will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to any Closing Date, unless on or before the first anniversary of the last
Closing Date, the Company notifies the Investors of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Company.
(d) Limitations On Amount. (i) The Company will have no liability
---------------------
to any Investor pursuant to Section 9.08(a) until the total of all Damages owed
to such Investor with respect to such matters exceeds such Investor's pro rata
interest (based on its aggregate commitment hereunder) of $1,000,000, and then
only for the amount by which such Damages exceed such pro rata interest of
$1,000,000. The liability of the Company pursuant to Section 9.08 shall not
exceed such Investor's pro rata interest (based on its aggregate commitment
hereunder) of $5,000,000 in the aggregate (provided that, if the amount of
Damages exceeds $5,000,000, the Investors' remedy shall be the recision of the
issuance and sale of the 8.5% Convertible Preferred Stock hereunder with the
Company repurchasing, at the purchase price, such stock).
(ii) Each Investor will have no liability to the Company pursuant to
Section 9.08(b) until the total of all Damages with respect to such matters
exceeds such Investor's pro rata interest (based on its aggregate commitment
hereunder) of $1,000,000, and then only for the amount by which such Damages
exceed such pro rata interest of $1,000,000. The liability of an Investor to the
Company pursuant to Section 9.08 shall not exceed such Investor's pro rata
interest (based on its aggregate commitment hereunder) of $5,000,000 in the
aggregate.
<PAGE>
(e) Other Limitations. The Company will have no liability to an
-----------------
Investor or the Indemnified Persons for any breach of representation or warranty
to the extent that the Company can establish that such Investor had actual
knowledge of the facts which form the basis of such claim prior to the
applicable Closing Date. The Investors will have no liability to the Company for
any breach of representation or warranty to the extent that the Investors can
establish that the Company had actual knowledge of the facts which form the
basis of such claim prior to the applicable Closing Date.
(f) Procedure for Indemnification. Promptly upon an indemnified
-----------------------------
party under Section 9.08(a) or 9.08(b) becoming aware of a claim it may have
against an indemnifying party under such Section, such indemnified party will if
a claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party, but the failure so to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may have
to any indemnified party, except to the extent that the indemnifying party
demonstrates that it shall have been materially prejudiced by the indemnifying
party's failure to give such notice. The parties shall cooperate in resolving
questions as to Damages payable under Section 9.08(a) or 9.08(b) and determining
the amount of any Damages payable. If the parties shall not be able, for a
period of 30 days, to concur and agree upon the amount of Damages payable under
said Section, as applicable, either party may, upon the expiration of such
number of days, submit such difference to a court of competent jurisdiction in
the United States of America for final determination. The final determination of
such court with respect to any difference so submitted, after all appeals have
been taken or the time to appeal shall have expired (the "Final Determination"),
-------------------
shall be conclusive and binding upon the parties. Promptly after the exact
amount and nature of any Damages under Section 9.08(a) or 9.08(b) payable has
been determined or agreed upon by the parties or fixed by a Final Determination,
the indemnifying party shall pay such Damages to the indemnified party. Such
Damages shall be deemed to be due and payable by the indemnifying party as of a
date no later than the date when notice of the claim therefor was first given to
the indemnifying party on behalf of the indemnified party.
Section 1.099. Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Neither this Agreement nor any of the parties' rights,
interests or obligations hereunder shall be assignable by any party hereto
without the prior written consent of the other parties hereto; provided that, if
--------
any Investor fails to fulfill its obligation to fund its commitment for shares
of 8.5% Convertible Preferred Stock hereunder, such defaulting Investor's
commitment obligation hereunder may be assigned to one or more other non-
defaulting Investor (which assignment shall occur no later than the applicable
Closing Date and any non-defaulting Investor accepting such additional
commitment shall execute and deliver an appropriate amendment or supplement to
this Agreement reflecting such assignment). No assignment shall relieve the
assigning party of any of its obligations hereunder. Any attempted assignment of
this Agreement in breach of this provision shall be void and of no effect.
Section 9.10. No Third Party Rights. Nothing in this Agreement,
---------------------
expressed or implied, shall or is intended to confer upon any person other than
the parties hereto or their
<PAGE>
respective successors or assigns any rights or remedies of any nature or kind
whatsoever under or by reason of this Agreement.
Section 9.11. Specific Performance. The Company acknowledges that
--------------------
the rights granted to the Investors in this Agreement are of a special, unique
and extraordinary character, and that any breach of this Agreement by the
Company could not be compensated for by damages. Accordingly, if the Company
breaches its obligations under this Agreement, the Investors shall be entitled,
in addition to any other remedies that they may have, to enforcement of this
Agreement by a decree of specific performance requiring the Company to fulfill
its obligations under this Agreement.
Section 9.12. Captions. The captions contained in this Agreement are
--------
for reference purposes only and are not part of this Agreement.
Section 9.13. Severability. Should any part of this Agreement for
------------
any reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in full force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part or parts which may, for any reason, be hereafter
declared invalid.
Section 9.14. Mutual Waiver of Jury Trial. Because disputes
---------------------------
arising in connection with complex financial transactions are most quickly and
economically resolved by an experienced and expert person and the parties wish
applicable state and federal laws to apply (rather than arbitration rules), the
parties desire that their disputes be resolved by a judge applying such
applicable laws. Therefore, to achieve the best combination of the benefits of
the judicial system and of arbitration, the parties hereto waive all right to
trial by jury in any action, suit or proceeding brought to enforce or defend any
rights or remedies under this Agreement.
Section 9.15. Jurisdiction. The courts of the State of New York in
------------
New York County and the United States District Court for the Southern District
of New York shall have jurisdiction over the parties with respect to any dispute
or controversy between them arising under or in connection with this agreement
and, by execution and delivery of this Agreement, each of the parties to this
Agreement submits to the jurisdiction of those courts, including but not limited
to the in personam and subject matter jurisdiction of those courts, waives any
-- --------
objections to such jurisdiction on the grounds of venue or forum non conveniens,
----- --- ----------
the absence of in personam or subject matter jurisdiction and any similar
-- --------
grounds, consents to service of process by mail (in accordance with Section
9.02) or any other manner permitted by law, and irrevocably agrees to be bound
by any judgment rendered thereby in connection with this Agreement.
Section 9.16. References to Other Agreements. To the extent that
------------------------------
this Agreement refers to any other agreement, or any provision thereof, such
reference shall be deemed to be to such agreement or provision in the form
initially executed by the parties thereto (regardless of whether such agreement
or provision is amended) unless and to the extent that (a) such amendment
<PAGE>
does not adversely affect the non-signing party or (b) the non-signing party
consent in writing to such amendment.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto or by their respective duly authorized officers, all as of the
dates written above.
PATINA OIL & GAS CORPORATION
By: /s/ Thomas J. Edelman
---------------------------
Name: Thomas J. Edelman
Title: Chairman and Chief Executive Officer
SNYDER OIL CORPORATION
By: /s/ John C. Snyder
---------------------------
Name: John C. Snyder
Title: Director
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP
By: First Reserve Corporation, its General
Partner
By: /s/ William E. Macauley
---------------------------
Name: William E. Macauley
---------------------------
Title: President and Chief Executive Officer
With copy to:
Thomas R. Denison, Esq. 475 Steamboat Road
Gibson Dunn & Crutcher LLP Greenwich, Connecticut 06830
1801 California Street Phone: (203) 625-2502
Suite 4100 Fax: (203) 661-6729
Denver, Colorado 80202
Phone: (303) 298-5734
Fax: (303) 313-2823
<PAGE>
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General Partner
By: /s/ Arnold L. Chavkin
---------------------------
Name: Arnold L. Chavkin
---------------------------
Title: General Partner
With copy to:
Harvey Eisenberg, Esq.
O'Sullivan, Graev & Karabell c/o Chase Capital Partners
30 Rockefeller Plaza, 41st 380 Madison Avenue, 12th Floor
Floor
New York, New York 10112 New York, New York 10017
Phone: (212) 408-2416 Phone: (212) 622-3100
Fax: (212) 408-0646 Fax: (212) 622-3101
HIGHBRIDGE INTERNATIONAL LDC
By: HIGHBRIDGE CAPITAL MANAGEMENT, INC.
By: /s/ Glenn R. Dubin
---------------------------
Name: Glenn R. Dubin
Title: Co Chairman
With copy to:
Ron Resnick, Esq.
c/o Highbridge Capital c/o Highbridge Capital Management, Inc.
Management, Inc. 767 Fifth Avenue, 23rd Floor
767 Fifth Avenue, 23rd Floor New York, New York 10153
New York, New York 10153 Phone: (212) 751-4510
Phone: (212) 751-4510 Fax: (212) 486-9379
Fax: (212) 759-6010
<PAGE>
BEDFORD FALLS INVESTORS, LP
By: Metropolitan Capital Advisors, LP
its General Partner
By: Metropolitan Capital Advisors, Inc.
By: /s/ Jeffrey Schwarz
------------------------------
Jeffrey Schwarz
Chief Executive Officer
660 Madison Avenue, 20th Floor
New York, NY 10021
Phone: (212) 486-8100
Fax: (212) 486-8819
/s/ Anthony V. Dub
---------------------------------
Anthony V. Dub
c/o Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010
Phone: (212) 325-4800
Fax: (212) 325-8266
/s/ Allen Finkelson
---------------------------------
Allen Finkelson
c/o Cravath, Swain & Moore
Worldwide Plaza
825 Eighth Avenue - 46th Floor
New York, NY 10019
Phone: (212) 474-1262
Fax: (212) 765-1047
/s/ William P. Nicoletti
---------------------------------
William P. Nicoletti
c/o Nicoletti & Company Inc.
1155 Avenue of the Americas, 29th Floor
New York, NY 10036
Phone: (212) 819-2640
Fax: (212) 391-7420
<PAGE>
/s/ Irik P. Sevin
---------------------------------
Irik P. Sevin
c/o Petroleum Heat & Power Co., Inc.
2187 Atlantic Street
P.O. Box 1457
Stamford, CT 06904
Phone: (203) 325-5450
Fax: (203) 328-7421
/s/ Peter Seaman
---------------------------------
Peter Seaman
c/o Universal Studios
100 Universal City Plaza
Universal Building #507
Suite 3G
Universal City, CA 91608
<PAGE>
SCHEDULE I
SCHEDULE OF INVESTORS' COMMITMENTS
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Number of Shares of Common Stock of Common Stock
Aggregate of 8.5% Convertible to be Acquired to be Acquired
Commitment Preferred Stock from the Company from SOCO
Name of Investor Amount to be Purchased at Initial Closing at Initial Closing
- ---------------- ------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
First Reserve Fund VII, Limited Partnership...... $32,500,000 1,300,000 51,587 36,111
Chase Venture Capital Associates, L.P. .......... $22,500,000 900,000 35,714 25,000
Highbridge International LDC.................... $ 4,750,000 190,000 7,540 5,278
Bedford Falls Investors, LP...................... $ 2,500,000 100,000 3,968 2,778
Anthony V. Dub................................... $ 400,000 16,000 635 444
Allen Finkelson.................................. $ 100,000 4,000 159 111
William P. Nicoletti............................. $ 100,000 4,000 159 111
Irik P. Sevin.................................... $ 100,000 4,000 159 111
Peter Seaman..................................... $ 50,000 2,000 79 56
----------- --------- ------- ------
Totals........................................... $63,000,000 2,520,000 100,000 70,000
</TABLE>
<PAGE>
EXHIBIT 4.2
FIRST AMENDMENT TO THE
PREFERRED STOCK PURCHASE AGREEMENT
FIRST AMENDMENT, dated as of September 19, 1997 (this "Amendment"), to the
---------
Stock Purchase Agreement, dated as July 31, 1997 (the "Preferred Stock Purchase
------------------------
Agreement"), among Patina Oil & Gas Corporation, a Delaware corporation (the
- ---------
"Company"), and each of the investors named on Schedule I, revised hereby, and
-------
who execute signature pages hereto (each an "Investor" and collectively, the
--------
"Investors")(terms defined in the Preferred Stock Purchase Agreement and used
---------
herein shall have the meanings given to them in the Preferred Stock Purchase
Agreement).
W I T N E S S E T H:
-------------------
WHEREAS, the Company and the Investors have entered into the Preferred
Stock Purchase Agreement, pursuant to which the Company has agreed to issue and
sell to such investors up to 2,520,000 shares of the Company's 8.5% Convertible
Preferred Stock, par value $.01 per share, on the terms and conditions set forth
in such Preferred Stock Purchase Agreement;
WHEREAS, the parties to the Preferred Stock Purchase Agreement desire that
certain provisions of the Preferred Stock Purchase Agreement be amended in the
manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Amendments
----------
(a) The Preamble to the Preferred Stock Purchase Agreement is hereby
amended by inserting the following phrase following the phrase "1997": "and as
amended and restated as of September 19, 1997,"
(b) Amendments to Recitals.
----------------------
(i) The first paragraph of the recitals to the Preferred Stock Purchase
Agreement is hereby amended by deleting the phrase "100,000" in its
entirety and inserting in lieu thereof the phrase "160,000".
(ii) The third paragraph of the recitals to the Preferred Stock Purchase
Agreement is hereby amended by inserting, on the third line, the following
phrase in the first parenthetical immediately prior to the word "the": "as
amended as of September 19, 1997".
(iii) The third paragraph of the recitals to the Preferred Stock Purchase
Agreement is hereby amended by inserting, on the sixth line, the following
parenthetical immediately following the word "Offering": "(other than the
70,000 shares transferred by SOCO to the Investors pursuant to the SOCO
Option Agreement referred to below)".
<PAGE>
2
(iv) The fourth paragraph of the recitals to the Preferred Stock Purchase
Agreement is hereby amended by inserting, on the fourth line, in the
beginning of the parenthetical immediately following the word "Agreements":
"(as amended as of September 19, 1997".
(v) The fourth paragraph of the recitals to the Preferred Stock Purchase
Agreement is hereby amended by inserting, on the tenth line, the following
phrase immediately following the word "hereof": "and (ii) concurrently with
the initial closing hereunder, SOCO has agreed to transfer pursuant to the
SOCO Option Agreements an aggregate of 70,000 shares of Common Stock to the
Investors;".
(c) Amendment to Section 4.05.
-------------------------
(i) Section 4.05(a) of the Preferred Stock Purchase Agreement is hereby
amended by inserting, on the eighth line, the following phrase immediately
prior to the word "except": "or any shares of Common Stock otherwise
acquired hereunder,".
(ii) Section 4.05(b) of the Preferred Stock Purchase Agreement is hereby
amended by inserting, on the third line, the following phrase immediately
following the word "thereof": "or any shares of Common Stock otherwise
acquired hereunder".
(iii) Section 4.05(b) of the Preferred Stock Purchase Agreement is hereby
amended by inserting, on the tenth line, the following phrase immediately
following the word "Stock": "and such Common Stock".
(iv) Section 4.05(b) of the Preferred Stock Purchase Agreement is hereby
amended by inserting, in the second paragraph, the following phrase
immediately following phrase "JULY 31, 1997": "AS AMENDED AND RESTATED AS
OF SEPTEMBER 19, 1997".
(d) Amendment to Section 4.07. Section 4.07 of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by inserting, on the fourth line, the
following phrase immediately following the word "converted": "and the other
shares of Common Stock acquired hereunder".
(e) Amendment to Section 4.08. Section 4.08 of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by inserting, on the second line, the
following phrase immediately following the word "Stock": "and the Common Stock".
(f) Amendment to Section 5.01. Section 5.01(c) of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by deleting, from the fourth line, the word
"and", and inserting, on the fifth line the following phrase immediately
following the word "Agreement": "and (iii) SOCO shall issue to the Investor
70,000 shares of Common Stock pursuant to the SOCO Option Agreement".
(g) Amendment to Section 5.04. Section 5.04 of the Preferred Stock
-------------------------
Purchase Agreement is hereby deleted in its entirety.
<PAGE>
3
(h) Amendment to Section 6.01. Section 6.01 of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by deleting, from the fourth line, the
phrase "as Additional Consideration owned" and inserting in lieu thereof the
following phrase: "acquired hereunder and the shares of Common Stock acquired
pursuant to the SOCO Option Agreement".
(i) Amendments to Section 8.01.
--------------------------
(i) Section 8.01(a) of the Preferred Stock Purchase Agreement is hereby
amended by inserting the following word immediately following the phrase
"Company;": "or".
(ii) Section 8.01(b) of the Preferred Stock Purchase Agreement is hereby
amended by deleting, from the last line, the word "or" and inserting a
period in lieu thereof.
(iii) Section 8.01(c) of the Preferred Stock Purchase Agreement is hereby
deleted it in its entirety.
(j) Amendment to Section 8.02. Section 8.02 of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by deleting the phrase "Except as provided
in Section 8.03, in" in its entirety and inserting in lieu thereof the word
"In".
(k) Amendment to Section 8.03. Section 8.03 of the Preferred Stock
-------------------------
Purchase Agreement is hereby deleted it in its entirety.
(l) Amendment to Section 9.07. Section 9.07 of the Preferred Stock
-------------------------
Purchase Agreement is hereby amended by deleting the phrase "In the event that
SOCO determines not to sell its Common Stock in the Secondary Stock Offering
because the proposed Net Offering Price is less than $7.0875 per share, then" in
its entirety and inserting in lieu thereof the phrase "At or following the
Initial Closing (or the termination of this Agreement, as the case may be),".
(m) Amendment to Section 9.16. Section 9.16 of the Preferred Stock
-------------------------
Agreement is hereby amended by inserting the following phrase at the end of such
paragraph: ; provided, however, that each party hereby consents to the
amendments (and, if applicable, restatements) of the Share Repurchase Agreement
and the Stock Purchase Agreement that were executed as of September 19, 1997 and
references in this Agreement to such documents shall be the form of such
document as so amended.
Section 2. Effectiveness. This Amendment shall become effective on the
-------------
date on which each of the parties to the Preferred Stock Purchase Agreement
shall have executed and delivered this Amendment in accordance with the
provisions of Section 9.03 of the Preferred Stock Purchase Agreement.
Section 3. No Other Amendments. Except as expressly amended, modified
-------------------
and supplemented hereby, the provisions of the Preferred Stock Purchase
Agreement are and shall remain in full force and effect.
<PAGE>
4
Section 4. Counterparts. This Amendment may be executed by one or more of
------------
the parties to this Amendment on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
5
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the day and year first above written.
PATINA OIL & GAS CORPORATION
By: /s/ Thomas J. Edelman
-----------------------------
Name: Thomas J. Edelman
Title: Chairman and Chief Executive Officer
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP
By: First Reserve Corporation, its General
Partner
By: /s/ William Macauley
-----------------------------
Name: William Macauley
-----------------------------
Title:
With copy to:
Thomas R. Denison, Esq. 475 Steamboat Road
Gibson Dunn & Crutcher LLP Greenwich, Connecticut 06830
1801 California Street Phone: (203) 625-2502
Suite 4100 Fax: (203) 661-6729
Denver, Colorado 80202
Phone: (303) 298-5734
Fax: (303) 313-2823
<PAGE>
6
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General
Partner
By: /s/ Arnold L. Chavkin
--------------------------------
Name: Arnold L. Chavkin
--------------------------------
Title: General Partner
With copy to:
Harvey Eisenberg, Esq.
O'Sullivan, Graev & Karabell c/o Chase Capital Partners
30 Rockefeller Plaza, 41st Floor 380 Madison Avenue, 12th Floor
New York, New York 10112 New York, New York 10017
Phone: (212) 408-2416 Phone: (212) 622-3100
Fax: (212) 408-0646 Fax: (212) 622-3101
HIGHBRIDGE INTERNATIONAL LDC
By: HIGHBRIDGE CAPITAL MANAGEMENT, INC.
By: /s/ Ron Resnick
--------------------------------
Name: Ron Resnick
--------------------------------
Title: Managing Director
With copy to:
Ron Resnick, Esq.
c/o Highbridge Capital c/o Highbridge Capital Management, Inc.
Management, Inc. 767 Fifth Avenue, 23rd Floor
767 Fifth Avenue, 23rd Floor New York, New York 10153
New York, New York 10153 Phone: (212) 751-4510
Phone: (212) 751-4510 Fax: (212) 486-9379
Fax: (212) 759-6010
<PAGE>
7
BEDFORD FALLS INVESTORS, LP
By: Metropolitan Capital Advisors, LP
its General Partner
By: Metropolitan Capital Advisors, Inc.
By: /s/ Jeffrey S. Schwarz
------------------------------------
Jeffrey S. Schwarz
Chief Executive Officer
660 Madison Avenue, 20th Floor
New York, NY 10021
Phone: (212) 486-8100
Fax: (212) 486-8819
/s/ Anthony V. Dub
---------------------------------------
Anthony V. Dub
c/o Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010
Phone: (212) 325-4800
Fax: (212) 325-8266
/s/ Allen Finkelson
---------------------------------------
Allen Finkelson
c/o Cravath, Swain & Moore
Worldwide Plaza
825 Eighth Avenue - 46th Floor
New York, NY 10019
Phone: (212) 474-1262
Fax: (212) 765-1047
/s/ William P. Nicoletti
---------------------------------------
William P. Nicoletti
c/o Nicoletti & Company Inc.
1155 Avenue of the Americas, 29th Floor
New York, NY 10036
Phone:(212) 819-2640
<PAGE>
8
Fax: (212) 391-7420
/s/ Irik P. Sevin
---------------------------------------
Irik P. Sevin
c/o Petroleum Heat & Power Co., Inc.
2187 Atlantic Street
P.O. Box 1457
Stamford, CT 06904
Phone: (203) 325-5450
Fax: (203) 328-7421
/s/ Peter Seaman
---------------------------------------
Peter Seaman
c/o Universal Studios
100 Universal City Plaza
Universal Building #507
Suite 3G
Universal City, CA 916082
<PAGE>
Schedule I
SCHEDULE OF INVESTORS' COMMITMENTS
<TABLE>
<CAPTION>
==================================================================================================
Name of Investor Aggregate Commit- Percentage of Shares Number of Shares
ment Amount of 8.5% Convertible of Common Stock
Preferred Stock to be Acquired at
Initial Closing
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Reserve Fund 32,500,000 51.58730% 82,540
VII, Limited
Partnership
- --------------------------------------------------------------------------------------------------
Chase Venture Capital 22,500,000 35.71429% 57,143
Associates, L.P.
- --------------------------------------------------------------------------------------------------
Highbridge 4,750,000 7.53968% 12,063
International LDC
- --------------------------------------------------------------------------------------------------
Bedford Falls 2,500,000 3.96825% 6,349
Investors, LP
- --------------------------------------------------------------------------------------------------
Anthony V. Dub 400,000 0.63492% 1,016
- --------------------------------------------------------------------------------------------------
Allen Finkelson 100,000 0.15873% 254
- --------------------------------------------------------------------------------------------------
William P. Nicoletti 100,000 0.15873% 254
- --------------------------------------------------------------------------------------------------
Irik P. Sevin 100,000 0.15873% 254
- --------------------------------------------------------------------------------------------------
Peter Seaman 50,000 0.07937% 127
- --------------------------------------------------------------------------------------------------
63,000,000 100.00000% 160,000
- --------------------------------------------------------------------------------------------------
160,000
===================================================================================================
</TABLE>
<PAGE>
EXHIBIT 4.3
PATINA OIL & GAS CORPORATION
CERTIFICATE OF DESIGNATION
OF
8.5% CONVERTIBLE PAY-IN-KIND PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law, Patina Oil
& Gas Corporation, a Delaware corporation (the "Corporation"), hereby certifies
that the following resolutions were duly adopted by its Board of Directors on
July 31, 1997 and supplemented on September 19, 1997 to set forth the powers,
designations, preferences and relative, participating, optional or other rights
of its 8.5% Convertible Pay-In-Kind Preferred Stock;
RESOLVED, that, pursuant to the authority granted to the Board of Directors
in the Certificate of Incorporation, there is hereby created, and the
Corporation is hereby authorized to issue, a series of Preferred Stock (as
defined in the Certificate of Incorporation) having the following powers,
designations, preferences and rights:
I. Designation of Series and Number of Shares. The series of the
Preferred Stock shall be designated 8.5% Convertible Pay-In-Kind Preferred Stock
(the "Convertible PIK Preferred Stock") and shall consist of 2,520,000 shares,
plus up to 500,000 additional shares of Convertible PIK Preferred Stock to be
issued as dividends on the Convertible PIK Preferred Stock pursuant to Section
III hereof. The initial liquidation preference of the Convertible PIK Preferred
Stock shall be $25 per share (the "Liquidation Value").
II. Rank. All shares of Convertible PIK Preferred Stock shall rank prior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all of the Corporation's now or hereafter issued Common Stock,
par value $.01 per share ("Common Stock"), and to all of the Corporation's
hereafter issued capital stock which by its terms ranks junior to the
Convertible PIK Preferred Stock both as to the payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, when and if issued (the Common
Stock and any such other capital stock being herein referred to as "Junior
Stock"). The Convertible PIK Preferred Stock shall, with respect to payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up of the Corporation, rank on a parity with the Corporation's
outstanding 7.125% Convertible Preferred Stock.
III. Dividends. The holders of Convertible PIK Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds at the time legally available therefor, dividends at an annual rate of
$2.125 per share. Such dividends shall be cumulative and shall accrue and be
payable in equal quarterly payments of $0.53125 per share on March 31, June 30,
September 30 and December 31 of each year (each of such dates being a "Dividend
Payment Date") (except that if any such date is a Saturday, Sunday or legal
holiday, then such dividend shall be payable on the next day that is not a
Saturday, Sunday or legal holiday), to holders of record at the close of
business on the date specified by the Board of Directors (or, to the extent
permitted by applicable law, a duly authorized committee thereof) at
<PAGE>
2
the time such dividend is declared, in preference to dividends on the Junior
Stock, commencing on the Dividend Payment Date next succeeding October 21, 1997,
the issuance date of the Convertible PIK Preferred Stock (the "Issue Date"). Any
such dividend record date shall be not less than ten days and not more than
sixty days prior to the relevant Dividend Payment Date. Dividend payments with
respect to shares of Convertible PIK Preferred Stock in respect of each
quarterly dividend period ending on or prior to the second anniversary of the
Issue Date (or portion of such quarterly dividend period in the case of the
dividend period in which the second anniversary of the Issue Date occurs)
relating to such shares shall be made in additional shares of Convertible PIK
Preferred Stock. On and after the second anniversary of the Issue Date relating
to shares of Convertible PIK Preferred Stock, dividends on such Convertible PIK
Preferred Stock shall be paid only in cash. Dividend payments made in shares of
Convertible PIK Preferred Stock shall be made by issuing shares (or fractions
thereof) with an aggregate Liquidation Value equal to the amount of such
dividends. All dividends paid with respect to shares of Convertible PIK
Preferred Stock pursuant to this Section III shall be paid pro rata to the
holders entitled thereto. All shares of Convertible PIK Preferred Stock issued
as a dividend will thereupon be duly authorized, validly issued, fully paid and
nonassessable.
Holders of Convertible PIK Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends provided for herein. Dividend payments which are in
arrears shall bear interest at an annual rate of 8.5%, compounded quarterly from
the date of the related Dividend Payment Date to the date such dividend is paid.
Dividends payable on the Convertible PIK Preferred Stock for the first quarterly
dividend period following the Issue Date (or any other dividend payable for a
period less than a full quarterly period) shall be computed on the basis of a
360-day year of twelve 30-day months. In the case of shares of Convertible PIK
Preferred Stock issued on the Issue Date, dividends shall accrue and be
cumulative from such date. In the case of shares of Convertible PIK Preferred
Stock issued as a dividend on shares of Convertible PIK Preferred Stock,
dividends shall accrue and be cumulative from the Dividend Payment Date in
respect of which such shares were issued as a dividend.
Each fractional share of Convertible PIK Preferred Stock outstanding shall
be entitled to a ratably proportionate amount of all dividends accruing with
respect to each outstanding share of Convertible PIK Preferred Stock pursuant to
this Section III, and all such dividends with respect to such outstanding
fractional shares shall be cumulative and shall accrue (whether or not
declared), and shall be payable in the same manner and at such times as provided
for in this Section III with respect to dividends on each outstanding share of
Convertible PIK Preferred Stock. Each fractional share of Convertible PIK
Preferred Stock outstanding shall also be entitled to a ratably proportionate
amount of any other distributions made with respect to each outstanding share of
Convertible PIK Preferred Stock, and all such distributions shall be payable in
the same manner and at the same time as distributions on each outstanding share
of Convertible PIK Preferred Stock.
For purposes hereof, the term "legal holiday" shall mean any day on which
banking institutions are authorized to close in New York, New York and the term
"business day" shall
<PAGE>
3
mean any day other than a Saturday, Sunday or legal holiday. No dividend record
date shall be the same as a date set for the redemption of any shares of
Convertible PIK Preferred Stock under Section V. If a dividend record date fixed
by the Board of Directors is prior to a redemption date then or theretofore set
under Section V, it shall be at least six business days prior to such redemption
date. Nothing contained herein shall limit the Board of Directors' discretion to
establish a dividend record date that is subsequent to a redemption date then or
theretofore established, without regard to the effect of such record date on the
dividend rights of holders of Convertible PIK Preferred Stock who elect to
convert under Section VI prior to the redemption date. Holders of shares of
Convertible PIK Preferred Stock that are redeemed under Section V on a
redemption date that falls between the record date and the payment date for a
dividend shall be entitled to receive the dividend, except to the extent the
price paid upon redemption reflects such dividend as an accrued dividend as
provided in Section V. Subject to the next paragraph of this Section III,
dividends on account of arrears for any past dividend period may be declared and
paid at any time, without reference to any Dividend Payment Date.
No dividend or other distributions, other than dividends payable solely in
shares of Junior Stock, shall be declared, paid or set apart for payment on
shares of Junior Stock or any other capital stock of the Corporation which by
its terms ranks junior as to dividends to the Convertible PIK Preferred Stock
(the Junior Stock and any such other class or series of the Corporation's
capital stock being herein referred to as "Junior Dividend Stock"), unless and
until all accrued and unpaid dividends on the Convertible PIK Preferred Stock
for all Dividend Payment Dates occurring on or before the payment date of such
dividends or other distributions on Junior Dividend Stock shall have been paid
or declared and set apart for payment.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Dividend Stock or any class or series of the
Corporation's capital stock which by its terms ranks junior to the Convertible
PIK Preferred Stock as to distributions of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary (the Junior
Stock and any class or series of the Corporation's capital stock which by its
terms rank junior to the Convertible PIK Preferred Stock as to such
distributions being herein referred to as "Junior Liquidation Stock"), shall be
made unless and until accrued and unpaid dividends on the Convertible PIK
Preferred Stock for all Dividend Payment Dates occurring on or before such
payment for such Junior Dividend Stock or Junior Liquidation Stock shall have
been paid or declared and set apart for payment.
No full dividends shall be declared, paid or set apart for payment on
shares of any class or series of the Corporation's capital stock whether
existing or hereafter issued and which by its terms ranks, as to dividends, on a
parity with the Convertible PIK Preferred Stock, including the Corporation's
7.125% Convertible Preferred Stock (any such class or series of the
Corporation's capital stock being herein referred to as "Parity Dividend Stock")
for any period unless full cumulative dividends have been, or contemporaneously
are, paid or declared and set apart for payment on the Convertible PIK Preferred
Stock for all Dividend Payment Dates occurring on or before the payment date of
such dividends on Parity Dividend Stock. No dividends shall be paid on Parity
Dividend Stock except on dates on which dividends are paid on
<PAGE>
4
the Convertible PIK Preferred Stock. All dividends paid or declared and set
apart for payment on the Convertible PIK Preferred Stock and any Parity Dividend
Stock shall be paid or declared and set apart for payment pro rata so that the
amount of dividend paid or declared and set apart for payment per share on the
Convertible PIK Preferred Stock and the Parity Dividend Stock on any date shall
in all cases bear to each other the same ratio that accrued and unpaid dividends
to the date of payment on the Convertible PIK Preferred Stock and the Parity
Dividend Stock bear to each other.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Parity Dividend Stock or any class or series of the
Corporation's capital stock which by its terms ranks on a parity with the
Convertible PIK Preferred Stock as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
including the Corporation's 7.125% Convertible Preferred Stock (any such class
or series of the Corporation's capital stock being herein referred to as "Parity
Liquidation Stock"), shall be made, and, other than dividends to the extent
permitted by the preceding paragraph, no distributions shall be declared, paid
or set apart for payment on shares of Parity Dividend Stock or Parity
Liquidation Stock, unless all accrued and unpaid dividends on the Convertible
PIK Preferred Stock for all Dividend Payment Dates occurring on or before such
payment for, or the payment date of such distributions on, such Parity Dividend
Stock or Parity Liquidation Stock shall have been paid or declared and set apart
for payment.
Any reference to "distribution" contained in this Section III shall not be
deemed, except as expressly stated, to include any distribution made in
connection with any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
IV. Liquidation Preference. In the event of a liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of Convertible PIK Preferred Stock shall be entitled to receive out of
the assets of the Corporation available for distribution to stockholders an
amount equal to the dividends accrued and unpaid on such shares on the date of
final distribution to such holders, whether or not declared, without interest,
plus a sum equal to $25.00 per share, and no more, before any payment shall be
made or any assets distributed to the holders of shares of Junior Liquidation
Stock. The entire assets of the Corporation available for distribution to
stockholders shall be distributed ratably among the holders of the Convertible
PIK Preferred Stock and any Parity Liquidation Stock in proportion to the
respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the liquidation
preferences of the shares of the Convertible PIK Preferred Stock, the holders of
such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. The voluntary sale, lease, exchange
or transfer of all or substantially all of the Corporation's property or assets
to, or its consolidation or merger with, one or more corporations shall not be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation.
V. Redemption at Option of the Corporation. Convertible PIK Preferred
Stock may not be redeemed by the Corporation prior to September 30, 2000.
Subject to the foregoing,
<PAGE>
5
Convertible PIK Preferred Stock may be redeemed by the Corporation, at its
option on any date set by the Board of Directors, in whole or in part at any
time, subject to the limitations, if any, imposed by applicable law, for an
amount in cash equal to the following redemption prices per share if redeemed
during the 12-month period beginning on September 30 of any year indicated
below:
<TABLE>
<CAPTION>
Redemption Price
Year Per Share
---- ---------
<S> <C>
2000................................... $26.50
2001................................... $26.00
2002................................... $25.50
2003 and thereafter.................... $25.00
</TABLE>
plus, in each case, an amount in cash equal to all per share dividends on the
Convertible PIK Preferred Stock accrued and unpaid thereon, whether or not
declared, through the date prior to the date fixed for redemption, such sum
being hereinafter referred to as the "Redemption Price."
No redemption date shall be the same as a dividend record date fixed
under Section III. If a redemption date established by the Board of Directors
is after a dividend record date then or theretofore fixed under Section III, it
shall be at least six business days after such dividend record date. Nothing
contained herein shall limit the Board of Directors' discretion to establish a
redemption date that is prior to a dividend record date then or theretofore
fixed, without regard to the effect of such redemption date on the dividend
rights of holders of Convertible PIK Preferred Stock who elect to convert under
Section VI prior to the redemption date.
In the case of the redemption of less than all of the then outstanding
Convertible PIK Preferred Stock, the Corporation shall designate by lot, or in
such other manner as the Board of Directors may determine to be fair, the shares
to be redeemed, or shall affect such redemption pro rata. Notwithstanding the
foregoing, the Corporation shall not redeem less than all of the Convertible PIK
Preferred Stock at any time outstanding until all dividends accrued and in
arrears upon all Convertible PIK Preferred Stock then outstanding shall have
been paid in full for all past dividend periods.
Not more than ninety nor less than thirty days prior to the date fixed
for redemption by the Board of Directors, notice thereof by first class mail,
postage prepaid, shall be given to the holders of record of the shares of
Convertible PIK Preferred Stock to be redeemed, addressed to such holders at
their last addresses as shown upon the stock transfer books of the Corporation.
Each such notice of redemption shall specify, the shares being redeemed, the
date fixed for redemption, the Redemption Price, the place or places of payment,
that payment will be made upon presentation and surrender of the shares of
Convertible PIK Preferred Stock, that on and after the date fixed for redemption
dividends will cease to accrue on such shares, the conversion price pursuant to
Section VI and that the right of holders to convert shares of Convertible PIK
<PAGE>
6
Preferred Stock shall terminate at the close of business on the fifth business
day prior to the date fixed for redemption (unless the Corporation defaults in
the payment of the Redemption Price).
If and only if there are more than ten holders of Convertible PIK
Preferred Stock, any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of
shares of Convertible PIK Preferred Stock receives such notice. If there are
less than ten holders of Convertible PIK Preferred Stock, notice shall be
effective if given in accordance with Section 9.02 of the Stock Purchase
Agreement pursuant to which the Convertible PIK Preferred Stock is issued.
Failure to give such notice by mail or any defect in such notice to the holders
of any shares designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Convertible PIK Preferred
Stock. 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 at the place designated in such notice
and shall thereupon be entitled to receive payment of the Redemption Price. If
less than all the shares evidenced by any such surrendered certificate are
redeemed, a new certificate shall be issued evidencing the unredeemed shares.
Notice having been given as aforesaid, if, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been deposited with a bank or trust company with irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Convertible PIK Preferred Stock, then, notwithstanding that the certificates
evidencing any shares so called for redemption shall not have been surrendered,
dividends with respect to the shares so called shall cease to accrue on and
after the date fixed for redemption, such shares shall no longer be deemed
outstanding, the holders thereof shall cease to be stockholders of the
Corporation 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.
If funds legally available for such purpose are not sufficient for redemption of
the shares of Convertible PIK Preferred Stock which were to be redeemed, then
the certificates evidencing such shares shall be deemed not to be surrendered,
such shares shall remain outstanding and the right of holders of shares of
Convertible PIK Preferred Stock thereafter shall continue to be only those of a
holder of shares of the Convertible PIK Preferred Stock.
The shares of Convertible PIK Preferred Stock shall not be subject to
the operation of any mandatory purchase, retirement or sinking fund.
VI. Conversion Provisions.
(a) Right of Conversion. Each full or fractional share of Convertible
PIK Preferred Stock shall be convertible at the option of the holder thereof, at
any time from the issue date until the close of business on the fifth business
day prior to any date fixed for redemption of such share as herein provided,
into fully paid and nonassessable shares of Common Stock, at a rate per full
share of Convertible PIK Preferred Stock equal to the aggregate Liquidation
Value of the
<PAGE>
7
Convertible PIK Preferred Stock to be converted divided by a conversion price
which shall initially be $9.50 (the "Conversion Price").
(b) Conversion Procedures. Any holder of shares of Convertible PIK
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Convertible
PIK Preferred Stock at the office of the transfer agent for the Convertible PIK
Preferred Stock which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank, or accompanied
by proper instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects to convert
such shares of Convertible PIK Preferred Stock and specifying the name or names
(with address or addresses) in which a certificate or certificates evidencing
shares of Common Stock are to be issued.
Except as otherwise described in this paragraph, no payments or
adjustments in respect of dividends on shares of Convertible PIK Preferred
Stock surrendered for conversion, whether paid or unpaid and whether or not in
arrears, or on account of any dividend on the Common Stock issued upon
conversion shall be made by the Corporation upon the conversion of any shares of
Convertible PIK Preferred Stock. The holder of record of shares of Convertible
PIK Preferred Stock on a dividend record date who surrenders such shares for
conversion during the period between such dividend record date and the
corresponding dividend payment date will be entitled to receive the dividend on
such dividend payment date.
The Corporation shall, as soon as practicable after such surrender of
certificates evidencing shares of Convertible PIK Preferred Stock accompanied by
the written notice and compliance with any other conditions herein contained,
deliver at such office of such transfer agent to the person for whose account
such shares of Convertible PIK Preferred Stock were so surrendered, or to the
nominee of such person, certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled as aforesaid, together with
a cash adjustment in respect of any fraction of a share of Common Stock as
hereinafter provided. Such conversion shall be deemed to have been made as of
the date of such surrender of the shares of Convertible PIK Preferred Stock to
be converted, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Convertible PIK Preferred Stock shall be
treated for all purposes as the record holder or holders of such Common Stock on
such date.
(c) Adjustment of Conversion Price. The Conversion Price at which a
share of Convertible PIK Preferred Stock is convertible into Common Stock shall
be subject to adjustment from time to time as follows:
(i) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay
or make a dividend or other distribution on any other class or series of
capital stock of the Corporation which dividend or distribution includes or
is convertible into Common Stock, the Conversion Price in effect at the
opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall
<PAGE>
8
be reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares constituting or included in such dividend or other distribution
(or in the case of a dividend consisting of securities convertible into
Common Stock, the number of shares of Common Stock into which such
securities are convertible), such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this subparagraph (i), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation. The Corporation shall not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Corporation.
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue (a) Common Stock (excluding any restricted stock issued to
management of the Company and approved by the Board), (b) rights or
warrants (excluding incentive stock options approved by the Board)
entitling the holders thereof to subscribe for or purchase shares of Common
Stock or (c) any security convertible into Common Stock at a price per
share less than the current market price per share (determined as provided
in subparagraph (vi) of this Section VI(c)) of the Common Stock on the date
fixed for the determination of stockholders entitled to receive such rights
or warrants, the Conversion Price in effect at the opening of business on
the day following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription, exercise,
conversion or purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or purchase,
such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination. In
case any rights, warrants or convertible securities referred to in this
subparagraph (ii) in respect of which an adjustment shall have been made
shall expire unexercised within 45 days after the same shall have been
distributed or issued by the Corporation, the Conversion Price shall be
readjusted at the time of such expiration to the Conversion Price that
would have been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon
<PAGE>
9
which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph (iv), in case
the Corporation shall, by dividend or otherwise, distribute to all holders
of its Common Stock evidences of its indebtedness, shares of any class or
series of capital stock, cash or assets (including securities, but
excluding any rights, warrants or convertible securities referred to in
subparagraph (ii) of this Section VI(c), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in
subparagraph (i) of this Section VI(c)), the Conversion Price in effect on
the day following the date fixed for the payment of such distribution (the
date fixed for payment being referred to as the "Reference Date") shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (vi) of this Section VI(c)) of the Common Stock on
the Reference Date less the fair market value (as determined in good faith
by the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) on the Reference Date
of the portion of the evidences of indebtedness, shares of capital stock,
cash and assets so distributed applicable to one share of Common Stock, and
the denominator shall be such current market price per share of the Common
Stock, such reduction to become effective immediately prior to the opening
of business on the day following the Reference Date. If the Board of
Directors determines the fair market value of any distribution for purposes
of this subparagraph (iv) by reference to the actual or when issued trading
market for any securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used in computing
the current market price per share of Common Stock pursuant to subparagraph
(vi) of this Section VI(c). For purposes of this subparagraph (iv), any
dividend or distribution that includes shares of Common Stock or rights or
warrants to subscribe for or purchase shares of Common Stock shall be
deemed to be (1) a dividend or distribution of the evidences of
indebtedness, cash, assets or shares of capital stock other than such
shares of Common Stock or rights or warrants (making any conversion price
reduction required by this subparagraph (iv)) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (making any further Conversion Price reduction required by
subparagraph (i) or (ii) of this Section VI(c)), except (A) the Reference
Date of such dividend or distribution as defined in this subparagraph (iv)
shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution," "the
date fixed for the determination of stockholders entitled to receive such
rights or warrants" and "the date fixed for such determination" within the
meaning of subparagraphs (i) and (ii) of this Section VI(c) and (B) any
shares of Common Stock included in such dividend or distribution shall not
be deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of subparagraph (i) of this Section
VI(c)).
<PAGE>
10
(v) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (A) cash
that is part of a distribution referred to in (iv) above and (B) in the
case of any quarterly cash dividend on the Common Stock, the portion
thereof that does not exceed the per share amount of the next preceding
quarterly cash dividend on the Common Stock (as adjusted to appropriately
reflect any of the events referred to in subparagraphs (i), (ii), (iii),
(iv) and (v) of this Section VI(c)), or all of such quarterly cash dividend
if the amount thereof per share of Common Stock multiplied by four does not
exceed 5% of the current market price per share (determined as provided in
paragraph (vi) of this Section VI(c)) of the Common Stock on the Trading
Day (as defined in Section VI(h)) next preceding the date of declaration of
such dividend), the Conversion Price in effect immediately prior to the
opening of business on the day following the date fixed for the payment of
such distribution shall be reduced by multiplying such Conversion Price by
a fraction of which the numerator shall be the current market price per
share (determined as provided in subparagraph (vi) of this Section VI(c))
of the Common Stock on the date fixed for the payment of such distribution
less the amount of cash so distributed and not excluded as provided above
applicable to one share of Common Stock, and the denominator shall be such
current market price per share of the Common Stock, such reduction to
become effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution.
(vi) For the purpose of any computation under subparagraph (ii), (iv)
or (v) of this Section VI(c), the current market price per share of Common
Stock on any date shall be deemed to be the average of the daily Closing
Prices (as defined in Section VI(h)) for the five consecutive Trading Days
ending with and including the date in question; provided, however, that (1)
if the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to subparagraph (i), (ii),
(iii), (iv) or (v) above ("Other Event") occurs after the fifth Trading Day
prior to the date in question and prior to the "ex" date for the issuance
or distribution requiring such computation (the "Current Event"), the
Closing Price for each Trading Day prior to the "ex" date for such Other
Event shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as a
result of such Other Event, (2) if the "ex" date for any Other Event occurs
after the "ex" date for the Current Event and on or prior to the date in
question, the Closing Price for each Trading Day on and after the "ex" date
for any Other Event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the Conversion Price is so required
to be adjusted as a result of such Other Event, (3) if the "ex" date for
any Other Event occurs on the "ex" date for the Current Event, one of those
events shall be deemed for purposes of clauses (1) and (2) of this proviso
to have an "ex" date occurring prior to the "ex" date for the other event,
and (4) if the "ex" date for the Current Event is on or prior to the date
in question, after taking into account any adjustment required pursuant to
clause (2) of this proviso, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value on the date in question (as determined in
good faith by the Board of Directors in a manner consistent
<PAGE>
11
with any determination of such value for purposes of paragraph (iv) or (v)
of Section VI(c), whose determination shall be conclusive and described in
a resolution of the Board of Directors) of the portion of the rights,
warrants, evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock. For purposes of
this paragraph, the term "ex" date, (x) when used with respect to any
issuance or distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to receive such
issuance or distribution and (y) when used with respect to any subdivision
or combination of shares of Common Stock, means the first date on which the
Common Stock trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes effective.
(vii) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments which by reason
of this subparagraph (vii) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment or in any
conversion pursuant to this Section VI.
(viii) Whenever the Conversion Price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Treasurer of the
Corporation setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed with the transfer agent for
the Convertible PIK Preferred Stock; and
(2) as soon as practicable after the adjustment, the
Corporation shall mail to all record holders of Convertible PIK
Preferred Stock at their last address as they shall appear upon the
stock transfer books of the Corporation a notice stating that the
Conversion Price has been adjusted and setting forth the adjusted
Conversion Price.
(ix) The Corporation from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least twenty
days, the reduction is irrevocable during the period and the Board of
Directors of the Corporation shall have made a determination that such
reduction would be in the best interest of the Corporation, which
determination shall be conclusive. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Corporation shall mail to holders
of record of the Convertible PIK Preferred Stock a notice of the reduction
at least fifteen days prior to the date the reduced Conversion Price takes
effect, and such notice shall state the reduced Conversion Price and the
period it will be in effect.
(d) No Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Convertible PIK Preferred Stock. If more than
one certificate
<PAGE>
12
evidencing shares of Convertible PIK Preferred Stock shall be surrendered for
conversion at such time by the holder, the number of full shares issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Convertible PIK Preferred Stock so surrendered. Instead of any
fractional share of Common Stock that would otherwise be issuable to a holder
upon conversion of any shares of Convertible PIK Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share in
an amount equal to the fraction of the Closing Price of the Common Stock on the
day of conversion or, if the day of conversion is not a Trading Day, on the next
preceding Trading Day.
(e) Reclassification Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property (including without limitation any capitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other person, any
merger of another person into the Corporation (other than a merger which does
not result in a reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Corporation or any share exchange), then
lawful provisions shall be made as part of the terms of such transaction whereby
the holder of each share of Convertible PIK Preferred Stock then outstanding
shall have the right thereafter to convert such share only into the kind and
amount of securities, cash and other property receivable upon such transaction
by a holder of the number of shares of Common Stock into which such share of
Convertible PIK Preferred Stock might have been converted immediately prior to
such transaction. The Corporation or the person formed by such consolidation or
resulting from such merger or which acquires such shares or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituting document to
establish such right. Adjustments for events subsequent to the effective date of
such a consolidation, merger, sale or transfer of assets shall be as nearly
equivalent as may be practicable to the adjustments provided for herein. In any
such event, effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease, transfer or otherwise so that the provisions set forth
herein for the protection of the rights of the holder of Convertible PIK
Preferred Stock shall thereafter continue to be applicable, and any such
resulting or surviving corporation shall expressly assume the obligation to pay
dividends and deliver, upon conversion, such shares of common stock, other
securities, or cash as set forth herein. The above provisions shall similarly
apply to successive transactions of the foregoing type.
(f) Reservation of Shares, Etc. The Corporation shall at all times
reserve and keep available, free from preemptive rights out of its authorized
and unissued stock, solely for the purpose of effecting the conversion of the
Convertible PIK Preferred Stock, such number of shares of its Common Stock as
shall from time to time be sufficient to effect the conversion of all shares of
Convertible PIK Preferred Stock from time to time outstanding. The Corporation
shall from time to time, in accordance with the laws of the State of Delaware,
in good faith and as
<PAGE>
13
expeditiously as possible endeavor to cause the authorized number of shares of
Common Stock to be increased if at any time the number of shares of authorized
and unissued Common Stock shall not be sufficient to permit the conversion of
all the then outstanding shares of Convertible PIK Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible PIK Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved as the case may be. If the Common Stock is listed on any
national securities exchange, the Corporation will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of Common Stock issuable upon conversion of the Convertible
PIK Preferred Stock, for so long as the Common Stock continues to be so listed.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 10% of the then outstanding shares of Common
Stock;
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation shall
be required, or of the sale or merger of all or substantially all of the
assets of the Corporation or of any share exchange whereby the Common Stock
is converted into other securities, cash or other property;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
(v) of any other event which would require an adjustment to the
Conversion Price under subparagraph VI(c);
then the Corporation shall cause to be filed with the transfer agent for the
Convertible PIK Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible PIK Preferred Stock, at their last addresses as they
shall appear upon the stock transfer books of the
<PAGE>
14
Corporation, at least fifteen days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record (if
any) is to be taken for the purpose of such dividend, distribution, redemption,
repurchase, or grant of 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, redemption, repurchase, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation, winding up or
other event 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 shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation, winding up or other event (but no failure to
mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
(h) Definitions. The following definitions shall apply to terms used
in this Section VI:
(i) "Closing Price" of any common stock on any day shall mean the
last reported sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices regular way of the common stock in each case on the principal
national securities exchange or quotation system on which the common stock
is listed or admitted to trading or quoted, or, if not listed or admitted
to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of the common stock
in the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similarly generally accepted
reporting service, or, if not so available in such manner, as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors of the Corporation for that purpose.
(ii) "Trading Day" shall mean a day on which securities are traded on
the national securities exchange or quotation system or in the over-the-
counter market used to determine the Closing Price.
VII. Voting Rights. (a) General. The holders of shares of Convertible
PIK Preferred Stock shall not have any voting rights except as set forth below
or as otherwise from time to time required by law. In connection with any right
to vote, each holder of shares of Convertible PIK Preferred Stock shall be
entitled to a number of votes which is equal to the whole number of shares of
Common Stock that could be obtained upon conversion of one share of Convertible
PIK Preferred Stock at the then applicable Conversion Price. Any shares of
Convertible PIK Preferred Stock owned, directly or indirectly, by any entity of
which the Corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors, shall not have voting rights hereunder and shall
not be counted in determining the presence of a quorum.
<PAGE>
15
(b) Designated Director Voting Rights. On the Issue Date, in addition
to any other rights to elect directors which the holders of Convertible PIK
Preferred Stock may have, the two holders with the greatest number of shares
held of record of Convertible PIK Preferred Stock shall have the right to each
elect a director of the Corporation to fill the vacancies that occur at such
date who shall continue to serve during the period in which any shares of
Convertible PIK Preferred Stock remain outstanding. If there is only one holder
of outstanding Convertible PIK Preferred Stock, such holder shall elect both
directors. The right of the holders of shares of Convertible Preferred Stock to
vote for and elect such two additional directors shall terminate when all
outstanding shares of Convertible PIK Preferred Stock shall have been redeemed
or otherwise retired. The term of office of all directors so elected shall
terminate as provided in the Corporation's by-laws.
The foregoing right of the holders of shares of Convertible Preferred
Stock with respect to the election of two directors may be exercised initially
at any annual meeting of stockholders or at any special meeting of stockholders
held for such purpose, or by the written consent of the holders of Convertible
PIK Preferred Stock without a meeting pursuant to Section 228 of the Delaware
General Corporation Law and thereafter at such annual meeting or by written
consent. The president of the Corporation shall within twenty days after the
delivery to the Corporation at its principal office of a written request for a
special meeting signed by the holders of at least 10% of all outstanding shares
of Convertible PIK Preferred Stock, call a special meeting of the holders of
Convertible PIK Preferred Stock to be held within sixty days after the delivery
of such request for the purpose of electing such additional directors.
The holders of shares of Convertible PIK Preferred Stock referred to
above voting as a class shall have the right to remove without cause at any time
and replace any directors such holders shall have elected pursuant to this
Section VII(b). In case of a vacancy occurring in the office of any director so
elected pursuant to this Section VII(b), the holder of Convertible PIK Preferred
Stock referred to above who elected the director which created such vacancy may,
at a special meeting of the holders or by written consent as provided above,
elect a successor to hold office for the unexpired term of such director.
(c) Default Voting Rights. Whenever dividends on the Convertible PIK
Preferred Stock or any other class or series of Preferred Stock shall be in
arrears in an aggregate amount equal to at least four quarterly dividends
(whether or not consecutive), (i) the number of members of the Board of
Directors of the Corporation shall be increased by two, effective as of the time
of election of such directors as hereinafter provided and (ii) in addition to
any other rights to elect directors which the holders of Convertible PIK
Preferred Stock may have, the holders of shares of Convertible PIK Preferred
Stock (voting separately as a class with all other affected classes or series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) shall have the exclusive right to vote for and elect such two
additional directors of the Corporation who shall continue to serve during the
period such dividends remain in arrears. The right of the holders of shares of
Convertible PIK Preferred Stock to vote for such two additional directors shall
terminate when all accrued and unpaid dividends on the Convertible PIK Preferred
Stock and all other affected classes or series of Preferred Stock have been
declared and
<PAGE>
16
paid or set apart for payment. The term of office of all directors so elected
shall terminate immediately upon the termination of the right of the holders of
shares of Convertible PIK Preferred Stock and such Preferred Stock to vote for
such two additional directors, and the number of directors of the Board of
Directors of the Corporation shall immediately thereafter be reduced by two.
The foregoing right of the holders of shares of Convertible PIK
Preferred Stock with respect to the election of two directors may be exercised
at any annual meeting of stockholders or at any special meeting of stockholders
held for such purpose. If the right to elect directors shall have accrued to the
holders of shares of Convertible PIK Preferred Stock more than ninety days
preceding the date established for the next annual meeting of stockholders, the
president of the Corporation shall within ten days after the delivery to the
Corporation at its principal office of a written request for a special meeting
signed by the holders of at least 10% of all outstanding shares of Convertible
PIK Preferred Stock, call a special meeting of the holders of Convertible PIK
Preferred Stock to be held within forty-five days after the delivery of such
request for the purpose of electing such additional directors.
The holders of shares of Convertible PIK Preferred Stock and any
Preferred Stock referred to above voting as a class shall have the right to
remove without cause at any time and replace any directors such holders shall
have elected pursuant to this Section VII(c).
(d) Class Voting. So long as any shares of the Corporation's
Convertible PIK Preferred Stock are outstanding the Corporation shall not,
without the affirmative vote or consent of the holders of at least 66-2/3% of
all outstanding shares of the Corporation's Convertible PIK Preferred Stock,
voting or consenting separately as a class without regard to series:
(i) create any class of stock convertible into Common Stock that by
its terms ranks prior to any outstanding Convertible PIK Preferred Stock of
the Corporation as to dividends or upon liquidation or increase the
authorized number of shares of any such class;
(ii) alter or change any of the provisions of the Corporation's
Certificate of Incorporation so as adversely to affect the relative rights
and preferences of any outstanding Convertible PIK Preferred Stock of the
Corporation (including, without limitation an increase in the size of the
Board); provided, however that the creation, amendment or reclassification
of any class of stock, that by its terms ranks junior to shares of
Convertible PIK Preferred Stock of the Corporation as to dividends or upon
liquidation or an increase in the authorized number of shares of any such
class shall not give rise to any such voting right; or
(iii) increase the authorized number of shares of the Corporation's
Preferred Stock.
VIII. Outstanding Shares; Status of Acquired Shares.
<PAGE>
17
(a) Outstanding Shares. For purposes of this Certificate of
Designation, all shares of Convertible PIK Preferred Stock issued by the
Corporation shall be deemed outstanding except: (i) from the date fixed for
redemption pursuant to Section V, all shares of Convertible PIK Preferred Stock
that have been so called for redemption under Section V, to the extent provided
thereunder; (ii) from the date surrender of certificates evidencing shares of
Convertible PIK Preferred Stock, all shares of Convertible PIK Preferred Stock
converted into Common Stock; and (iii) from the date of registration of
transfer, all shares of Convertible PIK Preferred Stock owned, directly or
indirectly, by any entity of which the Corporation owns, directly or indirectly,
a majority of the shares entitled to vote for directors.
(b) Reacquired Shares. Shares of Convertible PIK Preferred Stock
redeemed by the Corporation, received upon conversion pursuant to Section VI or
otherwise acquired by the Corporation shall be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, and may thereafter be issued, but not as shares of Convertible PIK
Preferred Stock.
IX. Partial Payments. Upon an optional redemption by the Corporation,
if at any time the Corporation does not pay amounts sufficient to redeem all
Convertible PIK Preferred Stock, then such funds which are paid shall be applied
to redeem such shares of Convertible PIK Preferred Stock as the Corporation may
designate by lot or in such other manner as the Board of Directors may determine
to be fair, or such redemption shall be effected pro rata.
X. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
XI. Miscellaneous. (a) Transfer Taxes. The Corporation shall pay any
and all stock transfer and documentary stamp taxes that may be payable in
respect of any issuance of delivery of shares of Convertible PIK Preferred Stock
or shares of Common Stock or other securities issued on account of Convertible
PIK Preferred Stock pursuant hereto or certificates or instruments evidencing
such shares or securities. The Corporation shall not, however, be required to
pay any such tax which may be payable in respect of any transfer involved in the
issuance or delivery of shares of Convertible PIK Preferred Stock or Common
Stock or other securities in a name other than that in which the shares of
Convertible PIK Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has
<PAGE>
18
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 or is not payable.
(b) Failure to Designate Stockholder or Payee. In the event that a
holder of shares of Convertible PIK Preferred Stock shall not by written notice
designate the name in which shares of Common Stock to be issued upon conversion
of such shares should be registered or to whom payment upon redemption of shares
of Convertible PIK Preferred Stock should be made or the address to which the
certificates or instruments evidencing such shares or such payment, should be
sent, the Corporation shall be entitled to register such shares and or such
payment in the name of the holder of such Convertible PIK Preferred Stock as
shown on the
<PAGE>
19
records of the Corporation and to send the certificates or instruments
evidencing such shares or such payment, to the address of such holder shown on
the records of the Corporation.
IN WITNESS WHEREOF, Patina Oil & Gas Corporation has caused this
Certificate of Designation to be signed on its behalf by Thomas J. Edelman, its
President, and Keith M. Crouch, its Secretary, this 17th day of October, 1997.
PATINA OIL & GAS CORPORATION
By: /s/ Thomas J. Edelman
-------------------------
Thomas J. Edelman, President
ATTEST:
/s/ Keith M. Crouch
- ---------------------------
Keith M. Crouch, Secretary
<PAGE>
EXHIBIT 5.1
[VINSON & ELKINS L.L.P. LETTERHEAD]
(214) 220-7700 (214) 999-7732
October 20, 1999
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Patina Oil & Gas Corporation
Registration Statement on Form S-3
Common Stock
Preferred Stock
Ladies and Gentlemen:
We have acted as counsel for Patina Oil & Gas Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933 (the "Securities Act"), on a Registration Statement on
Form S-3 (the "Registration Statement") of the offer and sale from time to time
pursuant to Rule 415 under the Securities Act of the following securities: (i)
230,000 shares of the Company's common stock, par value $.01 per share, (the
"Common Stock"); (ii) 1,818,511 shares of the Company's 8.50% preferred stock,
par value $1.00 per share (the "Preferred Stock"); and (iii) an additional
4,785,594 shares of common stock into which the preferred stock is convertible
(the "Conversion Shares") (together "Securities") by certain stockholders of the
Company (the "Selling Stockholders").
For purposes of rendering the opinions contained in this letter, we have
reviewed agreements, records and documents as we have deemed relevant in order
to render the opinions set forth herein, including but not limited to the
Certificate of Incorporation and the Bylaws of the Company.
As to certain questions of fact material to our opinions that we have not
independently established, we have relied upon certificates from officers of the
Company and upon certificates of public officials.
In rendering the following opinions, we have assumed (a) all information
contained in all documents reviewed by us is true and correct, (b) the
genuineness of all signatures on all documents reviewed by us, (c) the
authenticity and completeness of all documents submitted to us as originals, (d)
the conformity to authentic originals of all documents submitted to us as
certified or photostatic copies, (e) each natural person signing any document
reviewed by us had the legal capacity to do so, and (f) each person signing in a
representative capacity any document reviewed by us had authority to sign in
such capacity.
Based on the foregoing, and subject to the assumptions, exceptions and
qualifications stated below, we are of the opinion that:
1. The Common Stock and Preferred Stock being registered are legally
issued, fully paid and non-assessable. With respect to the Conversion Shares,
when certificates representing the Conversion Shares have been duly executed,
countersigned, registered and delivered upon conversion of the Preferred Stock,
in accordance with the terms of the Certificate of Designation governing such
Preferred Stock, then the Conversion Shares will be legally issued, fully paid
and nonassessable.
The opinions expressed above are subject in all respects to the following
assumption, exceptions and qualifications:
a. We have assumed that (a) the Registration Statement and any amendments
thereto (including post-effective amendments) will have become effective and
comply with all applicable laws; (b) the Registration Statement will be
effective and will comply with all applicable laws at the time the Securities
are offered or issued as contemplated by the Registration Statement (if such
offering or issuance requires the delivery of a prospectus under the Securities
Act or pursuant to any other law); (c) a prospectus supplement will have been
prepared and filed with the Securities and Exchange Commission describing the
Securities offered thereby and will comply with all applicable laws; (d) all
Securities will be issued and sold in compliance with applicable federal and
state securities laws and in the manner stated in the Registration Statement and
the appropriate prospectus supplement; and (e) a definitive
<PAGE>
purchase, underwriting or similar agreement with respect to any Securities
offered or issued will have been duly authorized and validly executed and
delivered by the Company and the other parties thereto.
b. We express no opinion with respect to the enforceability of
indemnification provisions to the extent they purport to relate to liabilities
resulting from or based upon negligence or any violation of federal or state
securities or blue sky laws.
c. The opinions expressed in this letter are limited to the General
Corporation Law of the State of Delaware, and the federal laws of the United
States of America.
We consent to the filing of this opinion of counsel as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to this firm under the
heading "Legal Matters" in the prospectus forming a part of the Registration
Statement. In giving this consent, we do not admit that this firm is in the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
This opinion is rendered on the date hereof and we disclaim any duty to
advise you regarding any changes in the matters addressed herein.
Very truly yours,
/s/ VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
(dollars in thousands, except ratio's)
<TABLE>
<CAPTION>
Six Months
Ended
6/30/99/(a)/ 1998/(a)/ 1997/(a)/ 1996 1995/(a)/ 1994
--------------- --------------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before taxes $ (276) $( 4,524) $(16,903) $ 3,168 $(3,222) $4,539
Interest expense 5,867 12,867 15,939 14,275 5,409 3,869
---------- --------- -------- ------- -------- -------
Earning before fixed charges 5,591 8,343 (964) 17,443 2,187 8,408
========== ========= ======== ======= ======== =======
Preferred stock dividends 3,282 6,335 3,346 2,129 -- --
Ratio of pretax income to net
income 1.00 1.00 1.00 0.89 1.54 1.54
-------- -------- -------- ------- ------- ------
Preferred stock dividend
factor 3,282 6,335 3,346 1,895 -- --
Fixed charges:
Interest expense 5,867 12,867 15,939 14,275 5,409 3,869
Preferred stock dividend factor 3,282 6,335 3,346 1,895 -- --
-------- -------- -------- ------- ------- ------
Total fixed charges and
preferred stock dividends 9,149 19,202 19,285 16,170 5,409 3,869
======== ======== ======== ======= ======= ======
Ratio of earnings to combined
fixed charges and preferred
stock dividends 0.61 0.43 (0.05) 1.08 0.40 2.17
======== ======== ======== ======= ====== ======
</TABLE>
__________________
(a) The ratio indicates a less than one-to-one coverage because the earnings
were inadequate to cover the fixed charges for the period. Our historical
earnings for the years ended December 31, 1995, 1997 and 1998 and the six
months ended June 30, 1999 were insufficient to cover our fixed charges.
The amounts of the deficiencies were $3.2 million, $20.2 million, $10.9
million and $3.6 million, respectively, for the ratio of earnings to
combined fixed charges and preferred stock dividends.
<PAGE>
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Denver, Colorado
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 12,
1999 included in Patina Oil & Gas Corporation's Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
October 20, 1999
